Solutions manual for competing for advantage 2nd edition by hoskisson by Hoskisson22

Chapt er 2 - Strategic Leaders hi p

SOLUTIONS MANUAL for Competing for Advantage 2nd Edition by Hoskisson Download at: http://downloadlink.org/p/solutions-manual-for-competing-foradvantage-2nd-edition-by-hoskisson/ Cha pter 2 : Stra teg ic Leaders hi p C HAP TER S UMMARY T hi s chapt er begi ns wi t h a focus on str at egi c l ea der s as i ndi vi duals. It di sc uss es t he i mpor t ance of str at egi c l ea der shi p skil l s and personal char act er isti cs t hat make l eader s eff ect i ve, and t he i nf luence s on l eader s â&#x20AC;&#x2122; abil it ies t o make e f f ect ive s t r at egi c dec isi ons. T he str at egi c l ea dershi p t hrough t op mana ge ment t eams i s also exami ned , wi th a revi ew of how top mana gement t eams i nf l uence t hei r or gani zat i ons a nd t he f act or s as sociat ed wi t h exe cut i ve s ucc es sion. T he six key component s of ef fec ti ve s tr at egi c l ea der ship ar e t hen expl ored, al ong wi t h how t hey i nf l uenc e t he amount of val ue a fi r m cr eat es and i ts e conomi c per f or manc e.

C HAP TER OUT LINE Indi vi dual St rat egi c Leaders a nd Inf l uence s on T hei r D ec i si ons Str at egi c Lea der shi p St yl e Ma nageri al Di scr et ion and Dec i si on Bi ases T op M anagement T eams T op Ma nagement T eam He t er ogenei t y T he CEO and T op Ma nagement T ea m Power Executi ve Succes si on Pr oces ses K ey Strategi c Leader shi p Res ponsi bi li ti es and Act ions Ensur e T hat t he Fir m i s W el l Posit i oned Economi ca ll y Acqui re, Devel op, and Ma nage K ey Res our ce s Devel op and Ma nage Rel ati onshi ps wi t h Exter nal St akehol der s Det er mi ne and Communi cat e Str at egi c Di r ecti on Over se e For mul at i on and Impl e men t ati on of Specif ic Str at egi es Est abl ish Bal anced Cont r ols Summar y

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Chapt er 2 - Strategic Leaders hi p

KNOW LED GE O BJ ECT IVES 1. Def i ne st r at egi c l eadership and desc ri be t he i mpor t ance of t op -l evel mana ger s a s r es our ce s . 2. Di sc uss the c harac teri st i cs of eff ecti ve s tr ategi c lea ders a nd t he f act ors that i nf l uence t hei r abil it y t o make e f f ect ive s t r at egi c dec isi ons, i ncl udi ng mana ger i al di scr et i on and dec isi on bias es. 3. Def i ne t op mana ge ment t eams a nd expl ai n t hei r ef fect s on f ir m per f or manc e. 4. Des cri be t he f act or s t hat i nfl uence the a bi lit y of t op mana ger s to be ef fect i ve st r at egi c l ea der s. 5. Des cri be t he pr oces ses ass oci at ed wi t h ens ur i ng t hat a fi r m i s well posi ti oned ec onomi ca ll y and i dent if y t he c har act er isti cs of a well def ined str ategy. 6. Explai n how st rategi c lea der s a cquir e, devel op, and mana ge f ir m r es our ces t o cr eate one or mor e compet i ti ve a dvant ages . 7. Des cri be how str at egi c l ea der s mana ge r el ati onshi ps wit h ext er nal st akehol der s i n or der t o r educe uncer tai nt y and e nhanc e val ue cr eati on.

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Chapt er 2 - Strategic Leaders hi p

8. Di sc uss the rol e of str ategi c l ea dershi p i n deter mi ni ng an d communi ca ti ng t he f ir mâ&#x20AC;&#x2122; s st rat egi c dir ect ion. 9. Di sc uss the i mpor tance a nd use of or gani zat i onal cont rol s.

LECTURE NO TES Indi vi dual St rat egi c Leader s and Inf l uences on Thei r Deci si ons - T hi s sec ti on i ntr oduces st rat egi c l eader shi p and t he conc ept of ski ll s hi er archy, whi ch det ai ls the acc umul ati ve s ki l l se ts at tai ned by eff ect i ve st r at egi c lea der s. See sl i des 1-3.

K ey Terms Str at egi c Lea der shi p - t he abi li t y t o anti ci pat e, envi si on, mai nt ai n f lexi bil it y, and e mpower ot her s t o cr eat e st rategi c cha nge a s nec ess ar y.

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Chapt er 2 - Strategic Leaders hi p See sl i de 4.

Chapt er 2 - Strategic Leaders hi p

1. Des pit e di ff erent l eader shi p st yl es , what do legenda r y CEOs al l have i n common ? a. T hey ar e vi sionar y—t hey have a cl ear vi ew of what t he y want t o acc ompl i sh .

See sl i de 5.

b. T hey ar e tr ansf or mat i onal —t hey are a gents of cha nge. 2. Wha t does s tr at egi c l ea dershi p invol ve ( i n additi on to the def init i on above)? a. It i s mul t i f uncti onal in sc ope . b. It i nvol ves mana gi ng t hr ough ot her s and i nfl uencing human be havi or . c. It r equi res acc ept ing an i ncrea singl y gr ea t er amount of cha nge i n an uncert ai n envir onment .

See Fi gur e 2.1: A Hi er ar chy of Str at egi c Le ader Capa bil it ies ( sli de 6) .

d. It ent ai ls mot i vat i ng others t o do mor e than i s expect ed, conti nuousl y enri chi ng t heir ca pabil it ies , and pl aci ng t he i nter ests of t he or gani zat i on above t heir own. 3. De sc ri be t he ski l ls hi erar chy conc ept . a. Level 1: Capabl e Indi vi dual —devel opi ng ski ll s and wor k et hic b. Level 2: Cont ri but ing T eam Me mber —wor ki ng ef fec ti vel y i n tea m st r uct ure a nd maki ng use f ul contr i buti on to achi evement of t ea m goal s c. Level 3: Compet ent Ma nager —or gani zi ng peopl e and r es our ces to ac hi eve or ganizat i onal obj ect i ves d. Level 4: Ef fec ti ve Leader —art i cul ati ng a c l ear str at egi c i ntent and mot i vat ing f oll ower s t o hi gh level s of per for manc e e. Level 5: Tra nsf or mat i onal Leader —poss ess ing an unwaver i ng r eso l ve t o l ead company t o gr ea t ness ; oft en at tr ibuti ng suc ces s t o t hei r tea m

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Chapt er 2 - Strategic Leaders hi p

Str ategic Leaders hi p St yle - T hi s sect i on d escri bes dif f er ent st yl es of st r at egi c l eade rshi p and t hei r ef fec ti vene ss i n dif f erent si tuati ons . See sl i de 7.

4. Di sc uss the di ff erent st yl es of st r at egi c l eadership and when t hey ma y be a ppr opr iatel y empl oyed. a. Di r ect i ve appr oac h - a t r adit i onal “ commande r ” st yle— mightbemostappr opri at e when r api d deci sions nee d to be made . b. Col l abor ati ve a ppr oac h - i n gene r al , t hi s part i ci pati ve st yl e usuall y yi el ds bett er res ult s when mana ger s s har e and e val uat e a gr eat er amount of r el evant i nf or mat ion i n t hei r dec isi on maki ng. c. Del egat ion - ef f ect i ve st yl e when i mpl ement ati on of st rat egy ca n be i mpr oved by i ndepe ndent mana ger dec isi on maki ng.

See sl i de 8.

5. Sever al exa mpl es of well -known CEOs are ment i oned t hr oughout t he c hapter t o illust rate t heir lea der shi p st yles . Who do you t hi nk has t he most ef f ecti ve l ea dershi p st yl e , and why? a. Answer s wi ll var y.

Manageri al Disc ret ion and Dec i si on Bi ases - T hi s sect ion pres ent s a det ai led discus si on ofthe influencethatmanagerialdiscreti on and dec isi on -ma ki ng bi as es ca n have on t he effectivenessof strategicdecisions;hi ghl i ght i ng how st r at egi c l eade rshi p can be enhanced,factorsthatconstrain manageri al decisi on maki ng, and how biase s and hubris a ff ect the quali t y of dec isions . See sl i de 9. K ey Terms Di sc reti on - l ati t ude for action Heur isti cs - r ul es of t humb use d i n deci si on maki ng Hubr i s - exc es si ve pr i de, leadi ng t o a f eeli ng of invi ncibi li ty

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Chapt er 2 - Strategic Leaders hi p Se e sl i de 10.

Chapt er 2 - Strategic Leaders hi p

6. How ca n t he ef f ecti vene ss of st r at egi c l eadership be enhanc ed? a. By mat chi ng t he cult ural and f unct ional bac k gr oundsof topmanagerswit h the c hallenges t hat a f ir mfacesinits current compet it i ve si t uati on b. By usi ng mana ger i al di scret i on t hat i s acti on -or i ent ed and s pur s t he company t o ac t ion

See sl i de 11.

c. By mi ni mi zi n g t he e ff ect s of deci si on -maki ng bi as es i. Awar ene ss of bias es ii. Open deci si on -maki ng en vi r onment i ii . Use of r eal opt i ons anal ysis t o ensure t he cons iderati on of pr oper probabil it ies (di scusse d mor e f ul l y i n Chapter 13)

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i v. Depe nding on a t op mana gement t ea m compose d of i ndi vi duals wit h di ver gent vi ews and a vari et y of bac kgr ounds See Fi gur e 2.2: Fact or s Aff ecti ng Ma nageri al Di sc reti on ( sl i de 12).

d. By mane uver i ng ar ound con st rai nt s on mana ger i al dec isi on maki ng 7. Wha t t ype of f act or s const rai n mana ger i al decisi on maki ng? a. Exte rnal envi r onment al f actor s ( suc h as i ndustr y st r uct ur e, r at e of mar ket gr owt h, degr ee of pr oduct di ff erenti at i on) b. Or gani zat i onal f act or s ( such as company si ze, a ge, r es our ces , cult ur e) c. Indi vi dual mana ger fac tor s ( suc h as commi t ment t o t he f i r m, t ol eranc e f or ambi gui ty, i nt er personal ski ll s, and ambi t i ons)

See sl i de 13.

8. Wha t are s ome of t he dec ision -ma ki ng bi as es that i nf l uenc e t he quali t y o f str ategi c mana gement dec i si ons? a. Rel ianc e on a l i mi t ed set of heuri st i cs when maki ng dec isi ons b. Rel ianc e on previ ousl y -f or med be l i ef s c. A f ocus on li mi t ed obj ecti ves d. Exposure to li mi t ed decisi on alt ernati ves e. Inse nsi t i vit y t o outcome probabil it

See sl i de 14.

ies f. An i ll usi on of cont rol 9. Wha t i s hubri s, and how can i t aff ect the quali t y of st rat egi c dec isi on maki ng? a. Hubr i s i s exces si ve pr ide l eadi ng t o a f eeli ng of i nvi ncibil it y. b. Hubr i s ca n magni f y t he ef fec t s of deci sion ma ki ng bi ases .

Top Managem ent Team s - T his s ecti on i de nt if ies t he t op mana gement t ea m of an or gani zati on as a cr it ical r esour ce f or fi rms s ee ki ng t o suc cess full y use the st rat egi c mana ge me nt process . It i s br oken i nt o t hr ee fac tor s t hat infl uence the abil it y of t op mana ge ment t ea ms t o exer cise ef fec ti ve st ra t egi c l eader shi p. See sl i de 15. K ey Term

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T op Ma nagement T eam - gr oup compose d of t he CEO and other key mana ger s r esponsi bl e for set ti ng t he dir ect i on of t he f ir m and f or mul ati ng and i mpl ement i ng i t s st rategi es .

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See sl i de 16. 10. Wha t t hr ee f act or s i n fl uence t he abili t y of t op mana gement t ea ms t o exerci se ef f ecti ve s t rat egi c l eader shi p? a. T op mana gement t ea m het er ogene it y b. T he CEO and t op mana gement t ea m power c. Executi ve s ucce ssi on p r ocess es

Top Managem ent Team H eter ogenei t y - T hi s sec tion di scusse s t he f or mati on of a di ver se t op mana ge ment t ea m wi t h a var iet y of st rengt hs, ca pabil iti es , and knowl edge to pr ovide e ff ect i ve st rat egi c l eader shi p whil e fac i ng compl ex e nvir onmental for ces and mana gi n g mul t i pl e st akeholder r el at i on shi ps . See sl i de 17 .

K ey Term Het erogene ous T op Management T eam - mana ger i al gr oup compose d of i ndi vi duals wit h dif ferent f unct ional bac kgr ounds, expe ri ence s, and educati ons .

See sl i de 18.

11. How ca n a het er ogene ous top mana ge ment t ea m contr ibut e t o bett er str at egi c gui dance and bett er or gani zat i onal perfor manc e ? a. A var i et y of di ff er ent per spec ti ves are i nt roduced i nt o dec isi on maki ng. b. T hese t ea ms ha ve a gr eat er pr opensit y t o war d str onger compet i ti ve a cti on and r eact i on . c. T hese t ea ms may be e ncouraged t o “t hink out side of t he box,” lea di ng t o mor e c reati ve de cisi on maki ng and yi el di ng i nnovat i on and strat egi c cha nge wit h in t heir or gani zat ions .

See sl i de 19.

d. V ar i ous ar eas of exper ti se ar e li kel y t o st i mul at e the i dent if ica ti on of envi r onment al oppor t unit i es a nd t hr eat s or t he need f or a new st r at egi c di rec ti on due t o changes wi t hi n t he fi r m. e. Deba t e over var i ous ideas is pr omot ed . 12. Wha t are s ome of t he challenges f aced by heter ogene ous t op mana ge ment t ea ms t hat ca n l ea d t o subopt i mal decisi on ma ki ng? a. Cr ea ti ng cohesi on —int egr at i ng di ver se opi nions and be havi or b. Communi ca t i on dif fi cul ti es, whi ch ca n i nhibit compr ehe nsi ve a nd long -t erm st r at egi c pl anni ng c. Compr ehe nsi ve e xami nat i on of thr eats a nd opport uni ti es 2– 9

Chapt er 2 - Strategic Leaders hi p

The CEO and Top Managem ent Team P ow er - T his s ect ion f ocuses on t he char act eri st ics t hat gi ve t he CEO and t op mana ge ment t ea m power r elati ve t o the boar d and t he i nfl uence these cha rac teri st i cs c an have on t he a mount of st rat egi c l eader shi p t he boar d pr ovi des. See sl i de 20 . K ey Terms CEO Dual it y—pr act ice of the CEO se r vi n g as t he chair of t he boar d of di rec tor s t o ac hi eve power r el at i ve t o t he board Indepe ndent Boar d Leader shi p Str uct ur e —str uct ure f or t he boar d of di rec tor s desi gned t o enhance t he boar d’s abi lit y t o moni t or t op -l evel mana ger s ’ deci si ons and acti ons ( part i cul ar l y i n ter ms of fi nancial perf ormanc e) by empl oyi ng t wo di ff erent people t o ser ve a s CEO and boar d chai r .

See sl i de 21.

Ste wardshi p T heor y—concept sugges t i ng t hat t op mana ger s want to do t he r i ght t hi ng for t he fi r m’ s shar ehol 13. Des ders pit e and t he tprhat emi se t hat f ir m of peri nter f or manc e cawit n be r educi ng higher t he amount f er ence ht ac hieved by boar d of di r ector s t hat are a cti vel y i nvol hei r acti ons wi l l i ncrea se the pr ofi t pot enti al of t he fi r ved m. wit h sha ping t he fi r m’ s st rategi c di r ecti on, what pr acti ce s can i ncrea se the power of t op mana gement t ea ms r el ati ve to i ts boar d of di rec tor s? a. Me mber s of t op mana geme nt can use t heir soci al and busi nes s t ies wit h di rect ors . b. Power f ul CEOs can a ppoi nt me mber s of t he t op mana ge ment t ea m or ot her sympat heti c ass oci at es t o se r ve on t he boar d. c. CEO dual it y

See sl i de 22 .

d. CEO t enure 14. Des cri be t he pr acti ce of CEO duali t y i n t oday’ s busi ness envi r onment ? a. It has bec ome mor e c ommo n i n t he Uni t ed Stat es. b. It occ ur s most oft en i n t he lar ges t f ir ms.

c. Incr ea se d shar eholder act i vi sm has r ece nt l y br ought t he pr act ice under sc ruti ny. d. It has bee n cr it ici zed f or causi ng poor perf or manc e a nd sl ow res ponse t o change. Exec uti ve Succ ession P roce sses - T his s ecti on anal yzes t he wisdom of se lect i ng top executives, particularlyCEOs,fromeither i nter nal or ext er nal labor mar ket s a nd t he i mpactthisdecisionhas oncompanyperfor manc e and abil it y t o embr ace c hange i n t oday’ s compet it i ve landsc ape .

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Chapt er 2 - Strategic Leaders hi p

See sl i de 23.

Chapt er 2 - Strategic Leaders hi p

K ey Terms Int er nal Ma nageri al Labor Ma r ket —oppor t unit i es for mana ger i al posit i ons to be fi ll ed f r om wi t hi n the fi r m

See sl i de 24.

Exte rnal Manager ial Labor Ma r ket —oppor t unit i es for mana ger i al posit i ons to be fi ll ed by ca ndi dat es fr om out side of t he f ir m 15. Wha t are t he benefi ts of f il li ng t op mana gement posi ti ons fr om t he i nter nal l abor mar ket ? a. Cont i nuit y b. Cont i nued commi t ment c. Fami l i ari t y d. Reduc ed t ur nover e. Ret ent i on of “ pri vat e knowl edge ”

See sl i de 25.

16. Whe n i s i nter nal suc ces si on f avor ed? a. Whe n t he f ir m i s pe rf or mi ng wel l 17. Wha t are s ome of t he vali d r ea sons f or t ur ni ng t o t he out si de l abor mar ket t o f il l t op mana ge ment posi ti ons?

See Addit ional Not es Bel ow.

a. Long t enure with t he s ame f i r m i s t hought t o reduce i nnovati on (“ st ale in t he s addl e ”). b. Out siders bri ng i n di ver se knowl edge ba ses and s ocial ks tfhat er t he pot ent ial fMar or syner Addi t ional Di sc ussnet ionwor Notes or off Manageri al Labor ket gy and ne w compet i ti ve a dvant age. These not es pres ent t wo exa mpl es t o il lustr at e when a CEO shoul d be hi r ed f r om t he insi de and out side l abor mar ket s. Example: IBM The Case for New Blood - I Dur i ng J ohn Aker s’ rei gn, IBM ha d gone fr om a workf or ce of 407,000 i n 1986 t o 300,000 i n 1992 . It s s t ock had dropped f rom a pe ak i n 1987 of $1757/ 8 t o $25 ( spli t a dj ust ed) i n 1993; and a l oss of $2.8 bi ll ion in 1991 and of $8 bil li on i n 1993. In ea r l y 1993 IBM di smi ss ed J ohn Aker s. Lou Ger st er , a f or mer president of Amer i can Expres s, was r ecr ui te d t o become IBM’ s CEO—a suc cessf ul out si der wit h st rong mana ger i al r eput ati on i n t he f i nanci al industr y—not t he comput er i ndust r y. Sixt y days a ft er taki ng t he CEO’ s r ei ns, Ger st er fac ed hi s most cha l- l engi ng dec isi on: whet her to br eak up IBM. Fast Forward Ger ster i nst it ut ed r adi cal change: r eengi neer i ng, downsi zi ng, pr oduct to se r vi ce, and eff ort s t o wel d t he di ff er ent piec es of IBM ba ck i nt o a c o- her ent whol e. Lou Ger st er , who st epped i n at IBM, s ucce ssf ull y t urned t he company ar ound. 2 –7

Chapt er 2 - Strategic Leaders hi p

See Fi gur e 2.3: Eff ect of CEO Succe ssi on and Top Ma nagement T ea m Composi t i on on Str at egy ( sl ide 26) .

Chapt er 2 - Strategic Leaders hi p

Ger ster’ s succes sor inher it ed a mor e s table c ompany, wi t h a sound st rat egi c tr aj e ct or y. Gi ven the s tr at egi c posit ion of IBM, who shoul d be t he next CEO? An i nsi der gr oomed by Ger st er was chose n --Pal mi sa no. Example: Compaq The Case For New Blood - II In 1991 Eckhar d Pfe if fer , an i nsi der , was r ecr ui ted t o take a dvant age of t his oppor t unit y. Bef ore becomi ng CEO i n 1991, Pfei ff er se r ved as Compaq’ s Exec ut i ve V i ce Pre si dent and Chi ef Oper a t ing Of f i cer . Pri or t o t hat , he was Presi dent of Compaq Eur ope a nd Int e r nat ional . Befor e j oi ni ng Compaq, Pf eif f er spent 20 yea r s wi t h Texas In st r uments . Pfe if fer i nst it uted a n aggr es si ve s tr at egy f or gr owt h: cut -t hr oat pr ici ng t o gai n shar e a nd mer ger wi t h Di gi t al and Tandem t o gai n pr oduct and se rvi ce sc ope. Compaq be ca me t he number one PC ma ker wi t h str ong domi nanc e of distr i b ut or channe ls. Fast Forward Af t er ei ght yea r s as the c ompan y’ s CEO, Pff ei fer was ousted by hi s boar d of di rec tor s. T he move c ame da ys a f t er t he company di scl osed t hat pr of it s woul d be onl y hal f of what Wall Str eet an a lys t s ha d bee n expe ct i ng. T he board cal led i nt o questi on Pff ei fer’ s st ra t egy t o st ave off i ntens e compet it i on ( part i cul arl y f r om Del l) and poor exe cut i on. T he t wo -yea r -ol d ac qui si ti ons of Di gi t al and T andem wer e not yet full y i nt e- gr at ed i nt o t he Compaq univer se. Manageri al Labor Mar ket Whe n shoul d a CEO be hired f rom t han out side, f r om t he i nsi de? ( Co m- put er / IT i ndu st r y) Gi ven t he st rategi c posi ti on of t he fi r m, who shoul d be t he next CEO? Wa ll Str eet l et out a c ol lecti ve gas p: Compaq ha d been se archi ng f or a CEO f or mont hs and t he bes t i t coul d do was it s own COO, Mi chael Cape ll as , an i nsi der , t o stabi li ze t he ship or gr oom f or a possi ble s al e. Hewle tt -Packar d buys Compaq Comput er . T he ne w compan y i s b e- comi ng nu mber one gl o bal ly i n combi ned Unix and Int el -ba se d ser ver s, PCs, a nd ext er nal st orage, and t hi r d i n ser vi ces behi nd IBM a nd EDS. Six mont hs af ter compl et i ng t he mer ger bet wee n Compaq and He wl ett -Packar d. Cape ll as qui ts his number t wo post at Hewlet t - Packar d.

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Chapt er 2 - Strategic Leaders hi p

K ey St rat egi c Leader shi p Res ponsi bil it i e s and Act i ons - T hi s sect i on outl ines t he var i ed r es ponsibil it ies and tas ks a ssoc iat ed wit h st r at egi c l eader shi p as t hey r elat e t o t he thr ee str at egi c mana ge ment per specti ves pr es ent ed i n Chapter 1. See Fi gur e 2 .4: Str at egi c Ma nagement Models and Eff ect i ve Str at egi c Lea der shi p ( sli de 27) .

18. Wha t are t he thr ee maj or responsi bil it i es of st rat egi c l eade rs a nd whi ch st rategi c mana ge ment per specti ve do t hey sa ti sf y? a. Ensuri ng t hat t he fi r m i s wel l posit ioned ec onomi cal l y. ( The I/ O Model of Above -Aver age Ret ur ns) b. Acqui ri ng, devel opi ng, and mana gi ng ke y r es ource s. ( The Resource -Bas ed M odel of Above -A ver age

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Chapt er 2 - Strategic Leaders hi p

Ret ur ns ) c. Devel opi ng and mana gi ng r el at i onshi ps wit h exter nal st akeholders. (The St akehol der Model of Responsi bl e Fir m Beha vi or and Fir m Per f or manc e ) 19. Wha t specif ic t asks a r e as soci at ed wi t h t hes e maj or r es ponsibil it ies ? a. Det er mi ni ng and communi ca ti ng st rategi c dir ect ion b. Over se ei ng t he f or mul ati on and i mpl ement at i on of spe ci fi c st rategi es c. Est abl ish ing b al ance d control s See Addit ional Not es bel ow.

20. Wha t are t he out comes t hat ca n be expected fr om ef f ect i ve st rat egi c l eader shi p ? a. T he est abl ishment of compet it i ve a dvant heion creaNotes ti on foforgrt eat er val f or he Addi t ionalage Di b. sc T uss he Exe rcue i se of tStr at egic Leader shi p These not es pr ovi de an exa mpl e to fi r m ill ustr ate t he i mpor t ance of eff ect i ve leader shi p. c. Above -aver age f i nanci al per f or manc e Exam ple : Wal- Mart Wha t was t he mar ket pot ent i al for di scount r et ai li ng i n t he 1980s? In 1987, Wa l -Ma r t mar ked i t s 25 th anni ver sar y. It had s al es of $15.9 bi l- l i on at 1,198 st or es and 200,000 empl oyee s ; but t hat was not enough. Str at egy Cont i nue a ggr es si ve gr owt h str ategy, expa nd t o ca pt ure oppor t uni t y, whi l e i nves ti ng i n t he “ busines s ” t o perf ect the for mul a: In ves t i n the c or e business, ( i .e. l ogi st ics , pr ici ng, mar ket ing, et c.) Bec ome undi sput ed pri ce l eade r , att rac ti ng emer gent “ pr i ce - se nsi ti ve ” cu st omer Capt ure mar ket shar e f r om compet i t or s by at t acki ng t hei r str on g- hol ds, ( some of t hei r vi ct i ms i ncl ude: Ja mes way, Hi l l s, Mont gomer y Wa r ds , K mar t ???) Res ult s Cont i nued gr owt h i nt o their cor e -mar ket and exper i ment at i on wi t h ma rket ext ensions ( Sam’ s Club) Int er nat ional expansi on t o fur t her f uel gr owt h Fast Forward Wal -Ma rt became a n undisput ed cha mpi on: Oper at es over 2,600 Wal -Ma rt and 475 Sam’ s Club st or es ( 2003 st at is ti cs) 2002 ranked #3 on For tune’s M ost Admi r ed Company ( 2003 st at isti cs) 2 –9

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Ensure That t he Firm is Well P osi ti oned Econom icall y - T hi s se ct ion di sc usses t he posit i oni ng r es ponsibil it ies of st r at egi c l ea der s and hi ghl i ght s t he fiv e i mpor t ant el ement s t hat identi f y a f i r m’ s st rategy. See sl i de 28. K ey Terms

See Fi gur e 2.5: T he Five M aj or El ement s of Str at egy ( sl i de 29) .

Scope - br ea dt h of a fi r m’ s ac ti vi t ies acr oss pr oduct s, mar ket s, geogr aphi c regi ons, cor e t echnol ogi es a nd val ue cr eation stages . 21. Di sc uss fi ve i mpor t ant el ement s t hat i denti f y a f ir m’ s st rat egy. a. Def i ni ng t he business arenas ( scope of busi nes s) is a cr it ical start i ng poi nt f or strat egi c pl anni ng and mana ge ment . b. Growth vehicl es, such as i nt er nal devel opme nt , j oint ventures,licensi ng, fr anchisi ng, and acquisitions,are also i mpor t ant t o under st andi ng a f ir m’ s str at egy. c. Di f fer enti at ors hel p a fi r m det er mi ne how it is e xpect ed t o wi n cust omer s i n t he mar ket pl ace. d. St agi ng refer s t o t he t i mi ng of st r at egy and t he se quence of moves t he fi r m wi l l t ake t o car r y it out ( especi al l y i mpor t ant because of t he spee d of change i n the compet i ti ve e nvi r onment ).

e. T he ec onomi c l ogi c of a strat egy pul l s t oget her allofthe aboveelements and f ocuse s on ac hi evi ng aboveAcquir e, Devel op, and Manage K ey Resources - T hi s sec ti on hi ghl i ghts t wo crit i cal r average fi nancial r et urns . esource s ; human c api tal and or gani zat i onal cult ure. T hes e t wo ar e cl osel y t ied to st r at egi c lea der shi p and ca n est abli sh a core c ompetenc y f or a fi r m i n it s quest for compet it i ve advant age. ( Ot her or gani zat ional res our ces t hat of f er the pot ent ial f or compet i t i ve a dvantage a r e cover ed i n Chapter 4.) T hi s mat eri al support s the i dea that fi r ms c an de velop core c ompet encies based on bot h t he ca pabi li ti es it posse sse s and t he way t he c apabil iti es ar e use d t o pr oduce st r See de 30. K ey Terms at egisl ci act ions. Or gani zat i onal Cul tur e - compl ex s et of ideol ogi es , symbol s, and c or e val ues that i s shared t hr oughout t he f ir m and i nfl uences t he way busi ness is conducted . See sl i des 31-32. 22. Wha t human r es our ce practi ce s are li nked t o str at egi c succ ess? a. Ma nagi ng i nt ell ect ual ca pi tal b. In ves t i ng i n ca pit al r esources c. Bui l di ng ef fect i ve c ommi t ment s t o or gani zat ional goal s d. Incor por ati ng i n ter nati onal expe ri ence i nto t he s ki ll sets of empl oyee s 2– 10

Chapt er 2 - Strategic Leaders hi p

e. Empl oyi ng ef f ec ti ve t r ai ni ng and de vel opment pr ogr ams t o pr omot e str ategi c vi si on and cohesi on f. Est abl ishing ef f ecti ve r ewar d plans g. Inst i t uti ng conti nuous l ear See sl i de 33.

ni ng h. Lever agi ng t he fi r m’ s e xpandi ng knowl edge ba se 23. Wha t cul t ur al qual it ies shoul d be enc our aged t o maximi ze an or gani zat ion’s st r at egi c eff ect i veness ? a. Ent r epr eneur i al opport un ism b. Empl oyee aut

See sl i de 34.

onomy c. Inno vat i vene ss d. Ri sk t aki ng e. Proa ct i veness f. Compet i t i ve aggr es si veness

See Addit ional Not es bel ow.

24. How ca n t he dif fi cul ti es of sha p ing and r ei nf orc i ng a new or gani zat ional cul t ur e be over come ? a. Eff ecti ve c ommuni ca ti Addi t ionalon Dib.scEff ussecti ionve Notes f or pr obl emSust sol ai ni ng an Ef f ect i ve O rgani zat ional Cul t ure - T hese not es provi de t wo exampl e s vi ng c. Eff ecti ve s t af fi ng t o i ll ust r at e t he i mpor t ance of or gani zat ional cul t ur e t o Effs ecti rf ore.manc e apprai sust ai n a f ird.m’ per ve forpe manc sal s e. Eff ecti ve r ewar d syst ems Exam ple : Gener al El ectri c Ove rvi ew Bui l d per vasi ve or gani zati onal cult ure ba sed on si mpl e pr i nci pl es: Compr ehe nsi ve lea der shi p cha rac teri st i cs e mbodi ed i n GE Leader shi p Model Goal to be #1 & #2 i n every mar ket se r ved; i f not , t hen exit that mar ket Stri ct r ank-or der i ng of emp l oyee s, espe ci al l y se ni or exec uti ves Pra ct i ce of “ mana gi ng -out ” bot tom 10% of empl oyee s ea ch yea r Ri gor ous HR prac ti ces , ( STAR Mode l , t al ent pl anni ng, as si gnment mana ge ment , coac hing, per for manc e mana ge ment , et c.) Oper at i onal Di sci pl i ne —Champi ons of “ Six Si gma ” appr oach t o pro c ess mana gement H i ghl ight s Unpr ecede nt ed gr owth and f i nancial perf or manc e ( at leas t under Wel ch) 2– 11 Consi st ent gr owt h i n ear ni ngs f r om 1980 -2001

Chapt er 2 - Strategic Leaders hi p

Res ult s Consi st ent 15% gr owt h of for 15 yea rs st r ai ght Worl d Most Admi r ed Company r anked #1 by Fort une f r om 1998-2002 Exam ple : Gener al El ectri c W anna-B e’ s Ove rvi ew T he t ypes of c ompani es that emul at e Gener al Electr ic incl ude All i ed Signal , Honeywell , and so on . Al li ed Signal’ s r ecr uitment of Larr y Boss i dy i s an exampl e of eff ort s made by t hese t ypes of compet it ors. Str at egy Emul at e t he GE model based on a f ew key pr i nci ples : Poach GE talent , ( i.e. e xec ut i ve -l evel mana ger s) Adapt GE cul tur al t r ai ts a nd bl end i nt o exi sti ng or ganizat i on Repl icat e GE process es ( e.g. , t al ent mana gement , as sign ment mana ge ment , Six Si gma, e t c.) Gr ow vi a M &A i nt o n ew pr oduct mar ket s i n or der t o expand por tf oli o and t o gai n economi es of scal e t o compet e wit h GE Larry Boss idy St ory In 1991, Boss i dy was r ecr ui t ed t o Al li ed Si gnal t o invi gor at e GE pr i nci pl es i nt o a “ medi ocre” perf or mi ng f ir m. Hi s s t rategy was : Focusi ng on aggr es si ve, but disc ipli ned gr owt h i nit i at ives Inst i t uti ng many GE HR pr ac ti ces ( ST AR Model , tal ent pl anni ng, perf or manc e mana ge ment , etc. ) Inst i t uti ng Six Si gma -l ed producti vi t y i ni ti ati ves Al l ied Si gnal Res ul t s Boss i dy’ s t enur e l ast ed fr om 1991 -1999 Succ essf ul mer ger wi th Honeywel l in 1999 31 consec ut i ve quar ters of EPS gr owt h of 13% or mor e

Deve l op and Manage Relat i onshi ps w i t h Ext er nal Stakehol ders - T hi s se ct ion emphas i zes t he r es ponsibil it ies t hat t op mana ger s ha ve, in addi ti on t o mot i vat i ng and dir ect ing t he i nt ernal or gani zat ion, t o cr eat e and mana ge r el ati onshi ps with ext er nal st akeholders . See T abl e 2.1: Mi nt zber g’ s Ma nageri al Roles ( sli de 35) .

25. Di sc uss the a ppli cat i on of Henr y Mi nt zber g’ s CEO study t o t op mana ger s’ att empt s t o devel op and mana ge r el at ionships with ext er nal st akeholders. a. T he ski ll s r equi r ed f or top mana ger s t o f ul fi ll al l of t he i nter per sonal, i nf or mat ional, and decisi onal r oles i n Mi nt zber g’ s model can be appl ied to 2– 12

Chapt er 2 - Strategic Leaders hi p t h e i r r e s p o n s i b i l i t i e s t o e f f e c t i v e l y r e l a t e t o t h e f

Chapt er 2 - Strategic Leaders hi p i r mâ&#x20AC;&#x2122; s ext er nal st akeholders.

2â&#x20AC;&#x201C; 13

Chapt er 2 - Strategic Leaders hi p

Det erm i ne and Com m unicat e St rat egi c Dire ct ion - T hi s sect i on uses t he e xampl e of t he Novar t i s’ mi ss i on st atement t o i ll ust rate t hat str ategi c di r ecti on i s embedde d i n a fi r m’ s mi ss i on, vi si on, pur pose, long -t er m goal s, a nd values . A f ull disc ussi on of establi shi ng val ues and ethi cal pr act ice s wi t hi n t he f r amework of t he st r at egi c mana gement pr ocess then f oll ows . See sl i de 36. K ey Terms Str at egi c Di r ecti on - def i ni ti on of a f ir m’ s i mage a nd character overtime,framed wit hin t he c ont ext of t he conditionsinwhich the company oper at es .

See T abl e 2.2: Mi ssi on of Novart is ( sli de 37) . See sl i de

Sust ai nabl e Devel opment - conc ept t hat a f ir m ca n and should oper at e wi t hout adver sel y inf l uenci ng i t s envi r onment . 26. In t er ms of whi ch st akeholder s i s Novart i s’ mi ss ion st atement def ined ? a. Cust omer s b. Empl oyee s c. Shar ehol der s d. Soci et y

38. See sl i de 39.

27. Wha t are t wo component s that const it ute a des ir abl e l ong -t er m vi si on for a fi r m? a. A cor e i deol ogy t o mot i vat e e mpl oyee s t hr ough t he company’ s her it age . b. An envi si oned fut ur e t o encour age e mpl oyee s t o str et ch beyond t hei r comf or t zones. 28. Wha t t ool s do t op mana ger s us e t o gui de empl oyee s i n t hei r dec isi on maki ng?

See sl i de 40.

a. A f ull y -def i ned and wel l -communi ca t ed st rat egi c di r ecti on . b. We ll -es t abli shed val ues and et hi cal pr act ice s i nt egr ated i nt o t he fi r m’ s cul t ur e .

See sl i de 41.

29. Name s o me a ct ions t hat st rat egi c l eaders c an t ake t o devel op an et hi cal cul t ur e wi t hi n t hei r fi r ms. a. Empl oy et hi ca l str at egi c l eader s. b. Est abl ish a nd communi ca t e spe ci fi c goals t o descri be t he f ir m’ s et hi cal st andar ds. c. Cont i nuousl y r evi se and updat e t he code of conduct bas ed on st akehol der i nput . d. Di ss emi nat e the c ode of conduct t o all stakehol der s t o i nf or m t hem of et hi cal st andar ds and pr acti ce s. e. Devel op a nd i mpl ement me t hods and pr ocedures t o use i n achi evi ng t he fi r m’ s ethica l st andar ds. f. Cr ea te a nd use expl i cit r ewar d systems t o r ecogni ze bol d2– acts 13t hat demonst r at e et hica l beha vi or and deci si on ma ki ng.

Chapt er 2 - Strategic Leaders hi p

g. Cr ea te a wor k envi r onment wher e all peopl e ar e t reat e d wi t h di gni t y.

O verse e F orm ulat i on and Im pl em ent at ion of Specif i c Strategies - T his s ecti on br i ef l y revi ews i mpl ement at i on act ions as they ar e relat ed t o ea ch of t he t hr ee str ategi c per spec ti ves on val ue cr eat ion . We ar e r emi nded t hat str at egi c di rec ti on ser ves as a gui de t o t he i mpl ement at ion of a f i r mâ&#x20AC;&#x2122; s speci fi c st rategi es . See sl i de 42 . 30. Wha t i mpl ement ati on consider at i ons r elate t o ea ch of the t hr ee st rat egi c per specti ves ? a. Impl ement at i on wit hi n t he I/ O ec onomi cs f r amework involvesdevel opi ng st ru ct ur es , syst emsandprograms torei nf orce t he ext er nal posi ti oni ng of the busi nes s. b. Impl ement at i on plans wi t hin t he Resour ce model i nvol ve ma ki ng opt i mal use of and suppor ti ng t he r es our ces and ca pabil iti es that pr ovi de a compet it i ve advant age . c. Impl ement at i on under t he St akehol der per spect i ve i nvol ves act i vi ti es such as col lec ti ng i nfor mat i on fr om st akeholders, ass ess ing t heir needs a nd desi res , i ntegr ati ng t hi s knowl edge i nt o str at egi c dec isi ons, ef fec ti vel y mana gi ng i nt er nal st akeholders, a nd f or mi ng i nte r or gani zat ional rel at ionshi ps with ext ernal st akeholders.

Est abli sh B al anced Control s - T his s ecti on br i ngs t op mana ger r es ponsi bi li ti es f ul l ci rcle by i ntr oduci ng cont r ol syst ems and t heir rol e i n mea suri ng t he degr ee of st r at egi c suc ces s and i n gui di ng al ter at ions nee ded to i mpr ove pe r f or manc e . In advanc e of a mor e det ai l ed di scussi on i n Chapt er 11, f inanci al and str ategi c c ont rol s are i nt r oduce d her e bec ause str ategi c lea der s ar e r es ponsibl e f or t he de vel opment and e ff ect i ve use of t he pa ramet er s wi t h i n whi ch st rat egi es ar e t o be i mpl ement ed. T he bal ance d scor ecar d fr amework pr ovi des a met hod t o est abl ish an appr opr iate bal ance bet ween f i nanci al and str at egi c c ont r ol s t o pr omot e de si red per f or manc e r es ul ts. See sl i de 43. K ey Terms Cont r ol s - f or mal , i nf or mation -bas ed pr ocedures use d by mana ger s t o mai nt ai n or alter pat ter ns i n or gani zati onal ac ti vi t ies . 2â&#x20AC;&#x201C; 14

Chapt er 2 - Strategic Leaders hi p

Bal anced Scor eca rd - f r ame wor k t hat str ategi c lea der s canuse toverifythatthey have e st abl ishe d bot h f inanci al and st r at egi c contr ols t o as ses s fi r m per for manc e.

2â&#x20AC;&#x201C; 15

Chapt er 2 - Strategic Leaders hi p

See sl i de 44.

Chapt er 2 - Strategic Leaders hi p

31. Def i ne t he f ocus of fi nancial and str ategi c c ontr ols a nd how t hey af fec t mana gement beha vi or . a. Fina nci al contr ol f ocus es on short -t er m f i nanci al out comes and oft en pr oduces ri sk-a ver se mana ger i al dec isi ons .

See Fi gur e 2.6: Fina nci al Cont r ol s and Str at egi c Cont r ol s i n a Bal anced Scor eca rd Fra mework ( sl i de 45) .

b. Str at egi c contr ol f ocus es on t he content of strategic actions( rat her t han t hei r out comes ) and encour ages dec isi ons that i ncor por at e moder at e and acceptable levelsof ri sk. 32. Wha t per specti ves are i nt egr ated to f or m t he bal anced scor eca rd f r amework? a. Fina nci al b. Cust omer c. Int er nal busi nes s pr oce sses d. Lear ni ng and gr owt h

Et hic al Q uest i ons - Rec ogni zi ng t he nee d f or f ir ms t o ef fec ti vel y i nterac t wi t h stakehol ders dur i ng t he st r at egi c mana gement pr ocess , al l str at egi c mana ge ment t opi cs have a n et hi cal di mens i on. A l ist of et hical quest i ons a ppear s af ter t he Summar y se ct i on of each chapt er i n t he t ext book. The t opic of et hics is be st cover ed t hr oughout t he c our se t o emphas i ze it s pr eval ence and i mpor tanc e. We r ecommend pos i ng at lea st one of t hese questi ons duri ng your clas s t i me t o st i mul at e di sc ussi on of et hica l i ssues r el evant t o the c hapt er mat eri al t hat you ar e cover i ng. ( See sl ides 46 -51.)

Chapt er 2 - Strategic Leaders hi p

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