FACULTY OF COMMERCE AND ADMINISTRATION DEPARTMENT OF ECONOMIC AND BUSINESS SCIENCES MODULE: ADVANCED STRATEGIC MANAGEMENT TOPIC: CPAPTER 2[THE PURPOSE AND CONTEXT OF BUSINESS: ELEMENTS OF SUSTAINABLE ORGANIZATION] LECTURER: Dr MAPRUNGA ASSESSMENT: GROUP PRESENTATION DUE DATE: 25 MARCH 2024 NAME NAMHLA MIHLE XOLELWA AKHONA SURNAME MPUNZI GAMNDANA MAHAM STUDENT NO 216276195 217044786 219486328 TABLE OF CONTENT LEARNING OUTCOMES PAGE Cover page……………………………………………………………………………1 Table of content…………………………………………………………………….2 Introduction…………………………………………………………………….……3 Purpose……………………………………………………………………….……….3 From Short-Term to Long-Term Strategizing.....................................3-4 Stakeholders vs Shareholders…………………………………….…………......4 Types of stakeholders………………………………………………..…………..5-6 The dynamics business context and evolving risks………………….……6-7 Context as opportunities: shared value and inclusive business……………………………………………………………………………...…7 The process of embedding context in strategy……………………..……..7-8 There are four steps of embedding context into strategy………………….8 What is the role of embedding local context in strategy……………………8 Four steps for developing contextual goals……………………………….…8-9 Measuring and reporting on progress…………………………………………….9 How to create a progress report in 5 simple steps…………………………….9 Conclusion……………………………………………..………………………………..10 References……………………………………………………………………………….11 Introduction Organizations are always looking for ways to succeed over the long run and keep a competitive edge in the intricate and dynamic world of business. Understanding and incorporating the organization's mission and context into day-to-day activities is a crucial component in creating a successful organization. Businesses also need to concentrate on sustainability, striking a balance between commercial objectives and environmental stewardship and social responsibility, in order to prosper in the face of global difficulties and changing public expectations. We examine the importance of context and purpose in creating a sustainable organization in this conversation. Purpose Building a sustainable organization requires a business to have a purpose. It influences the operations, values, and identity of the organization. The purpose of a firm defines its fundamental objectives and aspirations, which extend beyond generating money. It explains the company's mission and the kind of global effect it hopes to achieve. A well-defined goal can: - Encourage staff members, increasing rates of engagement and retention. - Draw clients who share the company's principles. - Direct long-term planning and decision-making. From Short-Term to Long-Term Strategizing: In the world of business, organizations have typically concentrated on short-term tactics meant to maximize shareholder value and profits. Nevertheless, this strategy frequently ignores how crucial long-term planning is to the ongoing success and expansion of the company. A long-term strategic strategy that takes into account multiple factors, including purpose, context, and stakeholder expectations, is crucial for the development of a sustainable company. An organization can implement the change in the following ways: 1. Highlight Purpose-Driven Approach: A purpose-driven strategy goes beyond profit generation to address the organization's mission and the impact it hopes to have. Setting long-term objectives, establishing moral standards, and generating value for all stakeholders are facilitated by aligning corporate operations with purpose. 2. Perform Stakeholder Analysis: Understanding the requirements and expectations of diverse stakeholders, such as consumers, workers, suppliers, communities, and shareholders, is essential to transitioning from a short-term to a long-term view. Actively communicate with stakeholders in order to establish good connections and gather information for strategic decision-making. 3. Evaluate the governance, social, and environmental (ESG) factors: By incorporating ESG factors into business plans, organizations may better control risks, solve environmental and societal issues, and provide long-term value that benefits all parties involved. Create measurements 4. Foster Innovation and Adaptability: Sustainable organizations must be flexible and adaptable in responding to changes in their context, such as emerging technologies, market trends, and regulatory developments. Encourage innovation and experimentation to find new solutions that address evolving business needs and contribute to long-term success. 5.Invest in Long-Term Growth and Sustainability Initiatives: Allocate resources towards initiatives that may not yield immediate results but have significant longterm benefits, such as employee development, research and development, and sustainable business practices. This investment in future growth sets the organization up for continued success. 6.Transparent Communication and Reporting: Establish open and transparent communication channels with stakeholders to share the organization's long-term strategy, goals, and progress. Regular reporting on sustainability performance builds trust and accountability, reinforcing the organization's commitment to its purpose and context. All in all, transitioning from short-term strategizing to a long-term perspective grounded in purpose and context requires a holistic approach to business management, prioritizing sustainable practices, stakeholder engagement, innovation, and adaptability. By focusing on these elements, organizations can ensure their long-term success while making positive contributions to society and the environment. (hamann & wendy , 2015) Stakeholders vs Shareholders: STAKEHOLDERS • Have an interest in the business, but don’t necessarily own it • • • SHAREHOLDERS • Partly own the business through share of stock May be affected directly or indirectly by the company’s activity Found in all types of organization • They typically invest in the company with the expectation of financial returns, such as dividends or capital appreciation. • • Directly affected by the company’s financial performance Found only in companies that issue shares Shareholders exercise their influence through voting rights in corporate decision-making processes, such as electing the board of directors or voting on major company initiatives. Types of stakeholders: Internal Directors Shareholders Management Employees Volunteers External Customers Suppliers Distributers Competitors Creditors Banks Union The government Media Transitioning from a shareholder-centric approach to a stakeholder-centric approach is a fundamental shift in organizational philosophy, especially in the context of sustainability. Here's how this transition might be articulated in the context of a sustainable organization: 1.Expanded Focus: A sustainable organization moves beyond solely prioritizing the interests of shareholders (those who own shares of the company) to consider the needs and concerns of all stakeholders. These stakeholders include employees, customers, suppliers, local communities, the environment, and society at large. 2.Long-Term Value Creation: While shareholders are important, a stakeholder approach recognizes that the long-term success and resilience of the organization depend on the health and well-being of all stakeholders. By considering the impacts of business decisions on a broader set of stakeholders, the organization aims to create sustainable value over time. 3.Integration of Environmental, Social, and Governance (ESG) Factors: A stakeholder-oriented approach inherently considers environmental, social, and governance factors in decision-making processes. This means accounting for the environmental footprint of operations, promoting social equity and responsibility, and upholding strong governance practices that ensure transparency, accountability, and ethical behavior. 4. Collaborative Decision-Making: Engaging with stakeholders in decision-making processes becomes a key aspect of organizational governance. This may involve consulting with employees on workplace policies, seeking input from local communities on development projects, or collaborating with suppliers to improve supply chain sustainability. 5. Risk Management and Resilience: By taking a holistic view of stakeholder interests, organizations can better identify and manage risks associated with social and environmental issues. Proactively addressing these risks enhances the organization's resilience and ability to navigate uncertain future challenges. 6. Brand Reputation and Trust: Prioritizing stakeholder interests and demonstrating a commitment to sustainability can enhance the organization's brand reputation and foster trust among stakeholders. This can lead to increased customer loyalty, investor confidence, and support from the wider community. 7. Regulatory Compliance and Legal Considerations: Embracing a stakeholderoriented approach may align with or even exceed regulatory requirements related to sustainability, social responsibility, and corporate governance. By staying ahead of regulatory trends, the organization can mitigate compliance risks and demonstrate leadership in its industry. 8.Measuring Impact and Accountability: Sustainable organizations often establish key performance indicators (KPIs) and metrics to track their impact across environmental, social, and governance dimensions. Regular reporting on these metrics enhances transparency and accountability to stakeholders, fostering trust and credibility. Overall, the transition from a shareholder to a stakeholder orientation in a sustainable organization represents a paradigm shift toward more inclusive, responsible, and resilient business practices. It acknowledges that the success of the organization is intrinsically linked to the well-being of all its stakeholders and the wider society in which it operates. (callaghan, 2015) To navigate the dynamic business context and evolving risks, organizations must adopt a proactive approach to risk management. This involves: 1.Risk Assessment: Conducting comprehensive risk assessments to understand the nature, likelihood, and potential impact of various risks on the business. 2. Agility and Flexibility: Building organizational agility and flexibility to adapt quickly to changing circumstances, such as by fostering innovation, streamlining processes, and empowering employees to make informed decisions. 3.Collaboration and Communication: Facilitating open communication and collaboration across different functions and levels of the organization to ensure that risks are identified and addressed effectively. 4.Compliance and Governance: Ensuring compliance with relevant regulations and industry standards while maintaining strong governance structures to mitigate legal, regulatory, and reputational risks. To navigate these evolving risks, businesses need to adopt a proactive and adaptive approach to risk management. This may involve conducting regular risk assessments, staying informed about relevant developments in the business environment, implementing effective risk mitigation strategies, and fostering a culture of resilience and innovation within the organization. Additionally, businesses can leverage technologies such as data analytics, artificial intelligence, and predictive modelling to anticipate and manage risks more effectively in a dynamic and evolving business context. CONTEXT AS OPPORTUNITIES: SHARED VALUE AND INCLUSIVE BUSINESS This refers to a strategic approach where businesses aim to create value for themselves while simultaneously addressing societal challenges and creating opportunities for all stakeholders, including marginalized groups. This concept involves leveraging the specific context in which a business operates-such as the local environment, culture, and socio-economic factors-to create sustainable business models that benefit both the company and society at large. Shared value: refers to the idea that economic value creation for a business can be closely tied to addressing social and environmental needs. Instead of viewing social responsibility as a separate aspect of business, shared value suggests that businesses can find competitive advantages and long-term success by identifying and addressing societal needs through their core business activities. Similarly, inclusive business: refers to business models that intentionally integrate low-income or marginalized communities into their value chains as suppliers, distributors, employees, or consumers. Inclusive business models aim to create opportunities for these communities while also generating profits for the business (Amos davis Hamannn & Louw &, 2015). By viewing the broader context as opportunities rather than constraints, businesses can innovate and develop strategies that not only drive financial performance but also contribute positively to society. This approach often involves collaboration with governments, non-profit organizations, and other stakeholders to address systemic challenges and create sustainable solutions. Ultimately, businesses that adopt shared value and inclusive business practices can create more resilient and prosperous societies while also strengthening their own competitiveness in the long run. THE PROCESS OF EMBEDDING CONTEXT IN STRATEGY • • A strategy can be defined as a plan that focuses upon the achievement of a predefined objectives constrained by inherent uncertainty. Embedding a contextual approach is of prime importance for any strategic planning. THERE ARE 4 STEPS OF EMBEDDING CONTEXT INTO STRATEGY. • • • • STEP 1 – determining and evaluating socio-ecological factors and their respective thresholds, the level at which the organization’s immunity becomes vulnerable. STEP 2 – determining the focus areas where the organization has the strongest influence. It involves the recognition and understanding of principal socio-ecological trends with respect to their associated thresholds to determine the degree of impact the organization’s activities have on the threshold and therefore, ranking the same in the order of priority such that the degree of influence can be enhanced post-recognition. STEP 3 – it is to understand the degree of change needed to adhere to the threshold and motivate others to commit to the same. STEP 4 – it is the commitment to the achievement and allocation of the change that was identified in the third step. Performance is tracked and analyzed by using trajectory targets as comparison parameters. WHAT IS THE ROLE OF EMBEDDING LOCAL CONTEXT IN STARTEGY • Micro-level factors of local context play the role of setting the preconditions for product development and determining the extant of productivity that can be achieved in the local context. The strategic implications that must be considered at the local level when applying a global brand include brand identity. • Business’s new strategies guide helps companies respond to the growing call for businesses to articulate their purpose and shift the global economy towards the reduction of inequality, a rapid climate transition, the preservation of biodiversity, and the elimination of waste. FOUR STEPS FOR DEVELOPING CONTEXTUAL STARTEGIES AND GOALS • Acknowledge – the need to operate within global, regional, and local socio-ecological thresholds. • • • Transparently – understanding and priorities a set of focus areas in relation to key socio-ecological trends at the global, regional, and local level. Set strategy and goals by transparently articulating the current performance gap and portion of this gap the business will address. Transparently tract performance against realistic trajectory targets. MEASURING AND REPORTING ON PROGRESS. There are 6 steps a business can measure progress namely as follows❖ Establish a SMART goal. ❖ Set a deadline. ❖ Break your larger goal down into smaller goals. ❖ Create a compelling scoreboard to track progress. ❖ Measure and Review progress regularly. HOW TO CREATE A PROGRESS REPORT IN 5 SIMPLE STEPS ❖ Step 1 – clarify goals and timeline, you firstly need to briefly explain the project to give context to the rest of the report. ❖ Step 2 – consider the stakeholders. ❖ Step 3 – share recent updates. ❖ Step 4 – identify drivers and blockers. ❖ Step 5 – list the next steps. You can monitor progress using both qualitative and quantitative methods. Quantitative project tracking methods look at numerical metrics such as costs, time, and other milestones. Qualitative methods, on the other hand, use survey data and regular team meetings to track progress. CONCLUSION This chapter covered organisational purpose and context as vital elements of strategy. To identify strategic objectives and priorities, we need to define and agree on the purpose of our organisation. To define our objectives and corresponding targets, we need to understand and respond to the changing context in which we are operating, we are now better able to design and implement strategy that shifts from short-term returns focus for shareholders to longer-term value creation for a range of stakeholders. References Amos davis Hamannn, J. v. R. C. N. P. V. & Louw &, V., 2015. Strategic Management. fourth ed. Siuthern Africa: Janine Leodolf. Anon., n.d. In: s.l.:s.n. Anon., n.d. In: s.l.:s.n. callaghan, a. d. h. j. v. r., 2015. strategic management. forth ed. south africa: janine leofolff. hamann, a. d. & wendy , P., 2015. THE PURPOSE AND CONTEXT OF BUSINESS:KEY ELEMENTS OF SUSTAINABLE ORGANISATION. In: W. PRIILAID, ed. STRATEGIC MANAGEMENT. SOUTH AFROCA: jANINE LOEDOLFF, p. 596.