STRATEGIC MANAGEMENT DEFINITION.

 According to Johnson and Scholes, strategic

management focuses on the management of
business by looking at the internal and external
factors which hinder or facilitate the pursuit of the
chosen strategy to achieve overall success.
 Stoner and Freeman defines it as a pattern based
on principally determining the long term goals of
the organisation and adopting courses of action
and allocation of appropriate resources to
implement those goals.
 It is about setting the underpinning aims of the
organization and choosing appropriate goals
towards those aims and fulfilling them over time.
DEFINITION CONTINUED.

 According to Cole (1997) strategic management is a process

directed by top management to determine the fundamental
aims or goals of the organization and ensure long range
decisions which allow for the achievement in the long term
whilst providing adaptive responses in the shorter term. It is
designed to sustain, invigorate and direct human and other
resources in the profitable fulfillment of the needs for
customers and other principal stakeholders.
 It is the systematic management of change
involving firm positioning through capability
planning, real time strategic responses through
issue management and systematic management of
resistance to change during implementation.
 DEFINITION CONTINUED.

 Michael Porter defines "strategy" in terms of

competitive strategy which is 'about being
different.'
 He argues that strategy is being in a competitive
position, being different in the eyes of the
customer, and adding value through a combination
of activities that are different from those of
competitors.
STRATEGIC MANAGEMENT AND STRATEGY.

 According to Johnson and Scholes strategy is the

direction and scope of an organization over the
long term taken to achieve some competitive
advantage for the organization.
 According to Grant, it is a plan for resource
deployment to gain a better position.
 CIMA defines a strategy as a course of action
including the specification of resources required to
achieve the specific objectives.
 According to Henry Mintzberg (1991) strategy
should be viewed as the five P’s which stands for
plan, ploy, perspective, position and pattern.
 DIAGRAM SHOWING THE FIVE Ps OF
STRATEGY ACCORDING TO H. MINTZBERG
PLAN
 .

PLOY.
PERSPECTIVE. STRATEGY
DEFINED AS :

POSITION. PATTERN.
THE FIVE P’s OF STRATEGY ACCORDING TO
H. MINTZBERG.

 1. Plan is a consciously intended course of action formulated

and adopted by an organisation to achieve its main
objectives. The plan will serve as a road map for the
organization ‘s future overall direction.
 2. Ploy refers to a trick designed to put all rival companies off
the scent by disguising the real intentions of the company.
The best trick will win the day and place the company ahead
of its competitors. Competitors should be outwitted by
thinking ahead of them.
 3. Pattern refers to consistent behavior and practices and
processes emerging from intended and unintended actions
emanating from strategic thinking.
FIVE P’s OF STRATEGY CONTINUED.

 4. Position refers to an acceptable location for the organization in its

environment and chosen market when compared with competitors
and its market share. The position is determined by the strategies
implemented by the organization.
 5. Perspective refers to an ingrained way of conceptually and
culturally perceiving the world after looking inside the organization.
The organization ‘s perception becomes its reality on which it will
chart its future courses of action based on current strategies.
 Strategy is therefore deliberate action formulated and
implemented by an organization with objective of
outperforming its competitors. Unless the organisation
continuously improve its strategy, the leap frog effect will
result in competitors imitating and retaliating in a more
competitive manner.
STRATEGIC MANAGEMENT AS A PROCESS.

 Strategic management is a cycle of decisions where each set has an

effect on subsequent decisions and having consequences for all
those affected by them.
 It is not an event which comes to an end but a cyclical which is
perpetual due to the dynamism in the operating environment which
requires continuous improvement of the strategy to keep pace with
developments.
 The strategic management process proceeds through
various steps covering vision and mission formulation,
determination of goals and objectives, environmental
scanning covering both internal and external, strategy
formulation , strategy analysis and choice, strategy
implementation, realization or results , and strategy control ,
and continuous improvement which will necessitate
revisiting the VISION and restart the process again
 STRATEGIC MANAGEMENT PROCESS.

 . VISION

STRATEGIC
INTENT.

Strategic Direction MISSION.

Setting

GOALS.

OBJECTIVES.
.

 . ENVIRONMENTAL
SCANNING.

INTERNAL EXTERNAL
ANALYSIS ANALYSIS.
1.SWOT ANALYSIS. 1.MACRO ANALYSIS.
2. VALUE CHAIN (PESTLEED)
ANALYSIS 2. FIVE FORCES
3. RESOURCES MODEL.
BASED VIEW. 3. STRATEGIC
4. FUNCTIONAL GROUPING
ANALYSIS. 4. INDUSTRY LIFE
CYCLE
 .

 . STRATEGY FORMULATION.

GENERIC GRAND
STRATEGIES. STRATEGIES.

STRATEGIC ANALYSIS AND CHOICE.

.

 . STRATEGY IMPLEMENTATION.
1. STRUCTURE.
2. LEADERSHIP.
3. CULTURE.
4. REWARD SYSTEM.
5. PORTFOLIO BALANCE.

STRATEGY CONTROL,EVALUATION AND

CONTINUOUS IMPROVEMENT.
ADVANTAGES OF STRATEGIC MANAGEMENT.

 1.Strategic management create pro activity by encouraging

focus on planning, monitoring and evaluating success of
plans.
 2. It facilitate group interaction resulting in better decisions.
 3. Employee involvement guarantees ownership and role
clarity.
 4. Strategic management reduces resistance to
change.
 Thompson and Strickland identified advantages as
follows:
 5. It provides guidance to the organization on what
it is trying to achieve.
ADVANTAGES CONTINUED.

 6. It unifies the organization by creating an

environment where there is a shared vision.
 7. It makes employees and managers alert to new
opportunities and threats.
 8. It creates a pro active stance to change.
 9. It provides managers with framework for
ensuring resources allocation to strategy –
supportive , results – producing areas.
DISADVANTAGESOR UNINTENDED
CONSEQUENCES OF STRATEGIC
MANAGEMENT.
 1. Wrong strategies may erode shareholder value and
stakeholder wealth and destroy the organization.
 2. It requires sufficient time to plan, implement and evaluate
the process.
 3. Formulators should be involved in implementation to
ensure continuity and ensure managers do not shirk their
responsibilities.
 4. Expectations from employees and the
organization should be managed and linked with
the rewards.
 5. Focus may be on planning at the expense of
implementation and the culture may be change
resistant making it an expensive exercise.
STRATEGIC DIRECTION SETTING .

 The strategic direction of an organization is set

through the formulation of its vision, strategic
intent, mission and its goals and objectives.
 This is normally done by the top management of
the organisation normally during a strategic
planning workshop.
VISION STATEMENT.

 This is a statement that articulates what an

organization wants to become thereby serving as
a road map.
 It is a dream that focus on a desirable future and
is an enduring promise which provides a big
picture perspective of who the organisation is,
what it does an d where it is headed.
 A vision consists of two parts of a 10 – 30 year
big hairy and audacious goal (BHAG) and a vivid
description of what it would be like to achieve
that goal.
CHARACTERISTICS OF A TRUE BHAG.

 1. Clear and easily understood by everyone.

 2. It is compelling and excites people.
 3. It serves as a unifying focal point of effort.
 4. It acts as a catalyst for team spirit.
 5. It has a clear finish line.
 6. It applies to the entire organisation.
 It should have 50% to 70% probability of success
but the organization should believe that the goal
can be reached anyway,
 This requires visionary leadership which thinks
beyond the current resources and capabilities and
environment.
CONTINUED.

 The attainment of BHAG require extraordinary

effort and own luck.
 The organization should formulate combinations of
either target quantitative BHAGs, target
QUALITATIVE, common enemy BHAGs, role model
BHAGs ad internal transformation BHAGs.
 Statement should be supported by full and
unambiguous vivid description of what things will
be when the vision is fulfilled and create a picture
or image employees carry around in their heads.
PURPOSE OF THE VISION.

 1. It provides management with a means to

integrate a variety of goals, dreams, challenges
and ideas into one theme.
 2. It provides the basis for the formulation of
mission statement, goals, objectives and strategic
selection decisions.
 3. It provides focus and direction to all
stakeholders thereby facilitating pursuance of the
same objectives.
 4. An inspiring vision acts as a motivator to all
employees to pursue shared goals.
.
 6. A vision awakens the dynamism in any
organization and building a visionary company
requires 1% vision and 99% alignment
FACTORS TO CONSIDER IN VISION
FORMULATION.

 1. The vision should be achievable in the long term so as

to retain its motivating power.
 2. The vision should embrace creativity about the future
direction the organization is taking and can never be
wrong or right but should work for the company.
 3. There should be massive involvement of all
stakeholders whose input should be seriously taken into
account.
 4. The vision should be regularly redeveloped to ensure
continued focus on a desirable future.
 5. Any new vision and strategic direction should be
communicated and shared with employees to break any
resistance to change .
CONTINUED.

 The attainment must require a certain level of

unreasonable confidence and commitment and
build stretch in strategic mindset.
 The organization should leverage internal resources
to bridge the gap between current position and
where it wants to be.
 The organization should concentrate resources,
converge them, accumulate intellectual capital and
tap it, borrow, complement and conserve resources
and recover resources.
 Organization should avoid the “we have arrived
syndrome "which promotes complacency.
STRATEGIC INTENT STATEMENT.

 Strategic intent is concerned with the direction in

which an organization wants to go , the org, it
wants to aspire and how it wishes to get there.
 An organization exhibits strategic intent if it
continuously and relentlessly pursue and
concentrates its strategic actions towards achieving
certain specified ambitious goals.
 A strategic staircase should be built between
current position and the vision and shows steps to
be climbed.
CONTINUED.

 It envisions a desired leadership position and

establishes the criteria the organisation will use to
chart its direction and progress.
 It creates a sense of urgency by setting ambitious
goals that stretches the organisation and focuses
on winning in the long term.
 It expresses the extent the organisation pursues its
mission and objectives and focus all resources,
capabilities and competitive actions towards
organizational position, achieving competitive
advantage and winning in the market place.
 EXAMPLE OF STRATEGIC STAIRCASE

VISION: To become
 . the leading college
in Zimbabwe
Diversification.

Differentiation.

Cost.

Where we Quality
are now
STRATEGIC INTENT CONTINUED.

 Strategic intent requires commitment and

personal effort of the entire organization towards
achievement of the goal.
 It focuses on the distant future leaving room for
flexibility which may be taken to achieve the goal.
 Strategic intent demonstrates deep seated
commitment by the organization to win and
unseat the industry leader.
VISION AND MISSION STATEMENT.

 While the vision and strategic intent statement

deals with the desired future state of the
organisation by articulating what the organization
wants to become, the mission statement
articulates what the organization's business
should be so as to address stakeholder needs and
interests.
DEFINITION OF MISSION STATEMENT.

 This is an enduring statement of purpose distinguishing

an organisation from similar in the industry and
defining its place within the environment thereby
providing guidance as to why an organization does what
it does as opposed to how.
 It identifies the scope of the organization ‘s operations in
terms of its location, people product, market, technology
and operations.
 It indicates and embodies the organization’s philosophy;
identity , character and reflects organisational image.
 The mission statement is NOT measurable but expresses
the organization’s intention , attitude and orientation on
how it wants to achieve its objectives.
THE OUTSIDE INSIDE PERSPECTIVE.
FOCUS AREAS AND INGREDIENTS OF THE
MISSION STATEMENTS.

 1. PURPOSE which addresses the reason for the

organisation’s existence as perceived by
management and workers and other stakeholders
eg the purpose may be articulated as to enhance
shareholder value .
 2. Strategy identification which articulates a set of
long term objectives affecting an organisation’s
position in its environment. It identifies strategy in
terms of the nature of business , competitive
position and source of advantage by which it hopes
to prosper.
CONTINUED.

 3. Articulation of policies and standards of

behaviour and cultural practices defining how
business is being carried out.
 4. Expression of values, belief, moral principles that
support behaviour standards. Values are unstated
beliefs of organizational members influencing their
ethics and morals.
 A mission should reflect the manner in which the
organisation sees its stakeholders and should
accommodate all interests and make formal
commitment to fulfill them.
TYPES OF MISSION STATEMENTS.

 . There are here types of mission statements and

these include:
 1. Input Oriented mission statement which focus on
the inputs into the management process. Such
inputs may include human resources, informational
resources, material resources, etc
 2. Output oriented mission statement which focuses
on the end results without consideration of the
inputs and the processes used to transform them
into finished products.
.
 3. Process oriented mission statement which focus
on the processes of transforming inputs into
outputs.
 Each mission statement should embrace inputs
outputs and the processes of transforming such
inputs into outputs for consumption.
 Each mission statement should embrace inputs
outputs and the processes of transforming such
inputs into outputs for consumption.
COMPONENTS OF A MISSION STATEMENT.

 A good mission statement comprises ten components

covering aspects like :
 1. Product or service
 2. target market.
 3. technology.
 4. organisational profitability and growth.
 5. Organisational survival.
 6. Organisational philosophy.
 7. Public image.
 8. Organisational self concept.
 9. Quality and customers.
 10. Employees.
1. PRODUCT OR SERVICE OFFERED TO THE
MARKET.

 The mission should clearly defined the product or

service the organisation is trying to sell to the
market.
 While there may be supplementary product
offerings, the basic product must be articulated
with certainty to assist the market and
employees.
 This will facilitate the delineation of the target
market and the appropriate technology to be
used in the delivery of the product to consumers.
2. MARKET OF THE PRODUCT.

 The primary market should be clearly stated to

which the product will be delivered.
 A product delivered to the wrong market will not
allow the organisation to achieve its main
objectives.
 The description of the market facilitate
appropriate marketing strategies which ensure
effective communication with the correct
population.
3. TECHNOLOGY FOR PRODUCT
DISTRIBUTION.

 The process for delivering the product to the end

user may be a critical aspect in the satisfaction of
the needs of the customer.
 The articulation of the principal technology is
product distribution need to be included in the
mission as this influences capacity to satisfy the
customer interest.
ORGANISATIONAL PROFITABILITY AND
GROWTH.

 The organization’s economic goals should not be

taken for granted and should be captured in the
mission.
 A focus on short term may compromise capacity
for long term organisational well being and
wealth maximization.
 Organisational profitability will guarantee survival
in the long term and growth should be measured
from various angles including market share,
product variety and sophistication of the
technology being used.
5. ORGANISATIONAL SURVIVAL.

 Organizational stakeholders require operational

continuity which ensures capital growth.
 In all the activities carried out by the
organisation, survival should not be taken for
granted as it underpins the realization of all other
goals and objectives.
 The survival requires continuous profitability,
growth and capacity to meet the dynamic needs
of the customers and other stakeholders.
6. ORGANISATIONAL PHILOSOPHY.

 Philosophy refers to the ways things are done

within an organisation.
 The philosophy reflects the beliefs, aspirations,
priorities and commitment of stakeholders in
terms of how the organisation will be managed to
achieve stakeholder interests.
 The philosophy should be shared by the
stakeholders to ensure a cooperative approach to
doing business.
7. PUBLIC IMAGE.

 The mission statement should instill a positive

image of the organization in the environment in
which it operates.
 This is facilitate by leaving positive environmental
foot prints which mould customer and public
perception about the organisation character.
 The expectations of stakeholders are also
influenced by the positive image and impression
the organisation leaves in the operating
environment.
8. ORGANISATIONAL SELF CONCEPT.

 The success of an organisation depends on its

ability to know its self accurately.
 This allows it to evaluate its strengths and
weaknesses and assist in identifying any
opportunities in the environment and how the
various threats may be neutralized.
 There is need to realistically carry out SWOT
analysis as this will have a bearing on survival
because a failure to evaluate organisational
capabilities and limits may result in wrong
strategies being recommended.
9. CUSTOMERS AND QUALITY.

 The targeted customers need to be clearly

articulated so as to identify the skills and
competencies required to meet the specific
needs.
 Targeting the wrong customers result in failure to
fulfill the needs while neglecting the correct
market segment.
 Product quality should not be ignored as it may
be a source of competitive advantage and should
viewed in terms of total quality management and
re engineering.
10. EMPLOYEES.

 Employees are a critical component of the

mission statement as they are the once who drive
the organisation ‘s strategy.
 There is need to treat them with dignity and
respect while providing them with an opportunity
to realize their full potential.
 Organizational objectives can only be met
through the use of satisfied employees who
possess the necessary skills and knowledge.
CHARACTERISTICS OF GOOD MISSION
STATEMENTS.

 1. It should place top priority on customer needs.

 2. It should state the broad range of products to be
provided by the organization.
 3. It should express a desire to maintain the highest
standards of integrity and professionalism.
 4. It should state the importance of human resources
and the desire to reward fairly and on merit.
 5. It should express a desire to grow and enhance
shareholder value.
 6. It should state the organization's commitment to
social responsibility.
 7. It should bring out the organization ‘s character.
 8. It should be easy to read and state the marketing
IMPORTANCE OF MISSION STATEMENT IN
CORPORATE STRATEGY.

 1. The mission statement provides a sense of

common direction to all stakeholders.
 2. A good mission provides cohesion as it
influences corporate culture.
 3. Any changes in mission will influence changes
in strategic direction and orientation.
 4. The mission statement deals with values which
influence consumer buyer behavior to purchase
the company’s products.
 5. A mission statement places ethical decision
making at the centre of the organization’s
decision making.
PAST EXAMINATION QUESTIONS.

 1. (a) What is a corporate mission? (3 marks.)

 (b) Where is the corporate mission derived from ?
(3 marks)
 (c) What areas of life does it cover? (5 marks)
 (d) What benefits does an organisation obtain
from a mission statement ? (4 marks)
STRATEGIC GOALS AND AIMS.

 These are finely focused statements of intent

directed at aspects of the organization's
operations that are critical for success of the core
business.
 The life of goals extends beyond the immediate
future and should be reviewed thoroughly every
three to five years.
CORPORATE OBJECTIVES.

 These are short term and specific intentions of

the various operational areas and specify and
quantify targets towards which effort and
investment has to be directed.
 Objectives have to fulfill certain requirements
according to Cole (2000)
CRITERIA TO BE FULFILLED BY OBJECTIVES.

 1. They should further the organisation ‘s purpose

and strategic aims.
 2. The should conform to organizational
standards and values and policies.
 3. They should be circumstantially realistic.
 4. Their achievement should be measurable in
terms of time, quantity , quality, cost and
relevant ratio.
 5. They should set challenging targets for
individuals.
 6. They should be set by agreement to ensure
ownership.
Objectives continued.

 7. They should bee open for adaptation in response to

unforeseen circumstances.
 8. They should not create conflict but serve the same
purpose and direction.
 In short organizational objectives have to be SMART
meaning they have to be:
 Specific
 Measurable.
 Achievable or Attainable.
 Realistic.
 Time Bound.
ENVIRONMENTAL SCANNING.

 This is also referred to as environmental analysis

and is a process carried out to collect appropriate
information from an organization's operating
environment so that any strategies which are
formulated strategically fit within that
environment.
 The process comprise both internal and external
analysis as there is an internal and external
environment.
 Strategies can only be formulated after results of
environmental scanning have been analyzed.
TYPES OF ENVIRONMENTS.

 . MACRO ENVIRONMENT
INDUSTRY ENVIRONMENT
MARKET OR TASK
MICRO/ INTERNAL EXTERNAL
ENVIRONMENT
ENVIRONMENT
INTERNAL ENVIRONMENTAL SCANNING.

 This involves colleting information from the

organization's internal environment which
includes its 7 ‘s which comprise its systems,
structure, style of management, strategy, skills,
staff and shared vision.
 The environment may also include the company’
financial structure or base which influence its
capacity to implement any strategies which are
formulated.
 Various tools may be used to collect information
and this include SWOT analysis, the Resources
Based View, Value Chain analysis and functional
SWOT ANALYSIS.

 This is the oldest method for carrying out

environmental analysis and involves collection of
information relating toe the company ‘s strengths,
weaknesses, opportunities and threats.
 SWOT stands for :
 1. Strength
 2. Weaknesses
 3. Opportunities.
 4. Threats.
WHAT IS A STRENGTH?

 A strength is a capability or resource which an

organisation possesses which others do not have
and act as an advantage when competing with
others.
 The strength may come in the form of a stable
financial base, adaptive culture, qualified or
experienced staff, a well known branded product,
and well balanced board of directors and a shared
vision.
 The consumers and competitors should perceive
the features as strengths for them to be useful
to the organisation.
DEFINITION OF A WEAKNESS.

 A weakness is a lack of or deficiency in a resource

compared to what competitors possess thereby
acting as a disadvantage when competing with
other players in the market.
 Examples of weaknesses include poor structure,
weak capital base, politicized culture, poorly
qualified employees and an unclear strategy.
 Weaknesses affect an organization's capacity to
implement its strategy.
STRENGTHS AND WEAKNESSES.

 These focus on the organization's internal

capacity which should be considered in coming up
with the future strategy.
 The strengths should be matched with available
opportunities for them to be beneficial to the
company.
 Any weaknesses should be converted into
strengths so as to take advantage of market
opportunities.
 USE OF SWOT TO GUIDE STRATEGY.

 . STRENGTHS. WEAKNESSES.
Internal to
the company.
CONVERSION

MATCHING
CONVERSION.
Exist
independent
of the
company OPPORTUNITIES. THREATS.
OPPORTUNITIES AND THREATS.

 Opportunities are favorable conditions in the external

environment which if exploited with the available resources
will lead to competitive advantage.
 Examples include the closure of a competitor, improvement in
the political environment, decline in inflation etc.
 Threats have to be converted into opportunities which can
then be matched with existing strengths.
 Threats are unfavorable conditions in the external
environment which militate against the
organization's capacity to achieve competitive
advantage.
IMPORTANCE OF THREATS AND
OPPORTUNITIES.

 Weirich developed the TOWS matrix which

emphasized the importance of threats and
opportunities.
 SO strategies employ strengths to seize opportunities.
 ST strategies employ strengths to counter or avoid threats.
 WO strategies address weaknesses so as to exploit
opportunities.
 WT strategies are defensive and aim at avoiding threats and
the impact of weaknesses.
 The four groups of strategies relate to different
time horizons.
RESOURCES BASED VIEW.

 This argues that an organisation ‘s competitive

advantage is based on the quality of resources at
its disposal and such resources may be tangible,
intangible and organisational capabilities.
 The extend to which the resources are used will
influence the degree to which it succeeds in
competing against other players.
TANGIBLE RESOURCES..

 Tangible resources are those which are visible

and can be seen by competitors.
 Such assets include premises, vehicles, machinery
and equipment.
 Tangible assets do not create sustainable
competitive advantage as they are easily imitated
easily by competitors and are difficult to ring
fence.
INTANGIBLE RESOURCES.

 This are invisible assets which contribute immensely to the

organization’s operations. and include assets like, goodwill or
reputation, trade marks, copy right material patents and other
forms of intellectual property rights and organizational
culture.
 These assets are difficult if not impossible to imitate. replicate
or copy and can provide long term competitive advantage
against competitors.
 ORGANISATIONAL CAPABILITY represent the company ‘s
ability to utilize all its resources to discharge its
mandate and outperform competitors.
DEPLOYMENT OF RESOURCES IN STRATEGIC
MANAGEMENT.

 Successful organizations demonstrate timely

responses, rapid and flexible production,
innovation, and management expertise in
coordinating and deploying organisational
resources and capabilities.
 Organisational resources and capabilities should
be unique and capable of leading to sustainable
competitive advantage which is difficult to
create , buy, replace or imitate, and possessing
certain characteristics.
CHARACTERISTICS OF ORGANISATIONAL
RESOURCES AND CAPABILITIES.

 These should possess the following attributes:

 1. VALUE in that the resources should be able to add
value by neutralizing external threats and exploiting
opportunities.
 2. They should be superior with capacity to fulfill
customer needs better.
 3.Scarcity which should be relative and sustainable.
 4.Inimitability whereby the resources should be difficult
to copy so as to provide long term competitive
advantage by ensuring that that there are no substitutes
or duplication e.g. reputation, organizational culture, etc
 5. The organisation should have the capacity to exploit
the resource that create the competitive advantage.
VALUE CHAIN ANALYSIS.

 A value chain is a sequential number of activities carried

out by an organisation resulting in the production and
delivery of a particular product or service to the final
consumer.
 These activities transform inputs into outputs which
consumers are prepared to pay for .
 Such resources should possess the following
characteristics:
 1. The product should be unique or different.
 2. The product should be cheaper than competing
products.
 3.The organization should have ability to respond to
customer needs faster tan competitors.
Value chain continued.
 Value chain analysis is a systematic method of determining
how the different organisational activities contribute to create
value for the customer.
 The organization is viewed as a segmented that creates value
in what clients are prepared to pay for.
 The various activities in the value chain are the building
blocks for competitive advantage and the activities are
grouped into primary and secondary activities.
 Primary activities physically create the goods from
raw materials while secondary facilitate the
smooth operation of the primary activities.
VALUE CHAIN DIAGRAM.

SUPPORT ACTIVITIES.
 . cost PRICE/ VALUE
1.Firm Infrastructure.
2. Human Resources Management.
3.Technology Development.
4. Procurement.
MARGIN.

Inbound Outbound Marketing & Service

Opera Sales.
Logistics. Logistics.
tions.

PRIMARY ACTIVITIES.
PRIMARY ACTIVITIES.

 These directly related to production, sales, marketing,

delivery and service.
 Inbound logistics receive, handle and store inputs to the
production system warehousing and stock control.
 Operations convert resource inputs like raw materials
and people into final products.
 Outbound logistics stores the product, package it,
distribute, test and deliver to final consumer.
 Marketing and sales inform customers about the product
and persuade them to buy through advertising and
promotion.
 After sale service install, repair and upgrade and provide
spares back up.
SUPPORT SERVICES.

 These provide purchased inputs , human resources ,

technology and infrastructure functions to support the
primary activities.
 Procurement deals with acquisition of resource inputs to
primary activities.
 Technology development deals with product design,
improve processes and resource utilization.
 Human resources deal with recruitment, training and
rewarding people.
 Firm infrastructure deals with planning, finance, quality
control and structures and routines that make up the
organization's culture.
CONNECTIONS WITHIN THE VALUE CHAIN.

 Linkages connect the activities of the value chain.

 Activities in the value chain affect one another
and the linkages require coordination.
 VCA facilitate establishment of activities that are
important in providing customers with the value
they want.
 It allows the analyzing of an organization's
strategic capability by focusing on overall means
by which value is created.
MANAGING THE VALUE CHAIN.

 Each value chain activity incurs costs and ties

both assets and time.
 Managers should assign both assets and costs to
each activity through activity based accounting.
 This enables benchmarking the organization’s
cost accounting information with those of others
to determine their strengths and weaknesses.
EXTERNAL ENVIRONMENTAL ANALYSIS.

 This is a process of collecting appropriate

information from the external environment.
 An organization should be compatible with its
external environment as it affects its growth,
profitability and survival.
 The analysis will identify and evaluate trends
beyond the control of a single organization and
reveal ant threats or opportunities that influence
strategic action.
WHY EVALUATE EXTERNAL ENVIRONMENT?

 When opportunities and threats are identified,

evaluated and matched with knowledge of
internal environmental organization can develop a
clear vision, mission and design strategies to
achieve long term objectives.

 It allows it to respond offensively or defensively

to environmental factors and develop policies to
achieve goals which result in strategic
competitiveness and above average returns,
thereby adapting to the environment to ensure
survival.
STEPS IN EXTERNAL ENVIRONMENTAL
ANALYSIS

 . SCANNING.

MONITORING.

FORECASTING.

ASSESSING.
FOUR ACTIVITIES INVOLVED IN EXTERNAL
ENVIRONMENTAL SCANNING.

 1. Scanning- Early signals of environmental changes and

trends are identified.
 2. Monitoring- The meaning of the environmental changes
and trends is detected through ongoing observation.
 3.Forecasting- Based on monitored changes and trends ,
projections of anticipated outcomes are developed.
 4. Assessing- The timing and importance of
environmental changes and trends for organization
strategies and their management are determined.
 Information can be collected from various sources
like trade shows, printed materials , network
contacts and customer representative .
COMPONENTS OF EXTERNAL ENVIRONMENT.

 .
MACRO AND GLOBAL ENVIRONMENT.

INDUSTRY ENVIRONMENT.

MARKET ENVIRONMENT
(DIRECT ACTION ENVIRONMENT.)
COMPONENTS OF EXTERNAL ENVIRONMENT.

 MACRO environment is analyzed using PESTLEED, key drivers or

scenarios.
 INDUSTRY environment is analyzed using M. Porter’s five forces
model, cycles of competition with the industry life cycle.
 COMPETITOR / MARKET environment is analyzed using strategic
group mapping, market segments and critical success factors.
 The external environment and its segments cannot be
controlled by an organization but the organization should
adapt to it. Uncertainty creates strategic challenges and
depends on complexity and stability. Dynamism creates
the need for scenario planning, intuition and learning
approach while complexity creates diversity and the
need to extensively decentralize.
FACTORS THAT MAY INFLUENCE THE ORGANISATION.

 Consumer demand of the products.

 Types of product needed to be developed.
 Nature of positioning and market segmentation strategies.
 Types of services needed.
 Choice of business to acquire or sell.
 Selection of suppliers and distributors.
 Government regulations and laws.
 Organizations should anticipate , mobilize and
empower managers and employees to identify,
monitor, forecast and evaluate key external forces
so as to anticipate emerging opportunities and
threats.
 COMPONENTS OF THE MACRO ENVIRONMENT.

 .
SOCIAL

ECONOMIC
TECHNOLOGICAL

THE
POLITICAL LEGAL
MACRO ENVIRONMENT

ECOLOGICAL
DEMOGRAPHIC ETHICAL
POLITICAL ENVIRONMENT.

 Government provides an enabling environment for maintaining and

improving physical, social and market infrastructure.
 Public policy on competition and consumer protection affects
strategy.
 The possibility for political change affect economic policies as taxes,
interest rates may affect cash flows.
 There may be need for planning and lobbying government.
 Consumer protection require market control and monopoly control
despite the advantages of economies of scale.
 Political risks exist where political factors may invalidate
organizational strategy and affect organization through wars,
corruption, sanctions, importation and nationalization.
 There is need to understand the host country political stability, state
commitment to private ownership, property rights, ideology, the
political cycle, government succession and influences on political
game rules.
ECONOMIC ENVIRONMENT.

 This affects at national and international level in

terms of exchange rates, inflation, and interests
rates.
 This covers growth in GDP , local economic trends
in rentals, labor rates, tax rates, government
spending and business cycle.
 In a boom the organization must identify demand
while in a decline it should anticipate the recession
and plan cost cutting and craft survival strategies.
 Exchange rates affect pricing, import costs, demand
and government policy may create barriers and
dumping.
SOCIAL ENVIRONMENT.

 The social trends will influence attitudes, beliefs

and culture.
 Cultural beliefs will impact on supervision practices
and women acceptance to work full time.
 The culture will also influence population growth
and consumption patterns and demand for certain
products.
TECHNOLOGICAL ENVIRONMENT.

 This covers developments in information

communication technology in terms of the gadgets,
apparatus and techniques and the impact on the
organization.
 Developments in technology will contribute to
economic growth through reduced costs,
productivity and new product development, product
delivery, market identification and communication.
 The developments will also influence home working
and appreciation of knowledge work value.
LEGAL ENVIRONMENT.

 This covers the general laws , healthy and

safety, company law, labor issues, data
protection, environmental management and tax
and competition legislation.
 The legal framework can be a facilitator or a
hindrance to organizational strategies.
 Regulatory compliance is a major issue for all
organizations.
ENVIRONMENTAL / ECOLOGICAL ENVIRONMENT.

 The environment provides resources , logistics

support and is influenced by government.
 Environmental protection has become an issue due
to pressure groups and legislation.
 All capital expenditure should be linked to
environmental issues, waste minimization and
product life cycle management. and sustainability
ETHICAL ENVIRONMENT.

 Ethics are moral standards of a particular society

which assist in determining what is good and what
is bad.
 They influence various issues pertaining to the
organization.
 These will influence how business practices are
carried out and the level of corruption within
society which will increase the cost of doing
business.
DEMOGRAPHIC ENVIRONMENT.

 This focuses on population trends and distribution

in terms of growth, age distribution, geographical
dispersion, ethnicity, household and family
structure, employment patterns and wealth
distribution.
 Demographic factors will influence product demand,
demand location tax and recruitment policies as
these affect the organization’s strategy.
 Any strategy will require consideration of the
country ‘s demographic variables.
KEY DRIVERS OF CHANGE.

 Changes in any environment is driven by four factors:

 1.Market globalization through homogenous consumer tastes
with organizations supplying the global customer and
purchasing from global suppliers. This is necessitated by
improved communication systems.
 2. Cost globalization through economies of scale;
sourcing efficiencies and exploiting country
specific advantages and spreading of costs.
 3. Government policy which may be sympathetic to
free trade and technical standardization.
 4. Global competition which may compel
organizations to venture into international trade.
NATIONAL COMPETITIVE ADVANTAGE.

 M. Porter identified four determinants of

national competitiveness which will also influence
organizationalFIRM
competitiveness
STRATEGY
and he referred to
this as the diamond
STRUCTUREmodel:
AND
RIVALRY.

FACTOR DEMAND
CONDTIONS. CONDITIONS.

RELATED AND
SUPPORTING
INDUSTRIES.
CONCEPT OF DIAMOND MODEL.

 M. Porter argued that some countries are more

competitive than others and conditions with a
country may firms to compete.
 Companies that require high technology and
skilled manpower are less affected by costs of
inputs of raw materials and basic labor as
determined by national endowment of factors of
production.
ANALYSING THE DIAMOND: FACTOR
CONDITIONS.

 This refers to country endowment with

human skills, physical resources,
knowledge, capital and infrastructure
the firm can use.
 The factors can be basic like natural
resources, climate or unskilled labor or
advanced covering sophisticated
scientific and technology and educated
population.
FACTOR CONDITIONS CONTINUED:

 WHAT MATTERS IS NOT ABUNDANCE BUT THE

EFFICIENCY OF RESOURCE DEPLOYMENT.
 Generalized factor like transport infrastructure do
not provide decisive and sustainable competitive
advantage like specialized factors.
 Knowledge bases in specific fields and logistics
systems for particular goods are difficult to move
to other countries and become integral to
innovation.
DIAMOND MODEL: DEMAND CONDITIONS.

 The home market determines how firms perceive,

interpret and respond to buyer needs.
 This puts pressure on firms to innovate and
provide launch pad for global ambitions.
 Factors that provides foundation for global entry
include absence of cultural barriers, similarity of
segments in home and global market,
sophisticated and demanding buyers set
standards, anticipation of buyer needs in local
market provides international experience and
early saturation of domestic market encourage
firm to export.
DIAMOND MODEL: RELATED AND SUPPORTING
INDUSTRIES.

 Competitive success in one industry is linked to

success in related industries.
 Domestic suppliers should be preferable than
foreign ones as they offer continuity, cooperation,
and coordination.
 They also understand the operating environment
and view issue from same perspective.
 Innovation is enhanced if suppliers are of quality
and information is transmitted rapidly and
problems resolved jointly.
DIAMOND MODEL: FIRM STRATEGY,
STRUCTURE AND RIVALRY.

 Countries display competitive advantage in

industries culturally suited to their normal
management practices and industrial structures.
 Firm strategy affected by national capital markets
goals and performance expectations, national
attitudes to wealthy and national culture influence
industrial priorities.
 Domestic rivalry forces companies to think
international, teach them about competitive
success and teach to compete on more than basic
factors and experiment on different strategic
approaches.
INFLUENCING THE DIAMOND.

 A country ‘s industries are clustered and

clustering is key to national competitive
advantage.
 A cluster links industries through vertical or
horizontal relationships.
Machinery producing
Goods. Finished goods.

Inputs ,
Supplies. Related services.
CREATING A DIAMOND OF COMPETITIVE
ADVANTAGE.

 Government influence the context in which

industry operates and can create opportunities
and pressure for innovation.
 Factors of production provide the seed corn and
related industries also provide the foundation
while government policy support cluster
development ad promotion of high standards in
education, research relevant technologies, while
home extraordinary demand set demand
conditions in the diamond.
INFLUENCING THE DIAMOND--- CONTINUED.

 An organization is likely to succeed

internationally if there is a supporting
cluster.
 Organizations should invest in
cooperative ventures like training,
infrastructure and research
COMPETING IN INDUSTRIES WITHOUT
NATIONAL COMPETITIVE ADVANTAGE.

 This requires the organization to do the following:

 1. Invest heavily in research and spread research
and development.
 2. Invest in human resources and look out for
new technologies.
 3. Collaborate with foreign companies.
 4. Supply overseas companies and source
components from overseas.
 5. Exert pressure on politicians to create better
conditions to develop the diamond.
THE INDUSTRY ENVIRONMENT.

 An industry is a group of organizations producing

similar or substitutable products and compete in
the same market.
 An organization need to establish its industry’s
ingredients for success, the industry structure,
the major determinants of competition and
identify its competitors.
 Industry structure can be examined by four
variables which include concentration in terms of
dominance by a few players, economies of scale,
product differentiation and barriers to entry.
 MICHAEL PORTER’S FIVE FORCES MODEL OF
COMPETITION.

 The five forces influence the intensity of industry

competition and profit potential:
BARRIERS TO NEW
ENTRY.

INDUSTRY
BARGAINING POWER COMPETITORS THREAT OF SUBSTITUTE
OF SUPPLIERS. Rivalry amongst PRODUCTS.
Existing firms.

BARGAINING POWER
OF CUSTOMERS.
THE THREAT OF NEW ENTRANTS.

 New entrants will bring extra capacity and

increased competition. The strength of the threat
depends on he barriers to entry and the likely
response of existing competitors to the new
entrant.
 Barriers to entry are any obstacles that
discourage a new organization to venture into a
particular market.
 Response of existing players refers to any
retaliatory action taken by current players in
response to the entry of a new player.
THREAT OF NEW ENTRANTS: BARRIERS TO
ENTRY.

 1. Scale economies compel new entrant to capture

large market so as to recover fixed cost and this
may be very expensive and unaffordable.
 2. Differentiation through branding and customer
loyalty.
 3. Capital requirements.
 4. Access to distribution channels.
 5. Switching costs which are incurred when moving
to new products or suppliers.
 6. Cost advantages to existing producers like
patents rights, experience, subsidies, favored to
access to raw materials, etc
BARRIERS TO ENTRY: EXPECTED RETALIATION.

 1. Retaliation by existing players should deter

new firms to enter the market.
 2. Fierce retaliation is expected where existing
players have large market share, possess
substantial resources and where the industry
growth is slow and there is no room for new
players.
 3. New player should focus on neglected market
segments which are not adequately served.
 4. Organization should avoid overstepping on the
toes of existing players.
THREAT FROM SUBSTITUTE PRODUCTS.

 1. A substitute product is a good or service produced by

another industry which satisfies the same customer needs by
performing similar functions.
 2. These products provide competition but are not produced
by competitors in the same industry.
 3. These cause a threat if there are no switching costs, if the
products are cheaper and performance better or equal to
those of competing products.
 4. Organization should differentiate its products
through price, quality delivery speed so as to
withstand this threat.
BARGAINING POWER OF BUYERS/
CUSTOMERS.

 Buyers are customers who require quality goods at lower

prices and can play competitors against each other.
 The consumers have bargaining power if :
 1. They purchase large quantities and their purchases account
for large proportion of seller’s revenue.
 2. Switching costs are low and products are standardized.
 3. Products are not important to the buyer and the customer
has access to a lot of information.
 4. There is credible threat to backward integration where
buyer becomes his own supplier.
 5. If the buyer earns low profits.
BARGAINING POWER OF SUPPLIERS.

 Suppliers are organizations providing raw materials,

equipment, machinery and associated services and can
increase prices or reduce quality.
 Supplier groups are strong if :

1. dominated by few large organizations and there is no

substitute for their products.
 2. Industry firms are not important customers to the group
as it sells to several industries.
 3. Supplier’s goods are critical to the buyer.

 4. Switching costs are very high

 5. There is credible threat for forward integration where the
supplier becomes his own buyer.
RIVALRY AMONGST COMPETING
ORGANISATIONS.

 This is the strongest force whereby direct

competitors take action which invite competitive
responses.
 Rivalry in a sector will affect profitability through
price competition , advertising battles, product
innovation and improved service.
 Competition becomes stiff as players in a market
become of similar size.
 The intensity of competition is determined by
various factors in the market.
FACTORS INFLUENCING INTENSITY OF
COMPETITION.

 1. Market growth where players compete for a

stagnant market.
 2. High fixed cost structure tempt players to
compete on price.
 3. Where buyers switch easily suppliers will
compete.
 4. Uncertainty about the other’s moves compel a
company to respond to uncertainty.
FACTORS INFLUENCING INTENSITY OF
COMPETITION.

 5. Where success is a prime strategic

objective firms will be very
competitive.
 6. Exit barriers may compel companies
to continue trading and these may be
in the form of breakup costs,
redundancy payments, effects on
synergy, government pressure and
management reluctance to accept
IMPACT OF I.T. ON COMPETITIVE FORCES.

 I.T. raises entry barriers by increasing economies of

scale and raising capital entry but can also reduce
selling costs through internet distribution channels.
 I.T. increases the number of accessible suppliers by
creating supplier proximity and electronic data
interchange can integrate suppliers with firm’s
admin structures creating switching costs.
 Bargaining power of customers can be influenced
through I.T. by locking them in thereby raising
switching costs.
IMPACT OF I.T ON COMPETITIVE FORCES.

 Access to improved information also increases

customers’ bargaining power but ability of supplier
to interact with more buyers reduce dependence on
few buyers.
 I.T may become a substitute product as it replaces
certain services like letters, leisure activities, etc
 I.T. allows new comers to imitate existing players
and can support any competitive strategy on low
cost , differentiation and focus.
 I.T. can be used to share communication networks
like ATMs in banks.
LIMITATION OF THE FIVE FORCES MODEL

 1. It assumes that organizations are always

competing when in practice they may cooperate
through joint ventures and strategic alliances.
 2. It ignores that the environment is dynamic and
can change before the analysis is changed.
PAST EXAMINATIONS QUESTIONS.

 Question 3 May 2000

 Identify five forces in the environment of a
business organisation , and discuss the threat
posed to your organization by each of these
forces ? (15 marks)
THE TASK ENVIRONMENT.

 The task environment comprises the specific

geographical within which the organization
operates.
 This comprises various actors in that environment
and includes suppliers, distributors or
intermediaries, customers and competitors.
 DIAGRAMMATIC REPRESENTATION OF THE
TASK ENVIRONMENT.

 . TASK
ENVIRONMENT.

SUPPLIERS.
CUSTOMERS.

DISTRIBUTORS/
INTERMEDIARIES. COMPETITORS.
SUPPLIERS.

 Organization should assess its relationship with

suppliers in terms of price competitiveness, product
quality, speed and reliable delivery and their
reputation.
 The after sales service need to be evaluated as it
impact on service quality.
 The relationship will influence ability to ensure
regular supplies and ring fence the scarce
commodities.
CUSTOMERS.

 These are individuals and groups who purchase the

goods and is most important vulnerable variable
and difficult to understand.
 Opportunities and threats may arise depending on
the number and size of customers, their tastes and
needs and success depends on response to the
needs.
 Organization should profile current and future
customers to successfully plan for their satisfaction.
 There is need to understand needs, purchasing
power and behavior and the impact of the macro
environment on these factors.
DISTRIBUTORS AND INTERMEDIARIES.

 These bridge the gap between manufacturers and

consumers and include wholesalers, retailers,
agents and brokers.
 Changes in distribution may bring opportunities and
threats and affect organizational performance.
 Powerful distributors can control customer access
to goods and services and demand lower prices but
the power can be weakened if organization has
many options.
 Items can be bought on line and delivered directly
to consumers by the producer thereby ensuring
contact and getting undiluted feedback.
COMPETITORS.

 These are organizations producing similar goods

and competing for the patronage of the same
clients.
 These are threatening forces in the task
environment trying to market the same product.
 Stiff competition create price competition which
affect profitability and competitors can determine
quantity and price of goods going on the market.
 Competition extends to struggle for capital raw
materials and labor. Organization should
understand competitor objectives, strategies, their
belief and assumptions and their capability.
HOW TO IDENTIFY COMPETITORS.

 Organization should identify both current and

future potential competitors.
 These can be identified through similarity of
definitions, objectives, vision and mission
statements.
 The more similar the definitions the greater the
likelihood that the companies are competitors.
 Competitors may also be identified through
strategic group mapping which involves plotting the
organization and its competitors on a strategic map
using two dimensions, one on the vertical and the
other on the horizontal axis.
STRATEGIC GROUPING OF COLLEGES.

Price Speciss
 .

Trust
Face City Study
Denmak.

Life Long Herentals

No of branches for each college.

WHAT IS A STRATEGIC GROUP MAPPING ?

 This is a clustering of organizations with similar

strategic characteristics following similar strategies
and competing on similar basis.
 The strategic space pertaining to the group is
defined by common strategic characteristics which
may include product diversity, geographical
coverage, pricing policy, product quality and
distribution method.
INDUSTRY LIFE CYCLE.

 Every industry develops through a life cycle which

affects and interact with the five forces model.
 The cycle reflects changes in demand and the
spread of technical knowledge among producers
 Innovation creates new industry through innovation
which later shifts to processes to maintain the
margins which are squeezed due to competition.
 The industry life cycle goes through inception,
growth, shakeout and maturity and finally decline.
DIAGRAMMATICAL REPRESENTATION OF
INDUSTRY LIFE CYCLE

.
Market
Inception Growth Shakeout/ Decline.
Demand Maturity

1. 2. 3. 4.
PERIOD IN YEARS OR MONTHS.
INCEPTION OR INTRODUCTION PHASE.

 During this stage the product is introduced as a

basic product without any established standards.
 Competitors are very few if any.
 Buyers are the early adopters who are prosperous
but curious and should be induced to experiment
with the product.
 The profits are negative but there is potential for
first mover advantage.
RAPID GROWTH PHASE.

 Products have now been improved and are more

sophisticated and differentiated.
 There are many new entrants entering the market.
 Most customers are now aware of the product and
easily attracted.
 The profits are good but starting to decline.
MATURITY OR SHAKE OUT.

 The products are now superior but standardized.

 Competition is becoming very stiff with weaker
players exiting the market.
 The marketing has been transformed into a mass
market and brand switching becomes common.
 Profitability under erosion due to competitive
pressures.
DECLINE OR DEATH STAGE.

 There is varied quality but generally

undifferentiated products.
 There are few remaining competitors, competing on
price.
 Buyers are now sophisticated and very traditional
and difficult to attract.
 Profits are variable and difficult to generate.
VALUE OF INDUSTRY LIFE CYCLE.

 The analysis assist in forecasting trends and

suggesting possible courses of action.
 The forces at play during each of the stages require
that strategies which are compatible with the stage
should be adopted to ensure compatibility with that
stage.
 Any move into a new stage require a corresponding
move in strategic direction to ensure compatibility
is maintained.
SCENARIO PLANNING.

 A scenario is a detailed and consistent view of how the

business environment of an organization might develop
in the future. According to M. Porter it is an internally
consistent view of what the future would turn out to be.
 It is built with reference to key influences and change
drivers in the environment and deal with conditions of
high uncertainty and are merely internally consistent
views of potential future conditions.
 Scenario building is a process used by organizations to
model the future due to environmental complexities.
 The past is not a guide to the future due to market
dynamism and the future is determined on the basis of
leading indicators and scenarios.
TYPES OF SCENARIOS.

 Macro scenarios consider possible future

environmental changes based on overall
conditions of the political, economic, social,
technological, etc.
 Industry scenarios focus on predicting
developments in a single industry in more detail.
 The process should be kept simple by using a
team comprising people from different
backgrounds and some nonconformists who
challenge consensus.
STEPS IN SCENARIO PLANNING. ( MERCER)

 1. Decide on change drivers by using

environmental analysis taking a ten year time
horizon to avoid extrapolating.
 2. Identify and select important issues and their
degree of certainty required.
 3. Bring drivers together into viable framework of
mini scenarios using intuition and group them
without calculating probability.
 4. Produce seven to nine scenarios and explore
underlying relationships amongst them.
SCENARIOS CONTINUED.

 5. Group scenarios into two or three larger

scenarios which are complementary not opposites
and are all equally likely and can hang together.
 6. Write scenarios in most suitable form for
managers and emphasis being on qualitative not
quantitative considerations.
 7. Identify critical outcomes or branching points
impacting on on long term survival and test them
through role plays to determine their meaning to
key stakeholders.
STRATEGY FORMULATION.

 This is the creative and intellectual phase of the

strategic management process which tries to
come up with various courses of action.
 Hofer and Schendel refer to three levels of
strategy which covers corporate, business and
functional or operational strategies.
THE STRATEGY MAKING PYRAMID.

 .
CORPORATE
LEVEL STRATEGY.

BUSINESS LEVEL
STRATEGY

FUNCTIONAL LEVEL
STRATEGY.

OPERATIONAL LEVEL
STRATEGY.
CORPORATE LEVEL STRATEGY.

 This is the managerial game plan concerned with

the overall purpose and scope of an organization
and how value will be added to the different parts
(sbus) of the organization.
 Strategy and strategic management should
impact upon the whole organization and all parts
should support and further the strategic plan.
 Strategy involves choices about allocating or
obtaining corporate resources now and in the
future.
BUSINESS LEVEL STRATEGY.

 This is a managerial game plan dealing with a

particular and distinct combination of products
and markets dealt with by a particular strategic
business unit.
 It focuses on competing successfully in particular
markets against other competitors in that market
segment.
 SBU level strategies must be coordinated with
corporate strategies and with each other.
FUNCTIONAL LEVEL STRATEGY.

 This is the managerial game plan for a specialist

functional department of an organization in its
effort to contribute to the business strategy of the
organization.
 Organizations are functionally departmentalized
into Human Resource, Marketing, Finance,
Production, and Administration and each will have
its own functional strategy which determines how
it will contribute to the business strategy.
 Such strategies include the H.R. Strategy,
Marketing strategy, etc.
OPERATIONAL LEVEL STRATEGY.

 This is a game plan for an operational section of

an organization like training, industrial relations,
health and safety , promotion and advertising,
etc.
 The operational strategy support the functional
strategy which in turn underpin the business
strategy and corporate strategy.
ALIGNMENT OF THE DIFFERENT LEVELS OF
STRATEGY.

 The four levels of strategy making need to be

aligned with one another to ensure that they are
compatible. Incompatibility will create
incongruence lead to the expected results not
being achieved.
STRATEGY AND COMPETITIVE ADVANTAGE.

 The primary aim of strategic management is to enable

organizations to adapt to environmental changes in a way
that success and long term survival are guaranteed.
 Organization should create competitive advantage and
distinguish itself from competitors through competencies
other organizations cannot copy readily.
 Competitive advantage can be based on low cost
manufacturing, quality service, innovative product
design created from intellectual capital, visionary
leadership style and proactive management.
GENERIC STRATEGIES.

 These are strategies or actions organizations

embark on to achieve their long term goals
through competitive advantage based on cost
leadership, differentiation and focus.
 A best cost approach to competitive advantage
can also be adopted which combines cost
leadership and differentiation.
M. PORTER’S GENERIC STRATEGIES.

 . BROAD
TARGET
LOW COST DIFFERENTIATION. MARKET
LEADERSHIP.

FOCUS.

BASED ON BASED ON NARROW

TARGET
LOW COST. DIFFERENTIATION. MARKET
COST LEADERSHIP

 Organizations pursuing this strategy aim to be the

lowest cost provider of a service or product in a
market and selling to a broad target market.
 The products are highly standardized and not
customized to individual customer tastes, desires
or needs.
 Cost leadership is based on making products with
few modifications and exploit cost reduction
benefits.
SOURCES OF COST REDUCTION BENEFITS.

 1. High capacity utilization result in spreading

fixed costs to more units.
 2. Economies off scale result in organization
procuring, producing, selling and advertising in
large volumes and negotiating better terms than
new entrants.
 Technological advances facilitate reduction of unit
cost of the service or products.
 Economies of learning and experience develop
from repetition and efficiency is improved in
product design and process improvement.
CIRCUMSTANCES UNDER WHICH COST
LEADERSHIP HAS POTENTIAL FOR SUCCESS.

 1. If target market is price sensitive.

 2. Product should be standardized and appeal to
a broad market.
 3. The market is large enough to provide
economies of scale advantages.
 4. Organization should have capital resources to
invest in cost reducing technologies and
processes.
 5. Organization should have capital to invest in
market research to keep pace with consumer
behavior.
ADVANTAGES OF COST LEADERSHIP.

 1. It increases organizational potential to increase

market share.
 2. Accumulated capital reserves provide strategic
alternatives to the organization in defending or
expanding the market.
 Competitors will not start a price war in a market
with a cost leader.
 Customers unlikely to switch to competitors due
to customer loyalty
 New entrants can be kept out of the market
easily.
RISKS ASSOCIATED WITH COST LEADERSHIP.

 1. There is risk of imitation or substitution as cost

advantages are short lived.
 2. Heavy asset commitment expose organization
to possible obsolescence due to competitor
breakthroughs.
 There may be preoccupation with cost cutting
while losing sight of market changes and
consumer demand changes.
 DIFFERENTIATION STRATEGY

 Differentiation aims to provide consumers with a

product or service that is considered unique in
terms of quality, status, technological superiority
or image.
 Consumer needs should be understood to
determine feasibility of incorporating
differentiating features into the product or
service.
 Customers can pay a premium price for the
product that satisfies their preferences.
 Successful differentiation create customer loyalty
retention.
CIRCUMSTANCES WHERE PURSUING
DIFFERENTIAON HAS POTENTIAL FOR
SUCCESS.

 1. Consumers should be prepared to pay more for

uniqueness than the cost of creating it.
 2.The product should have wide appeal to many
market segments.
 3. Costs should be reduced in value chain
activities not directly related to the source of
differentiation.
 4. The source of uniqueness should be durable
and not imitated quickly and cheaply by
competitors.
ADVANTAGES OF DIFFERENTIATION.

 1. It leads to customer loyalty and retention and

insulating organization against competitor rivalry.
 2. Ownership of highly sought product protects
the organization against destructive price wars
with competitors.
 3. Customers are less price sensitive and brand
loyal.
 4. Loyalty barriers make it difficulty for new
competitors to invade the market.
RISKS OF DIFFERENTIATION.

 1. Added costs may be more than the premium

price the customers are prepared to pay for.
 2. Differentiating feature may push costs above
those of competitors resulting in customers
sacrificing some of the features of the unique
product.
 3. Imitation result in differentiating features
becoming commodity features.
FOCUS STRATEGY.

 Focusing involves selecting a particular market

and catering for the specific needs of consumers
in that market segment.
 The success of focus depends on ability to
identify an appropriate market segment where
the organization can meet needs and desires of
buyers better than competitors.
 Focus can be based on differentiation or lowest
cost.
FOCUS BASED ON DIFFERENTIATION.

 The products and services provided to the niche market

come at high price premium.
 The market is small and sales figures are relatively low
compared to those of mass production.
 Extensive differentiation is normally accompanied by
increased high costs.
 According to M. Porter, a focus strategy achieves
advantage when broad business fall into
underperformance or over performance.
 Underperformance is when product fails to meet
segment needs while over performance is where the
product gives more to segment providing an opportunity
for a cost focus player.
CIRCUMSTANCES WHERE FOCUS BASED ON
DIFFERENTIATION HAS POTENTIAL FOR
SUCCESS.
PORTER’S PRIORITY
MATRIX
 This is a tool that sorts and ranks
various options into an order of
importance using weighted criteri
urgent not urgent
Urgent not urgent
.
 1. Market segment should have sufficient size and
growth potential to provide adequate long term
profit potential.
 2. The market segment should not be crucial to
success of major competitors.
 3. Consumers should be willing to pay high
premium for perceived value attached to the
product.
 4. Consumers should be brand loyal regardless of
price.
 5. Consumers should identify with the brand
which personifies a certain image or life style.
CIRCUMSTANCES WHERE PURSUING
DIFFERENTIATION BASED ON LOWEST COST
HAS POTENTIAL FOR SUCCESS.

 1. The market segment has sufficient size and

growth potential to provide adequate long term
profit potential.
 2. Market segment should not be crucial to the
success of major competitors.
 3. The consumers should be very price sensitive.

 The main advantage of focus strategy is ability to

carve a niche market against larger, broader line
competitors and it also enables the company to
utilize its specialized distinctive competence or
assets to create new niches.
ADVANTAGES OF FOCUS STRATEGY.

 1. A niche is more secure and organisation can

insulate itself against competitors.
 2. The firm does not spread itself too thinly
thereby failing to make an impact.
 3. Cost leadership and differentiation require
superior performance and life in a niche is easier
where there is little or no competition.
DISADVANTAGES OF FOCUS STRATEGY.

 1. Economies are sacrificed which may be

enjoyed by serving a wider market.
 2. Competitors may move into the segment with
increased resources and undermine organization
strengths.
 The segments needs may gravitate towards the
main market.
RISKS ASSOCIATED WITH PURSUING FOCUS
STRATEGY.

 1. The needs and expectations of the market may

gradually shift to the broader market thereby
decreasing profit potential of the segment.
 2. Competitors may develop technologies that
redefine preferences the niche being
concentrated on.
 3. Focus based on low cost may result in
organization sacrificing quality and service in
pursuit of lowest cost and in the end losing its
market share.
BEST COST STRATEGY.

 This is a strategy which simultaneously pursues

both differentiation and lowest cost strategy
against M. Porter’s advice of avoiding being stuck
in the middle road.
 Customization and cost effectiveness are primary
goals of this strategy
THE STRATEGY CLOCK.

 This develops M. Porter ‘s generic strategies by

analyzing strategies in terms of price and
perceived value added for the customer.
 The strategic clock was developed by JS & W as a
way of explaining the strategic options available
to an organization.
 The clock shows 8 strategies which can create
customer value.
 Any client buys from a provider whose offering
closely match his view of the proper relationship
between price and perceived benefits.
DIAGRAM OF THE STRATEGY CLOCK.

DIFFERENTIATION
FOCUSED
HIGH
 . 3. HYBRID DIFFERENTIATION

Perceived
Added value

2. LOW
PRICE 6.

STRATEGIES DESTINED
FOR ULTIMATE FAILURE
1. NO FRILLS 7.
LOW 8.
Low. PRICE HIGH
EXPLAINATION OF THE STRATEGY CLOCK.

 Each position on the clock has its own critical

success factors as each strategy is defined in
market terms.
 Strategy 1 and 2 will attract price conscious
customers.
 Strategies 4 and 5 are relevant to consumers who
require a customized product.
 The strategies on the clock can be categorized ito
price based, differentiation and failure strategies.
STRATEGY CLOCK--- PRICE BASED
STRATEGIES.

 The no frills and low price are price based

strategies.
 The no frills are for price sensitive customers
where switching costs are low and there is no
opportunity for competition based on product
features.
 It is appropriate for market entry, to gain
experience and build volume.
 Low price may precipitate a price war thereby
undermining profit margins reduced investment
for all players and M. Porter ‘s cost leadership is
the appropriate strategy.
STRATEGY CLOCK --- DIFFERENTIATION
STRATEGIES..

 The hybrid, differentiation and focused differentiation are

differentiation strategies representing different trade off
between market share and margin
 Differentiation can be created through product features, brand
marketing and core competencies.
 The hybrid strategy combines low cost than competitors and
differentiation
 Hybrid is better than differentiation where it may
lead to market share growth, low price is suited
to particular market segment and where it is used
as market entry strategy.
STRATEGY CLOCK—DIFFERENTIATION
STRATEGIES.

 Differentiation depends on whether a price premium is

charged or competitive price is accepted in order to build
market share.
 The strategy requires intelligence and preferences of the
customers, competitor responses.
 Focused differentiation seeks high price premium in
return for high degree of differentiation in a
concentrated area and restricted market segment.
 Focus is a start up strategy but require total
adoption by whole organization to avoid erosion
of the advantage.
STRATEGY CLOCK– FAILURE STRATEGIES.

 Strategies 6, 7 and 8 on the clock are

likely to result in failure and should not
be attempted.
GRAND STRATEGIES.

 These are business strategies pursued by

organizations to achieve cost leadership,
differentiation or focus so as to attain long term
goals
 The generic strategies can be achieved by
pursuing a combination of grand strategies.
 An organization can pursuing growth oriented
grand strategies, decline oriented and corporate
combinations.
 RELATIONSHIP BETWEEN GENERIC AND THE
DIFFERENT TYPES OF GRAND STRATEGIES.

CONCENTRATED

GENERIC. GRAND STRATEGIES.

GROWTH
 INTERNAL
GROWTH PRODUCT DEVT

MARKET DEVT.
LOW COST GROWTH
INNOVATION
LEADERSHIP. ORIENTED. RELATED
EXTERNAL
DIVERSIFICATION
GROWTH UNRELATED.

DECLINE TURNAROUND INTERGRATION VERTICAL

DIFFERENTIATION. ORIENTED DIVESTITURE.
HORIZONTAL
LIQUIDATION

BANKRUPTCY
JOINT VENTURE
CORPORATE STRATEGIC ALLIANCE
FOCUS. COMBINATIONS
CONSORTIA
GROWTH ORIENTED STRATEGIES .
 These strategies allow the organization to expand
its operations from where it is now operating.
 The organization can grow organically through
building their own products and developing their
own market.
 This can be through acquiring ready made
companies or starting new units.
 Growth oriented strategies can either be internal
or external growth.
 Growth may be driven from the current markets
and new markets using existing and new
products.
ANSOFF GROWTH VECTOR MATRIX.

 This tries to explain possible growth options using

grand strategies available to an organization.
 The diagram shows a combination of both
internal growth strategies and external growth
strategies which a company may adopt in trying
to gain market share.
ANSOFF MATRIX DIAGRAM.

PRODUCT
 . PRESENT NEW

PRESENT MARKET
PRODUCT
PENETRATION
DEVELOPMENT.
MARKET

MARKET DIVERSIFICATION
DEVELOPMENT.
NEW
MARKET PENETRATION /
CONCENTRATED GROWTH.

 This is also referred to as concentrated growth and involves

selling existing products in the current market with objective
of improving market share.
 The re is need to secure dominance through competitive
pricing, advertising and sales promotion.
 The company may also restructure a mature
market by driving competitors out and increase
usage rate by existing customers.
 This is a relatively low risk strategy as no capital
investment is required and is attractive to
unadventurous type of organization.
MARKET CONSOLIDATION.

 This focuses at maintaining the status quo where the

organization is already a market leader and available
funds are limited or the owner is nearing retirement or
try to avoid loss of personal control.
 This may also be appropriate where profitability and
growth do not correlate.
 Consolidation does not mean neglect so company should
enhance market offerings to maintain market share and
counteract competitor activities.
 High product quality is important to drive this strategy
as it compensate for low market share and low level of
marketing expenditure.
MARKET DEVELOPMENT STRATEGY.

 This involves expanding the sale of present products in new

markets to increase market share.
 This may include expanding into new geographical areas,
exporting, using new distribution channels like mail order
selling.
 The strategy may be extended to differential pricing to attract
new customers and create new market segments.
 The strategy is low risk as there is no need for capital
investment.
 Cultural barriers and lack of knowledge about consumer
buyer behavior in the foreign country presents
challenges to the organization.
 These barriers can be overcome by forming strategic
alliances or joint ventures with other organisations in the
PRODUCT DEVELOPMENT STRATEGY.

 This involves marketing new modified and improved

products in present markets.
 It is effective where successful products have reached
the maturity stage in their life cycle
 This allows organization to exploit existing market
arrangements and knowledge about customer needs and
wants.
 This increases the cost of entry into the market thereby
insulating the company against competitors.
 The strategy is riskier as it requires some investment in
new product development processes, research and
development, technology and production facilities.
DEVELOPING NEW PRODUCTS.

 New product or service creation is the life blood of

organizations as products do not remain
economically viable forever.
 The new product development involves six steps
which include idea generation, product screening,
business analysis or concept testing, product
development, test marketing and
commercialization.
 All these stages require appropriate decision
making by management.
IDEA GENERATION.

 This is a continuous and systematic search for new

opportunities and involves delineating the new
sources for ideas and methods of generating them.
 The sources may be both internal or external and
through competitors and may include market
research.
2. PRODUCT SCREENING.

 The set of potential products should be screened to

select the most viable ones.
 Those which are poor, unsuitable or unattractive
are weeded out and a check list used for the
preliminary evaluation which should cover
marketability, durability, productive ability and
growth potential and compatibility with current
product offerings.
 A short list of potential products will be created
from which further scrutiny is then made.
3. BUSINESS ANALYSIS.

 This involves further screening by establishing a

business case for the various products.
 Further evaluation is done to check whether
product idea fits with the resources available.
 The process will include demand projections and
analysis, costs, competition, investment
requirements and potential financial return.
 It may involve concept testing whereby some
research is designed to solicit initial consumer
reaction to the new product idea.
4. PRODUCT DEVELOPMENT.

 This is also known as prototype development

whereby the idea is converted into a tangible
physical product.
 This also include packaging, branding, product and
brand positioning and attribute and usage testing.
 This may extend to identification of a marketing
strategy.
5. TEST MARKETING.

 This involves product placement in selected areas

and observing its sale performance under the
proposed marketing plan.
 This pretest the whole plan before possible full
scale production of the product.
 The exercise is done on a lower scale to avoid
unnecessary exposure and areas of incompatibility
are identified and fine tuned.
6. COMMERCIALISATION.

 This involves product introduction into all the

targeted market.
 The product enters the introductory stage of the
product life cycle where there is potential for high
failure rate which should have been reduced by the
market testing process.
 Losses may be experienced and the organization
should regularly modify its offerings in response to
market behavior.
INNOVATION STRATEGY.

 Innovation involves creating new product life

cycles by introducing new products which make
similar existing products and services obsolete.
 The strategy is appropriate for companies
operating in markets where there is rapid
technological change which make products
obsolete.
 The organization should have the distinctive
technological competencies and capital resources
to invest in research and development.
EXTERNAL GROWTH STRATEGIES.

 The strategies include diversification and

integration.
 Diversification involves adding new products to
the organization ‘s current portfolio of products
which may or may not be related to current
products range.
 Diversification can be either related or unrelated.
 Integration involves gaining control over suppliers
distributors or competitors in particular industries
to enhance efficiency and effectiveness.
ADVANTAGES OF DIVERSIFICATION.

 1. Economies of scope may arise in several forms

of synergy.
 2. Corporate management skills may be
extendible to other units.
 3. Cross subsidy may enhance market power of
the organization.
 Related diversification whether horizontal or
vertical works better than conglomerate or
unrelated diversification.
RELATED DIVERSIFICATION.

 This is also referred to as concentric diversification

and involves adding new but related products with
objective of expanding the market share in the
existing market or enter new markets.
 The strategy has potential in industries
experiencing no or slow growth so as to increase
products consumed by individual consumer
 The organization should land the products at
competitive prices with brand loyalty being
developed.
 It is also appropriate where products are on
decline stage.
UNRELATED DIVERSIFICATION.

 This is also referred to as conglomerate

diversification which involve adding new
unrelated products or services in an effort to
penetrate new markets.
 It is attractive when experiencing declining sales
and profits or the market is saturated and the
organization has the capital and managerial talent
to compete in the new industry.
 The strategy can be pursued by buying an
existing company or establishing a new one from
scratch.
BENEFITS OF DIVERSIFICATION.

 Diversification involves extending the organization

beyond its original boundaries and its benefits
include:
 1. Access to key resources like capital, technology
and expertise.
 2. Sharing value chain activities provide
economies of scale and lower total cost.
 3. It spread the risks beyond a single industry.
 4. It provide opportunities for faster growth
higher profitability and greater stability.
 5. It facilitate response to environmental
changes.
RISKS ASSOCIATED WITH DIVERSIFICATION.

 1. Ignorance about new markets may create inefficiency due

to inadequate knowledge about customer needs,
technological developments and environmental shifts.
 2. Sharing value chain activities entails substantial costs in
communication, compromise and accountability.
 3. It reduces management effectiveness by placing significant
demand on executives due to increased complexity and
technological differences between industries.
 Managers may fail to understand each other due to units
differences and it creates lack of common identity.
 Over concentration in a particular industry may create
problems in the long term during a down turn with a
poor performing unit dragging the others with it.
INTEGRATION STRATEGY.

 This involves gaining control over suppliers ,

distributors or competitors in a particular industry
to enhance effectiveness and efficiency.
 Integration may be vertical or it may be
horizontal in nature.
DIAGRAMMATIC REPRESENTATION OF
INTEGRATION.

 .
SUPPLIER.

BACKWARD VERTICAL INTEGRATION

HORIZONTAL
ORGANISATION. INTEGRATION COMPETITOR.

FORWARD VERTICAL INTEGRATION

RETAILER/
DISRIBUTOR.
VERTICAL INTEGRATION.

 This involves extending the scope and operations

to other activities within the same industry by
expanding into parts of the industry value chain.
It may be backward or forward where the
company becomes its own supplier or distributor.
 The objective is to strengthen control of activities
the organization deem critical to its competitive
advantage.
 Vertical integration can be achieved through
backward and forward vertical integration.
ADVANTAGES OF VERTICAL INTEGRATION.

 1. It guarantees a secure supply of materials

thereby lowering supplier bargaining power.
 2. It develops stronger relationships with the final
consumer of the product.
 3. It allows a share of the profits at all stages of
the value chain network.
 4. It contributes to the creation of barriers to
entry which insulate orgaization against
competitors.
BACKWARD VERTICAL INTEGRATION.

 This involves gaining ownership or increased

control of the organization’s suppliers.
 This appropriate in industries where low cost and
supply certainty are vital to maintain competitive
advantage.
 It is necessary where suppliers are unreliable,
costly and unable to meet the needs of the
organization with regards to parts, components or
raw materials.
 The organization should have the capital and
human resources to pursue the strategy.
FORWARD VERTICAL INTEGRATION.

 This entails gaining ownership or increased

control over distributors or retailers and is
attractive where the retailers are unreliable , have
high profits and are incapable of serving
consumers effectively.
 The organization bypasses the retailer and deal
directly with the consumers.
BENEFITS AND RISKS OF VERTICAL
INTEGRATION.

 The strategy reduce economic uncertainties and

transaction costs facing the organization.
 Its major disadvantage is to over commit
resources to a technology, or process which may
become obsolete.
 The strategy is capital intensive resulting in high
fixed costs that leave organization vulnerable in
an industry down turn.
 Vertical integration poses problems with
integrating different sets of capabilities, skills,
managerial styles and values into one theme.
HORIZONTAL INTEGRATION.

 This involves taking ownership or increased control over

value chain activities of its competitors. This may
happen through mergers, acquisitions or takeovers.
 The strategy is attractive in a growing industry where
economies of scale can provide meaningful benefits.
 The organization should have the capital and human
talent needed to successfully manage the expanded
organization.
 Horizontal integration pose problems with regards to
integrate differences in organizational culture ,
capabilities, skills, management styles and values of the
organisations involved.
DECLINE STRATEGIES.

 These are also referred to as defensive strategies

which are adopted when the organization finds
itself in a vulnerable position due to poor
management, inefficiency and ineffectiveness.
 Defensive strategies include turnaround,
divestiture, liquidation and bankruptcy
TURN AROUND STRATEGIES.

 This is adopted when organization finds itself in a

situation where sales and profits are declining due to
adverse economic conditions, increased competition,
obsolete products, poor management and ineffective
production.
 The turnaround strategy focus on strengthening
distinctive competencies through reducing costs, re-
engineering processes, introduction of total quality
management, reducing assets, personnel and
curtailment of managerial perks.
 The strategy requires new management with new
perspectives , specialized skills and knowledge to
facilitate dramatic changes like restructuring and re-
engineering.
DIVESTITURE STRATEGY.

 This involves selling a division or part of an

organization to raise capital for either acquisitions
or investments.
 It may be part of a retrenchment strategy
focusing on removing unprofitable divisions or
those which no longer strategically fit and have
become liabilities in the portfolio due to poor
profitability resulting from lack of expertise or
increased competition in a particular industry.
LIQUIDATION STRATEGY.

 This entails selling all assets in an attempt to avoid bankruptcy and

then paying off creditors from the proceeds.
 It is pursued when efforts to turn around the organization through
retrenchment and divesture have been unsuccessful and ceasing
operations prove to be the only viable alternative.
 It is a planned and orderly method of converting assets into cash to
minimize losses to shareholder.
 Liquidation decision is an emotional one as it is admission of defeat
and embarking on activities that bring hardship to employees and
other stakeholders.
 It is better option than bankruptcy as management has
opportunity to plan activities to minimize losses to
stakeholders.
BANKRUPTCY STRATEGY.

 Bankruptcy involve selling all assets in batches

after there is no hope of turning around the
organization’s activities thereby find a way of
avoiding major debt obligations and union
contracts.
 The organization ‘s creditors are compensated to
the extend allowed by the cash resources
available with the rest of the debt obligation
being written off.
 After bankruptcy the organization is allowed to
reorganize and apply for rehabilitation and come
back and commence operations.
CORPORATE COMBINATIONS STRATEGY.

 This involves organizations joining forces and

combining their energies and competitive
advantages and working together to achieve their
goals.
 The strategies are appropriate where
organizations operate in global dynamic and
technologically driven industries where economies
of scale are critical for success.
 The combination strategies include mergers and
acquisitions, joint ventures, strategic alliances,
and consortias.
 DIAGRAMMATIC REPRESENTATION OF
COMBINATION STRATEGIES.

 . CORPORATE COMBINATIONS

CONSORTIA. JOINT VENTURE AND

FRANCHISING.

ACQUISITIONS AND
MERGERS. STRATEGIC
ALLIANCES.
CONSORTIA STRATEGY.

 Consortia's are cooperation amongst organizations on

specific business areas resulting in interlocking
relationships in the particular industry.
 They are sophisticated strategic alliances involving
multi partner and highly complex linkages between
group companies which may be financial,
technological, resources or value creating activities.
 The main risk is non compatibility of partners over
time and providing partners with more insight into
one’s knowledge and skills base than intended.
 It may be difficult to limit the use of the knowledge
gained from cooperation and the combinations can be
cost intensive .
JOINT VENTURES STRATEGY.

 This involves two firms joining forces for manufacturing,

financial or purchasing purposes and both share in the
equity and management of the business, distinctive skills
and technologies.
 Forming a joint venture is an attractive strategy when
distinct competencies of the organizations complement
each other.
 The organization share costs making it attractive for risk averse firms
and reducing risk of state interference if a local company is involved.
 Overseas joint venture facilitate provision of local knowledge quickly
while synergies are complemented.
 Participating in a joint venture enable company to to benefit from all
sources of profit and allow close control over marketing and other
operations.
DISADVANTAGES OF JOINT VENTURES.

 1. Conflict of interest between the different

parties may arise.
 2. Disagreements may arise over profits shares ,
management and other strategies.
 3. One partner may wish to withdraw from the
arrangement thereby threatening the survival of
the venture.
 4.There is the temptation of neglecting the core
competencies as joint venture s are unlikely to
create new competencies.
LICENSING ARRANGEMENTS.

 A licensing agreement is a commercial contract

whereby the licenser gives something of value to
the licensee in exchange for certain performance
and payments.
 The licenser may provide rights to produce a
patented product , use a process or trade mark
and receive advice and assistance on technical
issues.
 The licenser receives royalties for the intellectual
property rights.
FRANCHISING ARRANGEMENTS .

 This a method of expanding business on less

capital whereby the two parties invest different
inputs into the business.
 The franchiser provide the name and goodwill,
systems and business methods and support
services such as advertising, and training.
 The franchisee provide the capital investment,
personal involvement and local market knowledge
, payment to franchiser for the rights and
assumes responsibility for day to day operations
and profitability of the franchise.
DISADVANTAGES OF FRANCHISING.

 1. The search for competent candidates may be

costly and time consuming.
 2. Control over the franchisees may be
problematic as they may later demand autonomy.
STRATEGIC ALLIANCES STRATEGY.

 These are cooperative arrangements whereby

participants do not share ownership but share
skills and expertise for a defined period linked to
the life cycle of a specific project.
 When choosing alliance partners certain factors
have to be considered which include the drivers
for the benefits offered by collaboration, the
partners to be chosen, the external environment
facilitators, the activities and process in the
network the historical effectiveness of the
alliances and market orientation as alliance
partners normal lack commitment to the end user.
REASONS FOR ENTERING STARTEGIC
ALLIANCES.

 1. Sharing development costs for certain

technology.
 2. The regulatory environment may prohibit
takeovers while participants have complementary
markets and technology which will benefit both
parties.
 3. The alliance provide learning opportunities to
both parties and can generate innovations.
 4. It provides an opportunity to test the firm’s
core competencies in different conditions thereby
suggesting ways of improving it.
LIMITATIONS OF STRATEGIC ALLIANCES.

 .1. There may be disputes over control of

strategic resources.
 2. Organizations focus / concentrate on their
existing competencies and the alliance provide no
opportunity to create new competencies.
 3.Strategic priorities may conflict and handing
over of key aspects of strategic delivery may
create inflexibility.
MERGERS AND ACQUISITIONS STRATEGY.

 Acquisitions and mergers involve buying or combining with an

existing company to exploit advantages associated with marketing,
production, finance risk spreading, independence and overcoming
barriers to entry.
 Most acquisitions are based on ability to improve the acquired
company through investing extra resources and improved
management.
 The strategy may also facilitate entering a new market,
eliminate competition, increase utilization of productive
capacity, safeguard raw material supplies, acquire quality
management, gain undervalued assets, obtain tax
advantages or retain independence by acquiring another
to increase size so as to repeal predatory attacks by
other companies.
PROBLEMS WITH ACQUISTIONS AND
MERGERS.

 1. The cost may be prohibitive especially if

resisted by directors of the target company.
 2. Anti monopolies legislation may require that
the proposed merger be approved by the state
and this may take time.
 3. Customers of target company may resent the
sudden takeover and move to competitors.
 4. Problems may be encountered in assimilating
new products, customers, suppliers ,culture,
systems and employees and may create
management overload.
QUESTIONS FOR
PRACTICE.
 1. Identify three types of diversification strategies
and explain each of them as briefly as possible.
(15 marks)
 2. Explain what you understand by backward
vertical integration and forward vertical
integration.(10 marks)
 3. Discuss some of the more important
characteristics found in strategies at different
levels within the organization. (15 marks)
STRATEGIC IMPLEMENTATION.

 This is the communication, interpretation adoption and

enactment of strategic plans by translating creative thoughts
into action through alignment of leadership, organisational
culture, structures, reward systems, resource allocation and
portfolio balance with the chosen strategy package.
 It deals with the change required to
operationalize the strategy to achieve
organizational goals.
 Implementation is more difficult than formulation
and facilitate realization of strategic value of any
action.
STRATEGY IMPLEMENTATION.

 Strategy implementation is the action phase of the

strategic planning process which focus on translating the
various courses of action into reality. It is different from
formulation which is creative and intellectual without any
practicality.
 Implementation involves using various drivers to
transform the organization from its current position to a
new and improved position.
 Success in both formulation and implementation are
necessary for superior performance and all those
formulated are worth implementing.
 According to research only 10% of companies effectively
formulate and implement strategies while 70% of
change initiatives fail.
DIFFERENCES BETWEEN STRATEGY
FORMULATION AND IMPLEMENTATION.

 1. Formulation is the intellectual and thinking phase while

implementation is the operationalization and transformation into
action and reality.
 2. Formulation is market driven with an external focus while
implementation is an internal, operations driven activity.
 3. The skills required in formulation are intuitive and analytical while
implementation requires motivation and leadership skills.
 4. Strategy formulation is rational and well structured
while implementation is not well structured and
controlled.
 5. Formulation responsibility rests with top and senior
management while implementation involves all
managers from supervisors to the Board of Directors.
BARRIERS TO EFFECTIVE STRATEGY
IMPLEMENTATION .

 1. Inadequate leadership provided by top and

middle management.
 2. Failure to clearly define goals and share them
with employees.
 3. Failure to coordinate effective implementation
efforts.
 4. Failure to involve the formulators in the
implementation.
 5. Failure to clearly define key changes in
employee responsibilities.
 FOUR BARRIERS TO SUCCESSFUL STRATEGY
IMPLEMENTATION IDENTIFIED BY THE BALANCED
SCORECARD COLLOBORATIVE.
VISION BARRIER.
 . Only 5% of the workforce
Understands the vision and
Strategy.

PEOPLE BARRIER. 9 OUT OF 10

MANAGEMENT BARRIER.
Only 25% of managers Organisations fail to
85% of top management teams
Have rewards linked Successfully implement
Spend less than an
strategy.
To strategy. Hour on strategy.

RESOURCES BARRIER.
60% 0f organizations do not
link budgets to strategy.
STRATEGY AND CORPORATE GOVERNANCE.

 Governance deals with the way organisations are run, controlled and
directed in the best interests of all stakeholders.
 The King 2 Report require the board to define organisational
purpose, identify stakeholders and formulate strategy and supervise
management in strategy implementation.
 The Board should comprise both executive and non executive
director some who should be independent.
 The role of CEO and Chairman should be separated.
 Implementation should consider social and
environmental responsibility and be linked to
sustainability reporting, achieve consensus in and out of
the organization to avoid blockage by other
stakeholders.
DRIVERS OF SUCCESSFUL STRATEGY
IMPLEMENTATION.

 Strategy implementation should be steered in the

right direction through the use of appropriate
leadership, culture, reward systems, structure a,
resources allocation and portfolio balance.
 Strategic change require strong leadership and
adaptable culture, structural drivers of change
and the use of short term objectives, functional
tactics and policies.
 All drivers should be linked to the chosen
strategy.
Strategic leadership.
 Strategic leadership need to implement
incremental or revolutionary change and guide
the organization in its implementation efforts.
 Strategic leadership is the ability to anticipate
envision, maintain flexibility and empower others
to create required change and articulate the
vision and motivate others.
 It involves managing through others and
influencing them and inciting commitment from
all stakeholders.
Key characteristics of
strategic leadership.
 The key characteristics include the ability to
create a vision, communicate it clearly, empower
others and create trust, be willing to delegate and
make courageous and pragmatic decisions.
 The leader should have high degree of emotional
intelligence which includes self awareness, self
regulation, motivation, empathy and social skills.
 Self awareness, self regulation and motivation are
self management skills while empathy and social
skills focus on ability to relate with others.
COMPONENTS OF EMOTIONAL
INTELLIGENCE.

 1. Self awareness refers to ability to understand

one’s emotions, strengths, weaknesses, needs
and drives and knowing how they may affect
others and job performance. It involves
understanding one’s goals and assessing ‘s
capability realistically, being self confident and
having some sense of humor.
 2. Self regulation is ability to control emotions,
feelings and impulses and channel them in right
direction. The individuals are reasonable,
comfortable with ambiguity, open to change and
can create trust and fairness.
COMPONENTS OF EMOTINAL INTELLIGENCE
CONTINUED

 3. Motivation refers to the desire to achieve for

achievement sake and exceed expectations and have a
passion for their work. These are energetic, optimistic,
committed to their work and accept new learning and
challenges.
 4. Empathy involve considering employee feelings in
decision making and sense and understand their
viewpoints. This facilitate cultural diversity management.
 5. Social skills involve being able to establish rapport
with people irregardless of their backgrounds and
networking and interacting with colleagues and build
profitable networks within the organization.
DIFFERENCES BETWEEN LEADRSHIP AND
MANAGEMENT.

 1. Management is about coping with complexity while leadership is

about coping with change.
 2. Management focus on directing others to achieve ends using
means selected by the manager while leadership is concerned with
guiding, encouraging and facilitating pursuit of ends using means
they have approved or selected.
 3. Managers are analytical, structured and controlled while leaders
are experimental, visionary, flexible and creative.
 4. Managers focus on details and instruct and apply
authority while leaders focus on bigger picture, inspire
and apply influence.
 5. Managers enforce compliance while leader create
willingness to pursue what has been agreed
KEY RESPONSIBILITIES OF STRATEGIC
LEADERSHIP.

 1. Developing vision with stakeholder

participation.
 2. Communicating vision to stakeholders.
 3. Inspiring and motivating employees to achieve
the strategic objectives.
 4. Designing appropriate reward systems and
structures for senior management approval.
 5. Developing and maintaining appropriate and
effective organisational culture.
 6. Ensure organization incorporates sound
gorvenance principles into strategies and
operations.
MATCHING LEADERSHIP WITH CHOSEN
STRATEGY.

 A change in strategy demands a change in

leadership to maintain the tight fit between the
two
 Growth strategy require leader to manage
relationships, inspire people and communicate
objectives and strategies to them.
 Corporate strategies require integration of
cultures and value systems and identification of
synergies with leader possessing people and task
skills..
 Decline strategies require task oriented leaders
who focus on cost reduction and reducing assets
RECONCILIATION OF ORGANIZATION
LIFE STAGE AND LEADERSHIP STYLE.

 Organization life stage and leadership style should be compatible

with Rothschild proposing the following:
 1. Start up or embryonic stage requires a risk taker who are intuitive,
aggressive visionaries with entrepreneurial approach.
 2. The rapid growth stage requires a caretaker who builds on
strengths and create gradual change with commitment to the long
term with a directive approach.
 3. During maturity a surgeon style is required where the leader
becomes selective, decisive and delegative and prepared to make
tough and painful decisions necessitating restructuring and re-
engineering to commence a refocused growth phase where
participative leadership and team building become necessary.
 4. The decline phase require an undertaker who should make tough
decisions and place the organization to its restful place..
DIAGRAMMATIC REPRESENTATION OF THE
LEADERSHIP STAGES.

 .Risk Taker. Caretaker. Surgeon. Undertaker.

?????
DOGS
STARS CASHCOW

Birth/ Rapid Maturity/ Death/

Embryonic Growth. Slow Growth Decline
LEADERSHIP AND CORPORATE GOVERNANCE.

 Corporate governance is about leadership which

comprises four dimensions which include efficiency,
probity, responsibility and transparency and
accountability.
 Probity assures investors that management will behave
honestly and with integrity towards shareholders.
 Responsibility require addressing legitimate social
concerns.
 Strategic leaders should commit themselves to sound
governance with workforce adhering to code of ethics.
 Management should be exemplary in ethical compliance
and encourage employees to report any unethical
conduct and corporate governance violations with top
ORGANIZATIONAL CULTURE AND STRATEGY.

 Culture refers to the way things are done in an organization

based on the set of important unstated assumptions, beliefs,
behavioral norms and values that are shared by organizational
members.
 It represents the organization ‘s personality which determines
how activities without rules are performed.
 itself in stories, legends and
Culture manifests
traditions, ways of approaching problems and
decision making, its values behavior thought
patterns , its philosophy, stakeholder relationships
and approach to governance and ethics.
IMPORTANCE OF ORGANIZATIONAL CULTURE.

 A rare and not easily imitated culture can be a source of

competitive advantage which guides actions of organisational
and unites them.
 The values assumptions and beliefs of top management
impact on strategic management decisions and influence
employee attitudes.
 Culture can be an ally or stumbling block in
successful strategy implementation as it may
simplify implementation and become a valuable
driver if there is a tight fit between the chosen
strategy and culture..
CULTURE AND LEADERSHIP.

 Leaders create organizational culture and their

attitudes , beliefs and values are an important
manifestation of the organization’s culture.
 The founder’s imprint his values and leadership
style on the organization’s way of doing things
and when the organization grows it attracts
employees who share the founder’s values and
belief systems.
GUIDELINES ON HOW LEADERS CAN MANAGE
AND CREATE CULTURE.

 1. Key themes and dominant values should be

emphasized which reinforce the competitive
advantage the organization is seeking to build.
 2. Encourage dissemination of stories and
legends about core values.
 3. Institutionalize practices that systematically
reinforce desired beliefs and values.
 4. Adapt common themes so that they become
organization specific.
TYPES OF ORGANIZATIONAL CULTURE.

 Culture can be categorized into strong, weak,

unhealthy and adaptive cultures.
 1. Strong culture facilitate sharing of values,
norms and beliefs which are deeply ingrained and
difficult to eliminate. It can be an asset if it is
compatible with the chosen strategy and a
liability if they do not match.
 2. A weak culture is fragmented with few
traditions and , values and beliefs being shared.
There are subcultures and lack of cohesion and
corporate identity and the culture cannot drive
strategy implementation.
UNHEALTHY AND ADAPTIVE CULTURES.

 3. An unhealthy culture is highly politicized with

managers operating autonomous kingdoms with hostile
resistance to change and people suggesting new ways of
doing things.
 Entrepreneurial skills are not rewarded and organization
practices are not benchmarked against industry leaders
with organization believing it has all solutions and
answers to its challenges.
 4. Adaptive cultures facilitate the sharing of feelings of
confidence that the organization can neutralize threats
and exploit opportunities. There is receptiveness to risk
taking, innovation and experimentation and proactive
approach to strategic change which is evident with
strategies being changed whenever necessary.
CHARLES HANDY 1993 APPROACHES TO
CULTURE– THE POWER CULTURE.

 Power culture is found in small entrepreneurial

organizations where power is centralized and
communication personalized with empathy and
trust being central.
 There few rules and procedures and the centre
controls operations.
 Decisions are based on influence not logical
grounds and a lot of faith invested in the
individual.
 Individuals are power orientated , politically
minded and risk taking with little consideration
for security.
THE ROLE CULTURE.

 This is a bureaucratic culture where logic ,

rationality and rules and procedures dominate
with job descriptions determining selection of the
job holder and performance.
 Role culture offers security, predictability and
acquisition of specialist knowledge.
 Individuals who do the job to standard are
rewarded with power oriented people becoming
frustrated.
 The role organization succeeds in stable
environment and prefers where there are
economies of scale than flexibility and innovation.
TASK CULTURE.

 This is project oriented and brings right people

with functional expertise and resources together
for specific purpose.
 Project outcome is important than individual
objectives with influence widely dispersed with
individuals having control over their work.
 Task culture is appropriate where there is need
for flexibility, speed of reaction and sensitivity to
the market.
 The culture cannot support economies of scale or
great depth of expertise.
PERSON CULTURE.

 The culture respects the individual with

organization existing to serve individuals who are
pursuing their interests together by sharing
offices, secretarial services and equipment.
 The objectives are personal with organization not
having its own objectives.
 Few organisations exist in this state as they
always have their own objectives.
 Organizations have different cultures for different
levels and sections resulting in a mixture of
cultures.
TRANSFORMING CULTURE TO MATCH
STRATEGY.

 Existing corporate culture has to be considered in

choosing a strategy and those components of
culture hindering successful implementation
should be changed.
 A tight strategy- culture fit supports strategy
implementation by creating structures, standards,
value systems and informal rules that influence
implementation activities.
 A change in organisational culture may be
necessary to establish a fit between the chosen
strategy and current culture.
 PEARCE AND ROBINSON FRAMEWORK FOR
MANAGING THE STRATEGY – CULTURE
RELATIONSHIP..
HIGH.


Potential
. A - Changes need to be linked to B - Focus on synergy
basic mission and central And reinforcement of
compatibility organizational norms. Current culture.
of change in
key factors
C - Strategy should be reformulated D - Manage around
and existing or organizational culture should be
organizational The culture.
changed. The latter is difficult and
culture. requires a long term focus.

LOW Many Few

Key factors that need to be changed in order to

implement the new strategy.
EXPLANATION OF THE MATRIX.

 A- Numerous changes needed to key

organisational factors required to implement new
strategy. The changes should be linked to mission
and adjust the reward systems but use existing
employees to fill positions affected by strategy
implementation.
 Organization focus on changes that are least
compatible with existing culture.
CONTINUED.

 B – The organization is faced with few changes required

which are highly compatible with existing organizational
culture.
 They should reinforce existing culture and exploit the
opportunity to remove barriers to the desired culture.
 C – The organization is faced with the necessity of
making few major changes that are mostly incompatible
with existing culture.
 It should create a way of achieving the required change
that avoids confronting the incompatible culture.
 The organization may create a division or outsource or
subcontract with objective of managing around the
culture.
CONTINUED.

 D – The organization has to make major changes

to organizational factors which are incompatible
with the current entrenched culture and a
complete transformation is necessary.
 Changing the culture to align with the chosen
strategy is an arduous long term challenge the
leader should face.
 It is difficult to change deeply embedded habits
and values which people cling to emotionally and
the organization may determine whether
reformulation of the strategy is not the best
appropriate solution.
RESOURCE ALLOCATION AS A DRIVER OF
STRATEGY.

 Organizations succeed if they have the best

resources for strategy implementation and
resource allocation should support the long term
goals, structure and short term objectives.
 Budget and resource allocation plan should be
linked to the strategy and a change in strategy
require a change in resource allocation to ensure
resources and strategy fit.
 Resources may include financial, physical, human,
technological and information resources and are
generally scarce
BUDGETS AND RESOURCE ALLOCATION.

 Budgets are the basis for allocating resources and

specify priorities, quantify and prioritizes strategy
implementation efforts.
 Senior management should commit themselves to
budgeting for the budget to support
implementation.
 Few resources hinder and slows down
implementation and over allocation creates
wastage and reduces financial performance.
 New strategy should drive the resource allocation
process
REWARD SYSTEMS AND STRATEGY
IMPLEMENTATION.

 Motivating managers is a key success factor in

strategy implementation.
 New strategies imply risk and changes in
leadership, culture and structure and employee
commitment can be harnessed by establishing
appropriate reward systems.
 Rewards should be linked to strategy and
encourage behavior change in line with strategy
implementation and tied to achieving specific
outcomes.
 Rewards reflect top management attitude
towards performance and can influence culture
TYPES OF REWARD SYSTEMS.

 These systems can either be monetary and non

monetary.
 Monetary includes salary increases, profit share,
share options, cash bonuses and retirement
packages while non monetary include status,
recognition, awards, job security, promotion,
perks and stimulating assignments.
 Reward systems may be individual based or
group based to encourage high team
performance.
SHARE OPTIONS.

 These are introduced to encourage management to

pursue long term goals in line with shareholder
objectives and expectations and make them
entrepreneurial and concerned with quality and
innovation.
 A share option allows executives to purchase company
shares at a fixed price in future and the difference
between initial price and selling price represents the
compensation.
 The options cause managers to take undue risks.
 A restricted scheme require managers not to sell the
shares during a specified period and assist in retaining
key people as they hold to the shares.
GOLDEN HANDCUFFS, PARACHUTES AND
CASH BONUSES.

 This is geared at retaining key executives and retain

specialized skills through the deferring of cash bonuses
in a series of annual installments.
 The compensation is forfeited if one leaves the
organization before expiry of an agreed period.
 Golden parachutes allow the key executive to retain a
substantial cash bonus irregardless of whether he quits,
resigns or is fired.
 This compensate the executive for both success or
failure.
 Cash bonuses are spread throughout the whole
organization and calculated basing on certain accounting
measures.
REWARD ALIGNMENT TO THE CHOSEN
STRATEGY.

 A tight fit is necessary between the chosen strategy and

the reward system in place:
 1. Organizations in start up pursuing growth strategies
should incorporate large salaries and equities into their
reward systems.
 2. In rapid growth phase rewards should include salary
plus large bonuses for growth targets and equity for key
people.
 3. In maturity stage rewards should be linked to
efficiency and profit margin performance.
 4. The decline stage rewards should be linked to cost
savings.
ORGANISATIONAL STRUCTURE AS DRIVER
FOR STRATEGY IMPLEMENTATION.

 The dynamic environment require regular changes in

strategy which also necessitate a change in structure to
ensure alignment.
 The structure serves as the framework for setting short
term objectives, tactics and policies and resource
allocation and provide the formal reporting relationships,
procedures, controls and authority and decision making
processes.
 It assists in identifying tasks necessary for
implementation, grouping them to ensure coordination
and specifies who is responsible for the tasks.
 It can be source of advantage if its aligned with the
chosen strategy, is functional and difficult to copy and
make it easy for customers to deal with the business.
STRUCTURE FOLLOWS STRATEGY.

 A change in strategy require a change in

structure while a change in structure may
demand a change in strategy to ensure tight fit
which supports performance.
 Incompatibility of strategy and structure creates
admin problems, resource allocation challenges
and conflicting priorities regarding the strategy
implementation tasks.
 A STRATEGY INCOMPATIBLE WITH THE
STRUCTURE MAY NEED REVISION but general
structure should not be a determinant of strategy.
MCKINSEY 7 S FRAMEWORK

 . STRATEGY STRUCTURE.

SUPER
SKILLS. ORDINATE SYSTEMS
GOALS.

STAFF. STYLE.
MODIFIED 7 S FRAMEWORK

STRATEGY
 .
Cold
Triangle SYSTEMS
STRUCTURES

SHARED VALUES
OR VISION

Warm
STAFF Square. SKILLS

STYLE
STRUCTURES DURING ORGANIZATION LIFE
CYCLE.

 Organization in embryonic stage select growth

strategies which require structure supporting
aggressive growth.
 According to Chandler, 1962, organizations grow
first by volume, then by geography, then by
integration either vertical or horizontal and finally
through product or business diversification.
 Structures change from simple to complex which
is from entrepreneurial and functional structures
to matrix and product team structures.
TYPES OF ORGANIZATIONAL STRUCTURES.

 1. Entrepreneurial Structure.
 2. Functional Structure.
 3. Divisional Structure.
 4. Strategic Business unit Structure.
 5. Matrix Structure.
 6. Network Structure.
MATCHING STRUCTURE WITH STRATEGIES.

 Structures are moving away from multilayer hierarchical

structures to decentralized and flatter structures which
promote team work.
 Structure have become flat , informal virtual and based
on networks of temporary external and internal
relationships linked by I.T. In order to share skills and
costs.
 Single or dominant product organizations should employ
functional structures to allow for strong task focus.
 Divisional structures should be used by organizations
with several business lines.
 SBU structure is for organizations with unrelated
business divisions.
STRATEGY IMPLEMENTATION AND SHORT
TERM OBJECTIVES.

 Long term goals translate mission into

measurable outcomes and guide strategy
selection decisions while short term objectives
provide more specific guidance and indications of
actions needed to translate vision into action.
 Short term objectives guide action and direct the
activities of organizational members.
 They serve as standards and incentives to
organizational members and managers to
perform.
USE OF SHORT TERM OBJECTIVES.

 1. They help in establishing departmental and

divisional and organizational priorities which
becomes the basis of allocating resources.
 2. They assist progress monitoring towards
achievement of long term goals.
 3. They can be linked to reward systems and be
used to evaluate performance.
 4. They can be used ass check points for
operational and strategic control.
FUNCTIONAL TACTICS AND STRATEGY
IMPLEMENTATION.
STRATEGIC CONTROL .

 This is the third phase that concentrates on

evaluating the strategy to verify whether the
results are those intended. It comes after the
formulation and implementation stages.
 It may be the final phase in a stable, predictable
and evolutionary environment.
 Organisations should continuously review their
strategic choice s to remain competitive in an
environment characterized by stiff competition.
STRATEGIC CONTROL AND STRATEGIC
MANAGEMENT.

 Strategic control provides feedback to the formulation

and implementation stages to indicate adjustments
which are required to align the strategy to the operating
environment.
 Short term objectives may be used for performance
measurement while the budget is applied to monitor
strategic progress.
 Strategic control concentrates on chosen strategy
evaluation to check whether intended results are being
achieved and taking corrective action where necessary.
 It reviews the strategic content and evaluates and
control the implementation process.
DIFFERENCES BETWEEN STRATEGIC
CONTROL AND MANAGEMENT CONTROL.

 1. Traditional management focus on implementation

process in detail while strategic control focus on key
success factors of strategy.
 2. Operational control is short term while strategy
control is long term orientated.
 3. Operational control takes action after deviations while
strategic control guides the action as strategy takes
place and end results are years away.
 Strategies may become obsolete during implementation
and control alert managers of the new changes and
identify change triggers in the external environment that
require organizational responses and corrective action.
CONTRIBUTION OF CONTROL.

 Control questions performance , assumptions, and

expectations to determine whether the organization is
achieving short term objectives.
 The objective of strategic control system is to identify
key critical events that impact on strategy and are
referred to as change triggers.
 These should trigger the right responses at the right
time and allow managers to review content and
implementation progress.
 Strategic control types include premise control, strategic
surveillance , special alert control and implementation
control.
PREMISE CONTROL.

 This is a focused type of control used to

systematically and continuously check whether
assumptions and premises on which the
strategies are based are still applicable and valid.
 Assumptions are made due the absence of
detailed accurate information and complexity of
environmental and industry factors.
 Where a key premise or assumption is no longer
valid, this may necessitate a strategy change.
STRATEGIC SURVEILLANCE.

 This involves monitoring and interpreting a wide

range of new internal and external events that
affect the strategy.
 It is an unfocused type of strategic control based
on the idea that unanticipated information may
be discovered through monitoring multiple
information sources like the press, conferences,
etc.
SPECIAL ALERT CONTROL.

 This is a thorough, immediate and rapid

reconsideration and intense reassessment of
strategy due to sudden unexpected events.
 Strategic choices need to be reconsidered at this
stage to take into account new developments.
 Special alert control support strategic surveillance
and premise control in reviewing the content of
the chosen strategy.
IMPLEMENTATION CONTROL.

 This is done during the unfolding process of

translating strategy into action through various
initiatives.
 These initiatives may include restructuring the
organization, hiring new employees resources
allocation , introduction of new appropriate
reward systems and carrying out functional
activities.
 It provides the manager with information
regarding implementation success in terms of
performance levels and whether the strategic
direction needs to be changed.
OPERATIONAL CONTROL STEPS.

 Operational control provides feedback over a short period while

strategic control focus on the long term. The steps in operational
control include:
 1. Setting up standards of performance.
 2. Measuring actual performance.
 3. Identifying deviations from the standards.
 4. Initiating corrective action.
 Operational systems evaluate strategy implementation progress by
monitoring achievement of short term objectives using budgets,
schedules and key success factors.
 Budgets coordinates and assists through variance analysis while
scheduling determines the timing of resource allocation and activities
sequencing.
.
 The key success factors identify performance
areas of greatest importance in strategy
implementation and should have measurable
performance indicators which should receive
constant management attention.
 Strategies should be reviewed whenever it
becomes necessary and assumptions should be
regularly questioned to ensure their validity.
 Feed back should cover both the strategy and the
progress being made.
THE BALANCED SCORE CARD AND
STRATEGIC IMPLEMENTATION.

 This is a strategy implementation developed by

Kaplan and Norton.
 It translates the vision into strategic or long term
goals by breaking it into four perspectives.
 These perspectives include the financial
perspective, customer perspective, learning and
growth and internal business processes.
 The objectives will articulate what needs to be
achieved during strategy implementation.
 THE BALANCED SCORECARD
PERSPECTIVES.

 . FINANCIAL
PERSPECTIVE

LEARNING AND INTERNAL

GROWTH. BUSINESS
VISION. PROCESSES

CUSTOMER
PERSPECTIVE.
PORTFOLIO BALANCE AND STRATEGY
IMPLEMENTATION.

 The relationship between a holding company and

its strategic business units is viewed as that of a
parent and its children.
 The parent may adopt four policies towards the
SBU’S which include build, hold, harvest and
divest.
 The SBU portfolio must be managed against three
criteria which include balance, attractiveness and
strategic fit.
 Matrix based models are used to manage
portfolios, and the Ashbridge model is the only
one used to address strategic fit .
THE CORPORATE PORTFOLIO.

 A corporate parent should make decisions about

nurturing, acquiring and disposing of subsidiaries.
 The four major strategies that can be pursued in respect
of market segments, products and SBU’s include:
 1. A build strategy which forgoes short term earnings
and profits in order to improve market share.
 2. Hold strategy which seeks to maintain the current
position.
 3. Harvest strategy which seek short term earnings and
profits at the expense of long tern development.
 4. Divest strategy which reduces negative cash flows
and release resources for use else where.
MATRIX BASED MODELS FOR EVALUATING
BALANCE AND ATTRACTIVENESS CRITERIA.

 There are a range of f tools which can be used in

evaluating the portfolio of an organization.
 These tools include the following:
 1. The Boston Consulting Group (BCG) Matrix.
 2. The Public Sector Portfolio Matrix.
 3. The General Electric Business Screen.
 4. The Shell Directional Policy Matrix.
THE BCG MATRIX.

 This assesses business in terms of its cash generating

capacity and cash expenditure requirements.
 The SBUs are categorized in terms of market growth
rate and relative market share.
 Market share refers to one entity ‘s sales of a product or
service in a specified market expressed as a percentage
of the total sales by all entities offering that product or
service.
 Assessing growth rate as high or low depends on
condition in the market with high indicating good
opportunities but competition may erode that profits
and slow growth in a market with high barriers to entry
may be very profitable.
BCG MATRIX DIAGRAM.

 . HIGH

STARS QUESTION
MARKS.

MARKET
GROWTH
CASH DOGS.
COWS.

LOW
HIGH MARKET SHARE LOW
PORTFOLIO BALANCING.

 The portfolio should balance with cash cows providing finance for
stars and question marks and a minimum of dogs.
 1. In the short term stars require capital expenditure in excess of
their cash generation to maintain position in competitive growth
market but promise returns in future and the right strategy is to build
them.
 2. Stars will graduate into cash cows which need little capex since
mature markets are stable and generate high levels of cash income.
Cash cows are used to finance the stars and the strategy is to HOLD
or HARVEST if weak.
 3. Question marks need assessment whether they justify capex
hoping to increase market share or they should be allowed to die
quietly. The strategy may be to build or harvest.
 4.Dogs are ex cash cows fallen on hard times and are cash traps and
provide poor return. The strategy is to DIVEST or Hold.
LIMITATIONS OF BCG MATRIX.

 1. It is difficult to define high and low on both

axis of the matrix.
 2. The matrix is used to assess products rather
than sbus.
 3. The matrix is built around cash flows but
innovative capacity may be the critical resource.
THE PUBLIC SECTOR PORTFOLIO MATRIX.

 This is used to analyze services provided by

public sector bodies like local authorities,
parastatals and national government.
 The axes are an assessment of service efficiency
and public attractiveness and political support for
a service or organization depends to a great
extend on the extend to which the public need
and appreciate it.
 PUBLIC SECTOR PORTFOLIO MATRIX
DIAGRAM.
HIGH.
 .
POLITICAL HOT
PUBLIC OR PUBLIC .SECTOR
BOX.
POLITICAL STAR
NEED AND
THEREFORE
SUPPORT FOR
GOLDEN FLEECE. BACK DRAWER
EXPENSE.
ISSUES

LOW
HIGH. ABILITY TO SERVE EFFICIENTLY LOW.
PUBLIC SECTOR PRODUCTS.

 1. A public sector star is something that the system is doing well and
should not change. They are essential to the viability of the system.
 2. Political hot boxes are services that the public want or which are
mandated but for which there are not adequate resources or
competences.
 3.Golden fleece are services that are done well but for which there is
low demand. They are perceived to be undesirable uses for limited
resources. These are potential targets for cost cutting.
 4. Back drawer issues are unappreciated and have low
priority for funding and are candidates for cuts. If
managers perceive them as essential they should
attempt to increase support for them and move them
into the political hot box category.
THE GENERAL ELECTRIC BUSINESS SCREEN.

 This is similar to the BCG matrix but includes a broader

range of company and market factors.
 It classifies businesses according to industry
attractiveness and company strengths.
 It aims to consider a variety of factors that contribute to
both these variables.
 Business strength indicators include good market share,
effective sales force, strong marketing activity,
innovation, good distribution, brand strength and
financial strength.
 Market attractiveness indicators include the five forces,
growth rate, overall size, cyclicality, overall profitability,
inflation rate and general environmental issues.
 GEBS DIAGRAM.

BUSINESS
STRENGTH.
 . INVEST DEVELOP FOR
STRONG. INVEST FOR SELECTIVELY INCOME.
GROWTH FOR GROWTH

INV.EST DEVELOP
AVERAGE HARVEST OR
SELECTIVELY SELECTIVELY
FOR INCOME DIVEST.
AND BUILD
DEVELOP
SELECTIVELY HARVEST DIVEST.
BUILD ON
WEAK STRENGTH.

ATTRACTIVE AVERAGE UNATTRACTIVE

MARKET ATTRACTIVENESS.
APPLICATION OF THE GE MATRIX.

 The broader approach emphasize the attempt to

match competences within the company to
conditions within the market place
 The analysis can be used to assess competitive
position in the same product market across
national market boundaries. This will require
consideration of barriers to entry, political risk,
economic stability and business regulation when
considering market attractiveness.
THE SHELL DIRECTIONAL POLICY MATRIX.

 This is similar to GEBS as classification

depends on managerial judgment
rather than simple numerical scores.
 Its axis are competitive capability and
prospects for sector profitability.
SHELL DIRECTIONAL POLICY MATRIX
DIAGRAM.

 .
WEAK

AVERAGE

STRONG

UNATTRACTIVE AVERAGE ATTRACTIVE

PROSPECTS FOR SECTOR PROFITABILITY.
CONTINUOUS IMPROVEMENT AND
SUSTAINING COMPETITIVE ADVANTAGE.

 Continuous improvement can be achieved

through benchmarking, total quality management
and re engineering.
 Long term strategic success requires continuous
improvement by upgrading competitive
advantage and avoid the leap frog effect.
BENCHMARKING.

 This is the establishment through data gathering

of targets and comparators that pertain to
relevant levels of performance to be identified
and be used as a yardstick to measure
organizational performance .
 It is the comparison of selected performance
measures or operational processes against
challenging yardsticks.
TYPES OF BENCHMARKING.

 1. Historical benchmarking is internal comparison of

present against past performance and this may breed
complacence as long as current is better than previous
performance.
 2. Industry or sector benchmarking compares
performance against competitors and the weaknesses is
that the whole industry may not be doing well.
 3. Best in class benchmarking compares organizational
performance with the best practice wherever t is found
even beyond one’s own industry. This can have the
shock effect on complacent managers and lead to
dramatic performance improvement.
PROCESSES/ STAGES IN BENCHMARKING.

 1. Senior management commitment to change should be harnessed.

 2. Objectives and areas of benchmarking should be determined.
 3. Establish key performance measures by cooperating with
stakeholders.
 4. Select a partner who is not a competitor.
 5. Measure your own and the partner’s performance using a joint
team while ensuring confidentiality.
 6. Compare performance and discuss initial findings with
stakeholders.
 7. Design and implement improvement plan which may require
restructuring and reorganization, training and systems improvement.
 8. Monitor improvement continuously.
LEVELS OF BENCHMARKING.

 1. Resources – This involves carrying out a

resources audit by measuring revenue per
employee, capital intensity, quality of resources,
uniqueness, etc.
 2. Competence in separate activities:
Analyze activities by checking material wastage ,
output, sales calls, etc.
 3. Competence in linked activities: Analyze
overall performance like market share,
profitability, productivity, etc.
REASONS FOR UNDERTAKING
BENCHMARKING.

 1. Position audit to provide the basis for

establishing performance standards.
 2. It focuses on improvement in key areas and
set challenging but achievable targets.
 3. Information sharing is a spur to innovation.
 4. It improves performance in cost control and
value delivery.
DRAWBACKS OF BENCHMARKING.

 1. Emphasis is on efficiency not effectiveness and

may provide historical solutions to future
problems.
 2. Benchmarking does not identify why good or
bad performance is at a certain level.
 3. It is a catching up strategy not creation of
distinctiveness.
 4. It may divert management attention and
requires accurate information.
 5. Information sharing may be a treat to an
organization’s competitive advantage.
TOTAL QUALITY MANAGEMENT.

 This is “ comprehensive approach to improving

competitiveness , effectiveness and flexibility
through planning, organizing and understanding
each activity and continuously improving products
and services.
 It focuses on designing and delivering quality
products to customers and improve organisational
performance.
 It is a culture with total commitment to quality
and attitude expressed by everyone ‘s
involvement in continuous improvement using
scientific methods.
FOUR BASIC PRINCIPLES OF TQM.

 1. Commitment to quality at individual , entire

organization, top management and all
stakeholders.
 2. Use of scientific tools , technologies and
methods to make changes to processes and
methods.
 3. Total involvement through teamwork and
empowerment.
 4. Continuous improvement or Kaisen on a daily
basis.
DEFINITION OF QUALITY.

 The four dimensions of quality are as follows:

 1. Fitness to use.
 2. Fitness to standard.
 3. Fitness to cost.
 4. Fitness to latent requirements.
IMPLEMENTING TQM ACCORDING TO
CROSBY.

 1. Express management commitment to quality.

 2. Form quality teams.
 3. Determine where current and potential quality
problems lie.
 4. Evaluate cot of quality and explain its use as a
management tool.
 5. Raise quality awareness as personal concern of
all employees.
RE- ENGINEERING.

 Organizations are reorganized to create value for customers

by eliminating barriers that create a distance between
employees and customers.
 Processes should be reorganized to provide quality and low
cost to customers and focusing on customer needs not tasks.
 Business Process Reengineering (BPR) is the
analysis and redesign of workflow within and
between enterprises. Some radical redesign and
reorganization an enterprise may be necessary to
lower costs and increase quality of service with
I.T. becoming a key enabler for the radical
change.
SEVEN PRINCIPLEES OR REENGINEERINGTO
ACHIEVE IMPROVEMENT IN QUALITY, TIME
MANAGEMENT AND COST.( By Michael Hammer and
James Champy.)
 1. Organize around outcome snot tasks.
 2. Identify all processes and prioritize them in order
of redesign urgency.
 3. Integrate information processing work into real
work that produces the information.
 4. Test geographically dispersed resources as
though they were centralized.
 5. Link parallel activities in the workflow instead of
just integrating their results.
 6. Put the decision point where the work is
performed, and build control into the process.
 7. Capture information once and at the source.
RELATIONSHIP BETWEEN TQM AND RE-
ENGINEERING.

 Once processes are re – engineered , TQM

principles are used to continuously improve new
processes and find ways to manage tasks and
roles.
 The two are therefore complementary.
STRICTLAND’S THIRTEEN COMMANDMENTS FOR
FORMULATING STRATEGIES.

 1. Place top priority on crafting and executing strategies and

moves that enhance the firm’s competitive position for the
long term.
 2. Understand that a clear and consistent competitive
strategy when well crafted and well executed , builds a good
reputation and recognizable industry position. On the other
hand ,a frequently changed strategy aimed at capturing
temporary market opportunities usually yields passing
benefits.
 3. Avoid a stuck in the middle strategies that represent
compromises between lower costs and greater
differentiation , between broad and narrow market appeal.
STRICTLAND CONTINUED.

 4. Invest in creating a sustainable competitive

advantage.
 5. Play aggressive offences to build competitive
advantage and aggressive defense to protect it.
 6. Avoid strategies capable of succeeding only in
optimistic circumstances.
 7. Be cautious in pursuing a rigid or inflexible
strategies that locks the company in for the long
term with little room to maneuver as inflexible
strategies can be made obsolete by changing
market conditions.
STRICTLAND CONTINUED.

 8. Don’t under estimate the reactions and the

commitment of rival companies.
 9. Be wary of attacking strong resourceful rivals
with solid competitive advantage and ample
financial strength.
 10. Consider that attacking competitive
weaknesses is usually more profitable than
attacking competitive strengths.
 11. Be judicious in cutting prices without an
established cost advantage.
STRICTLAND CONTINUED.

 12. Be aware that aggressive moves to wrest

market share away from rivals often provoke
aggressive retaliation in the form of a marketing
arms race or price war.
 13. Strive to open up very meaningful gaps in
quality or performance features when pursuing
your strategy.
INTERNATIONAL BUSINESS STRATEGY.

 When the local market becomes very competitive and

saturated, an organization requires an international
strategy to remain afloat.
 There are very approaches which can be adopted to
enter the international market but the organization will
have four choices to choose from in pursuing its
strategy.
 The four international strategies available to the
company are as follows:
 1. International Strategy.
 2. Multi Domestic Strategy.
 3. Global Strategy.
 4. Trans – National Strategy.
THE FIVE STAGES IN GLOBAL BUSINESS
EVOLUTION.

 1. Exporting as an extension of home sales using foreign

intermediaries which is low risk and ethnocentric.
 2.Overseas branches arise when turnover is large
enough and requires greater investment.
 3.Overseas production exploits cheap labor and reduces
exporting costs with business run from Head Office.
 4. Insiderisation is a shift to polycentrism with full
functional organization being set overseas to reduce
exchange rate and political risk but economies of scale
are lost due to problems of coordination and the
company becomes a multinational.
 5. The global company takes a world view while
recognizing total differences with a geocentric
REASONS WHY COMPANIES MOVING
TOWARDS THE GLOBAL STAGE.

 1. Customer where the market convergence is driven by

widespread customer demand for products with similar
characteristics.
 2. The search for economies of scale by companies
drives expansion towards the global scale.
 3. Global competition has motivates companies to
expand for reasons of prestige and competitiveness.
 4. The management of currency risk is simplified if
company has major cash flows in the countries it
operates.
 5. Multiple country locations enable exploitation of both
absolute and comparative advantage.
INTERNATIONAL STRATEGY.

 This involves transferring valuable skills and

competencies and products to indigenous people and
institutions in .foreign countries where there is a relative
deficiency.
 The home country centralize operations especially
marketing and product strategy but product produced
internationally are rarely customized for the foreign
market.
 The products produced and marketed internationally are
homogenous even if local production facilities are
established.
 The need for national differentiation is very low
 Examples of organisations adopting the strategy include
ADVANTAGES AND DISADVANTAGES OF
INTERNATIONAL STRATEGY.

 The major advantage is that it facilitate the

building and transfer of distinctive competencies
to foreign markets thereby building permanent
capacity.
 The disadvantages of the strategy include:
 1. Lack of local responsiveness.
 2. There is inability to realize location economies.
 3. Lack of coordination create costly duplication
of facilities.
MULTI DOMESTIC STRATEGY.

 The strategy emphasize high national differentiation where

products are produced for specific markets.
 Key competencies are transferred o foreign markets but the
products throughout the whole world are autonomous and
strategic business units have independence form Head Office.
 Each foreign operation is responsible for its own functional
strategy and there is minimum synergy amongst the
operations.
 The strategy is most appropriate where there is high
requirement for national differentiation against a background
of low requirements for global coordination of operational
activities.
 Examples of multi domestic firms include BATA; Unilever;
Phillips; etc.
ADVANTAGES AND DISDVANTAGES OF MULTI
DOMESTIC STRATEGY.

 The main advantage is that product offerings and

marketing complies with local responsiveness thereby
making product more appropriate to the user.
 The disadvantages include:
 1. Inability to exploit and realize location economies.
 2. Failure to exploit location experience curve effects.
 3. There is failure to transfer competencies to foreign
markets thereby creating unnecessary dependency
syndrome.
 4. Additional costs are incurred in an effort to customize
the products.
GLOBAL STRATEGY.

 The strategy exploit economies of scale through

global coordination of experience curves and
competencies.
 All functional activities are strategically centralized
throughout the whole world.
 There is no effort to customize products due to
focus on cost minimization and control.
 A standardized product is offered for the global
market to enable maximum benefit from
economies of scale.
 There is aggressive and predatory pricing in all
the markets served by the company.
ADVANTAGES AND DISADVANTAGES OF
GLOBAL STRATEGY.

 The strategy facilitate exploitation of experience curve

effects and location economies as production facilities
can be placed where it is economically feasible.
 The major disadvantage is the lack of local
responsiveness of the product offerings.
 The examples of where this strategy is used is
Motorola, Ericsson; Nokia; etc.
 The strategy will be a complete failure if used for
products with a high requirement for national
responsiveness such as automobiles; processed goods;
audio players; etc.
 TRANS – NATIONAL STRATEGY.

 This is a combination of all the other strategies involving

exploiting experience based cost economies and location
economies by transferring distinctive competencies within the
firm while paying attention to pressure for local
responsiveness.
 The strategy is difficult to apply as the variables may be
opposite extremes which may not be easily achieved.
 Core product features are developed and modified to suit
specific local demands and tastes.
 Production of core components are centralized to exploit
economies of scale and local product features are then
decentralized.
ADVANTAGES AND DISADVANTAGES OF
TRANS – NATIONAL STRATEGY.

 The strategy relies on effective coordination of

activities throughout the whole world and the
advantages include:
 1. Exploitation of location economies.
 2. Products can be customized in accordance
with local responsiveness.
 3. Benefits of global learning may be exploited
together with experience curve effects.
 The major disadvantage is that it may be
difficulty to implement due to organizational
problems.
 INSTITUTE OF ADMINISTRATION AND
COMMERCE.

 STRATEGIC MANAGEMENT MAY 2010

 INSTRUCTIONS TO CANDIDATES:
 1. ANSWER QUESTION ONE WHICH IS
COMPULSORY.
 2. CHOOSE ANY OTHER THREE QUESTIONS.

 TOTAL MARKS 100

 CASE STUDY – THE RISE AND FALL OF
GIANTS.

 Although most of the divisions of the Amalgam Holdings (AH)

group had managed to survive the political madness of the
2007 – 2008 era , where the main group had managed to
grow its profits to US$20 MILLION over the period up to
September 2008.The facts on the ground ,indicate that the
AH group had effectively managed the winds of change and
had taken advantage of the skills of its leadership to manage
some of the key drivers of change especially during the period
prior to September 2007.The period 2007 to 2008 was
characterized by a number of forces that impacted negatively
on the operations of many institutions which resulted in some
of hem failing to make it through .One of the major variable
which was predominant was the unmanageable depreciation
of the Zimbabwean dollar that caused economic mayhem.
 CASE STUDY CONTINUED.

 Largely, the AH group was one of the giant multinational

organizations which was quite wide spread in terms of its
mission, and hence it had nine divisions that included pulp
and paper, tissue and fine paper business, the automotive
battery manufacturing, the automotive solutions distribution
business, the domestic energy business, stationery division,
the personal hygiene, the trading business and the regional
operations division. It was very clear that in some cases there
were a lot of synergies among some of the units and most of
them enjoyed the relatedness , albeit the fact that the
element of liability of bigness was creeping in.
 CASE STUDY CONTINUED.

 The multi currency dispensation brought in both opportunities

and challenges as it affected the various divisions differently.
Of the nine divisions, the auto solutions and the stationery
business were generating a lot of cash and both of them were
enjoying relatively high market share, and hence were
supportive of expansion efforts that were being pursued in
the battery manufacturing and the tissue business as well as
the personal hygiene divisions. Pulp and paper had lost a
significant portion of the market share and was almost on the
brink of collapse. The top leadership for the AH Group were
not too sure whether to mothball the operation of the paper
and pulp unit or possibly to inject more working capital,
however the iron of it was that the division had lost market
share to competition from the region which was now
infiltrating into the country.
 CASE STUDY CONTINUED.

 In addition to that these competing imports looked

better and cheaper. The trading division had shown
prospects for growth although there was minimal
cash generation; unfortunate to this division was
also the element of competition of imports that was
competitively priced. Sadly for domestic energy
solution it was a disaster and the best would have
been to dispose the division or were there any
prospects of resuscitation?
 CASE STUDY CONTINUED.

 Which ever the direction the economy was taking , for

effective leadership, it was neither here nor there , what was
important was the aspect of ensuring survival and growth
through manipulation of the business environmental variables.
This was common place in the automotive solution business,
whose leadership had adopted the concept of agile
absorption; hence had managed to preempt competition from
regional players by securing exclusivity of importing product
from main manufacturers in the region.
 Indeed , action needed to be taken by the divisional leaders
to avoid what could be regarded as the demise of the giant.
 REQUIRED: Read the above case study and attempt all sub
questions from (a) to (e).
QUESTIONS:1. (a) WHAT FORM OF DIVERSIFICATION IS
IMPLIED IN THE CASE? MOTIVATE YOUR ANSWER. (10
MARKS)
1. (b) SHOW YOUR UNDERSTANDING OF THE
TERM “AGILE ABSORPTION” (5 MARKS)
 1. © WHAT WAS THE EFFECT OF THE WINNING
FORMULA THAT WAS USED BY THE AUTOMOTIVE
SOLUTION BUSINESS UNIT AS IMPLIED IN THE CASE? (5
MARKS)
1.(D) THE MULTI CURRENCY DISPENSATION BROUGHT
IN BOTH OPPORTUNITIES AND CHALLENGES AS IT
AFFECTED THE VARIOUS DIVISIONS DIFFERENTLY.
EXPLAIN HOW THIS WAS THE CASE. (5 MARKS)
1(e) USING THE BCG MATRIC MAKE AN ATTEMPT TO
CARRY OUT A COMPANY SITUATION ANALYSIS OF THE
AMALGAM HOLDINGS GROUP. (15 MARKS)
2. DEMONSTRATE YOUR UNDERSTANDING OF THE
FOLLOWING TERMS AND PHRASES.
(a) SYNERGY
2. (b) SWOT
2. © GOODNESS OF FIT TEST.
2.(d) THE EXPERIENCE CURVE EFFECT.
2. (e) BENCHMARKING.
3. ACCORDING TO M.PORTER (1985) , COMPANIES THAT
VIEW COMPETITION FROM A TRADITIONAL
PERSPECTIVE ARE BOUND TO UNDERSTIMATE THE
COMPETITION DOMAIN.

 EXPLAIN WHAT YOU UNDERSTAND FROM THIS

STATEMENT WITH SPECIFIC REFERENCE TO AN
ORGANIZATION OF YOUR CHOICE. ( 20 MARKS)
4. “STRATEGY IMPLEMENTATION IS ABOUT CHANGE
MANAGEMENT, HOWEVER CHANGE MANAGEMENT IS ABOUT
DEMONSTRATING THE EFFICACY OF LEADERSHIP; IT IS ABOUT
TESTING THE ABILITY OF THE MANAGER TO LEAD CHANGE.
UNDERSCORE THE IMPORTANCE OF LEADERSHIP IN STRATEGY
IMPLEMENTATION. (20 MARKS)
 5. OUTLINE ON THE KEY COMPONENTS OF MC KINSEY”S 7 S
. FRAMEWORK FOR STRATEGY IMPLEMENTATION.
GIVE PRACTICAL EXAMPLES. (20 MARKS)
 INSTITUTE OF ADMINIISTRATION AND
COMMERCE.
MAY 2005 EXAMINATIONS.

 The Case study in Question one is compulsory

and has to be answered.
 You are then required to answer any other
three questions selected from Section B.
 The marks allocated to each question are
indicated at the end of the respective
questions..
 CASE STUDY.

 REQUIRED:
 Read the above extract carefully. On the
basis of your understanding of the issues
raised, draft a questionnaire which can be
used by top management to test various
aspects of strategy. Use the following
subheadings.
1. (a) CONSISTENCY OF STRATEGY
WITH THE ENVIRONMENT.

 1. Is strategy acceptable to the major stakeholders?

 2. It it responsive to the demands of the
competitive environment.
 3. Does the it provide a dominant competitive
advantage.
 4. Is the strategy vulnerable to counter attacks by
competitors.
 5. Are the forecast on which strategy based
credible.
 6. Is the strategy compatible with the company’s
moral and ethical codes.
1.(b). CONSISTENCY OF STRATEGY WITH
COMPANY’S INTERNAL POLCIES, MANAGEMENT
STYLE,AND PHILOSOPHY AND OPERATING
PROCEDURES.
 1. Does the strategy it management’s values, philosophy,
personality and sense of social responsibility.
 2.Is strategy known by all affected.
 3. Is the strategy consistent with company’s internal
strengths, objectives and policies.
 4. Does strategy conflict with other strategies.
 5. Does strategy exploit company strengths and neutralize
weaknesses.
 6. Is strategy consistent with the organization structure.
 7. Does the strategy contribute positively to the company
overall performance.
1.(c).APPROPRIATENESS OF STRATEGY IN THE
LIGHT OF ORGANIZATIONAL RESOURCES.

 1. Does the company have financial resources to

support implementation.
 2. What are the consequences of allocating capital
to this strategy.
 3. Are there other projects that can be affected by
implementing this strategy.
 4. Is the strategy compatible with current physical
resources.
 5. Does it facilitate utilization of current capacity.
 6. Does the company has appropriate leadership to
implement the strategy.
1.(d) LEVELS OF RISK ASSOCIATED
WITH THE STRATEGY.

 1. Has the strategy been tested using appropriate

analysis tools.
 2. Has sensitivity analysis carried out.
 2. Does it reconcile risk and return in line with
available resources and opportunities.
 3. Is the payback period acceptable in the light of
the current situation and projected changes.
1.(e) GOODNESS OF FIT BETWEEN STRATEGY
AND THE COMPANY ‘S PRODUCT LIFE CYCLE
AND MARKET POSITION.

 1. Is the strategy appropriate to the company’s

current and future position in the market.
 2.Have the company’s market strengths and
attractiveness matrix properly evaluated.
 3. Has the risk of running the product to the market
properly evaluated.
 4. If the strategy is targeting a niche market, how
long will that market remain open and profitable.
2. DISCUSS CHANGE MANAGEMENT
UNDER THE FOLLOWING HEADINGS:

 (a) CONDITIONS WHICH SHOULD EXIST FOR A SUCCESSFUL

CHANGE MANAGEMENT PROGRAMME.
 1.Need recognition where its we change or we perish.
 2. An idea relating to new way of doing something which if
implemented will address challenges with current situation.
 3. A proposal from organizational members to adopt the new
idea showing how this will solve the problem.
 4. A decision should be made to adopt the idea.
 5. Implementation whereby members use the idea and result
in changes in attitudes, behaviour, products, etc
 6. New strategy require financial resources and other
resources for implementation.
2. (b) REASONS FOR RESISTING
CHANGES.

 1. Self interest.
 2.Uncertainity about its effects.
 3.Lack of understanding of benefits and trust.
 4. Different perceptions about the change amongst
stakeholders.
 5. Lack of tolerance of new way of doing things.
 6.Use of ineffective change agent.
2©. METHODS FOR OVERCOMING
RESISTANCE.

 1. Education and communication.

 2.Participation and involvement of stakeholders.
 3.Facilitation and support in the form of training
and emotional support when at difficult stage.
 4. Negotiation and agreement.
 5. Manipulation and cooption.
 6. Explicit and implicit coercion.
 7. Use of an effective change agent.
3.DISCUSS COMPETITOR ANALYSIS
UNDER THE FOLLOWING HEADINGS:
(a) MAJOR ISSUES IN COMPETITOR
ANALYSIS.
 1. Who are the competitors of the company.
 2, What are the objectives of the competitors.
 3. What strategies are being used by the
competitors and how successful have they been.
 4.What are the strengths and weaknesses of the
competitors.
 5.What are the likely responses of competitors to
aggressive moves by the company.
3.(b) THE IDENTIFICATION OF
COMPETITORS.

 P. KOTLER (1997) identified the following

competitors:
 1. Brand competitors who offer similar products and
are similar in size and structure.
 2.Industry competitors who produce similar goods
but not of same size and compete in limited area or
product range.
 3. Form competitors whose products satisfy the
same needs but in different ways.
 4. Generic competitors who compete for customers
in the same income bracket
3. © FACTORS TO CONSIDER WHEN
RESPONDING TO COMPETITORS.

 1. The laid back competitor does not respond to

competitors.
 2.The selective competitor reacts to attacks in
certain markets and ignore other markets.
 3. The tiger competitor responds aggressively to
threats to drive the message that it will always
retaliate.
 4.The stochastic competitor does not demonstrate
predictable response and can respond or ignore.
3.(d) TYPES OF COST STRUCTURES

 1. High fixed cost structures precipitate aggressive

responses and vertical integration with capital
intensive operations.
 2. High unit cost makes it difficult for rival
companies to respond to price cuts. These costs
are covered by high selling prices which cannot be
lowered without adversely affecting the company’s
market position.
 3. High exit costs are once off costs of leaving an
unprofitable industry.
4. (a) IDENTIFY THE FOUR BUILDING BLOCKS
FOR THE BALANCED SCORECARD. (KAPLAN
AND NORTON 1996)

 . FINANCIAL
PERSPECTIVE

LEARNING AND VISION

GROWTH AND CUSTOMER
PERSPECTIVE STRATEGY. PERSPECTIVE.

INTERNAL BUSINESS
PERSPECTIVE.
4. (b) EXPLAIN THE MAJOR FEATURES
OF THE BALANCED SCORECARD.

 1. The major perspectives are a template , not a

straight jacket. Some companies may incorporate
additional perspectives on employees of
environmental issues.
 2. The BSC is not only performance measure that a
company can use.This management tool should be
used to highlight measures which are critical in
communicating the company ‘s strategy.
 3. The BSC can be developed at business unit level
or corporate level or a specific division.
 CONTINUED.

 4. The financial measures remain important but improvement

in business process, customer care and organizational
learning will not immediately translate into better financial
performance but can lay the foundation.
 5. The BSC can support market based and competency based
approaches to strategy as it can be adapted to support
strategies based on the acquisition and development of core
competencies.
 6. The measures used in the BSC should be mutuaally
consistent and reinforcing, to ensure that it is not just a
collection of desperate financial and non financial indicators.
It enables monitoring the course and effect relationships
which influence financial returns.
4.(c) OUTLINE THE STEPS INVOLVED IN
THE DEVELOPMENT OF A BSC.

 1. Identify key outcomes critical to company success.

 2. Identify the processes that lead to these outcomes.
 3. Develop key performance indicators for these processes.
 4. Develop reliable data capture and measurement
systems.
 5. Develop a competent mechanism for reporting
performance to relevant managers and staff.
 6. Undertake improvement programmes to enhance
performance.
4. (d) IDENTIFY AND EXPLAIN THE
PROBLEMS WHICH MAY BE
EXPERIENCED IN IMPLEMENTING A BSC
SYSTEM.
 1. Ensure management commitment to the
concept.
 2.Deciding who should develop the BSC measures.
 3. Identifying the business processes which add
value to the organization.
 4. Ensuring the measures used are congruent and
consistent with each other.
5. IDENTIFY AND EXPLAIN SIX TYPES OF STRATEGIES
WHICH A COMPANY CAN USE TO COUNTER THE ACTIONS
OF ITS RIVALS.

 1.Capitalising on competitor weaknesses by focusing on areas

where competitors have low market share.
 2. Simultaneous initiatives on many fronts through price cuts,
new products, advertising, etc
 3. End run offensives to avoid confrontation with big players
by focusing on neglected areas.
 4. Guerilla offensives involving hit and run concentrating on
customers not important to big players.
 5. Pre emptive strikes involving first mover advantages which
shield against attack form later entrants. This involve tying
raw materials, increase production before demand, etc.
6. IDENTIFY AND EXPLAIN EIGHT FACTORS
WHICH INFLUENCE STRATEGY FORMULATION
AND IMPLEMENTATION IN MATURING
INDUSTRIES.
 1. Competition is stiff due to slow growth leading to price
cuts, advertising, etc
 2. Consumers are sophisticated and can bargain due to
availability of knowledge.
 3. Competition produce emphasis on cost and service.
 4. Product innovation is hard to come by due to failure to
create new features and maintain client excitement.
 5. International competition increases and organization move
beyond national boundaries.
 6. Profitability declines and weaker firms are affected.
 7. Competition leads to mergers and acquisitions
MIDLANDS STATE UNIVERSITY.
2020.

 1. Explain the concept of strategic benchmarking and explain

how an organization you are familiar with has applied this
concept. (25 marks)
 2. What is a balanced scorecard and in what ways is it useful
to management ? (25 marks.)
 3. What role does a board of directors through the CEO
execute in an organisation? (25 MARKS)
 4. (a) What does the term stakeholder analysis refer to ? (5
marks)
 (b) Carry out a stakeholder analysis for your organisation or
another you are familiar with. (20 marks)
 5. Enumerate the four generic competitive strategies available
to an organisation which was identified by Miles and Snow in
1978 (25 marks)
 Discuss strategic planning at a business unit level. (25 marks,)
MIDLANDS STATE UNIVERSITY.
2020 MATABA AUGUSTINE
Masters in Strategic Management (GZU).
Dphil Studies Pending
 1. Present and discuss a management model which can be of great
assistance to management when introducing change to their
organization's status quo. (25 marks.
 2. Explain the following terms:
 (a) Strategic plan (b) Strategic objectives.
 © Corporate culture (d) Down – sizing.
 (e) Corporate values. (5 marks each.)
 3.(a) Discuss any 5 elements of an organization's direct action
environments. (10 marks)
 (b) How does the concept of “Environmentalism and Green
Revolution “ affect a manager’s job ? (15 marks,)
 4. Whether or not organisations operate globally it must be fully
aware of Global strategies which it may situationally , want to
implement. Discuss these strategies and explain how your
organisation is behaving towards the strategies. (25 marks.)
 5. Effectively discuss the role of a balanced scorecard in an