Strategic Management Lesson 2 PDF

STRATEGIC MANAGEMENT (2024-2025) LESSON 2 Strategic Purpose  LESSON 2 STRATEGIC INTENT OR STRATEGIC PURPOSE 1. Mission, vision and objectives 2. Corporate governance 3. Stakeholders and power/Interest matrix 4. Corporate Social Responsibility: initiatives and tools...

STRATEGIC MANAGEMENT (2024-2025) LESSON 2 Strategic Purpose  LESSON 2 STRATEGIC INTENT OR STRATEGIC PURPOSE 1. Mission, vision and objectives 2. Corporate governance 3. Stakeholders and power/Interest matrix 4. Corporate Social Responsibility: initiatives and tools 5. Cultural Context References: Código Unificado de Buen Gobierno (2020): http://www.cnmv.es/DocPortal/Publicaciones/CodigoGov/CBG_2020.pdf Dess, G.G.; Lumpkin, G.T. & Eisner, A.B. (2010): Strategic management. Text and cases, 5th. Edition, McGraw-Hill, NY. Chap. 1 Grant, R.M. (2010): Contemporary Strategy Analysis, 7th. Edition, John Wiley & Sons, Chichester. Chap. 2 Johnson, G.; Whittington, R. & Scholes, K. (2011): Exploring strategy. Text & cases, 9th. Edition, Prentice Hall, Essex. Chap. 4 Iborra, M.; Dasí, A.; Dolz, C., y Ferrer, C. (2014):Fundamentos de Dirección de Empresas. Paraninfo, Valencia, Chap. 9  ELEMENTS THAT INFLUENCE THE STRATEGY POWER VALUES 2.2 Corporate Governance / 2.4. CSR Shareholders Which purposes should be Who should the prioritized? organization serve? Why? How to identify the purposes? 2.1. Organizational Purposes Mission Vision Objectives 2.3. Stakeholders Whom does the organization 2.5. Cultural context serve? Which purposes are prioritized? Why? Johnson, Scholes y Wittington (2006): Dirección Estratégica, capítulo 4, pp. 164  2.1. MISSION, VISION, VALUES AND OBJECTIVES The MISSION represents the identity and personality of the company, in the present and in the future, from a very general perspective. The MISSION should collect the organization’s reason for being and therefore justifies its existence, forming something like a declaration of principles by which the company presents to society. It provides the company and its members as a valid reference to its own identity, so it is important to be known by all members of the organization, as it serves as element of identification with the company philosophy and cohesion among all participants. 2.1. MISSION, VISION, VALUES AND OBJECTIVES The MISSION tends to be stable in the time. In any case, it should be understood as a dynamic concept that evolves as the other components of the organization. The MISSION can be restated as a result of environmental changes, or changes in the top management of the company.  2.1. MISSION, VISION, VALUES AND OBJECTIVES Usually is based on the following variables: 1. The definition of the activity scope of the company. In practice, this definition has to do with the products or services offered, markets served or geographical area covered. 2. The identification of the essential capabilities that the company has developed or may develop in the future, which show how to compete in the markets. Based on them, the company achieves sustainable competitive advantage. 3. The values​​, beliefs, philosophy and elements of company culture. Mission and culture are interdependent in the sense that it can promote certain orientation of the company, but in turn, the mission determines and influences the system of values ​and behaviors required.  MISION To offer a wide range of well- designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. To empower people to build a more sustainable world through second- hand buying and selling. To create clothing that reflects authenticity and creativity, embracing a lifestyle for the youth and promoting self-expression. 2.1. MISSION, VISION, VALUES AND OBJECTIVES The answer to the questions of, how we should be? or, what we want to be in the future? relates to the concept of VISION The vision reflects the mental image of the trajectory of the company. It is refereed to the current perception of what should be the company's future and establishes the criteria that the organization has to use to set the way forward. Its definition must be one of the central roles of the leader. Vision should be a reference for all actions of individuals so, when various alternatives arise to them on how to perform tasks, all members should choose those that best suit the company’s vision.  VISION To create a better everyday life for the many people. To make second-hand the first choice for consumers, contributing to a circular economy. To become a leading brand for young creatives, offering clothing that resonates with personal freedom and modern trends. 2.1. MISSION, VISION, VALUES AND OBJECTIVES VALUES Principles that guide the actions of an organization. ▪ Values ​and beliefs conform organizational culture, and provide a clear reference to stakeholders (internal and external) about questions like, How are we? or how to behave? ▪ They can be an expression of how the organization behaves and / or refer to values ​that are intended to achieve.  VALUES Cost-consciousness, Simplicity, Sustainability, Togetherness Sustainability, Community, Trust, Innovation Authenticity, Creativity, Youth Empowerment, Self-expression 2.1. MISSION, VISION, VALUES AND OBJECTIVES OBJECTIVES Two broad types of objectives: ✓ General objectives: ▪ Corporate goals: usually defined in financial terms for each type of stakeholder ▪ SBUs’ goals ✓ Operational objectives: ▪ Specification of general goals and the ways to achieve them ▪ Usually measurable (use of indicators) in order to facilitate implementation  OBJECTIVES Expand market share, promote sustainable practices, and improve customer satisfaction. Expand user base across Europe, enhance platform security and user experience, and promote eco- friendly consumption habits. Expand international presence, engage with a growing online community, and launch more sustainable and inclusive collections.  ELEMENTS THAT INFLUENCE THE STRATEGY POWER VALUES 2.2 Corporate Governance / 2.4. CSR Shareholders Which purposes should be Who should the prioritized? organization serve? Why? How to identify the purposes? 2.1. Organizational Purposes Mission Vision Objectives 2.3. Stakeholders Whom does the organization 2.5. Cultural context serve? Which purposes are prioritized? Why? Johnson, Scholes y Wittington (2006): Dirección Estratégica, capítulo 4, pp. 164  2.2. CORPORATE GOVERNANCE Corporate governance: a set of mechanisms that allow owners (shareholders) to exercise control over managers in order to ensure the confluence of interests between both. Mechanisms of control: External: business market, capital market, managerial labor market and goods and services markets Internal: Incentive system Direct supervision: Board of Directors, control of the majority shareholders, hiring of external auditors or consultants, and supervision among managers. Corporate governance is created due to the separation between owners and managers and the emergence of conflicts of interest between both  2.2. CORPORATE GOVERNANCE The management of a company can be entrusted to a single administrator or multiple administrators. The Board of Directors is the body responsible for the administration of a company. The interaction between management and owners takes place at the board of directors.  2.2. CORPORATE GOVERNANCE The Board of Directors fulfill the dual function of: Advise, support, provide information, networks, that improve the strategic decisions of the company Monitor and supervise that executives' actions create value for the company Responsibilities/obligations of the Board of directors: Strategic: approve and determine the strategy and policies of the company Monitoring: management control (formulate annual accounts, appoint and dismiss of top management, etc.) Communication: they serve as a liaison with shareholders (presents the accounts to the General Meeting, convenes the General Meeting of shareholders, the agenda and proposes the agreements to be reached) 2.2. CORPORATE GOVERNANCE Codes of Best Practice The Codes of Best Practice are a set of recommendations designed to improve corporate governance in companies, promoting transparency, accountability, and a balance of power among the various stakeholders involved in business management. These codes emerged due to the need to prevent bad practices and conflicts of interest that can arise in companies with complex management structures. They appear in different countries due to the need of improving corporate governance.  2.2. CORPORATE GOVERNANCE Codes of Best Practice. Spanish reports. ⚫ Olivencia Report (February, 1998) → Independence of board members, audits ⚫ Aldama Report (January, 2003) → Audit comitees ⚫ Conthe Report (2006) → transparency and best practices ⚫ Rodríguez Report: Código Unificado de Buen Gobierno de las Sociedades Cotizadas, published on February 2015 and revised on June 2020. ⚫ → diversity, inclusión of non-financial Information, sustainability Codes of Best Practice. Other countries. Recommendations of EU Cadbury report (1992). UK Vienot Report (1995) France  ELEMENTS THAT INFLUENCE THE STRATEGY POWER VALUES 2.2 Corporate Governance / 2.4. CSR Shareholders Which purposes should be Who should the prioritized? organization serve? Why? How to identify the purposes? 2.1. Organizational Purposes Mission Vision Objectives 2.3. Stakeholders Whom does the organization 2.5. Cultural context serve? Which purposes are prioritized? Why? Johnson, Scholes y Wittington (2006): Dirección Estratégica, capítulo 4, pp. 164 2.3. STAKEHOLDERS AND POWER/INTEREST MATRIX Mission, vision and goals need to take into account shareholders interests but also the interest of other groups that can be affected by the behavior of the firm Stakeholders Groups or people who depend on an organization to achieve their own goals and on whom, in its turn, an organization depends. They can be affected by the goals, actions or behaviors of the firm. Types of stakeholders ◆ Internal: shareholders, directors, employees, managers ◆ External: clients, suppliers, government, competitors, NGOs, local associations, customers,.. 2.3. STAKEHOLDERS AND POWER/INTEREST MATRIX Customers Financial institutions State Shareholders Suppliers Managers Local COMPANY Community Workers Internal Unions Stakeholders Society in Social organizations External General (NGOs, Consumers, ecologists, Stakeholders etc.) Guerras & Navas, 2007:85 2.3. STAKEHOLDERS AND POWER/INTEREST MATRIX Stakeholder mapping or power/interest matrix: It is a tool for analysing stakeholders. Goals (a) describe and analyze the stakeholders that can affect firm’s strategy (b) analyze the game of power (c) manage the power and behavior of stakeholders Stages Describe stakeholders Asses the power of each stakeholder and potential coalitions Describe the interest of each stakeholder in each strategy Make specific proposals in order to manage stakeholders interests 2.3. STAKEHOLDERS AND POWER/INTEREST MATRIX STAKEHOLDER MAPPING: THE POWER/INTEREST MATRIX (A. MENDELOW - 1986) 2.3. STAKEHOLDERS AND POWER/INTEREST MATRIX STAKEHOLDER MAPPING: THE POWER/INTEREST MATRIX (A. MENDELOW - 1986) NGOs and Employees competitors and local community Government Customers and and suppliers investors 2.3. STAKEHOLDERS AND POWER/INTEREST MATRIX STAKEHOLDER MAPPING: THE POWER/INTEREST MATRIX (A. MENDELOW - 1986) Stakeholder mapping identifies stakeholder expectations and power and helps in understanding political priorities.  ELEMENTS THAT INFLUENCE THE STRATEGY POWER VALUES 2.2 Corporate Governance / 2.4. CSR Shareholders Which purposes should be Who should the prioritized? organization serve? Why? How to identify the purposes? 2.1. Organizational Purposes Mission Vision Objectives 2.3. Stakeholders Whom does the organization 2.5. Cultural context serve? Which purposes are prioritized? Why? Johnson, Scholes y Wittington (2006): Dirección Estratégica, capítulo 4, pp. 164  2.4. ETHICS AND CORPORATE SOCIAL RESPONSIBILITY ✓ Ethics comes from the Greek term ethos which means character (a set of qualities that morally differentiate a group of people or a person's peculiar way of being). ✓ They are acquired by persistent behavior, by habit and generate tendencies to respond in a certain way and generate expectations of response in others. Cortina, A. (2014).¿Qué es la ética? https://www.youtube.com/watch?v=JspFfzuJvec  2.4. ETHICS AND CORPORATE SOCIAL RESPONSIBILITY ✓ Business ethics focuses on the study and moral judgement of the decisions and actions that a company carries out within the scope of its freedom. ✓ Business ethics help a company develop a good character, which predisposes it to act in an excellent way and which distinguishes it from other companies. ✓ Corporate Social Responsibility (CSR) includes the set of obligations of a company derived from imperatives of an ethical nature, which the company imposes itself and which go beyond what is required by current legislation. Cortina, A. (2014).¿Qué es la ética? https://www.youtube.com/watch?v=JspFfzuJvec  2.4. ETHICS AND CORPORATE SOCIAL RESPONSIBILITY Why is CSR important? In the interest of enterprises - CSR provides important benefits to companies in risk management, cost savings, access to capital, customer relationships, HR management, and their ability to innovate. In the interest of the EU economy - CSR makes companies more sustainable and innovative, which contributes to a more sustainable economy. In the interests of society - CSR offers a set of values on which we can build a more cohesive society and base the transition to a sustainable economic system. http://ec.europa.eu/growth/industry/corporate-social-responsibility_es  2.4. ETHICS AND CORPORATE SOCIAL RESPONSIBILITY Dimensions of CSR: ✓ Economic: related to the own activity of the firm (production of goods and services needed by society and creation of value for stakeholders) ✓ Social: related to the concern about the community where the firm operates, respecting its traditions, its culture, and involving in beneficial actions to it ✓ Environmental: concern of the firm about its relationship to its environment (environmental management, sustainability, etc.) 2.4. ETHICS AND CORPORATE SOCIAL RESPONSIBILITY  2.4. ETHICS AND CORPORATE SOCIAL RESPONSIBILITY CSR: regulatory questions Ley 11/2018, de 28 de diciembre, por la que se modifica el Código de Comercio, el texto refundido de la Ley de Sociedades de Capital aprobado por el Real Decreto Legislativo 1/2010, de 2 de julio, y la Ley 22/2015, de 20 de julio, de Auditoría de Cuentas, en materia de información no financiera y diversidad. El 29 de diciembre de 2018 se publicó en el Boletín Oficial del Estado (BOE) la Ley 11/2018 de Información no Financiera y Diversidad. → The Spanish companies to which it is applicable must include in the management report a statement of non-financial information or prepare a separate report (subject to the same approval, deposit and publication criteria as the management report), the information of which will be verified by an independent verification service provider. 2.4. ETHICS AND CORPORATE SOCIAL RESPONSIBILITY CSR: regulatory questions Scope of application of Ley 11/2018 Companies with the following characteristics must include in the management report a statement of non-financial information: Companies considered Public Interest Entities (for example listed companies, financial entities...). Companies in which the average number of workers employed during the year is greater than 500 and also during two consecutive years meet, at the closing date of each of them, at least two of the following circumstances: That the total of the asset items exceeds 20,000,000 euros. That the net amount of its annual turnover exceeds 40,000,000 euros. That the average number of workers employed during the year is greater than two hundred and fifty. 2.4. ETHICS AND CORPORATE SOCIAL RESPONSIBILITY CSR: regulatory questions What's new: Until now, the information related to CSR campaigns in Spain was outside the legal standards. With this measure, investors and other stakeholders will have full access to company information, both fiscal and non-fiscal. The objectives are: o To help measure, monitor and manage the performance of companies and their impact on society. o Contribute to the management of the transition towards a sustainable economy that can combine long-term profitability with the protection of the environment. o Increase non-financial information by companies as a crucial factor in ensuring a more long-term approach 2.4. ETHICS AND CORPORATE SOCIAL RESPONSIBILITY CSR: regulatory questions What information should be included? In accordance with Ley 11/2018, the Non-Financial Information Statement (Estado de Información No Financiera - EINF) will include significant information on the following issues: business model, environmental management and performance, social and personnel-related issues (wage gap, average wages, organization of work and working time...), respect for human rights fight against corruption and bribery. Information about the company (relationships with suppliers, purchasing policy...)  ELEMENTS THAT INFLUENCE THE STRATEGY POWER VALUES 2.2 Corporate Governance / 2.4. CSR Shareholders Which purposes should be Who should the prioritized? organization serve? Why? How to identify the purposes? 2.1. Organizational Purposes Mission Vision Objectives 2.3. Stakeholders Whom does the organization 2.5. Cultural context serve? Which purposes are prioritized? Why? Johnson, Scholes y Wittington (2006): Dirección Estratégica, capítulo 4, pp. 164 2.5. CULTURAL CONTEXT WHAT IS ORGANIZATIONAL CULTURE? 2.5. CULTURAL CONTEXT 2.5. CULTURAL CONTEXT 2.5. CULTURAL CONTEXT FINISHING WITH A VIDEO: https://www.youtube.com/watch?v=v03-Q8Tt2fY