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Studying this chapter should provide you with
the strategic management knowledge needed to:
1. Define strategic leadership and describe
top-level managers’ importance as a
2. Define top management teams and
explain their effects on firm performance.
3. Describe the internal and external
managerial labor markets and their
effects on developing and implementing
4. Discuss the value of strategic leadership
in determining the firm’s strategic
AP Photo/Marty Lederhandler
5. Describe the importance of strategic
leaders in managing the firm’s resources,
with emphasis on exploiting and
maintaining core competencies, human
capital, and social capital.
6. Define organizational culture and explain
what must be done to sustain an effective
7. Explain what strategic leaders can do to
establish and emphasize ethical practices.
8. Discuss the importance and use of
Andrea Jung, CEO of Avon Products (center), in New
York’s Central Park. Emphasizing women’s health and
self-esteem, Avon Products recently launched “Avon
Running—Global Women’s Circuit,” a series of 10K and
5K fitness walks and prerace clinics in 11 U.S. cities and
16 countries. Andrea Jung, together with Susan Kropf
(COO), have strengthened Avon domestically and abroad.
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Strategic Leadership: The Good, the Bad, and the Guilty
“The truth is that CEOs are flawed individuals who are operating in a complex and imperfect world. . . .They are intensely driven to achieve and they operate in a marketplace that measures achievement almost wholly in the short term. They confront a world that moves faster than ever before, and really, there is little about their unwieldy organizations that they easily control.” Despite the major scandals and poor performance of corporations, the current crop of CEOs is no worse overall than previous CEOs. According to Keith Hammonds, the difference is that they now play in a different “sandbox” than they did ten years ago. In 1993, the CEOs of American Express, IBM, and Westinghouse were all forced to resign in the same week. Their companies were performing poorly. Today, a number of companies are performing poorly and a good number of CEOs have resigned because of their company’s performance (or because of unethical practices that have come to light).
Regardless of the challenges, some effective and successful strategic leaders do exist. For example, the team of Andrea Jung, CEO, and Susan Kropf, COO, of Avon Products deftly avoided a potential disaster for the company in the economic free fall experienced in Argentina, and have taken other actions to solidify Avon’s position in domestic and international markets. While 5 percent of Avon’s sales came from Argentina, Jung and Kropf have effectively expanded sales in other parts of the world. They have made Avon a major player in the $500 million market in Central and Eastern Europe and have increased sales by 30 percent in China. In 2002, Avon achieved its third consecutive year in which its earnings per share increased by more than 10 percent (an accomplishment in a very weak economy). Another successful strategic leader is James Morgan, recently retired CEO of Applied Materials. Before his retirement, Morgan had the distinction of being the longest-serving CEO in Silicon Valley, having held the position for 25 years. Morgan was thought of as a forward thinker, but actions leading to this description caused some analysts to question his strategies. Morgan took bold actions in slow economic times, a strategy that often produced revenue and market share growth when the economic turnaround began. In the 1980s, he moved into Asian markets before most U.S. firms perceived the opportunities there. Although Morgan’s action was heavily...
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