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9.6 Assessing the Strategic-Planning Process
Bene�its do not accrue automatically every time a company engages in strategic planning; they are more likely to be realized if they are consciously sought. Both strategic planners and the consultant facilitators advising them should strive to ensure that these bene�its are realized. The extent to which they are realized, therefore, constitutes an excellent assessment.
The 10 Bene�its
The 10 bene�its of effective strategic planning may also be viewed as criteria for assessing whether a company is doing strategic planning effectively. The 10 bene�its are organized to follow the Association for Strategic Planning's rubric of "Think—Plan—Act."
The 10 Bene�its of Effective Strategic Planning
"Think"
1. A shared understanding of external changes 2. The ability to anticipate future external changes 3. The ability to search for a better strategy or business model
"Plan"
4. Having a strategic vision 5. Choosing the best strategy from among viable alternatives 6. A constantly improving strategic-planning process 7. Having the board of directors on the same page
"Act"
8. Becoming a stronger competitor 9. Having an adaptive, innovative culture 10. Having all programs aligned with the vision, strategy, and company objectives
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Source: Abraham, S. (2010, February 23). Ten Bene�its of Effective Strategic Planning—and Why You Should Want Them All. Presentation at the 2010 ASP National Conference, Pasadena, CA.
1. A Shared Understanding of External Changes
To use a military analogy, just as con�licting accounts about an enemy's strength, position, and deployment make it dif�icult to devise a winning strategy, so too does the absence of a shared understanding of external changes and their impacts on the company make the crafting of a winning strategy extremely dif�icult. Because changes occur continuously, the only way to keep up with them and even anticipate some is to monitor them year round, and to keep the strategic planning group and board of directors informed as to key changes and developments in all areas. One person should be responsible for each area and be trained to collect and summarize data in useful form. A summary for the year with emphasis on recent trends should be prepared in advance of the annual strategic-planning meetings and be distributed to participants. To the extent this is done well the company's decision making will improve.
2. The Ability to Anticipate Future External Changes
A number of well-known techniques enable an organization to explore "soft" assumptions about the future and provide additional options for planning. These include scenario planning, forecasts, and simulations (Section 3.4). It may be that the �irm would be advised to engage a consultant that specializes in one of these areas, or pay attention to forecasts that have earned a good reputation over time. Expressed another way, the bene�it here is that the resulting information can guide the �irm toward actions that enable a preferred scenario to occur, or develop a contingency in case a hoped-for scenario does not occur.
3. The Ability to Search for a Better Strategy or Business Model
A company not actively seeking a better strategy is not doing a good job of strategic planning, and its strategic decisions will not be good ones. How else is a company to �ind a "blue ocean" or situational monopoly with no competition? How else could it guard against being disrupted by a company outside the industry or even plan a disruption itself in a proactive move? How else could it gain a competitive advantage it lacks or strengthen one it already has?
For every different strategy and business model contemplated, someone in the organization should assess its costs, feasibility, bene�its, and risks on an ongoing basis. The results of such assessments play directly into the strategic-decision-making process. Except when the �irm
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Your strategic vision should be realistic, achievable within a speci�ied time frame, inspirational, concise, and memorable.
Helder Almeida/iStockphoto/Thinkstock
needs to act immediately because the decision just won't wait, the information can wait until the annual strategic-planning process comes around.
4. Having a Strategic Vision
Every organization that wants to endure should have a strategic direction and strive to become something. Succeeding is more likely if there is a clear vision and if everyone knows what it is and is motivated to help the organization get there. Visions should be realistic (achievable within a set time frame, 5 or 10 years is typical), concise, inspirational, and memorable. They sometimes include a value statement, although listing values separately is more common (Section 2.1).
The real bene�it of a clear vision statement is to get everyone in the organization on board and wanting to achieve it; and though cumbersome, everyone in the organization should also have had a hand in creating it or at least providing feedback before it is adopted. As soon as the organization is close to achieving its vision, it should be changed, being careful to go through the same process of getting buy-in from everyone before adoption.
5. Choosing the Best Strategy from Among Viable Alternatives
Choosing from the best options available is a bene�it, as it allows people to trust the decision that was made and have faith in the direction the company is headed. This is bene�icial only if the strategic planning process generate good viable alternatives and a decision-making process for selecting the best one.
Having said that, such a "best strategy" doesn't guarantee success. It must be well executed for the �irm to succeed. It is much easier to "sell" the strategy down the line in a company and motivate a high level of execution if people know why it is the best from among the options considered.
6. A Constantly Improving Strategic-Planning Process
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The bene�it of improving the process should be clear: better strategic decision making. This might entail involving different people, getting better information, stimulating more spirited discussions and encouraging diverse views, or even using computer software to include inputs from everyone quickly (Warden & Russell, 2001). Without thoughtful annual improvements, an organization is likely to allow its strategic planning to become a rote exercise that is taken ever less seriously and one that participants, for those very reasons, resist wanting to participate in.
7. Having the Board of Directors on the Same Page
For public corporations and nonpro�its—and quite a few but not all privately held companies—it is imperative to ensure that the board of directors approves of all strategic decisions before any move to implement them is made. In fact, there are instances where the strategic decision comes from the board as in resisting a takeover bid or deciding to acquire another company. In the typical case where strategic planning is done by a top-management or strategic-planning team, there has to be some mechanism for the board to be kept apprised of the process. In 2005, management consulting �irm McKinsey & Co. polled over 1,000 directors and discovered that strategy coordination between the CEO and the board was the number-one cause for the success or failure of CEO appointments (Felton & Keenan Fritz, 2005). In some companies, the CEO is also chairman of the board, and so automatically serves as the desired link.
Boards of directors may have a strategic-planning committee whose chair would attend the meetings of the management group and keep the board informed. The bene�it, of course, is knowing that the strategic decisions made are in the best interests of the stockholders in the case of a public corporation or the sponsors and clients in the case of a nonpro�it organization. Ultimately it is the board that has responsibility for the strategic direction of the organization.
8. Becoming a Stronger Competitor
If strategic planning is done well and the strategy properly executed, then the company will become a stronger competitor. This, of course, is the principal bene�it for doing strategic planning in the �irst place. Many things have to contribute for this bene�it to be realized. For example:
Knowing how your industry and markets are changing Anticipating and meeting customers' needs Getting more customers to buy your product or service Creating or improving a core competence Knowing what your competitors are up to and outdoing them Defending one's position against attack from competitors Looking for "blue oceans" or monopolies with no competitors Looking for opportunities to disrupt the industry before someone else does
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Apple Computer's culture encourages innovation and new ideas to look for the "next big thing." Apple values learning from mistakes, sharing experiences, and developing ideas, no matter what the source.
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Cultivating a strong brand and staying true to it
Management knows that the company is a stronger competitor if it achieves gains in revenues and market share, and maintains high brand equity, or achieves other established measures of success the company holds dear.
9. Having an Adaptive and Innovative Culture
When a company has been following the same strategy for some time, the culture adapts to that strategy and gets it to work. However, if some major change is deemed necessary, such as pursuing a new strategy or adopting a new technology or manufacturing process, and the culture remains what it always was, then the change will not succeed. A mismatched culture is one of the principal reasons why changes and new strategies fail, and it is widely acknowledged that it is dif�icult to change a culture. The reason that it is dif�icult is that change imposed from above results in a lot of resistance. Many companies in this predicament resort to wholesale changes in personnel to change the culture.
With an adaptive culture, that draconian measure is not necessary. An adaptive culture is one that is willing to change if the reason for doing so makes sense. It is a culture that values open communication, education, teamwork, and individual initiative. Companies that have adaptive cultures make the necessary changes over time and succeed.
An innovative culture does not simply encourage innovation and new ideas and look for the next "big thing." It also puts a high value on learning from mistakes and giving people permission to make mistakes. Innovative cultures encourage the sharing of experiences and developing ideas no matter their source. Two of the best examples of innovative cultures are Apple Inc. and Google.
It would be dif�icult to make strategic decisions and implement them if the culture were not adaptive and innovative. The converse, of course, is also true. Making good strategic decisions that call for change and smooth execution will force the culture to be adaptive and innovative. Hiring people with similar traits will ensure that this desirable culture endures.
10. Having All Programs Aligned with the Vision, Strategy, and Company Objectives
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The importance of aligning everything the company does with its vision, strategy, and companywide objectives was discussed in the context of operational and budget planning (Chapter 8). The bene�it is the assurance of knowing that completing all programs, projects, and activities as planned will result in the strategy being implemented and the vision and company-wide objectives being fully realized (barring unforeseen circumstances).
In too many companies, what employees in the different functional areas and operational units actually do has little to do with the strategy that's in place, because little or no effort was expended to make sure that the two were aligned. As a result the strategy fails or "business as usual" triumphs. When operational planning is done, critical elements include performance measures (to track progress), appropriate training, and reward and incentive systems.
Discussion Questions
1. Of the 10 bene�its discussed in this section, which of them, in your opinion, are most often unrealized and why? 2. Which of these bene�its, again in your opinion, are most dif�icult to realize and why? 3. Do you believe that there are any bene�its that companies are less interested in realizing, hence probably won't? 4. In what ways are these 10 bene�its different from the annual improvement cycle recommended in Section 9.5?
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Chapter 11
Diversi�ied, Global, and Other Types of Organizations
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Learning Objectives
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By the time you have completed this chapter, you should be able to do the following:
Understand the added complexities involved in strategically managing both multibusiness and diversi�ied corporations. Appreciate the different strategies an international corporation can use to expand its markets and the dif�iculties involved in the strategic management of international and global corporations. Appreciate the differences between a business plan and strategic planning for startup companies. Learn how small businesses with meager resources can do strategic management (and why they don't). Understand how strategic management of nonpro�it organizations differs from that of for-pro�it corporations.
The discussion to this point through the �irst 10 chapters has intentionally focused on single-business, single-country corporations, which are the least complex of organizations to illustrate the model of strategic management and strategic planning expounded in this book. That knowledge can help you work through the additional complexities presented by multibusiness and diversi�ied corporations, and international and global corporations.
Entrepreneurial organizations have to be focused on entering the market with a better product or service and in fact need a business plan, not a strategic plan. Small businesses, whether intent on growth or mom-'n-pops, are handicapped by insuf�icient funds and experience of the owners. Finally, nonpro�it organizations lack a pro�it motive, are �inanced in part or wholly by third parties (principally grants or philanthropy), and are driven by causes; they present a very different strategic-management challenge.
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An excellent example of an international diversi�ied corporation is Disney, who has diversi�ied in the entertainment industry by producing movies, TV broadcasting, theme parks, cruise lines, and stores all around the world.
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11.1 Multibusiness and Diversi�ied Corporations
This discussion so far has focused on single-business corporations or strategic business units (SBU) that compete in a speci�ic industry with speci�ic competitors. They require unique strategies and �inancial resources to enable them, with someone, typically the CEO, accountable for what is achieved. Both multibusiness and diversi�ied corporations operate more than one business, that is, have more than one strategic business unit (SBU). By extension, a multibusiness corporation is one that owns more than one SBU or is in more than one business.
Why might a company want to operate a second SBU? It might want to pursue an opportunity in another industry or follow through on a different application of a technology it owns. Running a second SBU typically means being in a different industry or a substantially different segment of the same industry. If a men's jeans manufacturer wants to produce jeans for women, is that another business? No. If the same men's jeans manufacturer wants to produce denim jackets for men, is that another business? Again, the answer is no. However, in the latter case, it would morph from a jeans manufacturer into an apparel manufacturer to re�lect the change. Since jeans is apparel, the "business" it's in wouldn't change. But manufacturing or even distributing anything that wasn't apparel would mean getting into another business. For example, Levi's did not create another business with the creation of its Dockers brand; the new identity still represented a presence in the apparel industry. However, Sara Lee, a frozen and prepackaged foods company, pursued a new industry when it bought Hanes—a manufacturer of hosiery and clothing.
A diversi�ied corporation also called a conglomerate owns businesses that are unrelated to each other. Take the case of Honda. It is an auto manufacturer—all its different models of cars and trucks and manufacturing plants and international markets don't change that. But it also manufactures motorcycles, power equipment (generators, lawnmowers, pumps, snowblowers, tillers, and trimmers), marine engines, and jet engines (HondaJet)—all different businesses (Honda.com, n.d.).
So it is a multibusiness company. But is it diversi�ied? No. All of its businesses have a common element— in fact its core competence—and that is engines and engine design. It doesn't produce anything that doesn't have an engine in it.
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Consider another example. Disney Corp. is broadly in the entertainment industry, and is in animated and live moviemaking (and DVDs), TV broadcasting (ABC, ESPN, Disney Channel), theme parks (Walt Disney World and Disneyland and other resorts worldwide), cruise lines, licensing its trademarked characters to other companies, and its own stores that sell everything Disney, including books, toys, and branded merchandise (Disney, n.d.). Yes, it's a multibusiness corporation, but is it diversi�ied? To answer this question, use the de�inition as a guide, notwithstanding they are all in the "entertainment" industry. You will �ind that they are basically unrelated businesses—they have different competitors, demand different strategies and �inancial investments, and need different people to run them. Multibusiness corporations can encompass businesses that are related but still SBUs, like Wrigley's chewing gum and its acquisition of Lifesavers and Altoids from Kraft Foods. Related SBUs can bene�it from shared expertise and resources and thus have high potential to add more value to the corporation. Multibusiness corporations can also own different companies that constitute a complete value chain, like the global, 100% vertically integrated oil companies that �ind and drill for oil, transport it via pipeline or tanker to their re�ineries, re�ine the crude into many different products, and sell some of those products directly to consumers (for example, gas and home heating oil).
Management Challenges
Managing a corporation with multiple businesses involves everything we have discussed so far and more. Certainly, each business should be managed strategically and do strategic planning. One major difference is that these divisions or subsidiaries cannot go outside the corporation for �inancing, either to get a bank loan or any equity investment; they must ask the (parent) corporation for the �inancing they need. It is the parent that must make sure it has suf�icient �inancial resources for the needs of all its companies.
As we know, companies at different stages of their lifecycle vary in their need for capital. Young growing and expanding companies are voracious in their appetite for funds, while those that are mature and doing well are throwing off cash but still need funds for innovation. Knowing this about a corporation's businesses helps it to anticipate funding needs and preempts it from treating all its companies the same way. A useful way of arraying a corporation's portfolio of companies and their �inancial needs was created by the Boston Consulting Group (BCG) (Figure 11.1).
Figure 11.1: BCG portfolio matrix
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Source: Adapted from Alan J. Rowe, Richard O. Mason, Karl E. Dickel, Richard B. Mann, and Robert J. Mockler, Strategic Management: A Methodological Approach, Fourth Edition (Reading, MA: Addison-Wesley Publishing
Company, 1994) 253. Reprinted by permission of Pearson Education.
The matrix is used to array both a portfolio of products as well as a portfolio of companies. In the latter case, the "industry-growth-rate" axis applies to different industries. Both products and companies begin life as "question marks," a capital-intensive state, ideally growing in market share until they are the market leaders (relative market share 1.0) and become "stars." Over time, as the industry matures and they still retain market leadership, they become "cash cows," throwing off cash that is often used to fund new "question marks." The last quadrant, "dogs," although a nickname given by the Boston Group, is a misnomer. For example, in any mature industry, only one company can be market leader; does that make all the other companies "dogs"? Is Ford Motor Company, currently in number-two position in the automobile industry,
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a "dog"? While it is entirely possible for products and companies to go from "question marks" to "dogs" and still be pro�itable, BCG is really saying that companies should aim for and nurture "stars" and "cash cows."
The value for a multibusiness corporation is to use the tool to help manage the portfolio. A portfolio with too many "question marks" is going to require huge amounts of cash; however, with several cash cows to �inance those needs, the overall pressure to raise capital is reduced. Also, a portfolio heavy with cash cows has no future stars on the horizon, jeopardizing the company's long-term future. So the need is to have a balanced portfolio.
There are four principal management challenges: (a) ensuring that the right person is heading up each company, (b) ensuring that each company is following the right strategy to perform to expectations, (c) getting as balanced a portfolio of companies as possible, and (d) maximizing the synergy or advantages (also called "spillover effects") created through related businesses (Saloner, Shepard, & Podolny, 2001). Even though the parent may have acquired a company with a CEO already at the helm, once the parent owns it, this becomes the parent company's responsibility. Both company performance and reports from other senior and middle managers can provide a better indication. And the only way to check on the appropriateness of the strategy is to insist the company engages in strategic planning, read its strategic plan, and then grill the CEO and the key executives on its contents. If the answers are satisfactory, the parent company need only give them the capital they need, get out of the way, and let them perform. If the answers are not satisfactory, then there is a problem and management will have to work through to a new solution.
The kinds of questions to ask should be familiar by now:
Is your current strategy working? Why or why not? How are your industry, competitors, markets, and technologies changing? How are these changes impacting the company? How are you planning to cope with these impacts? Do you have a competitive advantage? If not, are you trying to develop one? Do you have any �inancial problems, and, if so, how are you �ixing them? What are the key strategic issues facing your company? What other strategic options did you consider? Why did you reject them? What makes you believe your strategy will work? What will you need ($ amount) to implement your strategy? What could go wrong as you move ahead, and how might you cope with that?
Strategic-Management Complexities
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The track record of diversi�ied corporations is dismal. Often, only corporate lawyers, investment bankers, and original sellers make a pro�it, rather than the shareholders.
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Assuming that the SBU companies in a diversi�ied corporation's portfolio do the kind of strategic planning described in this book, what does the corporation's top management do? It cannot do strategic planning because the companies in its portfolio are in different industries. Instead, it can do two things:
Set corporate-wide annual objectives that are typically �inancial and pro�itrelated, such as 15% ROE or 10% NPM. Sell any company in its portfolio that is preventing the corporation from achieving its objectives and buy any other that is a high performer to boost achievement of the corporation's objectives. The strategic challenge becomes having the right portfolio and the portfolio's ability to achieve the required �inancial performance.
As discussed earlier, a diversi�ied corporation's �irst approach should be to "rescue" a poorly performing SBU, or give it a chance to right itself through following a different strategy, or even being led by a different CEO. Only if its performance cannot be improved quickly enough should the SBU be put up for sale. For example, conglomerate Sara Lee spun off Coach, a leading brand in leather goods in 2000, and sold its personal care products unit to Procter and Gamble, Unilever, and SC Johnson between 2009 and 2011 (Crown, 2006).
It is worth noting that the track record of diversi�ied corporations or conglomerates in adding value has been historically dismal, just as the track record of acquisitions being successful (around 20%) is also dismal. Michael Porter, as far back as the late ‘80s, asserted that in the 33 companies he studied, only the lawyers, investment bankers, and original sellers pro�ited from the diversi�ication acquisitions, not the shareholders (Porter, 1987). One factor against a conglomerate's ability to add value is that each acquisition is unrelated, and few synergies or economies of scale are possible. Given this record, why do �irms diversify, especially into unrelated businesses? One answer could be that it provides additional bene�its to top-level executives that stockholders do not enjoy. As �irms get larger, so does executive compensation. As �irms become more complex and dif�icult to manage, so does executive compensation increase (Hitt, Ireland, & Hoskisson, 2007). And these correlations are true whether or not each new acquisition adds value to the �irm.
Diversi�ied �irms with related businesses, either producing different products for the same consumer market nationally or internationally (like Kraft or Nestlé) or using proprietary technologies in all its products (like Canon), have a more dif�icult challenge in trying to maximize synergies and ef�iciencies among its portfolio companies. When they succeed, they perform beyond expectations; when they don't, the
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situation is harder to correct because of the web of relationships between and among the companies. The parent can't just "sell off" the underperforming unit. Diversi�ied �irms are often also international in scope, to which we turn in the next section.
Discussion Questions
1. Managing a diversi�ied corporation at some point becomes largely a �inancial exercise—the overall objectives for the corporation are �inancial, and the decision to buy or sell companies for the portfolio is �inancial. Do you agree with this view? Why or why not?
2. If one of the portfolio companies in a diversi�ied corporation wasn't performing up to expectations yet provided a valuable service to society and had �irst-rate people among its staff, what argument would you use to keep the company in the portfolio and get it to perform better?
3. What other kinds of expertise does a multibusiness corporation need at the top besides accounting and �inancial? Explain. 4. On what basis might staff at the corporate level be hired and �ired? 5. Before acquiring a company to add to the portfolio, how might the management team really evaluate the company, which is in another industry, besides its �inancial results?
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11.2 International Corporations
Companies, regardless of the country in which they ordinarily do business, are driven to go explore international opportunities for two principal reasons. One is the maturing of the home market and a subsequent slowing of its growth rate. The other is recognition of signi�icant growth opportunities for the company's product or service in one or more foreign countries. Either or both will impel a company to expand internationally.
Becoming an international corporation is not that simple. The biggest difference is that competing abroad is quite unlike competing at home in the United States. In each country, the rules and culture are different, the playing �ield is not level, competitors are ruthless, and prices demand that costs be lower than low. For example, in an analysis of the luxury fashion industry in Brazil, which has historically had a strong market for high-end fashion and accessories, Imran Amed (2012) wrote, "When you try to do business here, you will eventually �ind yourself stuck in a morass of government bureaucracy, corruption, and an incomprehensible system of taxation."
Stephen Rhinesmith underscores the complexity of a global organization; managers need to balance issues of "centralization vs. decentralization, global ef�iciency vs. local responsiveness, and geographic vs. functional priorities" (Rhinesmith, 1996, p. xii). Our focus at this point is on international, not global, corporations (which are discussed Section 11.3). International corporations include essentially domestic companies that export products to other countries through incountry representatives or distributors (requiring no knowledge of foreign markets), international corporations that have an international division with foreign subsidiaries or divisions, and multinational enterprises that establish mini-replicas of their domestic business in each foreign market, having foreign nationals manage those businesses. Nestlé of Switzerland is a good example of this last type. In fact, multinational corporations try to look like "multidomestic" organizations so that local regulatory authorities treat them as a local business.
Going International
In the arena of international business, the adage "know before you go" is important advice. Many countries in the world have consulate of�ices in the largest U.S. cities on both coasts, and they are well informed as to what kinds of products are most needed in their countries as well as a list of products they are trying to export to the United States. They will also provide advice on how to go about exporting products to their country.
A prospective exporter must become familiar with the laws in that particular country, particularly as they apply to selling products there, paying taxes, and repatriating pro�its back to the home country. Japan, for example, is a closed market, and entering it requires a strategic
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For companies venturing into the foreign market, there are management challenges involved in estimating the demand for a product.
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alliance or partnership with a Japanese company. But the overarching consideration, besides potential demand, is the country's political climate and stability.
It is incumbent on any company planning to do business abroad to get all the information it can about the countries before deciding to expand elsewhere. Read voraciously about them and their relationships with the United States. Generate a list of questions and then seek answers from appropriate agencies of the federal government like the U.S. State Department. Best of all, visit the countries in question, shop at the kind of retail outlets that will stock your product, chat with customers, make appointments to talk with prospective business customers and distributors, and get information on bidding for government contracts if that is your market (of course, go with a translator if you cannot speak the language). Doing anything less heightens the risk immeasurably.
Management Challenges
For a company that has never ventured abroad before, there are considerable management challenges involved in doing so. In some respects, these challenges are similar to those that startups face when they enter a market for the �irst time. The most common include the following:
Estimating demand for its product in that country (and in every country being considered for expansion). Obtaining data is vital; guesses or opinion are not the bases on which to make large �inancial decisions. Knowing the current competitors, some of whom could be familiar because they probably compete in the domestic market. And what prices and versions of the product are being sold, and why might the company's also fare well? Determining whether enough infrastructure is in place such as for transportation and telecommunications. This can be a major issue in developing countries. The dominant language spoken in that country and, if not English, how you will overcome that barrier. How long it will take to break even and make money. This involves knowing which international strategy (discussed in the following section) makes most sense, particularly in the beginning. Whether to hire staff in the foreign country and, if so, how to train them, reward them, and nurture loyalty in them.
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Note again that domestic companies that outsource production or other services to another country are not considered international companies if they serve only their domestic market. However, Chinese factories, on the other hand, are international companies because most of their markets are in other countries (Midler, 2009). While companies that license their technology or trademarks to foreign companies are considered international in this discussion because their customers are located in other countries, the negotiations nevertheless take place on their home turf, and they don't have to learn about foreign cultures or business practices, or even take the risks that international companies do.
International Strategies
The following discussion includes different strategies that a hitherto domestic company can use to transform itself into an international company. They can be market-entry strategies as well as strategies to further its growth depending on available resources and what it might be facing competitively. They are discussed in order of increasing complexity, commitment, and cost.
Exporting and Market Expansion
Exporting doesn't require a presence in the host country, just knowledge of shipping and freight, insurance, and custom regulations. Most of all, it needs a distributor or importer in the host country that acts as the customer and places the orders. In an ideal situation, the importer would contact the company (manufacturer) to make the deal, but more typically, the company has to �ind the customer. With foreign consulates in the home country and the power of the Internet and telephone, the problem is not insurmountable. However, the domestic company will discover a great deal of pressure on prices, because it is now competing with manufacturers from all over the world.
To a large extent, how a company responds to pricing pressure depends on the country that is receiving the goods. The European Union is very different from a developing country like India. Savvy U.S. manufacturers, unless their product is unique and proprietary, might arrange to outsource manufacturing to reduce the price and then have the product shipped directly to their foreign customers, saving even more money. Of course, that introduces additional risks. There is the danger that the outsourced manufacturer has no scruples about selling the product to still other customers in other countries (Midler, 2009).
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Toyota built car-manufacturing plants in the United States when they determined it was more pro�itable to build and sell cars in the United States rather than ship them from Japan.
Associated Press/James CrispA risk that cannot be avoided (except by choosing a different foreign market) is currency-exchange �luctuations. For example, a surge of the Japanese yen against the U.S. dollar recently erased 80 billion yen ($1 billion) from Toyota's latest (2011 Q3) quarterly net income (Associated Press, 2011, Toyota pro�it drops). When a company determines that too much money is being lost bringing pro�its home, it will try to establish a manufacturing plant in the host country. That not only reduces currency-exchange losses, but also transportation costs and pressure on the home factory to produce for both markets. Keeping with the example of the auto industry, there is another bene�it to a manufacturer that decides to open a plant in different state or city. An automobile factory signi�icantly in�luences a community in diverse ways, not just as a result of local employment but also through an economic multiplier effect. Creating a factory within a community bene�its not just the local community, but also surrounding regions and even nearby states. Because the auto industry pays above–average wages and boasts a job–creation multiplier of 7.5—the highest of any United States industry—capital investment often has potential to reach or exceed $1 billion (McAlinden & Fulton, 2001), it is easy to see why communities battle each other to be chosen for an automotive-assembly plant. The cost to attract such an automotive investment is high; in some cases communities have offered incentive packages to car manufacturers reaching upward of $300 million per facility and over $100,000 per job (Car Research, 2003).
Market expansion, unlike exporting, does require a presence in the foreign market. Market expansion is a way of ending dependence on a foreign distributor or importer, which doesn't release any market information, and eliminating the markup it charges. Companies open sales of�ices and staff them with nationals of that country, because it's easier to train a local person about the product and company's procedures than to transplant someone from the home market and expect them to learn about the country, its culture, business practices, and market. Kenichi Ohmae (1990) believes the problem is more complex than this. Companies are held back because they cannot seem to get rid of the "headquarters" mentality. This is not just a problem of bad attitude, but rather stems from their entrenched systems, structures, and behaviors. But these are the last to get management's attention because the �irst symptoms are local (in the host country). For example, if advertising in the host country is not paying off as expected, the company may not recognize that the cause could be back at its own headquarters. Lacking cultural awareness, it may not understand what it takes to market effectively in the host country. Other possible causes for the failure to realize anticipated results include a reluctance to make long-term, front-end capital investments in new markets, or the failure to ensure that strong employees are in place at the local level. Instead the failure may be diagnosed as a local problem and the company will try to "�ix" that (Ohmae, 1990).
One of the challenges is the tension between headquarters telling the host sales of�ice what to do, and the sales of�ice—because of its proximity to the customer and knowledge of market trends in that country—telling headquarters what should be done. There is no easy solution to the problem except to choose the host sales manager with care; it should be someone headquarters can really trust and listen to.
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Eighty percent of Coca-Cola Company's revenues are outside the United States, making it perhaps the biggest global franchise in the world.
Marka/SuperStock
Headquarters should remind itself why it hired that person and what it is trying to do in that market, and be open to suggestions that can bene�it both. If things turn out as planned, the host sales of�ice will grow to become a major part of the international division of the home company, a pattern to be repeated with every new foreign market the company chooses to enter.
Another challenge is the realization that different countries require different versions or variations of the product. An example would be European's need of very small major appliances, like clothes washers and dryers and dishwashers, because they more commonly live in small apartments, unlike the very large appliances common in more spacious U.S. homes. Such product changes grow out of market research—the data and intelligence collected and made sense of by the of�ice that the company maintains in that country. This typi�ies a multidomestic strategy, when customer demands and needs vary substantially from country to country, forcing a company to modify any combination of product features, packaging, advertising, servicedelivery methods, and pricing; centralized control or integration is virtually impossible (Abraham, 2006). For example, McDonald's has succeeded in France, in part, by demonstrating an understanding of the country's cultural preference for longer, more leisurely meals than U.S. customers prefer and offering table service in response. Further, because the French are not inclined to "snack" in between meals, McDonald's emphasizes meals rather than the quick-serve
snack foods that are so popular in the United States. And, the company has introduced cultural favorites to the French McDonald's menu— such as baguettes (Fancourt, Lewis & Majka, 2012).
Another international-market-expansion strategy is franchising, which has been used successfully by well-known companies in the fast-food industry like McDonald's, KFC, and Subway (Hitt, Ireland, & Hoskisson, 2007). However, a host country's culture and preferences may dictate modi�ications in the menu items. For example, McDonald's in India could not serve beef because the cow is a sacred animal to Indians and Hindus; it served vegetarian and mutton burgers instead. Subway, when it �irst entered China, found the going dif�icult because the Chinese weren't used to eating with their hands; so at least one item on the menu had to be eaten with chopsticks (Hitt, Ireland, & Hoskisson, 2007).
Perhaps the most global franchise system is Coca-Cola, which derives over 80% of its revenues outside the United States. It franchises bottlers in virtually every country in the world; to manage those companies, it depends on the relationship with its bottlers and thus has to be
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organized geographically. For example, the Eurasian and Africa Group is responsible for 90 emerging markets, headquartered in Turkey (Holstein, 2011). Franchising is also the way in which the product turns out to be identical no matter the location.
Strategic Alliances
Forming strategic alliances has become more popular over time principally because it allows �irms to share both risks and resources as it tries to enter international markets. (Strategic alliances were introduced in Section 1.6. This section discusses the role of strategic alliances only in international expansion, sometimes called cross-border strategic alliances.) If the right partner can be found, then a strategic alliance with a �irm in the host country has distinct advantages over a simple exporting or market-expansion strategy:
The host partner is familiar with the host market, industry and competitive conditions, legal and social norms, political trends, and cultural idiosyncrasies of the country. Partnering with a local host company avoids paying tariffs and is sometimes the only way a foreign company can do business in a host country. This is true of Japan, which is otherwise closed to foreign businesses. The risks (and pro�its) are shared. Both partners learn capabilities from the other, including but not limited to technological skills, competitive/marketing skills, and a greater cultural awareness. (By the same token, each partner brings to the relationship unique knowledge and resources.)
While many strategic alliances are formed to create a competitive advantage, the purpose in this context is to expand the market for the home company in a way that reduces the risk and raises the probability of success (Ireland, Hitt, & Valdyanath, 2002). A successful strategic alliance depends critically on doing due diligence on the prospective partner and developing a sound agreement to which both parties are committed. Many companies have expanded their markets in this way, including Fujitsu, Cisco, Dell, and Microsoft. Lockheed Martin has formed over 250 alliances with �irms in more than 30 countries (Hitt, Ireland, & Hoskisson, 2007). French automaker Renault has had a successful strategic alliance over the years with Japanese automaker Nissan because it was well managed; executives from both companies knew their companies well, understood how each partner perceived the other, and could adapt while remaining true to their own company and cultural values (Pooley, 2005). The primary reasons why strategic alliances fail include incompatible partners, often a result of rushing into the agreement without fully considering key factors, and con�lict between the partners (Robins, Tallman, & Fladmoe-Lindqvist, 2002). In addition, the very nature of cross-cultural alliances can complicate the negotiotion process and result in a lack of communication and trust between the partners. Other reasons for failure include the possibility that one partner acts opportunistically outside the terms of the agreement, a lack of trust (which cannot be overemphasized), "stealing" proprietary information and even the partner's tacit knowledge of processes and ways of doing business, misrepresenting resources and competences brought to the relationship, and lack of transparency regarding necessary disclosures (Midler, 2009).
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Starbuck's and China's President's Coffee formed a joint venture to open hundreds of Starbuck stores in China, creating a whole new market for what had previously been a nation of tea drinkers.
Associated Press/Long yudan/Imaginechina
In pursuing international expansion, host-country partners are typically distributors. Some refer to this as a vertical complementary strategic alliance because it shares resources and capabilities from different stages of the value chain (as in vertical integration), compared to a horizontal complementary strategic alliance that involves one with a competitor. Choosing the right distributor partner is not easy. It has to have a good reputation with retailers (or with companies if the market is commercial) and the physical and organizational capacity to grow. A different kind of alliance would be with a manufacturer in the host country, not a distributor, and would entail a cross-distribution alliance, which is an agreement between two companies in different countries to market and distribute each other's products in the other's country. If this possibility is appealing, then the search for a partner should include manufacturers of products that are targeting similar markets and would bene�it from this particular kind of strategic alliance.
Joint Ventures
As noted in Chapter 1, a joint venture is a strategic alliance that requires a greater level of commitment. Also governed by an agreement between the two parties, a joint venture requires the formation of a separate corporate entity jointly owned by the two parties. International joint ventures are particularly dif�icult to manage successfully for some of the same reasons that complicate strategic alliances. Care should be taken in choosing the country in the �irst place before looking for potential joint venture partners; for example, Russia appears to have signi�icant disadvantages that should be taken into account including a chronic shortage of certain raw materials and dif�iculty repatriating pro�its back to the home country, which neither Russian banks nor authorities can guarantee or facilitate. A company contemplating this type of arrangement must also take measures to protect against government expropriation such as by limiting the circumstances in which it would be considered legal, de�ining a lump sum in U.S. dollars should expropriation occur unexpectedly, and taking out expropriation insurance before signing an agreement. American companies must also address natural- environmental issues, because Westerners often are blamed for airand water-pollution problems and habitat destruction (David, 2005).
The following are examples of well-known joint ventures:
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NUMMI (New United Motor Manufacturing, Inc.), the joint venture between General Motors and Toyota formed in 1984 in Fremont, California (and recently disbanded in 2010). GM saw an opportunity to learn about lean manufacturing, and Toyota established its �irst manufacturing base in North America and the chance to implement its production system in an American labor environment (Bensinger & Strack, 2009). NUMMI produced a number of models, notably the GM brands Geo Prizm and Pontiac Vibe and Toyota brands Voltz, Corolla, and Tacoma pickup truck. GM, despite its reason for entering into the joint venture, did not apply what it learned about ef�icient Japanese manufacturing to its other manufacturing divisions. Hewlett Packard's entry into the computer market in Japan through forming a joint venture with Yokogawa Electric (Yokogawa Electric, 1999). Starbucks formed a joint venture with China's President's Coffee to open hundreds of Starbucks coffeehouses in China. Long a country of tea drinkers, Starbucks is having success in helping the Chinese develop a taste for coffee (David, 2005). The Dutch company Philips Electronics NV has over $2.5 billion worth of investment in China that includes 30 wholly owned enterprises and joint ventures that employ 18,000 people and produce everything from semiconductors and lighting to medical diagnostic imaging equipment (David, 2005).
Joint ventures can prove thorny if managers assigned to operate the venture were not involved in forming or shaping it, if customers experience poorer service, if the support from the two "parents" is unequal in important ways, or if the venture itself begins to compete with one of the parents (Hutheesing, 2001).
Acquisition
Cross-border acquisitions increased signi�icantly during the 1990s and comprised 45% of all acquisitions completed worldwide (Shimizu, Hitt, Valdyanath, & Pisano, 2004). Why should a company expand internationally by acquiring another when it could form a strategic alliance or even a joint venture? There are several reasons for preferring an acquisition strategy:
Where the business is the same, it enhances economies of scale. In cases where technology transfer takes place, proprietary processes and other intellectual property can be more easily safeguarded. It provides the fastest and often largest initial international expansion of any of the other international strategies (Hitt & Pisano, 2003). Walmart expanded into Germany and the UK through acquiring local �irms (Levine, 2004). In most cases, the buildings and locations already exist instead of having to be built and situated, which takes considerable time in any country. While similar to a strategic-alliance strategy, in that the home company has partners in the host country to continue the expansion, only in the case of an acquisition can the acquirer control what the acquired company does. It lends itself to replication if the acquiring �irm has become adept at acquiring companies (foreign or domestic), that is to say, develops a core competence in doing this. The large companies that rely on acquisitions to grow have departments with experienced people whose sole job is to help make and help digest each acquisition.
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The U.S. Securities and Exchange Commission enforces the international accounting provisions through the 1977 Foreign Corrupt Practices Act.
Jim Bourg/Reuters/Corbis
Many references and mentions about acquisitions frequently include mergers and confuse the two, but, as Section 1.6 makes clear, the strategies are very different. As an international expansion strategy, mergers are far less common and more dif�icult to pull off, primarily because cultures from different countries must be successfully integrated.
Acquiring companies must realize that negotiations to acquire a company in another country are more complex than those for a domestic acquisition and must deal with two legal systems; only about 20% of cross-border bids lead to a completed acquisition compared to 40% of bids for domestic acquisitions (French dressing, 1999)
Ethics Challenges
Companies doing business in the international arena often �ind themselves facing ethical dilemmas. What is regarded as "unethical" at home sometimes seems to be "business as usual" in other countries. So why not, as the saying goes, "When in Rome, do as the Romans do"? If other companies are doing it and, in U.S. eyes, are "getting away with it," why not do likewise?
The Foreign Corrupt Practices Act is a federal law enacted in 1977 that prohibits the payment of bribes to foreign government of�icials and politicians as a means of establishing business in another country. The act contains two parts: an anti-bribery provision that is enforced by the Department of Justice, and an accounting provision overseen by the Securities and Exchange Commission (World Compliance, 2011). If a U.S. company is found to have been engaging in bribery abroad or taking or giving kickbacks in order to win a contract, they can be prosecuted at home regardless of whether others engage in the practice. In the past several years, enforcement of the law has signi�icantly increased.
Other challenges, encountered principally in international marketing, include but are not limited to the following:
Gifts/favors/entertainment—includes a variety of items such as generous gifts, personal travel opportunities funded by the company, items gifted upon completion of a business transaction, sex workers, and similar costly entertainment.
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Pricing—includes unfair differential pricing, inaccurate invoicing (e.g., invoices showing an amount different from the price paid by a buyer), pricing strategies that force out competitors, selling products abroad at price points far below that of the home country, and practices such as price-�ixing agreements that are legal abroad but illegal at home in the U.S. Products/technology—includes products and technology whose use is legal in the host country but illegal in the United States, and/or products deemed unacceptable or inappropriate for consumers in the host country. Tax-evasion practices—includes transfer pricing (where amounts paid between af�iliates and/or the parent company are modi�ied to bene�it pro�it allocation), the use of tax havens (where pro�its gained are recorded in a low-tax jurisdiction), adjusted interest payments on intra-�irm loans, and dubious amounts charged for management and services between af�iliates and/or the parent company. Activities considered illegal or immoral in the host country—including harm to the environment, unsafe working conditions, duplication of products and technology in places where patent protection, trademarks, or copyrights are not enforced (of particular concern in China), and short-weighting overseas shipments by charging a country an inaccurate weight. Questionable commissions to channel members—includes paying exorbitant commissions to sales agents, consultants, middlemen, dealers, importers, and other channel members. Involvement in political affairs—includes politically driven marketing activities such as the exertion of political in�luence by multinationals, conducting business while either country is at war, and illegally transferring technology. (Armstrong, 1992)
In many instances the playing �ield is not level for an international �irm, but that's why developing or acquiring skills traversing that �ield is a decided advantage.
Discussion Questions
1. How does environmental analysis differ in the international arena from the home market? Comment on the relative dif�iculty of obtaining the requisite information.
2. Choosing an international strategy is often dif�icult—is it better to open a sales of�ice, form a strategic alliance, or acquire a company in the target country? We know that country-speci�ic factors and the potential size of the opportunity signi�icantly affect the decision. But what role do �inancial considerations play? For example, how important is the size of the required investment, return on that investment (including ease of repatriating full pro�its), and time to breakeven (to recoup the investment)? Should these be more or less important? Explain.
3. Which kinds of international strategies are most appropriate for companies in the following domestic industries to use, and why?
producing movies software management consulting breakfast cereals school of business
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4. Imagine playing a role in deciding an international strategy for a company. You decide that forming a strategic alliance with a company in Brazil is the best way to go to enter that market. But negotiations don't go well because the deal is not structured fairly and you distrust the potential partner. Do you keep looking for the right partner or decide on another strategy?
5. When competing and operating internationally, by which moral compass do you steer? To what extent are your actions governed by what you perceive to be ethical and right? Discuss.
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11.3 Global Corporations
Global corporations are designed to compete globally and serve markets in most countries of the world that have enough experience and have developed sophisticated systems to manage such a complex enterprise. They are typically in one major industry (like electronics, telecommunications, or automobiles) but may have many product lines in many segments of that industry in order to achieve a global brand and economies in many areas of the value chain.
Global vs. International Corporations
There are two principal differences between global corporations and international corporations. The �irst is that a global company has centralized strategy-making and marketing control, meaning that country-speci�ic product preferences are minimal or nonexistent, and a standardized product can be marketed and sold to all countries, generating signi�icant economies of scale in purchasing, production, and advertising. SBUs operating in each country are interdependent and coordinated and integrated by the home of�ice (MacMillan, Van Putten, & McGrath, 2003). The second difference is that global businesses have the freedom to move functions to anywhere in the world; for example, they can purchase from anywhere, produce anywhere, carry out R&D anywhere, acquire companies anywhere, and even move the headquarters anywhere in the world.
A good example is the Focus ST (Sports Technology), one car manufactured by the Ford Motor Co., which is a multinational corporation. This Focus was designed, manufactured, and marketed in several countries. Today, it can be purchased in over 40 markets including the United States, Canada, Mexico, South Africa, Australia, New Zealand, and 15 European countries. It was engineered by the Ford Global Performance Vehicles group—a strategic partnership between Europe’s Team RS and North America’s Special Vehicle Team (SVT).
Focus ST has not come around by chance. . . . What came �irst was our global performance strategy, which has been developed with North America, Europe, and Asia together. With this, the core DNA attributes—steering, driving dynamics, sound quality, and power enhancements for all ST models—have been de�ined to the extent that our engineers can take that global DNA �ingerprint and use it to create the new Focus ST. (Jost Capito, as quoted in Ford News Center, 2011)
Management Challenges
The discussion here presumes that most of the challenges that beset the various international strategies also apply to pursuing global strategies. In addition, the following should be mentioned:
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Global strategies are vulnerable to local catastrophes that disrupt their operations. In October of 2011, �looding at a Honda plant in Thailand caused a chronic shortage of parts, forcing Honda to cut production by 50% in the United States and Canada.
Associated Press/Sakchai Lalit
Customer needs may change over time resulting in diminished demand for the global product. If the corporation is attentive, then it should take steps to phase in a transnational strategy, a name for a global strategy that capitalizes on ef�iciencies and economies of scale while being locally responsive, epitomized by the familiar saying, "Think globally, act locally."
Whirlpool Corporation embarked on a global strategy in the late 1980s, anticipating that a few global players would dominate the worldwide appliance industry. It grew through acquisitions and investments in companies in Europe, India, China, and South America. However, by the mid-90s, it suffered large losses in every market, calling into question its centralized global strategy. Once the company had established itself in these countries, each center of production began developing various skills and designs tailored to that particular region—they became centers of excellence for technology and production. In fact, the Whirlpool's Duet washers and dryers now popular in the United States are engineered and made in Germany; the quality of its "kink-free German technology" justi�ies the high price and outsells the competition (Hitt, Ireland, & Hoskisson, 2007).
Global strategies are particularly vulnerable to local catastrophes that disrupt �inely tuned operations. Two recent examples involve Toyota and Honda. Toyota's plunging sales and pro�its in the summer of 2011 were caused by parts shortages from the combination earthquake and tsunami disaster in northeastern Japan in March 2011 that closed its factory for a month (Associated Press, 2011, Toyota pro�it drops). Honda also underwent an unanticipated parts shortage when they were forced to cut U.S. and Canadian factory production by half due disastrous �looding in Thailand shortly after the company had begun to recover from the March 11 earthquake and tsunami in Japan (Associated Press, 2011, Honda to cut).
Global corporations often use sophisticated modeling and analysis techniques, perhaps more than multinational corporations. They use variants of the "traveling salesman problem," which chooses an optimum route for a sales representative to visit a number of cities at least once and travel the least distance. Global corporations use approximations of the model to locate factories and assembly plants to be both close to suppliers and close to customers in order to minimize transportation costs. Such a model can at best be a guide, however, because other factors must be taken into account such as investments, laws, and labor pool in particular countries that cannot be included in a quantitative model. The insights gained from such analyses enable the corporation to derive new solutions as soon as conditions change, just as a PERT model can be recon�igured instantly to recompute a new critical path to take into account delays or overspending in completing previous tasks.
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Discussion Questions
1. Why do you think only a few companies achieve a bona �ide globalization strategy? 2. Can you think of any forces that might be acting against globalization? 3. Research assignment: Go to the following companies' websites and determine whether they are pursuing a global, transnational, or multinational strategy (justify your conclusions):
IKEA Siemens
Sony Singapore Airlines
BMW Net�lix
Cisco Google
Exxon Walmart
4. Can you come up with any social or political arguments against globalization? 5. Can a global corporation become too big? Why or why not?
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Startups need a business plan to help secure needed funding to launch new products, as well as an operational plan to guide them to their objective.
Aleksandar Stojanov/iStockphoto/ThinkStock
11.4 Startups and Small Businesses
Having considered the case of very large multinational and global companies, we now turn our attention to very small businesses. While many startups and small businesses have little or no history, have insuf�icient funds at their disposal, and don't do strategic management or strategic planning, only startups need a business plan, not a strategic plan. A startup is a company, venture, or organization that comes into being the moment money is expended in its behalf, not when revenues are achieved or when it is registered. This section discusses startups �irst and then covers small businesses, which need to do strategic planning and management, but usually don't. De�ining small business is a matter of opinion as there is no standard agreement as to how small is small. On the grand scale of things, while companies with revenues or sales of under $100 million qualify as "small," this section focuses on even smaller businesses that have sales of under $10 million.
Business Plans vs. Strategic Plans
Startups have no way of answering the following questions:
Is the current strategy working? Should the current strategy be changed? Does the company have any �inancial problems? What strategic options does the company have?
These questions are at the heart of strategic planning and require both some history to go on and the existence of strategic options to consider. Startups have neither.
Instead, startups are formed and come into being with a product or service idea of suf�icient merit to enable them to enter the industry and immediately be competitive. The startup's industry is preordained by its particular product or service or, in extremely rare cases, by creating
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a brand-new industry. Its strategy is to enter the market, which it does usually through innovation and differentiation strategies, but sometimes through cost leadership (as when a startup disrupts incumbents in an industry with a much lower price point).
What startups need is a business plan, for two reasons—to secure funding the company needs to launch its product or service and to develop an operating plan to guide what it needs to do. With respect to securing investors, a business plan is a document that clearly explains the concept of the business, the opportunity it is going after, its vision in the �ive-to-seven year range, how it intends to meet existing competition, how it will make and price the product, why there will be a demand for it, when the company will break even, how much startup capital is sought and how it will be spent, and the founder's experience, motivation, and how much of his or her own money is invested in the company.
A business plan for operational purposes needs only to have a detailed cash-�low projection for two years by month with lots of detail, notably the sales projections form revenue targets for each month and the expenses form monthly budgets. Once things get going, the plan needs constant updating to re�lect new realities. It is for this reason that some people say that it isn't worth putting together a startup business plan, because no sooner has the ink dried than everything has changed.
Securing funding is often a huge problem; it is the rare startup (other than a mom-and-pop) that can launch a business �inanced entirely by the owner. Even getting a bank loan is problematic because banks typically require three years of pro�itable operations before giving a loan without commensurate collateral. In the economic climate following the banking crisis of 2008, many lenders raised their lending requirements or stopped making small-business loans entirely. But they continued to give a loan on the basis of collateral or with a cosigner whose credit rating and net worth were suf�icient.
Business plans constitute the principal way that startups secure external equity funding, typically from venture capitalists and angel investors. Getting the right investors that are as motivated for the venture to succeed as they are to make money is not easy. What many entrepreneurs don't realize is that venture capitalists are as eager to �ind a good venture that has some likelihood of succeeding as entrepreneurs are to get funded.
Outline of a Business Plan
Executive Summary (This should be done last and summarize every section in the business plan; its purpose is to get an investor to read the plan. It precedes the table of contents, is not page-numbered, and should be one page long single-spaced.
Main Sections
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The Business Concept (one page)—introduce the company or idea, tell how the company came to be, describe its history to date if it has already been started (this may take up to three pages), and provide contact information (person to contact, address, phone, e-mail, website).
Industry and Competitive Analysis (what you know about the industry in which you will compete and your competitors).
Market Analysis (everything you know about your customers—how many, whether growing, where dispersed, how they buy, price-sensitivity, needs, trends—consumer or business customers).
Environmental Trends (in the economy, technology, regulation, sociocultural, political, etc.—what might adversely affect the startup?)
Management Team (include ownership, who is taking what management role, how the company is organized now and at the end of two years, and something about the values or culture and how these will be sustained. Principal roles are marketing, operations, �inance, and R&D/engineering for a technical product).
Marketing Plan (what activities are needed to get the intended sales and how much will they cost)
Operations Plan (include all other programs, such as training, IT, staf�ing, leasing, manufacturing, outsourcing, security, etc. not included in the marketing or �inancial plans).
R&D/Engineering Plan (include if the company is still developing its product or intends to develop a next-generation product).
Financial Projections and Investment Deal (must include two years of projections, by month, with subtotals for each year, both for a "most likely" scenario and a "worst-case" scenario; must include a section called "Assumptions" that explains every number in the projections, together with a summary of the differences between the most-likely and worst-case projections [typically 4–6 key differences]; must summarize the key results from the projections, e.g., revenues and cash surplus [loss] for each year, return on initial investment, breakeven month, and capital investment required; and if outside investment is required, then must include a section on the investment deal [not a loan, because startups can't really get loans save in exceptional circumstances or from a family member]—amount required, stock percentage offered, how proceeds will be used, and any other terms).
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One of the most important challenges for a startup business is keeping it properly capitalized.
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Risks and Contingencies (enumerate the major risks the startup will face and what will be done to cope with or ameliorate each one).
Appendices (these can be A, B, C, etc. if you have more than one; continue with the page numbering. Full résumés of all principles should be in one appendix.)
Source: Adapted from Stanley C. Abraham, handout for his course on The Business Plan, California Polytechnic University, 2011.
A venture capitalist is a person that invests in a startup or expanding business venture with potential to achieve signi�icant returns on invested capital. Venture capitalists are looking for a high rate of return, to compensate for the much higher risk involved in investing in early-stage startups. Typically they are looking for over 25% but often closer to 40% return. When a high- tech prototype, for example, has proven the business concept and production begins, much of the early risk has dissipated and returns are much lower.
What's the difference between a venture capitalist and an angel investor? An angel investor is a former entrepreneur that has become wealthy from prior ventures and wants to help other entrepreneurs, usually in the same �ield. For example, someone that founded and sold a software venture is inclined to invest only in software startups. Angel investors typically invest smaller amounts than venture capitalists and take a more active role with the company's management. It is not uncommon for ventures to be funded by a group of angel investors, just as very large ventures expanding nationally (like
IKEA) would be funded by several venture-capital �irms and other investors.
An oft-overlooked source of funding, particularly with high-tech companies that have developed new technology, is a strategic alliance with a large corporation. Such corporations, both domestic and foreign and in many different industries, invest in entrepreneurial companies in return for rights to make or market new products and services. The investment is considerable for the small company and, besides the aforementioned rights, might also involve a small ownership stake (Silver, 1993).
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Unique Challenges Facing Startups
The biggest challenge, of course, is to produce the product successfully, establish it, get people buying it, generate positive cash �low, and continue to grow—easy to say but very hard to do. To accomplish this, other challenges need to be met almost simultaneously:
Make sure the company continues to be properly capitalized as it grows and expands, yet not relinquish too much of the founders' shares in the process. High-tech startups should consider forming a strategic alliance with a large corporation interested in its technology in exchange for the capital it needs and �irst rights to using the technology. Make sure the right people are hired who can do the job and perpetuate the culture of the founders. Be extra careful in forming a partnership; the partner might look perfect in the beginning, but it's not until the contracts have been signed and the working relationship is tested that the viability of the relationship becomes apparent. Also, choose partners with complementary skills and experience (not a clone of you) and a history that will not prove detrimental to the company (Jaffe, 1998). Adjust quickly as more is learned about the company's customers and competitors; while the business plan is a good foundation to start the business and obtain initial capital, it quickly becomes out of date.
These challenges are all business-related. However, many new entrepreneurs with ideas worth investing in have virtually no business experience. Depending upon the industry, they may be software or IT experts, scientists of one kind or another, or engineers that know more than anyone else about their product and why it works and, as a consequence, have a product-centered view of the business. The problem with this is that such an entrepreneur may tend to dwell on the technical aspects of the product, where they feel most comfortable, forgetting that venture capitalists are not necessarily technically inclined and are more interested in the business aspect of the startup. It is important when seeking funding to develop a customer-centered view of the business and speak the language of venture capitalists. There's nothing wrong with being the best expert in the world on the technology or product, but a startup needs to have someone on the team who knows marketing, accounting, and �inance.
Strategic Planning Challenges for Small Businesses
A small business is one that is privately owned and operated, has relatively few employees and small sales volume. Small businesses are typically privately owned corporations, partnerships, or sole proprietorships. Legally, a "small" business is de�ined as having less than 500 employees, the upper limit which governs whether business can qualify for any Small Business Administration programs. Small businesses can also be de�ined by their sales, assets, or net pro�its. This discussion excludes startups that have the bene�it of carefully conceived business plans and investor advisors and that are designed to grow quickly. It also excludes sole proprietorships, like CPAs and consultants, and independently owned mom-and-pop businesses, like convenience stores. Finally, it excludes franchisees that, although independently run, are
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Small businesses that grow to a certain size begin doing strategic planning.
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too constrained by the corporate parent through its franchise agreement and, for the franchised business certainly, are restricted from doing strategic planning.
Very small businesses, below $1 million in revenues, focus on surviving and, if they can, growing. They typically don't have additional staff to do research, or information systems to provide them with performance data when they need it, and are so pressed for time by the exigencies of day-today demands they don't often �ind time for strategic planning. Many small-business owners don't know how to do strategic planning and often cannot afford a consultant to help them. Finally, they may not need to do strategic planning. They may be pursuing the same strategy they had when the company was founded, spending all their resources, time, and energy in making it work, getting established, and surviving amid the competition. If the strategy is not working, the company will go under, usually by the owner declaring personal bankruptcy. It often has neither the know-how nor the resources to adopt a new strategy even if it knew what that might be.
Small businesses in the $1–10 million range also face the same challenges to do strategic planning but are probably organized better, have systems in place, and more experienced managers in leadership positions to help the owner. But they are still strapped for time and resources and may see no need to change the strategy if they are still growing. If the strategy faltered, the owner would seek either to be acquired or to declare bankruptcy. However, if performance had dropped far enough (or debt risen high enough) to adversely affect the price the company could get for selling it, then it might seek consulting assistance to explore other alternatives, like targeting a completely different market and restructuring its debt and cutting costs.
Larger small businesses, with revenues over $10 million, are often more sophisticated and �inancially more able to do strategic planning. However, in many cases, it is more likely than not for the owner to dictate what the company should do strategically and get the other functional vice presidents to go along. Doing really participative, research-based strategic planning with a group of top executives and operational managers is still rare with companies of this size. They have grown successfully without doing it and, subconsciously, often feel they can continue in the same vein.
The Association for Strategic Planning (ASP), a nonpro�it professional society whose mission is to help people and organizations to succeed through improved strategic thinking, planning, and action (Association for Strategic Planning, n.d.) has, since its inception, tried to appeal to
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small businesses. To date, however, small business owners and managers account for only about 1.5% of its current membership. The inference is that despite ASP's efforts and word-of-mouth advertising, small businesses don't have time to even learn more about strategic planning.
Strategic Management for Small Businesses
Some small businesses that reach a certain size do begin doing strategic planning, if only because they are not sure what the best course of action is in the foreseeable future. Perhaps also a recent executive hire with strategic-planning experience persuaded the owner/CEO that the bene�its of doing it would outweigh the costs. Either way, there are obstacles that need to be overcome.
First, assuming that the company's new executive could organize and facilitate a strategicplanning process, it would have to be explained and justi�ied to the other key managers in the company. There would need to be training: What is it? Why do it? How will things change? There would need to be preparation; speci�ic people would be asked to compile more information on external changes and educate the group. Then the group might spend a weekend offsite for an open discussion about feasible options the company could consider and, under the circumstances, which one might be best. If an option other than the one the company was pursuing were chosen, then the discussion should tackle how it was going to implement it and how it might be funded.
Even doing bare-bones strategic planning is not easy, especially for managers that are not used to the process in which decisions are made based on their input. But the predominant bene�it for doing strategic management is a greater level of con�idence that the company is pursuing the right strategy to be able to compete more effectively and achieve its vision and objectives. Without going through strategic planning, the company wouldn't have paused to re�lect on what it was doing and whether there was anything else it could be doing that would bene�it it more. Other bene�its, particularly for smaller businesses doing strategic planning for the �irst time, are updating everyone's mental models to re�lect a common reality and realizing that change is inevitable—the best kind being that which you initiate, not that to which you have to react.
Discussion Questions
1. Startups and small businesses often don't do strategic planning, or they have an aversion toward it; yet, changes keep happening all around them all the time. How are they able to grow and survive without doing strategic planning?
2. What arguments would you use to persuade the owner/president of a small business that strategic planning would bene�it his or her company, even if only one person participated?
3. Do venture capitalists and angel investors need to have a strategic-planning background in order to judge whether a business plan is real enough and has a good chance of succeeding? Discuss.
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4. The success rate of venture-capital investments is only 20%. Do you believe the reason for this is unforeseen circumstances, a poor assessment of the entrepreneur, or a lack of experience (and strategic-planning knowledge) on the part of the venture capitalist? Explain your choice.
5. An entrepreneur has written a detailed business plan, probably with the help of a consultant. What advice would you give to prepare him or her for a meeting with investors that have read the business plan? How can the entrepreneur make the best impression?
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Nonpro�it organizations rely on funding from philanthropists, foundations, corporations, and individual charitable donations
Associated Press/Chuck Burton
11.5 Nonpro�it Organizations
MBA programs, in general, don't have speci�ic courses on managing nonpro�it or not-for-pro�it organizations. Many feel this is a huge omission. Nonpro�its or 501(c) tax-exempt organizations in the United States in 2009 numbered over 1.5 million, accounted for 9% of all wages and salaries paid in the United States, and comprised 5.4% of GDP (Urban Institute, n.d.a).
Nonpro�its include arts organizations, some institutions of higher education, some hospitals, human-services organizations, religious organizations, foundations, museums, social-welfare, labor unions, neighborhood organizations, business leagues, and social and recreational clubs, among many other categories (Urban Institute, n.d.b). Only those organizations knowledgeable about strategic management manage strategically, and then with variable success. Numerous consulting �irms specialize in strategic planning and organizational development for nonpro�it organizations. For example, Raybin Associates specializes in fundraising, strategic planning, and management development for arts- related organizations and has completed projects for the New York Public Library, the Historic House Trust, and the Virginia Museum of Fine Arts (Raybin.com., n.d.).
How Nonpro�its Differ from For-Pro�it Corporations
The key difference between nonpro�it organizations and for-pro�it organizations is that their primary goal is not �inancial in nature, and this applies even to foundations, which must manage huge endowments. Yet all of them need money to exist and operate, and they must be managed. Being registered as a nonpro�it means that the organization is a legal entity, giving its members and of�icers the bene�it of limited liability. Counterintuitively, so long as the organization does not bene�it a single person and is organized for a nonpro�it purpose, it can make a pro�it on which it is not taxed if it has also met the IRS test for tax-exempt status. It has to meet both state and federal requirements to operate as a tax-exempt organization (Allen, 2006).
Another difference is that the source of funding comes from a third party and not directly from those that bene�it from the service—that is, a customer. Nonpro�its must rely on reports of past progress and accomplishments and proposals for more funding. The feedback from "customers" that for-pro�its
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to raise funds. rely on to dictate what products to produce is missing for nonpro�its. If the customer is whoever is supplying money to the entity, is the foundation,
philanthropist, or corporate donor "the customer"? Clearly not.
A �inal difference is that in the absence of �inancial objectives, most nonpro�its are cause-driven and serve an important social purpose. This makes it hard to determine how well a nonpro�it is doing. Instead of measuring the economic value created, which is relatively easy for a forpro�it corporation, measuring the social value created is far more dif�icult. For example, the mission of Habitat for Humanity is not building houses ef�iciently (on which measure it would score low since building takes place only on weekends when volunteers are available) but it is rather, to build houses for people who could not afford it, to add to the social capital generated when individuals contribute to their community and to the welfare of others (Magretta, 2002).
Unique Challenges for Nonpro�its
Nonpro�its rely on funding—whether from foundations, philanthropists, alumni, or charitable donations—from sources and people that believe in the cause or social purpose to which the nonpro�it is committed. So fundraising is a constant challenge for nonpro�its, and administrative costs for doing so (for example, widely distributing mailers to targeted prospective donors as well as paying for such lists) are appreciable and unending.
Again counterintuitively, just because they are nonpro�its doesn't mean they don't compete. They compete for funding, for good people, and for clients. A museum or opera company, for example, competes with all other forms of entertainment and leisure activities for patrons. The Chronicle of Philanthropy maintains a list called the "Philanthropy 400" of the nonpro�its that annually raise the highest amount of funds. The 400 institutions in the survey in 2009 raised $68.6-billion, though the drop they suffered in contributions that year (11% over the previous year) was nearly four times as great as the next biggest annual decrease: 2.8% in 2001, when charities also labored to raise funds from donors affected by the recession (Barton & Hall, 2010). There are many examples of nonpro�its competing. Kaiser Permanente, the largest nonpro�it HMO (health maintenance organization) in the United States, competes with for-pro�its for subscribers. David Lawrence, then chairman and CEO, wondered, "Was it possible to compete in the marketplace and, at the same time, remain true to our social mission?" (Magretta, 2002, p. 90). The Metropolitan Museum of Art competes with other museums, art institutions, and private collections worldwide when bidding for art works to add to their collections.
Another major challenge is recruiting people to work in the nonpro�it who share the values and social purpose of the organization. Sometimes people happily �ind the organization and apply to work there. But that alone is insuf�icient; they must also have the requisite skills
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and management experience of the position to be �illed. It is tempting to �ill a position with someone that has the skills and experience but not the values and mission of the enterprise.
Another challenge is deciding on what objectives to achieve. A nonpro�it that is committed to reducing the teenage crime rate in a community through conducting classes for high-school students shouldn't be measuring the number of classes taught and the attendance at each class, but rather the extent to which the teen-crime rate in the area discussed, declines. How might the Red Cross, to use a complex, global nonpro�it, measure how effectively it is achieving its mission? Should foundations focus on the number of grants they've awarded or on the outcomes those grants were designed to produce? Parents and taxpayers alike (not to mention the school principals involved) would like public education to do a better job of educating students—but what exactly is meant by "better education" or "an effective teacher" or "student learning"? Translating the nonpro�it's mission into measurable performance outcomes is not easy, and without such measures no one in the organization or that depends on it will know what is expected of them. What gets measured gets managed, in any kind of organization, and that means measuring results, not activity (Magretta, 2002).
Yet another challenge is competing for clients, just like for-pro�its. Museums, to be viable, must still advertise to get people to come to see their exhibits. Similarly, symphony orchestras, opera companies, and theater-production companies get people to come to their performances.
A �inal challenge for some but not all nonpro�its is maintaining their status as nonpro�its. Things change over time, and some nonpro�its start pro�it-making businesses (like cafeterias, websites) and must declare pro�its from such operations as income. If those initiatives grow, the relative amount of pro�it and the divergence from the stated mission could cause a problem in maintaining the nonpro�it's tax-exempt status.
Case Study Measuring Effectiveness in Ashoka
Ashoka is a multinational nonpro�it organization dedicated to �inding and supporting true social entrepreneurs. It considers social entrepreneurs as drivers of innovative solutions and extraordinary outcomes that improve the lives of millions of people. By �inding and supporting them, Ashoka leverages its in�luence for bene�iting society. Since it began, it has supported more than 1,800 social entrepreneurs, called Ashoka Fellows ("Fellows"), in more than 60 countries around the world. The enterprises they indirectly sponsor range from agriculture to public health.
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Ashoka is interested not only in the immediate success of its Fellows, but also in the enduring value that they have years after their funding has �inished. Here's how it measures this value.
Each year, Ashoka conducts a Measuring Effectiveness study focusing on the Fellows selected in the past 5–10 years. The study includes a survey sent to all Fellows elected in a given year, as well as a series of in-person interviews with a cross-section of survey respondents. The survey features the following indicators of success and social impact:
1. Original vision: Is the Fellow still working toward his or her original vision? (Five years later, 94% of Fellows say they are.) 2. Independent replication: Are others mimicking the programs started by the Fellows? (Five years later, 93% of Fellows say yes.)
3. Policy in�luence: Have the Fellows' programs in�luenced public policy? (Five years later, 56% respond af�irmatively.) 4. Leadership building: Have Fellows developed into leaders in their �ields? (Five years later, 54% of Fellows have.) 5. Leverage: How did Ashoka support help Fellows to succeed? This measure looks at how the stipend, collaboration, communications assistance, and other dimensions of Ashoka support, helped the Fellows.
Ashoka's approach is far ahead of the �ield simply because it desires to measure its long-term social impacts.
Source: Ashoka, measuring effectiveness: A six-year summary of methodology and �indings. Arlington, VA: Ashoka, 2006; and www.ashoka.org, as cited in Arthur C. Brooks, Social entrepreneurship: A modern approach to social value creation. Upper Saddle River, NJ: Pearson Prentice-Hall.
Strategic Management for Nonpro�its
Just as for-pro�its need to know what not to do as well as what to do, so also do nonpro�its; it is a hallmark of strategy. Small nonpro�its have clear missions and an unequivocal direction. However, some larger ones are faced with choices that might alter their mission (or not if they ignore the choices), and so should engage in strategic thinking and strategic planning. For example, Habitat for Humanity, discussed earlier, builds homes in stable communities that allow local merchants, volunteers, and the future homeowner to contribute to each other's welfare in a true grassroots endeavor. Should it extend its efforts to urban homelessness or disaster relief? Does that �it its business model, social mission and what makes it unique (Magretta, 2002)?
In today's rapidly changing environment of scarce resources, nonpro�its need to behave as tough competitors and thus constantly be aware of how their environment is changing and what it takes to stay on course. The need to manage strategically is more acute than ever.
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And when a nonpro�it is changing course and has to revise its mission, it doesn't need to get permission from its sponsors for making such strategic decisions, but it does need to be clear on its new mission and why it was changed. And it needs to make sure that its stakeholders or members also share that revised mission.
Discussion Questions
1. Think of 2–3 nonpro�its to which you contribute or would like to contribute (i.e., with whose cause or social purpose you identify). It is one thing to know how the nonpro�it is spending the money it receives from people like you, but do you know how well it is achieving its mission? If you don't, why is that?
2. Many benefactors feel good when they give donations (both cash and in-kind) to a charity, and not just because they get a tax deduction for doing so. But they don't read the letter and pamphlet showing what they have accomplished and what there is still to accomplish that many charities send only to donors. Is there a solution to this problem? Is it a problem?
3. Many famous private universities have huge endowments and are actually very well off. Give one or more good reasons why they should retain their tax exempt status.
4. Following (3), why should alumni get a tax deduction for giving to an alma mater that is, actually, very well off �inancially? 5. Many social-welfare nonpro�its, like hospitals, care for the indigent; hospices, etc. rely on donations from the general public as well as benefactors. Why doesn't the government support them? (The government does provide support in many areas like health for seniors (Medicare), education, the arts, and cancer research, to name a few.)
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Summary
This chapter focused on the dif�iculties and added complexity of strategic management in complex organizations. Multibusiness organizations simply have more than one strategic business unit (SBU) to run, and choose carefully who will head up each one. When the number of SBUs owned reaches the high double-digits, the company has to manage a portfolio of companies and make sure each one is performing to the best of its ability and that its strategy makes sense. In such organizations, management must rely more on �inancial results to assess the SBU. If its current portfolio is not achieving �inancial objectives set for the corporation as a whole, it has the ability to sell off those that are underperforming and acquire more highly performing companies. Diversi�ied corporations have, by de�inition, subsidiaries or divisions that are in different industries or in very different segments of the same industry, unlike multibusiness corporations, which could have companies in the same industry. Both have to manage portfolios of companies.
When companies expand into the international arena, they do so either because their home market has matured or because they see real opportunities in foreign markets. The key international- expansion strategies are exporting (no presence in the host country is required), market expansion (requires sales of�ices in the host country), manufacturing in the host country (if tariffs or transportation costs get too high), forming strategic alliances (principally with distributors and because alliances are expected in order to enter some countries like Japan), forming joint ventures and acquiring a company in the host country (usually but not exclusively in the same industry). Companies who develop a core competence in a particular strategy will fare very well.
Startups and emerging businesses have no history of performance and begin their existence with a single-minded market-entry strategy. The only questions they must answer are whether there is suf�icient demand for the product, whether they can compete with existing companies, and whether they can be pro�itable. Because strategic planning involves choices—what to do and what not to do—startups and very young businesses need a business plan to guide them (and raise the required startup capital), not strategic planning.
As a small business grows, typically beyond $10 million in annual revenues, its systems and organizational processes become more sophisticated, its managers more experienced, and the need for doing strategic planning more pronounced. However, if such a company has never done strategic planning, it faces the challenges of training its managers to do and believe in strategic planning, and to go through the inevitable change process that ensues. Even �inding the right strategic/change consultant can present a problem.
Nonpro�its are ubiquitous in the United States and cover the gamut of types including arts organizations, universities, hospitals, religious organizations and charities, labor unions, foundations, and neighborhood organizations, to name a few. They differ from for-pro�it companies in that they are �inanced in most cases by a third party (not their customers or banks), are cause-driven, serve a social purpose, and qualify as
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tax-exempt. Counterintuitively, nonpro�its are highly competitive; they compete for funding for good staff and for clients. They would be well advised to adopt the competitive mindset of for-pro�it corporations. Nonpro�its cannot use �inancial measures to denote how well they are doing, but rather have to devise ways to measure the extent to which they are achieving their social purpose, a more dif�icult task and one not done well by many nonpro�its. Translating their mission into objectives that clarify the organization's mission is perhaps their greatest challenge.
To be sure, some aspects of managing these more complex organizations are similar to what has been discussed in the previous nine chapters, but managing these more complex organizations presents more challenges.
Concept Check
Key Terms
angel investor A former entrepreneur that has become wealthy from cashing out prior ventures and wants to help other entrepreneurs in the same �ield.
conglomerate A corporation whose portfolio companies are in unrelated businesses.
cross-distribution alliance An agreement between two companies in different countries to market and distribute each other's products in the other's country.
diversi�ied corporation See conglomerate.
franchising An agreement with an independent company to capitalize, open, and operate identical stores/restaurants for an upfront fee and royalties based on gross sales in exchange for the right to use the brand, exclusivity in a certain market area (or country), access to suppliers,
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training, advertising, and other assistance.
global corporation One that utilizes a centralized strategy and marketing approach for a product that satis�ies customers in different countries without modi�ication and can purchase, produce, do R&D, and direct operations from anywhere in the world.
international corporation One that manufactures a product in its home country and distributes and sells it in foreign countries. (Outsourcing to foreign manufacturers does not make a corporation "international.")
multibusiness corporation One that owns more than one strategic business unit or is in more than one business.
multidomestic strategy Tailoring a product (including modifying its features, packaging, advertising, service-delivery methods, and pricing) to the varying demands and needs of customers in different countries, making centralized control virtually impossible.
nonpro�it organization One that has a mission re�lecting a social purpose; relies on taxdeductible contributions from corporations, foundations, philanthropists, and individuals for its funding; does not measure success in �inancial terms; and quali�ies as a taxexempt organization by state and federal tax authorities.
small businesses Privately owned and operated businesses with relatively few employees and small sales volume.
startup A company, venture, or organization that comes into being the moment money is expended in its behalf (not when revenues are achieved or it is registered).
strategic business unit (SBU) A single-business company that competes in a speci�ic industry with speci�ic competitors and requires unique strategies and �inancial resources to enable it, with someone accountable for what it achieves (typically the CEO).
transnational strategy A global strategy that capitalizes on ef�iciencies and economies of scale while being locally responsive—adapting its product in some way to certain markets.
venture capitalist A person that invests in a startup or expanding business venture with potential to achieve signi�icant returns on invested capital.
Pettengill
HIST 1302
Paper 1
Due: Feb. 1, 2018 – IN CLASS
In lecture and through our SFA readings we have learned that the United States during the period 1865 to 1910 was undergoing extensive and rapid changes economically, politically, and socially. How are the parallel narratives of the life of Jurgis Rudkus in The Jungle reflective of what is going on in America during this period? Do you think people like Jurgis are truly “free” and/or “equal” or are there social and political forces that are limiting their freedom?
In writing this paper you are required to engage readings from The Jungle, DTA, as well as lecture materials. It is expected that you will prove proficiency in the course materials and demonstrate the ability to synthesize and analyze these materials in support of your thesis.
· All sources must come from the materials covered in the class – so no outside sources.
1. Use of lecture material:
Radical Republicans’ plan for the South under Reconstruction was laid out in the Wade-Davis Bill. (Pettengill, 1-19-2010)
In this example you are citing the lecture by putting the last name of the instructor followed by the date the lecture was given.
2. Use of DTA material (whether it be quoted, referenced – acknowledging argument, etc. – or paraphrased:
In A Century of Dishonor, Helen Hunt Jackson believes that until they are provided with land, “idleness, improvidence, and indebtedness will be the rule” of Native American behavior. (Fernlund, 32).
In this example there is a selective use of material. It is contextualized – the author and the document from which the quote (or argument if you were to note the argument) has been introduced. The citation is properly located at the end of the sentence. Instead of citing the author of the document, you are to cite the editor of DAH – Fernlund – and the page number where we can find your quotation.
AGAIN, quote selectively. You should only quote that which is best said by the author and which both supports your argument as well as moves your paper forward.
3. Your use of Sinclair’s The Jungle will follow the same model for parenthetical citation. You will cite the author and the page number upon which the cited/referenced material can be found. Ex. (Sinclair, 110)
4. If you are speaking broadly about a document from DTA - and not pointing to a specific piece of text – you should cite the pages of the document. Ex:
In A Century of Dishonor, Helen Hunt Jackson argues that the Native American has been treated unjustly by the U.S. government. She advocates property ownership as a means to integrate the Native American into U.S. society and give them the rights they are currently without. (Fernlund, 31-32)
5. You will not find a specific page(s) to identify Sinclair’s argument in The Flivver King. However, it is expected that from your reading you will be able to determine what his argument is. You will be expected to articulate this argument in your paper. When you do this you are not expected to cite any page numbers. It is expected that you will introduce your statement of his argument. Ex.
In The Jungle, Upton Sinclair argues that ……….
· All citations come at the end of the sentence.
· Please see us (sooner rather than later) if you need guidance in focusing your paper.
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9.6 Assessing the Strategic-Planning Process
Bene�its do not accrue automatically every time a company engages in strategic planning; they are more likely to be realized if they are consciously sought. Both strategic planners and the consultant facilitators advising them should strive to ensure that these bene�its are realized. The extent to which they are realized, therefore, constitutes an excellent assessment.
The 10 Bene�its
The 10 bene�its of effective strategic planning may also be viewed as criteria for assessing whether a company is doing strategic planning effectively. The 10 bene�its are organized to follow the Association for Strategic Planning's rubric of "Think—Plan—Act."
The 10 Bene�its of Effective Strategic Planning
"Think"
1. A shared understanding of external changes 2. The ability to anticipate future external changes 3. The ability to search for a better strategy or business model
"Plan"
4. Having a strategic vision 5. Choosing the best strategy from among viable alternatives 6. A constantly improving strategic-planning process 7. Having the board of directors on the same page
"Act"
8. Becoming a stronger competitor 9. Having an adaptive, innovative culture 10. Having all programs aligned with the vision, strategy, and company objectives
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Source: Abraham, S. (2010, February 23). Ten Bene�its of Effective Strategic Planning—and Why You Should Want Them All. Presentation at the 2010 ASP National Conference, Pasadena, CA.
1. A Shared Understanding of External Changes
To use a military analogy, just as con�licting accounts about an enemy's strength, position, and deployment make it dif�icult to devise a winning strategy, so too does the absence of a shared understanding of external changes and their impacts on the company make the crafting of a winning strategy extremely dif�icult. Because changes occur continuously, the only way to keep up with them and even anticipate some is to monitor them year round, and to keep the strategic planning group and board of directors informed as to key changes and developments in all areas. One person should be responsible for each area and be trained to collect and summarize data in useful form. A summary for the year with emphasis on recent trends should be prepared in advance of the annual strategic-planning meetings and be distributed to participants. To the extent this is done well the company's decision making will improve.
2. The Ability to Anticipate Future External Changes
A number of well-known techniques enable an organization to explore "soft" assumptions about the future and provide additional options for planning. These include scenario planning, forecasts, and simulations (Section 3.4). It may be that the �irm would be advised to engage a consultant that specializes in one of these areas, or pay attention to forecasts that have earned a good reputation over time. Expressed another way, the bene�it here is that the resulting information can guide the �irm toward actions that enable a preferred scenario to occur, or develop a contingency in case a hoped-for scenario does not occur.
3. The Ability to Search for a Better Strategy or Business Model
A company not actively seeking a better strategy is not doing a good job of strategic planning, and its strategic decisions will not be good ones. How else is a company to �ind a "blue ocean" or situational monopoly with no competition? How else could it guard against being disrupted by a company outside the industry or even plan a disruption itself in a proactive move? How else could it gain a competitive advantage it lacks or strengthen one it already has?
For every different strategy and business model contemplated, someone in the organization should assess its costs, feasibility, bene�its, and risks on an ongoing basis. The results of such assessments play directly into the strategic-decision-making process. Except when the �irm
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Your strategic vision should be realistic, achievable within a speci�ied time frame, inspirational, concise, and memorable.
Helder Almeida/iStockphoto/Thinkstock
needs to act immediately because the decision just won't wait, the information can wait until the annual strategic-planning process comes around.
4. Having a Strategic Vision
Every organization that wants to endure should have a strategic direction and strive to become something. Succeeding is more likely if there is a clear vision and if everyone knows what it is and is motivated to help the organization get there. Visions should be realistic (achievable within a set time frame, 5 or 10 years is typical), concise, inspirational, and memorable. They sometimes include a value statement, although listing values separately is more common (Section 2.1).
The real bene�it of a clear vision statement is to get everyone in the organization on board and wanting to achieve it; and though cumbersome, everyone in the organization should also have had a hand in creating it or at least providing feedback before it is adopted. As soon as the organization is close to achieving its vision, it should be changed, being careful to go through the same process of getting buy-in from everyone before adoption.
5. Choosing the Best Strategy from Among Viable Alternatives
Choosing from the best options available is a bene�it, as it allows people to trust the decision that was made and have faith in the direction the company is headed. This is bene�icial only if the strategic planning process generate good viable alternatives and a decision-making process for selecting the best one.
Having said that, such a "best strategy" doesn't guarantee success. It must be well executed for the �irm to succeed. It is much easier to "sell" the strategy down the line in a company and motivate a high level of execution if people know why it is the best from among the options considered.
6. A Constantly Improving Strategic-Planning Process
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The bene�it of improving the process should be clear: better strategic decision making. This might entail involving different people, getting better information, stimulating more spirited discussions and encouraging diverse views, or even using computer software to include inputs from everyone quickly (Warden & Russell, 2001). Without thoughtful annual improvements, an organization is likely to allow its strategic planning to become a rote exercise that is taken ever less seriously and one that participants, for those very reasons, resist wanting to participate in.
7. Having the Board of Directors on the Same Page
For public corporations and nonpro�its—and quite a few but not all privately held companies—it is imperative to ensure that the board of directors approves of all strategic decisions before any move to implement them is made. In fact, there are instances where the strategic decision comes from the board as in resisting a takeover bid or deciding to acquire another company. In the typical case where strategic planning is done by a top-management or strategic-planning team, there has to be some mechanism for the board to be kept apprised of the process. In 2005, management consulting �irm McKinsey & Co. polled over 1,000 directors and discovered that strategy coordination between the CEO and the board was the number-one cause for the success or failure of CEO appointments (Felton & Keenan Fritz, 2005). In some companies, the CEO is also chairman of the board, and so automatically serves as the desired link.
Boards of directors may have a strategic-planning committee whose chair would attend the meetings of the management group and keep the board informed. The bene�it, of course, is knowing that the strategic decisions made are in the best interests of the stockholders in the case of a public corporation or the sponsors and clients in the case of a nonpro�it organization. Ultimately it is the board that has responsibility for the strategic direction of the organization.
8. Becoming a Stronger Competitor
If strategic planning is done well and the strategy properly executed, then the company will become a stronger competitor. This, of course, is the principal bene�it for doing strategic planning in the �irst place. Many things have to contribute for this bene�it to be realized. For example:
Knowing how your industry and markets are changing Anticipating and meeting customers' needs Getting more customers to buy your product or service Creating or improving a core competence Knowing what your competitors are up to and outdoing them Defending one's position against attack from competitors Looking for "blue oceans" or monopolies with no competitors Looking for opportunities to disrupt the industry before someone else does
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Apple Computer's culture encourages innovation and new ideas to look for the "next big thing." Apple values learning from mistakes, sharing experiences, and developing ideas, no matter what the source.
Miguel Medina/Stringer/AFP/Getty Images
Cultivating a strong brand and staying true to it
Management knows that the company is a stronger competitor if it achieves gains in revenues and market share, and maintains high brand equity, or achieves other established measures of success the company holds dear.
9. Having an Adaptive and Innovative Culture
When a company has been following the same strategy for some time, the culture adapts to that strategy and gets it to work. However, if some major change is deemed necessary, such as pursuing a new strategy or adopting a new technology or manufacturing process, and the culture remains what it always was, then the change will not succeed. A mismatched culture is one of the principal reasons why changes and new strategies fail, and it is widely acknowledged that it is dif�icult to change a culture. The reason that it is dif�icult is that change imposed from above results in a lot of resistance. Many companies in this predicament resort to wholesale changes in personnel to change the culture.
With an adaptive culture, that draconian measure is not necessary. An adaptive culture is one that is willing to change if the reason for doing so makes sense. It is a culture that values open communication, education, teamwork, and individual initiative. Companies that have adaptive cultures make the necessary changes over time and succeed.
An innovative culture does not simply encourage innovation and new ideas and look for the next "big thing." It also puts a high value on learning from mistakes and giving people permission to make mistakes. Innovative cultures encourage the sharing of experiences and developing ideas no matter their source. Two of the best examples of innovative cultures are Apple Inc. and Google.
It would be dif�icult to make strategic decisions and implement them if the culture were not adaptive and innovative. The converse, of course, is also true. Making good strategic decisions that call for change and smooth execution will force the culture to be adaptive and innovative. Hiring people with similar traits will ensure that this desirable culture endures.
10. Having All Programs Aligned with the Vision, Strategy, and Company Objectives
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The importance of aligning everything the company does with its vision, strategy, and companywide objectives was discussed in the context of operational and budget planning (Chapter 8). The bene�it is the assurance of knowing that completing all programs, projects, and activities as planned will result in the strategy being implemented and the vision and company-wide objectives being fully realized (barring unforeseen circumstances).
In too many companies, what employees in the different functional areas and operational units actually do has little to do with the strategy that's in place, because little or no effort was expended to make sure that the two were aligned. As a result the strategy fails or "business as usual" triumphs. When operational planning is done, critical elements include performance measures (to track progress), appropriate training, and reward and incentive systems.
Discussion Questions
1. Of the 10 bene�its discussed in this section, which of them, in your opinion, are most often unrealized and why? 2. Which of these bene�its, again in your opinion, are most dif�icult to realize and why? 3. Do you believe that there are any bene�its that companies are less interested in realizing, hence probably won't? 4. In what ways are these 10 bene�its different from the annual improvement cycle recommended in Section 9.5?
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Chapter 10
Ethics and Corporate Social Responsibility
Cultura Limited/SuperStock
Learning Objectives
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By the time you have completed this chapter, you should be able to do the following:
Understand the differences among ethics, morals, and values. Understand ethical issues and behavior. Learn about the various unethical behaviors that tempt managers and corporations. Learn about ethical dilemmas and an approach to coping with them. Ponder the extent to which ethics can be taught. Understand the nature of corporate social responsibility (CSR) and the role of corporations in being economically, legally, ethically, philanthropically, and environmentally responsible.
Ethics and ethical behavior should be embedded into the way people are brought up and the way business students are trained. But the sad fact is that unethical behavior is more the norm in the business world than the exception. The fact that it is widespread in no way condones unethical behavior. This chapter will clarify the distinctions between ethics, morality, and values, what unethical behavior is and isn't, situations that make it dif�icult to be ethical and how to cope with them, and the degree to which ethics can be taught.
The chapter also discusses corporate social responsibility (CSR), what it is, and the extent to which corporations have a duty to be socially responsible. Finally, the physical environment (air, land, water) is—or should be—an important stakeholder for corporations. What does the responsibility to safeguard the environment mean, and what role should corporations play?
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10.1 Ethics, Morals, and Values
The terms ethics, morals and values are often confused or used interchangeably in everyday speech. Before discussing ethics in more detail, it is important to establish de�initions of what each means and the differences among them. A traditional de�inition of ethics is the art and discipline of applying principles and frameworks to analyze and resolve complex moral dilemmas (Rossy, 2011).
The Josephson Institute of Ethics, a nonpro�it organization based in Los Angeles, de�ines ethics differently but perhaps more aptly for the business world: "Ethics is about how we meet the challenge of doing the right thing when that will cost more than we want to pay."
This de�inition gets to the heart of why "doing the right thing" is sometimes so dif�icult; we are unaware of the associated cost. The Institute breaks down the de�inition into two parts: (1) the ability to discern right from wrong, good from evil, and propriety from impropriety; and (2) the commitment or will to do what is right, good, and proper (Maxwell, 2003). People and organizations need to develop a standard to follow and then the will to uphold it, an ongoing struggle for both.
A moral person knows right from wrong and chooses right; an immoral person knows the difference too but chooses wrong, while an amoral person either doesn't know the difference or doesn't care. This description includes notions of bad versus good. Both require societal and cultural norms of right and wrong and, because these evolve over time, what is "right" is far from clear.
Values are the tenets most important to people and the ways that govern how they choose to live their life. That statement also applies to organizations (see Section 2.8). Some people have been known to die for preserving a value very important to them (like freedom, or protecting another's life), and at the other end of the scale are people who think nothing of in�licting harm on others if their cause warrants it (like allegiance to a gang and killing rival gang members to defend "turf").
Virtually every company has an ethics code of behavior, which more accurately might be called a moral code. More than 85% of companies have created and circulated organizational codes of conduct. Simply having a code does not necessarily mean that employees will follow it, however; there is no proof that codes of conduct actually in�luence ethical behavior (Rossy, 2011). An example of a less-than-successful code is that of energy corporation Enron. Enron's 64-page Code of Ethics, which opened with a motivating forward by CEO Kenneth Lay, did not avert one of history's worst instances of corporate ethical failure (Rossy, 2011). Enron went bankrupt as a result of corporate of�icers' unethical accounting practices. By in�lating earnings and cash �low, and keeping liabilities off the books, Enron presented a distorted picture of �inancial health, attracting investors in the process. Among the losses were the 401K retirement accounts of Enron employees. In contrast, CEO Lay sold stock in the months before the scandal broke and pro�ited greatly (Oppel, 2001).
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An unethical act is carried out with immoral intent, done with the full knowledge that it is legally and morally wrong or goes against societal or organizational norms (Rossy, 2011). It usually infringes obvious rules, laws, and corporate codes of ethics. An ethical "mistake," on the other hand, is an act that is not deliberately unethical, and is something an individual or group regrets afterward and desires to undo (Rossy, 2011). The following three components separate unethical actions from ethical mistakes:
Intentionality—did you harbor good or bad intention? Were you aware that you were doing something wrong? Did you attempt to hide or cover up your motives? Remorse—did you recognize and regret your unethical behavior? Or did you regret only being found out and exposed? Accountability—were you willing to own up to your mistakes and take responsibility for any unethical actions? Were you ready to try and reverse your actions and set things right? (Rossy, 2011)
The next four sections focus on ethics in business, amplifying the nature of ethical issues and dilemmas, revealing the unprecedented extent of unethical behavior, offering some guidelines for dealing with ethical dilemmas, and discussing the extent to which ethics can be taught.
Discussion Questions
1. Does obeying the law make a person "moral," and breaking it "immoral"? Discuss the reasons for your answer. 2. Can ethics vary from country to country? If you think so, provide an example of a country in which principles, norms, and standards of conduct are different from the United States, and provide as much detail as you can (even anecdotes).
3. Is a dictator moral, immoral, or amoral? Give reasons for your answer and an example that could validate your answer.
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10.2 Ethical Issues and Behavior The chairman of AOL Time Warner Book Group was having dinner in New York one evening with John Maxwell, a prominent author on leadership issues from a Christian perspective, and suggested he'd be the perfect fellow to write a book on business ethics. "There's no such thing," replied Maxwell. When asked what he meant, he said, "There's only ethics." This conversation spawned the title of the book Maxwell came to write (Maxwell, 2003).
People get into trouble when one set of ethics or values governs their private life and another their working life. For example, a typical sales employee might say, "I'm an honest person, but it's OK to pad my expense report because that's what everyone in the company does." In fact, many people are ethically duplicitous without realizing it. As Maxwell says, "The same person who cheats on his taxes and steals of�ice supplies wants honesty and integrity from the corporation whose stock he buys, the politician he votes for, and the client he deals with in his own business" (Maxwell, 2003).
Ethical issues arise whenever people are tempted to behave unethically or not do the right thing. Maxwell lists the �ive most common things that give rise to unethical responses:
Pressure to achieve results when things aren't going as planned, which is why people often "cook the books," cut corners, or "bend the rules." Students often cheat to get higher grades, executives manipulate information to increase stock price, factory workers produce inferior products to reduce costs or increase throughput rate. Many of us are under pressure—in 2005, the Ethics Resource Center conducted a national survey of U.S. employees and found that 10% of them at all levels reported feeling pressure to compromise ethical standards (Treviño & Nelson). The desire for pleasure (if it feels good, do it) leads people to live beyond their means, abuse drugs (of all kinds), suffer divorce and broken homes, and so on. Executives that have achieved an elevated compensation level may do whatever they must to preserve their lifestyle. The consequences are never worth the promise of the temptation and are almost always regretted later. Abusing the power a person has been given. This, too, can act like a drug: "having power is like drinking salt water. The more you drink the thirstier you get" (Maxwell, 2003, p. 80). Powerful executives may develop a sense of entitlement. They believe that they and the institution are one, so they can take what they want when they want it (Abraham Zaleznik, as quoted in Maxwell, 2003). Those who want to keep their power at all costs are also most likely to compromise standard ethical behavior to do so. While pride itself is not a bad thing—after all, we have all been brought up to take pride in ourselves, our work, our family, and our country—having an exaggerated sense of pride and self-worth (hubris) is destructive. Pride is essentially competitive; one is proud only of being richer, smarter, or better looking than others. If everyone else were as rich, smart, or good looking, there would be nothing about which to be proud. If your goal is to outdo everyone else, then your focus is entirely on yourself and your own interests (Maxwell, 2003). "Pride can blind you to your own faults, to other people's needs, and to ethical pitfalls that lie in your path" (Maxwell, 2003, p. 86).
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Ethical issues arise when people succumb to pressure to achieve results. Executives manipulate stock prices to increase value, students cheat to get higher grades, and workers produce inferior products to increase production rates.
Lisette Le Bon/SuperStock
Priorities. German poet and novelist Johann Wolfgang von Goethe said, "Things that matter most must never be at the mercy of things that matter least" (Quoted in Maxwell, 2003). Is being liked by others the most important thing to you? Is keeping your job more important than doing the right thing, like, blowing the whistle on some malfeasance? Do you know what your priorities are?
The following breakdown broadens our understanding of ethical issues in the corporate world:
Human-resources issues. An obvious example of this type of ethical issue is discrimination, which can lead to rampant unfairness. Sexual and other types of harassment may take the form of an individual in a hierarchy taking advantage of their position to use power to control others lower in the organizational structure. Harassment may also occur between peers and result in a hostile work environment for those who are the objects of the unwanted attention. Con�licts of interest may take many forms such as bribes and kickbacks, inappropriate in�luence, and the use of privileged information to bestow favor on special friends or interests. Customer-con�idence issues. In many business situations a person may be privy to con�idential information, which they may not reveal regardless of their position. To breach that con�identiality and divulge such information is a serious ethical violation. Product safety issues, whether the dangers to consumers were intentional or not, also fall into this category. When products are misrepresented, hyped beyond the bene�its they provide, or false claims are made, this transgresses truth in advertising ethical boundaries. In professions that handle other peoples' money, such as stockbrokers, there is an ethical obligation called �iduciary responsibility to base all actions on the best interest of the client. A stockbroker making an investment of a client's money for which the only motivation is the stockbroker's commission would be a violation of the broker's �iduciary responsibility. Issues arising from the use of corporate resources. These issues range from what may seem to be mundane to the extremely serious. Many people do not give a second thought to making personal calls from work, taking a long lunch or break, or taking stationery products from the supply room to use at home. All of these are examples of stealing company resources. Using company letterhead for personal reasons or allowing a personal view to be construed as the company's are misappropriations of the company's reputation. Most people would clearly recognize the ethical wrong in falsifying data to make a company's �inancial results look better or receive approval for a new drug (Treviño & Nelson).
The root problems in most of these instances are unfairness, lack of respect, and self-interest.
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Discussion Questions
1. This section introduced the notion that people behave unethically rather than bear the costs of ethical behavior (an economic reason). Do you think this is prevalent in corporations today? Why or why not?
2. We have all heard of the Golden Rule: "Do unto others as you would they do unto you." According to John Maxwell, it is the only guide to ethics one needs. Do you agree?
3. Assuming you do the "right" thing all or most of the time, how do you know it? Elaborate on your answer as best you can. 4. Ethics exist in law, business, medicine, and other spheres of life, even politics. Other than the settings in each sphere, would you say that the concept of ethics was the same or different in all spheres? Discuss.
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In the case of Bernie Madoff's Ponzi scheme, greed overruled all ethics. Madoff received a long-term prison sentence for bilking investors out of billions of dollars.
Stephen Chernin/Getty Images News/Getty Images
10.3 Unethical Behavior
Every day brings new reports of some new ethical violation or the disposition of a case brought against someone or a company for unethical behavior. Unethical behavior consists of conduct undertaken to bene�it a person or organization while knowingly (or being oblivious to the possibility of) harming others. Behavior is still considered unethical if the act is wrongful, whether or not it results in harm, for example, a deceitful representation even though not acted upon (Christopher D. Stone, J. Thomas McCarthy Trustee Chair in Law, University of Southern California Gould School of Law, personal communication, October 3, 2011).
Many cases involve greed, like the Ponzi scheme run by Bernard Madoff, a former chairman of the board of directors of the National Association of Securities Dealers (NASD). Madoff used money from new investors to pay "pro�its" to old ones until the situation imploded and the scam was revealed. People who trusted him with their investments lost billions of dollars. Another type of greed-induced unethical behavior is illustrated by the case of Raj Rajaratnam, founder of the Galleon Group, an international hedge fund based in New York. In 2011, Rajaratnam was convicted of securities fraud and conspiracy for insider trading and sentenced to 11 years in prison, the longest-ever term imposed for that type of offense. Unlike Madoff's Ponzi scheme, which swindled identi�iable victims directly of speci�ic amounts of money, insider trading cheats "the system" including all those investors who are not privy to the information on which pro�itable trades are made. At the heart of the prosecutors' case was an allegation that Mr. Rajaratnam gained access to con�idential information about a $5 billion investment in Goldman Sachs by Berkshire Hathaway Inc. in 2008 during the �inancial crisis. Prosecutors described an environment of rampant insider trading on Wall Street of which the defendant was only one prominent offender. In pronouncing his sentence, U.S. District Judge Richard Holwell stated that the billionaire investor's crimes "re�lect a virus in our business culture that needs to be eradicated." In addition to the prison term the judge also ordered Mr. Rajaratnam to pay a $10 million �ine and forfeit $53.8 million (Pulliam & Bray, 2011).
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Company consumer contracts' �ine print allows a �irm to change the terms as they see �it at any time, initiate higher fees, and forbid consumers from �iling lawsuits.
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Not all unethical behavior can be attributed to an individual acting out of the prospect of personal gain. Companies may collectively make unethical decisions that result in harm to others. Workers on the Deepwater Horizon oil platform in the Gulf of Mexico were concerned about safety on the rig months before the oil rig exploded but feared retribution and retaliation if they reported problems. In particular, employees reported that drilling took priority over maintenance that could have ensured safety. The explosion killed 11 employees and resulted in history’s largest accidental oil spill. The oil killed large numbers of wildlife, shut down crucial industries such as �isheries and tourism in large areas of the Gulf of Mexico, causing billions of dollars of economic damage and affecting untold numbers of people directly and indirectly (Urbina, 2010).
Entire industries may be tarred with the brush of unethical behavior in the interest of making pro�its. For decades the tobacco industry fought a cynical campaign to deny and discredit extensive research that demonstrated the very serious health risks of smoking. In the meantime, the tobacco companies were among the largest spenders on all forms of advertising to induce people to become addicted to smoking. As we all know, they �inally lost their protracted case, and it has been conclusively shown that executives were aware of the dangers even as they denied it publicly. Tobacco ads are no longer allowed on television, and it is now illegal to smoke in many public places such as restaurants, movie theaters, museums, aircraft, and so forth. Some states such as California have gone further, banning smoking in parks, apartment-complex balconies, and on the beach. There is now no disputing the fact that tobacco kills, yet these same tobacco companies continue to expand their markets for cigarettes around the world and get new generations addicted to smoking. The argument often used to justify their actions is that tobacco is a legal product. Of course, if tobacco was a new product being introduced to the market today, with all the attendant proven health
effects, there is no question that it would be immediately rejected by regulatory agencies as unsafe.
What about new drugs and medical products rushed to market without adequate testing or approval? In 2010, DePuy Orthopaedics, a unit of Johnson & Johnson, issued a global recall of its ASR XL Acetabular System and Hip Resurfacing System (hip implants) because of growing problems with the products and for selling them and other products without FDA approval (Kavilanz, 2011). Also in 2010, France's health regulators issued a recall of pre�illed silicone breast implants manufactured by Poly Implant Prothese (PIP), a French company, and said to
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affect 35,000–45,000 women worldwide. The gel used in them was unauthorized, and the implants have been associated with abnormally high rupture rates (PIP breast implant recall, 2010). In these examples, the companies involved paid for reparations to victims—and PIP was even shut down.
An ethical concern that may not be as obvious as the preceding examples because the harm is harder to identify has to do with the immensely complicated "�ine print" that we seem to confront on an increasing basis. Every time we install or update a software package we are required to accept a lengthy user agreement �illed with legalese unintelligible to (and ignored by) most people. Hidden among the verbiage often are clauses that have been described as "weasel words in contracts that allow a company to change the terms at any time, or lay the groundwork for sky-high fees, or that forbid a consumer from �iling a lawsuit." Web service providers such as Facebook and Google have attracted �irestorms of protest when they have decided to make unilateral changes to their privacy policies that invariably give the companies more freedom to make commercial use of the users' information or browsing habits and eroding what little is left of the individual's privacy. As Web entrepreneur David Hirsch commented in an interview on the burgeoning practice, "This �ine-print world we're living in is bad for consumers, bad for business, and bad for the country. You've got people not understanding what they're agreeing to, and they're getting clobbered" (Lazarus, 2011).
It may be glib to say that executives cheat, lie, fudge, and line their own pockets because they can, or because it's unfortunately more acceptable nowadays, or because no one will �ind out. But isn't this at the heart of ethical behavior—to do the "right" thing, even when no one is looking? Doing otherwise is unethical, and there must be many more unreported instances where people and organizations intentionally get away with such behavior, thus, in their minds, legitimizing it.
Case Study Corporate Ethics
On January 13, 2012, Carnival Corporation's Costa Concordia cruise ship ran aground a reef and capsized off the Italian coast after its captain, Francesco Schettino, steered the ship off the approved course. The ship sustained a hole in its hull greater than the length of a football �ield, causing it to take on water immediately. The chaos that ensued aboard the ship of panic-stricken passengers futilely seeking information and a disorganized evacuation was heavily reported in international news reports. Surviving passengers even reported that the ship's safety brie�ing hadn't been conducted at the time of the disaster and wasn't scheduled until the next day—three days after the ship sailed. And this is just the beginning of the ethical issues that arose in the days following the crash.
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The captain's ethics were called into question when reports emerged that he had an unauthorized female companion on the ship's bridge at the time of the crash with whom he'd also shared dinner and wine just minutes before, that he was performing a close "sail-by" to show off to the residents of the Island of Giglio or to "salute" a friend living on the island. Days later, recordings of conversations between the captain and Italian Coast Guard of�icials revealed that he had abandoned ship and was aboard a lifeboat before most of the ships passengers were evacuated. The Christian Science Monitor concluded that Schettino had engaged in "a pattern of untruths and attempted coverup" (Marquand, 2012, para. 1).
Carnival's corporate ethics were called into question, as well. For example, Schettino later de�lected attention from his initial "salute" story with the claim that his corporate managers told him to take the ship close to the shore as a publicity maneuver. Surviving passengers described chaos aboard the ship as language barriers, an unskilled crew, passenger lack of knowledge about evacuation procedures, and malfunctioning lifeboats all contributed to fear and panic. Reports indicate that passengers were initially told that the problem was an electrical failure; in an amateur video shot by a passenger, a crew member is heard telling passengers: "The situation is under control. Go back to your cabins. We ask you that you all return to your cabins. Once the electrical problem is sorted out everything will be back to normal shortly. Everything is under control. We are resolving the problem" (Pisa, 2012). An hour passed before the Captain ordered everyone to abandon ship, plunging nearly 4,000 people into complete chaos. During evacuation, crew members appeared to have little control and offered minimal support to panicked passengers—calling into questions corporate safety procedures.
Subsequent to the disaster, the corporation's moral compass was questioned when Carnival authorized call center employees to phone survivors and offer "30% off their next voyage." News accounts and editorials have labeled the offer "insensitive" and "crass," indicating that the decision to offer the discounts was an ill-conceived strategy for promoting company loyalty that might, in fact, further damage the cruise line's reputation (Costa Concordia disaster, 2012).
Finally, the wreck posed a grave threat to the maritime environment and the health and safety of coastal residents amid fears that the ship's 17 fuel tanks might begin to leak into the sea. As National Public Radio noted, "What do you do with a 1,000-foot wreck … Remove it. Very carefully" (Neuman, 2012, para. 1). The article further noted that removing the wreck involved "logistical and environmental issues that are just as large" as the ship (Neuman, 2012, para. 5).
Question for Critical Thinking and Engagement
Assume the role of a consultant hired by Carnival Corporation. Prepare a brie�ing on the critical issues that executives, management, and other leaders should address. What recommendations would you make to the corporation relative to public
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concerns about employee ethics, corporate safety policies, and the impact of this disaster on the environment?
Discussion Questions
1. List as many reasons as you can why a company would wish to abide by ethical standards. Organize the reasons based on whether they are morally or economically motivated.
2. Do you think business executives, particularly CEOs, have a general public image of behaving sel�ishly and unethically? Do you think that reputation is deserved? Discuss.
3. Imagine you are looking for a job. Is the company's having an ethical culture or behavior important to you? If so, how would you go about determining this?
4. Imagine you are hiring people. Your company is proud of the fact that it makes a pro�it by being ethical. How would you ensure you are hiring people with a similar ethos?
5. Cite some examples of trust in business from your personal experience or from reading the newspapers. What happens when trust is lost?
6. What other industries not discussed in this section have also succumbed to unethical behavior? Cite examples to justify your choices.
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10.4 Ethical Dilemmas and How to Approach Them
Every person will be faced with ethical dilemmas throughout life; it is inevitable. By de�inition, the "right answer" is elusive. An ethical dilemma arises when a person is presented with a choice (ordinarily of action) in which one consideration is the rightness or wrongness of the action (Christopher D. Stone, J. Thomas McCarthy Trustee Chair in Law, University of Southern California, personal communication, October 3, 2011). Some ethicists evaluate the action in itself, whatever the consequences. Consider a situation in which a person is attempting to shoot someone but realizes too late that the gun isn't loaded; the act is unethical even though the target didn't die. Others focus their evaluation on the consequences. For example, lying, which is a "bad" act, may have good consequences. Within the workplace, the "right thing to do" is usually complicated by time pressures and con�licting �inancial and political demands, and often comes with a price tag. While we never seem to have the right answer when we need it, there are �ive questions we can ask ourselves when faced with an ethical dilemma that might well help us avoid making the wrong decision:
1. What's in it for me? How will my loved ones and I bene�it, and what price will I pay in terms such as time, money, effort, and reputation? To fully understand what in�luences your self–interest in a situation, it can be helpful to ask, "Would I be comfortable sharing my real motives with the public?"
2. What decision or action would lead to the greatest good for the greatest number? This presupposes that one knows and understands the legitimate interests and values of others. John Stuart Mill's classic work on utilitarianism holds that the preferred decision is the one that will return the highest net social bene�it to all stakeholders (those people who might be affected by the outcome) (Mill, 1906). Value con�licts can make achieving such a noble outcome dif�icult; how do we de�ine the "greater good"? Many environmental and air-quality regulations, for example, are motivated by a desire to protect the general public and act in its behalf.
3. What laws, regulations, and written or unwritten social norms apply in this situation? German philosopher Immanuel Kant thought that moral decisions should be made by following a principle he called the Categorical Imperative; behave as though the maxim of your decision were to become a general law, required of all people. Patricia Werhane, Director of the Institute for Business and Professional Ethics at DePaul University, asks the following germane questions implied by such a rule-based perspective:
Does the action set positive or negative precedents? Is the action acceptable to other reasonable persons? Is it applicable to other similar situations? Does it respect, or at least not denigrate, human dignity? (Werhane, 1994)
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The German philosopher Immanuel Kant believed that moral decisions should be based upon the one principle he called the "Categorical Imperative"–act as if the maxim of your action were to become the general law.
De Agostini Picture Library/De Agostini/Getty Images4. What are my obligations to others? To understand this, one has to appreciate the role of reciprocity and trust in society. Reciprocity is a universal norm common to all human cultures; it is embodied in the Golden Rule. Implicit in this view is that people have to trust one another. How do you feel when someone you've previously helped rejects your request for help? Will you ever forget when someone you have helped many times doesn't reciprocate?
5. What will the lasting impact be on me and on my key stakeholders? Informed self–interest requires looking at the big picture and assuming that one's self–interest is aligned with societal interests. That is, one's self-interest rests on doing what is right for others. For example, consider the actions of environmentalists and others who make sacri�ices for societal movements.
These �ive questions in fact constitute a framework for identifying ethical dilemmas and help think through any inherent con�licts among the values and obligations they underscore. The following three criteria will help you to choose from and resolve those con�licts:
Priority. In this instance, which questions are most applicable to the key values held by you and your company? Balance. If you must compromise among your values, which is the best tradeoff? Acceptance. How well will your decision and rationale fare if submitted to public scrutiny? (Rossy, 2011)
In conclusion, ensure that you consider all �ive questions before making a decision. Always keep in mind the pivotal role of values when assessing the implications of the issues at hand. Compare the short- and long-term consequences. Take your time and avoid the urge to give into quick solutions that may be too good to be true. Go with your instincts, but remain open to counsel and advice. And be brave—sometimes the ethical answer can be politically unpopular. As a way of thinking through the ethical criteria just presented, consider the following examples of common, everyday situations that many employees face, and answer the related questions.
Everyday Ethics
Sheryl often takes home pens, pencils, printer paper, and other small of�ice supplies for her personal use—even though she doesn't perform any work from home. Is Sheryl's behavior ethical or unethical? Why or why not? Is there any "gray area" to what Sheryl is doing? In other words, under any circumstances, is her behavior ethical? What are the potential consequences of Sheryl's behavior to others? To her organization? How about to herself?
In order to get some new business, Phil overpromised, knowing his company couldn't deliver. He told the prospect that their orders would be delivered within 14 days, when he knew that deliveries have been taking 30–45 days. He also told the client
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that technology platforms were updated annually. However, due to the recent economic downturn, Phil knew that the platform hadn't been updated in over three years. What are the potential consequences of Phil's distortions? Is Phil's behavior unethical, or is he just doing what it takes to stay competitive in a tough economic climate?
Suzanne works in management for a pet supply retail chain and is upset by some questionable corporate policies about how small animals sold by the store are cared for. For example, she is not permitted to schedule cage cleaning for the hamsters and birds as often as she believes is necessary for their optimal health and well-being. What are her options? Are there any risks to Suzanne should she decide to expose her employer's policies? Do the bene�its of blowing the whistle on corporate policy outweigh the risks?
Cathy gets to work in the morning at the required hour, and spends about 20 minutes having coffee with her friends before heading to her desk. Cathy then spends the �irst hour of her day checking her personal e-mail, Facebook account, and even online dating sites. By about 10:00, she starts working; but she keeps Facebook and her personal e-mail account open throughout the day. Is Cathy's behavior ethical or unethical? Is there any "gray area" to what Cathy is doing? In other words, is her behavior acceptable? Would the answer be different if she is able to complete her assigned tasks and meet deadlines?
Eric is a supervisor for a transportation company that has several government contracts. This work is obtained through a strict competitive bidding process regulated by the federal government. He recently discovered that a coworker responsible for preparing project bids is having an affair with an insider at the government agency. Is the activity that Eric has observed (or learned of) unethical? Why or why not? If Eric is reasonably sure that the information he's learned is accurate, would it be unethical if he chose to ignore it? Why or why not? What are Eric's options?
Discussion Questions
1. Consider the case of a highly pro�itable public company that is rewarding its stockholders with capital gains on rising stock prices and dividend payouts. It is also awarding its top management generous compensation packages with guaranteed bonuses. Its rank-and-�ile employees, however, don't get raises or bonuses or otherwise realize the effects of such impressive corporate performance. In fact, the pro�it is achieved by keeping labor and other costs down. Is this an ethical issue? Do such companies perceive it as an ethical issue? Why or why not?
2. The role of unions has been to give a voice and some power to employees as stakeholders. Have they balanced the ethical issue? Do you see the rise in power of unions as a bad thing because they constrain what management can do and increase
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labor costs? Discuss. 3. If a corporation did not have an ethics of�icer, to whom would someone report a breach of organizational ethics? What if the alleged perpetrator were that person's manager?
4. When are ethics and ethics standards especially important in companies? 5. Companies often require that their employees work long hours or travel extensively. If you worked for such a company but had young children or elderly relatives to care for, you might �ind that your career would be jeopardized if you declined these additional work pressures. Is it unethical for a manager or a company to expect so much of employees despite their needs as parents, caregivers, or other life outside work? Discuss.
6. Is employing illegal migrant workers ethical? Why or why not? What is the nature of the dilemma? 7. Why do companies do business with other companies in China or Indonesia given unsettling reports one hears concerning labor practices? Is saving a few extra dollars the most important thing? Do companies realize that by doing so, they are helping perpetuate such practices?
8. Companies don't give a second thought to outsourcing jobs to lower-cost countries. Does the end (making pro�its) always justify the means? What does it say about the companies' attitude to its workers?
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Ethics classes may teach ethics, but by the time students get to college, most have learned their personal values from their family environment.
Associated Press/Matt Houston
10.5 Can Ethics Be Taught?
Today, every business school includes courses in ethics or requires ethics to be a part of every course in its curriculum. Judging by the results, however, the regular reports of unethical practices in business suggest the requirement hasn't made much difference. An informal poll of students in a business program a few years ago posed two questions: "Would you cheat if you knew for certain you would not be found out?" and "Would you cheat if everyone else was cheating?" Sadly, over 85% of the students answered "Yes" to each question. This experience seems to be shared by many instructors in business education. College business students are more likely to practice academic dishonesty, such as plagiarizing or cheating on exams, than students who are pursuing different majors or careers (McCabe & Treviño, 1995). Based on research showing that business-school students' moral reasoning skills may be ranked lower than students in philosophy, political science, law, medicine, and dentistry, business students may require increased ethics training (McCabe & Treviño, 1993). Lester Thurow, former Dean of the Sloan School of Management at MIT, believes the foundation of ethics must begin with family, clergy, schooling, and the jobs students hold prior to business school (Treviño & Nelson, 2007).
In the mid-'90s, Joseph Badaracco, an ethics professor at Harvard Business School did some research on MBA graduates that had taken an ethics course at Harvard and faced ethical dilemmas in the business world. Fifty percent of them had been employed by companies with of�icial ethics programs. He wrote: "Corporate ethics programs, codes of conduct, mission statements, hot lines, and the like provided little help . . . the young managers resolved the dilemmas they faced largely on the basis of personal re�lection and individual values, not through reliance on corporate credos, company loyalty, the exhortations of senior executives, philosophical principles, or religious re�lection" (Badaracco & Webb, 1995, p. 9). In other words, their personal integrity came from their upbringing rather than from ethics courses.
To �ind out how students felt about the business world, another professor asked his students a series of questions, one of which was whether they would dump known carcinogens in a river. Astonishingly, the students said that they would, claiming if they did not, someone else would.
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When asked if such a pessimistic environment was one in which they would like to live, students made the argument that they already lived in one. Disheartened, the professor concluded that his students' attitudes had been shaped long before his course began. He decided, as others had before him, that as a society, our obsession with money and material goods was producing future generations eager to succeed at any cost (Treviño & Nelson, 2007).
People, it turns out, are taught values early in life. If they do have a set of values that includes honesty, fairness, and sel�lessness, being around others that dismiss their values out of self-interest will quickly erode them. Parents will attest to changes that take place when their teenage children begin paying more attention to their peer group than to them. It becomes really challenging when people learn that in order to "win" (whether it's passing a test or climbing the career ladder), they have to sacri�ice their values and ethics.
Boys and girls that participate in sports in middle and high school and college are fortunate because, besides acquiring skills and stamina, they are taught the ethics of good sportsmanship and other character-building traits, such as teamwork, discipline, and sacri�icing individualism for the team. Unfortunately, there are coaches—and parents—that preach winning at any cost. In some sports such as track & �ield and cycling, we have almost reached a point where there is a presumption of guilt against those who are successful. When athletes in any sport are caught cheating, the common refrain is that "everyone else is doing it so I had to as well just to compete."
To conclude, the values and ethics ingrained in us from a very early age by our parents and family are the most reliable indicator of how we will fare when ethically tested later in our careers, no matter what those careers are. However, even people with good values and ethics can, when thrust into morally and ethically wanting corporations, behave unethically. When told by your manager to fudge some data or do something else that's wrong, do you comply in order to remain in their good graces and stay on that fast track up the corporate ladder, or do you stand your ground and risk not only your prospects but also your job? And when you are a few years from retirement, do you succumb to such demands or lose everything, knowing that getting another job at your age is highly unlikely? It is the unusual corporation that develops an ethical system and culture to make sure that employees behave ethically and want to behave ethically. One way that organizations can teach, encourage, and promote ethical behavior is by creating and modeling social responsibility and good citizenship through policies. Corporate social responsibility policies will be covered in the next section.
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Economist Milton Friedman considers a corporation's sole responsibility to society to be to make a pro�it and continue to create wealth and jobs.
George Rose/Hulton Archive/Getty Images
10.6 Corporate Social Responsibility
Perceptions of corporate social responsibility vary widely. As University of Chicago economist Milton Friedman wrote almost 50 years ago: "Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate of�icials of a social responsibility other than to make as much money for their stockholders as possible" (Friedman, 1962). Many people still believe, like Milton Friedman, that a corporation's sole responsibility to society is to make a pro�it so it can continue to provide jobs for people and thereby sustain communities and standards of living. To many others, corporate social responsibility (CSR) is so much more. For example, The Gap Inc. has a comprehensive social responsibility commitment that encompasses a youth development program, an environmental protection plan that addresses supply chain and in-store issues, and community investment that confronts social challenges (Gap, n.d.).
CSR is the idea that business has a duty to serve society as well as the �inancial interest of stockholders (Pierce & Robinson, 2005). CSR was conceptualized by Archie B. Carroll of the University of Georgia as a pyramid that represents various kinds of social responsibility (Figure 10.1). Economic responsibilities, at the base of the pyramid, are met by all well- managed corporations; the ones that aren't well managed fail or are acquired. The economic responsibility is to make as much pro�it as possible in order to create wealth and jobs. Then follow in order of importance legal, ethical, and philanthropic responsibilities. The pyramid is useful because it not only provides a structure for discussion but also demonstrates the complexities of the topic—different people perceive CSR to mean different things.
Legal Responsibilities
Companies are duty bound to honor the law and not break it in whichever country they do business. This is called their legal responsibilities. As was discussed earlier, many regulations and laws are enacted to protect the public and the public good, and there are a plethora of government agencies responsible for enforcing them, including the following:
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The Securities and Exchange Commission for ensuring the proper functioning of the securities industry (online and stock exchanges) and the integrity of �inancial reporting for public companies Occupational Safety Health Administration for ensuring safety in the workplace The Environmental Protection Agency for protecting the environment The US CPSC, while not a government agency, still has the authority to ensure the safety of consumer products sold in the United States The Internal Revenue Service for collecting taxes owed the federal government The National Labor Relations Board for minimizing unfair labor practices and ideally preventing them from happening
Figure 10.1: Corporate social responsibility pyramid
Source: From A. B. Carroll, "The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders." Business Horizons, Vol. 34 No. 4, 1991, pp. 39-48. Copyright © Elsevier. Used with
permission.
These agencies came into being to enforce appropriate regulations and laws to prevent corporations from in�licting harm on particular constituencies—investors, workers, consumers, the environment, and so on. Corporations know about these laws and the consequences for breaking them; it is their obligation to the shareholders and employees to be aware of the laws. Despite this, they may commit both errors of commission (they know about the laws but still try to circumvent them) and omission (they are not aware of particular laws or their consequences or don't agree with them). But are these laws effective? Do they succeed in changing the corporate behavior that is at the root of much malfeasance?
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As far back as 1975, Christopher Stone (1975) of the University of Southern California Law School explored this very topic. He found maximization of pro�its to be the dominant characteristic of corporations and that, by and large, corrective actions by the law in terms of �ines and penalties for wrongdoing had little effect on changing behavior. They were perceived as a "cost of doing business" so long as they were a relatively small percentage of pro�its, so �irms simply paid them and then went about business as usual. In 2011 United States District Court Judge Jed Rakoff took a strong stand from the bench regarding the culpability of �inancial institutions in the mortgage crisis that contributed to the recent recession. He refused to approve a boilerplate agreement between Citigroup and the Securities and Exchange Commission to settle a civil fraud case in which Citi was accused of having loaded a $1 billion mortgage fund with securities that it believed would fail. Citi sold the fund to investors and then it bet against its customers and reaped enormous pro�its when values declined. The settlement Rakoff rejected called for Citigroup to pay $285 million, which the judged described as "neither fair, nor reasonable, nor adequate, nor in the public interest." He characterized the $285 million �igure as "pocket change to any entity as large as Citigroup," and stated that large �inancial institutions regard such penalties "as a cost of doing business." In reaching this opinion, Judge Rakoff noted that Citigroup had settled similar cases with the SEC in the past and promised not to repeat the same behavior. The judge, in rejecting the agreement referred to Citi as "a repeat offender" (Wyatt, 2011).
To make penalties so severe as to jeopardize a company's ability to continue to produce goods and possibly force it out of business would be counterproductive and perhaps viewed as overregulation. Stone made persuasive arguments in his book that the law, as part of the punishment for speci�ic kinds of wrongdoing should insert into the corporation a probation of�icer or trustee, answerable to the court, to make sure that procedures are changed and that the problem would not recur. The types of offenses for which he envisions this type of remedy include the kind where the source of the problem could be ascertained, like the poor design of a car, quality of materials purchased not checked, cooking foods to the wrong temperature, lack of quality inspections, and the like.
It seems that laws and regulations play a necessary but far from suf�icient role in trying to get corporations to behave more responsibly; so long as corporations can absorb the costs incurred when they are indicted, in all likelihood they will continue to do whatever they want in pursuit of pro�it. The best solution, as Stone surmises, is for corporations to want to behave ethically. While a good number do, that number is not nearly large enough.
Ethical Responsibilities
Notwithstanding the ethics of individuals within a company, companies themselves are often reluctant to become ethically responsible on their own. They are typically pushed to do so by critics or stockholders. Campaign GM, formed by Ralph Nader and others, bought stock in General Motors and proceeded to wage a proxy �ight to force GM to adopt stricter testing and environmental standards and to put women and representatives from minority groups on its board of directors. Corporations have found themselves trying to satisfy their critics while at the
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Corporations dislike becoming ethically responsible of their own volition. Ralph Nader and others formed Campaign GM to buy GM stock and wage a proxy �ight against GM, urging them to adopt stricter testing and environmental standards.
Vince Mannino/Bettmann/Corbis
same time hoping the critics would go away. How could corporations become socially responsible if their management couldn't, even in principle, determine what their social obligations were (Wyatt, 2011)?
Corporations and researchers developed a new idea—instead of being socially responsible, why not be socially responsive? As long as a company was "responsive" to the demands of society and tried to anticipate and meet these demands, it didn't have to worry about being "responsible." In other words, it would have no obligation to be moral or ethical. Corporate social responsiveness is primarily pragmatic and perverts the connection between ethics and strategy. It is simple, easy, and wrongheaded (Freeman & Gilbert, 1988). It conveniently sidesteps the true notion of responsibility.
Ethical responsibilities encompass the more general responsibility to do the right thing and avoid doing undue harm to others. Unless a company's culture and public declarations put a priority on behaving ethically, individual managers will have a hard time being true to their values—swimming against the tide, so to speak. It is much easier to "go along" if it's okay with everyone else. In the rare instance when it's not okay, that individual will tender his or her resignation and join a company whose values are aligned with the individual's own.
Philanthropic Responsibilities
Philanthropic responsibilities are voluntary and engage the corporation's participation in activities that promote human welfare and goodwill. These take the form of donations of time or money to any of a number of deserving causes, charities, and civic-related projects. However, because such activities are voluntary and discretionary, failure to be philanthropic is not considered unethical, and some don't consider it even a responsibility (Treviño & Nelson, 2007).
It was Milton Friedman who said, in not so many words, that giving corporate pro�its to charity or using them in a way that doesn't bene�it stockholders was tantamount to stealing from stockholders (Freeman & Gilbert, 1988). Wouldn't it make more sense to return excess pro�its to the stockholders and let them decide to donate the money to causes near and dear to their hearts? What right does the corporation (and its board of directors) have to give its money away?
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In U.S. culture, wealthy individuals and businesses are expected to share their good fortune. Many of the wealthiest billionaires in the United States are proli�ic philanthropists. Bill and Melinda Gates top the list, having given $24 billion to their Bill and Melinda Gates Foundation to help bridge the gap in human health between the developed and developing world.
Eric Piermont/AFP/Getty Images
Fortunately, many companies feel it is their duty to "give back" to society and to contribute where the need is greatest. When the tsunami of 2004 hit Southeast Asia, companies like FedEx, Abbott Laboratories, and Coca-Cola jumped in to help. Over 100 companies are estimated to have sent $178 million worth of cash and medicine to affected countries, many doing so quietly, not announcing or advertising their contributions (Chandler, 2005). Many corporations also responded swiftly in September 2005 to help victims of hurricane Katrina after it rampaged through Louisiana, Mississippi, and Alabama. Walmart donated over $20 million to aid victims and donated 1,500 truckloads of free merchandise, food for 100,000 meals, and the promise of jobs for all displaced workers (Barbaro & Gillis, 2005). The recent earthquake, tsunami, and resultant nuclear accident that hit northern Japan on March 11, 2011, cost an estimated 22,000 lives and an estimated $300 billion, not counting the tens of thousands that were still homeless months later. The nuclear contamination is expected to persist for decades. The �lood of donations and assistance from countries, nongovernmental entities, corporations, and individuals has come from every region of the world. Businesses have provided donations of cash, materials, and services to help the victims. Many, such as Sony and Mitsubishi from Japan, Disney and
Goldman Sachs from the United States, and Pak Suzuki Motors from Pakistan have contributed matching funds to supplement employee donations (Philanthropy News Digest, 2011). Again, these are examples of the best of human nature, coming to the aid of those less fortunate and in dire need.
In the United States, there is a tradition of philanthropy on the part of wealthy individuals and businesses. In support of this, the federal tax code includes tax incentives to do so. Many of the wealthiest individuals and families in the United States are proli�ic givers. Bill Gates tops the list, having given generously to The Bill and Melinda Gates Foundation over the years to help bridge the gap in human health that exists between the developed and developing world (Treviño & Nelson, 2007). Warren Buffet, arguably the most successful investor in recent history, has, in addition to donating in excess of $9.5 billion to the Gates Foundation alone, committed to donating the bulk of his fortune to charity on his death. Further, he has persuaded more than 40 other billionaires to pledge the majority of their fortunes to charity during or after their lifetimes. The commitments by these benefactors are expressed in personal letters from each at Giving Pledge.com, describing the role philanthropy has played in their lives.
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For consumers, the bene�its of using nuclear power rather than fossil fuels are overshadowed by the risk of nuclear accidents, such as the one that occurred at the Fukushima nuclear facility in Japan in March of 2011.
Associated Press/Tokyo Electric Power Co.
Other forms of philanthropy support the arts (such as symphony orchestras, opera companies, and museums), city beauti�ication projects (such as commissioning a work of art or a garden), scholarships for students, research facilities at universities, hospitals, libraries, and so on. Many high-pro�ile contemporary organizations have signi�icant corporate social responsibility programs. For example, retailer Target contributes 5% of its income to programs bene�itting local communities with a Target presence (Target.com, 2008). Philanthropy goes beyond "doing the right thing," because it is something no one has a right to expect but something for which everyone is thankful.
Many of America's cities owe their greatest cultural features—museums, artwork, buildings, auditoriums, schools, and community facilities to the philanthropic efforts of corporate families such as the Carnegies, Rockefellers, Vanderbilts, and many more. Just walk around any university campus, and the names of some of those who have donated to fund education will be evident in the names of the buildings.
Environmental Responsibilities
Externalities are costs to society, such as air and water pollution, that are produced by companies but not re�lected in the company's cost structure (Kuttner, 1997). Historically, it was cheaper for such companies to pollute than not to; pro�its won out over the harm being done to society. The only way to protect society was through regulation. Thus, despite the aversion that companies have for regulations, not all are bad; some force an ethical standard on companies that otherwise would be ignored.
Because environmental responsibilities was not included in the pyramid shown in Figure 10.1, one shouldn't assume that they are "less important" or of a "lower order" of responsibility than philanthropic responsibilities. On the contrary, they are a vital part of corporate social responsibility and becoming more so with each passing year.
What we are talking about here is a company accepting responsibility for and reducing the adverse environmental effects stemming from its operations. Not only are expectations rising for corporations to become more environmentally responsible but technologies are advancing even faster to make some actions possible that only a few years ago were not. Take genetically engineered crops and genetically modi�ied foods—are they safe, and what will be the effect on farmers in regions where GM crops are planted (Schwartz & Gibb, 1999)? Or consider the case of Paci�ic Gas and Electric's
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contamination of the water supply in a small California town popularized in the �ilm Erin Brockovich. It turns out that 20 years later, water samples indicate that PG&E has not solved the problem.
Despite this bad news, a growing number of companies are becoming more environmentally responsible— leading one scholar to label the phenomenon business's new "megatrend" (Reid, 2010). For instance, the Coca-Cola Corporation has partnered with communities to restore watersheds (Coca-Cola Company, n.d.). Apple seeks to lead the industry in "reducing or eliminating environmentally harmful substances" from its packaging and the metal and plastic in its parts (Apple and the environment, n.d.); and hotelier Marriott is focused on "integrating greater environmental sustainability . . . through architecture and construction, engineering and procurement (Marriott, n.d.).
While companies are motivated by current pressures and existing laws to "clean up after themselves" in the short term, they resist making investments in causes such as research toward long-term solutions to the adverse environmental impacts of their operations. Generally, the immediate pressures to produce pro�its prevail. Michael Porter has said that pollution is in itself a form of inef�iciency in production, creating negative externalities that until now companies have been able to shift on to the public sector (Schwartz & Gibb, 1999). Will there come a time when the accounting profession begins to include costs for safeguarding the environment as a legitimate cost of doing business? Probably not until everyone in an industry is forced to do the same thing. Of course, in some industries, such costs are much higher than in others (for example, preventing oil spills, nuclear accidents, and tainted food).
Another problem is the growing skepticism the consumers have for technological advances being risk-free. A case in point is nuclear power, where the potential bene�its over using fossil fuels are balanced by the real risks of a nuclear accident such as the one experienced in Japan in March 2011. In a cost/bene�it analysis of nuclear power, how do you account for the possibility of a major nuclear accident or the risk in storing irradiated spent fuel for hundreds of years?
But whom do we blame for overly high levels of mercury in seafood? For the dumping of plastic and other indecomposable garbage now swirling in the Paci�ic Ocean in two pools, each the size of Texas? For rapidly depleting the world's supply of fossil fuel? For adding to our global carbon footprint? For changing global climate patterns?
Taking care of negative externalities caused by a particular �irm's operations is one thing, but there is growing evidence of massive environmental damage that is collectively caused, making it dif�icult to pin blame and rendering the law helpless. While I don't have any solutions (nor is this the appropriate forum for delving into the full extent of the problems), becoming aware of the problems is a �irst step, followed closely by nations getting together to try to mitigate them. How bad do they have to get before we are all forced to cooperate and take responsibility for solving them?
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Discussion Questions
1. In your opinion, what is the most pressing environmental problem: (a) that particular corporations are responsible for, and (b) that the global community is responsible for. Explain your choices.
2. Why is the law so far behind developments and policymakers even further behind? (Stone's book, for example, is a call for policymakers to act.) Is it because not enough facts are available, or there is too much ambiguity, or the costs of following through too high? Discuss.
3. If companies were suddenly expected to bear the costs of their negative externalities, whether or not you agree that is just, how do you think it will affect their stock prices, their prospects for the future, their investors, and their other stakeholders?
4. Following on from (3), do you believe it will spur innovation and investment in innovation? 5. What particular advantages accrue to companies who proactively take steps to safeguard the environment (like BMW), besides giving them a warm, fuzzy feeling?
6. Just from your perception over the past few years of reading the papers and listening to the news, what has accelerated interest in environmental responsibilities of corporations? Has it been the growth of environmental "watchdogs," investor activism, or consumer pressure? Discuss your thinking.
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Summary
Ethics is about how we meet the challenge of doing the right thing when it will cost more than we want to pay, which is a better de�inition for the business world than the traditional de�inition of "the art and discipline of applying principles and frameworks to analyze and resolve complex moral dilemmas." Morality is knowing the difference between right and wrong and choosing right. Someone who is immoral also knows the difference but chooses wrong. Values are tenets that are important to an individual or group and the ways that govern how they choose to live their life. An unethical act has immoral intent and is done with the full knowledge that it is legally and morally wrong or contravenes the prevailing societal or organizational culture. Unethical behavior consists of conduct undertaken to bene�it a person or organization while knowingly—or being oblivious to the possibility of—harming others. Behavior is still considered unethical if the act is wrongful, whether or not it results in harm.
Why do people behave unethically? In most instances, they are motivated by self-interest. Often they justify such behavior by claiming that other people are getting away with it. Fudging data to make quarterly results look good or to qualify for a bonus, cutting corners to meet production targets, and obeying an order by your manager to cover something up are a few examples of unethical behaviors. Organizations, particularly large ones, are so focused on meeting pro�it goals, buoying their stock price, and pleasing their stockholders that they may go to great lengths to avoid or minimize unnecessary expenditures. This includes a proclivity for externalizing whatever costs they can such as pollution. In some industries it is common for �irms to tolerate �ines and penalties for breaking the law or to settle a lawsuit so long as they are a fraction of pro�its, but continuing to do "business as usual." To some, this is simply a cost of doing business.
Ethical issues arise whenever people are tempted to behave unethically or not do the "right" thing. In the business world they include a host of issues. In the sphere of human resources, they include such matters as discrimination, sexual and other forms of harassment, and con�licts of interest. Customer-con�idence issues encompass con�identiality, product safety, truth in advertising, and �iduciary responsibilities. The use, or misuse, of corporate resources includes such behaviors as co-opting corporate reputation, stealing corporate resources, and falsifying data. The root problems in most of these instances are unfairness, lack of respect, and self-interest.
All of us face ethical dilemmas—a choice in which one consideration is the rightness or wrongness of the action—at some point in our careers. You will recognize you are facing one when you're not sure what the right thing to do is. However, asking yourself �ive questions might help you avoid making the wrong decision: (1) What is in it for me? (2) What decision or action would lead to the greatest good for the greatest number? (3) What laws, regulations, and social norms apply in this situation? (4) What are my obligations to others? (5) What will the lasting impact be on me and on my key stakeholders? Three further questions will aid in resolving con�licts you may encounter: In the
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current situation, which questions above relate most to your personal and organizational values? If those values must be jeopardized, which is the best tradeoff? How well will your decision and rationale fare if submitted to public scrutiny?
It is naive to think that ethics can be taught either in the workplace or in business school. Research has shown that such courses make little if any difference and that one's values and ethics are molded early on in life by our parents, family, church or religious group, and so on. Those values and ethics turn out to be the most reliable indicator of how we will fare when ethically tested later in our careers, no matter what those careers are. However, even people with good values and ethics can, when thrust into morally and ethically challenged cultures, behave unethically.
Corporate social responsibility (CSR) is the idea that business has a duty to serve society as well as the �inancial interests of investors. CSR can be viewed as a pyramid. At the base is economic responsibility, which is in essence the obligation of a corporation to make pro�its, provide jobs, and pay taxes. Many people believe, like economist Milton Friedman, that they are a corporation's only social responsibility.
Companies are duty bound to honor the law in whichever country they do business, which constitutes their legal responsibilities. Over the years, many government agencies have been created to enforce appropriate regulations and laws to prevent corporations from in�licting harm on particular constituencies—investors, workers, consumers, the environment, and so on. While these agencies have been, to varying degrees, effective at enforcing regulatory compliance, it is debatable whether laws and regulations have produced change in corporate ethical behavior. An eminent legal scholar, Christopher D. Stone, surmises that the best solution is for corporations to want to behave ethically.
Ethical responsibilities encompass the more general responsibility to do what's right and avoid doing undue harm to others. Many corporations are reluctant to embrace such responsibilities absent pressure from critics, stockholder groups, and lawsuits. Corporations that have tried to be socially responsive act on the belief that they have no obligation to be moral or ethical. Social responsiveness is primarily pragmatic and conveniently sidesteps the true notion of ethical responsibility.
Philanthropic responsibilities promote company involvement in causes and events that encourage human welfare and goodwill. Since such undertakings are optional, an absence of philanthropy does not mark a company as unethical, and some do not consider it a responsibility. Fortunately, many companies feel it is their duty to "give back" to society and to contribute in times of emergency or disaster, or to fund cultural and civic activities. Philanthropy goes beyond "doing the right thing," because it is something no one has a right to expect but something for which everyone is thankful.
Environmental responsibilities involve a company's accepting responsibility for and reducing the adverse environmental effects stemming from its operations. While a growing number of corporations are voluntarily becoming more environmentally responsible, others must be
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forced to do so by the regulations. There is also massive environmental damage that is collectively caused, making it dif�icult to assign responsibility to anyone and rendering the law helpless. The law lags behind the need, and policymaking lags behind the law; while changes are occurring, the pace is still too slow.
Concept Check
Key Terms
amoral Not knowing the difference between right and wrong or not caring.
corporate social responsibility (CSR) The idea that business has a duty to serve society as well as the �inancial interest of stockholders.
economic responsibilities Making pro�its so that the corporation grows and endures while providing jobs and paying taxes.
environmental responsibilities A company's accepting responsibility for and reducing the adverse environmental effects stemming from its operations.
ethical "mistake" An act that is not deliberately unethical, and is something an individual or group regrets afterward and desires to undo.
ethical dilemma A choice (ordinarily of action) in which one consideration is the rightness or wrongness of the action.
ethical issues Arise whenever people are tempted to behave unethically or not do the right thing.
ethical responsibilities Encompass the more general responsibility to do the right thing and avoid doing undue harm to others.
ethics (1) The art and discipline of applying principles and frameworks to analyze and resolve complex moral dilemmas.
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ethics (2) Is about how we meet the challenge of doing the right thing when it will cost more than we want to pay.
externalities Costs to society, such as air and water pollution, that are produced by companies but not re�lected in the company's cost structure.
immoral Knowing right from wrong and choosing wrong.
legal responsibilities Where companies are duty bound to honor the law (in whichever country they do business) and not break it.
moral Knowing right from wrong and choosing right.
philanthropic responsibilities Are voluntary and promote company involvement in causes and events that encourage human welfare and goodwill.
unethical act Is carried out with immoral intent, done with the full knowledge that it is legally and morally wrong or goes against societal or organizational norms.
unethical behavior Conduct undertaken to bene�it a person or organization while knowingly (or being oblivious to the possibility of) harming others. Behavior is still considered unethical if the act is wrongful, whether or not it results in harm.
values The tenets most important to people and organizations and the ways that govern how they choose to live their life.
Chapter 10 – Ethics and Corporate Responsibility
This chapter looks at both ethics and corporate social responsibility. First let’s define the two. According to Abraham (2012), “ethics is the art and discipline of applying principles and frameworks to analyze and resolve complex moral dilemmas” (p. 278). In understanding this definition one needs to know where these principles and frameworks originate in order to know how to analyze and resolve complex moral dilemmas. The basis for these principles is the individual values. Values come down to what is important to people that help them make decisions in terms of how they will live their life (Abraham, 2012). So when one looks at the principles and the frameworks that help make moral decisions, it really comes down to the values that person holds both professionally and personally. One could argue that our value system is developed based on our culture, upbringing, education, etc. All of these things do impact what people value as adults and will impact how adults make complex decisions. What if one has poor values? This can lead to unethical behavior. Throughout history there have been examples of individuals with unethical behavior. The textbook provides many examples such as Bernie Madoff’s Ponzi scheme. Another might be the decisions the leaders made with Enron. According to Victoria Duff (2014) there are five ways to demonstrate unethical behavior.
1. Deliberate deception
2. Violation of conscience
3. Failure to honor commitments
4. Unlawful conduct
5. Disregard of company policy (2014)
The second focus of this chapter looks at corporate responsibility. According to HEC Paris (n.d.) “a company has an economic responsibility: it must earn a return for its stockholders within the confines of the law. However, corporate social responsibility means that organizations have also ethical and societal responsibilities that go beyond their economic responsibilities” (para. 1). As our textbook illustrates in Figure 10.1, there is a corporate social responsibility (CSR) pyramid that illustrates all the areas that are impacted by CSR. The bottom of the pyramid is economic responsibility, then comes legal responsibility, followed by ethical responsibility and at the top, philanthropic responsibility Abraham, 2012).
Chapter 11 – Diversified, Global and Other Types of Organizations
Throughout this chapter the evaluation of diversified, global and other types of organizations are reviewed. In looking at these types of organizations it is important to understand the various strategies and their differences. Two strategies that are important to understand include deliberate and emergent strategies. Let’s break this down. As cited by Mintzberg and Waters (1985), “a strategy can be described as deliberate where the collective vision, goals and / or intention(s) of an organization is articulated as broadly and in as much detail as possible, communicated to the employees within that organization in order to realize a given outcome” (Manuwa, 2014, para. 1). However, another strategy could be described as emergent, which is “where consistencies arise in the actions / behavior of an organization over a period of time, even though the adoption of such behavior / actions was never explicitly intended; an example of this can occur “when an environment directly imposes a pattern of action on an organization” (Manuwa, 2014, para. 1). In reviewing the different types of corporations in this chapter we are looking at both global and international corporations. What is the difference between each of these? According to Iwan (2007), “global companies have invested and are present in many countries. They market their products through the use of the same coordinated image/brand in all markets. Generally one corporate office that is responsible for global strategy. Emphasis on volume, cost management and efficiency” (para. 5). Additionally, “international companies are importers and exporters, they have no investment outside of their home country” (Iwan, 2007, para. 3). Forbes School of Business Faculty
References
Abraham, S. C. (2012). Strategic management for organizations. San Diego, CA: Bridgepoint Education, Inc. Duff, V. (2014). Examples of unethical behavior in the workplace . Houston Chronicle. Retrieved from http://smallbusiness.chron.com/examples-unethical-behavior-workplace-10092.html HEC Paris (n.d.). Ethics and corporate social responsibility . Retrieved from http://www.mba.hec.edu/Learning-Experience/Part-time/Fundamental-Phase/Core-courses-2/Ethics-and-Corporate-Social-Responsibility Iwan, L. (2007). Difference between a global, transnational, international and multinational company . Lee Iwan Accumulated Experience. Retrieved from http://leeiwan.wordpress.com/2007/06/18/difference-between-a-global-transnational-international-and-multinational-company/
Manuwa, A. (2014, June 30). Deliberate vs. emergent business strategy. . Linkedin. Retrieved from https://www.linkedin.com/pulse/article/20140630061420-296333353-deliberate-vs-emergent-business-strategy
Text
Abraham, S. C. (2012). Strategic Management for Organizations. San Diego, CA: Bridgepoint Education, Inc.
Read the followings chapters in Strategic management for organizations :
· Chapter 10: Ethics and Corporate Social Responsibility
· Chapter 11: Diversified, Global, and Other Types of Organizations
Multimedia
Going Global Series:
· (Part 1) http://www.youtube.com/watch?v=aW80M6Cnrvs&feature=player_embedded
· (Part 2) http://www.youtube.com/watch?v=uKwCEDLI8xk&feature=related
· (Part 3) http://www.youtube.com/watch?v=E-87uSO2SXc&feature=related
· (Part 4) http://www.youtube.com/watch?v=AhsCkcJEeSk&feature=related
Running head: SWOT ANALYSIS 1
SWOT ANALYSIS 2
Boston Consulting Group SWOT Analysis
Reginald. A. Whimbush
Dr. Fireside
MGT450: Strategic Planning for Organizations
January 22, 2018
Teacher feedback for this paper:
This is great work. My feedback here is focused on the final, see the Announcements for the exact format.
The goal of a strategy format is to deeply recognize characteristics of each SWOT level with informed research, academic support or industry examples for your analysis that includes data, then building a narrative for the change or effort you are suggesting, and then by using methods presented in this course building a strategy that can be compiled and used by organization leadership.
Founded in 1963, Boston Consulting Group (BCG) is among the top management consulting services companies globally. Headquartered in Boston, Massachusetts, and founded by Bruce D. Henderson, BCG that began as a management and consulting division of Boston Safe Deposit now offers a range of services to solve clients’ hardest problems. It offers services such as marketing and sales, innovation and product development, corporate development and growth, technology and digital, and strategy among others to a number of industries from automotive to insurance to tourism to energy among others. The company operates in Asia Pacific, Africa, Middle East, North, South, and Central America, and Europe (bloomberg.com, 2018).
BCG a world leading consulting firm has grown from its culture, innovation, and thought leadership. Through its dynamic and supportive teams the company strives to unlock its clients and employees potential. It has over 80 offices in 45 countries with the aim of putting consultants in local markets to serve all clients globally. Its competitors are McKinsey & Company and Bain & Company that was started by ten employees of BCG in 1973 as an experiment that turned successful (managementconsulted.com, n.d).
BCG’s SWOT Analysis
SWOT analysis is simply analyzing a company’s strengths, weaknesses, opportunities and threats. Weaknesses and strengths are part of an internal analysis that illustrate a company’s capabilities or expertise and areas it needs to improve in respectively while threats and opportunities are part of an external analysis of a company that influences its profitability and growth (Abraham, 2012).
Strengths
Some special expertise or capabilities of BCG that have enhanced it success include it’s investment in its employees, expansion into different market globally, and maintenance of a good brand name. BCG employs staff from diverse backgrounds, with a range of experiences and interests that give it the unique ability to approach client problems and identify novel solutions that lead to transformative change. Through its diverse employee pool and strong inclusive staff culture, the company better understands clients’ problems and finds them lasting solutions. The company is classified among the best companies to work for because of its great benefits, flexibility, and learning opportunities among others. The company provides generous employee benefits ranging from flexible working hours to comprehensive health care coverage to dedicated training sessions among others. For instance, the company invests $80M yearly in Learning & Development (L&D) to enhance growth through training. An employee at the company receives $200K in L&D investment throughout his career course (greatplacetowork.com, 2017). The company has a good brand name, its present in over 45 countries, and has received several awards for its consulting services.
Weaknesses
There are a number of consulting firms that has led to stiff competition among firms offering management consulting services limiting market share. BCG has not penetrated international markets like McKinsey & Company and other competitors. BCG has not diversified its business areas but greatly relies on management consulting services which are quite risky due to entry of new firms or clients finding ways to solve their issues.
Opportunities
Management consultants are valuable to other organizations as they provide them with unique expertise that facilitates their operations and response to changing environment. Many organizations lack innovation and speed to respond to clients providing a rich opportunity for consulting firms like BCG to offer problem-solving skills (Srinivasan, 2014). BCG can diversify its business areas rather than stick to one strategy. The company can acquire smaller firms to strengthen its presence in other international markets. BCG can use digital technologies that enhance more efficient operations allowing for greater innovation. Innovation means a better understanding of customer needs and ways to effectively address their needs.
Threats
The management consulting industry tends to be highly fragmented with a number of consulting firms including independent consultants that increase competition and reduce market share for BCG. Since the marketplace is competitive, attracting top talent remains a challenge. This means that BCG must invest a lot in its employees to minimize employee turnover and recruit top talent. Entry of new players and the ability for clients to solve their own problems could lead to decreased returns for BCG. For instance, entry of specialized niche consulting firms and technology consultants such as IBM’s service can influence BCG’s returns (Christensen et al, 2013).
BCG is a leading management consulting firm that is well established. The company values its stakeholders including its employees’ which is evident from the awards it has received for being a best working place. The SWOT analysis on BCG indicates that the company is on the right track to sustained success. However, it needs to improve on the identified weaknesses such as increase penetration to other markets globally and diversify its business due to the stiff competition in the industry.
References
Abraham, S. C. (2012). Strategic Management for Organizations. San Diego, CA: Bridgepoint Education, Inc.
Bloomberg. (2018, January). Company Overview of The Boston Consulting Group, Inc.
Retrieved from Bloomberg: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=135794.
Christensen, C. M., Wang, D., & Bever, D. (2013). Consulting on the Cusp of Disruption.
Harvard Business Review.
Great Place to Work. (2017). The Boston Consulting Group, Inc. Retrieved from Great Place to
Work: http://reviews.greatplacetowork.com/the-boston-consulting-group-inc.
Management Consulted. (n.d). BCG’s Legacy of Creativity. Retrieved from
managementconsulted.com: https://managementconsulted.com/consulting-interviews/bcg-interview-101/.
Srinivasan, R. (2014). The Management Consulting Industry. IIMB Management Review, 26(4),
pp:257-270.
IMPORTANT: Tips for Final Paper:
Ideally your week 3 paper will serve as a foundation for your final, although you are NOT permitted to simply copy and paste you need to update all content based on my feedback and really the only mirrors of your week 3 and week 5 paper should be your background sections with any edits I map out for you. Please reach out with questions.
Let's say you are researching Coke: * Pull the Annual Report (this will help you craft your thesis which should be 1 page)
* Pull reports from major competitors like Snapple and Pepsi (this will help you craft your background/market analysis which will be 1 page)
* Pull current stock prices from Coke and all competitors using Yahoo or MorningStar (this will help you again craft the background/market analysis)
* Research and conduct SWOT (you can use academics and textbook sources here) 5 pages
* Include methods and processes from strategy concepts we discussed in class
* Use textbook methods to conduct academic research using Google Scholar or online databases from the Writing Center
* Based on SWOT outcomes create a strategy that meets the organizational goals outlined in the annual report (this will be 1 page)
* Use industry examples from best practices like those used at Amazon, Apple, Google, Starbucks, Wells Fargo (large high-performing organizations essentially) to support why your strategy and how your strategy and who your strategy will impact (again part of the 1 pages)
* Use 1 page to describe how you measure and know your strategy worked. Make sure if you are doing for-profit research (like Coke) that you include how much you expect stocks to go up, how many investors you would like to attract, and how prices of products will be impacted.
Final Project
PLEASE DO NOT SUBMIT A BID FOR THIS ASSIGNMENT IF YOU DO NOT UNDERSTAND EDUCATION TERMS AND CONCEPTS. ALL DIRECTIONS MUST BE FOLLOWED AND NO PLAGARIASM. MY SCHOOL USES SOFTWARE TO DETECT COPIED MATERIAL.
Focus of the Final Project
Select an organization and prepare a strategic plan to grow the business over the next three years. Your strategic plan must include the following:
· Please read the teacher comments on the paper titled Boston Consulting Group SWOT Analysis. You can use that paper as the basis for the final paper.
· Describe your organization’s history, products, and major competitors.
· Explain the current situation of the organization in the market.
· Conduct a SWOT analysis (strengths, weaknesses, opportunities and trends) to determine areas that offer opportunities for change.
· Choose at least three areas from your SWOT analysis and explain why the areas you have chosen are essential to your strategic plan. Use theories and examples from your text and additional sources to support your rationale.
· Explain your method to measure the success of your strategic plan.
Your paper must be eight pages in length (excluding the title and reference pages) and formatted according to APA style guidelines. In addition, you must use at least three scholarly sources, in addition to the text. Remember to incorporate information that you have learned from this course as well as your personal experience.
Your Final Project
· Must be eight to ten double-spaced pages in length and formatted according to APA style as outlined in the Ashford Writing Center.
· Must include a title page with the following:
· Title of paper
· Student’s name
· Course name and number
· Instructor’s name
· Date submitted
· Must include an introductory paragraph with a succinct thesis statement.
· Must address the topic of the paper with critical thought. If possible, provide the context of a first-person experience where you saw this academic concept in operation.
· Must conclude with a restatement of the thesis and a conclusion paragraph.
· Must use APA style as outlined.
· Must include a separate reference page that is formatted according to APA style.

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