The importance of strategic leadership in the global business environment

The importance of strategic leadership in the global business environment Introduction The kind of leadership approaches used by management in an organization is crucial in determining whether the set vision, goals and objectives will be attained.Advertising We will write a custom essay sample on The importance of strategic leadership in the global business environment specifically for you for only $16.05 $11/page Learn More Strategic leadership A strategy refers to an action plan. The plan is communicated to staff and they are motivated in attaining results. There are four approaches that are used by strategic leaders; these are classical, rational, evolutionary and systematic. Strategic Leadership Management There is a difference between management and leadership. Leadership on the other hand is creative, innovative and proactive. With the changing and highly competitive global business environment it is paramount for the company to practice strategic leadership. There are the internal changes that may involve changes in corpora te policies, financial constraints and strategy and external forces of change which include changes in customer demands, the political environment and technology Corporate Parenting Corporate parenting refers to the level of controls a company has over its subsidiaries and associate companies. There are three levels of corporate parenting. There are three levels of corporate parenting; financial, strategic and intervention. Globalization Globalization has many merits with the consumer being the major beneficiary. The idea of monopolies is defeated as businesses are forced to compete globally. The quality of products a company offers has to be very high. It increases specialization in the companies. Global Strategy and the Current challenges In today’s global business environment, strategic leadership is required. In strategic organizations, the leader expresses a vision for the global organization and motivates the people towards achieving that vision. Decisions have to be ma de on which foreign markets to invest in and what products to sell. There are many factors to be considered when getting involved in foreign markets such as the legal environment, the social and cultural environment and the competitive environment. Conclusion Strategic leadership is integral in maintaining a successful and sustainable global strategy. To be inflexible and static would lead to the death of any company competing in the global markets.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Introduction The kind of leadership approaches used by management in an organization are crucial in determining whether the set vision, mission, goals and objectives will be attained. In today’s turbulent global market the kind of leadership that is required is strategic leadership. Strategic  Leadership:  A strategy refers to an action plan. In an organization, the management communicates to the staff an action plan. The leader motivates them to work hard to achieve results. It is all about setting goals and objectives and achieving them over time (Cole, 1997). The main challenge for the strategic leader is the environment in which the business operates in. There is such uncertainty and risk in today’s business environment. The leaders have to make decisions based on volatile knowledge as it keeps changing daily (Guillot, 2003). Leaders are faced with making tough decisions. To some extent strategic management is an intuitive and philosophical undertaking (Parnell, 2003). The decisions plans have to be feasible and realistic and at the same time the most profitable to the organization. The leader considers the benefits of achieving the strategy and finds the challenges worthwhile (Morebusiness.com Editors, 2007).  There are four approaches that are used by strategic leaders (Whittington, 2002). The first approach is the classical theory where th e objective of the leaders is profit making.  Ã‚  Rational thinking is used to attain it. If a business is not profitable it is discarded. The second theory, evolutionary theory is different in that it does not focus on rationality alone. The environment in which the business is operating in is a critical factor. A radical kind of thinking and flexibility is required in complex and dynamic environments. By firms operating strategically in the dynamic environment, they ensure continuity of the organization (Ansoff, 1985). Many scholars have argued classical approach is irrelevant since it does not put into consideration the current dynamic environments (Skaik, 2009). The markets really determine who will stay in business. Very few businesses survive in the dynamic markets. The evolutionary method argues that markets are tough and unpredictable. It assumes the managers may not have the ability to establish long term strategies. Tough competition has to be dealt with by the companies struggling to survive. Companies will not succeed through rational thinking and calculation alone. In the processual approach the company considers the diverse realities on the ground. In this theory the managers consider the several individuals in the company and the different goals they may have. The goals have to be synchronized towards a common goal. Secondly the managers have to be aggressive since the markets are too messy and confused to be left in control of the company. In the systemic approach the company appreciates the role of the social environment on the company (Cuizon, 2009).Advertising We will write a custom essay sample on The importance of strategic leadership in the global business environment specifically for you for only $16.05 $11/page Learn More The family, religion and State have a huge impact on strategy. These relationships dictate how the staff members should conduct themselves. The leaders are optimistic they will be efficient and effective. Strategic Leadership and Management: There is a difference between management and leadership. Management ensures work is done. Managers focus on the daily directing and controlling activities. It is the authority and role given to them by the organization. The managerial skills are a great asset though deficient in the current fast-paced changing environment (Coach4growth Editors, 2010). This is because management is mostly reactive to situations. Reactive leaders worry about the day, they are tactical and operational. They do nothing to offset most of the future risk (CMOE Editors, 2010). They may even resist change instead of adapting to it and seeing the opportunities and competitive advantages therein.  Managers end up doing a lot of fire-fighting and are not proactive. Energy is spent mostly on resolving issues instead of analyzing the local and global environment. A manager has a vision and a goal but that is hardly enough. Leadership is creative, innovative a nd proactive (Sullivan, 2006). With the changing and highly competitive global business environment, it is paramount for the company to practice strategic leadership. Leaders anticipate troubles and opportunities. They are highly observant and aware of their surroundings and the changes therein. To a leader flexibility means staying open to opportunities as they arise (Mazur, 2010). They observe the emerging trends and patterns and adjust to the changing business climate. The forces of change a company faces are of two types. The first one is an internal change that may involve changes in corporate policies, financial constraints and changes in strategy. External forces of change include changes in customer demands, the political environment and technology. Leaders carry out Swot analysis in a bid to achieve a competitive advantage edge. They actively involve themselves in action-oriented plans. They communicate a strategy to the people and motivate them to achieve it. The leader is different in that above having vision and goals he is able to â€Å"sell† the vision to the people. He motivates them to buy the vision and aggressively pursue it. The leader is involved in inspiring staff to be self-driven. It may even involve using participative models for leadership such as teamwork. Leaders are more aware of change and guide the organization towards continuous improvement and learning. They are change agents where the managers would be satisfied with maintaining the status quo. There have been many arguments about the differences in leadership and management. In the global environment strategic leadership and management skills are both very important. The strategic leader should also be able to handle day to day tasks and at the same time be forward looking considering change and opportunities for growth. Being a leader with no managerial qualities will not help as one will not be able to operate the vision.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Corporate Parenting: Corporate parenting refers to the level of controls a company has over its subsidiaries and associate companies (Scribd Editors, 2010). There are three levels of corporate parenting. The first level refers to the financial controls that the parent company has over the business subsidiaries. The individual companies may carry out business activities and make decisions but the parent company sets the performance standards, goals and budgets for the subsidiaries. The parent company secondly has strategic control over the business unit. This is achieved by the parent company coming up with the common goal and vision. It ensures there is unity in all the business units towards achieving the common purpose. The third level of control is through intervention. When any issues arise in the business units the parent company intervenes and provides the ultimate control and decisions. Corporate parenting raises pertinent questions. What businesses should a company own? What are the organizational structures, management processes and philosophies that will enable the company to have superior performance compared to their competitors? It is unfortunate that most planning processes aim at developing the company at the business level and not at the global level yet the parenting strategy brings competitive advantage by controlling businesses that would potentially be independent (Campbell,1995). The parent company guides the individual businesses financial spending. It also acts as a central point connecting the subsidiaries to one another. Furthermore the parent company provides competent departmental functions. The parent company makes wise decisions in acquisitions, joint ventures and divestments. The newer business being adopted into existing corporations to some extent will not struggle. They will get a wealth of resources to draw from the parent company. A brand name and market presence have already been created to a certain level. There are policie s, procedures and a vision in place. However there may be certain factors to consider. The strategic leader has to ensure that the implemented policies fit well in the new venture’s environment otherwise there will be frustration. The parent company helps the ventures control costs. However reporting to the parent company works like a double-edged sword whereby there are benefits and costs (Miller, 1991). Where there is bureaucracy in decision making, subsidiaries may miss out on opportunities due to decision delay concerning product launches. There has to be a balance in the controls the parent company exerts over other business units. Globalization: There are numerous advantages of globalization. The consumer is the real winner in the globalised market (Nash, 2008). The idea of monopolies is defeated as businesses are forced to compete globally. The quality of products a company offers has to be very high. It increases specialization in the companies. Consumers do not have to buy overpriced goods from local companies. They can now buy the goods at a cheaper price from international companies that incur less manufacturing costs. The company benefits as they gain access to wider markets. The benefit of globalization for employees is career advancement as the company grows in staff numbers (Exforsys Inc Editors, 2000). On the other hand globalization may serve to slow down the processes in a company. It may take a long time to come up with a decision where there is bureaucracy. The management and leadership skills in a certain place may not be effective in another location. The company has to adjust culturally to the new target locations. The employees may end up stagnating in the large human resource pool. These are just a few of the changes that the leader faces. These global challenges need to be handled aggressively and strategically. Global Strategy and the Current challenges:  Ã‚  In today’s global business environment, strategic leadershi p is required. The strategic leader expresses a vision for the global organization and motivates the people towards achieving that vision (Juneju, 1998). Such a leader is loyal to the vision. Furthermore he keeps the people updated on the challenges and changes of the vision and the ways of achieving that vision. They are skilled in giving instructions. They are not dictatorial at all. They are listeners able to gain the confidence and trust of the staff (Aiman, 2007). A strategic leader must have a global perspective and be very innovative. Global strategy is planned at an international level since a company wants to take advantage of the global markets. Decisions have to be made on which foreign markets to invest in and what products to sell. Are there markets for the company products in the new target markets? How will the company products be promoted in the particular countries? There are many factors to be considered when getting involved in foreign markets such as the legal en vironment, the social and cultural environment and the competitive environment. The new markets are necessary as a company finds itself in its locale with a saturated market. Expanding globally to new markets increases the sales of the company. For example in the 1990’s 40% of the sales of coca cola’s sales came from foreign markets. This accounted for 60% of the company’s profits (Mote, 2010). Another advantage of engaging in global strategy is risk diversification. A company is no longer so vulnerable to the locale low economic cyclic.  Ã‚  A strategic leader needs to have forecasting and analytical skills to analyze the strengths, weaknesses, opportunities and threats of the company globally. Global strategy does not only refer to the handling of foreign markets of the company but also the handling of the inflow of global competition within the local country. One of the challenges is on how to create a strong market presence in the foreign country. Currentl y strategic leaders have been facing several challenges. The first one is change. Recently there was a global financial crisis in the Western countries that also trickled down to subsidiary countries. The housing crisis, high energy prices and over-extension of consumer debt led to many companies almost going bankrupt. This led to high loss of jobs (Dean, 2008). The global companies had to cut costs resulting to retrenchment and offers of early retirement. Companies such as audit firms had to let go of some of their employees in their subsidiary companies in Africa. The leader has to be innovative and resilient. This is a crisis that leaders learnt from and they realized the importance of diversifying their sources of income. Apart from economic changes there are political, environmental and legal changes that may take place in a country. The global crisis necessitated the change in the transaction laws. Risk of the transaction now is considered and weighed highly. The strategic lea der should always be aware of the expert arguments and discussions in the economic sectors. The issue of global warming is a hot issue now. Companies that use eco-friendly forms of energy are viewed more positively. Strategic leaders need to view this form of energy as not only cost-saving but opportunities to offer new products and services (Deloitte Editors, 2010) Firms that adapt rapidly to changes will be highly profitable. Global operations also bring in the second challenge of complexity of the organization’s operations. As the company expands the management is faced with the challenges of controlling activities that are beyond the country’s borders. The company now involves more staff. For companies engaged in the US, there is a growing trend of an aging workforce. These are the children born after the Second World War Two who are also referred to as ‘baby boomers’ (Larson, 2009). Families are more conscious and deliberate on the number of children they should have. They have mostly decided it is less. In Germany the death rate is higher than the birth rate. This has been the case for the last twenty years. Companies in that country outsource jobs to India. India has a high population and is a leading economy in outsourcing services. In Russia the population for the last ten years has been decreasing. The strategic company should have policies that are equitable and fair towards an aging workforce. It should also be flexible and engage in outsourcing human manpower. The companies in the global environment will be dealing with three kinds of age groups. In the West the aging workforce may dominate but in India and Africa there are a lot of young people. The management also needs to be able to handle older women well. With the financial crisis, retirement plans have changed and they will retire later. Thirdly there is strong competition in global markets. First of all there are the protected companies in the developing countries that enjoy tax incentives. They incur lower costs of production enabling them to sell their products cheaper. Lately there have been trade agreements being formed among countries in order to deal with the effects of globalization. In Africa there will be the formation of the East Africa Community for countries in the East Africa Region. Through trade agreements there is minimization of costs among member countries. It also encourages peace and cooperation (Divya, 2009) In Europe the use of the Euro single currency has helped the participating countries gain prominence in global markets. With the recent global financial crisis there will be higher cooperation between these member countries. Maintaining the monetary union will benefit all the member countries. The first company in a foreign market industry no longer enjoys being the lead for long since the market gets saturated and the competition keeps increases. Globally any company has to deal with the successful emerging economie s of India and China. India provides a lot of goods while India is at the forefront providing services. Companies have had to move offshore in search of new markets. A company should provide superior and high quality products.  Ã‚  A company may choose to be the low cost provider in a price sensitive market. Another strategy may be product differentiation. The final and very important challenge for a company is ethics and culture. An important aspect of global strategy is the moral and ethical practices of the country in the target countries. Issues of global social responsibility will definitely arise. The company may need to get involved in community initiatives in order to improve their image in the eyes of the locals. The company should ensure they practice honest advertising. The consumer should be educated on the product uses, dangers and side effects if any. This is a big challenge as shareholders desire to maximize profit. Another challenge is the change in the faces of th e family unit in the workplace. With the tough economic times both parents are forced to work. Companies have to include child care as one of their work incentives in order to increase the workers job mobility. The parents need workplaces that will take care of their babies as they work. Thirdly a company has to carry out a thorough research of the target market. Several companies due to inadequate research have launched products with ineffective names or marketing ads in their target countries. An example is when in the 1970’s General Motors attempted to market its Nova automobile in the country of Mexico. This proved difficult since the Mexican translation of the word Nova means â€Å"No go†. 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