Current Issues in Management Study Note PDF

CURRENT ISSUES IN MANAGEMENT Study Note Year 3 Semester 1  Introduction to Non-Market Environments Key Concepts 1. Market vs. Non-Market Components: o Market Component: Economic transactions within traditional markets. o...

CURRENT ISSUES IN MANAGEMENT Study Note Year 3 Semester 1  Introduction to Non-Market Environments Key Concepts 1. Market vs. Non-Market Components: o Market Component: Economic transactions within traditional markets. o Non-Market Component: Social, political, and legal factors influencing business beyond market transactions. 2. The Non-Market Environment: o Structured by interactions among businesses, governments, societies, and institutions. o Contains stakeholders, issues, and institutions shaping the external environment of businesses. 3. The Four I's Framework: o Issues: Topics of concern (e.g., regulation, ethics, environmental protection). o Interests: Stakeholder perspective-organized vs. unorganized groups. o Institutions: Legal, political, and social structures governing activities. o Information: Data that stakeholders rely on for decision-making. Examples of Non-Market Issues: Environmental protection. Health and safety regulations. Corporate social responsibility (CSR). Media analysis and public appreciation. 1|Page  Corporate Social Responsibility (CSR) Definition of CSR CSR refers to a corporation’s efforts to combine social, environmental, and ethical considerations into its operations and stakeholder interactions, beyond profit- making. Emphasizes compliance with laws, ethical standards, and international standards while promoting positive social and environmental impacts. Key Theories of CSR 1. Milton Friedman’s Profit Maximization: o CSR's primary responsibility is maximizing shareholder value while adhering to societal (social) norms and laws. 2. Stakeholder Theory: o Business decisions should address the needs of all stakeholders, including employees, customers, communities, and shareholders, not just owners. 3. Carroll’s Four-Part Model of CSR: o Economic Responsibility: Be profitable. o Legal Responsibility: Comply with laws and regulations. o Ethical Responsibility: Go beyond legal obligations and act ethically. o Philanthropic Responsibility: Contribute to societal good. Motivations for CSR 1. Moral Obligation: Ethical duty to address issues like global warming, corruption, and disaster relief. 2|Page  2. Strategic Benefits: o Improve reputation and employee morale. o Increase productivity and attract top talent. o Access government incentives and meet consumer demand. 3. Social Pressure: o Pressure from NGOs, governments, and activists can affect brand perception. 4. Managerial Perquisites: o Enhances leadership satisfaction by contributing to social good. CSR Implementation 1. Policies and Frameworks: o Develop codes of conduct and statements of social responsibility. o Establish dedicated CSR divisions. 2. Metrics to Measure CSR: o Environmental: Energy use, waste reduction, CO2 emissions. o Social: Community projects, ethical workplace practices. o Marketplace: Anti-competitive practices, fair pricing. o Workplace: Recruitment, health and safety, diversity. 3. Triple Bottom Line (TBL): Focus on environmental, social, and financial performance. 4. Balanced Scorecard: Assess financial health, customer relationships, internal processes, and growth, with CSR integrated into evaluation. 3|Page Challenges in Implementing CSR 1. Cost and Resource Allocation: o Balancing CSR initiatives with profit goals. 2. Public Trust and Skepticism: o Differentiating genuine efforts from bitter marketing. 3. Global Diversity: o Adapting CSR policies across different cultural and regulatory environments. Benefits of CSR 1. Enhanced brand image and customer loyalty. 2. Better employee retention and satisfaction. 3. Access to new markets and innovation opportunities. 4. Long-term financial gains through sustainable practices. Practical Examples 1. BP’s CSR Commitment: o Focused on ethical conduct, environmental performance, and stakeholder relationships. 2. Integrated Reporting: o Links strategy, governance, and financial performance with societal and environmental context for transparency. 4|Page  Sustainability Definition of Sustainability Sustainability: Development that meets current needs without damaging the ability of future generations to meet theirs. Requires using natural resources at a rate that allows regeneration and does not use up future supply. Core Ideas: Protect the environment while fostering economic growth. Promote fairness across generations and societies. Key Global Environmental Issues 1. Climate Change: o Driven by greenhouse gas emissions (fossil fuels, deforestation, etc.). o International treaties, such as the Paris Agreement, aim to limit global warming. 2. Ozone Depletion: o Caused by CFCs (e.g., refrigerants, solvents). o Addressed via the Montreal Protocol. 3. Resource Scarcity: o Limited fresh water and arable land. o Industrialization and overconsumption increases the problem. 4. Decline of Biodiversity: o Loss of species due to habitat destruction, pollution, and overexploitation. 5|Page  o Protected by the Convention on Biological Diversity. 5. Threats to Marine Ecosystems: o Overfishing, coastal development, coral reef damage, and ocean acidification. Forces Driving the Environmental Crisis Population Growth: Increases resource demand. Income Inequality: Extremes of wealth and poverty drive destructive environmental behaviors. Rapid Industrialization: Benefits include poverty reduction but also lead to ecological strain. Government Mechanisms for Sustainability 1. Environmental Regulation: o Standards for pollution control (air, water, land). o Agencies like the EPA oversee compliance and enforcement. 2. Market-Based Mechanisms: o Cap-and-Trade: Allow trading pollution allowances. o Green Taxes: Charge for environmentally harmful practices. 3. Information Disclosure: Publishing company pollutant data encourages accountability. 4. Civil and Criminal Enforcement: Fines and penalties discourage environmental violations. 6|Page Corporate Approaches to Sustainability 1. Voluntary Codes of Conduct: Examples: ISO 14000, CERES Principles, and the Greenhouse Gas Protocol. 2. Sustainability Metrics: o Triple Bottom Line: Assess financial, social, and environmental impacts. o Life Cycle Analysis: Evaluate a product's environmental footprint throughout its lifecycle. 3. Stages of Environmental Responsibility: o Waste reduction. o Life-cycle focus. o Innovative, sustainable technologies. Circular Economy (Resolve Framework) Aims to replace the traditional "take-make-dispose" model with sustainable practices: 1. Regenerate: Use renewable resources, restore ecosystems. 2. Share: Extend product life through reuse and maintenance. 3. Optimize: Enhance efficiency, minimize waste. 4. Loop: Recycle, remanufacture, and recover materials. 5. Virtualize: Shift to digital services. 6. Exchange: Adopt advanced technologies and sustainable practices. Benefits of Managing for Sustainability 1. Cost savings through efficiency and waste reduction. 2. Enhanced brand reputation and customer loyalty. 3. Reduced regulatory risks. 4. Innovation opportunities and strategic advantages. 7|Page  Non-Market Environment – Private Politics Key Concepts Private Politics: Influences the behavior of private economic agents without government intervention, relying instead on social pressure and potential harm to businesses. o Focuses on issues like the environment, health, human rights, and social justice. o Examples: Activist campaigns, corporate self-regulation, cooperative strategies with NGOs. Motivations for Private Politics 1. Self-interest 2. Broader societal concerns (often led by activist groups) 3. Individual concerns about specific issues Strategies in Private Politics Confrontational: o Campaigns targeting social issues like toxic emissions, labor rights, and animal welfare. o Tools: Boycotts, media attention, and symbolic protests. o Example: Fruit of the Loom reopened a Honduran factory after a student-led boycott. Cooperative: o Firms collaborate with NGOs or adopt policies addressing social issues. o Often criticized for lacking legitimacy but can reduce social pressure. 8|Page  o Example: McDonald’s reduced Happy Meal fries and added apple slices under activist pressure. Issue Management Process 1. Identify Issue: Recognize emerging public concerns. 2. Analyze Issue: Understand its implications for the organization. 3. Generate Options: Develop strategies incorporating ethical considerations. 4. Take Action: Implement chosen strategies. 5. Evaluate Results: Assess effectiveness and make necessary adjustments. Performance-Expectations Gap Definition: Difference between what stakeholders expect and the organization’s actions. Example: Coca-Cola faced backlash for groundwater consumption and pesticide contamination in India. Stakeholder Engagement Key Drivers: o Mutual goals between businesses and stakeholders. o Motivation and organizational capacity to engage. Benefits: o Improved public image and reputation. o Access to technical expertise and social expectations. o Better solutions through collaborative efforts. 9|Page Role of Social Media Amplifies stakeholder dialogue. Facilitates faster problem-solving and idea-sharing. Example: Stakeholder networks like Nike's collaborations with advocacy groups. Final Notes Private politics is a growing force shaping the non-market environment. Effective issue management, stakeholder engagement, and strategic responses are essential for bridging performance-expectations gaps. Case studies highlight the importance of balancing ethical considerations with business objectives. 10 | P a g e  Governments and Non-Market Environments Key Concepts Public Policy: A government's plan of action to achieve specific goals affecting its citizens. o Elements: ▪ Inputs: External pressures influencing decisions. ▪ Goals: Broad objectives or narrow interests. ▪ Tools: Incentives and penalties. ▪ Effects: Outcomes of policies and regulations. How Businesses and Governments Interact 1. Collaborative Partnerships: Cooperation for shared benefits, influenced by cultural values. 2. Adversarial Relationships: Conflict arises when goals diverge. 3. Legitimacy Issues: Businesses may face challenges when governments lack legitimacy or face public doubt. Example: In Sri Lanka, British American Tobacco opposed health warnings on cigarette packs, arguing for intellectual property rights but faced public backlash and accusations of bribery. Types of Public Policy 1. Economic Policies: o Fiscal: Managing taxes and spending to influence the economy. 11 | P a g e  o Monetary: Controlling currency supply and value. o Trade: Encouraging or limiting international trade. 2. Social Assistance Policies: o Providing services like education and healthcare. Corporate Political Strategies Businesses use power to gain advantages or limit competitors by: 1. Information Strategy: Sharing data with policymakers. o Example: Lobbying or expert testimony. 2. Financial Incentives: Offering financial support to influence decisions. o Example: Campaign contributions or economic leverage. 3. Constituency Building: Mobilizing public support. o Example: Advocacy advertising or stakeholder coalitions. Influencing Government Policies 1. Lobbying: Directly engaging policymakers to influence their decisions. o Example: Lobbyists help businesses present their interests in government discussions. 2. Public Engagement: Using media or forums to educate officials and the public. 3. Social Media: o Fast and influential, enabling businesses to connect with stakeholders and decision-makers. o Example: New media companies used social platforms effectively to oppose SOPA (Stop Online Piracy Act). 12 | P a g e  Media and the Nonmarket Environment Role of News Media in Nonmarket Issues Provide Information: Educate the public on issues that impact society. Identify Issues: Highlight problems needing attention from businesses or policymakers. Stimulate Action: Encourage responses from activists, firms, and government bodies. Raise Concerns: Critique firms' policies and practices. Suggest Solutions: Share information about alternative approaches. Media Outlets Examples Traditional: Newspapers, magazines, television, and journals. Digital: Blogs, social media platforms. Theory of News Media Coverage and Treatment 1. Forms of Treatment: o Reporting facts. o Interpreting events. o Discussing significance. o Advocating for actions. 2. Explanatory Variables: o Intrinsic Audience Interest: ▪ More coverage if the topic interests the audience. ▪ Content tailored to retain viewers. 13 | P a g e  o Societal Significance: ▪ Focus on issues crucial for democracy and informed citizenship. ▪ Journalists as guardians of the public's right to know. 3. Combined Perspective: o Audience interest drives coverage quantity. o Societal importance influences the depth of treatment. Media’s Influence on Society Social media shifts traditional media roles. Platforms like Facebook reshape public opinion and politics (e.g., their role in the 2016 U.S. elections). Challenges: Fake news and unchecked information spread. Extending the Theory Balance and Fairness: Media must ensure stories are accurate and equitable. Journalism Standards: Uphold editorial integrity to maintain credibility. 14 | P a g e  E-Communications and Non-Market Issues Technology and Its Impacts Definition: Practical application of scientific knowledge to commercial and organizational activities. Characteristics: o Rapid and continuous change. o Broad societal impact. o Self-reinforcing nature promotes faster development. Impact: o Alters business models (e.g., omnichannel strategies like Amazon). o Introduces tools like robotics, which improve efficiency but threaten job security. E-Business and Digital Marketing E-Business: Buying and selling goods and services online. Growth outpaces traditional businesses. Digital Marketing: Key benefits include the 5Ss: 1. Sell: Boost online sales. 2. Serve: Provide better customer service. 3. Speak: Engage with customers through two-way communication. 4. Save: Reduce costs via digital platforms. 5. Sizzle: Enhance brand engagement with innovative campaigns. 15 | P a g e Big Data and Its Challenges Definition: Analysis of vast volumes of data to identify patterns and insights. Characteristics: Volume, velocity, and variety of data. Opportunities: o Improved decision-making through predictive analytics. Challenges: o Ethical concerns over data privacy. o Unauthorized use and surveillance risks. Cybercrime and Security Concerns Cybercrime Examples: o Phishing and identity theft. o Hacking into corporate systems. o Distributed Denial of Service (DDoS) attacks. Business Response: o Use ethical hackers (white hatters) to identify system vulnerabilities. o Develop incident-response plans to handle breaches. Regulatory Frameworks: o Laws like GDPR (General Data Protection Regulation) protect user data. o Companies must balance security with ethical data use. 16 | P a g e Ethical Issues in E-Technology Key Concerns: o Misuse of personal data. o Surveillance vs. individual privacy. o Exploitation of vulnerable populations. Moral Responsibility: o Developers and cybersecurity professionals must act ethically. o Balance innovation with societal benefits. Government Role and Regulation Governments protect intellectual property and regulate e-technology: o Data Protection: GDPR ensures privacy and data security. o Censorship: Some nations restrict access to online content. o Self-Regulation: Companies often manage their own privacy policies and standards. 17 | P a g e  New Product and Service Development (NPSD) Key Concepts 1. Innovation: Transforming ideas into valuable products or services. o Example: Tesla’s use of design thinking to address sustainability. 2. Product Lifecycle: Products go through phases (introduction, growth, maturity, decline). Companies must innovate to replace outdated products. 3. Risks in NPD: o High cost, time consumption, and uncertainty. o Common failures: poor marketing, technical issues, financial constraints, and organizational misalignment. Stages of New Product Development 1. Idea Generation: o Proactive: Uses market analysis. o Reactive: Responds to customer feedback or complaints. 2. Screening and Selection: o Assess technical and market feasibility. o Evaluate organizational fit (skills, systems, and goals). 3. Concept Testing: o Use prototypes or descriptions to match customer needs. o Prevents the development of misaligned products. 18 | P a g e  4. Business Analysis: o Calculate potential sales, costs, and profits. o Perform break-even analysis and price estimation. 5. Product Development: o Design, test, and refine prototypes. o Use standardization and modularity for efficiency. 6. Market Testing: o Validate product acceptance through customer feedback. o Methods: Simulated tests or real-market trials. 7. Commercialization/Launch: o Full-scale market introduction. o Adjust based on ongoing customer feedback. Tips for Successful Product Design Standardization: Reduces cost and complexity but may limit customization. Modularity: Allows flexibility and scalability with fewer components. Common Causes of Failure 1. Marketing Issues: o Poor product differentiation. o Weak positioning or understanding of customer needs. 2. Technical Failures: o Design flaws or malfunctioning products. 19 | P a g e  3. Timing Errors: o Entering the market too early or too late. 4. Environmental Issues: o Regulatory challenges or economic instability. Modern NPD Strategies Agile Project Management: o Focus on delivering a Minimum Viable Product (MVP) for early feedback. Open Innovation: o Collaborate with external parties to enhance creativity and resources. 20 | P a g e  Digital Marketing What is Digital Marketing? Definition: Achieving marketing goals by applying digital technologies (e.g., web, email, databases, mobile, IPTV). Customer-Centric Focus: Uses online channels to attract and retain customers by: o Understanding customer profiles, behaviors, and needs. o Delivering targeted communications and services. Benefits of Digital Marketing: The 5Ss 1. Sell: Increase sales through a larger digital presence. 2. Serve: Provide better customer service and satisfaction. 3. Speak: Engage and build relationships with customers. 4. Save: Reduce marketing costs with efficient strategies. 5. Sizzle: Strengthen the brand through creative online experiences. Challenges in Digital Strategy Unclear responsibilities and objectives. Budget constraints or wastage. Difficulty in competing with innovative campaigns. Lack of measurement and planning. Differences Between Digital and Traditional Marketing 1. Interaction: Digital marketing offers two-way communication; traditional marketing is largely one-sided. 21 | P a g e  2. Reach: Digital channels can target a global audience instantly. 3. Personalization: Digital platforms allow for customized content for specific users. Advantages of Digital Media: Enhanced data collection and analysis for customer insights. Real-time interaction with users. Cost-effective marketing campaigns. The Marketing Mix in an Online Context Product: Core product is supplemented by add-ons (e.g., warranties, reviews). Price: Digital pricing strategies include dynamic pricing and segmentation. Place: Virtual organizations and e-commerce platforms offer flexibility. Promotion: Use of digital tools like email, social media, and virtual assistants. Framework for Digital Marketing: RACE 1. Reach: Attract visitors to the brand. 2. Act: Encourage interaction. 3. Convert: Turn visitors into customers. 4. Engage: Build long-term relationships. Applications of Digital Marketing Advertising and sales platform. Customer service tool. Medium for relationship-building. 22 | P a g e  Introduction to Globalization What is Globalization? Definition: Globalization is the deep integration of economic activities across national boundaries, emphasizing functional integration within global production networks (e.g., global value chains). Difference from Internationalization: o Internationalization involves expanding operations across borders. o Globalization focuses on integrating activities to function as a single global system. Causes of Globalization 1. Economic Liberalization: o Removal of international trade barriers (e.g., tariffs) since 1945 allowed firms to see the world as one market. 2. Technological Innovations: o Innovations in microprocessors, telecommunications, and transportation reduced costs and uncertainties, enabling: ▪ Efficient movement of goods. ▪ Affordable global travel. ▪ Seamless communication and operations. 23 | P a g e Impact of Globalization 1. Winners: o Transnational Corporations (TNCs): Exploit global efficiencies in production and labor. o Skilled Workers: Gain higher wages due to demand for expertise. 2. Losers: o Unskilled Workers: Face job losses as industries relocate. o Developing Countries: Often experience uneven benefits and increased inequality. Example: In 2015, 62 individuals owned as much wealth as 3.6 billion people, highlighting global inequality. Challenges and Limits 1. Economic Limits: o World trade growth has slowed since 2011. o Global firms often operate regionally rather than globally. 2. Political and Social Issues: o Global institutions like the WTO and IMF face criticism for democratic shortages and harmful policies. o Environmental concerns (e.g., high transport costs and ecological damage). Anti-Globalization Movement Concerns: o Globalization worsens inequality and threatens local economies. o Lack of transparency and fairness in global institutions. 24 | P a g e  Alternative Globalization: o Promotes global justice and fairness (e.g., fair trade movements). o Advocates social development and environmental protection. Opportunities for Bottom-of-the-Pyramid (BOP) BOP Definition: Refers to the 4 billion people living on less than $8 per day. Potential Benefits: o Social development and job creation in underserved areas. o Profitable opportunities for businesses targeting low-income markets. Example for Sri Lanka: Developing affordable products and services for underserved communities. 25 | P a g e  Transnational Corporations (TNCs) What is a Transnational Corporation (TNC)? Definition: A company that coordinates and controls operations in more than one country, even if it does not own all those operations. Key Features: 1. Networks within Networks: TNCs operate as interconnected systems across different regions. 2. Complex Control: Managing operations across borders is more challenging than managing domestic firms. Development of TNCs 1. Product Life Cycle Strategy: o Start strong in the domestic market. o Expand internationally as the home market saturates. o Example: New products typically align with domestic needs before entering global markets. 2. Other Development Paths: o Setting up production facilities abroad without intermediaries. o Mergers and acquisitions to gain a foothold in foreign markets. Geography and TNCs Bartlett and Ghoshal’s Models: o Global Product Strategy: Centralized production for global use. 26 | P a g e  o Worldwide Geographical Strategy: Regional adaptation while maintaining global oversight. o Global Matrix Structure: Combines product, geographic, and functional strategies. Examples: o BMW may lean towards geographical strategies to adapt locally. o ZwoBank could follow a global strategy due to the uniformity of financial services. TNCs as Networks Outsourcing: o Contracting production or services to third parties. o Common for cost-effectiveness in supply chain management (SCM). o Examples: Nike outsources manufacturing; tech companies like Cisco focus on innovation while outsourcing production. Types of Production Networks: o Collaborative partnerships. o Competitive partnerships (firms collaborate in some areas but compete in others). Advantages of Outsourcing 1. Frees up resources for core activities. 2. Leverages the expertise and infrastructure of third parties. 3. Increases flexibility to handle workload changes. 4. Provides external insights, reducing internal bias. 27 | P a g e Disadvantages of Outsourcing 1. Dependence on external suppliers. 2. Risks of communication issues and data leaks. 3. Loss of critical strategic knowledge. 4. Need for constant monitoring and relationship management. Key Considerations for Outsourcing 1. What to Outsource: o Non-core activities like manufacturing, accounting, or IT services. 2. Why Outsource: o To focus on strengths, reduce costs, and access global expertise. 3. Where to Outsource: o Choose countries with cost-effective labor, infrastructure, and reliable governance. 28 | P a g e  International Business Ethics What Are Ethics? Ethics is the concept of right and wrong behavior. It reflects how we interact with others and expect others to behave. Sources of ethics: family, religion, education, community, and media. Business Ethics vs. Personal Ethics Business ethics: Applies to organizational settings where decisions affect stakeholders. Personal ethics: Focuses on individual moral principles and actions. Why Should Businesses Be Ethical? 1. Enhance Performance: Ethical practices improve a company’s reputation and trustworthiness. 2. Legal Compliance: Helps businesses follow laws and regulations. 3. Prevent Harm: Avoid harm to stakeholders, the environment, and society. 4. Meet Stakeholder Demands: Customers, employees, and partners value ethics. 5. Promote Morality: Cultivates an ethical workplace culture. 29 | P a g e Causes of Ethical Problems in Business 1. Personal Gain: Actions for selfish reasons. 2. Competitive Pressure: Cutting corners to maximize profits. 3. Conflicts of Interest: Situations benefiting oneself at the company’s expense. 4. Cross-Cultural Contradictions: Ethical differences in global operations. Ethical Theories for Decision-Making 1. Virtue Ethics: Focuses on character and moral values. 2. Utilitarianism: Considers the greatest good for the majority by comparing costs and benefits. 3. Rights Approach: Respects fundamental human rights like safety and fairness. 4. Justice Approach: Ensures fair distribution of benefits and burdens. Corporate Culture and Ethical Climate Corporate Culture: Shared values and norms influencing workplace behavior. Ethical Climate: Unspoken rules about acceptable behavior in an organization. Functional Ethics in Business 1. Accounting Ethics: Integrity in financial reporting (e.g., avoiding fraud like in the Enron scandal). 2. Marketing Ethics: Honesty in advertising, especially with vulnerable groups. 30 | P a g e  3. Information Technology Ethics: Addressing privacy, intellectual property, and data security issues. Ethics in International Business Bribery and corruption are significant challenges in global business. Transparency International: Monitors corruption globally. OECD Anti-Bribery Convention: Prohibits bribery in international transactions. Guidelines for Ethical Business Leadership 1. Treat corporate values as non-negotiable. 2. Collaborate with local units to set ethical standards. 3. Fight institutional corruption. 4. Encourage moral imagination to resolve conflicts. 31 | P a g e