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Organisational Context

Organisational Context. MBA405. The structure of MB460. Macro. PEST. Key factors. Industry analysis. Level of analysis. Focus of analysis. Market analysis. Segmentation. Micro. Scenario planning. Willis, 2003. MBA405 Introductory session. What is the purpose of an organisation?

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Organisational Context

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  1. Organisational Context MBA405

  2. The structure of MB460 Macro PEST Key factors Industry analysis Level of analysis Focus of analysis Market analysis Segmentation Micro Scenario planning Willis, 2003

  3. MBA405 Introductory session • What is the purpose of an organisation? • Different types of organisation • What is corporate governance? • Who are the organisation’s stakeholders? • What is an organisation’s ethical stance?

  4. Why do organisations exist? • To provide goods and services • To provide employment • To satisfy the expectations of different cohorts of people -internal and external claimants

  5. Should organisations beresponsible for ….? • Employee welfare • Medicare, assistance for dependents • Working conditions • Flexible working, sports facilities • Job design • Satisfaction rather than economic efficiency • Pollution • Consistently achieve standards • Advertising • Curtailing advertising for products that harm health • Employment • Positive discrimination of minorities • Community • Sponsoring events

  6. Influences on organisational purpose • Who should the organisation serve? CORPORATE GOVERNANCE • Who does the organisation serve? STAKEHOLDERS

  7. Which purposes should it fulfil? ETHICAL STANCE • Which purposes are prioritised? CULTURAL CONTEXT

  8. Business Ownership • Types of ownership • Plc’s and different types of shareholder • Individual-home v overseas • institutional • Trends in types of ownership in different countries • Divorce of ownership from control • Who runs the business? • Principal –agent problem • Agency costs to monitor managers behaviour

  9. Share Ownership 2008

  10. Share ownership • A total market capitalisation of £1,158.4 billion at the end of 2008. • UK private individuals owned £117.8 billion (ie. 10.2%). • UK insurance companies held £154.9 billion. (13.4%) • UK pension funds held £148.8 billion. (12.8%) • UK Banks held £40.6 billion (3.5%) • UK Unit trusts held £21.3 billion and Investment Trusts £22.1 billion. (3.7%) • Other UK financial institutions held £115.3 billion.(10.0%) • UK charities held £8.7 billion(0.8%) • Foreign investors held £481.1 billion (41.5%).

  11. Private Share Ownership • On decline since 1963 when individuals owned 54% of quoted shares • In 2007 22% of adults held stocks or shares, but 12% held only “privatised” or “demutualised” shares (www.uksa.org.uk) • The median value of share portfolios was about £5,000, and the median number of companies held was only 3. • There are about 10 million shareholders in the UK but the vast majority hold only a few shares, and many of those will have come from privatisations, demutualisations or from former employments. Such shares are rarely traded.

  12. Corporate Governance • Why has attention focussed on governance? • What is corporate governance? • How is the organisation governed? • Accountability and disclosure • Personal v collective expectations • Stakeholders and their power and interest • Ethical stances and its relationship with mission

  13. Corporate Governance • OECD(2004) “Corporate governance involves a set of relationships between a companys management ,its board, its shareholders and other stakeholders. Good governance should provide proper incentives for the Board to achieve objectives in the interests of company and its shareholders ) • Accountability and Disclosure • Two issues – split between CEO and Chairman/role of non-executive directors)

  14. Governance reports • Cadbury (1992) • Greenbury (1995)-executive pay • Hampel(1998) • Higgs (2003)-exec/non exec directors • Smith(2003)- audit committees • Turnbull (2005)-guidelines for directors

  15. Stakeholders An individual or group of individuals who can affect or be affected by the performance of an organisation (Freeman 1983)

  16. Examples of stakeholders • Customers • Shareholders • Employees • Managers • Suppliers • Competitors • Bankers • Local community • Government

  17. Stakeholder expectations • Goods at right time, price and quality • Dividends, increased share price • Reasonable wages, good working conditions, job security • Salary, perks • Payment on time, regular orders • Fair trading practices • Loans and interest repaid on time • Employment, wealth -Noise, pollution-lack of • Taxation, employment

  18. Stakeholder conflicts • Growth v profitability • Growth v control/independence • Cost cutting v jobs • Volume v specialisation

  19. Stakeholders Are all stakeholders equally important?

  20. Stakeholder Mapping Stakeholder Mapping is an important part of Strategy Formulation. It consists of making judgements on three issues: • How likely each stakeholder group is to impress its expectations on the firm. • The likely impact that stakeholder expectations will have on future strategies • Whether they have the means to do so - power of the stakeholder group. Can we see this being used in the case study ?

  21. Stakeholder Mapping -Power/Dynamism Matrix PREDICABILITY High Low A B Few Problems Unpredictable but Manageable C D Powerful but Greatest Danger or Predictable Opportunities Low High POWER

  22. Stakeholder Mapping -Power/Interest Matrix LEVEL OF INTEREST Low High A B Minimal Effort Keep Informed C D Keep Satisfied Key Players Low High POWER

  23. Short-term shareholder interests Longer-term shareholder interests Multiple stakeholder obligations Shaper of society Ethical stances

  24. Ethical stances • Short-term stakeholder interests • Longer -term stakeholder interests • Multiple stakeholder obligaations • Shaper of society

  25. WHAT BUSINESS ARE WE IN?- some implications.

  26. MANCHESTER UNITED (1) • Football club or global brand? • Illustrates the factors which shape ‘purpose’ • Is topical

  27. WHAT BUSINESS ARE WE IN?- some implications(1). BusinessClub Who do Shareholders ‘Members’ we serve? ‘Family’ Governors Board Committee Ethical Stance Shareholder Shaper of interests society Dominant Financial ‘Professional’ values Mission Secretive Evangelical statement Procedural Political

  28. MANCHESTER UNITED (2)- corporate governance • Is a plc appropriate? • Legal obligation to shareholders • What other choices are available?

  29. Figure 5.7 Four possible ethical stances Short-term shareholder interests Longer-term shareholder interests Multiple stakeholder obligations Shaper of society

  30. MANCHESTER UNITED (3)- ethical stance • What was the stance? • What is the stance? • What should be the stance?

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