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Strategic Management

By:   •  November 2, 2012  •  Essay  •  914 Words (4 Pages)  •  918 Views

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In the world of complex and fast changing, the application of these internal resources and capabilities to an external context of markets and competition is a critical factor contributing to the success of a company (Andreas Gro¨ßler, 2006). Ethics in business can be considered as a organization's capability which will become an important source of sustainable advantage of a company as the proposition of Buller and McEvoy. In general meaning, ethical capability means the duty to do what is right. Many real world cases, for example Enron scandal and the recent Global Financial Crisis, have proven that business ethics plays a very important part in the real business.

Enron, America's seventh largest company with the the first natural gas pipeline network in American, has suffered from a debacle due to the violation of the business ethics and lack of sustainability. The story of Enron's wrong-doing business started since this corporation became the largest natural gas merchant in North America with the favor of selling energy at a higher price. This buying and selling financial contracts activities related to value of energy assets has bring Enron the outstanding profit. Enron's stock prices increased. This company is considered as the most admired company at that time. However, when all the stuff came into light, Enron's problems are revealed with big losses and debts. All figure and numbers in financial statements are falsified by top managers and there were a lot of special purpose entities existences in order to help Enron hide all serious problems. Business ethics was raised since Enron's managers especially its CFO, Andrew Fastow and some other executives, allowed accounting contrivances in order to hide its financial information with debts, losses and fraud. The collapse of Enron has alarmed the ethics in business. Once an organization operates without ethical capabilities, it can not retain the sustainability to operate and grow.

"Ethical capability…can be an important source of sustainable advantage". To dig deeper into this proposition, the author consider such issue related to sustainable advantage and strategic capability. Sustainable advantages can be considered long-term assets which determine the objective of an organization. Sustainable advantages not only involve such aspects as strategy, human resources, ethics, finance, etc, but it also depends on its effects on people including trust, honesty, integrity, quality and responsibility. Strategic capability is another smaller category which mainly mentions what an organization should process. According to Andreas, strategic resources and capabilities of an organization will determine its sustainable performance. In competition, famous companies with successful experience have suggested that competitive success depend on transforming a company's key processes into strategic capabilities (G. Stalk, P. Evans, L. E. Shulman, 2000: 62). Resources and assets an organization processes could be tangible such as physical resources and intangible like culture, knowledge, organizational ability. When calling resources "strategic" capabilities, that means they are valuable, rare, inimitable, non-substitutable, or still, ambiguous to competitors and can be used as basis for the achievement of competitive advantages (E. de Oliveira W. and J. E. Fensterseifer, 2003, 997). Business ethics can be strategic capability because pursuing the profit maximizing goal does not ensure the sustainability of an organization. A company always performs in a complex, turbulent, and competitive environment from the business perspective; therefore, it often considered such resources as capital, human resource etc as the most common strategic advantages. However, business is also a part of the society. Constructing a code of ethics can help the business having a good image to the

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