BUSINESS POLICIES &

STRATEGIES
#1 Role of Top Management and the Importance of
Company Policy

Major Functions:
1.Ensure efficient operation
2.Know the effects of external environment & how
could it be predicted
3.Know the capabilities of the company & its
manpower
CEO Airplane Pilot

-familiar with the plane &

interrelationships among its parts
-controls within reach and can
adjust operation of each
functional part to achieve
optimum performance
-See that it operates in the most
efficient manner & arrives at its
desired destination

Concerned with the effects of the

external environment
 -[physical landscape, flight path, weather
forecasts, capabilities of the craft & crew, data
and predictions on the environment & their
effects on the flight, ground control]
-Concerned with the changes in the
environment
-Sudden in-flight instruction from ground
control cannot be anticipated
Urgent decisions should be made in the face of
great uncertainty

Key difference with that of the -In terms of policy, strategy, planning
developing countries: - less predictable, fewer sources of information,
government, internal that relate to the culture
of the country
Counteractions of External Changes:
1. Change operation without change in strategy
2. Required change in strategy
3. Change the goal

Analogy:
• top management in an advanced industrial
country;
• well-trained, modern-day pilot on a round-the-
world flight
Key Difference: Policy, Strategy, Planning

1. External
2. Internal

Managerial Policy
- Integration of the general management
principles and functional areas which forces
the individual to draw on these and study the
central management of an enterprise
Responsibilities of the Chief Executive
[ Six Categories of Action]

1. Working closely with the BOD - elaborate

the major policies of a firm
2. Working closely with the BOD and top
management - define the objectives of the
firm
3. Working closely with his top managers -
develop strategies and long-range plans
4. Develop an organization which carries out the
strategic plan
5. Working closely with his top manager -
develop operating policies
6. Involves in the control of operation & problem-
solving

Major Policies
deal with the firm’s fundamental nature, its
identity & direction in which it is expected to
move
framework within which the objectives can be
established
Objectives
where the firm is expected to be at some
time in the future in quantitative term

Strategy
the approach developed to achieve the
objectives

Operating Policies
flow out of its objectives, strategy & its
organization
Major Policies

- In the form of a ‘statement of purpose’

- In terms of products and services
- In terms of anticipated position within the firm’s
industry
- Concerns the geographic market for the product
or service
- Involves ownership
- degree and type of social responsibility
Considerations in the development of major
policies:

1. Characters of owners
2. Firm’s resources
3. Possibility of changing existing resources
4. External environment
5. Projected changes in the external environment
Effect of absence of policy - ?
#2 The Total Environment of the Firm

Condition before establishment of policies:

- Understand external & internal environment

Most effective plan: anticipating & working

towards changes

Changes within: financial structure, physical

plant/factory, capabilities of management and
manpower
Educational Factors

1. Literacy level
- Bear upon the marketing approach to be used for
the products to be produced
- affects quality of goods that will be in demand
- Advertising to be used
- Affect the type of workers & managers the firm
will be able to hire
- Poses an issue on firm’s efficiency and growth
Solutions:
a. the firm must be able to anticipate the extent
and direction of such changes to develop
sound strategic plans
b. Literacy and technical training, supervisory
training, management development program
can be given to workers & management
2. Socio-Cultural factors
- Large firms shape the attitudes and the value
system of the communities
- Management principles, techniques and
practices which are effective in one culture are
not easily transplanted into another culture
- Affect management practices, principles and the
contents of the operating policies
- Affect the ability to attract talent to join the firm
or to start new businesses
- A view toward change in people: change in the
culture, attitudes and value systems
Solution:
a. Factors that work should not prevent
management to draw up company policies &
objectives, designing strategic plans, organizing,
formulating operating policies, controlling
operation
b. Anticipate when setting
3. Economic factors
- Affect the corporate goal-setting and strategic
planning
- Affect the types of products and services the firm
might diversify
- The existence & potential growth of competitors
Solution:
- Make a critical appraisal of the developmental
plan of the government
- Be perceptive with the nature of the competition
4. Administrative & Political factors
- laws, policies and the way they are administered
are critical to the firm’s operation
- A major causes in the efficiency of management
Solutions:
- Existence is in question: be concerned with
survival rather than efficiency & profitability
- It’s just a part of the total environment so
management must take it into proper
perspective
5. International factors
- Affect the firm’s ability to efficiently import goods
and export goods & enter into agreements with
foreign companies

#3 Corporate Strategy and Long-Range Planning

Major Problems with Corporate Planning
1. Nature & character of top management
2. Concerned only with producing current demands;
producing & merchandising goods which they
have profitable experience with
Activities that require planning [time, organized
effort]

Obtaining all necessary data

Deliberating through the various alternative
strategies
Estimating risks
Deciding on the best strategy
Activities before planning:
a. Evaluate company’s surplus resources
b. Decide on the extent to which the above could
be increased
c. Keep the firm’s situation, goals & potential gains

3. Did not really develop a strategic plan

Value of planning:
a. Expansion
b. Diversification
c. Surviving in expected & unexpected hard times
4. Managers adopt a personal campaign of ‘safety
first’ and shun activities that need decision with
uncertain outcomes
5. Managers feel that planning undermines their
authority
6. Others avoid the intellectually difficult analysis
required to develop a plan & structured
managerial process of controlling
The Process of Planning
 Data collection & Assessment of current position
Data: trends for the past 3-5 years, estimates beyond Assessment of the present situation, projection for the
five years next five years

Setting specific objectives

Major policies provide guidance or direction in setting objectives

Strategic planning
alternative choices of achieving co. objectives,
Strategy is the process of devising
and to the environment & selecting the bets method for
of relating these choices to company resources
 The operational plan
Product planning & development Market planning
Production planning Organizational planning
Manpower planning Financial planning

The Short-term plan

Coincides with the goals set for at the end of the first year of the LT plan
attainment based on sales & cost forecasts
Planning Process
I.
Purpose:
a. Reassess the company’s major policies
b. Restate specific objectives
c. Used for strategic planning

II.
Policies - provide guidance for decision-making
Operating policies - provide guidance for day-
to-day operating decisions
Major policy – general
Objectives - specific
Ex.
Major: the firm should have the largest number of
outlets in the industry
Objectives: to open two branches simultaneously
every quarter for five years

III. Strategic planning

a. To project what would happen if the company
were to continue its present course
2. Determine the preliminary objectives (5 years)
3. Identify the finite, operational gaps
Ex. Present: selling in the local market
future: a part of production will go export
market
4. Determine the set of available alternatives to
close the gaps
5. Evaluate the risks, costs and returns associated
with each alternative for each gap
make strategic choices necessary to reach a goal
-
Options
- Not in conflict with existing company policies
- Internally consistent
- Must be within the capability of the firm

6. prepare proforma financial statements for each

year of the planning period; review personnel
requirements

7. Prepare the strategic plan

a. Summary of firm’s current position
b. Statement of objectives
c. Description of chosen strategy for each goal
d. Financial statements projecting the probable
results over the period of the plan

IV. The Operational Plan

a. Product planning & development

b. Market planning
c. Production planning
d. Manpower planning
e. Organizational planning
f. Financial planning

Functions:
a. Set the goals for each year
b. Indicate the steps to be taken
c. Identify resource requirement: manpower &
cash
V. The Short-term Plan
- The ST plan and annual budget should coincide
with the goals set for the first year of the LT plan
- Divided into 12 monthly periods
I. Data on Internal assessment
a. Profits relative to the invested capital, total
capital, sales
b. Profit contribution of each product and service
c. Stage of the product life cycle reached by each
product
d. How has the organization of the firm evolved?
What are the present and probable future
expectations of the managers and workers?
e. Internal resources: plant. Equipment, cash,
credit, people
f. Development of the strengths of the union; its
demands
no union: expectations of workers

External assessment
a. Growth of the economy per sector the effect to
the demand for each of the product
b. Domestic & foreign competitors of each product
c. Possibility of substitutes
d. Factors to consider in the marketability of the
product
e. Changes in the distribution channels
f. Credit

#4 Key Aspects of Corporate Organization, Policy

and Control

Top management: conceptualization

implementation
Via:
a. development & maintenance of appropriate org
b. correct choice of policies
c. efficient system to control operation
Organization
Determining Factors:
a. Personality of the CEO – basis of the degree of
centralization & decentralization
b. Size of the firm
c. Number & type of products or services
d. Geographic presence

Categories
1. one-man operation
-
Advantages
a. No need for any intermediate levels of mgt
b. Has the sole responsibility and authority by
himself
c. Workers are known personally
d. Information flows directly to and from him
e. No need for coordination
f. Provides satisfaction to the manager; security
to the workers
Disadvantages:
a. May formulate vague strategies & plans
b. Decisions are based on experiences & limited
knowledge
c. Issues orders to all operating managers
d. Great burden on the single manager

- Becomes inefficient when employees’ number

exceed thirty

2. The father-son or manager-assistant

- The ‘boss’ retains all authority & responsibility;
makes all decisions
- Assistants only transmits orders and gather
information
- Still efficient with employees up to 400
Disadvantages:
a. The boss loses close contact with workers
resulting to decline in motivation
b. Assistants vie for popularity among workers and
the ‘boss’
c. Information are not reflective of facts needed
for decision-making
d. assistants’ potential are not developed since
there is no opportunity

3. Functional organization
- Favors growth in many directions because of the
concept of delegation & sanctions
- Functional managers: financial, production,
human resources, sales, purchasing – make
operating decisions
- Participates in the development of the firm’s
strategies & plans
- The CEO still makes the strategic decisions;
coordinates the work of OMs, achieves results
through the managers
- Permits growth up to thousands of employees
- Limited to firms with a small number of closely
related products

4. Functional organizations with HO and

Geographical dispersion
- An extension of the third form but with
manufacturing or sales operations in two or
more locations
- All strategic decisions, plans, policies and major
operating decisions are made at HO;
- Only routine operating decisions are delegated to
OMs
Advantages of written policies
1. Promote delegation of authority
2. Senior Managers are assured that lower
managers will act in any given situation
3. Promote consistency and reduce arbitrary bases
for decisions [i.e. treatment of workers,
suppliers, et al]
4. Increase the ability of different levels of
management to cooperate
Disadvantages
1. Some policies are highly confidential [ if freely
accessible via manual it might be available to
competitors]
2. Their effectivities remain even long after they
have become obsolete
3. May permit insufficient discretion to the
decision-maker
Two sets of operating policies
1. General policies for administration – applicable
at all levels and in all parts of the organization
2. Functional policies - developed for each
functional area

Managerial Control of Operations

Control : qualitative & quantitative
done by different people at different
levels of management

Goal: to attain the degree of perfection

Four-Step process:
1. Standard of performance must be established
- Based on the operational plan, policies,
objectives and strategies
- Select strategic points:
for management to see deviation and take
corrective action
which provide controls that consolidate many
areas of company operations
2. Actual performance must be measured in
relation to the standards
- May be done at different levels depending on
the company’s organization and the activities
being monitored
- Control data are generated by an inspector,
cost analyst, market researcher – not involved
with the operation; by-product of other record-
keeping operations
3. Performance information must be channelled to
the person responsible for controlling that
operation
- An info system must be established to be
accessible to individuals who compare actual
performance against standard and decide
whether or not to correct it
4. prompt, corrective action is taken
- Where there is discrepancies between standards
and performance occur
Process:
a. determine the cause of the discrepancy =
actual versus desired performance
b. decide the best corrective action

Causes of failure to meet Standard:

a.Internal – can be corrected by managerial
actions
b. Changes in the external environment
- Alter ST plan, LT plan, one of the strategies or
some of the objectives

Areas of control:
a. Profits g. accidents
b. Costs h. absenteeism
c. Sales i. labor turnover
d. Production
e. Quality
f. Machine utilization
Group of controls:
1. One individual
2. Communicated to a number of individuals

Top management
Control system
a. shows each operation
b. method & place of measurement
c. assigns responsibility to specific individuals for
setting the performance standards
d. Measuring performance
e. Compare actual with standard performance
f. Take corrective action

Degree of decentralization and delegation of

authority determine the assignment of
responsibility for analyzing reports & taking
corrective action
Good managerial control system allows
greater delegation of authority
Reports as control for Top Management:
a. Sales volume for each product
b. Production volume for each product
c. Inventory levels: finished good and raw materials
d. Profits: net and gross
e. Costs: manufacturing, sales and administrative
f. Labor attitudes: accidents, absenteeism,
turnover
g. Unused capacity – as a percent of total
Uses: decision-making purposes, corrective
measure, identification of correlations between
deviant performances
2. Management Information System

a. Required data by management – to achieve the

desired degree of control
b. Establish data processing procedure:
-identify the sources of all required
information
- identify the procedure for channelling such
information for processing and dissemination
to various users
- a feasibility study should be undertaken:
• to determine what computer best fits the
company’s needs
• If such a system can be handled by other
means or if a computer is required

Effect of the installation of an MIS

- On the organizational structure: personnel
planning, managerial development
- On the executives: what he is able to do,
how well he is able to do it
#5 The STRATEGY of Using Foreign Investors and
Licensees: A Philippine Perspective

Key area/essence of strategy:

a. Cooperation with a foreign company to achieve
its objectives
- Presents certain risks or potential problems
- Government’s approval is required
- Goals of the foreign company are also satisfied
Context: changing environment; firm’s strengths &
weaknesses
Firm: examine alternatives & choose the most
optimum from its point of view

Pre-independence ventures:
Foreign firm exports products to the country thru a
local agent
Manufactured its products in the country
-100% or a local partner/ importing agent
- joint-venture or licensing agreements may be
changed in the future
Potential Benefits for the Philippine company

1. PHL co. may want access to the patent rights or

manufacturing rights for a certain type of
product
- Manufactured in different countries by several
firms in each country; each firm has its own
patents
- simplest: outright, cash purchase of the rights
to manufacture without further payments
involved
2. PHL co. may know that a certain brand of a
foreign product is selling very well in the local
market
- Product may or may not be patented but
protected by a trademark
- Manufacture & sell the product in the local
market under the foreign trademark: with
agreement
a. quality standards must be maintained
b. A license agreement or equity participation
with accompanying rights to inspect, royalty
payments
3. PHL co. starts manufacturing a new product
where technical assistance is required
- Technical services agreement usually
accompanies a license to manufacture
Provisions:
a. plant design and construction assistance
b. Training for workers: technicians, engineers,
managers
c. Product redesign assistance
d. Help in technical advertising
e. Provide for production engrs. to help maintain
quality and productivity
4. PHL co. needs to improve its management
system
options: no outside assistance, local
management consultants, foreign management
consultants
Last option: have a mgt contract with a foreign
manufacturing co.
- design, build a plant, train people, supply key
technicians and managers, maintain full
responsibility for operating the plant
- No equity participation but full management
- May assign accountability for a certain aspect
aspect of management: production or marketing
management
- May have no connection with the plant
construction but with a manufacturing license
agreement

5. Access to foreign marketing channels

- Advice on trends in styles, marketing
- foreign multi-national firms which have control
of significant market segments manufacture in
different countries
Reasons:
a. Diversify risks
b. Seek new sources of production that offer
advantages
Key Question:
• Type of arrangement between the multinational
and the PHL firm
Variables:
a. Degree of equity participation by the foreign
firm
b. Quantity of exports which can be promised
6. PHL firm is planning to expand or diversify,
additional capital is required
- Secure equity participation from the foreign firm:
a. Joint venture facilitates borrowing from foreign
and international financial institutions

7. A joint venture and licensing agreements with

firms in Asian and African countries
- PHL firms provide technical and managerial
assistance to foreign firms in less developed
countries
Potential PROBLEMS
1. Loss in the degree of control by PHL owners
- A foreign partner with majority ownership: loss
of managerial and equity control
- A foreign firm has no equity but only a licensing
agreement on patent rights: no loss of control

2. Percentage of profits which should be paid out

as dividends
3. Disagreements over the need for additional
capital for expansion
4. Operating agreements as to the purchase of raw
materials from the foreign partner

Evolution of the problems:

PHL firm has gained all it can from the
arrangement
Wants to regain freedom of action
Action: PHL firm buys out the shares of the
foreign partner
seek early termination of the license
agreement
Point of View of Foreign Company

1. General concerns
a. Reasonable return on investment – related to its
view of the risk involved
Probability: payback period: 3-5 years
b. The possibility of devaluation
Probability: minimize initial cash outlay by
borrowing within the Philippines
capitalize his contributions in the
form of patents, trademarks, manufacturing
know-how
c. Foreign firms would prefer an equity investment
in which: they have majority ownership
there are provisions to increase
their investment to a majority if the venture
proves successful
Note:
licensing agreement – entails more time & expense
but with greater returns
Interested: Smaller foreign cos., those which
undertake a lot of research & development,
those with little or no foreign investments
2. Specific goals
a. Undertake a local manufacturing to penetrate
the local market:
Purpose: to keep the market or expand total sales
b. Set up a manufacturing base in the PHL
Purpose:
b.1 to avail of low-cost labor or materials to
produce for the local market, foreign market &
investor’s home country [usually MN firms]
b.2 for the PHL market and partly to gain access
to other market areas for which PHL offer
advantage in view of internal political reasons
Advantages of a license agreement:
1. Obtain extra income
2. Spread research and development
3. Retain established markets and reach new ones
4. Developed new market for parts manufactured
at home
5. Pave the way for new investment
6. Safeguard against infringement of patents in
the PHL
7. Acquire reciprocal benefits in technical know-
how
Reasons for going against licensing agreements:

1. They have a tradition or a policy of 100% or

majority equity investments
2. The fear of helping to establish a competitor
and may lose entirely once the license expires
3. The fear of losing the goodwill if the licensee
does not maintain quality standards
4. They feel that they have the organization and
resources for a direct investment
Point of View of the GOVERNMENT

1. Balance of Payments effects

- what extent is FX earned or saved
- How much foreign capital is brought in by the
foreign partner
- How much FX is saved by manufacturing locally
- How much FX is earned by exporting semi-
finished goods
- How much FX is expended and over what
period
- How much equipment must be imported: new
or used, credit terms, paid by company exports,
some parts imported for assembly in the PHL,
raw materials be imported, expected rate of
outflow of dividends, royalties, fees

2. Economic Development effects

- Number of jobs created in all categories
2.A unskilled and skilled workers
how much and what training to be provided
in what capacity will local technicians and
engineers be used
 plans for the gradual replacement of foreign
managers
extent of purchase of local materials
resulting in domestic exploitation
will the company seek to purchase parts
from other local suppliers

3. Political effects
Government policy:
a. Exclude or discourage foreign investment in
certain industries [e.g. military-related, basic
industries]
b. Too much foreign investment concentrated in
certain industries
c. Foreign investment may be acceptable from
certain countries but not from others
d. Tendency to decrease foreign industry
e. Favor agreements which contain a plan for
phasing out foreign ownership & control

Use of STRATEGY
- All parties: foreign, local firms, government –
sense of net gain
The PHL firm: select the scheme which gives the
largest net gain in the LT but letting the
government and the foreign firm achieve
minimum goals

TYPES of Strategies in dealing with Foreign

Partners:

1. Strategy for type of partner

a. Product range
- Diversified or one that is highly specialized
b. Size
large: with financial, technical, managerial
resources
Small: but responsive to its relationship

c. Extent of international operation

No other international interests: more responsive
but less sophisticated
Large firms: with international marketing network
facilitating entry of PHL co. product in the
foreign market
d. Nationality
- Have positive or negative implication

2. Ownership strategies
a. Joint venture with majority ownership by the
PHL firm
b. Joint venture with a 50-50 split on stock
ownership
c. Joint venture with minority PHL ownership
d. License agreements or management contracts
with no foreign equity participation
e. Joint venture with initial minority PHL
ownership with a provision: a percentage of
the stock be sold to the PHL firm each until it
acquires majority percentage or 100% of the
equity

f. Joint venture with a foreign company and the

Intl Fin Corp

g. Joint venture with a foreign co. and a local

development bank
3. Control strategies
Depends upon:
- type of decision
- Nature of the decision-making process
- Prior agreements on rights and responsibilities
Coverage:
- Hiring and firing production level
- New investment quality control
- Research and development marketing
- Pricing exports
- Dividends suppliers
4.Manufacturing strategies
- Refers to the mix of:
a.Portion of the final product to be imported
b.Portion that would be manufactured by the firm
c.Manufacturing subcontracted by other PHL
firms
Options: foreign firm ships 100% of the
materials/parts to the PHL for assembly by the
PHL firm
raw materials are available in the PHL,
firm manufactures & assemble the finished
product
Core strategy: decide what combination is
optimum before entry into negotiation
Consideration: firm’s own financial, managerial,
physical resources
environmental factors: availability
& cost of raw materials, existence of capable sub-
contractors, government regulations, practices
about importation

5. Marketing strategies
- Refer to the interrelation between domestic
versus export sales
Options:
- All production is marketed inside the PHL with no
assistance from the foreign firm
- 100% of the production is exported and sold to
the foreign partner
#6 Leadership and Social Responsibility

CEO’s Ideas and Characteristics

Corporate personality-image
Leadership Qualities:
• Analytical ability
• Creativity
• Self-awareness
• Degree of sensitivity as required by his strategic
role
Role of organization: balance the demands of
stockholders, consumer, labor, government,
general public

Leadership:
Task: integrate all individual efforts toward
organization objectives.
Influence: any means which induces behavioral
change in individuals or groups
exerted either up and down the
hierarchy and laterally in peer-group
relationships
Emulation Suggestion Persuasion Coercion

Striving to Bringing an Prevailing Forcing;

equal or idea, on a person constraint;
excel proposition by advice, compulsion
Imitating to , plan urging ; physical
equal or before a reason or pressure or
surpass person’s inducemen compressio
Approachin mind for ts to do n
g or considerati something
attaining on or
equality possible
action
Power and Authority: basis of the means of
influencing behavior

Power - the personal ability to induce

behavioral change
How to acquire:
a. Superior physical trait
b. Greater economic force
c. Higher mental capability
Authority - an institutionalized right to induce
behavioral change
- resides in the position, formal and
gives continuity to the organization

Power - resides in the person, informal,

transient in nature

Conclusion: Authority is designed to stop

abuses of personal power in formal
organizations
Results of Abuses in Organization Decisions:
1. Discontinuity
2. Unpredictability
3. Irrationality

Basis of Effectiveness of Authority:

- Consent of subordinates
- Position holder must be deemed legitimate by
subordinates
- Legitimacy : acceptance theory is linked with
the right to command theory
Leader - the individual given the task of
directing and coordinating task-relevant group
activities or who carries the primary
responsibility for performing these functions in
the group

Leadership Style
- leadership is a key part of
management
- leadership is the method used to
trigger subordinates to move toward the
organization’s goals
Boss-centered Subordinate-centered
Leadership Leadership

Use of Authority by
the Manager
Area of freedom for
subordinates
 Continuum of Leadership Behavior

Manager Manager Manager Manager Manager Manager Manager

makes sells presents presents presents defines permits
decision decision ideas tentativ problem limits, subordi
s& and e , gets asks nates to
announ invites decision suggesti group to function
ces it questio subject ons, make within
ns to makes decision limits
change decision defines
s by
superior
Study:
- Leadership approach is situational
[present incidents a & b]

a. Must have a clear understanding of the general

organizational and interpersonal relationships
specific to the situation
b. Know the methods of conflict resolution and
typologies
Conflict Resolution

Typology A
1. Problem Solving
- goals are shared and each of the parties to the
disagreement will contribute to the solution via
the satisfaction of shared criteria
2. Persuasion
- Goals differ but are not fixed
3. Bargaining
- Goals differ and taken as fixed

4. Politics
- Bargaining includes potential allies or other
influential parties who are expected to shift the
balance of power to one of the factions directly
involved in the conflict

Most effective: problem-solving; confrontation

Typology B
1. Forcing
- The authoritarian use of power by the
positional authority to force a solution that is
satisfactory to that person or group’s point of
view
2. Confrontation
- Getting conflicting parties to discuss their
problems and thresh out differences and reach a
solution that best meets the goals of the
organization

3. Smoothing or bargaining
- tends to compromise the real problem to
maintain interpersonal relationships at the
expense of a real solution to the conflict
Conflict: contributes to the need for change
also becomes dysfunctional
Conclusion 1: manager’s task is leadership
toward effective resolution not elimination of
conflict

Conclusion 2: examine specific problem and

people involved to determine the approach that
works best to meet the requirements of the org
Organizational Analysis

Task [objectives]

Technology Structure

People [actors]

Interactive Model showing the major dimensions of

any organization
Theory X – Authoritarian Theory Y - Participative

1. Man dislikes work & avoids if Work is satisfying

possible
2. People must be coerced, Exercises self-direction, self-
controlled, directed, threatened with control towards objectives
punishment to achieve objectives
3. Prefers to be directed, avoids With commitment
responsibility, little ambition, wants
security
Seeks responsibility
Creative capacity is
distributed
Intellectual capacities are
partially utilized
Factor Godown Advertising

1. Predominant Theory x Theory y

organizational
assumption

2. Predominant forcing confrontation

approach in conflict
resolution

3. Predominant Autocratic – non- Democratic -

leadership style participative participative
Assumptions: L Organization Assumptions: T Organization
1.Stable environment Uncertain environment
2. Positional authority Colleague influence
3. Centralized structure Decentralized structure
4. Conflict repressed Conflict encouraged
5. Conflict resolved by forcing Conflict resolved: confrontation

6. manager’s decision Committee decision

7. Creativity stifled Creativity rewarded
8. Loyalty to organization Loyalty to discipline
9. Few channels of comm Many channels of comm
Factor Godown Advertising Agencies

successful Theory X or “L” Theory Y or “T”

Forcing Confrontation
Autocratic Democratic

unsuccessful Theory Y or “T” Theory X or “L”

Confrontation Forcing
Democratic Autocratic
 Characteristic Z A
employment lifetime Short term
Control system implicit explicit

Decision-making consultative Individual

responsibility group individual

promotions slow fast

Concern for the total partial
individual
Interpersonal Accent on Accent on
work linkages cooperation competition
Social Responsibility

Argument:
One view - the business of business is business; LR
profit maximization is the contribution to society

2nd view - big business [growing power & impact

on society] should de-emphasize profits and
begin contributing directly to the welfare of
society
Acc. To Peter Drucker:

• Whoever assumes ‘responsibility’ asserts

‘authority’
• One is responsible for whatever one has
authority over
• Taking responsibility with no authority is
‘usurpation of power’
Question: what impacts do the organizations have
because of their function
Ex.HK government
Responsibility versus Accountability

Responsibility in management’s concept of

delegation:
- CEO delegates duties and authority to
subordinates but the firm’s success or failure is
still the responsibility of the CEO
- CEO creates an obligation for subordinates to
report to him
Traditional model of Social Responsibility
- Based on the economic model and assumptions
of perfect competition in which control was
achieved by able buyers and sellers in the market
- With Self-balancing nature
Demands of :
Workers = customers

Methods of Control:
1. Bureaucracy
2. Judicial systems
3. Administrative boards
4. Price regulation mechanisms
5. Education
6. Public opinion
7. Voting
8. self-control

Control used for Business

Accountability to several publics
[ stockholders, consumers, labor, general public]
Stockholders: highest profits
Consumers: quality products at a low price
Labor: high wages and better working
conditions
General public: safe and clean environment

Assessment of Impact and Opportunity

1. Make an inventory of its activities that have a
social impact
2. Explain the circumstances that led up to these
activities
3. Evaluate programs that are most relevant
4. Assess in which social programs connect with
firm and society