Business Strategy Questions
Business Strategy 3 Main Questions
Corporate Social Responsibility
Corporate Social Responsibility (CSR) is the consolidation of business activities and values, whereby the interests or welfare of all stakeholders, including customers, employees, investors, the environment and the community, are demonstrated in a company’s or organisation’s policies and actions (Grant 2005). CSR can also be viewed as the commitment or obligation of a company to take measures intended to protect and improve the society’s welfare along its own interests. CSR can be implemented at an individual, management or departmental level. The nature and the scale of the benefits of Corporate Social responsibility for an organisation varies depending on the nature of the business. Fundamentally, corporate social responsibility involves the integration of the corporate self-regulation into the business model. In this regard, Grant (2005) points out that CSR acts as a self-regulation mechanism that is incorporated into the organizational processes in order to monitor them and ensure that the organization complies with the law and upholds ethical and moral standards as well as international standards. The primary objective behind the use of CSR in the business model is to ensure that the firm is responsible for its actions.
Corporate Social Responsibility promotes the development of teams and expands both horizontal and vertical supporting industries (Grant 2005). Since organisations have a diverse pool of resources, tangible and intangible, societal goals can be attained with ease, while at the same guaranteeing profitability. Such resources include competencies, human resource, finance, and functional expertise. Through CSR, it is possible to address environmental issues such as pollution and carbon emissions. Companies, for example, can organize regular tree planting sessions as a measure of curbing global warning; this strategy can be helpful in appealing to ethical consumers who are committed to environmental conservation (Grant 2005).
Socially Responsible Organisations also benefit from the fact that their corporate brand is sold to the public. Reputation is one of the distinctive factors in a resource-based approach of a company that help to attain a sustainable competitive advantage in a hostile industry. In the present business context, conducting ethical business is increasingly becoming a core requirement for success. It may involve the development of products that are friendly to the environment or production processes that are environmentally safe by reducing greenhouse emissions and fossil fuel consumption, or adherence to the international labour standards. It is arguably evident that CSR has been integrated in almost every aspect of business. Contemporary consumers no longer consume the service/commodity itself; rather, they are more concerned with the values upheld by the corporation producing the commodity. This is what determines the meanings that consumers attach to brands such as eco-friendly products. This implies that CSR is one of the significant contributing factors that result into a good corporate reputation and image. In fact, CSR influences business aspects such as brand preference, confidence of the investors, perceptions of the analysts, purchasing decisions of the prospective consumers, and employee retention. The basic implication of this is that environmental responsibility can be exploited appropriately to establish a competitive advantage (Grant 2005). A failure to adopt CSR can impose devastating effects on the business, which can result in consumer boycotts, environmental damage and damage to the corporate reputation and image; all this has a negative effect on the long term sustainability of the business.
Research also indicates that socially responsible companies benefit from a pool of competent employees. The underlying logic is that most employees are attracted to such companies or organisations. By recruiting efficient and effective employees, the company would certainly improve its performance and productivity. High production at economical costs often results in diverse quality and affordable products. The other impact of Corporate Social Responsibility is a better organisational environment. A corporate culture is usually a reflection of its internal structures, policies, values, beliefs, and vision. A socially responsible organisation will consequently have a better working environment. This will in turn make an employee hiring process much easier. Employees in such an environment are always motivated and efficient. Motivation and efficiency are vital elements in a company because they are integral parts of productivity. A better working environment also lowers absenteeism and employee turnover. Because of improvements in the social aspects of the business and the society, social problems such as drug abuse, crime, pollution, illiteracy, and poverty will be eradicated. Consequently, less money would be spent or collected in terms of taxes and national budgetary allocation for social problems. Hence, social growth will create a better economic or business environment.
Organizations can use CSR to achieve and sustain their competitive position in the market (Grant 2005). This implies that the firm can incorporate CSR in its corporate level and business level strategies as leverage for a competitive advantage. Owing to the fact that it is becoming an ethical and business requirement for organizations to be responsible for their actions, it is crucial for an organization to use the opportunity that CSR presents to leverage their competitive position in the market. Therefore, CSR is an opportunity for the firm to establish a competitive advantage, boost investor confidence, adopt a cost reduction strategy, enhance brand preference, comply with the government regulations, and enhance its corporate image and reputation because of the moral and social responsibility, which are all vital in ensuring long sustainability for the organization.
In spite of CSR being beneficial to the society as well as to the organization, the approach is usually criticised in perspectives such as the cost to society, profit maximization, costly social overheads and inadequate competencies, and social skills. The main objective of many business organizations is profit maximisation. In that perspective, it is vital to meet its social responsibility while meeting social custom and law without compromising the desire to maximise profits for the organisation’s shareholders. This can be achieved by aligning organisational operations to its corporate culture. The organisation can also train and equip the directly involved personnel with the necessary critical skills for problem solving. The company should also enlighten the society stakeholders that CSR is an approach of giving back to society and not transferring the cost. Finally, in reference to high social cost, the company can strategically identify measures to leverage the cost of social responsibility to ensure that it operates efficiently while sustaining its competitive advantage. This may be approached through identifying and eliminating unnecessary costs in its internal environment.
Corporate Mission and the Strategic Planning Process
According to Grant (2005), corporate mission is a statement that outlines an organisation’s purpose or a reason for engaging in the underlying activity. It guides the activities or daily operations of a company. A mission statement also highlights the company’s overall goal, provides direction, and guides in critical decision-making. When establishing a business strategy for success, an organization needs to define its vision, mission, goals, or objectives clearly. The organisation needs to identify how it is going to implement its wishes into realistic solutions in the presence of intense competition. The definition of clear and specific goals or objectives is pivotal for an organization to compete healthily.
Strategic planning is a business concept that consists of decision-making, strategy definition, analysis, and actions an organisation undertakes in resource allocation with an aim of establishing and sustaining a competitive advantage. The concept entails three continuous processes, which are analysis, decisions, and actions. It involves the analysis of strategic goals (vision and strategic objectives) as well as of internal or external environments of the organisation (Grant 2005). A corporate mission is central to strategy planning or formulation process because it gives a framework in which the strategy is formulated. After the analysis, leaders make strategic decisions. This covers local and international operations. Implementation of strategies requires an effective allocation of the necessary resources. Therefore, strategic managers have to show how an organisation should compete to create and maintain the advantages in a marketplace.
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The corporate mission’s statement emanates from the culture and the intended long-term goals of an individual, a company or an organisation that seeks to establish the business. Some of the elements that may be used to form a mission statement are beliefs, values, goals, resources, capabilities, objectives, and experience. The statement describes the company’s present distinctive capabilities and stakeholders. Apart from the company’s mission statement, other statements may exist at a location or departmental levels. In today’s dynamic and competitive business landscape, a mission statement may be redefined to synchronise with business transformations. For example, in the event of acquisitions or alliances, a company may be forced to redefine its missions. Transformations in the underlying capabilities or technologies used to achieve goals and objectives of a company may lead to new mission statements.
Corporate mission is crucial because its core components shape the employee behaviour and the company’s operations (Grant 2005). Grant (2005) adds that the corporate mission is a critical element of the organisational culture, which provides a framework of running the business. In the business landscape, it is more disastrous not to have a vision or goals than failing to meet them. The statement also acts as a benchmark of measuring performance or success of the company. In order to achieve the goals, vision, and objectives of a company, the mission must be instilled in all the stakeholders involved. Grant (2005) also asserts that the mission statement serves as a focal point for the stakeholders to identify themselves with the company’s processes. He also highlights that it provides direction and unanimity of purpose to the stakeholders (Grant 2005). Corporate statements also stipulate the organisational working environment tone, hence promoting both horizontal and vertical integration within the company.
By defining the core structures of the company, the statement helps all the stakeholders translate its objectives to actionable or feasible performance and cost related measures. Studies in strategy management indicate that organisations that have coherent, lucid, and meaningful mission statements produce more than the average returns in shareholder benefits. As highlighted above, it is evident that articulate, feasible, credible, clear, and coherent corporate mission statement provides a foundation for actionable parameters and performance of a company. To summarise, a corporate mission statement also provides all the stakeholders the reason for existing or working for an organization.
A Resource–Based Approach to Strategic Development
Grant (2005) points out that a resource-based approach focuses on the internal capabilities of the company in formulating strategy to achieve a sustainable competitive advantage within its industry or markets. In this regard, Z Company will need to identify the capabilities within its value chain to provide it with a competitive advantage. The resource-based approach deals with the company’s competitive environment but considers an inside-out approach, which implies that the company’s internal environment is the starting point of a resource view strategy. This is often considered as an alternative approach to Porter’s five forces framework, which takes the outside-in (industry structure) as its starting point.
One of the fundamental characteristics of strategy is that the organisational performance or capability relies on its resource capability (Grant 2005). This is the resource-based approach to strategic development. The resource-based approach of strategy is commonly associated with the work of Grant (2005). Resources are the inputs that enable the company to carry out its operations. The company resources and capabilities are pillars of strategic development because they provide the basic direction and act as the primary source of profit for the company. Resources can be categorised as tangible and intangible. Tangible resources are the physical assets owned by the company. They are further categorised into financial resources, human resource, and physical resources. The last include machinery, buildings, and materials. The value of resources is only depicted when they are put in some productive use. Intangible resources include the knowledge and specialists skill within the company. It also comprises reputation and technological/intellectual resources.
Grant (2005) points out that, in order for the company to compete effectively, it must possess certain attributes (competencies). Competencies are derived from the bundle of the company’s internal resources. The company’s distinctive capabilities in the resource view strategy are derived from the company’s innovation, architecture and reputation. These attributes are associated to the links between the company and its stakeholders: shareholders, employees, customers, and business partners. It is the nature of these relationships that gives the company its distinctive capability in strategic development through its reputation, innovation, and architecture (Grant 2005).
The company’s architecture is made of the relational contracts within and outside the company. Architecture also refers to the company’s ability to create knowledge necessary to respond effectively to the dynamics of the external environment. Reputation is critical in markets where customers associate themselves to a product due to the long-term experience. Therefore, the company should establish a long-term reliable relationship with its stakeholders to achieve a competitive advantage. A company’s ability to innovate also gives it a distinctive capability, which is approachable and sustainable (Grant 2005). The company can only attain a sustained competitive advantage if it implements a unique and un-imitable value creating strategy. For a resource-based strategy to achieve a sustainable competitive advantage, it must be rare, valuable, and difficult to imitate and have no substitute.
The resource-based approach outlines a resource to be valuable if it can enable the company to formulate and successfully implement its strategies to improve its effectiveness or efficiency. These can be identified through SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis. According to Grant (2005), SWOT analysis defines the objectives of the company and identifies the external and internal factors that are vital in the achievement of the company’s objectives. Although rare and valuable resources provide a conduit to the competitive advantage, these resources should not be easily imitated by competitors for the company to generate above average returns. Imitation can be addressed if the company embodies social complexity, path dependency, unique location, and casual ambiguity. According to Grant (2005), resource capability refers to the quality and quantity of a company’s resources and their potential to deliver the desired results. That is, the cluster of attributes possessed by the company which enables it to achieve a competitive advantage. Finally, a resource-based approach can achieve sustainable competition if there are no strategically substitutable valuable resources that are imitable or not rare.