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					Strategic Management and
     the environment
         ESM 210

       Magali Delmas

                           2
    Class 1 Introduction
 Introductions
 Paper’s discussion (Reinhardt)
 Subjects that will be covered in the
  class
 Administrative matters
 Rules of the fishbanks game


                                         3
                 PORTER 1995
Fixed trade-off: Ecology versus the economy?

   Industry’s 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


                                                    4
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
                                                    5
       Environmental innovation
               can pay
 General  Electric - Ecomagination
    Program
    – Replaced existing lighting with high-efficiency
      lighting - Reduce its indirect GHG emissions by
      18,000 metric tons per year, providing expected
      savings of $2 million annually
 3M    Company - Brookings Environmental
    Performance Commitment
    – Implemented product changes to eliminate the
     use of 3.5 million of gallons of water
   See http://www.greenbizleaders.com/           6
    Is regulation necessary?
 Create pressure that motivates
  companies
 Improve environmental quality
 Alert and educate companies
 Create demand for environmental
  improvement
 Level the playing field

                                    7
Reinhardt: the environment as
 a business problem (1997)
    It is important to recognize the
     conditions under which it pays to be
     green.




                                            8
 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)

                                                 9
 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

                                                  10
    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
                                                 11
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

                                      12
      Teaching method
 Case discussion (Du Pont, Patagonia,
  Freeport Indonesia, McDonalds/
  Environmental Defense …)
 Lecture discussion
 Speakers (Patagonia, California Climate
  Action Registry…)
 Group project

                                            13
             Grading
 Group     Presentation    20%     (group
  presentation on case or other material)
 Class Participation 20%
 Individual Write-Up 25% (one individual
  write-up on a session of your choice)
 Group     Project 35% (report and
  presentation)
 No LA CB CP

                                        14
     Group presentation
 GROUP assignment: Each week 5 slide
  powerpoint presentation due (analyzis
  of case)
 GROUP presentation: Each week 1
  group presents to the class their
  recommendations
 The other groups challenge the group
  with questions

                                          15
     Individual Write-Up
 1 write-up for the entire quarter
 Analyze case briefly.
 Write the report as a recommendation
  for the CEO for the company
 Max 2 pages




                                         16
        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
                                           17
Examples of Group projects
 From Santa Barbara zoo to BP, Trader
  Joes, Lazy Acres etc…
 Local companies will facilitate the
  interview process
 Bigger companies will have more
  information available on the web
 Make sure you initiate contact very
  early on
                                         18
              Timing

 By November 6: 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 December 4
 Presentation of the report on
  December 6 (last class)
               Groups
   By the end of the session, please
    provide the name of the people in your
    group (4 people per group)




                                             20
Mondays and Wednesdays
 Mondays: case preparation in groups
  and speakers
 Wednesdays: case discussion and
  lecture




                                        21
    Next session Fishbanks
 Read the Fishbanks rules carefully and
  prepare your strategy for the game
 Fishbanks game (8 years max)




                                           22

				
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