Question

Role of leadership and corporate strategy in the formulation of plans and strategies

Answer 1

Leadership defination

The definition of strategic leadership denotes “the leader’s ability to anticipate, envision, and maintain flexibility and to empower others to create strategic change as necessary”. Strategic leadership has many facets, and it encompasses managing via others, and works as a helper for organizations to adjust with the changing world that appears as happening substantially as ever with the pace of time in today’s global business matrix. Strategic leadership demands the capability to incorporate and include both of the business environment of the organizations, which are internal and external. It is also responsible for managing and encompassing critical information processes. There are many recognizable actions which determine strategic leadership that can proffer positively towards effective strategy enactment, and they are in the following:

• Determining strategic direction
• Establishing balanced organizational controls
• Effectively managing the organization’s resource portfolio
• Sustaining an effective organizational culture
• Emphasizing ethical practices organizational controls

Role of leadership in the formulation of plans and strategies

Leadership quality plays as a key role in order to form and enforce a strategy. It works as a linkage which associates the heart of the institution with its body. The pledge kept by the leader is responsible for encouraging the institutions to become successful, and this success comes out of making effective decisions for the formulation of strategy and their enactment. If the strategies are not enacted with perfection, great strategies become insignificant. Strategies formulated lower than 50% see the light of enactment as there is dearth of leadership skills. Leaders give directions to what is the course of performance and the ways to accomplish that. Broadly, leader associated with an institute has the responsibilities for offering the vision, and he taking recourse of strategies reflects, chalks out the plan, and oversees the functioning undertakings. Moreover, he makes an attempt to suit his organization in congruity with the needs of the circumstances. Leaders disseminate energy boosting activities and heightened the morale and the spirit of the workers.

The leader distinguishes between vision, which describes where the enterprise is headed, and mission, which articulates why the enterprise exists. A good mission statement encapsulates a firm’s purpose with its unique contribution. For example, Disney’s mission may be stated simply as, “To make people happy.”A good leader understands the difference between vision and mission and makes sure that the organization does, too.

let's point out some important role of leadership in strategy formulation:

Setting Goals and Objectives

Good visions do not become reality by magic. The process of realizing the vision—strategy—is just as important to the firm as having the foresight and the commitment to achieve the vision. Somewhere just beyond the horizon of vision and before the hard edge of strategy kicks in begins the leader’s work of setting strategic goals and objectives for the organization. This activity calls for disciplined thinking to narrow the organization’s focus.

Jim Collins, who presented the traits of eleven outstanding companies in his book Good to Great, maintains that focused, disciplined thought is a common element of good-to-great leaders and their companies.Great leaders focus their firms on a single, organizing idea that unifies and guides all decisions. They boil down complexities into simple ideas that answer three questions: (1) What can we do best? (2) What is the economic denominator that drives our business? (3) What do our core people care passionately about? It is the leader’s job to ask these questions, even if others produce the answers.

The leader sets measurable goals and objectives for the organization. A goal or objective for which attainment cannot be measured is worthless. The leader makes measurable goals effective by building in incentives for attainment, what Jim Collins describes as “catalytic mechanisms.”These incentives reward goal-attaining behavior, discourage the opposite, and thus make strategy “happen” by virtue of their self-enforcement power, but they must be created to fit the organization. Consider Granite Rock’s short pay policy: every invoice that the gravel company issues includes a statement that if the customer is not satisfied for any reason, they simply do not pay for the line item and they do not need to return it. It is easy to imagine how a “short paid” invoice provides enormous incentive to fix quality or delivery problems immediately, thus moving Granite Rock toward its goal of customer satisfaction. Granite Rock’s short pay policy, 3M’s 15 percent discretionary time, and Nucor Steel’s production bonus system, all mechanisms designed to incentivize desired behavior, were developed to work within their respective organizations. When the leaders establish goals and build in incentives that reward attainment, the organization moves to achieve them.

Crafting a Strategy

The leader must now ask the question, “How are we as a firm going to employ our resources to achieve our goals?” Taking a strategic position means accepting that there will be trade-offs with other positions. It also means choosing what not to do, as well as what to do, because no company can compete successfully in every business segment featuring every variation of product or service. “The essence of strategy is choosing what not to do,” says Michael Porter, groundbreaking author of Competitive Strategy and creator of the “five forces” model of competition.Tough choices must be made, and the leader must be the one to force the issue.

But crafting strategy is not all top-down. Gary Hamel asserts that “revolutionary” strategy-making involves getting to the “revolutionaries” who are embedded in every organization and involving them in the strategy-making process.He advocates taking a “diagonal slice” through the organization to pick up these revolutionaries who exist at every level and across every function. Furthermore, the leader should make sure that three kinds of people participate in strategy-making: the young, those who are new to the firm, and those on the “periphery,” that is, the geographic boundaries of the business. Why these people? Because they are the ones—together with those picked up in the diagonal slice—who are certain to have the most revolutionary ideas for the company. They are the ones most likely to challenge the assumptions that the senior managers have all been taught to share. They are the most likely to redefine the industry by challenging its accepted beliefs. Such challenges require an attitude of humility and openness from the leader who crafts strategy for the firm.

In the end, it is the leader’s job to define the company’s strategic position and make the trade-offs. Instead of broadening into every segment in which profits may be earned, the leader focuses the company on deepening its strategic position and communicates the strategy externally to customers who value it, as well as internally to the firm. Taking a strategic position that delivers value and communicating that value inside and out are the core leadership tasks in crafting strategy.

Executing the Strategy

Leaders have primary responsibility for implementing the chosen strategy. While an action plan involves many discrete tasks, at the core the leader must build an organization that can carry out the strategy. The leader builds both an organizational culture and an organizational capability for executing strategy.

The “Southwest Spirit”is a positive, fun-loving, can-do approach to the job of flying passengers to their destinations. The company promotes two core values: LUV (love) and fun. LUV, the company’s ticker symbol, has to do with treating employees and customers with courtesy, caring, and respect. Former CEO Herb Kelleher took a different tack than most company executives do by insisting that the employees come first, the customer second. He reasoned that by treating employees well, they would be happier in their jobs and would in turn treat customers well.

However, it would be naïve to think that Southwest Airlines is successful solely because of a good company culture. Kelleher and his management team drove the company hard to squeeze cost out of every activity, from ticketing through baggage handling, and achieved distinctive capabilities that rivals have not been able to imitate. The Southwest Spirit undergirds this competitive capability with a company culture that, taken together, has made the airline consistently profitable.

Kathleen Eisenhardt, professor of strategy and organization at Stanford University, maintains that the leader must embed strategy in the organization: choose an excellent team, pick the right roles, and let the rest of the team make the strategic moves. The logic is that if you begin with the right people, you can more easily adapt to a fast-changing world because the right people already are adaptable and self-motivated. Indeed, picking the right people is one of the few things that leaders can directly control.

In industries undergoing rapid change, the organization structure should be kept flexible so that modular business units can be “patched” onto specific market opportunities as they arise.Good organizational patching requires committed “ego-less” leadership from the executive suite down to the business unit level and an organizational culture that encourages and rewards this behavior over empire-building, politics, and turf battles.

Concepts that provide a simple framework for the leader who would implement good strategy are: (1) embed strategy in the organization’s culture while focusing the organization on a few key strategic capabilities; (2) build a good team, and (3) remember that any strategy is temporary at best, so watch the environment and make adjustments in the organization as needed.

Evaluating Performance

How does the firm keep its strategy fresh? By keeping both the organization and its leadership agile. Gary Hamel and Liisa Vlikangas coined the term “strategic resilience” to describe the firm’s ability to continuously anticipate and adjust to trends that can permanently impair the earning power of the company. The goal is a resilient organization that is “constantly making its future rather than defending its past.

In the face of rapid change, the firm must conquer denial, nostalgia, and arrogance by cultivating good habits, such as visiting the places where change is taking place and getting to the real ideas and opinions of those who make change. The leader recognizes that even the best strategy decays with time and has to be renewed or altogether reinvented. Competitors, market forces, and technology changes cause such decay. Astute leaders must keep their eyes open in order to accurately and honestly appraise strategy decay as it occurs.

At the same time, the leader must see that there is an adequate supply of options that can be cultivated into full-fledged strategies to replace the decaying ones. These may start out as small stakes bets; the most promising ones are then selected and funded to full development. The more strategy options that are created in this fashion, the more resilient the firm will be in the face of change. The agile leader must nurture this process of renewal that replaces decay.

Donald Sull, who teaches at the London Business School, uses the term “active inertia” to describe an organization’s tendency to follow established patterns of behavior in response to a crisis. He maintains that “Success breeds active inertia, and active inertia breeds failure.Sull theorizes that active inertia is caused by what are essentially good traits that have become fossilized over time so that they no longer serve the company well.

Can active inertia be prevented? Yes! When a company finds itself challenged in the marketplace, instead of asking, “What should we do?” the leader should pause and ask, “What hinders us?” By reframing the question, the leader shifts focus to the strategic framework, activities, and patterns of behavior that by force of habit can channel energy in the wrong direction.

However, the leader should not try to change everything at once, since everything is probably not all bad. In trying to uproot everything, managers often destroy more than they create in crucial competencies and social relationships, thereby disorienting employees and alienating customers in the process. As Sull suggests, leaders “should build on the foundation of the past even as they teach employees that old strategic frames, processes, relationships, and values need to be recast to meet new challenges.The word “recast” sets the right tone for how change should be approached in an historically successful company in which the core values remain constant.

A company’s strategic vision can shift in subtle ways over time, so the wise leader must consciously re-ask the questions, “What are we all about and where are we going?” and then, “Are we going where we need to go?”

Leadership in Establishing Vision of the Organization

To put aim and vision into order might be considered as leaders’ the most significant liability. The vision makes strategic leaders able to determine the norms that offer the direction and larger extents for the enterprise. It offers the basis which enables the authorization of persons to align with independence, judgment, and initiative. Vision must be both broad and specific – broad enough to capture the hopes, dreams, and desires of a knowledge-based work force, and specific enough so that individuals can define the scope of their own work in the fulfillment of the vision.

I. Leader As An Innovator

To bring novelty within the whole institution is considered as the main job of leadership. The responsibility lies on the leadership is to take innovative strategic process, and that starts from thought to evaluating performance to make sure competitive advantage. To look after the whole organization. Leader should care about every aspect that can ensure the effectiveness in the organization. It should carefully develop and execute strategies because strategies are the stairway towards the vision and mission

II. Leader As An Analyst

In the strategic management process, it is the responsibility of leader to analyze the situation to find the gap between current and desired state. Further it is the duty of leader to formulate the plans to overcome the gaps according to the requirement of situation. Strategies based at the analysis of leaders so we can say that an important task of leadership is to scan the organization’s environment carefully. It is the basic function of leadership to organize or streamline the whole organization’s working especially the planning and executing of strategies. Because once they organize the system the change management is no more difficult. Leaders cannot lead efficiently till they cannot organize.

III. Leader As A Decision Maker

Leaders make decisions that help to achieve vision so the most important role of leadership is to make decisions. Leaders are responsible for proper functioning of the organization. So they have to decide what to do, how to do and by whom. Whole strategic management process depends upon the decision making of leader. Leaders decide how to achieve goals. What type of strategies should be and how they should implement? Leader as a collaborator: leadership provides the basis for strategy formulation. And to implement the strategies efficiently there is a need of resource collaboration. It is the responsibility of leader is to provide all the required resources. To fulfil the demand of organization leaders, have to collaborate with other. They make alliances with other organizations. The key task they perform is to create networks that align the organization with environment both internal and external, also locally and globally.

Conclusion

Leadership means taking up responsibilities. Leaders who are responsible make sure the efficacy of the process related to management. It offers the basis for strategy thought-out plan and by the offer of vision, it guides the organization curving into strategy formation. When it makes an attempt to formulate strategy process, it gives a try to bring into line the organization along with the necessary variation of the matrix. Then it gives attention to the enactment of the strategy where the main emphasis of the leadership goes to attain the vision by accomplishing the thought-out strategies. The topmost significant activity of leadership relates the alignment of its vision with the goals and objectives of the organization that result in having an organization’s competitive nature with the effective vibrant milieu; on the other hand, it can train and encourage the workers of the organization to attain the goal and vision. Finally, leadership has to have the evaluation process to ensure the effectiveness of the whole process, and this aspect will facilitate to identify the drawbacks and to make fresh the strategies in line with the change as well. Moreover, this evaluation process is able to help and sustain the constant growth of the institution. Thus, it can be said that leadership is known as the nucleus of the organization, and it should have the pivotal role like the role of blood and brain; as a result, the outcomes of the success can be guaranteed and be shared. The emotion which has the high value becomes winner in the end. The leaders who provide blood, works very hard always become the recipient of lion shares from their followers, and those who provide security and good times when it comes to the pinch, human beings are more known as heroic.

Role of corporate strategy in the formulation of plans and strategies

So you want your business to earn more than a decent amount of profit. You want your business to grow and be a force to reckon with in the industry. Naturally, you also want to be ahead of the competition, beating them soundly and putting as much distance as you can between you.

First, you have to come up with winning strategies, which you will then implement to come out on top. Your strategy formulation should roughly follow these steps:

1. Define the organization and its environment

The first step requires you to take a look at the organization. The points of interest are:

• Target market – This is the domain that the business hopes to dominate, so there is a need for the organization to clearly identify and define the particular group that it will target. Demographic and psychographic factors are the primary indicators considered in defining the organization’s target market.
• Customers – They are the end users of the products and services that the company offers. Who are they? How do they perceive value? Are you able to meet that perception? How do they make their purchasing decisions? Why do they purchase your products or services?
• Offerings – These are the products or services that you are selling to the customers. Do they offer value to the customers, and does that value meet their perceived value? How does the price point affect its value, if at all? What are the end benefits that these products and services have that convince customers to buy them?
• Adaptation to changes and challenges – Business environments are, at best, unstable in the sense that changes are expected and even anticipated. Anticipation will spur the company to come up with strategies to be able to adapt quickly and effectively. Therefore, the organization has to identify the potential challenges that are expected to arise. The most common examples are the introduction of new technologies and equipment, and updates in systems.

2. Define the strategic mission

Organizations are forward-looking, and they want to achieve something as they move the business along. The strategic mission will provide a clear picture of that long-range outlook, providing an overview of what the business wants to achieve. This will serve as a definitive and clear guide for the organization and its members as they carry out the tasks indicated in the plan.

A strong strategic mission should have all, if not most, of the following:

• An indication of a long-range perspective. The business is looking at the long term, not just one, three or five years down the road. It has to be clear on that front.
• Core values of the organization. The mission must include the values that are upheld and highly esteemed by the organization. These values will largely dictate how you are going to go about the process of achieving the goals of the organization.
• Nature of the business. Briefly, include a description of the core activities or main line of business of the organization. Is it in commercial retail, healthcare services, or automobile manufacturing?
• Current position of the organization in the market. Is the organization currently holding the leader position in the market? Are there special characteristics or features that clearly distinguish the organization from the rest? These should also be noted in the strategic mission.
• Vision of the organization. This is a statement of what and where the organization wants to be in the future, on its own and in the market.

Here are some tips that may help you when crafting your Strategic Mission statement.

• Start by taking a look at the main operations and offerings of the business and how they go about them. Consider also the end users or recipients of the output of these operations.
• Focus on the “what is”, not the “what should be”. That means you have to be objective in looking at the current state of affairs in the organization and the industry it belongs to.
• Present your drafts to other members of the information for critiquing. You may be able to get more pointers from their feedback, since they are likely to be more objective when evaluating the mission statement.
• Get pointers from other companies. In fact, it would be a great idea to take a look at the mission statements of your competitors, considering how you are pretty much in the same position and, probably, with a similar vision. Be careful, however, that you won’t be copying their mission statements outright.
• You might end up making dozens of draft mission statements and scrapping all of them. That is fine. Keep revising and improving until you have a draft of a mission statement that you are fully satisfied with, and that captures and reflects the organizations long-range perspective perfectly.

3. Define and set the strategic objectives

Strategic objectives represent what the organization must achieve in order for it to become competitive – or to remain competitive – and ensure sustainability of the business over the long term. They come in the form of specific responses or aims of the organization to address issues regarding competitiveness, long-term sustainability and other business advantages.

If the strategic mission will serve as a directional guide for where the business wants to be, the strategic objectives will serve as a directional guide on how the business will make use of its resources and carry out key functions and activities.

In essence, defining the strategic objectives involves identifying performance targets that the members of the organization will aim for, and these targets are clearly geared towards the attainment of the goals.

When setting strategic objectives, keep the following in mind:

• They should be specific and easy to understand by everyone, especially the members of the organization.
• They should be aligned with the strategic mission of the organization.
• They should be communicated to all employees and other members of the organization, and every effort must be made to ensure that they fully understand the objectives, as well as their individual and collective roles in achieving these targets.

• A strategic objective may be something as specific as “to increase annual growth sales rate by 15%”. Or it could be something like how New Leaf Paper set out to develop a new market for environmentally sustainable papers, and pioneer that market by introducing innovative environmental paper products. It is in keeping with how their mission statement referred to the organization’s environmental and sustainability thrusts, as well as that reference to inspiring and stimulating a shift in the paper industry.

4. Define the competitive strategy

The next step in strategy formulation is where the organization will start identifying and coming up with its long-term plan to gain advantage – and maintain it – over the competition. This is known as the competitive advantage, and the plan is referred to as the competitive strategy.

There are three factors at play when determining the Competitive Strategy of the organization.

• Market size: Logic would dictate that the overall competitive strategy of a business in the South American hotel industry will have differences with that of a firm in the larger European hotel industry. The size of the market comes with several implications. For example, larger markets generally have more players, which means more competitors. It also often means higher amounts of investment and resource allocations by the company since they have a larger area to cover. These, and other factors, are sure to influence an organization’s competitive strategy.
• Market growth trends: This requires looking into past market growth, how the market is currently moving along, and any potential growth in the future. Many industrial and market analysts conduct these types of studies from time to time, providing businesses with their inputs and thoughts on the future of the market, which these businesses will then use in its strategic management processes.
• Competition: A particular point of interest is competitive profitability. How are the competing firms in the market doing in terms of profit-earning? Are their huge disparities in their profit levels? Is the average actual profitability of the firms lower or higher than the expected industry average?
• Movements in and out of the market: You also have to consider the number of new market entries, withdrawals from the market, and a comparison of the two. A market with too many new entrants can mean a lot of things. It is possible that new players are coming in because they think there is still room for them. Some may also deem the existing firms in the market as weak competition, which is why they are coming in.
• Threats to the industry: Some industries are prone to more threats than others, and this is bound to affect the formulation of strategies. Aside from getting a feel for the level of vulnerability of the industry to threats, the potential threats should also be clearly identified.

The competitive position of the organization

This time, the focus is on the competition. Know who your competitors are and understand how they work. In aid of defining a competitive strategy, you should:

• Gain an understanding of the operations of competitors, such as their products and services, their marketing campaigns, and their customer bases.
• Analyze how the competitors are able to deliver value to their customers through their product offerings.
• Identify the strengths and weaknesses of competitors, and analyze how they are opportunities and threats to the organization.

The strengths and weaknesses of the organization

The organization also has to look internally and look into itself. In particular, it has to identify its strengths and acknowledge its weaknesses. By doing so, defining a competitive strategy will be easier.

Again, specificity is important when coming up with competitive strategies. Let us take a look at some competitive strategy examples:

• Produce at low cost and sell at a low price, but at high volume
• Pursue a market niche strategy