1-1 CHAPTER 2 CHAPTER 2 Leadership and Leadership and the Strategic the Strategic Management Management Process Process McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
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CHAPTER 2CHAPTER 2
Leadership and the Leadership and the Strategic Strategic
Management Management ProcessProcess
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
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The Strategy-Making, Strategy-Executing The Strategy-Making, Strategy-Executing ProcessProcess
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Revised: Revised: SevenSeven Tasks of Tasks of Strategic managementStrategic management
Mission/Vision Goals/Objectives Internal Analysis External Analysis Craft Strategy Implement Strategy Evaluation
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Key Elements of a Strategic Key Elements of a Strategic VisionVision
Provides a panoramic view of “where we are going”
Is distinctive and specific to a particular organizationAvoids use of
generic language that is dull and that could apply to most any company
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Strategic Vision vs. MissionStrategic Vision vs. Mission
A strategic vision concerns a firm’s future business path - “wherewe are going” Markets to be
pursued Future
product/market/customer/technology focus
The mission statement of a firm focuses on its present business purpose - “who we are and what we do” Current product and
service offerings Customer needs
being served
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Crystallizes an organization’s long-term direction
Reduces risk of rudderless decision-making
Creates a committed enterprise to make the vision a reality
Provides a beacon to keep strategy-related actions of all managers on common path
Helps an organization prepare for the future
Payoffs of a Clear Strategic Payoffs of a Clear Strategic VisionVision
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Characteristics of Effectively Characteristics of Effectively Worded Vision StatementsWorded Vision Statements
Graphic—Paints a picture of the kind of company that management is trying to create
Directional—Is forward looking Focused—Is specific enough to
provide guidance in decision making
Flexible—Is not so focused that it makes it difficult to adjust to change
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Characteristics of Effectively Characteristics of Effectively Worded Vision StatementsWorded Vision Statements
Feasible—Is within the real of what is possible
Desirable—Indicates why the directional path makes sense
Easy to Communicate—Can be explained in simple terms
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Example of a Strategic VisionExample of a Strategic Vision
Provide a global trading platform where practically anyone can trade practically anything.
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Example of a Mission StatementExample of a Mission Statement
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.
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Setting ObjectivesSetting Objectives
Purpose of setting objectives
Converts vision into specific performance targets
Creates yardsticks to track performance
Well-stated objectives areQuantifiableMeasurableContain a deadline for achievement
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Achieving good financial performance is not enough
Current financial results are “lagging indicators” reflecting results of past decisions and actions
Good strategic performance is thus a “leading indicator” of a company’s capability to deliver improved future financial performance
The Need for a Balanced The Need for a Balanced ScorecardScorecard
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Balanced Scorecard ObjectivesBalanced Scorecard Objectives
Financial Objectives
Outcomes focused
on improving
Financial
Performance
Strategic Objectives
Customer Value creation
Internal Processes Value creating processes
Learning and Growth Aligning organizational, information, and human capital with strategy
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Examples of Financial Examples of Financial ObjectivesObjectives
X % increase in annual revenues
X % increase annually in after-tax profits
Profit margins of X % X % return on capital
employed (ROCE) Sufficient internal cash
flows to fund 100% of new capital investment
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CustomerWinning an X % market shareAchieving a customer retention rate of X %Acquire X number of new customers
Internal ProcessesReduce product defects to X % Introduction of X number of new products in the
next three years Learning and Growth
Increase employee training to X hours/yearReduce turnover to X % per year
Examples of Strategic Examples of Strategic ObjectivesObjectives
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Short-Term vs.Short-Term vs.Long-Term ObjectivesLong-Term Objectives
Short-term objectives
Targets to be achieved soon
Milestones or stair steps for reaching long-range performance
Long-term objectives
Targets to be achieved within 3 to 5 years
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Objectives Are Needed at All Objectives Are Needed at All LevelsLevels
1. First, set business-level objectives
2. Next, establish functional-area objectives
3. Then, operating-level objectives are established last
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Crafting a StrategyCrafting a Strategy
Strategy Making Hierarchy for a Single Business Company
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Corporate Strategy
Business Strategies
Functional Strategies
Two-Way Influence
Corporate-Level Managers
Business-Level
ManagersFunctional Managers
Levels of Strategy-MakingLevels of Strategy-Makingin a Diversified Companyin a Diversified Company
Two-Way Influence
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Levels of Strategy-Making in Levels of Strategy-Making in a Single-Business Companya Single-Business Company
Business Strategy
Two-Way Influence
Functional Strategies
Business-Level Managers
Functional Managers
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Uniting the Company’sUniting the Company’sStrategy-Making EffortStrategy-Making Effort
A firm’s strategy is a collection of initiatives undertaken by managers at all levelsin the organizational hierarchy
Pieces of strategy should fit together like the pieces of a puzzle