Chapter 2 Managing External Relations Small Business Management

Chapter 2 Managing External Relations Small Business Management 4660

1. Establishing Ethical Foundation �Ethical Dilemma �occurs when a person’s values are in conflict – making it unclear whether a decision is the right thing to do �Ethics �a system of values - people consider in determining whether actions are right or wrong 2 -2

�Golden Rule �Treat others in the manner you wish to be treated. �Am I treating others the way I would want to be treated? �Utilitarianism �Seeking the greatest good for the greatest number of people. �Is my solution the best thing for the most people over the long term? 2 -3

�Universalism �A universal code of right and wrong that everyone can see and follow. � What if everyone did what I want to do? �Billboard principle �Asks whether someone would be comfortable putting his decision and name advertised on a billboard for the public to see. � What if my decision / action was advertised on a billboard? 2 -4

2. Knowing the Environment is a difficult concept – so huge - entire world outside yourself and your business - The key – have a model of the environment in mind 2 -5

Three Components �Can be divided into three parts: Internal Environment – People and groups within the boundary of a company e. g. owner, managers, employees and board member From the beginning (mature) – the setting of organisational culture must be set right �set of shared beliefs, basic assumptions, or common, accepted ways of dealing with problems and challenges within a company - demonstrate how things get done �E. g. Vision, Mission, Attitudes - honesty, discipline, fairness, responsibility, caring, cooperation, visionary training 2 -6

External Environment – forces, institutions and people (i. e. the rest of the world) outside the company’s boundary. Two parts: Task environment - part of the external environment made up of those components - company deals with directly such as customers, suppliers, consultants, media, interest groups and the like. • 2 -7

General Environment A part of external environment made up of sectors of major forces - shape people and institutions of the task and internal environments such as: �Economic sector – trends, market conditions and employment rate. �Technological sector - innovation, invention and modernization. 2 -8

• Sociocultural sector – nationality, religion and subcultures (based on groups formed around shared interests within a larger culture). • Demographic sector – trends in the mix of ages, races and gender in society. • Political-legal sector - reflects what’s happening in law, government and politics. 2 -9

Case Study : ESQ Leadership Centre 165 • VISION • To become a world class leadership centre • MISSION • Contributing in the development of • • individual and corporate. Establishing network in any field which benefits the society. Striving as a professional body that applies ESQ Way 165.

�Founded by Ary Ginanjar Agustian on 16 May 2000. • A lecturer at Politeknik Universitas Udayana, Jimbaran, Bali for five years. • Tertiary education: Universitas Udayana, Bali, STP Bandung; and Tafe College in Adelaide, South Australia. • 2001, wrote a book: ‘The Secret to Develop Emotional and Spiritual Intelligence’ - best seller. • In the beginning - gave lectures to explain his book - impacts on ESQ were not realized as expected.

�Radically changed his training methodology into a 3 -day program with the support of the avant-garde multimedia system � 2004, produced phenomenal results and led Ary to be selected as ‘The Most Powerful People and Ideas in Business’ by Swasembada Magazine. � 2005, selected as an ‘Agent of Change’ by Koran Republika. �March 2007, introduced ESQ and attracted experts in Spiritual Quotient (SQ) from various countries e. g. USA, Australia, Denmark, Netherlands, Nepal and India in a meeting organised by The Oxford Academy of Total Intelligence in England.

� 2006, ESQ was established in Malaysia. �Kiyai Hj. Abdul Hasyim Muzadi (Former President of Nahdatul Ulama and Secretary General of International Conference of Islamic Scholars)

Datuk Mustafa Abd. Rahman (a former Jakim director-general) Datuk as-Sheikh Nooh Gadut (Johor Religious Council advisor) Datuk Paduka Sheikh Hasbullah Abdul Halim (former Kedah Mufti) Tan Sri Kadir Talib (former Wilayah Persekutuan Mufti) Dr Adnan Yusof (Dean of the al-Quran and Sunnah faculty in the Islamic Science University of Malaysia).

�June 10, The ESQ leadership training sparked disagreements between muftis on its adherence to Islamic teachings. �Federal Territories Mufti Datuk Zahidi Wan Teh issued a “fatwa” banning ESQ on the grounds that its training breached Islamic teachings and “supports liberalism by making free interpretation of the Quran and [supports the concept of] pluralism in religions, which says that all religions are the same and true”.

�Perak Mufti Tan Sri Harussani Zakaria and former Johor Mufti Datuk Nooh Gadot have defended the programme, with the former saying that the ESQ courses had nothing to do with liberalism or pluralism.

�July 14 — The National Fatwa Council approved the Emotional Spiritual Quotient (ESQ) leadership training subject to certain conditions. �To date, 65, 000 participants including 8 Muftis, Ministers, IGP, Army Generals, Business Leaders, Professionals and Executives.

3. Managing Relations �Having learned about different types and sectors of the environment - including the case study ESQ 165 - the way to scan and analyse them – it makes sense to look at THREE approaches to managing relations with environment – external relations – to launch and grow – small business. �Building legitimacy �Developing a social network �Handling a crisis 2 -18

• Why? • GOAL of managing external relations is to create social capital • Includes characteristics of a legitimate business trust, consistency and networks that represent potential social obligations - an asset of the entrepreneur. • Helps make business operations – smooth and efficient • Capital in the same sense with cash and land – accumulated, spent and increase the value of your company goodwill – find it in the balance sheet. 2 -19

4. Techniques of Building Legitimacy �Legitimacy – belief that a company is worthy of doing business with because of the impressions or opinions of customers, suppliers, investors, or competitors. �Three general forms of legitimacy – can be developed: �People-based �Product-based �Organizational-based 2 -20

a. People-Based Legitimacy • Remember – owner is the business in many people’s mind. He or she is the most important element of social capital to customers and supporters of a business e. g. bankers, lawyers, and suppliers. • Competent, experience, track record and corporate values. Table 2. 1 2 -21

• Having people in the organisation – an owner, employees, or even media spokespeoplewhom customers know and respect increases the company’s legitimacy. • Make sure – competent, friendliest and most professional way – helps build the business goodwill. Table 2. 1 2 -22

People-Based - Indicators Table 2. 1

b. Product-Based Legitimacy Many small business owners think - most important source of legitimacy comes from an understanding of the product or service offered. If customers do not understand it - unlikely to get any customer attention because customers may not trust it. Table 2. 1 2 -24

Make sure – customer knows about the details of the product such as its: • High quality • Environmental friendliness • Competitive advantage • Instructions to use it • Assurance that it will be backed up Table 2. 1 2 -25

Product-Based - Indicators Table 2. 2 2 -26

c. Organization-Based Legitimacy Indicators If the customer understands the product final key is to promote knowledge about the organisation itself. • Focus on telling about history or visibility the company already enjoys. • Published information that makes sure - company looks like a professional business. 2 -27

Organization-Based - Indicators Table 2. 1 Table 2. 3

�Across these three types of legitimacy indicators, most small businesses will not incorporate all legitimacy factors at one time. �Should attempt to have at least a number of critical factors from each category and once implemented, they should be locked in.

5. Techniques of Developing Social Networking �Another basis for building social capital is through building a social network. �The entrepreneur’s set of relationships and contacts with individuals and institutions. 2 -30

�Social networking is a way to build trust, reciprocity and long-term relationships. �Shows your company’s expertise by convincing others to share their skills and knowledge with your company. �Most successful owners are those who recognise their expertise and establish relationships - give their customers the benefits of that expertise. 2 -31

Sources for Network Connections 2 -32

Types of Help Sought 2 -33

Online Social Networking Sites Table 2. 4 2 -34

6. Handling a Crisis Sooner or later, all businesses will face a crisis; knowing what to do can be a very specialized and emotionally demanding form of decision making. 6 steps: 1. Admit you’re in trouble – quickly 2. Get to the scene as soon as possible 3. Communicate facts you know 4. Have one person serve as the company’s spokesperson 5. Separate crisis management from the everyday management of the company 6. Deal with the crisis quickly 2 -35

Revision 2 -37