strategic leadership: managing the strategy-making process for competitive advantage 1 chapter...

Strategic Leadership: Managing the Strategy-Making Process for Competitive Advantage

Strategic Leadership: Managing the Strategy-Making Process for Competitive Advantage

1Chapter

Prepared by C. Douglas Cloud

Professor Emeritus of Accounting

Pepperdine University

Prepared by C. Douglas Cloud

Professor Emeritus of Accounting

Pepperdine University

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

GARETH R. JONES /CHARLES W. L. HILL

Theory of Strategic Management 10th ed.Theory of Strategic Management 10th ed.

Dell’s mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve.

DELL’S MISSION STATEMENTDELL’S MISSION STATEMENT

How does Dell’s profitability compare to Hewlett-Packard’s

and Apple’s profitability?


DELL’S MISSION STATEMENTDELL’S MISSION STATEMENT

Read more about Dell:

http://retailindustry.about.com/od/topusretailcompanies/p/dellincprofile.htm


http://retailindustry.about.com/od/topusretailcompanies/p/dellincprofile.htm

OVERVIEWOVERVIEW

A strategy is a set of related actions that managers take to increase their company’s performance.

Strategic leadership is how to most effectively manage a company’s strategy-making process to create competitive advantage.


OVERVIEWOVERVIEW

Strategy formulation is the task of selecting strategies.

Strategy implementation is the task of putting strategies into action.

Designing

Delivering

Supporting products Improving efficiency and effectiveness of operations

Designing a company’s organization structure

Control systems Culture


To increase shareholder value, managers must pursue strategies that increase the profitability of the company and ensure that profits grow.

To do this, a company must be able to outperform its rival. In other words, it must have a competitive advantage.

A company has competitive advantage over its rivals when its profitability is greater than the average profitability and profit growth of other companies competing for the same set of customer.

Learning Objective: After reading this chapter you should be able to explain what is meant by “competitive advantage.”

Learning Objective: After reading this chapter you should be able to explain what is meant by “competitive advantage.”


Risk capital is capital that cannot be recovered if a company fails and goes bankrupt.

Shareholder value is the return that a shareholder earns from purchasing shares in a company.

SUPERIOR PERFORMANCESUPERIOR PERFORMANCE

Read more about risk capital:

Read more about shareholder value:

http://financecareers.about.com/od/compliance/a/riskmanager.htm

http://www.investopedia.com/terms/s/shareholder-value.asp#axzz1jlwBlC7q


http://financecareers.about.com/od/compliance/a/riskmanager.htm

http://www.investopedia.com/terms/s/shareholder-value.asp

A Profitability is the result of how efficiently and effectively managers use the capital at their disposal to produce goods and services that satisfy customer needs.

The profit growth of a company can be measured by the increase in net profit over time.

The sum of money invested in the business

Net income after taxes

Together, profitability and profit growth are the principal drivers of shareholder value.


http://www.businessweek.com/news/2012-01-11/corporate-profit-growth-at-2-year-low-as-u-s-feels-europe-drag.html

SUPERIOR PERFORMANCESUPERIOR PERFORMANCE

Read more about corporate profit growth:



COMPETITIVE ADVANTAGE AND A COMPANY’S BUSINESS

MODEL

COMPETITIVE ADVANTAGE AND A COMPANY’S BUSINESS

MODELA A business model is a model of how to generate that above-average profitability and profit growth. A business model includes:

Selecting Customers Defining and Differentiating its product offeringsAcquiring and Keeping

Customers Creating ValueProducing Goods and

Services at Lower CostsDelivering Goods and Services to the MarketOrganizing Activities Within the Company

Configuring its resources

Achieving and Sustaining a High Level of Profitability

Growing the Business Over Time


Learning Objective: After reading this chapter you should be able to discuss the strategic role of managers at different levels within the organization.

Learning Objective: After reading this chapter you should be able to discuss the strategic role of managers at different levels within the organization.

PRIMARY TYPES OF MANAGERSPRIMARY TYPES OF MANAGERS

The general manager bears the responsibility

for the overall performance of the

company or for one of its major self-contained subunits or divisions.

The functional manager is responsible for

supervising a particular function, task, activity, or

operation..



LEVELS OF STRATEGIC MANAGEMENT


Corporate-Level Managers Oversee development of strategies for whole organization

CEO is principle general manager who consults with other senior executives

Business-Level Managers Responsible for business unit that provides product/service to

particular market

Functional-Managers Supervise particular function/operation (e.g. marketing,

operations, accounting, human resources)




Learning Objective: After reading this chapter you should be able to identify the primary steps in a strategic planning process.

Learning Objective: After reading this chapter you should be able to identify the primary steps in a strategic planning process.

STRATEGY PLANNING PROCESSSTRATEGY PLANNING PROCESS

1. Select the corporate mission and major corporate goals.

2. Analyze the organization’s external competitive environment to identify opportunities and threats.

3. Analyze the organization’s internal operating environment to identify the organization’s strengths and weaknesses.

(continued)© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


4.Select strategies that build on the organization’s strengths and corrects its weaknesses in order to take advantage of external opportunities and counter external threats.

5. Implement the strategies.

http://www.answers.com/topic/strategic-planning


Read more about strategic planning:

http://www.answers.com/topic/strategic-planning



The Mission StatementThe Mission Statement

The mission statement of Dell, Inc. was provided in an earlier slide.

A mission statement describes what a company does.

The vision of a company articulates, often in bold terms, what the company would like to achieve.

http://manonamission.blogspot.com/2005/05/eastman-kodaks-ek-mission-statement.html

The values of a company state how managers and employees should conduct themselves in business.

Read Eastman Kodak’s mission statement:

http://manonamission.blogspot.com/2005/05/eastman-kodaks-ek-mission-statement.html



Managers should establish precise and measureable major goals that address critical issues.

These goals should be challenging but realistic and, if appropriate, specify a time period in which the goals should be achieved.

Well-constructed goals provide a means by which the performance of managers can be evaluated.



External AnalysisExternal Analysis

The essential purpose of the external analysis is to identify strategic opportunities and threats within the organization’s operating environment that will affect how it pursues its mission.

Analyzing the industry environment requires an assessment of the competitive structure of the company’s industry, including the competitive position of the company and its major rivals.




SWOT Analysis and the Business Model

SWOT Analysis and the Business Model The comparison of strengths, weaknesses,

opportunities, and threats is normally referred to as a SWOT analysis.

The goal of a SWOT analysis:

Create, affirm, or fine-tune a company-specific business model.

Design a business model that will best align, fit, and match a company’s resources and capabilities to the demands of the environment in which it operates.


SWOT Strategies SWOT Strategies

Functional-level strategies are directed at improving the effectiveness of operations within a company. Manufacturing, marketing, materials management,

product development, and customer service

Business-level strategies The way a company positions itself in the

marketplace to gain a competitive advantage. The different position strategies that can be used in

different industry settings.


http://www.ehow.com/list_6815496_corporate-business-functional-level-strategies.htmlRead more about corporate-level strategies:


SWOT Strategies SWOT Strategies

Global strategies address how to expand operations outside the home country. How to grow and prosper in a world where

competitive advantage is determined at a global level.

Corporate-level strategies address what business the company should be in to maximize profitability. How should a company enter and increase its

presence to gain a competitive edge.


http://www.ehow.com/list_6815496_corporate-business-functional-level-strategies.html


Strategy ImplementationStrategy Implementation

Strategy implementation involves taking action at the functional, business, and corporate levels to execute a strategic plan.

Putting quality improvement programs into place

Changing the way a product is designed

Positioning the product differently in the marketplace

Offering different versions of the product to different consumers


Criticisms of Formal Planning Models

Criticisms of Formal Planning Models

Learning Objective: After reading this chapter you should be able to discuss the common pitfalls of planning and how those pitfalls can be avoided.

Learning Objective: After reading this chapter you should be able to discuss the common pitfalls of planning and how those pitfalls can be avoided.

Uncertainty, complexity, and ambiguity can have a large and unpredictable outcome.

Too much importance is attached to the role of top management, particularly the CEO.

Radical new technology changes the dominant paradigm in an industry.

Many strategies are the result of serendipity.


http://www.itbusiness.ca/it/client/en/Home/News.asp?id=48750Read more about CEO Bill Gates and his impact on Microsoft:

http://www.itbusiness.ca/it/client/en/Home/News.asp?id=48750


Learning Objective: After reading this chapter you should be able to outline the cognitive biases that might lead to poor strategic decisions, and explain how these biases can be overcome.

Learning Objective: After reading this chapter you should be able to outline the cognitive biases that might lead to poor strategic decisions, and explain how these biases can be overcome.

Scenario PlanningScenario Planning

Scenario planning involves formulation plans that are based upon “what-if” scenarios about the future.

Teams of managers are asked to develop specific strategies to cope with each scenario.

The great virtue of the scenario approach is that it can push managers to think outside the box.

http://www.gbn.com/about/scenario_planning.phpRead more about scenario planning and Royal Dutch Shell:

http://www.gbn.com/about/scenario_planning.php

STRATEGY DECISION MAKINGSTRATEGY DECISION MAKING

Cognitive Biases and Strategic Decision Making

Cognitive Biases and Strategic Decision Making

The rationality of decision-making is bound by one’s cognitive capabilities.

When managers make decisions, they tend to fall back on certain rules of thumb.

Sometimes these rules lead to severe errors, called cognitive biases.

http://www.buyerbehaviour.org/2007/06/prior-hypothesis-bias.htmlRead more about prior hypothesis bias.

Prior hypothesis bias refers to making decisions based on a belief, even when evidence proves that the belief is incorrect.


http://www.buyerbehaviour.org/2007/06/prior-hypothesis-bias.html

Cognitive Biasis and Strategic Decision Making

Cognitive Biasis and Strategic Decision Making

Escalating commitment occurs when decision makers, having committed significant resources to a project, commit even more despite feedback that tells them the project is failing.

The use of simple analogies to make sense out of a complex problem is reasoning analogy, which may flawed by invalid reasoning.

Generalizing from a small sample or a single vivid anecdote is representativeness.

The illusion of control is the tendency to overestimates one’s ability to control events.

Read more about bias caused by the illusion of control.http://www.sciencedaily.com/articles/i/illusion_of_control.htm© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

http://www.sciencedaily.com/articles/i/illusion_of_control.htm

Techniques for Improving Decision MakingTechniques for Improving Decision Making

Devil’s advocacy requires the generation of a plan, as well as a critical analysis of that plan.

Dialectic inquiry requires the generation of a plan and a counter-plan that reflects plausible but conflicting courses of action.

Strategic managers listen to a debate between advocates of the plan and counter-plan and then decide which will lead to higher performance.

This approach may reveal problems with definitions, recommended courses of action, and assumptions of both plans.


Learning Objective: After reading this chapter you should be able to discuss the role strategy leaders play in the strategy-making process.

Learning Objective: After reading this chapter you should be able to discuss the role strategy leaders play in the strategy-making process.

Characteristics of Good Strategic Leaders


1) Vision, Eloquence, and Consistency

a) A strong leader gives an organization a sense of direction.

b) Examples: Winston Churchill, Martin Luther King, Sam Walton

2) Articulation of a Business Model

a) Knowing how the various strategies that the company pursues fit together.

b) Examples: Michael Dell (Dell, Inc.), Steve Jobs (Apple)


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3) Commitment

a) A strong leader demonstrates his or her commitment to a vision and business model with action and words.

b) Example: Ken Iverson (Nucor)

4) Being Well Informed

a) Effective leaders develop a network of formal and informal sources who to keep them well informed about what is going on within their company.

b) Example: Jim Donald (Starbucks)





5) Willingness to Delegate and Empower

a) Avoids being overloaded with responsibilities.

b) Understands that delegation is a good motivational tool.

6) The Astute Use of Power

a) Power comes from control over resources that are important to the organization: budgets, capital, positions, information, and knowledge.

b) Politically astute managers use these resources to critically place allies who can help them attain their strategic objectives.




7) Emotional Intelligence

a) Self-awareness—the ability to understand one’s own moods, emotions, and drives.

b) Self-regulation—the ability to control or redirect disruptive impulses or moods.

c) Motivation—a passion for work that goes beyond money or status.

d) Empathy—the ability to understand the feelings and viewpoints of subordinates.

e) Social skills—friendliness with a purpose.

http://www.ihhp.com/what_is_eq.htmRead more about emotional intelligence.

http://www.ihhp.com/what_is_eq.htm

Strategy?1-32

Good Strategy/Bad Strategy: the difference and why it matters

What is Strategy?Henry Mintzberg interviewed by Michael KullFive Forces v Blue Ocean StrategyBlue Ocean Strategy and the World

https://www.youtube.com/watch?v=UZrTl16hZdk

https://www.youtube.com/watch?v=UZrTl16hZdk

https://www.youtube.com/watch?v=ibrxIP0H84M

https://www.youtube.com/watch?v=4srFC0de4ww



https://www.youtube.com/watch?v=V2b99iZviUk

https://www.youtube.com/watch?v=7SQDGBSjty4

strategic leadership: managing the strategy-making process for competitive advantage 1 chapter...

Documents

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passwordprotected website

certain product

competitive advantage

dells profitability

learning objective

companys strategy