Practising Strategy: A Southern African Context PDF

# Practising Strategy: A Southern African Context ## 2. Introducing the Practice of Strategy - Define strategy and explain its importance to the organisation. ### 2.3 Defining Strategy - What does it mean to be 'strategic'? Not all actions and decisions in an organisation can be considered ‘str...

# Practising Strategy: A Southern African Context ## 2. Introducing the Practice of Strategy - Define strategy and explain its importance to the organisation. ### 2.3 Defining Strategy - What does it mean to be 'strategic'? Not all actions and decisions in an organisation can be considered ‘strategic’. - **Business as usual:** If we continue what we are doing today, we may end up in a slightly different position than where we are today, and maybe, if we’re lucky, we might be in a better position than our competitors. It’s also possible that we might end up in the same position or even in a worse position than where we are today. However, we can set ourselves a long-term *strategic goal* that, if achieved, will take us considerably beyond where we are today, and possibly even beyond our competitors. This will give us a *competitive advantage* that will lead to long-term survival. This difference between point B and point C is *strategy*; those actions that will help us achieve our *strategic goals*. - *Strategic goals* are also known as *long-term* or *strategic objectives*. Being ‘strategic’ involves the following: * It is not ‘business as usual’ - we cannot simply keep doing what we have been doing for years and years and describe it as ‘strategic’. * It involves all business functions. It is an organization-wide issue, and across all managerial levels. * It is not a quick fix or a small change. It requires large, sustained change effort over a long period of time. * It requires large commitment of resources - it’s not cheap or easy. - **Successful Strategic Management**: striving for consistency * *Strategic Direction*: Consistent long-term strategic direction in terms of what the organisation wants to achieve in the future. * *Internal Consistency*: A profound understanding of the external environment to ensure that the organisation can align itself with opportunities and to deal with threats as effectively as possible. * *External Consistency*: Objective knowledge of the key resources and capabilities the organisation possesses, as well as its value to enable the organisation to build on these and develop a distinct competitive advantage. * *Dynamic Consistency*: The proper alignment of organisational structure, systems, culture, and functional and operational management (collectively referred to as organisational architecture) to ensure the effective implementation of strategic plans, portfolios, programmes, projects, and initiatives. - **Strategic management**: consistently aligning the organisation with its internal and external environments. * *Strategic Direction*: long-term goals of the organisation * *External Consistency*: the extent to which the organisation's strategy is aligned with the opportunities and threats in the external environment * *Dynamic Consistency*: the extent to which the strategy of the organisation is consistent with the key resources and capabilities of the organisation in its micro-environment. * *Internal Consistency*: the extent to which the organisational architecture (such as structure, systems, human resources, technology, and processes) is aligned with the strategy. - **Strategic control**: on the one hand, environmental scanning and control need to ensure that the planned strategy is on track; on the other hand, leaders, strategists, and other role-players in the organisation may pick up signals from the environment that could affect the strategy formation process. - **Organisational Architecture**: a management tool that is used to describe the workings of an organization, especially with regard to the alignment of strategy and the organisation. * *Culture*: Culture can be so powerful that no plan will work if it’s counter to the culture of the organization. * *Leadership and Governance*: Deals with the closely related issue of leadership and its role in strategy implementation and governance. * *Structure*: The structure refers to the physical manifestation of the organization in terms of geographical distribution, positions, reporting, and communication lines. - **Resources and Capabilities**: The success of organizations is dependent on them possessing unique strategic resources and valuable capabilities that form the foundation upon which the organizations are built and can grow. ## 2.1 The Origins of Strategic Management - While strategy is an ancient concept, strategic management originated in the late 1970s. - Strategic management was characterized by a focus on competition as the key driving force in the business environment, and profit maximisation as the primary goal of the organization. - The focus was on the positioning of the organization in its chosen markets relative to its competitors, as a source of competitive advantage (i.e., superior performance over the long term). - **Resource-based view (RBV):** a shift to understanding how organisations differed from their competitors (in terms of what capabilities they possessed) and how these differences could be leveraged for competitive advantage. ## 2.2 The Universal Principles of Strategic Management - Most lecturers involved in teaching strategic management have experienced a situation in which students complain that the way strategic management is taught is different from the way it actually happens in their organisations. - There are some principles that are common to all views of strategic management. ## Practising Strategy: Bidvest’s Corporate Strategy - Bidvest: a highly diversified South African corporation that focuses on diversification and innovation to grow their portfolio of successful, cash-generating businesses. * Consumer and industrial products, electrical products, financial services, freight management, office and print solutions, outsourced hard and soft services, travel and aviation services, and automotive retailing. * Aims to establish dominant positions in each of the markets they operate in with broad product offerings. * They invest in a blend of defensive, cyclical, and growth assets. ## Practising Strategy: Discovery’s Corporate Strategy - Discovery: a large, listed, financial services institution operating through Discovery Health, Discovery Life, Discovery Invest, short-term insurer Discovery Insure, and the very popular and successful *Discovery Vitality* (a wellness loyalty programme). * They are credited with the invention of the *medical savings plan* used widely by medical schemes today. * In 2019, Discovery launched its banking products in South Africa. ## 2.2.1 Principle 1: Strategy Is About Positive Change - Strategic management is ultimately about positive change for the organisation as a whole. - Positive change includes achieving superior performance, creating competitive advantage, creating shareholder wealth, above the average, creating value for and meeting the needs of all stakeholders, or, in some instances, just surviving in difficult times. ## 2.2.2 Principle 2: Strategy Takes a Long-Term View - Strategic management is taking a long-term view and ultimately focusing on wealth creation and sustainability over the long term, rather than on merely creating quick wins or short-term gains. ## The Big Picture - Strategic management is generally a messier process with more participants. - This approach to strategic management suggests that: * The organisation is continually aligned (through its strategic choices) with its external and internal environment. * The context of Africa is a critical influence on strategising and strategy. * Responsible competitiveness is a key goal of any organisation. ## Summary of Learning Outcomes - **LO 1:** Explain the origins of strategic management. - **LO 2:** Identify and explain the universal principles of strategic management and identify the application thereof in real-life situations. - **LO 3:** Define strategy and explain its importance to the organisation. - **LO 4:** Identify the characteristics of strategic decision-making, and provide guidelines to strategic decision-makers to aid them in making more responsible strategic decisions. - **LO 5:** Explain how the success of strategy can be measured and apply it in practical situations. - **LO 6:** Discuss a contemporary strategic management framework. ## Discussion Questions 1. Explain the origins of strategic management. 2. Identify and explain the universal principles of strategic management. 3. Explain the difference between ‘strategy’ and ‘strategic management’. 4. Describe what ‘strategic’ means. 5. List the characteristics of strategic decisions. 6. What guidelines would you give to strategic decision-makers to improve strategic decision-making in their organisations? 7. Explain what success means in strategic terms. 8. Differentiate between corporate- and business-level strategy. 9. Explain what is meant by internal consistency, external consistency, and dynamic consistency. 10. Would you describe the decision by Discovery to open Discovery Bank as a strategic decision? Substantiate your answer. 11. Explain the contemporary framework of strategic management to your colleagues (or fellow students) with the help of practical examples. ## Summary of Conventional and Our Approach | | Conventional Strategic Management | Our Approach | |------------------|-----------------------------------|----------------| | Central Focus | Understanding how organisations develop and maintain competitive advantage | Understanding what strategists do to achieve and maintain competitive advantage responsibly | | View of Strategy | Abstract - a characteristic of the organisation | The strategic acts, talk and documents that strategists produce | | Responsibility | Top management formulates, middle management implements | A wide range of strategists is involved and influence the process | | Process | Logical and rational | Messy, experimental, and iterative | | Process Flow | Thinking before doing | No clear separation between thinking and doing | | Key Influences | Cognition, micro-economic | Cognition and politics, microeconomics, and sociology | | Goal | Competitive advantage and sustainability | Responsible competitiveness | ==