Challenges and contemporary themes

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Lecture 2

• Challenges and contemporary themes
• The Business vision and mission statements

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Topics

• Key industry success factors and performance
• Corporate governance
• Core values
• The vision statement
• The mission statement
• Stakeholders and inclusivity

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Some Terms of competitive analysis

• Key industry success factors services,
  attributes, competences, capabilities with the
  greatest bearing on success
• Competence knowledge, skills, behaviours,
  attitudes, capabilities
• Core competences something you do well relative
  to other internal activities
• Distinctive competence (competitive advantage)
  something that you do well relative to
  competitors
• Sustainable competitive advantage (SCA) a
  strategy unable to be duplicated or too costly to
  imitate

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Corporate Governance

• It is a framework about whom the organisation is
  there to serve and how the purpose and priority
  of an organisation should be decided.
• The role of corporate governance a strategic
  control perspective.
• It focuses on the need for both shareholders and
  their representatives (the board) to actively
  ensure that management fulfuills its overriding
  purpose of increasing long-term shareholder
  value.

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Corporate Governance

• Aim of the firm?
• Separation of ownership and management has given
  rise to a set of ideas of agency theory.
• Principal-Agent theory relationship between the
  principals (owners of the firm) and the agents
  who are paid by principals to perform a job on
  their behalf (management).
• Agency problem the goals of principals and
  agents conflict
• Agency cost sum of incentive costs, monitoring
  costs and individual financial losses incurred by
  principals to solve agency problem

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Corporate Governance

• Governance mechanisms to solve Principal-Agent
  conflict to ensure that managerial and
  shareholder interests are aligned.
• Internal governance control
• A committed and involved board of directors
• Shareholder activism (growing influence of
  institutional owners) e.g. Australian
  Shareholders Association (ASA)
• Managerial rewards and incentives
• External governance control
• Market power
• Auditors
• Regulatory body (ex. Sarbanes-Oxley Act 2002)

Source Dess, Lumpkin and Eisner (2006),
strategic management, pp.330-345.
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Role of board of directors

• Types of Board
• One-tire board
• Two-tires board
• Board members
• Insiders CEO, top-level managers
• Related outsiders not involved in day to day
  operation but have a relationship with the
  company
• Outsiders (independent director) individuals who
  are independent of the firm in terms of
  day-to-day operations and other relationships

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Role of board of directors

• Two choices of board influencing strategies
• Delegated to management stewardship role
• As independent monitors of an organisations
  activities on behalf of shareholders
• Engage with management (must concern the time and
  knowledge level of non-executive directors to
  perform their task)

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Role of board of directors

• Composition of the outside directors and
  involvement in the strategic decision making
  process affects the probability of financial
  distress ( Hambrick and dAveni 1992 Levitt
  1998)
• How to choose competent directors for companys
  board?
• Why do directors of board need to participate in
  the strategic decision making process?

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Core values

• An organisations belief system, which provide
  individual, group, and corporate social control
  over the types of activities that the
  organisation encourage.

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Vision

• Agreement on the basic vision for which the firm
  strives to achieve in the long run is critically
  important to the firms success.

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Vision
Vision without action is a daydream. Action
without vision is a nightmare. Japanese proverb

• What do we want to become?

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Vision
Clear Business Vision
ComprehensiveMission Statement
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Vision Statement

• Fremantle port
• To be valued by our customers and the community
  for our leadership and excellence.
• http//www.fremantleports.com.au/Planning/Strategi
  c_Plan_2007-2011_web.pdf

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Vision Statement Examples

• Vision of PSA Corporation
• From managing a world-class port, we shall grow
  into a world-class corporation with a network of
  ports, logistics and related businesses
  throughout the world. We shall be recognised
  everywhere for quality and value.

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Mission Statement
What is our business?

• A good mission statement defines the overall
  character of the organisation.
• Incorporating core values and stakeholder
  inclusivity, the mission statement provides
  organisational members with a general direction,
  i.e. the reason for existence.

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Mission Statements

• What kind of organisation are we and what is our
  purpose?
• What do we stand for and what are our beliefs and
  values?
• Who are our customers?
• What separates us from competitors?
• What is our long-term vision? What are we
  striving to become?

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Developing Vision Mission
Clear mission is needed before alternative
strategies can be formulated and implemented
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Developing Vision Mission
Participation from diverse managers is important
in developing the mission.
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Mission Statement Examples

• The Australian Maritime Colleges mission is the
  provision of the highest quality education,
  training and consulting, and the conduct of
  applied research of international distinction, to
  meet the needs of the maritime sector.

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ProductsServices
Markets
Customers

Technology
Mission Elements
Employees
Survival Growth Profit
Public Image
Philosophy
Self-Concept
David (2005) argues that an effective mission
statement needs to include these nine components.
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Components of Mission

• Components of mission and corresponding questions
  to be answered
• Customers
• Who are the firms customers?
• Products or services
• What are the firm's major products or services?

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Components of Mission

• Markets
• Geographically, where does the firm compete?
• Technology
• Is the firm technologically current?

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Components of Mission

• Concern for survival, growth, and profitability
  
• Is the firm committed to growth and financial
  soundness?
• Philosophy
• What are the basic beliefs, values, aspirations,
  and ethical priorities of the firm?

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Components of Mission

• Self-concept
• What is the firms distinctive competence or
  major competitive advantage?
• Concern for public image
• Is the firm responsive to social, community, and
  environmental concerns?
• Concern for employees
• Are employees a valuable asset of the firm?

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Evaluation of Mission Statement

• Mission components and its presentation
  guidelines are criteria for evaluation.
• Should the mission include this feature?
• Is this the best way to express this particular
  feature? Is there a better way?

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Presentation Guidelines of Mission Statement

• Clear and readable
• Challenging and motivating
• Believable and achievable
• Reasonably enduring

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Stakeholders

• Stakeholders the individuals and groups of
  persons who have a special stake or claim on the
  company.
• Employees
• Managers
• Shareholders
• Boards of directors
• Customers
• Suppliers
• Distributors
• Creditors
• Governments
• Unions
• Competitors
• Environmental groups
• The general public

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• The success of a port is not only determined
  by infrastructure, superstructure and related
  output performance, it is increasing being
  determined by the way the port manager succeeds
  in directing the interactions between
  stakeholders towards a common objective as
  described by the mission statement. (Henesey,
  Notteboom and Davidsson 2003)

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Source Henesey, Notteboom and Davidsson 2003
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Inclusivity (Stakeholder Management)

• A inclusive style management takes into
  consideration all stakeholders and builds
  competitive advantage.
• Hannon, Patton and Marlow (2000) argue that a
  critical issue for success is the ability to
  manage and develop a network of interdependent
  relationships with a wise and diverse range of
  stakeholders.
• Ex the change and transformation at Fremantle
  port with the CEO.
• Duffy (1999) noted the ability to develop a
  strategy, map out a vision and articulate it in
  manner so that the participant, staff, and port
  customers feel included.

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Stakeholder analysis

• Who are the stakeholders?
• What do they concern about the organisation or
  what are their influences on the organisation?
• Companys strengths and difficulties in managing
  stakeholders concerns and influences.

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TEMPLATE STAKEHOLDER ANALYSIS
Source modified from the template of stakeholder
analysis, http//www.pmc.gov.au/implementation/gui
de/docs/template_c.doc
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Importance of Stakeholder Analysis

• It is a base to write an organisations
  vision/mission/values.
• What else?

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Class Activity

• Conduct a stakeholder analysis for AMC.
• Refer to Royal Caribbean Cruises vision and
  mission statements,
• Do you think the vision statement is good? Why or
  why not?
• Evaluate the mission statement of the company.
• In your opinion, what are the three most
  important components that should be included when
  writing a mission statement? Why?