Apollo XIII

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Strategic Management and the public private
interface

• ESM 210
• Magali Delmas and Oran Young

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Class 1 Introduction

• Introductions
• Papers discussion (Reinhardt)
• Subjects that will be covered in the class
• Administrative matters
• Rules of the fishbanks game

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PORTER 1995Fixed trade-off Ecology versus the
economy?

• Industrys private costs for prevention and
  cleanup
• costs that lead to higher prices and reduced
  competitiveness
• This is a static view of environmental regulation
  were everything except regulation is held
  constant
• i.e. technology, products, processes and customer
  needs are fixed

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A world of dynamic competition

• Companies operate in a world of dynamic
  competition not in the static world of much
  economic theory
• Firms constantly find innovative solutions to
  pressures of all sorts from competitors,
  regulators and customers
• Environmental management offers opportunities to
  innovate, differentiate products, reduce costs,
  or otherwise enhance the profitability of
  operations

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Environmental innovationcan pay

• Rhone Poulenc equipment to recover and sell
  diacids as additives for dyes investment 76MF
  revenues 20.1 MF per year
• Dow reduced use of caustic soda for production of
  chemical cost 200,000 savings 2.4 millions
• 3 M technique to run rapid quality test on new
  batches reduce Haz waste savings 200,000...

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The free lunch debate. Is regulation necessary?

• Create pressure that motivates companies
• Improve environmental quality
• Alert and educate companies
• Create demand for environmental improvement
• Level the playing field

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Reinhardt the environment as a business problem
(1997)

• It is important to recognize the conditions under
  which it pays to be green.

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Conditions to reconcile provision of public good
and expected value of the firm (1)

• Possibility for strategic interaction with
  competitors
• Rent seeking (German car manufacturers)
• Collusion (Responsible Care)
• Opportunities to differentiate products
• Bundle public good with private consumption
  benefit (Patagonia)

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Conditions to reconcile provision of public good
and expected value of the firm (2)

• Discovery of unexploited cost savings
• (Interfaces, Xerox product take back)
• Managing environmental risks
• insurance policy sour community relations related
  costs shocks (Exxon)
• Increase productivity
• Recruit and retain high level employees with
  personal environmental convictions

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Topics that will be studied in the course (1)

• I. The context for environmental management
  tragedy of the common and environmental
  regulation
• II. Environmental performance and financial
  performance
• II. Basic Environmental strategies and
  competitive advantage
• environmental differentiation, cost reduction,
  and risk reduction

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Topics that will be studied in the course (2)

• IV. Managing stakeholders
• new types of relationships between firms,
  regulatory agencies, NGOs and communities and
  suppliers
• V. International issues in environmental
  management

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Teaching method

• Case discussion (Du Pont, Patagonia, Freeport
  Indonesia, McDonalds/ Environmental Defense )
• Lecture discussion
• Speakers (Patagonia, Genentech)
• Group project

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Grading

• Group Presentation 15 (group presentation on
  case or other material)
• Class Participation 25
• Individual Write-Up 25 (one individual write-up
  on a session of your choice)
• Group Project 35 (report and presentation)
• No LA CB CP

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Group project

• Select company or organization of your choice
• Analyze firm business and environmental
  strategies using the concepts learned in class
• Suggest improvement be creative!
• Information sources firm but also its
  stakeholders

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Timing

• By Thursday February 3 1 page summary of project
  including
• the name of the company you will be researching,
  your group members and description of project
• Deadline of report March 8
• Presentation of the report on March 10 (last
  class)

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Groups

• By the end of the session, please provide the
  name of the people in your group (4 people per
  group)

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Next session Fishbanks

• Read the Fishbanks rules carefully and prepare
  your strategy for the game
• Fishbanks game (8 years max)