Chapter 1

Identify eight challenges that face South African business.

 Rapidly increasing competition from new and unexpected forces

 Changing demographics and psychographics
 New technology
 The new global economy
 The shift from manufacturing to services
 The proliferation of corporate stakeholders
 Managing the new workforce
 The rapid rise of the green movement

How did the former CEO of General Electric (John F Welsch, Jr.) describe strategic management?

 Understanding where the business is at the moment

 Having a clear view about where the business wants to be in the future
 Conducting a wide-scale debate about how it will reach its future destination

List Mintzberg perspectives on management (5P’s).

 Plan - how to attain outcomes that will realise the organisations goals and objectives
 Pattern – strategy is a pattern of consistent behaviour over time
 Position – refers to the positioning of the business via specific products and markets
 Perspective – refers to the company’s unique and fundamental way of doing things to remain competitive
 Ploy – a plan or manoeuvre which is intended to outwit the competition

Henry Mintzberg and his colleagues identified several major perspectives on strategy formation. Name and briefly explain these
perspectives. Strategy formation is….

 A formal process – needs structured planning

 process of conception – about designing the future
 A visionary process – clarifies and realises a new future
 A analytical process – it considers the current realities and position for the future
 A collective process – involves various stakeholders
 A reactive process –
 Process of transformation – creating a new reality for the business

1.2 Definition of strategy

‘A plan of action designed to achieve a long-term or overall gain.’

Give definitions for the following:

 Stratagem – A stratagem I a plan or scheme use to outwit an opponent

 Strategic – Identification of overall aims and interests, i.e. long-term military advantage
 Strategize – Devise a strategy or strategies
 Strategist – A strategist is a person skilled in planning action, i.e. military warfare and political parties

1.3 Definition of management

Insight to what management is:

 The responsibility for and the control of a company or organisation.

 Ensuring the correct use of resource combinations to create products or services.
 Ensuring a profitable and sustainable business.
 Actions to achieve the maximum results with the least possible waste.

1.4 Definition of strategic management

Definition Lynch

Strategic management can be described as the identification of the purpose of the organisation and the plans and actions to achieve that
purpose.

Language of strategy. Define the terms and description

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  Strategic management – the art and science of formulating, implementing and evaluating cross-functional decisions that enable an
organisation to achieve its objective
 Goal – a specific aim that the organisation wants to achieve
 Objective – a goal which is to be achieved by a certain time  Unique resources/core competencies – the specific resources,
processes or skills that provide the organisation whit a competitive advantage
 Competitive advantage – the edge that an organisation has over others
 Strategies – the efforts that an organisation implements to outperform its rivals
 Vision – the dream for the business. Meant only for the members of the company
 Mission – the reason for the business’s existence. Overriding purpose of the organisation
 Strategic intent – synonym vision, desired future state/aspirations. The intention of the organisation.
 Strategic control –The monitoring of strategies as they are implemented, in order to ensure that they are effective and achieve its
objectives.

Define the term strategic control.

The process used by organizations to control the formation and execution of strategic plans; it is a specialised form of management control

1.5 Understanding competitive advantage

Competitive advantage is an ability of an organisation to differentiate itself from others (Porter).

A company must master these factors (see below) so that a company can keep on differentiating itself from the rest:

Factors relating to competitive advantage

● Time ● Execution ● Manoeuvrability ● Knowledge ● Value ● Process ● Cost ● Differentiation

1.6 The importance of strategy

Strategic planning asks four important questions. What are these questions?

Strategy is a specialised form of long term planning. It considers internal and external factors and then chooses a direction based on the
information gathered from the internal and external factors.

The strategy road map enables an organization to ask the following fundamental questions:
1. Where do we come from?
2. Where are we going?
3. Where do we want to go?
4. How do we get to our desired future?

1.7 People involved in the strategic management process

MO ─name the people involved in the strategic management process

– Chief Executive Officer

– Chief Financial Officer
– Chief Operations Officer
– Chief HR Officer
– Other members of C-Suite

C-suite is a widely-used slang term used to collectively refer to a corporation's most important senior executives. C-Suite gets its name
because top senior executives' titles tend to start with the letter C, for chief, as in chief executive officer, chief operating officer and chief
information officer.

1. Draw a diagram illustrating the phases of the strategic management, as well as the people involved at each stage.

1.8 The strategic management process

1. Name the five phases or steps in the strategic management process

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  Phase 1:Formulating a strategic direction
 Phase 2:Setting specific objectives for the organisation
 Phase 3:Strategy formulation
 Phase 4: Strategy implementation
 Phase 5:Strategy evaluation

1.9 The building blocks of strategic management

MO ─ identify the building blocks of strategic management

Building blocks of strategic management

1. Formulation of a strategic direction
2. Formulation of long-term goals and objectives
3. Strategy formulation and selection
4. Strategy implementation
5. Strategy evaluation

Explanation of the blocks of strategic management:

The formulation of a strategic direction

 Top management facilitates the process regarding the clarity of the strategic direction.
 Organisation assessment in terms of:
o internal resources, as well as
o Inherent strengths and weaknesses.
 Includes assessment of industry and macro environment and opportunities for growth
 Outcome of process:
o formulation of a long-term vision
o formulation of a mission

Formulation of long-term goals and objectives

 Follows completion of the internal and external assessment.

 Translates into what the business wants to achieve.
 Seen as long-term objectives and goals.

Strategy formulation and selection

 Investigates and formulates a number of strategies towards a desired future

 Strategies should:
o Develop organizations competitive advantage (short run).
o Ensure profitability and sustainability in the long run.
 Selecting the one-ideal strategy is not always easy o On the one hand reliance is placed on quantitative analysis (mathematical and
statistical modelling).
o On the other hand reliance is placed on qualitative analysis (it will call on the intuition and insight of the management
team). Qualitative analysis is subjective and is based on unquantifiable information.

Strategy implementation

 Strategy implementation is the Achilles Heel (weakness) of successful strategic management.

 Management cannot implement organizational strategies.
 Successful implementation of strategies also requires exceptional management and leadership by top management.

Strategy evaluation

 Final stage of strategic management.

 During implementation the business environment changes.
 Unexpected challenges or difficulties may arise.
 Strategies must be reviewed.
 Management must gauge/assess the success of the determined strategies and change the course of action if required.

1.10 The various levels of strategic management

Describe the various levels of strategic management

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  Managers at various levels in the organization will participate in the strategic management process. The outcome of their planning
process will be a corporate strategy.
 Strategy implementation and deployment/start-up will happen at various levels in the organisation.
 Functional strategies are usually the responsibility of divisional managers.
 Business and corporate strategies are executed by business level and top management respectively. This also implies that all
managers will be involved in the implementation of the strategy.
 As implementation commences, care should be taken that managers not only understand the strategy but also commit to its
implementation.
 Performance management contracts and incentive schemes can be used as tools or instruments to achieve the buy-in of all the
role players.

1.11 Advantages and disadvantages of strategic management

Advantages (Mintzberg)

Start with STRATEGY

 Strategy sets direction
 Strategy focuses on effort
 Strategy defines the organization
 Strategy defines consistency

The above list is expanded (Thompson):

 It provides guidance to the entire organisation on the crucial aspect of 'what it is we want to do'.
 It makes managers, employees and other stakeholders more alert regarding the looming/pending opportunities and threats in the
environment.
 It unifies the organisation around the same goals/objectives.
 It affords management the opportunity to take a creative stance when it comes to large scale change.
 It facilitates the evolution of the business model in order to achieve sustained financial success.
 It creates a framework within which organisational resources can be allocated to business priorities.

1.12 Levels of strategic management

Strategic management happens at THREE levels:

 Strategic level
o ten thousand fee view; organisation defines the organisational vision and mission
o Domain of the C-Suite
o Evaluates how the strategy needs has an impact on:
 the target market
 the main products or services on offer
o Strategy at this level are mere brushstrokes and do not contain high level detail, it is seen as a set of general guidelines
 Tactical level
o the guidelines, general plans and budgets (designed by C-Suite) are applied to the specific situations and operational
conditions of divisions, departments or business units
o Represented by senior managers
o Reporting structure directly to C-Suite
o Domain of different divisions, departments in the organisation
 Operational level
o day-to-day operational actions in a business
o Contributes to overall goals and strategies at higher levels
o Focuses on what to do and how do things better on a day to day basis

1.13 A four-level model of strategic management

Four levels of strategy

● Corporate strategy ● Business strategy ● Functional strategy ● Operating strategies

1.14 Discuss other aspects that will impact on strategy formulation

Discuss other aspects that will impact on strategy formulation

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  Competitive capability - the way that organisations view its own strategy will impact on its strategy.
 Size of organization
o Size of the organization can impact on the way strategies are formulated
o The size of the organisation is subservient/submissive to the desire for sustainability.
 Age of organisation
o Regardless of age every business finds itself in a competitive environment.
o Strategies are meant to find ways to compete, often in hostile/unfriendly circumstances.
 Levels of motivation
o Companies that maintain a high-level of motivation amongst management and staff have a better chance of formulating
and implementing successful strategies.
 Levels of self-image and belief in capability
o Two factors that are often overlooked when considering the impact on strategic management are the organisations self-
image and its own belief in the organisations capability
o The better the organisation’s self-image, the greater the chance (even that of a mediocre strategy) of success.
 Levels of operational and organisational maturity
o Operational maturity refers to the level of experience that an organisation has in doing the core and valuable activities in
their business. operational maturity has a direct influence on the efficacy/effectiveness of a strategy

Chapter 2
2.1 Introduction

 The term ‘Strategic management’ is synonymous with ‘strategic Planning’

 If you don’t know where you are going you wind up somewhere else (Quote by Lawrence J Peter)
 In short a Vision states ‘This is where to go and Mission states ‘this is the manner in which we aim to get there’

2.2 Strategic vision and mission statements

2.2.1 Formulating a Strategic vision PHASE 1

Discuss a vision statement under the following headings:

 Definition
o A vision statement endeavours to look into and pronounce the future. It serves the purpose of directing the organisation
over the long term.
 Characteristics
o Forward looking
o Idealistic
o Does not provide any detail on how these ideals will be achieved
o Fairly philosophical in nature
 Aspects to consider when formulating a vision
o Strategic vision is the end result of a perpetual process of scanning and analysing the internal and external environment
in order to identify opportunities and threats
o While formulating the strategic vision, top management should ideally follow a collaborative approach
o Management should not be bogged down by current reality
o The vision must be communicated across all levels of the organisation

Six criteria for assessing a good vision

● Is it clearly formulated? ● Is it focused on the future? ● Is it idealistic? ● Is it challenging? ● Will it excite people? ● Wil it unify people?

Name four questions that could guide a management team as they formulate the vision of the organisation
 What do our customers expect from us?
 What do our shareholders expect from us?
 What do our employees expect from us?
 Where do we want to go in terms of industry and economy?

Some successful organisations do not have mission or vision statements. But they do have clearly formulated Strategic objective or
statement of intent

2.2.2 Elements of a vision

Two tendencies regarding a vision that must be addressed

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  A vision at all cost
 The vision, the whole vision and nothing but the vision

Shortcomings of a vision statement

 Incomplete – there is not enough specifics in the vision statement to show where the company wants to go and what kind of
company the executives plan to develop
 Vague – There is not enough information on how the company plans to achieve its vision. There are no clues on how the company
is going to change, there are also no clues on why change is necessary
 Bland – The vision does not motivate anyone
 Not distinctive – The vision statement is so general that it could apply to any other company in the industry
 Reliant on superlatives – There are too many of the following phrases in the statement: “Best in class; Global leader” etc
 Too generic – The vision statement fails to actually identify the company for which it was written
 Broad - The vision statement is so general that it can cover any strategic option the company wants to pursue

Characteristics of a good vision statement

 Graphic – It should create a vivid, realistic and convincing picture about what the company wants to achieve
 Directional – It provides clues on where the company wants to go. It also contains signals to indicate how the company is making
progress towards the future
 Focused – There has to be clues about what the company wants to achieve and what are not on the company’s strategic agenda
 Flexible – The vision should be able to compensate for unseen circumstance. As the organisation move towards the future, it may
be necessary to re-phrase the vision statement from time to time
 Desirable – The vision statement must be attractive to everyone in the organisation. The more people that are motivated by the
vision statement, the better
 Easy to communicate – It must be written in simple everyday language (understandable)

2.2.3 Formulating and developing a strategic mission

Rossouw et al. (2007: 18) indicate that modern mission statements focus on ten essential components. Each component contains clues
about how the organisation wants to meet its strategic vision:

 Specific products or services: These enable the organisation to make a broad statement about the products or services it intends to
offer.
 Specific market(s): This helps the organisation to specify the type of market in which it wants to offer its products or services:
o A niche market may be suitable for a specialised product, whereas a standardised product can attract a bigger market.
o The organisation can indicate the locality of the market e.g. in a specific city, province, country or a few specific countries.
o The mission statement can briefly describe the demographics of the market it wants to pursue.
 Geographical domain: This refers to the base of operations that the organisation will have.
 Technology: Although the mission statement does not need described technology in detail, the organisation may want to make
mention of the main technologies it intends to use in the creation of products or services.
 Organisational will: This concerns how the organisation plans to survive, grow and maintain its profitability.
 Management philosophy: The mission statement should contain a short set of statements regarding:
o the ethical values of the organisation;
o the beliefs of the organisation;
o the aspirations of the organisation; and
o the operating principles of the organisation.
 Organisational values: The mission statement contains the basic themes in the organisation that will help to create and strengthen
its competitive advantage.
 Self-concept: This refers to brief statements regarding known strengths and weaknesses in the organisation.
 Public image: This refers to the way that the organisation wants to be perceived by the market.
 Service or product quality: This allows the organisation to explain how it intends to produce high-quality products and services.

Discuss a mission statement under the following headings:

 Definition
o It should be a lasting statement of purpose that differentiates one organisation from others. It is a pronouncement of an
organisation’s reason for existence. It answers the question ‘what is our business?’

 Characteristics
o Define what the organisation is and what is hopes to become
o Limited enough to exclude some projects and comprehensive enough to allow for creative growth

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 o Make an organisation distinguishable from others
o Function as a framework for evaluating activities, both current and potential
o Be in written form and clear enough to be understood by shareholders
 Purpose
o Align the firm’s goals around one purpose
o Provide a foundation for assigning organisational structure
o Establish a general organisational culture
o Serve as a central point for stakeholders to identify with the purpose and course
o Aid the conversion of objectives into a work structure; assign tasks o Specify purposes and translation of purposes into
objectives
 Components
o Specific products or services
o Specific markets
o Technology
o Organisational will
o Management philosophy
 Benefits associated with a well-formulated mission
o Organisation achieves a heightened sense of purpose
o Good mission statement reveals customers, products or services, markets, etc.
o Provides direction for all planning activities
o Captures the organisation’s unique and enduring reason for being; energises stakeholders
 Explain the business mission in the form of three questions
o Why do we exist?
o What do we want to accomplish?
o What is our business?

Chapter 3
The context of strategic direction

3.1 There are three levels on which an organisation can be analysed.

 Macro level / the external (general environment)
 Market level / the industry
 Organisation level / the internal (competitor environment)

3.2 What is meant by a “SWOT” analysis?

 A study undertaken by an organization to identify its internal

strengths and weaknesses, as well as its external opportunities and threats.
 Structured planning method that is continuously updated. Informs the organisation about its competitive capabilities and possible
strategic actions. Most misused and misunderstood concept in strategic management

3.2.1 The SWOT scorecard consists of five questions:

 How many strengths remained from one period to another?

 How many strengths are still relevant from one period to another?
 How many new weaknesses appeared compared to the previous period?
 How many new opportunities arose since the previous period?
 How many new threats appeared since the new period?

3.2.2 What are the factors that make the SWOT analysis ineffective?

 Lack of rigour ● Time horizon

 Rose-tinted ● Not Specific
 Over-estimating strengths ● Interrelated Whole
 Under-utilising opportunities ● Bottom Up
 Too wide ● Creativity before criticism
 Blind acceptance ● Evaluate

3.3 Analysing the macro/external environment

Define PEST or PESTEL and outline the different forces

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A straightforward and effective tool utilise for scanning the external environment for key macro environmental forces that might affect an
organisations

 Political forces refer to government’s involvement in the industry in which the business operates
o Relative stability of the government
o Tax laws
o Press freedom
o Import restrictions
o Foreign trade regulations
o Antitrust regulations
 Economical forces refer to the state of the economy
o Currency markets
o Interest rates
o Inflation rates
o Unemployment levels/trends
o Cost of electricity
o Cost of labour
 Socio-cultural forces refer to the demographic and cultural aspects of the organisation’s market
o Consumer activism
o Issues in education
o Lifestyle changes
o Age distribution
o Population growth
o Family size
 Technological forces consider issues that affect the manner whereby a firm delivers it’s product and service to the market
o New products
o Internet and bandwidth availability
o Computer hacking activity
o Patent protection
o Basic infrastructure level
o Technological research
 Ecological forces comprise exogenous environmental factors,
o Drought & Floods
o Global warming & Climate change
o Availability of natural resources
o Waste disposal and recycling
 Legal forces are related to the legal environment which organisations operate
o Legislation regulating minimum wages
o Consumer and Competition laws
o Health and safety regulations
o Employment equity laws

Give a definition for scanning: Organisations do not exist in a vacuum, they are constantly influenced by four main environments

Define forecasting: The prediction of a future event and the estimation of that future event’s on a business. Forecasts look at historical
data, attempt to detect a trend in the data, and use that to predict what could happen in the future

Give a definition of a trend: Systematic variation of key indicators or behaviour over time

3.4 Porters five force model

 Product differentiation
 Capital requirements for entry
 Switching costs
 Existing players and rivals comparative access to distribution channels
 Anticipated reprisal from existing players

 Rivalry – strongest of all forces. Firms are constantly competing for advantage over their rivals.
 Threat of new entrants – Barriers to entry are high, new entrants likely to be discouraged

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 o Entry of new players, slow market growth, high cost of storage, high exist barriers
o Low Barriers, easier for new entrants
 Threat of substitute products/services
o Can perform similar functions as another
o Close substitutes will be less price sensitive to relative price movements.
 Bargaining power of suppliers
o Suppliers are powerful when supply large conglomerates,
o more concentrated provide goods & services that are essential to customers
 Bargaining power of buyers
o Monopoly - many suppliers and only one buyer
o Buyers are powerful when
 they are concentrated (i.e. there are a select few buyers, each with significant market share),
 Product they buy is standardised (and therefore substitutable)
o Cost of product purchases is not competitive. List other instances when buyers are considered to be powerful.
o There is a possibility of vertical integration, initiated by either the supplier or the buyer.

3.4.1 Describe the limitations of Porter’s Five Forces Model.

 Assess the profitability of the industry.

 Five forces are applicable to all competitors in equal measure. Reality of strength of various forces differs from business
to business.
 Product and resource markets, consider differences between businesses gauging their marketing strengths.
 The model cannot be applied in isolation.
 Assumes static market structures, which is not prevalent in today’s market place.
 Assumes that relationship between competitors is always hostile.
 Does not consider new business models and market dynamics.
 More about analysing current structure to enable analyses of future events.

3.5 Competitor profiling and analysis

Definition: Process where an assessment is made of the strengths and weaknesses of current & potential competitors

3.5.1 Michael Porter described a competitor analysis framework that focused on the four key aspects of a competitor.

 Competitor’s objectives
 Competitor’s assumptions
 Competitor’s strategy
 Competitor’s resources and capabilities

Identify at least five critical questions that you will have to answer with regards to each one of your main competitors.

 What are their short-term and long-term objectives?

 What are their financial objectives?
 Where is the competitor focusing their energy?
 Which new markets or products are they exploring?
 How does the competitor see the market?
 What’s the competitors view on the future development in the industry?
 Who are the key consumers or clients that the competitor feels will be most profitable?
 What marketing strategies are they employing?
 What are the areas of strength for the competitor?

3.5.2 Growth share matrix

 Problem children or question marks: These enterprises require more cash than they generate.
 Cash cows: These are enterprises that have high levels of spare cash but they do not invest the cash profitably.
 Stars: These are enterprises that are self –sufficient in cash and can survive lean times with ease.
 Dogs / survivalists: These are enterprises that generate low levels of cash. Although they use low levels of cash, there is little to
no growth in these enterprises. They earn just enough to pay expenses

3.5.3 Boston matrix

Definition: The Boston matrix compares the organisation’s market share against market growth of the whole industry.

 Stars – high market share and high market growth

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 o Production innovation
o Product development
o Horizontal integration
o Concentrated growth
o Strategic alliances
 Cash cows – high market share and low market growth
o Production innovation
o Product development
o Horizontal integration
o Concentrated ventures
o Strategic alliances
 Question marks – low market share and high market growth
o Product development
o Re-thinking concentrate growth
o Market development
o Horizontal integration
 Dogs – low market share and low market growth
o Divestiture
o Liquidation
o Concentric diversification
o Conglomerate diversification

3.5.4 The SPACE matrix - Definition: Strategic Positioning and Action Evaluation matrix

Four important variables on which it is based:

 Financial strength (internal) and industrial strength (external) – aggressive
 Industrial strength (external) and environmental strength (external) – competitive
 Financial strength (internal) and competitive advantage (internal) – conservative
 Competitive advantage (internal and environmental strength (external) – defensive

Chapter 4
4.1 Define the acronym SMART
 Specific – goals must be written down and dated
 Measurable – objectives must indicate what will be achieved and when
 Attainable – objectives must be possible to achieve whilst going beyond current performance levels
 Realistic – organisation employees must be able to see the link between objectives and mission
 Time bound – objective must describe by when the performance should be delivered

The objective of the formulation of long-term goals are Three-fold

 It guides energy and resources of the organisation
 It provides for specific, measurable outcomes.
 It creates the standard against which an organisation can access the strategies they want to employ

Definition of a long term objective goal

 It can be seen as a desired result that the organisation wants to achieve.
 A goal is therefore a specific place where the organisation wants to end up at the end of a specific period of time.

Management can ask a number of questions to translate the mission statement into something more measurable
 Where should the organisation focus its energy?
 What are the specific objectives/goals that needs to be achieved?
 By when must these objectives be met?
 Who should be accountable for attaining the goals /objectives?
 How will the organisation measure the achievement of the goals/objectives?

Focus areas of long-term goals (aspects)

 Size and type of organisation
 Product or product range

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  Level of profitability to be achieved
 Growth in market share
 And nature of the customers they want to attract

The cascading process of goals and objectives

1. Vision 2. Mission 3. Values 4. Strategic objective 5. Strategic priorities or performance areas

List the criteria of goal settings

 Acceptable
 Understandable
 Motivating
 Challenging
 Flexible/adaptable
 Promote participation

Key performance areas where goals and objectives can be linked to

 Products and services
 Customer service and experience
 Innovation
 Profitability
 Productivity
 Safety
 Social responsibility
 Human resources
 Income
 Market share

Chapter 5
5.1 Definition: competitive strategy
 Being different, deliberately choosing a different set of activities to deliver a unique mix of value

5.2 Five elements of Porter’s Generic strategy model (strategies aimed at getting a competitive advantage in the market)

 Overall low-cost leadership strategy

o Attempts to undercut competitors on all products and services, implies that the company continuously, almost
relentlessly drives down the cost of production.
 Focus Areas: Sustained investment in technology; sourcing raw materials at the best possible price; Creating and
maximising economies of scale; keeping labour costs as low as possible.
 Focused low-cost strategy
o The organisation selects a few products and services to be offered at a lower cost
 Broad differentiation strategy
o Mostly associated with limiting products or services to a select few in the market
 Focused differentiation strategy
o Focus on customers who want something different but do not want to pay more for the difference
 Best-cost provider strategy
o Gives customer value for money by offering up-scaled products or service at lower cost

5.3 Grand strategies:

 Cost leadership implies that the company continuously, almost relentlessly, dries down the cost of production
 Differentiation: as a strategic option refers to the situation where the company introduces products and services that are so
unique that customers will be willing to pay a premium for the product.
 Focused strategy: attempts to attend to the needs of a particular market segment
 Maintenance strategies: assume that the organisation is satisfied with the status quo and that they are not going to make changes
to its strategy
 Growth level one strategies: aim to develop markets and new products, focus on innovation and grow products or services in
selected markets

 Growth level two strategies: where growth can no longer be sustained by level one strategies. Organisations are compelled to
consider actions such as:
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 o Vertical integration: aims to take actions closer to raw materials or closer to customers. Cut out the ‘middleman’ so
products/services are more affordable
o Horizontal integration: aimed at the acquisition of one or more organisation in the same industry so that a larger market
can be captured
o Concentric diversification: focus on acquiring business that can strengthen one’s technologies, distribution channels,
marketing operations etc.
o Conglomerate diversification (unrelated growth): an organisation acquires business out of other industries that have
little or nothing to do with their own industry
o Joint venture: a fleeting partnership put together by two or more firms to capitalise on a given opportunity
o Strategic alliance: a peculiar partnership in which firms work together commercially to achieve common goals for a
predetermined period.
 Consortia: general undertaking by one or more organisations to deliver a product or service that requires expertise from each
separate organisation
 Globalisation: organisations do business all over the world.
 Divestment strategies: when the organisation can no longer sustain itself
o Turnaround: Reduce costs, selling off unwanted assets and finding new markets
o Unbundling: Selling of unprofitable business units or closing them down
o Liquidation: Liabilities exceeds assets, forcing the organisation to file for bankruptcy.

Briefly distinguish generic from grand strategies: When generic strategies focus on capturing the biggest possible market, grand strategies
(or master strategies) focus on the sustainability of the organisation

Five factors that can be used to differentiate your business from that of competitors
 Strong capabilities in research & product development
 Superior product quality
 Technological leadership
 Innovation & creativity
 Strong marketing abilities & communication skills
 A good reputation in the market

5.4 Criteria for effective strategies

 It must be appropriate – It is important to check that strategies are consistent with the needs of the environment, the resources
and the values of the organization, and its current mission
 Feasible/achievable
 Desirable - the firm needs to ascertain whether it is really desirable going ahead with the chosen strategy – especially in light of
the prevailing risks and constraints.

5.5 Name 2 sub-elements in the third step of the strategic management process (crafting a strategy)
 Strategy identification
 Evaluating strategies
 Selecting strategies

5.6 The firm needs to ascertain whether it is really desirable going ahead with the chosen strategy – especially in light of the prevailing
risks and constraints. Synergy is particularly prevalent in this regard. Describe ‘synergy’ in the context of desirability.
 Effective synergy ideally should result in a greater concentration of resources in relation to rivals. The prospects of synergy
should be evaluated alongside the implications of the organisations strategic perspective and culture. Expansion into products
and markets with which the organisation has no proficiency or skills may cause an unnecessary disconnect.

Chapter 6
6.1 The six main criteria for strategy selection
 Is the strategy consistent with the organisations mission and vision?
 Is the strategy suitable for the competitive environment in which the organisation operates?
 Are the assumptions used to create the strategy still valid?
 Is the strategy feasible in the sense that it fits into the organisations culture and available resources?
 Is there commitment from leaders to follow the strategy, do all stakeholders accept the strategy?
 Can competitor actions make it difficult to implements and will it worsen or improve the risks the organisation is willing to
take?

6.2 Give a definition for Growth share matrices

 It compares the organisation’s market share against the growth rate of the whole industry.

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 Balanced Scorecard:

Chapter 7
7.1 Strategy implementation
 Deals with translating thoughts or the strategic plan into action. It is the phase in the strategic management process in which
management aligns leadership, organisational culture, etc.

7.2 Barriers to successful implementation:

 A lack of strategic consensus
 Autonomous strategic behaviour by renegade managers
 Diffusion of perspectives
 Failure to communicate the strategic intent and strategic objectives properly
 A mismatch between strategy and structure

7.3 Leadership (Meyer & Boninelli)

 the ability to shape the organisation’s decisions and deliver high value over time, not only personally but also by inspiring others
in the organisation; the ability to accomplish something through the people that wouldn’t have happened if the leader wasn’t
there; being able to mobilise ideas and values that energise people; leaders develop a story line that engages other people
 Great leaders enable ordinary people to do extraordinary things; they set up people for success; they interrogate ethical issues
 Leaders inspire others to follow them;
 Leaders turn pessimists into optimists

7.4 Leadership depends on:

 A person’s experience
 A person’s background
 A person’s development (educational) level

7.5 People are often reluctant to step into leadership:

 They may not want the additional responsibility
 They may not want to deal with ‘boardroom politics’
 They may not want to be removed from their current role because they are satisfied

7.6 What does ‘structure follows strategy’ refer to?

 it means that if the one changes, the other needs to change accordingly

7.7 What are probable characteristics of organisational structures of the future?

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  decentralised, flat configurations
 converged on teams
 networked relationships, inter-connected through the use of technology
 unceremonious, virtual firms

7.8 Provide brief guidelines for matching structures with strategies

 Matrix and product-team structures buoy invention and product enhancement.
 Functional structures are best suited to single- or dominant product firms.
 Large, disparate firms with dissimilar business units should stick to small business units per se.
 Firms with numerous interconnected business lines should make use of a divisional structure.

7.9 Why is resource allocation important for strategy implementation?

 Resources should be allocated so as to encourage the attainment of the organisation’s long-term goals and short-term goals.
Should the firm be short of resources, this will create a barrier to successful strategy enactment. On the other hand, an over-load
of resources will lead to wastage and will affect financial performance and results.

7.10 Time leverage, resource leverage, Financial Leverage and knowledge and education leverage
 Time leverage – leveraging your own time requires effective time management, eliminating unnecessary activities and focusing on
things that matter
 Resource leverage – : is the way in which organisations maximise their resource capacity and productivity
 Knowledge and education leverage – if organisations can invest in and find more formal ways of learning, it will progress quicker
 Financial leverage: using ‘other people’s money’ to grow your business

7.11 How can management leverage resources?

 concentrating resources on key strategic goals
 accumulating resources efficiently
 efficient use by complementing one resource with anther to create higher order value
 conserving resources wherever possible
 recovering the from the market place in the shortest possible time

Chapter 8
Continual improvement through strategic control and evaluation

8.1 Implementing successful controls there are five important factors,

 controls must be linked to measurable goals and objectives
 results must be interpretable
 there have to sufficient communication channels in place to respond to any variance observed in the result
 a good management information system is essential and not optional
 leaders must be able to react to control variances so that corrective actions can be taken

8.2 Managers will need to consider three levels of control

 strategic controls
 functional controls
 operational controls

8.3 Various types of control approaches:

 control which is aimed at validating strategic assumptions
 control aimed at strategic issues management
 interactive control
 periodic review of strategy

8.4 Strategic control

Provides feedback on the formulation and implementation phases of the strategic management process.
Evaluates the chosen strategy in order to verify whether results produced by the strategy are those intended

 Four different types of strategic control

 a. premise controls: pay attention to assumptions and predictions associated with the organisation’s strategy
 b. implementation controls: are about the steps and actions over tie to craft and implement the strategy
 c. strategic surveillance controls: relate to the scanning of the different competitive environments
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  d. special alert controls: refer to the organisation’s reaction when sudden and unexpected events occur

8.5 Define functional controls and list the five different types of functional control

 Define performance standards that will be used to assess the success of the strategic plan
 Define the measurements that will be used to track the progress of the strategic plan
 Define the boundaries of deviation
 Define the corrective actions to be used when deviations occur
a) Scheduling controls: the sequence and timing of all the actions required to make the strategic plan successful
b) Performance evaluations: are a necessary art of strategic controls. Leaders must be aware of at least 3 perspectives hen
dealing with performance management
c) The personal perspective: the collective actions of teams that are responsible for implementing and executing a strategy
are measured against goals
d) The corporate perspective: the market (investors, shareholders, customers, etc.) watches the organisation’s performance
after its strategy has been publicly announced
e) Management information systems: refer to either manual systems or computer-based systems that provide leaders with
information

8.6 What are four steps commonly found in operational control systems
 Sets standards of performance
 Measures actual performance
 Identify deviations from standards set
 Initiate corrective action

8.7 What is SBU a synonym for; list five important planning points
 Strategic and business planning
 Groups similar divisions into strategic business units, and delegates authority and responsibility for each unit to a senior
executive who reports directly to the group CEO.
o Consultation with stakeholders and staff
o The analysis of trends and external developments
o The identification of organisational strengths and weaknesses
o The formulation of long-term objectives
o The implementation of the strategic plan

8.8 What are the advantages and disadvantages of SBU

 Advantages:
o It ensures decentralised decision making and enhances responsiveness
o It places strategy formulation and implementation closer to each business unit’s unique competitive environment
o It provides good training for strategic managers
o It increases performance accountability
 Disadvantages:
o It requires an extra, costly layer of management
o The role of the SBU heads and the central head office is often ambiguous
o It is not always clear how much authority and power the business heads should enjoy
o Duplication of functions increases costs
o There could be inconsistency across the business units in forms of overall corporate image and policies

Chapter 9
9.1 Give a definition for NFP
 Non-profit companies are businesses that do not operate for profit and that have public benefits in mind. Additionally, these
companies focus on cultural, social, communal and group interests.
o Don’t operate on profits
o Public benefits in mind
o Associated with charities and social upliftment
o All profit to be reused in the business
9.2 What areas of strengths do managers in a NFP have to have
 Ethics and leadership
 Good governance
 Ethical and responsible fundraising
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  Planning and strategic thinking
 Efficiency and growth focus (without harming the business)
 Multi-level communication and social responsibility

9.3 What are some of the biggest challenges faced by state-owned companies
 Corruption
 Inefficiency
 Unaccountability
 Political interference
 Lack of transparency
 Nepotism

9.4 What are the specific strategic questions that apply to NFP as well as profit making ones
 Why do we exist?
 What can we do for our clients?
 What do we do well?
 What determines the viability of our organisation?
 Who are our competitors in terms of the service we provide?

9.5 What is the main difference between NFP and profit-seeking organisations
 NFP: rely on donations; not there to make a profit but breakeven
 Profit-seeking: rely on product/services they sell; the bigger the profit the better

9.6 What are the constraints on strategic management for NFP organisations
 Services are provided by the charity are not tangible
 Organisation is dependent on clients and sponsors
 Community expects the service the NFP can provide
 Some employees are part-time or voluntary workers

9.7 The constraints on strategic management for NFP organisations will influence two main elements, namely
 Strategy formulation
 Strategy implementation
 Strategy evaluation

9.8 Name two strategies that can be selected by NFP organisations to meet the demands of clients in terms of services offered
 Strategic piggybacking
 Strategic alliances

9.9 What resources are needed by NFP organisations to engage in successful strategic piggybacking
 Something to sell
 Some capital
 Management control
 Management/trustee support

9.10 Mention the disadvantage of strategic piggybacking

 Organisation makes money, sponsors can withdraw funding
 New venture becomes primary purpose resulting in loss of focus on primary mission

9.11 What questions should a NFP ask itself

 Why do we exist?
 What do we want for our clients?
 What determines the viability of or organisation?
 What do we do well?
 What can we improve?

Long Theory Question

Hamel and Prahalad (1984) emphasises the need to manage the organisation’s strategic resources to achieve ambitious stretching
objectives. According to Hamel and Prahalad management can leverage its resources, financial and non-financial in five fundamental ways:
Required:
Discuss each of the following criteria with regards to resource leveraging. In your answer include some practical examples to demonstrate
leverage of resources.
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1.1. Concentrating resources on key strategic goals.
1.2. Accumulating resources: mining and borrowing
1.3. Complementing resources: blending and borrowing
1.4. Conserving resources: recycling, co-opting and shielding
1.5. Recovering resources: expediting success
Answer
1.1. Concentrating resources on key strategic goals
Convergence
 The pursuit of a single strategic intent over a long period of time ensures that the efforts of individuals, functional departments
and entire business converge on the same goal.
 Every individual, function and unit within an organisation must concentrate on the same organisational goal.
 Everyone should know and understand core competencies, investment programmes and organisational direction.
 Multiple goals and conflicting goals would undermine goals.
 Similarly multiple focuses will undermine strategy.
 Leverage requires a strategic focal point, or what we have called a strategic intent, on which the efforts of individuals, functions
and business can converge over time.
 The Komatsu example: Komatsu strategy is quality drive. Komatsu pointed out that quality improvement comes at a cost,
investment in production equipment, training, technology and so on. After it twice won the Deming prize, it continued its focus on
quality while increasing focus on product development, cost management and value engineering.
Focus
 Prevents the dilution of resources at any given time.
 A company must specify and prioritise the improvements it will pursue.
 Too many managers finding their companies behind on cost, quality, cycle time, customer service and other competitive metrics,
have tried to put everything right at the same time and then wondered why progress was so painfully slow.
 Without focused attention on a few key operating goals at any one time, improvement efforts are likely to be so difficult that the
company ends up as a perpetual laggard in every critical performance area.
 Komatsu focused almost exclusively on quality until it had achieved world standards.
 Then, and only then, did it turn successfully to value engineering, manufacturing rationalisation, product-development speed, and
the attainment of variety at low cost.
 By focusing Motorola established a 6-sigma quality and reduced defects from 60 million to 40 per million.
Targeting
 The goal is not just to focus on a few things at a time, but to focus on the right things.

1.2. Accumulating resources: mining and borrowing

Mining
 Some firms are just more efficient in learning than others.
 The capacity to mine ideas for improvement and innovation from each and every incremental experience is a critical component
of resource leverage.
 A firm must consider each new experience, each success or failure as an opportunity to learn.
 Every company is a reservoir of experiences.
Borrowing
 Through alliances, joint ventures, inward licensing, and the use of subcontractors and outsourcing, a firm can avail itself of skills
and resources residing outside the firm.
 Borrowing can be used to multiply resources at every stage of the value chain.
 Sony, was one of the first companies to commercialise the transistor and the charge – couple device, while Bell Labs pioneered it.
 Amazon knew what to do with the Internet. Tapping into the global market for technology is a potentially important source of
resource leverage.
 Borrowing can take a myriad of forms: welding tight links with suppliers to exploit their innovations, sharing development risks
with critical customers, borrowing resources from more attractive factor markets, with the motive being to supplement internal
resources that lie outside a company’s boundaries.

1.3. Complementing resources: blending and balancing

Blending
 This is the essence of the resource transformation process.
 Blending involves several skills or combine different types of resources to multiple the values
 Second form of blending is the ability to successfully integrate diverse functional skills.
 Possessing resources is different from blending those resources to an advantage.
 By blending different types of resources in ways that multiply the value of each, management transforms its resources while
leveraging them.
 Blending requires technology generalists, systems thinking and the capacity to optimise complex technological trade-offs.
Balancing

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  Involves taking ownership of resources that multiply the value of a firm’s unique competencies.
 By gaining control over the missing resources, however, management can multiply the profits extracted from the company’s
unique assets.
 For example EMI faced a situation in the 1970’s when it invented computerised axial tomography or the CAT scanner. Although
the British company had a ground-breaking product, it lacked a strong international sales and services network and adequate
manufacturing skills. As a result EMI found it impossible to capture and hold onto its fair share of the market. Companies such as
SIEMENS and GE, with stronger distribution and manufacturing capabilities, imitated the concept and captured much of the
financial bonanza, and what EMI created became money spinners for GE and other competitors.
 Whatever the nature of the imbalance, the logic is the same. A company cannot fully leverage its accumulated investment in any
one dimension if it does not control the other two in some meaningful way.
 Rebalancing leads to leverage when profits captured by gaining control over critical complementary assets more than, cover
acquisition costs.

1.4. Conserving resources: recycling, co-opting and shielding

Recycling: The more often a given skill or competence is used, the greater the resource leverage.
 It is said that in Japan, no technology is ever abandoned, it is reserved for future use.
 Sharp exploits its liquid-crystal display competence in calculators, electronic pocket calendars, mini-TV’s and large screen
projections TV’s and laptop computers.
 Recycling is not limited to technology-based competencies. Brands can be recycled too.

Co-opting: sometimes it is possible to entice a potential competitor into a fight against a common enemy. Sometimes it is possible to work
collectively to establish a new standard or develop a new technology.
 Sometimes a group of firms can coalesce around a particular legislative issue. The goal is to co-opt the resources of other firms
and thereby extend one’s influence and power within one’s industry.
 Co-option provides another route to conserving resources. Enticing a potential competitor into a fight against a common enemy,
working collectively to establish a new standard or develop a new technology building a coalition around a particular legislative
issue in these and other cases, the goal is to co-opt the resources of other companies and thereby extend one’s own influence.
 The goal is to enrol others in the pursuit of a common objective MMM.
Shielding or protecting: The greater the enemy’s numerical advantage, the greater the incentive to avoid a full frontal attack.
 The goal is to maximise enemy losses while minimising the risk to one’s own forces. This is the basis for ‘resource shielding’.
 Searching for under defended territory is a way to shield resources.

1.5. Recovering resources: expediting success

 Another important determinant of resource leverage is the elapsed time between the expenditure of resources and the recovery
of those resources, in the form of revenues, via the marketplace.
 Firms that can do anything twice as fast as competitors, with a similar resource commitment, enjoy a twofold leverage advantage.
 The time between the expenditure of resources and their recovery through revenues is yet another source of leverage – the more
rapid the recovery process, the higher the resource multiplier.
 Thus, a company that can do anything twice as fast as its competitors, with a similar resource commitment, enjoys a twofold
leverage advantage.
 A rapid recovery is a resource multiplier. In simple arithmetic, a firm with rapid recovery is twice better than its competitors. For
example, Detroit car makers (8 years to introduce a new model while Japanese, 4.5 years).

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