BBA3 Strategy SG 2024 PDF

BACHELOR OF BUSINESS ADMINISTRATION Strategic Management III This study guide highlights key focus areas for you as a student. Because the field of study in question is so vast, it is critical that you consult additional literature. Copyright © Regenesys, 2024 All rights reserved. No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording or otherwise) without written permission of the publisher. Any person who does any unauthorised act in relation to this publication may be liable for criminal prosecution and civil claims for damages. CONTENTS 1. STUDY MATERIAL......................................................................................................................................1 2. PRESCRIBED AND RECOMMENDED RESOURCES...............................................................................1 2.1 BOOKS............................................................................................................................................... 1 2.2 ARTICLES.......................................................................................................................................... 2 2.3 MULTIMEDIA..................................................................................................................................... 5 3. INTRODUCTION..........................................................................................................................................6 3.1 LEARNING OUTCOMES................................................................................................................... 6 3.2 AN INTRODUCTION TO STRATEGIC MANAGEMENT................................................................... 7 3.2.1 INTRODUCTION................................................................................................................... 8 3.2.2 STRATEGY DEFINED........................................................................................................... 8 3.2.3 LEVELS OF STRATEGY..................................................................................................... 11 3.2.4 STRATEGY STATEMENTS................................................................................................ 14 3.2.5 MANAGERS AND STRATEGY........................................................................................... 20 3.2.6 THE THREE BRANCHES OF STRATEGY......................................................................... 21 3.2.7 KEY POINTS....................................................................................................................... 25 3.3 STRATEGIC MANAGEMENT MODELS.......................................................................................... 26 3.3.1 INTRODUCTION................................................................................................................. 27 3.3.2 DETERMINING STRATEGIC CHOICES............................................................................. 27 3.3.3 APPLYING STRATEGIC MODELS..................................................................................... 31 3.3.4 IMPLEMENTING THE RIGHT STRATEGY........................................................................ 36 3.3.5 KEY POINTS....................................................................................................................... 42 3.4 DEVELOPING STRATEGY............................................................................................................. 43 3.4.1 INTRODUCTION................................................................................................................. 44 3.4.2 INTENDED STRATEGY DEVELOPMENT.......................................................................... 45 3.4.3 STRATEGIC LEADERSHIP................................................................................................ 45 3.4.4 STRATEGIC PLANNING SYSTEMS................................................................................... 46 3.4.5 ADVANTAGES AND DISADVANTAGES OF STRATEGIC PLANNING............................. 48 3.4.6 MANAGING STRATEGY DEVELOPMENT........................................................................ 48 3.4.7 PERCEPTIONS OF STRATEGY......................................................................................... 50 3.4.8 STRATEGY DEVELOPMENT AND ORGANISATIONAL CONTEXTS............................... 51 3.4.9 MANAGING EMERGENT AND INTENDED STRATEGIES................................................ 54 3.4.10 CASELETS.......................................................................................................................... 55 3.4.11 KEY POINTS....................................................................................................................... 58 3.5 STRATEGY IN PRACTICE.............................................................................................................. 59 3.5.1 INTRODUCTION................................................................................................................. 59 3.5.2 THE STRATEGISTS............................................................................................................ 60 3.5.3 STRATEGIZING ACTIVITIES.............................................................................................. 64 3.5.4 COMPETITOR MARKET ANALYSIS.................................................................................. 70 3.5.5 IMPLICATIONS OF ANALYSIS........................................................................................... 72 3.5.6 STRATEGY DESIGN AND IMPLEMENTATION METHODOLOGIES................................ 76 3.5.7 KEY POINTS....................................................................................................................... 89 3.6 EVALUATING STRATEGY.............................................................................................................. 90 3.6.1 INTRODUCTION................................................................................................................. 91 3.6.2 EVALUATION...................................................................................................................... 91 3.6.3 EVALUATION CRITERIA.................................................................................................... 93 3.6.4 A FRAMEWORK FOR EVALUATING STRATEGY............................................................. 97 3.6.5 KEY POINTS..................................................................................................................... 112 4. REFERENCES.........................................................................................................................................114 5. VERSION CONTROL...............................................................................................................................120 List of Tables TABLE 1: DIFFERENT APPROACHES TO STRATEGIC MANAGEMENT....................................................10 TABLE 2: STRATEGIC CHOICES...................................................................................................................27 TABLE 3: POSSIBLE ADVANTAGES AND DISADVANTAGES OF STRATEGIC PLANNING......................48 TABLE 4: TOP MANAGERS AND DIRECTOR SKILLS..................................................................................62 TABLE 5: EXAMPLE OF THE DEVELOPMENT OF AN ORGANISATIONAL PROFILE................................66 TABLE 6: THE MACROENVIRONMENT VARIABLES....................................................................................68 TABLE 7: THE SAFE CRITERIA......................................................................................................................94 TABLE 8: ADVANTAGES AND DISADVANTAGES OF PORTFOLIO ANALYSIS..........................................99 TABLE 9: THE LIFE-CYCLE PORTFOLIO MATRIX......................................................................................101 TABLE 10: EXAMPLE – THE MACROENVIRONMENT VARIABLES...........................................................103 List of Figures FIGURE 1: THE THREE BRANCHES OF STRATEGY...................................................................................21 FIGURE 2: STRATEGY PROCESS.................................................................................................................24 FIGURE 3: GRAND STRATEGIES..................................................................................................................37 FIGURE 4: THE VIRGIN GROUP....................................................................................................................41 FIGURE 5: THE STRATEGY DEVELOPMENT PROCESS............................................................................44 FIGURE 6: THE STRATEGY DEVELOPMENT CONTEXT.............................................................................52 FIGURE 7: THE PYRAMID OF STRATEGY IN PRACTICE............................................................................60 FIGURE 8: THE STEPS IN THE DEVELOPMENT OF AN ORGANISATIONAL PROFILE............................65 FIGURE 9: STEPS IN ENVIRONMENTAL FORECASTING...........................................................................69 FIGURE 10: PORTER’S FIVE FORCES..........................................................................................................71 FIGURE 11: THE SEVEN-S MODEL...............................................................................................................79 FIGURE 12: BALANCED SCORECARD..........................................................................................................92 FIGURE 13: A FRAMEWORK FOR EVALUATING STRATEGY.....................................................................97 FIGURE 14: VALUE-FOR-MONEY LINE.......................................................................................................110 FIGURE 15: BOWMAN’S STRATEGY CLOCK.............................................................................................110 1. STUDY MATERIAL Your material includes: This study guide; Prescribed reading and multimedia; Digital assessments at the end of each section of your course; and An individual assignment. These resources provide a starting point for your studies. You are expected to make good use of your textbooks, the additional resources provided via online links, and wider reading that you, as a higher education student, will source yourself. 2. PRESCRIBED AND RECOMMENDED RESOURCES A number of resources are prescribed to help you complete this course. 2.1 BOOKS The following textbook is recommended and should be used to complete the course. Johnson, G., Whittington, R., & Scholes, K. (2020). Exploring strategy: Text and cases. (12th ed.). Pearson Education Ltd. You can order a hard or soft copy of this book through the library, or through reputable academic bookstore. You may also find these books useful: Hellriegel, D., Jackson, S.E., Slocum, J., Staude, G., Amos, T., Klopper, H.B., Louw, L., & Oosthuizen, T. (2008). Management principles. (3rd ed.). Oxford University Press. Smit, P.J., Cronje, G.J de J., Brevis, T., & Vrba, M.J. (2011). Management principles: A contemporary edition for Africa. (5th ed.). Juta. © Regenesys Business School 1 2.2 ARTICLES Abdul, R. (2015, February 11). Virgin corporate strategy, case study. RobAbdul.com https://www.robabdul.com/business/virgin-corporate-strategy-case-study-article-this-report-closely-examines- the-virgin-groups-corporate-rationale/ (accessed 19 December 2023). Abdul, R. (2015, February 11). Implementation strategy for your new e-commerce web site. RobAbdul.com, https://www.robabdul.com/business/implementation-strategy-for-your-new-ecommerce-web-site-membership- society-charity-ecommerce-parallel-cut-over-implementation-methods-website/ (accessed 16 January 2023). Adidas. (2017, March 8). Adidas: Strategy acceleration. https://www.adidas- group.com/media/filer_public/08/11/081184d4-bfef-47b3-a02d-cc53c583f492/adidasag_strategyacceleration- en.pdf (accessed 19 December 2023). Alonso, T. (2023, July 13). Porter's five forces: The definitive overview. Cascade. https://www.cascade.app/blog/porters-5-forces (accessed 19 December 2023) Anglo American. (2022). Get to know our sustainable mining plan. https://www.angloamerican.com/~/media/Files/A/Anglo-American-Group-v5/PLC/sustainability/anglo-american- sustainable-mining-plan-2022.pdf (accessed 19 December 2023). Anglo American. (2022). Sustainable change for our communities. https://www.angloamerican.com/sustainability/communities (accessed 19 December 2023). Axonn. (2015). Your content strategy made simple. https://www.axonn.co.uk/wp-content/uploads/2015/08/your- content-strategy-made-simple-ebook.pdf?%20pid=explorer&efh=false&a=v&chrome=false&embedded=true (accessed 19 December 2023). Bhasin, H. (2019, February 27). SWOT analysis of Cisco. Marketing91. https://www.marketing91.com/swot- analysis-cisco/ (accessed 19 December 2023). Beauregard, B. (2016, February 24). Reviewing your mission statement. https://www.intelligentoffice.com/blog/reviewing-your-mission-statement/ (accessed 19 December 2023). Bregman, P. (2017). Execution is a people problem, not a strategy problem. Harvard Business Review, January 4, 2-6 (Use EbscoHost on the Regenesys portal to find this article). Carpenter, A. (2023, September 18). Brand perception: What it is and how to improve it. Capterra. https://www.capterra.com/resources/what-is-brand-perception/ (accessed 19 December 2023) Dibartolomeo, M. (2022, May 17). How to spot a bad strategy. APMG International. https://apmg- international.com/article/how-spot-bad-strategy-0 (accessed 19 December 2023). © Regenesys Business School 2 Dowd, M., & Waugh, R. (2011). Wollongong city council case study on strategic, tactical, operational service level development using NAMS.PLUS templates. https://waughinfrastructure.com/wp- content/uploads/2013/05/Waugh-Wollongong-City-Council-Case-Study-on-Strategic-Tactical-and-Operational- Service-Level-Development-Using-NAMES.PLUS-Templates-Mike-Dowd-Ross-Waugh-IPWEA-August- 2011.pdf (accessed 19 December 2023). Drummond, B. (2017, November 28). The traits of a "good strategy", and how to avoid a "bad strategy” in planning. Medium. https://medium.com/@bec_drummond/the-traits-of-a-good-strategy-and-how-to-avoid-a-bad- strategy-in-planning-6bd0f78bc83b (accessed 19 December 2023). Frederick, R. (2023, September 25). The future of strategy isn't a strategic plan. Medium. https://ryanfrederick.medium.com/the-future-of-strategy-isnt-a-strategic-plan-2cfe4842f2b9 (accessed 19 December 2023). Fukushima, D. (2023, May 15). Strategic planning in a highly uncertain world. Toffler. https://tofflerassociates.com/vanishing-point/strategic-planning-in-a-highly-uncertain-world/ (accessed 19 December 2023). Idle, T. (2015, July 14). How Unilever is creating a web of partnerships. Green Biz. https://www.greenbiz.com/article/how-unilever-creating-web-partnerships (accessed 19 December 2023). Indeed.com. (2022, October 3). How to measure and build positive brand perception. https://www.indeed.com/career-advice/career-development/brand-perception (19 December 2023). Jurevicius, O. (2023, December 3). SWOT analysis: Do it properly! Strategic Management Insight. https://www.strategicmanagementinsight.com/tools/swot-analysis-how-to-do-it.html (accessed 19 December 2023). Kolb, D. (2023, June 19). Porter's generic competitive strategies: Creating and sustaining competitive advantage. Medium. https://medium.com/@kolbeuk/porters-generic-competitive-strategies-creating-and- sustaining-competitive-advantage-a1ac377ddf5f (accessed 19 December 2023). Kumar, A. (2022, April 28). Environmental scanning: Meaning, characteristics, process, needs, and approaches to the environmental scanning. GetUpLearn. https://getuplearn.com/blog/environmental- scanning/?utm_source=rss&utm_medium=rss&utm_campaign=environmental-scanning (accessed 19 December 2023). Lancefield, D. (2021, November 22). Mastering the connection between strategy and culture. PWC. https://www.strategy-business.com/article/Mastering-the-connection-between-strategy-and-culture (accessed 19 December 2023). Martin, R. (2014). The big lie of strategic planning. Harvard Business Review, 92(1/2), 78-84. (use EbscoHost on the Regenesys portal to find this article). © Regenesys Business School 3 Martin, R. (2020, November 2). Strategy as problem-solving. Medium. https://rogermartin.medium.com/strategy-as-problem-solving-5c6fb9291d87 (accessed 19 December 2023). Management Study Guide. (nd). Strategic management - Meaning and important concepts. https://www.managementstudyguide.com/strategic-management.htm (accessed 19 December 2023) Mchunu, S. (2023, March 24). What is brand perception? WebFX. https://www.webfx.com/blog/marketing/what- is-brand-perception/ (accessed 19 December 2023). MindTools. (n.d.). Porter’s five forces. https://www.mindtools.com/pages/article/newTMC_08.htm (accessed 19 December 2023). Mind Tools. (2013). Kotter’s 8-step change model: implementing change powerfully and successfully. https://www.mindtools.com/pages/article/newPPM_82.htm (accessed 19 December 2023). Momin, A. (2023, October 17). Cisco PESTLE analysis: Navigating global technology disruption. https://pestleanalysis.com/cisco-pestle-analysis/ (accessed 19 December 2023). Nestle. (n.d.). Responding to changing customer requirements: The drive towards wellness. https://unblogdemarketing.files.wordpress.com/2013/04/nestle-edition-10-full.pdf (accessed 19 December 2023). Park, R. (2020, October 5). The importance of adaptability in an increasingly complex world. EY. https://www.ey.com/en_us/innovation/the-importance-of-adaptability-in-an-increasingly-complex-world (accessed 19 December 2023). Procter & Gamble. (2011, November 3). The Procter & Gamble Company and Teva Pharmaceutical Industries announce formation of new consumer health care partnership. https://www.businesswire.com/news/home/20111103005832/en/The-Procter-Gamble-Company-and-Teva- Pharmaceutical-Industries-Announce-Formation-of-New-Consumer-Health-Care-Partnership (accessed 19 December 2023). Recklies, O. (n.d.). Problems and barriers to strategic planning and proposals for solutions. Themanager.org, http://www.themanager.org/Strategy/Strategic-planning-problems-barriers.htm (accessed 19 December 2023). SAFe. (n.d.). Vantiv: Case study. https://www.scaledagileframework.com/vantiv-case-study (accessed 19 December 2023). Savkin, A. (2023, May 15). The impact of VUCA on strategic planning. Medium. https://medium.com/@bscdesigner/the-impact-of-vuca-on-strategic-planning-3848c42a06c0 (accessed 19 December 2023). Savov, V. (2016, September 30). BlackBerry’s success led to its failure. The Verge. https://www.theverge.com/2016/9/30/13119924/blackberry-failure-success (accessed 19 December 2023). © Regenesys Business School 4 Simister, P. (2018, February 18). Bowman’s strategy clock – Your strategic options. https://www.tutor2u.net/business/reference/strategic-positioning-bowmans-strategy-clock (accessed 19 December 2023). Sullivan, B., Garvey, J., Alcocer, J., & Eldridge, A. (2020). Retail banking 2020: Evolution or revolution? Price Waterhouse Coopers. https://www.pwc.com/gx/en/banking-capital-markets/banking-2020/assets/pwc-retail- banking-2020-evolution-or-revolution.pdf (accessed 19 December 2023). Study Lib.com. (n.d.). A Wilkinson case study. https://studylib.net/doc/10040285/a-wilkinson-case-study (accessed 19 December 2023). The Forbes Group. (2014, July 25). Portfolio analysis: separating winners from losers in the association work plan. https://www.slideshare.net/kumaraswamymudirajjeekuru/portfolio- analysismatrixexplanationandquestionnaire (accessed 19 December 2023). Top Non-profits. (n.d.). 30 example vision statements for non-profits. https://topnonprofits.com/examples/vision- statements/ (accessed 19 December 2023). Uta, I. (2021, February 5). McKinsey 7S model of Nokia - where the company went wrong. Brand Minds. https://brandminds.com/mckinsey-7s-model-of-nokia-where-the-company-went-wrong/ (accessed 19 December 2023). Vascellari, A. (2015). Environmental scan – What? Why? How? http://www.andreavascellari.com/2014/01/environmental-scan/ (accessed 19 December 2023) Wroblewski, M.T. (2019, November 5). Advantage and disadvantage of emergent strategy. Chron. http://smallbusiness.chron.com/advantage-disadvantage-emergent-strategy-10070.html (accessed 19 December 2023). 2.3 MULTIMEDIA Moment. (2022, 24 February). How to perform a SWOT analysis for your business [Video]. YouTube https://www.youtube.com/watch?v=AjR5Hmexvo8 (accessed 19 December 2023) Porter, M. (2010, September 16). What is strategy? [Video]. YouTube https://www.youtube.com/watch?v=0BgMQkKMKaE (accessed 21 November 2023) © Regenesys Business School 5 3. INTRODUCTION Strategy sets out the direction for an organisation. Strategy determines the purpose and aim of the firm. The mere fact that an organisation has been established implies that it has a mission, a duty to fulfil, a reason for its existence. This study guide on strategic management will help you understand what happens behind the scenes in devising, implementing and managing strategies. 3.1 LEARNING OUTCOMES On completing this course, you should be able to: Review strategic management concepts and principles; Develop a strategic plan; Evaluate strategic plans; Review organisational strategy in line with environmental dynamics; and Compare different strategic management theories and models. The timetable under each section heading provides guidance on how long to spend studying the section. Follow the timetable to ensure that you spend a suitable length of time on each section, complete the assignment, and have enough time to prepare for the examination. © Regenesys Business School 6 3.2 AN INTRODUCTION TO STRATEGIC MANAGEMENT Timeframe Minimum of eight hours Learning outcome Review strategic management concepts and principles Recommended Johnson, G., Whittington, R., & Scholes, K. (2020). Exploring strategy: Text and cases. (12th textbook ed.). Pearson Education Ltd. Axonn. (2015). Your content strategy made simple. https://www.axonn.co.uk/wp- content/uploads/2015/08/your-content-strategy-made-simple- ebook.pdf?%20pid=explorer&efh=false&a=v&chrome=false&embedded=true (accessed 19 December 2023). Beauregard, B. (2016, February 24). Reviewing your mission statement. https://www.intelligentoffice.com/blog/reviewing-your-mission-statement/ (accessed 19 December 2023). Dowd, M., & Waugh, R. (2011). Wollongong city council case study on strategic, tactical, operational service level development using NAMS.PLUS templates. https://waughinfrastructure.com/wp-content/uploads/2013/05/Waugh-Wollongong-City- Council-Case-Study-on-Strategic-Tactical-and-Operational-Service-Level-Development- Using-NAMES.PLUS-Templates-Mike-Dowd-Ross-Waugh-IPWEA-August-2011.pdf Prescribed reading (accessed 19 December 2023). Martin, R. (2014). The big lie of strategic planning. Harvard Business Review, 92(1/2), 78- 84 (use EbscoHost on the Regenesys portal to find this article). Management Study Guide. (nd). Strategic management – Meaning and important concepts. https://www.managementstudyguide.com/strategic-management.htm (accessed 19 December 2023). Top Non-profits. (n.d.). 30 example vision statements for non-profits. https://topnonprofits.com/examples/vision-statements/ (accessed 19 December 2023). Vascellari, A. (2015). Environmental scan – What? Why? How? http://www.andreavascellari.com/2014/01/environmental-scan/ (accessed 19 December 2023). Moment. (2022, 24 February). How to perform a SWOT analysis for your business. [Video] Prescribed YouTube https://www.youtube.com/watch?v=AjR5Hmexvo8 (accessed 19 December 2023) multimedia Porter, M. (2010, September 16). What is strategy? [video] YouTube https://www.youtube.com/watch?v=0BgMQkKMKaE (accessed 21 November 2023). Every organisation is established for a purpose. That purpose is determined during strategy formulation. Where an organisation should be, what it should do, what function it should fulfil, Section overview are examples of the decisions made in the strategic planning process. In this section we examine levels of strategy and work on drawing up strategic statements. © Regenesys Business School 7 3.2.1 Introduction This section is a brief review of concepts and principles covered in Strategic Management I and II. The purpose of this section is to refresh your knowledge of previous courses. It serves as the foundation for the sections to follow. Decide now on the role you would like to adopt as you work through this course. If you work in an organisation, tackle the exercises from the perspective of a team or departmental manager in the organisation. If you want to build your own business, use the exercises to create plans and strategies for this enterprise. Alternatively, select a business with which you are familiar – perhaps a local one – and use that to build your ideas as you work through this course. So when you come across an exercise that refers to “your organisation”, this will be the organisation to which we are referring. 3.2.2 Strategy Defined Concept Recap Watch this video for a recap of terms and concepts, and then answer the questions that follow: Management Study Guide. (nd). Strategic management – Meaning and important concepts. https://www.managementstudyguide.com/strategic-management.htm (accessed 19 December 2023). Questions 1. Explain the key concepts addressed in the clip. 2. Discuss the importance of these key concepts in strategic management. 3. Provide practical examples of these key concepts within your organisation. © Regenesys Business School 8 Now consider the following definitions of the term “strategy”: The determination of the long-run goals and objectives of an enterprise and the adoption of courses of action and the allocation of resource necessary for carrying out these goals. – Alfred Chandler Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value. – Michael Porter A pattern in a stream of decisions. – Henry Mintzberg The long-term direction of an organisation. – Exploring Strategy (Johnson et al, 2020) Compare Definitions 1. Compare the various definitions of strategy by Chandler, Porter, Mintzberg and Exploring Strategy. 2. Drawing on the important principles highlighted in Chandler, Porter, Mintzberg and Exploring Strategy’s definitions, develop your own definition of strategy that is applicable to your organisation. Each of the given definitions illustrates important yet distinct elements of strategy. What is Relevant? Here’s another definition from Michael Porter. Watch it, and then answer the questions that follow: Porter, M. (2010, September 16). What is strategy? [Video]. YouTube https://www.youtube.com/watch?v=0BgMQkKMKaE (accessed 19 December 2023). Questions 1. Outline the key learnings from this clip. 2. Discuss how these key learnings are relevant to your organisation. © Regenesys Business School 9 Given what you have just heard and read, consider these statements. Which of them qualify as strategy statements? Increase sales through additional sales staffing. Increase sales by increasing the number of locations. Increase profitability by laying off staff. Decrease cost by outsourcing production. Reduce overhead by improving inventory control. Boost price of the company’s shares by increasing the dividend. Boost price of the company’s shares by buying shares back. Increase research and development expenditure to develop new products. Acquire a competitor. Sell a part of the company that is no longer a profitable division. Develop a Statement The former dean of the Rotman School of Management, Roger Martin (2014), argues that the ritual of strategic planning lulls organisations into thinking that they know where they are going and how, when they would be better off focusing on their target markets and ensuring that their choices are logical, rather than worrying about the thoroughness of their decision-making processes. Martin, R. (2014). The big lie of strategic planning. Harvard Business Review, 92(1/2), 78-84. Find this article on Ebscohost via the Regenesys portal and, using Martin’s advice, draw up a strategic statement suitable for your organisation. TABLE 1: DIFFERENT APPROACHES TO STRATEGIC MANAGEMENT Chandler Adopts a logical thought process, starting with the development of goals and objectives, leading to the allocation of resources. Porter Places emphasis on choices, differences and competition. Mintzberg Acknowledges that strategies do not always unfold according to plan and that, at times, organisations are required to improvise due to unforeseen circumstances. (Whittington et al., 2020) Strategic management approach: Assuming that you own a firm, which approach to strategic management resonates best with your personal value system? Explain your answer. © Regenesys Business School 10 3.2.3 Levels of Strategy Whittington et al. (2020) divide organisational strategy into three levels: corporate, business and operational. Corporate-level strategy Corporate-level strategy deals with the full range of the organisation and how value is added to the organisation. Corporate level strategy is concerned with: Reach: Defining the issues that are corporate responsibilities. These might include identifying the overall vision , mission and goals of the corporation, the type of business the corporation should be involved in, and how businesses will be integrated and managed; Managing activities and business interrelationships: Corporate strategy seeks to develop synergies by sharing and coordinating staff and other resources across business units, investing financial resources across business units, and using business units to complement other corporate business activities; and Management practices: Corporations decide how business units are to be governed: through direct corporate intervention (centralisation) or through autonomous government (decentralisation). Business-level strategy Business-level strategy is applicable in those organisations which have different businesses, and each business is treated as strategic business unit (SBU). The fundamental concept in SBU is to identify the discrete independent product/market segments served by an organisation. For each product group, the nature of the market differs in terms of customers, competition, and marketing channel. Therefore, different strategies are required for different product groups. Where the SBU concept is applied, each SBU sets its own strategies to make the best use of its resources (its strategic advantages) given the environment it faces. The corporate strategy sets the long-term objectives of the firm and the broad constraints and policies within which an SBU operates. Some examples of business-level strategies: Innovation strategies; Scale appropriateness strategies; and Response strategies. © Regenesys Business School 11 Functional strategies Functional strategy, as is suggested by the title, relates to a single functional operation and the activities involved therein. These strategies are concerned with how the components of an organisation deliver the corporate- and business-level strategies effectively. The functional level of your organisation is the level of the operating divisions and departments. The strategic issues at the functional level are related to functional business processes and the value chain. Functional level strategies in R&D, operations, manufacturing, marketing, finance, and human resources involve the development and coordination of resources through which strategies at the business unit level can be executed effectively and efficiently. “Retail businesses apply specific operational strategies to promote sales. For example, Walmart’s operational strategy is to increase faster sales by using lower inventory levels and prices. A low inventory enables Walmart to keep their prices low for clients and allow them to replace old stock with new products when the stock is sold. This strategy also increases demand for the product. High demand and low prices contribute to increasing sales for Walmart. “Online businesses apply different operational strategies to brick and mortar retailers. For example, many online merchants adopt an operations strategy of developing a user-friendly and reliable website for their customers. “B2B or business to business companies sell products and services to other companies. They apply different operational strategies to retailers, who sell directly to consumers. An example of an operational strategy for a B2B company is to establish the business as industry experts or thought leaders by speaking at events, appearing in the media or publishing articles. When companies are regarded as market leaders, they often generate more business than those who are not well known in the industry.” (Newton, 2013) © Regenesys Business School 12 Identify the Differences Learn more about the complexity of strategic planning from this case study of service level agreements in the Wollongong municipality, and answer the questions that follow: Dowd, M., Waugh, R. (2011). Wollongong city council case study on strategic, tactical, operational service level development using NAMS.PLUS templates. https://waughinfrastructure.com/wp- content/uploads/2013/05/Waugh-Wollongong-City-Council-Case-Study-on-Strategic-Tactical-and-Operational- Service-Level-Development-Using-NAMES.PLUS-Templates-Mike-Dowd-Ross-Waugh-IPWEA-August- 2011.pdf (accessed 19 December 2023). Questions 1. Tabulate the differences between corporate, business and operational level strategy and provide examples from the case study that illustrate these differences. Use this template: Corporate Level Strategy Business Level Strategy Operational Level Strategy 2. Critically evaluate the use of strategic planning levels in Wollongong Municipality. 3. Determine the type of strategy most suitable for your organisation. © Regenesys Business School 13 In summary, we may conclude that: Strategic decisions are about: The long-term direction of the organisation; The scope of organisations’ activities; Gaining advantage over competitors; Addressing changes in the business environment; Building on resources and competencies (capabilities); and The values and expectations of stakeholders. Therefore, they are likely to: Be complex in nature; Be made in situations of uncertainty; Affect operational decisions; Require an integrated approach; and Involve considerable change. (Johnson et al., 2020) 3.2.4 Strategy Statements A strategic statement is defined as: A statement that sets out the organisation’s long-term strategic direction and broad policy direction. It gives the organisation a clear sense of direction and serves as a blueprint for the organisation’s activities for the future. (Adapted from Management Study Guide, 2012) Mission A mission is: The purpose of the organisation. The organisation’s reason for existence. The role it wishes to fulfil internally and externally. A mission statement encompasses what the organisation is capable of, who the stakeholders will be, and it describes what makes the organisation unique. (Adapted from Management Study Guide, 2012) © Regenesys Business School 14 A mission statement: Must be feasible; and should be Clear; Inspiring; Precise; Unique; Analytical; and Credible. (Management Study Guide, 2012) Consider the following mission statements: IKEA “To offer a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.” Amazon “We aim to be Earth’s most customer-centric company. Our mission is to continually raise the bar of the customer experience by using the internet and technology to help consumers find, discover and buy anything, and empower businesses and content creators to maximise their success.” LG Electronics “We wish to maintain our hard-earned reputation for bringing added value to the lives of consumers.” Honda “Maintaining a global viewpoint, we are dedicated to supplying products of the highest quality, yet at a reasonable price for worldwide customer satisfaction.” © Regenesys Business School 15 Review a Mission Statement No mission statement lasts forever. It must be reviewed often, so that the organisation remains relevant. Read how, why and when organisations review mission statements, and answer the questions that follow: Beauregard, B. (2016, February 24). Reviewing your mission statement. https://www.intelligentoffice.com/blog/reviewing-your-mission-statement/ (accessed 19 December 2023). Questions 1. Critically review or draft your organisation’s mission statement in the light of these requirements: It must be feasible; It should be clear; It should be inspiring; It should be precise; It should be unique; It should be analytical; and It should be credible. 2. Does your mission statement answer these questions: Who are we? What is our purpose? What business are we in? What social or political problems do we exist to address? What are our core values? What makes us unique? 3. Discuss how you would improve your mission statement, and redraft it. Vision A vision is: A dream. It is an “idea” or “hope” of where the organisation wishes to be in the future. A vision is developed with the stakeholder’s best [interests] in mind. It describes aspirations for the future and describes where the organisation intends to be in the future. (Management Study Guide, 2012) © Regenesys Business School 16 A vision statement must: 1. Be unambiguous; 2. Be clear; 3. Harmonise with organisation’s culture and values; and 4. Have dreams and aspirations which are rational and realistic. (Management Study Guide, 2012) Here are some excellent examples: Top Non-profits. (n.d.). 30 example vision statements for non-profits. https://topnonprofits.com/examples/vision-statements/ (accessed 19 December 2023). Consider the following vision statements: Tesla “To accelerate the world’s transition to sustainable energy.” Google “To organise the world’s information and make it universally accessible and useful.” Netflix “Becoming the best global entertainment distribution service.” Facebook “Giving people the power to build community and bring the world closer together.” © Regenesys Business School 17 Analyse a Vision Statement Critically review these vision statements using the relevant criteria, and complete the tasks that follow: We intend to provide our customers with the best online shopping experience from beginning to end, with a smart, searchable website, easy-to-follow instructions, clear and secure payment methods, and fast, quality delivery. Our hair salon will change the way you think about a haircut. Full-service comfort, friendly staff, a relaxing atmosphere, and the best prices in town give you an experience that will leave you glowing both inside and out. As we move towards our goal of being a world-class university, we will support research on a global scale. Locally, our campus will service the research needs of the learning community, granting access to many information resources. Questions 1. Discuss how you would improve these vision statements. 2. Redraft these vision statements based on your discussion. 3. Draft a vision statement for your organisation. Objectives An objective is: An achievement or goal that the organisation wishes to achieve. It is interrelated with the mission and vision. Objectives will be developed by the organisation in order to achieve its mission and reach the potential of their vision. Policies are developed to assist with the attainment of objectives. Top-level management is responsible for setting objectives, as they are the foundation of planning. Most organisations have multiple objectives. These should be: 1. Both short term and long term; 2. Flexible; and 3. Feasible, realistic and operationally achievable. © Regenesys Business School 18 Analyse Objectives Critically analyse the following objectives based on the characteristics that have been described: To increase the number of scholarships available to business students by introducing three new bursaries for students to apply for in 2024. Each bursary awarded will be a minimum of R30 000. To achieve attendance of at least 150 guests at the National Education Conference on 31 March 2024 by sending a promotional e-mail to all relevant education professionals in South Africa by 30 November 2023. To organise and provide administrative support to marketing and finance departments, including the drawing up and distribution of agendas and minutes, at least two weeks before and after the meeting. Questions 1. Discuss how you would improve these objectives. 2. Redraft one of the objectives. 3. Write three or four objective statements for your organisation. 4. Determine whether they meet the criteria of an objective statement: Both short term as well as long term; Flexible; and Feasible, realistic and operationally achievable. 5. If necessary, redraft your objective statements. Scope The scope of the organisation includes its range and capabilities. There are three scope concerns: 1. Who to serve – your clients or customers; 2. Your geographical location; and 3. The extent of internal activities. (Whittington et al., 2020) Advantage In order to increase its competitive advantage and avoid surprises that could negatively affect the business, an organisation must be able to adapt to the pressures of the external environment. Environmental scanning is a method that allows organisations to gather realistic and subjective information on the environment and devise strategy accordingly. © Regenesys Business School 19 This part of the strategy statement refers to how the organisation wishes to achieve the objectives that they have set in the chosen environment. (Whittington et al., 2020) The Importance of the Business Environment Andrea Vascellari regards environmental scanning as “the study and interpretation of external events and trends which influence an organisation, an industry or even an entire market”, giving “a bird’s eye view of the whole environment from different angles that we want to analyse and keep a track of while working on our communication plans and, indeed, throughout the execution of our initiatives”. Read her article and complete the tasks that follow: Vascellari, A. (2015). Environmental scan – What? Why? How? http://www.andreavascellari.com/2014/01/environmental-scan/ (accessed 19 December 2023) Questions 1. Explain why it is important for an organisation to have an advantage in its environment. 2. Apply Vascellari’s three-lens model to conduct an environmental scan of your organisation. 3. Discuss the insights this approach gives you in environmental scanning. 4. Determine the areas of concern your organisation needs to consider to retain its competitive advantage. 3.2.5 Managers and Strategy All managers are concerned with strategy, but not necessarily in the same way. Top managers usually formulate and control strategy, but they may also involve others in the process. Middle and lower-level managers have to meet strategic objectives and deal with constraints. However, all managers have to communicate strategy to their teams, and can contribute to the formation of strategy through ideas and feedback (Whittington et al., 2020). The role of the Manager: Managers have various roles they play within an organisation from managing teams to being involved with strategic decisions. Discuss the various roles that managers play concerning strategy within your organisation. © Regenesys Business School 20 3.2.6 The Three Branches of Strategy To make strategy holistically, managers must consider the organisation’s context, its strategic options, and its strategy formulation processes, as illustrated in Figure 1. FIGURE 1: THE THREE BRANCHES OF STRATEGY (Whittington et al., 2020) Strategy context Strategy context concerns the environment in which the organisation operates, both internal and external. (Whittington et al., 2020) Strategy context is built on the notion that the strengths, weaknesses, opportunities and threats (SWOT analysis) of the environment must be considered in strategy formulation. Industry analysis research asks: “Why are organisations attracted to operating in this market?” Cultural analysis research is built on the understanding that a cultural fit is needed between stakeholders’ culture, organisational culture and strategy. All three components are interrelated. Resource-based research focuses on the unique characteristics of each organisation, and how these characteristics will contribute to the competitive status of the organisation. This is founded on an analysis of the economic, psychological and sociological environments in which the organisation operates. (Whittington et al., 2020) © Regenesys Business School 21 In other words, the strategy context refers to the scope of an entity, including: 1. Parent organisation (organisation owning one or more entities); 2. Enterprise (an entire organisation); 3. Division or department (a sub-organisation within the overall organisation); 4. Work unit (a sub-sub-organisation); and 5. Work role (one person’s job or part of a job). (Urgo, 2009) The SWOT Analysis 1. Critically examine the following situations and discuss whether they are strengths, weaknesses, opportunities or threats: New legislation A weak marketing department An excellent debtors division A shortage in supply A decrease in competition Justify your answers. 2. Determine the effect of the strengths, weaknesses, opportunities or threats in your answer to question 1 on your organisation. 3. Discuss the importance of conducting industry analysis research, cultural analysis research and resource-based research, at your organisation. The SWOT analysis is vital part of devising a strategic plan. However, there are two phases of the SWOT analysis, and the second is often forgotten: 1. Determining the strength, weaknesses, opportunities and threats. 2. Matching and converting strengths and weaknesses to opportunities and threats. Here is an explanation of a complete SWOT analysis: Moment. (2022, 24 February). How to perform a SWOT analysis for your business [Video]. YouTube https://www.youtube.com/watch?v=AjR5Hmexvo8 (accessed 19 December 2023). © Regenesys Business School 22 Strategy content Strategy content focuses on the nature of different strategies and their chances of success. (Whittington et al., 2020) The emphasis is on the advantages and strengths of each strategy. Performance researchers provide an economic analysis of which strategies, under which market conditions, will deliver the best results. Generalisations about strategies are rejected in this sphere (Whittington et al., 2020). Recap Your Learning Read about the importance of strategy in strategic planning. Consider awareness, interest, action/conversion and advocacy, and then answer the questions: Axonn. (2015). Your content strategy made simple. https://www.axonn.co.uk/wp- content/uploads/2015/08/your-content-strategy-made-simple- ebook.pdf?%20pid=explorer&efh=false&a=v&chrome=false&embedded=true (accessed 19 December 2023). Questions 1. Explain the principles of awareness, interest, action or conversion, and advocacy and apply them to your organisation. 2. Determine why the content of your strategic plan is so important for your business. 3. Discuss the consequences of a poorly articulated strategic plan. Strategy process Strategy process examines the way in which strategies are made (formulated) and executed (implemented). Research about planning is meant to help managers with the practical processes of strategy. This involves an analytical and rational thought process centring on economics and management sciences, to assist with strategic planning and implementation. © Regenesys Business School 23 FIGURE 2: STRATEGY PROCESS (On Strategy, n.d.) People are also considered in strategic planning research. Choice and change researchers appreciate the psychological, emotional, sociological and irrational nature of people. These researchers believe that every situation is subjective and that applying a textbook rationality approach to all strategies is a recipe for disaster. Strategy-as-practice researchers use a micro- sociological approach to examine human realities of formal and informal strategy processes. The focus is on how people do strategy work, and the importance of their having appropriate tools and skills to implement the strategy. (Whittington et al., 2020) © Regenesys Business School 24 3.2.7 Key Points Chandler, Porter and Mintzberg are key theorists who have defined the term strategy from different angles. There are three levels to corporate strategy. Operational strategies are concerned with the effective organisational delivery of corporate and business strategies. Strategy statements set out the organisation’s long-term strategic direction and broad policy direction. A mission and vision statement gives the business a clear sense of direction. A vision is a dream. Managers and leaders drive the organisational vision. Content, context and process are all branches of strategy. The strategy management process is a complex yet fundamental process that drives and guides the success of the organisation. © Regenesys Business School 25 3.3 STRATEGIC MANAGEMENT MODELS Timeframe Minimum of 20 hours Learning outcome Compare different strategic management theories and models. Recommended Johnson, G., Whittington, R., & Scholes, K. (2020). Exploring strategy: Text and cases. textbook (12th ed.). Pearson Education Ltd. Abdul, R. (2015, February 11). Virgin corporate strategy, case study. https://www.robabdul.com/business/virgin-corporate-strategy-case-study-article-this-report- closely-examines-the-virgin-groups-corporate-rationale/ (accessed 19 December 2023). Alonso, T. (2023, July 13). Porter's five forces: The definitive overview. Cascade. https://www.cascade.app/blog/porters-5-forces (accessed 19 December 2023). Bhasin, H. (2019, February 27). SWOT analysis of Cisco. Marketing91. https://www.marketing91.com/swot-analysis-cisco/ (accessed 19 December 2023). Idle, T. (2015, July 14). How Unilever is creating a web of partnerships. Green Biz. https://www.greenbiz.com/article/how-unilever-creating-web-partnerships (accessed 19 December 2023). Kolb, D. (2023, June 19). Porter's generic competitive strategies: Creating and sustaining competitive advantage. Medium. https://medium.com/@kolbeuk/porters-generic- competitive-strategies-creating-and-sustaining-competitive-advantage-a1ac377ddf5f Prescribed reading (accessed 19 December 2023). Momin, A. (2023, October 17). Cisco PESTLE analysis: Navigating global technology disruption. https://pestleanalysis.com/cisco-pestle-analysis/ (accessed 19 December 2023). Procter & Gamble. (2011, November 3). The Procter & Gamble Company and Teva Pharmaceutical Industries announce formation of new consumer health care partnership. https://www.businesswire.com/news/home/20111103005832/en/The-Procter-Gamble- Company-and-Teva-Pharmaceutical-Industries-Announce-Formation-of-New-Consumer- Health-Care-Partnership (accessed 19 December 2023). Recklies, O. (n.d.). Problems and barriers to strategic planning and proposals for solutions. Themanager.org, http://www.themanager.org/Strategy/Strategic-planning-problems- barriers.htm (accessed 19 December 2023). Uta, I. (2021, February 5). McKinsey 7S model of Nokia - where the company went wrong. Brand Minds. https://brandminds.com/mckinsey-7s-model-of-nokia-where-the-company- went-wrong/ (accessed 19 December 2023). Models have been devised as guides to assist organisations in their practical application of Section overview strategy. However, it is crucial to note that each organisation is unique. A strategy that uplifts one organisation may have the opposite effect if implemented in another. This section takes a specific look at applicable models. © Regenesys Business School 26 3.3.1 Introduction Developing strategies for organisations is a complex task. It requires sound content and a thorough assessment of the environment. It must also be built on reputable theories and models. Each theory and model can guide successful decision-making when applied to the right situation. 3.3.2 Determining Strategic Choices Strategic choices require decisions to be made about the direction in which strategy might move and the methods by which strategy might be pursued (Whittington et al., 2020). TABLE 2: STRATEGIC CHOICES Business strategy Organisations have options available to them as to how they wish to compete in certain markets. These strategies normally involve issues of cost and differentiation. The main purpose of business strategy is to gain a competitive advantage. Corporate strategy Top management develops corporate strategy. This corporate strategy focuses on the and diversification scope or range of an organisation’s offerings. It incorporates the extent to which the organisation’s offerings may be diversified; in other words, the corporate strategy includes the organisation’s spread of products and markets. International strategy Becoming a global organisation or competing in an international context is a form of diversification into new geographical markets. It is just as complex as product or service diversification. Innovation and Innovation involves constantly creating new (more efficient or better) ways of doing certain entrepreneurship things or developing new products and services. Entrepreneurship is a form of innovation in that it involves the creation of a new enterprise. Acquisitions and Due to the constantly changing environment in which organisations operate, management alliances needs to make decisions regarding methods of pursuing its strategies. Some organisations may choose to develop or pursue strategies through mergers and acquisitions or strategic alliances with other organisations. (Whittington et al., 2020) © Regenesys Business School 27 Identify the Differences 1. Tabulate the differences between organisations’ strategic management choices. Business strategy Corporate strategy International Innovation and Acquisitions and and diversification strategy entrepreneurship alliances 2. Apply each strategic management choice to your organisation. 3. Compare and critically analyse the differences between strategic management choices on your organisation. 4. Which strategic choice would you employ? Justify your answer. Fundamental questions for strategic choices: How should business units compete? Which businesses to include in the portfolio? Where should the organisation compete internationally? Is the organisation innovating appropriately? Should the organisation buy other companies, form alliances or go it alone? (Whittington et al., 2020) Choosing a strategy Managers must choose a strategy based on the vision, mission and long-term goals of the organisation. Michael Porter (1985) offers three generic strategies for competitive advantage, namely: 1. Low-cost leadership; 2. Differentiation; and 3. Focus. When using a low-cost leadership strategy, an organisation to maximise sales by minimising costs per unit. The organisation achieves this either by gaining more experience or by expanding the size of its operations (economy of scale). A differentiation strategy allows a firm to charge higher prices for a product because customers perceive it to be different from (and somehow better than) other similar products. This difference can be in quality, the production process, design, reputation, and numerous other elements. A focus strategy involves the (often exclusive) concentration of energies on a specific product line or segment of the market (Root of Three, 2013). © Regenesys Business School 28 Low-cost leadership Low cost leadership strategy is centred on the organisation’s capacity to produce and deliver products of competitive quality at a lower cost than competitors. Cost leadership strategy involves much more than cost reduction, as it uses strategic planning and review sessions to improve the bottom line by improving efficiencies. Some organisations use their efficient cost structures to protect their markets against competitors, reducing prices when competitors try to move into their market space. Such reactive responses may make a company predominantly inward focused. Mind Tools (2013b) says: “Porter’s generic strategies are ways of an organisation gaining a competitive advantage – in other words, developing the “edge” that gets you the sale and takes it away from your competitors. There are two main ways of achieving this within a cost leadership strategy: “Increasing profits by reducing costs, while charging industry-average prices. “Increasing market share through charging lower prices, while still making a reasonable profit on each sale because you have reduced costs.” Remember that cost leadership is about minimising the cost to the organisation of delivering products and services. “The cost leadership strategy is exactly that – it involves being the leader in terms of cost in your industry or market. Simply being among the lowest-cost producers is not good enough, as you leave yourself wide open to attack by other low-cost producers who may undercut your prices and therefore block your attempts to increase market share” (Mind Tools, 2013b). The organisation therefore needs to be confident that it can achieve and maintain the number one position before choosing the cost leadership route. Organisations that are successful in achieving cost leadership usually have: Access to the capital needed to invest in technology that will bring costs down; Very efficient logistics; and A low cost base (labour, materials, facilities), and a way of sustainably cutting costs below those of competitors. The greatest risk in pursuing a cost leadership strategy is that these sources of cost reduction are not unique to a particular organisation, and that competitors copy your cost reduction strategies. This is why it is important to continually find ways of reducing every cost. © Regenesys Business School 29 Differentiation Differentiation involves making your products or services different from and more attractive than those of your competitors. How you do this depends on the exact nature of your industry and of the products and services themselves, but typically involve features, functionality, durability, support and also brand image that your customers value (Mind Tools, 2013b). To make a success of a differentiation strategy, organisations need: Good research, development and innovation; The ability to deliver high-quality products or services; and Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings. Large organisations pursuing a differentiation strategy need to stay agile with their new product development processes. Otherwise, they risk attack on several fronts by competitors pursuing focus differentiation strategies in different market segments. Focus strategy A focus strategy is sometimes also referred to as a “niche” strategy. Organisations that use focus strategies: “Concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it, develop uniquely low cost or well-specified products for the market. Because they serve customers in their market uniquely well, they tend to build strong brand loyalty among their customers. This makes their particular market segment less attractive to competitors” (Mind Tools, 2013b). Compare the Differences 1. Apply the various generic strategies (low-cost leadership, differentiation and focus) to your organisation. 2. Compare and contrast the fundamental difference between the strategies with regard to your organisation. 3. Determine which strategy is most appropriate for your organisation and explain why. Get to grips with generic strategies by reading these short articles: Alonso, T. (2023, July 13). Porter's five forces: The definitive overview. Cascade. https://www.cascade.app/blog/porters-5-forces (accessed 19 December 2023). Kolb, D. (2023, June 19). Porter's generic competitive strategies: Creating and sustaining competitive advantage. Medium. https://medium.com/@kolbeuk/porters- generic-competitive-strategies-creating-and-sustaining-competitive-advantage- a1ac377ddf5f (accessed 19 December 2023). © Regenesys Business School 30 3.3.3 Applying Strategic Models Understand which strategic models are available for your organisation. The classic prescriptive model of strategic management: exploring the process In describing their version of the classic prescriptive model, Wheelen and Hunger (2011) say that the process of strategic management has five main elements: 1. Environmental scanning – the external opportunities and threats of the SWOT analysis. 2. Internal scanning – the strengths and weaknesses of the SWOT analysis. 3. Strategy formulation – mission, objectives, strategies and policies. 4. Strategy implementation – including programmes, budgets and other procedures. 5. Evaluation and control – keeping the strategic process on its predicted path. In the strategic management process, the person who performs each action is just as important as the precise sequence of events. This is particularly true for organisations composed of firms in unrelated industries. For this reason, strategic tasks in these organisations are often divided between a corporate centre and various strategic business units (SBUs). The question is, which tasks to assign to which unit? There is, unfortunately, no straightforward answer to this question. Comparing SWOT and PESTLE See how the PESTLE and SWOT analyses can be applied to Cisco, and then answer the questions: Bhasin, H. (2019, February 27). SWOT analysis of Cisco. Marketing91. https://www.marketing91.com/swot- analysis-cisco/ (accessed 19 December 2023). Momin, A. (2023, October 17). Cisco PESTLE analysis: Navigating global technology disruption. https://pestleanalysis.com/cisco-pestle-analysis/ (accessed 19 December 2023). Questions Conduct a PESTLE analysis of your organisation. Conduct a SWOT analysis of your organisation. Concisely summarise the key points of the PESTLE and SWOT analysis for your organisation. Compare and critically evaluate the differences between the PESTLE and SWOT outcomes for your organisation. A multinational such as Unilever undertakes its SWOT analysis at the corporate headquarters level. It is also the corporation that defines the overall mission and objectives. The reason is that the corporate HQ usually has the overview needed to direct the main strategic thrust, and the resources to fund it. These decisions are passed down so that strategy options can be generated by the strategic business units (SBUs). © Regenesys Business School 31 The strategy selection is then undertaken at corporate headquarters, in consultation with the SBUs and in the light of the available funds. The SBUs then implements the agreed strategies. The process is driven by corporate headquarters, since this is the only part of the organisation with a picture of all relevant aspects. But individual subsidiaries are often given considerable freedom within the guidelines to develop their strategy, as is the case at Unilever. The relationship between the headquarters and the SBUs at General Motors (USA) has been of this nature since the 1920s, when Alfred Sloan was brought in from one of the subsidiaries to rescue and reorganise what became one of the world's largest companies. Strategic plans can be formulated from below, but normally the implementation of such proposals requires the resources, which only the general office [i.e. the corporate HQ] can provide. Within the broad policy-lines laid down by that office and with the resources it allocates, the executives at the lower levels carry out tactical [i.e. day-to-day, non-strategic] decisions. (Chandler, 1963b) The rule of thumb in the prescriptive model is that each step must be completed before one can move on to the next phase. Some problems with the prescriptive approach There are some assumptions or simplifications in the prescriptive process that may not be true in reality. We summarise four here, but it should be noted that other difficulties also exist: 1. Environment: The prescriptive approach assumes a predictable environment – variations in the environment can make this approach difficult to sustain. 2. Clear planning procedure: Planning procedures can be complicated by the need to persuade managers to undertake certain strategies that might not be supported by other managers. They may be reluctant to accept these strategies for a variety of reasons, ranging from loss of power to personality clashes. 3. Top-down procedures: These procedures enforced on the various SBUs by corporate HQ are the most efficient methods of developing new and innovative strategies. It is assumed that the SBUs can cope with the environment and gain commitment from the managers who will implement the strategies. Many studies have shown, however, that managers find such processes demotivating. 4. Culture: Culture, in this context, has two meanings: o The style, beliefs and practices of the particular organisation; and o The culture of the country in which the organisation operates. The challenge with the prescriptive approach is that some cultures are simply ill-suited to a dominant, top-down approach. (Business Teacher, 2011) © Regenesys Business School 32 Solutions to problems in the prescriptive process Finding solutions to the problems encountered by the prescriptive process requires a careful survey of these difficulties. One such survey in the early 1980s found that the prescriptive model had become excessively rational, bureaucratic and formalised. There are ways to overcome these problems. They involve a more open strategic planning culture with less emphasis on quantification of data. Two aspects of the actual process can also be emphasised: 1. Exploring with the proposers of the strategy the assumptions on which the strategy is based. (When such assumptions are incorrect, the whole strategy is open to doubt.) 2. During the strategy review sessions, requesting a simple verbal summary of the main proposals. If this cannot be done, then the proposals themselves may be suspect. Companies should also periodically examine whole process and system by which a strategy is devised: this is a planning process audit. The aim of planning audits is to remove impediments that creep in over time. Emergent strategy development Emergent strategy development is: Built on the philosophy that strategies emerge on the basis of a series of decisions, a pattern in which becomes clear over time. (Johnson et al., 2020) Emergent strategy development shifts the definition of strategy from a “grand plan” to “a pattern in a stream of decisions”. It may emerge from 1. Logical incrementalism; 2. Political processes; 3. Prior decisions; and or 4. The product of organisational systems. (Johnson et al., 2020) Logical incrementalism Logical incrementalism strategies are developed through experimentation and learning. Partial comments are considered, rather than global formulations of total strategies. There are four main characteristics of strategy developed in this way: 1. Environmental uncertainty: Due to the uncertain nature of the environments in which organisations operate, it is advisable that they not merely focus on decisions and strategies drawn from an analysis of previous historical information. Organisations realise that they need to constantly scan their various environments. © Regenesys Business School 33 2. General goals: Setting goals too early in a project restricts innovation and experimentation. It is therefore advisable to set general rather than specific goals. 3. Experimentation: This includes developing a potential strategy and testing it on a sample of the market in order to analyse the outcomes and so determine whether it will work on a larger scale. 4. Co-ordinating emergent strategies: Top management analyses the sample tests conducted during experimentation. This informs decisions that affect the grand strategy of the organisation. They then communicate the improvements to shareholders. (Johnson et al., 2020) It is logical to conclude that organisations that apply logical incrementalism need to be “learning organisations”. This means that these organisations need to adapt efficiently and effectively to change, and encourage questioning and challenges. Political process Strategies that emerge from political processes are drawn from debate, bargaining and negotiation among powerful organisational stakeholders. Each person’s way of thinking and the goals that they wish to accomplish are unique. The following factors contribute to political process strategies: 1. Personal experience of stakeholders; 2. Competition of resource allocation and influence in the organisation; 3. The relative influence of stakeholders in the organisation; and 4. Different access to information. (Johnson et al., 2020) Prior decisions Past decisions that have proven effective and profit-yielding may be added to the organisation’s strategy. In order to make the most of this, the organisation needs to incorporate continuity in its approach to strategy. Continuity is likely to be a characteristic of strategy for the following reasons (ibid): Emergent strategy as a managed continuity This is built on the philosophy that each strategic move should be informed by the rationale of the previous one. Path-dependent strategy development This occurs when historical preconditions affect, determine or influence current strategic decisions. © Regenesys Business School 34 Organisational culture and strategy development This occurs when the culture of the organisation (routines, behaviours, attitudes, beliefs, norms and “taken-for-granted assumptions”) affects the outcome of strategies. The Link between Strategy and Culture Find out more about the important relationship between organisational culture and organisational strategy in this article, and complete the tasks that follow: Lancefield, D. (2021, November 22). Mastering the connection between strategy and culture. PWC. https://www.strategy-business.com/article/Mastering-the-connection-between-strategy-and-culture (accessed 19 December 2023). 1. Explain what you have learned from the article provided. 2. Identify the key learning principles that you can apply to your organisation. 3. Determine future changes in strategy and organisational culture based on the key learning principles. The product of organisational systems Strategies may also emerge from lower-level managers, as they deal with strategic issues and devise appropriate policies and procedures to carry out these strategies. Strategy development is therefore influenced by systems and routines familiar to managers within their particular, practical contexts. For example, the financial and marketing managers’ systems will differ from one another. Their respective approaches to strategy development will, therefore, also be different. The resource allocation process and the attention-based view are two major influencing factors in this regard (Johnson et al., 2020). © Regenesys Business School 35 Recommend Solutions to Problems and Barriers Read about overcoming barriers in strategic planning, then answer the questions: Recklies, O. (n.d.). Problems and barriers to strategic planning and proposals for solutions. Themanager.org, http://www.themanager.org/Strategy/Strategic-planning-problems-barriers.htm (accessed 19 December 2023). Questions 1. Recommend solutions to the following problems of the prescriptive approach based in your organisation: Environmental assumptions; Managerial opinions; Staff compliance; and Cultural fit of strategy 2. Critically compare the solutions provided and discuss the similarities and differences at your organisation. 3. Identify the core barriers in strategic planning for your organisation, today and in the next three years. 4. Determine ways to overcome these barriers within your organisation. 3.3.4 Implementing the Right Strategy Grand strategies Once an organisation has chosen a generic strategy it should use one or a combination of the grand strategies to implement it with. There are three categories of grand strategies: 1. Growth; 2. Decline; and 3. Corporate combination strategies. (Smit et al., 2011) Internal growth strategies 1. A concentration growth strategy involves “concentrating on improving what one is already doing [and] can be accomplished by increasing consumption rate of existing consumers or “poaching” from the competitor” (Smit et al., 2011). 2. Market development strategies are closely linked to concentration strategies, as they build on existing strengths and skills. Market development strategies involve selling products in new markets by opening new outlets or attracting other market segments (Smit et al., 2011). © Regenesys Business School 36 3. Product development implies a substantial modification to existing products to increase market penetration. (Rumble, 1992). 4. An innovation strategy is a riskier strategy and implies a continual search for original or novel ideas (Smit et al., 2011). FIGURE 3: GRAND STRATEGIES (Adapted from Smit et al., 2011) External growth strategies Integration and diversification are higher risk strategies. There are three types of integration strategies (Smit et al., 2011): 1. Backward vertical integration is when an organisation wants more control over its sources of supply. 2. Forward vertical integration involves the acquisition of a business nearer to the ultimate consumer. For instance, if an organisation receives unsatisfactory service from a distributor of its products, that organisation could acquire that distributor. 3. Horizontal integration is a long-term strategy by which a similar organisation is taken over for reasons such as scale-of-operations or a larger market share (reach new markets or get rid of competition). © Regenesys Business School 37 Diversification strategies are used when an organisation cannot achieve its growth objective in its current industry with its current products: Concentric diversification involves the addition of a business related to an organisation in technology, markets or products; while Conglomerate diversification seeks growth by acquiring a business because it represents the most promising investment opportunity available. Decline strategies There are various decline strategies: Turnaround strategy: Focuses on eliminating inefficiencies in an organisation. Divestiture strategy: Involves the sale of a business or a major component of it. Harvesting: When an organisation seeks to maximise cash flow in the short run. Liquidation: The most extreme form as the entire organisation ceases to exist. (Adapted from Smit et al., 2011) © Regenesys Business School 38 Growth Strategies 1. Critically analyse the following growth strategies, and determine their success: Scenario Growth strategy Comment Unilever introduced Sunsilk shampoo in the Market development US. Was sold in Europe, Latin America and Asia. Coca-Cola launched Diet Coke Sweetened Product development with Splenda. Hasbro (toy company) launched baby care Product diversification products under Playskool brand. JC Penney, after repositioning of the brand to Market penetration make it more fashionable, erected a "pop-up" store in Times Square. Target added more designer collections in Market penetration addition to current designer collections such as Isaac Mizrahi. Gap introduced Forth & Towne brand aimed at Product diversification women over 35. Nintendo launched DS hand-held game device. Product development Campbell developed advertising campaign for Market penetration its soups. Frito-Lay removed trans fats from its salty Product development snack products. 2. Compare the success of two growth strategies from the table and discuss the differences in each approach and speculate on why they succeeded. 3. Determine which growth strategies would be applicable to your organisation. 4. Identify the pros and cons of these strategies for your organisation. Corporate combinations The first corporate combination strategy is a joint venture, which “requires a commitment of funds, other resources, facilities and services by two or more legally separate entities to a combined undertaking for their mutual benefit” (Smit et al., 2011). Strategic alliances are another option, as a means of entering new markets. Mergers involve the total pooling of resources by two or more organisations on a collaborative and voluntary basis. Acquisitions occur when the organisation being taken over agrees to sell a controlling interest to the dominant company. Reasons for choosing an acquisition as a strategy include economies of scale, gaining access to customer bases and maintaining control over price and industry (Smit et al., 2011). © Regenesys Business School 39 Joint Ventures and Strategic Alliances Consider the significance of strategic alliances in these articles, and answer the questions: Idle, T. (2015, July 14). How Unilever is creating a web of partnerships. Green Biz. https://www.greenbiz.com/article/how-unilever-creating-web-partnerships (accessed 19 December 2023). Procter & Gamble. (2011, November 3). The Procter & Gamble Company and Teva Pharmaceutical Industries announce formation of new consumer health care partnership. https://www.businesswire.com/news/home/20111103005832/en/The-Procter-Gamble-Company-and-Teva- Pharmaceutical-Industries-Announce-Formation-of-New-Consumer-Health-Care-Partnership (accessed 19 December 2023). Questions 1. Compare the differences and similarities between a joint venture and a strategic alliance. Justify why your examples may be classified as such. 2. Based on your previous SWOT and PESTLE analysis, determine under which circumstances your organisation would benefit from a strategic alliance. 3. Discuss the benefit of the strategic alliance discussed in the answer to question 2, for your organisation. Factors affecting strategic choice The first factor influencing the strategic choice is corporate governance: “ The King II Report on Corporate Governance in South Africa acknowledges that there is a move away from the single bottom line (profit for shareholders) to a triple bottom line, which embraces the economic, environmental and social aspects of organisations’ activities.” (Smit et al., 2011) The second factor influencing strategic choice relates to external factors such as suppliers, customers or competition. Top management’s attitude towards risk and the personality of a manager affect strategy selection. Pressures from the mission and long-term goals, and culture, have a huge influence on strategy selection. Timing also influences choice of strategy. The strategic plan provides focus of planning at all levels and addresses issues such as formulation of the vision, mission and long-term goals. The vision and mission are informed by the internal and external analyses. The long-term goals determine the choice of strategy. An organisation needs to choose the generic strategy to follow and then use one of the grand strategies with which to implement it. (Adapted from Smit et al., 2011) © Regenesys Business School 40 Virgin’s Corporate Strategy Introduction This report closely examines the Virgin Group’s corporate strategy or rationale, and identifies the relationships of a strategic nature within the Virgin empire. Virgin’s value-adding qualities shall be discussed and the main issues faced by Virgin shall be identified and solutions will be recommended respectively. Corporate Rationale The Virgin Group consists of an assorted mix of businesses. It has its “finger in every pie”, so to speak. The Virgin Group has diversified into 200 businesses. (See Figure 4.) FIGURE 4: THE VIRGIN GROUP Sir Richard Branson, founder of Virgin in 1970, is in the author’s opinion the single most important ingredient to all the success that has been reaped up to date. As the saying goes, “you reap what you sow” thus, the corporate rationale is merely a projection of Sir Richard’s own personal philosophy, which he has sewn into the fabric of corporate rationale. A personal philosophy and a personal persona that is revered and respected by the British public and beyond. (Abdul, 2003) Learn more about Branson’s strategy for Virgin in the rest of this case study and then answer the questions: Abdul, R. (2015, February 11). Virgin corporate strategy, case study. https://www.robabdul.com/business/virgin-corporate-strategy-case-study-article-this-report-closely- examines-the-virgin-groups-corporate-rationale/ (accessed 19 December 2023). Questions 1. Identify the generic and grand strategies used by the Virgin Group. Justify your answers with relevant academic theory. 2. Now identify your organisation’s grand and generic strategies and justify your answers with relevant theory. © Regenesys Business School 41 3. Compare and justify Virgin’s and your organisation’s strategic choice. Discuss the similarities and differences between them. 4. Has your organisation accomplished a strategic fit? If not, why not? 5. Are the strategies selected feasible, sustainable and acceptable? Explain with regard to your organisation. 6. Compare the strategies used. Would they have been as successful as other strategic approaches? 3.3.5 Key Points There are five strategic choices an organisation can pursue: business strategy, corporate strategy and diversification, international strategy, innovation and entrepreneurship, acquisitions and alliances. The exploring strategy model requires understanding the strategic position of an organisation (context), assessing strategic choices for the future (content) and managing strategy in action (process). Understanding the environmental factors helps organisations develop their strategy appropriately. A SWOT analysis helps determine an organisation’s strategic position. The generic strategies (low-cost leadership, differentiation and focus) help organisations choose their ideal strategy. Research is fundamental in developing a strategy. The prescriptive model helps organisations explore their strategy. Culture is a core component of strategic implementation. When implementing a grand strategy both internal and external factors must be considered. Decline strategies are as important as growth strategies. © Regenesys Business School 42 3.4 DEVELOPING STRATEGY Timeframe Minimum of 20 hours Develop a strategic plan; and Learning outcomes Review organisational strategy in line with environmental dynamics Recommended Johnson, G., Whittington, R., & Scholes, K. (2020). Exploring strategy: Text and cases. textbook (12th ed.). Pe

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