Sbl Summary.docx

Unit 1: Strategy, leadership and culture 1. Leadership - Leadership: process – influencing an org – its efforts towards aim or goal - Perspectives: o Trait approach: natural leaders possessed traits others did not o Behavior approach: focus on what managers actually do – leadership effectiveness o Power-influence approach: amount and type of power used (autocratic vs participative) o Situational (contingency) approach: different traits will be effective in different situations o Integrative approach: More than one type of leadership variables - Roles of top managers: o Envisioning future strategy – communicating clear vision o Aligning the org to deliver the strategy, ensure people are committed and empowered o Embodying change – being role model - Roles of middle managers: o Advisers to senior managers because they are closest to operation o Sense making: translating strategy into specific change o Reinterpretation and adjustment of strategy as circumstances change o Local leadership of change – local level of senior’s role of ‘aligning’ and ‘embodying’ - Change and leadership: o Transactional leaders: focus on systems and controls, seek improvements o Charismatic leaders: energize people – build vision for the future – change management is a natural part of what they do - Change management styles: Education and communication Explain why change is necessary Collaboration and participation Involving people affected by change into the process Intervention The agent delegate some tasks to project teams Direction Use authority to establish strategy in top-down fashion Coercion Impose change 2. Strategy: - Levels of strategy: Corporate strategy - Overall purpose and scope of org - How to add value to diff business units Business-level - How to complete successfully - What products to sell, target market, etc. Operational - Parts such as marking. Finance support overall -

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Mission statements: o Formal documents – state org’s mission – promote desired behavior – support strategy and adherence to core values o Sometimes exercise of PR – generalisations Strategic management: o Strategic position (PESTLE and SWOT) o Strategic choices (focus on customers) o Strategic in action implementing, perf appraisal, strategy development, change management

3. Culture: - Pattern of shared basic assumptions – ‘way we do things round here’ - Cultural web (CROPS PS): Control systems What is measured ad rewarded Routines Behavior to each other and outside; Rituals: formal or informal events Org structure Formal and informal relationship Paradigm Shared assumptions, beliefs Symbols Logos, office layouts, titles and uniforms Power structures People holding power (incl. experts) Stories and myths Stories told to each other, outsiders and new recruits

Unit 2: Stakeholder and social responsibility 1. Agency theory:

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Used to study the problems of motivation and control – principal needs help of an agent Dominance of joint stock company – separation of ownership and management  conflict of interest

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Agency costs: studying data, hire expert, external auditor, attending meetings, investigate affairs, share transaction costs 2. Stakeholders:

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People, groups and orgs – affect and be affected by actions of org Direct / indirect claims: ability to voice opinions, significance for the org Active / passive stakeholders Stakeholder mapping: Power: influence on decision making Interest: effort put in to participate in org’s activities Issues with mapping: (1) difficult to measure, (2) not static, (3) based on strategic positioning rather than ethical or moral, (4) difficult when there are conflicts of interest and (5) does not consider legitimacy

3. CSR:

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Org consider the interests of society and take responsibility for the impact of their activities Extend beyond statutory obligations to comply with legislation Carroll 1991: Philanthropic Ethical Legal Economic Johnson and Scholes 2017:

Charitable donations, contributions to communities Act fairly and justly Obeying the law To shareholders, employees, customers

Short-term shareholder interest (Laissez-faire) Long-term shareholder interest

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Duty of compliance to the law only Enlightened self-interest: long-term benefit to well-managed relationships with stakeholders  enhance corp image and prevent pressure from legal regulation Multiple stakeholder obligations Without appropriate relationships with stakeholders, they will not be able to function Long-term survival cannot be measured by bottom-line only Shaper of society Financial considerations are of secondary importance CSR 2.0: creativity, scalability (translating across borders), responsiveness, glocality, circularity

4. Sustainability: - AA1000 standard: triple bottom line: people (social), planet (environment) and profit - Global reporting initiative (GRI): aim to develop transparency, accountability, sustainable development - ISO 14000: o Environment policy statement – based on reliable data, allow for development of targets o Assessment of environmental aspects o Management system ensuring effective monitoring of environmental compliance o Internal audits o Public declaration that ISO is being complied - Integrated reporting Financial Funds obtained through financing and operation Manufactured Objects used in production and service Human Skills, experience and motivation Intellectual Intangible assets (patents, brand) Natural Water, land, biodiversity, ecosystem Social Institutions and relationships established between stakeholder groups Guiding principles: -

Strategic focus and future orientation Connectivity between factors Stakeholder relationships Materiality Reliability and completeness Consistency and comparability

Unit 3: Impact of Corporate Governance on strategy 1. 11 core principles: Integrity Fairness Judgement Independence Skepticism Transparency Probity Responsibility Accountability Innovation Reputation

Honesty, straightforward dealing Respecting rights and views of any group Making complex decisions Free from bias Considering with open mind Open and clear disclosure Not misleading Acknowledgement of blame and praise Answer to consequences Responsive to change Other people’s perceptions

2. OECD principles:

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Rights of shareholders Equitable treatment of shareholders Role of stakeholders Disclosure and transparency (remuneration, audit) Responsibilities of the Board Sustainable value and corporate culture

3. Principle-based vs rule-based Features

Benefits

Disadvantages

Where?

Examples

Principle-based Broad principles Comply and explain basis Allow investors to decide if they agree with departure

Greater flexibility Effective across nations Forces board and shareholders to think about consequence of governance arrangements So broad – little use as a guide Investors not confident about consistency Incorrectly viewed as voluntary Governing bodies had the role in setting standards for companies to follow UK Corp Governance

Rule-based Required to comply with detailed code Non-compliance cannot be justified Investors rely on third party to penalize Easier compliance Consistent minimum standards for investors’ confidence

Allow no deviation Difficult enforcement

Jurisdictions that lay emphasis on obeying the law USA Sarbanes-Oxley

4. Board responsibilities 4.1 Responsibilities: o Monitoring CEO o Overseeing strategy o Monitoring risks, control systems and governance o Monitoring human capital aspects o Managing potential conflict of interest o Ensuring effective communication of strategic plans 4.2 Membership: Size Balance – varied view and coherence of decision making Diversity Gender, ethnicity, backgrounds, experience Inside/outside mix Executive and non-executive directors 4.3 Board leadership: Chairman CEO - Leadership to the board - Leadership to the business - Ensuring board receives accurate timely info - Provide accurate and timely info - Ensure effective communication with - Communicate with stakeholders shareholders - Lead in induction of new directors - Co-operate in induction and development - Meet with NEDs without executives - Cooperate by providing necessary resources - Facilitating board appraisal - Cooperate in board appraisal - Encouraging active participation of members - Cooperate with all members 4.4 Unitary vs multi-tier boards Unitary

Two-tier (supervisory – NED and executive)

Advantages - All members have equal responsibility - Easier cooperation and coordination - NEDs lead to better decisions - NEDs less likely to be excluded from info - Clear and formal separation of duties - Supervisory has capacity to guard against management inefficiency - Supervisory consider needs of stakeholders - Actively encourages transparency within company

Disadvantages - NED cannot be expected to manage and monitor - Time requirements on NED - No specific provision for employees to be represented - Emphasizes divide between shareholders and directors - Confusion over authority – lack of accountability - Restricted info to supervisory - Supervisory may not be independent - Members of supervisory board may be shareholder representatives – not legal for shareholders to instruct directors

4.5 Support mechanisms Committees: - Audit: liaising with external audit – supervise internal audit – review annual accounts and controls

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Remuneration: advising executive director remuneration policy Nomination: recommending appointments of new directors Risk: overseeing risk management o Unitary vs multi-tier boards NEDs’ roles: - Strategy: contribute and challenge strategy - Risk: ensure financial info is accurate and controls are robust - Scrutiny: scrutinize perf of management – represent shareholders’ interests - People: responsible for determining the suitable levels of remuneration for executives 4.6 Insider vs outsider corporate governance Insider

Outsider

Advantages - Reduce agency problem - Easier to influence management, policy and strategy - Smaller base of shareholders  more willing to take long-term strategic view - Family-run business develop culture over a long time - Separation between ownership and management  important for development of governance - Shareholders have voting rights  exercise control - Hostile takeovers can acts as disciplining mechanism

Disadvantages - May be discrimination against minority shareholders - Tend not to develop formal governance - Reluctant to employ outsiders or NEDs - More prone to misuse of funds

- Likely to have agency problem - Larger shareholders tend to have shortterm priorities

5. Governance of different types of orgs: Private Public Purpose and Profit, market Public goods/services objective Perf measure Agency-driven, profit Value for money (3Es) and market share Ownership Stakeholders Leadership Governance

Partners, shareholders and lenders Lobby groups, government Board of directors Principle/rule-based External audit

Taxpayer Population, taxpayers Delegated authority Reporting to oversight body External audit and political scrutiny

Charitable NGO ‘Third sector’ -health, relief, education and support More tailored results than public or charitable Independent Can be government owned Trustees, population, pressure groups

Unit 4: The external environment 1. External environment: 1.1 Macro environment (PESTLE):

1.2 Macro environment (Porter’s Diamond): Factor conditions Basic factors: natural resources, climate, unskilled labour – basic pre-conditions – do not provide any sustainable competitive advantage Advanced factors: infrastructure, communications, higher education, skilled labour Home demand conditions Domestic demand encourages competitiveness, costefficient and high-quality products Related and supporting industries Supported by supply chain Firm strategy, structure and rivalry Cultural factors, social attitudes and management styles can lead to competitive advantage  These elements can create a ‘cluster’ of extremely competitive firms (Silicone Valley) 1.3 Micro environment (Five forces):

2. Scenario planning: 1 Identify scope (time frame, products, markets, stakeholders) 2 Identify key trends and areas of uncertainties based on PESTLE 3 Construct initial scenarios based on areas of uncertainty 4 Check scenario for consistency and plausibility 5 Expand into full descriptions as if it’s actually occurring 6 Develop quantitative models of diff scenarios on profitability and cash flow 7 Develop strategies to be adopted if they actually happen

Unit 5: Strategic capability 1. Strategic capability: 1.1 Resources and competences Threshold: minimum requirements Unique: provide competitive advantage Threshold competences, threshold resources, core competences, unique resources 1.2 Four qualities Value Resources or competences valued by customers and orgs Rarity Not generally available to competitors Inimitability Difficult to base competitive advantage on resources – can be easily bought  Competences which are difficult to imitate Organizational support Whether org can support its capabilities 1.3 Organizational knowledge: Organizational learning: culture that promotes intuition, discussion of conflicting views and experimentation Knowledge management: exploit existing knowledge and create new knowledge Knowledge management technologies: automation systems, intranet – share info internally, expert system, data warehouses, data mining 2. Porter’s value chain:

Value network: manage the linkages with value chains of suppliers and customers (use bargaining power, promote innovation and creation of knowledge) 3. SWOT analysis: Match strengths with opportunities Convert weaknesses to strengths, threats to opportunities

Unit 6: Competitive advantage and strategic choice 1. Porter’s generic strategies How to achieve Cost leadership - Economies of scale - Use latest tech to reduce cost/enhance productivity - Exploit learning curve - Minimize overhead cost - Get favorable access to supply Differentiation - Build brand image (Breakthrough products, - Give product special features improved products, competitive - Exploit other activities in the value chain products) - Use IT and innovation - Build customer relationships Focus strategy: concentrate attention on one segment instead of entire market Advantages: a niche is more secure, the org does not spread itself thinly, little competition Disadvantages: sacrifices economies of scale, competitors can move into the segment, segment may become less distinct from market 2. Seven Ps

3. Price-based, differentiation and lock-in 3.1 Price-based strategies:

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Low margins – increase volume or cross-subsidization

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Obstruct attempts at imitation – bidding, licensing

Be cost leader – constantly drive down costs – win price war

No-frills strategy – successful at segment that appreciates low price 3.2 Differentiation: Focus on inherently immobile resources such as brands, high customer switching cost Cost advantage – invest in innovation, brand management and quality improvement

3.3 Lock-in:

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Org’s product becomes industry standard  direct competitors reduced to niches

4. Orgs portfolios 4.1 BCG matrix:

4.2 Public sector portfolio matrix:

Public sector star: should not change – doing well – essential to viabilitiy Political hot box: public wants – not adequate resources Golden fleece: done well, but low demand  potential target for cost cutting Back drawer issue: unappreciated, low priority for funding  candidates for cuts or move to political hot box 5. Direction for growth 6. Diversification 7. Methods of development