Slide 1

Chapter 2Managing External RelationsSmall Business Management4660Ethical Dilemmaoccurs when a persons values are in conflict making it unclear whether a decision is the right thing to do

Ethicsa system of values - people consider in determining whether actions are right or wrong

2-21. Establishing Ethical Foundation2It is important for students to understand the what is legal and what is ethical are not necessarily the same thing. Pose some ethical questions for them to consider as they go through the chapterWould you cheat on an exam?Would you lie about being sick to skip work?Would you put extra miles or meals on your expense account?

Golden RuleTreat others in the manner you wish to be treated.Am I treating others the way I would want to be treated?UtilitarianismSeeking the greatest good for the greatest number of people.Is my solution the best thing for the most people over the long term?2-3UniversalismA universal code of right and wrong that everyone can see and follow.What if everyone did what I want to do?Billboard principleAsks 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?2-42. Knowing the Environment2-5

Environment is a difficult concept so huge entire world outside yourself and your business The key have a model of the environment in mindThree Components

Can be divided into three parts:Internal Environment People and groups within theboundary of a company e.g. owner, managers, employees and board memberFrom the beginning (mature) the setting oforganisational culture must be set rightset of shared beliefs, basic assumptions, or common, accepted ways of dealing with problems and challenges within a company - demonstrate how things get doneE.g. Vision, Mission, Attitudes - honesty, discipline, fairness, responsibility, caring, cooperation, visionary - training2-6External Environment forces,institutions and people (i.e. the rest of the world) outside the companys boundary. Two parts:Task environment - part of the externalenvironment made up of those components- company deals with directly such ascustomers, suppliers, consultants, media,interest groups and the like.

2-7

General EnvironmentA 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 whats happening in law, government and politics.2-9Case Study : ESQ Leadership Centre 165VISIONTo become a world class leadership centre

MISSIONContributing 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 system2004, 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 RelationsHaving 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 legitimacyDeveloping a social networkHandling a crisis

2-18There are several low-cost and relatively fast ways to monitor the environment. 6They include: Looking for trends and future-looking articles in the trade and professional press of yourindustry or those of members of your task environment (see Skill Module 2.1). Asking your customers, suppliers, banker, attorney, and accountants what they see on the horizonfor business in general, for business in your community in general, or for your industryor line of business in particular. Keeping notes on the things that bother you about the way work is done now, or what bothersyou about how something has changed (whether a product, service, or process you deal with),and periodically do some fast research (typically searching on the Web) on what causes itand how others feel about it. For opinion Web sites, try ePinions, Yelp, Amazon, Buzzillions,Mouthshut, TrustedReviews, ConsumerSearch or CitySearch. Subscribing to a couple of magazines/newsletters (online or hard copy) or online newsfeedsor blogs outside your area of business. In the science/technology area for example look atDiscover, Wired, Scientific American , or even Popular Mechanics . For online versions, youcan subscribe to the RSS feed or a summary e-mail to several of the print magazines, or onlinesources like Gizmag. For all of these, tag or record interesting ideas so you can come back tothem when you have time to think. By the way, you can find a list of online and print magazinesOrganized by topic areas on Yahoo Directorys News and Media section (dir.yahoo.com/News_and_Media18Why?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 efficientCapital in the same sense with cash and land accumulated, spent and increase the value of your company goodwill find it in the balance sheet.2-194. Techniques of Building LegitimacyLegitimacy 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-basedProduct-basedOrganizational-based2-2020a. People-Based LegitimacyTable 2.12-21 Remember owner is the business in many peoples 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.

21Table 2.12-22 Having people in the organisation an owner, employees, or even media spokespeople-whom customers know and respect increases the companys legitimacy.

Make sure competent, friendliest and most professional way helps build the business goodwill. 22

Table 2.1People-Based - Indicatorsb. Product-Based LegitimacyTable 2.12-24Many 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.24Table 2.12-25Make sure customer knows about the details of the product such as its:High qualityEnvironmental friendlinessCompetitive advantageInstructions to use itAssurance that it will be backed up25Product-Based - Indicators

Table 2.22-2626c. Organization-Based Legitimacy Indicators2-27If 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.27Table 2.1

Table 2.3Organization-Based - IndicatorsAcross 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 NetworkingAnother basis for building social capital is through building a social network.The entrepreneurs set of relationships and contacts with individuals and institutions.2-3030Social networking is a way to build trust, reciprocity and long-term relationships.Shows your companys 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.2-3131Sources for Network Connections

2-3232While business organizations are the natural place to go for advice, there are many people available at your local college, your church, on your softball team, at your gym, or any other place you spend time, which have valuable information and experience.Types of Help Sought2-33

Online Social Networking Sites2-34

Table 2.46. Handling a CrisisSooner 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:Admit youre in trouble quicklyGet to the scene as soon as possibleCommunicate facts you knowHave one person serve as the companys spokespersonSeparate crisis management from the everyday management of the companyDeal with the crisis quickly2-3535All small business owners will face a crisis at some point. It is best to admit you need help and get it as soon as you can to prohibit the crisis from growing. If it is a public crisis designate a spokesperson to keep the public and employees informed. While crises cannot be avoided, when dealt with properly they can be manageable. If not dealt with properly, a crisis could be your down fall.

Revision2-37