Roth4_SM_Lecture_PPT_C02_Final 2.pptx

CHAPTER 2 Strategic...

CHAPTER 2 Strategic Leadership Managing the Strategy Process ©ISerg/iStock/Getty Images RF ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.  The AFI Strategy Framework Jump to Appendix 1 long image description ©McGraw-Hill Education.  Learning Objectives LO 2-1 Explain the role of strategic leaders and what they do. LO 2-2 Outline how you can become a strategic leader. LO 2-3 Describe the roles of corporate, business, and functional managers in strategy formulation and implementation. LO 2-4 Evaluate top-down strategic planning, scenario planning, and strategy as planned emergence. LO 2-5 Assess the relationship between stakeholder strategy and sustainable competitive advantage. LO 2-6 Conduct a stakeholder impact analysis. ©McGraw-Hill Education.  What Is Strategic Leadership? Successful use of power and influence Directing the activities of others Pursuing an organization’s goals Enabling organizational competitive advantage ©McGraw-Hill Education.  Leaders Can Positively Impact Performance Mark Zuckerberg – Facebook Elon Musk – Tesla and SpaceX Jeff Bezos – Amazon Oprah Winfrey – HARPO Sheryl Sandberg – Facebook Angela Ahrendts – Apple Mary Barra – General Motors Howard Schultz - Starbucks ©McGraw-Hill Education.  Leaders Can Destroy Shareholder Value Ken Lay – Enron John Sculley – Apple Bernard Ebbers – WorldCom Richard Fuld – Lehman Brothers Richard Wagoner – General Motors Robert Nardelli – The Home Depot and Chrysler Ron Johnson – JC Penney ©McGraw-Hill Education.  What Do Strategic Leaders Do? Exhibit 2.1 SOURCE: Data from O. Bandiera, A. Prat, and R. Sadun (2012), “Management capital at the top: evidence from the time use of CEOs,” London School of Economics and Harvard Business School Working Paper. Jump to Appendix 2 for long ©McGraw-Hill Education. description.  How Do You Become a Strategic Leader? Leadership actions reflect: Age, education, and career experiences Personal interpretations of situations Strong leadership: innate abilities and learning ©McGraw-Hill Education.  Upper Echelon’s Theory Organizational outcomes reflect the values of the top management team. Outcomes include: Strategic choices Performance levels ©McGraw-Hill Education.  Great Companies Based on the bestseller Good to Great Written by Jim Collins Over 1,000 companies were analyzed. Great companies had things in common: Sustained competitive advantage Stock returns of almost 7x the general market Consistent patterns of leadership Summarized in the Level 5 Leadership Pyramid ©McGraw-Hill Education.  Level-5 Leadership Pyramid Exhibit 2.2 (Adapted to compare corporations and entrepreneurs) SOURCE: Adapted from J. Collins (2001), Good to Great: Why Some Companies Make the Leap... And Others Don’t (New York: HarperCollins), 20. ©McGraw-Hill Education. Jump to Appendix 3 long image description  Progression of Leaders Through the Pyramid Each level builds upon the previous one. Prior levels must be mastered before moving on. Each level helps individuals develop the capacity for greater success. A Level-5 executive: Works to help the organization succeed Helps others reach their full potential ©McGraw-Hill Education.  The Strategy Process Strategy Formulation: The choice of strategy Where and how to compete Strategy Implementation: Organization, coordination, integration How work gets done The execution of strategy ©McGraw-Hill Education.  The Strategy Process Across Levels Corporate Strategy Where to compete? Industry, markets, and geography Business Strategy How to compete? Cost leadership, differentiation, or value innovation Functional Strategy How to implement a chosen business strategy? ©McGraw-Hill Education.  Formulation and Implementation Across Levels Exhibit 2.3 Jump to Appendix 4 long image description ©McGraw-Hill Education.  Corporate Strategy Decide in which industries, markets, and geographies their companies should compete. Corporate executives: Create synergies across SBUs. Decide whether to enter or exit industries and markets. Set strategic objectives. Allocate scarce resources among SBU. Monitor performance. Make adjustments to the portfolio as needed. ©McGraw-Hill Education.  Business Strategy Standalone division of corporate Profit and loss responsibility Work with corporate to determine business strategy Cost leadership Differentiation Value innovation ©McGraw-Hill Education.  Functional Strategy Within each strategic business unit: Accounting Finance Human resources Product development Operations Manufacturing Marketing Customer service Functional managers are responsible for decisions and actions within the function. ©McGraw-Hill Education.  Three Approaches to Organizational Strategy Strategic planning A formal, top-down planning approach Scenario planning A formal, top-down planning approach Strategy as planned emergence Begins with a strategic plan, but is less formal ©McGraw-Hill Education.  Top Down Strategic Planning (1 of 2) Data-driven strategy process Top management attempts to program future success through Analysis of: Prices Costs Margins Market demand Head count Production runs Five year plans and correlated budgets Performance monitoring ©McGraw-Hill Education.  Top-Down Strategic Planning (2 of 2) Exhibit 2.4 Jump to Appendix 5 long image description ©McGraw-Hill Education.  Shortcomings of the Top-Down Approach May not adapt well to change Formulation separate from implementation Information flows one-way Leaders’ future vision can be wrong Example: Apple Steve Jobs predicted customers needs Apple didn’t engage in market research Since Cook took over, their planning process has evolved ©McGraw-Hill Education.  Scenario Planning (1 of 2) Asks “what if” questions: Top management envisions different scenarios Then they derive strategic responses Optimistic and pessimistic futures planned Considerations can include: New laws Demographic shifts Changing economic conditions Technological advances ©McGraw-Hill Education.  Scenario Planning (2 of 2) Exhibit 2.5 ©McGraw-Hill Education. Jump to Appendix 6 long image description  Approaches to Scenario Planning Obtain input from different levels and functions R&D, manufacturing, and marketing and sales Determine how to compete situationally Example: UPS What if the price of a barrel of oil was $35, or $100, or even $200? Attach probabilities to different future states: Highly likely vs. unlikely 85% vs. 2% likely ©McGraw-Hill Education.  Black Swan Events The high impact of a highly improbable event. In the past, most people assumed that all swans were white. When they first encountered swans that were black, they were surprised. Examples: Security breach of an IT system Accounting Scandals: Enron Real Estate Bubble: 2008 financial crisis ©McGraw-Hill Education.  Questions to Ask in Scenario Planning What resources and capabilities do we need to compete successfully in each scenario? What strategic initiatives should we put in place to respond to each scenario? How can we shape our expected future environment? ©McGraw-Hill Education.  Strategy as Planned Emergence Top Down and Bottom Up Bottom-up strategic initiatives emerge Evaluated & coordinated by management Relies on data, plus: Personal experience Deep domain expertise Front line employee insights ©McGraw-Hill Education.  Key Points About Strategy Intended strategy The outcome of a rational and structured top-down strategic plan Realized strategy Combination of intended and emergent strategy Emergent strategy Any unplanned strategic initiative Bubbles up from the bottom of the organization Can influence and shape a firm’s overall strategy ©McGraw-Hill Education.  Intended vs. Realized Strategy Jump to Appendix 7 for long ©McGraw-Hill Education. description.  Strategic Initiatives Any activity a firm pursues to explore and develop New products and processes New markets New ventures Can bubble up from deep within a firm through: Autonomous actions Serendipity Resource-allocation process (RAP) ©McGraw-Hill Education. Autonomous Actions, Serendipity, and the Resource Allocation Process (RAP) Autonomous Actions Strategic initiatives undertaken by employees In response to unexpected situations Serendipity Random events, surprises, coincidences Has an effect on strategic initiatives Resource-Allocation Process (RAP) How a firm allocates resources based on policy Helps shape realized strategy ©McGraw-Hill Education.  Companies with Good Strategy Are Valuable Companies with a good strategy: Provide products or services to consumers at an affordable price Make a profit Can provide benefits such as: Education, infrastructure, public safety, health care, clean water and air Strategic failure is expensive ©McGraw-Hill Education.  Stakeholders Organizations, groups, and individuals Can affect or are affected by a firm’s actions Have an interest in the performance and survival of the firm Internal stakeholders: Stockholders, employees (including executives, managers, and workers), and board members External stakeholders: Customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels ©McGraw-Hill Education.  Internal and External Stakeholders in an Exchange Relationship with the Firm Exhibit 2.8 Jump to Appendix 8 long image description ©McGraw-Hill Education.  Stakeholder Strategy An integrative approach to managing a diverse set of stakeholders to gain and sustain competitive advantage Stakeholder management benefits firm performance Stakeholders more cooperative Lower business transaction cost Greater adaptability and flexibility More predictable returns Stronger reputation ©McGraw-Hill Education.  Stakeholder Impact Analysis (1 of 2) A decision tool Helps strategic leaders can recognize, prioritize, and address the needs of different stakeholders. Important stakeholder attributes: Power: control over actions Legitimacy: valid concerns Urgency: require immediate attention ©McGraw-Hill Education.  Stakeholder Impact Analysis (2 of 2) Exhibit 2.9 Jump to Appendix 9 long image description ©McGraw-Hill Education.  The Pyramid of Corporate Social Responsibility Exhibit 2.10 SOURCE: Adapted from A. B. Carroll (1991), “The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders,” Business Horizons, July-August: 42. ©McGraw-Hill Education. Jump to Appendix 10 long image description