Lecture 11: Business Models

Question 1

what is circular economy about

Answer 1

Circular economy is about the way firms produce different goods. Change the role of growth in the economic system. Circular economy is related to a system change.

Question 2

how do you go from a linear to a circular approach of production?

Answer 2

• Using material more efficient and durable
• Reusing the waste in the production process
• Changing the use of inputs and outputs in the production of different goods
• Changing the production process itself
• Considering different types of goods: more durable

Question 3

milton friedman

Answer 3

shareholder approach

Question 4

edward freeman

Answer 4

stakeholder approach

Question 5

shareholder approach

Answer 5

profits

A company should only care about its shareholders. To create a profit for shareholders to have the profit they need (first official theory on firms). Return of investments (even when the environment around the company is destroyed; e.g. bad working conditions). It is about short term profit.

Question 6

stakeholder approach

Answer 6

social responsibility

Important to make profit and grow, but also while considering the stakeholders around you. The corporate environment should be considered as an ecosystem: important to manage with all the groups and satisfy them, to be able to keep the company healthy and successful in the long term.

Question 7

dominant approach today

Answer 7

stakeholder

Question 8

theory of the firm

Answer 8

friedman / freeman

Question 9

long-term possibilities for a company to grow

Answer 9

First: the responsibility to all stakeholders,

then: the possibility to make profit in the long term.

Question 10

stakeholders

Answer 10

Stakeholders have a vested interest in the success of the organization or project

Question 11

shareholders

Answer 11

shareholders are partial owners of the organization of the project and are focused on the ROI

Question 12

roi

Answer 12

return on investment

Question 13

CSR

Answer 13

= Corporate Social Responsibility

Question 14

corporate social responsibility

Answer 14

Corporate Social Responsibility (CSR) has been developed: balancing the three P’s: Planet, people, profit = triple bottom line

Question 15

triple bottom line

Answer 15

planet, people, profit

Question 16

CSR framework for …

Answer 16

CSR is important framework to engage firms in sustainable development

Question 17

Other things involved in the CSR framework

Answer 17

• Economic performance issues
• Social performance issues = impact on society
• Environmental performance issues = impact on the environment

Question 18

any kind of business strategy should be in line with …

Answer 18

important stakeholders; ecosystem around the business

Question 19

synergy between performance issues

Answer 19

when you do good on one of them, also another one can profit.

Question 20

three ways for companies to apply CSR

Answer 20

1. win-win
2. delegated philanthropy
3. insider-initiated corporate philanthropy

Question 21

win-win

Answer 21

long-term perspective to maximizing (intertemporal) profits = triple bottom line to system value (directly in the strategy of the company).

When a company is really applying the triple bottom line, changing the whole strategy.

Question 22

win-win example

Answer 22

An example is circular economy. Thinking about the long-term existence of the world, but investing a lot of money right now.

Question 23

delegated philanthropy

Answer 23

CSR profit sacrifice is then passed through to stakeholders. The idea is to do good things on behalf of your stakeholders. A way to generate marketing strategy and attract specific types of customers. Sacrifice in your profit, to do good for the stakeholders.

Question 24

example delegated philanthropy

Answer 24

An example is when a company decides to restore a forest in a developing country, or to create a foundation to organize some sustainable activities, or increase the price to buy fairtrade or organic materials because consumers want that to happen.

Question 25

insider-initiated corporate philanthropy

Answer 25

not motivated by stakeholders’ demands or willingness to sacrifice money for a good cause, but rather reflects management’s or the board members’ own desires to engage in philanthropy (like giving to charity). Its not about changing the strategy of a company, but about individuals like the CEO that wants to do something good for society on individual level. Individual decisions inside a firm.

Question 26

example insider-initiated corporate philanthropy

Answer 26

donating to charity by an individual

Question 27

enron

Answer 27

Employees were buying shared, but the board was already aware that the company was going bankrupt –> they sold their own shares, but convinced the employees to buy shares. The bubble burst, everyone lost billions –> one of the biggest bankruptcy filings in history.

Question 28

Standard & Poor’s Global Rating

Answer 28

American credit rating agency (CRA) and publishes financial research and analysis on stocks, bonds, and commodities. Measures the stock exchanges of the 500 largest companies (biggest and powerfullest)

Question 29

discrepancy with actions in the field

Answer 29

They say good things, but this is not what they do,
reputation effects, lack of uniformity

Question 30

why are corporate cultures important to consider

Answer 30

Firms are like any other social group, they can be very different. Different corporate cultures can clash.