Chapter 5, 6, 7 & 8 PDF

lOMoARcPSD|40186229 -Strategies need to be tailored to (changing) conditions CH5: Structuring organizations Structural design elements Structure dened: The formal arrangement of tasks in a business organisation -Why structure?  Knowing who is in charge of what  Allocating resources...

lOMoARcPSD|40186229 -Strategies need to be tailored to (changing) conditions CH5: Structuring organizations Structural design elements Structure dened: The formal arrangement of tasks in a business organisation -Why structure?  Knowing who is in charge of what  Allocating resources  Creating coherence and consistency among activities -Design elements: 1. Dierentiation and integration 2. Centralisation and decentralisation 3. Formalisation and informalisation Dierentiation: dividing organisational practices into distinct tasks by smaller units Integration: coordinating distinct tasks of smaller units to accomplish coherent organisational practices -Dierentiation: Dierentiation: Setting up individual tasks to match individual capabilities and to accomplish learning eects Favours eciency, may undermine motivation Creating units to accomplish joint tasks and to cluster related tasks 14 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 Generates complementarity, may engender narrow focus -Types of units: Functional departmentalisation Product departmentalisation Geographic departmentalisation Hybrid departmentalisation Matrix departmentalisation -Integration: 15 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 Integration: Coordinating tasks within a unit and across units Coordination mechanisms  Direct supervision  Mutual adjustment  Standardisation of skill, process, and output Span of control: larger when task homogeneity and standardization -Centralization & Decentralization: Centralisation: concentration of decision-making Pro:  Low coordination costs  Consistency and integration  Speed of overall response Con:  Info overload  Demotivating  Slowness of local response Decentralisation: dispersion of decision-making -Horizontal decentralisation -Vertical decentralisation Pro:  Manageability of info  Match with specic expertise  Speed of local response Con:  High coordination costs  Consistency and integration  Slowness of overall response 16 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 -Formalisation & Informalisation: Types of (in)formalisation: Position (job), Process (work, interactions) Formalisation: prescribed characteristics of expected behaviour Pro:  Reducing uncertainty  Reducing process variability  Reducing product variability  Enhancing procedural fairness  Dissuading undesired behaviour Con:  Ignoring environmental changes  Dissuading process improvement options  Dissuading desirable product adaptations  Ignoring situational diversity  Dissuading employee creativity Informalisation: emerging characteristics of expected behaviour Pro:  Responding to the unforeseen  Improving processes  Tailoring products  Matching situational diversity  Tapping into employee creativity Con:  Provoking uncertainty-related anxiety  Risking loss of process quality  Risking generation of undesired products  Risking arbitrary, unfair decisions  Risking undesirable employee behaviour Contingencies impacting structure 17 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 Internal contingencies: Size and age, Technology External contingencies: Environmental complexity, Environmental turbulence / dynamics Size and age: Larger and older organisations: more formalised structure, more elaborate structure Technology: More regulating technology: higher formalisation Unit production: smaller teams than mass production Environmental complexity: Higher complexity: more decentralisation Environmental turbulence (dynamics): Higher turbulence: more organic structure Viable congurations Conguration: combination of design elements Viable conguration: coherent and consistent combination of design elements matching organisational contingencies Basic conguration Simple structure 18 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 Machine bureaucracy Professional bureaucracy Divisionalised form Adhocracy Wrap-up -Organisations should eectively use all design elements to shape a suitable structure -Contingencies are crucial, yet only partially controllable -The adopted organisational structure should tightly match with relevant contingencies CH6: Managing sustainably Meaning of sustainable business Denition: Professional activities accomplishing economic viability and stakeholder satisfaction within planetary boundaries -Related terms: Sustainable business: Economic viability and stakeholder satisfaction within planetary boundaries. 19 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 Machine bureaucracy Professional bureaucracy Divisionalised form Adhocracy Wrap-up -Organisations should eectively use all design elements to shape a suitable structure -Contingencies are crucial, yet only partially controllable -The adopted organisational structure should tightly match with relevant contingencies CH6: Managing sustainably Meaning of sustainable business Denition: Professional activities accomplishing economic viability and stakeholder satisfaction within planetary boundaries -Related terms: Sustainable business: Economic viability and stakeholder satisfaction within planetary boundaries. 19 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 Corporate (social) responsibility (CSR): Business practices focused on ethical, social, and environmental impacts. Inclusive business: Integrates underserved communities into value chains. Shared value: Business strategies that create economic value while addressing societal challenges. Corporate citizenship: Companies acting responsibly towards society and the environment. Circular business: Business models that promote reuse, recycling, and reduction of waste. Drivers of sustainable business -What drives sustainable business?  Instrumental motives (‘the business case’)  Relational motives (‘the social case’)  Moral motives (‘the normative case’)  Legal motives (‘the coercive case’) Instrumental motives (‘the business case’)  Sales generation (new markets, price premium)  Cost reduction (eco-eciency, lower cost of capital, employee motivation)  Risk reduction (less litigation risk) Relational motives (‘the social case’)  Good relations with internal and external stakeholders  Maintaining legitimacy (‘licence to operate’) Moral motives (‘the normative case’)  Sense of duty (deontology)  Higher-order values Legal motives (‘the coercive case’)  Regulatory compliance  Avoidance of nes or closure Mainstreaming of sustainable business Mainstreaming: integrating sustainable business into core activities Institutionalisation: Accomplishing durable, widely adopted, taken-for-granted (business) practices 20 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 -Institutionalisation process: 1. Trigger -Being sensitised to strong (external) pressure: Accidental opportunity, Media scandal, Moral wake-up, Legislation 2. Innovative practice -Responding to trigger: Local and ad-hoc action (ESH, HR, compliance ocers), Satisfying specic stakeholder demands, Disconnected from core business 3. Theorisation -Demonstrate relevance beyond initial action: Economic opportunities, Corporate legitimacy, Corporate values, Similar regulation 4. Diusion -Formulate and communicate sustainability targets -Involve all business actors: Line and sta functions, Procurement, production, marketing, R&D, … , From MT to shop oor, Supply chain partners 5. Maintenance -Link projects to core business -Weave socioenvironmental activities into structure and culture -Integrate socioenvironmental targets into KPIs -Make new targets increasingly ambitious Wrap-up -Sustainable business simultaneously considers economic, ecological, and social aspects -Organisations increasingly have a variety of good reasons to pursue sustainability -Sustainable practices will only last when fully incorporated into ‘business as usual 21 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 CH7: Managing internationally The international environment International Convergence: Tthe process by which countries become more alike in economic, political, social, and technological aspects due to globalization and shared challenges. -International PESTEL analysis:  Political: political openness turning into nationalism  Economic: neoliberalism turning into (regionalised) protectionism  Social: increasing (inequity-related) social tensions  Technological: burst of IT-related innovations, selectively spread  Ecological: local and global ecological boundaries crossed  Legal: increasing disrespect of private property rights and multilateral agreements -Ghemawat’s CAGE framework: match rm-environment  Cultural distance: Dierences in language, religion, social norms, and values between countries.  Administrative and political distance: Dierences in government policies, regulations, and political systems between countries.  Geographic distance: Physical distance and dierences in climate, time zones, and infrastructure between countries.  Economic distance: Dierences in economic development, income levels, and cost structures between countries. Internationalization strategies ! Reminder: The Strategy Diamond ! Economic logic types: Cost saving, Market access, Competition, Government policies -Economic logic: Cost saving: International factor market dierences: Lower labour costs, Lower capital costs, Lower natural-resource costs 22 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 Scale economies: International specialisation Logistics: Lower transport costs -Economic logic: Market access: Serving foreign customers with similar needs: Enhancing sales markets Serving global customers: Selling to customers with operations in multiple countries Leveraging marketing skills: Enhancing the reach of a rm’s competitive advantage -Economic logic: competition: Optimising interdependent markets: Coordinating activities to absorb international market uctuations Following main competitors: Ensuring oligopolistic suppliers will not pre-empt foreign markets -Economic logic: Government policies: Trade discouragement: Tari and non-tari barriers to trade Location-specic practices: National (technological) standards and (nancial) controls FDI stimulation: Subsidies, tax benets, infrastructure -Arenas: Cost savings:  Arbitrage to minimise factor costs  Specialisation to optimise scale economies  Proximity to minimise logistic costs Market access:  Similarity to extend existing sales markets  Following global customers  Similarity to leverage on existing skills Competition:  Regional market optimisation  Following competitors Government policies:  Foreign investments inside protected markets 23 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229  Local activities to align to local practices  Foreign investments to benet from stimuli -Vehicles: types: Importing / exporting: Procuring from / selling to another country Licensing / franchising: selling a name, technology, or process for production / service abroad Joint venture: equity alliance abroad with a (local) partner Wholly owned subsidiary: aliate abroad in full ownership Mobility and capabilities: -Dierentiators: Operational excellence:  Low-cost production  Scale economies  Organisational superiority  Logistic superiority Customer intimacy:  Marketing superiority  Global customer orientation  (Local government orientation) Product leadership:  Technological superiority  Design superiority  Product quality superiority 24 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 -Staging: Sequence (typical):  Exporting  Sales subsidiaries  Production subsidiaries  Locally oriented, autonomous subsidiaries  Globally specialised subsidiaries Speed:  Slow: greeneld expansion (organic growth)  Fast: browneld expansion (acquisition)  One (relatively close) market at a time (cf. Uppsala model)  Many markets simultaneously (cf. born-global rms) Internationalisation structures Domestic structure + export Domestic structure + internat. Division Multidomestic structure Transnational structure Wrap-up -Internationalisation is prevalent in most businesses -Internationalisation both extends and changes the nature of managing 25 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 -International strategy and structure reect the international environment and the internal capabilities CH8: The ethical manager “There is no such thing as business ethics. There is only one kind – you have to adhere to the highest standards." Marvin Bower, former managing partner of McKinsey & Company "Relativity applies to physics, not ethics." Albert Einstein What is business ethics? -Business ethics:  Applies general ethics (right or wrong) to business, and is culturally dependent.  Not a separate code of conduct, though companies can set up their own codes.  Poses challenges for international companies due to varying cultural norms. Why do ethics matter? -Volkswagen Emissions Scandal:  Year: 2015  Industry: Automotive  Issue: Volkswagen admitted to installing software in diesel vehicles to cheat emissions tests, making cars appear environmentally friendly while emitting pollutants up to 40 times above legal limits.  Impact: o Legal: Over $30 billion in nes, penalties, and buyback costs. o Reputation: Severely damaged public trust and brand value. o Operations: Sales decline, recall of millions of vehicles, and increased regulatory scrutiny. o Executives: Legal actions against top executives, including CEO Martin Winterkorn, who resigned. o Environmental: Highlighted broader issues of environmental compliance and corporate responsibility. -Enron Scandal: "The Story of Greed":  Years: 1980s-2001  Industry: Energy (Houston, Texas)  Peak: o Recognition: Listed as a top Fortune 500 company, frequently cited as "America's Most Innovative Company." o Financials: Revenues of nearly $101 billion in 2000. 26 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229  Issue: o Accounting Fraud: Used complex nancial structures to hide debt and inate prots. o Aggressive Culture: High-pressure environment focused on short- term prots and stock prices. o Insider Trading: Executives sold millions in stock while publicly praising the company's health.  Impact: o Bankruptcy: Declared bankruptcy in December 2001, with 21,000 employees losing their jobs. o Arthur Andersen: The accounting rm involved lost its license and disbanded, resulting in 85,000 job losses. o Legal: CEO Je Skilling sentenced to 24 years in prison; other executives faced legal consequences. o Market: Shook investor condence and led to stricter regulations (e.g., Sarbanes-Oxley Act). -Lehman Brothers Collapse:  Year: 2008  Industry: Investment Banking  Peak: Fourth largest investment bank in the USA.  Issue: o Risky Practices: Heavy investment in subprime mortgages and nancial products with high risk. o Manipulation: Used accounting tricks to hide the true extent of their nancial exposure. o Prot Culture: Promotion based on aggressive deal-making, with high bonuses for top performers.  Impact: o Bankruptcy: Filed for Chapter 11 on September 15, 2008. o Economic: Contributed to the global nancial crisis, leading to massive economic downturns and job losses. o Auditor: Ernst & Young, their auditor, faced scrutiny but continued to operate. o Regulation: Sparked discussions on nancial regulations and the need for reform in the banking sector. -Fortis Misleading Shareholders:  Years: 2007-2008  Industry: Financial Services (Belgium)  Issue: o False Information: Misled shareholders about the company's nancial health. o Cover-Up: Provided inaccurate nancial statements during critical periods.  Impact: o Legal: Former CEO Jean-Paul Votron and other top executives were investigated for misleading practices. o Reputation: The scandal tarnished the reputation of Belgium's largest nancial group. 27 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 o Financial: Shareholders could seek signicant compensation for the losses incurred. o Regulatory: Prompted tighter scrutiny and regulations in the nancial services sector. What do we learn from these examples? -Why do managers involve in unethical behavior? Rational choice theory: weighing chances Of being caught Strain theory: Actors resort to misconduct when they are not able to achieve their goals (reshuing some papers) Organizational Culture: The shared values, beliefs, and practices that shape behavior within an organization.  People are blinded and do not see evil  People are convinced they acted ethically, even if they did not Business ethics knows many applications -Business ethics Knows many applications: Accounting: Insider trading, executive compensation, facilitation payments, etc. Human resource management: Discrimination, sexual harassment, privacy issues, slavery, safety, etc. Production: Emission, tobacco, modied food, testing on animals, etc. Sales and marketing: Skimming, price discrimination, sex in commercials, misleading commercials, defectuous/dangerous goods, etc. Ethical dilemma 28 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 Denition: An ethical problem or dilemma arises when a decision benets one party at the expense of another, creating a conict of values or interests. Example Scenario: A company considers building an overseas plant without pollution controls, saving 5 million Euros but potentially harming the local shing industry. Installing controls would protect the environment but make the plant nancially unviable. -Utilitarian Approach: o Aim: Greatest good for the greatest number. o Decision: Build the plant to benet the majority. -Moral Rights Approach: o Aim: Maintain rights of all aected parties (e.g., right to life, safety, and free consent). o Decision: Inform aected parties and ensure their rights are respected. -Fairness/Justice Approach: o Aim: Ensure decisions are based on equity, fairness, and impartiality. o Decision: Treat all stakeholders fairly, avoid discrimination. -Individualism Approach: o Aim: Promote long-term self-interest leading to honesty and integrity. o Decision: Actions should benet the individual’s long-term interests without harming others. -Common-Good Approach: o Aim: Serve common goals and values for society’s benet. o Decision: Ensure actions support the community's well-being, including the weakest members. Factors that determine ethical and unethical behavior? Ethical and unethical behavior is inuenced by several key factors that shape individual decisions within organizational contexts: 1. Individual: Stage of Moral Development o Denition: The stage of moral reasoning individuals have developed, based on Kohlberg’s theory. o Tests Used: Moral Development Scale for Professionals, Dening Issues Test, Heinz Test. 29 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 2. Individual Characteristics o Values: Basic convictions about right and wrong. o Personality Traits:  Ego Strength: The strength of convictions, self-discipline, and accountability.  Locus of Control: Internal (belief in personal control) vs. external (attributing control to external factors). 3. Organizational/Structural Variables o Goal Attainment: High goals may lead to ethical dilemmas and strain. o Organizational Mechanisms:  Performance Appraisal: Outcome-oriented systems inuencing ethical conduct.  Behavioral Examples: Ethical behavior demonstrated by managers. 4. Organizational Culture o Ethical Culture: Determines whether an organization promotes ethical behavior. o Strength of Culture: Strong cultures enforce ethical norms eectively. o Examples: Contrasts between British Coal Corporation (BCC) and Enron illustrate the impact of organizational culture. 5. Intensity of the Ethical Dilemma o Denition: The severity and complexity of ethical dilemmas faced. o Impact: Higher intensity requires deeper consideration and may inuence decision-making. 6. Moral Decision Making o Group Dynamics: Groupthink and group shift inuence ethical decisions negatively. o Heuristics: Decision-making biases can lead individuals to overlook unethical behavior. Ethics in an international context -The School of Ethical Universalism: 30 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229  Denition: Ethical standards are universally applicable across cultures and countries.  Implementation: Companies can develop uniform codes of ethics for global operations.  Critique: Challenges the existence of truly universal ethical standards; concerns about ethical imperialism. -The School of Ethical Relativism:  Denition: Ethical standards vary across cultures and countries based on diering beliefs and norms.  Implementation: Advocates for adapting to local ethical standards in each country of operation.  Argument for Relativism: Respects local customs and avoids imposing foreign standards.  Argument against Relativism: Risks inconsistency and may tolerate lower ethical standards in certain contexts. -Integrated Social Contracts Theory:  Denition: Combines elements of universal principles with local adaptations based on societal norms.  Implementation: Establishes universal ethical principles (rst-order rules) while allowing for stricter local norms (second-order rules).  Advantage: Balances global consistency with respect for local ethical standards.  Critique: Challenges in enforcing more stringent global rules without appearing culturally insensitive. How managers can improve ethical behavior in an organization  Hire individuals with high ethical standards  Establish codes of ethics and decision rules  Lead by example (ethical culture)  Set realistic job goals and include ethics in performance appraisal (systems and structures)  Provide ethics training  Conduct independent social audits  Provide support for individuals facing ethical dilemmas such as whistle blowers 31 Downloaded by Hong Van Do ([email protected])