Midterm Review 2 - Management
1. Chapter 5: The Business Environment
2. Chapter 6: Ethics and Corporate Social Responsibility
3. Chapter 7: Planning, Business Strategy
4. Chapter 8 (and 9): Organizing and Human Resource Management
Chapter 5: The Business Environment
Canada and Its Economic System
o Canada’s abundance of natural resources, skilled labour force and sophisticated technology-
based business have enabled the economy to grow.
o G7/8: A "quasi-organization" comprising the world's major fully developed economies. The
G7 consists of (JUBICGF) the US, Japan, Germany, Britain, France, Italy, and Canada. In 2006,
the G7 transitioned to the G7/8 with the inclusion of Russia into its membership. The G7/8
countries meet at least once annually to discuss major economic, political, and societal
issues challenging the global marketplace. Recently, China has shown an great amount of
economic development and is now attending at least part or all of the summit meetings.
Contributing Factors to Economic Development:
1. Political Stability
2. Manageable levels of National Debt, Established Factors of Production, and National
Monetary Policy and Banking System.
3. Sufficient Levels of Investment, Low Inflation, Absence of Corruption, Effective Legal
System, and Comparative Advantage.
o Comparative Advantage: Refers to the ability of a country to produce or supply goods or
services at a lower cost than other countries or to possess resources or unique services that are
o Foreign Direct Investment (FDI): Occurs when a company or individual from one country makes
an investment into a business within another country. This investment can reflect the physical
ownership of productive assets or the purchase of a significant interest in the operations of a
o The Underlying Economic Model (Canadian Mixed Economic System) - for an economic system
to develop and grow and encourage and foster a climate that promotes and rewards economic
risk, a balanced relationship also needs to be established among 3 fundamental market
1. The law of supply and demand
2. Allowance for private ownership, entrepreneurship, and wealth creation.
3. Extent of government involvement in influencing economic activity and direction.
1. The Law of Supply & Demand: Refers to the ability of the market, independent of external
influences, to determine the price for which a product or service will be bought and sold.
1 The number of purchasers who are willing to pay for a product or service at various
price points; generally as prices increase, demand decreases.
1. Inelastic Demand: Movement in price which does not result in significant
changes in demand (i.e.: gas).
2. Elastic Demand: Quantity demanded does change significantly due to a
change in price (i.e.: electronic reader).
Supply: Reflects how much of a product or service producers are willing to provide
the market at various price points; as prices increase, supply usually increases.
Price Equilibrium: The point at which the supply curve intersects the demand curve;
no surplus or shortages of good.
2. Allowance for Private Ownership, Entrepreneurship, and Wealth Creation: Refers to the
openness of the market to support, encourage, and promote the concepts of private
enterprise, personal ownership, entrepreneurship, and wealth creation. To a varying degree,
economies around the world allow individuals and corporations these rights. Some
economies, such as the United States and Canada, fully support these concepts in a climate
of risk versus return. Developing economies such as , China and India are allowing greater
access to these fundamentals, whereas others, such as North Korea, are less willing to
provide strong support of these capitalistic principles.
3. GOVERNMENT INVOLVEMENT IN INFLUENCING ECONOMIC ACTIVITY AND DIRECTION:
Government involvement in the economy relates to the varying roles government can play
within ongoing day-to-day economic activities. Government can act as a customer via the
purchasing of goods and services; as a regulator, restricting access or defining competitive
protocols within particular economic sectors; as a manager via powers granted to Crown
organizations, such as the Bank of Canada; as a taxation agent; as an economic stimulation
agent via grant and subsidy programs, infrastructure development programs, and specific
industry or company bailout programs; and as a competitor (providing services in direct
competition for private-sector businesses), to name a few. These three market composition
principles will come together to provide the overall framework for economic activity within
a given nation or economy.
Open System: Refers to an economic system that adheres to the principles of
economic freedom: the law of supply and demand, full and open access to the
principles of private ownership, entrepreneurship, and wealth creation, and an
absence of regulation on the part of government.
Controlled System: Refers to an economic system where the fundamentals of the
law of supply and demand, private ownership, entrepreneurship, and wealth creation
are largely restricted or absent, and the government fully controls the economic
direction and activity.
Mixed Economic System: Refers to an economic system that contains components
of both open and controlled systems. It includes the core principles of economic
freedom, with some degree of centralized economic planning and government
regulation and involvement.
2 The Economy in Simple Terms - This productivity and its resulting economic activity will be
predicated on the basis of four fundamental factors (ESCC):
1. Expenditures: the purchases you make in support of your day-to-day economic activity that are
deemed to be of value in meeting sustenance needs and in improving your overall quality of life.
Clothing, food, housing, and transportation would be examples of such expenditures.
2. Savings: dollars you set aside today that will support economic activity and wealth creation in/for the
future. Placing money in an RRSP (Registered Retirement Savings Plan) or purchasing GICs (guaranteed
investment certificates) are examples. Your savings are then lent to others with the intent of stimulating
their economic activity in the hopes of enhancing their wealth and private ownership levels.
3. Capital asset investments: investments you are making today to further expand your capacity to
conduct and expand your productivity and overall economic capacity. If your business requires an
additional truck in order to expand, the purchase of this truck would be considered an investment
focused on expanding your productivity and economic activity. Investments in real estate with the
purpose of building future equity via wealth appreciation are an additional example.
4. Credit: the borrowing of dollars to support expenditures or investments being made. You may have
needed to borrow money to purchase the above-mentioned truck, which you deem necessary to expand
your business’s capacity and capabilities, or to finance the real estate purchase you made.
4 PILLARS OF ECONOMIC ACTIVITY AND GROWTH:
ECONOMIC ACTIVITY = EXPENDITURES + SAVINGS + INVESTMENT + CREDIT
GDP (Gross Domestic Product): Refers to the total market value of the goods and services (economic
output) a nation produces domestically over a period of time (generally one calendar year). Economists
track the movement of GDP (upward or downward) over a period of time to determine whether an
economy is growing or contracting.
Examples of factors that contribute to economic growth and, therefore, the total value for GDP
1. Goods and services produced and purchased domestically for consumption
2. Business investment within the economy
3. Goods produced for export purposes
4. Government spending
o Recession: Refers to a period of time that marks a contraction in the overall economic activity
within an economy. A recession is typically believed to occur when an economy experiences two
or more quarters of negative GDP movement.
The Movement of Economic Activity Within an Economy can be Sequenced as Follows:
1. Growth in the economy via its GDP driver(s) (mainly consumer spending in the United
States and Canada) results in an increase in corporate revenue and profits and
government tax revenue (increased tax revenue, GST revenue, provincial tax revenue,
3 2. As a result of this increase in profits and tax revenue, both business and government will
possess increased capacity to invest in new infrastructure and new product/service
offerings for consumers. These investments expand the economic infrastructure to meet
the growing needs of the economy and the people within it, and add further stimulation
to economic activity.
3. Increased business activity requires more employees, resulting in an expansion of
4. With an increase in the need for workers, employers are forced to pay higher wages to
attract and retain employees. These higher wages result in additional dollars for workers
(consumers) to spend and, therefore, contribute to economic growth (via further spending
and/or expanded credit capabilities). As long as this real wage growth outpaces
inflationary pressures, true economic growth will occur.
o Chartered Banks: Are financial institutions regulated under the Canada Bank Act. Their primary
responsibility is to bring together borrowers and lenders by accepting deposits and lending out
money—all in a manner that safeguards the interests of their customers.
o Inflation: Refers to a rise in the level of prices of goods and services within an economy over a
period of time.
Trends Impacting the Canadian Market:
2. Geographic clustering
3. Currency exchange rate impact
4. Branch market impact
5. Sustainability and green initiatives
6. Aging workforce
7. Immigration and multi-culturalism
8. Long-term competitiveness
9. Small business emphasis
o Geographic Clustering: Occurs when regional economies develop into what are considered
distinct from one another and separated by significant geographic space where
interdependency is minimized.
o Currency Exchange Rate: The overall appreciation in the value of the Canadian dollar, when
benchmarked against the U.S. dollar, has both positive and negative effects for the Canadian
4 economy. On the positive side, the strength of the Canadian dollar has assisted in reducing the
price of goods and ser-vices being imported into the country from other countries. It has also
made trips to the United States less expensive for Canadians.
Parity: Means being equal or equivalent to; specifically, the value of one currency being equal to
that of another.
o Bench Marketing Impact: Although Canada is a $1-trillion-plus economy—PPP (purchasing
power parity)—the overall size of our economy is small when compared to other countries. This
includes both fully developed economies, such as the U.S. ($14-trillion-plus), and developing
economies, such as the People’s Republic of China ($6.91 trillion PPP), and India ($2.81 trillion
PPP). In addition, with such strong demand for our natural resources, energy, and commodity-
based goods and services, many global organizations have looked to actively purchase Canadian-
o PPP (Purchasing Power Parity): A measure that takes into account the relative cost of
living and the inflation rates of each country, and adjusts the total value of economic
o Hostile Takeover: Refers to an attempt by a company to take over another company
whose management and board of directors are unwilling to agree to the merger or
o Sustainability & Green Incentives: Sustainability and green initiatives will have an increasing
emphasis across the business spectrum. Companies will seek to achieve both market positioning
advantages and cost advantages through the execution of green-based strategies as part of their
overall business plan. This will include an increased emphasis on green products, more
environmentally friendly packaging, reduced carbon emissions, and greater sensitivity to the use
of finite resources in the development, production, and distribution of goods and services to the
global community at large. An example of this is Walmart Canada’s new Walmart HE stores.
Designed to reduce energy consumption by 30 percent, HE stores are projected to deliver, for
Walmart, $25 million in energy savings between 2009 and 2014 when compared to stores built
in 2005. Walmart will achieve these savings by using initiatives such as rerouting waste energy
from refrigerators to help heat stores, reduced lighting costs, and modifying roofing systems to
reflect light away from the building thus reducing summer cooling costs. Walmart Canada’s
long-term focus is the pursuit of three sustainability goals globally: (1) to produce zero waste, (2)
to operate with 100 percent renewable energy, and (3) to make available environmentally
o Aging Workforce, Immigration and Multi-Culturalism: Similar to many other fully developed
economies, Canada’s workforce is aging. As an example, in March 2011 the Petroleum Human
Resources Council of Canada issued a report that indicated Canada’s aging workforce is poised
to impact the employment needs of Canada’s energy sector. The report indicates that over 30
percent of this workforce is expected to retire within the next decade, resulting in a need to hire
and train workers. As baby boomers slide into retirement, analysts are becoming increasingly
concerned about intellectual capital shortages in fields such as information technology, health
5 care, education, and skilled trades in a number of market sectors, including the petroleum
sector as noted above. With an aging population and one of the lowest birth rates of any fully
developed country, Canada’s strategy for replacing retiring workers and for continuing to grow
our economic base is closely tied to immigration. The need for skilled and well-educated
workers will continue to rise, resulting in our need to import such skills due to a shortage
domestically. Reliance on immigration brings both challenges and opportunities. The challenges
are focused on ensuring that immigrants in Canada find a country that is welcoming to them and
respectful of their ethnic backgrounds and traditions. Assimilation into society in a manner that
enables them to actively contribute to social and cultural growth is a key to ensuring that
Canada remains a preferred choice for the highly technical employee base that a knowledge-
based economy will need. Recognition of skill and degrees earned abroad will be a fundamental
component of this process in order to ensure that upon their arrival to Canada immigrants are
able to positively contribute to Canadian society with minimal barriers. Having said this, a
fundamental requirement of this assimilation process will be the challenge of ensuring that this
immigrant population possesses, or quickly develops, the required language and critical thinking
competency skills necessary for functioning in today’s highly technical marketplace. With
immigration and multi-culturalism comes the emergence of new ethnic markets that represent
business opportunities for the delivery of goods and services to these growing market segments.
o Long-Term Competivness: With the Canadian dollar expected to remain strong against the U.S.
dollar for the foresee- able future, and the rise of the developing economies of Asia, Eastern
Europe, and South America, Canada will be challenged to maintain its competitive advantages in
the market- place. As one of the world’s largest exporters of natural resources, commodities,
and energy, these market segments should continue to grow and enable sections of the country
to realize ongoing GDP growth. For other parts of Canada, the drive to retain competitive
advantages may not be so easy. The challenge to improve productivity levels, the increased cost
base associated with our strong currency, and the ability of businesses within developing
countries to operate with lower overall costs (largely due to savings in the labour sector) mean
that Canadian manufacturers and the economy as a whole will need a shift in emphasis to
o Small Business Emphasis : Although our larger corporations (e.g., Royal Bank, Manulife,
Bombardier, Research In Motion, GM of Canada) tend to dominate the business headlines, it is
small business that makes up the most significant portion of the fabric of our marketplace.
Companies in Canada that have more than 500 employees make up just 0.1 percent of Canadian
businesses. Businesses that are largely owned and operated by sole proprietors and possess no
employees make up over 56 percent of our country’s businesses. In fact, businesses with fewer
than 20 employees represent over 90 percent of our approximately 2.4 million business
establishments.20 Entrepreneurship continues to drive small business creation in Canada and
this trend is not anticipated to subside going forward. Domestic ethnic market development,
global niche market opportunities, and specialty goods and services offerings are just a few
examples of where continuous small business growth will be driven.
o Globalization: Refers to the growing interconnectivity of the world and the heightened
interdependence we are seeing among its various economic regions. The advent of social
6 networking tools—Facebook and Twitter, for example—has enabled us to transmit information
to as many as 500 million people across the globe with simply the tap of a finger. The Internet
has enabled the development of business models that are able to reach potential buyers with
few boundaries or restrictions. As the global economy becomes more connected and emerging
economies—such as the BRIC countries (Brazil, Russia, India, China) and CIVETS countries
(Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa)—continue to develop their
domestic and export-based economies, new business opportunities will arise as never before. At
the same time, so will increased competitive pressures.
o Managing in Challenging Times - In order to fully understand where the market is going,
managers look to generally answer three fundamental questions:
1. What are the general indicators saying about the current economy and about the current
relationships among the key variables governing our mixed economic system (law of supply and
demand; support for the concepts of entrepreneurship, wealth creation, and private
2. What broad-level changes (political, economic, social, technological, environmental, and
legal) are occurring within the sectors of the economy that directly impact my organization’s
future growth and market position?
3. What specific current competitive actions may disrupt the way in which business is done
within my organization’s particular market sector?
The Primary Economic Indicators:
o Unemployment rate
o Inflation Rate
o Consumer Price Index (CPI)
o New Housing Starts
o Manufacturing Inventory
o Consumer Confidence Index
o Price per Barrel of Crude Oil
o Stock Market Indexes (TSX, S&P 500, Dow Jones)
o Currency Exchange Rate
o Monthly Retail Sales
o Industry-Specific Indexes
o PESTEL Analysis: Refers to a macro-level assessment of the political, economic, social,
technology, environmental, and legal trends that can or will impact the markets within
which an organization competes.
o Protectionism - Is the outcome of the intent of economic policies that are put in place
to protect or improve the competitiveness of domestic industries via impeding or
restricting the openness of a market or markets to foreign competitors through the use
7 of tariffs, trade restrictions, quotas, artificial control of currency values, or other related
MANAGERS LOOK FOR TRENDS IN:
o Government intervention or regulation such as protectionism
o Demographic and cultural shifts as well as behavioural changes
o Changes to laws that could impact overall business risk
o Changes in environmental compliance regulations
o Speed and direction of technology shifts that could render products, services and/or
Managers must constantly look to see where and how their markets are changing in light
of competitive influences.
Legal and Regulatory Environment
o Part of the decision in starting a new business is affected by how governments work with
Freedom of ownership
Elimination of corruption
o Governments can do a lot to lessen the risk of starting and running a business through laws.
I.E.: Competition Act, Canada Small Business Financing Act, the Consumer Packaging
and Labeling Act.
o Technological Environment:
The use and application of technology affects productivity.
Productivity: Is the amount of output you generate given the amount of input.
The more you can produce in any given period of time, the more money you
are worth to companies (I.E.: the girl who saved a company by analyzing
their profitability and growth; she became the CEO).
Effectiveness: Producing the desired results.
Efficiency: Producing goods and services using the least amount of
E-Business (Business-2-Business – B2B): Refers to a wide range of business activates
on the web from simple postings of product photos to B2B marketplaces.
E-Commerce (Business-2-Consumers – B2C): Refers to websites that allow
transactions so that customers can buy products online.
o Competitive Environment: All environments are important, but the degree to which you
need to deal with them depends on whether you do or do not have competition.
Customer service exceeds customer expectations
Employee service: Responsibility, authority, freedom, training, empowerment.
Concern for the environment.
o Social Environment
Demography: The statistical study of the human population with regard to its size,
density, and other characteristics such as age, race, gender income etc…
The Aging Population - More people are living due to:
o Better medical knowledge and technology
o Better health habits such as:
A reduction in the number of people who smoke
Canada has a strong multicultural population
Understanding Competitive Models: Understanding the type of competitive environment a
business is facing is fundamental to creating a strategy for competing and understanding where and
how to allocate resources in support of product/service positioning and overall marketing effort.
o The 4 Key Competitive Models:
1. PURELY COMPETITIVE MARKETS - Markets characterized by a number of similar
(undifferentiated) products or services, the absence of a dominant market
leader, and few barriers to entry (i.e. Agriculture)
2. MONOPOLISTIC MARKETS - Markets that possess a number of different
suppliers or products and services, but the nature of the product or service,
along with the marketing effort initiated by businesses within the sector, has
enabled true differentiation to set in (i.e. Cell phones)
3. OLIGOPOLY-BASED MARKETS - Markets that contain a small number of
suppliers that control a large percentage of market share within the market, and
that compete on the basis of products/services that have achieved success in
distinguishing themselves from their competitors (i.e. Airplane manufacturers)
4. MONOPOLY-BASED MARKETS - Markets that are served by a single
product/service provider (i.e. Utilities)
Sensing Market Change - one of the most often used business tools for assessing changes in
market sectors is the Porter’s Five Forces Model. Michael Porter (Harvard University) suggests that
managers and business owners can keep their finger on the pulse of the industry in which they
operate by assessing changes in 5 key areas:
1. Rivalry Among Existing Competitors – The more competitors there are, the
more intense the rivalry for customers and market share.
2. Threat of New Entrants – The probability of new entrants appearing in the
industry and market.
3. Threat of Substitute Products/Services – Obsolescence as a result of new or
substitute products and services.
4. Bargaining Power of Suppliers – Dependency on suppliers for critical aspects of
products and services offered; Supplier control and relationships.
5. Bargaining Power of Buyers – Choice buyers have and ease of switching to
Chapter 6: Ethics and Corporate Social Responsibility
Ponzi Scheme: A type of investment fraud that involves the payment of purported returns to
existing investors from funds contributed by new investors.
9 A few examples of poor ethics in management:
Conrad Black (2007)
Bernie Madoff (2009)
Ethics and Individuals
o Ethics: Is a reflection of the moral principles or beliefs about what an individual views as
being right or wrong.
We need to assess ethics within an organization at 2 levels:
1. The individuals themselves
2. The culture of the organization within which individuals work
o These beliefs are built in part around the norms or standards of conduct society views as
acceptable behaviour practices
o Individual motivations, cultural and environmental upbringing, personal pressures, and lack
of information or ignorance will all influence – positively or negatively – an individual’s
o The Dilemma: Each of us has a different interpretation of what is acceptable or non-
acceptable behaviour influenced by our own personal upbringing as well as societal and
other external influences.
Ethics can be thought of as an invisible hand that guides each of us as we make
There are 4 fundamental sources of ethical interpretation with respect to business decision-
4. Business Culture
o We need to recognize where the boundaries lie and be able to live with the decision made;
Use the “Triple Yes” Rule:
1. Yes #1—Does the decision that I am making fall within the accepted values or
standards that typically apply to all organizational environments?
2. Yes #2—Would I be willing to have this decision communicated to all of my
organization’s stakeholders, and have it reported on the front page of the
newspaper or serve as the lead story on a news channel?
10 3. Yes #3—Would the people in my life with whom I have a significant personal
relationship (family, spouse, etc.), as well as managers of other organizations,
approve of and support my decision?
o In business, we need to think in terms not of what is in our personal best interest, but of
what is in the best interests of the stakeholders and the public at large.
The Ethical Decision-Making Process
o Is designed to get a manager to slow down and think through all the consequences of a
decision he/she is about to make.
Has 2 Key Elements:
1. Ensuring you have initiated the proper depth of assessment to fully understand
the ethical dilemma and/or consequences that may permeate the decision or
exist below its surface
2. Testing your interpretation with a mentor or advisor to ensure you are correctly
interpreting the situation and that your decision-making frame of reference is
o Integrity: Honest, eeliability, ethics, moral judgement.
o You have to be reliable, trustworthy, honest and willing to take responsibility for
mistakes you have made; it is being able to look in the mirror each day and know
that you are defined by your actions.
The most important skill you bring to the workplace is your integrity; if people
cannot trust you, they will not want to work with you.
Ethics and Culture
o A critical component of an organization’s culture is defining the boundaries of acceptable
behaviour for management & employees
o The responsibility for developing policies relating to values, ethics, and financial integrity lies
with the organization’s Board of Directors
o Board Of Directors: The governing body of a corporation, comprising individuals chosen or
elected to oversee the management of the organization
o Management needs to execute the policy but first the Board needs to define the parameters
of what is meant by ethics and integrity and develop the necessary structure and processes
that will enable it to gauge the conscience of the organization
Zones of Decision Making
o For Boards to effectively create a culture of ethical behaviour and financial integrity, they must
commit to the following:
1. The Board must clearly define and establish boundaries of acceptable behaviour and
financial integrity, and create performance standards to evaluate adherence to these
2. These boundaries must be clearly understood and communicated to all employees in
the form of a policy or code of conduct.
3. The Board must appoint a representative (individual or committee) at the board level
whose responsibility is to audit performance in all critical areas of the policy.
11 4. The Board must create and support a “Whistleblowing” mechanism for the reporting of
ethical concerns within the organization.
Whistleblowing: Is the process through which an individual informs someone in
authority of a dishonest act or the dishonest behaviour of another person.
5. The Board must interact with senior management and external agencies monitoring
the organization’s activities in order to discuss issues that arise.
The Board of Directors, as representatives of the organization’s stakeholders, must see
itself as the creator and sentinel of the organization’s conscience.
o Governments and agencies worldwide have created regulations that define how
organizations should comply with financial integrity obligations and ethical decision-making
and behaviour. Examples include:
In the US: The Sarbanes-Oxley Act of 2002
In Canada: Ontario Bill 198 and Multilateral Instruments (regulations) 52-108, 52-109
o The focus is on protecting the interests of investors/stakeholders by heightening the financial
operational requirements in areas such as auditor independence, audit committee
responsibility, CEO and CFO accountability, public disclosure and penalties.
o The G20 has agreed in principle to the development of high quality global accounting
o Code of Conduct: Is the name for a statement that describes the required responsibilities,
actions, and rules of behaviour of an organization’s employees.
o The board of directors, as representatives of the stakeholders of an organization, must see
itself as the creator and sentinel of the organization’s conscience.
o Recognizing the concerns associated with defining ethics and the challenges organizations face
in regulating the behaviour of their employees and management teams, governments and
agencies worldwide have created regulations that define how organizations should comply with
financial integrity obligations and ethical decision making and behaviour.
o Forensic Accounting: is the integration of accounting, auditing, and investigative skills.
Forensic accountants are specialists in looking beyond the numbers in order to interpret
what exactly is transpiring within an organization
Forensic audits are critical to determining the potential extent of damage an
organization may have incurred due to unethical employee behaviour or financial
Forensic accountants and audits are also key to legal action
Corporate Social Responsibility (CSR)
o CORPORATE SOCIAL RESPONSIBILITY (CSR): The understanding that the purpose of an
organization is to create shared value (business and society) by strategically integrating into its
actions a partnership mentality with society where the objectives of both parties are met.
12 CSR means treating the public interest as a key stakeholder in an organization’s
operational success and shifting attitudes from “winning for me” to one of participating
in activities that enable the organization to win while serving the public good.
CSR creates shareholder value by actively partnering in environmental, social, and public
policy programs and initiatives that contribute to the long-term health of society.
Consumers have definite opinions as to what they believe CSR should represent. These
1. Giving back to local communities
2. Self regulating their actions
3. Being willing to be held accountable for their decisions
4. Helping others
5. Operating ethically, honestly, and lawfully
6. Being environmentally responsible
7. Offering quality products and services at fair prices
8. Treating employees fairly
Areas where consumers feel companies are doing an unsatisfactory job include:
Transparency about business practices and product/service risks
Development of socially and environmentally responsible products/services
Fair pricing and appropriate accessibility levels
Issues associated with political influence, acceptable profit levels, and senior
o Key Conclusions: Customers are paying attention, and companies need to demonstrate and
communicate CSR to win public trust.
The Interdependency of CSR and Corporate Strategy
o The CSR Pyramid illustrates four primary views associated with the integration of CSR into an
1. Personal Projects by a business leader (base level)
2. Philanthropy through cash or in-kind donations (base level)
3.Operational Initiatives (middle level) – transition from arm’s length social issues to
that of social issues impacted as a result of the organization’s daily operations; an
awakening within the organization of a desire to mitigate social harm as a result of its
business system activities; seeking to enhance efficiencies while minimizing
4. Strategic Partnering (top level) – True integration of social responsibility into the
organization’s strategy development and execution process; requires a cultural shift
within the organization.
o The transition to true CSR (top level of the CSR Pyramid) is identified by two fundamental shifts
in the integration of strategy and social agenda:
1. The organization’s decision-making process evolves from one that responds to
identified pertinent social issues to a process that treats CSR as a core root of the
organization’s strategic planning process.
2. The organization recognizes that certain social issues impact the key drivers of its
competitiveness and therefore seeks to actively develop the necessary social
partnerships to leverage such competitiveness
13 o For many companies, this is a 2-step process that requires leadership from the top and a
complete risk/reward audit of the full business system and strategic approach to social
o Key social interactions and areas of responsibility that occur on a daily basis need to be
identified followed by identification of the social impacts that are critical to the organization’s
Organizations that make it to the top of the pyramid recognize that the long term health
of society is fundamental to the long term health of the organization; the two are
interconnected, not separate and distinct.
o Transitioning to the top of the CSR Pyramid requires significant change in operating procedures,
processes and culture.
o Such change will necessitate significant investment upfront and potentially an additional cost
layer to the operating budget.
o For NFPs and charities, the goodwill associated with the work they do and the integrity with
which they conduct themselves are fundamental to their existence.
o NFPs are heavily dependent on monetary gifts (donations) from others to keep their
o NFPs and charities must earn and maintain the trust of Canadians in order to be the
recipients of their generosity.
This means that NFP managers must be able to communicate to Canadians the
legitimacy of their organizations, be able to provide clear programs/service
outcomes, and be fully able/creditable in accounting for how their organization
spend donors money.
Management Reflection – It is ALL About Trust
o Organizations need to encourage entrepreneurship, innovation and risk-taking.
o The common thread of making this happen is TRUST.
o The best asset you can bring to work on a daily basis is your integrity.
o Integrity means being honest, respecting the dignity of others, listening before you speak,
being accountable for your mistakes, doing what you say your going to do, demonstrating
transparency in the decisions you make, not presuming you have all the answers, and
thanking people for their feedback.
o Successful managers are open and authentic. They encourage open discussion,
communicate their concerns, and do not manipulate others or distort facts.
Chapter 7: Planning Business Strategy
The Concept of a Business Strategy
o The development of an organization’s business strategy is fundamentally one of the most
important responsibilities of a senior management team or, in the case of a small business, the
business owner. For an organization to be successful over the long term, managers need to have
a game plan as to where and how to compete in the markets in which they intend to serve.
o Interdependency of Strategy & Tactics
Well-directed & Positioned Strategy + Efficient & Effective Tactics Execution
= BUSINESS GROWTH & PROFORBILITY
14 1. The ability to define and create a strategic direction and market position for the organization
(strategic plan); and
2. The ability to execute the core tactical initiatives within the plan in a manner that ensures the
The long-term success of an organization and its ability to evolve and grow is predicated
on two fundamental principles: the ability to define and create a strategic direction and
market position for the organization (strategic plan), and the ability to execute the core
tactical initiatives within the plan in a manner that ensures the organization’s success.
Strategy Made Simple
o Strategies are generally customized for each business, given the market conditions that they
face and the desired business goals they aspire to reach. In its most basic form, business
strategy is all about understanding what opportunities exist in the marketplace and which ones
should be pursued. Based on these conclusions, managers then have to decide upon their path
of action in pursuit of capitalizing on the opportunities chosen. Think of strategy simply as being
summarized by the answers to two questions: “Where do we want to play,” and “How do we
plan to win.” By answering these two questions, we develop the seeds for what is called our
intended or deliberate strategy; that is, the specific direction and actions we plan to take in
order to guide our organization’s decisions going forward.
Core Elements for Assessing Business Strategy
o For business managers, the development of a business strategy means making decisions and
determining direction in six key areas: (PMPRBR)
MISSION = The organization’s fundamental purpose or reason for existence;
Mission Statement identifies the company’s broad goals
VISION = A forward-thinking statement that defines what a company wants to
become and where it is going
Specific markets/market segments the business sees itself competing in
3. Products & Services
Review of current and potential new products/services
Allocation of a business’s resources in support of its strategic decisions
5. Business System Configuration
Modifying infrastructure and systems to ensure success of the plan
6. Responsibility & Accountability
Identifying the key objectives to be achieved and who is responsible for them
1. Purpose: Refers to the mission of the organization and the vision its managers or owner(s) have
for the business. Mission defines an organization’s purpose or reason for existence. Mission
statements usually identify the broad goals around which a company was formed. They also can
reflect on how an organization will get to where it wants to go. Mission statements, when
15 combined with ethics policies and statements of behaviour or values, guide the overall direction
and activities of a business. Decisions made by managers within an organization should reinforce
the mission the company is aspiring toward. A vision statement is a forward-thinking statement
that defines what a company wants to become and where it is going (i.e.: Wal-Mart’s vision is to
become the worldwide leader in retailing and Jim Treliving and his partner George Melville’s
initial vision for Boston Pizza was to have it become Canada’s #1 casual dining chain
o For example: Wal-Mart’s mission is currently identified as “helping people save
money so they can live better.”
2. Markets: Refers to the specific markets or market segments the business sees itself competing
in. As part of the strategy development process, managers and owners need to assess their
success in existing markets and evaluate the potential of new markets. Markets should be
assessed in terms of their current and future profitability and growth potential. Markets that
represent opportunities for future growth and enhanced profitability will receive greater
managerial attention and resource support. Markets that have become unprofitable or
marginally profitable and lack significant future growth will be evaluated in terms of market exit
strategies or harvesting strategies.
o Harvesting: Refers to a strategy that reflects a reduced commitment to a particular
market given its perceived weak future growth or profitability potential.
3. Products & Services: Refers to a review of the current products and services offered by a
business, as well as potential new products/services that are to be added to the products
portfolio. Over time, products and their related services can become obsolete or no longer
desired by the organization’s customers. This can be the result of technological innovation,
changes in consumer needs and tastes, or new direct substitutes for existing products and
services being offered by competitors. A critical part of the strategy development process is to
determine which products and related services are to remain part of a business’s portfolio, as
well as which are to receive additional R&D (research and development) support, and which
new ones are to be added.
o For example: A strategic business decisions regarding services could relate to whether
customers should be offered payment terms for b