Transcript Strategic Management: Competitiveness and Globalization

Strategic Leadership
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Strategic leadership involves:
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the ability to anticipate, envision, maintain
flexibility and empower others to create
strategic change
multi-functional work that involves working
through others
consideration of the entire enterprise rather
than just a sub-unit
a managerial frame of reference
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Strategic Leadership and the
Strategic Management Process
Effective Strategic
Leadership
shapes the formulation of
Strategic Intent
Strategic Mission
and
influence
Successful
Strategic Actions
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Strategic Leadership and the
Strategic Management Process
Successful
Strategic Actions
Formulation
of Strategies
Implementation
of Strategies
yields
Strategic
Competitiveness
Above-Average Returns
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Factors Affecting Managerial
Discretion
External Environment
External Environment
• Industry structure
• Rate of market growth
• Number and type of
competitors
• Nature and degree of
political/legal constraints
• Degree to which products
can be differentiated
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Factors Affecting Managerial
Discretion
External Environment
Characteristics of the
Organization
Characteristics of the
Organization
• Size
• Age
• Culture
• Availability of resources
• Patterns of interaction
among employees
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Factors Affecting Managerial
Discretion
External Environment
Characteristics of the
Organization
Characteristics of the
Manager
Managerial
Discretion
Characteristics of the
Manager
• Tolerance for ambiguity
• Commitment to the firm
and its desired strategic
outcomes
• Interpersonal skills
• Aspiration level
• Degree of self-confidence
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Top Management Teams
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The top management team is composed of
key managers who are responsible for
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formulating and
implementing
the organization’s strategies
A heterogeneous top management team with
varied expertise and knowledge can draw on
multiple perspectives when evaluating
alternative strategies and building consensus
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Top Management Teams
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A top management team must also be able to
function effectively as a team in order to
implement strategies
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a heterogeneous team makes this more difficult
a heterogeneous team, however, is associated
positively with innovation and strategic change
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Strategic Leadership
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Chief executive officers can gain so much
power that they are virtually independent
of oversight by the board of directors
This is especially true when the CEO is
also chairman of the board of directors
CEOs of long tenure can also wield
substantial power
The most effective forms of governance
share power and influence among the
CEO and board of directors
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Managerial Labor Markets
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The internal labor market is comprised of the
career path alternatives available to a firm’s
managers
Selecting internal candidates for management
positions helps to build on valuable firmspecific knowledge
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Managerial Labor Markets
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The external labor market includes the
collection of career opportunities for
managers outside their firm
Selecting an outsider often brings fresh
insights and may energize the firm with
innovative new ideas
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Managerial Labor Markets
Homogeneous
Top Management
Team Composition
Heterogeneous
Managerial Labor Market:
CEO Succession
Internal CEO
External CEO
succession
succession
Ambiguous:
Stable
possible change in
strategy
top management
team and strategy
Stable strategy
with innovation
Strategic
change
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Exercise of Effective Strategic
Leadership
Establishing
balanced
organizational
controls
Determining
strategic
direction
Exploiting and
maintaining
core
competencies
Effective Strategic
Leadership
Emphasizing
ethical
practice
Sustaining
an effective
organizational
culture
Developing
human
capital
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Determining Strategic Direction
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Strategic direction means the development of
a long-term vision of a firm’s strategic intent
A charismatic leader can help achieve
strategic intent
It is important not to lose sight of the
strengths of the organization when making
changes required by a new strategic direction
Executives must structure the firm effectively
to help achieve the vision
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Exploiting and Maintaining Core
Competencies
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Core competencies are resources and
capabilities that serve as a source of
competitive advantage for a firm over its
rivals
Strategic leaders must verify that the
firm’s competencies are emphasized in
strategy implementation efforts
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Exploiting and Maintaining Core
Competencies
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In many large firms, and certainly in
related-diversified ones, core
competencies are exploited effectively
when they are developed and applied
across different organizational units
Core competencies cannot be developed
or exploited effectively without developing
the capabilities of human capital
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Developing Human Capital
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Human capital refers to the knowledge and
skills of the firm’s entire workforce
Employees are viewed as a capital resource
that requires investment
No strategy can be effective unless the firm
is able to develop and retain good people to
carry it out
The effective development and management
of the firm’s human capital may be the
primary determinant of a firm’s ability to
formulate and implement strategies
successfully
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Sustaining an Effective
Organizational Culture
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An organizational culture consists of a
complex set of ideologies, symbols, and
core values that is shared throughout the
firm and influences the way it conducts
business
Shaping the firm’s culture is a central task
of effective strategic leadership
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Sustaining an Effective
Organizational Culture
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An appropriate organizational culture
encourages the development of an
entrepreneurial orientation among
employees and an ability to change the
culture as necessary
Reengineering can facilitate this process
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Sustaining an Effective
Organizational Culture
Changing Culture and Business
Reengineering
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The benefits of business reengineering are
maximized when employees believe that:
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every job in the company is essential and
important
all employees must create value through their
work
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Sustaining an Effective
Organizational Culture
Changing Culture and Business
Reengineering
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Constant learning is a vital part of every
person’s job
Teamwork is essential to successful
implementation
Problems are solved only when teams accept
the responsibility for the solution
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Emphasizing Ethical Practices
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Ethical practices increase the
effectiveness of strategy implementation
processes
Ethical companies encourage and enable
people at all organizational levels to
exercise ethical judgment
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Emphasizing Ethical Practices
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To properly influence employee judgment
and behavior, ethical practices must
shape the firm’s decision-making process
and be an integral part of an
organization’s culture
Leaders set the tone for creating an
environment of mutual respect, honesty
and ethical practices among employees
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Establishing Balanced Organizational
Controls
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Organizational controls provide the
parameters within which strategies are to
be implemented and corrective actions
taken
Financial controls are often emphasized in
large corporations and focus on shortterm financial outcomes
Strategic control focuses on the content
of strategic actions, rather than their
outcomes
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Establishing Balanced Organizational
Controls
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Successful strategic leaders balance
strategic control and financial control
(they do not eliminate financial control)
with the intent of achieving more positive
long-term returns
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Strategic and Financial Controls in a
Balanced Scorecard Framework
Perspectives
Criteria
Financial
• Cash flow
• Return on equity
• Return on assets
Customer
• Assessment of ability to anticipate
customers needs
• Effectiveness of customer service
practices
• Percentage of repeat business
• Quality of communications with
customers
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Strategic and Financial Controls in a
Balanced Scorecard Framework
Perspectives
Criteria
Internal Business
Process
• Asset utilization improvements
• Improvements in employee morale
• Changes in turnover rates
Learning and
Growth
• Improvements in innovation ability
• Number of new products compared
to competitors
• Increases in employees’ skills
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