Chapter 2 MAZ

Miles A. Zachary
MGT 4380
Strategic Management
 “Good business leaders create a vision, articulate the
vision, passionately own the vision, and relentlessly
drive it to completion.” – Jack Welch, former GE CEO
 A vision is one key aspect of an organization a leader
may use to inspire employees
 It describes what an organization hopes to become in
the future
 Clear
 Brief
 Empowering
 In a survey of 1,500 top firm executives, 98% reported
that a leaders must first and foremost have “a strong
sense of vision.”
 90% reported that they have questioned their own
ability to be visionary leaders
 Many firms do not articulate a vision
 Of the firms that do have vision statements, many fail
to empower employees appropriately
 Thus, a strong vision embraced by employees is a
powerful competitive advantage
 An organization’s mission statement attempts to
capture the organization’s identity; it answers the
question “Who are we?”
 While vision statements focus on the future, mission
statements should be written around the past and
 Strong mission statements suggest why organizational
stakeholders (e.g. employees, suppliers, customers,
community) why they should support the organization
and ensure it’s success
 While mission and vision statements are different,
they should pursue similar goals
 Organizations are often troubled by divergent mission
statements and vision statements
 Example: Universities established with mission
statements focusing solely on educating citizens v.
pursuing lofty research goals inline with the university’s
 Organizations may accomplish this by focusing on
developing and pursuing narrower objectives—goals
 Goals are smaller-scoped objectives that provide clear
and tangible to employees in their day-to-day work
 The most effective goals are:
 Specific
 Measurable
 Aggressive
 Realistic
 Time-bound
 Specific goals are explicit and direct people’s energy;
often times they require articulated steps to achieve
Measurable goals are quantifiable; useful because
success can be clearly determined
Aggressive goals are challenging; require people test
and extend their limits
Realistic goals are achievable; while goals should be
lofty, they should be reasonable
Time-bound goals are finite; there is a delineated
time horizon
 The period of time after a goal is achieved is
important, but often overlooked
 An organization should determine whether to accept
it’s new position or reformulate and pursue a new goal
 Example: After achieving their goal of landing on the
moon, NASA failed to articulate their next goal
 Organizational performance is a broad term that
encompasses how well an organization is pursuing
their mission, vision, and goals
 A vital aspect of strategic management
 The ultimate dependent variable in strategic
management research
 Organizational performance is subjective and depends
upon how it is defined
 Two important considerations:
Performance measures—a metric with which
performance can be gauged (e.g. ROA, Tobin’s q, stock
price, earnings per share)
Performance referents—a standard that can be held
against a measure to determine an organization’s
relative performance (e.g. industry standards,
competitor performance, social norms)
 Different measures and referents communicate
different information; suggests the importance of
multiple measures of performance
 Many measures and referents exist, so it’s important to
identify rich yet manageable objectives
 The balanced scorecard approach was developed by
Harvard professors Robert Kaplan and David Norton
to help managers diversify performance analysis
 Recommends that managers focus on a few key
measures reflecting four (4) dimensions
Internal business process
Learning and growth
 The triple bottom line approach to reflects a more
holistic view of performance than the balanced
scorecard approach
 Focuses on three (3) bases:
People (society)
Planet (environment)
Profit (financial)
 Developed in the 1980’s, but gained popularity in the
late 1990’s
 Many firms are finding social cache by emphasizing
social and environmental values
 Many CEOs are thrust into the public spotlight
 Firm Advantages
 Enhance corporate image
 Increase stock price
 Improve stakeholder morale
 Firm Disadvantages
 Gaps in actual and expected performance may be magnified
 Unethical or illegal behavior attracts negative publicity
 Individual CEOs are presented with both benefits and
 Individual Benefits
 High compensation/benefits
 Prestige-based power
 Elite network opportunities
 Individual Costs
 Face bad reputation with negative performance
 Increased media scrutiny
 Friends and family forced into the spotlight
 While entrepreneurship is traditionally thought of as a
person starting a new venture, corporate
entrepreneurship describes entrepreneurial activity
in an existing organization
Organizations failing to continually innovate fall into
the trap of creative destruction (Schumpeter, 1934)
Corporate entrepreneurs innovate new products and
services and find/develop resources to support it
Successful corporate innovators are valuable
organizational assets and can benefit from this value
However, some risks still exist…
 Entrepreneurial orientation (EO) refers to the processes,
practices, and decision-making styles of organizations that
act entrepreneurially
 Firm-level concept
 Essential part of crafting an entrepreneurial strategy
 A firm’s EO is determined by aggregating 5 dimensions:
 Autonomy
 Competitive Aggressiveness
 Innovativeness
 Proactiveness
 Risk-taking
 Autonomy
 Generally refers to the freedom that individuals and
groups/teams have to introduce and develop new ideas
 Reflects a lack of hindrances associated with organizational
 Structure is key
 Competitive Aggressiveness
 Tendency for a firm to intensely engage competitors rather
than avoid them
 Includes strategic ploys to gain favorable industry positions
 Competitive action is powerful and executives must consider
the short and long-run consequences
 Innovativeness
 The tendency to pursue creativity and experimentation
 Innovativeness is aimed at creating new products,
services, processes, and/or skills to increase a firms
 Innovations may build on an existing advantage or
introduce a radically different advantage
 Firms should assess how new innovations impact
existing advantages (cannibalization)
 Firms with strong innovative abilities tend to enjoy
better firm performance than others
 Proactiveness
 The tendency to anticipate and act on future needs rather
than waiting to react
 Adopts an opportunity-seeking perspective
 Typically first or early to enter a market
 Can often capitalize on first-mover advantages, but is also
subject to first-mover disadvantages
 Risk-taking
 Tendency to engage in risky or bold actions as opposed to
 Different people perceive risk and uncertainty differently
 Some industries reward/punish risk-taking differently
 Steps can be taken to increase a firm’s EO
 Executives should design an organization’s structure to
promote and enhance the five dimensions of EO
 Leverage power/influence
 Ecological design
 Additionally, executives should properly monitor the
EO level of a firm
 Gauge employee satisfaction
 Examine key entrepreneurial performance measures
 Slack capital/resources
 R&D expenditures
 Executives (namely the CEO) are responsible for
establishing a firm’s mission, vision, and goals
 They should also work to encourage the necessary
culture to accomplish their objectives
 Performance metrics and referents are important
when determining a firm’s relative and absolute
position, but must be chosen carefully
 Executives should determine a firm’s appropriate level
of EO and work to encourage responsible levels of EO

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