BEM3033 Strategic Management

Session 2

Strategic Purpose
 Session Structure
1. Organisational purpose
2. Stakeholders and strategic management
3. Organisation types and their focus
4. Session summary
5. References
6. Homework
1. Organisational purpose
High performance organisational cultures
‘Clear and compelling vision, mission, goals and strategy.’
(Warrick 2017, p.397)

Purpose statements
Less common in companies, more typical of social enterprises
Vision
Vision statements
• what the organisation wants to be and in broad terms to achieve.
• articulates the ideal of the organisation.
• points the organisation in the direction of where it wants to be.
Defining vision can be complex
CHARIS Exeter (link)
• Organisation set up to resettle refugees in 2016 through Government
backed Community Sponsorship scheme.
• Resettled two Syrian families to date.
• Partnership with 3 churches in Exeter and CHARIS Refugees in
Taunton.
• Has raised over £60,000 since 2016.
• Each family costs approx. £25,000 to resettle, set against government
estimate of £9,000.
Defining vision can be complex
Defining a vision for the charity
• Re-name: Churches Community Action for Refugees in Exeter
(Churches CARE)?
• Should we attempt to represent all churches in Exeter?
• Do we want to be the main Christian agency for refugee work in
Exeter?
• To what extent will we engage in advocacy vs resettlement support?
Mission statements
• Typically include the purpose of the organisation.
• States how the vision will be achieved in practice.
• Identifies the primary audience the organisation will serve.
• May list specific businesses, industries in which the
organisation will operate.
Strategy in relation to purpose

Watkins (2007)
2. Stakeholders and strategic management
Every organisation involves a system of primary stakeholder
groups with whom it establishes and manages relationships.

Stakeholders:
• can affect the organisation’s vision and mission.
• are affected by the strategic outcomes of the organisation.
• have enforceable claims on the organisation’s performance.
• cooperate with an organisation if their expectations are being met or
exceeded.
• compete with an organisation in zero-sum contexts.
Freeman (1984)

“This theory maintains that the objectives of

the firm should be derived balancing the
conflicting claims of the various “stakeholders”
in the firm: workers, stockholders, suppliers,
vendors.”
(Igor Ansoff 1965 Corporate Strategy)
The stakeholder model (Donaldson and Preston 1995, p.69)

Governments Investors Political Groups

Investors

Suppliers ORGANISATION Customers

Trade
Associations Communities
Employees
 Stakes based in financial investment conferring
various rights: e.g. voting and sharing profits.

Stakes based on
supplying to
contract
conferring various Stakes based in
rights: e.g. fair the satisfactions
treatment; and protections
respect for implicitly
intellectual promised in the
property; having market offer.
feedback taken
into account.

Stakes based on building and maintaining a

successful business operation.
 Stakes based on legitimacy: e.g. Stakes based in claims to
protection of public interests and justice, e.g. human and
upholding the rule of law. environmental rights.

Stakes based in claims to

Stakes based on organisational
human survival and wellbeing:
membership and the quality of member
e.g. indigenous sovereignty;
services provided.
safety; religion.
Normative viewpoints
The strategist should adopt moral or ethical perspectives to guide
stakeholder management:

• We ought (or not) to do x, because it is the right thing to do.

• We ought to respect stakeholder rights, because stakeholders have
intrinsic value.

Questions raised:
• Is the satisfaction of multiple stakeholders a zero-sum game (benefits to
one stakeholder come at the expense of others)?
• What justifications can we use to privilege some stakeholders over others
when making decisions?
Justice
Stakeholder management perspectives raise questions about justice for
strategists:

Fundamentally justice is about rights and obligations possessed by

stakeholders.

Justice is about the moral grounds for distribution of goods:

– Utilitarianism
– Libertarianism There is a big role
– Social contract theory for morality and
– Virtue ethics ethics in strategic
decision making.
'Clip from The Electric Car Revolution: Winners and Losers - Panorama', The Electric Car Revolution: Winners and Losers - Panorama, 03:30 26/11/2021, BBC News 24, 30 mins. 00:25:41-00:29:25.
https://learningonscreen.ac.uk/ondemand/index.php/clip/220484?bcast=135727895 (Accessed 20 Jul 2022)
What would you do as CEO?
Do you see the Nuns as competitors with Tesla?
– What course of action does this lead you to take?
– What are the resource/timescale implications?

Can you simply ignore the Nuns?

– What is your strategy for keeping this issue out of the media?
– What are the resource/timescale implications?

Do you see the Nuns as potential collaborators with Tesla?

– What course of action does this lead you to take?
– What the resource/timescale implications?
Strategic management of stakeholders
Stakeholder salience
A theory that explains to whom and to what managers pay attention to.

Stakeholder attributes
1. Power to influence the firm
2. Legitimacy of the stakeholder’s relationship to the organisation
3. Urgency of the stakeholder’s claim on the firm

Mitchell, Agle & Wood (1997)

Mitchell, Agle & Wood (1997, p.874)
3. Organisational types and their focus
Different types of organisations prioritise different
stakeholders:

1. Companies We are just going to think about

2. Cooperatives these types. Most of you will
choose to study 1 or 2 on this
3. Charities
module.
4. Social enterprises
5. Public sector organisations
6. Non-governmental organisations (NGOs)
Companies
Investor Owned Companies:
• Private
• Public Limited Company
Member Owned Companies:
• Company Limited by Guarantee
Hybrid Companies:
• Charitable company limited by Guarantee
• Community Interest Company
• Limited Liability Partnerships
Global Company Facts (De La Cruz et al. 2019)
• 41,000 listed companies.
• Combined value $84 trillion.
• 10,000 companies represent 90% of market capitalization.
• 41% of market cap held by institutional investors.
• 14% of total market cap held by public sector.
• public sector owns more than 50% of shares in 10% of world’s
largest companies.
• in half of the world’s listed companies, the three largest
shareholders hold >50% of capital.
• crossborder investments account for almost 25% of the
investments in public equity markets around the world.
Company ethics: narrow view
Friedman, M.L. [1970] (2007)

“The social responsibility of a business is to ‘make as much money as possible while

conforming to [...] basic rules of the society, both those embodied in law and those
embodied in ethical custom.” (p.33).

• Businesses should behave ethically, but should not proactively assert a social agenda.
• Investing in social initiatives detracts from the profits of a company and thus limits its role to
benefit shareholders and customers.
• Investing in social initiatives is unethical because businesses are not democratically elected to
enforce change.
• Business have power to contribute to social goals, yet are not representative enough of society to
legitimately implement them.
Company ethics: wide view
• Companies are not discrete units - they are part of nested
systems of stakeholders. Corporate responsibility extends
further than customers and shareholders.
• Democratic control can and should be exercised over companies
to protect the legitimate interests of citizens.
• Investors should be responsible and exercise control over
company managers to avoid waste and corruption.
• Corporate Social Responsibility principles should be integrated
into corporations through codes of conduct and principles.
Cooperatives
A cooperative is an “autonomous association of persons
united voluntarily to meet their common economic, social and
cultural needs and aspirations through a jointly owned and
democratically-controlled enterprise.” Co-operative Identity

• Distinctive to companies, because they adhere to the

International Co-operative Alliance Values and Principles.
• Part of a movement of cooperatives that share a common
vision for capital to serve the needs of people.
Cooperative Values
Co-operatives are based on the values of self-help, self-
responsibility, democracy, equality, equity and
solidarity.

In the tradition of their founders, co-operative members

believe in the ethical values of honesty, openness, social
responsibility and caring for others.
Cooperative Principles
1. Voluntary and open membership
2. Democratic member control
3. Member economic participation
4. Autonomy and independence
5. Education, training and information
6. Co-operation among co-operatives
7. Concern for community
Co-operative strategy
For co-ops to succeed they need to ensure that:
(1) the purpose of the co-op is central to members;
(2) the governance structure encourages member patronage;
(3) the operations provide a competitive advantage for their members.

Coops retain a surplus to re-invest, but all other profits are reallocated to members
as a dividend. So, they are often call not-for-profit organisations.
World Cooperative Monitor (link)

$2.2 trillion – combined turnover of top 300 coops.

World Cooperative Monitor (link)
World Cooperative Monitor (link)
Cooperatives you may know
Cooperatives you never knew were coops
Charities
• All the money they raise must go towards serving their aims.
• They cannot have shareholders.
• The main stakeholder they serve are the beneficiaries.
• BUT they need to think carefully about a wide range of stakeholders, reputation
management, marketing the positive impacts they achieve, managing their brand
and possible shocks to their income streams.
https://www.youtube.com/watch?v=l310kU0M98k
s
 Legal
Churches Agreement CHARIS Landlords Donors
Church Members Other CS Groups
Vineyard Exeter Refugees Exeter Residents Exeter Residents
Exeter Network Church
Belmont Chapel 80% Funding: Housing / Repairs 10% Funding
Insurance
Prayer Support Policies + Legal Support Legal Process
Volunteers Local Services
Meeting Space Schools
Housing
CHARIS Education
Security
Police
Language Training
Welfare
Exeter Health Services
Employment
Stories
Advice
Marketing
10% Funding Safety Checks
Reputation
Legal Process Authorisations
Accountability
Networking

Refugee Families Exeter Devon

Reputation
Reporting Home Office Checks City County
Accountability Authorisations
Benefits
Council Council
Social enterprises
• Have a strong social/environmental mission
• Utilize business income/profit to deliver mission
• Legally can be quite simple/complex
• Often work in partnership with a wide range of organisations

Do you know any social enterprises?

4. Session Summary
You should now be able to:
1. explain and differentiate the terms mission, vision, values and
objectives.
2. discuss the significance of profits in for-profit and not-for profit
organizations.
3. critically reflect upon the potential for business organizations to
address global moral and ethical challenges through stakeholder
engagement.
4. comprehend the challenges and benefits of agreeing a shared
understanding of strategy with key stakeholders.
5. References
Barney, J. B. (2018). ‘Why resource‐based theory's model of profit appropriation must incorporate a stakeholder perspective’. Strategic
Management Journal, 39(13), 3305-3325.
Collier, J., & Wanderley, L. (2005). Thinking for the future: global corporate responsibility in the twenty-first century. Futures, 37(2-3), 169-
182. https://doi.org/10.1016/j.futures.2004.03.027
De La Cruz, A., A. Medina and Y. Tang (2019), “Owners of the World’s Listed Companies”, OECD Capital Market Series, Paris,
www.oecd.org/corporate/Owners-of-the-Worlds-Listed-Companies.htm.
Engert, S., Rauter, R., & Baumgartner, R. J. (2016). ‘Exploring the integration of corporate sustainability into strategic management: A
literature review’. Journal of Cleaner Production, 112, 2833-2850.
Donaldson, T., & Preston, L. E. (1995). ‘The stakeholder theory of the corporation: Concepts, evidence, and implications’. Academy of
Management Review, 20(1), 65-91.
Freeman, R. E. (1984). Stakeholder Management: framework and philosophy. Pitman: Mansfield, MA.
Friedman, M. (2007). ‘The Social Responsibility of Business Is to Increase Its Profits’. In: Zimmerli, W.C., Holzinger, M., Richter, K. (Eds)
Corporate Ethics and Corporate Governance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-70818-6_14
Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997). ‘Toward a theory of stakeholder identification and salience: Defining the principle of who
and what really counts’. Academy of Management Review, 22(4), 853-886.
Thompson, J. L., Scott, J. M., & Martin, F. (2020). Strategic Management: Awareness and Change. Andover: Cengage. [Chapter 3]
Warrick, D. D. (2017). ‘What leaders need to know about organizational culture’. Business Horizons, 60(3), 395-404.
Watkins, M. D. (2007). ‘Demystifying strategy: The what, who, how, and why’. Harvard Business Review, 10.
6. Homework
1. Read the Essential Reading for this week - Chapter 3 of the core text
book.
2. Prepare for Seminar 2 (week 3) by reading the Littlewoods Case Study
and taking a look at the questions in the Seminar 2 slides.
3. Read one of the Further Readings.