DISCUSSION

SEP 2017 STRATEGEIC MANAGEMENT RETAKE

WHAT IS STRATEGIC MANAGEMENT?
TOP MANAGEMENT RESPONSIBILITY- WHAT TOP MANAGERS DO
HIGHEST LEVEL OF PLANNING FOR THE COMPANY
LONG TERM TIME FRAME AND WIDE SCOPE COVERING THE ENTIRE
COMPANY
BOTH EXTERNAL AND INTERNAL FOCUS .
EXTERNAL TO STUDY/ ANALYSE PEST AND INDUSTRY/ COMPETITIVE
FACTORS THAT OFFER OPPORTUNITIES AND THREATS
INTERNAL TO STUDY WORK PROCESSES, RESOURCE AVAILABILITY,
PERFORMANCE THAT OFFER STRENGTH AND WEAKNESS
HOW DO YOU DESCRIBE THE TOP
MANAGEMENT WHO CARRY OUT SM ?
A PILOT FLYING THE PLANE (COMPANY)
THE MANAGEMENT WITH THE HIGHEST DEGREE OF AUTHORITY AND
RESPONSUBILITY
ABILITY / EXPERIENCE/ KNOWLEDGE/ SKILL/ COMPETENCY TO
ANALYSE AND SYNTHESIZE THE INFORMATION THAT HAS BEEN
OBTAINED IN ORDER TO MAKE STRATEGIC DECISIONS ABOUT PLANS
FOR THE COMPANY AND THE IMPLEMENTATION OF THOSE PLANS
MAKE DECISIONS THAT HAVE A HIGH DEGREE OF RISK AND
UNCERTAINTY TO IMPACT THE FUTURE OF THE ORGANIZATION, SO
MUST HAVE THE SKILL AND CONFIDENCE TO DO SO
What is Strategy?
Strategy is the direction and scope of an organisation over
the long term, which achieves advantage in a changing
environment through its configuration of resources and
competences with the aim of fulfilling stakeholder
expectations.
Strategy is a set of goals, instructions, self-imposed
restrictions that describe how the organisation propose to
develop and direct all the resources invested in the
organisation

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Definition of Strategic Management
Strategic Management is the art of formulating,
implementing and evaluating cross functional decisions that
enable organisations to achieve its objectives (David 2004)
The process of identifying, choosing and implementing
activities that will enhance the long term performance of an
organisation by setting direction and by creating ongoing
compatibility between the internal skills and resources of the
organisation and the challenging external environment
within which it operates. (Vijoen & Dann 2003)

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Strategic Thinking involves considering
the Stages of Strategic Management

Strategy Strategy Strategy

formulation implementation evaluation

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Characteristics of Strategic Decisions
Complexity both internal and external
Uncertainty
Operational decisions
Integration
Relationships and networks suppliers, distributors, customers and
competitors.
Change
WHAT IS STRATEGIC THINKING
1. Please refer to slide 1 & 2
2. Strategy Formulation & Decisions
developing a vision and mission
identifying an organizations external opportunities and
threats
determining internal strengths and weaknesses
establishing long-term objectives
generating alternative strategies
choosing particular strategies to pursue
 (1) Where
are we
now?

(2) Where
do we wish
Mintzergs
to be?
Design Approach
to Strategy
Development

(3) How do
we get
there?
Source: Mintzberg, H., Ahlstrand, B., Lampel, J.,(2009,) Strategy Safari, your complete guide through the wilds of
Strategic Management, , 2nd Edition, Pearson Education Limited, p26.
Strategic Issues

The long term direction of the organisation

The scope of the organisations activities
Advantage for the organisation over competition
Strategic fit with the business environment
Organisations resources and competencies
The values and expectations of stakeholders
Strategic thinking questions
Fundamental questions for Strategic Position:
What are the environmental opportunities and
threats?
What are the organisations strengths and
weaknesses?
What is the basic purpose of the organisation?
How does culture shape strategy?
Strategic choices in strategic thinking
Fundamental questions for Strategic Choice:
How should business units compete?
Which businesses to include in the portfolio?
Where should the organisation compete
internationally?
Is the organisation innovating appropriately?
Should the organisation buy other companies, form alliances or go it
alone?
Slide 1.13

Strategic decisions

Johnson, Whittington and Scholes, Exploring Strategy, 9th Edition, Pearson Education Limited 2011
WHAT IS STRATEGIC THINKING
Strategy Implementation
requires a firm to establish annual objectives, devise
policies, motivate employees, and allocate resources so
that formulated strategies can be executed
often called the action stage
Strategy Evaluation
Determining which strategies are not working well
Three fundamental activities:
reviewing external and internal factors that are the bases for
current strategies
measuring performance
taking corrective actions
WHAT IS STRATEGIC THINKING
It Involves trying to achieve sustained competitive
advantage by doing business activity better than that
of competitors and to have better resources than that
of the competitors
may include geographic expansion, diversification,
acquisition, product development, market
penetration, retrenchment, divestiture, liquidation,
and joint ventures
Strategic Thinking Dimensions
Process the strategic development integration and implementation
process
Content addresses strategic activities and actions
Context Internal and external factors that are considered in the
strategy

De Wit & Meyer (2004)

Strategy Context

International
Context
Industry
Context
Organisational
Context

Manager
Paradoxes of Strategy Process

Strategic
Logic vs. Creativity
Thinking

Strategy Strategy Deliberateness vs.

Process Formation Emergence

Strategic
Revolution vs. Evolution
Change

De Wit & Meyer (2004)

How to Gain and Sustain
Competitive Advantage

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The Nature of Long-Term Objectives
Objectives
provide direction
allow synergy
assist in evaluation
establish priorities
reduce uncertainty
minimize conflicts
stimulate exertion
aid in both the allocation of resources and the design of jobs

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WHAT IS STRATEGIC THINKING INVOLVES STAKEHOLDER
ANALYSIS
Stakeholders of a Large Organisation

4-21
WHAY IT IS IMPORTANT FOR STRATEGIC
THINKING TO DO A STAKEHOLDER ANALYSIS?
Stakeholders have a claim on the
organization to meet their
expectations
If their expectations are not met,
they will be unhappy and will take
action against the company
If the stakeholders have enough
power, such action may be harmful
to the company success. Therefore
top management must analyse
stakeholder power and
expectations to guide strategic
thinking
Employees pay job satisfaction
Customers quality & value for
money
Shareholders good dividend and
high market share price
Suppliers new business and
repayment of credit sales
Government & regulators obey
the law
Society CSR
NGO satisfy their goals
KEY TOPICS FOR SEP 2017 Exam
1. Strategic positioning and key global environmental factors that
influence the strategic positioning of the company in the case
2. Corporate vs Business strategies key features to highlight
similarities and differences. Use examples from the case study to
show which is a corporate strategy and which is a business strategy
3. Mckinsey 7S framework. Explain and draw diagram. Discuss why it
is a very useful tool to help in strategic implementation. Explain the
features and importance of strategic implementation. Then use
examples from the case to expand on your answer
4. Mode of entry into international business environment. Discuss on
the 6 modes of entry and choose and expand on the ones used by
the Case Company
Answer guide for topic 1
Topic 1 :Strategic positioning
Definition
Why it is so important?
What are the tools that are used to gather information needed to do
strategic positioning? PESTLE, SWOT, Stakeholder, Porters 5 forces (
where are we now)
Decisions to guide strategic positioning Choice of Key success factors (
where do we want to go?) that exploit S & O and minimize W & T. Also
identify core competencies that the company has and the ones that need
to be developed for effective strategic positioning ( what must we do?)
Apply to the case study using the tools to explain the strategic position of
the company and what type of strategy to adopt and core competencies to
use, that leads to achievement of key success factors
Relationships Between Key External
Forces and an Organization

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Economic Forces
Shift to service economy Income differences by region and consumer
Availability of credit group
Price fluctuations
Level of disposable income
Propensity of people to spend Foreign countries economic conditions
Interest rates Monetary and Fiscal policy
Stock market trends
Inflation rates
GDP trends Tax rate variation by country and state
Consumption patterns European Economic Community (EEC) policies
Organization of Petroleum Exporting
Unemployment trends Countries (OPEC) policies
Value of the dollar
Import/Export factors
Demand shifts for different goods and
services

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Social, Cultural, Demographic, and
Natural Environmental Forces
U.S. Facts
Aging population
Less white
2050 = 20% population > 65 years
2075 = no ethnic or racial majority

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Political, Government, and
Legal Variables

Environmental regulations USA vs. other country relationships

Number of patents Political conditions in foreign
countries
Changes in patent laws
Global price of oil changes
Equal employment laws Local, state, and federal laws
Level of defense expenditures Importexport regulations
Unionization trends Tariffs
Antitrust legislation Local, state, and national elections

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Results of Technological Advances
1. Major opportunities and threats that must be considered in formulating strategies.
2. Can affect organizations products, services, markets, suppliers, distributors, competitors,
customers, manufacturing processes, marketing practices, and competitive position.
3. Can create new markets, result in new and improved products, change the relative competitive
cost positions, and render existing products and services obsolete.
4. Can reduce or eliminate cost barriers between businesses, create shorter production runs,
create shortages in technical skills, and result in changing values and expectations of
employees, managers, and customers.
5. Can create new competitive advantages that are more powerful than existing advantages.

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Competitive Forces
Characteristics of the most competitive companies:
1. Strive to continually increase market share
2. Use the vision/mission as a guide for all decisions
3. Whether it's broke or not, fix itmake it better
4. Continually adapt, innovate, improve
5. Acquisition is essential to growth
6. Hire and retain the best employees and managers possible
7. Strive to stay cost-competitive on a global basis

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Key Questions About Competitors
1. What are the strengths of our major competitors?
2. What are the weaknesses of our major competitors?
3. What are the objectives and strategies of our major competitors?
4. How will our major competitors most likely respond to current economic, social,
cultural, demographic, environmental, political, governmental, legal, technological,
and competitive trends affecting our industry?
5. How vulnerable are the major competitors to our alternative company strategies?
6. How vulnerable are our alternative strategies to successful counterattack by our
major competitors?
7. How are our products or services positioned relative to major competitors?
8. To what extent are new firms entering and old firms leaving this industry?
9. What key factors have resulted in our present competitive position in this industry?
10.How have the sales and profit rankings of our major competitors in the industry
changed over recent years? Why have these rankings changed that way?
11.What is the nature of supplier and distributor relationships in this industry?
12.To what extent could substitute products or services be a threat to our competitors?

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The Five-Forces Model of Competition

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Stakeholder, Internal analysis
Stakeholder elaborate on internal connected & external
Internal Analysis Strength & weakness use records financial, HR,
marketing reports, quality reports
Answer guide for topic 2
 Topic 2 :
Explain Corporate & Business strategies
Levels of Strategy
(1) Corporate Level Strategy
- Overall purpose
- How to add value ( good return on investment, brand image, CSR) to the different parts of
an organization?
(2) Business Level Strategy
- How to compete ( More sales, more profit) successfully in a chosen market?
Strategic Business Unit (SBU)
- Distinct market
- Separate resources and competencies
(3) Operational Strategies
- Implementing corporate & business level
strategies
- Resources, processes and people
Strategic Structure
Hierarchical

Corporate

Business Business Business

Unit Unit Unit

Functional Functional Functional Functional Functional

Strategy Level
Level of Aggregation Level of Organisation Description

Corporate Level Corporation/Group Group of Corporate Strategies

Business Level Operating Unit Strategies within Operating Unit

Personal Task Specific to

Functional Level Functional Functional activities Project
(Operational Level) Department Management, Channel
Management, Branding

De Wit & Meyer (2004)

Levels of Strategy
News Corporation
Corporate- diversifying from print
level journalism into social
strategy networking.

Website and marketing

Business-level improvements at My
Space to attract more
strategy users.

MySpace engineers
Functional strategy increasing processing
Capacity.
Levels of Strategies
Corporate Strategy
Defines the strategy for the corporation (or organisation) as
a whole, and is cascaded to business units below.
Must be holistic and define the overall purpose and scope
of the organisation.
Must be visionary in some measure.
Must ensure that the different parts of the organisation
add value to the overall strategy.
Must meet the expectations of major stakeholders.Defines
the strategy
Definition of Corporate Strategy
Corporate strategy is the pattern of decisions in a company
that determines and reveals its objectives, purpose, or goals,
produces the principal policies and plans for achieving those
goals, and defines the range of business the company is to
pursue, the kind of economic and human organisation it is or
intends to be, and the nature of economic and non-
economic contribution it intends to make to its shareholders,
employees, customers, and communities (Andrews, 1987)

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Corporate Strategy
(1)Scope Should the organization concentrate on one area of activity or
many?
(2)Long term What sort of company you want to become? Marathon vs.
Sprint
(3)Advantage Over competitors, what customers consider important
(4)Environment Opportunities, threats. Meeting clearly identified customer
need through appropriate positioning (ie: cost leadership, niche marketing)
(5)Resources and competences intellectual resources, innovation, brand
identity
(6)Stakeholders Internal & External
Slide 1.43

Corporate Structures

Source: Adapted from M. Goold, A. Campbell and M. Alexander, Corporate Level Strategy, Wiley, 1994 ; Cited in Johnson
G., Scholes, K., Whittington R., (2008) Exploring Corporate Strategy, Prentice Hall

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Johnson, Whittington and Scholes, Exploring Strategy, 9th Edition, Pearson Education Limited 2011
The Corporate Parent
A Portfolio Manager is a corporate parent acting as an agent on
behalf of financial markets and stakeholders
Johnson, Scholes, Whittington (2008:274)

A Synergy Manager is a corporate parent seeking to

enhance value across business units by managing
synergies across business units
Johnson, Scholes, Whittington (2008:275)

The parental developer is a corporate parent seeking to

employ its own competencies as a parent to add value to its
businesses and build parenting skills that are appropriate for
its portfolio of business units
Johnson, Scholes, Whittington (2008:276)
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Alternative Strategies Defined and
Exemplified

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Alternative Strategies Defined and
Exemplified

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Integration Strategies
Forward Integration
involves gaining ownership or increased control over
distributors or retailers
Backward Integration
strategy of seeking ownership or increased control of a firm's
suppliers
Horizontal Integration
a strategy of seeking ownership of or increased control over a
firm's competitors

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Intensive Strategies
Market Penetration Strategy
seeks to increase market share for present
products or services in present markets through
greater marketing efforts
Market Development
involves introducing present products or services
into new geographic areas
Product Development Strategy
seeks increased sales by improving or modifying
present products or services

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Diversification Strategies
Related Diversification
value chains possess competitively valuable cross-business
strategic fits
Unrelated Diversification
value chains are so dissimilar that no competitively valuable
cross-business relationships exist

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Synergies of Related Diversification
Transferring competitively valuable expertise,
technological know-how, or other capabilities from
one business to another
Combining the related activities of separate
businesses into a single operation to achieve lower
costs
Exploiting common use of a known brand name
Using cross-business collaboration to create
strengths

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 Defensive Strategies
Retrenchment
Regroups through cost and asset reduction to reverse declining sales and
profits

Divestiture
Selling a division or part of an organization
Often used to raise capital for further strategic acquisitions or
investments

Liquidation
Selling all of a companys assets, in parts, for their tangible worth

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Defensive Strategies
Retrenchment
occurs when an organization regroups through cost and
asset reduction to reverse declining sales and profits
also called a turnaround or reorganizational strategy
designed to fortify an organizations basic distinctive
competence

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Defensive Strategies
Liquidation
selling all of a companys assets, in parts, for their tangible
worth
can be an emotionally difficult strategy

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Means for Achieving Strategies
Cooperation Among Competitors
Joint Venture/Partnering
Merger/Acquisition
Private-Equity Acquisitions
First Mover Advantages
Outsourcing/Reshoring

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Levels of Strategies
Business Unit strategy:
Must be derived and be aligned with the corporate
strategy.
Must be focused on how to compete in the particular
markets or business areas for which the business unit has
responsibility.
Can be visionary and creative within the context of its
business remit.
Michael Porter's Five
Generic Strategies
Cost Leadership emphasizes producing standardized products
at a very low per-unit cost for consumers who are price-sensitive
Type 1
low-cost strategy that offers products or services to a wide range of
customers at the lowest price available on the market
Type 2
best-value strategy that offers products or services to a wide range of
customers at the best price-value available on the market

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Michael Porter's Five
Generic Strategies
Type 3
Differentiation is a strategy aimed at producing products
and services considered unique industry-wide and directed
at consumers who are relatively price-insensitive

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Michael Porter's Five
Generic Strategies- focus
Type 4
low-cost focus strategy that offers products or services to a
niche group of customers at the lowest price available on the
market
Type 5
best-value focus strategy that offers products or services to a small
range of customers at the best price-value available on the market

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