Business Strategy - 2024/2025

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Questions and Answers

Which stakeholder group includes suppliers and customers?

  • Social/political stakeholders
  • Economic stakeholders (correct)
  • Community stakeholders
  • Technological stakeholders

In what way can community stakeholders influence an organization?

  • Through formal agreements with the organization
  • By developing internal policies
  • Through lobbying or activism (correct)
  • By participating in employee training programs

What is the primary role of technological stakeholders in a business context?

  • Managing financial investments
  • Contributing to human resource policies
  • Shaping new product development strategies (correct)
  • Influencing marketing strategies

Which of the following groups typically does NOT have a formal relationship with an organization?

<p>Community stakeholders (B)</p> Signup and view all the answers

How might external stakeholders influence an organization’s strategy?

<p>By leveraging their relationships with internal stakeholders (D)</p> Signup and view all the answers

Which type of stakeholders is likely to be especially influential in a public-sector context?

<p>Social/political stakeholders (D)</p> Signup and view all the answers

Which stakeholders are specifically mentioned as part of the economic group?

<p>Banks and shareholders (C)</p> Signup and view all the answers

What characteristic uniquely defines internal stakeholders?

<p>They are involved in specialized departments (B)</p> Signup and view all the answers

What is a key outcome of stakeholder mapping in coalition-building?

<p>Analyzing the key blockers and facilitators of a strategy (A)</p> Signup and view all the answers

Which type of companies are publicly quoted?

<p>Companies with shares traded on public stock exchanges (C)</p> Signup and view all the answers

What is a responsibility of professional managers in publicly quoted companies?

<p>To handle the day-to-day operations of the company (B)</p> Signup and view all the answers

What do family businesses typically prioritize over short-term profit maximization?

<p>Long-term survival and minimizing risks (A)</p> Signup and view all the answers

In stakeholder mapping, what does repositioning certain stakeholders aim to achieve?

<p>Enhance the effectiveness of coalition-building efforts (B)</p> Signup and view all the answers

In entrepreneurial businesses, how do founders maintain power?

<p>Through ownership and deep business knowledge (B)</p> Signup and view all the answers

What is a common characteristic of state-owned enterprises compared to publicly quoted companies?

<p>They are wholly or majority owned by national or regional governments. (C)</p> Signup and view all the answers

What role do shareholders have in publicly quoted companies if they are dissatisfied?

<p>They can push for management changes or sell their shares. (D)</p> Signup and view all the answers

What is a potential conflict for family business owners when pursuing growth?

<p>Loss of family control if professional managers are appointed (A)</p> Signup and view all the answers

What might be a consequence of expanding into mass markets?

<p>Reduction in quality standards (D)</p> Signup and view all the answers

How does stakeholder mapping assist organizations?

<p>By understanding stakeholder power and political priorities (A)</p> Signup and view all the answers

What does the term 'power' refer to in the context of stakeholder mapping?

<p>The ability to persuade or coerce others to take action (A)</p> Signup and view all the answers

Which factor influences the attention that stakeholders give to certain issues?

<p>Criticality of the issue for the stakeholder (A)</p> Signup and view all the answers

What risk might arise from raising funds through going public?

<p>Increased bureaucratic processes (C)</p> Signup and view all the answers

What relationship can exist between a local division of a multinational organization and its host country?

<p>The local division prioritizes local market demands over corporate goals (C)</p> Signup and view all the answers

What might be a negative consequence of focusing on specialist services in public services?

<p>Diversion of resources from general standard services (C)</p> Signup and view all the answers

What are the main issues highlighted that influence the strategic position of an organization?

<p>Stakeholders, Governance, and Ethics (A)</p> Signup and view all the answers

What unethical practice did Cambridge Analytica engage in with Facebook user data?

<p>Using data to influence elections (A)</p> Signup and view all the answers

How did Facebook's share price perform in 2018 compared to the overall stock market?

<p>It moved 20% slower than the market (B)</p> Signup and view all the answers

What percentage of shares does Mark Zuckerberg hold compared to the voting rights he receives?

<p>Marie has 18% of the shares with 70% voting rights (A)</p> Signup and view all the answers

Which statement accurately describes stakeholders in an organization?

<p>They are groups needing the organization to fulfill their goals and vice versa. (C)</p> Signup and view all the answers

What was a major ethical concern raised about Facebook in 2018?

<p>Misuse of private user data for profit (C)</p> Signup and view all the answers

What role does formal governance play in an organization's strategy?

<p>It guides the translation of an organization's purpose into strategic actions. (D)</p> Signup and view all the answers

Why must managers consider stakeholders in strategic decisions?

<p>Stakeholder demands can significantly diverge, influencing short-term strategies. (D)</p> Signup and view all the answers

Which model describes the relationship between owners and managers in organizations?

<p>Principal-agent model (C)</p> Signup and view all the answers

What is a key stakeholder in corporate governance besides the owners?

<p>Employee representatives (A)</p> Signup and view all the answers

Which of the following is NOT identified as a governance issue in principal-agent theory?

<p>Cost of capital discrepancies (C)</p> Signup and view all the answers

What role do managers and stakeholders play in the governance chain?

<p>They are interlinked through reporting relationships. (A)</p> Signup and view all the answers

What challenge arises due to knowledge imbalances in the principal-agent relationship?

<p>Agents usually hold more relevant information. (A)</p> Signup and view all the answers

In a small family business, what best describes the governance chain?

<p>There are family shareholders, a board with some family members, and family managers. (D)</p> Signup and view all the answers

Why are misaligned incentives considered a problem in the principal-agent model?

<p>They may cause agents to pursue goals that conflict with principles' interests. (B)</p> Signup and view all the answers

Which type of business structure is less commonly associated with complex corporate governance issues?

<p>Small family businesses (A)</p> Signup and view all the answers

Flashcards

Stakeholders

Individuals or groups that rely on an organization to achieve their goals, and who the organization also relies on.

Diverging Stakeholder Demands

Stakeholder expectations can be varied and sometimes conflicting, especially in the short term.

Governance

The process of ensuring that an organization's actions are guided by its purpose, taking into account its stakeholders and ethical considerations.

Ethics

Moral principles and values that guide an organization's behavior and decision-making.

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Purpose of an Organization

The overarching reason and goal for an organization's existence.

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Governance Mechanisms

Formal mechanisms and procedures used to establish and monitor an organization's direction and performance.

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Organizational Values

A statement that outlines the organization's core values and principles.

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Strategy

The overall plan of action that an organization uses to achieve its goals and objectives.

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Economic Stakeholders

Include those who directly interact with the organization for economic reasons, such as suppliers, customers, distributors, banks, and owners.

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Social/Political Stakeholders

Involve policy-makers, local councils, regulators, and government agencies that influence the organization's strategy.

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Technological Stakeholders

Contribute to the creation or adoption of new technologies that can impact the organization's strategy, such as key adopters, standards agencies, and ecosystem members.

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Community Stakeholders

Are affected by the organization's actions, even if they don't have a formal relationship with it, such as those living near a factory or members of the wider society.

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Internal Stakeholders

Include internal departments, offices, and factories, as well as individual employees at different levels of the organization.

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Stakeholder Influence

Can have varying levels of influence depending on the situation and organizational strategy.

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External Stakeholder Influence

Can exert pressure on internal stakeholders to represent their interests, potentially impacting the organization's strategy.

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Short-term Profit vs. Long-term Growth

Profitable short-term actions can clash with the need for long-term investments in company growth.

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Family Control vs. Business Growth

Family-owned businesses might hesitate to expand due to the potential loss of control if they need to hire professional managers.

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Growth Funding & Financial Risks

Seeking funds through loans or share issues to grow can make a company less financially secure and independent.

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Public Listing: Funds vs. Transparency

Going public on the stock market can raise funds, but forces management to be more transparent and accountable.

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Mass Market Demand vs. Quality

Widening a company's reach to mass markets often demands lowering product quality standards.

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Specialized Services vs. General Needs

In public services, focusing on specialized services can take away funds from standard services used by more people.

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Global Company vs. Local Responsibilities

Large multinational companies face conflicts when local divisions have responsibilities to both the head office and to the host country.

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Stakeholder Mapping: Power & Attention

Stakeholder mapping analyzes the power and attention of stakeholders to understand political priorities in an organization.

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Power/Attention Matrix

A tool used to categorize stakeholders based on their power and interest in the organization.

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Stakeholder Mapping

The process of identifying and analyzing key stakeholders, understanding their interests, and strategizing how to manage their influence.

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Publicly-Quoted Companies

Companies owned by the public through shares traded on stock exchanges. These companies are governed by professional managers who aim to generate profits for shareholders.

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State-Owned Enterprises

Organizations owned by governments, where decisions often align with political agendas and may not prioritize profits as much as private companies.

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Entrepreneurial Businesses

Businesses founded and controlled by entrepreneurs who often prioritize long-term growth and innovation over short-term profits.

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Family Businesses

Businesses passed down through generations within a family, often prioritizing family legacy and stability over maximizing profits.

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Limited Cognitive Capacity

Situations where stakeholders lack the capability or resources to fully comprehend or process the information needed to make informed decisions.

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What is corporate governance?

The structures and systems put in place to ensure that managers are held accountable to stakeholders.

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Who are the key stakeholders in corporate governance?

They are individuals or groups who have a legitimate interest in a company's activities. They are affected by the company's decisions and have the right to be heard.

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What is the governance chain?

It illustrates the relationships and responsibilities of different groups involved in making sure a company is run effectively.

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Explain the principal-agent model.

It's like a contract where someone (the principal) hires another person (the agent) to act on their behalf.

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What are the three main problems in principal-agent theory?

Knowledge imbalance, monitoring limits and misaligned incentives.

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How does corporate governance relate to strategy?

It's a way to connect the interests of stakeholders (like owners) with management action.

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Who are the owners in corporate governance?

They represent the owners of a company and are responsible for setting the company's overall direction.

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Who are the managers in corporate governance?

They are responsible for implementing the company's strategy and making day-to-day decisions.

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Study Notes

Business Strategy - 2024/2025

  • Course presenter: Sandra Ramos
  • Course timeframe: 2024/2025

The Strategic Position

  • Focus: Stakeholders and Governance
  • Discussion on organizational missions, visions, values, and objectives
  • Key stakeholders' wishes define an organization's purpose
  • Governance and ethical considerations guide translation of purpose into strategy

Introduction

  • Stakeholders, governance, and ethics are key to understanding organizational purpose
  • Stakeholders' desires define an organization's purpose
  • Formal governance mechanisms and ethical considerations transform purpose into strategy
  • Facebook's (2018) scandals highlight ethical, governance, and strategic concerns
  • Facebook's strategy centers on collecting user data for advertising
  • This data is vulnerable to misuse
  • Cambridge Analytica (2018) used Facebook data to influence US presidential and UK Brexit campaigns
  • Acknowledged data leak involving 50 million users
  • Facebook's share price underperformed the stock market by 20% in 2024
  • Governments raised questions about Facebook's data protection and usage practices
  • Concerns regarding Mark Zuckerberg's governance power and CEO ability, given size and market value of Facebook

Stakeholders

  • Stakeholders are individuals or groups dependent on organizations to achieve their goals
  • Managers must consider stakeholder expectations in strategic decisions
  • Stakeholder demands can vary, especially in the short-term
  • Examples: owners and maximizing profit might conflict with customers wanting quality and employees needing good jobs
  • Stakeholders in a large organization include: government, shareholders/owners, activist groups, suppliers, customers, competitors, trade associations, employees, and managers

Stakeholder Groups (continued)

  • Economic stakeholders (e.g., customers, banks, shareholders)
  • Social/political stakeholders (e.g., policy-makers, local councils, regulators)
  • Technological stakeholders (e.g., key adopters, standard agencies)
  • Community stakeholders (e.g., residents living near businesses)
  • Internal stakeholders (e.g., employees, departments)

Stakeholder Mapping

  • Identifies stakeholder power and attention to understand political priorities
  • Organisations involve political coalitions of stakeholders, each with differing power and attention levels

Stakeholder Mapping (continued)

  • Power: ability of individuals or groups to persuade, induce, or coerce others to follow certain courses of action
  • Not derived from hierarchical position in organization or formal corporate governance
  • Internal stakeholders gain power through hierarchy, influence, resource control, knowledge, and skill
  • External stakeholders' power comes from depending on resources and through relationships with internal stakeholders, knowledge, and skills

Stakeholder Mapping (continued)

  • Stakeholders' attention levels influenced by issue criticality, quality of information channels, and cognitive capacity.
  • Power/Attention Matrix: categorizes stakeholders based on power and attention levels (High/High, High/Low, Low/High, Low/Low) to help with strategy and decision-making for how best to engage with stakeholders

Stakeholder Mapping (continued)

  • Building stakeholder coalitions important for effective strategy
  • Stakeholder mapping aids strategy by identifying blockers and facilitators of strategic success and assessing proper responses

Owners

  • Publicly quoted companies: Shares traded on exchanges; owners (shareholders) do not typically manage daily operations.
  • Managers generate financial returns for shareholders. Dissatisfied shareholders can sell shares or push for leadership changes.
  • State-owned enterprises: Wholly or majority owned by national or regional governments; politicians delegate control to professional managers; must create profit while pursuing government policy goals.
  • Entrepreneurial businesses: Controlled by founders; prioritize business knowledge and control; bring in managers and investors as they grow.
  • Family businesses: Control passed down family lines, retain majority control, but bring in professional managers; prioritize long-term goals - minimizing risk, and succession over short-term profit maximization
  • Other variants exist (e.g., non-profit, partnerships, employee-owned firms)

Ownership, Management, and Purpose

  • Visual representation of relationships between various ownership and management styles

Corporate Governance

  • Structures and systems by which managers are held accountable to stakeholders (typically owners, and other groups like employee representatives)
  • Linking stakeholder interests with management actions a crucial aspect of strategic development

Governance Chain

  • Managers and stakeholders linked through governance chain
  • Shows roles and relationships of different groups in organization governance
  • Small family business, example: Simple governance chain; family shareholders, board w/ family members, and managers (some possibly family too)

Governance Chain (continued)

  • Principal-agent model: Principals employ agents to act on their behalf; principal (owner) and agent (manager) are linked
  • Complex in large public companies: Multiple principals and agents at all organizational levels

Governance Chain (continued)

  • Governance issues (principal-agent theory) arise from knowledge imbalances, monitoring limits, and misaligned incentives.

Handbook

  • Resource for further reading - Exploring Strategy text and cases, 11th edition, Pearson Education

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