IGNOU MBA MS -91 Solved Assignment 2011
Course Code : MS-91
Course Title : Advanced Strategic Management
Assignment Code : 91/TMA/SEM-I/2011
Coverage : All Blocks
Q1. Identify the features of Corporate Philosophy and examine it with reference to an organisation (Name and describe the organisation you are referring to).
Solution: In marketing, a corporate identity is the "persona" of a corporation which is designed to accord with and facilitate the attainment of business objectives. It is usually visibly manifested by way of branding and the use of trademarks. Corporate identity comes into being when there is a common ownership of an organizational philosophy that is manifest in a distinct corporate culture — the corporate personality. At its most profound, the public feel that they have ownership of the philosophy. Often referred to as organizational identity, corporate identity helps organizations to answer questions like “who are we?” and “where are we going?” Corporate identity also allows consumers to denote their sense of belonging with particular human aggregates or groups.
In general, this amounts to a corporate title, logo (logotype and/or logogram), and supporting devices commonly assembled within a set of guidelines. These guidelines govern how the identity is applied and confirm approved colour palettes, typefaces, page layouts and other such methods of maintaining visual continuity and brand recognition across all physical manifestations of the brand. These guidelines are usually formulated into a package of tools called corporate identity manuals.
Many companies, such as McDonald's and Electronic Arts, have their own identity that runs through all of their products and merchandise. The trademark "M" logo and the yellow and red appears consistently throughout the McDonald's packaging and advertisements. Many companies pay large amounts of money for the research, design and execution involved in creating an identity that is extremely distinguishable and appealing to the company's target audience.
Concept
Corporate identity is often viewed as being composed of three parts:
Corporate design (logos, uniforms, corporate colours etc.)
Corporate communication (advertising, public relations, information, etc.)
Corporate behavior (internal values, norms, etc.)
Corporate identity has become a universal technique for promoting companies and improving corporate culture. Most notable is the COCOMAS committee and company PAOS, both founded by Motoo Nakanishi in Tokyo, Japan in 1968. Nakanishi fused design, management consulting and corporate culture to revolutionize corporate identity in Japan. In the United States, graphic design firms such as Chermayeff & Geismar pioneered the application of modernist principles to corporate identity design.
Organizational point of view
In a recent monograph on Chinese corporate identity (Routledge, 2006), Peter Peverelli, proposes a new definition of corporate identity, based on the general organization theory proposed in his earlier work, in particular Peverelli (2000). This definition regards identity as a result of social interaction:
Corporate identity is the way corporate actors (actors who perceive themselves as acting on behalf of the company) make sense of their company in ongoing social interaction with other actors in a specific context. It includes shared perceptions of reality, ways-to-do-things, etc., and interlocked behaviour.
In this process the corporate actors are of equal importance as those others; corporate identity pertains to the company (the group of corporate actors) as well as to the relevant others;
Corporate actors construct different identities in different contexts.
Visual identity
Corporate visual identity plays a significant role in the way an organization presents itself to both internal and external stakeholders. In general terms, a corporate visual identity expresses the values and ambitions of an organization, its business, and its characteristics. Four functions of corporate visual identity can be distinguished. Three of these are aimed at external stakeholders.
First, a corporate visual identity provides an organisation with visibility and "recognizability". For virtually all profit and non-profit organisations, it is of vital importance that people know that the organization exists and remember its name and core business at the right time.
Second, a corporate visual identity symbolizes an organization for external stakeholders, and, hence, contributes to its image and reputation (Schultz, Hatch and Larsen, 2000). Van den Bosch, De Jong and Elving (2005) explored possible relationships between corporate visual identity and reputation, and concluded that corporate visual identity plays a supportive role in corporate reputations.
Third, a corporate visual identity expresses the structure of an organization to its external stakeholders, visualising its coherence as well as the relationships between divisions or units. Olins (1989) is well-known for his "corporate identity structure", which consists of three concepts: monolithic brands for companies which have a single brand, a branded identity in which different brands are developed for parts of the organization or for different product lines, and an endorsed identity with different brands which are (visually) connected to each other. Although these concepts introduced by Olins are often presented as the corporate identity structure, they merely provide an indication of the visual presentation of (parts of) the organization. It is therefore better to describe it as a "corporate visual identity structure".
A fourth, internal function of corporate visual identity relates to employees' identification with the organization as a whole and/or the specific departments they work for (depending on the corporate visual strategy in this respect).
Identification appears to be crucial for employees, and corporate visual identity probably plays a symbolic role in creating such identification.
The definition of the corporate visual identity management is:
Corporate visual identity management involves the planned maintenance, assessment and development of a corporate visual identity as well as associated tools and support, anticipating developments both inside and outside the organization, and engaging employees in applying it, with the objective of contributing to employees' identification with and appreciation of the organization as well as recognition and appreciation among external stakeholders.
Special attention is paid to corporate identity in times of organizational change. Once a new corporate identity is implemented, attention to corporate identity related issues generally tends to decrease. However, corporate identity needs to be managed on a structural basis, to be internalized by the employees and to harmonize with future organizational developments.
Efforts to manage the corporate visual identity will result in more consistency and the corporate visual identity management mix should include structural, cultural and strategic aspects.
Guidelines, procedures and tools can be summarized as the structural aspects of managing the corporate visual identity.
However, as important as the structural aspects may be, they must be complemented by two other types of aspects. Among the cultural aspects of corporate visual identity management, socialization – i.e., formal and informal learning processes – turned out to influence the consistency of a corporate visual identity. Managers are important as a role model and they can clearly set an example. This implies that they need to be aware of the impact of their behavior, which has an effect on how employees behave. If managers pay attention to the way they convey the identity of their organization, including the use of a corporate visual identity, this will have a positive effect on the attention employees give to the corporate visual identity.
Further, it seems to be important that the organization communicates the strategic aspects of the corporate visual identity. Employees need to have knowledge of the corporate visual identity of their organization – not only the general reasons for using the corporate visual identity, such as its role in enhancing the visibility and recognizability of the organization, but also aspects of the story behind the corporate visual identity. The story should explain why the design fits the organization and what the design – in all of its elements – is intended to express.
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Q2. Highlight the Corporate governance practices in Indian context.
Solution : The concept of corporate governance is poorly defined because it covers various economics aspects. As a result of this different people have come up with different definitions on corporate governance. It is hard to point on any one definition as the ultimate definition on corporate governance. So the best way to define the concept is to provide a list of the definitions given by some noteworthy people.
Various definitions of corporate governance:
1. According to Sir Adrian Cadbury.
The system by which companies are directed and controlled
Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society”
2. According to Mathiesen (2002)
“Corporate Governance is a field in economics that investigates how to secure/motivate efficient management of corporations by the use of incentive mechanisms, such as contracts, organizational designs and legislation. This is often limited to the question of improving financial performance, for example, how the corporate owners can secure/motivate that the corporate managers will deliver a competitive rate of return.”
The definition given by Mathiesen means that corporate governance is a method which tries to find out the different incentives which would motivate the managers of a corporate to give a good return to the owners of the corporation.
3. According to the Journal of Finance written by Shleifer and Vishnv (1997),
“Corporate governance deals with the way in which suppliers of finance to corporate assure themselves of getting a return on their investment”
The definition here means that corporate governance is basically a technique where people who give money (lenders of the money) promise themselves or comfort themselves about getting a return on their investment.
4. According to J. Wolfensohn, president of the World Bank, (in 1999)
“Corporate governance is about promoting corporate fairness, transparency and accountability”
5. According to OECD (Organisation for Economic Co-operation and Development)
“Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance.”
The definition given by OECD means that corporate governance is an arrangement which manages the corporations. The configuration of corporate governance defines the duties and obligations of all the members of the corporation, gives the structure of setting the objectives and the method of attaining the set
In short all the definitions stated above implies that corporate governance is a mode by which the management is motivated to work for the betterment of the real owners of the corporation i.e. the shareholders.
In other words corporate governance can be defined as the relationship of a company to its shareholders or more broadly the relationship of the company to the society.
Corporate governance thus refers to the manner in which a company is managed and states the rules, laws and regulation that affect the management of the firm. It also includes laws relating to the formation of the firm, establishment of the firm and the structure of the firm. The most important concern of corporate governance is to ensure that the managers and directors act in the interest of the firm and for the shareholders.
The focus has shifted to Corporate Governance (CG) time and again on account of repeat emergence of financial crises across the global, as well as frequent instances of financial reporting failures. In competitive markets, Corporate Governance is a reflection of market disciplines, and forms the cornerstone for efficient allocation of resources. CG enables managements to take decisions, while at the same time being accountable for the decisions taken. Securities & Exchange Board of India (SEBI) appointed the Committee on Corporate Governance in May, 1999 under the Chairmanship of Kumar Mangalam Birla, to promote and raise the standards of Corporate Governance, in the particular context of companies of the Committee included
(i) to suggest measures to improve Corporate Governance in the listed companies, in areas such as continuous disclosure of material information, both financial and non financial, manner and frequency of such disclosures, and the responsibilities of independent and outside directors;
(ii) to draft a code of corporate best practices; and
(iii) to suggest safeguards to be instituted to deal with insider information and insider trading.
Based on the recommendations of the Birla Committee, SEBI laid down requirements on Corporate Governance for listed entities in February, 2000. However, certain entities including public and private sector banks, financial institutions, insurance companies and those incorporated under a separate statute were exempted from the requirements. Subsequently, the requirements of SEBI were forwarded to Reserve Bank of India (RBI) to consider issuing appropriate guidelines to banks and financial institutions so as to ensure that all listed companies followed the same standards of Corporate Governance. While a number of recommendations already stood implemented, with a view to further improving the Corporate Governance standards in banks, additional measures were recommended for implementations by banks. These measures included constitution of a Committee to look into the complaints of shareholders and half yearly disclosure of unaudited results. The RBI also recommended compliance with the requirements of the provisions of clause 49 of the Listing Agreement in June, 2002. The Standing Committee on International Financial Standards and Codes, Reserve Bank of India constituted the Advisory Group on Corporate Governance to study the status of applicability and relevance and compliance of international standards and codes of industrialized and emerging countries and suggest measures/recommendations for achieving the best practice in India. The Group while submitting its Report in March, 2001, drew attention to the Organization for Economic Cooperation and Development (OECD) principles, the models of corporate governance in various countries – U.S., U.K., East Asia and Europe, and the status in India. The Group covered the mechanism in India with reference to (i) the private corporate sector, (ii) banks and the development financial institutions, and (iii) Central and State public sector enterprises set up under the Companies Act, 1956. Comparisons were also drawn with Bank for International Settlement (BIS) principles. The report submitted that it was essential to bring reforms quickly so as to make boards of corporates/banks/financial institutions/public sector enterprises
more professional and truly autonomous. The first important step to improve governance mechanism in public sector units was to transfer the actual governance functions to the boards from the concerned administrative ministers and also strengthen the boards by streamlining the appointment process of directors. Further there was a need for public sector banks to maintain a high degree of transparency in regard to disclosure of information. The recommendations covered areas of responsibilities of the board of stakeholders/shareholders, selection procedures for appointment of directors of the board, size and composition of the board, committees to be appointed by the board for corporate governance, disclosure and transparency standards, role of shareholders and role of auditors. In August, 2002, the Department of Company Affairs (DCA) under the Ministry of Finance and Company Affairs appointed the Naresh Chandra Committee to examine the various CG issues including appointment of the auditors and his independence; determination of audit fees; measures to ensure that the managements and companies present “true and fair” financial statements and certification of the same by the management and the directors; the necessary to have a transparent system of random scrutiny of the audited accounts; adequacy of regulations for oversight of statutory functionaries; and the role of independent directors. SEBI appointed the N.R. Narayana Murthy Committee in February, 2003 to evaluate the adequacy of existing Corporate Governance practices and to further improve upon them. The Committee was in line with the Board’s belief that efforts to improve CG standards in India must continue. The Committee focused on such issues as audit committees and reports, independent directors, related parties, risk management, directors and their compensation, code of conduct and financial disclosure. The Committee’s recommendations were based on such parameters as fairness, accountability, transparency, ease of implementation, verifiability and enforceability. Prior to these initiatives, in 1996, the CII had taken the first institutional initiative to develop and promote a code of conduct for the Indian industry. The initiative was in response to concerns regarding promotion of investor interest, particularly, small investor’s interest; promotion of transparency within business and industry; need to move towards international standards in terms of disclosure of information by the corporate sector; and to develop a high level of public confidence in Indian industry.
The Department of Company Affairs, in May 2000, invited a group of leading industrialists, professionals and academics to study and recommend measures to enhance corporate excellence in India. The Study Group in turn set up a Task Force, which examined the subject of Corporate Excellence through sound corporate governance and submitted its report in Nov. 2000. The task force in its recommendations identified two classifications namely essential and desirable with the former to be introduced immediately by legislation and the latter to be left to the discretion of companies and their shareholders. Some of the recommendations of the task force include:
Greater role and influence for nonexecutive independent directors
Stringent punishment for executive directors for failing to comply with listing and other requirements
Limitation on the nature and number of directorship of managing and whole-time directors
Proper disclosure to the shareholders and investing community
Interested shareholders to abstain from voting on specified matters
More meaningful and transparent accounting and reporting
Tougher listing and compliance regimen through a centralized national listing authority
Highest and toughest standards of Corporate Governance for listed companies
A code of public behaviour for public sector units
Setting up of a centre for Corporate Excellence
Recently, the Government has announced the proposal for setting up the Centre for Corporate Excellence under the aegis of the Department of Company Affairs as an independent and autonomous body as recommended by the study group. The centre would undertake research on Corporate Governance; provide a scheme by which companies could rate themselves in terms of their corporate governance performance; promote corporate governance through certifying companies who practice acceptable standards of corporate governance and by instituting annual award for outstanding performance in this area. Government’s initiative in promoting corporate excellence in the country by setting up such a center is indeed a very important step in the right direction. It is likely to spread greater awareness among the corporate sector regarding matters relating to good corporate governance motivating them to seek accreditation from this body. Cumulative effect of the companies achieving levels of corporate excellence would undoubtedly be visible in the form of much enhanced competitive strength of our country in the global market for goods and services.
A large number of public sector companies both in the banking industry and financial sector have on their Boards representative of the Government / Reserve Bank of India. It is for debate whether functionaries of the Government should sit on their boards. While there is no easy or straightforward answer to this question, at some distant future it is hoped, all the Directors would be truly independent. The subject is no doubt complex and can be looked upon from various angles. Frauds in the banking system are also increasing but computer Management Information Systems should be able to detect them early and the Board must have the will to deal with such mischiefmakers in an exemplary manner. Zero tolerance should be the goal for frauds in the banking system. It is the leader at the helm of affairs who makes a difference. A close coordination exists through High Level Co-ordination Committee (HLCC) between RBI, SEBI, IRDA and the Secretary Finance, Government of India who has a formal structure for reviewing the affairs which impact the whole financial system. Although the US and UK models are different, this model has served us well and we seem to be comfortable to continue with the same for some more time to come.
There is an entire subject called “whistle blowing” and there is enormous literature on this subject – when to blow the whistle, who should blow the whistle and where the whistle should be heard. These are the questions for which one needs to find the answers between spate of anonymous letters to which any one working in public sector is used to and honest officials are harassed sometimes on one side and the damaging investigative audit reports and doctored balance sheets on the other side. Somewhere in between lies the governance and ethics; and standards expected to be set up by the virtuous men appointed for heading these institutions. In such organizations the shareholders and the other stakeholders derive full value. It is myopic, bordering on foolishness, to look for astronomical return by the shareholders, who would allow the boards to indulge in unethical practices like market rigging, insider trading, speculation and host of other irregular practices for the sole purpose of making huge profits. One cannot argue that the shareholder’s value is enhanced by higher profits and dividends are distributed by the board acting merely as an agent of the shareholder who becomes the principal. Here lies the test of governance of the board of directors walking the well defined, honest and straight path in conducting the affairs in the required atmosphere of transparency seen and perceived by all the stakeholders, the markets and the regulators. Then only one can confidently state that corporate governance has taken firm roots in this country.
Satyam Computers services limited was a consulting and an Information Technology (IT) services company founded by Mr. Ramalingam Raju in 1988. It was India’s fourth largest company in India’s IT industry, offering a variety of IT services to many types of businesses. Its’ networks spanned from 46 countries, across 6 continents and employing over 20,000 IT professionals. On 7th January 2009, Satyam scandal was publicly announced & Mr. Ramalingam confessed and notified SEBI of having falsified the account.
Raju confessed that Satyam’s balance sheet of 30 September 2008 contained:
Inflated figures for cash and bank balances of Rs 5,040 crores (US$ 1.04 billion) [as against Rs 5,361 crores (US$ 1.1 billion) reflected in the books].
An accrued interest of Rs. 376 crores (US$ 77.46 million) which was non-existent.
An understated liability of Rs. 1,230 crores (US$ 253.38 million) on account of funds which were arranged by himself.
An overstated debtors’ position of Rs. 490 crores (US$ 100.94 million) [as against Rs. 2,651 crores (US$ 546.11 million) in the books].
The letter by B Ramalinga Raju where he confessed of inflating his company’s revenues contained the following statements:
“What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew significantly [annualised revenue run rate of Rs 11,276 crores (US$ 2.32 billion) in the September quarter of 2008 and official reserves of Rs 8,392 crores (US$ 1.73 billion)]. As the promoters held a small percentage of equity, the concern was that poor performance would result in a takeover, thereby exposing the gap. The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. It was like riding a tiger, not knowing how to get off without being eaten.”
The Scandal:
The scandal all came to light with a successful effort on the part of investor’s to prevent an attempt by the minority shareholding promoters to use the firm’s cash reserves to buy two companies owned by them i.e. Maytas Properties and Maytas Infra. As a result, this aborted an attempt of expansion on Satyam’s part, which in turn led to a collapse in price of company’s stock following with a shocking confession by Raju, The truth was its’ promoters had decided to inflate the revenue and profit figures of Satyam thereby manipulating their balance sheet consisting non-existent assets, cash reserves and liabilities.
The probable reasons:
Deriving high stock values would allow the promoters to enjoy benefits allowing them to buy real wealth outside the company and thereby giving them opportunity to derive money to acquire large stakes in other firms on another hand. There could be the reason as to why Raju’s family build its shareholding and shed it when required.
After the scandal, on 10 January 2009, the Company Law Board decided to bar the current board of Satyam from functioning and appoint 10 nominal directors. On 5th February 2009, the six-member board appointed by the Government of India named A. S. Murthy as the new CEO of the firm with immediate effect.
The board consisted of:
1) Banker Deepak Parekh.
2) IT expert Kiran Karnik.
3) Former SEBI member C Achuthan S Balakrishnan of Life Insurance Corporation.
4) Tarun Das, chief mentor of the Confederation of Indian Industry and
5) T N Manoharan, former President of the Institute of Chartered Accountants of India.
Q3. “Corporate Philanthropy is considered as a practice by companies of all sizes and sectors making charitable contributions to address a variety of social, economic and other issues as part of their overall corporate citizenship strategy” Discuss.
Solution :Corporate philanthropy or corporate giving is the act of corporations donating some of their profits, or their resources, to nonprofit organizations.
Corporate giving is often handled by the corporation, directly, or it may be done through a company foundation.
Corporations most commonly donate cash, but they also donate the use of their facilities, property, services, or advertising support. They may also set up employee volunteer groups that then donate their time.
Corporations give to all kinds of nonprofit groups, from education and the arts to human services and the environment.
Also Known As: Corporate Giving
Examples:
IBM gives millions of dollars each year to nonprofits through its corporate philanthropy program.
Founded in 1868, Tata Industries is the classic Indian example of a family-run business that has built a reputation for philanthropy alongside that of business success. Now one of the largest corporations in India, with over 80 companies operating across seven sectors, the company funds a vast number of charitable Trusts that are involved in a range of community development works. Anant Nadkarni is the general manager of Group CSR for the Tata Council for Community Initiatives, a network of over 30 Tata companies charged with coherently driving projects across 200,000 employees and nearly 100 facilities. He talks proudly of projects run by TCCI, which include the Functional Adult Literacy Programme, which aims to make a substantial contribution to the fight against illiteracy in India.
Tata does appear to be an example of pure corporate philanthropy. As Ranan Tata, chairman of Tata Sons, says, “We are not doing this for propaganda or visibility. We are doing it for the satisfaction of knowing that we have really achieved and given something to the community in which we are working.” The Indian philanthropic tradition of Tata and thousands of other family businesses has evolved for many reasons: partly because to live in India is to live in the midst of grotesque inequality, partly because families tend to be rooted in communities and partly because good schools and hospitals produce an educated and healthy workforce.
Q4. How are principles of corporate social responsibility being followed by Amway
Solution :
Corporate Social Responsibility (CSR) means businesses and organisations working responsibly and contributing positively to the communities they operate in. It involves working with employees, their families, the local community and society at large to improve their quality of life. Companies that operate in a socially responsible way strengthen their reputations. In business, reputation is everything. It determines the extent to which customers want to buy from you, partners are willing to work with you and your standing in the community.
The company
Amway is one of the world’s largest direct sales organisations with over 3 million IndependentBusiness Owners (IBOs) in over 80 markets and territories worldwide. It is a family-owned business with a strong emphasis on family values. Its IBOs are often couples. Many of these are raising families. They therefore have a strong bond with children. These families are more than happy to partner with Amway, who, as part of its Corporate Social Responsibility strategy, works with UNICEF, the United Nations Children’s Fund.
As a family company, Amway is committed to playing a part in improving the lives of children in need across the globe. In this way, the company is able to show its commitment to the support of global causes.
Amway defines a global cause as ‘a social issue affecting many people around the world engaged in a struggle or plight that warrants a charitable response’.
This case study shows how Amway is a business that does more than provide customers with good quality products. It shows the practical realities of Amway’s global commitment and how it plays a key role in the communities in which it operates.
Growth and responsibility
An understanding of how Amway operates as an organisation gives a clearer picture of the contribution it can make to help children in need across the globe. Amway’s vision is to help people live better lives. It does this every day by providing a low-cost low-risk business opportunity based on selling quality products.
What does Amway do?
Amway distributes a range of branded products. These products are sold to IBOs worldwide. The IBOs are Amway’s links with consumers and the communities in which they operate. The IBOs are self-employed and are highly motivated. They work within the guidelines of Amway’s Rules of Conduct and Code of Ethics, which are about being honest and responsible in trading. IBOs sell to people that they know or meet. They can introduce others to the Amway business.
Typical products that IBOs sell include:
personal care – fragrances, body care
skin care and cosmetics
durables such as cookware and water treatment systems
nutrition and wellness products such as food supplements, food and drinks.
IBOs play a key part in helping Amway to deliver its Global Cause Programme.
Amway programmes
In order to give many of the world’s children a chance to live a better life, Amway launched the global One by One campaign for children in 2003. The One by One programme:
helps Amway to bring its vision to life
declares what the company stands for
builds trust and respect in Amway brands
establishes Corporate Social Responsibility at a high level.
Amway encourages staff and IBOs to support its One by One campaign for children.
Since 2001, Amway Europe has been an official partner of UNICEF and has been able to contribute over €2 million (about £1.4 million). The focus is on supporting the worldwide ‘Immunisation Plus’ programme.
This involves, for example, providing measles vaccines to children across the globe. The ‘Plus’ is about using the vehicle of immunisation to deliver other life-saving services for children. It is about making health systems stronger and promoting activities that help communities and families to improve child-care practices. For example the ‘Plus’ could include providing vitamin A supplements in countries where there is vitamin A deficiency.
Since 2001, Amway and its IBOs across Europe have been supporting UNICEF’s child survival programme. The need is great. One out of ten children in Kenya does not live to see its fifth birthday, largely through preventable diseases. Malaria is the biggest killer with 93 deaths per day. Only 58% of children under two are fully immunised.
The work of the One by One programme is illustrated by a field trip undertaken by Amway IBOs to Kenya. The IBOs travelled to Kilifi in 2006 to meet children and to find out what the problems are in various communities. They act as champions spreading the message throughout their groups. In Kilifi, the focus is on trying to reach the most vulnerable children and pregnant mothers. The aim is to increase immunisation from 40% to 70%. Other elements of the programme involve seeking to prevent the transmission of HIV/AIDS to infants.
As the Amway organisation grows and prospers, it is able through CSR actions to help communities to grow and prosper too.
Q5. What do you understand by strategy? How does Amway develop and implement its strategy?
Solution : Developing a strategy
A strategy is an organisational plan. Implementing a strategy involves putting that plan into action. In other words a strategy shows how a business will achieve its goals. The strategy thus enables an organisation to turn its values into action. Values are what a company stands for. An important value for Amway is being a caring company. Amway believes in demonstrating this caring approach and this is why it has partnered with UNICEF.
All Directors design strategies for the whole of an organisation. Effective strategies involve discussion and communication with others. The views of IBOs are influential in creating strategies for Amway. Amway’s strategies for corporate social responsibility are cascaded through the organisation as shown below.
Amway’s Global Cause strategy involves creating responsible plans that make a difference. However, the strategy is flexible. In shaping the strategy, research was carried out to find out which global causes IBOs support. The results showed that many favoured a cause that helped children. There was a clear fit between Amway’s aims to help children and UNICEF’s ‘Immunisation Plus’ programme for children.
Objectives
From the outset, Amway set out some clear objectives for its strategy. These were to:
build loyalty and pride among IBOs and employees
enhance Amway’s reputation as a caring organisation
make a real difference to human lives.
Child mortality is particularly high in developing countries because of infectious diseases. Many children could still be alive if they had been vaccinated.
For under £12 a child can be vaccinated against these diseases and has a fighting chance to reach adulthood. UNICEF’s world child ‘Immunisation Plus’ programme is a fitting focus for the activities of Amway UK and its IBOs.
The UK initiative is part of a European-wide fundraising campaign for children. It recognises the importance of building good working relationships with UNICEF in each market in order to launch fundraising programmes through Amway’s IBOs and their customers. The objective is to raise €500,000 (about £350,000) every year until 2010 across Amway Europe.
In 2005 Amway UK’s partnership was deepened through becoming an official Corporate Partner of UNICEF UK. The Corporate Partnership is a closer longer-term relationship which benefitsboth partners. Working together the two parties raise money for UNICEF.
Identifying stakeholders
Amway’s Corporate Social Responsibility strategy has been developed with the interests of the following stakeholders in mind:
Communicating the strategy
Good, clear communication is essential in making sure that the CSR strategy relates directly to the company business objectives. Communication also helps in putting the strategy into practice.
A number of communications media are used:
1. Face-to-face communication: Regular meetings take place between UNICEF, Amway and its IBOs. Through meetings with UNICEF staff, Amway is able to discuss the vision and objectives. It then passes the message on by meeting with IBOs. In 2005 the two organisations arranged a joint briefing day for IBO Leaders. They were able to hear firsthand experiences from UNICEF staff about their roles and UNICEF’s work as well as where the money goes.
2. Printed material: Amway produces a monthly magazine for all IBOs called Amagram.
3. Public relations materials are also important, particularly at launch events for the initiative (e.g. in Milton Keynes in 2006).
4. Email communication: Email is very important in the company – it plays a significant part in keeping IBOs up-to-date.
5. Online activities: There is a micro-site dedicated to the Amway UK/UNICEF partnership on the UNICEF UK website.
Fundraising
Amway Europe provides support for fundraising to the extent of €500,000 (about £350,000) per year through selling items such as:
greetings cards
multi-cultural gifts and cards
stationery and wrapping paper
toys for children.
However, Amway UK’s support goes well beyond these activities. In addition, it involves staff fundraising events and raffles organised by the IBOs. UNICEF attends IBO major events (usually supported by 1,000 or more IBOs) where requested. A UNICEF stand outlines the work with speakers, literature and merchandise.
Conclusion
Amway is a family business with family values. Its IBOs are people who want to make a difference to the communities in which they operate and to the wider world community. This is Corporate Social Responsibility (CSR) in action.
The clue to Amway’s success is the careful planning of its strategy and its involvement with many stakeholders in getting the strategy right. Of course, it is early days in the latest chapter of a strong relationship between Amway and UNICEF. Evaluation is taking place to measure the success of the initiative in terms of meeting fundraising goals. Customer research is carried out to test customers‘ views on the relationship and to find out how aware the general public is about what Amway is doing in the field of CSR.
