CHAPTER 1
STRATEGIC LEADERSHIP: MANAGING THE STRATEGY-
MAKING PROCESS FOR COMPETITIVE ADVANTAGE
LEARNING OBJECTIVES
Explain what is meant by competitive
advantage
Discuss the strategic role of managers
at different levels within the
organization
Identify the primary steps in a strategic
planning process
Discuss some common pitfalls of
planning and how those pitfalls can be
avoided
2
LEARNING OBJECTIVES
Some tools to improve strategic
decision making
Discuss the role strategy leaders play
in the strategy-making process
3
STRATEGY
Set of related actions that managers
take to increase their companys
performance
Strategic leadership: Creating
competitive advantage through
effective management of the strategy-
making process
Strategy formulation: Selecting strategies
based on analysis of an organizations
external and internal environment
Strategy implementation: Putting
strategies into action 4
DETERMINANTS OF
SHAREHOLDER VALUE
5
COMPETITIVE ADVANTAGE AND
BUSINESS MODEL
Competitive advantage
Occurs when a companys profitability is greater than
the average profitability of firms in its industry
Sustained competitive advantage
A companys strategies enable it to maintain above-
average profitability for a number of years
Business model
Conception of how strategies should work together as
a whole to enable the company to achieve
competitive advantage
6
BUSINESS MODEL
Select, acquire, and retain customers
Define and differentiate its product
offerings
Create value for customers
Produce and deliver goods or services
Lower cost
Organize activities within the firm
Configure its resources
Achieve and sustain a high level of
profitability
7
BUSINESS MODEL EXAMPLE
8
STRATEGIC MANAGEMENT
General managers
Bear responsibility for a companys overall performance
or for one of its major self-contained subunits or
divisions
Functional managers
Responsible for supervising a particular function, task,
activity, or operation
Multidivisional company
Competes in several different businesses and has a
separate self-contained division to manage each
9
LEVELS OF STRATEGIC
MANAGEMENT
10
STEPS IN A FORMAL STRATEGIC
PLANNING PROCESS
Select the corporate mission and goals
Analyze the organizations external
competitive environment and internal
operating environment
Select strategies that:
Build on the organizations strengths and
correct its weaknesses
Are consistent with the organizations
mission and goals
Are congruent and constitute a viable
business model
11
EXTERNAL AND INTERNAL
ANALYSIS
External analysis - Identifies strategic
opportunities and threats that will
affect how an organization pursues its
mission
Involves examination of the:
Industry environment in which the company
operates
Country or national environment
Macroenvironment
Internal analysis - Focuses on reviewing
the resources, capabilities, and
competencies of a company 12
MAIN COMPONENTS OF THE
STRATEGIC PLANNING PROCESS
Feedback
External
Analysis:
Opportunities Designing
and Threats Organization
Structure
Existing Business
Strategies:
Mission, Functional,
Designing
Model
Vision, SWOT Strategic Business, Governance
Organization
Values, and Choice Global, and and Ethics
Culture
Goals Corporate-
Level
Designing
Internal Organization
Analysis: Controls
Strengths and
Weaknesses
Strategic Formulation Strategic Implementation
13
AAComprehensive
ComprehensiveStrategic
StrategicManagement
ManagementModel
Model
EXISTING BUSINESS MODEL
Internal Analysis:
MISSION, VISION, VALUES, AND GOALS Strengths and
Weaknesses
CONTINOUS MONITORING, FEEDBACK,
SWOT: STRATEGIC CHOICES
External Analysis:
AND CORRECTIVE ACTION
FUNCTIONAL LEVEL STRATEGIES Opportunities and
Threats
BUSINESS LEVEL STRATEGIES
GLOBAL STRATEGIES
CORPORATE LEVEL STRATEGIES
GOVERNANCE AND ETHICS
ORG. STRUCTURE ORG. CULTURE ORG. CONTROL
MEASURE AND EVALUATE
PERFORMANCE 1-14
COMPONENTS OF A MISSION
STATEMENT
Mission
Purpose of the company, or a statement of what the company strives
to do
Vision
Articulation of a companys desired achievements or future state
Values
Statement of how employees should conduct themselves and their
business to help achieve the company mission
Goals
Precise and measurable desired future state that a company attempts
to realize
15
STRATEGY
STRATEGYPLANNING
PLANNINGPROCESS
PROCESS
MISSION
MISSIONAND
ANDVISION
VISIONEXAMPLES
EXAMPLES
Organization Mission Vision
North South produce competent will be and remain a
University graduates in their center of excellence in
selected disciplines higher education. It will
who will have gain recognition,
productive careers or nationally and globally
choose to engage in and will attract
advanced studies. students, faculty, and
staff from all parts of
the world.
Microsoft At Microsoft, we work Create experiences
to help people and that combine the
businesses throughout magic of software with
the world realize their the power of Internet
full potential. This is services across a world
our mission. Everything of devices.
we do reflects this
mission and the values
that make it possible.
MISSION
MISSIONAND
ANDVISION
VISIONEXAMPLES
EXAMPLES
Organization Mission Vision
Chevron Our Company's foundation
is built on our Values,
At the heart of The
Chevron Way is our Vision
which distinguish us and to be the global energy
guide our actions. We company most admired for
conduct our business in a its people, partnership and
socially responsible and performance.
ethical manner. We
respect the law, support
universal human rights,
protect the environment,
and benefit the
communities where we
work."
STRATEGIES
Functional-level strategies
Directed at improving the effectiveness of operations within a
company
Business-level strategies
Encompass the businesss overall competitive theme
Global strategies
Address how to expand operations outside the home country
Corporate-level strategies
Determine:
The businesses a company should be in to maximize profitability
and profit growth
How to gain a competitive edge
19
STRATEGY IMPLEMENTATION
AND FEEDBACK LOOP
Strategy implementation
Taking action at the functional, business, and
corporate levels to execute a strategic plan
Designing the best organization structure,
culture, and control systems to put a chosen
strategy into action
Feedback loop - Provide information to
the corporate level on the:
Strategic goals that are being achieved
Degree of competitive advantage being
created and sustained
20
WELL CONSTRUCTED GOALS
Precise and measurable.
Address crucial issues.
Challenging but realistic.
Specify a time period for completion.
Well constructed goals also provide a
means by which the performance of
managers can be evaluated
21
EMERGENT AND DELIBERATE
STRATEGIES
22
SCENARIO PLANNING
23
SCENARIO PLANNING
Formulating plans that are based on
what-if scenarios about the future
Encourages managers to:
Think outside the box and be more flexible
Anticipate probable scenarios
Ivory tower planning - Recognizes that
successful strategic planning
encompasses managers at all levels of
the corporation
24
COGNITIVE BIASES AND
STRATEGIC DECISION MAKING
Cognitive biases
Systematic errors in human decision making
Arise from the way people process information
Prior hypothesis bias
Decisions are made based on prior beliefs, even when evidence proves
that those beliefs are wrong
Escalating commitment
Decision makers, having committed significant resources to a project,
commit even more, despite receiving feedback that the project is failing
Reasoning analogy
Use of simple analogies to make sense out of a complex problem
25
TECHNIQUES FOR IMPROVING
DECISION MAKING
Devils advocacy
A member of a decision-making team identifies all the
considerations that might make a proposal unacceptable
Possible perils of recommended courses of action are
brought into light
Dialectic inquiry
Generation of a plan and a counter-plan that reflect plausible
but conflicting courses of action
Promotes strategic thinking
26
CHARACTERISTICS OF GOOD
STRATEGIC LEADERS
Vision, eloquence, and consistency
Articulation of a business model
Commitment
Being well informed
Willingness to delegate and empower
Astute use of power
Emotional intelligence
Self-awareness, self-regulation, and
motivation
Empathy and social skills
27
