Strategic management Lecture 10. The business ethics, social responsibility, and corporate culture.
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Transcript of Strategic management Lecture 10. The business ethics, social responsibility, and corporate culture.
Strategic managementStrategic management
Lecture 10. Lecture 10.
The business ethics, social The business ethics, social responsibility, and responsibility, and
corporate culture corporate culture
Organisationstructure
and design
Resourceallocation
andcontrol
Managingstrategicchange
Strategyevaluation
and selection
Strategicoptions
Bases ofstrategicchoice
Strategicchoice
Strategyimplemen-
tation
Strategicanalysis
Resources,competencesand capability
Expectationsand purposes
Theenvironment
Process of strategic management
Expectations andExpectations and PurposesPurposes
Expectations and Purposes - Expectations and Purposes - OutlineOutline
1.1. Identification of oIdentification of organirganissational ational stakeholdersstakeholders
2.2. Stakeholder mappingStakeholder mapping
3.3. Corporate governanceCorporate governance
4.4. Ethical issuesEthical issues
5.5. CultureCulture
A Ford Pinto storyA Ford Pinto storyIn the 1970’s more and more company developed small, simple, and cheap In the 1970’s more and more company developed small, simple, and cheap
car, for the young persons. The Ford Co. delayed, and try th catch up. car, for the young persons. The Ford Co. delayed, and try th catch up. The management speed up the developments, and enters the market The management speed up the developments, and enters the market with the Ford Pinto. with the Ford Pinto.
There were more than 500 thousend car on the market when a serious There were more than 500 thousend car on the market when a serious accident happened: After driving away from the filling station two cra accident happened: After driving away from the filling station two cra collided, the Ford Pinto blow up, and three girl burned in the car. A collided, the Ford Pinto blow up, and three girl burned in the car. A magazin investigated the case and realised, that there were more than magazin investigated the case and realised, that there were more than 10 similar accidects, and there were 5 death 10 similar accidects, and there were 5 death
The company investigated the case and the analysis descovered: The company investigated the case and the analysis descovered: Back bumper weak, and were too near to the fuel tank. Back bumper weak, and were too near to the fuel tank. The engineeers know about the problems, however they were in delayThe engineeers know about the problems, however they were in delay The problems could be solved by building into cars a 10 The problems could be solved by building into cars a 10 $$ rubber plate rubber plate The management find that the car in this form met the existing safeti The management find that the car in this form met the existing safeti
regulations. regulations. However the company was lobbiing against rising the safety standards. However the company was lobbiing against rising the safety standards. The cost-benefit analysis describe, if they call back all the cars and The cost-benefit analysis describe, if they call back all the cars and
rebuild the car it would cost 11 m rebuild the car it would cost 11 m $$. . If the company will change only the future’s cars, there will be about 10 If the company will change only the future’s cars, there will be about 10
death, and it would cost about 10 m death, and it would cost about 10 m $$ for the company. for the company. The decision were: not the change. The decision were: not the change. There were 2 millió cars, about 11 death, but this number were better than There were 2 millió cars, about 11 death, but this number were better than
the industrial avarege. the industrial avarege.
Four Possible Ethical StancesFour Possible Ethical Stances
Business ethics – Business ethics – the societal expectations of organisationsthe societal expectations of organisations
Macro levelMacro level• Range from laissez faire to shapers of societyRange from laissez faire to shapers of society• Ethical stance of organisation in societyEthical stance of organisation in society• Extent an organisation exceeds its minimum Extent an organisation exceeds its minimum
obligations to stakeholders and societyobligations to stakeholders and society Corporate social responsibilityCorporate social responsibility
• Specific ways to exceed minimum obligations Specific ways to exceed minimum obligations imposed by legislation/corporate governanceimposed by legislation/corporate governance
• Reconcile conflicting demands of stakeholdersReconcile conflicting demands of stakeholders Individual levelIndividual level
• Behaviour and actions of individuals within Behaviour and actions of individuals within organisationsorganisations
The most important ethical conceptsThe most important ethical concepts
Moral: Relating to, dealing with, or capable of Moral: Relating to, dealing with, or capable of making the distinction between right and wrong making the distinction between right and wrong in conduct or characterin conduct or character
Ethics: The system or code of morals of a Ethics: The system or code of morals of a particular person, religion, group or profession. particular person, religion, group or profession.
Ethical: Conforming to moral standards, Ethical: Conforming to moral standards, conforming to the standards of conduct of a given conforming to the standards of conduct of a given profession or group. profession or group.
Ethical behaviour is what is accepted as „good” Ethical behaviour is what is accepted as „good”
and „right”, and as opposed to „bad” and and „right”, and as opposed to „bad” and „wrong” in the context of governing moral code. „wrong” in the context of governing moral code.
•Convincing yourself that the behaviour is not really illegal
•Convincing yourself that the behavoiur is really everyone’s best interests
•Convincing yourself that nobody will ever find out what you’ev done.
•Convincing yourself that the organization will protect you.
Four ways of rationalize ethical misconduct
Obey the Law.A basic tenet of social responsibility and mamagerial ethics is
obedience to the law, preferably both the letter and the spirit of the law.
Tell the truth.Telling the truth is important in building trust with relevant
stakeholders.Show respect for people.Stick to the „golden rule”."Do unto others as you would have them do unto you".Above all, do not harm.This principle - the first rule of medical ethics - is considered by
some writers to the bottom-line ethical consideration.Practice participation, not paternalism.This principle is aimed at learning about the needs of relevant
stakeholders, rather than deciding what is the best for them.Always act when you have responsibility.Managers have the responsibility of taking action whenever they
have the capacity or resources.
ETHICAL GUIDELINES FOR MANAGERS
1.Social obligation - corporate behavior at this level conforms only to legal requirements and competitive market pressures
2. Social responsibility - Corporate behavior at this level is congruent with prevailing norms, values, and expectations of society.
3. Social responsiveness - Corporate behavior at this level takes preventive action to avoid adverse social impacts from company activities and even anticipates or takes the lead in future movement beyond current expectations.
Continuum of social responsibility
Corporate Social ResponsibilityCorporate Social Responsibility
Internal AspectsInternal Aspects External AspectsExternal Aspects
Employee welfareEmployee welfare Environmental issuesEnvironmental issues
Working conditionsWorking conditions ProductsProducts
Job designJob design Markets and Markets and mmarketingarketing
Intellectual propertyIntellectual property SuppliersSuppliers
EmploymentEmployment
Community activityCommunity activity
Human rightsHuman rights
Some questions of corporate social responsibility
Some questions of corporate social responsibility
Ecology and Environmental QualityPollution cleanup and preventionDispersion of industryLand use and beautification
ConsumerismTruth in lending, advertising, and businessProduct warranty and serviceControl of harmful products
Community needsUse of expertise for local problemsAid with health-care facilities and educationService on voluntary groups
Governmental relationsRestrictions on lobbyingControl of business political action
The most important areas of the corporate social responsibility (1)
Minorities and Disadvantages personsTraining of unemployed Equal employment opportunityLocating plants and offices in minority areasPurchasing from minority businesses
Labor relationsImproved occupational health and safetyProvision of day-care centersOptions of flexible work hours
Stockholder relationsPublic seats on the board of directorsImproved financial disclosure
Corporate philanthrophyFinancial support for arts and cultureSpecial scholarships and gifts to educationFinancial support for assorted charities
The most important areas of the corporate social responsibility (2)
Majon arguments againts social responsibility
Major arguments for social responsibility
Loss of business profits Long-run profit for business
Increased business costs Public image of business will improve
Dilution of business purpose Better environmant for everyone
Too mach socila power for business
Public expectations support business social responsibility
Lack of business accountability to public
Business may avoid more regulation
Arguments for and againts of corporate social responsibilities
Corporate social responsibilityCorporate social responsibility
Corporate social responsibilityCorporate social responsibility ( (CSRCSR, also called , also called corporate consciencecorporate conscience, , corporate citizenshipcorporate citizenship, , social social performanceperformance, or , or sustainable responsible business/ sustainable responsible business/ Responsible BusinessResponsible Business))[1][1] is a form of corporate self- is a form of corporate self-regulation integrated into a business model. CSR policy regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international the spirit of the law, ethical standards, and international norms. The goal of CSR is to embrace responsibility for the norms. The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact company's actions and encourage a positive impact through its activities on the environment, consumers, through its activities on the environment, consumers, employees, communities, stakeholders and all other employees, communities, stakeholders and all other members of the public sphere who may also be considered members of the public sphere who may also be considered as stakeholders.as stakeholders.
Organisational CultureOrganisational Culture
“The basic assumptions and beliefs that areshared by members of an organisation, thatoperate unconsciously and define in a basictaken-for-granted fashion an organisation’sview of itself and its environment”
Schein 1997
“The basic assumptions and beliefs that areshared by members of an organisation, thatoperate unconsciously and define in a basictaken-for-granted fashion an organisation’sview of itself and its environment”
Schein 1997
Organisational CultureOrganisational Culture
Corporate culture
Patterns of behaviour based on mutual values and ways of thinking within a certain corporate.
Each company has its own norms of behaviour, which help its members to understand what the organisation represents.
Culture as mental programming
Hofstede’s idea of culture• Every person has patterns of
thinking, feeling and potential acting
• Analogy to way computers are programmed = mental programs or software of the mind
Culture is the collective programming of the mind, which distinguishes
the members of one group of people from an other!
Cultural Frames of ReferenceCultural Frames of Reference
Organisational FieldOrganisational Field Organisations within a field have:Organisations within a field have:
• Common business environmentCommon business environment• Common norms and valuesCommon norms and values• Shared set of assumptionsShared set of assumptions• A recipe of organizational purpose and shared A recipe of organizational purpose and shared
wisdomwisdom Dangers:Dangers:
• Institutionalised managers may be blinkeredInstitutionalised managers may be blinkered• Transition between sectors difficultTransition between sectors difficult
Legitimacy:Legitimacy:• Need to meet expectations in terms of Need to meet expectations in terms of
assumptions, behaviours and strategassumptions, behaviours and strategiesies
Ch. HANDY’s classification of corporate culture Ch. HANDY’s classification of corporate culture
High formalisation High formalisation Low formalisationLow formalisation
High High centralisationcentralisation
Role culture Role culture
(Like a bank)(Like a bank)
Power culture Power culture
(Like az entrepreneur)(Like az entrepreneur)
Low Low centralisation centralisation
Task culture Task culture
(Like a software-(Like a software-development team development team
Personality culture Personality culture
(Like a lawyer’s (Like a lawyer’s association)association)
HANDY’s classification of corporate HANDY’s classification of corporate culturescultures
Handy defines four major corporate cultures, in which Handy defines four major corporate cultures, in which the organisational structure of the given culture can be the organisational structure of the given culture can be found.found.Power or ‘club’ culturePower or ‘club’ cultureStructure: like a web, with a spider Structure: like a web, with a spider in the middle, a boss possessing in the middle, a boss possessing all power.all power.
Zeus, directed by his instinct and caprice.Zeus, directed by his instinct and caprice.
Most important is the relationship Most important is the relationship with the central leader.with the central leader.Important is the belief in individual performance.Important is the belief in individual performance.Rating is based on result. Flexible structureRating is based on result. Flexible structure
HANDY’s classification of corporate HANDY’s classification of corporate culturescultures
Role cultureRole culture
Classical burClassical bureaueaucracy.cracy.
Like a Greek temple, works Like a Greek temple, works
according to logic and rationality.according to logic and rationality.
Apollo, God of clear mind and practicality.Apollo, God of clear mind and practicality.
Function is dominated, not the individual.Function is dominated, not the individual.
Stability and predictability are important.Stability and predictability are important.
Rigid structure.Rigid structure.
HANDY’s classification of corporate HANDY’s classification of corporate culturescultures
Task cultureTask cultureConcentrates on successful fulfilment of Concentrates on successful fulfilment of tasks.tasks. Like a matrix, power is in the Like a matrix, power is in the cutting points.cutting points. Source of power are Source of power are the knowledge and expertise.the knowledge and expertise.Pallas Pallas AthenAthenee, Goddess of wisdom, , Goddess of wisdom, nature and inventions.nature and inventions.Team culture, the result by joint effort Team culture, the result by joint effort is important.is important.Objective oriented and flexible. Objective oriented and flexible. Hard to carry out control, short life.Hard to carry out control, short life.
HANDY’s classification of corporate HANDY’s classification of corporate culturescultures
Personality culturePersonality cultureIndividuality oriented, Individuality oriented, structure lives for the structure lives for the realisation of the objectives realisation of the objectives of the individuals.of the individuals.Loose cooperation of highly Loose cooperation of highly qualificated individuals.qualificated individuals.
Dionysus, autonomous Dionysus, autonomous God of wine and ecstasy.God of wine and ecstasy.
• Entreprenurial culture is one that fosters positive attitudes towards entrepreneurship
• Environment which combines social,political and educational attributes.
• USA is the most entreprenurial culture of the world:
-always seeking sg. new-achievement-orientation-they worship innovation-non-conformist-entrepreneurship is a career option
HOFSTEDE: Impact of national culture on corporate culture
Market Family
Machine
Pyramid
GB, USA, Canada, Denmark
Germany, Finland, Austria
India, Malaysia
France, Japan, Hungary, Greece
Power distancelow high
high
low
Un
certa
inty
avoid
an
ce
Entrepreneurial culture: Hofstede’s dimensions
Individualism vs.collectivism
Individualism vs.collectivism
Power distancePower distance
Uncertaintyavoidance
Uncertaintyavoidance
masculinitymasculinity
This is the degree to which people prefer to act as individuals rather than groups.? Me-culture
This level depends on the socio-culture of the country.Individualism: West-Europe, USA
Collectivism: We -culture: Japan, China, South-America
This is the degree to which people prefer to act as individuals rather than groups.? Me-culture
This level depends on the socio-culture of the country.Individualism: West-Europe, USA
Collectivism: We -culture: Japan, China, South-America
This is the degree of inequality among people that the community is willing to accept.
Low power distance: informal and open relation, flat structures in organisation. Example: UK, USA, Scandinavia
High power distance: formal relation, hierarchies: France, RussiaSouth America
This is the degree of inequality among people that the community is willing to accept.
Low power distance: informal and open relation, flat structures in organisation. Example: UK, USA, Scandinavia
High power distance: formal relation, hierarchies: France, RussiaSouth America
Degree to which people prefer to avoid uncertainty and prefer structured rather than unstructured situation.
Low uncertainty avoidance: prefer flexibility, high risk-taking, ambiguity. Example: USA, Scandinavia
High uncertainty avoidance: prefer rules and procedures.
Degree to which people prefer to avoid uncertainty and prefer structured rather than unstructured situation.
Low uncertainty avoidance: prefer flexibility, high risk-taking, ambiguity. Example: USA, Scandinavia
High uncertainty avoidance: prefer rules and procedures.
This define quality of life issue. Masculine virtues are: assertiveness, competition and success,social gender roles are
distinct.Feminine virtues: modesty, compromise and co-operation social
gender roles overlap. Important: warmth in personal relationships.
This define quality of life issue. Masculine virtues are: assertiveness, competition and success,social gender roles are
distinct.Feminine virtues: modesty, compromise and co-operation social
gender roles overlap. Important: warmth in personal relationships.
CountryCountry PDIPDI IDVIDV MASMAS UAIUAI
AustriaAustria 1111 5555 7979 7070
FinlandFinland 3333 6363 2626 5959
FranceFrance 6868 7171 4343 8686
GreeceGreece 6060 3535 5757 112112
Great Great BritainBritain
3535 8989 6666 3535
GermanyGermany 3535 6767 6666 6565
HungaryHungary 3131 5555 7979 8383
ItalyItaly 5050 7676 7070 7575
JapanJapan 5454 4646 9595 9292
SwedenSweden 3131 7171 55 2929
USAUSA 4040 9191 6262 4646
VenezuelaVenezuela 8181 1212 7373 7676
Competitive advantages of different culture profiles
Power distance smallPower distance small
Acceptance of Acceptance of responsibilityresponsibility
Power distance largePower distance large
DisciplineDiscipline
CollectivismCollectivism
Employee commitmentEmployee commitmentIndividualismIndividualism
Management mobilityManagement mobility
FemininityFemininity
Personal service, Personal service, agricultureagriculture
MasculinityMasculinity
Mass production, heavy Mass production, heavy industryindustry
Uncertainty avoidance Uncertainty avoidance weakweak
Basic innovationsBasic innovations
Uncertainity Uncertainity avoidance avoidance
Strong precisionStrong precision
Relationship between national and corporate
cultures
Major differences between national and corporate cultures
• Values of national culture are incorporated to our mind until age of 10-12.
• We are not affected that deep by the corporate culture.
National cultural features can be
observed more at work than corporate culture.
The Cultural WebThe Cultural Web
The Cultural Web: some useful questions
Problems of conflicts of cultures at Problems of conflicts of cultures at international acqusitions and fusionsinternational acqusitions and fusions
Conflicts of both national and Conflicts of both national and corporate cultures corporate cultures
1 Deculturisation1 Deculturisation – aggressive merging – aggressive merging2 Separation2 Separation – both cultures live – both cultures live
further parallelfurther parallel3 Assimilation3 Assimilation – One culture – One culture
dominates, merging a slow and dominates, merging a slow and peaceful processpeaceful process
4 Integration4 Integration – equal, balanced – equal, balanced merging of two culturemerging of two culturess by creating a by creating a new one.new one.
DEAL and KENNEDY DEAL and KENNEDY corporate structure categoriescorporate structure categories
Basis of categorisation is rate of the Basis of categorisation is rate of the risk undertaken and the speed of risk undertaken and the speed of the feed back of success.the feed back of success.
1 Tough guy, macho culture1 Tough guy, macho culture High risk, prompt feed-back on High risk, prompt feed-back on
success, slogan: success, slogan: ‘seek for a hill and ‘seek for a hill and climb it’climb it’
Specification: pushy, extravagant Specification: pushy, extravagant personspersons
e.g. stock exchange, TV producerse.g. stock exchange, TV producers
DEAL and KENNEDY DEAL and KENNEDY corporate structure categoriescorporate structure categories
2 ‘Work hard/ play hard’ culture2 ‘Work hard/ play hard’ culture SlogSlogaan: n: ‘Seek for a need and ‘Seek for a need and
satisfy it’satisfy it’.. Small risk, but prompt feed-back Small risk, but prompt feed-back
on success.on success. CContinuous team work.ontinuous team work. Good consumer servise is a must Good consumer servise is a must
in this culture.in this culture. E.g. service companies, E.g. service companies,
department stores, computer department stores, computer dealers, etcdealers, etc..
DEAL and KENNEDY DEAL and KENNEDY corporate structure categoriescorporate structure categories
3 ‘Bet-your-company’ culture3 ‘Bet-your-company’ culture
Big, long term risk, very slow Big, long term risk, very slow feed-back.feed-back.
Slow and sound analytical Slow and sound analytical workwork
Slow rating of employees.Slow rating of employees.
E.g. Investment banks, space E.g. Investment banks, space research, cancer research, etc.research, cancer research, etc.
DEAL and KENNEDY DEAL and KENNEDY corporate structure categoriescorporate structure categories
44 ‘‘process’ cultureprocess’ culture
Low risk, very slow feed-back Low risk, very slow feed-back on success, if it exists at all.on success, if it exists at all.
Hard to detect the performance Hard to detect the performance of the employees.of the employees.
Working process is highlighted.Working process is highlighted.
E.g. burE.g. bureaueaucratic banks, cratic banks, insurance companies, insurance companies, governmental officesgovernmental offices