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Leadership, Strategy & Competitive Advantage

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sophia soliven

on 28 June 2013

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Transcript of Leadership, Strategy & Competitive Advantage

Leadership, Strategy
& Competitive Advantage
Group C
LS 126
by Hills and Jones
Opening Case:
Dell Computer
Strategic Leadership & Superior Performance
Principal Drivers of Shareholder Value
Competitive Advantage
Manufacturer of
personal computer
systems
Decade of
high profitability
, indicative of
sustained competitive advantage
- As against competitors such as HP, Acer, Lenovo
Dell’s
business model
-
Selling directly to retail clients
; bypassing wholesalers & retailers for low cost structure
– Conducting sales via the
internet
– Allowing customers to
customize
their own products
– Excellent supply chain management =
quick inventory TO
Opening Case:
Dell Computer
Dell’s
decline

Reduced cost structures
of competitors
– Competitors offering
wider range of products, better after-sales service (HP)
– Poor
customer service
Why do some companies
succeed
, while some others
fail
?

STRATEGY
- set of related actions that managers take to increase company’s performance.
– Ultimate objective:
achieve competitive advantage
Strategic leadership
– effective management of strategy-making process to increase company performance
– Via attainment competitive advantage over rivals
Maximizing shareholder value
= overall goal of profit-making organizations
– In the form of,
(1) Appreciation
in the value of stock, and
(2) Dividends
– WHY maximize shareholder value?
(1)
Shareholders
provide capital
for business operations, and
(2)
Shareholders, as legal owners, entitled to
claims on profits
Profitability
Profit Growth
Effectiveness of
Strategies
Shareholder
Value
NOTE: The challenge for companies is
to
generate high profitability
AND
increase profits over time
– that is,
simultaneously
PROFITABILITY
-
Return
on capital invested (debt, plus equity)
-
ROIC
= Net Income / Capital
- Indicator of effective capital management
PROFIT GROWTH
- Increase in net profit over time
Competitive advantage
: greater profitability and profit growth than industry averages
– Companies which have competitive advantage are able to:
(1)
seize
market shares
, and thus,
(2)
earn and
grow

profits
rapidly
– Objective is to have
sustained competitive
advantage, that is maintain excellent position over long period of time
– NOTE:
Inter-industry differences
(e.g. saturation, industry stage, level of technology, profitability)
Business Model: managerial initiative
on how the different strategies should
come together
, or integrate
– To generate competitive advantage, in the end.
Strategic Managers
Levels of Strategic Management
Strategic Managers
Strategic Managers
Responsible for
formulating strategies
- To attain
competitive advantage
and
high profitability
Put strategies into effect
Lead
strategy-making process
Ex. Michael Dell (Dell Computer)
2 types:
1.
General Managers
: overall performance or one major division
2.
Functional Managers
: particular function (task, activity or operation)

Head Office
Corporate Level
CEO, Board of
Directors, Corporate
Staff
Business Level
Division A
Division B
Divisional Managers,
Staff
Business
Functions
Business
Functions
Functional Level
Functional Managers
Market A
Market B
Corporate-Level Managers
-
Define goals
of the organization
-
Determine
what businesses to engage in
-
Allocate resources
among the different businesses
-
Formulate and implement strategies
spanning individual businesses
-
Lead
the entirety of the organization
CEO
- Principal general manager
- “Agent of shareholders”

Business-Level Managers
-
Head of each division
= principal general manager
-
Translate general statements
of direction into concrete strategies
-
Strategies
specific to a particular business
Functional-Level Managers
- Specific
business functions
(e.g. HR, product development, etc.)
- In charge of only one organizational activity
-
Closer to the customers
; provide info for Corporate and Business-Level Managers

Step 2
Step 3
Step 5
Step 1
Step 4
Step 1
The Strategy-Making Process
Select the corporate
mission
and major corporate
goals
Analyze the organization’s
external competitive
environment to identify
opportunities
and
threats
Analyze the organization’s
internal
operating environment to identify
strengths
and
weaknesses


Must be
consistent
with the mission and goals
Must be
congruent
and constitute a viable business model

Implement
the strategies
Step 2
Step 3
Step 4
Select strategies
that build on the strengths and weaknesses in order to take advantage of opportunities and counter threats (external).

Step 5
MISSION STATEMENT
MISSION
Vision
Major Goals
Provides the
framework
within which strategies are formulated
4 components:
Mission
– raison d’être (reason for existence)
Vision
– desired future state
Key values
Major goals

What the company does
Business definition
- What is our business? What will it be? What should it be?
- WHO (
customer groups
), WHAT (
customer needs
), HOW (
distinctive competencies
)
Focus:
Customer needs
> Particular products
Mission:
Customer-oriented
> Product-oriented
Kodak: “provide customers with the solutions they need to capture, store, process, output, and communicate images – anywhere, anytime.”

Desired future state; what it wants to achieve
Nokia: “If it can go mobile, it will!”

Values
How managers and employees should conduct themselves
How they should do business
What kind of organization they should build to achieve the mission
Basis of a company’s organizational
culture
, which is an
important source of competitive advantage

Precise
and
measurable
desired future state
4 characteristics of well-constructed goals:
1. Precise and measurable
2. Address crucial issues (limited number
-> focus)
3. Challenging but realistic
4. Specified time period or deadline
High profitability
and
sustained profit growth
-
LONG RUN
> short run
- Central goal:
maximize shareholder returns

SWOT Analysis and Business Model
Strategy Implementation
External Analysis
Industry Environment
National Environment
Socioeconomic or Macro environment

Internal Analysis
Capabilities and competency

Weaknesses and threats

Find strategies to exploit:
- External opportunities
- Counter threats
- Build company strengths
- Eradicate weakness

10% Planning, 90% Implementing

Feedback Loop

Strategy Formulation
Personal Experience: Strategy Implementation
First Week: Improving visuals and actually being a competitor

Budgeting
Effectiveness
Long-term or short-term?

Strategy Making &Planning
Strategy Planning in an Unpredictable World
Strategy Planning
Strategy Making by Lower-Level Managers
Serendipity and Strategy
As an emergent process
A plan
Rational
Highly structured
By top management

Consider:
Unpredictability of the real world
Involvement/role of lower level managers
Serendipity and Strategy

Complexity and uncertainty
Chance
Unforeseen change
Adaptability and responsiveness
Traditional strategic planning process
Inflexible

Too centered around top management
Influence of individual managers
Autonomy of lower level managers
Initiative
Perspective and innovation

Accidental vs deliberate
“window of opportunity”
Opportunity to profit
Make-or-break

Henry Mintzberg’s Model of Strategy Development
Realized strategies
Strategies put into action
Intended and unplanned
Unrealized strategies
Planned but not implemented
External factors
Changes in environment

Henry Mintzberg’s Model of Strategy Development
Henry Mintzberg’s Model of Strategy Development
Emergent strategies
Unplanned strategies/actions
Unforeseen circumstances
Action by lower level managers
Serendipity
Unplanned strategic shift by top management
Strategic Leadership: What makes an excellent leader?
Vision, Eloquence and Consistency

Visionary leader, or having a clear & compelling vision
Eloquent, to communicate vision to constituents
Consistently articulate vision, until integrated in organization’s culture

Articulation of the Business Model


Ability to identify business model
That is, to have
oversight
as to
how strategies mesh

Commitment


Being Well Informed



Knowing
what is going on
within the company, even at the grassroots level
Both from
formal
and
informal
sources

Willingness to Delegate and Empower



Avoid being overloaded with responsibilities, by assigning duties to subordinates
Empowering subordinates by providing them independency and encouragement

Astute Use
of Power



Avoiding dictatorship style of leadership; “intelligent” use of power
Emotional Intelligence




Self-awareness, self-regulation, motivation, empathy, skills
Generate trust and confidence of subordinates
Strategic Planning
in Practice

Decentralized Planning
Strategic Intent
Scenario Planning
Developed by
Royal Dutch Shell
Formulating plans that are based on
“what-if” scenarios

Identify different
possible futures

Formulate plans to deal with those futures

Invest in one plan but…

Hedge your bets by preparing for other scenarios

Switch strategy if signposts shows alternative scenarios becoming more likely

Ambitious
goals
and vision
Resources
and
Capabilities
Good
Strategy
Managers from all levels of the corporation

Top Management
Middle Managers
Lower Managers
Strategic Decision-Making
Cognitive Biases
Groupthink
Techniques for Improving Decision-Making
Strategic Leadership
Prior hypothesis bias
Escalating commitment
Reasoning by analogy
Representativeness
Illusion of control

Based on emotional rather than an objective assessment on the course of action
Devil’s advocacy


Dialectic inquiry

Vision, eloquence and consistency
Articulation of the business model
Commitment
Being well-informed
Willingness to delegate and empower
The astute use of power
Emotional intelligence
Full transcript