Business Management

BMNG7311

Course lecturer:

Ricardo Carvalho
 Ricardo Carvalho
• 20+ Year Corporate Career in the
hospitality and education environment
• BCom (Financial Management) – UJ
• MBA – GIBS, University of Pretoria
• Qualified Coach – Results Coaching
System
• Lecturer / Facilitator (8+ years)
• Consultant
• Currently PM for School of Management
• Part-time lecture at GIBS & USB-Ed
 Business Management 3A
Course outline themes
1. Strategic Management – An overview
2. Sustainable Organisation
3. Strategic Direction
4. Strategic Decision Enablers
5. Analysing the Macro Environment
6. Analysing the Industry Environment
7. Analysing the Internal Environment
Business Management 3A

Learning Unit 1

Chapter 1

Strategic Management –
An overview

Theme 1: What is Strategy?

 Introduction – The Nature of Strategic
Management

Learning objectives
Theme 1: What is strategy?
• Explain the concept of strategy
• Explain the development of strategy in the 20th & 21st
century.
• Discuss the nature of strategy
• Discuss the role of strategy

Theme 2: Understanding strategic management

• Explain the concept of strategic management
• Compare the two perspectives on managing
strategically
• Summarise the concept of the strategic link
 Introduction – The Nature of Strategic
Management

Learning objectives
Theme 3: Strategy in practice?
• Examine the tests for a winning strategy
• Critique strategic paradoxes
 Introduction – The Nature of Strategic
Management

Key learning unit questions

• What is strategy?
• How do companies go about creating a strategy?
• What separates a good strategy from a poor strategy?
 Introduction – The Nature of Strategic
Management

Class Discussion
• Name a company, that you believe has a great strategy
• Why do you believe this.
• Has it always been this way?
• Do you think they will still be top of mind 5 years from
now?
 Introduction – The Nature of Strategic
Management

Introduction to Strategy
• Competitive environment
• Sustainable business models
• Need to think strategically to gain a competitive
advantage
• Strategic questions include
 Where are we now?
 Where do we want to go?
 How will we get there?
 How are we doing?
 Introduction – The Nature of Strategic
Management
Introduction to Strategy continued
• Strategic questions include
 Where are we now (Strategic analysis)
 Where do we want to go (Strategic direction)
 How will we get there (Strategy formulation and
implementation) – this will be covered in BMNG7312
 How are we doing (Strategy evaluation)
• Key to sustainability lies in an organisations ability to
successfully implement its strategies
• Organisations cannot succeed in a vacuum and thus
must be part of society and the environment
• Hence triple-bottom line reporting
 Introduction – The Nature of Strategic
Management

Introduction to Strategy continued

• Strategic Analysis (what is/are our....)
 competitive positioning
 resources and dynamic capabilities
 appeal and innovative value added to its products
and services
 extent to which it meets the needs and
expectations of its customers and stakeholders
 environmental integrity
 current performance
 Introduction – The Nature of Strategic
Management

Introduction to Strategy continued

• Strategic Direction, we focus on:
 our vision and goals
• Strategy formulation and implementation depends on:
 how strategy is formulated at the different
organisational levels based on customer needs,
stakeholder expectations, integration with the
environment, and ethical perspectives
 the influence of leadership, values, organisational
culture, and organisational architecture on strategy
implementation
 Introduction – The Nature of Strategic
Management

Introduction to Strategy continued

• Strategic Control (Feedback)
 Managing performance of the organisation through
strategic control measures and appropriate
feedback
 Introduction – The Nature of Strategic
Management
What is strategy https://www.youtube.com/watch?v=TD7WSLeQtVw
 Introduction – The Nature of Strategic
Management

The Essence of Strategy

Strategy conceptualisation
• Key element of managerial activity.
• What does strategy really mean?
 Table 1.1, Selected definitions of strategy, page 9
 Introduction – The Nature of Strategic
Management

The Essence of Strategy continued

Strategy conceptualisation continued

• Key themes about strategy include:
 Giving the business direction
 Determining the goals of the organisation
 A means to achieve a goal
 Links resources and capabilities with competitor
actions and business environment
 Meeting customer needs and creating a
sustainable competitive advantage
 Providing a plan for management
 Introduction – The Nature of Strategic
Management

The Essence of Strategy continued

The historical origins of the concept of strategy

• Greek word strategos, meaning “General”
• Strategos – statos (Army) and agein (to lead)
• Sun Tzu’s – The art of war written in about 500BC
• Military strategies
• Business strategies
• Sport strategies
 Introduction – The Nature of Strategic
Management

The Essence of Strategy continued

The historical origins of the concept of strategy continued

• Commonalities of military & business strategies
 Strategies is concerned with long-term direction
and sustainable success
 Strategy exploits the links between the internal and
external environments – the so-called strategic link
 Strategies requires major resources
 Introduction – The Nature of Strategic
Management

The Essence of Strategy continued

The historical origins of the concept of strategy continued

• Commonalities of military & business strategies cont.
 Strategies are likely to affect the whole
organisation
 Strategies are shaped by the values and
expectations of stakeholders
 Strategies are directed by vision – the ability to
move forward
 Introduction – The Nature of Strategic
Management
The Essence of Strategy continued

Strategy development in the 20th & 21st centuries

• F.W. Taylor – Time and motion studies to identify the
best way for employees to perform a task
• Henri Fayol – Formal structures and processes for the
adequate performance of all important tasks
• Henry Ford – Focused on innovative technology,
mechanisation, quality standards, redesign, and cost
cutting
• Alfred Sloan – Emphasised rapid model changes, niche
marketing, structured management teams and
separate operational and strategic planning
 Introduction – The Nature of Strategic
Management

The Essence of Strategy continued

Strategy development in the 20th & 21st centuries

• Peter Drucker – argued for proactive planning to shape
the organisation’s environment
• Philip Zelznick – introduced the notion of distinctive
competence
• Table 1.2 - The evolution of strategic management
page 11 & 12
 Introduction – The Nature of Strategic
Management

The Essence of Strategy continued

• Strategy development in the 20th & 21st centuries
• World War II – Development of game theory (prisoners’
dilemma)
• 1950’s - 1970’s – Rational planning (prescriptive and
predictive approaches to strategy generation)
• 1970’s - mid 80’s – Quest for positioning and market
leadership (competitive advantage in a changing
environment)
 Michael Porter
 Boston Consulting Group
 Introduction – The Nature of Strategic
Management

The Essence of Strategy continued

Strategy development in the 20th & 21st centuries

• Late 80’s - 1990’s – Shift to the internal organisational
environment, and from strategic planning to strategic
management (inside-out perspective)
• 2000’s – Theoretical development, rethinking the
contemporary business models including the
application of game and complexity theories to
business, and the analysis of the disruptive effect of
technology
 Introduction – The Nature of Strategic
Management

The Essence of Strategy continued

Strategy development in the 20th & 21st centuries

• 2001 Chantell Illbury & Clem Sunter (SA strategists) –
advocated the re-emergence of scenario planning as a
valuable tool in preparing for possible different futures.
• Other developments include:
 Diagnosis of the 21st century competitive landscape
and impact of globalisation
 Strategic use of knowledge in organisations
 Application of real options thinking, risk
management, and scenario planning
 Introduction – The Nature of Strategic
Management

The Essence of Strategy continued

Strategy development in the 20th & 21st centuries

• Sustainability – implies that organisations can achieve
a competitive advantage with above-average returns by
creating value, managing ethically, and being
sustainable, corporate global citizens with social,
environmental, and economic integrity
• King Report on Corporate Governance
 Introduction – The Nature of Strategic
Management

The Nature and Role of Strategy

• Henry Mintzberg outlined five approaches to
management, known as the 5 P’s of strategy
 Plan – overall direction and course of action
 Position – meeting customers needs, outward
looking
 Perspective – way of doing things
 Ploy – outwit competitors
 Pattern – consistent behaviour over time
 Introduction – The Nature of Strategic
Management
The Nature and Role of Strategy continued

The 5 P’s of strategy continued

• Strategy as a Plan
 provides overall direction and course of action
 views strategy as a top-down, rational and
structured process
 a match between internal capabilities and external
opportunities is desired (strategic link)
 criticised for not being adaptable enough to deal
with the unpredictability of the business
environment
 Introduction – The Nature of Strategic
Management

The Nature and Role of Strategy continued

The 5 P’s of strategy continued

• Strategy as a Position
 focus is on products and their position in the
external competitive market
 as a strategy looks downwards, focusing on the
satisfaction of customers needs
 It also looks outwards towards external competitive
market
 its view is on an outside-in perspective
 Introduction – The Nature of Strategic
Management

The Nature and Role of Strategy continued

The 5 P’s of strategy continued

• Strategy as a Perspective
 strategies formed on what has been done in the
past.
 the collective experience and views of individuals
within the organisation are taken into account, in
other words it refers to the organisations way of
doing things or organisations culture
 the approach starts internally and the focus is on
an inside-out perspective.
 Introduction – The Nature of Strategic
Management

The Nature and Role of Strategy continued

The 5 P’s of strategy continued

• Strategy as a Ploy
 a specific action is taken to disrupt competitor’s
activities
 a smokescreen to manoeuvre and outwit a
competitor
 e.g. give an impression of expanding capacity by
purchase of land to discourage competitor from
building a new plant, however the real strategy is
not expansion but the ploy
 Introduction – The Nature of Strategic
Management

The Nature and Role of Strategy continued

The 5 P’s of strategy continued

• Strategy as a Pattern
 looks at the difference between deliberate and
emergent strategies and the consistency of
strategic behaviour over time
 a deliberate strategy is an intended (planned)
strategy that is fully realised (actually done)
 intended strategies that are not realised are called
un-realised or abandoned strategies
 Introduction – The Nature of Strategic
Management

The Nature and Role of Strategy continued

The 5 P’s of strategy continued

• Strategy as a Pattern continued
 in reality only a small number of intended strategies
are actually realised.
 an emergent strategy is an unplanned response to
unforeseen circumstances as interpreted by
individual managers
 Figure 1.2, page 18
 Introduction – The Nature of Strategic
Management

The Nature and Role of Strategy continued

The 5 P’s of strategy continued

• The 5 P’s outline the different approached or ways of
thinking about strategy.
• They are theoretical frameworks and are not mutually
exclusive, thus different approaches may be followed
within an organisation
• Key is understanding the different approaches which
will assist you in creating a workable and successful
strategy
 Introduction – The Nature of Strategic
Management

The Nature and Role of Strategy continued

Levels of strategy
• The overall strategy for a business can be broken down
into three distinct levels:
 Business
 Corporate
 Functional
• There must be cohesion between the various levels of
strategy, thus functional strategies must support
business strategies in order to achieve long-term
objectives
 Introduction – The Nature of Strategic
Management

The Nature and Role of Strategy continued

Levels of strategy continued

• Business level strategy
 relates to how the organisation competes and
attains a competitive advantage in each area of
business
 strategic link between internal capabilities and
external relationships is important
 Introduction – The Nature of Strategic
Management

The Nature and Role of Strategy continued

Levels of strategy continued

• Corporate level strategy
 relates to the overall purpose and scope of an
organisation
 addresses the question of how value can be added
at all business levels and lines
 Introduction – The Nature of Strategic
Management
The Nature and Role of Strategy continued

Levels of strategy continued

• Functional level strategy
 which includes operational level strategy, underpins
business level strategy by implementing business
strategies through the functional areas such as
marketing, human relations, production, information
systems, and finance
 Primary role of functional strategy is to support the
overall business strategy and competitive approach
by performing strategy-critical activities
 Table 1.3, page 21 (summary of the 3 strategies)