THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 SOLUTION 1 – CASE STUDY (REEKS LIMITED) (a) Corporate governance concerns for Reeks are as follows: Board size Reeks have five members serving on its Board of Directors. Even though different theories advocate for either small or large boards, a company in the nature of Reeks should have a board size which is larger than five. This concern is critical especially considering the fact that it got listed on the Ghana Stock Exchange and its intention to expand its operation in the Asian market. Having a larger board size than five is likely to enhance the Board’s performance. The fact that it had to consult an independent consultant is an indication that the board is lacking in expertise due to its small number. Reeks Limited must consider increasing its board number to at least nine members with majority being non-executive directors with requisite expertise for effective monitoring and decision making. Board composition Reeks five member board of directors is composed of three executive directors and two non-executive directors. Sound corporate governance principles advocate for more independent non-execute directors on the board. Clearly, this principle is breached in Reeks Limited. In addition to this, the executive directors are closely related (close family member) which also raises concerns of independence during decision making. The fact that these executive directors, who are the majority on the board, are closely related is unhealthy for the company since they can advance their own course easily at the expense of the shareholders. The status of the company has changed from being private to a public company and this must also be reflected in the composition of the board directors. Reeks Limited must consider increasing the number of non-executive directors of the board with relevant expertise. This will ensure a lot of independence and objectivity in the board’s decision making process. It will also ensure that the new status of the company as a public company is reflected in the composition of the board. Again, having more non-executive directors on the board will also ensure that the interests of key stakeholders of the company are brought to bear on the board.
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 Representation on Board committees The fact that two committees that assist the board in carrying out its functions of audit and setting the remuneration of key officials are headed by executives directors raises concerns for corporate governance. Sound governance principles advocate for independent non-executive directors to constitute the majority, if not all, of the board’s committees. This is to ensure independence and objectivity regarding the work of the board. The two committees which are chaired by the executive directors, who are also related, raises concerns of independence, competence and objectivity of the work of the board. Reeks can deal with the issue by employing non-executive directors with requisite expertise to chair the various board committees. They should consider constituting these committees with only non-executive directors. This means getting more nonexecutive directors on the board is very crucial for sound corporate governance in Reeks. CEO/Chairman of the Board Sound corporate governance advocates for the separation of the positions of the CEO and chairperson of the board. This is to ensure that authority and power is not vested in one dominant individual. It will ensure appropriate check and balances on the activities of the company especially relating to the CEO. Sound corporate governance principles advocate for an independent non-executive director to chair the Board. These principles have been breached by Reeks and thus raise a lot of concerns regarding objectivity in decision making. It is recommended that the CEO steps down as chairman of the Board and a decision is taken to appoint one of the two non-executive directors as chairperson of the Board or appoint a new chair from outside the company.
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 (b) If Reeks Limited chooses to conduct its business in Asia using agents, this effectively represents a substantial degree of delegation. The agents are most likely to be independent businesses over which Reeks will have indirect control. The absence of direct control by Reeks over these businesses will rise to the following types of control problem: Probity The Asian customers will have a relationship directly with the agent and indirectly with Reeks. Consequently, anything the agent does will reflect upon Reeks; for example, if an agent was to conduct dishonest advertising make unrealistic claims about Reeks products, this could affect Reeks reputation. Appropriate control measure: Reeks should enquire into any potential agent’s background and trading record. It could utilize published financial statements, banker’s references and specialist agencies or business analyst. Requirements could be incorporated in the agency agreements to govern the agent’s behaviour. Performance If Reeks uses agents, it has delegated the responsibility for market development and profitability to an organization over which it has no direct control. Reeks could find that the agent has different objectives to itself: the agent might want very rapid growth whereas Reeks might wish to grow more conservatively. The agent may have divided loyalties as it is likely to hold agencies from a number of clients and some of these may be competitors of Reeks. Agents, as independent organizations, have autonomy from Reeks and this must be respected. However, this autonomy does imply severe restrictions on Reeks ability to control. Appropriate control measure: objectives and performance measures should be a part of the agency agreement and Reeks could require regular reports from the agent as well as the right to inspect its internal accounts. Culture In the agent’s country, business may be conducted differently to how it is carried out in Reeks’ home country; for example, the amount of time for which trade credit is extended may be shorter/ longer than in Reek’s home country. If Reeks tries to impose its usual trade credit upon its agents/customers, this could cause difficulties. Appropriate control measure: Reeks may have to accept the different cultural practices that exist within the agent’s country. However, the agency agreement should delineate boundaries that are mutually acceptable.
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 Communication Although modern communications are very efficient there still remain difficulties for Reeks trying to control its agents in Asia. Time differences must be taken into account and internet and telephone communication are not always reliable. In addition, language differences will also complicate communication. Appropriate control measure: as with culture, some of these problems are likely to be insoluble. However, Reeks might overcome difficulties by requiring the agent to make periodic visits to Reeks’ office and this could be supplemented by Reeks personnel making visits to the agent’s premises. Such visits could be carried out be Reeks’ internal auditors. (c) Forecast based on Independent Consultant’s assumptions End of year 31 December
Actual 2012 GH¢000
Incremental revenue
5,000
Incremental costs Incremental profit for the year
Forecast 2013 GH¢000
Forecast 2014 GH¢000
Forecast 2015 GH¢000
Forecast 2016 GH¢000
Forecast 2017 GH¢000
6,250
7,812
9,765
12,206
15,257
1,000
1,250
1,562
1,953
2,441
3,051
4,000
5,000
6,250
7,812
9,765
12,206
(d) From the incremental profit forecast it is possible to derive the following forecasts: Years
2012 GH¢
2013 GH¢
2014 GH¢
2015 GH¢
2016 GH¢
2017 GH¢
Incremental EPS
0.022
0.028
0.035
0.043
0.054
0.068
Incremental DPS
0.011
0.014
0.017
0.022
0.027
0.034
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 The consultant from Wilson and Associates assumptions about the future are much more optimistic than those of the Finance Director of Reeks Limited and this is reflected in both the earnings per share and the dividend forecasts. By 2017, for example, the consultant’s dividend forecast is 262% of that of the Finance Director’s (GH¢0.034/GH¢0.013*100%). It is not clear what the source of the consultant’s assumptions is but it is likely they are based on expert knowledge of the market (considering his experience in the electronic market in Asia). Thus based on his forecast, the shareholders should benefit from the proposed expansion. It may be possible the consultant has got access to other relevant information that is not disclosed to the Finance Director. However, care must be taken to ascertain the basis of the Finance Director’s forecast since he may also have access to certain data that is not available to the consultant (especially internal data about the organization). If the assumptions of the consultant are not really based on expert knowledge, then the prospects for Reek’s expansion are not so bright and shareholders are likely to suffer for it.
SOLUTION 2 (a) The concept of corporate governance has been variously defined by different institutions and persons based on their different theoretical perspectives. It generally refers to the system by which business corporations are managed for the benefit of its shareholders and other stakeholders. More specifically, corporate governance refers to the manner in which the power of corporations is exercised in the stewardship of a corporation’s total portfolio of assets and resources with the objective of maintaining and increasing shareholder value and respect of the legal of all stakeholders in the context of its corporate mission. OR Corporate governance refers to 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 core idea underlying the concept is the efficient and effective use of the resources of corporations by its executives in creating value for all identifiable stakeholders.
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 (a) A system or framework by which corporations or companies are managed (i.e. directed and controlled) (b) The efficient and effective use of corporations’ resources (c) Create value on the investments of the owners/shareholders of the corporations (d) Emphasize on the recognition and respect for all other stakeholders of the corporation like regulatory bodies, employees, environment, customers, business partners etc. (b) A discussion of three theories underlying the development of corporate governance is as follows: (i)
Agency Theory: The agency theory, in the context of companies, has its major feature the separation of ownership from control. In this context, managers are the agents who are appointed by the principals, the owners/shareholders of the company in this case, to oversee the day to day running of their business for the benefit of the principals. This relationship is the most commonly cited agency relationship in the context of corporate governance. This agency relationship gives rise to a number of problems relating to the opportunistic behaviour or self-interest of the agent. For instance, the agent (in this case the management of companies) may not act in the best interests of the principal, or the agent may act only partially in the best interests of the principal(s). There could be a number of dimensions to this self-interest or opportunistic behaviour of the agents. For example, the agent(s) could misuse his power for pecuniary or other advantage as well as the agent refusing to take appropriate risks in pursuance of the principal’s interest because he (the agent) views those risks as not being appropriate (this is the case where the principal and the agent have different attitudes to risk). There is also the problem of information asymmetry presented by the agency relationship. This is where the principal and the agent have access to different levels of information. In practice, the principals are at a disadvantage since they only know what the agent wants them to know. The costs resulting from managers misusing their position, as well as the costs of monitoring and disciplining them to try to prevent abuse, have been called ‘agency costs’.
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 In the context of corporations and issues of corporate control, agency theory views corporate governance mechanisms, especially the board of directors, as being an essential monitoring device to try to ensure that any problems that may be brought about by the principal-agent relationship are minimized. (ii)
Stakeholder Theory The stakeholder theory of corporate governance extends the agency theory by incorporating accountability to a wider group of constituents rather than focusing on shareholders. The stakeholders theory postulate that the focus of corporate objectives should not be on only the maintenance or enhancement of shareholder value but should address the concerns of a wider stakeholder group, such as employees, providers of credit, customers, suppliers, government and the local community. In this case, the focus on shareholder value becomes less selfevident. The implication of the stakeholder theory is that governance structures need to encompass all possible relationships and issues arising as a result of management’s relationship to the firm’s stakeholders. Stakeholders theory suggests that any group or individual who can affect or is affected by the achievement of the organization’s objectives ought to be considered in instituting corporate governance mechanisms. It is, therefore, expected of management to create a balance between the varied and usually conflicting interests of all stakeholders. The criticism leveled against the stakeholder theory is the fact that it is unable to justify how the trade-offs against the interests of each of the stakeholder groups might be made and thus there is no defined measureable objectives of the company which leaves managers unaccountable for their actions. Jensen thus advocates the enlightened value maximization, which is identical to enlightened stakeholder theory to deal with this problem. The ‘enlightened value maximization utilizes much of the structures of stakeholder theory but accepts maximization of the long-run value of the firm as the criterion for making the requisite trade-offs among its stakeholders and therefore solves the problems that arise from multiple objectives that accompany traditional stakeholder theory’.
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 (iii)
Stewardship Theory Stewardship theory draws on the assumptions underlying agency theory and transaction economic theory. The theory perceives company executives and managers working for the shareholders as stewards whose responsibility it is to protect and maximize shareholders’ wealth through firm performance. Stewards are perceived as maximizing their own utility function or (satisfaction) through the maximization of the shareholders’ wealth. Unlike agency theory, stewardship theory stresses not on the perspective of individualism and self-interest of the agent, but rather on the role of top management as stewards, integrating their goals as part of the organization. The stewardship perspective suggests that stewards are satisfied and motivated when organizational success is attained. Whereas the agency theory emphasizes the control of managerial ‘opportunism’ by having a board chair independent of the CEO, and using incentives to bind CEO interests to those of shareholders, stewardship theory stresses the beneficial consequences on shareholders returns of facilitative authority structures which unify command by having roles of CEO and chair held by the same person. The safeguarding of returns to shareholders may be along the track, not of placing management under greater control by owners, but of empowering managers to take autonomous executives action.
SOLUTION 3 (a) Responsibilities of Directors regarding the financial statements of a company (i)
They are responsible for the preparation and fair presentation of the financial statements in accordance with relevant accounting standard (e.g. IFRS, US GAAP, etc) and in the manner required by the Companies Code, 1963 (Act 179), Securities and Exchange Commission Regulation 2003, LI 1728 and Ghana Stock Exchange Membership Regulations 1991, LI 1510 (i.e. if they are listed).
(ii)
They are responsible for designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error.
(iii)
They are responsible for selecting and applying appropriate accounting policies
(iv)
They have a responsibility in making appropriate estimates that are reasonable in the circumstances.
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 (b) Four (4) reports usually contained in a company’s annual report are: (i)
Directors Report: the director’s report is normally the first report contained within the pages of the annual report. The information contained in the director’s report include statements about the responsibilities of the directors regarding the financial statements of the company, maintenance of proper books of accounting and appropriate internal control systems to safeguard the assets of the company. It also contains statement about the nature of the company’s principal business and whether there was any change in the company’s principal business during the year. The report also gives a brief highlight about the financial results of the company and statement regarding the payment of any dividend to shareholders based on the financial results. The directors also state within this report any changes regarding the membership of the board of directors in accordance with appropriate section of the Companies Code (Act 179). Lastly, a statement regarding the appointment or re-appointment of the external auditors of the company is given.
(ii)
Auditors Report: this is the report that contains the formal opinion, or disclaimer thereof, by the independent (external) auditor, as a result of an external audit performed on the company in accordance with provisions in a relevant regulation (example, Ghana Companies Act, 1963 (Act 179)). The report is primarily prepared for shareholders of the company’s financial statement to make some economic decisions. The report stipulates how the audit was conducted, the responsibility of directors regarding the company’s financial statements and internal controls and the auditor’s responsibility and basis of opinion.
(iii)
Chairman’s Review/Report: the chairman’s report or review highlights the general operating environment of the company. It usually emphasizes on the general economic and political environments of the country in which the company operates. It also discloses information relating to major global or regional economic developments. Other disclosures contained in this report include: company’s current business strategy and the likely effect of the strategy on current performance; highlights on current operational and financial performance; description of marketing networks for the company’s finished products; disclosures relating to competition within the company’s industry and analysis of its market share. A statement regarding the declaration of dividends to shareholders is also contained therein. The report concludes with information relating to the future of the company.
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 (iv)
Managing Director’s Report: the managing director’s report is a report by the managing director to the shareholders regarding the operation of the company in the financial year. It contains a review of the industry in which the company operated in the year as well as a review of the current financial results and a discussion of the major factors underlying performance. Usually, the managing director’s report contains almost the same or similar information as the chairman’s review.
(v)
Corporate Governance Report: the corporate governance report is a report by the directors to highlight on good corporate governance principles that are being implemented by the company to safeguard the assets and other resources of the company. It usually contains a brief description and responsibilities of various committees (example include the audit; technical and remuneration committees) that are instituted by the Board to assist it in carrying out its functions. It also contains information regarding the internal control as well as performance and evaluation mechanisms instituted by the board to ensure effective and efficient utilization of company’s resources.
(vi)
Corporate Social Responsibility Report: the CSR report is a report on the social responsibility activities of the company. It usually highlights the social responsibility activities that have been undertaken during the current year and may disclose the company’s policy regarding its social responsibility strategy. It usually has some pictures relating to some major social responsibility activities that were undertaken during the current year.
SOLUTION 4 (a) Arguments in favour of larger percentage of outsiders on boards include: (i)
Outside directors are less biased and more likely to evaluate management performance objectively than insiders.
(ii)
They prevent management from acting selfishly to the detriment of the shareholders
(iii)
Boards with larger proportion of outside directors tend to favour growth through international expansion and innovative venturing activities than boards with a smaller proportion of outsiders.
(iv)
Research has found that board with larger number of outsiders tends to have better corporate governance than boards with insiders.
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 (v)
Outsiders tend to be more objective and critical of corporate activities.
(b) Arguments in favour of more insiders on the board include: (i)
Insiders are more effective than outsiders because they are more likely to have the interest, availability and/or competency. Because of their long tenure with the company, insiders (senior executives) tend to identify with the corporation and its success (stewardship theory).
(ii)
Rather than use the firm for their own ends, insiders are thus most interested in guaranteeing the continued life and success of the corporation.
(iii)
Outside directors may sometimes serve on so many boards that they spread their time and interest too thin to actively fulfill their responsibilities. The reserve is the case when a board is made up of more inside directors.
SOLUTION 5 (a) Dimensions/Characteristics of strategic decisions The discussion so far has revealed that strategic management is a complex activity. It affects the long-term success of an organization. But what are the decisions facing an organization that are strategic and, therefore, deserve attention of strategic management? The following dimensions are typical of strategic issues (i)
Strategic issues require top-management decision: since strategic decisions cut across several areas of a firm’s operations, they require top-management involvement. Normally only top-management has the viewpoint needed to understand the broad implications of such decisions and the power to authorize the necessary resource allocations.
(ii)
Strategic issues require large amounts of the firm’s resources Strategic decisions involve substantial allocation of people, physical assets, or money that either must be redirected from internal sources or secured from outside the firm. They also commit the firm to actions over an extended period. For these reasons, they require substantial resources.
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 (iii)
Strategic issues often affect the firm’s long-term prosperity Strategic decision apparently commits the firm for a long time, usually for a minimum of five years. In fact, the effects of such decisions often last much longer. Once a firm has committed itself to a particular strategy, its image and competitive advantages usually are tied to the strategy. Firms become known in certain markets, for certain products, with certain technologies based on their strategic choices. They would put their previous gains in danger if they shifted from these markets, products or technologies by adopting a radically different strategy. Accordingly, strategic decisions have enduring effects on firms for sustainability.
(iv)
Strategic issues are future oriented Strategic decisions are based on what managers forecast, rather than on what they know. With such decision, emphasis is placed on the development of projections that will enable the firm to select the most promising strategic options. In the turbulent and competitive free enterprise environment, a firm will succeed only if it takes a proactive stance toward change.
(v)
Strategic issues usually have multifunction or multi-business consequences Strategic decisions have complex implications for most areas of the firm. Decisions about such matters as customer mix, competitive emphasis, or organizational structure necessarily involve a number of the firm’s strategic business units (SBU’s), divisions, or programmes units. All of these areas will be affected by the allocations or reallocations of responsibilities and resources that result from these decisions.
(vi)
Strategic issues require considering the firm’s external environment All business firms exist in an open system. They affect and are affected by external conditions that are largely beyond their control. Therefore, to successfully position a firm in competitive situations, its strategic managers must look beyond its operations. They must consider what relevant decision others (e.g. competitors, customers, suppliers, creditors, government and labour) are likely to make.
(b) Steps and strategic planning The process of Strategic Management has a critical role to play in an organization. (i)
Formulate the organisation’s mission, including broad statements about its purpose, philosophy and goals.
(ii)
Conduct an analysis that reflects the organisation’s internal conditions and capabilities.
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 (iii)
Assess the organisation’s external environment, including both the competitive and general contextual factors.
(iv)
Analyze the organisation’s options by matching its resources with the external environment.
(v)
Identify the most desirable options by evaluating each option in light of the organisation’s mission.
(vi)
Select a set of long-term objectives and grand strategies that will achieve the most desirable options.
(vii)
Develop annual objectives and short-term strategies that are compatible with the selected set of long-term objectives and grand strategies.
(viii) Implement the strategic choices by means of budgeted resource allocations on which the matching of task, people, structures, technologies and reward systems is emphasized. SOLUTION 6 The management issues which should be addressed include communication, centralization of authority, leadership, structure, culture, policies and motivation. (i)
Communication It is obvious that management does not communicate sufficiently to employees. This is illustrated by the accusation of lack of openness and lack of direction. Communication is important to create awareness about management plans, policies, and decisions taken at higher levels. Employees also need feedback on their performance and an opportunity to communicate their concerns back to management. Management must use seminars, notice boards, departmental meetings etc to communicate plans, policies and intended changes to employees.
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 (ii)
Centralization of authority It is suggested in the case that management imposes decisions on their employees. This means that there is a perception of concentration of authority at the top. This situation discourages the use of initiative, reduces commitment and slows down employee learning. Management should encourage employee participation in decision making. They should pass on the less important decisions to employees and supervise them, orientate or train them where necessary to ensure that they perform as expected. This will raise their commitment levels and their productivity.
(iii)
Leadership Leadership is the ability to influence the attitudes and opinion of others to achieve a coordinate effort from a diverse group of employees. Lack of direction and inefficient management as stated in the case, suggests that leadership is weak. The breakdown of discipline and employees lukewarm attitudes also means that management is helpless and at their wits end. Strategic leadership is needed for successful implementation of strategy, such leaders must be able to analyze situations and make the best decisions, solicit feedback from their peers, superiors and employees about the value of their decisions. Leaders in this organization need training or orientation that will equip them with appropriate skills such as communication, human, conceptual and analytical skills.
(iv)
Structure In the case, the issue that relates to structure is the allegation of ‘square pegs in round holes’, a suggestion that the wrong people have been placed at certain positions. It also means that the task responsibilities are not performed as expected. This will not only affect their units or departments but the quality of products or services that are delivered by the whole structure. Management must more such people to positions where they can perform better or even retrench them if necessary. Sometimes the positions have to be scrapped and new ones created.
(v)
Culture According to the case, there is a culture of indiscipline, lukewarm attitudes and informed groupings that are not helping the organization. The new management must address these challenges quickly. They must make employees understand that the ownership of the organization has changed hands. They must outline their strategic direction, indicating their new vision (if any) objectives and strategies. Above all, the values and habits that they require of both management and other staff should be clearly stated and communicated.
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THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014 (vi)
Motivation/Rewards In order to address the downward trend in performance, an efficient motivation/reward system is required. The new management must institute such a system to motivate or reward staff who will excel in performance and punish those who will intentionally show lack of enthusiasm and commitment.
(vii)
Policies Policies will be needed to serve as guidelines for thinking and decision-making management and performance of specific actions by subordinates. The policies will reduce misunderstanding, bring about consistency in the treatment of problem and serve as a convenient and authoritative reference to staff. Some policies are captured in manuals and made available to departments or units while in some cases they are passed on orally and through practice.
SOLUTION 7 (a) Technical obsolescence and technical improvements Technical change pressures can stem from outside the organization in the form of new developments by competitors and the availability of new technologies which the organization might wish to harness. Internal research and development and innovatory ideas from managers can generate technical change internally. (b) Political events Many of these change pressures will be outside the control of the organization; but firms will be forced to respond. In the mid-to-late 1980’s there was considerable pressures on companies not to trade with South Africa, and in the late 1980’s increased public awareness of environmental issues began to place pressures on certain firms. (c) The tendency for large organization and markets to become increasingly global Globalization has provided opportunities and new directions of growth for many organizations. Others have been forced to respond to changing competitive conditions. The growing incidence of joint ventures and strategic alliance is a feature of this. (d) Increases in the size, complexity and specialization of organizations The growth of organizations, linked to internal changes of structure, creates pressure for future changes. Large complex specialist organizations have made increasing use of information technologies in their operations, introducing automation and JIT systems. There create a need for greater specialist expertise from both managers and other employees, possibly necessitating training and changes in their jobs. Effective use of these technological opportunities also requires greater co-operation and co-ordination between functions and managers. Page 15 of 16
THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: CORPORATE STRATEGY AND GOVERNANCE, NOVEMBER, 2014
(e) The greater strategic awareness and skills of managers and employees Able and ambitious managers and employees, who want job satisfaction and personal challenges, need opportunities for growth within the organization. These can be promotion opportunities or changes in the scope of jobs. Such changes require both strategic development and growth by the company and appropriate styles of nonautocratic leadership. (f) Economic trendy (g) Socio-cultural environment (h) Trends in natural environment
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