BBA 410 - Strategic Management Lecture 1 PDF

BBA 410 - Strategic Management REBECCA ML KATOWA BA, MBA, DIPM, FZIM [email protected] July 2024  STRATEGIC MANAGEMENT LECTURE 1: 29 July 2024 UNIT 1: The Strategic Management Process STRATEGIC MANAGEMENT PRESENTATION OUTLINE ...

BBA 410 - Strategic Management REBECCA ML KATOWA BA, MBA, DIPM, FZIM [email protected] July 2024  STRATEGIC MANAGEMENT LECTURE 1: 29 July 2024 UNIT 1: The Strategic Management Process STRATEGIC MANAGEMENT PRESENTATION OUTLINE  Introduction  Course Outline/Course Module  Examination Skills & Class Ground Rules  Class Quiz/Test  Concept of Strategy  Concept of strategic Management  Nature and Significance of Strategy  Process of Strategic Management STRATEGIC MANAGEMENT COURSE OUTLINE & MODULE (Uploaded on Portal) ASSESSMENT 1. Assignment: 10%, To be uploaded: 5th August, Due Date: 9th September, 2024 2. Mid Semester Examination: 20%, Date: 30th Sept - 11th Oct, 2024 3. CA Validation: 11th – 15th November 4. End of Semester Examination: 70%, Date: 2nd – 13th Dec, 2024 Examination and Assignment Writing Skills Examination Skills To present a passable exam script you need to ensure that your answers are clear, organised and demonstrate your understanding of the subject matter.  Read the Instructions Carefully: Begin by reading the instructions and questions thoroughly. Understand what is being asked of you before you start writing your answers. Do not make assumptions of what is being asked of you.  Plan Your Answers: Take a few moments to plan your answers before you start writing. Use the back of the Question paper to plan the structure of your answers.  Use Clear and Concise Language: Avoid unnecessary jargon or complicated sentence structures that may confuse the Examiner Examination Skills Cont’d  Handwriting: Empirical evidence substantiate that poor handwriting scores low marks in Exams while good handwritings scored high marks. Write neatly and legibly; a well – presented script is easier for the Examiner to read and evaluate  Provide Relevant Examples and Evidence: Support your answers with relevant examples, evidence, or references where applicable. This demonstrates your understanding of the topic and reinforces your arguments.  Answer the Question Directly: Avoid going off topic.  Structure Your Answers: A well structured answer is easier to follow. Use headings, Bullet points, or numbering as appropriate Examination Skills Cont’d  Be Mindful of Time: Keep track of the time and allocate it wisely for each question. If you are running short on time, prioritize completing all questions rather than spending excessive time on one or two questions. Leave time at the end for proof reading.  Be mindful of the Marks per question and allocate your time and length of answer accordingly. For example you cannot write two pages to answer a five marks question.  Proofread Your Answers: Before submitting your exam script, take a few minutes to proofread your answers. Check for spelling and grammatical errors. Spelling mistakes, poor grammar, and syntax errors cost marks. Examination Skills (cont’d) REMEMBER  Presenting a passable exam script goes beyond providing correct answers. It involves effective communication, organisation, and clarity of thought.  Your objective is to present your knowledge and understanding in a manner that is going to be well received by the Examiner.  Use the Language and Vocabulary of Strategic Management.  Behavioural Aspects: Class attendance and class participation counts Strategic Management: Class Quiz STRATEGIC MANAGEMENT Why study strategic management? Chess and Business Strategy Strategy Introduction to Strategy  What is the difference between Strategy and plan?  Why is a game of Chess a good metaphor for strategic decision-making in the business world? Strategy Development Traditional view believed strategy was always the predominant outcome of a formal planning process and that top management played the pivotal role through a top down process. This has been challenged in recent years given the unpredictability of the operating environment and the intent of managers in organisations. Modern scholars have adopted a more encompassing view of what strategy development actually is as: Intended Strategies: This entails the deliberate management intent through planning process Emergent Strategies: Develops out of social and political processes, and around organisations; the unplanned responses to unforeseen circumstances. Unrealised Strategy: Part of the intended strategy that is not carried out (unrealised intentions) Realised Strategy: The realised strategy is that which the organisation adopts. Deliberate Strategy: Part of the intended strategy that comes to fruition as initially conceived (realised intentions). Henry Mintzberg’s model of Strategy Development Nature and Significance of Strategy The concept of Strategy can be applied in virtually any situation where there are goals to be achieved and decisions to be made. Strategy is used in many different contexts to achieve specific objectives for example:  Environmental strategy  Sports strategy  Personal development strategy  Healthcare strategy  Educational strategy In the business world, strategy is essential for both entrepreneurial and mature enterprises to achieve their long-term goals. It involves an analysis of markets, identifying competitors, and determining how to gain a competitive advantage. Business strategy is based on an assumption of competition and adapting to change to succeed. Defining Strategy Definition: Strategy refers to a plan of action designed to achieve long- term or overall aims and objectives. It is the high-level road map that guides an organisation’s choices and actions to reach its goals. Key Characteristics:  Focus on goals and objectives: focuses on what the organisation wants to achieve and the broad approaches it will take to get there.  Long-Term Orientation: Covers longer time horizons  Resources Allocation: How to allocate Capital, talent, and time to achieve the desired outcomes.  Competitive Positioning: How the organisation will compete, its unique value propositions and competitive advantages  Scope: Defines Business model, target markets, and growth strategies. Defining Strategy Strategy: Gerry Johnston and Kevin Scholes (in Exploring Corporate Strategy) define strategy as “the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through the configuration of resources and competences with the aim of fulfilling stakeholder expectations”. Alfred D Chandler, defined strategy as: “ the determination of the basic long- term goals and objectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out these goals”. Thompson and Strickland (in Strategic Management) defines strategy as: “the pattern of actions and business approaches managers employ to please customers, build an attractive position, and achieve organisational objectives; a company’s actual strategy is partly planned and partly reactive to changing circumstances”. Strategy and the Operating Environment The process of strategy formulation begins with framing the vision, mission, and value statements of the organisation in combination with the external analysis of the business environment (PESTEL) and internal analysis of the organisation (SWOT). An effective strategy therefore implies an understanding of the external and internal environment and making choices that takes advantage of the inherent opportunities or strengths, while mitigating the threats and weaknesses. Role of Strategy  A company’s strategy is the game plan management is using to stake out a market position, conduct its operations, attract and please customers, compete successfully, and achieve organisational objectives.  A company’s strategy consists of a combination of competitive moves and business approaches that management employ to please customers, compete successfully , and achieve organisational objectives.  A strategy entails managerial choices among alternatives and signals organisational commitment to specific markets, competitive approaches , and ways of operating. The Concept of Strategic Management Strategic Management:  can be defined as the process of defining/formulating, implementing, and evaluating an organisation’s strategy. It involves the ongoing management tasks required to realise the strategy and achieve long – term strategic objectives.  It involves the analysis of the organisation’s internal capabilities, external environment, and competition to develop effective strategies that guide decision – making and resource allocation.  The ultimate goal of strategic management is to gain sustainable competitive advantage and create value for stakeholders, such as customers, employees, shareholders, and the community. Strategic Management Key Characteristics:  Comprehensive Process: Strategic management is the process of defining, implementing, and evaluating an organisation’s strategy. It involves the ongoing management tasks required to realise the strategy and achieve strategic objectives.  Integration: It integrates various functions and operations within the organisation to align with strategic goals.  Adaptation: Strategic management includes monitoring the external and internal environments and making adjustments to the strategy as necessary to respond to changes.  Performance Management: It involves setting performance benchmarks, measuring outcomes, and taking corrective actions to ensure that the organisation stays on track.  Leadership and Governance: Requires strong leadership to drive the process and ensure organisational alignment. The Concept of Strategic Management (cont’d Strategic management according to Henry Mintzberg, is to manage the five P’s:  Plan - steps to attain goals  Ploy- strategic move to outperform competitors  Pattern – consistency of strategic actions  Position- strategic place in industry relative to competitors  Perspectives – image of company and its executive  Lamb Robert (1984) defines strategic management as an on-going process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly FUNDAMENTAL DIFFERENCES BETWEEN STRATEGY & STRATEGIC MANAGEMENT  Scope and Focus: Strategy focuses on the what and why of the actions; what goals to purse and why they are important. Strategic management focuses on the how and when; how to implement the strategy and when to adjust it based on performance and environmental changes.  Timeframe: Strategy has long term perspective, strategic management involves both short-term and long-term perspectives focusing on immediate actions and adjustments to meet long-term.  Nature: Strategy is more static and directional, providing a framework for decision-making. Strategic management is dynamic and continuous, involving regular assessment and realignment of actions and adjustments to meet long- term goals  Components: Strategy comprises the vision, mission, goals, and the overall plan to achieve them. Strategic management involves formulation of strategy, implementation through projects and initiatives, monitoring progress, and taking corrective measures. Three Main Elements in Strategic Management Stages of Strategic Management in Organisation The strategic management process consists of three stages:  Strategy formulation  Strategy implementation  Strategy evaluation Stages of Strategic Management (cont’d) Key Steps Involved in Strategy Formulation include:  Environmental Analysis: Assess the external environment by conducting a thorough analysis of on organisation’s external opportunities and threats. This is through an analysis of industry trends, market dynamics, customer preferences, technological advancements, regulatory changes, and competitive landscape using frameworks like PESTEL, Porter’s Five Forces, and SWOT analysis  Internal Analysis: Evaluate the organisation’s internal strengths, and weaknesses, its Resources, Capabilities, Core Competencies, culture, and operational efficiency  Developing a vision and mission: Ensure the organisation’s Mission and Vision are clear and well- defined.  Establishing long-term objectives: Objectives should be SMART and aligned with the organisation’s mission and vision.  SWOT Analysis: Combine the findings from the environmental and internal analyses to identify the organisation’s strengths, weaknesses, opportunities, and threats in order to generate alternative strategies and strategic priorities.  Choosing particular strategies to pursue: Common strategies include differentiation, cost leadership, innovation, market expansion and partnership. Stages of Strategic Management (cont’d)  Resource Allocation: Determine financial, human, technological, and operational resources required.  Risk Assessment: identify potential risks and challenges associated with the chosen strategies and formulate risk mitigation strategies.  Competitive Positioning: Establish a unique value proposition and differentiation factors relative to competitors  Strategic Initiatives: what are the specific action plans, projects, and initiatives required to achieve selected strategies.  Alignment and Communication: Effective and comprehensive communication to all stakeholders  Regular Review and adjustment: Make regular reviews and adapt accordingly. Strategy Formulation Decisions At Corporate level strategy, formulation decisions include:  What new business to enter  What businesses to abandon  Whether to expand operations or diversify  Whether to enter international markets  Whether to merge or form a joint venture  How to avoid a hostile takeover Stages of Strategic Management (cont’d) Strategy Implementation  Requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed  Establishing policies and procedures, building capabilities, setting up controls and monitoring systems, managing change, reviewing and adapting, and rewarding performance.  Often called the action stage of strategic management. Strategy implementation is considered the most difficult stage in the strategic management process. Stages of Strategic Management (cont’d) Strategy evaluation comprises three activities:  Reviewing external and internal factors that are the bases for current strategies  Measuring performance, and  Taking corrective actions The Core of Strategic Management Concept  Mission and Vision: The organisation’s mission defines its purpose and core values, while the vision outlines the desired future state or long – term goal  Strategic Analysis: Involves the assessment of the organisation’s internal strengths and weaknesses, as well as external opportunities and threats in the industry or market where the firm plays.  Strategy Formulation: Based on the analysis, strategic alternatives are development to align the organisation’s resources and capabilities with the opportunities and challenges identified. Strategies may involve market expansion, product diversification, cost leadership, differentiation, or other approaches.  Strategy Implementation: The translation of the chosen strategies into specific actions and initiatives involves setting clear objectives, allocating resources, defining responsibilities, and establishing timelines. Definitions & Concepts – Mission/Vision The Core of Strategic Management Concept (Cont’d)  Strategy Execution: The actual implementation of the strategies takes place. This phase requires effective communication, leadership, and organisational alignment critical for success.  Strategic Control and Evaluation: Once strategies are implemented, it is crucial to monitor progress and evaluate results against predetermined objectives. This is provides for adjustments and corrective actions.  Continuous Improvement: Since strategic management is an ongoing process, organisations must continually adapt to changes in the macro environment, reassess their strategies, and seek new opportunities for improvement.  Long-term Objectives: Objectives can be defined as specific results that an organisation seeks to achieve in pursuing its basic mission. Long-term implies more than one year. The Core of Strategic Management Concept (Cont’d)  Strategies: are the means by which long term objectives will be achieved. Business strategies may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint venture.  Annual Objectives: are short-term milestone that organisations must achieve to reach long term objectives. They should be established at the corporate, divisional, and functional levels in a large organisation. Annual objectives should be stated in terms of management, market, finance/accounting, production/operations, research and development, and computer information systems.  Policies: policies include guidelines, rules, and procedures established to support efforts to achieve stated objectives. Policies can be established at a corporate level and to an entire organisation. Policies allow consistency and coordination within and between organisational departments.  Key Terms in the Language of Strategic Term Management Definition A personal example Mission Overriding purpose in line with Be healthy and fit the values or expectations of stakeholders Vision or Strategic intent Desired future state: the aspiration of To run the London/SA Marathon the organization Goal General statement of aim or purpose Lose weight and strengthen muscles Objective Quantification (if possible) or more Lose 5 kilos by 1 September and run precise statement of the goal marathon next year Strategic capability Resources, activities and processes. Proximity to a fitness center, a Some will be unique and provide successful diet ‘competitive advantage’ Strategies Long-term direction Exercise regularly, compete in marathons locally, stick to appropriate diet Business model How product, service and information Associate with a collaborative ‘flow’ between participating parties network (e.g. join a running club) Control The monitoring of action steps to: Monitor weight, run and measure Nature and Significance of Strategic Management. Strategic Management provides a roadmap for success, enables efficient resource utilisation, and enhances the overall performance and resilience of the organisation:  Long – term Vision: it provides a clear and long – term vision for the organisation. It defines the direction in which the organisation aims to move and aligns all its stakeholders towards common goals.  Competitive Advantage: Through strategic analysis and formulation, organisations can identify unique strengths and opportunities to gain a competitive advantage. This advantage allows them to differentiate themselves from competitors and succeed in the market.  Resource Allocation: Strategic management helps organisations allocate resources effectively. It ensures that resources like finances, human capital, and time are utilised in the most efficient manner to achieve strategic objectives. Nature and Significance of Strategic Management (cont’d)  Risk Management: By analysing external threats and internal weaknesses, organisations can proactively address risks and challenges. Strategic management enables organisations to develop contingency plans and mitigate potential negative impacts.  Innovation to Change: Strategic management encourages organisations to explore new opportunities and innovate to stay relevant and grow. It fosters a culture of creativity and encourages the pursuit of new ideas and initiatives.  Enhanced Decision – Making: Strategic management provides a structured framework for decision – making. It helps leaders consider various factors, analyse alternatives, and choose the best course of action based on the organisation’s long - term objectives.  Financial Performance: Effective strategic management can lead to improved financial performance. Successful strategies can lead to increased revenues, reduced costs, and higher profitability. Nature and Significance of Strategic Management (cont’d)  Alignment of Efforts: Having a well-defined strategy ensures that all departments and employees are aligned towards common objectives. This reduces conflicts and enhances collaboration within the organisation.  Stakeholder Communication: A well communicated strategy fosters transparency and builds trust among stakeholders, including employees, customers, investors, and partners.  Sustainability and Social Impact: Strategic management enables organisations to consider their impact on the environment and society. By incorporating sustainability into their strategies, organisations can contribute positively to their communities and the planet. Benefits of Engagement in Strategic Management  Discharges Board Responsibility: The first and most important reason behind having strategic management is it discharges the responsibility of the Board of Directors  Provides a Framework for Decision-making: Strategy gives a framework in which all staff can make day-to-day operational decisions and ensure that those decisions are all moving the organisation in a single direction.  Enables Measurement of progress: The the setting of measures for success, forces the establishment of objectives  Provides Organisational Perspectives: Strategic management looks at the components and the interrelationship between those components, in order to produce a strategy that is excellent for the entire organisation, and not a single component. Examples of Effective Strategic Management Practices There are numerous examples of companies that attribute their success or achievements to effective strategic management practices: 1) Apple: Apple is a prime example of a company with effective strategic management approach. Their strategic decisions and effective management practices have enabled them to become one of the most valuable and influential technology companies in the world. 2) Toyota Motor Corporation: Toyota’s success in the automotive industry is largely attributed to its efficient and innovative practices 3) Amazon.com, Inc: Amazon’s strategic management approach involved diversifying its product and service offerings, investing in cutting-edge technology, and continuously improving its supply chain and logistics to deliver unparalleled customer experience. Examples of Effective Strategic Management Practices 1) Trade Kings: Trade Kings success has been attributed to in part, effective leadership, sound management practices, commitment to innovation, diverse product portfolio, effective marketing and branding and sound strategic decisions over the years. 2) Zambeef: Zambeef’s success is attributed to vertical integration, investment in technology and infrastructure, adaptability, strategic decision making, capability to navigate challenges, and capitalizing on growth opportunities. 3) Zambia Sugar: The phenomenal growth has been attributed to in part, management demonstrating sound strategic decision making, effective risk management, and a commitment to long-term growth. Drawbacks of Strategic Management Anticipate the Future Environment: Anticipating the future is not a simple task. If the future does not unfold as anticipated, it may ruin the entire strategy  Its Expensive: some organisation may not afford the services of external consultants to help them build up an effective strategy  Complex Process: It comprises, the internal and external environments, long and short term objectives, strategic control of the company’s resources, and it also has to look at the organisational structure. Because of the interdependence nature, a single variation in one element, can affect all the factors.  Execution Requires time and endurance: effective execution of strategic management requires management time and lots of endurance. Reflective Questions  What are the key components of Strategy?  How do you ensure a Robust Strategy? CONCLUSION…… Strategic Questions  What is the primary goal of strategic management?  Analyse the key challenges and opportunities in strategic management