Chapter 14: Strategy and Society

Question 1

Social entrepreneur definition

Answer 1

An individual or organization that
uses free-market principles and
creates for-profit businesses with
the goal of creating shared value.

Question 2

Shared value definition

Answer 2

The simultaneous
creation of economic value (for the
business) and social value (for the
larger community).

Question 3

Economic value definition

Answer 3

The creation
of income, wealth, and other
economic outcomes for
individuals and organizations.

Question 4

Social value definition

Answer 4

Improvements in
the noneconomic elements of
individuals’ lives and community
well-being.

Question 5

The notion of shared value means that organizations, and the communities in which they
operate,

Answer 5

can gain both types of value: improvements in both economic and social welfare

Question 6

Are profits and social welfare a trade off?

Answer 6

Profit and social welfare are not substitutes that managers have to trade off, but complements
that reinforce each other.

Question 7

Is social value a source of strategic advantage?

Answer 7

Creating social value may increase revenue through increased
customer loyalty, brand equity, and willingness to pay, or it may reduce costs through efficient
supply chains and engaged, productive employees

Question 8

Other social value organizations include the not-for

profit healthcare sector:

Answer 8

hospitals, nursing homes, hospice care, or other community-based health agencies

Social value organizations also include public and private universities and colleges,
secondary schools, faith-based organizations, many arts and community development
organizations, and museums.

Question 9

Sustainable stakeholder advantage

Answer 9

The ability of an
organization to consistently
gather resources from, or provide
services to, key stakeholders such
as donors, volunteers, students,
or clients.

Social-value organizations work to create sustainable
stakeholder advantage

Question 10

External Analysis and the Value Net

Answer 10

External Analysis and the Value Net

Question 11

The Value Net diagram (Figure 14.1)

Answer 11

In the center is the organization and around it is Supplier, Competitor, Complementor, and Customer

Question 12

Value net definition

Answer 12

A model of value
creation that describes how an
organization interacts with others
in its environment to create value.
The value net consists of four
elements: customers, suppliers,
competitors, and complementors

Question 13

Customers definition

Answer 13

Individuals or groups
that purchase, or receive, the
outputs of the organization.

Question 14

Suppliers definition

Answer 14

Individuals, groups,
or organizations that provide
important inputs for the
organization.

Question 15

Competitor

Answer 15

An individual
or organization that makes
customers value the organization’s
output less because it offers its
own product or service.

Question 16

Complementor

Answer 16

An individual
or organization that makes
customers value the organization’s
output more because of its
product or service.

Question 17

The value net helps social-value-focused organizations, for two reasons:

Answer 17

1) First, most of the
stakeholders they interact with play multiple roles

2) treating a stakeholder as a
“single-role player” can lead to poor decision making

Question 18

Internal Analysis: Resources and Capabilities

Answer 18

Using the value chain to understand how, when, and where social value gets created has
helped hospitals create sustainable stakeholder advantages.

Successful social value organizations build from a strong platform of clear values and
priorities to develop a set of resources and capabilities that result in value creating activities

Question 19

Perhaps the greatest difference between an economic-value and social-value focused
organization comes in the area of _______

Answer 19

governance.

Question 20

Alignment between the organization and its multiple stakeholder
audiences proves to be a constant challenge for social-value organizations

Answer 20

Models like
the McKinsey 7 S framework can help strategic managers create and maintain effective alignment,
just as they can for business firms.

Question 21

Corporate social responsibility (CSR)

Answer 21

Activities of
companies designed to further
some social objective that lies
beyond the direct economic
interests of the organization.

Question 22

Increasingly, members of the larger society want to know that businesses create social, not merely
economic, value. Business leaders have taken two approaches to meet these demands:

Answer 22

1) They have incorporated demands for corporate social responsibility (CSR) into their existing operations
2) They have tried new and innovative solutions to help solve society’s most intractable problems

Question 23

The term corporate social responsibility refers to:

Answer 23

activities that companies engage in that are
designed to further some social objective and that lie beyond the direct economic interests of
the firm.

Question 24

CSR is closely connected to the logic of the ____________________ or __________________

Answer 24

stakeholder model of corporate governance

Question 25

Figure 14.2 shows this pyramid and the four fundamental social responsibilities of business.

Answer 25

Top - Philanthropic Responsibilities
Ethical Responsibilities
Legal Responsibilities
Bottom - Economic Responsibilities

Question 26

Economic responsibility

Aka bottom of the pyramid

Answer 26

A firm’s obligation to generate
economic profits.

Unless the firm produces profitable
products and becomes a sustainable and ongoing contributor in society, all its other responsibilities
fade away.

Question 27

Legal responsibility

aka second to bottom

Answer 27

A firm’s obligation to obey the written and

codified laws of the countries in which it operates.

Question 28

Ethical responsibility

Second to top

Answer 28

A firm’s
obligation to abide by the
unwritten ethical standards,
norms, and values of the
communities in which it operates

Question 29

Philanthropic responsibility

Top of pyramid

Answer 29

A firm’s obligation to contribute
to the enhancement of the
communities in which it operates.

implies that a firm has an obligation to give back in some way and contribute to
strengthening the fabric of its local communities, as well as the larger society.

A firm can fill its philanthropic responsibilities in
many ways, and managers enjoy substantial discretion about how to fulfill those obligations

Question 30

Philanthropy

Answer 30

Gifts that promote
the good or well-being of others

Firms engage in traditional philanthropy when they make donations of money,
employee time, or products or services to local community organizations

Question 31

Cash donations

Answer 31

A monetary gift as
one organization transfers money
to a recipient group.

Example: Sponsoring an event

Question 32

In-kind donation

Answer 32

Philanthropy accomplished as one organization
transfers product, employee time, or other services to a recipient group.

Example: After Hurricane Katrina hit New Orleans and the Gulf Coast, Walmart donated 1,500 truckloads
of relief supplies to affected residents—another type of in-kind donation

Question 33

Global Reporting Initiative (GRI)

Answer 33

provides firms and stakeholders with an objective way to assess a firm’s social performance

The GRI has developed a set of reporting guidelines firms use to produce an annual report, much like the 10K filing that US firms provide for their shareholders. The GRI standards cover many areas of a firm’s performance, including economic impacts for shareholders, stakeholders, and communities.

The GRI guidelines also cover a firm’s environmental performance along dimensions including energy use, biodiversity protection, and levels of emissions and waste. The social category of the GRI report holds firms accountable for their labor practices, compliance with
human rights standards and goals, contributions to local communities, and the production of safe and responsible products

Question 34

More than ______ percent of the world’s largest companies regularly
create and publish sustainability reports based on the GRI guidelines.

Answer 34

95

Question 35

Social Entrepreneurship

Answer 35

The use of innovative organizations and business models to create social value.

Question 36

Social value is created in two ways:

Answer 36

1) first, by reducing social
harms

2) second, by increasing the level of social benefits.

Question 37

Where do social entrepreneur’s come from?

Answer 37

Social entrepreneurs may come
from any field, including the government, faith-based organizations, large corporations, and even
traditional entrepreneurial ventures

Question 38

Types of Social Entrepreneurship

There are three ways

Answer 38

1) They attempt to build capacity,
2) they sell products or services,
3) or they drive institutional change

Question 39

Capacity building

Answer 39

The transfer of skills and abilities from one
organization to another.

entails transferring the ability to effectively
perform tasks from one organization to another

Question 40

Institutional change

Answer 40

When entrepreneurs strive to change the way people and groups think about problems and they
work to create or change social institutions—from government policies to social values

Question 41

Most social entrepreneurial ventures that build capacity rely on ______________ and __________ as
a key element of their business model

Answer 41

education and training

Question 42

Skills of Social Entrepreneurs

Answer 42

The different value creation strategies for social entrepreneurship each require a unique set of
organizational skills and leadership abilities.

Question 43

Figure 14.3 matches the three types of social

entrepreneurship with its corresponding leadership skill set

Answer 43

Page 283

Question 44

Social bricoleur

Answer 44

Organizations focused on capacity
building need a leader who is a social bricoleur

A social entrepreneur who creates something new through the combination of diverse and
different elements.

one who can successfully bricolage, a
French word that means creating something by combining diverse and different elements, into
a new setting

Question 45

Social constructor

Answer 45

A social entrepreneur who builds something that did not exist before.

Constructors build something new and
innovative that did not exist before.

Question 46

Social engineer

Answer 46

Finally, social entrepreneurial organizations working to create larger, institutional
changes succeed when led by a social engineer

A social entrepreneur who designs and creates new social systems to create large-scale change

Engineers design and then create more
effective social systems to create large-scale change.

Question 47

Challenges in Social Entrepreneurship

Answer 47

First, social entrepreneurs often work in difficult, unstable, and harsh conditions, particularly
those working at the base of the economic pyramid to help the world’s poor

Second, social entrepreneurs who want to combine a for-profit model with a social mission
face the difficulty of managing a hybrid organization
-For example, TOMS is a for-profit shoe and
eyewear retailer whose mission includes providing a pair of shoes to a needy person for every
pair of shoes sold and helping restore a person’s eyesight with every pair of sunglasses purchased

Question 48

Base of the pyramid (BoP)

Answer 48

Describes those living in conditions of extreme poverty
around the world, usually defined
as those who earn less than $2 per day.

BoP environments usually feature harsh
climates including excessive heat, cold, humidity, or desert conditions

Question 49

Hybrid organization

Answer 49

An organization pursuing more than a single goal; each goal has equal importance.