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Exam Question Candidates: Short Questions
Exam Question Candidates: Short Questions
SHORT QUESTIONS
Differentiation strategy
The advantages of differentiation strategies include the following:
They could safeguard an organisation against competition as a result of brand loyalty.
They could enhance profit margins by slightly higher pricing than their competitors.
Powerful suppliers are rarely a problem.
Differentiators are unlikely to experience problems with powerful buyers.
Threats of substitute products really depend on competitors' products to meet or exceed customer needs before
customers would be willing to switch products.
Effective differentiation and brand loyalty could act as barriers to entry.
The disadvantages of differentiation strategies relate to the organisation's inability to maintain uniqueness from a
customer perspective − not fully responding to the durability challenge of competitive advantage. Another danger
stems from the design or physical features of a product, which are much easier to imitate than uniqueness, which
stems from intangible sources like innovation, quality of service, reliability, brand and prestige.
Explain the role of value chain and resource based view in internal analysis
The activities of an organisation are effectively combined to create customer value. Activities are divided into five
primary and four support categories.
Primary activities and related capabilities include the following:
Inbound logistics: receiving, storing and distributing inputs for the manufacturing of products by the
organisation. Capabilities: purchasing; material and inventory control systems
Operations: activities that transform inputs into final products, i.e. facility operations, machines and assembly.
Capabilities: design and product development, quality control, component manufacture and assembly
Outbound logistics: collecting, storing and distributing of products and services to customers. Capabilities:
distribution coordination, processes related to warehousing of products and dealer relationships
Marketing and sales: marketing, sales and purchasing of products and services of an organisation. Capabilities:
innovative promotion and advertising, and a motivate sales force
Customer service: everything involved in improving and maintaining the value of a product for the customer.
Capabilities: parts, warranty and servicing arrangements, and the quality and training of employees
Support activities include the following:
Administration and infrastructure support the entire value chain and include general management, planning,
financial management, information systems, legal issues and quality management. Capabilities: risk
management and integration of the value chain
Human resource management involves the appointment, development and retention of employees at all levels,
their compensation and all matters relating to their employment. Capabilities: training, skills development, staff
recruitment and retention
Procurement is the purchasing function. Capabilities: inventory and database management
Technology development involves all technology related to the operations and management of the organisation.
Capabilities: integrated management information systems and technology-management design and
manufacturing
The objective of capabilities based competition is to build difficult-to-imitate organisational capabilities that
distinguish a company from its competitors.
Critically discuss the obstacles and drawbacks in doing business in Africa.
There are some key strategic issues facing Africa as a whole, and Sub-Saharan Africa in particular, which present
challenges to investors and business in Africa:
Lack of infrastructure
This is a significant damper on investment and business in Africa. For businesses, the lack of infrastructure may
translate into a supply chain and distribution system that is inadequate and disorganised.
Lack of industrial development
Most of the member countries apply primary resource development and then export the raw product for secondary
and tertiary economic processing. This results in extensive imports as the final products then need to be brought
back into these countries for local consumption.
Political instability
From a business perspective, political instability in Africa takes the form of unpredictable government decision
making that leads to volatility or armed conflict, making foreign investment extremely risky at best.
High levels of poverty
In most African countries, a significant portion of the population fall in the ‘the bottom of the pyramid’ economic
bracket. The bottom of the pyramid is those families surviving on less than the international poverty line of $2 per
day. Those living at the bottom of the pyramid often endure poor living conditions.
Corruption
The cumulative effect of endemic corruption on business and the African economy is massive. According to
Transparency International’s 2012 Corruption Perception Index (CPI), 90% of African countries scored below the
‘pass mark’. Corruption destroys lives and communities, and undermines countries and institutions.
An inefficient public sector
In 2013, economic growth for the African economy was negative. This dismal failure to alleviate poverty in sub-
Saharan Africa can be attributed to an inefficient public sector.
Lack of key skills
Due to limited access to education at various levels, African markets often present investors with lack of people with
key business skills and an oversupply of semi-skilled and unskilled workers.
Explain the importance of strategic thinking and strategic direction setting in strategic planning and management
The importance of strategic thinking relates to the conceptual nature of strategy and strategy formulation, which is
referred to as the thinking part of strategic management. Strategic thinking may occur at the following three
successive hierarchical levels in organisations:
Lower level: self-awareness, critical thinking, intellectual curiosity and openness
Intermediate level: exercising good judgement and understanding the business – problem solving, decision
making, business acumen and customer focus
Higher level: successfully creating ”new and different” – dealing with ambiguity, innovative management and
perspective taking
Strategic direction refers to the long-term goals of the organisation which can be expressed as, for example, vision
and mission statements. It is the key element against which all strategic decisions should be measured. All strategies
must be formulated with the strategic direction in mind. Advantages of clear strategic direction:
It provides direction
It guides all the organisational efforts towards achieving the same goals
It binds the organisation members to work together towards achieving the overarching goal of the organisation
It communicates to internal and external stakeholders what the organisation wants to achieve in the long run
It guides decision making
It distinguishes the organisation from other organisations
It promotes a sense of shared expectations
It contributes to synergy among managers and employees
LONG QUESTION (THIS WOULD THEN FIT WITH THE CASE STUDY)
Explain the role of strategists and managers in the context of strategy as practice
Role of strategists and managers in the context of strategy as practice:
A strategist is the ‘doer’ of the strategy. Whereas top managers have traditionally been regarded as the custodians
of strategy, the idea that other people and even artefacts can also be strategists is gaining ground. Any individual or
group within the organisation that controls key actions can be regarded as a strategist. Since objects can also control
or influence key actions, we can extend this definition to include presentations, written documents, information
systems, and so on. Individual strategists will, cognitively speaking, fall into one of four broad types: detail-conscious,
big-picture conscious, non-discerning, and cognitively versatile.
Strategists Description
Detail-conscious Practitioners who are detail-conscious are highly analytic and driven by the minutiae of
available data, with little or no regard for intuition. They have a tendency to approach
problems in a step-by-step, systematic fashion.
Big-picture Practitioners who are big-picture conscious can become preoccupied with gaining an overview
conscious of the problem at the expense of the details. They are highly intuitive in orientation, with little
or no regard for analytical approaches to problem-solving or decision-making.
Non-discerning Non-discerning practitioners deploy minimal cognitive resources in order to derive strategic
insight, being disciplined to process the detail or to extract a bigger picture from such detail.
They rely on opinion and wisdom received from others and thereby relieve themselves of the
burdens of analytic and intuitive processing altogether.
Cognitively These practitioners possess in equal abundance the inclination to attend to analytical detail and
versatile cut through that detail, as and when required. This type of practitioner is able to switch more
readily between analytic and intuitive processing strategies
Top managers as strategists:
The role of the top management team is to set the overall strategic direction of the organisation by formulating the
strategy, allocating the resources and reviewing the strategic success. They are responsible for gathering
information, from both the internal and external environment, and choosing strategies and actions to help the
organisation gain a sustainable competitive advantage. They then communicate this to middle management,
explaining the rationale behind their strategic choices so that middle managers can link the strategies and strategic
goals to implementation efforts. Top managers are also responsible for the review of strategies. They reflect upon
their decisions and actions, and this may lead to changes or new decisions and actions.
Board of directors as strategists:
Boards of directors of companies influence strategizing in organisations, being the focal point and custodians for
corporate governance. Although strategic decision making is done by senior management, the board of directors
influences the overall direction and monitors the relationship between management and other stakeholders to
ensure the organisation is sustainable in the long term.
Middle managers as strategists:
Middle management is now much closer to the strategic apex and makes a variety of contributions to the
formulation, implementation, review and success of strategies. Three strategic roles of middle managers:
1) Implementing deliberate strategy - This role is aligned with the traditional role of strategic management, but
remains valid in the contemporary business organisation, especially in relation to deliberate strategies. It deals
with managerial interventions, actions and tasks to align the organisational action with the strategic intention of
top management. Middle managers’ ability to understand, anticipate and manage processes needed to secure
positive and pervasive commitment to strategy is a critical general management implementation skill. Middle
managers implement strategy by translating corporate strategy into action plans and individual objectives.
2) Synthesising information - This is the interpretation and evaluation of information. How middle managers
understand and share information influences the success or failure of the organisational strategies. Not only do
middle managers provide information concerning internal and external events to top management, but they are
also responsible for passing information down to subordinates, which can reduce uncertainty and resistance to
change. Middle managers are considered linking pins, equipped with the ability to combine strategic macro-
information and hands-on micro-information.
3) Reshaping the strategic thinking of top management by selling to them strategic initiatives that diverge from
their current conception of strategy
This role links with emergent strategizing. Middle managers frequently become organisational champions for
initiatives developed at the operating level. This role is distinct from product championing as it centres on
influencing corporate management to adjust their current concept of management. It is defined as the persistent
and persuasive communication of strategic options to top management. By proposing and defining issues for top
managers, middle managers provide important contributions to an organisation’s strategic direction and thereby
influence organisational effectiveness.
Consultants as strategists:
The management consulting industry is considered to be one of the most powerful forces shaping organisational
strategy. Management consultants are practitioners who are considered to be knowledgeable about the business
environment and organisations. They have a wealth of industry contacts and a good reputation based on experience.
Most importantly, management consultant firms pool their resources, knowledge and experience across industries
and are authoritative forces in advising on best practices.
People bring with them their own personalities and backgrounds in the form of culture, education, politics, and
religion. Strategizing is therefore not only a cognitive activity, but is fuelled by the individual’s quest for personal
power. Strategizing is essentially what strategists do, and can be described as devising or influencing strategies.
Through their actions, strategists influence the allocation of the organisation’s resources and control or influence key
actions. Strategizing and strategy making are often used interchangeably and include strategizing activities.
Strategizing not only involves those within the organisation, but also consulting firms, business schools, business
media, academic journals, professional societies, enterprises and management in a joint endeavour that all recognise
as somehow strategic.
Explain the external environment relating to Africa as a frame of reference for doing business in Africa
Local customs and customer preferences
Investors, as well as organisations exporting to countries in Africa, should bear in mind that countries are diverse and
differ in terms of the following: their political stability; legal system; size of their economy as indicated by GDP and
GNP levels; level of economic development; rate of economic growth; size of the country; population size; levels of
disposable and discretionary income; sophistication of infrastructure; industry characteristics; market size and
consumer needs; and culture, as well as customs and especially religious traditions. These are but a few
determinants that business leaders need to contemplate as a start. Comprehensive country analysis would, for
example, further involve country risk analysis and taking into account information derived from the Human
Development Index and information made available by organisations such as Transparency International.
The rationale for this brief overview is to reaffirm that an organisation's international or global strategy which is
successful in its home country in most cases will not work in Africa. The message is clear − deciding on business
involvement in Africa must be preceded by extensive research and strategic analysis, most importantly about the
actual market needs and customer preferences.
Legislation
Investors and business leaders should be aware of the legal dispensation of the country they are involved in or
contemplating becoming involved in. An intimate knowledge of a country's legal system, laws and regulations as well
as the extent to which the rule of law and effective law enforcement prevail is indispensable. Relevant issues would
include those relating to ownership, labour relations, taxation, customs and excise, direct investment, securities
exchange and listing requirements, repatriation of profits and dividends to parent organisations in the home
country, foreign exchange controls and transfer pricing rules.
Political considerations
Owing to the political complexities that organisations face when setting up business in African countries, ways that
could be considered to circumvent or overcome such complexities include the following:
partnering with local stakeholders for a number of reasons, including ease of entry into the country, shared
ownership (international joint ventures) or involvement by agreement (strategic alliances) as a source of local
market knowledge, potentially favourable government relations, and sharing risks, especially in the early stages
of a venture where uncertainty is high
responding positively to an awareness of community, cultural and social needs in terms of customised products;
certain human resource management practices and an awareness of political events and national priorities could
enhance organisation-government relations. See the experience of SABMiller below.
Creative supply chain management
Owing to underdeveloped infrastructure in many of the countries in Africa, organisations have to devise their own,
innovative supply chain solutions, especially in terms of logistics relating to procurement and inbound transportation
and the distribution of products to markets. Study the following ways in which these challenges can be addressed:
investing in own infrastructure
product innovation to meet specific market needs
developing local suppliers to ensure consistent supply of raw materials
developing distribution channel strategies that are sufficiently flexible to cope with both formal and informal
distribution via wholesalers and retailers to serve their markets effectively
In the case of land-locked countries, logistics could present a nightmare. Not only could customs clearance at a
country's nearest port take relatively long, but cross-border customs clearance en route could cause further delays,
while poor infrastructure, especially roads and ineffective rail transport, add to already existing time delays that all
translate into higher costs, potential production delays and getting products to market.
Investing heavily in talent
The lack of skills, and especially key managerial skills, remains a drawback in African countries. Organisations doing
business in Africa need to identify, attract and retain talent, but also invest in training and development, including
mentorship.
Explain the importance of stakeholders and stakeholder management for sustainable business
Any organization is the sum of its stakeholders. Stakeholders have different perspectives on the organisation, each
looking to take something out of it and all have an ability to influence that success. To achieve a competitive
advantage an organisation needs to meet the needs of the stakeholders which means adding value. Adding value can
be defined as adding certain characteristics to the product/services that the competitor and customer cannot do for
themselves. Anyone who is directly influenced by the acts of the organization is seen as a stakeholder. Stakeholders
usually have divergent goals and are driven not only by profit or other financial aspects. To ensure sustainability and
long term survival of the organization it is important to ensure that the claims of the stakeholders are met. In the
event of their claims not being met, organisations will lose their competitive advantage and ultimately losing their
sustainability over the long run. Stakeholders are those entities that can affect or be affected by the organisation’s
actions. Some examples of key stakeholders are creditors, directors, employees, government, owners, suppliers,
unions, the environment and the community from which the business draws its resources. Not all stakeholders are
equal. For example, customers are entitled to fair trading practices, but they are not entitled to the same
consideration as the company’s employees.
Any strategic decision taken by an organisation is likely to have positive and negative consequences for different
stakeholders. When a company needs to cut costs and plans a round of lay-offs, this negatively affects the
community of workers in the area and therefore the local economy. Shareholders, however, may be positively
affected, as the company may return to profitability after this decision. The extent to which organisations should
consider stakeholders in their decision making is thus a point of contention.
The shareholder view argues that the claims of shareholders, the owners of the business, are paramount to any
business. Without this focus on shareholders, the organisation would not attract investors and this would affect
sustainability. Supporters of this view argue that in the long run, profit benefits all stakeholders.
On the other hand, the stakeholder perspective argues that shareholders cannot be the sole focus – if they are,
other stakeholders may withdraw their support for the organisation to its detriment. Supporters of this view
accordingly argue that all stakeholders should be considered in the strategic decision-making processes of the
organisation.
As a middle ground, some observers have argued that there should not be a great chasm between the two views, as
an enlightened shareholder perspective is really no different to an enlightened stakeholder perspective. In terms of
sustainable strategy, the organisation should thus try to balance the needs and claims of its key stakeholders. In
determining the relative importance of stakeholders, the organisation needs to weigh up the claims of stakeholders
and the relative power and influence of stakeholders. In the case of a strike, a union may demand a substantial
increase in their pay, which the employers usually claim they cannot afford. Whether the demand constitutes a
legitimate claim is an issue of debate, but in the meantime the workers are exerting their power by withholding
labour, to the detriment of the company.
The stakeholder salience model can assist managers in determining the relative importance of stakeholders of the
organisation. It should be noted that the importance of stakeholders will differ from firm to firm and from industry
to industry.
The determining factors are as follows:
Stakeholder power is determined by the extent to which stakeholders control the resources required by the
organisation. The more resources and the higher the degree of control, the more powerful the stakeholders.
Employees and unions, for example, have direct control over the human resources of the organisation, whereas
the community does not always have similar control.
Stakeholder legitimacy is determined by the extent to which the stakeholders are affected by the decision of the
organisation, and the more affected, the higher the legitimacy. Once again, the employees of the organisation
are directly affected by the organisation’s decisions, and therefore have a high level of legitimacy.
Stakeholder urgency is determined by the time sensitivity of the stakeholder’s claim, and the level of importance
to the stakeholder. The more urgent and important the claim, the higher the level of urgency.
We can use these attributes to classify stakeholders into three broad classes:
Latent stakeholders have only one attribute, either power, or legitimacy or urgency. For example, for many
organisations the environment may be such a stakeholder. It has legitimacy, as it is affected by the decisions of
the organisation, but may not have power or urgency.
Expectant stakeholders have two or three attributes. For example, the government may have power and
urgency, but may not have a high level of legitimacy.
Salient stakeholders have the strongest claim, and will be most important to the organisation. For example,
unions have high power, high legitimacy and high urgency. However, it could be said that shareholders in this
case are also salient stakeholders, which may help to explain the deadlock between management and labour
regarding the remuneration claims of the union.