Strategic Management Ch. 1

External Control View of Leadership

Situations in which external forces -- where the leaders has limited influence -- determine the organization's success.

Romantic View of Leadership

Situations in which the leader is the key force in determining the organization's success -- or lack thereof.

Mission Statement

- A set of organizational goals that include both the purpose of the organization, its scope of operations, and the basis of its competitive advantage. - Mission statements are more specific and focused on the means by which the firm will compete. - Have greatest impact when they reflect an organization's enduring, overarching strategic priorities and competitive positioning. - Few mission statements identify profit or any other financial indicator as the sole purpose of the firm, many do not even mention profit or shareholder return. - A good mission statement must communicate why an organization is special and different. They mention values rather than profits. - Mission statements can and should change when competitive conditions dramatically change or the firm is faced with new threats or opportunities.

Benefits of Meaningful Objectives in an Organization

- Help channel all employees' efforts toward common goals. - Helps organizations concentrate and conserve valuable resources and work collectively in a timely manner. - Challenging objectives can help to motivate and inspire employees to higher levels of commitment and effort. - Proper objects provide a yardstick for rewards and incentives. They will ensure a greater sense of equity or fairness when rewards are allocated.

Vision

- Organizational goal(s) that evoke(s) powerful and compelling mental images. - Leaders must develop and implement a vision. - The vision statement may also contain a slogan, diagram, or picture -- whatever grabs attention. - The aim is to capture the essence of the more formal parts of the vision in a few words that are easily remembered, yet that evoke the spirit of the entire vision statement.

Hierarchy of Goals

- Organizational goals ranging from, at the top, those that are less specific yet able to evoke powerful and compelling mental images, to, at the bottom, those that are more specific and measurable. - Includes its vision, mission, and strategic objectives.

Operational Effectiveness

- Performing similar activities better than rivals. Popular Management Innovations include: Just-in-time, total quality, benchmarking, business process re-engineering, outsourcing.

Shared Value

- Policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in which it operates. - Focuses on identifying and expanding the connections between societal and economic progress. - Not about personal values or about "sharing" the value created by firms. Instead it is about expanding the total pool of economic and social value. - Opportunities to create shared value arise because societal problems can create economic costs in the firm's value chain. - Synergy increases when firms consider societal issues from a shared value prospective and invent new ways of operating to address them.

Intended Strategy

- Strategy in which organizational decisions are determined only by analysis. - Unforeseen changes and obstacles may result in at least some parts of the intended strategy remaining unrealized.

"Zero Sum"

- The role of management is to look upon the various stakeholders as competing for the organization's resources. -The gain of one individual or group is the loss of another individual or group. - Rooted in the traditional conflict between workers and management, leading to the formation of unions and sometimes ending in adversarial union-management negotiations and long, bitter strikes.

Reasons Visions Fail

- The walk doesn't match the talk. Employee enthusiasm around a vision can be quickly diminished if employees find that senior management's behavior is not consistent with the vision. - Irrelevance. Employees reject visions that are not anchored in reality. - Not the holy grail. A vision simply cannot be viewed as a magic cure for an organization's illness. - Too much focus in directing people and resources toward a grandiose vision can lead to devastating losses and missed opportunities. - People have difficulty identifying with a vision that paints a rosy picture of the future but does not account for the often hostile environment in which the firm competes or that ignores some of the firm's weaknesses.

3 Important Mechanisms to Ensure Effective Corporate Governance

1. An effective and engaged board of directors 2. Shareholder activism 3. Proper managerial rewards and incentives

Four Key Attributes of Strategic Management

1. Directed toward overall organizational goals and objectives 2. Includes multiple stakeholders in decision making 3. Requires incorporating both short-term and long-term perspectives. 4. Involves the recognition of trade-offs between effectiveness and efficiency.

3 Types of Leaders Needed in the Strategic Management Process

1. Local line leaders who have significant profit-and-loss responsibility. 2. Executive leaders who champion and guide ideas, create a learning infrastructure, and establish a domain for taking action. 3. Internal networkers who, although they have little positional power and formal authority, generate their power through the conviction and clarity of their ideas.

5 Criteria for Objectives to be Meaningful

1. Measurable - there must be at least one indicator that measures progress against fulfilling the objective 2. Specific - This provides a clear message as to what needs to be accomplished. 3. Appropriate - It must be consistent with the organization's vision and mission. 4. Realistic - It must be an achievable target given the organization's capabilities and opportunities in the environment. In essence, it must be challenging but doable. 5. Timely - There must be a time frame for achieving the objective.

Competitive Advantage

A firm's resources and capabilities that enable it to overcome the competitive forces in its industry(ies).

Stakeholder Management

A firm's strategy for recognizing and responding to the interests of all its salient stakeholders.

Strategic Objectives

A set of organizational goals that are used to operationalize the mission statement and that are specific and cover a well-defined time frame.

Strategy Implementation

Actions made by firms that carry out the formulated strategy, including strategic controls, organizational design, and leadership. - Strategic control and corporate governance - Creating effective organizational designs - Creating a learning organization and an ethical organization - Fostering corporate entrepreneurship

Stakeholder

An individual or group, inside or outside the company, that has a stake in and can influence an organization's performance.

Strategic Management: Analyses

Analysis of strategic goals (vision, mission, and strategic objectives) along with the analysis of the internal and external environment of the organization.

Triple Bottom Line

Assessment of a firms financial, social, and environmental performance.

Strategic Management: Actions

Decisions are of little use if they are not acted on. Firms take the necessary actions to implement their strategies.

Strategy Formulation

Decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantage. - Formulating business-level strategy - Formulating corporate-level strategy - Formulating international strategy - Entrepreneurial strategy and competitive dynamics

Strategic Management: Decisions

Leaders must make strategic decisions. These decisions address two basic questions: What industries should we compete in? How should we compete in those industries?

Efficiency

Performing actions at a low cost relative to a benchmark, or 'doing things right'

Crowdsourcing

Practice wherein the internet is used to tap a broad range of individuals and groups to generate ideas and solve problems.

"Symbiosis"

Recognizes that stakeholders are dependent upon each other for their success and well-being.

Strategic Management Process

Strategy analysis, strategy formulation, and strategy implementation.

Realized Strategy

Strategy in which organizational decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences.

Strategy Analysis

Study of firm's external and internal environments, and their fit with organizational vision and goals. - Analyzing organizational goals and objectives - Analyzing external environment of the firm - Analyzing the internal environment of the firm - Assessing a firm's intellectual assets

Effectiveness

Tailoring actions to the needs of an organization rather than wasting effort, or 'doing the right thing'

Strategic Management

The analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages. Two Components: First - analyses, decisions, and actions of an organization Second - study why some firms outperform others (related to competitive advantage).

Ambidexterity

The challenge managers face of both aligning resources to take advantage of existing product markets as well as proactively exploring new opportunities.

Social Responsibility

The expectation that businesses or individuals will strive to improve the overall welfare of society. - Corporate Social Responsibility (CSR)

Strategies

The ideas, decisions, and actions that enable a firm to succeed.

Corporate Governance

The relationship among various participants in determining the direction and performance of corporations. The primary participants are (1) the shareholders, (2) the management (led by the chief executive officer), and (3) the board of directors.

Strategic Management: Competitive Advantage

Two Questions: How should we compete in order to create competitive advantages in the marketplace? - Should firm be a low-cost producer or develop prod/services that are unique and charge premium prices or combine both. How can we create competitive advantages in the marketplace that are unique, valuable, and difficult for rivals to copy or substitute? - Make advantages sustainable, instead of temporary.