Organizational Leadership. The Importance of Strategic Leadership in Business

Scientific Essay, 2017

24 Pages

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Political Economy



Organizational Leadership

The aim of this article is to discuss about the importance of strategic leader in business organization. The research project paper encompasses the relationship between leadership and general business environment in terms of competition, market and political economy as well as its implications of strategic leadership to the business performance of the firm.


Leadership is defined as the initiation and maintenance of structure in expectation and interaction (Stogdill, 2005). To define leadership as a trait is different from defining it as a process. The trait perspective interprets leadership as a property possessed in variable degrees by different people (Jago, 1982). It suggests that it resides in select people and restricts leadership to those who have special and inborn talents (Northouse, 2009). In contrast, Northouse also mentions the process viewpoint in leadership is pertaining to the interactions between followers and the leaders and makes leadership reachable to everyone.

The process leadership is to use the non-coercive influence to direct and coordinate the activities of the members of an organized group toward accomplishment of group objectives (Stogdill, 1948). Here, there is a convincing argument that leadership is process, not a position (Hoojiberg, 2007). One's position does not naturally make one a leader or guarantee that leadership unavoidably will take place (Hooijberg, 2007) and leadership can be exercised by anyone in any organization, not just by anyone in positions of authority (Kezar, 2009).

The style approach integrates aspects of the trait and process approaches by proposing that key feature of leadership is the actual behavior of the leader (Black, 2007). Kurt Lewin (1939) guided a group of researchers to classify different styles of leadership. This early study has been very prominent and recognized three major leadership styles.

The three foremost styles of leadership are(U.S. Army Handbook, 1973):

- Authoritarian or autocratic
- Participative or democratic
- Delegative or Free Reign

The three statements below illustrate the three main leadership styles:

Authoritarian (autocratic)

“I want both of you to. . .”

Participative (democratic)

“Let's work together to solve this. . .”

Delegative (free reign)

“You two take care of the problem while I go. . .”


Practically, all definitions of leadership share the viewpoint that leadership involves the process of influence (Vroom and Jago, 2007). There is no single person whose influence on organization’s strategy is superior to that of the chief executive officer (CEO). He must rise to the juncture, especially when there is a significant change in strategy (Freedman and Tregoe, 2004). As pointed by Hollander (1978), the leader is the central and vital part of the leadership process. Leadership is a process of influence which requires an ongoing transaction between a leadership and followers.

Strategic leadership delegates the use of the strategy process as an organized method of decision making that integrates the shared leadership into its concepts and practices. A strategy is not just acts a means used by a leader who exercises his authority that clarifies purposes and priorities, mobilizes motivation and resources, and sets paths for the future (Morrill, 2007).

Strategic leadership refers to a manager’s capability to express a strategic foresight for the organization, or a part of the organization, and to inspire and influence others to attain that vision. Strategic leaders initiate organizational formation, allocate resources and articulate strategic vision. Strategic leaders work in an ambiguous situation on very intricate issues that influence and are influenced by occasions and organizations peripheral to their own (Management Study Guide, 2011).

Handy (1993) states that environment plays an important factor as to the degree of freedom that the leader has to work in. Six key aspects of the environment:

- The power position of the leader in the entire organization.
- The relationship of the leader to the group.
- The organizational norms.
- The structure and technology of the organization.
- The variety of responsibilities.
- The variety of subordinates.

Besides, Handy well thought out the above as internal view of the environment, whilst external Environment includes customers, shareholders, competitors, financial markets, human resource markets, government agencies, supply of resources and cultural influences. Hence, any leader has to influence the environment as well as being influenced by it.

In today’s rapidly changing, global business environment, enterprises are facing steady and often insightful change — from the marketplace, competitors, progressing technologies, and increasing client expectations. Increasing demands for cost control and new products, when shared with a sense of necessity, create an atmosphere that is often pressured and multifaceted (Friedman and Gyr, 1998).

Strategic thinking plays an important role in dynamic business environment. It is a wider and more innovative way of thinking on a daily basis about the entire goals of the job, team and organisation. It is longer-term orientated with a more organized view of the environment (Haines, 2005). Graetz's model (2002) holds that the role of strategic thinking is "to seek innovation and imagine new and very different futures that may lead the company to redefine its core strategies and even its industry” (Wikipedia, 2011).

Recent years have shown that more and more organizations are realizing that working with architecture is essential for achieving and maintaining effective business operations. Nevertheless, implementing an architectural practice is not simple. The concept of dynamic architecture, also known as dynamic enterprise architecture (DYA®) was originally introduced in a book written by a Dutch which is aimed at delivering real value to an organization (Martin and Marlies, 2006). Today, innovative business leaders and most strategy experts do not regard strategy as planning but rather as thinking (Vadim, 2011). As strategic leaders, they must respond to rapidly evolving and a dynamic business environment. Hence, one of the tools to use in dynamic enterprise is DYA®. As an architecture or a framework, which means that the set of principles and models to guide the design and the processes, organizational structures, information, applications and technical infrastructure in the organization (Martin and Marlies, 2006).

Today’s business world is facing with various types of challenges; everybody is struggling and is fighting for survival and existence. In order to survive in a business environment, business leaders nowadays understandably are willing to invest time and resources in talentship development. Talentship provides a direct connection to what they perceive as a critical business need. Effective organization uses talentship concepts in the development of a new strategy or change initiative (Boudreau and Ramstad, 2007).


This research mainly discuss about the relationship between the general business environment and leadership which comprises the factors on competition, market, political economy that require the business leaders to think and practice strategically.


In western world, for instance American business people are free to pursue their dreams without interference. This personal freedom is known as free enterprise (Watkins et al, 2001). Competition, as per theory, brings about commercial firms to develop new products, services and technologies, which would give consumers greater choice and better products (Wikipedia, 2005). As far as this is concerned, in order to improve business environment is by fostering more competition. Competition can raise firm’s incentives to innovate and improve their cost-efficiency (OECD, 2010).

For the past thirty years, competition has occupied the centre of strategic thinking (Kim and Mauborgne, 1999). Competition is one of society’s most powerful forces in for making things better (Porter, 2008). As expounded in one of the Porter’s book titled ‘Competitive Strategy’(1985), says competing on achieving best practices are what he means “ competition to be the best and to be unique”. Porter argues that a school of thought has emerged that strategy is not so important as industry boundaries are said to change so rapidly, but rather profitability is seen as dominated in certain firm position. He also has argued that both industry and position are important, and ignoring either one will cause a firm to peril.

Strategic leaders are frequently aware of competition that can exist between peers; competition for the resources in organization, for attention, for power, for praise, and for the next promotion. Building trust between peers is greatly important for strategic influence to be successful (Hughes and Beatty, 2005). In addition, strategic leaders are also change agents want the organization to not merely to survive, but to thrive to win in the competition for market share or recognition excellence (Grandstaff and Sorenson, 2009).

As the research done by Cameron & Quinn (1999) in the Competing Values Framework (CFV) model, organizations with emphasis on a rational culture encourage competition and the successful achievement of well-defined goals. The CFV provides critical lessons for strategic leaders (Pisapia, 2009). The value creation of Toyota is one the few companies that has demonstrated an ability to pursue several directions simultaneously. ‘Lean production’ and ‘just in time’ manufacturing techniques have set Toyota distinctly from others.

Strategic leadership is concerned about connecting the past, the present and the future of the organization to ensure the continuity in the face of competition and evolution. Particularly under crises, strategic leaders need to act so that they can influence the organization directly through their charismatic and their transformational behaviour (Hooijberg, 2007). One important role the strategic leaders can play in the development of the organization by encouraging the sharing of knowledge and information (Boal, 2006). Cyert and March (1963) argued that firms learn mainly by encountering problems. When organizations come across problems, they instigate a search for solutions, adopt solutions that solve the problem, and hold on to good solutions for future purpose (Boal, 2006).

Other than this, the highly competitive nature of the current business climate creates tremendous global company operations. As strategic business leaders, they ought to rapidly respond to a changing environment, a free enterprise must integrate business functions into a single function efficiently utilizing information technology, and share data with third party vendors and customers (Lee et al, 2003). Current business environment lays emphasis on new management practices. Leaders need to carefully think about the basic board members’ skills, hard and soft, to impart the management team with a good exchange of thoughts. All board members should play a role in the ‘team’ (Nad and Roe, 2010).

Leading in today’s increasingly complicated and fast-paced world is becoming more and more difficult (Riggio and Conger, 2007). In times of turbulence, strategic leaders should know how to manage and resolve conflicts. Leaders can minimize the level of conflict within and between groups by improving their communication and listening skills, as well as spending time networking with others (Yukl, 1989). One of the conflict resolution strategies is by using competition (Thomas, 1976). He describes that competition reflects a desire to achieve one’s own ends at the expense of someone else. This is known as win-lose orientation.

These days, leadership is not about exercising unilateral power. Rather, it is about mobilizing people to face challenges that require new priorities or values, new habits, or new ways of doing business. It is about inspiring them to take responsibilities and do the work that only they can do (Harvard Business School, 2005). As such, strategic leadership needs strategic communication. Leaders must make communication a personal priority and drive its value throughout the organization (Obuchowski, 2005). Effective communication and leadership are closely-related. Winston Churchill, the former prime minister of Britain, a remarkable driver of his success was his skill as an effective communicator (Wreden, 2005).

As with any team, getting the most value from the virtual team requires establishing a firm foundation for success. That foundation includes clear definition of leadership responsibilities and the right type of team culture. Likewise, it is important for a virtual team leader to ensure the team members easily send messages to one another and remain aligned behind the goal (Harvard Business Press, 2010).

The speed at which you can communicate defines how quickly you can make money. If I can respond to customer in six hours anywhere in the world at any time, that is a competitive advantage. That redefines competition.- Bob Buckman (Source:

In order to survive in the changing business environment, a strategic leader has to be equipped himself with continuous learning and training. Change is inevitable. Continuous learning is an intellectual stimulation will lay the foundation for the subordinates acquire the skills, and implement changes. Similarly, training is also essential as it works best when used as a vehicle to achieve organizational by developing skills and improving performance (Ponder, 2005) as well as it has a positive influence on organizational performance (Brewster et al, 2004). Organizations that are lack of appropriate training in crisis leadership are even prepared for the direct threats to their core businesses, for instance, food contamination and product tampering. The companies that are prepared for these are mainly in the food and pharmaceutical industries (Mitroff, 2005).


In today's very competitive marketplace a strategy that insures an unfailing approach to offering your product or service in a way that will outperform the competition is critical. Nevertheless, in concert with defining the marketing strategy you must also have a well defined approach for the day to day process of implementing it. It is of little value to have a strategy if you lack either the capitals or the capability to implement it (Business Resources Software, 2011).

Failure to understand the market requirement in business is one of the biggest mistake business leaders make in dynamic business environment. One study cites the loss of market focus as a leading cause of business failures. A loss of market focus results in missed opportunities (Lussier and Achua, 2010). The question of why a firm successful or fail is perhaps the central question in strategy (Rumelt et al, 1994). To survive, a firm must understand what good corporate strategy is (Porter, 2008).

Strategic thinking allows a business owner or leader to decide how to utilize these resources most effectively and press on the company toward its objectives. Strategic thinking directs the management team on markets that are most likely to succeed (Hill, 2005). Success in the market does not mean total absence of loss, success comes from average performance in many trades (Schabacker, 2005). Staying in touch with the market will help to identify threats to the organization and opportunities to pursue. A thorough understanding of the market means knowing the customers, the competitors and the competitive position within the market (Ponder, 2005). For this reason, it is necessary for a strategic leader to have an in-depth understanding of competitive products and services within the marketplace (Cripe & Mansfield, 2002)

Outstanding business leaders do something like world-class chess players. Before making a decision on what to do next, they work out the possible instantaneous outcomes of their action and contemplate over a series of moves in the more faraway future. Such a method is crucial in rapidly on the rise emerging markets, where one apparently small commitment often triggers an irresistible demand for many additional resources (Schlevogt, 2010).

More and more organizations are thinking of emerging markets in a strategic and systematic way and are recognizing that the emerging markets must be a central part of their long-term global strategy. Undoubtedly, for some organizations emerging markets are now central to their strategy. Economic growth in the emerging markets outpaced growth in the developed world by 4.5% between 2000 and 2005, and it is believed this trend will continue in future ( Pacek and Thorniley, 2007).

Risk deals with the probability and consequences of failure of a strategy. Risk is often part of the strategic leadership (Ireland et al, 2008). In some ways, the decision on whether to enter a high-risk market is simple because the reality is stark and the expectations are more likely to be realistic. For those who have the corporate tolerance calculated risk (for the sake of setting up strategic market leadership), investing in physical assets and establishing operations in high-risk emerging market may result in a firm becoming the market leader (Pacek and Thorniley, 2007).

According to Vadim (2011), leadership-management synergy expounds that a strategic manager controls risk while a strategic leader seeks opportunities. Seeing this, strategic leaders always need to inspire his followers in his teamwork and to provide vision in his empowerment work. The place to ‘strike rich’ is in the emerging markets of the world, and the time is now (Caslione and Thomas, 2000). The emerging markets are mainly from the middle class segment. In relation to this, strategic leaders should venture into the golden opportunities in big four emerging markets like China, India, Russia and Mexico. It is projected that within the next 10 years, these four countries will create a big middle class equal to 800 million consumers (Tiku, 2008).

Conversely, that may also be the place to ‘lose big’ if one is not careful in venturing into emerging markets (Caslione and Thomas, 2000). It is risky to implement half-baked entry and market testing. John Menzer, who took over Wal-Mart’s international operations in 1999, once told the Financial Times in early 2003:

When we decide to go into a new market, we are going to go in with enough mass that we use our core competencies. No more flag-planting or opening a few stores to test out the market. (Source: Pacek and Thorniley, 2007)

As the world emerges from the global recession, excellence in leadership is at the forefront for sustainable success. Leadership ‘soft skills’ can be considered the backbone of a good leader. Invest in soft skills such as strategic thinking and conflict management are some of the core soft skills that will always be beneficial to career growth (Runta, 2008). Soft skills, personal and interpersonal competencies are extremely important in good times and bad. Research also shows that difficulty relating with others is one of the most - if not the most - frequent causes for executive derailment (Ruyle, 2011). Executive derailment occurs when a leader, once seen as a high-potential candidate on the fast-track to executive levels, ends up fired or demoted. Research shows that a surprising 30-50% of executive leaders will suffer from derailment at some point in their career (Mihai, 2009).

Some studies have suggested that the most evident type of executive derailer is the individual high in independence and low in relationship needs. This type of leader would be seen by others as smart, technically strong but with poor team-building skills. This is one type of leader who should be observed and mentored closely to ensure that their skills improve so that they are able to meet and exceed the demand of leadership (Mihai, 2009). In order to avoid derailment, a leader must have the ability to learn and develop continually as this is a key competency in today’s organisations. He needs to recognise that new jobs require new frameworks and new behaviours and then adjust to ‘fill in the gaps’ appropriately. Researchers at the Centre for Creative Leadership (CCL) initiated the research on executive derailment and is planning to launch further research into derailment in Europe and Asia in the future (Prince, 2005).

The Centre for Creative Leadership (CCL) is consistently rated by leading media such as Business Week and the Financial Times as the top provider of executive leadership programs, it is one of the world’s largest organisations dedicated to the understanding, practice and development of leadership in Europe, Asia and the Americas. CCL plows its profits back into research, which underpins all its programs and assessment instruments. CCL’s European headquarters is in Brussels. ( Source: )

Political economy

The study of political economy comprising of two environments, they are the political environment and the economic environment. The political environment can foster or hinder economic developments and direct investments. This environment is ever-changing. As examples, the political and economic philosophies of a nation's leader may change overnight. The stability of a nation's government, which frequently rests on the support of the people, can be very volatile. Various citizen groups with vested interests can undermine investment operations and opportunities. And local governments may view foreign firms suspiciously (Cliffs Notes, 2011).

A strategic business leader has to be aware that credibility is foundation of leadership. People want to follow leaders who are credible (Kouzes and Posner, 2008). Credibility means political influence and access (Pew Research Centre, 1999). In the context of political environment, today’s successful business leader needs to know how to design and to implement a global strategy, to respond quickly to a challenging political environment and to build a strong a leadership culture (Harvard Business School, 2011).

From the perspective of economic environment, corporate social responsibility (CSR) as the central issue is the appropriate role of business (Reinhardt et al, 2008). In a free enterprise, a businessman is not connected merely with profits, but also with promoting desirable ‘social’ ends, meaning that business has a ‘social conscience’ and takes seriously in social responsibilities for providing employments, eliminating discriminations, avoiding pollution and whatever else (Friedman, 2007). In relation to this, a strategic business leader should play his active role to introduce the modern concept of ethical organization which encompasses the CSR, ethical management and leadership (Alan Chapman, 2010). This business ethics has long been a highly practical resource to any organization (McNamara, 1999). Other than this, business leaders must monitor currency, infrastructure, inflation, interest rates, wages, and taxation (Cliffs Notes, 2011).

When a business leader put into practice of his strategies in the political economy environment, one of the considerations to take in is the strategic-leadership environment (as shown in Figure 1).

illustration not visible in this excerpt

Figure 1 (Source: Air and Space Power Journal, United States Air Force, winter 2003, page 69)

The environment includes four distinct, interrelated parts: the national security, domestic, military, and international environments. In the strategic environment, a strategic leader needs to consider many factors and actors. The structure recognizes the fact that a strategic leader must conceptualize in both the political and military realms. Leaders who make strategic decisions cannot separate the components, especially when they are dealing with the national security environment (Guillot, 2003).

As mentioned earlier, capitalist business people like Americans are free to pursue their dreams in a free enterprise to an exceptional degree. Free enterprise is the heart of the market system of economics, the engine of entrepreneurial success. Every business leader in a free enterprise must endeavour to develop his strategies and influence the rule makers and referees in government. Winning the influence game is what every business leader should know about. These are the skills that every business leader needs to succeed in the increasingly complex and rapidly changing globalized economy in which they operate and to gain competitive advantage for their company's future (Watkins et al, 2001).

As far as political economy strategy is concerned, it is particularly refer to grand strategy. A grand strategy is a political-military means-ends chain which is a state theory explaining it can cause ‘security’ for itself (Posen, 1984). The connotation of means-ends chain is what military ends shall be employed by military means. The role of grand strategy is to co-ordinate and to direct all the resources of a nation, or band of nations, towards the attainment of the political object of the war - the goal defined by fundamental policy (Ripley and Lindsay, 1997). Grand strategy provides purpose and guidance to all lower-level strategy and tactics. Today, a corporate grand strategy should be framed out similarly to how military strategy is shaped from cited national interests and national security strategic perspectives (Mard, 2004). This strategy is also known as Enterprise-Wide Strategy paints the picture of the future state and needs to balance with long-term goals and short-term activities.

The last few decades reveal the winds of change took place in Asia whereby Asian business leaders outperformed in an evolving economy. Despite often unpredictable economic, social and political forces, growth in Asian businesses has continued strong. Foreign companies have paid out considerable effort trying to penetrate into Asian markets, especially in China and India. Nonetheless, countries such as China, Taiwan, and Indonesia have all been accused as not sufficiently or effectively protecting intellectual property rights. In view of huge size of these nations' markets, the lack of secure intellectual rights poses a main problem for commerce. Today, business leaders must deal with lax business laws, facilitate corporate governance, and adjust to upcoming challenges and opportunities persistently. For the rapidly expanding Asian economy, the particular strategies and techniques that business

leaders decide in running a company are critical. As such, the issues that the business leaders commonly deal with, including policy instability in the nation, and restrictive labour regulations must always be the highlight in planning the strategies. Besides, business leaders should explore the broader question of effective global strategy (Zhang, 2011).

As a global strategic business leader, he will certainly face both the political risk as well as economic risk. Political risk refers to instability in national governments and to war, both civil and international (Hitt et al, 2009). Economic risk involves the possibility that an economic downturn will negatively impact an investment (Thefreedictionary, 2011) or the security risk posed by terrorists (Hitt et al, 2009). A business leader can strategically apply ‘glocal’ concept (Dubos, 1972) means ‘act locally, think globally’. It is time for him to realize that political risk is an opportunity as globalization is a process of rising acceptance of political risk in search of greater economic rewards (Di Piazza and Bremmer, 2006). Always remember that all successful enterprises take risks, managing risk on the upside is an offensive action taken by management to increase the possibility of success, and often revenues (Cassidy, 2000).

A business leader needs to synthesize the information from the past and present and combine it with a view in the future as it is part of the process in the formation of strategic thinking (Thompson, 2001). Many organizations do not take the long term future into account particularly the risk of failed strategy. They have wasted a lot of time, money and energy creating short-term goals that did not stand up to the test of the future (Thinking Futures, 2011). On the other hand, Henry Mintzberg (1994) has characterised strategic thinking is about synthesis - using intuition, creativity and foresight to formulate an integrated perspective or vision of where an organisation should be heading. In other words, strategic thinking is related with the setting of the goal itself, not the steps needed to bring it about, which is the realm of strategic planning. Napier et al (1998) argued that business leaders need to balance between intuitive thinking of the East and critical thinking of the West. They need to draw balance on both our critical and creative thinking abilities in order to perceive and analyzes alternatives and ground action in reality.

Conclusion (Implications and recommendations)

A business leader of today ought to shape up to be an excellent entrepreneur of tomorrow. Tomorrow’s entrepreneur leaders will need to

be agile and able to incorporate all aspects of good decision making in an increasingly global and multifaceted business environment. Ethical leadership principles and practices are vital for the future business (Business Roundtable Institute for Corporate Ethics, 2007).

Other than equipped with ethical leadership, a survey done by University of Washington (2011) states a strategic business leader needs to build a strong global networking as follows:

- Network with leaders from multinational and foreign companies in a mutual learning environment

- Learn how other business professionals build up opportunities and deal with challenges abroad, including operations, partnerships, product development, and legal contracts

- Learn about business practices and cultures from international executives

In a nutshell, a strategic leadership is to respond effectively to change. Nowadays, a business leader should have the awareness of the enthusiasm of futuristic thinking. To analyze the forms of change, many institutions have shifted the PEST approach (Politics, Economics, Social and Technology) to PEEST approach (Politics, Economics, Environment, Social and Technology). One instance of environmental approach that has been used by an organization is Nissan Mobile Company. Nissan’s environmental philosophy is summarized in the phrase ‘symbiosis of people, vehicles and nature.’ This expresses Nissan’s ideal picture of a sustainable mobile society. To contribute to the creation of human society, Nissan is aiming to become a ‘sincere eco-innovator.’ For the future of our planet and generations to come, they are doing everything they can to help our natural environment, by reducing the environmental impact in real world terms and providing customers with innovative products that contribute to the development of a sustainable mobile society (Nissan, 2011).

In line with the United Nations Environment Programme, a business strategist should use his expertise to strengthen environmental standards and practices while helping implement environmental obligations at the country, regional and global levels. In response to the mission of United Nations Environment Programme, global business leaders must provide global leadership and incentives to encourage care for the environment, notification, so that countries and people to improve the benefit of future generations without such damage their quality of life partnership (United Nations Environment Programme, 2011).

A futuristic business leader needs to face the future challenges by equipping themselves with innovations and effective business models as these two are tremendous valuable assets to a company (Prasad et al, 2010). At this very moment, they point out that the best ICT potential has yet been properly explored. The concept of ‘Green ICT’ plays an increasingly important role in business world particularly and private life by increasing the international inter-connectedness and speed up the process of globalization. Besides, as suggested by Swallow (2009), the future business leaders should carry out ‘Green Business Standards’ by striving to improve business performance and mainly generating a common platform for understanding such as corporate social responsibility, sustainability and Green Business Practices. Nonetheless, today’s business leaders from now and then has to keep up with the accelerated pace of globalization, rapid technological change, and the growth of new economy ‘knowledge-intensive’ industries (Ndubisi, 2010). As quoted by Salkowitz (2010), Ndubisi believes that in the next decades, the new wealth will be created in industries like nanotechnology.

As a global citizen, in complying with the concept of ‘globalizationlocalization’ (glocal), this mind-set is the key of learning how to adapt business practices and information-management processes to different market and cultural environments (Hui, 2003). Besides, a strategic business leader should adapt constantly to the future of world civilization and global business environmental changes in terms of changes in competition and political economic in dynamic business environment. Ultimately, by merging together the business good practices and the strategic thinking, a good business leader of today will be an outstanding entrepreneur of tomorrow.


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Organizational Leadership. The Importance of Strategic Leadership in Business
Doctorate in Business Administration
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organizational, leadership, importance, strategic, business
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Yap Boon Hup (Author), 2017, Organizational Leadership. The Importance of Strategic Leadership in Business, Munich, GRIN Verlag,


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