Current Issues in Strategic Management

By:
Bal Ram Chapagain

May 3, 2018 1
 Current Issues in SM
 Strategic management is mainly concerned with
gaining and sustaining competitive advantage.
 Cost, quality, innovation and speed are the main
sources of competitive advantage.
 However, CSR, ethics and governance are also
gaining importance these days than ever before in
order to achieve & sustain competitive advantage.
 They are mainly helpful in getting stakeholder
support, gaining reputation and promoting
efficiency.
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 Concept of CSR
 Lack of agreement on what it really means.
 Philanthropy and CSR cannot be used
interchangeably.
 Contemporary definitions of CSR mainly focus on:
• Ethical conduct of business
• Fulfilling stakeholder needs
• Integrating economic, social & environmental
concerns in business decisions and actions
 However, “responsible earning” is more
important than “spending for social causes”.

May 3, 2018 © Bal Ram Chapagain. All Rights 3

Reserved.
 Some Widely Cited CSR Definitions
"A concept whereby companies integrate social and environmental
concerns in their business operations and in their interaction with
their stakeholders on a voluntary basis." European Commission

"CSR is a company’s commitment to operating in an economically,

socially and environmentally sustainable manner whilst balancing the
interests of diverse stakeholders." CSR Asia

"Corporate Social Responsibility is the continuing commitment by

business to behave ethically and contribute to economic development
while improving the quality of life of the workforce and their families
as well as of the local community and society at large." World
Business Council for Sustainable Development
May 3, 2018 © Bal Ram Chapagain. All Rights 4
Reserved.
Thus, CSR may be defined as the obligation of
business management to devise policies, make
decisions and take actions that protect and promote the
legitimate interests of different stakeholders along with
the interest of business itself.

May 3, 2018 © Bal Ram Chapagain. All Rights 5

Reserved.
 Benefits of CSR*
 Enhanced reputation
 Support from community, government & other
stakeholders
 Talent attraction & retention
 Customer attraction & loyalty
 Cost reduction
 Mitigation of business risks
 Easy access to capital
 Competitive advantage
 Profitability and stock price appreciation
----------------------------------------------------------------------
* Conditions apply
May 3, 2018 © Bal Ram Chapagain. All Rights 6
Reserved.
 Major Theoretical Perspectives on CSR

1. Friedman’s Shareholder Theory

2. Freeman’s Stakeholder Theory
3. Carroll’s CSR Pyramid
4. Porter & Kramer’s CSV Approach

May 3, 2018 © Bal Ram Chapagain. All Rights 7

Reserved.
 CSR vs. Window Dressing

November 5-6, 2017 8

 The Link between CSR and Competitive
Advantage

CSR Practices toward: • Reputation

• Employees • Stakeholder support
• Customers • Talent attraction, • Competitive
• Investors motivation & retention Advantage
• Community • Customer attraction & (Low Cost and/or
Differentiation
• Environment loyalty Advantages)
• Government • Cost & risk reduction
• Ethics etc. • Easy access to capital etc.

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 The Link between CSR and Competitive
Advantage
• However, the nature of CSR activities and the
CSR budget should be carefully designed.
• It should be aligned with business mission, vision,
values and strategies (e.g., coca-cola on water
conservation).
• Moreover, the law of diminishing returns may apply.
• Sometimes, failure to communicate CSR
performance may result in less benefit or no benefit
to business.
• For instance, if a bank runs financial literacy
program in the community where it operates, it can
increase its customer base while at the same time
community people can be protected from the
exploitation
May 3, 2018 of indigenous lenders. 10
 Concept of Business Ethics
 The term “ethics” has been coined from the Greek
word “Ethikos” which means character.
 Thus, when applied to business, this simply means
“business with character”.
 Specifically, business ethics is concerned with doing
the right things by business (or who represent it)
even when no one is looking/noticing/compelling.
 “Right” or “wrong” should be based on morality as
opposed to, for example, commercially, strategically
or financially.
 “Ethics” has become a buzzword in today’s business
world.
May 3, 2018 balram.chapagain@gmail.com 11
 Importance of Business Ethics
 Reputation
 Attract ethical consumers
 Mitigation of litigation & other business risks
 Gain stakeholder support
 Overcome regulatory pressures
 Sustain competitive advantage
 Enhanced quality of life of people (Physical: good
health, clean environment etc.; Social: good education,
harmonious society; Economic: secure job, standard of
living etc.; Psychological: satisfaction, security etc.)

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 Unethical Behavior
 Real Juice
 New Road “Gud-Pak”
 Nepalese Carpet Industry
 Enron
 Ncell??

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 Important Ethical Issues

“Should firms charge as high a price as the market

will bear?”

“Should firms deceive competitors in the face of

extreme competition in order to stay ahead of them?

 Legal requirements and long-run

consequences should be carefully analyzed in
order to give answers to these questions.
Ethical Dilemma: A Case Incident

You tender for a building contract. Knowing that one of your

competitors is devious, you invite him into your office for a
chat about business in general. You believe that while you
are out of the room your competitor will look at what is on
your desk. You have left a dummy tender there, quoting a
much higher figure than in your real tender. Your competitor
uses this sneak information to guide his tender. You later
tender for a lower sum, and get the contract.
Questions:
1.Who is (un)ethical?
2.Does your competitor have a legitimate ethical complaint?
3.What do you think will be the long-run consequences?
 Corporate Governance
• A manner by which companies are directed and
controlled.
• It is about promoting corporate fairness,
transparency, accountability and rule of law.
• In other words, 'good corporate governance' is simply
doing 'good business'.
• Good governance not only ensures the efficiency and
sustainability of business but also instrumental in
protecting the interests of other stakeholders.

May 3, 2018 16
 Corporate Governance Essentials
• Clear mission, vision, values, and code of conduct
• Clearly defined organization structure
• Independence, diligence, and appropriate size of BOD
• Independent and efficient auditing
• Compliance and risk management framework
• Effective monitoring of conflict of interest
• Senior management must ‘walk and talk’
• Business activities should be system driven
- Objectives, Budgets, and Procedures
- Information flow internally and to the external
stakeholders
May 3,- 2018
Effective evaluation & control systems
balram.chapagain@gmail.com 17
Which level is more responsible?
• Board level
• Senior management
• Day to day operations

May 3, 2018 balram.chapagain@gmail.com 18

Assessment of CG in Nepalese Organizations
• No clear mission, vision, values and strategies
• Organization structure & design not properly
matching with strategies
• Problem in BOD independence & qualification
particularly in government owned companies
• Inadequate risk management, auditing & control
frameworks
• Lack of vigorous interaction between BOD, CEO
and other managers
• Lack of transparency and accountability

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 Any Questions?

May 3, 2018 20
 Thank You!!
May 3, 2018 21