Chapter 22: Corporate Governance

I. WHAT IS CORPORATE GOVERNANCE?

 Corporate governance refers to the systems, processes, and practices by which
companies are directed and controlled. It encompasses the relationships among
a company's management, board of directors, shareholders, and other
stakeholders.

 Corporate Governance is the interaction between various participants

(shareholders, board of directors, and company’s management) in shaping
corporation’s performance and the way it is proceeding towards.

II. IMPORTANCE OF CORPORATE GOVERNANCE:

 Ensures transparency in decision-making.
 Fosters trust among stakeholders.
 Promotes fairness and equitable treatment.
 Aligns company goals with stakeholders' interests
 Contributes to long-term success and sustainability
 Reduces risk of unethical behavior or mismanagement.
 Enhances company reputation.

III. FOUR PRINCIPLES OF CORPORATE GOVERNANCE

1. Transparency - the quality of being open and honest in communication and
decision-making, providing clear, accessible, and understandable information to
stakeholders.
2. Accountability- the obligation to take responsibility for one's actions,
decisions, and policies, and to be answerable to stakeholders for the outcomes.
3. Responsibility- the duty to manage and perform tasks reliably and ethically,
ensuring that one's actions contribute positively to personal, organizational, or
societal goals.
4. Fairness- treating people justly and impartially, ensuring that everyone has
equal opportunities and is judged based on merit without discrimination.

IV. BENEFITS OF CORPORATE GOVERNANCE

 Ensures corporate success and economic growth Maintains investors’
confidence
 Lowers the capital cost
  Has a positive impact on the share price
 Provides proper inducement to the owners as well as managers
 Minimizes wastages, corruption, risks and mismanagement
 Prevents fraud and misconduct Helps in brand formation and development
 Ensures the organizations is managed in the best interests of all

V. CONCLUSION
Corporate governance is crucial for managing companies as it provides structure and
guidance for smooth business operations. It strengthens relationships between
management, the board of directors, shareholders, and other stakeholders, fostering
trust, transparency, and accountability. Good corporate governance leads to stability
and long-term success, protects stakeholder interests, enhances reputation, manages
risks, and promotes corporate social responsibility (CSR) and environmental, social,
and governance (ESG) initiatives. By embracing best practices in corporate
governance, companies can achieve sustainable growth and greater success.
Chapter 23: Business Ethics – A Successful Way of Conducting Business
Definition of Business Ethics
Business ethics refers to carrying business as per self-acknowledged moral standards.
It is actually a structure of moral principles and code of conduct applicable to a
business.
Business ethics involves evaluating what is right or wrong, fair or unfair, in the conduct
of business operations, interactions with stakeholders, and treatment of employees,
customers, suppliers, and the broader community.
It goes beyond just a moral code of right and wrong; it attempts to reconcile what
companies must do legally vs. maintaining a competitive advantage over other
businesses.

Role of Corporate Social Responsibility in Business Ethics

Corporate Social Responsibility (CSR) is a concept that suggests businesses have a
responsibility to contribute positively to society beyond just maximizing profits for
shareholders. This means that managers are interested in long-term corporate interests
as well as society’s health.
Two Approaches in Embracing CSR
1. Sustainability. Companies create products or services that in the long run will
alleviate society’s problems, which in turn will yield them a profit, a portion of which they
give back to the society by advocating for the conservation of natural resources,
donating to charities, etc.
2. Stakeholder Theory. Giving attention to every stakeholder in the entire company. The
employees, customers, owners, suppliers, management, and the community.
➢ Employees want a good, secure job and excellent wages while management wants
productive workers and profits.
➢ Customers expect excellent customer service and high-quality products while the
community wants a corporation to pay their taxes, offer their citizens good wages, and
help support the environment by not polluting.
➢ Suppliers want their businesses to remain plentiful and owners, of course, want a
financial return for an excellent profit. Overall, CSR promotes a holistic approach to
business ethics, where companies strive to create value not only for shareholders but
also for society and the environment, both now and in the future.
ETHICAL ISSUES
 Relation of Employees and Employers: An ethical issue may arise if a company
imposes long working hours without adequate compensation leading to
employees going on a strike.
 Interaction between Organization and Customers: Consider a scenario where a
company knowingly markets a product as “all natural” when it contains synthetic
ingredients, deceiving customers and undermining their trust.
 Interaction between Organization and Shareholders: An ethical issue may arise
if a company withholds crucial financial information from its shareholders,
preventing them from making informed decisions about their investments.
 Environmental Issues: Suppose a manufacturing company knowingly disposes
of hazardous waste improperly, causing pollution and harm to the local
ecosystem. This neglect of environmental responsibility poses significant ethical
concerns.
 Work Environment: If a company neglects workplace safety measures, leading
to accidents or injuries among employees, it raises ethical concerns regarding
the organization’s commitment to employee well-being.
 Bribery: If a company engages in bribery to secure contracts or favors from
government officials, it not only violates laws but also compromises its integrity
and fairness, raising ethical questions about its business practices.

ETHICAL PRINCIPLES
Below is a list of some significant ethical principles to be followed for a successful
business:
1. Protect the basic rights of the employees/workers.
2. Indulge in truthful and reliable advertising.
3. Follow health, safety and environmental standards.
4. Do not replicate the packaging style so as to mislead the consumers.
5. Treat everyone (employees, partners and consumers) with respect and integrity.
6. Present factual information. Maintain accurate and true business records.
7. Do not accept child labor, forced labor or any other human right abuses.
8. Strictly adhere to the product safety standards.
Being ethical in business operations fosters trust, enhances reputation, and contributes
to sustainable growth and success.

CONCLUSION: In today’s interconnected and transparent world, where ethical lapses

can lead to significant reputational and financial repercussions, prioritizing business
ethics is not just for moral and legal compliance but a strategic necessity for achieving
sustainable competitive advantage.
Chapter 24: Social Responsibilities of Managers

Social responsibility is defined as the obligation and commitment of managers to take

steps for protecting and improving society’s welfare along with protecting their own
interest.
These are following reasons why the managers must have social responsibilities:
1. Organizational Resources – An organization has a diverse pool of resources in
form of men, money, competencies and functional expertise.

2. Precautionary Measure – if an organization lingers on dealing with the social

issues now, it would land up putting out social fires so that no time is left for
realizing its goal of producing goods and services.

3. Moral Obligation – The acceptance of managers’ social responsibility has been

identified as a morally appropriate position.

4. Efficient and Effective Employees – Recruiting employees becomes easier for

socially responsible organization. For instance – Tobacco companies have
difficulty recruiting employees with best skills and competencies.

5. Better Organizational Environment – The organization that is most responsive to

the betterment of social quality of life will consequently have a better society in
which it can perform its business operations. Hence, an improved society will
create a better business environment.

But, manager’s social responsibility is not free from some criticisms, such as:
1. High Social Overhead Cost – The cost on social responsibility is a social cost
which will not instantly benefit the organization.

2. Cost to Society – The costs of social responsibility are transferred on to the

society and the society must bear with them.

3. Lack of Social Skills and Competencies – The managers are best at managing
business matters but they may not have required skills for solving social issues.

4. Profit Maximization – The managers decisions are controlled by their desire to

maximize profits for the organizations shareholders while reasonably following
the law and social custom.
Social responsibility can promote the development of groups and expand supporting
industries.
Core Competencies – is an essential for Organizational Success.
What is Core Competency?
Core competency is a unique skill or technology that creates distinct customer value.
Core competencies are flexible and developing with time. They do not remain rigid and
fixed.
Resources and capabilities are the building blocks upon which an organization create
and execute value-adding strategy so that an organization can earn reasonable returns
and achieve strategic competitiveness.

Resources are inputs to a firm in the production process. These can be human,
financial, technological, physical or organizational.
Capabilities refer to organizational skills at integrating it’s team of resources so that
they can be used more efficiently and effectively.
Organizational capabilities are generally a result of organizational system, processes
and control mechanisms. These are intangible in nature.
The organizational strategies may develop new resources and capabilities or it might
make the existing resources and capabilities stronger, hence building the core
competencies of the organization.
Core competencies
 Help an organization to distinguish its products from it’s rivals as well as to
reduce its costs than its competitors and thereby attain a competitive advantage.
 Decide the future of the organization.
  Give way to innovations.
Chapter 25: Diversification as a Viable Corporate Strategy

Diversification is one of the strategies pursued by firms wishing to grow in newer

markets and by launching newer products. Diversification usually entails the firms
entering new markets in the industry in which they are already present by launching
newer products.

Types of Diversification:
Concentric diversification is a corporate strategy where a company expands into new
markets or product lines that are closely related to its existing business activities. In
other words, the company leverages its core competencies, technologies, or distribution
channels to enter new market segments or offer new products or services.
The idea here is to ensure that their brand image and brand loyalty are transferred to
the newer products.

Horizontal diversification happens when firms tag on to the existing market segments
and leverage the existing customer base though the products that they launch are
aimed at sub segments in the current market. It is where a company expands into new
product or service offerings that are unrelated to its existing business but still appeal to
its current customer base. Horizontal diversification involves branching out into entirely
different industries or sectors.

Conglomerate Diversification launches entirely new product lines that have no

alignment with their existing resources and capabilities and enter completely new
markets where they do not have a presence.

Goals of Diversification
Profit from diversifying when existing products and market segments are saturated or
when competitors have outperformed the firm. Use cash reserves to aggressively enter
new markets and launch new products to ensure continued success and profitability.
 Defensive diversification focuses on protecting the firm’s position when faced
with market saturation or competitive threats.
 Offensive diversification involves using available resources to proactively enter
new markets and launch new products to drive growth and profitability.
Risks associated with Diversification
UNCERTAINTY AND UNFAMILIARITY:
Diversification often involves venturing into new markets or launching new products that
the company may not have prior experience with, that challenges of understanding
customer preferences, market dynamics, regulatory environments, and competitive
landscapes.
Diversification requires companies to enter uncharted territory, where they may lack in-
depth knowledge or understanding.

ANSOFF MATRIX
The Ansoff Matrix, developed by management expert Igor Ansoff, offers a roadmap for
firms to grow by focusing on launching new products or entering new markets.
Presented as a matrix with four quadrants based on products and markets, it provides
options for market share expansion. The quadrants include market penetration, market
development, product development, and diversification, each representing a different
growth strategy.
Market penetration happens when the existing products are marketed in a way to
increase the market share of the firm. This is a minimal risk strategy as all that a firm
has to do is to increase its marketing efforts and improve on its market share.
Market development is a growth strategy to expand into new markets with existing
products. It requires capabilities and resources, aligning core competencies with
products, and careful due diligence due to the inherent risks of entering unfamiliar
markets.
Product development occurs when firms introduce new products into existing markets.
This strategy relies on leveraging established market presence and brand reputation to
meet customer expectations. While it offers advantages of brand recognition, it poses
risks as success isn’t guaranteed, and customer transition to new products may not be
seamless.
Diversification occurs when firms introduce new products into new markets, marking
the riskiest strategy in the Ansoff Matrix. This entails both developing new products and
entering unfamiliar markets. Success is uncertain as firms navigate uncharted territory
and introduce products with unpredictable reception. Diversification is a high-risk
strategy justified only by the potential for significant returns.
Chapter 26: Reasons for Avoiding Strategic Planning
STRATEGIC PLANNING

 Is a process in which an organization’s leaders define their vision for the future
and identify their organization’s goals and objectives.
 The process includes establishing the sequence in which those goals should be
realized so the organization can reach its stated vision.

Benefits of strategic planning

 Formulating a clear strategy helps companies navigate the complexities of the

business landscape and achieve their Long-term objectives

 Formulating a clear strategy helps companies navigate the complexities of the

business landscape and achieve their Long-term objective

 One major benefit is improved decision making a well-defined strategy provides a

Framework for making choices allocating resources effectively and prioritizing
initiatives based on their strategic fit.

REASONS WHY SOME FIRMS DO NOT DO STRATEGIC PLANNING

Lack of Knowledge
Some firms may lack the understanding of what strategic planning entails and how it
can benefit their organization. Without adequate knowledge, they may perceive
strategic planning as a complex and unnecessary process.

Poor Reward Structure

In organizations where employees are not incentivized or rewarded for participating in
strategic planning activities, there may be little motivation to engage in such endeavors.

Firefighting mindset
Firms that operate in constantly reactive modes, dealing with crises as they arise, may
struggle to prioritize strategic planning.
Waste of time
Some organizations may view strategic planning as an unnecessary bureaucratic
exercise that yields no tangible benefits. This perception can stem from past
experiences where strategic plans failed to produce desired outcomes.

Laziness or contentment with current success

In some cases, firms may become complacent with their current level of success and
see no need to engage in strategic planning to drive further growth. For example, a
regional retailer that dominates its local market may see little value in developing a
strategic plan to expand into new territories or diversify its product offerings.

Lack of trust in management

If employees perceive management as incompetent or disconnected from the realities
of the business, they may doubt the effectiveness of strategic planning efforts led by
management.

Have been there, done that Mindset

Organizations that have been successful in the past without formal strategic planning
may fail to recognize the evolving nature of their industry and the need for continuous
strategic adaptation.

Lack of consensus and differing ideas

Organizations characterized by internal conflict, siloed departments, or divergent
strategic visions may struggle to develop cohesive strategic plans.

Conclusion
The absence of strategic planning within some firms can be attributed to a myriad of
factors, ranging from lack of knowledge and poor reward structures to a firefighting
mindset and internal conflicts. By understanding these factors and addressing them
proactively, organizations can overcome barriers to strategic planning and position
themselves for long-term success in an increasingly complex and competitive business
landscape.
Chapter 27: Strategic Management to the Millennial Generation

Millennials
Millennials or Generation Y are those born between 1980-1995. They are the first
generation to grow up with the internet, which were widely used in school. Hence, they
grew up being proficient at using computers. Millennials are also called “Digital Natives”
due to the high level of digital literacy.

Marketing to Millennials
1. Digital Marketing to Millennials – Managers should focus on digital platforms
and social media to reach the millennials where they spend significant amount of
their time.

2. Recognize the evolving lifestyles of Millennials and change with them –

this means that a business or organization has understood that Millennials have
distinct preferences, values, and lifestyles compared to previous generations.

The Millennials and the Workforce

Businesses should become high-tech themselves
By becoming high tech, businesses can create a modern and engaging work
environment that attracts and retains Millennial employees, who value innovation,
flexibility, and the use of technology in the workplace.

The Future is More Jobs

Increase Employment Opportunities
Business leaders and CEO should create as many jobs as possible for this generation
to ensure that their energies are channelized in a positive manner instead of in a
negative manner.

Conclusion
Millennials are a crucial demographic for businesses, both as consumers and as part of
the workforce. They value authenticity, innovation, and social responsibility, making it
essential for businesses to adapt their marketing strategies and workplace
environments to cater to their preferences. By understanding and engaging with
Millennials effectively, businesses can unlock significant opportunities for growth and
success in today’s market.
Chapter 28: OWN THE FUTURE: INSIGHTS FROM RECENT RESEARCH INTO
STRATEGIZING FOR THE FUTURE

TEN QUALITIES NEEDED TO STAY AHEAD OF THE COMPETITION:

1. ADAPTABLE –The ability to quickly adjust to changes in the market, technology,
and consumer behavior. Being adaptable means being flexible and open-minded
to new ideas and approaches.

2. GLOBAL – Allows a company to access diverse markets, resources, and talent

pools. It involves understanding cultural nuances, adapting products/services to
different regions, and leveraging international opportunities.

3. CONNECTED – Building strong networks and partnerships within the industry

and beyond enhances innovation, knowledge sharing, and access to resources.
Being well-connected enables companies to stay informed, agile, and
competitive.

4. SUSTAINABLE – Embracing sustainability not only helps the environment but

also fosters long-term business viability. Sustainable practices, such as reducing
carbon footprint, minimizing waste, and promoting ethical sourcing, are
increasingly valued by consumers and investors alike.

5. CUSTOMER FIRST – Prioritizing customer needs, preferences, and experiences

is essential for building loyalty and staying relevant. By understanding and
anticipating customer demands, companies can tailor their products/services and
improve overall satisfaction.

6. FIT TO WIN – Maintaining operational excellence and efficiency ensures that a

company can deliver value consistently. This involves optimizing processes,
investing in technology, and continuously improving performance to stay
competitive.

7. VALUE-DRIVEN – Offering unique value propositions that resonate with

customers is key to differentiation and market success. Whether it’s through
innovation, quality, or affordability, providing superior value creates a compelling
reason for consumers to choose your brand.

8. TRUSTED – Building trust among stakeholders, including customers, employees,

and investors, is fundamental for long-term success. Transparency, integrity, and
 reliability are essential for establishing and maintaining trust in a competitive
marketplace.

9. BOLD – Embracing risk-taking and innovation is necessary for driving growth

and seizing opportunities. Companies that are willing to challenge the status quo,
experiment with new ideas, and take calculated risks are often the ones that lead
the way in their industries.

10. INSPIRING – Cultivating a compelling vision and purpose inspires stakeholders

to rally behind the brand, fostering a culture of creativity, collaboration, and
excellence that fuels innovation, attracts top talent, and drives sustainable
success in the competitive marketplace.

CONCLUSION
In conclusion, to stay ahead of the competition and win the race for the market in the
next decade, companies must embrace a holistic approach that combines adaptability,
global perspective, customer-centricity, and sustainability. By prioritizing these qualities
alongside operational excellence, trust-building, and bold innovation, businesses can
navigate the complexities of an evolving market landscape with resilience and foresight.
Ultimately, those that embody these principles will not only survive but thrive, shaping
the future of their industries and delivering value that transcends mere market
competition.