Chapter 1: Strategic Leadership: Managing the Strategy Making Process for Competitive Advantage

1. Chapter 1: Strategic Leadership: Managing the Strategy Making Process for Competitive Advantage

2. Business Organizations • An organization is a collection of functions or departments working together to bring a product or service to market.

3. Types of Organizations • Sole Proprietorship – owner/operator. • Partnership – the business is owned by two or more people. • Corporation – a business entity that issues shares of ownership – can be public or private

4. Strategy • Defined as a set of actions that are related, used by managers to increase organizational performance • Strategic leadership – how to manage an organization’s strategy making process to improve organizational performance • Strategy making process – the selection and implementation of a choice of processes designed to advance organizational goals • Strategy formulation – the task and process of selecting organizational strategies • Strategy implementation – translating the selected strategy into action • Designing, delivering, and supporting products • Improving the efficiency and effectiveness of an organization • Designing an organization’s structure, control systems, and culture

5. Maximizing Organizational Value • Profitability – the ability of an organization to generate financial returns for its investors • Return on invested capital – earnings generated from money used to start and operate a business – measured as net income after taxes/(capital and debt) • Measures the efficiency and effectiveness of the use of a firm’s capital • Profit growth – the increase in an organization’s net profit over time • Shareholder Value – the reason why investors purchase shares of a corporation • Includes anticipated share price appreciation – an increase in stock price • Includes anticipated dividends – funds generated by an organization that are paid to shareholders

6. Competitive Advantage • A competitive advantage is where an organization obtains greater profitability than the average profitability of other organizations competing for the same set of customers • Sustained competitive advantage – when an organization’s strategies allow it to maintain above average profits for a number of years

7. Business Model A business model is management’s conception of how a set of strategies can be used in a coherent manner to enable an organization to obtain a competitive advantage, achieve superior profitability, and provide above average profit growth

8. Business Model (Continued) A business model specifies how a company will: • Select its customers • Define and differentiate its product offerings • Create value for its customers • Acquire and keep customers • Produce goods and services • Deliver goods and services to the market • Organize the firm’s activities • Configure the organization’s resources • Achieve and sustain profitability, and • Grow the business over time

9. Variations in Performance by Industry

10. Types of Managers • General Managers – bear overall responsibility for the organization or one of its major self-contained units • Functional Managers – supervise a particular task, activity, or operation