BUS608: Ethical and Strategic Management

1a. Explain the importance of strategy and ethics in business

• How do you think companies effectively implement ethical strategies?
• What are some ways companies implement and monitor their codes of ethics?
• How do you think functional strategies can support corporate strategies?

Strategy is hierarchical in that you'll have a corporate strategy, which is the firm's overarching strategy. The business strategy refers to the aggregated strategies of a single business firm or strategic business unit. Functional strategies are focused on a specific area, such as marketing or human resources, to help the company reach its goal.

To review, see Business Strategy, Overview of Business Ethics, and Why Study Ethics.

1b. Explain the drivers, such as innovation and markets, that assist in determining business strategy

• Think of a few of your favorite products. What type of global business strategy do they use?
• How would an organization utilize diffusion of innovation concepts to develop its strategy?
• In what ways might a company analyze the elements of strategy: suitability, feasibility, and acceptability?

This section focused on the three main drivers of strategy: markets, diversification, and innovation. Understanding the types of markets, such as monopolies and pure competition, is important to determine a strategy.

Diversification is "not putting all your eggs in one basket". In business, this means developing a strategy that allows you to be diversified, which lessens the risk to the business if one or more business units end up not being as successful as you'd hoped. One way companies diversify is to develop a global strategy, which consists of export, standardization, transnational, and multi-domestic strategies. An export strategy is when a company focuses on its domestic operations but sells some products or services to other countries. A standardization strategy is one where a company treats the whole world as one market. That is, they assume one product can meet the needs of everyone, everywhere, so they do not change the product or service when selling to different markets. A multi-domestic strategy is one where products and services are customized based on the specific conditions of the countries in which they operate. A transnational strategy combines standardization and multi-domestic strategies. This strategy might be useful when a company faces significant cost pressure from competitors but must also offer products and services that meet local customer needs.

Innovation is also important to consider when developing a strategy. For example, how the organization develops and introduces new products to the market and the speed at which they do so. In Figure 1, the purple line in the graph shows the percentage of the market that buys new products at each stage of product launch. From the graph, we can see that there are a small number of innovators and a large number of early and late majority adopters. The yellow line on the graph shows the cumulative market share gained. In other words, the yellow line shows the total market share gained at the end of each phase by adding the shares from each previous phase.

Figure 1: Diffusion of ideas

Finally, understanding the framework in which strategic decisions are made is important too. This includes suitability, feasibility, and acceptability. Suitability refers to the overall rationale of the strategy, feasibility looks at the resources necessary to actually implement the strategy, and acceptability concerns itself with meeting the expectations of stakeholders with the strategy.

To review, see Sustained Innovation, Impact of Diversification on Risk and Return, Competition in Market Structure, and Global Business Strategy.

1c. Analyze the importance of leadership and integrity when formulating business strategy

• What behaviors do you think are important to be a servant leader?
• How does servant leadership impact the business strategy?
• What types of ethical models are most important in business?

This section addresses ethical leadership models and explains the principles necessary to apply integrity to business dealings.

Leaders do many things to ensure they are being ethical. Some of the characteristics of ethical behavior for a leader include showing respect for others, treating all stakeholders fairly, building community, and working toward a common good. Honesty, of course, is important in all business (and personal) dealings. Another way leaders engage in ethical dealings is by employing servant leadership. A servant leadership approach means placing service before self-interest, listening to others, inspiring through trust, and working toward feasible goals.

Organizational culture is also important to note when it comes to ethics and strategy development. Culture is defined as the shared values and meanings members hold in common. This concept is important because culture plays an important role in all dealings, and by focusing on shared values, the company can be more ethical.

Also, consider the various ethical models that can be applied to leadership and ethics, such as virtue ethics, a utilitarian approach, universalism, justice, and rights approaches.

To review, see Ethics at the Organizational Level and Ethical Principles and Responsible Decision-Making.

1d. Explain how companies measure ethics and analyze social responsibility in organizations

• What is the difference between shareholders and stakeholders?
• How can companies create goodwill for stakeholders in their organization?
• Can you think of examples of companies that have behaved unethically, resulting in serious profitability issues?

Now, we will address the meaning of social responsibility in business and discuss how this ties to ethical behavior. Something that many companies do to ensure they are meeting the needs of stakeholders is an analysis of stakeholders, stakeholder interests and goals, and the impact of potential decisions on each stakeholder.

As you review the materials in this section, consider that stakeholders benefit directly from managers' ethical conduct, which in turn increases goodwill, and normally equals higher profit. In addition to this idea, the idea that businesses should think long-term and operate for long-term gain rather than short-term gain is important.

To review, see Ethics and Profitability.

Unit 1 Vocabulary

Be sure you understand these terms as you study for the final exam. Try to think of the reason why each term is included.

• business ethics
• business strategy
• corporate strategy
• diversification
• ethics
• functional strategy
• servant leadership
• strategy