1MONASH BUSINESS SCHOOL MGF5928: Strategic Leadership Week 2: Managing the strategy process and the quest for competitive

advantages MONASH BUSINESS SCHOOL2  Successful use of power and influence

 Directing the activities of others  Pursuing an organization’s goals  Enabling organizational competitive advantage What Is Strategic Leadership? 2MONASH BUSINESS SCHOOL3 Level-5 Leadership Pyramid (Adapted to compare corporations and entrepreneurs) SOURCE: Adapted from J. Collins (2001), Good to Great: Why Some

Companies Make the Leap . . . And Others Don’t (New York: HarperCollins), 20.

MONASH BUSINESS SCHOOL4 The Strategy Process Strategy

Formulation The choice of

strategy Where and

how to

compete Strategy

Implementation Organization,

coordination,

integration How work

gets done The

execution of

strategy 3MONASH BUSINESS SCHOOL5  Strategic planning – A formal, top-down planning approach  Scenario planning – A formal, top-down planning approach  Strategy as planned emergence – Begins with a strategic plan, but is less formal Three Approaches to Organizational Strategy MONASH BUSINESS SCHOOL6  Data-driven strategy process  Top management attempts to program future success through – Analysis of:  Prices  Costs  Margins  Market demand  Head count  Production runs – Five year plans and correlated budgets – Performance monitoring Top Down Strategic Planning 4MONASH BUSINESS SCHOOL7  Asks “what if” questions: – Top management envisions different scenarios – Then they derive strategic responses  Optimistic and pessimistic futures planned  Considerations can include: – New laws

– Demographic shifts – Changing economic conditions – Technological advances Scenario Planning MONASH BUSINESS SCHOOL8 Scenario Planning 5MONASH BUSINESS SCHOOL9  What resources and capabilities do we need to compete successfully

in each scenario?

 What strategic initiatives should we put in place to respond to each

scenario?

 How can we shape our expected future environment? Key questions in Scenario Planning MONASH BUSINESS SCHOOL10  May not adapt well to change  Formulation separate from implementation  Information flows one-way  Leaders’ future vision can be wrong  Example: Apple – Steve Jobs predicted customers needs – Apple didn’t engage in market research – Since Cook took over, their planning process has evolved Shortcomings of the Top-Down Approach 6MONASH BUSINESS SCHOOL11  Top Down and Bottom Up – Bottom-up strategic initiatives emerge – Evaluated & coordinated by management  Relies on data, plus: – Personal experience – Deep domain expertise – Front line employee insights Strategy as Planned Emergence MONASH BUSINESS SCHOOL12  Organizations, groups, and individuals  Can affect or are affected by a firm’s actions  Have an interest in the performance and survival of the firm  Internal stakeholders: – Stockholders, employees (including executives, managers, and workers), and

board members  External stakeholders: – Customers, suppliers, alliance partners, creditors, unions, communities, media,

and governments at various levels Stakeholders 7MONASH BUSINESS SCHOOL13  An integrative approach to managing a diverse set of stakeholders to

gain and sustain competitive advantage  Stakeholder management benefits firm performance – Stakeholders more cooperative – Lower business transaction cost – Greater adaptability and flexibility – More predictable returns – Stronger reputation Stakeholder Strategy MONASH BUSINESS SCHOOL14  A decision tool  Helps strategic leaders can recognize, prioritize, and address the

needs of different stakeholders.  Important stakeholder attributes: – Power: control over actions – Legitimacy: valid concerns – Urgency: require immediate attention Stakeholder Impact Analysis 8MONASH BUSINESS SCHOOL15 Stakeholder Impact Analysis MONASH BUSINESS SCHOOL16  What is the firm’s accounting profitability?  How much shareholder value does the firm create?  How much economic value does the firm generate? Three Standard Performance Dimensions 9MONASH BUSINESS SCHOOL17 Stock Market Valuations of Apple and Microsoft, 1990–2017 MONASH BUSINESS SCHOOL18 Firm B’s Competitive Advantage 10 MONASH BUSINESS SCHOOL19 Firm C’s Competitive Advantage MONASH BUSINESS SCHOOL20  Helps managers achieve their strategic objectives

 Uses internal and external performance metrics

 Balances both financial and strategic goals The Balanced Scorecard 11 MONASH BUSINESS SCHOOL21  Customers – Revenue, profit, customer satisfaction  Value Creation – Competitiveness, innovation, organizational learning  Core Competencies – Key business processes  Shareholders – Cash flow, operating income, ROIC, ROE, total returns to shareholders Examples of Metrics for Each Balanced Scorecard Section MONASH BUSINESS SCHOOL22  Links strategic vision to responsible parties  Translates vision into measurable goals  Designs and plans business processes  Implements feedback and organizational learning

 Alerts to needed strategic goal adaptation Advantages of the Balanced Scorecard 12 MONASH BUSINESS SCHOOL23  Focused on implementation – Not formulation  Managers must identify the right metrics to track  Lacks guidance: – Which metrics to use? – How to address setbacks? Disadvantages of the Balanced Scorecard MONASH BUSINESS SCHOOL24  Focus: economic, social and ecological performance  Three dimensions: – Economic Dimension: Profits  Businesses must be profitable to survive

– Social Dimension: People – Ecological Dimension: Planet  Considers the natural environment

The Triple Bottom Line 13 MONASH BUSINESS SCHOOL25  Chapters: 2 and 5 – Rothaermel, F. (2019). Strategic management 4th edition. New

York: McGraw-Hill Irwin.

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