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what do strategic leaeders do？

strategy scholars found that they spend, on average, 67 percent of their time in meetings. most managers prefer oral communication.

Strategic leadership

the behaviors and styles of executives that influence others to achieve the organization's vision and mission.

Strategy

the creation of a unique and valuable position, involving a different set of activities

Why so much bad strategy?

-The inability to make decisions and (good) choices -Template-style strategy; "Fill in the Blanks" NOTE:"All of the above" is not a strategy. Hope is not a strategy. Copying others is not always good strategy.

five-step process of recognizing stakeholders' claims. In each step, managers must pay particular attention to three important stakeholder attributes: power, legitimacy, and urgency.

A stakeholder has power over a company when it can get the company to do something that it would not otherwise do. A stakeholder has a legitimate claim when it is perceived to be legally valid or other- wise appropriate. A stakeholder has an urgent claim when it requires a company's immediate attention and response.

Stakeholder strategy

An integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage. Concerned with how the firm exchanges with various stakeholders to create and trade value

Strategy formulation break down into three distinct areas-business

Business strategy concerns the question of how to compete (cost leadership, differentiation, or integration). (General managers in SBU)

Autonomous actions

By lower-level employee

GOOD TO GREAT

Collins found consistent patterns of leadership among the companies he studied, as pictured in the Level-5 leadership pyramid

Strategy formulation break down into three distinct areas-corporate

Corporate strategy concerns questions relating to where to compete (industry, markets, and geography). （corporate executives）

Strategic leadership

Executives' use of power and influence to direct assets in the pursuit of an organization's goals

Firm effects

Firm performance attributed to the actions managers take. a firm's strategy can explain up to 55 percent of its performance. The remaining 25 percent is partly attributed to business cycles and other effects.

Upper-echelons theory

Framework that views organizational outcomes - strategic choices and performance levels - as reflections of top management values, who interpret situations through their unique perspective lens

Strategy formulation break down into three distinct areas-functional

Functional strategy concerns the question of how to implement business strategy. （functional manager)

FORMULATION:

Guiding policy to address the competitive challenge ex: Guiding Policy - Business Model Innovation Seamless integration across music/photo/mobile devices iPods, iTunes, iMacs disrupted the existing PC market Shifted competitive focus to mobile devices

Business Strategy

How to build a sustainable competitive advantage in a discrete and identifiable market

black swan events

Incidents that describe highly improbable but high-impact events.

The Level-3 competent manager

Is efficient and effective in organizing resources to accomplish stated goals and objectives. Does things right.

FOR-PROFIT VS. NOT-FOR-PROFIT VISIONs Main difference

Is the metric by which the firm assesses successful performance for nonprofit such as TFA--success measure by the impact its teachers have on student performance; for for-profit: measured by financial performance.

The Level-1 highly capable individual

Makes productive contributions through motivation, talent, knowledge, and skills.

stakeholders

Organizations, groups, and individuals that can affect or are affected by a firm's actions.

Temporary or Transient Competitive Advantage

Outperforming competitors or potential rivals over a relatively short period of time. Requires more emphasis on innovation and change

planned emergence

Strategy process in which organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top management.

Strategic initiatives can be the result of top-down planning or can emerge through a bottom-up process from deep within the organization. They have the potential to shape a firm's strategy.

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SCENARIO PLANNING

The interdependence among analysis, formulation, and implementation also enhances organizational learning and flexibility.

Corporate Strategy

The overall plan for creating value in a diversified company Resources united in one firm, but not necessarily in one market

A set of coherent actions to implement the firm's guiding policy.

This element is accomplished through strategy implementation (Part 3 of the AFI framework).

competitive disadvantage

Underperformance relative to other competitors in the same industry or the industry average

The Level-2 contributing team member

Uses high level of individual capability to work effectively with others in order to achieve team objectives.

What is our vision?

What do we want to accomplish ultimately Aspiration of the firm that lays the foundation for its mission - "to" is a common word EX：Vision: To attain an excellent education for all children.

Tangible rewards of superior value creation and capture are

are profitability and market share.

Strategy

choosing what not to do

STEP 3: IDENTIFY OPPORTUNITIES AND THREATS.

consumers boycott 集体抵制 In the best-case scenario, managers transform such threats into opportunities.

Strategy

creating fit among a company's activities

What is the difference between Business Strategy and Corporate Strategy?

e.g. Sony Music v. SONY

Functional managers are responsible

for implementing business strategy within a single functional area.

Strategy

from book: a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.

realized strategy

generally a combination of its top-down strategic intention and bottom-up emergent strategy.

To become an effective strategic leader, a manager needs to develop skills to move sequentially through five different leadership levels:

highly capable individual, contributing team member, competent manager, effective leader, and executive.

Failure to face the problem

if you fail to identify and analyze the obstacles, you don't have a strategy. Instead, you have a stretch goal or a budget or a list of things you wish would happen.

External stakeholders

include customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels.

internal stakeholders

include stockholders, employees (including executives, managers, and workers), and board members

Firm performance is determined primarily by two factors

industry and firm effects.

Serendipity

random events, pleasant surprises, accidental happenstances

three steps of analysis, formulation, and implementation in a SCENARIO PLANNING

analysis: identify multiple future scenarios; formulation:develop different strategic plans to address future scenarios. Implementation: execute dominant strategic plan.

A company can outperform only if it can establish "a difference" that it can preserve over time The difference must achieve the following:

(1) deliver greater value to customers (2) create comparable value at a lower cost

The Strategic Management Process

(1) strategic planning, (2) scenario planning, and (3) strategy as planned emergence.

We want this AFI framework to do two things:

(1) to explain and predict differences in firm performance, and (2) to help managers formulate and implement a strategy that results in superior performance

Strategic Positioning

--the creation of a unique and valuable position, involving a different set of activities --Trade-offs are required (Walmart versus Nordstrom)

The strategist is empowered by:

-The universality of strategic management principles. -Knowledge that the actions they create have more influence on firm performance than does the external environment. -Following the 3-step AFI framework

What positions does Porter recommend?

1) Variety based = producing a subset of an industry's products or services (2) Needs based = serving most or all of the needs of a particular group of customers (3) Access based = segmenting customers who are accessible in different ways

what strategy is not.

1. Grandiose statements are not strategy. ---We will be #1 2.A failure to face a competitive challenge is not strategy. 3.Operational effectiveness, competitive benchmarking, or other tactical tools are not strategy.

Two Important Functions of value

1. Values form a foundation for a firm's vision and mission. 2.Values serve as the guardrails to keep the company on track.

CUSTOMER-ORIENTED VS. PRODUCT-ORIENTED difference 2

1.A product-oriented vision defines a business in terms of a good or service and tend to force managers to take a myopic近视 view of the business landscape. 2.A customer-oriented vision defines a business in terms of providing solutions to customer needs and are more flexible. （However the company needs to be careful to differentiate between a customer-oriented vision and following customer sentiments.）

CUSTOMER-ORIENTED VS. PRODUCT-ORIENTED difference 1

1.Customer-oriented vision statements allow firms to adapt to changing environments. 2.Product-oriented vision statements are less flexible. (Strategic flexibility is a necessary condition to achieve competitive advantage)

why stakeholder strategy

1.Satisfied stakeholders are more cooperative 2.Increased trust lowers transaction costs 3.Effective management leads to greater adaptability and flexibility 4.Avoidance of negative outcomes 5.Reduction of risk exposure 6.Strong reputations rewarded in the marketplace

TOP-DOWN AND BOTTOM-UP Process

1.intended strategy: top-down strategic plan; 2.bottom-up emergent strategy: aotonomous actions+serendipity+resource allocation process (RAP)

Level-5 leadership pyramid

A conceptual framework of leadership progression with five distinct, sequential levels. Each level builds upon the previous one; the manager can move on to the next level of leadership only when the current level has been mastered.

Stakeholder impact analysis

A decision tool with which managers can recognize, prioritize, and address the needs of different stakeholders, enabling the firm to achieve competitive advantage while acting as a good corporate citizen.

A good strategy consists of three element

A diagnosis of the competitive challenge. A guiding policy to address the competitive challenge. A set of coherent actions to implement the firm's guiding policy.

Willingness to Pay Matters

A greater difference between value creation and cost: Increases the firm's economic contribution Increases likelihood of gaining competitive advantage

AFI strategy framework

A model that links three interdependent strategic management tasks—analyze, formulate, and implement—that, together, help managers plan and implement a strategy that can improve performance and result in competitive advantage.

IMPLEMENTATION:

Set of coherent actions to implement the firm's guiding policy ex: Effectively Implemented Overarching Approach Simple Rules: Focused only on two computer models (laptop and desktop) in two market segments (professional and consumer) Disrupted Industry Status Quo: Business model innovation through product innovations executed at

EMPLOYEE COMMITMENT

All employees should be involved in setting vision and mission. Belief in a company's vision and mission motivates its employees. Moreover, every employee plays a strategic role. Lower-level employees focus mainly on strategy implementation when a firm is using top-down or scenario planning. However, any employee (even at the entry level) can have great ideas that might become strategic initiatives with the potential to transform companies.

An emergent strategy

An emergent strategy describes any unplanned strategic initiative undertaken by mid-level employees of their own volition. If successful, emergent strategies have the potential to influence and shape a firm's strategy.

three steps of analysis, formulation, and implementation in a traditional top-down strategic planning process

Analysis: external/internal analysis->reconfirm or adjust vision,mission,values formulation of strategy: corporate-business-functional implementation: structure, culture, control, corporate governance,business ethics

strategic initiative

Any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures strategic initiatives can be the result of top-down planning by executives, or they can also emerge through a bottom-up process.

, the Level-5 manager: executive

Builds enduring greatness through a combination of willpower and humility. can truly be judged only if the organizations are able to sustain a competitive advantage in the years after the successful executive has departed from the organization.

ANALYSIS:

Diagnosis of the competitive advantage ex: Competitive Challenge for Steve Jobs 2001 - Recognized that with less than 5% market share, Apple could not compete with Microsoft, Intel, and Dell in the PC industry, thus Jobs needed to create the next big thing

examples of industry effects

Examples: Entry and exit barriers Number and size of companies Types of products and services offered

Some hallmarks of bad strategy:

Failure to frame the problem appropriately ex: Find investors to expand our stores to the US Mistaking goals for strategy ex: Increase our # of SKUs by 30% Bad "fuzzy" strategic objectives ex: Be the first choice for furniture Fluff (i.e., superficial abstraction) ex: Ensure our products have soul

Industry effects

Firm performance attributed to the structure of industry in which the firm competes. Found that the industry a firm is in determines about 20 percent of a firm's profitability.

What is our mission?

How do we accomplish our goals? What an organization does, including products, services, and which markets - "by" is a common word Ex:Mission: By enlisting our nation's most promising future leaders in the effort.

STRATEGY AS PLANNED EMERGENCE: TOP-DOWN AND BOTTOM-UP

In contrast to the two rational planning approaches just discussed, this one is a less formal and less stylized approach to the development of strategy

JetBlue: "Stuck in the Middle"?

JetBlue ran into trouble by trying to combine two different strategies simultaneously.There were a cost-leadership strategy, focused on low prices, and a differentiation strategy, focused on delivering unique features. Despite enjoying some early years of competitive advantage, Jet Blue is struggling to maintain that edge.

GOOD TO GREAT

Jim Collins identified great companies as those that transitioned from average performance to sustained competitive advantage. He measured that transition as "cumulative stock returns of 6.9 times the general market in the 15 years following their transition points."

Black Swan Events: Two Key Points

Managers: Managerial actions can affect the economic well-being of countless global citizens. Stakeholders:Effective stakeholder management is necessary to ensure continued survival and sustainable competitive advantage.

sustainable competitive advantage

Outperforming competitors or the industry average over a prolonged period of time.

competitive parity

Performance of two or more firms at the same level. Competitive Parity is measured on meaningful criteria and looks at lagging and leading indicators.

At Level 4, Effective leader

Presents compelling vision and mission to guide groups toward superior performance. Does the right things.

Strategic management process

Process employed by strategic leaders to conceive and implement a strategy, which leads to sustainable competitive advantage

The three strategy processes discussed in this chapter, each have strengths and weaknesses Important variables to consider:

Rate of environmental change (internal/external) Firm size Employee commitment to vision, mission, and organizational values

TOP-DOWN STRATEGIC PLANNING

Rational, top-down process aiding in programming for future success;typically concentrates strategic intelligence and decision-making responsibilities in the office of the CEO.

Implications for the Strategist

STRATEGY is the SCIENCE of SUCCESS and FAILURE. Strategists are challenged by competition, complexity, uncertainty and volatility.

Strategic management principles learned here can be applied universally.

Strategists work in: Small start-ups and large, multi-national companies For-profit and nonprofit organizations Private and public sectors Developed and emerging economies These concepts also can work in your own career

What questions are relevant in Business Strategy? We will focus on this in the first half of the semester

Strategy applied to a discrete market： How attractive is an industry? What are the likely opportunities and threats? How can a firm position itself within the industry to create a sustainable competitive advantage? What are the company's distinctive competencies and resources that can produce a competitive advantage? How sustainable is this competitive advantage?

How about International Strategy? What are the relevant questions?"FOREIGN"

Strategy applied to an international context: Which country markets to enter? Which businesses to enter? How to enter? How to compete? International Strategy focuses on the unique characteristics of entering and operating in multiple, culturally and legally different markets

Porter: Strategic Fit

Strategy is about combining activities Fit is important because discrete activities often affect one another Competitive Advantage grows out of the entire system of activities Replicating the fit between many activities makes imitation hard and makes a competitive advantage more sustainable Strategy = creating fit among a company's activities

SCENARIO PLANNING

Strategy-planning activity in which managers envision different what-if scenarios to anticipate plausible futures. Scenario planning takes place at both the corporate and business levels of strategy. Addresses both optimistic and pessimistic futures

competitive advantage

Superior performance relative to other competitors in the same industry or the industry average. (superior, relative)

A firm's realized strategy is generally a combination of its top-down intended strategy and bottom-up emergent strategy, resulting in planned emergence.

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Ethical values are the guardrails that help keep the company on track when pursuing its mission and its quest for competitive advantage.

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In scenario planning, managers envision what-if scenarios and prepare contingency plans that can be called upon when necessary.

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To be effective, visions and missions need to be backed up by hard-to-reverse strategic commitments

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Top-down strategic planning is a sequential, linear process that works reasonably well when the environment does not change much.

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Corporate Strategy Questions

The strategy applied to the multidivisional or diversified firm:Why do we have firms? What determines firm limits and boundaries? Why do we have multi-business firms? How do multi-business firms create or destroy value? How are multi-business firms managed?

How Do You Become an Effective and Ethical Strategic Leader?

The upper-echelons theory favors the idea that strong leadership is the result of both innate abilities and learning.

Resource Allocation Process (RAP)

The way a firm allocates its resources can be critical in shaping its realized strategy

2 of Porter's Generic Strategies

These approaches are called generic strategies (1) = Differentiation (2) = Cost Leadership

STEP 5: ADDRESS STAKEHOLDER CONCERNS.

Thinking about the attributes of power, legiti- macy, and urgency helps to prioritize the legitimate claims and to address them accord- ingly.

A diagnosis of the competitive challenge.

This element is accomplished through strategy analysis of the firm's external and internal environments

A guiding policy to address the competitive challenge.

This element is accomplished through strategy formulation, resulting in the firm's corporate, business, and functional strategies (Part 2 of the AFI framework).

What are our values?

What guardrails do we put in place to act ethically and legally as we pursue our vision and mission? Values are ethical standards/norms that govern the behavior of individuals within a firm.

STEP 4: IDENTIFY SOCIAL RESPONSIBILITIES.

corporate social responsibility (CSR)== four components: economic(gain and sustain competitive advantage), legal (law and regulation are society's codified ethics, define minimum acceptable standard), ethical(do what is right, just and fair), and philanthropic* responsibilities.(corporate citizenship) ** Note that society and shareholders require economic and legal responsibilities; Ethical and philanthropic responsibilities result from a society's expectations toward business.

Besides the rate of change, a second dimension is firm size. Larger firms tend to use

either a top-down stra- tegic planning process or scenario planning.

STEP 2: IDENTIFY STAKEHOLDERS' INTERESTS.

employee stock ownership plans (ESOPs). assets under management (AUM).

STEP 1: IDENTIFY STAKEHOLDERS.

focuses on stakeholders that currently have, or potentially can have, a material effect on a company. This prioritization identifies the most powerful stakeholders (both internal and external) and their needs.

The objective of corporate-level strategy is to

increase overall corporate value so that it is higher than the sum of the individual business units

Strategic management

integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.

General managers in strategic business units

must answer the strategic question of how to compete in order to achieve superior performance. They must manage and align the firm's different functional areas for competitive advantage.

Philanthropic Responsibilities.*

often subsumed under the idea of corporate citizenship, reflecting the notion of voluntarily giving back to society. Microsoft's corporate philanthropy program has donated more than $3 billion in cash and software to people who can't afford computer technology.

Corporate executives must

provide answers to the question of where to compete (in industries, markets, and geographies), and how to create synergies among different business units.

shortcoming of strategic planning

rests on the assumption that we can predict the future from the past. The approach works reasonably well when the environment does not change much. One major shortcoming of the strategic planning approach is that we simply cannot know the future.

The effectiveness of the chosen strategy process is contingent upon

the rate of change in the internal and external environments of the firm In a slow-moving environment, top-down strategic planning might be the most effective approach.

What is the fundamental goal of management?

to maximize profits (П) П = R - C

FOR-PROFIT VS. NOT-FOR-PROFIT VISIONs competitive advantage how to get:

vision is aspirational, not exclusively financial. --Thus highly motivating visions can improve financial performance.