Strategic Management Ch13

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Strategic Management

Strategic Management

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  • 1. Strategic Leadership Chapter Thirteen © 2006 by Nelson, a division of Thomson Canada Limited.
  • 2. The Strategic Management Process Chapter 8: Acquisition & Restructuring Chapter 9: International Strategy Chapter 10: Cooperative Strategy Strategy Formulation Chapter 11: Corporate Governance Ch. 12: Org. Structure & Controls Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategy Implementation Strategic  Actions  Chapter 3: The External Environment Strategic Competitiveness Strategic Mission & Strategic Intent Strategic Objectives & Inputs Chapter 1: Strategic Management Ch. 2: Strat. Mgmt . & Performance Chapter 3: The External Environment Chapter 3: The External Environment Chapter 4: The Internal Environment Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 7: Corp.-Level Strategy Chapter 13: Strategic Leadership Strategic Competitiveness
  • 3. Strategic Leadership
    • Knowledge Objectives
    • Describe strategic leadership & differentiate between strategic, visionary & managerial leadership
    • Define top management teams & explain their efforts on firm performance & their ability to innovate & make appropriate strategic changes
    • Discuss the value of strategic leadership in deciding a firm’s strategic direction and explain the strategic leaders’ role in exploiting & maintaining core competencies
    • Describe the importance of strategic leaders in developing human capital
    • Define organizational culture, explain what must be done to sustain an effective culture & what strategic leaders can do to establish & emphasize ethical practice
    • Discuss the importance & use of organizational controls
  • 4. Strategic Leadership Presumes
    • An ability to influence those with whom one works
    • The leader understands the emergent strategy process
    • A shared vision of what the organization is to be
    • Agreement among senior manger & board members of opportunities and threats
    • Visionary leadership that entails many characteristics such as a willingness to take risks
    • Managerial leadership that includes an intended rational way of looking at the world
  • 5. Strategic Leadership and the Strategic Management Process Effective Strategic Leadership and Influences Strategic Intent Strategic Mission Shapes the formation of Successful Strategic Actions Formulation of Strategies Implementation of Strategies Strategic Competitiveness Above Average Returns Yields
  • 6. Managerial Leaders
    • Adopt impersonal, passive attitudes towards goals
    • View work as enabling process that involves some combination of ideas & people interacting to establish strategies & make decisions
    • Relate to other people according to their role in the decision making process
    • Maintain a low level of emotional involvement in these relationships
    • Influence only the actions & decisions of those with whom they work
    • Want stability & strive to preserve existing order
  • 7. Visionary Leadership
    • Shape ideas as opposed to reacting to them
    • Influence changes in the way people think about what is possible, desirable and necessary
    • Are concerned with ideas & relate to people in intuitive & empathetic ways
    • More likely to make decisions based on values.
    • Willing to invest in human capital & creating & main-taining an effective culture to ensure long term viability
    • Is future-oriented & concerned with risk taking
    • Want creativity, innovation and chaos
    • Strive to change the existing order
  • 8. Strategic Leadership
    • A synergistic combination of managerial & visionary leadership
    • Manages the paradox created by the use of managerial & visionary models
    • Establishes the context through which stakeholders are able to perform at peak efficiency
    • Willing to make candid, courageous & yet pragmatic decisions
    • Solicits corrective feedback from peers, superiors & employees about the value of their difficult decisions
  • 9. M anagerial L eaders S trategic L eaders , V isionary L eaders Want stability & to preserve the existing order Guide without a strategic vision. Constrained by values & by using explicit knowledge Guide knowledge creation by encouraging contradictory capabilities (e.g. individual, group, and organizational tacit & explicit knowledge) Are comfortable handling Short-term day-to-day activities Define boundaries by use of metaphors, analogies & models to allow for a mix of contradictory concepts Manage the paradox created by use of managerial & visionary leadership models Control by social- ization & sharing common norms, values & beliefs Are not dependent on the organisation for their sense of who they are Are future-oriented concerned with risk-taking Want stability & to preserve the existing order Guide without a strategic vision. Constrained by values & by using explicit knowledge Are comfortable handling Short-term day-to-day activities Want stability & to preserve the existing order Guide without a strategic vision. Constrained by values & by using explicit knowledge Are comfortable handling Short-term day-to-day activities Control by social- ization & sharing common norms, values & beliefs Are future-oriented concerned with risk-taking Are not dependent on the organisation for their sense of who they are Control by social- ization & sharing common norms, values & beliefs Are future-oriented concerned with risk-taking Are not dependent on the organisation for their sense of who they are
  • 10. Factors Affecting Managerial Decisions Managerial Discretion External Environment Industry Structure Rate of market growth Number & type of competitors Political/Legal constraints Product differentiation Employee interaction Organizational Characteristics Resource availability Size and age Culture Interpersonal skills Tolerance for ambiguity Commitment to the firm Aspiration level Self-confidence Characteristics of the Manager
  • 11. Top Management Teams Top management teams are comprised of key managers who are responsible for formulating and implementing the organization’s strategies A top management team must also be able to function effectively as a team in order to implement strategies A heterogeneous team makes this more difficult A heterogeneous top management team with varied expertise and knowledge can draw on multiple perspectives when evaluating alternative strategies and building consensus
  • 12. Strategic Leadership
    • Chief executive officers can gain so much power that they are virtually independent of board of directors oversight
    • This is especially true when the CEO is also chairman of the board of directors (CEO / Board Chair Duality)
    • CEOs of long tenure can wield substantial power
    CEO / Board Chair Duality
    • The most effective forms of governance share power and influence among the CEO and board of directors
    Has been blamed for poor performance & slow response to change.  Occurs most commonly at the largest firms 
  • 13. Effective Strategic Leadership Determines Strategic Direction Developing a long-term vision of the firm’s Strategic Intent Exploits & Maintains Core Competencies Ensure firm’s core competencies are emphasized in strategic implementation Develops Human Capital No strategy is effective unless a firm develops & retains staff to execute it Sustains an Effective Organizational Culture Leaders play a critical role in shaping and reinforcing the firm’s culture Determines Strategic Direction Exploits & Maintains Core Competencies Develops Human Capital Sustains an Effective Organizational Culture Establishing Balanced Organizational controls To create controls balanced between financial and strategic measurements. Establishing Balanced Organizational controls Emphasizaing Ethical Practices Enable those at all organization levels to act ethically when doing what is needed to implement firms’ strategies Emphasizing Ethical Practices
  • 14. Determining Strategic Direction
    • 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
  • 15. Determining Strategic Actions
    • Developing a long term vision of the firm’s strategic intent
    • The ideal long term vision has 2 parts:
    • Core ideology
    • An envisioned future.
  • 16. Exploiting & Maintaining Core Competencies
    • 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.
  • 17. Sustaining an Effective Organizational Culture
      • 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
    Changing Culture & Business Reengineering
  • 18. Organizational Controls Common Strategic Controls High level of interaction  High level of interaction between corporate headquarters and divisions  Ability to share resources and capabilities among divisions  Open communication between corporate and divisional managers 
  • 19. Ethical Practices Establish & transmit specific goals noting the firm’s ethical standards (e.g., develop / disseminate a code of conduct) Developing an ethical organizational culture: Continuously revise & update the code of conduct, based on inputs from stakeholders Disseminate a code of conduct to all stakeholders to inform them of the firm’s ethical standard / practices Develop & implement methods / procedures to use in achieving the firm’s ethical standards Have explicit rewards to recognize acts of courage (e.g., using proper channels / procedures to report wrongdoing) Create a work environment in which all people are treated with dignity      
  • 20. The Balanced Scorecard
    • Complements financial measures of past performance with measures of the drivers of future performance.
    • It should translate a business unit’s mission & strategy into tangible objectives & measures.
    • The objectives & measures view organizational performance from four perspectives.
      • Financial 3. Internal Business Process
      • Business Process 4. Learning and Growth
    • Source: “The Balanced Scorecard” by Robert S. Kaplan, David P. Norton
  • 21. The Balanced Scorecard Matrix To achieve our vision, how will we sustain our ability to change & improve? What bus. processes must we excel at to satisfy shareholders & customers? How do we appear to shareholders to succeed financially? How do we appear to our customers to achieve our vision? © 1996 HBR Publishing
    • Custom
    • Training
    • Knowledge
    • Library
    90% Cross-Train Develop Strategic Skills
    • R&D Prog.
    • Customer
    • Mailing
    2006 – 15% 2007 – 50% 2008 – 60% % Revenue from new Products Develop New Products Frequent Buyers Club 95% Customer Retention Increased Customer Satisfaction
    • Sales Promo
    • New Channel
    • Marketing
    10% Product A 40% Product B 50% Product C Revenue Mix Broaden Revenue Mix Learning & Growth Internal Business Processes Financial Customer Initiatives Targets Measures Objectives Question What is critical to success? How is it measured? Performance expectation? Key action Programs? What is critical to ask?
  • 22. 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
  • 23. 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
  • 24. The Strategic Management Process Chapter 8: Acquisition & Restructuring Chapter 9: International Strategy Chapter 10: Cooperative Strategy Strategy Formulation Chapter 11: Corporate Governance Ch. 12: Org. Structure & Controls Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategy Implementation Strategic  Actions  Chapter 3: The External Environment Strategic Competitiveness Strategic Mission & Strategic Intent Strategic Objectives & Inputs Chapter 1: Strategic Management Ch. 2: Strat. Mgmt . & Performance Chapter 3: The External Environment Chapter 3: The External Environment Chapter 4: The Internal Environment Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 7: Corp.-Level Strategy Chapter 13: Strategic Leadership Strategic Competitiveness