Understanding Business Strategy Concepts & Cases

1. Understanding Business StrategyConcepts & Cases Part I: Vision Chapter 2: Leading Strategically

3. Strategic Leadership • Strategic leadership involves developing a vision for the firm, designing strategic actions to achieve this vision, and empowering others to carry out those strategic actions. • Is strategic leadership important?

4. Establishing the Vision & Mission • Strategic plans are designed for a 3- to 5- year period, but a vision is usually targeted for generally 10- to 20- years. • Contains the firm’s DNA • Contains a picture of the firm in the future • Defines the firm’s core intent and the business(es) in which it operates • The mission flows from the vision.

6. Strategic Leadership • Effective strategic leaders can develop a vision of the future and inspire stakeholders to commit to sharing it. • Example: Porsche and CEO Wendelin Wiedeking Strategic leaders use their team of managers to help make major decisions – esp. to define and implement a vision for the firm and its strategy.

7. Top Management Team • A top management team is the group of managers charged with the responsibility to develop and implement the firm’s strategies. Generally, the top management team is composed of officers of the company with the title of vice president and higher. • Homogeneous team • Heterogeneous team • Example: Nissan and CEO Carlos Ghosn

8. Management Succession • Strategic leaders must develop people who can succeed them. • Example: GE and the Ten-Step Talent program • Hiring from the inside motivates employees • Example: PepsiCo and CEO Indra Nooyi

9. Management Succession • Most new CEOs selected for the job in an inside succession are unlikely to change in any drastic way the strategies designed under the leadership of the former CEO.11 However, when the firm is performing poorly, it is more common to select an outside successor. • Example: GE & CEO Lou Gerstner

10. Management Succession Both insiders and outsiders have strengths and weaknesses depending on the conditions of the firm. However, the key is forming a succession plan and developing a strong set of training programs for managers so that the firm can develop internal candidates who have a strong inside perspective.

11. Managing the Resource Portfolio • Resources are the basis for a firm’s competitive advantages and strategies. • Tangible resources • Intangible resources • Financial capital • Example: TiVo and intellectual property

12. Managing the Resource Portfolio • Intellectual property is produced by human capital. • Human capital includes the knowledge and skills of those working for the firm. Employees’ knowledge and skills are critical for all organizations. • Effective strategic leaders base their strategies on the human capital in the firm.

13. Managing the Resource Portfolio • Social capital is another important resource. • Social capital includes all internaland external relationships that help the firm provide value to customers and ultimately to its other stakeholders. • Internal social capital • External social capital • Social capital is most effective when partners trust each other (strong ties).

14. Managing the Resource Portfolio • Leaders of today need the essential qualities of what we now call a Cross-Enterprise Leader—a leader adept at building, fostering and influencing a complex web of relationships across all levels—from employees, partners and suppliers to customers, citizens, and even competitors.

15. Building an Entrepreneurial Culture • An entrepreneurial culture encourages employees to identify and exploit new opportunities. • encourages creativity and risk taking • tolerates failure • championing innovation is rewarded • Examples: Steve Jobs & Apple • 3M

16. Promoting Integrity and Ethical Behavior • Strategic leaders should determine the boundaries of acceptable behavior; establish the tone for organizational actions; and ensure that ethical behaviors are expected, praised, and rewarded. • Recently, cases in which strategic leaders acted opportunistically in managing their firms have been a major concern: Enron & Tyco.

17. Promoting Integrity and Ethical Behavior • Sarbanes-Oxley Act supposed to curtail CEO/corporate opportunistic behavior. • One form of potential opportunism, related-party transactions, involves paying a person who has a relationship with the firm extra money for reasons other than his or her normal activities on the firm’s behalf. • Examples: Steve Jobs and The Ford Motor Company

18. Promoting Integrity and Ethical Behavior • Often worse than opportunistic behavior is fraud and other unlawful activities by managers and companies’ representatives. • Sustained effective outcomes over time are demonstrated only by leaders who have integrity and are valued by all the stakeholders of the firm.

19. Using Effective Controls • Controls are necessary to ensure that standards are met and that employees do not misuse the firm’s resources. • Financial controls focus on shorter-term financial outcomes. • Strategic controls focus on the content of strategic actions rather than on outcomes.

20. Using Effective Controls • Most effective: balanced strategic and financial controls for long term evaluation of strategy content. • Balanced Scorecard • Financial (profit, growth, and shareholder risk) • Customers (valued received from products) • Internal business processes (asset use) • Learning & growth (culture of innovation/change)