Business-Strategic Management Study Guide

Strategic Management Damelin©
BCOM IN BUSINESS MANAGEMENT

BCOM IN MARKETING AND BUSINESS
MANAGEMENT
BCOM IN INFORMATION TECHNOLOGY
BUSINESS MANAGEMENT 3A/ STRATEGIC

MANAGEMENT
STUDY GUIDE
2020
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Table of Contents
1. About Brand .................................................................................................................................... 7

2. Our Teaching and Learning Methodology ...................................................................................... 8
2.1 Icons ...................................................................................................................................... 10
3. Introduction to the Module .......................................................................................................... 11
3.1 Module Information.............................................................................................................. 11
3.2 Module Purpose .................................................................................................................... 11
3.3 Outcomes .............................................................................................................................. 11
3.4 Assessment ........................................................................................................................... 12
3.5 Planning Your Studies ........................................................................................................... 12
4. Prescribed Reading ....................................................................................................................... 12
4.1 Prescribed Book .................................................................................................................... 12
4.2 Recommended Articles ......................................................................................................... 13
4.3 Recommended Multimedia .................................................................................................. 13
5. Module Content ............................................................................................................................ 14
5.1 Study Unit 1 Strategic Management Essentials .................................................................... 15
5.1.1 Introduction .................................................................................................................. 15
5.1.2 Definitions of Strategic Management ........................................................................... 16
5.1.3 Stages of Strategic Management .................................................................................. 16
5.1.4 Integrating intuition and Analysis ................................................................................. 17
5.1.5 Strategic management model....................................................................................... 19
5.1.6 Benefits of Strategic Management ............................................................................... 20
5.1.7 Conclusion ..................................................................................................................... 22
5.1.8 Revision questions ........................................................................................................ 23
5.2 Study Unit 2: Outside -Use Strategic Planning ...................................................................... 24
5.2.1 Introduction .................................................................................................................. 24
5.2.2 Multinational Organizations ......................................................................................... 24
5.2.3 Advantages and Disadvantages of entering global markets ......................................... 25
5.2.4 The Global Challenge .................................................................................................... 26
5.2.5 Communication differences across countries............................................................... 27
5.2.6 Business Cultures across Countries............................................................................... 28
5.2.7 African Countries........................................................................................................... 29
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5.2.8 Conclusion ..................................................................................................................... 30

5.2.9 Revision Questions ........................................................................................................ 32
5.3 Study Unit 3: Ethics/Social Responsibility and Sustainability ............................................... 33
5.3.1 Introduction .................................................................................................................. 33
5.3.2 Business Ethics .............................................................................................................. 34
5.3.3 Social Responsibility ...................................................................................................... 36
5.3.4 Environmental Sustainability ........................................................................................ 36
5.3.5 Conclusion ..................................................................................................................... 37
5.4 Study Unit 4: Types of Strategies .......................................................................................... 40
5.4.1 Introduction .................................................................................................................. 40
5.4.2 Types of Strategies ........................................................................................................ 40
5.4.3 Michael Porter’s Five Generic Strategies ...................................................................... 42
5.4.4 Means for Achieving Strategies .................................................................................... 43
5.4.5 Strategic Management in Non-Profit and Governmental organisations ...................... 45
5.4.6 Strategic Management in Small firms ........................................................................... 45
5.4.7 Conclusion ..................................................................................................................... 48
5.5 Study Unit 5: Vision and Mission Analysis ............................................................................ 49
5.5.1 Introduction .................................................................................................................. 49
5.5.2 What do we want to become?...................................................................................... 49
5.5.3 What is our business? ................................................................................................... 50
5.5.4 Benefits of a clear Vision and Mission Statements ....................................................... 51
5.5.5 Characteristics of a Mission Statement ........................................................................ 51
5.6 Study Unit 6: Internal Audit .................................................................................................. 54
5.6.1 Introduction .................................................................................................................. 54
5.6.2 Nature of an Internal Audit ........................................................................................... 54
5.6.3 Resource Based View .................................................................................................... 55
5.6.4 Management ................................................................................................................. 55
5.6.5 Marketing ...................................................................................................................... 57
5.6.6 Finance and Accounting ................................................................................................ 57
5.6.7 Production and Operations ........................................................................................... 59
5.6.8 Research and Development .......................................................................................... 59
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5.6.9 Management Information Systems .............................................................................. 60

5.6.10 Internal Factor Evaluation (IFE) Matrix ......................................................................... 60
5.6.11 Conclusion ..................................................................................................................... 62
5.7 Study Unit 7: The External Audit ........................................................................................... 63
5.7.1 Introduction .................................................................................................................. 63
5.7.2 The Nature of an External Audit ................................................................................... 63
5.7.3 The Industrial Organisation view .................................................................................. 64
5.7.4 Economic Factors .......................................................................................................... 65
5.7.5 Social, Cultural, Demographic and Natural Environment Forces.................................. 65
5.7.6 Political, Governmental and Legal Forces ..................................................................... 66
5.7.7 Technological Forces ..................................................................................................... 66
5.7.8 Competitive Forces ....................................................................................................... 67
5.7.9 Competitive Analysis: Porter’s Five Forces Model ........................................................ 67
5.7.10 The Competitive Profile Matrix ..................................................................................... 68
5.7.11 Conclusion ..................................................................................................................... 71
5.8 Study Unit 8: Strategy Generation and Selection ................................................................. 72
5.8.1 Introduction .................................................................................................................. 72
5.8.2 The process of generating and selecting strategies ...................................................... 72
5.8.3 A comprehensive strategy formulation framework ..................................................... 73
5.8.4 The Strengths –Weaknesses-Opportunities-Threats (SWOT) Matrix ........................... 74
5.8.5 The Strategic Position and Action Evaluation (SPACE) Matrix ...................................... 75
5.8.6 The Boston Consulting Group (BCG) Matrix ................................................................. 76
5.8.7 The Internal- External (IE) Matrix.................................................................................. 76
5.8.8 The Quantitative Strategic Planning Matrix (QSPM) .................................................... 77
5.8.9 Cultural Aspects of Strategy Choice .............................................................................. 78
5.8.10 The Politics of Strategy Choice ...................................................................................... 78
5.8.11 Conclusion ..................................................................................................................... 79
5.9 Study Unit 9: Strategy Implementation ................................................................................ 80
5.9.1 Introduction .................................................................................................................. 80
5.9.2 The Nature of Strategy Implementation ....................................................................... 80
5.9.3 Current Marketing Issues .............................................................................................. 81
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5.9.4 Market Segmentation ................................................................................................... 81

5.9.5 Product Positioning ....................................................................................................... 82
5.9.6 Finance/Accounting Issues............................................................................................ 83
5.9.7 Conclusion ..................................................................................................................... 84
5.10 Study Unit 10: Strategy Execution ........................................................................................ 85
5.10.1 Introduction .................................................................................................................. 85
5.10.2 The nature of strategy implementation........................................................................ 85
5.10.3 Annual Objectives ......................................................................................................... 86
5.10.4 Managing Resistance to Change ................................................................................... 86
5.10.5 Creating a Strategy Supportive Culture ........................................................................ 87
5.10.6 Human Resource Concerns when implementing strategies ......................................... 87
5.10.7 Conclusion ..................................................................................................................... 89
5.11 Study Unit 11: Strategy Monitoring ...................................................................................... 90
5.11.1 Introduction .................................................................................................................. 90
5.11.2 The nature of strategy evaluation................................................................................. 90
5.11.3 Consistency ................................................................................................................... 91
5.11.4 Consonance ................................................................................................................... 91
5.11.5 Feasibility ...................................................................................................................... 91
5.11.6 Strategy Evaluation ....................................................................................................... 91
5.11.7 The Balance Scorecard .................................................................................................. 92
5.11.8 Contingency Planning.................................................................................................... 93
5.11.9 Auditing ......................................................................................................................... 93
5.11.10 Twenty First Century Challenges in Strategic Management ..................................... 94
5.11.11 Conclusion ................................................................................................................. 95
5.11.12 Revision Questions .................................................................................................... 95
6. References .................................................................................................................................... 96
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1. About Brand
Damelin knows that you have dreams and ambitions. You’re thinking about the future, and how the
next chapter of your life is going to play out. Living the career you’ve always dreamed of takes some
planning and a little bit of elbow grease, but the good news is that Damelin will be there with you
every step of the way.
We’ve been helping young people to turn their dreams into reality for over 70 years, so rest assured,
you have our support.
As South Africa’s premier education institution, we’re dedicated to giving you the education
experience you need and have proven our commitment in this regard with a legacy of academic
excellence that’s produced over 500 000 world – class graduates! Damelin alumni are redefining
industry in fields ranging from Media to Accounting and Business, from Community Service to Sound
Engineering. We invite you to join this storied legacy and write your own chapter in Damelin’s history
of excellence in achievement.
A Higher Education and Training (HET) qualification provides you with the necessary step in the right
direction towards excellence in education and professional development.
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2. Our Teaching and Learning Methodology
Damelin strives to promote a learning-centred and knowledge-based teaching and learning

environment. Teaching and learning activities primarily take place within academic programmes and
guide students to attain specific outcomes.
• A learning-centred approach is one in which not only lecturers and students, but all
sections and activities of the institution work together in establishing a learning
community that promotes a deepening of insight and a broadening of perspective with
regard to learning and the application thereof.
• An outcomes-oriented approach implies that the following categories of outcomes are

embodied in the academic programmes:
• Culminating outcomes that are generic with specific reference to the critical cross-field
outcomes including problem identification and problem-solving, co-operation, self-
organisation and self-management, research skills, communication skills,
entrepreneurship and the application of science and technology.
• Empowering outcomes that are specific, i.e. the context specific competencies students
must master within specific learning areas and at specific levels before they exit or move
to a next level.
• Discrete outcomes of community service learning to cultivate discipline-appropriate

competencies.
Damelin actively strives to promote a research culture within which a critical-analytical approach and
competencies can be developed in students at undergraduate level. Damelin accepts that students’
learning is influenced by a number of factors, including their previous educational experience, their
cultural background, their perceptions of particular learning tasks and assessments, as well as
discipline contexts.
Students learn better when they are actively engaged in their learning rather than when they are
passive recipients of transmitted information and/or knowledge. A learning-oriented culture that
acknowledges individual student learning styles and diversity and focuses on active learning and
student engagement, with the objective of achieving deep learning outcomes and preparing students
for lifelong learning, is seen as the ideal. These principles are supported through the use of an engaged
learning approach that involves interactive, reflective, cooperative, experiential, creative or
constructive learning, as well as conceptual learning via online-based tools.
Effective teaching-learning approaches are supported by:
• Well-designed and active learning tasks or opportunities to encourage a deep rather than
a surface approach to learning.
• Content integration that entails the construction, contextualization and application of

knowledge, principles and theories rather than the memorisation and reproduction of
information.
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• Learning that involves students building knowledge by constructing meaning for

themselves.
• The ability to apply what has been learnt in one context to another context or problem.
• Knowledge acquisition at a higher level that requires self-insight, self-regulation and self-
evaluation during the learning process.
• Collaborative learning in which students work together to reach a shared goal and
contribute to one another’s learning at a distance.
• Community service learning that leads to collaborative and mutual acquisition of

competencies in order to ensure cross cultural interaction and societal development.
• Provision of resources such as information technology and digital library facilities of a high
quality to support an engaged teaching-learning approach.
• A commitment to give effect teaching-learning in innovative ways and the fostering of

digital literacy.
• Establishing a culture of learning as an overarching and cohesive factor within institutional

diversity.
• Teaching and learning that reflect the reality of diversity.
• Taking multi culturality into account in a responsible manner that seeks to foster an
appreciation of diversity, build mutual respect and promote cross-cultural learning
experiences that encourage students to display insight into and appreciation of
differences.
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2.1 Icons
The icons below act as markers, that will help you make your way through the study guide.
Additional information
Find the recommended information listed.
Case study/Caselet
Apply what you have learnt to the case study presented.
Example
Examples of how to perform a calculation or activity with the solution
/ appropriate response.
Practice
Practice the skills you have learned.
Reading
Read the section(s) of the prescribed text listed.
Revision questions
Complete the compulsory revision questions at the end of each unit.
Self-check activity
Check your progress by completing the self-check activity.
Study group / Online forum discussion

Discuss the topic in your study group or online forum.
Think point
Reflect, analyse and discuss, journal or blog about the idea(s).
Video / audio
Access and watch/listen to the video/audio clip listed.
Vocabulary
Learn and apply these terms.
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3. Introduction to the Module

Welcome to Business Management 3A/Strategic Management
Strategic management includes the formulation, implementation and evaluation of the major goals
and initiatives taken by an organisation’s top managers on behalf of shareholders. This module is
commingled with some classic and real-life applications but mostly very recent, which show the
importance of particular elements of theory to the understanding of real managerial issues.
Supporting the general view on this course is the all-inclusiveness of case studies that can be applied
to real-life situation.
3.1 Module Information

Qualification title BCom in Information Management
BCom in Marketing and Business Management
BCom in Business Management
Module Title Business Management 3A/Strategic Management
NQF Level 7
Credits 20
Notional hours 200
3.2 Module Purpose

This course aims to help managers and students better comprehend strategic management by openly
explaining, analysing, and evaluating important strategy concepts and showing how these can be
applied in the business world. Students are further empowered to use their critical faculties in
diagnosing the models, concepts and frameworks that will be introduced continually
3.3 Outcomes
At the end of this module learners should be able to:
• Illustrate and explain the strategic management process.

• Defend the use of strategy in an organization.
• Describe the influence of the environment
• Describe (competitive, scope, scale, diversity, and the value chain)
• Explain the resource-based view of the firm.
• Describe architecture, structure, and Culture
• Depict and discuss strategic management knowledge.
• Assess organizational performance and set strategic priorities
• Discuss Options and strategic methods.
• Analyse strategies in profit-making contexts.
• Examine strategies in international Contexts.
• Evaluate strategies where profit is not the main objective.
• Examine the effect of organizational change.
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3.4 Assessment
You will be required to complete both formative and summative assessment activities.
Formative assessment:
These are activities you will do as you make your way through the course. They are designed to help
you learn about the concepts, theories and models in this module. This could be through case studies,
practice activities, self-check activities, study group / online forum discussions and think points.
You may also be asked to blog / post your responses online.
Summative assessment:
You are required to do one test and one assignment. For online students, the tests are made up of the
revision questions at the end of each unit. A minimum of five revision questions will be selected to
contribute towards your test mark.
Mark allocation
The marks are derived as follows for this module:
Test 20%
Assignment 20%
Exam 60%
TOTAL 100%
3.5 Planning Your Studies

You will have registered for one or more modules in the qualification and it is important that you plan
your time. To do this look at the modules and credits and units in each module.
Create a time table / diagram that will allow you to get through the course content, complete the
activities, and prepare for your tests, assignments and exams. Use the information provided above
(How long will it take me?) to do this.
What equipment will I need? • Access to a personal computer and internet.
4. Prescribed Reading
4.1 Prescribed Book
David, F. R., David, F, R. (2015) Strategic Management: Concepts & Cases. Cate town: Pearson.
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4.2 Recommended Articles

Leiblein, M.J. and Reuer, J.J. 2020. Foundations and futures of strategic management. Strategic
Management Review, 1(1). [Online], available on: http://leeds-
faculty.colorado.edu/jere1232/Leiblein%20and%20Reuer.pdf, accessed, 19 November 2019.
Tale Skjølsvik, Frida Pemer, Bente R. Løwendahl, (2017). Strategic management of professional
service firms: Reviewing ABS journals and identifying key research themes, Journal of
Professions and Organization, Volume 4, Issue 2, July 2017, Pages 203–
239, https://doi.org/10.1093/jpo/jox005.
Lietz, T. Strategic Management – State of the art. A biometric analysis of strategic management
research conducted between 2008 and 2017. [Online], available at:
https://www.jku.at/fileadmin/gruppen/131/Master_Theses_Highlights/Lietz_Thomas_Master
s_Thesis_1.pdf, accessed, 19 November 2019.
4.3 Recommended Multimedia

Websites:
www.investopedia.com
https://www.strategicmanagement.net/
Video / Audio
https://www.youtube.com/channel/UCqeIRvS2Z_Q0p70ARvphdLA
https://www.youtube.com/watch?v=tL0OK1nFXiY
https://www.youtube.com/watch?v=EvvnoNAUPS0
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5. Module Content
You are now ready to start your module! The following diagram indicates the topics that will be
covered. These topics will guide you in achieving the outcomes and the purpose of this module.
Please make sure you complete the assessments as they are specifically designed to build you in your
learning.
STUDY UNIT 1: STRATEGIC MANAGEMENT ESSENTIALS
STUDY UNIT 2: OUTSIDE -USA STRATEGIC PLANNING
STUDY UNIT 3: ETHICS/SOCIAL RESPONSIBILITY/SUSTAINABILITY
STUDY UNIT 4: TYPES OF STRATEGIES
STUDY UNIT 5: VISION AND MISSION ANALYSIS
STUDY UNIT 6: INTERNAL AUDIT
STUDY UNIT 7: THE EXTERNAL AUDIT
STUDY UNIT 8: STRATEGY GENERATION AND SELECTION
STUDY UNIT 9: STRATEGY IMPLEMENTATION
STUDY UNIT 10: STRATEGY EXECUTION
STUDY UNIT 11: STRATEGY MONITORING
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5.1 Study Unit 1 Strategic Management Essentials
This unit provides an overview of strategic management a well-known concept

among South African people, precisely managers, professionals, business
Purpose people, technicians and workers. It presents a concrete and integrative model
of the strategic-management path, it defines basic actions in strategic
management.
By the end of this unit, you will be able to:
• Explain the meaning of strategic management.
• Describe the strategic management process.
Learning • Examine the need for integrating analysis and intuition strategic
Outcomes management.
• Illustrate and explain the strategic management model.
• Present the benefits of good strategic management.
It will take you 20 hours to make your way through this unit.
Time
Strategic the art and science of formulating, implementing, and

Management evaluating cross-functional decisions that enable an
Important terms
organization to achieve its objectives
and definitions
Mission It identifies the scope of the business of the firm and

Statement answers the question “what is our business”. Its
fundamentally the reason for an organisation’s existence.
Vision It answers the question “what do we want to become” its

Statement top management dream to be achieved in the long term.
5.1.1 Introduction
The ever-changing needs of customers and the work force have characterised today’s environment
coupled by an increasing intensity in competition, globalisation of world economies and rapid
technological changes. Accomplishment in this continuously dynamic and competitive environment
depends on the extent to which organisation develops, implements, monitors and evaluates its
business strategy (Tentine, 2000:4). One common reason for failure was not strategy, but the
execution of strategy. The problem is that strategic thinkers often face a challenge where they
overlook the obstacles to the implementation of the strategy. Without a vehicle to translate strategy
into action and allow managers and employees to link strategy to their personal beliefs,
implementation is doomed failure (Roussow, 2014). This unit will present the strategic management
model which represents an impeccable and concrete approach for formulating, implementing, and
evaluating strategies.
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5.1.2 Definitions of Strategic Management

The strategic management concept has evolved overtime and will continue to make progress. As a
result, there is a plethora of definitions and interpretations depending on the authors and sources.
Strategic management can be defined as the art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an organization to achieve its objectives. As this
definition implies, strategic management focuses on integrating management, marketing,
finance/accounting, production/operations, research and development, and information systems to
achieve organizational success (David & David, 2015).
Strategic management is the process of examining both present and future environments, formulating
the organizations objectives, and making, implementing, and controlling decisions focussed on
achieving these objectives in the present and future environments. (Garry Danny R Arnold 2012).
Strategic management can be seen as a gap which an organisation needs to bridge, the gap is located
between the present and the envisaged future situation so as to keep up with the constantly changing
environment. What this means is that there is a gap between the organisations present situation and
the organisations goals, so in order to bridge the gap, the organisation must develop strategies on
how it will move from the current situation to the ideal situation (mission).
Figure 1.1 Strategic Management Nature
The word “strategy” is derived from the Greek word strategos. It means ‘the art of generals” and is
used in military context as an art or plan of overpowering the enemy. A strategy in management
implies a plan of action to accomplish the set goals and objectives. Strategic Management is therefore
defined as all the rulings and activities arising from the formulation and execution of strategies with
the aim of achieving the company’s objectives (Roscoe, 2014).
Think point
“If you do not know where you are going, then any road will lead you
there, strategy is everything”.
.
5.1.3 Stages of Strategic Management
The strategic-management process entails three stages: strategy formulation, strategy

implementation and strategy evaluation. (David & David: 2015).
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Strategy Formulation
It incorporates the construction of a vision and mission, the identification of an organization’s external
opportunities and threats, the definition of internal strengths and weaknesses, establishing long-term
goals, generating alternative strategies, and the selection of particular strategies to pursue. Strategy-
formulation concerns include determining what new businesses to enter, what businesses to
abandon, how to distribute resources, whether to increase operations or diversify, whether to enter
international markets, whether to merge or form a joint venture, and how to evade a hostile takeover
(David & David, 2015)
Strategy Implementation
Strategy implementation compels a firm to create annual objectives, motivate employees, devise
policies, and allocate resources so that formulated strategies can be executed. It comprises of
developing a strategy-supportive culture, building an effective organizational structure, preparing
budgets, redirecting marketing efforts, developing and exploiting information systems, and
connecting employee remuneration to organizational performance (David & David, 2015)
Strategy implementation often is called the “action stage” of strategic management. Implementing
strategy means mobilizing employees and managers to put formulated strategies into action.
Frequently contemplated to be the most challenging stage in strategic management, strategy
implementation requires self-control, commitment, and sacrifice. Successful strategy implementation
dwells on the manager’s capacity to motivate employees, which is more an art than a science.
Formulated strategies which are not implemented serve no value. (David & David, 2015).
Strategy Evaluation
This is the closing stage in the strategic management process. It is necessary for manager s to have
the full information of “what went wrong and what went right”. Strategy evaluation is the main means
for obtaining the information as it provides closure. All strategies are subject to deviations because
external and internal factors are continuously changing. Three fundamental strategy evaluation
undertakings are (1) revising external and internal factors that are bases for current strategies, (2)
assessing performance and (3) taking corrective actions (David & David, 2015).
Think point
“Strategic evaluation is not a luxury but a need, as success today is no

guarantee of success tomorrow! Success offers a new breed of
different problems, complacent organisations who do not evaluate
their strategies are setting themselves up for failure”.
5.1.4 Integrating intuition and Analysis

The strategic management process can be explained as a systematic, objective and logical, approach
for making major judgements in an organization. It endeavours to organize quantitative and
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qualitative information in a way that permits effective decisions to be made under conditions of
ambiguity. Most people recognize that intuition is essential to making good strategic decisions based
on past experiences, judgement and feelings. Intuition is specifically valuable for making decisions in
situations of great uncertainty or little precedent. (David & David, 2015).
Even though some establishments today may endure and prosper because they have intuitive
geniuses managing them, most are not so fortunate. Most organizations profit from strategic
management, which is built upon integrating intuition and evaluation in decision making. Selecting an
intuitive or analytic approach to decision making is not an either–or proposition. Managers at all levels
in an organization infuse their intuition and verdict into strategic-management analyses. Intuitive
thinking and analytical thinking supplement each other. (David & David, 2015).
“Key terms in strategic management
The table below presents key terms in strategic management with their meanings:
Table 1.1 Key Terms in Strategic Management
Key Terms in Strategic Management Meanings

• Competitive Advantage • Anything that a firm does well better than the
rival, or when it owns something that the rival
desires and does not own.
• Strategists • The individuals exclusively responsible for the

achievement and failure of an organisation.
• Vision Statement • It answers the question “what do we want to

become” its top management dream to be
achieved in the long term.
• Mission Statement • It identifies the scope of the business of the firm

and answers the question “what is our business”.
Its fundamentally the reason for an
organisation’s existence.
• External Opportunities and • These refer to aspects behind our control such
External threats as: cultural, economic, demographic, social,
environmental, political, legal, governmental,
technological and competitive trends that may
profit or harm the organisation in the future.
• Internal Strengths and • These describe an organisation manageable

Weaknesses activity that are performed well or poorly. They
appear in the functional departments such as:
production, research, management, marketing
and development, information systems activities
in the business.
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• Long Term Objectives • Distinctive results that an organisation seeks to

accomplish in pursuing its mission.
• Strategies • Are the means in which long term objectives will

be achieved?
5.1.5 Strategic management model

The model below does not warrant success, but it denotes a clear and practical methodology for
formulating, implementing, and evaluating strategies. The framework illustrated in figure 1 is an
extensively recognized, comprehensive model of the strategic management process. Relationships
among main aspects of the strategic -management process are shown in the model (David & David,
2015).
Figure 2: Strategic Management mode
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5.1.6 Benefits of Strategic Management
Figure 2 highlights the benefits to a firm that does strategic planning (Fred R David & Forest R David:
2015).
Figure1, 3: Benefits to a firm that does strategic planning
The Result
Deeper Greater
Enhanced Of all
Improved Commitment
Communication employees on
Understanding
a mission to
help the firm
SUCCEED
An organization is more proactive than reactive in shaping its own future through the use of strategic
management; it further permits an organization to initiate and influence (rather than just respond to)
activities—and thus to exert control over its own destiny. The primary value of strategic management
has been to assist organizations devise better strategies through the use of a more methodical, logical,
and rational approach to strategic choice. It provides guidance to the whole organisation, and
explicitly what an organisation wishes to achieve (David & David, 2015).
Communication is a key to fruitful strategic management. Through participation in the process, in

other words, through dialogue and participation, managers and employees become dedicated to
supporting the organization. A massive benefit of strategic management, then, is the prospect that
the process provides to empower individuals. Empowerment is the performance of strengthening
employees’ sense of effectiveness by encouraging them to contribute in decision making and to
exercise initiative and imagination, and remunerating them for doing so (D.Roussow, 2014).
Tangible benefits such as a heightened awareness of external threats, an enriched understanding of

competitors’ strategies, increased employee productivity, reduced resistance to change, and a
stronger understanding of performance–reward relationships are offered by strategic management.
Strategic management increases the problem-prevention capabilities of organizations because it
stimulates interaction among managers at all divisional and functional levels. A basis for identifying
and rationalizing the need for change to all managers and employees of a firm which helps them view
change as an opportunity rather than as a threat is provided by the strategic management process.
Some none financial benefits of a firm applying strategic management, according to Greenley, are (1)
augmented discipline, (2) enhanced coordination (3) superior communication (4) reduced resistance
to change (5) amplified forward thinking (6) better synergy (7) more effective allocation of time and
resources. (David & David, 2015).
In the 21st Century there is no survival for firms who are not using strategic concepts and techniques.
It is commonly accepted that organizations that plan ahead have a greater chance of transacting their
vision into reality. A good strategist, plan and executes the plan successfully whereas a bad strategist
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never plans then tries to control people. The old adage remains true that “failure to plan (a strategy)
is planning to fail (your goal).
Think point
“Strategic Planning should be simple, none routine, more of a people
process than a paper process”
Additional Information
Table 1.2 Excerpts from Tzu "The art of war" (Sun TZU, 1988)
• War (Strategy) is a substance of huge importance to the state, a matter of life or death, the
road wither to survival or ruin. Henceforth it is crucial that it is studied comprehensively.
• Discern your enemy (competitor) and know yourself, and in a hundred battles you will never
be defeated. When you are uninformed of the enemy, but you understand yourself, your
chances of winning or losing are equal.
• The first person to occupy the battlefield and waits his enemy is at ease, and he who comes
later to the section and rushes into the fight is tired.
• Analyse the enemy (competitor) strategies so that you are familiar with his weaknesses as
well as his strong points.
• Skilled leaders will not let a strategy restrain creative counter –movement.
• If you make a decision to go to the battle, do not publicize your intentions or plans. Project
“business as usual”. When tough appear weak. Courageous appear fearful, and orderly appear
chaotic. Complete appear empty, Wise appear foolish, Advancing, appear to be retreating,
moving quickly appear to be relaxed. In one place appear to be in another.
Case Study: Nintendo strategy disrupts video game industry
Case study/Caselet
Nintendo is a major game development company, developing both

video game consoles and software in April 2008 Nintendo was ranked
seventh, in the annual business week-Boston Consulting Group,
ranking of the world’s most innovative companies. The award
recognized the company as an innovator that had challenged the
prevailing business model of the video game industry with its new
video game console, the Wii.
The video game console industry traditionally went into new cycle
every five to six years. In 2006, when the newest generation of video
game console were introduced, Microsoft and Sony had continued with
their previous strategies of increasing the computing power of their
21
latest products, the Xoux 360 and the PlayStation 3. However,

Nintendo had planned something strategic………… and very different.
The company believed that the video game industry had been focusing
far too much on existing gamers and had completely neglected none
gamers.
Nintendo considered these none gamers to be the source of future
growth. With this in mind, it developed a radically different strategy
and produced the Wii, whose processing power was dwarfed by that of
both the PlayStation 3 and Xbox360.Nevertheless, it soon became
evident that Nintendo’s Wii was a company success. This success was
a result of clever strategic planning (Berry J, 2017)
Source: Business Queensland 2016, Nintendo, case study, viewed 29
February 2018
http// bx.businessweek.com/Nintendo/
Vocabulary
Learn and apply these terms:
Strategy, Strategy Implementation, Strategy Management, Strategy

Formulation, Objectives

1. Critically analyze the strategies of Nintendo, Xbox and
PlayStation from the above case study.
2. Based on the information above, develop a strategic
management model for Nintendo.
5.1.7 Conclusion
Strategic management is the process of examining both present and future environments, formulating
the organizations objectives, and making, implementing, and controlling decisions focussed on
achieving these objectives in the present and future environments. (Garry Danny R Arnold 2012).
Strategic management therefore plays a pivotal role in bridging the gap is located between the present
and the envisaged future situation so as to keep up with the constantly changing environment. It is
crucial for organisations to develop strategies on how it will move from the current situation to the
ideal situation (mission).
22
5.1.8 Revision questions
1. Justify the use of strategic management in an organization.

2. Distinguish between a vision statement and a mission
statement.
3. Examine the strategic management process.
4. Strategic management is all about gaining and maintaining
competitive advantage. Explain using examples.
5. List four strategists whom you know personally. Rank them on
their effectiveness as a leader in their organization.
6. According to Sun Tzu warfare is based on deception. Should
strategic planning be based on deception?
23
5.2 Study Unit 2: Outside -Use Strategic Planning

This study unit unpacks strategic management in a global perspective. Now
that the world has turned into a global village, it is important for students to
Purpose
fully grasp strategic management issues affecting businesses operating in the
current global business ecosystem.
By the end of this unit, you will be able to:
• Discuss the nature and implications of labour union membership

Learning across Europe.
Outcomes • Explain the advantages and disadvantages of entering global markets.
• Discuss communication differences across countries.
• Discuss Africa as the newest hotspot for business entry
Time It will take you 18 hours to make your way through this unit.
Important terms Globalisation Arises when there is integration of world economies and
and definitions cultures, promoting a free flow of capital, goods, and
technology
Multinational These are corporations that conduct businesses in multiple

organisation countries
Culture ‘Culture ... is that complex whole which includes

knowledge, belief, art, morals, law, custom, and any other
capabilities and habits acquired by man as a member of
society.’ Tyler (British anthropologist) 1870: 1; cited by
Avruch 1998: 6
5.2.1 Introduction
Global considerations now have a huge impact on all strategic decisions, based on the fact that
countries boundaries can no longer define the extent and limits of our imaginations. In order for one
to survive in business, one is expected to visualise and appreciate the world from the perspectives of
others. Strategic management is basically about managers appreciating markets, prices, suppliers,
competitors, governments, shareholders and customers worldwide. The price and quality of a
business’s products and services must be exceedingly competitive on a worldwide basis. not just on a
local basis. Doing business globally ensures that shareholders receives substantial revenue growth.
5.2.2 Multinational Organizations

Business operations conducted across national borders are called international firms or multinational
corporations. The strategic management process is practically the same for multinational firms as for
purely domestic firms, however the process is more complicated for international firms as a result of
more variables and relationships. The external environment’s opportunities and threats that confront
a multinational corporation are almost boundless, and the number and difficulty of these factors
24
increase dramatically with the number of products created and the number of geographic areas
attended (David & David, 2015).
Effort and time is required to identify and assess external trends and events in multinational
corporations than in domestic corporations. Different cultures have diverse norms, values and work
ethics which makes strategy implementation difficult. Multinational corporations face distinctive and
diverse threats such as expropriation of assets, currency losses through exchange rate fluctuations,
socio/political disturbance, tariffs and trade barriers. Companies should examine relevant journals and
patent reports, seek the opinion of academic and research organizations, and participate in
international trades fairs before entering international markets so as to reduce the risks associated in
entering new markets (David & David, 2015).
5.2.3 Advantages and Disadvantages of entering global markets

Firms have numerous reasons for expanding involvement in business operations across national
borders. The greatest advantage will be to acquire new customers for their products and services, thus
increasing revenue. However there also numerous potential disadvantages of initiating, continuing
and expanding business across national borders. Table 2.1 will highlight the advantages and
disadvantages of entering global markets.
Table 2.1 Advantages and Disadvantages of entering global markets
Advantages Disadvantages
• Firms can acquire new customers for • Foreign operations could be seized by
their products. nationalistic factions.
• Capacity can be absorbed by foreign • Communication is difficult as firms

operations and economic risks can be confront different often little
distributed over a wide number of understanding of socio and cultural
markets. environment.
• Foreign operations can permit firms • Flaws of competitors in foreign lands are
to create low cost production often overvalued and strengths are
facilities in locations close to raw underestimated. Keeping informed is a bit
materials or cheap labour. difficult when doing business
internationally.
• Foreign operations may end in cheap • Barriers to communication can be created

tariffs, lower taxes and favourable due to differences in language, culture and
political treatment. value systems among countries.
• Joint ventures can enable firms to • An in depth understanding of regional

learn new technology, culture and organizations such as the European
business practices of other people. Economic Community is challenging but is
often required in doing business
internationally.
25
• Economies of scale can be • Dealing with two or more monetary

accomplished from operation in systems can complicate international
global rather than solely domestic business operations
markets.
• A firm’s power and prestige in • Economic risk-the potential for a country’s

domestic market may be significantly economic conditions and policies, property
enhanced if the firm competes rights and currency exchange rates to harm
globally. a firm’s operations within a country.
Think point
A cycle comprises of various stages—introduction, growth, maturity

and decline. Instead of permitting your product decline, new
international customers can kick-start the cycle all over again. This
increases the profitability and shelf life of your product.
5.2.4 The Global Challenge

U.S. businesses in many industries are being battered by foreign competitors. In its simplest sense,
the global disputes faced by U.S. business is twofold: how to increase and maintain exports to other
nations and how to defend domestic markets against imported goods. A small number of companies
can afford to ignore the presence of international competition. Firms that may appear insulated and
contented today may be vulnerable tomorrow; for example, foreign banks do not yet compete or
operate in most of the United States, but this too is shifting. America’s economy is gradually becoming
much less American (Roussouw, 2014).
A monetary system and world economy are emerging. Corporations in every corner of the globe are
making use of the opportunity to obtain customers globally. Markets are fluctuating rapidly and, in
many cases, converging in tastes, trends, and prices. Innovative transport systems are fast-tracking
the transfer of technology. Shifts in the environment and location of production systems, especially
to China and India, are reducing the response time to changing market conditions.
An increasing number of countries around the world are openhearted foreign investment and capital.
As a result, labor markets have progressively become more international. East Asian countries are
market leaders in high labor-intensive industries, Brazil offers plentiful natural resources and rapidly
developing markets, and Germany offers skilled labor and technology. The drive to develop the
efficiency of global business operations is leading to greater functional specialization. (David & David:
2015).
26

Discuss in your study group or online forum the advantages and
disadvantages of entering global markets citing clear and concise
examples in South Africa.
Table 2-2 Cultural Pitfalls that may help you be a better Manager
• Waving is a severe insult in Greece and Nigeria, particularly if the hand is close to someone
face.
• Making a “goodbye” wave in Europe can mean ‘No” but it means “Come here” in Peru.
• In China last names are written first.
• Direct eye contact is impolite in Japan.
• Folding your arms across your chest is a sign of annoyance in Finland.
• In Brazil touching your thumb and first finger-an American.
• Nodding or tossing your head back in Southern Italy, Malta, Greece and Tunisia means “No”.
In India, this body motion means “Yes”.
• Snapping your fingers is vulgar in France and Belgium.
• In China, leave some food on your plate to display that you host was so generous that you
could not finish.
• Do not eat with your left hand when dining with clients in Malaysia or India.
• One form of communication works the same worldwide. It is the smile-so take that along
wherever you go.
Example
Being direct, “let’s get to business” discussion is considered

discourteous in Africa. Always exchange pleasantries and inquire about
family before beginning to transact any business. Even if you are just
purchasing vegetables!
5.2.5 Communication differences across countries

Italians, Germans and French normally do no relax up executives with praise before they criticize.
Americans do soften up folks, and this practice seems manipulative to Europeans.
• Israelis are familiar to fast-paced meetings and have less tolerance for U.S informality and
small talk.
27
• British executives often grumble that U, S executives talk too much. Informality and
spontaneity from Americans in business settings jolt many foreigners.
• European generally when they are asked to wear name tags by Americans, they feel they are
being handled like children.
• Indian executives are used to interjecting one another. Thus, when US Executives pay
attention without asking for clarification or posing questions, they are regarded by Indians as
not paying attention.
• When negotiating orally with Malaysian or Japanese Executives, it is suitable to allow

periodically for a time of silence.
• Refrain from asking foreign managers questions such as “How was your weekend?” that is
intrusive to foreigners, who tend to regard their business and private lives as totally separate.
Example
In Africa Always greet people first when you enter an area. Otherwise,
you may wonder why people are just looking at you when you enter a
room. They are waiting for you to offer a greeting, which will be
received with a big smile and a warm reply.
5.2.6 Business Cultures across Countries
Mexico business culture:
It is an authoritarian society in term of families, churches, business and school. Employers pursue
workers who are courteous, respectful and obedient rather than innovative, creative and
independent. Life is much slower in Mexico than in USA. Mexican employers are paternalistic,
providing workers with more than a paycheck, but in return expect allegiance. In Mexico business
associates rarely entertain each other in their homes which are regarded as a place reserved
exclusively close friends and family (Roussou, 2014).
Japan Business culture
Japanese place huge importance on group loyalty and agreement in a concept known as Wa. Wa
necessitates all members of a group to agree and cooperate, this results in a constant discussion and
compromise. Formal meetings are usually conducted informally. Most Japanese managers are often
reserved, quiet and distant, introspective and other oriented as compared to US managers who are
conversational, impulsive, insensitive, direct and individual oriented (Rossouw, 2014).
Brazil business culture
In Brazil and US, men greet each other by shaking hands while maintain steady eye contact. Women
greet each other with kisses, starting with left and then alternating. Face to face communication is
28
preferred over written communication. Appointments are normally cancelled on last minutes in Brazil.
Brazilian people are more interested in negotiating with people than with companies ( Rossouw 2014).
Germany Business culture
Germans are like Americans they do not need a personal relationship to do business. They are more
interested in the business person’s academic credentials and their company’s credentials. Germans
are often direct to the point of bluntness. They do not invite people to their homes and only close
friends are welcome. It is very rude to cancel meetings on a last minute and this could jeopardize the
whole business deal (Roussouw, 2014).
Egypt business culture
Egyptians prefer doing business with those they know and respect and spend more time cultivating
relationships before business is conducted. In Egypt appearance is very important conservative
clothing is ideal. For Egyptians direct eye contact is a sign of honesty. Egyptians must know and like
you to conduct business. Personal relationships are necessary for long term business (Roussouw,
2014).
India Business culture
Indians prefer doing business with those that they have established business with. Punctuality is very
essential, and most Indians do not trust the legal system and they avoid arguing publicly. Like in many
Asian cultures, people in India do not like to say no, verbally or none verbally. Rather than
disappointing you, they often will say something is not available, will offer you the response that they
think you want to hear or will be vague. This behavior should not be considered dishonest ( Roussouw,
2014).
Nigeria business culture
Extended family is still the backbone of social and business system. Grandparents, cousins, aunts,
brother and sisters as well as in-laws all work as a unit in life. Nigerians do not use their first names
readily. Giving gifts is common and even expected. Nigerians are generally outgoing and friendly
especially in the Southwest (Roussouw, 2014).
Additional information
When in small villages and Africa‘s rural areas, a visit to the local chief
is the first stop you should make. When in the company of the chief,
remove your hat, keep your hands out of your pockets and do not cross
your legs
5.2.7 African Countries

In 2012m 23 African countries held democratic elections, whereas in 1989 only 3 African were
considered democracies. Currencies in Africa are stabilizing and many countries are fun raising to build
modern highways, ports and power grids. African countries are winning over investors as indicated by
Zambia which issued over $750 million bonds recently followed by Rwanda, Nigeria and Kenya doing
29
the same. Investors are looking closely at Africa now in the wake of low interests rates and slow growth
elsewhere in the planet.
Vocabulary
Learn and apply these terms: Globalization, international firms, culture,
global markets.
Table 2-2 provides a summary of the economic situation in 12 African countries. Not that Angola is
rated lowest in terms of doing business whereas South Africa is rated highest.
Table 2.2 Sampling of African Countries- Ease of doing business rankings
Country Population in Millions Ease of doing business Capital City
South Africa 49 35 out of 183 Pretoria

Tunisia 11 46 out of 183 Tunis
Ghana 24 63 out of 183 Accra
Morocco 32 94 out of 183 Rabat
Kenya 39 109 out of 183 Nairobi
Egypt 79 110 out of 183 Cairo
Ethiopia 86 111 out of 183 Addis Abba
Uganda 33 123 out of183 Kampala
Nigeria 150 133 out of 183 Abuja
Sudan 41 135 out of 183 Khartoum
Mozambique 22 139 out of 183 Maputo
Angola 13 172 out of 139 Luanda
Source: Bases on Information at http.//www.doingbusiness,org/rankings on November 1, 2012.
5.2.8 Conclusion
This chapter displays some basic global information that can be important to consider in developing
strategic plan for any organization. The advantages of engaging in international may offset the
drawbacks for most firms. It is very crucial for in strategic planning to be effective, and the nature of
global operation may be the key component in a plan’s overall effectiveness.
30
Case study/Caselet: Doing Business in South Africa

Doing Business in South Africa – What You Must Know Negotiations and
Business Relationships Generally speaking, South Africans are goal
oriented. They value personal competitiveness and achievement and
have a tendency of seeing time as a linear concept. In comparison, their
dominant style of communication can somehow relate to that of the
United States. To encapsulate everything, South Africans are very direct
when it comes to airing out their views or speaking out and would dare
say exactly what they mean instead of coating everything lusciously.
That said, it’s advisable to conduct yourself in a very direct and clear
manner. For business cards, it’s always advisable to exchange them
during the first meeting, which is usually held over lunch and dinner
while enjoying good foods. And since the great majority of South
Africans are transactional, a personal connection may not be necessary
for anyone who’s planning to start a business in this country.
Now when it comes to dressing, formal business attire can actually
suffice. Investor’s Protection and Credit Access Worldwide, South
Africa has been ranked first for ease access of credit facilities and
investors protection, as well. By that I mean, there’s no country where
foreigners can easily be loaned and, at the same time, be protected by
the law like South Africa. That’s according to IFC and the World Bank
report, which further maintained how the infrastructure in South Africa
is so much favourable for foreign investment. Property Registration
Property registration in South Africa involves 6 registration procedures
that can approximately take you 23 days. This can essentially vary
depending on how quickly you’re able to obtain rates clearance
certificate from the local authority, as well as how long it will take a
conveyance to lodge your title-deed at the Deeds’ Registry.
Challenges Getting Electricity: The first challenge that you’re likely to
face while starting a business in South African is getting electricity. In
actual fact, the entire procedure involves a series of lengthy
procedures, which translates to waiting for about 226 days before
getting the applied electricity. To be clear, Eskom — a public electricity
utility–usually takes about 60 days to issue an estimate and an addition
of 165 days to tie up external connection works. Resolving Insolvency:
Another challenge worth noting if you are planning on doing business
in South Africa is resolving insolvency. Without hyperbole, the entire
procedures take approximately 2 years with a 35.4% recovery rate and
an estate cost of about 18%. Paying Taxes Paying taxes in South Africa
takes a summation of 200 hours in a year, all of which is divided into 9
payments. Among the taxes to pays, there’s the Unemployment
Insurance Contribution and the Cooperate tax which, apparently, will
involve a more arduous procedure, with the former being the most
expensive and demanding. The Economic Engines of South Africa’s
31
Growth –
Needless to say, South Africa is an economic powerhouse for Africa at
large. For this reason, the country actually enjoys a great opportunity
to grow at an alarming rate since 1999. On the same light, foreign
investors with intentions of capturing the African market as a whole
usually set their eyes first on South Africa before shifting to another
country, if need be. – The South African stock exchange has been
ranked 20 worldwide. Apart from that, the legal framework in this great
nation is also well-developed and favours foreign investment. – State
owned companies have also played a major role in spurring South
Africa’s economy to its present position. In fact, the manufacturing
sector in South Africa has been ranked first in Africa–as the most
developed manufacturing sector in the entire continent..
Source: https://buzzsouthafrica.com/business-south-africa/
5.2.9 Revision Questions
1. Describe the business culture in Japan.

2. Africa is rapidly joining the world economy. Five examples to
justify this.
3. Why is globalization of industries a common factor today?
32
5.3 Study Unit 3: Ethics/Social Responsibility and Sustainability
The sections on this unit (business ethics, social responsibility and

sustainability) are distinct however the topics are quite related. Actions an
organization implements beyond what is legally required to protect or enhance
Purpose the well-being of living things are referred as social responsibility.
Sustainability specifies the magnitude that an organization’s actions protect,
mend and preserve rather than harm or destroy the natural environment. It is
unethical, irresponsible and in many cases illegal to pollute the environment.
After studying this unit, you should be able to:
Learning • Discuss the ethics of workplace romance.

Outcomes • Explain why good ethics good business in strategic management is.
• Examine why whistle-blowing is important to encourage in a firm.
• Discuss the importance of social responsibility.
• Illustrate trends in bribery law.
It will take you 18 hours to make your way through this unit.
Time
Important terms Ethics The ability to distinguish between good and bad
and definitions Corporate It is the obligation of corporations to give back to the
Social society by looking after the environment and providing a
Responsibility helping hand to the community
Whistle- The act of alerting authorities on any unacceptable

Blowing behaviour by a company or its management/directors
Bribes as the offering, giving, receiving or soliciting an item of

value to influence the actions of an official of an official or
other person in discharge of a public or legal duty
5.3.1 Introduction
Social responsibility, business ethics and sustainability issues therefore are interrelated and impact all
areas of the comprehensive strategic management model. Business ethics can be well-defined as
principles of behavior within organizations that guide decision making and behavior. Excellent
business ethics is a prerequisite for good strategic management: good ethics is just good business!
(David & David, 2015).
33
5.3.2 Business Ethics
The Institute of Business Ethic (IBE) conducted a study titled “Does Business Ethics Pay?” and came to
the conclusion that presenting clear commitment to good ethical conduct outperform companies that
do not display ethical conduct. The benefits of conducting business ethically also pays off in financial
returns. If an organization has integrity, nothing else matters, if it doesn’t have integrity, nothing else
matters.
Legal and moral breaches of ethical conduct by both public and private organizations are reported
daily by newspapers and businesses. It’s very expensive to be unethical. For example, some of the
largest payouts for close actions legal fraud suits ever were against Enron ($ 7.16 billion), WorldCom
($6.16 billion) and Royal Ahold ($1.09billion). Yahoo’s CEO Scott Thompson recently was forced to
resign as a result of his” resume pudding or inflating” (Fred R David & Forest R David: 2015).
Table 3-1- Seven Principles of Admirable Business Ethics
1) Be trustworthy because no individual or business wants to do business with an entity they do

not trust.
2) Be open-minded, continually asking for “ethics-related feedback’ from all internal and
external stakeholders.
3) Honor all commitments and obligations.
4) Do not misrepresent, exaggerate or instead with any print materials.
5) Be visibly a responsible community citizen.
6) Utilize your accounting practices to identify and eliminate questionable activities.
7) Follow the motto: Do unto others as you would have them do unto you.
An ethics cultures
Reverend Billy Graham once said “When wealth is lost, nothing is lost, when health is lost, something
is lost, when character is lost, all is lost”. No society anywhere in the world can compete long or
successfully with people stealing from one another or not trusting one another, with every bit of
information requiring notarized confirmation, with every disagreement ending up in litigation, or with
ever disagreement ending up in litigation, or with government having to regulate businesses to keep
them honest. Being unethical is a recipe for headaches, inefficiency, and waste. Business relationships
are built mostly on mutual trust and reputation. Max Killan said: “If business is not based on ethical
grounds, it is of no benefit to society, and will, like all other unethical combinations, pass into oblivion”
Example
“There is a competitive advantage in good ethics.”
34
Whistle-Blowing
Policies that require staff members to report an unethical violation they discover or see in the firm is
called whistleblowing. In the commercial world they would receive up to 25 percent of the proceeds
of legal proceedings against firms for wrong doing. The pay-outs are becoming more and more
common. An accountant tipped off the IRS that his employer that his employer was skimping on taxes
and received $4,5million in the first IRS whistle-blower award. Firms can align ethical and strategic
decision making by incorporating ethical considerations and encouraging whistle-blowing or the
reporting of unethical practices. (Fred David & David, 2017:101).
Bribes
Bribery is described as the offering, giving, receiving or soliciting an item of value to influence the
actions of an official of an official or other person in discharge of a public or legal duty. A bribe is a
present given to influence a receiver’s conduct. The present may be any money, good, right in action,
property, preferment, object of value or merely a promise or undertaking to induce or influence the
action, vote or influence of a person in an official or public capacity. Bribery is a crime in most countries
in the world, including South Africa (F David & David, 2015).
Example
“Many believe unethical behaviour is purely driven by greed”
Workplace Romance
Workplace romance between two consenting employees happens, the question is not whether to
allow or accept the practice, it’s also not about how the practice can be prevented, and rather it’s
more of how it can be managed. An organisation should not have a policy which forbids workplace
romance as that would be considered as invasion of privacy, unnecessary and overbearing. Not all
workplaces romances are detrimental to the organisation, some actually improve work performance’s
adding energy which translates into enhanced morale, communication and productivity. However, it
is important to recognise the downside risks of workplace romance which are the following.
• Favoritism complains might arise.
• Confidentiality of records may be breached.
• Reduced quality and quantity of work can be a problem.
• Personal arguments can lead to work arguments.
• Whispering secrets can lead to tensions and hostilities among coworkers.
• Conflicts of interests may arise, especially when well-being of the partner trumps well-being
of the company (David & David,2017:102).
Organizations should establish guidelines which address workplace romance. Workplace guidelines
should apply to all employees at all levels of the firm and specify situations in which affairs are
especially discouraged such as supervisor and subordinate, as the downside risks generally exceed the
upside benefits. (David & F David: 2015).
35
5.3.3 Social Responsibility

Some strategists concur with Ralph Nader, who declares that organizations have huge social
obligations. Nader points out, for example, that Exxon/Mobil has more assets than most countries,
and because such firms have an obligation to help society cure its many ills. Other people, however,
correspond with the economist Milton Friedman, who emphasizes that organizations have no
obligation to do any more for society than is legally required. Friedman may challenge that it is
irresponsible for a firm to give monies to charity. Indeed, no social need can be met by the firm if the
firm fails. Strategists should examine social problems in terms of potential costs and benefits to the
firm and focus on social issues that could benefit the firm most. For example, should a firm avoid laying
off employees so as to protect employees’ livelihood, when that decision may force the firm to
liquidate (David & David, 2017)
Social Policy
The term social policy holds managerial philosophy and thinking at the highest level of the firm, which
explains why the topic is covered in this textbook. Social policy is interested with what responsibilities
the firm has to employees, consumers, environmentalists, minorities, communities, shareholders, and
other groups. Many firms still struggle to determine appropriate social policies after many years of
debate. The impact of society on business and vice versa is becoming more pronounced each year.
Corporate social policy should be designed and articulated during strategy formulation, set and
administered during strategy implementation, and reaffirmed or changed during strategy evaluation.
Firms should aim to engage in social activities that have economic benefits (David & David, 2017).
Social Policies on Retirement
Certain countries around the world are confronted with severe workforce shortages associated with
their aging populations. The percentage of people’s age 65 or older exceeds 20 percent in Japan, Italy,
and Germany—and will reach 20 percent in 2018 in France. In 2036, the percentage of persons age 65
or older will reach 20 percent in the United States and China. Unlike the United States, Japan is
hesitant to rely on large-scale immigration to strengthen its workforce. Instead, Japan provides
incentives for its elderly to work until ages 65 to 75. Western European countries are doing the
opposite, providing incentives for its elderly to retire at ages 55 to 60. The International Labor
Organization says 71 percent of Japanese men ages 60 to 64 works, compared to 57 percent of
American men and just 17 percent of French men in the same age group. (David & David, 2017: 104).
5.3.4 Environmental Sustainability

Strategists of businesses and countries are being assessed and scrutinized from a natural environment
perspective. Some companies do not only monitor the price its vendors offer for products but also
how the products are made in terms of environmental practices. Businesses must not exploit and
decimate the natural environment. The word environment has been defined by the International
Standards organization (ISO) as “surroundings in which an organisation operates, including air, water,
land, natural resources, flora, humans and their interrelation”. Firms gain competitive advantage by
being good stewards of the natural environment. Stakeholders are especially resentful of firms that
harm rather than protect the natural environment (Roussouw, 2014).
ISO 14000/14001 Certification
36
The International Organization for Standardization (ISO) based in Geneva, Switzerland is a network of
the national standards institutes of 147 countries, one member per country. ISO is the world’s biggest
developer of sustainability standards. ISO standards are widely accepted all over the world as they
have no legal authority to enforce their implementation. In its own capacity it does not regulate or
legislate. Governmental agencies in various countries, such as the Environmental Protection Agency
(EPA) in the United States, have adopted ISO standards as part of their regulatory framework, and the
standards are the basis of much legislation. Adoptions are sovereign decisions by the regulatory
authorities, governments, and/or companies concerned (Roussouw, 2014)
ISO 14000 refers to a series of voluntary standards in the environmental field. The ISO 14000 family
of standards is mainly concerned with the extent to which a firm reduces harmful effects on the
environment caused by its activities and continually monitors and improves its own environmental
performance. Included in the ISO 14000 series are the ISO 14001 standards in fields such as
environmental auditing, environmental performance evaluation, environmental labeling, and life-
cycle assessment (David & David: 2015).
5.3.5 Conclusion
Consumers recognize and appreciate firms that do more than is legally required to be socially
responsible. The primary objective of any business is to stay in business while adhering to laws and
regulations. A firm can be socially responsible by proactively conserving and preserving the natural
environment. For example, to create a corporate sustainability report annually is not legally required,
but such a report, based on concrete actions, goes a long way toward assuring stakeholders that the
firm is worthy of their support. Social responsibility, business ethics and environmental sustainability
are interrelated and key strategic issues facing all organizations.
37
Case Study: Bribery Training

Apply what you have learnt to the case study presented.
1. A member of the event organising committee for a Local Section has a relative
who owns a hotel or conference venue that the committee normally use for events;
this presents a conflict of interest. If there is a conflict of interest for any member of
the committee this must be communicated to the rest of the committee before the
event is organised and before committing to a contract booking with the venue. A
best practice approach would also include obtaining at least 3 different quotes for
products or services to present to the committee before a decision is made (Ashkenas
et al, 2011)
2. A Local Section committee member is reviewing venues for an event and they
are offered additional benefits over and above the product in the form of a free
upgrade for committee members or personal benefits above what is being asked for
(free stay, dinner, wine), this constitutes a bribe. It is different if the venue is trying to
sell its product by offering tea and coffee or samples and offering discounts on the
package that promotes their product (offering a certain amount of free/ discounted
wine on numbers over 100), as this benefits all. The venue has committed the crime
of offering a bribe to the local section committee member, even if that member
refuses to accept the additional benefits. In the above case to ensure that members
are not breaking the law they should refuse such additional benefits. A best practice
approach would be for committee members to obtain at least 3 different quotes for
products or services to present to the committee before a decision is made (Ashkenas,
Suzanne Francis, and Rick Heinick, 2011).
3. A school teacher approaches a Local Section committee member about
getting funding for a school trip to the Science Museum. The committee member is
invited by the school teacher to join them for the trip if the funding is granted. If a
member of the Local Section committee has been offered a bribe this should be
refused and also be communicated to the rest of the committee as soon as it occurs.
4. If a member of the board wants to admit family friend to RSC membership of
a particular level who is perhaps not fully eligible, this is a conflict of interest. The rest
of the board should be alerted to the relationship of the board member to the
applicant before the review process occurs. If a member of the board has been
offered a bribe this should also be communicated to the board and the RSC as soon
as it occurs.
5. An international member is coming to the UK for the General Assembly; there
will be a delay in their progress through immigration services despite having the
correct paperwork, which would mean that the member would miss the Delegates
Assembly. The delegate is offered the chance to by-pass the extended procedures for
a payment of £100. In this case the delegate should immediately refuse the offer and
elect to miss the delegate’s assembly and should report the bribe to the RSC and the
38
relevant immigration service (Ashkenas et al, 2011).

6. Someone who works for a large energy company offers the SEI Board a cash
incentive to promote their form of renewable energy internally within the RSC and
externally to affect the RSC’s policy position. If a member or members of the board
have been offered a bribe this should also be communicated to the rest of the
committee and the corporate governance executive as soon as it occurs and
immediately refused. (Ashkenas et al, 2011
7. A member of the awards committee is offered the opportunity of a placement
for one of their students in the exchange of support for a particular award nominee.
If a member of the board has been offered a bribe this should also be communicated
to the rest of the committee as soon as it occurs and immediately refused (Ashkenas
et al, 2011).
8. A multinational bank approaches the Finance Board to encourage them to
move the RSC’s banking to their bank. To discuss this matter further the board
member is invited to attend a meeting at a holiday home in Italy. If a member of the
board has been offered a bribe this should also be communicated to the rest of the
committee as soon as it occurs and immediately refused (Ashkenas et al, 2011)
Source: Ashkenas , Suzanne Francis, and Rick Heinick, 2011.” Bribery Training Case
Study” Harvard Business Review, p126
1. Why is good ethics important in strategic management?

2. Discuss bribery and its implications on strategic
management.
3. How would a strategist attitude towards social responsibility
affect a firm’s strategy?
39
5.4 Study Unit 4: Types of Strategies

This unit brings strategic management to life with a variety of contemporary
Purpose examples. A synopsis of strategic management in nonprofit organizations,
small firms and governmental agencies is provided.
• Examine the benefits and drawbacks of merging with another firm.
• Identify types of business strategies.
Learning • Discuss Porters five generic strategies.
Outcomes • Discuss the levels of strategies in large versus small firms
• Illustrate the five-mover advantage concept.
• Describe strategic management in non-profit, governmental and
small organisations
Market Launching present products or services into new

Important terms Development geographic area.
and definitions
Divestiture Selling a division or part of an organisation.
Forward Gaining ownership or increased control over distributors or

Integration retailers.
5.4.1 Introduction
In their search for higher revenues and profits, hundreds of companies have welcomed strategic
planning fully. Nelson, former chair of UPS, expounds on why his company has developed a new
strategic planning department “Because we are making bigger bets on investments in technology, we
can’t afford to spend a whole lot of money in one direction and then find out five year later it was the
wrong direction”.
5.4.2 Types of Strategies

Defined and exemplified in Table 4-1 alternate strategies that a firm could pursue can be grouped into
11 actions: forward integration, backward integration, horizontal integration, market penetration,
market development, product development, related diversification, unrelated diversification,
retrenchment, divestiture, and liquidation. Each strategy has immeasurable variations. Just to provide
an example, market penetration can comprise of adding salespersons, increasing advertising,
expenditures, couponing and using similar actions to increase market share in a given geographic area
40
Table 4.1 Alternative Strategies Defined
Strategy Definition
Forward Integration Gaining ownership or increased control over distributors or retailers.
Backward Integration Pursuing ownership or increased control of a firms suppliers
Horizontal Integration Pursuing ownership or increased control over competitors
Market Penetration Pursuing increased market share for present products or services in
present markets through greater marketing efforts.
Market Development Launching present products or services into new geographic area.
Product Development Pursuing increased sales by improving present products or services or

developing new ones.
Related Diversification Combining new related products or services.
Unrelated Diversification Combining new unrelated products or services.
Retrenchment Reorganising through cost and asset reduction to reverse declining

sales and profit
Divestiture Selling a division or part of an organisation.
Liquidation Selling all of a company’s assets, in parts, for their tangible worth.
Source: (David and David, 2017:124)
Levels of Strategies
The process of strategy creation is not only for top executives, middle and lower level managers also
participate in the strategic planning process. In large companies there are four levels of strategies:
corporate, divisional, Functional and operational as illustrated in Table 4-2 however in small firms
there three levels of strategies: company, functional, and operational.
Table 4-2 Levels of Strategies with Persons Most Responsible
Large Company
Table 4.2 Levels of Strategies with Persons Most Responsible
Levels Strategy Level Person Responsible
Highest Level Corporate Level Chief Executive Office
Upper Medium Level Division level Division President or Executive Vice President
Medium Level Functional Level Finance, Marketing, R & D, Manufacturing,

Information systems and Human resources
managers
41
Lower Level Operational Level Plant managers, sales managers, production

and department managers
Small Company
Levels Strategy Level Office
Highest Level Corporate Level Owner or President
Medium Level Functional Level Finance, Marketing, R & D, Manufacturing,

Information systems and Human resources
managers
Lower Level Operational Level Plant managers, sales managers, production

and department managers
Source: (David and David,2017:125)
5.4.3 Michael Porter’s Five Generic Strategies

Strategies permit organizations to gain competitive advantage from three different bases: cost
leadership, differentiation, and focus. Porter calls these bases generic strategies
Cost leadership lay emphasis on manufacturing standardized products at a very low per-unit cost for
consumers who are price-sensitive. Two alternate types of cost leadership strategies can be defined.
Type 1 is a low-cost strategy that presents products or services to a wide range of customers at the
lowest price available on the market. Type 2 is a best-value strategy that offers products or services
to a variety of customers at the best price-value available on the market; the best-value strategy goal
is to offer customers a variety of products or services at the lowest price available compared to a rival’s
products with similar attributes. Both Type 1 and Type 2 strategies target a large market (David &
David, 2017).
Porter’s Type 3 generic strategy is differentiation, a strategy endeavoured at producing products and
services considered exclusively unique industry wide and focussed at consumers who are relatively
price-insensitive. Focus denotes producing products and services that fulfil the needs of small groups
of consumers. Two alternative types of focus strategies are Type 4 and Type 5. Type 4 is a low-cost
focus strategy that offers products or services to a small range (niche group) of customers at the
lowest price available on the market. Examples of firms that use the Type 4 strategy include Jiffy Lube
International and Pizza Hut, as well as local used car dealers and hot dog restaurants. Type 5 is a best-
value focus strategy that offers products or services to a minute range of customers at the best price-
value available on the market (David & David, 2017: 134).
Porter’s five strategies imply diverse organizational arrangements, control procedures, and incentive
systems. Bigger firms with greater access to resources generally compete on a cost leadership and/or
differentiation basis, whereas smaller firms often compete on a focus basis. Porter’s five generic
strategies are illustrated in Figure 5-3. Note that a differentiation strategy (Type 3) can be practised
with either a small target market or a large target market. However, it is ineffective to perform a cost
42
leadership strategy in a small market because profits margins are generally too small. Likewise, it is
ineffective to pursue a focus strategy in a large market because economies of scale would generally
favour a low-cost or best-value cost leadership’s strategy to gain and/or sustain competitive
advantage (David & David, 2017).
Porter’s Five Generic Strategies
Type 1: Cost Leadership—Low Cost
Type 2: Cost Leadership—Best Value
Type 3: Differentiation
Type 4: Focus—Low Cost
Type 5: Focus—Best Value
Source: Based on Michael E. Porter, Competitive Strategy: Techniques for Analysing Industries and
Source: (David and David, 2017:135).
Porter emphasizes on the need for strategists to complete cost-benefit analyses to evaluate “sharing
opportunities” among a firm’s existing and potential business units. Sharing activities and resources
boosts competitive advantage by lowering costs or increasing differentiation. In addition to prompting
sharing, Porter emphasizes on the need for businesses to effectively “transfer” skills and expertise
among autonomous business units to gain competitive advantage.
5.4.4 Means for Achieving Strategies

Various means for achieving strategies are employed in order for a firm to be successful. The following
means will be discussed below:
1) Cooperation among competitors.
2) Joint venture and partnership
3) Merger/Acquisition
4) Private- Equity Acquisitions
43
5) Outsourcing and Reshoring
Cooperation among competitors
Fred R David & Forest R David (2015) postulates that strategies which emphasize cooperation among
competitors are being implemented more. Both firms must contribute something unique for
collaboration between competitors to succeed. Such as technology, distribution, basic research or
manufacturing capacity. But a major endanger is that unintended transfers of important skills or
technology may occur at organizational levels below where the deal was signed. Information not
enclosed in the formal agreement often gets traded in the day- to –day interactions and dealings of
engineers, marketers and product developers. Firms often provide too much information to rival firms
when operating under cooperative agreements! Tougher formal agreements are needed.
Joint venture and partnering
Joint venture is a widespread strategy that occurs when two or more companies form a temporary
partnership or conglomerate for the purpose of capitalizing on some opportunity. Normally, the two
or more sponsoring firms develop a separate organization and have shared equity ownership in the
new entity. Other types of cooperative arrangements consist of research and development
partnerships, cross-distribution agreements, cross-licensing agreements, cross-manufacturing
agreements, and joint-bidding consortia (Fred R David & Forest R David, 2015). They are often used to
minimise risk, to improve communications, to globalize operations and usually used to pursue an
opportunity that is too cumbersome or too risky for a company to pursue alone (David & David, 2015.
Merger/ Acquisition
Merger and acquisition are two frequently used ways to pursue strategies. A merger occurs when two
organizations of about equal size join to form one enterprise. An acquisition occurs when a large
organization purchases (acquires) a smaller firm, or vice versa. When a merger or acquisition is not
desired by both parties, it can be called a takeover or hostile takeover. In contrast, if the acquisition is
desired by both firms, it is termed a friendly merger. Most mergers are friendly. Below are the benefits
of merging with or acquiring another firm (David & David, 2015).
Table 4-3 Potential Benefits of Merging With or Acquiring another Firm
• To provide improved capacity utilization.
• To make better use of the existing sales force.
• To reduce managerial staff.
• To gain economies of scale.
• To smooth out seasonal trends in sales.
• To gain new suppliers, distributors, customers, products and creditors.
• To gain new technology
• To reduce tax obligations (David and David, 2017:141)
First Mover Advantages
44
First mover advantages refer to the immense benefits a firm may achieve by moving into a new market
or creating a new product or service prior to rival firms some advantages of being a first mover
comprise of securing access to rare resources, acquiring new knowledge of key factors and issues, and
carving out market share and a position that is easy to defend and costly for rival firms to overtake.
First mover advantages are equivalent to occupying the high ground first, which puts one in an
excellent strategic position to start antagonistic campaigns and to defend territory. Being the first
mover can be remarkably wise when such actions (1) build a firm’s image and reputation with buyers,
(2) produce cost advantages over rivals in terms of new technologies, new components, and new
distribution channels, and so on, (3) create strongly loyal customers, and (4) make imitation or
duplication by a rival hard or unlikely. (David & David, 2017.
The competitive advantage gained by being the first mover can be sustained if that specific firm is also
a fast learner. There are dangers connected with being the first mover, such as unexpected and
unanticipated problems and costs that occur from being the first firm doing business in the new
market. Therefore, being a slow mover (also called fast follower or late mover) can be effectual when
a firm can effortlessly copy or imitate the lead firm’s products or services.
Outsourcing
Business-process outsourcing (BPO) is a quickly growing new business that encompasses companies
taking over the functional operations, such as human resources, information systems, payroll,
accounting, customer service, and even marketing of other firms. Companies are selecting to
outsource their functional operations more and more for several reasons: (1) it is less costly, (2) it
allows the firm to give all its attention to its core businesses, and (3) it enables the firm to provide
better services. Other advantages of outsourcing are that the strategy (1) allows the firm to align itself
with “best-in-world” suppliers who focus on performing the special task, (2) provides the firm
flexibility should customer needs shift unexpectedly, and (3) permits the firm to concentrate on other
internal value chain activities critical to sustaining competitive advantage. BPO is a means for
achieving strategies that are similar to partnering and joint venturing David & David, 2015).
5.4.5 Strategic Management in Non-Profit and Governmental

organisations
The strategic-management process is being implemented successfully by countless non-profit and
governmental organizations, such as the Girl Scouts, Boy Scouts, the Red Cross, chambers of
commerce, educational institutions, medical institutions, public utilities, libraries, government
agencies, and churches. The non-profit sector, surprisingly, is by far America’s biggest employer. Many
non-profit and governmental organizations outperform private firms and corporations on
innovativeness, motivation, productivity, and strategic management (David & David, 2017).
5.4.6 Strategic Management in Small firms

The reason why “becoming your own boss” has become a nationwide obsession is that entrepreneurs
America’s role models. It seems as if everyone now wants to own a business—from teens are and
college students, who are signing up for entrepreneurial courses in record numbers, to those over age
65, who are forming more companies every year. The strategic-management process is just as
important for small companies. From their launch, all organizations have a strategy, even if the
45
strategy just evolves from day-to-day operations. Even if conducted informally or by a single
owner/entrepreneur, the strategic-management process can significantly enhance small firms’
growth and prosperity (David & David, 2017).
Case study/Caselet: SA Companies with winning strategy
Apply what you have learnt to the case studies presented below.
Creating a sound business strategy that functions as the cornerstone for consistent growth, claiming
expanding market share and receiving a solid return on investment is not easy. The
fluctuating global economic climate and the challenges inherent in South Africa’s economy such as
declining consumer confidence make developing a winning business strategy touch. However a
number of South African companies have found a formula that works for them (Terry, 2001).
Woolworths is one example of a company with a strong business strategy.
46
Woolworths has claimed increasing market share, seen a surge in turnover and has expanded the
brand’s footprint in South Africa and beyond. Mr Price is another SA success story, showing increased
profits, improved sales growth and resilience even in difficult financial years. Seartec has seen
significant expansion through its acquisition of a diversified portfolio of complementary brands and
an overhauled product offering and strong revenue growth (Terry, 2001).
While each of these businesses are very different, their business strategies have a number of key
points in common:
Strong leadership
Each of these businesses have benefited from focused management that adopts a “lead from the
front” approach. In the case of Woolworths, Ian Moir has seen decreased costs and increased
profitably during his tenure as CEO, while the appointment of dynamic duo Mark McChlery and Bob
Skinstad as Seartec’s CEO and CMO respectively has brought renewed energy to the organisation(
Terry, 2001).
A diverse product offering
Mr Price’s initial offering was fashion apparel, but the brand has since diversified into sporting apparel
and home wares such as textiles and furniture. Woolworths not only sells home ware and clothing but
has been well-received as a food and grocery outlet. Seartec has recently acquired a number of
businesses, including Limtech Security Solutions; Office Box, an online stationery supplier; and Fuze
Cloud, a provider of cloud-based solutions. Seartec’s idea is to give clients a one-stop shop where they
can access an integrated package of products that fits all of their needs in the technology space (Terry,
2001).
A strong and streamlined online component
No business can ignore the impetus to have an online presence, but a strong business strategy takes
it one step further. Modern consumers have the internet at their fingertips and providing in-depth
information and the ability to shop online is becoming more and more critical. Mr Price has responded
with a comprehensive e-commerce offering, while Seartec has provided an extremely fresh take on
the normally onerous task of shopping for office supplies with simple and smart online (and overnight)
supplier Office Box (Terry, 2001).
An emphasis on creating value
Every consumer is looking for the best deal. Even if their offering is a luxury item, businesses need to
deliver exceptional value or risk losing a client. Woolworths acknowledged this with an aggressive
strategy that incorporated weekly promotions at a substantially reduced cost and benchmarking of
47
product prices to ensure that they remained competitive. This has netted the brand a sharp increase
in customers from lower LSM groups as well as their traditional high LSM shoppers. Mr Price has
acquired a name as a retailer that stocks trendy and desirable items at an affordable price. Seartec
gives their clients unique rental finance options in order to fix their asset costs. Comprehensive after-
sales service and support also provides added value (Terry, 2001).
In conclusion, these businesses have been able to weather the changes in the market and stay ahead
of the curve by keeping flexible, embracing change and remaining dedicated to meeting the needs of
their current and prospective clients. Business managers and leaders need to push to do the same
when formulating a business strategy in order to remain competitive
Source: Terry 2011. “Case Study: South Africa Winning Strategy” Harvard Business Review, p82
https://www.seartec.co.za/3-sa-companies-with-winning-business-strategy//
Vocabulary
Learn and apply these terms.
Cost leadership, differentiation, long term objectives, divestiture, first
mover advantages
5.4.7 Conclusion
Firms can consider a strategy that focuses on: forward integration, backward integration, horizontal
integration, market penetration, market development, product development, related diversification,
unrelated diversification, retrenchment, divestiture, and liquidation. Each strategy has immeasurable
variations.
1. List three industries where cooperation with competitors is

most likely and explain why.
2. Discuss important reasons why many mergers and
acquisitions fail.
3. Critically analyze Michael Porter 5 Generic strategies
48
5.5 Study Unit 5: Vision and Mission Analysis
This unit focuses on the concepts and tools which are employed to write and
evaluate business vision and mission statements. The process of developing a
Purpose
vision and mission statement will be discussed. The best way to understand
vision and mission can be clearly traced back to when a business first starts.

• Describe the nature and role of vision and mission statements in
strategic management.
Learning • Dramatize why the process of developing a mission statement is as
Outcomes important as the resulting document.
• Identify the components of mission statements.
• Evaluate mission statements of different organizations.
• Construct good vision and mission statements.
Mission A mission statement is the foundation for priorities,

Important terms Statement strategies, plans and work assignments
and definitions
Vision A vision statement should reveal the type of business the
firms engages. is a declaration of an organization's
objectives, intended to guide its internal decision-making?
Philosophy The basic beliefs and values of the organisation
5.5.1 Introduction
In the introduction, a new business is simply a collection of ideas and beliefs, which are then put into
writing and translated into vision and mission statements. The unit will discuss a framework for
developing mission statements.
5.5.2 What do we want to become?

A vision statement is an answer to the following question. “What do we want to become”. It provides
a basis for developing a comprehensive mission statement. Organizations have a vision statement and
a mission statement; the vision is developed first and foremost. It should be a short, preferably one
sentence and input of many managers is of utmost importance when crafting the vision statement.
Where there is no vision, the people perish (Proverbs 29:18).
Think Point
Leadership is the capacity to translate vision into reality- Warren Bennie.
49
5.5.3 What is our business?
Drucker says that questioning “What is our business/” is synonymous with asking the question “What
is our mission?” The mission statement is a declaration of an organization from other similar
enterprises, the mission statement is a assertion of an organization’s “reason for being.” It answers
the pivotal question “What is our business?” A clear mission statement is highly crucial in order for a
firm to establish effective objectives and formulate strategies. A mission statement reveals what an
organization wants to be and whom it wants to serve.
Drucker (2004) has the following to say about mission statement:
“A mission statement is the foundation for priorities, strategies, plans and work assignments. It is the
starting point for the design of jobs and organizational structures. A lumber mill makes lumber, an
airline carries passengers and freight, and a bank lends money. But” What is our business?” is almost
always a challenging question and the right answer is usually anything but obvious. The answer to this
question is the first responsibility of strategists.
Strategists have an important role they play of crafting the vision and mission statement. Firms that
develop and revisit their vision and missions statements, treat them as living documents and consider
them an important part of the firm’s culture to realize great benefits.
Think Point
Facebook was not originally created to be a company. It was built to accomplish a social mission - to
make the world more open and connected. Mark Zuckerberg
Vision versus Mission
The mission statement answers the question “What is our business?” the vision statement answers
the question “What do we want to become”? It is of huge benefit to the organization when employees
and manager’s model or fashion the vision and mission statements for a firm as that will result in
documents which reflect the personal visions that managers and employees have in their hearts.
Shared vision develops common interests that can motivate employees out of the monotony of daily
work and put them into a new exciting world filled with challenges and opportunities (David & David,
2015).
Vision Statement Analysis
A vision statement should reveal the type of business the firms engages. For an example, to have a
vision that says” to become the best retailing firm in the USA” is not good, because that firm could be
selling anything from boats to bunnies.
Starbucks Proposed Vision Statements
“Starbucks strives to ethically find and roast the highest quality Arabica coffee in the world. With
stores around the world, we are the premier roaster and retailer of speciality globally”
Starbucks “Improved “Vision Statements
50
“Starbucks vision is to be the most well-known, speciality coffee, tea, and pastry restaurant in the
world, offering sincere customer service, a welcoming atmosphere, and unequalled quality.
Starbucks Vision Statement Analysis
• The existing vision statement does not state what the company wants to become. Nor does it
acknowledge the firms movement into speciality tea offerings.
The improved vision statement reveals the company’s aspirations for the future and acknowledges
that upscale tea and pastries complement their premium coffee offerings (Fred R David & Forest R
David, 2015).
5.5.4 Benefits of a clear Vision and Mission Statements

• Clarity of purpose of achieved among all employees and managers.
• Provides clear direction.
• Useful as a focal point for all stakeholders of the firm.
• Resolve divergent views among managers.
• Promotes a sense of shared expectations among all managers and employees.
• Project a sense of worth and intent to all stakeholders.
• Provides a basis for all other strategic planning activities.
• Project an organized, motivated organisation worthy of support.
• Achieve higher organizational performance.
• Achieve synergy among all managers and employees (David and David, 2017: 163).
5.5.5 Characteristics of a Mission Statement

A Declaration of Attitude
A mission statement is more than a statement of specific details; it is a declaration of attitude and
outlook. It usually is broad in scope for at least two major reasons.
• First, a good mission statement allows for the generation and consideration of a range of
feasible alternative objectives and strategies without unduly stifling management creativity.
• Second, a mission statement needs to be broad to reconcile differences effectively among,

and appeal to, an organization’s diverse stakeholders, the individuals and groups of individuals
who have a special stake or claim on the company. Thus a mission statement should be
reconciliatory (David and David, 2017: 164).
A Customer Orientation
A good mission statement describes an organization’s purpose, customers, products or services,

markets, philosophy, and basic technology. According to Vern McGinnis (2001), a mission statement
should:
51
(1) Define what the organization is and what the organization aspires to be,
(2) Be limited enough to exclude some ventures and broad enough to allow for creative growth,
(3) distinguish a given organization from all others,
(4) serve as a framework for evaluating both current and prospective activities,
(5) Be stated in terms sufficiently clear to be widely understood throughout the organization.
A good mission statement reflects the anticipations of customers. Rather than developing a product
and then trying to find a market, the operating philosophy of organizations should be to identify
customers’ needs and then provide a product or service to fulfil those needs.
Mission Statement Components
Most practitioners and academics of strategic management feel that an effective statement should
include nine components. Because a mission statement is often the most visible and public part of the
strategic-management process, it is important that it includes the nine characteristics as summarized
below (David & David, 2017).
1. Customers—who are the firm’s customers?
2. Products or services—what are the firm’s major products or services?
3. Markets—geographically, where does the firm compete?
4. Technology—is the firm technologically current?
5. Concern for survival, growth, and profitability—is the firm committed to growth and financial
soundness?
6. Philosophy—what are the basic beliefs, values, aspirations, and ethical priorities of the firm?
7. Self-concept—what is the firm’s distinctive competence or major competitive advantage?
8. Concern for public image—is the firm responsive to social, community, and environmental
concerns?
9. Concern for employees—Are employees a valuable asset of the firm?(David and David,
2017:166)

Discuss the topic in your study group or online forum.
Identify from the internet six mission statements and present your
analysis to the class as a group.
52
1. Write a vision and mission statements for local restaurant in

your area.
2. List three things you are on a mission to accomplish in the next
three years, how relevant is the concept of vision/mission to
an individual in their personal and professional life? Explain.
3. Discuss the characteristics of a good mission statement.
53
5.6 Study Unit 6: Internal Audit

The unit discusses on identifying and evaluating a firm’s strengths and
weaknesses in the functional areas of business, which includes marketing,
Purpose management, finance and accounting, research and development and
management information systems. The process of performing an internal audit
will also be described.
• Describe how to perform an internal strategic management audit.

• Discuss key interrelationships among the functional areas of business.
Learning • Explain the importance of financial ratio analysis.
Outcomes • Explain how to determine the firm’s internal strengths and
weaknesses.
• Discuss the role and nature of management information’s systems in
strategic management.
• Develop an internal factor evaluation matrix.
Planning Planning consists of all those managerial activities related

to preparing for the future
Organizing Organizing includes all those managerial activities that

Important terms
result in a structure of task and authority relationships.
and definitions
Motivating Motivating involves efforts directed toward shaping human
behaviour. Specific topics include leadership,
communication, work groups, behaviour modification
Controlling Controlling refers to all those managerial activities directed

toward ensuring that actual results are consistent with
planned results
5.6.1 Introduction
All organisations are characterised by strengths and weaknesses in the functional areas of business.
An organisation which is equally strong and weak in all areas does not exist. Maytag for example is
known for excellent product design, whereas Procter and Gamble is known for superb marketing.
5.6.2 Nature of an Internal Audit

All organisations have internal strengths and weaknesses with respect to functional areas of business.
Coupled with external opportunities and threats and clear, vision and mission statements, provides
the basis for establishing objectives and strategies. Objectives and strategies are establishing with the
intention of capitalizing on internal strength and overcoming weaknesses (David & David,2017:178).
6.2.1 The process of performing an Internal Audit
54
The process of performing an internal audit is the same as performing an external audit. It’s a process
whereby representative managers and employees get highly involved in determining a firm’s
strengths and weaknesses. The internal audit involves gathering, assimilating and evaluating
information about the firm’s marketing, management, finance and accounting & D and Management
Information operations. The process of performing an internal audit is an opportunity for
management and employees to understand their jobs, departments and divisions contribution to the
success of the organisation, which will then increase their performance as they get to understand how
their work affects other areas and activities of the firm.
Performing an internal audit is an excellent vehicle for improving and enhancing the process of
communication. Through involvement in performing an internal strategic management audit,
managers from different departments and divisions of the firm come to understand and appreciate
the nature and effect of decisions in other functional business area in the firm. The knowledge of
interrelationships among functional businesses is highly critical for effectively establishing objectives
and strategies. (David & David: 2015.
The figure below illustrates how firms should strive to improve on their weaknesses turning them into
strengths, and ultimately developing distinctive competencies that can provide the firm with
competitive advantages over rival firms.
Figure 6.1 The Process of gaining a competitive advantage in a firm
Weaknesses ⇒ Strengths ⇒ Distinctive Competencies ⇒ Competitive Advantage
5.6.3 Resource Based View

The resource-based view (RBV) approach to competitive advantage contends that internal resources
are more important for a firm than external factors in achieving and sustaining competitive advantage.
RBV theory asserts that resources are actually what helps a firm exploit opportunity and neutralize
threats. For a resource to be valuable, it must either be (a) rare, (b) hard to imitate or (c) nor easily
substitutable (Fred R David & Forest R David, 2015).
Such resources will be the ones which other firms do not possess, as it will enable the firm with the
rare resources to have a competitive advantage. It even gets better if the rare resource is hard to
imitate as that will make it harder for other firms to obtain these resources. RBV has gained popularity
as it clearly demonstrates a clear relationship between resources and sustained competitive
advantage in strategic management.
Understanding external and internal factors and more importantly the relationships among them, is
the key to excellent strategy formulation. Strategist have to continually scan the environment to
identify and take advantage of positive changes as well as buffer against negative changes in an effort
to sustain a firms competitive advantage (Fred R David & Forest R David, 2015).
5.6.4 Management
According to Fred R David & Forest R David (2015) the functions of management consist of five basic
activities: planning, organizing, motivating, staffing, and controlling
55
Planning
Planning consists of all those managerial activities related to preparing for the future. Specific tasks
include forecasting, establishing objectives, devising strategies, developing policies, and setting goals.
Organizing
Organizing includes all those managerial activities that result in a structure of task and authority
relationships. Specific areas include organizational design, job specialization, job descriptions, job
specifications, span of control, and unity of command, coordination, job design, and job analysis.
Motivating
Motivating involves efforts directed toward shaping human behaviour. Specific topics include
leadership, communication, work groups, behaviour modification, and delegation of authority, job
enrichment, job satisfaction, needs fulfilment, organizational change, employee morale, and
managerial morale.
Staffing
Staffing activities are centred on personnel or human resource management. Included are wage and
salary administration, employee benefits, interviewing, hiring, firing, training, management
development, employee safety, affirmative action, equal employment opportunity, union relations,
career development, personnel research, discipline policies, grievance procedures, and public
relations.
Controlling
Controlling refers to all those managerial activities directed toward ensuring that actual results are
consistent with planned results. Key areas of concern include quality control, financial control, sales
control, inventory control, and expense control, analysis of variances, rewards, and sanctions.
6.3.1.0 Management Audit Checklist of Questions
The following checklist of questions can help identify and determine strengths and weaknesses in the
functional area of business. An answer of no to any question indicates a potential weakness whereas
a yes indicates a potential strength.
1) Does the firm use strategic management concepts?
2) Are company objectives and goals measurable and well communicated?
3) Do managers at all hierarchical levels plan effectively?
4) Do managers delegate authority well?
5) Is the organization’s structure appropriate?
6) Are job descriptions and job specifications clear?
7) Is employee morale high?
8) Are employee turnover an absenteeism low.
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9) Are organizational reward and control mechanisms effective?
5.6.5 Marketing
Marketing can be described as the process of defining, anticipating, creating, and fulfilling customers’
needs and wants for products and services. There are seven basic functions of marketing: (1) customer
analysis, (2) selling products/services, (3) product and service planning, (4) pricing, (5) distribution, (6)
marketing research, and (7) opportunity analysis. Understanding these functions helps strategists
identify and evaluate marketing strengths and weaknesses (Fred R David & Forest R David, 2015).
5.6.6 Finance and Accounting

The financial condition of a firm is often considered to be the best measure of its competitive position
and overall attractiveness to investors. For effective formulation of strategies, the organisations
financial strengths and weaknesses should be determined. A firm’s liquidity, leverage, working capital,
profitability, asset utilization, and cash flow can evaluate or even eliminate some strategies as being
feasible alternatives.
Breakeven Analysis
The firm’s financial condition depends not only on the functions of finance, but also on many other
factors that include (1) management, marketing, management production/operations, research and
development, and management information systems decisions; (2) actions by competitors, suppliers,
distributors, creditors, customers, and shareholders; and (3) economic, social, cultural, demographic,
environmental, political, governmental, legal, and technological trends. In a global economic recession
when consumers are price sensitive, many firms have to lower prices to compete. As a firm lowers
prices, its breakeven (BE) point in terms of units sold increases, as illustrated in Figure below.
The breakeven point can be defined as the quantity of units that a firm must sell in order for its total
revenues (TR) to equal its total costs (TC). Total Revenue (TR) line rotates to the right with a decrease
in Price, thus increasing the Quantity (Q) that must be sold just to break even. Increasing the
breakeven point is thus a huge drawback of lowering prices. Of course when rivals are lowering prices,
Figure 6.2 A before a breakeven chart when prices are lowered
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a firm may have to lower prices anyway to compete but it has to be in line with its breakeven point
(Fred R Source: David & Forest R David: 2015).
Figure 6.3 A before and after a breakeven chart when fixed costs are increased
Figure 6.4 A before and after breakeven chart when prices are lowered, and fixed costs are increased.
Source: (David and David,2017: 195-196)
Finance/Accounting Audit Checklist
The following finance/accounting questions, like the similar questions about management earlier,
should be examined:
1. Where is the firm financially strong and weak as indicated by financial ratio analyses?
2. Can the firm raise needed short-term capital?
3. Can the firm raise needed long-term capital through debt and/or equity?
4. Does the firm have sufficient working capital?
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5. Are capital budgeting procedures effective?
6. Are dividend pay-out policies reasonable?
7. Does the firm have good relations with its investors and stockholders?
8. Are the firm’s financial managers experienced and well trained?
9. Is the firm’s debt situation excellent?
5.6.7 Production and Operations

The production/operations function of a business consists of all those activities that transform inputs
into goods and services. Production/operations management deals with inputs, transformations, and
outputs that vary across industries and markets. A manufacturing operation transforms or converts
inputs such as raw materials, labour, capital, machines, and facilities into finished goods and services.
Roger Schroeder suggested that production/operations management comprises five functions or
decision areas: process, capacity, inventory, workforce, and quality (Fred R David & Forest R David,
2015).
Production/Operations Audit Checklist
Questions such as the following should be examined:
1. Are supplies of raw materials, parts, and subassemblies reliable and reasonable?
2. Are facilities, equipment, machinery, and offices in good condition?
3. Are inventory-control policies and procedures effective?
4. Are quality-control policies and procedures effective?
5. Does the firm have technological competencies?
5.6.8 Research and Development

The fifth major area of internal operations that should be examined for specific strengths and
weaknesses is research and development (R&D). Many firms today conduct no R&D, and yet many
other companies depend on successful R&D activities for survival. Firms pursuing a product
development strategy especially need to have a strong R&D orientation. Organizations invest in R&D
because they believe that such an investment will lead to a superior product or service and will give
them competitive advantages.
Research and development expenditures are directed at developing new products before competitors
do, at improving product quality, or at improving manufacturing processes to reduce costs. Effective
management of the R&D function requires a strategic and operational partnership between R&D and
the other vital business functions. A spirit of partnership and mutual trust between general and R&D
managers is evident in the best-managed firms today (Fred R David & Forest R David, 2015).
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5.6.9 Management Information Systems

Information ties all business functions together and provides the basis for all managerial decisions. It
is the cornerstone of all organizations. Information represents a major source of competitive
management advantage or disadvantage. Assessing a firm’s internal strengths and weaknesses in
information systems is a critical dimension of performing an internal audit. A management
information system receives raw material from both the external and internal evaluation of an
organization. It gathers data about marketing, finance, production, and personnel matters internally,
and social, cultural, demographic, environmental, economic, political, governmental, legal,
technological, and competitive factors externally. Data are integrated in ways needed to support
managerial decision making (David & David, 2015).
5.6.10 Internal Factor Evaluation (IFE) Matrix

A summary step in conducting an internal strategic-management audit is to construct an Internal
Factor Evaluation (IFE) Matrix. This strategy-formulation tool summarizes and evaluates the major
strengths and weaknesses in the functional areas of a business, and it also provides a basis for
identifying and evaluating relationships among those areas. Intuitive judgments are required in
developing an IFE Matrix, so the appearance of a scientific approach should not be interpreted to
mean this is an all-powerful technique. A thorough understanding of the factors included is more
important than the actual numbers. IFE Matrix can be developed in five steps. (Fred R David & Forest
R David: 2015).
In strategic management, an internal audit determines the organization’s position within its industry.
This process is essential for building and maintaining a sustainable competitive advantage.
Example
From Steve Jobs to Donald Trump, Richard Branson to Howard Schultz, from Bill
Gates to Ralph Lauren – we have had the privilege to see and learn from some
brilliant minds and great managers!
People who came from nothing, and went on to become billionaires, people who
combined book smarts with street smarts, managers who were great with
people, and managers who had natural leadership skills!
A Manager, an integral component in any company’s machinery
Here’s what some of them say about management, leadership and being a great manager:
It's not about money. It's about the people you have, and how you're led." - Steve Jobs
“The best executive is the one who has sense enough to pick good men to do what he wants done, and
self-restraint to keep from meddling with them while they do it.” – (Theodore Roosevelt, 2012)
“Focus on a few key objectives … I only have three things to do. I have to choose the right people,
allocate the right number of dollars, and transmit ideas from one division to another with the speed of
light. So I’m really in the business of being the gatekeeper and the transmitter of ideas.” – (Jack Welch,
2012)
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"What's measured improves" - Peter F. Drucker
“Hire people who are better than you are, then leave them to get on with it. Look for people who will
aim for the remarkable, who will not settle for the routine.” – David Ogilvy
“If you pick the right people and give them the opportunity to spread their wings—and put
compensation as a carrier behind it—you almost don’t have to manage them.” – Jack Welch
“Surround yourself with the best people you can find, delegate authority, and don’t interfere as long
as the policy you’ve decided upon is being carried out.” – Ronald Reagan
"Management is doing things right; leadership is doing the right things" - Peter F. Drucker
“Hiring people is an art, not a science, and resumes can’t tell you whether someone will fit into a
company’s culture. When you realize you’ve made a mistake, you need to cut your losses and move
on.” – Howard Schultz
"Management is, above all, a practice where art, science, and craft meet" - Henry Mintzberg
"The true measure of the value of any business leader and manager is performance." - Brian Tracy
”A leader is the one who can outline the broad vision and the direction, and say here’s where we are
going to go, here’s why we need to go there, and here’s how we are going to get there. A manager is
the one who actually gets up under the hood and tunes the carburettor.” – (Mike Huckabee,2012)
“Good management is the art of making problems so interesting and their solutions so constructive
that everyone wants to get to work and deal with them.” – Paul Hawken.
“The conventional definition of management is getting work done through people, but real
management is developing people through work.” – Agha Hasan Abedi
"Good management consists in showing average people how to do the work of superior people." - John
Rockefeller
“The Four Keys of Great Managers: (1) When selecting someone, they select for talent … not simply
experience, intelligence or determination. (2) When setting expectations, they define the right
outcomes … not the right steps. (3) When motivating someone, they focus on strengths … not on
weaknesses. And (4) when developing someone, they help him find the right fit … not simply the next
rung on the ladder.” -Marcus Buckingham
Reading
Read the section on management trends on the link below:
Source: M Maken, ( 2016) http://smartbusinesstrends.com/16-

managemen.
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5.6.11 Conclusion
The mission statement focuses on what the business is all about whereas the vision statement outlines
what the organisation seeks to accomplish. It is of huge benefit to the organization when employees
and manager’s model or fashion the vision and mission statements for a firm as that will result in
documents which reflect the personal visions that managers and employees have in their hearts.

1. Explain the following concepts:
• Resource Based view
• Management
• Internal factor matrix
2. Explain the importance of examining R & D strengths and
weaknesses in an institution.
3. Analyse the importance of an MIS system within an
organisation.
62
5.7 Study Unit 7: The External Audit
Purpose The unit assesses the tools and techniques which are needed to conduct
external strategic management which is also referred to as industry analysis.
• Describe how to conduct an external strategic management audit.
Learning • Identify and discuss 10 major external forces that affect organizations.
Outcomes • Describe key sources of external information.
• Examine the importance of monitoring external trends and events.
• Discuss the importance of gathering competitive intelligence
Economic Consists of any economic events that affect business

Forces strategy such as inflation and interest rates
Important terms
and definitions Competitive These are exerted by companies that produce similar
Forces products which can reduce a company’s market share
Political These are political events such as nationalisation, which can

Forces have an impact on an organisation.
5.7.1 Introduction
An external audit is an important part of strategic management as it reveals threats and opportunities
facing an organization, managers are then able to formulate strategies to take full advantage of the
opportunities and reduce the impact of threats. The unit presents a clear and practical framework for
the identification and utilization of external information.
5.7.2 The Nature of an External Audit

The purpose and rationality of an external audit is to develop a list of opportunities and threats that
could benefit the organisation and threats that should be avoided. The formulation of strategies from
the identified opportunities and threats will enable firms to respond either offensively or defensively,
by doing that the firm will be taking advantage of external opportunities or minimizing the impact of
potential threats.
Key External Forces
As Davian and Marko (2008) points out, 'There are three significant standpoints on the marketing
environment, namely the 'macro-environment,' the 'micro-environment' and the 'internal
environment' (refer to Figure 1). Davorin and Mirko (2008) further stresses that micro-environment
comprises of suppliers that deal directly or indirectly, consumers and customers, and other local
stakeholders [company, competitor, public and middle man]. Whereas, macro-environment includes
all factors [Social, Technological, Economic, Environment, Political, Legal, Education, Demographics
(STEEPLED)] that may impact an organization, but that are out of their direct control (Daborin & Mirko,
63
2008). On the other hand, internal environment are factors [Men, Money, Machinery, Materials and
Markets (Five M's)] that are internal to the business (Daborin & Mirko, 2008)
David & David (2017) postulates that external forces can be separated into five extensive categories:
(1) economic factors, (2) social, cultural and natural environment forces: (3) political, governmental
and legal forces; (4) technological forces and (5) Competitive forces. The relationship among these
forces and an organization are depicted in Figure7-1.
Figure 7.1 Relationships between key external forces and an organization
The Process of Performing an External Audit
David & David (2017) alludes to fact that the process of performing an external audit must consist of
as many managers and employees as possible, participation in the strategic-management process can
lead to understanding and commitment from organizational members. Individuals recognize the value
of having the opportunity to contribute ideas and to gain a deeper understanding of their firms’
industry, competitors, and markets. To perform an external audit, a company first must gather
competitive intelligence and information about economic, social, cultural, demographic,
environmental, political, governmental, legal, and technological trends. Individuals can be asked to
monitor various sources of information, such as key magazines, trade journals, and newspapers.
Think point
A business does not operate in a void. It has to act and react to what
transpires outside the factory and office walls. These factors that
happen outside the business are known as external factors or
influences.
5.7.3 The Industrial Organisation view
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The Industrial Organization (I/O) method to competitive advantage believes that external industry
factors are more significant than internal factors in a firm for achieving competitive advantage.
Proponents of the I/O view such as Michael Porter, contend that organizational performance will be
primarily determined by industry forces (Fred R David & Forest R David: 2015). The model explains
that before a firm crafts their strategy, they should first take care of the external environment.
The model further explains that the industry in which a firm selects to compete has a much greater
influence on the firm’s performances than do the choices managers make inside the organization.
They contend that the performance of an organisation is based on industry factors such as economies
of scale, product differentiation, barriers to entry, the economy and level of competitiveness than on
internal resources, structure and operations (David & David, 2017).
5.7.4 Economic Factors

Economic forces are aspects such as interest rates, labour and government monetary policies, inflation
that influence levels of production and demand for goods and services. These factors determine the
availability and affordability of production resources, as well as the abilities of consumers to afford
your end product (Mark Cipher 2008). Economic forces influence the success and direction of the
economy and the firms that operate in the economy, often determining the competitiveness of the
macro-environment. They have a direct bearing on the potential appeal of various strategies.
For example, when interest rates rise, funds needed for capital expansion become more costly or
unavailable. Also, when interest rates rise, discretionary income declines, and the demand for
discretionary goods falls. When stock prices increase, the desirability of equity as a source of capital
for market development increases. Also, when the market rises, consumer and business wealth
expands (David & David, 2017).
5.7.5 Social, Cultural, Demographic and Natural Environment Forces

Demographic, social, cultural and environmental changes have a major effect on all products, services,
markets, and customers. Industries are being staggered and challenged by the opportunities and
threats arising from changes in social, cultural, demographic, and environmental variables. The social
factors that affect a firm include the values, attitudes beliefs, opinions and lifestyles of person’s in the
firm’s external environment as developed from demographic cultural, religious, educational and
ethnic conditioning (Mark Cipher 2008) like other forces in the external environment social factors
change continually. As social attitudes, beliefs and values change, so does the demand for various
types of dresses, books, leisure activities. Below is a figure which shows the factors effect social and
cultural environment (Roussow, 2014).
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Figure 7.2 Factors which effect social and cultural environment
5.7.6 Political, Governmental and Legal Forces

Local, federal, state and foreign governments are chief controllers, deregulators, subsidizers,
employers, and customers of organizations. Political, governmental, and legal factors, therefore, can
characterise significant opportunities or threats for both small and large organizations. For industries
and firms that depend heavily on government contracts or subsidies, political forecasts can be the
most important part of an external audit (David & David: 2015).
Changes in patent laws, antitrust legislation, tax rates, and lobbying activities can affect firms
significantly. The increasing global interdependence among economies, markets, governments.
5.7.7 Technological Forces

According to Anugwom (2005), Kotler, (2003), an organisation must familiar with its external
environment to be successful overtime. There must be a strategic fit between what the environment
wants and what the firm has to offer as well as between what the firm needs and what the
environment can provide. Furthermore, to Osuagwu, (2009), Ekpunobi, (2008), Stoner et al (2002),
and Wilson, et al (1992), external environmental factors that impact business organisations‟
operations can be categorized into economic factors, socio-cultural factors, political and legal factors,
technological factors, competitive factors, ecological factors, demographic factors etc.
The most dramatic factor now shaping our destiny is technology, which is a process of transforming
scientific discoveries into realities. According to Kotler and Armstrong (2005) every new technology
replaces an older technology and that technological environment is highly dynamic as new
technologies render old ones obsolete while it also creates new markets and opportunities. Also,
Thompson and Martin (2010) pointed out that technology in one respect is part of the organization
and it is used for the creation of competitive advantage.
According to Barnat (2005) technological change can decimate existing businesses and even entire
industries, since it shifts demand from one product to another. Moreover, transformations in
technology can affect a firm’s operations as well its products and services. He further said these
changes might affect processing, methods, raw materials and service delivery. Therefore, marketers
66
should keep track of the advancement and invention in technology, nature of changes in technological
environment as well as the diversity in technology in their operating environment.
5.7.8 Competitive Forces

Competition in nearly all industries can be described as severe —and sometimes as cutthroat The
identification of rival firms and determining their strengths, weaknesses, capabilities, opportunities,
threats, objectives, and strategies is an important part of an external audit. Collecting and evaluating
information on competitors is necessary for successful strategy formulation. Identifying major
competitors is not always easy because many firms have divisions that compete in different industries.
Many multidivisional firms do not provide sales and profit information on a divisional basis for
competitive reasons.
David, F.R & David F.R (2015) have identified seven characteristics which describe the most
competitive industries:
1) Strive to continually increase market share.
2) Use the vision/mission as a guide for all decisions.
3) Realize that the old adage “ if it’s not broke ,don’t fix it” has been replaced by
“ whether its broke or not ,fix it
4) Continually adapt, innovate, improve-especially when the firm is successful.
5) Strive to grow through acquisition whenever possible.
6) Hire and retain the best employees and managers possible.
7) Strive to stay cost-competitive on a global basis.
5.7.9 Competitive Analysis: Porter’s Five Forces Model

Porters Five - Forces Model of competitive analysis is a widely used approach for developing strategies
in many industries. According to Porter, the nature of competitiveness in given industry can be viewed
as a composite of five forces:
1) Rivalry among competing firms.
2) Threats of new entrants
3) Potential development of substitute products.
4) Bargaining power of suppliers.
5) Bargaining power of consumers.
Figure 7.3 The five forces Model of Competition
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Source: Based on Michael Porter. Competitive Strategy) New York Press,2001, pg 201.
5.7.10 The Competitive Profile Matrix

According to David & David (2017) the Competitive Profile Matrix (CPM) identifies a firm’s major
competitors and its particular strengths and weaknesses in relation to a sample firm’s strategic
position. The weights and total weighted scores in both a CPM and an EFE have the same meaning.
However, critical success factors in a CPM include both internal and external issues; therefore, the
ratings refer to strengths and weaknesses, where 4 = major strength, 3 = minor strength, 2 = minor
weakness, and 1 = major weakness. The critical success factors in a CPM are not grouped into
opportunities and threats as they are in an EFE. In a CPM, the ratings and total weighted scores for
rival firms can be compared to the sample firm. This comparative analysis provides important internal
strategic information. See example of (CPM) on page 246 prescribed textbook.
Case study/Caselet: Crime and other Macro Economic Factors affecting SA

Business
While the statistics are still worryingly high, Grant Thornton reveals that the impact
of contact crime on South African business continues its decline since this concern
was first surveyed in 2007.
Grant Thornton’s 2011 International Business Report on business owners’
perceptions, reveals that 50% of South African businesses have been directly
affected by contact crime during the past 12 months.
At a media briefing this morning, national chairman of Grant Thornton SA, Leonard
Brehm, said: “This figure is still unacceptably high, with half of the survey population
being directly affected by crime in the past year. The sad conclusion is that crime is
still a major problem in South Africa.”South African business owners were asked if
they, their employees or any of their immediate families had been directly affected
68
by contact crimes (road rage, hijackings, personal security threat, violent crime or
housebreakings) in the past year - 50% said yes( G, Goreck, 2017)
The good news is that the responses are lower each year. “When we started
surveying the impact of crime on South African private businesses in 2007, an
astonishing 84% had been directly affected by crime during the 12 months under
review,” says Brehm. “Now, just five years later, the figures are almost 35% lower.In
terms of business owners considering emigration, the figures also indicate a lower
percentage each year. In 2009, 32% responded they were considering leaving, while
2010’s data reveals 18% and in 2011 17% of South African business owners have
seriously considered leaving SA permanently, as a result of the impact of crime. (G,
Goreck, 2017)
Business owners’ reasons for considering emigration have changed since 2010. The
high crime rate – still the number one reason causing business owners to consider
emigration – was an astonishing 93% in 2009 but has declined year by year and is
56% in 2011.
Increasingly, the political climate is a reason for business owners to consider
emigration with 46% citing this as a concern this year compared to 42% during 2010.
The regional data relating to the political climate as a reason to emigrate reveals
further interesting findings.
Gauteng (57%) and the Eastern Cape (62%) recorded the highest responses as to
whether the political climate is a concern, with the Western Cape citing the lowest
concern for this issue at 29%. Conversely, the Western Cape stated that the high
crime rate in South Africa is their main reason for considering emigration (64%),
followed by KZN (59%), then Gauteng business owners at 54% and Eastern Cape at
46% ( G, Goreck ,2017)
When South African business owners were asked to describe how the threat to
personal security affected business operations, increased costs of security (48%) and
decreased motivation (20%) were the two most important items identified. “This is
a clear indication that organisations experience a serious financial impact from
crime,” says Brehm. “Overall, though we are encouraged by the fact that that there
has been an improving trend over the years but the effect and cost of contact crime
on business remains appalling.” (G, Goreck, 2017)
51% of South African business owners state that their businesses have been
negatively affected by Government Service Delivery. At this morning’s media
briefing Grant Thornton released findings relating to South African specific factors
affecting business - which will now be tracked on a quarterly basis as part of the
International Business Report (IBR). Government Service Delivery is one of the four
elements to be tracked for South Africa in the firm’s quarterly IBR tracker. Other
elements being tracked are perceptions relating to South Africa’s socio-political
environment, the impact of the Companies Act and crime, which is dealt with above
G, Goreck, 2017)
“Business owners state that utilities such as gas and electricity are the biggest
service delivery element negatively impacting their business (30%) with billing issues
(20%) and road concerns such as potholes and traffic lights a secondary concern
(20%),” says Brehm. When business owners were asked about the political climate
69
and its impact on business decisions, 48% of executives surveyed for this quarter are
worried.
Regarding the Companies Act, Brehm says: “When the Act became effective on 1
May, companies were asked to comply with legislation, aspects of which they know
very little about.” Grant Thornton’s IBR quarterly tracker reveals that on balance
only 5% of businesses are well informed about the new Act.
“We’re encouraged to see, though, that 40% of business owners surveyed are well
informed on the new Act, however an alarming 35% of businesses are poorly
informed,” he says.
Brehm expects that knowledge of the new Companies Act and all its intricacies could
take years for businesses to achieve.
Global tracker elements - Q2 economic update
Global perceptions from over 11 000 business owners will be tracked quarterly.
The Q2 rolling average economic data relating to Grant Thornton International’s
Optimism / Pessimism Index, shows that South Africa’s optimism balance of +66% is
very similar to the +67% rolling average recorded in Q1. This is against a global
optimism balance of just +28%, which seems to be gradually improving from the
27% rolling average in Q1.
An ‘optimism balance’ is the proportion of business owners reporting they are
optimistic about the outlook of their country’s economy for the year ahead, less
those reporting they are pessimistic( G, Goreck ,2017).
“Sharp increases in administered prices, the strong rand and uncertainty regarding
issues such as nationalisation of mines in South Africa make business conditions
tough this year –particularly for those with an export focus,” said Brehm. “It seems
South African business owners continue to be optimistic about the nation’s
economic landscape for the year ahead.”
When monitoring business constraints on a quarterly basis South African business
owners state that the lack of availability of a skilled workforce is still the major
constraint to business growth.
Grant Thornton’s Q2 data reveals that 37% of SA business owners believe that the
lack of a skilled workforce is the greatest constraint to business expansion. Over-
regulation is increasingly constraining business growth, up 4% since December 2010,
and this is ranked by business owners as the second biggest factor at 34%.The BRIC
economies seem to be battling with similar constraint issues with BRIC business
owners indicating that the lack of availability of skills (BRIC: 41%) and regulatory
issues (BRIC: 36%) combined with the cost of finance (BRIC: 36%) are the major
constraints in Brazil, Russia, India and China too
.
Source:Goreck,2017)http://www.gbn.co.za/articles/dailynews/2054/Crime+and+Other+Macro+Econ
omic+Factors+Affect+SA+Business.html.
70
5.7.11 Conclusion
The goal of external audit is to develop a list of opportunities and threats that could benefit the
organisation and threats that should be avoided. The formulation of strategies from the identified
opportunities and threats will enable firms to respond either offensively or defensively, by doing that
the firm will be taking advantage of external opportunities or minimizing the impact of potential
threats.
1. Distinguish the industrial organisation view for the resource-

based view.
2. Identify and discuss the external forces which affect an

organisation.
3. Construct and explain the five forces model of competition.
71
5.8 Study Unit 8: Strategy Generation and Selection
Purpose The unit assesses the tools and techniques which are needed to conduct
external strategic management which is also referred to as industry analysis.
• After studying this unit, you should be able to:
• Describe a three-stage framework for choosing among alternative
strategies.
Learning • Assess the role of intuition in strategic analysis and choice.
Outcomes • Discuss the role of organizational culture in strategic analysis and
choice.
• Discuss the role of a board of directors in choosing among alternative
strategies.
Strategy Is the process of generating a strategy for an organisation

Important terms Formulation
and definitions
SWOT Strengths, Weaknesses, Opportunities and Threats
BCG Boston Consulting Group (BCG)
5.8.1 Introduction
Strategists never fully deliberate all feasible alternatives that could profit the firm because there are
an immeasurable number of probable actions and an endless number of ways to implement those
actions. Therefore, a manageable set of the most attractive alternative strategies must be developed.
This unit will illuminate strategy generation and selection.
5.8.2 The process of generating and selecting strategies

The advantages, disadvantages, trade-offs, costs, and benefits of these strategies should be
established. Identifying and evaluating alternative strategies should involve many of the managers
and employees who earlier assembled the organizational vision and mission statements, performed
the external audit, and conducted the internal audit. Each department should have representatives
who are included in the strategy formulation activity. Research has shown that involvement provides
the best opportunity for managers and employees to gain a deeper understanding of what the firm is
doing and why and to become committed to helping the firm accomplish its objectives.
While conducting a strategy analysis and choice activity, all participants should have the firm’s
external and internal audit information by their sides. This information, coupled with the firm’s
mission statement, will help participants develop in their own minds particular strategies that they
believe could profit the firm most. Creativity should be inspired in this thought process. Alternative
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strategies proposed by participants should be considered and discussed in a meeting or series of

meetings. Proposed strategies should be listed in writing. When all feasible strategies identified by
participants are given and understood, the strategies should be ranked in order of attractiveness by
all participants, with
1 = should not be implemented,
2 = possibly should be implemented,
3 = probably should be implemented, and
4 = definitely should be implemented (David and David, 2017: 249-250).
This process will result in a prioritized list of best strategies that reflects the collective wisdom of the
group
5.8.3 A comprehensive strategy formulation framework

Important strategy-formulation techniques can be integrated into a three-stage decision making
framework, as shown in Figure 8-1
The strategy –formulation analytical framework
Figure 8.1 The strategy –formulation analytical framework
Source: (David and David, 2017: 250)
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Stage 1 of the formulation framework consists of the EFE Matrix, the IFE Matrix, and the Competitive
Profile Matrix (CPM). Called the Input Stage, Stage 1 recapitulates the basic input information required
to formulate strategies. Stage 2, called the Matching Stage, focuses upon generating feasible
alternative strategies by aligning key external and internal factors. Stage 2 techniques include the
Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix, the Strategic Position and Action
Evaluation (SPACE) Matrix, the Boston Consulting Group (BCG) Matrix, the Internal-External (IE)
Matrix, and the Grand Strategy Matrix. Stage 3, called the Decision Stage, and involves a single
technique, the Quantitative Strategic Planning Matrix (QSPM). A QSPM uses input information from
Stage 1 to objectively evaluate feasible alternative strategies identified in Stage 2. A QSPM reveals the
relative attractiveness of alternative strategies and thus provides objective basis for selecting specific
strategies (David & David: 2017).
5.8.4 The Strengths –Weaknesses-Opportunities-Threats (SWOT)

Matrix
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix is an imperative matching tool that
assists managers to create four types of strategies: SO (strengths-opportunities).Strategies, WO
(weaknesses-opportunities) Strategies, ST (strengths-threats) Strategies, and WT (weaknesses-
threats) Strategies.3 Matching key external and internal factors is the most difficult part of developing
a SWOT Matrix and requires good judgment and there is no one best set of matches. SO Strategies
use a firm’s internal strengths to take advantage of external opportunities. (David & David: 2017)
All managers would be happy if their organizations are placed in a position where internal strengths
are utilised to take advantage of external trends and events. Organizations generally will pursue WO,
ST, or WT strategies to get into a situation in which they can apply SO Strategies. When a firm has
major weaknesses, it will strive to overcome them and make them strengths. When an organization
faces major threats, it will seek to avoid them to concentrate on opportunities.
WO Strategies aim at improving internal weaknesses by taking advantage of external opportunities.

Sometimes key external opportunities exist, but a firm has internal weaknesses that prevent it from
exploiting those opportunities. For example, there may be a high demand for electronic devices to
control the amount and timing of fuel injection in automobile engines (opportunity), but a certain auto
parts manufacturer may lack the technology required for producing these devices (weakness). One
possible WO Strategy would be to acquire this technology by forming a joint venture with a firm having
competency in this area. An alternative WO Strategy would be to hire and train people with the
required technical capabilities.
ST Strategies use a firm’s strengths to avoid or reduce the impact of external threats. This does not
mean that a strong organization should always meet threats in the external environment head-on. WT
Strategies are defensive tactics directed at reducing internal weakness and avoiding external threats.
An organization faced with numerous external threats and internal weaknesses may indeed be in a
precarious position. In fact, such a firm may have to fight for its survival, merge, retrench, declare
bankruptcy, or choose liquidation.
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5.8.5 The Strategic Position and Action Evaluation (SPACE) Matrix
The SPACE Matrix
Figure 8.2 The Space matrix
Source: Adapted from H. Rowe, R. Mason, and K. Dickel, Strategic Management and Business Policy:
A Methodological Approach (Reading, MA: Addison-Wesley Publishing Co. Inc., © 1982): 155.
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5.8.6 The Boston Consulting Group (BCG) Matrix
Figure 8.3 The relative market share position
Autonomous divisions (or profit centres) of an organization make up what is called a business
portfolio. When a firm’s divisions compete in different industries, a separate strategy often must be
developed for each business. The Boston Consulting Group (BCG) Matrix and the Internal-External (IE)
Matrix are designed specifically to enhance a multidivisional firm’s efforts to formulate strategies The
BCG Matrix graphically portrays differences among divisions in terms of relative market share position
and industry growth rate. The BCG Matrix allows a multidivisional organization to manage its portfolio
of businesses by examining the relative market share position and the industry growth rate of each
division relative to all other divisions in the organization. Relative market share position is defined as
the ratio of a division’s own market share (or revenues) in a particular industry to the market share
(or revenues) held by the largest rival firm in that industry (David & David: 2017)
5.8.7 The Internal- External (IE) Matrix

The Internal-External (IE) Matrix positions an organization’s various divisions in a nine-cell display,
illustrated in Figure 6-9. The IE Matrix is similar to the BCG Matrix in that both tools involve plotting
organization divisions in a schematic diagram; this is why they
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Are both called “portfolio matrices?” Also, the size of each circle represents the percentage sales
contribution of each division, and pie slices reveal the percentage profit contribution of each division
in both the BCG and IE Matrix.
Figure 8.4 The IFE Total weighted scores
5.8.8 The Quantitative Strategic Planning Matrix (QSPM)

Other than ranking strategies to accomplish the prioritized list, there is only one analytical technique
in the literature designed to establish the relative attractiveness of feasible alternative actions. This
technique is the Quantitative Strategic Planning Matrix (QSPM), which comprises Stage 3 of the
strategy-formulation analytical framework 6. This technique objectively indicates which alternative
strategies are best. The QSPM uses input from Stage 1 analyses and matching results from Stage 2
analyses to decide objectively among alternative strategies.
That is, the EFE Matrix, IFE Matrix, and Competitive Profile Matrix that make up Stage 1, coupled with
the SWOT Matrix, SPACE Matrix, BCG Matrix, IE Matrix, and Grand Strategy Matrix that make up Stage
2, provide the needed information for setting up the QSPM (Stage 3). The QSPM is a tool that allows
strategists to evaluate alternative strategies objectively, based on previously identified external and
internal critical success factors. Like other strategy-formulation analytical tools, the QSPM requires
good intuitive judgment.
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8.8.1 The Quantitative Strategic Planning Matrix—QSPM
Conceptually, the QSPM determines the relative attractiveness of various strategies based on the
extent to which key external and internal critical success factors are capitalized upon or improved. The
relative attractiveness of each strategy within a set of alternatives is computed by determining the
cumulative impact of each external and internal critical success factor.
5.8.9 Cultural Aspects of Strategy Choice

All organizations have a culture. Culture includes the set of shared values, beliefs, attitudes, customs,
norms, personalities, heroes, and heroines that describe a firm. Culture is the unique way an
organization does business. It is the human dimension that creates solidarity and meaning, and it
inspires commitment and productivity in an organization when strategy changes are made. It is
beneficial to view strategic management from a cultural perspective because success often rests upon
the degree of support that strategies receive from a firm’s culture. If a firm’s strategies are supported
by cultural products such as values, beliefs, rites, rituals, ceremonies, stories, symbols, language,
heroes, and heroines, then managers often can implement changes swiftly and easily (David &
David,2015).
5.8.10 The Politics of Strategy Choice

All establishments are political, if it’s not managed, political manoeuvring consumes valuable time,
subverts organizational objectives, diverts human energy, and results in the loss of some valuable
employees. Sometimes political prejudices, preconceptions and personal preferences get unduly
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embedded in strategy choice decisions. Internal politics affect the choice of strategies in all
organizations. Because strategies must be operational in the marketplace and capable of gaining
internal commitment, the following tactics used by politicians for centuries can aid strategists (David
& David, 2017).
Equifinality—there is potential to achieve similar results using different means or paths. Strategists
should appreciate that achieving a successful outcome is more important than imposing the method
of achieving it. It may be possible to generate new alternatives that give equal results but with far
greater potential for gaining commitment.
Satisfying— accomplishing satisfactory results with an acceptable strategy is far better than failing to
achieve optimal results with an unpopular strategy.
Generalization—shifting focus from specific issues to more general ones may increase strategists’
options for gaining organizational commitment.
Focus on Higher-Order Issues—by raising an issue to a higher level, many short-term interests can be
postponed in favour of long-term interests. For instance, by focusing on issues of survival, the airline
and automotive industries were able to persuade unions to make concessions on wage increases.
Provide Political Access on Important Issues—Strategy and policy decisions with significant negative
consequences for middle managers will motivate intervention behaviour from them (David & David,
2017).
5.8.11 Conclusion
When selecting a strategy, it is important to scrutinise the advantages, disadvantages, trade-offs,
costs, and benefits of these strategies selected. Identifying and evaluating alternative strategies
should involve many of the managers and employees who earlier assembled the organizational vision
and mission statements, performed the external audit, and conducted the internal audit.

1. Briefly discuss Quantitative Strategic Planning Matrix (QSPM).
2. Explain how strategies are generated and selected
3. How would you comprehensively formulate a strategy?
Discuss in your study group or online forum the difference and

similarities between the Boston Matrix and the Internal-External
Matrix.
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5.9 Study Unit 9: Strategy Implementation

This unit looks at strategy implementation which unswervingly impacts on the
Purpose lives of plant managers, division managers, department managers, sales
managers, product managers, project managers, personnel managers, staff
managers, supervisors, and all employees.
After studying this unit, you should be able to
• Develop effective perceptual maps to position rival firms.
Learning • Evaluate the cash worthy of any business.
Outcomes • Discuss procedures for determining the worth of a business.
• Explain market segmentation and product positioning as strategy
implementation tools.
Important terms
and definitions
5.9.1 Introduction
In some circumstances, individuals may not have partaken in the strategy-formulation process at all
and may not appreciate, understand, or even accept the work and thought that went into strategy
formulation. There may even be hesitant or resistance on their part. Managers and employees who
do not understand the business and are not committed to the business may sabotage strategy-
implementation efforts in hopes that the organization will return to its old ways (David & David,2015).
Thus, unit will discuss strategy implementation in full.
5.9.2 The Nature of Strategy Implementation

Strategy implementation is a central constituent of the broader strategic management process
(Mazzolla & Kellermanns, 2010). It is considered to be the process that converts the crafted strategy
into actions which facilitate and guarantee that the vision, mission and strategic objectives of the
organisation are positively realised as laid out in the strategy blue print (Hill & Jones, 2008). Again, it
is imperative to stress that strategy implementation is an integral component of strategic
management process. Many public organisations in South Africa craft sound strategies to allow for
the realisation of their shared goals.
However, of great concern has been the recording of high failure rates regarding strategy
implementation amongst public institutions (Speculand, 2009). The ultimate consequence of such
failure has been sharp deterioration in service delivery by public institutions in general and local
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municipalities in particular. Studies suggest that most strategies, frequently accomplish less than half
of what their sponsors hoped and planned for, with as high as 9 out of 10 strategies failing to be
implemented successfully (Speculand, 2009).
5.9.3 Current Marketing Issues

Countless marketing variables have a bearing on the success or failure of strategy implementation,
and the scope of this text does not allow us to address all those issues. Some examples of marketing
decisions that may require policies are as follows:
1. To use exclusive dealerships or multiple channels of distribution.
2. To use heavy, light, or no TV advertising.
3. To limit (or not) the share of business done with a single customer.
4. To be a price leader or a price follower.
5. To offer a complete or limited warranty.
6. To reward salespeople based on straight salary, straight commission, or a combination

salary/commission.
7. To advertise online or not.
The New Principles of Marketing
1. Don’t just talk at consumers—work with them throughout the marketing process.
2. Give consumers a reason to participate.
3. Listen to—and join—the conversation outside your company’s Web site.
4. Resist the temptation to sell, sell, and sell. Instead attract, attract, attract.
5. Don’t control online conversations; let it flow freely.
6. Find a “marketing technologist,” a person who has three excellent skill sets (marketing,
technology, and social interaction).
7. Embrace instant messaging and chatting.
5.9.4 Market Segmentation

Two variables are of principal significance to strategy implementation: market segmentation and
product positioning. Market segmentation and product positioning rank as marketing’s most
important contributions to strategic management. Market segmentation is extensively used in
implementing strategies, especially for small and specialized firms. Market segmentation can be
defined as the subdividing of a market into distinct subsets of customers according to needs and
buying habits Market segmentation is an important variable in strategy implementation for at least
three major reasons (Roussow, 2014).
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Market development, product development, market penetration, and diversification are strategies
which require increased sales through new markets and products. To execute these strategies
successfully, new or improved market segmentation approaches are required. Second, market
segmentation allows a firm to operate with limited resources because mass production, mass
distribution, and mass advertising are not required. Market segmentation enables a small firm to
compete successfully with a large firm by maximizing per-unit profits and per-segment sales.
Finally, market segmentation decisions directly affect marketing mix variables: product, place,
promotion, and price, Segmentation is a fundamental to matching supply and demand, which is one
of the thorniest problems in customer service. Segmentation often reveals that large, random
fluctuations in demand actually consist of several small, predictable, and manageable patterns.
Matching supply and demand allows factories to produce desirable levels without extra shifts,
overtime, and subcontracting. Matching supply and demand also minimizes the number and severity
of stock-outs (Speculand, 2009).
Think point
It is not feasible to go after all customers, because customers have
different wants, needs and tastes. Some customers want to be style
leaders. They will always buy certain styles and usually pay a high price
for them. Other customers are bargain shoppers. They try to find the
lowest price.
5.9.5 Product Positioning

After markets have been segmented so that the firm can target particular customer groups, the next
step is to find out what customers want and expect. This takes analysis and research. A severe mistake
is to assume the firm knows what customers want and expect.
Recognising target customers to concentrate marketing efforts on sets the stage for deciding how to
meet the needs and wants of particular consumer groups. Product positioning is widely used for this
purpose.
Positioning entails developing schematic representations that reflect how your products or services
compare to competitors’ on dimensions most important to success in the industry. The following steps
are required in product positioning: (Speculand, 2009)
1. Choose key criteria that effectively differentiate products or services in the industry.
2. Illustrate a two-dimensional product-positioning map with specified criteria on each axis.
3. Plan major competitors’ products or services in the resultant four-quadrant matrix.
4. Categorise areas in the positioning map where the company’s products or services could be most
competitive in the given target market. Look for vacant areas (niches).
5. Create a marketing plan to position the company’s products or services appropriately.
Because just two criteria can be examined on a single product-positioning map, multiple maps are
often developed to assess various approaches to strategy implementation.
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Multidimensional scaling could be used to examine three or more criteria simultaneously, but this
technique requires computer assistance and is beyond the scope of this text. Some rules for using
product positioning as a strategy-implementation tool are the following (Roussow, 2015).
1. Look for the hole or vacant niche. The best strategic opportunity might be an un-served
segment.
2. Don’t serve two segments with the same strategy. Usually, a strategy successful with one
segment cannot be directly transferred to another segment.
3. Don’t position yourself in the middle of the map. The middle usually means a strategy that is
not clearly perceived to have any distinguishing characteristics. This rule can vary with the
number of competitors.
Bright Ideas:
Example
You can use a formula like this to write a product positioning statement:
For (this group of users), they have (this specific problem), which (your
company name) uniquely solves/makes possible by providing (this value.
5.9.6 Finance/Accounting Issues

In this section, we examine several finance/accounting concepts considered to be central to strategy
implementation: acquiring needed capital, developing projected financial statements, preparing
financial budgets, and evaluating the worth of a business. Some examples of decisions that may
require finance/accounting policies are these (Roussow, 2015)
1. To grow capital with short-term debt, long-term debt, preferred stock, or common stock.
2. To lease or buy fixed assets.
3. To establish an appropriate dividend pay-out ratio.
4. To use LIFO (Last-in, First-out), FIFO (First-in, First-out), or a market-value accounting

approach.
5. To expand the time of accounts receivable.
6. To ascertain a certain percentage discount on accounts within a specified period of time.
7. To ascertain the amount of cash that should be kept on hand.
Acquiring Capital to Implement Strategies
Successful strategy implementation often requires additional capital. Besides net profit from
operations and the sale of assets, two basic sources of capital for an organization are debt and equity.
Determining an appropriate mix of debt and equity in a firm’s capital structure can be vital to
successful strategy implementation.
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An Earnings per Share/Earnings before Interest and Taxes (EPS/EBIT) analysis is the most widely used
technique for determining whether debt, stock, or a combination of debt and stock is the best
alternative for raising capital to implement strategies. This technique involves an examination of the
impact that debt versus stock financing has on earnings per share under various assumptions as to
EBIT.
5.9.7 Conclusion
When it comes to strategy implementation, people may even be hesitant or resist the process.
Managers and employees who do not understand the business and are not committed to the business
may sabotage strategy-implementation efforts in hopes that the organization will return to its old
ways (David & David,2015). Thus, strategy implementation requires training of employees and change
management to prevent resistance to change.
1. Explain product positioning and market segmentation a strategic

management tool.
2. “Strategy implementation is an integral component of strategic
management process” Discuss.
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5.10 Study Unit 10: Strategy Execution

The purpose of this study unit is to outline the phase where strategy is
Purpose executed. Strategy execution is a critical to the success of a given company
strategy.
• Explain why corporate wellness has become so important in strategic
planning.
Learning • Explain why strategy implementation is more difficult that strategy
Outcomes formulation.
• Discuss how to modify an organizational culture to support new
strategies.
Change The process of assisting employees to smoothly adopt a

Important terms Management change in strategy
and definitions
Strategy Deals with the management of different forces during
Execution change
5.10.1 Introduction
Successful strategy formulation does not guarantee successful strategy implementation. It is always
more difficult to do something (strategy implementation) than to say you are going to do it (strategy
formulation)! Although inextricably linked, strategy implementation is fundamentally different from
strategy formulation
5.10.2 The nature of strategy implementation
Strategy formulation and implementation can be contrasted in the following ways:
• Strategy creation is positioning forces before the action.
• Strategy execution is managing forces during the action.
• Strategy formulation focuses on effectiveness.
• Strategy execution focuses on efficiency.
• Strategy formulation is primarily an intellectual process.
• Strategy realization is primarily an operational process.
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• Strategy formulation requires good intuitive and analytical skills.
• Strategy implementation requires special motivation and leadership skills.
Strategy formulation requires coordination among a few individuals.
5.10.3 Annual Objectives

Establishing annual objectives is a decentralized activity that directly involves all managers in an
organization. Active participation in establishing annual objectives can lead to acceptance and
commitment. Annual objectives are essential for strategy implementation because they (1) represent
the basis for allocating resources; (2) are a primary mechanism for evaluating managers; (3) are the
major instrument for monitoring progress toward achieving long-term objectives; and (4) establish
organizational, divisional, and departmental priorities. Considerable time and effort should be
devoted to ensuring that annual objectives are well conceived, consistent with long-term objectives,
and supportive of strategies to be implemented. Strategy implementation requires coordination
among many individuals David & David, 2015)
5.10.4 Managing Resistance to Change

Change cannot be escaped by no organization or individual. But the thought of change raises worries
because people fear economic loss, inconvenience, uncertainty, and a break in normal social patterns.
Almost any change in structure, technology, people, or strategies has the potential to interrupt
comfortable interaction patterns. For this reason, people resist change. The strategic-management
process itself can impose major changes on individuals and processes. Reorienting an organization to
get people to think and act strategically is not an easy task (David & David, 2015).
Resistance to change can be deemed to be the single greatest danger to successful strategy
implementation. Resistance regularly occurs in organizations in the form of sabotaging production
machines, absenteeism, filing unfounded grievances, and an unwillingness to cooperate. Strategy
implementation is faced with resistance especially when people do not understand what is happening
or why changes are taking place. In that case, employees may simply need accurate information.
Successful strategy implementation hinges upon managers’ ability to develop an organizational
climate conducive to change. Change must be viewed as an opportunity rather than as a threat by
managers and employees (David & David, 2015).
Think point
While resistance is the normal human reaction in times of change, good
change management can mitigate much of this resistance.
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5.10.5 Creating a Strategy Supportive Culture

Strategists should strive to preserve, emphasize, and build upon aspects of an existing culture that
support proposed new strategies. Aspects of an existing culture that are antagonistic to a proposed
strategy should be identified and changed. Substantial research indicates that new strategies are often
market-driven and dictated by competitive forces. For this reason, changing a firm’s culture to fit a
new strategy is usually more effective than changing a strategy to fit an existing culture.
Schein (2011) indicated that the following elements are most useful in linking culture to strategy:
1. Formal statements of organizational philosophy, charters, creeds, materials used for

recruitment and selection, and socialization
2. Designing of physical spaces, facades, buildings
3. Deliberate role modelling, teaching, and coaching by leaders
4. Explicit reward and status system, promotion criteria
5. Stories, legends, myths, and parables about key people and events
6. What leaders pay attention to, measure, and control?
7. Leader reactions to critical incidents and organizational crises
8. How the organization is designed and structured
9. Organizational systems and procedures
10. Criteria used for recruitment, selection, promotion, levelling off, retirement, and
“excommunication” of people
5.10.6 Human Resource Concerns when implementing strategies

More and more companies are instituting furloughs to cut costs as an alternative to laying off
employees. Furloughs are temporary layoffs and even white-collar managers are being given
furloughs, once confined to blue-collar workers. The job of human resource manager is changing
rapidly as companies continue to downsize and reorganize. Strategic responsibilities of the human
resource manager include assessing the staffing needs and costs for alternative strategies proposed
during strategy formulation and developing a staffing plan for effectively implementing strategies.
(David & David, 2015)
This plan must consider how best to manage spiralling health insurance costs. The human resource
department must develop performance incentives that clearly link performance and pay to strategies.
The process of empowering managers and employees through their involvement in strategic-
management activities yields the greatest benefits when all organizational members understand
clearly how they will benefit personally if the firm does well. Linking company and personal benefits
is a major new strategic responsibility of human resource managers. Other new responsibilities for
human resource managers may include establishing and administering an employee stock ownership
plan (ESOP)
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Case study/Caselet: Strategic Plan and Development & Implementation

A This Case Study describes how Gagnon Associates helped in the development and
implementation of this client’s first, comprehensive strategic plan.
The Company
America’s oldest direct-mail catalogue marketing company.
The Situation
After years of enviable growth, the company encounters a business down turn and
withstands the first layoffs in its history. Impact on company morale is significant,
and though the imperative to resolve on a future course is clear, consensus on future
direction remains to be achieved. This will also be the first time the company has
developed a comprehensive plan for the entire enterprise vs. managing its separate
business channels independently.
The Approach
Orvis engages Gagnon Associates to lead the executive team and a select group of
additional senior managers through a comprehensive team-based Strategic Planning
Process. Extensive, confidential interviews of the Executive Team provide, in the
words of the CEO, a “needed and welcomed opportunity to ‘go to confession,’” while
a consolidated reporting of key interview themes provides them with “new and
valuable insights” critical to moving forward.
Guided by Gagnon Associates, executives conduct a comprehensive Scan of the Orvis
operating environment and an assessment of the company’s strengths, weaknesses,
opportunities and threats to serve as a context for planning. Next, over a two-to-
three month period Gagnon Associates leads Orvis senior executives through the
rigorous planning process itself. Executives achieve consensus on company direction
and, for the first time, develop concrete, corporate-wide goals, strategies, initiatives,
timetables and accountability structures to achieve their common vision.
The Results
Within little more than a year, the COO reports that, due to the “heightened focus”
on growth and profitability resulting from the plan, a key distribution channel
experiences an 80% increase in sales. A second channel is forecast to grow by 20%.
A comprehensive brand-building initiative is completed along with the complete
revitalization of the human resource function and associated programs.
A reengineering initiative in the company’s merchandise operations/sourcing
function transforms the new product development process and achieves 70% of the
resulting cost-savings targeted for the next year by year end of the current year.
The CEO credits the Strategic Planning Process with providing “valuable insights that
encouraged me to change my style and approach to leading the Company.” He
asserts, “The Planning Conferences themselves provided the leadership group some
valuable benefits, especially in the area of clarifying and improving the effectiveness
of how we make high-level decisions. We do a better job of ensuring clear disposition
of issues and avoiding ‘drift’ than we did before.”
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The plan results in a strategic refocusing of company direction, a revitalized

organization, and improved business results described by the client as nothing less
than “a turnaround.”
Source ( Kelly, 2012 ) A case study :https://thinkgagnonassociates.com/case-
studies/orvis-company
5.10.7 Conclusion
Strategy execution is an important part of strategic management and therefore should not be treated
in isolation but should be part and parcel of strategy implementation and evaluation in order for it to
be beneficial to the organisation.

Discuss in your study group or online forum how you would create a
strategy supporting culture as the executive team.
Reading
You should read further about this topic, together with its
accompanying sections in the following prescribed textbook:
Fred R. David & Forest R. David. Strategic Management Concepts and
Cases, Pearson Education Limited.
1. If you are a manager at a company, how would you facilitate

strategy implementation?
2. “Strategy implementation is an integral component of strategic
management process” Discuss.
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5.11 Study Unit 11: Strategy Monitoring
This unit marks the final stage of strategic management in an organisation,

Purpose which involves the monitoring of organisational strategy. This monitoring
process is crucial in today’s organisations where the business environment is
highly volatile.
Learning • Explain why strategy evaluation is complex.
Outcomes • Discuss the importance of contingency planning in strategy evaluation.
• Discuss three 21st challenges in strategic management
Internal Consist of all the factors within the organisation which can
Important terms Environment affect the success of the business
and definitions
External Economic factors, political factors, technology and social
Environment factors are part of the external environment
5.11.1 Introduction
We live in an environment which is constantly changing, the best and formulated strategies and
excellently implemented strategies become obsolete as a firms external and internal environment
changes. It is highly important that strategists evaluate and control the implementation of strategies.
5.11.2 The nature of strategy evaluation

The strategic-management process develops decisions that can have considerable, long-lasting
consequences. Erroneous strategic decisions can inflict severe penalties and can be exceedingly
difficult, if not impossible, to reverse. Strategists would agree that strategy evaluation is vital to an
organization’s well-being; timely evaluations can keep on guard management to problems or potential
problems before a situation becomes critical. Strategy evaluation includes three basic activities: (1)
examining the underlying bases of a firm’s strategy, (2) comparing expected results with actual results,
and (3) taking corrective actions to ensure that performance conforms to plans (David & David, 2015)
Ample and timely feedback is the cornerstone of effective strategy evaluation. Strategy evaluation can
be no better than the information on which it is based. Exerting too much pressure from top managers
may result lower managers scheming numbers they think will be satisfactory. Strategy evaluation can
be a complicated and sensitive undertaking. Too much emphasis on evaluating strategies may be
expensive and counterproductive (David & David, 2015).
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5.11.3 Consistency
Inconsistent goals and policies should not be presented by a strategy. Organizational conflict and
interdepartmental bickering are often indicators of managerial chaos, but these problems may also
be a sign of strategic irregularity. Three guidelines help determine if organizational problems are due
to inconsistencies in strategy:
• If managerial problems persist despite changes in personnel and if they tend to be

issue-based rather than people-based, then strategies may be inconsistent.
• If an achievement for one organizational department means, or is interpreted to

mean, failure for another department, then strategies may be inconsistent.
• If policy problems and issues persist to be brought to the top for resolution, then
strategies may be inconsistent.
5.11.4 Consonance
Consonance refers to the requirement for strategists to assess sets of trends, as well as individual
trends, in evaluating strategies. A strategy must represent an adaptive response to the external
environment and to the critical changes occurring within it. One problem in pairing a firm’s key internal
and external factors in the formulation of strategy is that most trends are the result of connections
among other trends. For example, the day-care explosion came about as a combined result of many
trends that included a rise in the average level of education, increased inflation, and an increase in
women in the workforce. Although single economic or demographic trends might appear steady for
many years, there are waves of change going on at the interaction level (David & David, 2015).
5.11.5 Feasibility
A strategy should not overburden available resources nor create unsolvable sub problems. The final
broad test of strategy is its feasibility; that is, can the strategy be attempted within the physical,
human, and financial resources of the enterprise? The financial resources of a business are the easiest
to quantify and are normally the first limitation against which strategy is evaluated. It is sometimes
forgotten, however, that innovative approaches to financing are often possible.
Methods, such as captive subsidiaries, sale-leaseback arrangements, and tying plant mortgages to
long-term contracts, have all been used effectively to help win key positions in suddenly expanding
industries. A less countable, but actually more rigid, limitation on strategic choice is that imposed by
individual and organizational capabilities. In evaluating a strategy, it is crucial to assess whether an
organization has demonstrated in the past that it possesses the abilities, competencies, skills, and
talents needed to carry out a given strategy.
5.11.6 Strategy Evaluation

A strategy must provide for the development and/or maintenance of a competitive advantage in a
selected area of activity. Competitive advantages normally are the result of superiority in one of three
areas: (1) resources, (2) skills, or (3) position. The concept that the positioning of one’s resources can
augment their combined effectiveness is familiar to military theorists, chess players, and diplomats.
Position can also play a crucial role in an organization’s strategy. A good position is defensible once
91
gained—meaning that it is so expensive to capture that rivals are deterred from full-scale attacks.
Positional advantage tends to be self-sustaining as long as the key internal and environmental factors
that underlie it remain stable. This is why entrenched firms can be almost impossible to unseat, even
if their raw skill levels are only average (Fred R David & Forest R David: 2015).
Although not all positional advantages are associated with size, it is true that larger organizations tend
to operate in markets and use procedures that turn their size into advantage, while smaller firms seek
product/market positions that exploit other types of advantage. The major feature of a great position
is that it allows the firm to obtain advantage from policies that would not similarly benefit rivals
without the same position. Therefore, in evaluating strategy, organizations should examine the nature
of positional advantages associated with a given strategy.
Strategy evaluation is becoming progressively more difficult with the passage of time, for many
reasons. Domestic and world economies were more stable in years past, product life cycles were
longer, product development cycles were longer, technological advancement slower, change occurred
less frequently, there were fewer competitors, foreign companies were weak, and there were more
regulated industries. Other reasons why strategy evaluation is more difficult today include the
following trends:
1. An intense increase in the environment’s complexity.
2. The increasing difficulty of predicting the future with accuracy.
3. The increasing number of variables.
4. The rapid rate of obsolescence of even the best plans.
5. The increase in the number of both domestic and world events affecting organizations.
6. The decreasing time span for which planning can be done with any degree of Certainty.
5.11.7 The Balance Scorecard

It is an important strategy-evaluation tool. It is a process that allows firms to evaluate strategies from
four perspectives: financial performance, customer knowledge, internal business processes, and
learning and growth.
The Balanced Scorecard analysis requires that firms seek answers to the following questions and utilize
that information, in conjunction with financial measures, to adequately and more effectively evaluate
strategies being implemented: (David & David,2015)
1. How well is the firm continually improving and creating value along measures such as innovation,
technological leadership, product quality, operational process efficiencies, and so on? 2. How well is
the firm sustaining and even improving upon its core competencies and competitive advantages?
3. How satisfied are the firm’s customers? The firm examines six key issues in evaluating its strategies:
(1) Customers, (2) Managers/Employees, (3) Operations/Processes, (4) Community/Social
Responsibility, (5) Business Ethics/Natural Environment, and (6) Financial. The basic form of a
Balanced Scorecard may differ for different organizations. The Balanced Scorecard approach to
strategy evaluation aims to balance long-term with short-term concerns, to balance financial with
92
nonfinancial concerns, and to balance internal with external concerns. It can be an excellent
management tool, and it is used successfully today by Chemical Bank.
5.11.8 Contingency Planning

A fundamental premise of good strategic management is that businesses plan ways to deal with
unfavourable and favourable events before they occur. Too many organizations organise contingency
plans just for unfavourable events; this is a mistake, because both minimizing threats and capitalizing
on opportunities can improve a firm’s competitive position.
Regardless of how carefully strategies are formulated, implemented, and evaluated, unforeseen
events, such as strikes, boycotts, natural disasters, arrival of foreign competitors, and government
actions, can make a strategy obsolete. To minimize the impact of potential threats, organizations
should develop contingency plans as part of their strategy-evaluation process. Contingency plans can
be defined as alternative plans that can be put into effect if certain key events do not occur as
expected ( David & David, 2015)
Some contingency plans commonly established by firms include the following:
1. If a major competitor withdraws from particular markets as intelligence reports
Indicate, what actions should our firm take?
2. If our sales objectives are not reached, what actions should our firm take to avoid profit losses?
3. If demand for our new product exceeds plans, what actions should our firm take to meet the higher
demand?
4. If certain disasters occur—such as loss of computer capabilities; a hostile takeover attempt; loss of
patent protection; or destruction of manufacturing facilities because of earthquakes, tornadoes or
hurricanes—what actions should our firm take?
5. If a new technological advancement makes our new product obsolete sooner than expected, what
actions should our firm take?
Think Point
It’s OK to deviate from the plan. The plan is only a guideline, not a strict roadmap which must be
followed. Changes in the plan usually result from changes in the organization’s external environment
and/or client needs result in different organizational goals, changes in the availability of resources to
carry out the original plan, etc.
5.11.9 Auditing
A regularly used tool in strategy evaluation is the audit. Auditing is defined by the
American Accounting Association (AAA) as “a methodical process of objectively acquiring and

evaluating evidence regarding assertions about economic actions and events to determine the extent
of correspondence between these assertions and established criteria, and communicating the results
to interested users.
93
Auditors examine the financial statement of firms to determine whether they have been prepared
according to generally accepted accounting principles (GAAP) and whether
They fairly represent the activities of the firm. Independent auditors use a set of standards called
generally accepted auditing standards (GAAS).
5.11.10 Twenty First Century Challenges in Strategic Management

Three specific challenges or decisions that confront all strategists today are (1) making a decision on
whether the process should be more an art or a science, (2)making a decision on whether strategies
should be visible or hidden from stakeholders, and (3) making a decision on whether the process
should be more top-down or bottom-up in their firm.
The Art or Science Issue
The prescribed textbook is coherent with most of the strategy literature in advocating that strategic
management be viewed more as a science than an art. This standpoint asserts that firms need to
systematically assess their external and internal environments, conduct research, carefully evaluate
the pros and cons of various alternatives, perform analyses, and then decide upon a particular course
of action.
The Visible or Hidden Issue
A noteworthy aspect of any competitive analysis discussion is whether strategies themselves should
be secret or open within firms. However, for a business organization, secrecy may not be best. Keeping
strategies secret from employees and stakeholders at large could severely inhibit employee and
stakeholder communication, understanding, and commitment and also forgo valuable input that
these persons could have regarding formulation and/or implementation of that strategy (David &
David, 2015).
Thus, strategists in a particular firm must make a decision on whether the risk of rival firms easily
knowing and exploiting a firm’s strategies is worth the benefit of improved employee and stakeholder
motivation and input. Most executives concur that some strategic information should remain
confidential to top managers, and that steps should be taken to ensure that such information is not
disseminated beyond the inner circle those not easily predicted by rivals. Business and war are
analogous (David & David: 2015).
Some reasons to be completely open with the strategy process and resultant decisions are these:
1. Managers, employees, and other stakeholders can readily contribute to the process. They
often have excellent ideas. Secrecy would forgo many excellent ideas.
2. Investors, creditors, and other stakeholders have greater basis for supporting a firm when they
know what the firm is doing and where the firm is going.
3. Visibility promotes democracy, whereas secrecy promotes autocracy. Domestic firms and
most foreign firms prefer democracy over autocracy as a management style.
4. Participation and openness enhance understanding, commitment, and communication within

the firm.
94
Reasons why some firms prefer to conduct strategic planning in secret and keep strategies hidden
from all but the highest-level executives are as follows:
1. Free dissemination of a firm’s strategies may easily translate into competitive intelligence for
rival firms who could exploit the firm given that information.
2. Secrecy limits criticism, second guessing, and hindsight.
3. Participants in a visible strategy process become more attractive to rival firms who may lure
them away.
4. Secrecy limits rival firms from imitating or duplicating the firm’s strategies and undermining
the firm.
The Top-Down or Bottom-Up Approach
Proponents of the top-down approach contend that top executives are the only persons in the firm
with the collective experience, acumen, and fiduciary responsibility to make key strategy decisions. In
contrast, bottom-up advocates argue that lower- and middle-level managers and employees who will
be implementing the strategies need to be actively involved in the process of formulating the
strategies to ensure their support and commitment (David & David:2015).
5.11.11 Conclusion
Even though strategic management is not a guarantee for success however it allows organisations to
make successful long-term decisions. To execute these decisions efficiently and take corrective actions
as needed to ensure success. It is important to realise that successful organizations view strategic
management as first and foremost a people process. People are what makes the organization and are
the implementers of strategic management.

Identify four firms that provide their strategic plans on their websites,
and four that do not. Should firms do this? Explain and present your
answer in your study group or online forum.
1. “Evaluating strategies on a continuous rather than a periodic

basis is desired” Discuss.
2. Do you feel that strategic management should be more of a top
down or bottom up process in a firm? Briefly explain your
answer.
3. Discuss contingency planning.
95
6. References
Fred R David, Forest R David (2015) Strategic Management Concepts and Cases, Pearson Education
Oxford, United Kingdom
D Rossouw, S J Le Roux (2014) Strategic Management An Applied South African Perspective, Van
Schaik, South Africa
Hampden Turner, C.M. (1993). Dilemmas of Strategic Learning Loops (Chapter 14). Strategic
Thinking: Leadership and the Management of Change. Edited by Hendry, J., Johnson, G. & Newton,
J. The Strategic Management Society. John Wiley &
Sons Ltd, pp. 336 338.
Hill, C.W.L. & Jones, G.R. (1995). Strategic Management: An Integrated Approach. Boston: Houghton
Mifflin, p. 8.
Johnson, G. & Scholes, K. (1993). Exploring Corporate Strategy, Text and Case. Third Edition. Boston:
Prentice Hall, p. 85.
Huleblian, Jeray,Gerry, “ Exploring Firm Characteristics that Differentiate leaders in industry
Merger” Strategic Management Journal 33 no 9 ( September 2012
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Strategic Management Damelin©

BCOM IN BUSINESS MANAGEMENT

BUSINESS MANAGEMENT 3A/ STRATEGIC

COPYRIGHT © EDUCOR, 2019

1. About Brand .................................................................................................................................... 7

5.2.8 Conclusion ..................................................................................................................... 30

5.6.9 Management Information Systems .............................................................................. 60

5.9.4 Market Segmentation ................................................................................................... 81

2. Our Teaching and Learning Methodology

Damelin strives to promote a learning-centred and knowledge-based teaching and learning

• An outcomes-oriented approach implies that the following categories of outcomes are

• Discrete outcomes of community service learning to cultivate discipline-appropriate

Effective teaching-learning approaches are supported by:

• Content integration that entails the construction, contextualization and application of

• Learning that involves students building knowledge by constructing meaning for

• Community service learning that leads to collaborative and mutual acquisition of

• A commitment to give effect teaching-learning in innovative ways and the fostering of

• Establishing a culture of learning as an overarching and cohesive factor within institutional

• Teaching and learning that reflect the reality of diversity.

Study group / Online forum discussion

3. Introduction to the Module

3.1 Module Information

3.2 Module Purpose

• Illustrate and explain the strategic management process.

You may also be asked to blog / post your responses online.

The marks are derived as follows for this module:

3.5 Planning Your Studies

What equipment will I need? • Access to a personal computer and internet.

4.2 Recommended Articles

4.3 Recommended Multimedia

STUDY UNIT 1: STRATEGIC MANAGEMENT ESSENTIALS

STUDY UNIT 2: OUTSIDE -USA STRATEGIC PLANNING

STUDY UNIT 3: ETHICS/SOCIAL RESPONSIBILITY/SUSTAINABILITY

STUDY UNIT 4: TYPES OF STRATEGIES

STUDY UNIT 5: VISION AND MISSION ANALYSIS

STUDY UNIT 6: INTERNAL AUDIT

STUDY UNIT 7: THE EXTERNAL AUDIT

STUDY UNIT 8: STRATEGY GENERATION AND SELECTION

STUDY UNIT 9: STRATEGY IMPLEMENTATION

STUDY UNIT 10: STRATEGY EXECUTION

STUDY UNIT 11: STRATEGY MONITORING

5.1 Study Unit 1 Strategic Management Essentials

This unit provides an overview of strategic management a well-known concept

Strategic the art and science of formulating, implementing, and

Mission It identifies the scope of the business of the firm and

Vision It answers the question “what do we want to become” its

5.1.2 Definitions of Strategic Management

Figure 1.1 Strategic Management Nature

5.1.3 Stages of Strategic Management

The strategic-management process entails three stages: strategy formulation, strategy

“Strategic evaluation is not a luxury but a need, as success today is no

5.1.4 Integrating intuition and Analysis

“Key terms in strategic management

Table 1.1 Key Terms in Strategic Management

Key Terms in Strategic Management Meanings

• Strategists • The individuals exclusively responsible for the

• Vision Statement • It answers the question “what do we want to

• Mission Statement • It identifies the scope of the business of the firm

• Internal Strengths and • These describe an organisation manageable

• Long Term Objectives • Distinctive results that an organisation seeks to

• Strategies • Are the means in which long term objectives will

5.1.5 Strategic management model

Figure 2: Strategic Management mode

5.1.6 Benefits of Strategic Management