STUDY UNIT 1
1. Critically differentiate between the concepts of strategy, strategic planning and strategic management.
2. Describe the different levels of strategy in an organisation.
3. Critically discuss the importance, benefits and risks of strategy.
4. Describe the tests for a winning strategy.
Critically differentiate between the concepts of strategy, strategic planning and strategicmanagement.
Strategy
Strategy can be described as the long-term direction of the organisation, a pattern in a stream of decisions, the means by which organisations achieve their objectives and the deliberate choice of a set of activities to achieve competitive advantage.
Strategic Planning
Strategic planning or strategy formulation is the first phase of an integrated strategic management process, based on the concepts of strategic thinking and strategy, and comprises the following three main decision stages:
(1) Deciding on the future of the organisation
(2) Analyzing the organization’s external and internal environments
(3) Selecting appropriate competitive strategies – strategic choice
Strategic Management
Strategic management is ultimately about consistently aligning the organisation with its internal and external environments
2. describe the different levels of strategy in an organisation.
Corporate Level
This is the top management level and it affects the strategic decisions of the organization as managers and the board of directors makes decisions here from the top to the bottom, the ‘top-bottom’, approach. Here CEO and the board of directors can be found. Neil Ritson, (2013), describes the corporate level as ‘knowing what businesses we are in and what business should the organization be in?’.
The Business Level
This is where the staff and other middle and operational managers can be found. Here we can expect to see divisional managers and the staff of separate business units.
The Functional Level
Finally the functional level, the staff on the floor implements the activities from the top managers. Here we can expect to see the functional managers and the staff in each functional area in a business unit. The line of bureaucracy and the chain of command takes place within these three levels.
3.0 The Importance, Benefit and Risk of Strategy
Though strategy is a coherent nature about the future direction of an organization, they provide an actionable blue print for achieving organisation aspirations. Strategy critical show its importance to organisation in the following areas;
· To provide a cohesive strategic thinking and an innovative and future oriented decision framework for the organisation
· it puts the contribution by organisation members , thereby facilitating the communication strategy to all
· Its help the organisation to verbalized its aspiration and serve as a sources of motivation for everyone in the organisation.
However there are risk also associated with the strategy, this could be factors of external event and trend that can have an impact on the company’s strategy and its shareholder value.
4.0 The Test for a Winning Strategy
Though strategy severs as an aspiration for organisational goal, for strategy to have met it purpose as a winning strategy, to be most successfully it must meet the following requirement;
· that goals are consistent and long term
· there is an in-depth understanding of the competitive environment
· and an objective appraisal of resources and effective implementation \
In meeting the above requirement, the organisation strategy as success and as a winning approach there should complies with the following key fits,
· The goodness fit test, this measure looks at how well the organisation strategy fit in the organisation situation in matching the industry and competitive environment.
· The competitive advantage test, which look at whether the strategy can help the organisation achieve a sustainable competitive advantage.
· and finally the performance test, were the strategy is measured in terms of profitability, financial strength, competitive strength and the market standing of the organisation
STUDY UNIT 2
1. What is meant by the traditional process perspective on strategic management? Provide a critical analysis of this perspective
2. Critically differentiate between deliberate and emergent strategies
3. Explain what is meant by strategy as practice? Critically defend why is it an appropriate approach to manage new strategic realities
4. Explain why strategic thinking is important in setting a strategic direction
5. Explain what is meant by strategising and critically explain the role of strategists and managers in the context of strategy as practice
1. What is meant by the traditional process perspective on strategic management? Provide a critical analysis of this perspective
The traditional process perspective is a rational, sequential, static, linear process with distinct stages/phases to achieve strategic management. The three stages consist of:
Strategic Planning/Strategy Formulation – Environmental analyses & Formulation of strategies (strategic direction, strategic choice) mostly by top management
Strategy Implementation – developing and implementing annual objectives & short-term functional strategies & tactics that are compatible with long-term choices. Involves all staff.
Strategy Review, Feedback and Control – continuously evaluate the success of the strategic management process as input for future decision-making. Aimed at monitoring progress and providing feedback.
2. Critically differentiate between deliberate and emergent strategies
Deliberate strategies: when planned strategies (termed intended strategies) become realised
Tend to emphasise central direction & hierarchy. Implemented & realised under 3 conditions:
Planned/intended strategies work well in stable business environments. Environments are today becoming increasingly dynamic, turbulent & unpredictable leading to an increase of unplanned & emergent strategies:
Emergent strategies: order in absence of intention; suddenly rationalising a strategy to mean something very different from original intention; strategies not explicitly intended, are unplanned & emerge over time often due to changing environments / competitive circumstances…
3. Explain what is meant by strategy as practice? Critically defend why it is an appropriate approach to manage new strategic realities
Practice Perspective offers a broader view of strategic management, considering wider range of strategists (board of directors, top- & middle managers, consultants) but also allows for the messy realities of doing strategy in practice.
Strategy-as-practice: non-linear/-sequential process enabling organisation's to cope with new competitive realities. Integrates activities & forces with strategising - That strategy is done by people and influenced by their context.
Interaction between strategy praxis (the work), strategy practitioners (workers), strategy practices (tools of strategy). Organisation will customise strategising practices to suit own unique circumstances
Strategy no longer a mainly deliberate, top-down process but all levels of management & employees deemed strategic actors especially when coping with emergent strategies
4. Explain why strategic thinking is important in setting a strategic direction
Strategic thinking relates to the conceptual nature of strategy and requires a strong foundation of critical thinking. Strategic thinking is the ability to see the total enterprise, to spot trends and understand competitive landscape, to see where business needs to go and lead it into the future. All of which is critical factors when setting an organisation's strategic direction.
5. Explain what is meant by strategising and critically explain the role of strategists and managers in the context of strategy as practice
Strategising: "essentially what strategists do; described as devising or influencing strategies." Action performed by strategists (people) who guide strategic planning & management process.
Strategists ('doer' of strategy): Individual, group or an object in an organisation that controls key or precedent-setting actions. Can also be external role players.
Types of strategy worker includes detail-conscious, Big Picture-conscious, Non-Discerning and Cognitively Versatile.
Top managers as strategists are responsible for setting overall strategic direction, allocation resources etc.
- Role as social craftsperson ensures buy-in from employees, deals with tensions & conflict, creating positive atmosphere
- Role as artful interpreter contextualises strategy that other can identify own roles in it
- Role as known stranger ensures balance between distance & closeness in interaction between strategists & other parties to maintain objectivity while cultivating trust
Board of Directors as Strategists: Focal point & custodians for corporate governance thus influences strategising & overall strategic direction. Monitors relationship between management & stakeholders to ensure organisations long-term sustainability.
Middle managers as Strategists: roles include implanting deliberate strategy; synthesising information; reshaping strategic thinking of top management; managing change and facilitating adaptability.
Consultants as Strategists: a valuable source of expertise, available to organisations in need of specialised info & guidance
Study unit 3
1. Explain the various methods for macro-environmental analysis
2. Analyse the structure, dynamics and attractiveness of the South African mining industry.
3. Discuss the importance of performing a competitor analysis
Explain the various methods for macro-environmental analysis
Four important techniques which can be employed when analysing the external environment:
1. Scanning: Early signals of environmental changes and trends are identified
2. Monitoring: Meaning of environmental changes & trends is detected through ongoing observation.
3. Forecasting: based on monitoring changes and trends, projections of anticipated outcomes are developed.
4. Assessing: timing and importance of environmental changes and trends for organisations strategies and their management are determined.
______
Analyse the structure, dynamics and attractiveness of industries
Industry Structure
The first and fundamental determinant of an organisation’s profitability is industry structure. The general types of industry structure are monopoly, duopoly and oligopoly −and the competitive implications of major types of competition, namely monopolistic and perfect competition.
A monopoly player, such as a state-owned enterprise, serves in a closed domestic environment and normally has a total advantage, while it retains government support. In a monopoly there are high barriers to exit and entry into the market for firms. A low degree of competition is evident and the market is stable and predictable.
An oligopolistic structure is characterised by a few large organisations, each with substantial shares of the market. They try to maintain their own long-term competitive advantage through crafting largely defensive strategies. In an oligopoly there are significant barriers to exit and entry into the market, there is a moderate degree of competition and the market share is stable.
Monopolistic competition has more rivals of a similar size, which can result in less stability and short-term competitive advantage. This leads to aggressive strategic approaches and more intense competition. There is also a moderate to high degree of competition. A low to moderate degree of market stability is evident.
Perfect competition implies that an organisation would require an aggressive strategic approach. The market would be volatile, with frequent entry and exit of players. There exist a large number of identical firms with no barriers to entry and exit. There is also a high degree of competition and a low degree of market stability.
SA's mining industry is characterised by substantial regulatory factors and barriers in that it requires sizable investments of resources, and entities depend on concessions, permits and other government issued documents. From this perspective, the mining industry is made up of mostly a few large organisations (such as De Beers, Transhex and Alexkor) each with substantial market shares, giving it a oligopolistic structure.
However, recent times has seen a move towards what can be considered as artisanal mining – smaller entities approach mines that was established long ago but since then have been abandoned. These smaller entities appropriate the necessary mining rights as they believe that there is still ore to be gained from the so-called 'depleted mines.' In this context structure moves towards monopolistic competition as it sees more competition from similarly sized rivals aggressively seeking competitive advantage.
Industry Dynamics
Refers to the rate of competitive and structural change in an industry over time. Management challenge of dynamic industries is to know at all times the rules of the industry, who their competitors are and why change takes place. Change can be due to
- external factors (e.g. technological change),
- change in one or more of the industry forces,
- internal factors (e.g. new product and/or process development),
- or some other factors.
As already mentioned, recent times has seen a change in structure of the mining industry causing large firms to consider if they have to change their strategies to try and maintain market share or whether the threat that minor entities pose in buying up discarded plots is small enough to be ignored.
Mining itself is a long process and even before that a lot of time is required for the necessary investments and documents to be acquired to utilise a mine. In this sense the nature of the industry is not disposed to change, however the effects of the economy and new technologies should be closely monitored.
Analysing Industry Attractiveness
Responsible for industry attractiveness (in terms of both nature of competition in an industry & its profitability).
To be able to analyse industry attractiveness appropriately a distinction has to be made regarding the market segments. In the mining and supplying of for example iron ore, the Chinese has substantial buying power as they are in a position to change suppliers (option of different countries) from which they buy in bulk. This makes for high industry competitiveness and low profitability.
The mining industry require great amounts of electricity or fuel to operate. Here suppliers such as Eskom are considered powerful because
- they are a monopoly, there are no other electricity suppliers that can be used;
- fuel sources are very specific (if the organisation would want to move away from electricity to combustible fuels)
- albeit a large part, the mining industry is not Eskom's only source of total income.
This this leads to increased industry competitiveness with the effect of lower industry profitability
As resources become scarcer, so also does the rivalry between existing industry members increase.
It is not easy for potential or new competitors to enter into the mining industry due to intensive capital requirements, access and infrastructure often required for distribution, and government regulation and legislations. Hardship of entry therefore leads to decreased competitiveness which has a positive effect on profitability.
Providers of substitute products & services: as the providers of raw material, there are very few, if any, substitutes available to the mining industry.
Government intervention as already indicated, is a big influence in the mining industry.
Complementors as additional forces: the leasing of equipment can be seen as a service that can enhance an the industry member's own products as the mining industry saves on capital investments in this way.