Strategic Management Chapter 11

Strategies in Different Industry Contexts

• The forces driving the evolution of an industry through different phases include:
  • Changes in industry growth rate over time
  • New knowledge and product innovation

Industry Life Cycle Phases

• Introduction (Emerging) Phase:
  • Industry is in its infancy
  • Experimentation with different production methods and technologies
  • Uncertain and difficult to predict environment
  • Characteristics: new market, proprietary technological know-how, and first-time buyers
  • Strategic issues: financing initial operations and targeting market segments
  • Strategic options: risk-taking entrepreneurship, perfecting technology, and developing attractive features
• Growth Phase:
  • Product gains customer acceptance
  • Rapid changes and short product life cycles
  • Duration depends on the industry or product line
  • Strategic options: reacting to, anticipating, or leading change
• Maturing Phase:
  • Customers develop brand loyalty
  • Lower level of competition
  • Slowly growing demand
  • Implications for competitive advantage: reduced opportunities for differentiation, and cost-based factors
  • Strategic options: eliminating slow-selling products, trimming costs, and avoiding strategic pitfalls

Fragmented Industries

• Characteristics: absence of market leaders, low entry barriers, and customized products
• Strategic options: becoming a low-cost operator, achieving higher productivity, and focusing on lower labor costs

Not-for-Profit Organisations

• Strategic management concepts and techniques are central to achieving competitive advantage
• NFP organisations aim to achieve institutional advantage rather than competitive advantage
• Key factors: vision, mission, and goals
• Revenue sources: donations, government grants, and client payments
• Constraints: intangible services, dependence on clients and sponsors, and community involvement

Impact of Constraints on Strategy

• NFP organisations have different and often divergent goals and objectives
• Impact of community involvement in local government issues
• Strategy formulation, implementation, and control are affected by constraints

Useful Strategies for NFP Organisations

• Strategic piggybacking: developing new activities to generate funds
• Strategic alliances: forming partnerships to bundle competences and resources

Strategy in the Health Sector

• Core issue: increasing demand for health services due to complex and changing disease profiles
• Determinants of health-care systems: political, economic, social, and ecological environments
• Strategic impact of HIV and AIDS epidemic: socioeconomic gains, empowerment, and skills development
• Health-care in South Africa: private and public sectors, with a focus on business principles and regulatory frameworks

Strategy Choice

• Socially responsible choice: considering the general public interest, emerging societal priorities, and community involvement
• Influence of culture and internal politics on strategy evaluation and choice
• Criteria for strategy evaluation: customer satisfaction, flexibility, cost-effectiveness, and logical reasoning
• Appropriateness, feasibility, desirability, and competitive advantage are key considerations

Strategy Evaluation Tools and Techniques

• Contribution to the portfolio of the organisation
• BCG matrix: dogs, question marks, stars, and cash cows
• Investment appraisal: cash flow forecasting, cost-benefit analysis, and impact analysis
• Strategic evaluation in different strategic approaches: prescriptive, emergent, and adaptive approaches

Strategy Implementation and Change Management

• Significance of successful strategy implementation: turning strategic plans into action tasks

• Differences between strategy formulation and implementation: thinking vs. action phases

• Strategy implementation as a component of the strategic management process: integral part of formulation, implementation, and control

• Performance gap: attributed to poorly formulated plans, misapplied resources, and breakdowns in communication

• Barriers to strategy implementation: lack of alignment, inadequate information systems, and ineffective coordination

• Change management: dissatisfaction, vision, and strategy for implementation

• Key features of change management: proactive, perceived need for change, necessary resources, and commitment from managers and employees

• Types of strategic change: adaptation, reconstruction, evolution, and revolution### Understanding Change and Strategy Implementation

• Change management involves five steps: defining the problem, defining the change objective, identifying driving forces, identifying restraining forces, and developing a comprehensive change strategy.

Kurt Lewin's Change Model

• Lewin's model consists of three stages: unfreezing, moving to the next level, and refreezing.
• Unfreezing involves preparing for change, moving to the next level involves implementing change, and refreezing involves stabilizing the new state.

Model of Strategic Change Process

• The model involves identifying areas of change, managing resistance to change, using power and influence, and developing a learning organisation.

Identifying Areas of Change

• New technology and operational tasks may be needed.
• Administrative changes involve new structures, policies, budgets, and reward systems.
• In the people area of change, it is important to match individual and corporate values.

Managing Resistance to Change

• Strategies for overcoming resistance include education and communication, participation and involvement, facilitation and support, and negotiation and agreement.

Power and Influence

• Managers can use "political" tactics to influence employees, such as developing liaisons, presenting a positive image, and using "divide and rule" strategies.

The Learning Organisation

• Learning must be seen as a continuous process.
• Employees work and learn as a team.
• Visions for the future must be shared.

Implementation Framework

• The McKinsey 7S framework model involves seven interdependent internal aspects of an organisation: strategy, structure, systems, shared values, style, staff, and skills.

Strategy Implementation Process

• Core components for strategy implementation include building an organisation that grows and develops the needed competencies, having strong strategic leadership, nurturing a corporate culture, linking rewards and incentives to strategic targets, and establishing a policy and procedure framework.

People Management

• Characteristics of strategy-supportive employees include being committed to the strategy, competent, and high-performing.
• Empowerment and participation of people are important for strategy implementation.

Strong Strategic Leadership

• Strategic leadership is crucial for driving the implementation process.
• Leadership has an impact on every aspect of the strategy implementation process.

Establishing a Strategy-Enhancing Corporate Culture

• An effective culture that supports strategy implementation is vital.
• Culture can be defined as a system of shared values that shapes what is important to people.

Linking Rewards and Incentives

• Rewards and incentives should be linked to the achievement of strategic targets and milestones.
• Rewards must be utilised correctly to encourage desired behaviour.

Organisational Structure

• The organisational structure must be aligned with the strategy at all times.
• Structure follows strategy.

Processes and Practices for Rewarding Employees

• Reward management system tools can be divided into financial and non-financial rewards.

Coordinating Mechanisms

• Six basic coordinating mechanisms include mutual adjustment, direct supervision, standardisation of work processes, standardisation of work outputs, standardisation of employees' skills, and standardisation of employees' norms.

Essential Parameters of Design

• Job specialisation, behaviour formalisation, training, and socialisation are essential parameters of design.

Allocating Resources

• Resources must be allocated in a way that supports the organisation's long-term goals, chosen strategy, structure, and short-term objectives.

Establishing Policies, Guidelines, and Procedures

• Policies, guidelines, and procedures must be established to support the strategy implementation process.

Developing Action Plans, Short-Term Objectives, and Functional Tactics

• Action plans, short-term objectives, and functional tactics must be developed to support the strategy implementation process.

Designing and Incorporating Information and Operating Systems

• Information systems can be defined as a set of interrelated elements that collect, manipulate, and disseminate data and information.
• Aspects that influence the effectiveness of an information system include its capabilities, the organisation's characteristics, and the work systems.

Striving towards Continuous Improvement

• Implementing continuous improvement is influenced by a number of organisational factors, including a clear strategic framework, a supportive culture, an enabling infrastructure, and a supporting toolkit.

Strategy Implementation and Corporate Governance

• Organisational leaders and managers should ensure that the recommendations of the King III Report on corporate governance are followed during the implementation process.

The Role of Leadership in Strategy Implementation

• The role of leadership is vital in strategy implementation, and leaders should have visionary qualities, be able to empower and motivate employees, and create and implement strategic change.

Strategic Leadership

• Strategic leadership can be defined as the ability to anticipate what is necessary, articulate a strategic vision, empower and motivate employees, and create and implement strategic change.

Characteristics of Strategic Leaders

• Characteristics of strategic leaders include the ability to create and communicate a vision, instil commitment, delegate and empower, and make tough decisions.

Emotional Intelligence

• Emotional intelligence involves understanding the emotions of oneself and others, and includes self-awareness, self-regulation, self-motivation, social awareness, and social skills.

Strategic Intelligence

• Strategic intelligence involves gathering information about competitors and transforming it into knowledge to stay one step ahead of the competition.

Key Actions and Responsibilities of Strategic Leaders

• Key actions and responsibilities of strategic leaders include determining the organisation's strategic direction, managing the organisation's resource portfolio, and sustaining an effective organisational culture.

Matching Leadership Styles with the Chosen Strategy

• Different types of strategies require different types of leadership styles, such as growth strategy, strategic alliances, recovery strategies, and more.### Leadership and Organisational Culture
• In the start-up phase, a risk-taker as a leader is needed, with an entrepreneurial leadership style.
• In the rapid growth phase, a caretaker as a leader is needed, who leads with commitment and builds on the organisation's strengths.
• In the maturity stage, a surgeon as a leader is needed, with a selective, decisive, participative, and delegative leadership style.
• In the decline phase, an undertaker as a leader is needed, who makes tough decisions to prevent major losses for shareholders.

Transformational Leadership

• Characteristics of transformational leadership:
  • Seeing themselves as change agents and visionaries.
  • Dealing with resistance to change.
  • Believing in the unlimited potential of the human being.
• Components of transformational leadership:
  • Influence: winning trust and respect.
  • Individual attention: paying attention to individual needs for development.
  • Inspiration: motivating and inspiring employees.

Moral Duties for Strategic Leaders and Company Directors

• Five moral duties (the five Cs):
  • Conscience: intellectual honesty and doing everything in the best interests of the organisation and all stakeholders.
  • Care: devoting serious attention to the affairs of the organisation.
  • Competence: having the knowledge, skills, and competencies required for governing the organisation effectively.
  • Commitment: being committed in performing duties and responsibilities.
  • Courage: having the courage to act with integrity in all strategic decisions and activities.

Organisational Culture

• Seven important aspects of culture:
  • Marketing orientation and customer priority.
  • Target orientation and commitment to achieving agreed levels of performance.
  • Attitudes towards costs and cost reduction.
  • Commitment and loyalty to the organisation felt by staff.
• Organisational culture influences the success of strategy implementation:
  • Culture, climate, and values need to be aligned with and supportive of the strategy.
  • Leaders need to be conscious of their values and ensure alignment with organisational values.

Levels of Culture

• Nature and character of organisational culture consists of:
  • Assumptions: deepest level of cultural awareness, taken-for-granted assumptions.
  • Values: telling members what is important and what they need to pay attention to.
  • Artifacts: observable behaviours of members, structures, systems, procedures, rules, and physical aspects of the organisation.

Aspects of Culture

• Manifestations of culture:
  • Stories: historical events that are significant.
  • Symbols: symbols of success.
  • Power structures: who makes decisions and how are they influenced?
  • Organisational structure: hierarchy and access to senior people.
  • Control systems: degree of control and bureaucracy.
  • Routines and rituals: special occasions and events.
  • Paradigm: what the organisation is about, its mission, and values.

Internal Determinants of Organisational Culture

• Six internal determinants:
  • Leadership style.
  • Organisational policies.
  • Managerial values.
  • Organisational structure.
  • Characteristics of the workforce.
  • Organisational size.

Types of Organisational Culture

• Four types:
  • Power culture: dependent on the style of the leader.
  • Role culture: authority is dictated by hierarchy.
  • Task culture: expertise and technical challenges.
  • Person culture: self-help groups or partnerships.

Managing and Creating Distinct Cultures

• Guidelines:
  • Emphasise key themes and dominant values.
  • Encourage dissemination of stories and legends about core values.
  • Institutionalise practices that reinforce desired beliefs and values.

Changing Organisational Culture

• Six steps:
  • Formulate a clear strategic vision.
  • Display top-management commitment.
  • Model culture change at the highest level.
  • Select and socialise newcomers and terminate deviants.
  • Develop ethical and legal sensitivity.

Strategic Control and Improvement

• Nature of strategic control:
  • Identifying the basis of the strategy.
  • Comparing actual results with expected results.
  • Taking corrective actions.

Types of Strategic Control

• Premise control: checking assumptions and premises.
• Special alert control: rapid reconsideration of strategy due to unexpected events.
• Implementation control: controlling the implementation process.

Criteria to Evaluate a Strategy

• Consistency: internal criterion to identify alignment with goals and policies.
• Feasibility: internal criterion to identify resource limitations.
• Consonance: external criterion to evaluate trends on which the strategy is based.
• Advantage: external criterion to evaluate competitive advantage.

The Balanced Scorecard

• Four perspectives:
  • Financial: making more money by selling more or spending less.
  • Customer: customer satisfaction and value creation.
  • Internal business: internal processes creating and delivering value.
  • Learning and growth: developing distinctive competencies.

Continuous Improvement

• Approaches:
  • Comparison with past performance.
  • Comparison with key success factors.
  • Benchmarking: comparing with best practices in the industry.
  • Total quality management and re-engineering.
  • ISO 9001: international standard for quality management systems.