SM A10 Purpose Shareholder Value and Stakeholders

7/28/2019 SM A10 Purpose Shareholder Value and Stakeholders

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Strategic Management

Purpose, shareholder value,

and stakeholders

Prof.Dr. E.Vatchkova



Contents

1. Identifying stakeholders2. The political power in the organization

3. Sources of power

4. Stakeholder mapping

5. Power/dynamism matrix6. Power/interest matrix

7. Conflicts of expectations

8. Managerial values

9. Ethical issues10. Cultural frames



Freeman’s definition (1984)

“Any group or individual who can

affect or is affected by the

performance of an organization”



Stakeholders concept is valuable

when:

The organizational objectives are defined

Specific strategic developments will takeplace

The strategic choice is to be made



Groups of stakeholders

External stakeholders

The state

Customers

Suppliers

Financial institutions

Shareholders

Unions

Media

Internal stakeholders

Managers

Employees



Power

The ability of individuals or

groups to persuade, induce or

coerce others into followingcertain courses of action

The organization is a

political arena



Source of power within the

organization

Hierarchy (formal)

Influence (informal)

Control of strategic resourcesPossession of knowledge and skills

Control of the environment

Involvement in strategy implementation



Sources of power for external

stakeholders

Control of strategic resources

Involvement in strategy implementationPossession of knowledge (skills)

Through internal links



Indicators of power

Internal stakeholders

1. Status

2. Claim on resources

3. Representation

4. Symbols

External stakeholders

1. Status

2. Resource

dependence

3. Negotiating

arrangements4. Symbols



Stakeholders mapping – assessing

the importance of stakeholder

expectations How likely each stakeholder is to impress

its expectations on the company

Whether they have the means to do so

(assessment of power)

The likely impact of stakeholder

expectations on future strategies

P /d i t i



Power /dynamism matrix

A

Few

problems

B

Unpredictable but

manageable

C

Powerful

but

predictable

D

Greatest danger or

opportunities

Predictability

Power

Low

LowHigh

High

Adapted from Mendelow, 1999



Power / interest matrix

A

Minimal

effort

B

Keep

informed

C

Keep

satisfied

D

Key players

Level of interest

Power

Low High

Low

High

Adapted from Mendelow, 1999



Stakeholders expectations(1)

Shareholders:

Annual dividends

Increasing the value of their investments in

the company as the share price increases




Managers

salaries and bonuses

proxy paymentsresponsibility

challenge

working for a well known andprestigious company




Employees

wages

holidays job satisfaction

working conditions

security




Consumers

desirable and quality productscompetitive prices

new products at appropriate time




Distributors

on time and reliable deliveries

Suppliers

constant orderspayment on time

Financers

interest payments

loan repayments




Government

payment of taxes

provision of employmentcontribution to the nation’s exports

Society in general

socially responsible actions



Common conflicts of

expectations

Growth – profitability

Cost efficiency – jobs

Volume – qualitySavings in one SBU –increased spending

in elsewhere

Division’s belonging to two organizationalfields



Definition

Values are broad, general beliefs about

some way of behaving or some end state

is preferable to the individual



The influence of values

The way other individuals and groups areperceived, thereby influencing interpersonalrelationships

The decisions and problem solutionsThe perception of situations

The criteria for ethical behavior

The acceptation or resistance to organizational

goalsThe ways to achieve the success



Types of values

Theoretical – order, system, logicEconomic – usefulness and practicability

Aesthetic – art and beauty

Social – people and their welfarePolitical – power over people and things

Religious – unity and harmony



The political and cultural aspect

of the organization

1.Whom the organization does actuallyserve?

The concept of stakeholders

2. Which purposes an organization shouldfulfill?

Ethical considerations

3. Which purposes are actually prioritized?The cultural concepts



Some questions of CSR J&S,02

Internal aspects

Employee welfare

Working conditions

Job design

Intellectual property

External aspects

Green issues

Products

Markets andmarketing

Suppliers

EmploymentCommunity activity



The cultural web

Paradigm

Stories

Symbols

Power

Routines and

rituals

Control

Organizationalstructures



Expectations and purposes model

Corporate governanceBusiness ethics

Stakeholders Cultural context

Organizational

Purposes•Mission•Objectives



Managing for shareholder value

General consideration:How to make the business value-based?

Objective:

Maximizing shareholder value over time

Strategy:

Significant change in management

Action tasks (initiatives)

Key steps (initiatives) 1




(Cadbury-Schweppes plc,1966)

1. Preparing a multi-year blueprint for the many

changes to make the business value-based

2. Identify sources of value creation and

destruction, using financial and performance

measures: Economic profit

Return on total invested capital

Earning growth

Free cash flow

3. Set performance targets

4. Manage day-to day performance





5. Focusing business strategies on thesearch for profitable growth

6. Creating short- and long term incentive

plans for senior managers7. Reviewing the value performance of all

the businesses

8. Delivering awareness and trainingsessions on managing for value (top 300

executives worldwide)





9. Carrying two pilot studies in core group

businesses (produce “value champions”)

10. Establishing the first “rolling strategic

management agenda” for the board:

list of issues

managers in charge

value-maximizing decisions



Funding strategies in different

circumstances: the Growth/share matrix

Growth (Stars)Business risk: High

Financial risk needs to be: Low

Funding by: Equity (growth

investors)

Dividends: Normal

Launch (Question marks)Business risk needs to be: Very

high

Financial risk: Very low

Funding by: Equity

(venture capital)

Dividends: Zero

Maturity (Cash cow)

Business risk: Medium

Financial risk can be: Medium

Funding by: Debt and equity

(retaining earnings)

Dividends: High

Decline (dogs)

Business risk: Low

Financial risk can be: High

Funding by: Debt

Dividends: Total



THANK YOU !

Documents

SM A10 Purpose Shareholder Value and Stakeholders