Gain awareness of the three tests that distinguish a winning strategy from a so-so
.... Why Should Crafting and Executing Strategy. Be Top-Priority Management ...
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Chapter Learning Objectives 1. Understand the role of business strategies in moving a company in the intended direction, growing its business, and improving its financial and market performance. 2. Develop an awareness of the four most reliablestrategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage. 3. Learn that business strategies evolve over time because of changing circumstances and ongoing management efforts to improve the company’s strategy. 4. Understand why a company’s strategy must underpinned by a business model that produces revenues sufficient to cover costs and earn a profit. 5. Gain awareness of the three tests that distinguish a winning strategy from a so-so or flawed strategy. 6. Learn why good strategy and good strategy execution are the most trustworthy signs of good management. 1-4
Thinking Strategically: The Three Big Strategic Questions
What Do We Mean By “Strategy?”
1. What’s the company’s present situation?
Consists of competitive moves and
business approaches used by managers to run the company
2. Where does the company need to go from here?
Management’s “action plan” to
Business(es) to be in and market positions to stake out
Grow the business
Buyer needs and groups to serve
Attract and please customers
Direction to head
Compete successfully
3. How should it get there?
Conduct operations
A company’s answer to “how will we get there?” is its strategy
Achieve the targeted levels of organizational performance 1-5
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The Hows That Define a Firm's Strategy
Developing a successful strategy hinges on
How to grow the business How to please customers How to outcompete rivals
Key Elements of a Successful Strategy making competitive moves aimed at
Strategy is HOW to . . .
Appealing to buyers in ways to set the company apart from rivals and Carving out its own market position
How to manage each functional
Involves developing a distinctive “aha”
piece of the business (R&D, production, marketing, HR, finance, and so on)
element to Attract customers and Produce a competitive edge
How to respond to changing market
conditions
Copying competitive moves of other successful companies rarely works!
How to achieve targeted levels of
performance 1-7
Strategy and the Quest for Competitive Advantage
Starbucks’ Strategy: The Key Elements Expand number of Starbucks stores domestically by
blanketing metropolitan areas, then adding stores on the city’s perimeter Make Starbucks a global brand by opening stores in an increasing number of foreign locations View each store as a billboard for the company and as a contributor to building the company’s brand and image Broaden in-store products to include coffee-flavored ice cream, teas, fresh pastries, music CDs, and coffee accessories Fully exploit the growing power of the Starbucks’ name and brand image with out-of-store sales Display corporate responsibility and environmental sustainability Control costs of opening new stores Promote customer-friendly service and enhance store ambience by making Starbucks a great place to work
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The heart and soul of any strategy are actions a
company makes to Improve its financial performance, Strengthen its competitive position, and Gain a competitive advantage over rivals
A creative, distinctive strategy that sets a
company apart from rivals and yields a competitive advantage is a company’s most reliable ticket to above average profitability Operating with a competitive advantage is more profitable than operating without one Operating with a competitive disadvantage nearly always results in below-average profitability 1-9
A Powerful Strategy Leads to Sustainable Competitive Advantage
1-10
Strategic Approaches to Building Sustainable Competitive Advantage Be the industry’s low-cost provider
A company achieves sustainable competitive
advantage when
Achieve a cost-based competitive advantage
An attractive number of buyers prefer its products/ services over those of rivals and The basis for this preference is durable
Incorporate differentiating features
Superior product/service keyed to higher quality, better performance, wider selection, value-added services, or some other attribute
Its nice when a strategy produces A temporary competitive edge but A sustainable edge over rivals greatly enhances a
Focus on a narrow market niche
Win a competitive edge by doing a better job than rivals of serving the needs and preferences of buyers in the niche
company’s prospects for above-average profitability What separates a powerful strategy from an ordinary strategy is management’s ability to forge a series of moves, both in the marketplace and internally, that produces sustainable competitive advantage!
Develop expertise and resource strengths
not easily imitated or matched by rivals Achieve a capabilities-based competitive advantage 1-11
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Competitive Advantage Examples (con’t)
Competitive Advantage Examples
Focus on a narrow market niche
Strive to be industry’s low-cost provider
Wal-Mart Southwest Airlines
eBay – Online auctions Best Buy – Home electronics McAfee – Virus protection
Outcompete rivals on a key differentiating
feature Johnson & Johnson – Reliability in baby
Starbucks – Premium coffees and coffee drinks The Weather Channel – Info about the weather
products Harley-Davidson – King-of-the-road styling
Develop expertise, resource strengths, and
capabilities not easily imitated by rivals
Rolex – Top-of-the-line prestige BMW– Engineering design and performance Amazon.com – Wide selection and convenience
Walt Disney – Theme park management and family entertainment Dell Computer – Build-to-order manufacturing capabilities Ritz-Carlton – Personalized customer service 1-13
Figure 1.1: Identifying a Company’s Strategy
1-14
Why Do Strategies Evolve? A company’s strategy is a work in progress Changes may be necessary to react to Financial crisis Fresh moves of competitors Evolving customer preferences Technological breakthroughs Emerging market opportunities Changing political or economic climate New ideas to improve strategy 1-16
Figure 1.2: A Company’s Strategy Is a Blend of Proactive Initiatives and Reactive Adjustments
Linking Strategy With Ethics Ethical and moral standards go beyond Prohibitions of law and language of “thou shalt not”
to issues of Duty and “right” vs. “wrong” Ethical and moral standards address
“What is the right thing to do?” Two criteria of an ethical strategy Does not entail actions and behaviors that cross the line from “should do” to “should not do” (because such actions are unsavory, shady, unconscionable, injurious to others, or harmful to the environment) Allows management to fulfill its ethical duties to all stakeholders
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3
A Firm’s Ethical Responsibilities to Its Stakeholders Owners/shareholders – Rightfully expect some form of return on their investment Employees – Rightfully expect to be treated with dignity and respect for devoting their energies to the enterprise Customers – Rightfully expect a seller to provide them with a reliable, safe product or service
What Is a Business Model? A business model addresses “How do we
make money in this business?” Is the company’s strategy capable of delivering good bottom-line results?
Do the revenue-cost-profit economics
of the strategy make good business sense? Look at revenue streams the strategy is expected to produce
Suppliers – Rightfully expect to have an equitable relationship with firms they supply and be treated fairly
Look at associated cost structure and potential profit margins
Community – Rightfully expect businesses to be good citizens in their community
Do resulting earnings streams and ROI indicate the strategy has good potential to deliver acceptable profitability? 1-20
Relationship Between Strategy and Business Model Strategy . . .
Business Model . . .
Deals with a company’s competitive initiatives and business approaches
Concerns whether revenues and costs flowing from the strategy demonstrate a business can be profitable and viable
ra
St
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gy
s es sin el Bu Mod
Microsoft’s Business Model Employ a cadre of highly skilled programmers to develop proprietary code; keep source code hidden from users Sell resulting OS and software packages to PC makers and users at relatively attractive prices to achieve a 90% or more market share Most costs in developing software are fixed; variable costs are small; once break-even volume is reached, revenues from additional sales are almost pure profit Provide modest level of technical support to users at no cost Rejuvenate revenues by periodically introducing next-generation software with features inducing PC users to upgrade their operating systems
Red Hat’s Business Model Rely on collaborative efforts of volunteer programmers to create the software Collect and test enhancements and new applications submitted by volunteer programmers for evaluation and inclusion in new releases of Linux Market upgraded and tested family of Red Hat products to large companies, charging a subscription fee that includes 24/7 support within 1 hour in 7 languages Make source code open and available to all users Capitalize on specialized expertise required to use Linux by providing fee-based training, consulting, software customization, and clientdirected engineering to Linux users
Tests of a Winning Strategy GOODNESS OF FIT TEST How well does the strategy fit the company’s external and internal situation? COMPETITIVE ADVANTAGE TEST Is the strategy helping the company achieve a sustainable competitive advantage? PERFORMANCE TEST Is the strategy resulting in better company performance? 1-24
4
Other Criteria for Judging Merits of a Strategy
Why Should Crafting and Executing Strategy Be Top-Priority Management Tasks? A compelling need exists for
Degree of risk the strategy poses as
managers to proactively shape how a firm’s business will be conducted
compared to alternative strategies Degree to which the strategy is flexible
and adaptable to changing circumstances
A strategy-focused firm is
more likely to be a strong bottom-line performer than one that views strategy as secondary
While these criteria are relevant, they seldom override the importance of the three tests of a winning strategy! 1-25
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Good Strategy + Good Strategy Execution = Good Management Crafting and executing strategy are core
management functions Among all things managers do, nothing
affects a company’s ultimate success or failure more fundamentally than how well its management team Charts a company’s direction, Develops competitively effective strategic moves and business approaches, and Pursues what needs to be done internally to produce good day-in/day-out strategy execution Excellent execution of an excellent strategy is the best test of managerial excellence – and the most reliable recipe for winning in the marketplace! 1-27
Chapter Learning Objectives 1. Grasp why it is critical for company managers to think long and hard about where a company needs to head and why. 2. Understand the importance of setting both strategic and financial objectives. 3. Recognize that the task of crafting a company strategy draws on the entrepreneurial talents of managers at all organizational levels. 4. Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to achieve companywide performance targets. 5. Become aware of what a company must do to achieve operating excellence and to execute its strategy proficiently. 6. Understand why the strategic management process is ongoing, not an every-now-and-then task. 7. Learn what leadership skills management must exhibit to drive strategy execution forward. 8. Become aware of the role and responsibility of a company’s board of directors in overseeing the strategic management process.
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Figure 2.1: The Strategy-Making, Strategy-Executing Process
Developing a Strategic Vision Involves thinking strategically about Future direction of company Changes in company’s product/market/ customer technology to improve
Current market position Future prospects A strategic vision describes the route a company intends to take in developing and strengthening its business. It lays out the company’s strategic course in preparing for the future. 1-32
Key Elements of a Strategic Vision Delineates management’s aspirations for the
Role of a Strategic Vision A well-conceived, well-communicated vision
business
Provides a panoramic view of “where we are going” Charts a strategic path Is distinctive and specific to
a particular organization
Avoids use of generic language that is dull and boring and that could apply to most any company
functions as a valuable managerial tool to Give the organization a sense of direction, mold organizational identity, and create a committed enterprise Illuminate the company’s directional path Provide managers with a reference point to Make strategic decisions Translate the vision into hard-edged objectives and strategies
Captures the emotions of
Prepare the company for the future
employees and steers them in a common direction
A strategic vision exists only as words and has no organizational impact unless and until it wins the commitment of company personnel and energizes them to act in ways that move the company along the intended strategic path!
Is challenging and a bit beyond a
company’s immediate reach
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Table 2.2: Characteristics of an Effectively Worded Vision Statement
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Example of Strategic Vision
6
Example of Strategic Vision
Examples of Strategic Visions
Strategic Vision vs. Mission
Characteristics of a Mission Statement
A strategic vision
concerns a firm’s future business path - “where we are going” Markets to be pursued
Identifies boundaries of a company’s current
A company’s mission
statement typically focuses on its present business purpose - “who we are and what we do”
Future product/market/ customer/technology focus
Current product and service offerings
Kind of company management is trying to create
Customer needs and customer groups being served
business and says something about Present products and services Types of customers served Geographic coverage Conveys Who we are, What we do, and Why we are here
Geographic coverage 1-40
Key Elements of a Mission Statement
Mission Statement: Trader Joe’s
A complete mission statement should cover three
things: Customer needs being met – What is being satisfied Customer groups or markets being served – Who is being satisfied What the organization does (in terms of business approaches, technologies used, and activities performed) to satisfy the targeted needs of the targeted customer groups – How customer needs are satisfied
(a unique grocery store chain) To give our customers the best food and beverage values that they can find anywhere and to provide them with the information required for informed buying decisions. We provide these with a dedication to the highest quality of customer satisfaction delivered with a sense of warmth, friendliness, fun, individual pride, and company spirit. 1-41
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Linking the Vision with Company Values
Mission Statement: OSHA
Companies often develop a statement of values to guide a
company’s pursuit of its vision and strategy and paint the white lines for how a company’s business is to be conducted
Occupational Safety and Health Administration
Company values statements typically contain four to eight beliefs, traits, and behaviors relating to such things as Fair treatment, integrity, ethical behavior, innovation, teamwork, product quality, customer satisfaction, social responsibility, community citizenship
To promote the safety and health of America’s workers by setting and enforcing standards; Providing training, outreach, and education; Establishing partnerships; Encouraging continual process improvement in workplace safety and health.
But values statements remain a bunch of nice words until
espoused beliefs, traits, and behaviors are Incorporated into company’s operations and work practices Used as benchmarks for job appraisal, promotions, and rewards If company personnel are not held accountable for displaying company values in doing their jobs, then the company values statement is a bunch of empty words!
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Example: American Express’ Company Values
Example: Toyota’s Company Values Respect for and development of employees
Customer commitment
Quality and Integrity
Teamwork Getting quality right the first time Learning
Respect for people
Continuous improvement
Teamwork
Example: DuPont’s Company Values
Embracing change in pursuit of low-cost, top-notch manufacturing excellence in motor vehicles
Example: Abbott Laboratories’ Company Values
Safety
Ethics
Pioneering
Achieving
Respect for people
Environmental stewardship
Caring
Enduring
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Example: Yahoo’s Core Values
Communicating the Strategic Vision Winning support for the vision involves Putting “where we are going and why” in writing Distributing the statement organization-wide Having executives explain vision to employees An engaging, inspirational vision Challenges and motivates workforce Articulates a compelling case for where company is headed Evokes positive support and excitement Arouses a committed organizational effort to move in a common direction 1-50
Capturing the Vision in a Slogan
Capturing the Vision in a Slogan
FedEx
Scotland Yard
“Satisfying worldwide demand for fast,
“To make London the safest
time-definite, reliable distribution.”
major city in the world.”
Home Depot
Charles Schwab
“Helping people improve the
“To provide customers with
places where they live and work.”
the most useful and ethical financial services in the world.” 1-51
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Recognizing Strategic Inflection Points
Intel’s “Strategic Inflection Points”
Sometimes an order-of-magnitude change occurs in
Prior to mid-1980s
a company’s environment that Dramatically alters its future prospects
Focus on memory chips
Starting in mid-1980s
Mandates radical revision of its strategic course
Abandon memory chip business (due to lower-cost Japanese companies taking over the market) and
Critical decisions have to be made about where to
go from here A major new directional path may have to be taken
Become preeminent supplier of microprocessors to PC industry
Be undisputed leader in driving
A major new strategy may be needed
PC technology forward
Responding quickly to unfolding changes in the
1998
marketplace lessons a company’s chances of Becoming trapped in a stagnant business or Letting attractive new growth opportunities slip away 1-53
Shift focus from PC technology to becoming the preeminent building block supplier to Internet economy 1-54
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Overcoming Resistance to a New Strategic Vision
Payoffs of a Clear Strategic Vision Crystallizes an organization’s long-term
Mobilizing support for a new vision entails
direction
Reiterating basis for the new direction
Reduces risk of rudderless decision-making
Addressing employee concerns head-on
Creates a committed enterprise
where organizational members enthusiastically pursue efforts to make the vision a reality
Calming fears Lifting spirits
Provides a beacon to keep strategy-related
actions of all managers on common path
Providing updates and progress reports as events unfold
Helps an organization prepare for the future 1-55
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Importance of Setting Stretch Objectives
Setting Objectives
Objectives should be set at levels that
Purpose of setting objectives
stretch an organization to
Converts vision into specific performance targets Creates yardsticks to track performance Well-stated objectives are
Perform at its full potential, delivering the best possible results Push firm to be more inventive Exhibit more urgency to improve its business position Be intentional and focused in its actions
Quantifiable Measurable Contain a deadline for achievement
There’s no better way to avoid ho-hum results than by setting stretch objectives and using compensation incentives to motivate organization members to achieve the stretch performance targets!
Spell-out how much of what kind
of performance by when 1-57
Types of Objectives Required Financial Objectives
Strategic Objectives
Outcomes focused
Outcomes focused on improving competitive strength and market standing
on improving financial performance
1-58
Examples: Financial Objectives Annual revenue growth of X% X % increase in after-tax profits annual Earnings per share growth of X% annually Annual dividend increases of X% Profit margins of X% X% return on capital employed (ROCE) Annual stock price increases that average X% over
time
$
Strong bond and credit ratings Sufficient internal cash flows to fund 100% of new
capital investment Stable earnings during periods of recession 1-60
10
Good Strategic Performance Is the Key to Better Financial Performance
Examples: Strategic Objectives Winning an X% market share within 3 years Achieving lower overall costs than rivals Overtaking key competitors on product performance
or quality or customer service within 2 years
However, setting well-chosen strategic
Deriving X% of revenues from sale of new products
introduced in past 5 years Being the recognized industry leader in product innovation and/or technological know-how Having a wider product line than rivals Consistently getting new or improved products to market ahead of rivals Having stronger national or global sales and distribution capabilities than rivals
objectives and achieving them signals
Growing competitiveness Growing strength in the marketplace A company that is growing competitively stronger is
developing the capability for better financial performance in the years ahead Good strategic performance is thus a “leading indicator” of a company’s capability to deliver improved future financial performance
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A Balanced Scorecard Approach – Setting Strategic and Financial Objectives A balanced scorecard for measuring
Unless a company sets and achieves stretch strategic objectives it is not developing the competitive muscle to deliver even better financial results in the years ahead!
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General Motors’ Objectives Reduce the percentage of automobiles
company performance is optimal; it entails Setting financial and strategic objectives Placing balanced emphasis on achieving both types of objectives (However, if a company’s financial performance is dismal or if its very survival is in doubt because of poor financial results, then stressing the achievement of the financial objectives and temporarily deemphasizing the strategic objectives may have merit)
Just tracking financial performance overlooks the
importance of measuring whether a company is strengthening its competitiveness and market position The surest path to sustained future profitability year after year is to relentlessly pursue strategic outcomes that strengthen a company’s business position and give it a growing competitive advantage over rivals!
Achieving good financial performance is not enough Current financial results are “lagging indicators” reflecting results of past decisions and actions — good profitability now does not translate into stronger capability for delivering even better financial results later
using conventional internal combustion engines (ICE) through the development of hybrid ICEs, plug-in hybrid ICEs, rangeextended electric vehicles, and hydrogen fuel cell electric engines Reduce automotive structural costs to benchmark levels of 23 percent of revenue by 2012 from 34 percent in 2005 Reduce annual U.S. labor costs by an additional $5 billion by 2011
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The Objectives at Yum! Brands
The Home Depot’s Objectives
(KFC, Pizza Hut, Taco Bell)
Open 100 KFC restaurants in Vietnam by 2010
Be the number one destination for professional
Expand Taco Bell restaurant concept to Dubai, India,
contractors, whose business accounted for roughly 30 percent of 2006 sales
Spain and Japan during 2008 and 2009 Increase number of international restaurant locations
Improve in-stock positions so customers can find
from 12,000 in 2007 to 15,000 in 2012
and buy exactly what they need
Increase operating profit from international operations
Deliver differentiated customer service and the
from $480 million in 2007 to $770 million in 2012
know-how that our customers have come to expect from The Home Depot
Expand Pizza Hut’s menu to include pasta and chicken
dishes Decrease the number of company owned restaurant
Repurchase $22.5 billion of outstanding shares
units in U.S. from 20% of units in 2007 to less than 10% of units by 2010 Increase the number of Taco Bell units in the U.S. by 2%–3% annually between 2008 and 2010
during 2008 Open 55 new store locations with 5 store
relocations in 2008 1-65
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Both Short-Term and Long-Term Objectives Are Needed
Avon’s Objectives
Short-term objectives
Increase our beauty sales and market
share Strengthen our brand image Enhance the representative experience Realize annualized cost savings of $430 million through improvements in marketing processes, sales model and organizational activities Achieve annualized cost savings of $200 million through a strategic sourcing initiative
Targets to be achieved soon Milestones or stair steps for reaching long-range performance targets Long-term objectives Targets to be achieved within 3 to 5 years Calls for actions now that will permit reaching targeted long-range performance later 1-67
Concept of Strategic Intent
1-68
Characteristics of Strategic Intent Indicates firm’s intent to making quantum
A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective!
gains in competing against key rivals and to establishing itself as a winner in the marketplace, often against long odds Involves establishing a grandiose
performance target out of proportion to immediate capabilities and market position but then devoting the firm’s full resources and energies to achieving the target over time Entails sustained, aggressive actions to take
market share away from rivals and achieve a much stronger market position 1-69
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Importance of Top-Down Objectives
Objectives Are Needed at All Levels The objective-setting process is more topdown than bottom up
Provides guidelines for objective-setting and
strategy-making in lower-level organizational units
1. First, set organization-wide objectives and performance targets
Helps ensure that performance targets set by
business units, divisions, and departments are directly connected to achieving company-wide objectives
2. Next, set business and product line objectives
Top-down objective-setting has
two advantages Leads to cohesive and compatible objectives
3. Then, establish functional and departmental objectives
and strategies up and down the organization Helps unify internal efforts to move company along the chosen strategic path
4. Individual objectives are established last 1-71
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Crafting a Good Strategy Requires Good Business Entrepreneurship
Crafting a Strategy
Developing a winning strategy involves
Strategy-making involves astute
entrepreneurship
Diagnosing the direction and force of the market changes underway and making timely strategic adjustments
Actively searching for opportunities to do new things or Actively searching for opportunities to do existing things in new or better ways
Spotting new or better ways to satisfy customer needs Figuring out how to outwit and outmaneuver competitors
Strategizing involves Developing timely responses to happenings in the external environment and Steering company activities in new directions dictated by shifting market conditions
Pursuing ways to strengthen the firm’s competitive capabilities Proactively trying to out-innovate rivals 1-73
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The Hows That Define a Firm's Strategy
The Role of Astute Entrepreneurship in Crafting a Company’s Strategy
How to grow the business
Masterful strategies come partly (maybe mostly) by doing things differently from competitors where it counts Innovating more creatively Being more efficient Being more imaginative Adapting faster
How to please customers How to outcompete rivals How to respond to changing market
conditions How to manage each functional
piece of the business (R&D, production, marketing, HR, finance, and so on)
Rather than running with the herd! Good strategy-making is therefore inseparable from good entrepreneurship— one cannot exist without the other!
How to achieve targeted levels of
performance 1-75
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Why Is Strategy-Making Nearly Always a Collaborative Process?
Who Is Involved in Strategy Making? CEO (chief executive officer)
The job is often way too big for one person or a
small executive group—many strategic issues are complex or cut across multiple areas of expertise
Has ultimate responsibility for leading the strategy-making process Functions as strategic visionary and chief architect of strategy
The more a company’s operations cut across
Senior executives
Typically have influential roles in fashioning those strategy components involving their areas of responsibility Managers of subsidiaries, divisions, geographic
regions, plants, and other important operating units (and, often, key employees with specialized expertise)
different products, industries and geographic areas, the more that headquarters executives must delegate strategy-making authority to down-the-line managers in charge of particular functions and operating units In today’s companies every manager typically has a strategy-making role—ranging from major to minor—for the area he or she heads!
Some pieces of the strategy are best orchestrated by onthe-scene company personnel with detailed familiarity of the piece of the business they are in charge of running 1-77
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Figure 2.2: A Company’s Strategy-Making Hierarchy
Corporate Strategy Orchestrated by headquarters executives and involves Moves to diversify into different industries Actions to boost the combined performance
of the company’s different businesses Actions to capture cross-business synergies Establishing investment
priorities and steering corporate resources into the most attractive businesses 1-80
Business Strategy
Functional Strategies
Concerns the actions and approaches crafted to produce successful performance in one specific line of business. Is usually the responsibility of the manager in charge of the business and involves Crafting competitive moves to build
sustainable competitive advantage Seeing that lower-level strategies within
Concerns the game plan for a function, activity, or process within a business; is usually orchestrated by the functional head and involves Crafting functional strategic initiatives that will support the overall business strategy Adding function-related
the business are well-matched to the overall business strategy
strategic details to the overall business strategy
Gaining approval of business-level strategic
moves by corporate-level officers and directors 1-81
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Levels of Strategy-Making in a Diversified Company
Operating Strategies Are generally crafted by frontline managers
(subject to review and approval by higherranking managers) Concern the relatively narrow strategic initiatives and approaches for managing key operating units (geographic regions, distribution centers, plants) and strategicallyrelevant operating activities (advertising, supply chain activities, Internet sales) Add further detail and completeness to functional and business strategies
Corporate-Level Managers
Corporate Strategy Two-Way Influence
Business-Level Managers
Business Strategies Two-Way Influence
Functional Managers
Functional Strategies Two-Way Influence
Operating Managers
Operating Strategies
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Levels of Strategy-Making in a Single-Business Company
Uniting the Company’s Strategy-Making Effort A firm’s strategy is a collection of initiatives
Business-Level Managers
undertaken by managers at all levels in the organizational hierarchy Pieces of strategy should fit together like the pieces of a puzzle Key approaches used to unify all strategic initiatives into a cohesive, company-wide action plan
Business Strategy Two-Way Influence
Functional Managers
Functional Strategies
Effectively communicate company’s vision, objectives, and major strategies to all personnel Diligently review lower-level strategies for consistency and support of higher-level strategies—revise as needed
Two-Way Influence
Operating Managers
Operating Strategies
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Implementing and Executing Strategy
What Is a Strategic Plan?
Operations-oriented activity aimed at
Its strategic vision and business mission
A Company’s Strategic Plan
performing core business activities in a strategy-supportive manner Tougher and more time-consuming
than crafting strategy
Its strategic and financial objectives
Key tasks include Improving the efficiency with which the strategy is being executed
Consists of Its strategy
Showing measurable progress in achieving both operating excellence and targeted results 1-88
What Does Implementing and Executing the Strategy Involve? Building a capable organization
Organizational Characteristics of Good Strategy Execution Requires a concerted effort to achieve
operating excellence
Allocating resources to strategy-critical activities
Involves a company’s entire management
Establishing strategy-supportive policies
team
Instituting best practices and programs
for continuous improvement
Hinges on skills and cooperation
of operating mangers who can
Installing information, communication,
and operating systems
Push needed changes in their organizational units Consistently deliver good results
Motivating people to pursue the target objectives Tying rewards to achievement of results Creating a strategy-supportive corporate culture
Success is best indicated by Meeting or beating performance targets
Exerting the leadership necessary to drive the
Progress in achieving the strategic vision
process forward and keep improving 1-89
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Evaluating Performance and Making Corrective Adjustments
Monitoring, Evaluating, and Adjusting as Needed Taking actions to adjust to the march of
Crafting and implementing a strategy is not a
one-time exercise Customer needs and competitive conditions change
events tends to result in one or more of the following
New opportunities appear; technology advances; any number of other outside developments occur
Altering long-term direction and/or redefining the mission/vision
One or more aspects of executing the strategy may not be going well
Raising, lowering, or changing performance objectives
New managers with different ideas take over Organizational learning occurs
Modifying the strategy
All these trigger a need for corrective actions
Improving strategy execution
and adjustments on an as-needed basis 1-91
Leading the Strategic Management Process
Numerous Roles of Strategic Leaders
Diverse leadership challenges include Exerting take-charge leadership Being a spark plug for change and action Ramrodding things through Achieving results Leading the strategic management
Culture Builder
Visionary Chief Entrepreneur & Strategist
process can involve various styles and approaches Being a hard-nosed authoritarian Being a perceptive listener Being a compromising decision maker Delegating authority to people closest to the action Being a coach Assuming a highly visible role in guiding the process Making brief ceremonial appearances
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Resource Acquirer & Allocator Crisis Solver
Motivator Policy Enforcer
Mentor
Taskmaster
Negotiator
Process Integrator
Capabilities Builder
Head Cheerleader
Spokesperson Consensus Builder Policymaker
Coach
Arbitrator Chief Administrator & Strategy Implementer
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Role #1: Stay on Top of What’s Happening
Things a Chief Strategy Implementer Must Do to Be Successful 1. Stay on top of what’s happening
Develop a broad network of formal
and informal sources of information
2. Make sure company has a good strategic plan
Talk with many people at all levels
3. Put constructive pressure on
Be an avid practitioner of MBWA
company to achieve good results
4. Push corrective actions to improve overall
Observe situation firsthand
strategic performance
Monitor operating results regularly
5. Lead development of stronger core competencies and competitive capabilities
Get feedback from customers
6. Display ethical integrity and lead social
Watch competitive reactions of rivals
responsibility initiatives 1-95
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Role #2: Make Sure Company Has a Good Strategic Plan
Role #3: Put Constructive Pressure on Company to Achieve Good Results Successful leaders spend time
Two key responsibilities of CEO and top-
level executives
Mobilizing organizational energy behind
Good strategy execution and Operating excellence
Effectively communicate company’s vision, objectives, and major strategy components to down-the-line managers and key personnel
Nurturing a results-oriented work climate
Exercise due diligence in reviewing lower-level strategies for consistency and support of higherlevel strategies
Promoting enabling cultural drivers
Strong sense of involvement on part of company personnel
Emphasis on individual initiative and creativity Respect for contributions of individuals and
Effective leadership minimizes
potential for conflict between different levels in the strategy hierarchy
groups 1-97
Pride in doing things right
Role #5: Promote Stronger Core Competencies and Capabilities
Role #4: Push Corrective Actions to Improve Strategy-Making and Strategy-Execution Requires deciding
Top management intervention is
required to establish better or new
When adjustments are needed
Resource strengths and competencies
What adjustments to make
Competitive capabilities
Involves
Senior managers must
Adjusting long-term direction, objectives, and strategy on an as-needed basis in response to unfolding events and changing circumstances
lead the effort because
Promoting fresh initiatives to bring internal activities and behavior into better alignment with strategy
Competencies reside in combined efforts of different work groups and departments, thus requiring cross-functional collaboration
Making changes to pick up the pace when results fall short of performance targets
Stronger competencies and capabilities can lead to a competitive edge over rivals
1-99
1-100
Corporate Governance: Strategic Role of a Board of Directors
Role #6: Display Ethics Leadership and Lead Social Responsibility Initiatives Set an excellent example in
1-98
Our ethics code is . . .
Exercise strong oversight to ensure five
tasks of strategic management are executed to benefit
Displaying ethical behaviors Demonstrating character and personal integrity in actions and decisions
Shareholders or
Declare unequivocal support for high ethical
standards and expect all employees to conduct themselves in an ethical fashion Encourage compliance and establish tough
consequences for unethical behavior 1-101
Stakeholders Make sure executive actions are not only
proper but also aligned with interests of stakeholders 1-102
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Obligations of a Board of Directors
Key Responsibilities of Board Members
Be inquiring critics and overseers
Be well informed about a company’s performance
Evaluate caliber of senior executives’
Guide and judge CEO and other top executives
strategy-making and strategy-executing skills Institute a compensation plan for top executives rewarding them for results that serve interests of
Exhibit courage to curb inappropriate or unduly
risky management actions Confirm that CEO is doing what
board expects Provide insight and advice to management
Stakeholders and Shareholders
Be intensely involved in debating pros and cons
of key actions and decisions
Oversee a company’s
Board members have a very important oversight role in
financial accounting and reporting practices
the strategy-making, strategy-executing process! 1-103
1-104
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