GARETH R. JONES /CHARLES W. L.

HILL
Theory
Theoryof
of Strategic
StrategicManagement
Management 10th
10thed.
ed.

Chapter

Strategic
Strategic Leadership:
Leadership:
Managing
Managing the
the
Strategy-Making
Strategy-Making
Process
Process for
for
Competitive
Competitive
Advantage
Advantage
Prepared by C. Douglas
Cloud
Professor Emeritus of
Accounting
Pepperdine University

OVERVIEW
OVERVIEW

A strategy is a set of related actions that

managers take to increase their companys
performance.
Strategic leadership is how to most
effectively manage a companys strategymaking process to create competitive
advantage.

OVERVIEW
OVERVIEW

Strategy formulation is the task of selecting

strategies.
Strategy implementation is the task of
putting strategies into action.
Designing
Designing a companys
organization structure

Supporting products
Delivering
Control systems

Improving efficiency
and effectiveness of
operations
Culture

Learning
Learning Objective:
Objective: After
After reading
reading this
this
chapter
chapter you
you should
should be
be able
able to
to explain
explain what
what
is
is meant
meant by
by competitive
competitive advantage.
advantage.
To increase shareholder value, managers must
pursue strategies that increase the profitability of the
company and ensure that profits grow.
To do this, a company must be able to outperform its
rival. In other words, it must have a competitive
advantage.
A company has competitive advantage over its rivals
when its profitability is greater than the average
profitability and profit growth of other companies
competing for the same set of customer.

SUPERIOR
SUPERIOR PERFORMANCE
PERFORMANCE

Risk capital is capital that cannot be

recovered if a company fails and goes
bankrupt.
Shareholder value is the return that a
shareholder earns from purchasing shares in
a company.
Read more about risk capital:
http://financecareers.about.com/od/compliance/a/riskmanager.htm
Read more about shareholder value:
http://www.investopedia.com/terms/s/shareholder-value.asp#axzz1jlwBlC7q

SUPERIOR
SUPERIOR PERFORMANCE
PERFORMANCE

Profitability is the result of how efficiently and

effectively managers use the capital at their
disposal to produce goods and services that
satisfy customer needs.
The sum of
money invested
The profit growth of a company
can be
the profit
business
measured by the increase ininnet
over
time.
Together, profitability and profit
growth are the
Net income
aftervalue.
taxes
principal drivers of shareholder
Read more about corporate profit growth:
http://www.businessweek.com/news/2012-01-11/corporate-profit-growth-at-2-year-low-as-u-sfeels-europe-drag.html

COMPETITIVE
COMPETITIVE ADVANTAGE
ADVANTAGE
AND
AND A
A COMPANYS
COMPANYS BUSINESS
BUSINESS
MODEL
MODEL
A business model is a model of how to generate that
above-average profitability and profit growth. A business
model includes:
Selecting Customers
Acquiring and Keeping
Customers
Producing Goods and
Services at Lower Costs

Defining and Differentiating

its product offerings

Creating Value
Delivering Goods and
Services to the Market
Organizing Activities
Configuring its resources
Within the Company
Achieving and Sustaining a High Growing the Business Over
Level of Profitability
Time

Learning
Learning Objective:
Objective: After
After reading
reading this
this chapter
chapter
you
you should
should be
be able
able to
to discuss
discuss the
the strategic
strategic role
role
of
of managers
managers at
at different
different levels
levels within
within the
the
organization.
organization.
PRIMARY
PRIMARY TYPES
TYPES OF
OF MANAGERS
MANAGERS

The general manager

bears the responsibility
for the overall
performance of the
company or for one of its
major self-contained
subunits or divisions.

The functional manager

is responsible for
supervising a particular
function, task, activity, or
operation..

LEVELS
LEVELS OF
OF STRATEGIC
STRATEGIC
MANAGEMENT
MANAGEMENT

LEVELS
LEVELS OF
OF STRATEGIC
STRATEGIC
MANAGEMENT
MANAGEMENT

Corporate-Level Managers

Oversee development of strategies for whole organization

CEO is principle general manager who consults with other
senior executives

Business-Level Managers
Responsible for business unit that provides product/service to
particular market

Functional-Managers
Supervise particular function/operation (e.g. marketing,
operations, accounting, human resources)

Learning
Learning Objective:
Objective: After
After reading
reading this
this
chapter
chapter you
you should
should be
be able
able to
to identify
identify the
the
primary
primary steps
steps in
in aa strategic
strategic planning
planning
process.
process.
STRATEGY
STRATEGY PLANNING
PLANNING PROCESS
PROCESS

1. Select the corporate mission, vision, and major

corporate goals.
2. Analyze the organizations external competitive
environment to identify opportunities and threats.
3. Analyze the organizations internal operating
environment to identify the organizations strengths
and weaknesses. (continued)

STRATEGY
STRATEGY PLANNING
PLANNING PROCESS
PROCESS

4. Select strategies that build on the organizations

strengths and corrects its weaknesses in order
to take advantage of external opportunities and
counter external threats.
5. Implement the strategies.

Read more about strategic planning:

http://www.answers.com/topic/strategic-planning

STRATEGY
STRATEGY PLANNING
PLANNING PROCESS
PROCESS

A mission statement describes what a company

does.
The vision of a company articulates, often in bold
terms, what the company would like to achieve.
The values of a company state how managers
and employees should conduct themselves in
business.
Read Eastman Kodaks mission statement:
http://manonamission.blogspot.com/2005/05/eastman-kodaks-ek-mission-statement.html

MISSION
MISSION AND
AND VISION
VISION EXAMPLES
EXAMPLES
Organization

Mission

Vision

North South
University

produce competent
graduates in their
selected disciplines
who will have
productive careers or
choose to engage in
advanced studies.

will be and remain a

center of excellence in
higher education. It will
gain recognition,
nationally and globally
and will attract
students, faculty, and
staff from all parts of
the world.

Microsoft

At Microsoft, we work
to help people and
businesses throughout
the world realize their
full potential. This is
our mission. Everything
we do reflects this
mission and the values
that make it possible.

Create experiences
that combine the
magic of software with
the power of Internet
services across a world
of devices.

MISSION
MISSION AND
AND VISION
VISION EXAMPLES
EXAMPLES
Organization

Mission

Vision

Chevron

Our Company's
foundation is built on
our Values, which
distinguish us and
guide our actions. We
conduct our business
in a socially
responsible and ethical
manner. We respect
the law, support
universal human
rights, protect the
environment, and
benefit the
communities where we
work."

At the heart of The

Chevron Way is our
Vision to be the global
energy company most
admired for its people,
partnership and
performance.

STRATEGY
STRATEGY PLANNING
PLANNING PROCESS
PROCESS

Managers should establish precise and measureable

major goals that address critical issues.
These goals should be challenging but realistic and, if
appropriate, specify a time period in which the goals
should be achieved.
Well-constructed goals provide a means by which the
performance of managers can be evaluated.

STRATEGY
STRATEGY PLANNING
PLANNING PROCESS
PROCESS
The
The Mission
Mission Statement
Statement

STRATEGY
STRATEGY PLANNING
PLANNING PROCESS
PROCESS
External
External Analysis
Analysis

The essential purpose of the external analysis is

to identify strategic opportunities and threats
within the organizations operating environment
that will affect how it pursues its mission.
Analyzing the industry environment requires an
assessment of the competitive structure of the
companys industry, including the competitive
position of the company and its major rivals.

STRATEGY
STRATEGY PLANNING
PLANNING PROCESS
PROCESS
SWOT
SWOT Analysis
Analysis and
and the
the Business
Business
Model
Model weaknesses,
The comparison of strengths,
opportunities, and threats is normally referred to as a
SWOT analysis.
The goal of a SWOT analysis:
Create, affirm, or fine-tune a company-specific
business model.
Design a business model that will best align, fit,
and match a companys resources and capabilities
to the demands of the environment in which it
operates.

STRATEGY
STRATEGY PLANNING
PLANNING PROCESS
PROCESS
SWOT
SWOT Strategies
Strategies

Functional-level strategies are directed at

improving the effectiveness of operations within a
company.
Manufacturing, marketing, materials management,
product development, and customer service

Business-level strategies
The way a company positions itself in the
marketplace to gain a competitive advantage.
The different position strategies that can be used in
different industry settings.

STRATEGY
STRATEGY PLANNING
PLANNING PROCESS
PROCESS
SWOT
SWOT Strategies
Strategies

Global strategies address how to expand

operations outside the home country.
How to grow and prosper in a world where
competitive advantage is determined at a global
level.

Corporate-level strategies address what

business the company should be in to maximize
profitability.
How should a company enter and increase its
presence to gain a competitive edge.
Read more about corporate-level strategies:
http://www.ehow.com/list_6815496_corporate-business-functional-level-strategies.html

STRATEGY
STRATEGY PLANNING
PLANNING PROCESS
PROCESS
Strategy
Strategy Implementation
Implementation
Strategy implementation involves taking action at the
functional, business, and corporate levels to execute a
strategic plan.
Putting quality improvement programs into place
Changing the way a product is designed
Positioning the product differently in the
marketplace
Offering different versions of the product to
different consumers

A
A Comprehensive
Comprehensive Strategic
Strategic Management
Management Model
Model
EXISTING BUSINESS MODEL
MISSION, VISION, VALUES, AND
GOALS
SWOT: STRATEGIC CHOICES
FUNCTIONAL LEVEL STRATEGIES
BUSINESS LEVEL STRATEGIES

Internal
Analysis:
Strengths and
Weaknesses
External
Analysis:
Opportunities
and Threats

GLOBAL STRATEGIES
CORPORATE LEVEL STRATEGIES
GOVERNANCE AND ETHICS
ORG.
STRUCTURE

ORG. CULTURE
MEASURE AND EVALUATE
PERFORMANCE

ORG. CONTROL

1-23

Learning
Learning Objective:
Objective: Some
Some tools
tools for
for
improving
improving Decision
Decision Making
Making and
and Strategic
Strategic
Planning
Planning
Scenario
Scenario Planning
Planning
Scenario planning involves formulation plans that are
based upon what-if scenarios about the future.
Teams of managers are asked to develop specific
strategies to cope with each scenario.
The great virtue of the scenario approach is that it can
push managers to think outside the box.
Read more about scenario planning and Royal Dutch Shell:
http://www.gbn.com/about/scenario_planning.php

Techniques
Techniques for
for Improving
Improving Decision
Decision Making
Making

Devils advocacy requires the generation of a

plan, as well as a critical analysis of that plan.
Dialectic inquiry requires the generation of a
plan and a counter-plan that reflects plausible
but conflicting courses of action.
Strategic managers listen to a debate between
advocates of the plan and counter-plan and then
decide which will lead to higher performance.
This approach may reveal problems with
definitions, recommended courses of action, and
assumptions of both plans.

Learning
Learning Objective:
Objective: After
After reading
reading this
this
chapter
chapter you
you should
should be
be able
able to
to discuss
discuss the
the
role
role strategy
strategy leaders
leaders play
play in
in the
the strategystrategymaking
making process.
process.
Characteristics
Characteristics of
of Good
Good Strategic
Strategic
Leaders
Leaders
1) Vision, Eloquence, and Consistency
a) A strong leader gives an organization a sense of
direction.
b) Examples: Winston Churchill, Martin Luther King, Sam
Walton
2) Articulation of a Business Model
a) Knowing how the various strategies that the company
pursues fit together.
b) Examples: Michael Dell (Dell, Inc.), Steve Jobs (Apple)
(continued)

Characteristics
Characteristics of
of Good
Good Strategic
Strategic
Leaders
Leaders

3) Commitment

a) A strong leader demonstrates his or her

commitment to a vision and business model with
action and words.
b) Example: Ken Iverson (Nucor)

4) Being Well Informed

a) Effective leaders develop a network of formal and
informal sources who to keep them well informed
about what is going on within their company.
b) Example: Jim Donald (Starbucks)
1-27

Characteristics
Characteristics of
of Good
Good Strategic
Strategic
Leaders
Leaders

5) Willingness to Delegate and Empower

a) Avoids being overloaded with responsibilities.

b) Understands that delegation is a good motivational
tool.

6) The Astute Use of Power

a) Power comes from control over resources that are
important to the organization: budgets, capital,
positions, information, and knowledge.
b) Politically astute managers use these resources to
critically place allies who can help them attain their
strategic objectives.
(continued)

Characteristics
Characteristics of
of Good
Good Strategic
Strategic
Leaders
Leaders

7) Emotional Intelligence

a) Self-awarenessthe ability to understand ones

own moods, emotions, and drives.
b) Self-regulationthe ability to control or redirect
disruptive impulses or moods.
c) Motivationa passion for work that goes beyond
money or status.
d) Empathythe ability to understand the feelings and
viewpoints of subordinates.
e) Social skillsfriendliness with a purpose.
Read more about emotional intelligence.
http://www.ihhp.com/what_is_eq.htm