Adaptation in business is the key to surviving changing conditions that will challenge managers to conceptualize the relationship between their companies and their external environments". (Lawrence & Weber, 2008, p. 288, para. 2) "It is inevitable that large-scale business operations will have diverse and often unexpected impacts on the larger society". (Preston, 1975, p. 2, para. 6)
ABC Complete Kitchens will need to create an internal value system that is synonymous with the strategic objectives that guide its business model. The identification of relevant stakeholders comprised of both internal and external environments need to be acknowledged by the Board of Directors of ABC Complete Kitchens. The Board of Directors should conceptualize the inception of the plant into society, including how decisions will impact the local economy and how the local economy will impact decisions and processes of the plant.
The proposed guidance is to follow the instrumental argument within the stakeholder theory. "The instrumental argument states that stakeholder management is more effective as a corporate strategy. Companies that take into consideration the rights and concerns of multiple groups perform better, over the long run, than those that do not." (Lawrence & Weber, 2008, p. 289, para. 5) Establishing a community relations department within ABC Complete Kitchens can identify issues that are, or may become a concern to key stakeholders. (Lawrence & Weber, 2008, p. 299, para. 7)
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Corporate social responsibility (CSR) represents a context in which there are a large number of different stakeholders with different, potentially conflicting goals. As such, it is a useful context in which to examine the potential role of metrics in comparing, integrating, and reconciling the goals of different stakeholders. (Raghubir, Roberts, Lemon, & Winer, 2010, p. 2, para. 6)
The reason to support the recommendation to ABC Complete Kitchens to pursue a CSR policy is not only related to a profitable bottom line; it is also the responsibility generated by the company that can have a long term effect on the company's value in society. This cultivation can impact many areas to include: "attracting talent within the labor force, design of innovative products, attracting and retaining customers through brand loyalty associated with ABC Complete Kitchens and providing reputation insurance in a crisis." (Raghubir et al., 2010, p. 2, para. 8) A method to quantify metrics to ensure goals are achieved across stakeholders should be planned and implemented.
Supporting research using the AGREE model leads to developing a set of metrics that assess the impact of CSR actions on stakeholders beyond the company's customers, collaborators, and competitors to the larger community. AGREE is comprised of: Audience of stakeholders, Goals of stakeholders, Resources used to achieve consensus goals, Effectiveness with which the stakeholder goals are realized and Efficiency with which the resources are deployed. (Raghubir et al., 2010, p. 5, para. 2)
Establishment of the proper approach for CSR, either proactive or reactive to society (external stakeholders) can be complicated. The underlying issue is to not create a corporate hypocrisy that will undermine ABC Complete Kitchens' value. Research validates "the existence of a destructive effect of inconsistent CSR information, which can trigger consumers' perceptions of corporate hypocrisy and thus jeopardize their positive CSR beliefs and attitudes toward the firm." (Wagner, Lutz, & Weitz, 2009, p. 13, para. 2)
Proactive and reactive information alone passed to the consumer could have negative impacts for ABC Complete Kitchens. ABC Complete Kitchens should decide on "one of the two approaches combined with an abstract CSR statement for proactive or specific statements for reactive, i.e. real life testimonials of how ABC Complete Kitchens' products are positively affecting society." (Wagner et al., 2009, p. 13, para. 3) The incorporation of some negative information (disclaimer) about a product may also aid in the reduction of hypocrisy awareness by the consumer. ABC Complete Kitchens will need to continually develop and adapt its CSR policies to ensure a positive relationship exists with society.
By maintaining a strong connection with stakeholders ABC Complete Kitchens will be able to maintain a positive image as an industry leader.
Corporate Ethical Climate
The importance of mission, vision, values and strategic objectives is part of the foundation of an organization. Characteristics are developed from people within the organization: directors, managers and workforce. ABC Complete Kitchens should build upon the foundation and characteristics with the understanding of how it must make a connection with stakeholders within society. Decisions that guide what ABC Complete Kitchens will do in any business situation must be driven by sound corporate ethics. "All organizational values that pertain to questions of right and wrong contribute to the company's ethical climate: the shared perceptions of what are correct behavior and how ethical issues will be dealt with." (Cullen, Victor, & Stephens, 1989, p. 2, para. 5)
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ABC Complete Kitchens must incorporate strong ethics through training and development of its directors and managers so that they can promote those values to the workforce in the organization in order to learn and uphold ethical values. "The exercising of strong ethical components imparts a sense of trust which will promote positive alliances among business partners." (Lawrence & Weber, 2008, p. 329, para. 4) The Board of Directors must also be aware of the Sarbanes-Oxley Act of 2002, which was created to legally enforce the business ethics of firms, through various oversight committees. In addition, if ABC Complete Kitchens considers trading stock publically at some point, "the Securities and Exchange Commission has specific guidelines for internal controls, financial reporting and the development of a code of ethics for the board." (Lawrence & Weber, 2008, p. 330, para. 11)
The recommendation to the Board of Directors is to start with an ethics questionnaire (sample in appendix A) created by management and administered to all employees and answered anonymously to measure the current ethical climate of ABC Complete Kitchens. "Management will be able to identify values, priorities and decision making processes noting ethical problem areas and potential conflicts between the ethical climate and company goals in order to design a strategy for changing or strengthening the climate." (Cullen et al., 1989, p. 12, para. 2) Climate influences how each employee approaches tasks delegated by management and the reasoning used for management decisions.
Considerations of managers' morals need to be assessed as well. Managers are the leaders and role models for ABC Complete Kitchens. A manager with poor morals can undermine the climate of the company, leading to poor productivity or lack of confidence in decision making, ultimately affecting the objectives of customers' businesses. Managers must possess multiple traits that incorporate a caring presence with a rationale for applying rules. Special care must be observed in order to not create self-interest climates based solely on promotions which might attract certain illegal and ill-moral activities such as bribes or fraudulent activity at the expense of the company and society. "Managers should use a basis of three principles to help assess whether a decision will have certain negative ethical implications. The three principles are: utilitarian for cost-benefit considerations, rights for respecting entitlements and justice for fairness of actions." (Lawrence & Weber, 2008, p. 341, para. 1)
"A key factor in effectiveness is a good fit between the organizations' ethical climate and its strategy, enforcing mechanisms and decision making processes that suit the climate." (Cullen et al., 1989, p. 12, para. 6) A top-down approach would reinforce and achieve this type of positive process. ABC Complete Kitchens' management is the cornerstone to its success with proper training and implementing feedback on the current ethical climate. A formal code of ethics should be developed to provide a foundation that supports the vision of management and the employees and is consistent with the strategic objectives of the company.
Awareness of ABC Complete Kitchens' ethical climate in respect to foreign markets should be addressed due to global competitiveness of markets. The application of ethics should be consistent between both foreign and domestic markets. Management in foreign markets must be chosen and trained carefully in order to ensure that societal values will be observed and ethics will remain intact in spite of varying foreign values. "In a ten country poll, the respondents in nine out of ten countries preferred setting higher ethical standards and improving society over more traditional goals of making profit, paying taxes, creation of jobs and obeying the law." (Lawrence & Weber, 2008, p. 328, p. 3)
International Management Considerations
The Board of Directors global vision will take ABC Complete Kitchens' products to foreign market segments. In order to achieve the global vision a framework should be developed to address key objectives and considerations. Sales that have reached a twenty percent level are indicative of a foreign direct investment. It will be necessary to establish foreign operations to continue and grow the market segment that has been captured.
The recommendation is to establish foreign marketing and customer sales operations, including the development of Global Customer Management (GCM). Establishing proper management and hiring within the host country will aid in strategic objectives of marketing, sales and additional supply chain considerations. Future growth for a possible foreign manufacturing plant can be reviewed using a Return on Investment (ROI) model to analyze whether the number of units produced justifies capital outlay. The Board of Directors and upper management should agree on a percentage of sales threshold utilizing the ROI model.
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"Attracting, retaining, and growing global customers is a difficult and complex task that goes well beyond portfolio segmentation and customer relationship management initiatives of the past decade." (Capon & Senn, 2010, p. 3, para. 1) "GCM provides more standardized products and services so as to secure efficiency benefits, greater purchasing power, and lower prices from increased unit volumes to the customers." (Capon & Senn, 2010, p. 2, para. 1) The development of a GCM program is essential to maintain sales generated in foreign markets and to further develop on a global scale. Reasons to develop this strategy are to use the potential of a multi-national customer in charge of global procurement whereby the customer is looking for the best deal globally and that many multi-national companies cannot supply. (Capon & Senn, 2010, p. 4, para. 3) GCM should have its own program manager that works in close relation to the lead management team for the foreign segment of ABC Complete Kitchens.
Management considerations for foreign operations should be focused around an ethnocentric policy; the expatriate's role will be to keep ABC Complete Kitchens best interest in mind. "The expatriate manager protects the values and the culture of the home country." (Ayma, Kreicker, & Masztal, 1994, p. 1, para. 10) Considerations for alternate management strategies such as moving to a polycentric policy can be evaluated once the subsidiary has demonstrated success. Obstacles that pose the greatest challenge to managers will be learning the local customs and language of the host country. "The development of a global leadership training model designed for a high degree of interaction between trainees from multiple cultures would help the learning process with validation of key concepts through the exchange of experiences and ideas." (Ayma et al., 1994, Cross-Cultural training module section, p. 1, para. 1)
The board should also be aware of certain compensations to be made available to the expatriate. Compensations should include some type of incentive bonus, relocation costs, housing allowance and transportation.
A method favored by the majority of American International Companies has been to pay a base salary equal to that paid to a domestic counterpart, in the belief that no one should be worse off for accepting foreign employment, with the addition of allowances and bonuses. (Ball, Geringer, Minor, & McNett, 2010, p. 462, para. 5)
In addition, consideration for a spouse or family, if necessary, should also be addressed. Human Resources should develop a pre-entry program and exit program to prepare the expatriate for the assignment and to become re-acquainted with the home company and country upon completion of the assignment. Procedures should be in place to ensure the individual accepting the assignment is valued by the company.
In order to meet the objectives of GCM and foreign sales particular attention should be paid to the supply chain of ABC Custom Kitchens. "It is critical that the operations at each stage in the supply chain are synchronized in order to minimize the size of buffer inventories, representing more expense to the company." (Ball et al., 2010, p. 506, para. 1) Further importance is stressed in utilizing cross-functional teams to stay involved in the design of new products. ABC Complete Kitchens' marketing department should evaluate the trade-off of the standardization of products, simplifying product components for simplified process concerns. The globalized supply chain has the additional analysis of the international component in order to understand problems as they occur both materially and socially.
Developing a measure of value networks means that not only the performance of the physical supply chain has to be measured and analyzed, but also that the quality of social relationships, communication and information sharing, the satisfaction of the relevant people or groups have to be evaluated and drawn to getting design issues.(Jaehne, Li, Riedel, & Mueller, 2009, p. 11, para. 2)
A final consideration to the Board of Directors is the financial impact to ABC Complete Kitchens. "The use of foreign currencies will impact the financial operations when the subsidiary uses foreign currency and when the results of the subsidiary are reported to the parent company resulting in gains and losses on the translation." (Ball et al., 2010, p. 478, para. 3) Guidance from ABC Complete Kitchens' accounting department can direct the timing of payments to foreign vendors by analyzing the spot rates of foreign currency. Receivables will also be impacted, so an analysis of the type of currency to be paid by customers (U.S. Dollars or other) should be completed. Reporting requirements are still under the United States standards which follow Generally Accepted Accounting Principles, however, prudence would suggest becoming familiar with International Financial Reporting Standards that continue to evolve and emerge amongst foreign nations for reporting purposes.
Summary of Recommendations
Recommendations presented to the Board of Directors for ABC Complete Kitchens are intended to provide a foundation for the corporation to expand resources both domestically and internationally. The mission of providing high quality, durable industrial kitchen equipment that meets high volume demands of customers' food service is now supported by a framework of corporate social responsibility and sound ethical policies. The importance of continually reviewing and upholding value systems within the company such as how society perceives ABC Complete Kitchens, not only as an employer, but as a contributor to society helps to reinforce that the company can be seen as a community and industrial leader. The development of strong ethics also supports how society views the company; in essence, it provides reassurance that ABC Complete Kitchens is committed to social and ethical responsibility. Building strong business relationships should be centered on community and customers, extending to suppliers that support the mission of ABC Complete Kitchens. With these recommendations ABC Complete Kitchens will have a sound foundation in order to move into foreign markets with operations. Initially, guidance from an expatriate will build operations, with the consideration of moving to a home country national that will accelerate business using local customs and language to further develop the market. Continued foreign market development will focus on global customer management, with the expectation that a larger market segment will be obtained through dealing with procurement on a global basis.
(Cullen et al., 1989, p. 7, Exhibit 1)