Chapter 2

Definitions

Strategy Formulation: process of identifying and defining the organization's strategies

Management Control: process of implementing the organization's strategies

Task Control: process of ensuring that tasks are carried out efficiently and effectively

The Shareholder View

owners have the legal power to close down the company
main objective = give return on owners' investment
main concern = creating value for the owners

The Stakeholders View

Stakeholders Image

Numbers of equallty important objectives
Inputs from all stakeholders are crucial for the company's survival
Main concern = balancing demands from different stakeholders

Comparison

	Short-term shareholder view	Long-term shareholder view	Stakeholder view
Who ?	Present Owners	Present & Future Owners	Stakeholders
Time	Short Term	Long Term	Long Term
Main goal	Short-term profitability	Long-term profitability	Survival
Performance measures	Mainly financial	Financial & Non-Financial	Financial & Non-Financial
Importance of shareholders	Very high	High	High
Importance of stakeholders	Rather Low	Rather High	High

Corporate Social Responsibility (CSR) is the responsibility of the company to contribute to the well-being of society

How to communicate to stakeholders, media and public?

Globalization
NGOs
Global Compact Initiative

Means

Code of Conduct: set of rules and guidelines for the behavior of employees
Sustainability reporting: report on the company's environmental, social and governance (ESG) performance
Internal reporting channels: communication channels between employees and management
Culture and values: company's values and behaviors
Personal example: case study of a stakeholder
Storytelling: sharing stories of the company's successes and failures
Training: training of employees
Intranet: internal communication

Mission

Mission is the purpose of the company

Inspires employees
Attracts people
Encourages team spirit

Goals

Goal is a target that the company aims to achieve

Financial goals

High profitability
Low risk

Profitability

For profit organizations

Return on investment (ROI)
Return on assets (ROA)
Return on equity (ROE)

Cost effectiveness

Non-profit organizations

Cost of capital
Cost of goods sold
Cost of services

Strategic goals

How to build or sustain the company's competitive advantage

Strategies

Strategy is a plan of action to achieve goals

Strategies Image

Types

Deliberate

Design perspective
Strategic planning perspective
Positioning perspective

Emerging

Emerge out of the status quo

Corporate Strategy

Single Industry: Coca-Cola
Related diversification: Johson & Johnson
Unrelated diversification: Virgin

Porter's Five Forces Image

Differentiation vs Low Cost

Low-cost: competitive advantage based on cost leadership, e.g. Ryanair
Differentiation: competitive advantage by offering something unique, e.g. Ferrari
Cost-cum-differentiation: competitive advantage by offering something unique and at a low cost, e.g. Scania
Stuck-in-the-middle: neither low-cost nor differentiation

Contigencies

THE ENVIRONMENT

Volatility
Uncertainty
Complexity
Ambiguity

TYPES

Throughput controls that follow a 'coercive' logic: Ford
Throughput controls that follow a 'enabling' logic: Spotify

	Mechanistic	Organic
Motivation	Pay	Contribution to goals
Work-style	Specialized, defined responsabilities	Cooperation, teamwork and interaction
Structure	Hierarchic	Horizontal
Communication	Formal & Tight	Informal & Loose
Assessment	Supervision	Encouragement
Focus	Internal	External
Measures	Narrow cost & productivity measures for evaluation	Broader & non-financial measures for learning
Values	Planning & budgeting	Flexibility & creativeness
Values	Technology & routines	People & culture

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