University of North-West

Graduate School of Business and

Government Leadership

Strategic Management for MBA: ADM 807

Table of Contents

• What is Strategy • Strategic Planning Process

• Hierarchy of strategy – Industry Analysis
– Corporate level strategies – Environmental Scanning
– Business level strategies – Strategy Formulation
– Functional level strategies – Strategy Implementation
• Corporate Governance, ethics – Evaluation and Control
and social responsibility
– Individual Ethics in • The Strategic Audit Process
organisations – The 8 stages of strategic Audit
– Social responsibility and ethics
– Organisational approaches to
social responsibility
– Managing social responsibility

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 What is Strategy

Strategic Management for MBA: ADM 807

What is strategy

Defined, strategy is:

The execution of a set of choices based on customer

Needs, which identifies the essential positioning,
Competitive advantages, and configuration of
Activities necessary to create value superior
To competition and generate superior returns

4
Operational Effectiveness

Achievement of the best practices through:

• Using state of the art technology

• Eliminate waste
• Continuous organisational improvement
• Providing superior service
• Increased productivity

5
The Model of Strategy

• Unique competitive position

• Activities tailored to strategy
• Making clear tradeoffs or choices
• Creating a strategic fit across activities
• A sustainability of a system not parts
• Continuity
• OE as a given

6
Tradeoffs

• The need to choose is reflected by incompatibilities

between positions

 More of “A” necessitates less of “B”

 Overlap between competitive positions is limited
 Without tradeoffs, only OE is attained

• Seek tradeoffs and accentuate them

• Be able to choose what not to do

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 Hierarchy of Strategy

Strategic Management for MBA: ADM 807

Hierarchy of Strategy

Strategies Tools of Analysis

Grand Strategies • Industry Analysis

• Growth • SWOT Analysis
• Stability Corporate
• Retrenchment

Generic Strategies • SBU Analysis

• Low cost (BCG Matrix)
• Differentiation Business
• Focus

Functional Strategies
• Marketing • Functional Analysis
Functional
• Product
• Financial etc
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Hierarchy of Strategy

• Corporate Strategy
– Overall business direction (e.g. Diversify into a
different industry)
• Business Strategy
– Business Unit Level Decision making (e.g.
Increase market share)
• Functional Strategy
– Functional areas level (e.g. Increase sales
level)

10
Corporate Level Business Decisions
Michael Porter’s 5 Forces of Competitive Analysis
Potential
Entrants

Threat of
New Entrants

Industry
Bargaining Competitors Bargaining
Power of Suppliers Power of Buyers

Suppliers Buyers
Rivalry among
Existing Firms

Threat of
Substitute Products
or Services

Substitutes

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Corporate Level Business Strategies

S W
• Structure • Structure
Internal

• Culture • Culture
• Resources • Resources
• Agency • Agency

O T
External

• Competitors • Political factors

• Customers • Economic Factors
• Unions • Socio-Cultural Issues
• Suppliers • Technology Factors

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Business Level Strategic Decisions

High

Question
Stars
Market Growth

Marks

Cash
Dogs
Cows
Low

High Relative Market Share Low

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Business Level Strategic Decisions

Strategic Advantage

Uniqueness Low Cost Position

Industrywide Overall Cost

Differentiation
Leadership
Strategic Target

Particular
Segment Focus
only

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Functional Strategic Level Decisions

C o r p o r a t io n " A "
C EO

M a r k e t in g F in a n a c e H R R &D IS
G M C FO G M G M G M

e.g STP • Capital • Job/Skill Match • Process R&D • Manage info flow
Mix budgeting • Job analysis • Product R&D to manage:
Life Cycle • Leverage • Tech competence  Early warning
 Automation
 MIS

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Practical Example

• Organisational Vision and objectives • Understand the Budget Requirements

• An enabling organisational Structure • CAPEX
• Project Rainbow: • OPEX
• Interrelation between projects • MTEF
• Projects’ support of objectives Strategic • Expenditure
• Commitments

• Clarify levels of ACCOUNTABILITY

• Who’s responsible for which project(s)
• Identify needed administrative capabilities, • Design a project integration matrix (IM)
• Develop a tight compliance culture
Policies and procedures:
• Standard Project Charters; with meeting IM milestones
• Reporting standards;
• Project Initiation charters;
Tactical • Identify an executive resource to
ensure compliance at all times
• Develop Analysis capabilities

• Understand the
• Develop an execution strategy
Postmasters’ brief
to meet project IM milestones • Map Postmasters’ brief to
• Standing Integration
strategic objectives
meetings;
• Standard reporting Operational • Map individual projects to
Postmasters’ brief

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Corporate Governance, ethics and
Social Responsibility

Strategic Management for MBA: ADM 807

Ethics

• Business-Society interactive relationship

– Forces in the societal or general environment
affect business decisions through groups in
the task environment.
– There is therefore need for business to be
constantly aware of variables and forces in
both the task and societal environment.
– Lack of SR and ethical business dealing can
cause conflict.

18
Ethics

Family Situational Values and Peer

Experience
Influence Factors Morals influence

Individual ethics

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SR and Ethics

• Carroll’s responsibilities of business

– Economic : ROI
– Legal : Abide by all laws and govt. regulations
– Social : Discretionary
– Ethical : Good corporate citizenship as
expected by society

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Approached to SR

Degree of Social Responsibility

Social Social Social Social

Obstruction Obligation Response Contribution

Lowest Highest

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 Industry Analysis

Strategic Management for MBA: ADM 807

The Strategic Management Process

Environmental Strategy Strategy Evaluation and

Scanning Formulation Implementation Control
Industry Analysis

Mission
External
Objectives
• Societal
Environment Strategies

Policies
•Task
Environmental Programs

Internal Budgets

• Structure
Procedures
• Culture
• Resources Performance

23
Industry Analysis – Porter’s 5 Forces

Potential
Entrants

Threat of
New Entrants

Industry
Bargaining Competitors Bargaining
Power of Suppliers Power of Buyers

Suppliers Buyers
Rivalry among
Existing Firms

Threat of
Substitute Products
or Services

Substitutes

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Threat of Potential Entrants
Potential
Entrants

Industry
Competitors
Suppliers Buyers

Substitutes
This force is influenced by barriers to entry:

• Economies of scale
• Product differentiation
• Capital requirements
• Switching Costs
• Access to distribution channels
• Cost disadvantages independent of size
• Government policy

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Rivalry among existing firms
Potential
Entrants

Industry
Competitors
Suppliers Buyers

Substitutes
This force is influenced by:

• Number of competitors
• Rate of industry growth
• Product or service characteristics
• Amount of fixed costs
• Capacity
• Height of exit barriers
• Diversity of rivals

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Threat of substitute products or services
Potential
Entrants

Industry
Competitors
Suppliers Buyers

Substitutes

Substitute products appear to be different but

can satisfy potential returns of an industry by
placing a ceiling on the prices, firms in the industry
can profitably charge. To the extent that switching costs
are low, substitutes may have a strong effect on an industry.

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Bargaining power of buyers
Potential
Entrants

Industry
Competitors
Suppliers Buyers

Substitutes

This force is influenced by:

• Large purchases
• Backward integration – Producing the product itself
• More suppliers in the industry
• Low costs for changing suppliers
• A product constituting a large % of consignment,
encouraging shopping for a lower price
• Sensitivity to cost and service differences

28
Bargaining power of suppliers
Potential
Entrants

Industry
Competitors
Suppliers Buyers

Substitutes
This force is influenced by:

• Few suppliers in an industry

• Less # of substitutes
• Forward integration by suppliers
• Purchases being a small portion of a
supplier group’s goods

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 Strategic Planning Process

Strategic Management for MBA: ADM 807

 Environmental Scanning:

External and Internal

Environmental Scan
Strategic Management for MBA: ADM 807
The Strategic Management Process

Environmental Strategy Strategy Evaluation and

Scanning Formulation Implementation Control
Industry Analysis

Mission
External
Objectives
• Societal
Environment Strategies

Policies
•Task
Environmental Programs

Internal Budgets

• Structure
Procedures
• Culture
• Resources Performance

32
2 Categories of the external environment

• Societal environment
– General environmental factors like:
• Socio-cultural, economic, political/legal and
technological forces
• Task environment
– Groups affecting the corporation and whom
the corporation affects
• Government, shareholders, suppliers,
customers, creditors, competitors, unions and
community.

33
Internal Scanning and analysis: RBV of the firm

• Resource Based View (RBV) of the firm

Emphasizes the core competence as a

unifying factor among a firm’s businesses.
– Identifies core competency as a value creation
tool
– Uses the firm’s resources [(In)tangible and
capabilities] as primary determinant of its
strength and weaknesses

34
RBV Approach to strategy analysis

• 5 activities are involved:

– Identify and classify resources in terms of
strengths and weaknesses
– Combine different core competencies into a
unified whole
– Appraise resources based on their
appropriability (Ability to harvest profits
resulting from the use of resources)
– Select the best strategy
– Upgrade weaknesses to fill resource gaps

35
Characteristics of resources, important in sustaining competitive
advantage

• Durability: At what rate does the resource

depreciate or become obsolete?
• Transparency: How easy is it for other firms
to understand the coherence of your
resources?
• Transferability : How easy can your resources
be transferred to competitors?
• Replicability : How easy is it for competitors to
duplicate your success?

36
Functional Analysis: SCR Analysis

• Areas of Focus are:

– Structure
• Divisional, Simple or conglomerate
– Culture
• Gives a sense of identity and fulfills the
following:
– Gives a sense of identity
– Encourages commitment
– Adds stability
– Provides a frame of reference and guide for
appropriate behaviour

37
The Strategic Management Process

Environmental Strategy Strategy Evaluation and

Scanning Formulation Implementation Control
Industry Analysis

Mission
External
Objectives
• Societal
Environment Strategies

Policies
•Task
Environmental Programs

Internal Budgets

• Structure
Procedures
• Culture
• Resources Performance

38
SWOT Analysis – Bridge between Enviro Scan and Strategy
Formulation

• Analysis of the corporation’s Strength,

Weaknesses, Opportunities and Threats
• It’s aimed at identifying the corporation’s
distinctive competence
• Internal Factor Analysis, External Factor
Analysis

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Review of the mission and objectives

• Mission – A broad statement indicating why

the business exists
• Goals – Broad open-ended statements of
where the business intends to be in the future
• Objectives – Measurable, precise and
quantifiable statements indicating where the
business intends to be in a specified point in
time

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Corporate Strategies
There are 3 grand strategies that can be taken @ a corporate level,
Growth, Stability and Retrenchment Strategies
Competitive Position

W R, t R, c R, b

A G G

S G S G
H M L
Industry Attractiveness

41
Growth strategies

• Concentration
• Vertical Integration – Growth through taking over
functions previously performed by others (Backward or
forward integration)
• Horizontal Integration – Growing in other geographic
locations or increasing product ranges
• Diversification
• Concentric diversification – Diversifying into related
industries
• Conglomerate diversification – Diversifying into
unrelated industries

42
Stability Strategies
• Pause or proceed with caution
– No significant change in corporate strategy
– If industry is facing an uncertain future, a company may pause its
growth initiatives to consolidate its resources
– A company my proceed with caution and not make sudden moves or
take unjustified moves in an industry even if it has a strong competitive
advantage
• No change or profit strategy
– A company may have no obvious opportunity/threat
– When there are few aggressive new competitors
– A no change strategy is appropriate when there’s no significant change
in the company’s situation
– A company in a matured industry with a declining profit and sales level
may follow a profit strategy, which helps it to get through the financial
difficulty period by cutting expenses in the short run

43
Retrenchment Strategies

• Turnaround
– Contract
– Consolidate
• Captive company
– Captive company
– Sell out
• Bankruptcy
– Liquidation
– Bankruptcy

44
Business/Competitive Strategy

• Focuses on improving the competitive position of a

firm’s products/services
• Addresses the HOW and not the WHAT
• Following the corporate strategy formulation,
decisions will be taken pertaining to:
– Basis to competition, cost reduction/differentiation
– Scope of competing, i.e Niche or Industry-wide

45
Business Level Strategic Decisions

Strategic Advantage

Uniqueness Low Cost Position

Industrywide Overall Cost

Differentiation
Leadership
Strategic Target

Particular
Segment Focus
only

46
3 Generic Strategies

• Low cost – Ability operate more efficiently than the

competition
• Differentiation – Provide a superior service
• Focus – Providing superior service to a particular
target only

• Low cost and differentiation are industry-wide

strategies. Focus is for a segment

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Functional Strategic Level Decisions

C o r p o r a t io n " A "
C EO

M a r k e t in g F in a n a c e H R R &D IS
G M C FO G M G M G M
• Market Dev Strategy • Capital • Job/Skill Match • Process R&D • Manage info flow
• Mkt penetration budgeting • Job analysis • Product R&D to manage:
• Dev new mkts • Leverage • Tech competence  Early warning
for current goods  Automation
• Product dev Strategy  MIS
• Push/pull strategy
• Pricing

48
Example

A REAL LIFE EXAMPLE OF DEVELOPING A

FUNCTIONAL STRATEGY FOR THE INFORMATION
TECHNOLOGY OF THE S.A POST OFFICE

49
Strategic Management Process:

Strategy Implementation
Strategic Management for MBA: ADM 807
The Strategic Management Process

Environmental Strategy Strategy Evaluation and

Scanning Formulation Implementation Control
Industry Analysis

Mission
External
Objectives
• Societal
Environment Strategies

Policies
•Task
Environmental Programs

Internal Budgets

• Structure
Procedures
• Culture
• Resources Performance

51
Implementation

• Who implements strategy

– Everyone implements, ‘though at different levels
– To foot dragging, involve everyone
• What must be done
– Develop programs, budgets and procedures
• Strategy must be action oriented and standardised
– Strive for synergy
• Bettered outcomes from a combination of functions than
would be individually

52
How strategy is implemented

• The following are primary considerations:

– Organising: Structure
– Structure follows strategy
– Organizational life cycle
• 4 Stages
– Birth
– Growth
– Maturity
– Decline

53
Product Life Cycle

High Stages
Introduction Growth Maturity Decline
Sales Volume

Time
Low

54
The Strategic Management Process

Environmental Strategy Strategy Evaluation and

Scanning Formulation Implementation Control
Industry Analysis

Mission
External
Objectives
• Societal
Environment Strategies

Policies
•Task
Environmental Programs

Internal Budgets

• Structure
Procedures
• Culture
• Resources Performance

55
Evaluation and Control Process

5. Take Corrective Action

2. Establish 3. Measure 4. Match

1. Determine what No
Performance Actual Performance
To measure Match
Standards Performance to standards

Matches

STOP

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 The Strategic Audit

Strategic Management for MBA: ADM 807

8 Stages of the Strategic Audit

1. Evaluate the current situation

• Financial Analysis
• The strategic posture
2. Evaluate the strategic Managers
3. Conduct an external environmental scan
4. Conduct an internal environmental scan
5. Perform a SWOT analysis
6. Develop alternatives and recommend the best
7. Outline the implementation of the chosen alternative
8. Define the evaluation and control process for checking the
success of your chosen alternative

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