Which of the following is a true statement about the AAA global strategy framework
IntroductionIn this article, two of the main decision-making frameworks from the SBL Study Guide are examined. In particular, this article clearly explains the two frameworks mentioned in Study Guide Section A3 – namely the American Accounting Association (AAA) model, and Tucker’s 5-question model. In each case, we start with an explanation of the model before showing how it might be used in a case situation. Show The American Accounting Association (AAA) modelThe American Accounting Association (AAA) model comes from a report for the AAA written by Langenderfer and Rockness in 1990. In the report, they suggest a logical, seven-step process for decision making, which takes ethical issues into account. The model begins, at Step 1, by establishing the facts of the case. While perhaps obvious, this step means that when the decision-making process starts, there is no ambiguity about what is under consideration. Step 2 is to identify the ethical issues in the case. This involves examining the facts of the case and asking what ethical issues are at stake. The third step is an identification of the norms, principles, and values related to the case. This involves placing the decision in its social, ethical, and, in some cases, professional behaviour context. In this last context, professional codes of ethics or the social expectations of the profession are taken to be the norms, principles, and values. For example, if stock market rules are involved in the decision, then these will be a relevant factor to consider in this step. In the fourth step, each alternative course of action is identified. This involves stating each one, without consideration of the norms, principles, and values identified in Step 3, in order to ensure that each outcome is considered, however appropriate or inappropriate that outcome might be. Then, in Step 5, the norms, principles, and values identified in Step 3 are overlaid on to the options identified in Step 4. When this is done, it should be possible to see which options accord with the norms and which do not. In Step 6, the consequences of the outcomes are considered. Again, the purpose of the model is to make the implications of each outcome unambiguous so that the final decision is made in full knowledge and recognition of each one. Finally, in Step 7, the decision is taken. Scenario for the AAA model Step 1: What are the facts of the case? Step 2: What are the ethical issues in the case?
Step 3: What are the norms, principles, and values related to the case? Step 4: What are the alternative courses of action? Step 5: What is the best course of action that is consistent with the norms, principles, and values identified in Step 3? Step 6: What are the consequences of each possible course of action? Under Option 2, the auditor would refuse the bribe. This would be likely to have a number of unfortunate consequences for the client and possibly for the future of the client–auditor relationship. It would, however, maintain and enhance the reputation and social standing of auditors, maintain public confidence in audit, and serve the best interests of the shareholders. Step 7: What is the decision? Back to top Tucker's 5-question modelThis model is conceptually slightly different from the AAA model but is nevertheless a powerful tool for determining the most ethical outcome in a given situation. It might be the case that not all of Tucker’s criteria are relevant to every ethical decision. If it were used when considering the AAA model scenario above, for example, there is no indication of the environmental relevance of the auditor’s decision. In addition, the reference to profitability means that this model is often more useful for examining corporate rather than professional or individual situations. Applying Tucker’s model requires a little more thought than when using the AAA model in some situations, however. This is because three of the five questions (profitable, fair, and right) can only be answered by referring to other things. So when the model asks, ‘is it profitable?’, it is reasonable to ask, ‘compared to what?’ ‘Similarly, whether an option is ‘fair’ depends on whose perspective is being adopted. This might involve a consideration of the stakeholders involved in the decision and the effects on them. Whether an option is ‘right’ depends on the ethical position adopted. A deontological perspective may well arrive at a different answer than a teleological perspective, for example. In order to see how Tucker’s model might work in practice, we will consider two decision scenarios, one fairly clear cut and one that is a little more complicated. Tucker:
Scenario 1 Is it profitable? Is it legal? Is it fair? Is it right? Tucker: Scenario 2 Is it profitable? Yes. Is it legal? Is it fair? Is it right? Is it sustainable or environmentally sound? Back to top Using these models – in summaryIn the exam, candidates may be asked to assess or evaluate a situation such as one of the above scenarios in order to evaluate and may decide to use one of these models as an effective way of justifying their decision. Although some marks will be available for remembering the questions in the model used, the majority of marks will be assigned for its application. If the situation is relatively complex, exam answers should reflect that complexity, showing, for example, the arguments for and against a given question in the model and also showing this in the final decision. In most situations, the models can be used as a basis for identifying the factors that need to be addressed. In only the most clear-cut cases, or when the case provides a minimum of information, will the decision be straightforward. In summary, these two models can be used to ensure that ethical considerations are included when making important leadership type decisions. Both models contain distinct steps or questions that encourage the decision maker to recognise the ethical issues in a decision. The AAA model invites the decision maker to explicitly outline their norms, principles, and values, while Tucker’s model allows for discussion and debate over conflicting claims (eg between different beliefs of what is ‘fair’ and ‘right’). Both are potentially useful to senior decision makers and hence their inclusion as an important part of the SBL Study Guide. Adapted from an article originally written by a member of the P1 examining team Back to top What is the AAA framework global strategy?The AAA framework offers three approaches to global value creation – adaptation, aggregation, and arbitrage. Adaptation strategies aim to up revenues and market share by customising one or more parts of a company's business model to suit local needs.
Who created the AAA framework?One of the framework was identified by Ghemawat- AAA Framework in which the three As stand for Adaptation, Aggregation and Arbitrage.
Which is referred to as global strategy?A global strategy is a strategy that a company develops to expand into the global market. The purpose of developing a global strategy is to increase sales across the world. The term "global strategy" includes standardization, and international and multinational strategies.
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