Strategic Business Environment - Essay Example

Contents Introduction 2. Strategic Business Environment 3. Corporate Social Responsibility 4. Data 5. Conclusion and recommendations Introduction- This paper discusses the trends in corporate strategy formation among the different organizations and understands the factors affecting the business strategies of any company which focuses on maximum profitability. With recent trends in the global organizations under the scanner and their practices affecting the world’s economy adversely, businesses and governments along with social organizations have all awakened to the much needed and subtle or highly intelligent and balanced approach to running businesses for profitability. Although it cannot be argued that till date many of the businesses have been rallying around the concept of profit with some of the latest and evolving concepts like globalization, networking, etc., the commitment and implementation of the best practices in the different industries no doubt have given way to a more unrealistic approach towards running the businesses. It can also be observed that the fluctuating economies and large-scale downturns, etc. in turn adversely affecting the very sustainability of the human race on this globe has raised an alarm which is being taken seriously by all concerned. In fact there is an immediate need for implementing a more evolved strategic approach to business and consider the holistic environment for profitability. Though the present businesses do have a framework for conducting their businesses, incorporating other aspects to sustain and enhance their profitability to a higher extent needs to be looked at. Also, the trends and strategies that the businesses have adopted seem to be open ended and very much need to be improved for the benefit of the society. Bernstein expresses doubts of how responsible the concept of Corporate Social Responsibility (CSR) adopted by the businesses is as they need to be transparent, produce quality, and be ethical and socially responsible on the whole (2007). Further, there is a need for continuous improvement in the strategies in all the industry sectors to ensure sustainable practices are constantly innovated and implemented and also cautiously discarding the inefficient and unethical practices that might have crept in over a period of time, thus affecting the strategy framework. These views and observations will be kept in mind while studying the recent trends in strategic business environments in realizing the need for incorporating sustainable practices like ethical behaviour and social responsibility for more profitable businesses. Of particular interest is the petroleum industry and their initiatives to adopt or enhance their ethical and social responsibility framework and related strategies. The practices adopted in this direction in one of Middle East’s largest petroleum corporations, the Kuwait National Petroleum Company (KNPC) is studied and compared with the advantages and disadvantages it has over the other companies which are already in this direction. It is to be noted that the petroleum industry is chosen for the study as it accounts to the largest employee base, economy and fluctuations and even war-prone in the whole world. Strategic business environment- In this section we attempt to understand the relevance of strategies in businesses and the health of the same. Every business big or small has a strategy for conducting its operations to serve the business’s main objective of doing a profitable business. However, the extent to which these strategies are implemented and are helpful in achieving the desired results for the stakeholders is debatable going by the recent downturn in world’s economy. Studying the strategy concept that is being implemented in the various industries across the world, it is observed that it encompasses almost all of the activities of a business. While a strategy is defined as the business plan used to achieve the objectives and goals of the organisation, it is supposed to be a unified, integrated and a comprehensive plan. Further, the need for such a strategic plan is identified to enable the business to prepare for the future opportunities while sustaining the present (Business Strategy-1, na). A strategy is supposed to equip the business to face changes in corporate, business and social environment effectively with the minimum affect. This draws the attention to the need for a holistic approach that enhances the chances of weathering any kind of situations and environment which can be detrimental to the sustainability of the business itself. In this direction, the businesses have adopted various models of business and as Prasad observes, these models are the frameworks for a business to adopt while considering its broadest goals and objectives. Further, these models adopted to chart the strategies for each different business are considered to represent the reality in which they have to operate. Strategies framed based on these models are found to have been incorporated with a clear idea of the relationship between the different entities in the business environment (2009, p4). It is also observed that strategic planning is the foremost activity in any business and the key stakeholders in the management are involved while they are required to have a clear idea of the various angles of the business and its impact on each of the stakeholder in that business (DEMAND METRIC, na, pp 3-6). Further, while framing the strategy for a business, it has been observed that there is ambiguity in adopting a uniform approach as a strategy can be formed based on the themes of interdependency, challenges or long term planning (Prasad, 2009, p7). The global trends of downturn in almost every economy only suggests that there is to much focus on a particular theme in any business and a lack of a holistic and comprehensive planning for the long term objectives. In fact, it can be debated if the businesses have any inclination towards long term strategic planning with the exception of a few which have the distinction of thinking ahead of their times and thinking ethically and responsibly. It cannot be ruled out that most of the businesses have focussed too much on the immediate returns by planning for the short term goals and objectives and the upward surge of many of them only reiterates this fact. The spate of downturns in the economy is evidence enough that there is an urgent need for reviewing the very framework of the strategic planning by these businesses or revisit the models and the framework an renew the strategic plans by incorporating a more real and profitable angle of ethical and socially responsible behaviour by these businesses. In Dr. Al-Jayyousi’s, the IUCN West Asia Regional Director’s words, “Long term sustainability for organizations demands that organizations re-think their business strategy from solely focusing on making profit to corporate citizenship and sustainable development” (IUCN, 2009). A more concrete approach towards this change is the realisation and proactive initiations by the different businesses big and small, to incorporate the concept of ethical behaviour and Corporate Social Responsibility (CSR). These concepts are being explored and researched to understand the framework of forming strategic business plans that serve to be more effective in making today’s businesses more sustainable and profitable. Corporate Social Responsibility- This concept has become the necessary ingredient in any business today and the clearer the need for incorporating it in the strategic plan of the business the better it is equipped to face the challenges in the real world. It is observed that any business needs to consider the different stakeholders as against the present scenario in which the shareholders interests are given preference, and frame strategies to take a balanced approach to doing business keeping in line with the changing environmental conditions globally. As the External Relations Manager in Proctor & Gamble Egypt, Mr. Ramez Farag observes in the IUCN meet on the occasion of World Environment Day that the three pillars of sustainability, namely, environmental protection, economic development, and social responsibility need to be considered as indispensible by any business so they can contribute to the public good (IUCN, 2009). It can be observed that of late, oil and gas companies have realized the need for reviewing their strategic plans to address their ethical and social obligations. Although this initiative may not be purely aimed at doing well to the society at the cost of profits, it can be understood as a positive step towards contributing to the larger good of the community in which they operate. However, the fact that these businesses have started to recognize the importance of ethical and social obligations and responsibilities for a profitable and sustainable business is a welcome sign that the standards of the entire range of stakeholders would be benefitted. Of particular importance is the activity in this direction in the Middle Eastern oil and gas companies as they have one of the largest numbers of employees, processes, stakeholders and are the major driving forces of the world economy. Data - There is the Dubai Chamber’s Centre for Responsible Business’s journal CSR Al Youm that is dedicated to featuring the various attempts of the businesses in this region towards enabling CSR being adopted by the different businesses. Although the concept of CSR has been identified, it has been in the periphery and is found to be moving into the mainstream business practices with greater focus on the human capital (2009, p 2). In January 2009 Kuwait National Petroleum Company (KNPC) announced its decision to launch a historic CSR and sustainability project, known as the KNPC CSR project, which aims at it becoming the world’s first company to adhere to the upcoming ISO26000 standards in the year 2011, that relate to Corporate Social Responsibility Guidance Industry Standard. This is supposed to be an enhancement to its existing environmental, social and economic strategies along with its Corporate Responsibility and Sustainability Reporting strengths. KNPC has been awarded the “Cleanest Production” for best practices in production and social practices among others. It has floated a company called Sovereign Strategy aimed at fulfilling its social obligations to Kuwait and its communities while benefitting its key stakeholders. Since the concept of CSR also includes environmental concerns at large, KNPC has also included this aspect of reducing the effects of Greenhouse Gas Emissions which is a major concern for environmentalists as it is affecting the ozone layer adversely. Another important initiative by this company in the direction to achieve profitability through ethical and socially responsible behavior is a small step wherein it aims at reflecting its commitment to giving equal importance to the people’s and the planet’s concerns on par with its commitment to profitability (Zawya, 2009). This aptly reflects the ideas of the Director of Corporate Relations in WWF International, Mr. Jean- Paul Jeanrenaud, that doing less bad is not good enough but observes that there is a need to lead companies that will help restore the planet and bring a transformative change to create a One Planet Economy (IUCN, 2009). The World Bank (WB) is on a mission to educate the developing countries to incorporate CSR in their strategic pubic and private sectors. WB has clearly defined CSR as the commitment of businesses to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life, in ways that are both good for business and good for development. As part of its mission, the WB has studied the oil sector in Angola in 2003 to give recommendations to focus on the sustainable development of the poverty stricken region (Ettenborough et al, 2003, pp 8, 9). The report by the WB indicates that eighteen oil companies in the region of Angola have little practice of CSR initiatives in their strategic plans for profitability and this can be attributed to the quality in their strategic business plans which translate to lesser quality of integration, co-ordination, commitment, communication and availability of data (Ettenborough et al, 2003, p 18). Conclusion - It is noted that the oil sector in the Middle East is more evolved in incorporating CSR in its strategic planning as compared to that in Angola as evident from the strategy planning of KNPC, which is aiming at enhancing its role in CSR by deciding to develop and adhere to a three year strategic CSR plan which would be certified by the upcoming ISO26000 standard in 2011. However, the custom strategic plans for implementing CSR in the different regions serve the unique demands on one hand but should be contributing to the global economy initially while taking steps to integrate the framework sooner or later. References- 1. Bernstein, Aaron. Is Corporate Social Responsibility Responsible? Directorship. November 1, 2006. http://www.directorship.com/is-corporate-social-responsibility-responsible/. 2. Business Strategy-1. http://www.scribd.com/doc/19974635/Business-Strategy-1. 3. How To Guide-Generating Business Strategy Plans. Pp 3-6. http://www.scribd.com/doc/19781777/Generating-Business-Strategy-Plans. 4. Prasad, V.K.S. Introduction To Business Strategy. 08th January, 2008. Pp 4-7. Available at SSRN: http://ssrn.com/abstract=1324532. 5. IUCN calls upon mainstreaming environment in CSR. 05th June 2009. IUCN. http://www.iucn.org/about/union/secretariat/offices/rowa/?3544/IUCN-calls-upon-mainstreaming-environment-in-CSR. 6. CSR Al Youm. Dubai Chamber. March-April 2009. Vol2. Issue2. P2. http://web2.dubaichamber.ae/pdf/crb/csr_alyoum/Dubai_chamber_CSR_Alyoum_Vol2_Issue2_en.pdf. 7. KNPC Launches Historic CSR and Sustainability Project. 12th January, 2009. Zawya. http://www.zawya.com/Story.cfm/sidZAWYA20090112141359/KNPC%20Launches%20Historic%20CSR%20and%20Sustainability%20Project/. 8. Ettenborough, M. et al. Corporate Social Responsibility, Public Policy And the Oil Industry in Angola. Angola Petroleum Sector CSR Survey. August 221st, 2003. Pp 8-18. http://siteresources.worldbank.org/INTPSD/Resources/Angola/Angola_Petroleum_CSRsurvey.pdf. Read More