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

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

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

Strategy
1. Defined as a set of actions that are related, used by managers to increase organizational performance Strategic leadership how to manage an organizations strategy making process to improve organizational performance
a. b. c. 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
i. ii. iii. Designing, delivering, and supporting products Improving the efficiency and effectiveness of an organization Designing an organizations structure, control systems, and culture

2.

Maximizing Organizational Value

1.
a.

Profitability the ability of an organization to generate financial returns for its investors

b. c.

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 firms capital Profit growth the increase in an organizations net profit over time

2.

a.

Shareholder Value the reason why investors purchase shares of a corporation

b.

Includes anticipated share price appreciation an increase in stock price Includes anticipated dividends funds generated by an organization that are paid to shareholders

Competitive Advantage
1. A competitive advantage is where an organization obtains greater profitability than the average profitability of other organizations competing for the same set of customers 2. Sustained competitive advantage when an organizations strategies allow it to maintain above average profits for a number of years

Business Model
A business model is managements 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

Business Model (Continued)

A business model specifies how a company will:
1. 2. Select its customers Define and differentiate its product offerings 3. Create value for its customers 4. Acquire and keep customers 5. Produce goods and services 6. Deliver goods and services to the market 7. Organize the firms activities 8. Configure the organizations resources 9. Achieve and sustain profitability, and 10. Grow the business over time

Variations in Performance by Industry

Types of Managers
1. General Managers bear overall responsibility for the organization or one of its major self-contained units 2. Functional Managers supervise a particular task, activity, or operation