Strategic management
Lecture 10.
The business ethics, social
responsibility, and
corporate culture
Process of strategic management
Expectations
and purposes
Resources,
competences
and capability
The
environment
Strategic
analysis
Bases of
strategic
choice
Strategic
choice
Strategy
implementation
Strategic
options
Strategy
evaluation
and selection
Managing
strategic
change
Organisation
structure
and
design
Resource
allocation
and
control
Expectations and Purposes
Expectations and Purposes Outline
1.
2.
3.
4.
5.
Identification of organisational
stakeholders
Stakeholder mapping
Corporate governance
Ethical issues
Culture
A Ford Pinto story
In the 1970’s more and more company developed small, simple, and cheap
car, for the young persons. The Ford Co. delayed, and try th catch up.
The management speed up the developments, and enters the market
with the Ford Pinto.
There were more than 500 thousend car on the market when a serious
accident happened: After driving away from the filling station two cra
collided, the Ford Pinto blow up, and three girl burned in the car. A
magazin investigated the case and realised, that there were more than
10 similar accidects, and there were 5 death
The company investigated the case and the analysis descovered:

Back bumper weak, and were too near to the fuel tank.

The engineeers know about the problems, however they were in delay

The problems could be solved by building into cars a 10 $ rubber plate

The management find that the car in this form met the existing safeti
regulations.

However the company was lobbiing against rising the safety standards.

The cost-benefit analysis describe, if they call back all the cars and
rebuild the car it would cost 11 m $.

If the company will change only the future’s cars, there will be about 10
death, and it would cost about 10 m $ for the company.

The decision were: not the change.
There were 2 millió cars, about 11 death, but this number were better than
the industrial avarege.
Four Possible Ethical Stances
Business ethics –
the societal expectations of organisations

Macro level
• Range from laissez faire to shapers of society
• Ethical stance of organisation in society
• Extent an organisation exceeds its minimum
obligations to stakeholders and society

Corporate social responsibility
• Specific ways to exceed minimum obligations
imposed by legislation/corporate governance
• Reconcile conflicting demands of stakeholders

Individual level
• Behaviour and actions of individuals within
organisations
The most important ethical concepts




Moral: Relating to, dealing with, or capable of
making the distinction between right and wrong
in conduct or character
Ethics: The system or code of morals of a
particular person, religion, group or profession.
Ethical: Conforming to moral standards,
conforming to the standards of conduct of a given
profession or group.
Ethical behaviour is what is accepted as „good”
and „right”, and as opposed to „bad” and „wrong”
in the context of governing moral code.
Four ways of rationalize ethical misconduct
• Convincing yourself that the behaviour is not
really illegal
• Convincing yourself that the behavoiur is really
everyone’s best interests
• Convincing yourself that nobody will ever find
out what you’ev done.
• Convincing yourself that the organization will
protect you.
ETHICAL GUIDELINES FOR MANAGERS
Obey the Law.
A basic tenet of social responsibility and mamagerial ethics is
obedience to the law, preferably both the letter and the spirit of the
law.
Tell the truth.
Telling the truth is important in building trust with relevant
stakeholders.
Show respect for people.
Stick to the „golden rule”.
"Do unto others as you would have them do unto you".
Above all, do not harm.
This principle - the first rule of medical ethics - is considered by
some writers to the bottom-line ethical consideration.
Practice participation, not paternalism.
This principle is aimed at learning about the needs of relevant
stakeholders, rather than deciding what is the best for them.
Always act when you have responsibility.
Managers have the responsibility of taking action whenever they
have the capacity or resources.
Continuum of social responsibility
1. Social obligation - corporate behavior at this level
conforms only to legal requirements and competitive
market pressures
2. Social responsibility - Corporate behavior at
this level is congruent with prevailing norms, values,
and expectations of society.
3. Social responsiveness - Corporate behavior at
this level takes preventive action to avoid adverse
social impacts from company activities and even
anticipates or takes the lead in future movement
beyond current expectations.
Corporate Social Responsibility
Internal Aspects
External Aspects
Employee welfare
Environmental issues
Working conditions
Products
Job design
Markets and marketing
Intellectual property
Suppliers
Employment
Community activity
Human rights
Some questions of corporate social responsibility
Some questions of corporate social responsibility
The most important areas of the corporate
social responsibility (1)
Ecology and Environmental Quality
Pollution cleanup and prevention
Dispersion of industry
Land use and beautification
Consumerism
Truth in lending, advertising, and business
Product warranty and service
Control of harmful products
Community needs
Use of expertise for local problems
Aid with health-care facilities and education
Service on voluntary groups
Governmental relations
Restrictions on lobbying
Control of business political action
The most important areas of the corporate social
responsibility (2)
Minorities and Disadvantages persons
Training of unemployed
Equal employment opportunity
Locating plants and offices in minority areas
Purchasing from minority businesses
Labor relations
Improved occupational health and safety
Provision of day-care centers
Options of flexible work hours
Stockholder relations
Public seats on the board of directors
Improved financial disclosure
Corporate philanthrophy
Financial support for arts and culture
Special scholarships and gifts to education
Financial support for assorted charities
Arguments for and againts of corporate social
responsibilities
Majon arguments againts social
responsibility
Major arguments for social
responsibility
Loss of business profits
Long-run profit for business
Increased business costs
Public image of business will
improve
Dilution of business purpose
Better environmant for everyone
Too mach socila power for
business
Public expectations support
business social responsibility
Lack of business accountability
to public
Business may avoid more
regulation
Corporate social responsibility
Corporate social responsibility (CSR, also called
corporate conscience, corporate citizenship, social
performance, or sustainable responsible business/
Responsible Business)[1] is a form of corporate selfregulation integrated into a business model. CSR policy
functions as a built-in, self-regulating mechanism whereby
a business monitors and ensures its active compliance with
the spirit of the law, ethical standards, and international
norms. The goal of CSR is to embrace responsibility for the
company's actions and encourage a positive impact through
its activities on the environment, consumers, employees,
communities, stakeholders and all other members of the
public sphere who may also be considered as stakeholders.
Organisational Culture
“The basic assumptions and beliefs that are
shared by members of an organisation, that
operate unconsciously and define in a basic
taken-for-granted fashion an organisation’s
view of itself and its environment”
Schein 1997
Organisational Culture
Corporate culture
Patterns of behaviour based on mutual
values and ways of thinking within a
certain corporate.
Each company has its own norms of
behaviour, which help its members to
understand what the organisation
represents.
Culture as mental programming
Hofstede’s idea of culture
• Every person has patterns of thinking,
feeling and potential acting
• Analogy to way computers are
programmed = mental programs or
software of the mind
Culture is the collective programming of the mind,
which distinguishes the members of one group of
people from an other!
Cultural Frames of Reference
Organisational Field



Organisations within a field have:
• Common business environment
• Common norms and values
• Shared set of assumptions
• A recipe of organizational purpose and shared
wisdom
Dangers:
• Institutionalised managers may be blinkered
• Transition between sectors difficult
Legitimacy:
• Need to meet expectations in terms of
assumptions, behaviours and strategies
Ch. HANDY’s classification of corporate culture
High
centralisation
Low
centralisation
High formalisation
Low formalisation
Role culture
Power culture
(Like a bank)
(Like az entrepreneur)
Task culture
Personality culture
(Like a softwaredevelopment team
(Like a lawyer’s
association)
HANDY’s classification of corporate cultures
Handy defines four major corporate cultures, in
which the organisational structure of the given culture
can be found.
Power or ‘club’ culture
Structure: like a web, with a spider
in the middle, a boss possessing
all power.
Zeus, directed by his instinct and caprice.
Most important is the relationship
with the central leader.
Important is the belief in individual performance.
Rating is based on result. Flexible structure
HANDY’s classification of corporate cultures
Role culture
Classical bureaucracy.
Like a Greek temple, works
according to logic and rationality.
Apollo, God of clear mind and practicality.
Function is dominated, not the individual.
Stability and predictability are important.
Rigid structure.
HANDY’s classification of corporate cultures
Task culture
Concentrates on successful fulfilment of
tasks. Like a matrix, power is in the
cutting points. Source of power are
the knowledge and expertise.
Pallas Athene, Goddess of wisdom,
nature and inventions.
Team culture, the result by joint effort
is important.
Objective oriented and flexible.
Hard to carry out control, short life.
HANDY’s classification of corporate cultures
Personality culture
Individuality oriented,
structure lives for the
realisation of the objectives
of the individuals.
Loose cooperation of highly
qualificated individuals.
Dionysus, autonomous
God of wine and ecstasy.
• Entreprenurial
culture is one that fosters positive
attitudes towards entrepreneurship
• Environment which combines social,political
and educational attributes.
• USA is the most entreprenurial culture of the world:
-always seeking sg. new
-achievement-orientation
-they worship innovation
-non-conformist
-entrepreneurship is a career option
HOFSTEDE: Impact of national culture on
corporate culture
low
Uncertainty
avoidance
high
Market
Family
GB, USA, Canada,
Denmark
India, Malaysia
Machine
Pyramid
Germany, Finland,
Austria
France, Japan,
Hungary, Greece
low
Power distance
high
Entrepreneurial culture: Hofstede’s dimensions
Individualism vs.
collectivism
This is the degree to which people prefer to act as individuals rather
than groups.? Me-culture
This level depends on the socio-culture of the country.
Individualism: West-Europe, USA
Collectivism: We -culture: Japan, China, South-America
Power distance
This is the degree of inequality among people that the community is
willing to accept.
Low power distance: informal and open relation, flat structures in
organisation. Example: UK, USA, Scandinavia
High power distance: formal relation, hierarchies: France, Russia
South America
Uncertainty
avoidance
Degree to which people prefer to avoid uncertainty and prefer
structured rather than unstructured situation.
Low uncertainty avoidance: prefer flexibility, high risk-taking,
ambiguity. Example: USA, Scandinavia
High uncertainty avoidance: prefer rules and procedures.
masculinity
This define quality of life issue. Masculine virtues are: assertiveness,
competition and success,social gender roles are distinct.
Feminine virtues: modesty, compromise and co-operation social
gender roles overlap. Important: warmth in personal relationships.
Country
PDI
IDV
MAS
UAI
Austria
11
55
79
70
Finland
France
Greece
Great Britain
Germany
Hungary
Italy
Japan
Sweden
USA
Venezuela
33
68
60
35
35
31
50
54
31
40
81
63
71
35
89
67
55
76
46
71
91
12
26
43
57
66
66
79
70
95
5
62
73
59
86
112
35
65
83
75
92
29
46
76
Competitive advantages of
different culture profiles
Power distance small
Acceptance of responsibility
Power distance large
Discipline
Collectivism
Employee commitment
Individualism
Management mobility
Femininity
Personal service, agriculture
Masculinity
Mass production, heavy
industry
Uncertainty avoidance weak
Basic innovations
Uncertainity avoidance
Strong precision
Relationship between
national and corporate
cultures
Major differences between national
and corporate cultures
• Values of national culture are
incorporated to our mind until age of 1012.
• We are not affected that deep by the
corporate culture.
National cultural features can be
observed more at work than corporate
culture.
The Cultural Web
The Cultural Web: some useful questions
Problems of conflicts of cultures at international
acqusitions and fusions
Conflicts of both national and corporate
cultures
1 Deculturisation – aggressive merging
2 Separation – both cultures live further
parallel
3 Assimilation – One culture dominates,
merging a slow and peaceful process
4 Integration – equal, balanced merging of
two cultures by creating a new one.

DEAL and KENNEDY
corporate structure categories

Basis of categorisation is rate of the risk
undertaken and the speed of the feed
back of success.
1 Tough guy, macho culture
High risk, prompt feed-back on success,
slogan: ‘seek for a hill and climb it’
Specification: pushy, extravagant persons
e.g. stock exchange, TV producers
DEAL and KENNEDY
corporate structure categories
2 ‘Work hard/ play hard’ culture
Slogan: ‘Seek for a need and satisfy it’.
Small risk, but prompt feed-back on
success.
Continuous team work.
Good consumer servise is a must in this
culture.
E.g. service companies, department
stores, computer dealers, etc.
DEAL and KENNEDY
corporate structure categories
3 ‘Bet-your-company’ culture
Big, long term risk, very slow feed-back.
Slow and sound analytical work
Slow rating of employees.
E.g. Investment banks, space research,
cancer research, etc.
DEAL and KENNEDY
corporate structure categories
4
‘process’ culture
Low risk, very slow feed-back on
success, if it exists at all.
Hard to detect the performance of the
employees.
Working process is highlighted.
E.g. bureaucratic banks, insurance
companies, governmental offices