Strategic Leadership
Strategic Leadership involves:
The ability to anticipate, envision, maintain flexibility
and empower others to create strategic change
Multi-functional work that involves working
through others
Consideration of the entire enterprise rather than
just a sub-unit
A managerial frame of reference
Strategic Leadership
and the Strategic
Management Process
Effective
Strategic Leadership
shapes the formulation of
Strategic Intent
and
Strategic Mission
influence
Successful
Strategic Actions
Formulation
of Strategies
Implementation
of Strategies
Strategic Competitiveness
Above-Average Returns
Factors Affecting Managerial Discretion
External Environment
Industry Structure
Rate of market growth
# and type of competitors
Political/Legal constraints
Product differentiation
Organizational
Characteristics
Size and age
Culture
Resource availability
Employee interaction
Managerial Discretion
Characteristics of the Manager
Tolerance for ambiguity
Commitment to the firm
Interpersonal skills
Aspiration level
Self-confidence
Exercise of Effective Strategic
Leadership
Establishing
balanced
organizational
controls
Determining
strategic
direction
Exploiting and
maintaining
core
competencies
Effective Strategic
Leadership
Emphasizing
ethical
practice
Sustaining
an effective
organizational
culture
Developing
human
capital
Determining Strategic Direction
• Strategic direction means the development of
a long-term vision of a firm’s strategic intent
• A charismatic leader can help achieve
strategic intent
• It is important not to lose sight of the strengths
of the organization when making changes
required by a new strategic direction
• Executives must structure the firm effectively
to help achieve the vision
Exploiting and Maintaining Core
Competencies
• Core competencies are resources and
capabilities that serve as a source of
competitive advantage for a firm over its rivals
• Strategic leaders must verify that the firm’s
competencies are emphasized in strategy
implementation efforts
Exploiting and Maintaining Core
Competencies
• In many large firms, and certainly in relateddiversified ones, core competencies are
exploited effectively when they are developed
and applied across different organizational
units
• Core competencies cannot be developed or
exploited effectively without developing the
capabilities of human capital
Developing Human Capital
• Human capital refers to the knowledge and
skills of the firm’s entire workforce
• Employees are viewed as a capital resource
that requires investment
• No strategy can be effective unless the firm is
able to develop and retain good people to
carry it out
• The effective development and management
of the firm’s human capital may be the
primary determinant of a firm’s ability to
formulate and implement strategies
successfully
Sustaining an Effective
Organizational Culture
• An organizational culture consists of a
complex set of ideologies, symbols, and core
values that is shared throughout the firm and
influences the way it conducts business
• Shaping the firm’s culture is a central task of
effective strategic leadership
Sustaining an Effective
Organizational Culture
• An appropriate organizational culture
encourages the development of an
entrepreneurial orientation among employees
and an ability to change the culture as
necessary
• Reengineering can facilitate this process
Changing Culture and Reengineering
The benefits of business reengineering are
maximized when employees believe that:
• Every job in the company is essential and
important
• All employees must create value through their
work
• Constant learning is a vital part of every person’s
job
• Teamwork is essential to implementation
success
• Problems are solved only when teams accept
the responsibility for the solution.
Emphasizing Ethical Practices
• Ethical practices increase the effectiveness of
strategy implementation processes
• Ethical companies encourage and enable
people at all organizational levels to exercise
ethical judgment
Emphasizing Ethical Practices
• To properly influence employee judgment and
behavior, ethical practices must shape the
firm’s decision-making process and be an
integral part of an organization’s culture
• Leaders set the tone for creating an
environment of mutual respect, honesty and
ethical practices among employees
Establishing Balanced
Organizational Controls
• Organizational controls provide the
parameters within which strategies are to be
implemented and corrective actions taken
• Financial controls are often emphasized in
large corporations and focus on short-term
financial outcomes
• Strategic control focuses on the content of
strategic actions, rather than their outcomes
Establishing Balanced
Organizational Controls
• Successful strategic leaders balance strategic
control and financial control (they do not
eliminate financial control) with the intent of
achieving more positive long-term returns
Why do a situation analysis?
Situation analysis concentrates on
generating solid answers to a welldefined set of strategic questions and
using these answers to:
– Appraise the company’s strategic situation
and business position
– Craft a suitable strategy
Situation analysis focuses on:
–EXTERNAL FACTORS – the firm’s
MACRO-environment (industry and
competitive conditions)
–INTERNAL FACTORS – the firm’s
immediate MICRO-environment (its
own internal situation and
competitive position)
The Key Questions in
Company Situation Analysis
1. How well is the company’s present strategy
working?
2. What are the company’s strengths,
weaknesses, opportunities, and threats?
3. Are the company’s prices and costs
competitive?
4. How strong is the company’s competitive
position?
5. What strategic issues does the company
face?
SWOT Analysis
• SWOT represents the first letter in
Strengths, Weaknesses, Opportunities,
and Threats.
• SWOT analysis
– Involves sizing-up a company’s INTERNAL
strengths and weaknesses and its
EXTERNAL opportunities and threats
– Is an easy to use tool for getting a quick
overview of a company’s strategic situation
Why SWOT Analysis is Important
It is the basis for matching strategy to
the company’s situation –
– To its internal strengths and weaknesses
– To its external threats and opportunities
A winning strategy must always fit the
company’s situation.
Strengths
• What is a company Strength?
– Something a company is good at doing or
a characteristic that gives it an important
capability.
Weaknesses
• What are company weaknesses?
– Something a company lacks or does poorly
(in comparison to others) or a condition
that puts it at a disadvantage.
Opportunities
• What are company opportunities?
– Those that offer important avenues for
profitable growth, those where a company
has the most potential for competitive
advantage, and those which the company
has the financial resources to pursue.
Threats
• What are company Threats?
– Certain factors in a company’s external
environment that pose a threat to its wellbeing.
Some questions to consider once the
SWOT listings have been compiled are:
• Does the company have internal strengths or
core competencies an attractive strategy can
be built around?
• Do company weaknesses make a company
vulnerable and does it disqualify a company
from pursuing industry opportunities?
• Which weaknesses does a company need to
correct?
Some questions to consider once the
SWOT listings have been compiled are:
• Which opportunities does the company have
the skills and resources to pursue with a real
chance for success? Which opportunities are
the best from the company’s standpoint?
(Remember: Opportunity without the means
to capture is only an illusion.)
• What external threats should management be
worried most about and what strategic moves
need to be made to craft a good defense?