hill_&_jones_ch_1

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

1Chapter

Prepared by C. Douglas Cloud

Professor Emeritus of Accounting

Pepperdine University

GARETH R. JONES /CHARLES W. L. HILL GARETH R. JONES /CHARLES W. L. HILL

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

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

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 COMPETITIVE ADVANTAGE AND A COMPANY’S BUSINESS AND A COMPANY’S BUSINESS

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

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)

LEVELS OF STRATEGIC LEVELS OF STRATEGIC MANAGEMENTMANAGEMENT

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

STRATEGY PLANNING PROCESSSTRATEGY PLANNING PROCESS

1. Select the corporate mission, vision, 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)


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-planningRead more about strategic planning:


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:

MISSION AND VISION EXAMPLESMISSION AND VISION EXAMPLES

Organization Mission Vision

North South University … produce competent graduates in their selected disciplines who will have productive careers or choose to engage in advanced studies.

… will be and remain a center of excellence in higher education. It will gain recognition, nationally and globally and will attract students, faculty, and staff from all parts of the world.

Microsoft At Microsoft, we work to help people and businesses throughout the world realize their full potential. This is our mission. Everything we do reflects this mission and the values that make it possible.

Create experiences that combine the magic of software with the power of Internet services across a world of devices.

MISSION AND VISION EXAMPLESMISSION AND VISION EXAMPLES

Organization Mission Vision

Chevron Our Company's foundation is built on our Values, which distinguish us and guide our actions. We conduct our business in a socially responsible and ethical manner. We respect the law, support universal human rights, protect the environment, and benefit the communities where we work."

At the heart of The Chevron Way is our Vision to be the global energy company most admired for its people, partnership and performance.


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.


The Mission StatementThe Mission Statement


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 SWOT Analysis and the Business ModelModel 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.


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

A Comprehensive Strategic Management ModelA Comprehensive Strategic Management Model

EXISTING BUSINESS MODEL

MISSION, VISION, VALUES, AND GOALS

SWOT: STRATEGIC CHOICES

FUNCTIONAL LEVEL STRATEGIES

BUSINESS LEVEL STRATEGIES

GLOBAL STRATEGIES

CORPORATE LEVEL STRATEGIES

GOVERNANCE AND ETHICS

MEASURE AND EVALUATE PERFORMANCE

ORG. STRUCTURE ORG. CULTURE ORG. CONTROL

Internal Analysis: Strengths and Weaknesses

External Analysis: Opportunities and Threats

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Learning Objective:Learning Objective: Some tools for Some tools for improving Decision Making and Strategic improving Decision Making and Strategic PlanningPlanning

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:

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

Characteristics of Good Strategic Characteristics of Good Strategic LeadersLeaders

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)

(continued)

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3) Commitmenta) 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 Informeda) 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)

(continued)


5) Willingness to Delegate and Empowera) Avoids being overloaded with responsibilities.

b) Understands that delegation is a good motivational tool.

6) The Astute Use of Powera) 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 Intelligencea) 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.

hill_&_jones_ch_1

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