University of North-West Graduate School of Business and Government Leadership

1. University of North-WestGraduate School of Business and Government Leadership Strategic Management for MBA: ADM 807

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

3. What is Strategy Strategic Management for MBA: ADM 807

4. What is strategy Defined, strategy is: The execution of a set of choices based on customer Needs, which identifies the essential positioning, Competitiveadvantages, and configuration of Activities necessary to create value superior To competition and generate superior returns

5. Operational Effectiveness • Achievement of the best practices through: • Using state of the art technology • Eliminate waste • Continuous organisational improvement • Providing superior service • Increased productivity

6. 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

7. 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

8. Hierarchy of Strategy Strategic Management for MBA: ADM 807

9. Functional Business Corporate Strategies Tools of Analysis • Industry Analysis • SWOT Analysis • Grand Strategies • Growth • Stability • Retrenchment • Generic Strategies • Low cost • Differentiation • Focus • SBU Analysis • (BCG Matrix) • Functional Strategies • Marketing • Product • Financial etc • Functional Analysis Hierarchy of Strategy

10. 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)

11. Potential Entrants Threat of New Entrants Industry Competitors Bargaining Power of Suppliers Bargaining Power of Buyers Suppliers Buyers Rivalry among Existing Firms Threat of Substitute Products or Services Substitutes Corporate Level Business Decisions Michael Porter’s 5 Forces of Competitive Analysis

12. S W • Structure • Culture • Resources • Agency • Structure • Culture • Resources • Agency Internal O T • Competitors • Customers • Unions • Suppliers • Political factors • Economic Factors • Socio-Cultural Issues • Technology Factors External Corporate Level Business Strategies

13. High Stars Question Marks Market Growth Cash Cows Dogs Low Relative Market Share High Low Business Level Strategic Decisions

14. Strategic Advantage Uniqueness Low Cost Position Differentiation Overall Cost Leadership Industrywide Strategic Target Particular Segment only Focus Business Level Strategic Decisions

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

16. Organisational Vision and objectives • An enabling organisational Structure • Project Rainbow: • Interrelation between projects • Projects’ support of objectives • Understand the Budget Requirements • CAPEX • OPEX • MTEF • Expenditure • Commitments Strategic • Clarify levels of ACCOUNTABILITY • Who’s responsible for which project(s) • Identify needed administrative capabilities, • Policies and procedures: • Standard Project Charters; • Reporting standards; • Project Initiation charters; • Develop Analysis capabilities • Design a project integration matrix (IM) • Develop a tight compliance culture • with meeting IM milestones • Identify an executive resource to • ensure compliance at all times Tactical • Understand the • Postmasters’ brief • Map Postmasters’ brief to • strategic objectives • Map individual projects to • Postmasters’ brief • Develop an execution strategy • to meet project IM milestones • Standing Integration • meetings; • Standard reporting Operational Practical Example

17. Corporate Governance, ethics and Social Responsibility Strategic Management for MBA: ADM 807

18. 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.

19. Family Influence Situational Factors Values and Morals Experience Peer influence Individual ethics Ethics

20. 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

21. Degree of Social Responsibility Social Obstruction Social Obligation Social Response Social Contribution Lowest Highest Approached to SR

22. Industry Analysis Strategic Management for MBA: ADM 807

23. Environmental Scanning Strategy Formulation Strategy Implementation Evaluation and Control Mission External • Societal • Environment • Task • Environmental Objectives Strategies Policies Programs Internal • Structure • Culture • Resources Budgets Procedures Performance The Strategic Management Process Industry Analysis

24. Potential Entrants Threat of New Entrants Industry Competitors Bargaining Power of Suppliers Bargaining Power of Buyers Suppliers Buyers Rivalry among Existing Firms Threat of Substitute Products or Services Substitutes Industry Analysis – Porter’s 5 Forces

25. Potential Entrants Industry Competitors Suppliers Buyers Substitutes Threat of Potential Entrants • 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

26. Potential Entrants Industry Competitors Suppliers Buyers Substitutes Rivalry among existing firms • 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

27. Potential Entrants Industry Competitors Suppliers Buyers Substitutes Threat of substitute products or services 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.

28. Potential Entrants Industry Competitors Suppliers Buyers Substitutes Bargaining power of buyers • 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

29. Potential Entrants Industry Competitors Suppliers Buyers Substitutes Bargaining power of suppliers • 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

30. Strategic Planning Process Strategic Management for MBA: ADM 807

31. Environmental Scanning: External and Internal Environmental Scan Strategic Management for MBA: ADM 807

32. Environmental Scanning Strategy Formulation Strategy Implementation Evaluation and Control Mission External • Societal • Environment • Task • Environmental Objectives Strategies Policies Programs Internal • Structure • Culture • Resources Budgets Procedures Performance The Strategic Management Process Industry Analysis

33. 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.

34. 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

35. 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

36. 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?

37. 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

38. Environmental Scanning Strategy Formulation Strategy Implementation Evaluation and Control Mission External • Societal • Environment • Task • Environmental Objectives Strategies Industry Analysis Policies Programs Internal • Structure • Culture • Resources Budgets Procedures Performance The Strategic Management Process

39. 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

40. 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

41. H M L Competitive Position Corporate Strategies There are 3 grand strategies that can be taken @ a corporate level, Growth, Stability and Retrenchment Strategies R, t R, c R, b W G G A G S G S Industry Attractiveness

42. 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

43. 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

44. Retrenchment Strategies • Turnaround • Contract • Consolidate • Captive company • Captive company • Sell out • Bankruptcy • Liquidation • Bankruptcy

45. 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

46. Strategic Advantage Uniqueness Low Cost Position Differentiation Overall Cost Leadership Industrywide Strategic Target Particular Segment only Focus Business Level Strategic Decisions

47. 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

48. Functional Strategic Level Decisions • Market Dev Strategy • Mkt penetration • Dev new mkts • for current goods • Product dev Strategy • Push/pull strategy • Pricing • Manage info flow • to manage: • Early warning • Automation • MIS • Process R&D • Product R&D • Tech competence • Job/Skill Match • Job analysis • Capital • budgeting • Leverage

49. Example A REAL LIFE EXAMPLE OF DEVELOPING A FUNCTIONAL STRATEGY FOR THE INFORMATION TECHNOLOGY OF THE S.A POST OFFICE

50. Strategic Management Process: Strategy Implementation Strategic Management for MBA: ADM 807