Strategic Management
Purpose, shareholder value,
and stakeholders
Prof.Dr. E.Vatchkova
Contents
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Identifying stakeholders
The political power in the organization
Sources of power
Stakeholder mapping
Power/dynamism matrix
Power/interest matrix
Conflicts of expectations
Managerial values
Ethical issues
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 take
place
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 following
certain courses of action
The organization is a
political arena
Source of power within the
organization
Hierarchy (formal)
Influence (informal)
Control of strategic resources
Possession 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 implementation
Possession of knowledge (skills)
Through internal links
Indicators of power
Internal stakeholders
External stakeholders
1. Status
2. Claim on resources
1. Status
2. Resource
dependence
3. Negotiating
arrangements
4. Symbols
3. Representation
4. 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
Power /dynamism matrix
High
A
Low
Few
problems
Predictability
Low
B
Unpredictable but
manageable
Power
High
C
Powerful
but
predictable
D
Greatest danger or
opportunities
Adapted from Mendelow, 1999
Power / interest matrix
Level of interest
Low
Low
High
A
Minimal
effort
B
Keep
informed
C
Keep
satisfied
D
Key players
Power
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
Stakeholders expectations(2)
Managers
salaries and bonuses
proxy payments
responsibility
challenge
working for a well known and
prestigious company
Stakeholders expectations(3)
Employees
wages
holidays
job satisfaction
working conditions
security
Stakeholders expectations(4)
Consumers
desirable and quality products
competitive prices
new products at appropriate time
Stakeholders expectations(5)
Distributors
on time and reliable deliveries
Suppliers
constant orders
payment on time
Financers
interest payments
loan repayments
Stakeholders expectations(6)
Government
payment of taxes
provision of employment
contribution to the nation’s exports
Society in general
socially responsible actions
Common conflicts of
expectations
Growth – profitability
Cost efficiency – jobs
Volume – quality
Savings in one SBU –increased spending
in elsewhere
Division’s belonging to two organizational
fields
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 are
perceived, thereby influencing interpersonal
relationships
The decisions and problem solutions
The perception of situations
The criteria for ethical behavior
The acceptation or resistance to organizational
goals
The ways to achieve the success
Types of values
Theoretical – order, system, logic
Economic – usefulness and practicability
Aesthetic – art and beauty
Social – people and their welfare
Political – power over people and things
Religious – unity and harmony
The political and cultural aspect
of the organization
1.Whom the organization does actually
serve?
The concept of stakeholders
2. Which purposes an organization should
fulfill?
Ethical considerations
3. Which purposes are actually prioritized?
The cultural concepts
Some questions of CSR
Internal aspects
Employee welfare
Working conditions
Job design
Intellectual property
J&S,02
External aspects
Green issues
Products
Markets and
marketing
Suppliers
Employment
Community activity
The cultural web
Stories
Symbols
Routines and
rituals
Paradigm
Control
Power
Organizational
structures
Expectations and purposes model
Corporate governance
Business ethics
Organizational
Purposes
•Mission
•Objectives
Stakeholders
Cultural context
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
Key steps (initiatives) 2
(Cadbury-Schweppes plc,1966)
5. Focusing business strategies on the
search for profitable growth
6. Creating short- and long term incentive
plans for senior managers
7. Reviewing the value performance of all
the businesses
8. Delivering awareness and training
sessions on managing for value (top 300
executives worldwide)
Key steps (initiatives) 3
(Cadbury-Schweppes plc,1966)
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
Maturity (Cash cow)
Business risk: Medium
Financial risk can be: Medium
Funding by: Debt and equity
(retaining earnings)
Dividends: High
Launch (Question marks)
Business risk needs to be: Very
high
Financial risk: Very low
Funding by: Equity
(venture capital)
Dividends: Zero
Decline (dogs)
Business risk: Low
Financial risk can be: High
Funding by: Debt
Dividends: Total
THANK YOU !