Business Strategy Chapter 10 Strategy, Ethics, and Social Responsibility

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S 1: Strategy,  Ethics,  and  Social  Responsibility

S 2:Linking  Strategy  to  Ethics and  Social  Responsibility

Key Issues:

—Should there be a link between a company’s efforts to craft and execute a winning strategy and its duties to:

—Conduct activities in an ethical manner?

—Demonstrate socially responsible behavior by

—Being a committed corporate citizen?

—Attending to needs of non-owner stakeholders? 

S 3:What  Is  Business  Ethics?

—Business ethics involves applying general ethical principles and standards to business behavior

—Ethical principles in business are not different from ethical principles in general

—Business actions are judged

—By general ethical standards of society

—Not by a set of rules business people
apply to their own conduct 

S 4:Are  Ethical  Standards  Universal  or  Dependent  on  Local  Norms?

Three schools of thought regarding extent

to which ethical standards can be applied . . .

• Ethical Universalism
• Ethical Relativism
• Integrative Social Contracts Theory

S 5:Concept  of  Ethical  Universalism

—According to the school of ethical universalism . . . 

—Same standards of what is ethical and what is unethical resonate with peoples of most societies regardless of

—Local traditions and

—Cultural norms

—Thus, common ethical standards can be used to judge conduct of personnel at companies operating
in a variety of

—Country markets and

—Cultural circumstances

S 6:Concept  of  Ethical  Relativism

—According to the school of ethical relativism . . .

—Different societies/cultures/countries

—Put more/less emphasis on some values than others

—Have different standards of right and wrong

—Have different social mores and behavioral norms

—What is ethical or unethical

—Must be judged in light of local
customs and social mores and

—Can vary from one country to another 

S 7:Characteristics  of  a  Moral  Manager

—Dedicated to high standards of ethical behavior in

—Own actions

—How the company’s business is to be conducted

—Considers it important to

—Be a steward of ethical behavior

—Demonstrate ethical leadership

—Pursues business success

—Within confines of both letter and spirit of laws

—With a habit of operating well above what laws require

S 8:Characteristics  of  an  Immoral  Manager

—Actively opposes ethical behavior in business

—Willfully ignores ethical principles in making decisions

—Views legal standards as barriers to overcome

—Pursues own self-interests

—Is an example of capitalistic greed

—Ignores interests of others

—Focuses only on bottom line –
making one’s numbers

—Will trample on others to avoid being trampled upon

S 9:What  Are  the  Drivers  of  Unethical Strategies  and  Business  Behavior?

• Large numbers of immoral and amoral business people.

• Overzealous pursuit of  personal gain, wealth, and other selfish interests.
• Heavy pressures on company managers to meet or beat earnings targets.
• Company cultures that place profits and good performance ahead of ethical behavior.

S 10:Approaches  to  Managing  a Company’s  Ethical  Conduct:

Unconcerned or non-issue approach

Damage control approach

Compliance approach

Ethical culture approach

S 11: Four Approaches to Managing Business Ethics:

S 12:Why  Should  Company  Strategies  Be  Ethical?

—An unethical strategy

—Is morally wrong

—Reflects badly on the character of company personnel

—An ethical strategy is

—Good business

—In the best interest of shareholders
S 13:The Business Costs of Ethical Failures:

S 14: Linking  Strategy  to  Ethics  and  Values

—If ethical standards are to have more than a cosmetic role, boards of directors and top executives must work diligently to see they are scrupulously observed in

—Crafting a company’s strategy and

—Conducting every facet of a company’s business

—Two sets of questions must be considered by senior executives when reviewing a new strategic initiative

—Is what we are proposing to do fully compliant with our code of ethical conduct?  Is there anything here that could be considered ethically objectionable?

—Is it apparent this proposed action is in harmony with our core values?  Are any conflicts or concerns evident?

S 15:What  Is  Corporate  Social  Responsibility?

—The notion that corporate executives should balance interests of all stakeholders began to blossom in the 1960s

—Social responsibility as it applies to businesses concerns a company’s duty to

—Operate in an honorable manner

—Provide good working conditions for employees

—Be a good steward of the environment

—Actively work to better quality of life in

—Local communities where it operates and

—Society at large

S 16:What  Is  Socially  Responsible Business  Behavior?

—A company should strive to balance strategic actions

—To benefit shareholders against any possible adverse impacts on other stakeholders

—To be a good corporate citizen

—Socially responsible behaviors include

—Corporate philanthropy

—Actions to earn trust and respect of stakeholders for
a firm’s efforts to improve the general well-being of

—Customers

—Employees

—Local communities

—Society

—Environment

S 17:Fig. 10.2: Categories of Socially Responsible Business  Behavior

Business Strategy Chapter 9 Strategies Based on a Company’s Market Position

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S 1: Strategies  Based  on  a Company’s  Market  Positio
—Industry leaders

—Runner-up firms

—Weak or crisis-ridden firms

S 2: Industry  Leaders: The  Defining  Characteristics

•Strong to powerful market position

•Well-known reputation

•Proven strategy

•Key strategic concern – How to sustain
dominant leadership position

S 3: Strategy  Options:  Industry  Leaders

Stay-on-the-offensive strategy

Fortify-and-defend strategy

Muscle-flexing strategyS 4: Stay-on-the-Offensive  Strategies

•Be a first-mover, leading industry change.

•Best defense is a good offense.

•Concentrate on achieving a competitive advantage
and then widening the advantage over time.

•Relentlessly pursue continuous improvement
and innovation, being first to market with

–Technological improvements.

–New or better products.

–More attractive performance features.

–Customer service improvements.

S 5: Stay-on-the-Offensive  Strategies (continued)
•Aggressively seek out ways to

–Cut operating costs

–Establish competitive capabilities rivals cannot match

–Make it easier for potential customers to switch their purchases from other firms to the leader’s own products

•Aggressively attack profit sanctuaries of important rivals

•Launch fresh initiatives to expand overall industry demand

–Spur creation of new families of products

–Make product more suitable for consumers
in emerging-country markets

–Discover new uses for product

–Attract new users of product

–Promote more frequent use

•Grow faster than industry, taking market share from rivals

S 6:Fortify-and-Defend  Strategy

Objectives

•Make it harder for new firms to enter and for challengers to gain ground

•Hold onto present market share

•Strengthen current market position

•Protect competitive advantage

S 7:Fortify-and-Defend  Strategy: Strategic  Options
•Increase advertising and R&D

•Provide higher levels of customer service

•Introduce more brands to match attributes of rivals

•Add personalized services to boost buyer loyalty

•Keep prices reasonable and quality attractive

•Build new capacity ahead of market demand

•Invest enough to remain cost competitive

•Patent feasible alternative technologies

•Sign exclusive contracts with best suppliers and distributors

S 8:Muscle-Flexing  Strategy

Objectives

•Play competitive hardball with smaller

rivals that threaten leader’s position

•Signal smaller rivals that moves to cut
into leader’s business will be hard fought

•Convince rivals they are better off playing
“follow-the-leader” or else attacking each
other rather the industry leader
S 9:Muscle-Flexing  Strategy: Strategic  Options

—Be quick to meet price cuts of rivals

—Counter with large-scale promotional campaigns if rivals boost advertising

—Offer better deals to rivals’ major customers

—Dissuade distributors from carrying rivals’ products

—Provide salespersons with documentation about weaknesses of competing products

—Make attractive offers to key executives of rivals

—Use arm-twisting tactics to pressure present customers not to use rivals’ products

S 10:Muscle-Flexing  Strategy Risks—

Running afoul of antitrust laws

—Alienating customers with bullying tactics

—Arousing adverse public opinion
S 11:Types  of  Runner-up  Firms

—Market challengers

—Use offensive strategies to gain market share

—Focusers

—Concentrate on serving a
limited portion of market

—Perennial runners-up

—Lack competitive strength to do
more than continue in trailing position

S 12:Obstacles  Runner-Up Firms  Must  Overcome
When big size is a competitive asset, firms

with small market share face obstacles
in trying to strengthen their positions

—Less access to economies of scale

—Difficulty in gaining customer recognition

—Inability to afford mass media advertising

—Difficulty in funding capital requirements

S 13:Strategic  Options for  Runner-Up  Firms

 w—hen big size provides larger rivals with a cost advantage, runner-up firms have two options

—Build market share

—Lower costs and prices to grow sales or

—Out-differentiate rivals in ways to grow sales

—Withdraw from market

S 14:Offensive  Strategies  for  Runner-Up  Firms:  Building  Market  Share

—Acquire smaller rivals to expand company’s market reach and presence

—Find innovative ways to drive down costs
to win customers from higher-priced rivals

—Craft an attractive differentiation strategy

—Pioneer a leapfrog technological breakthrough

—Be first-to-market with new or better products and build reputation for product leadership

—Outmaneuver slow-to-change market leaders in adapting to evolving market conditions and customer needs

—Forge strategic alliances with key distributors, dealers, or marketers of complementary products

S 15:Strategic  Approaches  for  Runner-Up  Firms
1. Vacant niche strategy

2. Specialist strategy

3. Superior product strategy

4. Distinctive image strategy

5. Content follower strategy

S 16:Vacant  Niche  Strategy for  Runner-Up  Firms

—Focus strategy concentrated on end-use applications market leaders have neglected

—Characteristics of an ideal vacant niche

—Sufficient size to be profitable

—Growth potential

—Well-suited to a firm’s capabilities

—Hard for leaders to serve

S 17:Specialist  Strategy for  Runner-Up  Firms

—Strategy concentrated on
being a leader based on

—Specific technology

—Product uniqueness

—Expertise in

—Special-purpose products

—Specialized know-how

—Delivering distinctive customer services

S 18:Superior  Product  Strategy for  Runner-Up  Firms

—Differentiation-based focused strategy based on

—Superior product quality or

—Unique product attributes

—Approaches

—Fine craftsmanship

—Prestige quality

—Frequent product innovations

—Close contact with customers to
gain input for better quality product

S 19:Distinctive  Image  Strategy for  Runner-Up  Firms
—Strategy concentrated on ways to

stand out from rivals

— Approaches

—Reputation for charging lowest price

—Prestige quality at a good price

—Superior customer service

—Unique product attributes

—New product introductions

—Unusually creative advertising

S 20:Content  Follower  Strategy for  Runner-Up  Firms

—Strategy involves avoiding

—Trend-setting moves and

—Aggressive moves to steal
customers from leaders

—Approaches

—Do not provoke competitive retaliation

—React and respond

—Defense rather than offense

—Keep same price as leaders

—Attempt to maintain market position

S 21:Weak  Businesses:  Strategic  Options

—Launch an offensive turnaround strategy
(if resources permit)

—Employ a fortify-and-defend strategy
(to the extent resources permit)

—Pursue a fast-exit strategy

—Adopt a harvest strategy
(a slow-exit type of end-game strategy)

S 22:Achieving  a  Turnaround: The  Strategic  Options
—Sell off assets to generate cash and/or reduce debt

—Revise existing strategy

—Launch efforts to boost revenues

—Cut costs

—Combination of efforts
S 23:What  Is  a  Harvest  Strategy?
—Steers middle course between status quo and exiting quickly

—Involves gradually sacrificing market position
in return for bigger near-term cash flow/profit

—Objectives

—Short-term - Generate largest
feasible cash flow

—Long-term - Exit market

S 24:Types  of  Harvest  Options

—Reduce operating expenses to rock-bottom

—Hold reinvestment to minimum

—Place little priority on new capital investments

—Emphasize stringent internal cost controls

—Trim advertising and promotion expenses

—Do not replace employees who leave

—Shave equipment maintenance

S 25:When  Should  a  Harvest Strategy  Be  Considered?

Industry’s long-term prospects are unattractive

—Building up business would be too costly

—Market share is increasingly costly to maintain

—Reduced levels of competitive effort will not trigger immediate fall-off in sales

—Firm can re-deploy freed-up resources
in higher opportunity areas

—Business is not a major component of
diversified firm’s portfolio of businesses