copyright © 2001 houghton mifflin company. all rights reserved. chapter 2 stakeholders and the...

Copyright © 2001 Houghton Mifflin Company. All rights reserved.

Chapter 2Chapter 2

Stakeholders and Stakeholders and the Corporate Missionthe Corporate Mission

StrategicStrategic Charles W. L. HillCharles W. L. Hill

ManagementManagement Gareth R. JonesGareth R. Jones

Fifth EditionFifth Edition

PowerPoint Presentation PowerPoint Presentation by Charlie Cookby Charlie Cook

An Integrated ApproachAn Integrated Approach

Copyright © 2001 Houghton Mifflin Company. All rights reserved. 2-2

FIGURE 2.1

Stakeholders and the EnterpriseStakeholders and the Enterprise

Contributions

Contributions

Inducements

Inducements


Stakeholder Impact AnalysisStakeholder Impact Analysis

1.1. Identify stakeholdersIdentify stakeholders

2.2. Identify stakeholders’ interests and Identify stakeholders’ interests and concernsconcerns

3.3. Identify resulting claims stakeholders are Identify resulting claims stakeholders are likely to makelikely to make

4.4. Identify most important stakeholders (from Identify most important stakeholders (from the organization's perspective)the organization's perspective)

5.5. Identify the resulting strategic challengesIdentify the resulting strategic challenges


Mission StatementMission Statement

A formal commitment to stakeholders that the A formal commitment to stakeholders that the firm’s strategy incorporates and recognizes firm’s strategy incorporates and recognizes their claims on the organization.their claims on the organization.

Mission statement elements:Mission statement elements: A declaration of the overall vision, or mission.A declaration of the overall vision, or mission. A summation of managerial philosophical values.A summation of managerial philosophical values. An articulation of key organizational goals.An articulation of key organizational goals.


Vision, or MissionVision, or Mission

A statement of purpose (A statement of purpose (strategic intentstrategic intent) ) committing the organization to ambitious committing the organization to ambitious overarching (overarching (stretchstretch) goals.) goals.

Provides a sense of direction and purpose.Provides a sense of direction and purpose. Drives strategic decision making Drives strategic decision making

and resource allocations.and resource allocations. Forces the seeking of Forces the seeking of

significant performancesignificant performance improvements to improvements to

attain goals.attain goals.


Customer Orientation and Business Customer Orientation and Business DefinitionDefinition

Abell’s FrameworkAbell’s Frameworkfor Defining thefor Defining theBusinessBusinessConsumer-oriented Consumer-oriented

versus versus Product-oriented Product-oriented business definitionbusiness definition

FIGURE 2.2

Source: Derek F. Abell, Defining the Business: The Starting Point of Strategic Planning (Englewood Cliffs, N.J.: Prentice-Hall, 1980), p. 17.


ValuesValues

Johnson & Johnson’s credoJohnson & Johnson’s credosets its responsibilities to:sets its responsibilities to:

1.1. J&J product users.J&J product users.2.2. J&J employees.J&J employees.3.3. Communities in which J&JCommunities in which J&J

employees live and work.employees live and work.4.4. J&J stockholders.J&J stockholders.

FIGURE 2.3

Source: Courtesy of Johnson & Johnson.


GoalsGoals

Good goal characteristics:Good goal characteristics: Precise and measurablePrecise and measurable Address important issuesAddress important issues Challenging but realisticChallenging but realistic Time period specifiedTime period specified

The overriding organizational goal:The overriding organizational goal: Maximizing shareholder returns.Maximizing shareholder returns.

Firms need both short- and long-term goals.Firms need both short- and long-term goals.


The Corporate Governance The Corporate Governance ProblemProblemOn-the-job consumptionOn-the-job consumption

Elaborate and expensive Elaborate and expensive perks for top management.perks for top management.

Excessive pay not linked Excessive pay not linked to performanceto performance

Down markets and upward spirals of executive pay.Down markets and upward spirals of executive pay.

Empire buildingEmpire building Buying additional businesses that increase the size of Buying additional businesses that increase the size of

the company without increasing shareholder wealth.the company without increasing shareholder wealth.


The Tradeoff Between ProfitabilityThe Tradeoff Between Profitabilityand Growth Rateand Growth Rate

FIGURE 2.4


Corporate Governance Corporate Governance MechanismsMechanismsBoard of directorsBoard of directors

Stock-based compensationStock-based compensation

Corporate takeoversCorporate takeovers Takeover constraintsTakeover constraints Corporate raidersCorporate raiders GreenmailGreenmail

Leveraged buyoutsLeveraged buyouts Managers offer to exchange equity for debt in a Managers offer to exchange equity for debt in a

leveraged buyout (purchase of the company).leveraged buyout (purchase of the company).


Strategy and EthicsStrategy and Ethics

The purpose of business ethicsThe purpose of business ethics To provide the tools for dealing with moral complexity To provide the tools for dealing with moral complexity

in strategic decisions. in strategic decisions.

Shaping the organization’s ethical climateShaping the organization’s ethical climate Emphasizing the importance Emphasizing the importance

of strong ethical values by top of strong ethical values by top management.management.

Including the values in the Including the values in the organization’s mission statement.organization’s mission statement.


Thinking Through Ethical ProblemsThinking Through Ethical Problems

A model of ethical decision makingA model of ethical decision making

FIGURE 2.5


Corporate Social ResponsibilityCorporate Social Responsibility

The sense of obligation to include social The sense of obligation to include social criteria in strategic decision making.criteria in strategic decision making.

Pro:Pro: It is the right way for a firm to behave.It is the right way for a firm to behave. Economic actions have social consequences.Economic actions have social consequences. Social behavior affects the firm’s market value.Social behavior affects the firm’s market value.

Con:Con: A firm’s primary obligation is to maximize profits for A firm’s primary obligation is to maximize profits for

its stakeholders in open competition.its stakeholders in open competition.

copyright © 2001 houghton mifflin company. all rights reserved. chapter 2 stakeholders and the...

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