Student name: Bibek Pant

Student id: U3104011

Unit Name: Strategic management
Assignment: 2nd individual assignment
Word count: 2078

Introduction:
Business today functions in a very complex and challenging manner. Organisations now no
more works in isolation and depend on dynamic leadership to guide them through
unprecedented changes. Evidence have proved that even the best and venerable organizations
are failing to adapt to change, implement their strategic plans successfully or prepare for a
more uncertain future. This turmoil has something to do with leadership. (Pasmore. W, 2014)

Strategic leadership includes: making strategic decisions concerning the products and
services of organizations and markets; selection of key executives; and allocation of
resources to major organizational components; formulation of organizational goals and
strategy; (House & Aditya, 1997, p.445).

Strategic leadership has a clear vision and mission for a company, organization or a
Government as it must have a core purpose and core values that always remains static. The
strategies and practices attached to the company have to adapt to the fast growing world.
Vision provides direction about what to preserve and what to change.
Strategic leadership thinks strategically and navigate the unknown effectively: the abilities to
anticipate, challenge, interpret, decide, align and learn. An adaptive strategic leader is
resolute and flexible, persistent in the face of setbacks but also able to react strategically to
environmental shifts. ( Schoemaker and Howland, 2013).
Literature on Strategic leader
Even gifted executives with the best and most admired management training dont
necessarily make star CEOs. When a company hires a new leadership, it gets a bundle of

abilities and experience. Some general management skills such as setting a vision, motivating
employees, organizing: budgeting: and monitoring performance have been shown to translate
well to new environments. This is conventional leadership. Strategic leadership falls under
three catagories: strategic human capital, or the individuals strategic expertise in cost cutting,
growth, or cyclical markets: industry human capital, meaning technical and regulatory
knowledge unique to an industry: and relationship human capital, to the extent to which an
individual managers effectiveness can be attributed to his experience working with
colleagues or as part of a team. By probing the facts behind such fabled talent, it is concluded
that companies need to look beyond corporate pedigree when choosing a new leader.
Groysberg, McLean & Nohria ( 2006).
Strategic leadership brings forth what Einstein sums up the challenge we face: No problem
can be solved from the same consciousness that created it. We must learn to see the world
anew. (Keene, 2000). According to the theory of complexity, our world is not a reality of
things independent of ourselves, but a world of relationships and the quality of those
relationships will determine the quality of our reality. Strategic leadership will therefore, be
one of creating and determining the purpose of the organization, its vision, purpose, values,
competitive positioning, core capabilities and competencies. (Keene, 2000).
Firm Strategy stems from values, vision, competitive positioning and development of core
capabilities and competencies but leadership is the main root that forms firms strategy.
Though vision helps to formulate strategies, a leadership style in an organization positively
predicts the inspirational strength of their vision statement. (Berson, Y., Shamir, B., Avolio,
B.J. & Popper, M. 2001).
In uncertain and difficult times visioning is vital to establish direction (Ian, 1992). Strategic
vision is a coherent and powerful statement of what the business should aim to become. It

must be realistic about the market, competitive, economic, and regulatory conditions and
reflect the values and aspirations of management, employees, and stakeholders (Ian, 1992)
The more value an organization creates, the more profitable it is likely to be. A strategy is
formed by taking into consideration the value an organization wants to and can provide to
customers. However, only a good leader can foresee the future and evaluate the potential of
an organization to create value and makes strategic plans and decisions accordingly.
A Core Competency is a deep proficiency that enables a company to deliver unique value to
customers. It embodies an organizations collective learning, particularly of how to
coordinate diverse production skills and integrate multiple technologies. Such a Core
Competency creates sustainable competitive advantage for a company and helps it branch
into a wide variety of related markets. Core Competencies also contribute substantially to the
benefits a companys products offer customers (porter, 1985).
A strong leader recognizes the core competencies and capabilities of an organization and
make strategies fully utilizing its core competencies which helps it to position itself higher
than other companies in that specific industry. Mismatched capabilities, poor asset
configurations, and inadequate execution can all play their part in undermining a company's
strategic objectives. Since bold strategies often require breakthroughs along a number of
fronts, a company needs stronger and more dominant leadership at all levels if these
strategies are to succeed (Tsun-yan Hsieh and Sara Yik, 2005).
In nutshell, leadership plays the most important role in formation, success and failure of
organizational strategies. Hence, strategic leadership is the base for formulating firm strategy.
Hambrick and Mason (1984) built an idea that the specific knowledge, experience, values,
and preferences of top managers will influence their assessment of the external environment,

and ultimately the choices they make about organizational strategy. This theory was adapted
and expanded by subsequent authors, and eventually came to be known as strategic
leadership theory (Finkelstein & Hambrick, 1996). A fundamental premise of strategic
leadership theory is that a leaders field of vision and interpretation of information is
influenced by that leaders values, cognitions, and personality (Cannella & Monroe, 1997).
As per Boal and Schultz (2007), strategic leadership supports and sustains innovation that
encourage a motivated response to new situations and challenges (Boal and Schultz, 2007,
p. 412). A strategic leader can focus on activities that yield highest return or on activities
which need severe attention by analysing each activity separately.

Strategic issues of IKEA

IKEA is a furniture store with stores in multiple nations with affordable prices. The furniture
store has an impressive 298 stores in 26 countries, selling $US36 billion a year (Ikea's
Strategy for Becoming the World's Most Successful Retailer | Business Insider. 2015).
However, there are few strategic issues like executive succession, technical changes, major
shift in customer needs, globalization of the industry and changing workforce capabilities that
may impact its future profitability and growth.

Executive succession:
IKEA follows an autocratic leadership (Ingvar Kamprads leadership style, 2015). Though
this strategy has been effective till now, it acts as a barrier for innovation and demotivates
employees. To gain competitive advantage in market, IKEA should change it leadership
pattern from autocratic to democratic leadership. This will benefit IKEA through valuable
insight to given issues, high morale of employees and innovation.

To change the pattern of Autocratic leadership, it is beneficial to hire an external qualified

CEO from external managerial labour market rather than promoting an internal senior
executive in line (Hanson, D., Hitt, M.A., Ireland, R.D. & Hoskisson, R.E. 2014). Failure to
do so will lead to downfall of company as it will not have any competitive edge. One bad
succession decision at the top organization can undermine a decade of hard work (Kotter,
1995).

Technical changes:
As per emarketer there has been a significant growth in ecommerce sale in Australia
(Australian Retail Ecommerce Sales to Top $10 Billion in 2015 eMarketer, 2015).
Competitors like Temple and Webster and e-bay are highly advanced in technology and are
flourishing due to World Wide Web. IKEA is still not technically equipped to compete with
them. It has its own webpage like an online magazine but it does not sell products online.
This impacts its positioning in industry and can throw it out of competition.
Strategic leadership is required to solve this issue. A strategic leader through internal and
external analysis, can analyse the market demand and can revise the proportion of investment
on research and development and other functions. As mentioned by Hagel and Singer (1999)
electronic commerce is the next future and to stay in competition one has to be technically
advanced.
Major shift in customer needs and Changing Workforce capabilities:
Customers expect good quality product in low price, due to which IKEA grew a lot. But, with
the emergence of ecommerce customers are preferring shopping online than going to stores.
This major shift in customer preference can be a cause of concern for IKEA. With the pace
customers are opting for online shopping options, IKEA would lose lot of potential customer

if it did not launch a buy option online. Need for strategic leadership is very important here.
A good leader has a good vision as mentioned earlier. Leaders by changing the recruitment
policy, could hire people with technical with other competencies like leadership and
interpersonal skills. They can also change the workforce capabilities by providing training to
employees. A strategic decision has to be taken by senior executives and CEO to allocate
funds and time for training employees to attain new skills like technical skills, so that they are
multi-skilled and flexible. Top-level managers by focusing on recognition of employees
contributions and treating them like valuable assets can maximize opportunities for personal
growth and development. (Bartlett & Ghoshal, 1994).

Globalization of the business:

IKEA has its branch in different countries and all branches are impacted by the local market
of the foreign countries. A good strategic leader is able take good hiring and advertising
decisions, giving result to boost in productivity. With globalization, the need for strategic
leadership has increased. IKEA follows a transnational leadership pattern and is benefitting
from it. Transnational strategy is an international strategy through which a firm seeks to
achieve both global efficiency and local responsiveness. Ex in China it has decentralized its
decision making responsibility unlike in some other countries. IKEA does not significantly
change its corporate strategy and operations to adapt to local markets unless there is a
compelling reason for doing so (Twarowska and Kakol, 2015).

Recommendation:
IKEA through strategic leadership can overcome the above mentioned issue. However, it is
recommended to use strategic tools like Porters value chain analysis by the leaders for
successful strategies. Inability to use value chain analysis and strategic leadership, will make
the firm rigid and inflexible leading to blockage of growth, work saturation in organization,
low competitive skills and decrease in goodwill. These factors can further result in downfall
of organization.

Conclusion:

Strategic leaders by either hiring new qualified workers or by training existing workers, can
gain technical skills to stay in competition. Executive succession is very important and as
IKEA needs a change and innovative policies, I have suggested recruiting a CEO or senior
executives from external labour market. IKEAs international strategy is its plus point so it
should continue with this strategy. However their leaders have to keep a keen eye and identify
customers changing preference quickly and fulfil their corporate social responsibility to gain
competitive advantage for above average returns within societal values.

References:
1. Porter, Michael E., "Competitive Advantage". 1985, Ch. 1, pp 11-15. The Free Press.
New York.
2. Porter's Value Chain. 2015. Porter's Value Chain. [ONLINE] Available at:
http://www.ifm.eng.cam.ac.uk/research/dstools/value-chain-/. [Accessed 24 October
2015].

3. Australian Retail Ecommerce Sales to Top $10 Billion in 2015 - eMarketer . 2015.
Australian Retail Ecommerce Sales to Top $10 Billion in 2015 - eMarketer .
[ONLINE] Available at: http://www.emarketer.com/Article/Australian-RetailEcommerce-Sales-Top-10-Billion-2015/1011823. [Accessed 24 October 2015].
4. Hagel and Singer, 1999. Unbundling the Corporation, Harvard Business Review,
MarchApril.

5. Bartlett & Ghoshal, 1994. Changing the Role of Top Management: Beyond Strategy
to Purpose, Harvard Business Review, November-December, pp. 79-88

6. (Katarzyna Twarowska and Magdalena Kakol, 2015. . [ONLINE] Available at:

http://www.toknowpress.net/ISBN/978-961-6914-02-4/papers/ML13-349.pdf.
[Accessed 24 October 2015].).

7. Kotter, 1995. Leading Change, Why Transformation Efforts Fail, Harvard Business
Review, Mar-Apr pp. 59-67).

8. Berson, Y., Shamir, B., Avolio, B.J. & Popper, M. 2001, "The relationship between
vision strength, leadership style, and context", The Leadership Quarterly, vol. 12, no.
1, pp. 53-73.
9. Hsieh, T. & Yik, S. 2005, "Leadership as the starting point of strategy", The
McKinsey Quarterly, , no. 1, pp. 66.
10. Finkelstein and Hambrick, 1996, S. Finkelstein, D.C. Hambrick, Strategic leadership:
Top executives and their effects on organizations, West Publishing Company, St. Paul,
MN (1996)

11. Ham brick, D.C. & Mason, P.A. 1984, "Upper Echelons: The Organization as a
Reflection of Its Top Managers", The Academy of Management Review, vol. 9, no. 2,
pp. 193-206.
12. Cannella, A. A., & Monroe, M. J. (1997). Contrasting perspectives on strategic
leaders: Toward a more realistic view of top managers. Journal of Management, 23,
213,237.

13. Boal, K. B. (2007). Strategic leadership, organizational learning, and network ties.

14. Ikea's Strategy For Becoming The World's Most Successful Retailer | Business
Insider. 2015. Ikea's Strategy For Becoming The World's Most Successful Retailer |
Business Insider. [ONLINE] Available at: http://www.businessinsider.com.au/ikeasstrategy-for-success-2015-1. [Accessed 24 October 2015].

15. Hanson, D., Hitt, M.A., Ireland, R.D. & Hoskisson, R.E. 2014, Strategic management:
competitiveness and globalization, 5th asia-pacificition. Edn. Cengage Learning,
South Melbourne, Victoria

16. Ingvar Kamprads leadership style. 2015. Ingvar Kamprads leadership style.
[ONLINE] Available at: http://testervn.hubpages.com/hub/Ingvar-Kampradsleadership-style. [Accessed 24 October 2015].

17. Bartlett & Ghoshal, 1994. Changing the Role of Top Management: Beyond Strategy
to Purpose, Harvard Business Review, November-December, pp. 79-88.