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STRATEGIC MANAGEMENT, TERMS & CONCEPTS,

BUSINESS ETHICS

Those actions (or by default, inactions) which determine the long term future of an organization.

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THREE KEY QUESTIONS

1. Where is the organization today?

2. Where do we want it to be in the future?

3. What needs to be done to get there?

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CHARACTERISTICS OF STRATEGIC ACTIONS AND

DECISIONS

•Infrequent•Consequential•Precedent -- and policy -- setters

•Multifunctional

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SOME EXAMPLES

•Miller Beer and Philip Morris

•Lockheed and the Electra

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HIERARCHY OF STRATEGY

•Corporate•Business•Functional

Ideally, these play together

Realistically, there’s often conflict

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SOME EXAMPLES OF CONFLICT

•Clara Peller and Wendy’s•Ford, Kawasaki, and social responsibility

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WHAT IS THE PURPOSE OF A BUSINESS?

•Profit?•Revenue?•Jobs?•Meet society’s needs?•Something else?

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JAMES INVESTMENT RESEARCH, INC.

Firm Objectives

• Provide highest quality service to our clients– Good performance– Lots of communications– Provide economic or such other advice/assistance as possible

• Provide good work environment for our employees• Compensate staff at high levels

– Stable and growing client base– Low expenditures except for salaries– High firm profits to be shared with employees

• Technological leadership in investment research– State of the art equipment– Emphasis on innovation and creativity

• Strong professional reputation of the firm and its personnel– Honesty and integrity– Competence– Quality of work

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THE CONCEPT OF STAKEHOLDER

•Old view: maximize stockholder value•New view: one maximizes stockholder

value over the long run by balancing the benefits to all stakeholders: customers neighbors

employees stockholders

management vendors

government competitors

& more . . .

•Some examples . . .

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STRATEGIC DECISION MAKERS

•Boards of Directors•Senior management•Roles, skills, tasks

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BOARD OF DIRECTORS

•Elected by shareholders•Mission:

– Protect interests of owners– Hire -- and fire -- top management– Approve management initiatives

•Trends:– Codetermination– Board responsibility– Board activism– Strong owners, e.g., mutual funds

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MANAGEMENT TASKS DIFFER WITH LEVEL

Supervisor Manager CEO

Technical

Interpersonal

Conceptual

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STRATEGIC PLAN: A VITAL TOOL

•Seven parts:–Evaluate current performance–Scan external environment: Identify opportunities and threats

–Scan internal environment: Identify strengths and weaknesses

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SEVEN PARTS (cont.)

–Analyze strategic factors: SWOT

–Develop and select alternative strategies

– Implement the strategy–Evaluate and control the strategy

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BUSINESS ETHICS

• Is this just something taught in schools?

•Some real life cases:– Ford’s Pinto– Manville’s asbestos– Financial houses: Barings, Saloman Brothers– Tobacco– Handguns– International Fabricating Corporation

• Impacts? Financial? People?

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WHY BE ETHICAL?

1. Moral reasons

2. Self-interest

3. Financial well-being

4. Retain autonomy

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AN ETHICAL MODEL

•From The Power of Ethical Management, by Peale and Blanchard:1. Is it legal?2. Is it balanced?3. How does it make you feel about yourself?

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MOVING FROM INDIVIDUAL TO CORPORATE

1. Hire correctly

2. Set standards

3. Model, or “What you can learn from your dog.”

4. Talk

5. Institutionalize into decision- making

6. Reward, and sanction