Peter Drucker and other management consultants and theorists used to argue that the most important question for managers to ask was: What’s your business? The emphasis on clearly defining what business an organization was in captured the creative and intellectual imagination of an entire generation of management thinker. The literature of the file is filled with stories about consultants who made a fortune by offering insights such as, ‘you are not in the tin can business, you are in the packaging business’.
But another question lurks at the heart of strategic management decisions: What did you stand for? This question calls for a statement of values and principles, as an answer to questions about why a company does what it does. The critic who asks, why did AT&T agree to divest the bell operating companies? may want to know what options were available to AT&T but it is even more likely that the critic wants to know what values and principles lay behind AT&T’s decision. Drucker and others call such a statement of values and principles enterprise strategy (E-strategy for short)
At least seven different enterprise strategies have been identified:
(1) Stockholder E-Strategy: The corporation should maximize the interests of stockholders.
(2) Managerial Prerogative E-Strategy: The corporation should maximize the interests of management.
(3) Restricted Stakeholders E-Strategy: The corporation should maximize the interest of a narrow set of stakeholders, such as customers, employees and stockholders.
(4) Unrestricted Stakeholder E-Strategy: The corporation should maximize the interest of all stakeholders.
(5) Social Harmony E-Strategy: The corporation should maximize social harmony.
(6) Rawlsian E-strategy: The corporation should promote inequality among stake holders only of inequality results in raising the level of the worst off stakeholder.
(7) Personal Projects E-Strategy: The corporation should maximize its ability to enable corporate members to carry out their personal projects.
Although these brief statements become immensely more complicated when any organization attempts to put them into practice, the trend toward looking at the ethical foundations of strategy is likely to continue especially given the uncertain environment of today’s organizations and the increasingly critical eye with which its decisions are being examined.
E-Strategy in Practice: IKEA managers have established an entire business around the mission of the company’s founder, Ingvar Kamprad to create a better everyday life for the majority of the people. Managers the company have devised a strategy from this mission in which the roles of IKEA’s suppliers, warehousing distribution and retailing systems are well integrated and internally consistent. The strategy is implemented by highly motivated employees who consider themselves part of the ‘IKEA family’. They are given generous benefits, including paternal leave and four weeks of vacation after five years with the company. At the same time, company executives fly coach and stay in lower priced hotels. So, the E-strategy at IKEA combines elements of improving people’s lives and relating as family members.
Managers at Kinder Care Learning Centers Inc have recognized the opportunities offered by the increase in women in the workforce. Kinder care operates education-oriented child care centers. As more women meter the workforce, managers at a variety of organizations have seen the value of offering onsite or subsidized child care as a benefit. It is an excellent enticement and, morale builder for their employees. Kinder Care is expanding to meet such corporate needs. It is opening new centers at a rate of more than two a month near mass transit stations and at work sites. So, the E-Strategy here appears to combine elements of pre-school education and strong assurances the child care will be conveniently available. Think about the E-Strategy that seems to be followed at MTV. Then compare that to an E-strategy that managers appear to follow at CNN.