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Date: 12-03-2016
Summary
Strategic Leadership
Main concepts
Strategy: a set of actions established by managers of a company to increase
the performance of the enterprise. By using strategies, managers may
achieve superior performance and in this way the company could have a
competitive advantage over its rivals.
Strategic leadership: it refers to how effectively the strategy-making
process is carried out in order to increase not only the companys
performance but also to create competitive advantage. Therefore, making the
enterprise more valuable to its owners or shareholders.
Strategy formulation: the part in which the manager selects the strategies
to be used in the company by analyzing the internal and external
environment of the enterprise.
Strategy implementation: when strategies are executed or put in action.
Risk capital: capital that cannot be recovered if the company goes
bankrupt.
Shareholder value: Returns earned by shareholders from the purchase of
shares. These returns come from: 1) capital appreciation in the value of a
companys shares and 2) dividend payments.
Return on invested capital (ROIC): Net profit over the capital invested in
the company (profit/invested capital).
Net profit: bet income after tax.
Capital: sum of money invested in the firm (stockholders equity + debt).
Competitive advantage: when a companys profitability is higher than the
average profitability and profit growth of other enterprises that have the
same target.
Sustained competitive advantage: when the company maintains a
superior average profitability for a number of years.
Business model: the managers plan on how his or her strategies and way
of distributing the capital investment will fit together in order to gain
competitive advantage, which will, at the same time, ensure the growth of
profit and the achievement of profitability.
Multidivisional company:
Strategic Managers
In the majority of companies there are two main types of managers:
1. General managers: responsible for the overall performance of the
company or for one of its major divisions. They are in charge of
achieving profitability, profit growth and competitive advantage through
various strategies.
2. Functional managers: responsible for supervising a particular function.
Corporate-Level Managers
These level includes the chief executive officer (CEO), senior
executives, and corporate stuff. These people make the most important
decisions at a company and they are in charge of developing the strategies
that will lead the enterprise to success. However, the CEO is the principal
general manager, as well as, the principal leader of managers at a lower
division. The main responsibility of the CEO is to integrate the business and
corporate strategies to ensure a consistent maximization of profit and high
profitability. Furthermore, corporate-level managers are said to be the link
between shareholders and the people who implement the strategies and
who help to develop the company.
Business-Level Managers
Head of a business unit who is in charge of transforming the guiding
principles that come from the corporate-level managers into strategies for
individual and specific businesses.
Functional-Level Managers
These type of managers are in charge of the organizational
departments. They are responsible for developing functional strategies in
their specific business area which will help to fulfill the business and
corporate-level managers strategies.
First step: You can define the companys business by answering 3 questions:
a) What is our business? Customers, customers needs, how the
company satisfies those needs.
b) What will it be?
c) What should it be?
The mission can be of two types:
1. A customer-oriented mission that focuses on which kinds of customer
needs the products are satisfying
2. A product-oriented mission that focuses on the characteristics of the
products sold by the company.
It is recommended to establish a customer-oriented mission because
with just the other one, you are just describing the physical part of the
product but not specifically how this product will satisfy the customer needs.
This type of mission will help to anticipate demand shifts.
Vision: it defines what the company wants to achieve in the future.
Values: (norms, standards and values) they are the core values that establish
the behavior of the companys managers and employees with its customers
and their commitment with the enterprise to achieve its mission and goals.
Major goals
Second step: establish major goals.
Characteristics of well-constructed goals:
1. They are precise and measurable.
2. They try to improve the performance of the company or address crucial
issues.
3. They challenge employees to improve the operations of an organization
because they know that the goal is achievable and realistic.
4. They have a deadline to be achieved. This will motivate even more the
employees to accomplish the objective. Nonetheless, not all goals may
require time constraints.
Major goals should be established for the long and short-term in order
to have profitability and profit growth in the long run. This will not only help
to increase competitiveness but also will ensure a high performance of the
company.
External Analysis
By examining the external environment of the company, managers will
be able to identify opportunities and threats that will influence in the
achievement of the companys mission.
Strategic Leadership
Key characteristics of good strategic leaders that lead to high
performance:
1. Vision, eloquence, and consistency. Sense of direction,
communicate the vision and energize people and consistently
articulate the vision till it becomes part of the organizations
culture.