Chapter 1 slides

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Nov 20, 2013 (4 years and 1 month ago)

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The Study of Business,
Government, and Society



Chapter 1



This chapter provides an overview of the business
-
government
-
society field of study by:


Defining basic terms


Discussing the field’s importance to managers


Introducing the four basic models of the business
-
government
-
society relationship


Explaining the authors’ approach to the subject matter.

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-
Hill/Irwin

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-
Hill Companies, Inc. All rights reserved

Opening Case:


ExxonMobil Corporation


Company history


Main business is discovering, producing, and
selling oil and natural gas


Descended from the Standard Oil trust


In 1890 Congress passed the Sherman Antitrust Act to
outlaw its monopoly


Once had more than a 90% market share of the
American oil market


The values of its founder, John D. Rockefeller,
defined the company culture


In 1972 Standard Oil of New Jersey changed its
name to Exxon, and in 1999 it merged with
Mobil, to form ExxonMobil


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-
Hill Companies, Inc. All rights reserved

Opening Case:

ExxonMobil Corporation (continued)


The leader


John D. Rockefeller (Standard Oil)


Brilliant strategist and organizer who
crushed competitors


Emphasized cost control, efficiency,
centralized organization, and suppression
of competitors


Although Rockefeller’s influence is buried in
the passage of time, ExxonMobil’s actions
remain consistent with his nature

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Hill/Irwin

© 2008 The McGraw
-
Hill Companies, Inc. All rights reserved

Opening Case:

ExxonMobil Corporation (continued)


Today ExxonMobil remains a powerful force, but that power is
limited by economic and political forces.


It now controls only 5.6% of oil production and holds less than
1% of petroleum reserves, far less than it did in the 1950s.


It has complex relationships with powerful governments.


For a considerable time, company managers denied that the
world is warming.


ExxonMobil’s large size attracts the watchful eye of
environmental, civil rights, labor, and consumer groups.


It engages in corporate citizenship by funding a variety of
programs to benefit education, communities, health, nature,
and the arts.


The story of ExxonMobil illustrates the importance of interactions
between one large corporation, governments, and society.

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-
Hill/Irwin

© 2008 The McGraw
-
Hill Companies, Inc. All rights reserved

What is the Business

Government


Society Field?


Business



broad term encompassing a
range of actions and institutions.


Government



refers to structures and
processes in society that authoritatively
make and apply policies and rules.


Society



a network of human relations that
includes three interacting elements:


Ideas


Institutions


Material things

McGraw
-
Hill/Irwin

© 2008 The McGraw
-
Hill Companies, Inc. All rights reserved

How Institutions Support Markets

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Hill/Irwin

© 2008 The McGraw
-
Hill Companies, Inc. All rights reserved

Why is the BGS Field Important to
Managers?


To succeed in meetings its objectives a business
must be responsive to
both

its
economic

and its
noneconomic

environment.


Recognizing that a company operates not only
within markets but within a
society

is critical.


A basic agreement or
social contract

exists
between the business institution and society.


Managers must respect and adhere to society’s
expectations.


This contract defines the broad duties that
business must perform to retain society’s
support, but these duties are often ambiguous.

McGraw
-
Hill/Irwin

© 2008 The McGraw
-
Hill Companies, Inc. All rights reserved

Four Models of the BGS Relationship:

The Market Capitalism Model

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-
Hill/Irwin

© 2008 The McGraw
-
Hill Companies, Inc. All rights reserved

Four Models of the BGS Relationship:

The Market Capitalism Model
(continued)


The market capitalism model depicts
business as operating within a
market

environment, responding primarily to
powerful economic forces.


The market acts as a
buffer

between
business and nonmarket forces.


History and nature of markets


Adam Smith,
The Wealth of Nations


Capitalism


Managerial capitalism


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Hill/Irwin

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-
Hill Companies, Inc. All rights reserved

Four Models of the BGS Relationship:

The Market Capitalism Model
(continued)


Important assumptions of the market capitalism
model:


Government interference in economic life is
slight

(laissez
-
faire).


Individuals can
own

private property and freely
risk

investments.


Consumers are
informed

about products and
prices and make
rational

decisions.


Moral restraint
accompanies the self
-
interested
behavior of business.


Basic institutions such as banking and laws
exist to
ease

commerce.


There are
many

producers and consumers in
competitive markets.

McGraw
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Hill/Irwin

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-
Hill Companies, Inc. All rights reserved

Four Models of the BGS Relationship

The Market Capitalism Model
(continued)


Critiques of the Market Capitalism Model


Increased prosperity comes at the cost of
increased
inequality


Results in
base values
being energized and
virtue being eroded


The BGS relationship according to the Market
Capitalism Model:


Government regulation should be
limited
.


Markets discipline private economic activity to
promote social welfare.


The proper measure of corporate performance
is
profit
.


The ethical duty of management is to promote
the interests of shareholders.

McGraw
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Hill/Irwin

© 2008 The McGraw
-
Hill Companies, Inc. All rights reserved

Four Models of the BGS Relationship:

The Dominance Model

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Hill/Irwin

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-
Hill Companies, Inc. All rights reserved

Four Models of the BGS Relationship:

The Dominance Model (continued)


Business and government
dominate

the
great mass of people, which results in the
enrichment of a few at the expense of
many.


Populist reform movement
opposed

the
dominance model.


Marxism emerged in Europe about the
same time.


Most accurate in the 1800s, but is being
resurrected due to the fear of transnational
corporations in a global context.


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Hill/Irwin

© 2008 The McGraw
-
Hill Companies, Inc. All rights reserved

Four Models of the BGS Relationship

The Countervailing Forces Model

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Hill/Irwin

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Hill Companies, Inc. All rights reserved

Four Models of the BGS Relationship

The Countervailing Forces Model
(continued)


Countervailing forces model conclusions:


Business is deeply integrated into an open society
and must respond to many forces, both economic
and noneconomic.


Business is a major initiator of
change

in
society

through its interaction with government, its
production and marketing activities, and its use of
new technologies.


Broad
public support

of business depends on its
adjustment

to multiple social, political, and
economic forces.


BGS relationships continuously
evolve
as changes
take place in the main ideas, institutions, and
processes of society.

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Hill/Irwin

© 2008 The McGraw
-
Hill Companies, Inc. All rights reserved

Four Models of the BGS Relationship

The Stakeholder Model

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Hill/Irwin

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-
Hill Companies, Inc. All rights reserved

Four Models of the BGS Relationship

The Stakeholder Model


Stakeholders are those whom the corporation
benefits or burdens by
its

actions and those who
benefit or burden the firm with
their

actions.


Primary stakeholders


Secondary stakeholders


Debate about how to identify
who

or
what

is a
stakeholder.


Stakeholder model is an ethical theory of
management in which the
welfare
of each
stakeholder

must be
considered

as an end.


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Hill/Irwin

© 2008 The McGraw
-
Hill Companies, Inc. All rights reserved

Four Models of the BGS Relationship

The Stakeholder Model (continued)


Criticism of the stakeholder model:


It is
not

a realistic assessment of the power
relationships between the corporation and other
entities.


There is no single, clear, and objective
measure

to evaluate the combined
ethical/economic performance of a firm.


Advocacy for the stakeholder model:


A corporation that embraces stakeholders
performs
better
.


It is the ethical way to manage because
stakeholders have
moral

rights that grow from
the way powerful corporations
affect

them.

McGraw
-
Hill/Irwin

© 2008 The McGraw
-
Hill Companies, Inc. All rights reserved

Text Approach to the

Subject Matter


Comprehensive scope


Interdisciplinary approach with a
management focus


Use of theory, description, and case
studies


Global perspective


Historical perspective

McGraw
-
Hill/Irwin

© 2008 The McGraw
-
Hill Companies, Inc. All rights reserved