Student Version

Chapter 12
Strategic Leadership

PART 3 Strategic Actions: Strategy Implementation

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 Strategic Leadership and Style

• Strategic leadership requires the ability to:

– Anticipate and envision.
– Maintain flexibility.
– Empower others to create strategic change through
selecting and implementing a firm’s strategies as
necessary.
• Strategic leadership is:
– Multi-functional work involving working through others.
– Consideration of the entire enterprise rather than just
a sub-unit.
– A managerial frame of reference.

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 The Role of Top-Level Managers

• Managers often use their discretion when

making strategic decisions and implementing
strategies.
• Factors affecting the amount of decision-making
discretion include:
– External environmental sources
– Characteristics of the organization
– Characteristics of the manager

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Factors Affecting Managerial Discretion

External • Industry structure

Environment • Rate of market growth
• Number and type of
competitors
• Nature and degree of
political/legal constraints
• Degree to which products can
be differentiated

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Factors Affecting Managerial Discretion

External • Size
Environment • Age
• Culture
Characteristics of • Availability of resources
the Organization
• Patterns of interaction
among employees

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Factors Affecting Managerial Discretion

External
Environment
• Tolerance for ambiguity
• Commitment to the firm and its
Characteristics of
the Organization
desired strategic outcomes
• Interpersonal skills
Characteristics of • Aspiration level
the Manager • Degree of self-confidence

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Factors Affecting Managerial Discretion

External
Environment

• The degree of latitude for

Characteristics of action when making strategic
the Organization
decisions, especially those
concerned with effective
Characteristics of
the Manager
implementation of strategies.
• How managers exercise
discretion when determining
Managerial appropriate strategic actions is
Discretion critical to the firm’s success.

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 Top Management Teams

• Composed of the key managers who are

responsible for selecting and implementing the
firm’s strategies.
• A heterogeneous top management team:
– Has varied expertise and knowledge.
– Can draw on multiple perspectives.
– Will evaluate alternative strategies.
– Builds consensus.

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CEO and Top Management Team Power

• Higher performance is achieved when board of

directors are more directly involved in shaping
strategic direction.
• A powerful CEO may:
– Appoint sympathetic outside board members.
– Have inside board members who report to the CEO.
– Have significant control over the board’s actions.
– May also hold the position of chairman of the board
(CEO duality).

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 Managerial Succession

• Organizations select managers and strategic

leaders from two types of managerial labor
markets:
– Internal managerial labor market
• Advancement opportunities related to managerial
positions within a firm.
– External managerial labor market
• Career opportunities for managers in organizations
other than the one for which they currently work.

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 Key Strategic Leadership Actions:
Determining Strategic Direction

• Determining strategic direction involves

developing a long-term vision of the firm’s
strategic intent.
– Five to ten years into the future
– Philosophy with goals
– The image and character the firm seeks
• Ideal long-term vision has two parts:
– Core ideology
– Envisioned future

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 Sustaining an Effective
Organizational Culture

• Organizational Culture
– The complex set of ideologies, symbols and core
values shared through the firm, that influences the
way business is conducted.
• Entrepreneurial Mind-set (Orientation)
– Personal characteristics that encourage or discourage
entrepreneurial opportunities.
Autonomy  Proactiveness
Innovativeness  Risk taking

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 Strategic entrepreneurship

• Taking entrepreneurial actions using a strategic

perspective.
• Firms engaging in strategic entrepreneurship
simultaneously engage in opportunity-seeking and
advantage-seeking behaviors.
– The purpose is to continuously find new opportunities and
quickly develop innovations to exploit them.

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 Definitions

• Entrepreneurship
– A process used by individuals and groups to identify
entrepreneurial opportunities without being immediately
constrained by the resources they control.
• Corporate entrepreneurship
– Applying entrepreneurship (including the identification of
entrepreneurial opportunities) within ongoing, established
organizations.
• Entrepreneurial opportunities
– Conditions in which new goods or services can satisfy a need in
the market. Increasingly, entrepreneurship positively contributes
to individual firms’ performance and stimulates growth in
countries’ economies.

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 Innovative activity

• Firms engage in three types of innovative activity

– Invention - the act of creating a new good or process
– Innovation - the process of creating a commercial product
from an invention
– Imitation - the adoption of an similar innovations by
different firms. Invention brings something new into being
while innovation brings something new into use.

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 International entrepreneurship

• The process of identifying and exploiting

entrepreneurial opportunities outside the firm’s
domestic markets has become important to firms
around the globe.
• Evidence suggests that firms capable of effectively
engaging in international entrepreneurship
outperform those competing only in their domestic
markets.

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 Producing innovation

• 3 basic approaches used to produce innovation

– internal innovation
• R&D and forming internal corporate ventures
– cooperative strategies such as strategic alliances
– acquisitions

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 2 types of innovation

• Firms create two types of innovation—incremental

and radical—through internal innovation that takes
place in the form of autonomous strategic behavior or
induced strategic behavior.

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 Cooperative relationship

• To gain access to the specialized knowledge that

often is required to innovate in the complex global
economy, firms may form a cooperative relationship
such as a strategic alliance with other companies,
some of which may be competitors.

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 Acquisitions

• Acquisitions are another means firms use to obtain

innovation. Innovation can be acquired through direct
acquisition, or firms can learn new capabilities from
an acquisition, thereby enriching their internal
innovation abilities.

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 Creating value

• The practice of strategic entrepreneurship by all types

of firms, large and small, new and more established,
creates value for all stakeholders, especially for
shareholders and customers. Strategic
entrepreneurship also contributes to the economic
development of countries.

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