## Corporate Culture
Corporate culture refers to a company's values, beliefs, business principles, traditions, ways of operating, and internal work environment. It exerts powerful influence on the behaviour of managers and employees.
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### Importance of Corporate Culture
1. A culture of creativity and embracing change enables successful execution of product innovation strategies.
2. A culture built on listening to customers and employee empowerment drives superior customer service execution.
3. A strong, strategy-supportive culture motivates employees, sets standards, and fosters identification with the company's vision.
4. Employees feel better about their work and environment → higher engagement and enthusiasm.
5. Employees collaborate and take on the challenge of realising the company's vision.
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### Culture as Strength vs Weakness
| Culture as Strength | Culture as Weakness | |
|---|---|---|
| Characteristics | Clear, explicit values communicated consistently; management invests time in reinforcing principles | Many sub-cultures exist; few shared values; traditions are rare |
| Effect | Facilitates communication, decision-making, control, cooperation, and commitment | Obstructs strategy implementation; creates resistance to change |
| Employee identity | Strong sense of commitment, loyalty, and identity | Employees lack commitment, loyalty, and a sense of belonging |
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### Changing a Problematic Culture
Changing culture is very difficult because of deeply held values and habits. It requires concerted management action over time.
Steps:
1. Diagnose — identify which facets of current culture are strategy-supportive and which are not.
2. Communicate openly — managers talk forthrightly to all concerned about what must change.
3. Take visible, aggressive actions — actions that everyone understands are intended to establish a new culture.
4. Create a shared vision through communication to manage change.
5. Menu of actions:
- Revise policies and procedures
- Alter incentive compensation
- Shift budget allocations to new strategy projects
- Recruit and hire new managers and employees
- Replace key executives
- Communicate the need and benefits to employees
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### Strategy-Supportive Culture
A strategy-supportive culture aligns values, practices, and behavioural norms with what strategy execution requires.
- Provides a system of informal rules and peer pressure about how to conduct business.
- Strong culture = fit with strategy → good execution; no fit → hurts execution.