Submitted By:
SIA, JASON
TAMSI, NORLENCE
VIÑALON, MARIE FRANCES
UY, ADRIAN JAY
UY, KYTE CHANDLER
Submitted to:
Engr. James Anthony T. Toledo, MBA, MM
Instructor
12-1 Strategic Leadership and Style
Strategic leadership is the ability to anticipate, envision, maintain flexibility, and empower others
to create strategic change as necessary. Strategic leaders must learn how to effectively
influence human behavior, often in uncertain environments. Strategic change is a change
brought about as a result of selecting and implementing a firm’s strategies.
The style of leadership used by those in top management positions is important. Likely, the
leader’s style will be based, at least partially, on his or her personal ideology and experience.
Transformational leadership is considered to be one of the most effective strategic leadership
styles. This style entails motivating followers to exceed the expectations others have of them, to
continuously enrich their capabilities, and to place the interests of the organization above their
own. Transformational leaders develop and communicate a vision for the organization and
formulate a strategy to achieve that vision. They make followers aware of the need to achieve
valued organizational outcomes and encourage them to continuously strive for higher levels of
achievement.
12-2 The Role of Top-Level Managers
When making decisions related to using the strategic management process, managers
(certainly top-level ones) often use their discretion (or latitude for action).20 Managerial
discretion differs significantly across industries. The primary factors that determine the amount
of decision-making discretion held by a manager (especially a top-level manager) are
1. external environmental sources such as the industry structure, the rate of market growth in
the firm’s primary industry, and the degree to which products can be differentiated
2. characteristics of the organization, including its size, age, resources, and culture
3. characteristics of the manager, including a commitment to the firm and its strategic outcomes,
tolerance for ambiguity, skills in working with different people, and aspiration levels
12-2a Top Management Teams
A top management team is composed of the individuals who are responsible for making certain
the firm uses the strategic management process, especially for the purpose of selecting and
implementing strategies.
Top Management Teams, Firm Performance, and Strategic Change
The job of top-level managers is complex and requires a broad knowledge of the firm’s internal
organization as well as the three key parts of its external environment—the general, industry,
and competitor environments. Therefore, firms try to form a top management team with the
knowledge and expertise needed to operate the internal organization and who can deal with the
firm’s stakeholders as well as its [Link] also need to structure the top management
team in a way to best utilize the members’ expertise (e.g., create structural interdependence to
make the best decisions).To have these characteristics normally requires a heterogeneous top
management team. A heterogeneous top management team is composed of individuals with
different functional backgrounds, experience, and education.
The CEO and Top Management Team Power
Board of directors is an important governance mechanism for monitoring a firm’s strategic
direction and for representing stakeholders’ interests, especially shareholders. In fact, higher
performance normally is achieved when the board of directors is more directly involved in
helping to shape the firm’s strategic direction.
Boards of directors, however, may find it difficult to direct the decisions and resulting actions of
powerful CEOs and top management teams. Often, a powerful CEO appoints a number of
sympathetic outside members to the board or may have inside board members who are also on
the top management team and report to her or him.
CEOs and top management team members can also achieve power in other ways. For
example, a CEO who also holds the position of chair of the board usually has more power than
the CEO who does not. Some analysts and corporate “watchdogs” criticize the practice of CEO
duality (when the positions of CEO and the chair of the board are held by the same person)
because it can lead to poor performance and slow responses to change, partly because the
board often reduces its efforts to monitor the CEO and other top management team members
when CEO duality exists.
12-3 Managerial Succession
An internal managerial labor market consists of a firm’s opportunities for managerial positions
and the qualified employees within that firm.
An external managerial labor market is the collection of managerial career opportunities and the
qualified people who are external to the organization in which the opportunities exist.
With respect to the CEO position, several benefits are thought to accrue to a firm using the
internal labor market to select a new CEO, one of which is the continuing commitment to the
existing vision, mission, and strategies for the firm. Also, because of their experience with the
firm and the industry in which it competes, inside CEOs are familiar with company products,
markets, technologies, and operating procedures.
Another benefit is that choosing a new CEO from within usually results in lower turnover among
existing personnel, many of whom possess valuable firm-specific knowledge and skills. In
summary, CEOs selected from inside the firm tend to benefit from their
1. A clear understanding of the firm’s personnel and their capabilities
2. appreciation of the company’s culture and its associated core values
3. deep knowledge of the firm’s core competencies as well as abilities to develop new ones as
appropriate
4. “feel” for what will and will not “work” in the firm
In spite of the understandable and legitimate reasons to select CEOs from inside the firm,
boards of directors sometimes prefer to choose a new CEO from the external managerial labor
market. Conditions suggesting a potentially appropriate preference to hire from outside include
1. the firm’s need to enhance its ability to innovate
2. the firm’s need to reverse its recent poor performance
3. the fact that the industry in which the firm competes is experiencing rapid growth
4. the need for strategic change
12-4 Key Strategic Leadership Actions
Certain actions characterize effective strategic leadership; we present the most important
ones in Figure 12.4. Many of the actions interact with each other. For example, managing the
firm’s resources effectively includes developing human capital and contributes to establishing a
strategic direction, fostering an effective culture, exploiting core competencies, using effective
and balanced organizational control systems, and establishing ethical practices. The most
effective strategic leaders create viable options in making decisions regarding each of the key
strategic leadership actions.
12-4a Determining Strategic Direction
Determining strategic direction involves specifying the vision and the strategy or strategies to
achieve this vision over time.
12-4b Effectively Managing the Firm’s Resource Portfolio
Effectively managing the firm’s portfolio of resources is another critical strategic leadership
action. The firm’s resources are categorized as financial capital, human capital, social capital,
and organizational capital (including organizational culture). Clearly, financial capital is critical to
organizational success; strategic leaders understand this reality.88 However, the most effective
strategic leaders recognize the equivalent importance of managing each remaining type of
resource as well as managing the integration of resources (e.g., using financial capital to
provide training opportunities to the firm’s human capital). Most importantly, effective strategic
leaders manage the firm’s resource portfolio by organizing the resources into capabilities,
structuring the firm to facilitate using those capabilities, and choosing strategies through which
the capabilities can be successfully leveraged to create value for customers. Exploiting and
maintaining core competencies and developing and retaining the firm’s human and social capital
are actions taken to reach these important objectives.
Exploiting and Maintaining Core Competencies
Core competencies – are capabilities that serve as a source of competitive advantage for a
firm over its rivals
- Relate to an organization’s functional skills, such as manufacturing, finance, marketing,
and research and development
Emphasis of core competencies:
Competitive agility – an ability to act in a variety of competitively relevant ways
Competitive speed – an ability to act quickly when facing environmental and competitive
pressures
Capabilities – are developed over time as firms learn from their actions and enhance their
knowledge about specific actions needed
Developing Human Capital and Social Capital
Human capital refers to the knowledge and skills of a firm’s entire workforce. From the
perspective of human capital, employees are viewed as a capital resource requiring continuous
investment.
Social capital involves relationships inside and outside the firm that help in efforts to accomplish
tasks and create value for stakeholders. Social capital is a critical asset given that employees
must cooperate with one another and others, including suppliers and customers, in order to
complete their work. In multinational organizations, employees often must cooperate across
country boundaries on activities such as R&D to achieve performance objectives (e.g.,
developing new products).
12-4c Sustaining an Effective Organizational Culture
In Chapter 1, we defined organizational culture as the complex set of ideologies, symbols, and
core values that are shared throughout the firm and that influence how the firm conducts
business. Because organizational culture influences how the firm conducts its business and
helps regulate and control employees’ behavior, it can be a source of competitive advantage.
Given that each firm’s culture is unique, it is possible that a vibrant organizational culture is an
increasingly important source of differentiation for firms to emphasize when pursuing strategic
competitiveness and above-average returns. Thus, shaping the context within which the firm
formulates and implements its strategies, that is, shaping the organizational culture is another
key strategic leadership action.
Entrepreneurial Mind-Set
Entrepreneurial mindset: a way of thinking that enables you to overcome challenges, be
decisive, and accept responsibility for your outcomes. It is a constant need to improve your
skills, learn from your mistakes, and take continuous action on your ideas. Anyone willing to do
the work can develop an entrepreneurial mindset.
Five dimensions characterizing a firm’s entrepreneurial mind-set:
● · Autonomy
● · Innovativeness
● · Risk taking
● · Proactiveness
● · Competitive aggressiveness
These five dimensions influence the actions a firm takes to be innovative and launch new
ventures
Autonomy – the first of an entrepreneurial orientation’s five dimensions which allows
employees to take actions that are free of organizational constraints and permits individuals and
groups to be self-directed
Innovativeness – reflects a firm’s tendency to engage in and support new ideas, novelty,
experimentation, and creative processes that may result in new products, services, or
technological processes
Risk taking – reflects a willingness by employees and their firm to accept risks when pursuing
entrepreneurial opportunities
Proactiveness – describes a firm’s ability to be a market leader rather than a follow
- These organizational cultures constantly use processes to anticipate future market
needs and to satisfy them before competitors learn how to do so
Competitive aggressiveness – is a firm’s propensity to take actions that allow it to consistently
and substantially outperform its rivals
Changing the Organizational Culture and Restructuring
Right people – those who have the values desired for the organization
Performance appraisals – establishing goals and measuring individual performance toward
goals that fit in with the new core values
Reward systems – rewarding the desired behaviors that reflect the new core values
Requirements of shaping and reinforcing a new culture:
● · Effective communication and problem solving
● · Selecting the right people
● · Engaging in effective performance appraisals
● · Using appropriate reward systems
12-4d Emphasizing Ethical Practices
Strategic leaders can take several actions to develop and support an ethical organizational
culture. Examples of these actions include
1. establishing and communicating specific goals to describe the firm’s ethical standards
(e.g., developing and disseminating a code of conduct)
2. continuously revising and updating the code of conduct, based on inputs from people
throughout the firm and from other stakeholders
3. disseminating the code of conduct to all stakeholders to inform them of the firm’s ethical
standards and practices
4. developing and implementing methods and procedures to use in achieving the firm’s ethical
standards (e.g., using internal auditing practices that are consistent with the standards)
5. creating and using explicit reward systems that recognize acts of courage (e.g., rewarding
those who use proper channels and procedures to report observed wrongdoings)
6. creating a work environment in which all people are treated with dignity
12-4e Establishing Balanced Organizational Controls
Organizational controls- are basic to a capitalistic system and have long been viewed as an
important part of the strategy implementation process
Controls- are necessary to help ensure that firms achieve their desired outcomes
- The formal, information-based procedures used by managers to maintain or alter
patterns in organizational activities
- Help strategic leaders build credibility, demonstrate the value of strategies to the firm’s
stakeholders, and promote and support strategic change
- Provide the parameters for implementing strategies as well as the corrective actions to
be taken when implementation-related adjustments are required
The balanced scorecard is a tool firms use to determine if they are achieving an appropriate
balance when using strategic and financial controls as a means of positively influencing
performance. This tool is most appropriate to use when evaluating business-level strategies;
however, it can also be used with the other strategies firms implement (e.g., corporate,
international, and cooperative).
An appropriate balance of strategic controls and financial controls, rather than an overemphasis
on either, allows firms to achieve higher levels of performance.
Financial control- focuses on short-term financial outcomes
Strategic control- focuses on the content of strategic actions rather than their outcomes
Four perspectives are integrated to form the balanced scorecard:
■ financial (concerned with growth, profitability, and risk from the shareholders’ perspective)
■ customer (concerned with the number of value customers perceive was created by the firm’s
products)
■ internal business processes (with a focus on the priorities for various business processes
that create customer and shareholder satisfaction)
■ learning and growth (concerned with the firm’s effort to create a climate that supports
change, innovation, and growth)
Balanced scorecard framework- allows the firm to understand how it looks to shareholders
(financial perspective), how customers view it ( customers perspective), the processes it must
emphasize to successfully use its competitive advantage (internal perspective), and what it can
do to improve its performance in order to grow (learning and growth perspective)
CASE STUDY
Fruitas Holdings, Inc
Fruitas Holdings, Inc. is the leading group in the food cart industry in the Philippines. Since its
flagship stall, Fruitas Fresh from babot's Farm opened in 2002, it now has around 1,000 stores in
the Philippines and more than 20 brands in its portfolio.
PROBLEM:
Fruitas Holding, Inc has limited stalls specifically in Cebu City areas unlike Luzon areas.
Fruitas Holdings, Inc has less stalls than their competitors meaning, with that study they need to
measure the areas in Cebu and penetrate other areas in Cebu may in the Northern or Southern
area where they can put stalls.
ALTERNATIVE
1. Strategic leaders should develop strategic competencies. Basically, it is the fundamental
of teaching and learning competencies towards your competitors. It is the ability to
overcome difficulties for securing the required resources to execute the strategy.
2. Strategic leaders should have organizational ability which is to align people and
organizations. This will help them to align individuals to future company state or position.
Creating organizational alignment is a critical responsibility of an organization’s leaders.
Indeed, the same leader’s who define their organizations’ visions create roadmaps to get
there and make course corrections along the way.
3. Strategic Leaders should know how to manage strategic change in order for them to
respond to new market threats or new opportunities. As we all know, Filipinos tend to be
excited about something new.
RECOMMENDATION:
.
We chose alternative 3 since change is very common in business. This is one of the most
effective approaches in strategic leadership since it is crucial to readily adapt to changes
brought by the environment most especially from the competitors.
