© 2015 Cengage Learning 1

Chapter 5
Strategic
Management
and Corporate
Public Policy

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 Learning Outcomes
1. Describe the concept of corporate public policy and relate
it to strategic management.
2. Articulate the four major strategy levels and explain
enterprise-level strategy.
3. Explain social entrepreneurship and relate it to the
benefit corporation.
4. Explain sustainability reports and integrated reporting.
5. Link public affairs with the strategic management
function.
6. Indicate how public affairs may be incorporated into
every manager’s job.
© 2015 Cengage Learning 3
 Chapter Outline

• The Concept of Corporate Public Policy

• Four Key Strategy Levels
• The Strategic Management Process
• Public Affairs as a Part of Strategic
Management
• The Corporate Public Affairs Function Today
• Summary

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The Concept of Corporate Public Policy
Affirmative Action Employee privacy

Corporate public policy is

a firm’s posture, stance,
strategy or position
regarding the
Environmental environmental, social,
Sustainability
global, and ethical
aspects of stakeholders
and corporate
functioning
Sexual harassment
Product safety

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 Corporate Public Policy
and Strategic Management
Strategic management -
•Refers to the overall management process that
strives to identify corporate purpose, and to
position a firm to succeed in its market
environment.
Corporate public policy -
•Incorporates sustainability as that part of the
overall strategic management of the organization
that focuses on the environmental, economic,
social and ethical stakeholder issues that are
embedded in the decision processes of the firm.

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 Relationship of Ethics
to Strategic Management -
• For business ethics to have any meaning
beyond pompous moralizing, it should be
linked to corporate strategy.
• Corporate strategy can be revitalized because
the linkage permits addressing management
issues in ethical terms.
• This linkage can be better understood when
we think about the:
• Four key strategy levels (decisions are made
at several levels)
• Steps in the strategic management process
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 Four Key Strategy Levels
Enterprise-level strategy -
• What is the role of our firm in society?
• For what do we stand?
Corporate-level strategy -
• What business should we be in?
Business-level strategy -
• How should we compete in this business or
industry?
Functional-level strategy -
• How should we integrate subfunctional
activities and relate them to changes in our
functional areas?
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The Hierarchy of Strategy Levels

Enterprise-Level Strategy

Corporate-Level Strategy

Business-Level Strategy

Feedback
Functional-Level Strategy

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 Emphasis on
Enterprise-Level Strategy
For what do we stand?
• What is the role of our organization in
society?
• How is our organization perceived by our
stakeholders?
• What principles or values does our
organization represent?
• What obligations do we have to society at
large, including to the world?
• What are the broad implications for our
current mix of businesses and allocation of
resources?
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 Manifestations of
Enterprise-Level Thinking -
• A positive, constructive, sensitive firm
response in a public crisis
• The use of:
• Codes of ethics
• Codes of conduct
• Mission statements
• Values statements
• Corporate creeds
• Vision statements
• Policy-oriented codes and statements
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 Social Entrepreneurship -
• The social entrepreneurship has as its reason
for being a mission of societal value creation.
• The creation of wealth is a means to achieve
the goal of creating societal value.
• Social entrepreneurship’s central focus is the
alleviation of poverty, but it may address a
range of societal goals, including education,
the environment, and the arts.
• The bottom-of-the-pyramid (BOP) is term
used to characterize the largest and poorest
socio-economic group of people, those who
live on less than $2/day.
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 The Benefit Corporation-
• Unlike the traditional corporation, the Benefit
Corporation has a broader mission that includes
having a positive impact on society.
• The societal mission does not take a backseat to
shareholder wealth maximization.
• The Benefit Corporation offers managers,
investors and customers the opportunity to
participate in or patronize businesses that
promise to make social responsibility an
important goal.
• 12 states now have laws permitting companies
to incorporate as Benefit Corporations.
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 The Importance of Core Values
Core Values -
•Are the deeply ingrained principles that guide
all of a company’s actions and decisions.
•Serve as cultural cornerstones.
•Having a set of core values that are not
followed will do no good.
•To be effective, firms need to weave core values
into everything they do.
•If a firm’s core values are not upheld, they
become hollow, and do more harm than good.

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 Other Manifestations of
Enterprise-Level Thinking -
Establishment of public-policy committees -
•Sustainability
•Ethics
•Corporate philanthropy, etc.
Establishment of a Public affairs Office -
•Included in strategic decision-making
Identification of social or public issues –
•Integrated into strategic management processes

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The Strategic Management Process-

1. Goal formulation
2. Strategy formulation
3. Strategy evaluation
4. Strategy implementation
5. Strategic control
6. Environmental analysis

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Strategic Management Process and
Corporate Public Policy

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Components of Strategy Formulation

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 Strategic
Corporate Social Responsibility (1 of 2)
CSR & Competitive Advantage -
•3 ways corporations intersect with society:
• Generic social issues (firm’s operations do not
affect society and issue is not material to firm’s
long-term competitiveness)
• Value chain social impacts (a firm’s normal
operations significantly affect society)
• Social dimensions of competitive context (social
issues affect the underlying drivers of a firm’s
competitiveness)
•These categories divide into 2 modes of
corporate involvement:
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 Strategic
Corporate Social Responsibility (2 of 2)
Responsive CSR
•Addresses generic social impacts through
good corporate citizenship and value chain
social impacts by mitigating harm.
Strategic CSR
•Transforms value chain social impacts into
activities that benefit society while reinforcing
corporate strategy.
•Advances strategic philanthropy that
leverages competitiveness.
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 Measuring
Sustainable Corporate Performance
• Achieving sustainability requires performance
accountability.
• When firms measure only financial performance,
environmental and social considerations become side
issues.
• To achieve sustainability, the triple bottom line must
be reflected in every aspect of the firm’s operation.
• Sustainability reports (integrated reports – IR) reflect
the extent to which the firm is creating value in the
triple bottom line.
• Social Audits, Social Responsibility Reports and
Environmental Impact Reports focus on specific areas.
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 Public Affairs
As a Part of Strategic Management

Strategic Management Process

Part of
Public Affairs Management which is

Enterprise-Level Strategy Environmental Analysis

Corporate Public Issues Crisis

Policy Management Management

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 The Corporate Public Affairs
Function Today
Public Affairs grew in the U.S. because of:
1.The growing magnitude and impact of
government.
2.The changing nature of the political system.
3.The recognition by business that it was
being outflanked by interests counter to its
own.
4.The need to be more active in politics
outside traditional community-related
aspects.
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 Public Affairs Defined -
The Public Affairs Council (PAC), the leading
organization of executives who do the PA
work of companies, defines PA as:
•“Public affairs represents an organization's
efforts to monitor and manage its business
environment. It combines government relations,
communications, issues management and
corporate citizenship strategies to influence
public policy, build a strong reputation and find
common ground with stakeholders.”

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Public Affairs Activities & Functions -

• Public Affairs (PA) began from isolated

company initiatives designed to handle
diverse activities, but was sometimes
managed by Public Relations staffers, but they
are not the same.
• Public relations focuses on selling a product,
while public affairs is designed to influence
public policy.
• PA activities may include lobbying, global
public affairs, social media, corporate
responsibility, campaign finance, grassroots
advocacy, crisis communication, and more.
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 Future of Corporate PA
• If the PA function is to be effective, it must have
influence at the top management level.
• Because of corporate ethical crises, PA specialists
have an ideal opportunity to help transform business
and society relationships. There are 3 primary
opportunities:
• Help develop value-based enterprises; and work
cooperatively with them on social issues.
• PA executives can be thought leaders in their
firms, and collaborate with those outside the firm
on current issues.
• Be mindful of global issues, including those which
begin as domestic issues and migrate.
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 Key Terms
• benefit corporation • public affairs
• bottom of the pyramid departments
• business-level strategy • public affairs
• corporate-level strategy management
• public affairs strategy
• corporate public affairs • shared value
• corporate public policy • social audit
• enterprise-level strategy • social entrepreneurship
• functional-level strategy • social responsibility
• Global Reporting report
Initiative • strategic management
• issues and crisis strategic management
management processes
• public affairs (PA) • sustainability report
• value shift

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