The nature, role, and purpose of business Meanings
BUSS1000 Study Notes
Week 2 – The nature, role, and purpose of business
Meanings: -
Organization: “a group of people who work together in an organized way for a shared purpose” Company: “an organization that sells goods or services in order to made money” Corporation: “a large company or group of companies that is controlled together as a single organization” Business: “a particular company that buys and sells goods and services” Stakeholder: “an organization or “a person such as an employee, customer, or citizen who is involved with an organization, society etc.. And therefore has responsibilities towards it and an interest in its success.”
Stakeholders: -
Owners (e.g. investors, shareholders, agents, analysts, and ratings agencies) Customers (e.g. direct customers, indirect customers, and advocates) Employees (e.g. current employees, potential employees, retirees, representatives, and dependents) Industry (e.g. suppliers, competitors, industry associations, industry opinion leaders, and media) Community (e.g. residents near company facilities, chambers of commerce, resident associations, schools, community organizations, and special interest groups) Environment (e.g. nature, nonhuman species, future generations, scientists, ecologists, spiritual communities, advocates, and NGOs) Government (e.g. public authorities, and local policymakers; regulators; and opinion leaders) Civil society organizations (e.g. NGOs, faith based organizations, and labor unions)
Mission, vision and values -
Explaining why an organization exists An understanding of hat the leaders want the organization to become Describes an inspiring new reality Often serve to aid in decision making Provides context for all decisions within the organization Guiding the development of strategy and organization
So what’s the difference? -
Mission Statement: “a short written description of the aims of a business, charity, government department, or public organization” Vision Statement: “a statement of what a company or an organization would like to achieve in the future” Values: “the principles that help you to decide what is right and wrong, and how to act in various situations”
Three musts of a mission . Look at strength and performance -
Do better what you already do well – if it’s the right thing to do
. Look outside at the opportunities and the needs -
Where can you make a difference?
. Look at what you really believe in -
A mission is not impersonal
Where do they lead us? -
Organizational culture: “the types of attitudes and agreed ways of working shared by the employees of a company or organization” Organizational culture will be something that will appear often through your studies
What are these initialisms? -
Corporate Social Responsibility Creating Shared Value Social Entrepreneurship
-
CSR > CSV > SE
Corporate Social Responsibility -
Increasing societal pressure for organizations to think beyond their bottom line. There were many ways that this was discussed however a good definition appeared at the turn of the century. “CSR as actions that appear to further some social good, beyond the interests of the firm and that which is required by law” (McWilliams % Siegel, 2001, p117)
-
Often, we talk about “giving back” as an example Donations Sponsorships Funding community projects
Examples of CSR: Fairtrade Purchasing -
Cadbury Australia and New Zealand Cocoa Life and Fairtrade Australia and New Zealand
-
Warren Buffet Pledged 99% of his fortune via philanthropic causes. (Schifrin, 2013)
Critiques of CSR -
What counts? Longevity of change? How much counts? Who decides?
For organization specifically -
Ethics and legality of spending shareholders money on ventures unrelated to organizations profitability and performance. i.e. where does CSR turn into poor financial management?
Creating Shared Value -
-
“The purpose of the corporation must be redefined as creating shared value, not just profit per se. This will drive the next wave of innovation and productivity growth in the global economy. It will also reshape capitalism and its relationship to society.” (Porter & Kramer, 2011, p 2) Driving mutually beneficial change Reconceiving products and markets
Example of CSV: Transforming procurement -
GE Ecomagination program
Critiques of CSV . Unoriginal -
It ‘trashes CSR’ and uses a straw man argument It really isn’t that different in the eyes of many scholars
. Ignores tensions -
Moving beyond tradeoffs Win – Win Greenwashing
. Naivety around compliance -
Assumes people will comply with law and ethical standards? Who decides?
. Doesn’t address systematic problems within capitalism . (Crane, Palazzo, Spence, & Matten, 2014)
Social Entrepreneurship Definitions -
-
-
Entrepreneurs are those persons (business owners) who seek to generate value through the creation or expansion of economic activity, by identifying and exploiting new products, processes or markets. Entrepreneurial activity is enterprising human action in pursuit of the generation of value through the creation or expansion of economic activity, by identifying and exploiting new products, processes or markets. Entrepreneurship is the phenomenon associated with entrepreneurial activity. (OECD Eurostat Entrepreneurship Indicators Programme, 2009)
These definitions are important because: -
Differentiate entrepreneurial activity from ‘ordinary’ business activity (note the emphasis on newness: new products, new processes or new markets) Indicate corporations and other businesses can be entrepreneurial even though only the people in control and owners of organizations can be considered entrepreneurs Emphasize entrepreneurial action is manifested rather than planned or intended Do not equate activity with the formation of any particular corporate vehicle; and Incorporate economic, social and cultural value creation (even though they are defined in the context of business)
Social Entrepreneurship -
SE is a type of entrepreneurship that is distinguished by three key factors Socially: dominant social mission – addressing social problems – reduced externalities, market voids, gender empowerment, equal supply chains Innovation: create destruction, resourcefulness, changing institutions, reconfiguring needs, wants, demands Market orientation: performance, impact measurement, stakeholder not just shareholder strong values, market failure (private/public/social)
Social entrepreneurship often manifests social enterprise -
“They are established to unmet social needs through business like and innovative means.” (Wang, 2009, p 1-2)
Two driving forces (Alter, 2006) –
“First, the nature of the desired social change often benefits from an innovative, entrepreneurial, or enterprise-based solution… (p. 205).”
–
“Second, the sustainability of the organization and its services requires diversification of its funding stream, often including the creation of earned income opportunities (p. 205).”
–
Can be profit or non-profit
–
More sustainable earned income strategies
–
Use of business as a vehicle and a way of thinking
Example of SE: Honey Care Africa -
Honey Care Africa – honeycareafrica.com NGO provides beehives through loan finance and trains rural farmers Farmers sell to private enterprise selling fair trade in EU market Proceeds return to NGO to pay off hives and buy new one to scale program Pioneering SE and fair trade before it was popularized
Critiques of Social Entrepreneurship -
Who’s unmet social needs? How can existing organizations engage in social entrepreneurship? Can all enterprises that deliver social service be considered social entrepreneurship? Is SE found in the process or the output? What counts? Who decides?
Week 2 – The nature, role, and purpose of business
Meanings: -
Organization: “a group of people who work together in an organized way for a shared purpose” Company: “an organization that sells goods or services in order to made money” Corporation: “a large company or group of companies that is controlled together as a single organization” Business: “a particular company that buys and sells goods and services” Stakeholder: “an organization or “a person such as an employee, customer, or citizen who is involved with an organization, society etc.. And therefore has responsibilities towards it and an interest in its success.”
Stakeholders: -
Owners (e.g. investors, shareholders, agents, analysts, and ratings agencies) Customers (e.g. direct customers, indirect customers, and advocates) Employees (e.g. current employees, potential employees, retirees, representatives, and dependents) Industry (e.g. suppliers, competitors, industry associations, industry opinion leaders, and media) Community (e.g. residents near company facilities, chambers of commerce, resident associations, schools, community organizations, and special interest groups) Environment (e.g. nature, nonhuman species, future generations, scientists, ecologists, spiritual communities, advocates, and NGOs) Government (e.g. public authorities, and local policymakers; regulators; and opinion leaders) Civil society organizations (e.g. NGOs, faith based organizations, and labor unions)
Mission, vision and values -
Explaining why an organization exists An understanding of hat the leaders want the organization to become Describes an inspiring new reality Often serve to aid in decision making Provides context for all decisions within the organization Guiding the development of strategy and organization
So what’s the difference? -
Mission Statement: “a short written description of the aims of a business, charity, government department, or public organization” Vision Statement: “a statement of what a company or an organization would like to achieve in the future” Values: “the principles that help you to decide what is right and wrong, and how to act in various situations”
Three musts of a mission . Look at strength and performance -
Do better what you already do well – if it’s the right thing to do
. Look outside at the opportunities and the needs -
Where can you make a difference?
. Look at what you really believe in -
A mission is not impersonal
Where do they lead us? -
Organizational culture: “the types of attitudes and agreed ways of working shared by the employees of a company or organization” Organizational culture will be something that will appear often through your studies
What are these initialisms? -
Corporate Social Responsibility Creating Shared Value Social Entrepreneurship
-
CSR > CSV > SE
Corporate Social Responsibility -
Increasing societal pressure for organizations to think beyond their bottom line. There were many ways that this was discussed however a good definition appeared at the turn of the century. “CSR as actions that appear to further some social good, beyond the interests of the firm and that which is required by law” (McWilliams % Siegel, 2001, p117)
-
Often, we talk about “giving back” as an example Donations Sponsorships Funding community projects
Examples of CSR: Fairtrade Purchasing -
Cadbury Australia and New Zealand Cocoa Life and Fairtrade Australia and New Zealand
-
Warren Buffet Pledged 99% of his fortune via philanthropic causes. (Schifrin, 2013)
Critiques of CSR -
What counts? Longevity of change? How much counts? Who decides?
For organization specifically -
Ethics and legality of spending shareholders money on ventures unrelated to organizations profitability and performance. i.e. where does CSR turn into poor financial management?
Creating Shared Value -
-
“The purpose of the corporation must be redefined as creating shared value, not just profit per se. This will drive the next wave of innovation and productivity growth in the global economy. It will also reshape capitalism and its relationship to society.” (Porter & Kramer, 2011, p 2) Driving mutually beneficial change Reconceiving products and markets
Example of CSV: Transforming procurement -
GE Ecomagination program
Critiques of CSV . Unoriginal -
It ‘trashes CSR’ and uses a straw man argument It really isn’t that different in the eyes of many scholars
. Ignores tensions -
Moving beyond tradeoffs Win – Win Greenwashing
. Naivety around compliance -
Assumes people will comply with law and ethical standards? Who decides?
. Doesn’t address systematic problems within capitalism . (Crane, Palazzo, Spence, & Matten, 2014)
Social Entrepreneurship Definitions -
-
-
Entrepreneurs are those persons (business owners) who seek to generate value through the creation or expansion of economic activity, by identifying and exploiting new products, processes or markets. Entrepreneurial activity is enterprising human action in pursuit of the generation of value through the creation or expansion of economic activity, by identifying and exploiting new products, processes or markets. Entrepreneurship is the phenomenon associated with entrepreneurial activity. (OECD Eurostat Entrepreneurship Indicators Programme, 2009)
These definitions are important because: -
Differentiate entrepreneurial activity from ‘ordinary’ business activity (note the emphasis on newness: new products, new processes or new markets) Indicate corporations and other businesses can be entrepreneurial even though only the people in control and owners of organizations can be considered entrepreneurs Emphasize entrepreneurial action is manifested rather than planned or intended Do not equate activity with the formation of any particular corporate vehicle; and Incorporate economic, social and cultural value creation (even though they are defined in the context of business)
Social Entrepreneurship -
SE is a type of entrepreneurship that is distinguished by three key factors Socially: dominant social mission – addressing social problems – reduced externalities, market voids, gender empowerment, equal supply chains Innovation: create destruction, resourcefulness, changing institutions, reconfiguring needs, wants, demands Market orientation: performance, impact measurement, stakeholder not just shareholder strong values, market failure (private/public/social)
Social entrepreneurship often manifests social enterprise -
“They are established to unmet social needs through business like and innovative means.” (Wang, 2009, p 1-2)
Two driving forces (Alter, 2006) –
“First, the nature of the desired social change often benefits from an innovative, entrepreneurial, or enterprise-based solution… (p. 205).”
–
“Second, the sustainability of the organization and its services requires diversification of its funding stream, often including the creation of earned income opportunities (p. 205).”
–
Can be profit or non-profit
–
More sustainable earned income strategies
–
Use of business as a vehicle and a way of thinking
Example of SE: Honey Care Africa -
Honey Care Africa – honeycareafrica.com NGO provides beehives through loan finance and trains rural farmers Farmers sell to private enterprise selling fair trade in EU market Proceeds return to NGO to pay off hives and buy new one to scale program Pioneering SE and fair trade before it was popularized
Critiques of Social Entrepreneurship -
Who’s unmet social needs? How can existing organizations engage in social entrepreneurship? Can all enterprises that deliver social service be considered social entrepreneurship? Is SE found in the process or the output? What counts? Who decides?
