Explain What Is Meant by the Concept Strategic Management (5)

STRATEGIC PLANNING

(MNG3701)

Topic 1

(Explain what strategic management is and how it fits into the contemporary business environment)

Question 1

Explain what is meant by the concept strategic management (5)

•A set of managerial decisions and actions that determines the long term performance of an organisation.

•It includes environmental scanning, strategic formulation, strategy implementation, evaluation and control.

•To create sustain competitive advantages and to achieve the organisation objectives.

•It is about maximization of all stakeholders’ wealth and not only profit maximization.

•It creates new and different opportunities for tomorrow.

Question 2

Diagrammatically depict and explain the strategic planning process (10)

Explanation of the strategic planning process

The strategic planning process is a thinking stage.

It starts with the strategic direction (vision & mission statements and strategic intent).

Internal and external environmental analyses are conducted to identify strengths, weaknesses, opportunities and threats.

The long-term goals are formulated and then strategy selection takes place.

Question 4

Differentiate between the three phases of the strategic management process (10)

3 Step Strategic planning process

The strategic planning is a thinking stage. It starts with the vision and mission statements. Internal and external environmental analyses are done to identify strengths, weaknesses, opportunities and threats. The long-term goals are formulated and then strategy selection takes place.
Strategy implementationis the action stage of the strategic management process. This is where the chosen strategies are implemented through different drivers and instruments.
Strategic control- The last stage of the strategic management process is strategic control. This can be seen as the checking stage. In this stage, management would evaluate the success/failure of the chosen strategies against strategic objectives.

Question 5

With reference to the different strategic planning champions, explain who is involved in the strategic management process. (5)

Social craftsperson (SC) has to do with the ability to integratedifferent expectations from different groups together. An SC also has the ability to be sensitive to tension that might arise in the process of reaching a common ground.
Artful interpreter (AI) has enough understanding of the local norms, routines and positions of other role players to be able to adjust the strategic planning process according to the rules of the local game. It follows that there should be an acknowledgement that there is no one universal strategic planning practice that works in all contexts.
Known strangers (KS) are associated with maintaining a balance between closeness and distance to the other role players in the strategic planning process.

Question 6

In tabular format, explain the different views of strategic management. (5)

Traditional View / Emerging View
View / Strategy as fit with resource / Strategy as stretch and leverage
Industry Space / Strategy as positioning in existing industry space / Strategy as creating new industry space
Responsibility / Strategy as a top management activity / Strategy as a total and continuous organisational process
Exercise / Strategy as an analytical exercise / Strategy as an analytical and organisational exercise
Direction / Strategy as extrapolating from the past / Strategy as creating the future

Question 7

Differentiate between the different levels of strategy. (5)

Corporate strategy is strategy for guiding a firm's entry into and exit from different businesses, for determining how a parent company adds value to and manages its portfolio of businesses, and for creating value through diversification.
Business level strategy is more concerned about developing and sustaining a competitive advantage for the goods and services that are produced. It is strategy for competing against competitors within a particular industry.
Functional level, decisions involve the development and coordination of resources through which business unit level strategies can be executed efficiently and effectively

Question 8

Discuss the benefits of strategic management (10)

Benefits of strategic management

Higher profitability – Organisations that engage in strategic planning typically have higher profitability results, and have shown an improvement in turnover and profits.
Higher productivity – These organisations also tend to have higher productivity because better planning and utilisation of resources enable them to produce and deliver more products at a lower cost.
Improves communication – Strategic planning improves both internal and external communication across the various functions, divisions and stakeholders of an organisation, and employees of the organisation understand the goals and objectives of the organisation much better.
Empowerment of employees – Strategic planning can also increase the empowerment of employees when managers involve employees in developing strategies and give employees ownership of implementing strategies.
Disciplineandasenseofresponsibility – Itevokesdisciplineandasenseofresponsibilitywhenthemanagementteamtakesfullresponsibilityforstrategicplanningandimplementation.
Bettertimemanagement – Timemanagementismoreeffectivebecausetheimplementationofstrategicplansneedstobecompletedbyspecificdates.
Betterallocationofresources – Whenresourcesareallocatedbasedonthestrategiesthatareimplemented;thestrategicmanagementapproachalsofacilitatesmoreeffectiveresourcemanagement.
Encouragesproactivethinking – Thestrategicmanagementapproachprovidesa framework orprocessforeachemployeetoseehowthestrategyprogressesanditencouragestheproactivethinkingofemployees,whichinturnlessensresistancetochange.

Question 9

Discuss the risks of strategic management (10)

If strategic planning and strategic management are executed incorrectly, it could negatively affect an organisation's productivity, profitability and competitive advantage.

Time - Strategic planning requires time, and in today’s complex business environment, managers are often too busy solving short-term problems to focus on long-term strategic planning.
Unrealistic expectations of managers and employees – Engaging in strategic planning activities sometimes creates unrealistic expectations in managers and employees.
The uncertain chain of implementation – Strategic planning takes place at top management level, whilst strategy implementation takes place at all levels of the organisation.
Negative perception of strategic management – The strategic management approach might sometimes suffer from a lack of buy-in by potential participants.
No specific objectives and measurable outcomes – Without measurable outcomes, it will be difficult to determine if strategy implementation is going according to plan.
Culture of change – Generally people in the organisation may be resistant to change.
Success groove – Today’s success is no guarantee of tomorrow’s competitive advantage.

Topic 2

(EXPLAIN AND INTERPRET THE STRATEGIC DIRECTION OF AN ORGANISATION.)

Question 1

Identify and explain any five components of strategic leadership (10)

-This is necessary to set strategic direction.

Determining the company’s purpose and vision

Leaders must articulate the vision and provide guidelines as to where the company wants to go and what are the key steps that need to be taken in order to reach that position.

Exploitingandmaintainingcorecompetencies

Corecompetencies(whichincluderesourcesandcapabilitiesthatensureacompetitiveadvantage)havebecomethebasisofthenewcompetitivelandscape.

Developinghumancapital

Humancapitalentailsknowledgeandskillsoftheorganisation’sentireworkforce. Leadersshouldthereforedrivetheinvestmentinhumancapitalinordertoderivethefullcompetitivebenefit.

Sustaining an effective organisational culture

Strategic leaders who are capable of learning how to shape the organisational culture in a competitively relevant way will become valued sources of competitive advantage.

Emphasising ethical practices

Ethical practices refer to the moral filter that evaluates a potential course of action.

Establishing balanced organisational control

Controls are needed to guide work in such a way that performance goals are reached.

Question 2

Identify and explain the five tasks of strategic leadership (10)

Recognise the dual nature of strategy (short term as well as long term)

Companies should balance the focus of tomorrow with its current realities.

Start with vision, mission and distinctive profile

A clear sense of mission and distinctive profile is necessary to create a clear-cut framework for strategy definition and action.

Replace “resource-based” strategy with a new basis of strategy formulation.

In today’s changing markets competencies and resources have to be closely aligned with future opportunities.

Focus on strategy as being the alignment between the external and the internal worlds of the company

Leaders have to work on both upstream perspective (competitive industry) and downstream perspective (in changing core strategy).

Competing through business systems, not through businesses

The coordination between all the elements in the value-creating process will then lead to the creation of higher value-creation, but will also lower costs.

Recognise that there is an owing decentralisation of strategy-making and leadership.

The decentralisation of leadership must be accompanied by new managerial frameworks and assistance from the top.

Question 3

Differentiate between mission, vision and strategic intent (9)

Vision / Mission / Strategic intent
Vision statement is a roadmap of the organisation. / Statement of purpose that distinguishes organisation from similar ones. / Often used to set strategic direction and also as a basis for resource allocation.
It is a dream that focuses on the desirable future of the organisation, an enduring promise. / Identifies the scope of an organisation’s operation in terms of products, market and technology. / Establishes the criterion the organisation will use to chart its progress.
Answersthequestionwhatdowewanttobecome? / Answers the question what is our business? / Entails the setting of ambitions, overarching goals for position of leadership for the company in the long term.

Question 4

Discuss any ten components of the mission statement (10)

Products or services that the organisation offers or plans to roll out in future form part of the mission statement components
Markets–have to do with where the organisation does its business
Technology–how the organisation does its business
Survival issues–how the organisation plans to expand in future and markets it may want to serve
Growth–whattheorganisationperceivestobeimportanttoitinrelationtogrowthinitiatives

Profitability–thismayincludeimmediateandfutureprofitsandmarketshareandmarketimpact

Philosophy,self-concept–thishastodowithwhattheorganisationbelievesinandalsoitsvalues

Concernforpublicimage–howtheorganisationwantstobeperceivedbyitsmarketandbysociety

Concernforemployees–howtheorganisationtreatsitsemployeesgiven that theyareitsinternalclients

Concernforcustomers–thishastowiththeidentificationofcustomers,theirneedsaswellastheorganisation’scapacitytosatisfytheseneeds
Qualityissues–arerelatedtocustomerrequirementsanddegreeofsatisfactionoftheirvariousneedsbytheorganisation

Topic 3

(EXPLAINCORPORATE GOVERNANCE AND ITS ROLE TO STRATEGIC MANAGEMENT)

Question 1

Explain what success means in strategic terms (5)

Successshould be measuredinwealth maximisation,andnotinprofitmaximisation.
Wealthmaximisationisalong-term focusonwealthcreationforallstakeholders.
Asstrategists,weneedtofocusonsurvivalinthelong-term,thatis,sustainability.
Profitabilityaloneisaweakindicatorofsuccess.Organisationsneedtoequallyfocus on profitability, market share and new product development.
•Profitabilitymeasuresmustbecomplementedbyacontinuousandthoroughenvironmentalscan for threats and exploit opportunitiesinthechangingenvironment.

Question 2

Explain the concept "responsible leadership" (6)

Responsible leadership is defined as the “act of ethical, values-based leadership in pursuit of economic and societal progress and sustainable development”.
It provides the mind-set within which corporate governance should take place. It also suggests that the organisation should take ownership of the consequences of their business activities on an economic, social and environmental level.
It follows that business has two main responsibilities in the form of corporate social responsibility (CSR) and corporate sustainability.

Question 3

Discuss the concept of corporate governance (6)

Referstotheformal system of accountabilityoftheboardofdirectorsto all shareholders
Formal and informal relationshipsbetweenthecorporatesectoranditsstakeholdersandtheimpactofthecorporatesectoronsocietyingeneral
KingIII Report

Question 4

Explain the importance of corporate governance to strategic management (5)

Corporate governance has to do with formal and informal relationships between the board of directors and other stakeholders. It concerns how the organisation conducts itself within the context of good business practices. Good corporate governance has the following characteristics: accountability, discipline, fairness, independence, social responsibility and transparency.
Whenplanningtakesplace,strategicleadershavetoadheretogoodcorporategovernancepractices.TheKingIIReportisgenerallyusedbyleaderssinceitgivesguidelinestotheboardofdirectorsonhowtheyshouldholdoffice.Itidentifiesthefollowingcharacteristicsofgoodcorporategovernance:accountability, discipline, fairness, independence, social responsibility and transparency.
In the strategic management context, the King II Report states that an inclusive approach should be followed when formulating a mission statement.
Furthermore, corporate governance characteristics have to be considered when planning takes place.
The legitimate claims of the stakeholders must be considered. The plans must also be communicated to all stakeholders, as well as the organisation’s values.
As many managers as possible should be involved in this process.
Joint planning with due consideration for the environment is thus necessary.

Question 5

Describe the impact of the King Report on Corporate Governance for Southern Africa (2009) (King III Report) on strategic planning(10)

Boards and directorsremuneration to be fixed by shareholders
Risk-based approachto be adopted, as to a pure legal compliance
Internal auditto have a role in assessing the controls to be adopted
Sustainability reporting
Relations and communication among stakeholders and
Integrated reportingneeded

Topic 4

(ANALYSE AND INTERPRETE THE RESULTS OF AN ASSESSMENT OF THE INTERNAL ENVIRONMENT)

Question 1

Discuss the limitations of the SWOT analysis (5)

Despitestillbeingregardedasoneoftheusefultoolsforassessingtheenvironment,SWOTanalysesmaybeassociatedwiththefollowinglimitations:

The focus on the external environment maybe too narrow.
Such analyses maybe perceived to be a static assessment – a one-shot view of a moving target.
The strengths identified may not always lead to an advantage.
Suchanalysesmayleadtoanoveremphasisofasinglefeatureorstrengthanddisregardotherimportantfactorsthatmightleadtocompetitivesuccess.

Question 2

Diagrammatically depict and explain where internal assessment fits into the strategic planning process (10)

Internal Environment Analysis–Once the Strategic direction has been determined the environments in which the organisation interacts needs to be analysed. The internal environment refers to variables inside the organisation, the resources, the assets, the employees, the mission and vision, the board of directors, etc. The strengths and weakness are determined within this environment which can be controlled by the organisation.

Question 3

Identify and differentiate between the main resources of an organization (6)

Tangible Resources / Intangible Resources / Capabilities

Cash
Products
Movable property
Immovable property
Equipment

Patents and Copy rights
Reputation
Brand Image
Appeal to Market

Skills
Knowledge
Experience

Question 4

Explain what the resource-based view of an organisation encompasses (6)

Whatisresource-basedview(RBV)allabout?

Itstemsfromtheideathat:anorganisation’sresourcesaremoreimportantthantheindustrystructureinanattempttogainandkeepitscompetitiveadvantage.
RBVlooksattheroleofkey resourceswithinanorganisation.
Theseresourcesaregenerallydividedintotangibleandintangibleassets and capabilities.
Theyenabletheorganisationtogainacompetitiveadvantage.
Theotherperspectiveonkeyresourcesistoexplorethe value they provide to the customer.
Theskills and experience of staffcouldfallundercapabilities.These,however,differfromoneorganisationtothenext.

Question 5

Diagrammatically depict and explain the value-chain method of assessing an organisation’s internal environment (10)

Question 6

Explain the steps involved in conducting a value-chain analysis (16)

Steps in Value Chain Analysis

Identifyandclassifyactivities:The first step is to identify various primary and secondary activities of an organisation.
Allocatecosts:Allocate cost for each activity, as each activity ties up time and costs. Activity-based costing can be used in this step.
Identifytheactivitiesthatdifferentiatetheorganisation:AVCAhelpstodeterminetheactivitiesthatdifferentiateitfromitscompetitorsandservesasasourceofcompetitiveadvantage.
Examinethevaluechain:Thelaststepistoclassifyactivitiesasstrengthsorweaknessesoftheorganisation.

Question 7

Differentiate between primary and secondary activities (4)

Primary activities

Primary activities are those activities involved in the physical creation of the product. They generally depend on the nature of the core business.

Primary activities typically include the following:

Input or inbound logistics
operations
output or outbound logistics
marketing and sales
Customer service

Secondary activities (also referred to as support activities)

Provide infrastructure or inputs to allow the primary activities to take place on an on going basis. These activities literally support the primary activities and the performance of the primary activities depends on the support activities.

Support activities include the following:

procurement
technological development
human resource management
general administration and infrastructure
financial management

Question 8

Explain what the functional approach entails (5)

Thefunctionalapproachisasimpleapproachtoconductaninternalaudit.

Theauditcanbedonebyanalysingtheorganisation'sfunctionalactivities,usingalistofinternalauditquestions.(Alsomakesextensiveuseofratioanalysis.)
Thereisnocomprehensivelistofquestions,andeachorganisationhastodetermineitsowninternalauditquestions.
Themainaimistodeterminehowwellorpoorlyfunctionsarebeingperformedandwhatresourcestheseareasactuallyneedtoperformeffectively.
Thedisadvantageofthisapproachisthatthefocusisonthefunctionalareas(siloeffect),andnotonwhetheraspecificfunctionalareamakes an importantcontributiontotheorganisationscompetitiveadvantage.

Topic 5

(ANALYSE AND INTERPRETE THE RESULTS OF AN EXTERNAL ENVIRONMENT ASSESSMENT)

Question 1

Explain what external assessment means in strategic planning terms (5)

Anorganisationisanopensystem,andwillbothaffectandbeaffectedbytheenvironment.Theorganisationalsodrawsitsinputsfromtheenvironment,andthushastobeawareoftheavailableresources,aswellasopportunitiesandthreats.Severalsourcesareusedtoobtaininformationwithaviewtoassessingtheexternalenvironment(market,industryandmacroenvironment)oftheorganisation.
Externalassessmentthusfocusesonidentifyingkeytrendsandeventsbeyondthecontrolofasingleorganisation.Thisisacontinuousprocessoffourinterrelatedactivities:scanning,monitoring,forecastingandassessing.

Question 2

Describe the components of, and process involved in, conducting a macro environmental analysis (10)

Question 3

Diagrammatically depict and explain the position of external environmental assessment in the strategic planning process (10)

External environment analysis:Once the Strategic direction has been determined the environments in which the organisation interacts needs to be analysed. The external environment refers to variables outside the organisation, the market, the industry, and macro environment. The opportunities and threats are determined within these environments which are beyond the organisation’s control.

Question 4

Identify and explain the macro-environmental variables that impact on an organisation (12)

PESTEI

Political/ Legal Environment (BEE, legislation and government)
Economic Environment (Monetary and fiscal policy,Taxes and Interest rates)
Socio-cultural Environment (Demographics, social responsibility and charity initiatives)
Technological Environment (Product development, design and innovation)
International Environment (Global warming, WTO and terrorism)
Ecological/ Physical Environment (Green marketing, pollution and natural resources)

Question 5

Discuss the use of forecasting techniquesin strategic management (5)

Forecastsare educated assumptions about future trends and events.
Forecastinghelpstheorganisationtobe proactive.Thechoiceofasuitableforecastingtechniquedependsnotonlyonthe availability of historical data,butalsoonfactorssuchascosts,timeandtheaccuracyoftheforecastinformationthatisneeded.
Indecidingwhichforecastingtechniquetouseonehastostrikeabalancebetweenmanyfactors.Perfectinformationisvery expensiveandfindingitisvery time consuming.
Onethereforehastofindatechniquethatsuitstheneedsofastrategicplanner,andthismeansthatthestrategicplannerhastounderstandthebenefits, limitations and applicability of the different forecasting techniques.

Question 6

Diagrammatical depict and explain how Porter’s five forces model is used in assessing the industry environment (10)

Threat of new entrants: the extent to which new entrants are a threat depends on the existence and level of barriers to entry into the industry, where barriers give existing companies an advantage over new entrants.

Rivalry between existing organisations:level of rivalry between existing firms in an industry

The bargaining power of buyers: Buying power, that is the relative power of buyers with regard to their suppliers

The bargaining power of suppliers: Relative power of the supplier with regard to their buyers

Substitutes: The threat of substitutes or alternative products or services tends to increase in respect of their relative price and performance.

Question 7

Give guidelines on how to perform a competitor analysis (6)

It is important for an organisation to understand who its competitors are, and their strengths and weakness relative to the organisation’s strategic position.

Compare the future objectives of competitors with the organisation’s own objectives
Determine current strategies of competitors
What assumptions are competitors making in terms of the future status of the industry
What are the strengths and weakness of competitors
Decide on how the organisation will respond to competitors

Question 8

Describe the limitations of Porter’s five forces analysis (5)

The model claims to assess the profitability of the industry. There is however, strong evidence that organisation-specific factors are more important to the individual organisations success than industry factors are
The model implies that the 5 forces apply equally to all competitors in an industry. The truth is that the strength of the forces differs from organisation to organisation
Product and resource markets are not adequately covered by the model
The model can never be applied in isolation. It was accepted by Porter that the outcomes of the model’s application were only relevant where the macro environment remained constant and stable
The model assumes that the relationship between the competitors is always hostile

Question 9