Module 4

Weeks 7-8
 LEARNING OBJECTIVES:

• DEFINE STRATEGIC LEADERSHIP

• UNDERSTAND STRATEGIC LEADERSHIP AND THE
STRATEGIC MANAGEMENT PROCESS
• IDENTIFYING THE FACTORS AFFECTING MANAGERIAL
DISCRETION
• KNOW HOW TO EXERCISE THE EFFECTIVE STRATEGIC
LEADERSHIP
• DETERMINING STRATEGIC DIRECTION
• EXPLOITING AND MAINTAINING CORE COMPETENCIES
• DEVELOPING HUMAN CAPITAL
• SUSTAINING AN EFFECTIVE ORGANIZATIONAL CULTURE
• CHANGING CULTURE AND REENGINEERING
 Strategic Leadership

Strategic Leadership involves:

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

Strategic Leadership Effective
Strategic Leadership
and the Strategic
Management Process shapes the formulation of

and
Strategic Intent Strategic Mission
influence

Successful
Strategic Actions

Formulation Implementation
of Strategies of Strategies

Strategic Competitiveness
Above-Average Returns
 Factors Affecting Managerial Discretion
External Environment Organizational
Industry Structure Characteristics
Rate of market growth Size and age
# and type of competitors Culture
Political/Legal constraints Resource availability
Product differentiation Employee interaction

Managerial Discretion

Characteristics of the Manager

Tolerance for ambiguity Aspiration level
Commitment to the firm Self-confidence
Interpersonal skills
 EXERCISE OF EFFECTIVE STRATEGIC
LEADERSHIP

Determining
Establishing strategic Exploiting and
balanced direction maintaining
organizational core
controls competencies

Effective Strategic
Leadership

Emphasizing Developing
ethical Sustaining human
practice an effective capital
organizational
culture
 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
 EXPLOITING AND MAINTAINING CORE
COMPETENCIES

• 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
 EXPLOITING AND 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
 DEVELOPING HUMAN CAPITAL

• 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
 SUSTAINING AN EFFECTIVE
ORGANIZATIONAL CULTURE

• 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
 SUSTAINING AN EFFECTIVE
ORGANIZATIONAL CULTURE

• 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
 CHANGING CULTURE AND
REENGINEERING
The benefits of business reengineering are
maximized when employees believe that:
• EVERY JOB IN THE COMPANY IS ESSENTIAL AND
IMPORTANT
• ALL EMPLOYEES MUST CREATE VALUE THROUGH
THEIR WORK
• CONSTANT LEARNING IS A VITAL PART OF EVERY
PERSON’S JOB
• TEAMWORK IS ESSENTIAL TO IMPLEMENTATION
SUCCESS
• PROBLEMS ARE SOLVED ONLY WHEN TEAMS ACCEPT
THE RESPONSIBILITY FOR THE SOLUTION.
 EMPHASIZING ETHICAL PRACTICES

• ETHICAL PRACTICES INCREASE THE EFFECTIVENESS

OF STRATEGY IMPLEMENTATION PROCESSES
• ETHICAL COMPANIES ENCOURAGE AND ENABLE
PEOPLE AT ALL ORGANIZATIONAL LEVELS TO
EXERCISE ETHICAL JUDGMENT
 EMPHASIZING ETHICAL PRACTICES

• 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
 ESTABLISHING BALANCED
ORGANIZATIONAL CONTROLS

• 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 SHORT-
TERM FINANCIAL OUTCOMES
• STRATEGIC CONTROL FOCUSES ON THE CONTENT OF
STRATEGIC ACTIONS, RATHER THAN THEIR OUTCOMES
 ESTABLISHING BALANCED
ORGANIZATIONAL CONTROLS

• 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
 WHY DO A SITUATION ANALYSIS?

Situation analysis concentrates on

generating solid answers to a well-
defined set of strategic questions and
using these answers to:
– Appraise the company’s strategic situation
and business position

– Craft a suitable strategy

SITUATION ANALYSIS FOCUSES ON:
–EXTERNAL FACTORS – the firm’s
MACRO-environment (industry and
competitive conditions)

–INTERNAL FACTORS – the firm’s

immediate MICRO-environment (its
own internal situation and competitive
position)
 THE KEY QUESTIONS IN
COMPANY SITUATION ANALYSIS

1. HOW WELL IS THE COMPANY’S PRESENT

STRATEGY WORKING?
2. WHAT ARE THE COMPANY’S STRENGTHS,
WEAKNESSES, OPPORTUNITIES, AND THREATS?
3. ARE THE COMPANY’S PRICES AND COSTS
COMPETITIVE?
4. HOW STRONG IS THE COMPANY’S
COMPETITIVE POSITION?
5. WHAT STRATEGIC ISSUES DOES THE COMPANY
FACE?
 SWOT ANALYSIS
• SWOT REPRESENTS THE FIRST LETTER IN
STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND
THREATS.
• SWOT ANALYSIS
• INVOLVES SIZING-UP A COMPANY’S INTERNAL
STRENGTHS AND WEAKNESSES AND ITS
EXTERNAL OPPORTUNITIES AND THREATS
• IS AN EASY TO USE TOOL FOR GETTING A
QUICK OVERVIEW OF A COMPANY’S
STRATEGIC SITUATION
WHY SWOT ANALYSIS IS IMPORTANT

IT IS THE BASIS FOR MATCHING STRATEGY TO THE COMPANY’S

SITUATION –
• TO ITS INTERNAL STRENGTHS AND WEAKNESSES
• TO ITS EXTERNAL THREATS AND OPPORTUNITIES

A winning strategy must always fit the

company’s situation.
 STRENGTHS

• WHAT IS A COMPANY STRENGTH?

• SOMETHING A COMPANY IS GOOD AT DOING OR A CHARACTERISTIC
THAT GIVES IT AN IMPORTANT CAPABILITY.
 WEAKNESSES

• WHAT ARE COMPANY WEAKNESSES?

• SOMETHING A COMPANY LACKS OR DOES POORLY (IN COMPARISON
TO OTHERS) OR A CONDITION THAT PUTS IT AT A DISADVANTAGE.
 OPPORTUNITIES

• WHAT ARE COMPANY OPPORTUNITIES?

• THOSE THAT OFFER IMPORTANT AVENUES FOR PROFITABLE GROWTH,
THOSE WHERE A COMPANY HAS THE MOST POTENTIAL FOR
COMPETITIVE ADVANTAGE, AND THOSE WHICH THE COMPANY HAS THE
FINANCIAL RESOURCES TO PURSUE.
 THREATS

• WHAT ARE COMPANY THREATS?

• CERTAIN FACTORS IN A COMPANY’S EXTERNAL ENVIRONMENT THAT
POSE A THREAT TO ITS WELL-BEING.
SOME QUESTIONS TO CONSIDER ONCE THE
SWOT LISTINGS HAVE BEEN COMPILED ARE:

• DOES THE COMPANY HAVE INTERNAL STRENGTHS OR

CORE COMPETENCIES AN ATTRACTIVE STRATEGY CAN
BE BUILT AROUND?

• DO COMPANY WEAKNESSES MAKE A COMPANY

VULNERABLE AND DOES IT DISQUALIFY A COMPANY
FROM PURSUING INDUSTRY OPPORTUNITIES?

• WHICH WEAKNESSES DOES A COMPANY NEED TO

CORRECT?
 SOME QUESTIONS TO CONSIDER ONCE THE
SWOT LISTINGS HAVE BEEN COMPILED ARE:

• WHICH OPPORTUNITIES DOES THE COMPANY HAVE

THE SKILLS AND RESOURCES TO PURSUE WITH A REAL
CHANCE FOR SUCCESS? WHICH OPPORTUNITIES ARE
THE BEST FROM THE COMPANY’S STANDPOINT?
(REMEMBER: OPPORTUNITY WITHOUT THE MEANS TO
CAPTURE IS ONLY AN ILLUSION.)

• WHAT EXTERNAL THREATS SHOULD MANAGEMENT BE

WORRIED MOST ABOUT AND WHAT STRATEGIC
MOVES NEED TO BE MADE TO CRAFT A GOOD
DEFENSE?
 Merci beaucoup
!
Commit to the Lord whatever you do, and your
plans will succeed” (Proverbs 16:1-3).

e l l e
st b
ie e
a v
L
 Module 4:
Strategic Leadership
and
Direction
Week 7-8
Overview
• A coherent technological innovation
strategy leverages the firm’s existing
competitive position and provides
direction for future development of the
firm.
• Formulating this strategy requires:
• Appraising the firm’s environment,
• Appraising the firm’s strengths, weaknesses,
competitive advantages, and core
competencies,
• Articulating an ambitious strategic intent.
Assessing the Firm’s Current Position

• External Analysis
• Two common methods are Porter’s Five-
Force Model and Stakeholder Analysis.
• Porter’s Five-Force Model
1. Degree of existing rivalry. Determined by number of firms,
relative size, degree of differentiation between firms, demand
conditions, exit barriers.
2. Threat of potential entrants. Determined by attractiveness of
industry, height of entry barriers (e.g., start-up costs, brand
loyalty, regulation, etc.)
3. Bargaining power of suppliers. Determined by number of
suppliers and their degree of differentiation, the portion of a
firm’s inputs obtained from a particular supplier, the portion of a
supplier’s sales sold to a particular firm, switching costs, and
potential for vertical integration.
Assessing the Firm’s Current Position
4. Bargaining power of buyers. Determined by number of buyers, the firm’s
degree of differentiation, the portion of a firm’s inputs sold to a particular
buyer, the portion of a buyer’s purchases bought from a particular firm,
switching costs, and potential for vertical integration.
5. Threat of substitutes. Determined by number of potential substitutes,
their closeness in function and relative price.

Recently Porter has acknowledged the role of complements. Must

consider:
a) how important complements are in the industry,
b) whether complements are differentially available for the
products of various rivals (impacting the attractiveness of
their goods), and
c) who captures the value offered by the complements.
Assessing the Firm’s Current Position
• Five-Force Model
Assessing the Firm’s Current Position
Stakeholder Analysis

1. Who are the stakeholders.

2. What does each stakeholder want.
3. What resources do they contribute to
the organization.
4. What claims are they likely to make on
the organization.
Assessing the Firm’s Current Position
• Internal Analysis
1. Identify the firm’s strengths and weaknesses. Helpful to
consider each element of value chain.
Assessing the Firm’s Current Position
2. Assess which strengths have potential to be
sustainable competitive advantage
• Rare
Competitive
• Valuable
• Durable
Advantage Sustainable
• Inimitable Competitive
Advantage

• Resources are difficult (or impossible) to imitate

when they are:
• Tacit
• Path dependent
• Socially complex
• Causally ambiguous
Identifying Core Competencies and Capabilities
• Core Competencies: A set of integrated and harmonized
abilities that distinguish the firm in the marketplace.
• Competencies typically combine multiple kinds of abilities.
• Several core competencies may underlie a business unit.
• Several business units may draw from same competency.
• Core competencies should:
• Be a significant source of competitive differentiation
• Cover a range of businesses
• Be hard for competitors to imitate
Identifying Core Competencies and Capabilities
Risk of Core Rigidities

• When firms excel at an activity, they can

become over committed to it and rigid.
• Incentives and culture may reward current
competencies while thwarting development of
new competencies.
• Dynamic capabilities are competencies that
enable the firm to quickly respond to change.
• E.g., firm may develop a set of abilities that enable it to
rapidly deploy new product development teams for a
new opportunity; firm may develop competency in
working with alliance partners to gain needed resources
quickly.
Strategic Intent
• Strategic Intent
• A long-term goal that is ambitious, builds upon and
stretches firm’s core competencies, and draws from all
levels of the organization.
• Typically looks 10-20 years ahead, establishes clear milestones
• Firm should identify resources and capabilities needed to close gap
between strategic intent and current position.

6-13
 Theory In Action

The Balanced Scorecard

▪ Kaplan and Norton argue

that effective performance
measurement should
incorporate:
▪ Financial perspective
▪ Customer perspective
▪ Internal perspective
▪ Innovation and learning

14
 Merci beaucoup!
iaz
La vie est belle ive
r a D

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Philippians 4:6 m f
N i
Do not be anxious about anything, but in r ia
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everything by prayer and supplication with r.M
thanksgiving let your requests be made D
known to God.