Ethics and Governance
The concepts of ethics and corporate governance are unceasingly becoming importance in the modern day organizations as they play a great role in addressing key issues. In that respect, the two concepts take varying approaches and their application varies among firms (Elms et al., 2010). Regarding the ethics issue, it relates to the norms and morality of a given community and what is right or wrong draws from those norms and morality values. In the modern world, the issues of ethics have been popularized given the increased cases of organizations that have been judged on the ethical basis (Cannon, 2012).
In that respect, some organizations have found themselves in situations pitting them between the ethical decision making and their profitability maximization resulting in ethical dilemmas. The ethical dilemma entails the difficulty in deciding what should be done given the self-interest and the interests of the greater good. Some of the key issues in which the ethics have been reflected include the environmental issue where corporations have had to make decisions regarding their operations in some cases having to make less optimal financial decisions just because of the ethical aspects the matter carriers (Teale et al. 2003).
An example of an ethical dilemma would be a company that seeks ways of disposing its plant waste into the nearest river as that would provide a low cost. However, although the disposal method would be cost-effective, it would entail harming the communities that rely on that river for a water source. In another case would be a pharmaceutical company such as GlaxoSmithKline seeking to test one of its drugs or deciding whether to continue the sale of a drug that has adverse side effects on its users. The decision would involve addressing key possibilities in such drug failure rather than continuing using them in the view that the market would not know the negative effect they would have on the consumers. In such case, deciding whether to continue a drug with negative effects of pulling it off the market would involve an ethical dilemma. In the great interest of the society, ethical principles would call for the withdrawal of such drug regardless of the financial costs and implications to the business (Crane and Matten, 2007).
In that respect, the decision would be based on what is right or wrong on the ground of morality. Thus, it can be concluded that morals act as a key guide to ethical decision making. Further, accepted norms in a society can be concluded as key guide as to what can be considered ethical or unethical conduct,
On corporate governance, the concept has been popularized in the modern business world given the increasing conflict of interests that needs to be managed, In that respect, the concept has been playing a great role in ensuring controls in organizations and seeking to ensure that stakeholders’ interests are protected through implementation of the suitable approaches and systems.
Some of the keys issues that have led to the corporate governance concept relate to the increased failure of firms owing to the decision that greatly bordered on excessive risk taking or self-serving interests. Other issues that have brought out the corporate governance include the corruption, frauds, and executive compensation. With that, various types of governance frameworks have been put in place seeking to protect the investors as well as organizations from exploitation by the management and decision makers as well as ensuring that shareholders worth is protected through decisions making that is guided by certain principles (McManus, 2011).
On issues touching on the executive compensation, decisions have been made that have crippled firms as the senior managers sought to enrich themselves at the expense of the firm and the shareholders. With that, framework such as executive pay and compensation policies have been greatly focused on as means of reducing the excessive benefiting of the senior managers (Elms et al. 2010).
Example of ethical decision making would involve Oil Company such as BP seeking to stop a seabed oil exploration that could be considered dangerous or a high risk for the ecosystem. If the company identified such a high risk, the ethical decision would be to stop the exploration until the safety issue was addressed.
In a case of corporate governance, good practice entails embracing standards that seek to enhance the protection of the shareholders worth as well as enhance the organizations continuity as a going concern. A good example is development of suitable governance structures by financial service companies such as Barclays seeking to ensure that executive compensation is on merit and performance basis and does not involve exploiting the company through excessive bonuses and allowances at expense of the shareholders.
An example of corporate governance failure is Lehman Brothers, which failed due to poor corporate governance that did not safeguard against the excessive risk taking. Another example is the case of Enron. Enron, which was a commodities company and services corporation 2001 scandal that involved keeping huge debts off their balance sheets (Accounting, 2016). Finally, American Insurance group which was a multinational insurance company is third example of corporate governance failure. The company booked loans as revenues and told traders to inflate stock prices (Accounting, 2016).
In that respect, the corporate governance concept covers various issues ranging from the control system to the conduct of employees and the accounting standards’ application.
In view of the analysis on ethics and corporate governance, it is clear that the two seeks to address vices that could result in organizations leading to their failure or negatively affecting their brand image. That has been demonstrated by the fact that the provided examples of company failures resulted from lack of suitable governance structures. Thus, it is crucial for organizations to embrace ethical decision making as well as establish strong governance structures for purpose of sustainability.
Mergers, Acquisitions, and Alliances
Mergers acquisitions and the strategic alliances have been key strategies that organizations apply in achieving competitive advantage. The three relates to amassing power in the market as they seek to offer synergy through varying methods.
Regarding the mergers, they mainly involve two firms of same relative size coming together to form an independent firm that enjoys the synergy of the two companies’ resources.
On the other hand, the acquisition mainly relates to larger firms seeking to acquire relatively smaller firms as ways of enhancing their capacity by taking advantage of the capabilities identified in those acquired resources.
The key drivers of the mergers and acquisitions can be summarizing as the pursuit of growth, competitive advantage enhancing financial efficiency, tax efficiency and assets stripping. Regarding the growth, companies are merging or acquiring other firms enhances their resource capabilities as well as benefits from the market share of those firms that have been acquired or merged with. That has become necessary considering the increased competition with globalization and firms can seek to merge or acquire others in various territories as means of achieving growth in those regions.
Regarding the issue of competition, power in the market is crucial tool that firms use to compete with, that entails firms seeking to combine resources as ways of addressing a competitor or creating a competitive advantage against the industry peers, that s possible given the synergies of the combined resources such as technologies as well as key 9natangibel assets
Regarding the efficiency enhancing, some firms may be efficient in some areas that other and identification of those differences and seeking to merge of acquiring a firm with capabilities in an area where a business has a weakness I a useful way of enhancing the overall organizational efficiency. For instance, a firm in the oil and gas industry may be efficient in the downstream operations while another is efficient in the upstream operations. Combining those firms through a merger would create overall efficiency across the supply chain achieving substantial power in the market.
Also, firm may seek to combine resources through mergers or acquire other firm’s resources as a way of reducing their overall tax burden; that is achievable considering the different tax system and capital requirements that may place the varying tax burden on given parameters.
Finally, a firm may seek to embrace a merger or acquire the other as a way of stripping those key resources and assets that they would deem as being a threat to their competitiveness. That is common with increasing technological advance where a firm identifies the peers or other firms with key assets and technologies that could threaten their sustainability and them acquiring them to get the assets of the market or to put those assets into their use.
Given the above drivers, the mergers and acquisition have various benefits to firms in view that that could enable exploitation of distinctive capabilities, enhance asset management, increase the operations scale and increase geographical coverage given the globalization that open markets for firms across the globe. Finally, the strategic alliances have become key strategies where two independent firms come together for the purpose of pursing certain objective bust still retaining their independence and structures.
For instance, it would require a company such as HP, which is well known for its hardware development to partner with a key software developer such as Microsoft in a bid to enhance its power in the market regarding its production and offer of its computers. In that respect, such strategic change for the business would require the HP’s management to consider the power potential that the strategic alliance would offer regarding competitiveness and sustainability in the long run (HP, 2014).
The key benefits of such strategic alliances can be identified to include expediting of developments, overcoming the deficit in key operational areas, enhancing the supply chain, risk sharing and economies of scale as well as improving market access across the globe.
However, all the three strategies have key drawback that includes the conflict of cultures and interests, failure to achieve the common goal and varying management styles that may make it difficult to coordinate. For Mergers and acquisitions the key drawback may involve the premium prices mainly paid for the transactions, the clash of cultures that may negatively affect the integration and the achieving of less than expected cost saving hence businesses could take longer to achieve the goal they could have easily achieved independently.
However, there are several strategies that can be applied in seeking to ensure the success of the mergers, acquisition and strategies alliance among them the commitment between the involved partners, building relationships based on trust and identifying a balance of interests where the interest of cultures could clash.
An example of strategic alliance would be a company such as the General Motors seeking to establish a key partnership with one of its components suppliers in supplying crucial components for production of its cars. On the other hand, a merger would involve two firms of relatively same size such as Apple and Google merging to form a powerful business in the technology market to address competition in both software and hardware markets.
Some of the key areas in which the three strategies may be applied include in seeking technology transfers and supply of key components. An example of the application includes the Wells Fargo merger with Wachovia merger that involved a remodeling of all the Wachovia banking stores to Wells Fargo’s floor layout. The two companies sought to combine their efficiencies with Wells Fargo floor layout being provided with the environment-friendly concept of the Wachovia (Wells Fargo, 2016). Another good example of the acquisition strategy application is the case of Disney acquiring Maker Studios hence enhancing its capabilities (Christine, 2014).
In view of the analysis, it is clear that the three strategies of mergers, acquisitions and strategic alliance provide firms with an opportunity to grow. That is given the power that the three provides in terms of synergies from resources combination, technology transfer and the ability to venture into new markets. With that, it would be recommended that firms seeking to enhance competitive advantage in their market could apply one of the strategies as a means of competing with the market leaders.
Power and Politics
Change is crucial to organizational success given that the firms operate in a dynamic environment. However, effective management of change requires suitable approaches that in-turn requires considering the keys aspects of power and politics as well as the elements that influence them such as the stakeholders and resources (Johnson et al., 2014).
Power: Power refers to the influence that a firm, a group or an individual has over the outcome of a possible change. Thus, managers should pay attention to the power factor in a bid to ensure that the influence works in their favor towards the positive realization of the change goals and objectives. With that, it also requires the managers to harness that power for the purpose of driving change with the appropriate support as well as sustainability. Also, firms can overcome challenges and opposition to the change given the influence that the said power would have on the aspect in question (Jennings and Wattam, 1998).
Politics: The Politics refer to the means by which key actors have an influence on the outcomes of the planned changes or systems; operations. In that respect, change management requires understanding the politics in play for them to better address the key issues through the most acceptable means to those who are involved.
Stakeholders: The stakeholders refer to those groups, individuals or organizations with the ability to influence an outcome or who are affected by that outcome. In that respect, the interest of the key stakeholders is of great influence on the manager's ability to execute change as it requires considering their interest and seeking a balance that would enhance their support of the proposed change (Teale, Dispenza, Flynn and Currie, 2003). In that respect, it requires managers to have a good understanding of the politics involved in managing the stakeholders’ needs as well as learning skills on how to be politically correct regarding those influences.
Resources: Every change requires resources of various types; ranging from personnel and fund to expertise. In that respect, the managers need to consider the availability as well as sustainability of the resources before deciding on the suitable approach towards change.
Given those factors, the managers have the understanding that they need to ensure effective management of alliances as well as the building of relationships that would help them achieve the desired power action to drive the change and the desired outcome. In that respect organizations would need to enhance their power to enhance competitiveness and ability to deliver in the increasingly competitive market.
In summary, the decision makers are required to recognize the need of being politically correct as well as harnessing the power of politics by acquiring the relevant skills as well as understanding the processes involved (Jennings and Watham 1998). That would be key for managers even in managing possible influences to their decisions regarding change. It would also be key in ensuring that organizations have access to power and key resources.
Some of the ways of gaining power or a key source of power for businesses can be described as the strategies involving mergers, acquisitions and strategic alliances. That is because those strategies would offer synergies by harnessing resources and capabilities, hence enabling businesses to retain a competitive position in a market. However, there are other key sources of power that businesses can apply. A good example is an application in the upstream segment of the oil and gas industry where companies such as BP have loyalty programs for their customers (BP, 2015). With that, the business ensures that the customers would even find it costly to switch to substitute products such as clean energy given that they would lose their loyalty gains regarding the discounts and offers they get from the BP loyalty program. In that view, substitute offering businesses such as those offering electric energy for cars as a substitute for the oil and gas would have little impact on the BP’s customer base.
Another example of strategies seeking to apply power would pertain to businesses protecting themselves from new entry threat. For a business to retain its competitiveness in the market, it requires protecting its market share from capture by new entrants. To achieve that, the business needs to enhance its power and retain it. That power is gained through various strategies that eventually act as barrier to the potential entrants into the market. An example of the strategy application is the wide scale operations that offer economies of scale to business, hence ensuring that it is operated and can sell below the average cost of the new entrants. With that, new entrants would not find the market to be profitable for their entry. Another case of power application is Coca-cola retaining leadership in the soft drinks market with its economies of scale offers it protection against the potential threat from new entrants. That is because businesses entering into the market would have to sell their products at prices that are below their average cost making their operations unsustainable. Another strategy to enhance the power would be seeking protection through licensing of key industry operations. That would ensure that the firms are protected from new entrants as the licensing would limit the market entry.
Example of politics influence on a business can be cited in cases such as one that Wall-Mart faces regarding its low cost operation model. The retailer’s management has to deal with politics regarding the suitability of their model given that it is claimed to pay low wages to its workers. In that respect, the Wall Mart managers would need good skills of managing politics and influence from key agencies such as the workers unions. On the other hand, power application example can be the case of General Electric when it used to be a monopoly in electricity supply. With that, the company can be said to have enjoyed power from the government protection against competition through limited licensing of entry into the market.
In view of the analysis, it is clear organizations operate under dynamic environments with key influences such as politics. With that, mangers are needed to not only have suitable skills to address the political processes but also establish the suitable relationships and networks that would help them address such forces. On the other hand, power has been demonstrated as a key competitive element that organizations seek in their bid to establish leadership in their respective industries. In that view, it would be crucial for organizations facing stiff competition to identify the most suitable approaches of amassing power through the various strategies that are available such as mergers, acquisitions and strategic alliances.
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