A.5 Other environmental and ethical issues TXT Other environmental and ethical issues.pdfShow the link between i) the operation of the “value drivers” and ii) the behaviour of

A.5 Other environmental and ethical issues

a). Discuss the ways in which stakeholder groups operate and the ways in which they affect an organisation

and its strategy formulation and implementation e.g. Mendelow’s matrix [3]

Study Approach

The overall approach to understanding and addressing the capability effectively and efficiently Discuss “Discuss” determines the requirements of this capability. The nature of a “discussion” is that i) issues are examined in detail and comprehensively (hence

analysis would be required of stakeholder groups, the ways in which they operate, why and how those behaviours affect organisations directly and indirectly in

terms of strategy formulation and execution); ii) an evaluation is carried out skilfully during the discussion; iii) a conclusion is reached. This does not necessarily

mean agreement. The conclusion may not be conclusive. “The extent to which stakeholders influence strategy formulation and execution depends on the nature

and size of the business. Individuals within groups may have conflicting interests and the interests of different groups may conflict.”

What should be

discussed: the

issues

“…ways in which stakeholder groups operate and the effects of those behaviours on strategy formulation and execution…”

Approach:

Extracts from Annual reports (highlighting key issues)

How stakeholders influence business activity http://smallbusiness.chron.com/stakeholders-influence-business-activities-18754.html

Show the link between i) the operation of the “value drivers” and ii)

the behaviour of stakeholders. Use appropriate models such as the

balanced scorecard, performance prism, six sigma, etc: e.g. how

does stakeholder behaviour affect value drivers such as sales volume

and price? Discuss this with particular reference to businesses such as

dairy farmers, breweries, groceries e.g. Tesco plc, NHS, HE.

- Analyse the effects on the customer of cyclicality, economic

outlook (confidence or sentiment), fashion, status, culture, etc.

- Analyse the effects on the employee of cost cutting, change e.g.

mergers and acquisitions, empowerment,

- Analyse the effects on the investor of business change,

performance e.g. maturity of the product

http://v5.books.elsevier.com/bookscat/samples/9780750680431/9780750680431.PDF

Managing for value: the crucial contribution financial strategies make to overall

business success. It is concerned with maximising the long-term cash generating capability of the organisation. The key value and cost drivers are the factors that have most influence on the

cash generation capability of the organisation. In the public sector these are the factors that have most influence on the ability to provide best value services.

Strategic management activity

Value drivers

(increase share holder value)

Cost drivers

(reduce shareholder value)

Operations Sales volume, price Cost of sales, other operational cost.

Show the links between “cost drivers” and the behaviours of

stakeholders (use appropriate analysis and models to anchor the

discussion in concepts and principles that are recognisable. This adds

credibility and scores professional marks)

http://smallbusiness.chron.com/stakeholders-influence-business-activities-18754.html


Investment Disposal of fixed assets (brings in proceeds and therefore increases

shareholder value)

Investment in capital is an application of funds that potentially reduces shareholder wealth in the short term. In the medium to long-term the returns on the investment increases equity in the form of retained earnings and other comprehensive income.

Reduction in debtors and stocks (by conversion to cash that is then preserved, reducing stockholding costs and default risk while

increasing working capital) increases shareholder value.

Reduction in current liabilities is an application of funds that reduces shareholder wealth.

Finance Interest on debt capital is a charge against profits; reduces shareholder wealth.

The mix of equity and debt affects shareholder wealth: the higher the proportion of debt the higher the effect on earnings.

Support discussion with i) Case Study, ii) Reference to articles and

other suitable sources.


See Fig1.5, page 4

Supporting

evidence

- Support discussion with i) Case Study, ii) apt references to articles, iii) annual reports and other suitable sources.

Conclusion Evaluate:

- Determine whether the increased involvement of stakeholders is beneficial to the organisation in terms of improving business performance operationally (in

the short-term) and strategically (in the long-term).

- Does it increase share holder value or best value (in not for profit organisations such as the Police, schools, online retailing, etc.)?

Exam Insight Discuss the approach of the examiner:

- Cite particular insightful comments as to how students have performed and discuss their implications for learning and exam practice.

- Discuss the past exam question style and scope, highlighting what this indicates as to how students should go about mastering the material e.g. is the case

study approach the right one?

- Discuss the intellectual levels and their implications for learning and exam practice.

June 2012 q3 Six sigma

June 2012 q5 Performance measurement and management of stakeholders

Dec 2011 q4 a) suitable information for assessing branch manager’s performance; b) Management style, appraisal, reward system

June 2008 q3 Q3b cultural issues and strategic management


Practise and

Learn

- Design appropriate worked examples (with annotations where appropriate)

- Design appropriate exercises to allow specific relevant competences to be developed.

- Design appropriate exercises to overcome certain learning problems. What learning problems are associated with this type of subject matter? What is this

type of subject matter? Types are: i) Abstract and conceptual (requiring conceptualised understanding); ii) Thesis (requiring analysis and reasoning to

support or prove the thesis); iii) Experiential or observational (requiring); iv) Inferential (requiring inferences); v) Procedural (descriptive: logical

progression); vi) Exploratory – the “messy problem”.

1. A stakeholder is an individual that depends on an organisation for satisfying their goals and on whom the organisation

depends for satisfying its goals.

Stakeholder Goals How they operate and influence strategic performance

COMMERCIAL ORGANISATION SUCH AS TESCO PLC, BP, Investor - Obtain steady and secure

income

- Obtain capital growth

(value investor)

- Appoint directors as agents to run the business on their behalf (the principals) ensuring adequate governance

structures are in place to achieve investor goals, environmental goals and social goals.

- Manage the principal-agency problem through incentives designed to align behaviour of agents closely with goals of

principal

- Require accountability of directors to the principal.

- Appoint auditors to check truth and fairness and report what they are not happy with

- Use agm to monitor and evaluate the performance of directors and to recommend new goals or enhancements to

existing goals that provide the basis for strategic direction. E.g. improve shareholder value can translate to growth

plans and targets which could mean diversify, retrench (e.g. sale of products and businesses)

-

The following quotes from Exploring Corporate Strategy, JSW emphasize the importance of stakeholders in strategic

management. These act as anchors to all the tools, analysis and discussions and must be referred to constantly.

Strategy is the scope and direction (of an organisation) over the long term which achieves advantage in a changing

environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations

Strategic position is concerned with identifying the impact on strategy of the external environment, an organisation’s

strategic capability (resources and competences) and the expectations of stakeholders.

Types, aspirations, needs and power of various investors

- Institutional e.g. pension funds (dormant

- Venture capital: (Exit route planned; can force business to sell after adequate growth)

- Small long term investors

- Short term investor (erratic behaviour, short-selling)

- Bond holders (long term)

- Preference shareholders

- Ordinary shareholders.

Aspects of behaviour that are relevant to strategic management.

- Remuneration of directors. Bonuses are a strategic issue because of the need to address the principal-agency problem

through adequately designed incentives. These sometimes generate concerns from investors as to whether the directors

e.g. CEO is worth his bonus.

- Divestment (close down a business,

- Investment (raise new capital; buy a new business, etc)

- Dividend decisions (dividend policy)

- Social conscience (employment rights and human rights)

- Environmental concerns (waste, pollution, energy)

Customers Obtain goods and services

safely and securely

- Increasing demand for lower prices and enhanced quality due to competition and commoditisation resulting from

advances in IT and increasing number of players in all business sectors. This demand for improvements in value

propositions is also driven by improvements in customer experience and knowledge of products and being able to

compare prices and products from various suppliers on the internet.

- Enhanced customer protection e.g. arising from legislation about consumer rights gives customers improved

confidence to demand higher quality in products and warranties for defective products.

- Buyer power is a key force in Porter’s 5 forces. Where customers are conscious of their power e.g. the big grocery

retailers (Tesco, ASDA, Sainsbury, Morrison’s) they can exert buyer power and extract cost savings from their

suppliers which can give them considerable competitive cost advantage. This becomes a strategic planning issue.

-

How does the entity respond?

- This naturally affects production strategies and objectives e.g. reduction of costs in the value chain; reduction of

defective products; reduction of product variations; differentiation through branding, pricing strategies, innovation,

product convergence e.g. Apple planning TV product to complete the suite of products that offer customers total

experience which potentially means they will stay with Apple; loyalty awards that are aimed at locking in customer

loyalty over long periods during which they accumulate rewards.

- Relentless focus on the customer in order to maximise returns on each customer. Examples of operational strategies

are i) Database marketing (CRM); ii) Shift of emphasis from marketing to CRM, from functional departments

(marketing) to integrated approach to providing value to the customer in ways that extend the customer’s experience.

Amazon is a prime example of this where buying one book leads to information about other similar books which can

often result in more sales for Amazon because the customer thereby discovers desirable books that she would not wish

to be without.

- Customer profitability management is a strategic management initiative that is concerned with implementing the

firm’s generic strategy through its dealings with the customer. The customer becomes the unit of accounting analysis

to: i) identify the cost of dealing with the customer (buying patterns, after sales service, customer capture, etc), ii)

identify the non-value added activities that may be used to reduce costs, iii) distinguish the firm’s products

(differentiation strategy). ABC and ABM can potentially be used to enhance the organisation’s competitive advantage

and secure customer loyalty through a combination of efficient processes, excellent product (and service) quality and

customer care.

Suppliers - Produce and sell to a

secure customer

- Secure and prompt

payment for suppliers

- One of the forces in Porter’s 5 forces. (A model for analysing strategic position by identifying the factors that have

most influence in determining relative competitive position. Crucial to maintaining sustainable performance over the

long term.)

- An essential part of the value chain or value network, including outsourcing. The strategic implication is that

organisations need to manage the performance of key suppliers competently as suggested by Porter’s value Chain

Framework. This is crucial for sustaining competitive advantage through cost reduction (JIT procurement and

production), acquisition and control of vital supplies. This means competence in selecting, motivating and controlling

suppliers to align their operations and strategies with those of the organisation. Lack of alignment could prove fatal to

strategic execution at the operational level.

- Suppliers could be conscious of their power over the organisation and may exercise that power for themselves. The

structure of the industry in which the supplier operates is crucial. For example, where there are relatively few

suppliers a cartel may be formed (e.g. OPEC as in the oil industry) and the suppliers may restrict production to

maximise prices and revenues for themselves. This could have a knock-on effect on the performance of the

organisation. Airline operations are extremely vulnerable to suppliers of aircraft fuel where fuel cost is a very high

component of the total operating cost. Risk management is therefore crucial in mitigating the effects of price

fluctuations due to supplier power, currency movements and other risk factors.

- Segmentation of the market enables suppliers to target customers and provide customised services that attract

premium prices. At the same time suppliers can provide goods and services in accordance with a variety of value

propositions (perceived added value) identified in the strategy clock: no frills, low cost, hybrid, differentiation,

focused differentiation; strategies destined to ultimate failure are also identified.

- Bankers as suppliers of capital are extremely risk averse and in the US and UK they have a proven track record of not

lending since the financial crises. The UK Government is being urged to bypass banks and setup new alternative

lending agency so that money can go direct to businesses that need the money badly to invest so that the economy can

recover faster by means of a demand led stimulus.

Employees (a

major group of

suppliers, of

labour)

Secure and rewarding

employment; value their rights

and social acceptability

- Essential for execution of agreed strategy; the strategic implications are that organisations need to be highly

competent in human resource management: selecting, training, retaining, motivating and rewarding employees.

- Staff are attracted to employers that safeguard their well being and provide a suitable work/life balance. This means

flexibility to accommodate diversity, respect for human rights and employment rights and existence of prospects for

growth which is part of the strategic human resource challenge.

- Employee behaviour is not controllable. Organisations spend a lot of money on human resources but they cannot

entirely control how staff will behave. Employees are part of the governance chain and therefore are crucial in

achieving the goals of investors and other stakeholders. Yet human rights means that they are free to work where they

chose to. This presents strategic planning and execution challenges which are met by a range of strategies involving

incentives conditional on a vesting period, employee share options, etc that are designed to increase the likelihood that

key employees will stay long enough for adequate returns to be obtained on the organisation’s investment in them.

- Union membership is an employment right that organisations preserve for employees under the law. This provides

security to staff against undesirable employer behaviour. Yet moral hazard is an ever present risk in the principal-

agency problem which could be accentuated by the protection offered by unions. For example, unions may limit the

extent to which costs can be lowered through employees becoming more efficient (in accordance with the experience

curve) by imposing working conditions such as shift hours and intervals between piecework, holidays, etc designed to

protect staff at work from being exploited. This may create a culture in which employees prefer to exert less effort

than is required for optimum production and competitive advantage. This could lead to organisations outsourcing

work to China, India and other countries where labour costs are lower and union power is less restrictive.

- Performance management, measurement and evaluation is integral to the performance management framework. The

Balanced Scorecard highlights the learning and growth perspective making it a strategic issue that organisations

should identify the competences required by employees to transform strategic resources into value propositions

(products and services) through its activities and processes. Sensitive performance measures (those that respond to

employee performance) must be used to evaluate and incentivise employees. This has the risk of employees reporting

distorted information (e.g. Management of earnings) to boost their bonuses, satisfy contractual requirements and

respond to market pressures. This is another example of moral hazard.

-

Consumer

Associations

- Consumer associations exist to protect consumers from unfair trading practices and defective products and rip-off

financing arrangements

- Warranties and professional indemnity insurance are examples of how an organisation responds to the risk of having

to provide remedies to consumers for defective work or goods.

- Consumer associations can also affect strategic formulations and business performance where ethical pressures force

the organisation to respond to ethical and health concerns e.g. obesity and food safety concerns. McDonald has had to

modify its recipes and brand several times over the past decades to respond to various pressure groups including

consumer groups who link McDonald foods and beverages to obesity and poor health particularly in children.

Responding to these concerns can affect business strategies and performance.

Business Groups

e.g. Chambers of

commerce; BBA

- British Chambers of commerce promote domestic and international trade and industry. As such they help

organisations to plan and promote expansions to international markets, influencing governments and international

organisations such as WTO to remove trade barriers.

- They can contribute significantly to expanding export and domestic markets. They seek and obtain incentives such as

export subsidies, export credit finance, tax waivers on exports such as VAT, restrictions on taxes on imports and tax

allowances and tax breaks for businesses all of which can affect business performance.

- The confederation of British Industry and British bankers Association perform similar duties in aid of their members.

- They can be very effective in reducing risks and promoting good practice.

Professional

bodies, e.g.

ACCA, CCAB

- Professional bodies such as the Law Society, CCAB and British Medial Association exist to regulate their members

and provide confidence to the public in the ethical character and professional competence of their members.

- Accountants in their role as employees contribute to strategic management because of their expertise. Auditors

contribute to governance and stewardship of resources through their role as independent examiners of the financial

statements depicting stewardship and accountability.

Regulators Secure compliance with

regulation so as to achieve

legal, social, economic and

other benefits and protection

for the wider public.

- Regulators such as the FSA (Financial Services Authority) are empowered by law to set standards of behaviour and

performance of financial institutions towards their customers for the benefit of their customers and fore the public

good.

- The regulator can impose severe penalties if the institutions they regulate are found to have broken the law or fallen

short of acceptable ethical practice. Recently Barclays was fined around £300,000 by regulators in the UK and US for

their part in manipulating LIBOR, a benchmark rate of interest used in financial contracts worldwide.

- As such they are a risk factor to the organisation as has been highlighted by the recent massive compensation of

consumers by the banks for mis-selling PPI (Payment Protection Insurance). “The banks lost in court after years of

systemically mis-selling PPI. Now they've put up to £9 billion aside to pay out.”

- The reputational damage can affect business performance as customers can vote with their feet if they

don’t trust a supplier. Customer loyalty can be lost to more ethical banks such as The Co-operative Bank

which boasts substantial gains from ethical practices over the years.

- Cost is another issue that can affect strategic formulation. Substantial penalties and damages can affect the

business’ cost leadership strategy in a competitive environment as it cannot pass on the costs without

losing out to competitors.

Tax authorities Collect all revenue from

company and employees

- Tax planning is a major part of strategic planning as the tax consequences of intended actions have to be analysed and

considered from all perspectives to ensure that plans are adequate for managing for value. For, example, the cash flow

implications of plans have to be considered and the deferred tax consequences of transactions are an integral part of

financial strategy formulation as they can have a considerable impact on the balance sheet and income statement.

- Grants can be significant part of capital expenditure. Hence tax authorities can be instrumental in making funds

available to the government which can affect strategic plans and financial plans.

- Tax rates can affect capital expenditure plans and the location of industries. UK tax laws, particularly the low rates of

corporation tax (currently 2012 small rate 21%, main rate 24%) and capital allowances, have been influential in

attracting inward investment and encouraging people to start their own business.

- Personal tax rates can be influential in the decisions of highly skilled individuals as to where they want to work. This

can affect strategic plans as employees are crucial to strategic execution.

NHS Doctors &

Nurses

- Secure employment

- Patient care

Patients - Healthcare

Government - Provide health care

- Safeguard patient interests

- Obtain best value

Regulators - Secure compliance with

standards of healthcare

(Care Quality

Commission)

- Secure compliance with

standards of financial

management (Monitor)

Suppliers - Produce and sell to a

secure customer

- Secure and prompt

payment for suppliers

Tax authorities - Collect all income tax and

VAT

2.

b) Discuss the ethical issues that may impact on strategy formulation and business performance. [3]

Study Approach

The overall approach to understanding and addressing the capability effectively and efficiently

Discuss “Discuss” determines the requirements of this capability. The nature of a “discussion” is that i) issues are examined in detail and comprehensively (hence



mean agreement. The conclusion may not be conclusive. “Ethics as business practice can only be effectively embraced throughout the organisation if it is

integrated into strategy formulation as an inherent component of decision making at all levels. To be ethically sound the organisation’s culture should not only

reflect but be driven by ethics as a motive for business action; a reason to be efficient in delivering best value to customers; a reason for accountability and

fiduciary responsibility to stakeholders. This transcends corporate ethics and calls for a sense of personal responsibility from all stakeholders.”

What should be

discussed: the

issues

“…the ethical issues that may impact on strategy formulation and business performance …”

Approach:


Identify ethical issues - The principal-agency problem and related issues e.g. moral hazard,


the ethical behaviour of stakeholders. Use appropriate models such as

the balanced scorecard, performance prism, etc: e.g. how does

stakeholder behaviour affect value drivers such as sales volume and

price? Discuss this with particular reference to businesses such as


-





Value drivers


Cost drivers




shareholder value)





Finance Interest on debt capital is a charge against profits;





reduces shareholder wealth.




Supporting

evidence Support discussion with i) Case Study, ii) apt references to articles, annual reports and other suitable sources.

On the Rio Tinto website, the company claims: "We are right behind London 2012's commitment to delivering the most

sustainable Games".

In a statement, Rio Tinto said: "Kennecott continues to operate within the parameters of its air permits and is consistently in

compliance with the US, EPA and Utah Division of Air Quality regulations, which are based on strict standards for protecting

human health."

ON THE BLOG: The Great Olympic Greenwash

However, speaking earlier this year, Cherise Udell, founder of Utah Moms for Clean Air, said: "In Utah, Rio Tinto are the

number one emitter of toxins known to cause harm to human health. Every year, between 1,000 and 2,000 Utahans die

prematurely due to chronic air pollution and Rio Tinto's Bingham mine is responsible for about 30 per cent of this."

http://www.huffingtonpost.co.uk/2012/06/19/olympics-2012-rio-tinto-medal-environment_n_1608522.html Conclusion Evaluate:

- Determine whether the ethical stance of stakeholders is beneficial to the organisation in terms of improving business performance operationally (in the

short-term) and strategically (in the long-term). Think about McDonalds, Rio Tinto (who donated the Olympic medals)







June 2011 q5a,b Environmental accounting and reporting

Dec 2010 q4 q4a Factors that affect environmental strategy

Q4b,c Environmental performance management

Dec 2009 q4 Q4b economic, social and financial considerations in evaluation of expansion into new country

Dec 2008 q3 Q3c Environmental legislation (potential risk factor)

http://www.huffingtonpost.co.uk/meiling-mcnamara/the-great-olympic-greenwa_b_1608432.html

http://www.huffingtonpost.co.uk/2012/06/19/olympics-2012-rio-tinto-medal-environment_n_1608522.html

Practise and

Learn







3. The table below gives an analytical discussion of each of the components of ethics in business.

Ethical issues Impact on strategy formulation and business performance Corporate Governance - Shareholders and other principal stakeholders need assurance that the board of directors and other agents and employees will act in

the best interests of its stakeholders. In a commercial organisation the shareholders (the principal) appoint the directors (the agent)

to run the company on their behalf and incentivise them to align their behaviour with the best expectations of shareholders. The

problem arises when the agent’s behaviour diverges from the expectations of the principal and the principal is unable to verify the

actions of the agent either because information is not available or it is not practical to do so for reasons of cost, time and

convenience. Another related problem is where the agent’s rewards are not commensurate with the performance, leading

shareholders to act to block certain compensation proposals.

- The requirements of governance set up a governance chain throughout the organisation. This dictates the structure of responsibility

and accountability and the basis of resource allocation. These are issues that are addressed at the strategic planning phase of

strategic management. Monitoring and control are discharged through these structures of governance to achieve the strategic

objectives of the organisation. However, there is an increasing trend towards adapting structures, systems and processes to fit

internal and external business requirements in a competitive and globalized environment and these are issues that affect strategy

formulation. For example, network structures, flat structures, matrix structures and divisionalized structures are examples of

adaptations of the traditional functional structure to accommodate contingent factors in the business environment.

- The requirements of fiduciary duty impose a need on the agents to get the strategy right. The rewards can be substantial just as the

penalty for getting it wrong can be severe. This affects strategy formulation as directors are motivated by their own contractual

responsibilities, market expectations and incentive prospects. These factors can translate into a conflict between short-term and

long-term decisions that are often not resolved in a balanced way resulting in the CEO being relieved of his duties. The average

tenure of a CEO is five years and this is becoming the norm in western economies reflecting the pressures and conflicts inherent in

strategic management at the top.

- The requirements of risk management impose a need for effective risk analysis and evaluation to minimise or eliminate strategic,

operational, financial, legal and regulatory risks. In most organisations this is delegated by the board to the Audit committee. Where

risk management strategies are effective and executed competently they can protect the organisation from crippling losses and

support strategic management practices, increasing the likelihood that the organisation’s strategic priorities can be achieved.

- Sound corporate governance can enhance the reputation of the organisation, securing customer loyalty, increasing retention,

maintaining and improving market share and avoiding costs of recruitment to offset loss of existing customers. Weak corporate

governance can have the opposite effects, undermining strategic management and resulting in failure to achieve strategic priorities.

Corporate social responsibility - “Corporate Social Responsibility (CSR) is the continuing commitment by business to behave ethically and contribute to economic

development while improving the quality of life of the workforce and their families as well as of the local community and society at

large.” World Business Council for Sustainable Development

- The concept of the Triple Bottom Line reflects all the elements highlighted in the above: i) ethical conduct, ii) economic or

financial development, iii) social responsibility and sustainability

- Social Responsibility is concerned with i) employment rights and ii) human rights of employees. “It is the firm’s obligation to

maximise its positive impacts upon stakeholders whilst minimising the negative effects.”

- The strategic relevance of these cannot be over emphasized. Organisations need to be competent at human resource management to

attract the best talents to compete. CSR policies can motivate employees and improve their productivity. Employees can help

organisations develop a culture that fosters high performance. Employees can help the organisation differentiate itself from others

in the strategic group.

In a survey conducted by BusinessWeek magazine, Google was the most sought after company by college students, MBAs, women, engineers, and diverse individuals. Google ranked 1st on the 10th annual '100 Best Companies to Work For' list of Fortune, a well-known international business magazine. HR practices at Google is named 'People Operations', which is designed to underline the fact that it is not a mere administrative function, but ensures the building of a strong employee-employer relationship. Google's HR practices clearly reveal the impressive results of the company's approach, which help in increasing employee productivity.

Resources http://www.firstgroup.com/assets/pdfs/csr/FINAL_CSR_policy_March_08.pdf example of CSR at work

Environmental sustainability - What is environmental sustainability? One of the triple bottom lines environmental sustainability is concerned with waste, energy

and pollution. These issues are at the heart of the organisation’s strategic capabilities and their use in achieving strategic objectives.

For example, “Our Environmental Sustainability Vision is to be an eco-efficient company where excellence in environmental

stewardship and sustainable innovation build Brands That Matter™ and create value for our shareholders, consumers and customers.” NewellRubbermaid

- The requirement of sustainability means that all core processes of the strategic implementation plan should be analysed carefully and appropriate strategies approved and introduced to ensure sustainability is integral to decision making, criteria of success and evaluation of successful performance. This could mean certain business strategies should not be pursued; certain products may not be produced because the environmental sustainability implications are prohibitive.

- The cost implications should be reliably assessed e.g. the cost of environmental cleanup, waste and pollution could be substantial and could affect the competitive ability of the business. That is why it is a strategic cost issue.

- Environmental accounting and reporting methods should be assessed and approved.

Resources http://www.newellrubbermaid.com/CorporateResponsibility/EnvironmentalSustainability/Pages/EnvironmentalSustainability.aspx

c) Discuss the ways in which stakeholder groups may influence business performance. [2]

Study Approach

The overall approach to understanding and addressing the capability effectively and efficiently Discuss “Discuss” determines the requirements of this capability. The nature of a “discussion” is that i) issues are examined in detail and comprehensively (hence



http://www.firstgroup.com/assets/pdfs/csr/FINAL_CSR_policy_March_08.pdf

http://www.newellrubbermaid.com/CorporateResponsibility/EnvironmentalSustainability/Pages/EnvironmentalSustainability.aspx

mean agreement. The conclusion may not be conclusive. “The extent to which stakeholders influence strategy formulation and execution depends on the nature

and size of the business. Individuals within groups may have conflicting interests and the interests of different groups may conflict.”

What should be

discussed: the

issues

“…ways in which stakeholder groups operate and the effects of those behaviours on strategy formulation and execution…”

Approach:


How stakeholders influence business activity http://smallbusiness.chron.com/stakeholders-influence-business-activities-18754.html


the behaviour of stakeholders. Use appropriate models such as the

balanced scorecard, performance prism, six sigma, etc: e.g. how

does stakeholder behaviour affect value drivers such as sales volume

and price? Discuss this with particular reference to businesses such as


- Analyse the effects on the customer of cyclicality, economic

outlook (confidence or sentiment), fashion, status, culture, etc.

- Analyse the effects on the employee of cost cutting, change e.g.

mergers and acquisitions, empowerment,

- Analyse the effects on the investor of business change,

performance e.g. maturity of the product






Value drivers


Cost drivers




shareholder value)





Finance Interest on debt capital is a charge against profits; reduces shareholder wealth.






http://smallbusiness.chron.com/stakeholders-influence-business-activities-18754.html





See Fig1.5, page 4

Supporting

evidence

- Support discussion with i) Case Study, ii) apt references to articles, annual reports and other suitable sources.

Conclusion Evaluate:

- Determine whether the increased involvement of stakeholders is beneficial to the organisation in terms of improving business performance operationally (in

the short-term) and strategically (in the long-term).







Practise and

Learn







4. This has been adequately covered under a) and b)


Documents

A.5 Other environmental and ethical issues TXT Other environmental and ethical issues.pdfShow the link between i) the operation of the “value drivers” and ii) the behaviour of