week1notes-120826233114-phpapp01
TRANSCRIPT
-
7/25/2019 week1notes-120826233114-phpapp01
1/35
-
7/25/2019 week1notes-120826233114-phpapp01
2/35
1-2
ExxonMobil Corporation
o Company history
o Main business is discovering, producing, and selling
oil and natural gas
o Descended from the Standard Oil trusto In 1890 Congress passed the Sherman Antitrust Act to
outlaw its monopoly
o Once had more than a 90% market share of the
American oil market
o The values of its founder, John D. Rockefeller, defined
the company culture
-
7/25/2019 week1notes-120826233114-phpapp01
3/35
1-3
ExxonMobil Corporation
o The leader
o John D. Rockefeller (Standard Oil)
o Emphasized cost control, efficiency, centralized
organization, and suppression of competitors
o ExxonMobil is no longer the commanding trust of
Rockefellers era
o
Its power is challenged and limited by economic,political, and social forces
-
7/25/2019 week1notes-120826233114-phpapp01
4/35
1-4
ExxonMobil Corporation
o As a corporate citizen ExxonMobil funds worldwide
programs to benefit communities, nature, and the arts
o The story of ExxonMobil raises central questions
about the role of business in societyo When is a corporation socially responsible?
o How can managers know their responsibilities?
-
7/25/2019 week1notes-120826233114-phpapp01
5/35
1-5
ExxonMobil Corporation
o What actions are ethical or unethical?
o How responsive must a corporation be to its critics?
-
7/25/2019 week1notes-120826233114-phpapp01
6/35
1-6
What is the BusinessGovernment
Society Field?
Business Profit-making activity that provides products and services to satisfy
human needs
Government Structures and processes in society that authoritatively make and
apply policies and rules
Society A network of human relations composed of ideas, institutions, andmaterial things
Idea An intangible object of thought
Value An enduring belief about which fundamental life choices are correct
Ideology A bundle of values that creates a particular view of the world
Institution A formal pattern of relations that links people to accomplish a goal
Material things Tangible artifacts of a society that shape and are shaped by ideas and
institutions
-
7/25/2019 week1notes-120826233114-phpapp01
7/35
1-7
Figure 1.1 - How Institutions Support
Markets
-
7/25/2019 week1notes-120826233114-phpapp01
8/35
1-8
Why is the BGS Field Important to
Managers?
o To succeed in meetings its objectives a business must
be responsive to both its economic and its
noneconomic environment
o Recognizing that a company operates not only withinmarkets but within a society is critical
-
7/25/2019 week1notes-120826233114-phpapp01
9/35
1-9
Why is the BGS Field Important to
Managers?
o A basic agreement or social contract exists between
economic institutions and other networks of power in
a society
o Establishes the general duties that business must fulfillto retain the support and acquiescence of the others as
it organizes people, exploits nature, and moves
markets
-
7/25/2019 week1notes-120826233114-phpapp01
10/35
1-10
Figure 1.2 - The Market Capitalism Model
-
7/25/2019 week1notes-120826233114-phpapp01
11/35
1-11
Four Models of the BGS Relationship: The
Market Capitalism Model
o Depicts business as operating within a market
environment, responding primarily to powerful
economic forces
o The market acts as a buffer between business andnonmarket forces
o Understanding the history and nature of markets is
important to appreciate this model
-
7/25/2019 week1notes-120826233114-phpapp01
12/35
1-12
Four Models of the BGS Relationship: The
Market Capitalism Model
o The advent of market economy, reshaped human life
oMarket economy:The economy that emerges when
people move beyond subsistence production to
production for trade, and markets take on a morecentral role
-
7/25/2019 week1notes-120826233114-phpapp01
13/35
1-13
Four Models of the BGS Relationship: The
Market Capitalism Model
oCapitalism: An economic ideology with a bundle of
values including private ownership of means of
production, the profit motive, free competition, and
limited government restraint in marketsoManagerial capitalism: A market economy in which
the dominant businesses are large firms run by
salaried managers, not smaller firms run by owner-
entrepreneurs
-
7/25/2019 week1notes-120826233114-phpapp01
14/35
1-14
Four Models of the BGS Relationship:
The Market Capitalism Model
o Important assumptions
o Government interference in economic life is slight
oLaissez-faire:An economic philosophy that rejects
government intervention in marketso Individuals can own private property and freely risk
investments
o Consumers are informed about products and prices and
make rational decisions
-
7/25/2019 week1notes-120826233114-phpapp01
15/35
1-15
Four Models of the BGS Relationship:
The Market Capitalism Model
o Moral restraint accompanies the self-interested
behavior of business
o Basic institutions such as banking and laws exist to
ease commerceo There are many producers and consumers in
competitive markets
-
7/25/2019 week1notes-120826233114-phpapp01
16/35
1-16
Four Models of the BGS Relationship:
The Market Capitalism Model
o The BGS relationship according to the market
capitalism model:
o Government regulation should be limited
o Markets will discipline private economic activity topromote social welfare
o The proper measure of corporate performance is profit
o The ethical duty of management is to promote the
interests of shareholders
-
7/25/2019 week1notes-120826233114-phpapp01
17/35
1-17
Four Models of the BGS Relationship:
The Market Capitalism Model
o Criticism
o Increased prosperity comes at the cost of increased
inequality
o Results in base values being energized and virtuebeing eroded
-
7/25/2019 week1notes-120826233114-phpapp01
18/35
1-18
Figure 1.3 - The Dominance Model
-
7/25/2019 week1notes-120826233114-phpapp01
19/35
1-19
Four Models of the BGS Relationship: The
Dominance Model
o Represents the perspective of business critics
o Business and government dominate the great mass of
people
o Those who subscribe to the model believe thatcorporations and a powerful elite control a system
that enriches a few at the expense of the many
-
7/25/2019 week1notes-120826233114-phpapp01
20/35
1-20
Four Models of the BGS Relationship: The
Dominance Model
o Proponents of the dominance model focus on the
defects and inefficiencies of capitalism
oPopulism:A political pattern, recurrent in world
history, in which common people who feel oppressedor disadvantaged seek to take power from a ruling
elite seen as thwarting fulfillment of the collective
welfare
-
7/25/2019 week1notes-120826233114-phpapp01
21/35
1-21
Four Models of the BGS Relationship: The
Dominance Model
o Populist reform movement opposed the dominance
model
oMarxism:An ideology holding that workers should
revolt against property owning capitalists who exploitthem, replacing economic and political domination
with more equal and democratic socialist institutions
-
7/25/2019 week1notes-120826233114-phpapp01
22/35
1-22
Figure 1.4 - The Countervailing Forces
Model
-
7/25/2019 week1notes-120826233114-phpapp01
23/35
1-23
Four Models of the BGS Relationship: The
Countervailing Forces Model
o Suggests exchanges of power among them,
attributing constant dominance to none
o This is a model of multiple forces
o It differs from the dominance model in rejecting anabsolute primacy of business and crediting more
power to a combination of forces and interactions
rendered paltry by the dominance model
-
7/25/2019 week1notes-120826233114-phpapp01
24/35
1-24
Four Models of the BGS Relationship: The
Countervailing Forces Model
o Conclusions:
o Business is deeply integrated into an open society and
must respond to many forces, both economic and
noneconomico Business is a major force acting on government, the
public, and environmental factors
-
7/25/2019 week1notes-120826233114-phpapp01
25/35
1-25
Four Models of the BGS Relationship: The
Countervailing Forces Model
o To maintain broad public support, business must adjust
to social, political, and economic forces it can
influence but not control
o
BGS relationships evolve as changes take place in theideas, institutions, and processes of society
-
7/25/2019 week1notes-120826233114-phpapp01
26/35
1-26
Figure 1.5 - The Stakeholder Model
-
7/25/2019 week1notes-120826233114-phpapp01
27/35
1-27
Four Models of the BGS Relationship: The
Stakeholder Model
oStakeholder:An entity that is benefitted or burdened
by the actions of a corporation or whose actions may
benefit or burden the corporation
o The corporation has an ethical duty toward theseentities
-
7/25/2019 week1notes-120826233114-phpapp01
28/35
1-28
Four Models of the BGS Relationship: The
Stakeholder Model
oPrimary stakeholders:Entities in a relationship with
the corporation in which they, the corporation, or both
are affected immediately, continuously, and
powerfullyoSecondary stakeholders:Entities in a relationship
with the corporation in which the effects on them, the
corporation, or both are less significant and pressing
-
7/25/2019 week1notes-120826233114-phpapp01
29/35
1-29
Four Models of the BGS Relationship: The
Stakeholder Model
o Exponents of the stakeholder model debate how to
identify who or what is a stakeholder
o The stakeholder model reorders the priorities of
management away from those in the marketcapitalism model
-
7/25/2019 week1notes-120826233114-phpapp01
30/35
1-30
Four Models of the BGS Relationship: The
Stakeholder Model
o Criticism
o It is an unrealistic assessment of the power
relationships between the corporation and other
entitieso It sets up too vague a guideline to substitute for the
yardstick of pure profit
o There is no single, clear, and objective measure to
evaluate the combined ethical/economic performanceof a firm
-
7/25/2019 week1notes-120826233114-phpapp01
31/35
1-31
Four Models of the BGS Relationship: The
Stakeholder Model
o The interests of stakeholders vary that they conflict
with shareholders and with one another
o Most fanatical pursuit of profit creates greater lasting
good for society than pursuit of profit tempered bycompassion
-
7/25/2019 week1notes-120826233114-phpapp01
32/35
1-32
Four Models of the BGS Relationship: The
Stakeholder Model
o Advocacy for the stakeholder model:
o A corporation that embraces stakeholders performs
better
o It is the ethical way to manage because stakeholdershave moral rights that grow from the way powerful
corporations affect them
-
7/25/2019 week1notes-120826233114-phpapp01
33/35
1-33
Our Approach to the Subject Matter
o Comprehensive scope
o Interdisciplinary approach with a management focus
oStrategic management:Actions taken by managers to
adapt a company to changes in its market andsociopolitical environments
-
7/25/2019 week1notes-120826233114-phpapp01
34/35
1-34
Our Approach to the Subject Matter
o Use of theory, description, and case studies
oTheory:A statement or vision that creates insight by
describing patterns or relationships in a diffuse subject
matteroA good theory is concise and simplifies complex
phenomena
-
7/25/2019 week1notes-120826233114-phpapp01
35/35
1 3
Our Approach to the Subject Matter
o Global perspective
o Historical perspective
oHistory:The study of phenomena moving through
time