1 LEARNING UNIT 1

STRATEGIC MANAGEMENT
1

INTRODUCTION AND ESSENTIALS

1 LEARNING OUTCOMES
After working through this learning unit and chapter 1 in David and David (2017)
and chapter 1 in Van Nieuwenhuizen (2017), you should be able to:

(1) define and explain the concept of strategic management and explain why
it is important
(2) define management, business management and safety management
(3) distinguish (differentiate) between business, strategic and safety
management
(4) identify strategic risks in organisations
(5) list strategic risks found within an organisation
(6) investigate reasons why organisations engage in strategic planning
(7) investigate reasons why organisations do not engage in strategic planning.
(8) explain the key questions that need to be addressed to ensure that
organisations are on the right track pertaining to strategic management
(9) outline the strategic management model that will be applied in this module
(10) list the key individuals and role players involved in strategic management
(11) explore the responsibilities of role players in strategic management
(12) identify the advantages and disadvantages of strategic management
(13) compare business and military strategy

2 ABBREVIATIONS AND CONCEPTS

At the beginning of each learning unit, you will be given a list of key concepts and
abbreviations. It is important that you familiarise yourself with these concepts, as
you will be applying them throughout this module. You can also consult the multi-
lingual glossary for definitions and descriptions of the concepts and abbreviations.

CEO Chief Executive Officer

RoI Return on Investment

Business management Competitive advantages

Empowerment Mission
Objectives Opportunities
Policies Safety management
Strategies Strategist
Strategic management Strategic management model
Strategic planning Strategos
Strengths threats Vision statements
Weaknesses

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Open Rubric


1.1 INTRODUCTION
In today’s ever-changing economic environment, organisations are required to
make sensible corporate strategic decisions to ensure a competitive advantage.
Many corporate managers however do not fully understand the essence of corporate
strategic decision-making. While the discipline of strategic management is often
misunderstood and criticised for being too theoretical and useless in the real world,
the case studies and activities in the learning units will put the theory of strategic
management into practice. In this module we will strive to show you how strategic
management could benefit your organisation.

Within this learning unit you will be introduced to aspects of business, strategic and
safety management to assist in developing a sustainable competitive advantage within
any organisation. This learning unit will utilise chapter 1 of each of the prescribed
books for SMA4802, Strategic management,

David, FR and David, FR. 2017. Strategic management. A competitive advan-

tage approach, concepts and cases. 16th ed. Malaysia: Pearson.

and

Van Nieuwenhuizen, PJJ. Strategic direction, planning and management. An

introduction. Cape Town: Edge learning.

So, what is strategic management? Before we start let’s watch the following online
video:

Watch online the following video clip 2018 (9:37) by Gregg, “Learning to gain an
understanding of strategic management”: https://youtu.be/eOFqekOF9ZI

1.2 STRATEGIC MANAGEMENT

Strategic management is an ongoing plan to monitor and evaluate an organisation’s
means of achieving its strategy. To understand how strategy is applied in an
organisation, let us first consider the meaning of the word. The term “strategy” is
derived from the Greek work “strategos”, meaning leadership of an army (art of a
general) (Van Nieuwenhuizen, 2017:1). Consider, for a moment, the multitude of
soldiers in an army and then consider the number of employees in an organisation.
Now consider the management team developing plans and implementing those
plans/strategies to achieve their objective. Although the objectives of an army are
different from those of an organisation, the strategic process used is the same.
Strategy is defined as a plan of action with the aim of achieving an organisation’s
long-term goals (Van Nieuwenhuizen, 2017:1). It is defined as an art and a science
for the formulation, implementation, and evaluation of cross-functional decisions
to enable the organisation to achieve its objectives (David & David, 2017:33). It
is a process whereby the organisation’s top management demonstrate leadership
and commitment of its intended business success by setting organisational objectives
and analysing its competitive environment, both internally and externally. Their
innovative thinking will give them a competitive advantage. The purpose of strategic
management is to exploit and create new and different opportunities for tomorrow.
Strategic management can be synonymous with strategic planning, though strategic
planning is more often used in an organisational context, inclusive of long-range
planning, which tries to optimise for tomorrow the trends of today (David & David,
2017:33).

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 LEARNING UNIT 1:  Strategic management introduction and essentials

Watch online: Watch the following video clip:

“Learning to gain an understanding of strategic management” by Gregg, 2018 (9:37)

Available from: https://youtu.be/eOFqekOF9ZI

ACTIVITY 1.1: ‌WHAT IS STRATEGY?

After watching the online video related to the nature of strategic management,
summarise (in 250–300 words) what strategic management is.

ACTIVITY 1.2: ‌WHAT IS STRATEGY?

After watching the online video, develop four questions that could be asked and
indicate how these questions can contribute towards your organisational strategy.

Above, we have looked at strategy, but what is the difference between operations
and strategy and where does safety management fit into this equation?

Watch online: Watch the following video clips:

“The difference between operations and strategy” by cmoeinc (5:17). Available at

https://www.youtube.com/watch?v=EQCo-7SMJ_c

“What are the key areas of safety management?” by Basgen (2016) (1:02). Available at
https://www.getsmarter.com/blog/career-advice/key-areas-safety-management-faqs/

“Strategy vs operational risk management” by Alex Sidorenko (2018) (6:35). Available

at https://www.youtube.com/watch?v=rNPWmV5zPHw

ACTIVITY 1.3: ‌OPERATIONS, STRATEGY AND SAFETY

After watching the videos, elaborate on the aspects of operations, strategy and
safety management discussed and explain (in 200–250 words) how these can be
used in your organisation.

1 DISCUSSION 1.1: DIFFERENT MANAGEMENT CONCEPTS

Let’s consider the different management concepts. In your own words (150–200),
distinguish between the different management concepts:

• Management
• Business management
• Strategic management
• Safety management

Online discussion

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 • Strategic management
• Safety management


Online discussion

The management components of business, strategic and safety management are

Theillustrated
management components
in figure 1.1. of business, strategic and safety management are
illustrated in figure 1.1.

Business
management
Identification of hazards, Requires effective utilisation of the
assessment of risks and control organisation’s resources
measures to mitigate

Business
essentials

Safety Strategic
management management

Requires utilisation of the

organisation’s resources to
achieve their goals

Figure 1. 1. Management essentials (Developed by Rielander CL)

FIGURE 1.1
Management essentials (Developed by Rielander CL)
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The motive for the existence of a business is to earn a return on investment (RoI) in
the form of a profit. Central to business sustainability is the effectiveness and efficiency
of business management practices which is fundamental in today’s fast changing
and competitive world. This underscores the significance of strategic management
for the organisation to remain relevant and gain a competitive advantage in their
business. Strategic management is regarded as an essential component of the business,
as it predicts the organisation’s future. Understanding the organisation’s internal
and external factors is key to building a sound business strategy, which forms the
organisation’s road map. For a business strategy to be successful, it is imperative that
all interested and affected parties be involved and that the participation, consultation
and contribution of the bargaining council also be recognised. A business will be
exposed to different types of risks in its operational activities, any of which may
have a significant impact. Some risks are operational in nature, while others are
strategic in nature. According to Weller (n.d), strategic risks are those that arise from
the fundamental decisions that top management take concerning an organisation’s
objectives. Essentially, strategic risks are the risks of failing to achieve these business
objectives. The identification of hazards and assessment of risks – as well as the
mitigation of these risks – are essential for all operations in an organisation. Business
activities needs to be strategically managed with the application of safety principles
to prevent accidents, damage to equipment and ill-health among employees.

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 LEARNING UNIT 1:  Strategic management introduction and essentials

2 DISCUSSION 1.2: STRATEGIC RISKS

List five strategic risks found in your organisation and explain how these are
managed in accordance with the organisation’s strategic plan.

Online discussion

1.3 STRATEGIC MANAGEMENT PLAN VERSUS PROCESS

A strategic plan is an organisation’s game plan which allows for that organisation
to compete in a global competitive market. The strategic plan is made up of the
managerial decisions taken and signals commitment towards specific policies,
procedures, operations, and markets.

A strategic management process consists of three stages, namely (1) strategy

formulation, (2) strategy implementation and (3) strategy evaluation. The primary
objective of strategic management thinking is to develop the organisation’s mission
strategy and to set organisational objectives. The strategic management process
therefore takes a logical and systematic approach to describing the objectives and
attempts to organise both the quantitative and qualitative information to allow for
effective corporate strategic decision-making. The strategic management process
should be based on continuous monitoring to ensure timely change and adaptation.
Successful organisations are continually adapting their bureaucracies, systems,
products, cultures and strategies to ensure continued competitive advantages (David
& David, 2017:34–35).

Watch online: Watch the following video clips:

Strategic management process by afra alnaimi (4:35). Available from: https://youtu.

be/o0U0gwvnhek

“Overview of the Strategic Planning Process” by virtualstrategist (4:30). Available

at https://youtu.be/sU3FLxnDv_A

STUDY: David and David (2017:32–35)

3 DISCUSSION 1.3: STRATEGIC PLANNING

Do research related to the strategic planning process and identify ten strategic
safety management goals that your organisation should consider.

Why are some organisations reluctant to engage in strategic planning? To answer

this question, do your own research and share your findings in the discussion
forum on why organisations do not do strategic planning.

Online discussion

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1.4 IMPORTANCE OF STRATEGIC MANAGEMENT

Strategy is specialised long-term planning that strategists must consider in relation
to both internal and external factors. For an organisation to put itself on the right
path, the following questions should be asked:

• Where are we today?

• Where did we come from?
• Where are we going?
• How are we going to get there?
To answer each of these questions, it is important that the strategist understands the
past, the present and the future and that he or she also understands the journey of
achieving the strategic objectives.

• Understanding the present

Organisations should understand their present actions and status. This is achieved
by the strategic team reviewing the present state of the organisation and asking
a series of questions about these actions and processes.

• Understanding the past

The history of the organisation shapes its present status. Past actions and deci-
sions define the way an organisation conducts its business – not only then, but in
respect of today’s business operations as well. As such, an in-depth understand-
ing of the past operations forms a foundation for today’s business strategy. The
fundamental purpose of reviewing the past is to identify trends in decisions made
and behaviours undertaken. To gain an understanding of the organisation’s past,
a series of questions are asked.

• Understanding the future

The development of a strategic plan is to determine the organisation’s future
direction, after taking stock of its past and present activities and decisions made.
Again, there are a series of questions to be asked.

• Understanding the journey

At this stage the strategic team should know and understand the organisation
and where it wants to go in the future. Thus, all that remains is to close the gap
between the past and the future through target actions. This stage can be sum-
marised by asking how the strategic goals are to be achieved through a series of
questions (Van Nieuwenhuizen, 2017:11-12).

ACTIVITY 1.4: ‌STRATEGIC MANAGEMENT QUESTIONS

List six strategic questions to be asked for each of the following:

• Understanding the present

• Understanding the past
• Understanding the future
• Understanding the journey

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 LEARNING UNIT 1:  Strategic management introduction and essentials

Before continuing with the strategic management model there are a number of
key terms that you should understand. Review the following terms in David and
David (2017:36–41)

• Strategic objectives versus long-term & annual objectives

Strategic objectives serve the organisation’s ambition which is embedded in its
vision and mission and that helps convert them into more specific plans. Annual
objectives are short-term milestones and should be achieved to meet long-term
objectives. Long-term objectives are organisational goals set for a period between
one to five years, or more. For the objectives to be effective, they should be
SMART (Specific, Measurable, Achievable, Realistic and Time-bound).

• Competitive advantage
A competitive advantage is defined in David and David (2017:36) as an activ-
ity done especially well by an organisation as compared to how that activity is
done in another organisation and includes any appealing resources a competitive
organisation might want.

• Internal and external opportunities and threats

Opportunities:

(1) What opportunities are open to your business?

(2) Explore opportunities for linkages with international organisations.
(3) Invest in people development.
(4) Explore resource to maximise production to meet demand and supply of
resources/materials.
(5) Increasing demand of resources/materials.

Threats:

(1) What internal and external threats could harm your business?
(2) What obstacles do you foresee harming your business?
(3) If the rand value depreciates, there will be a fall in resource prices.
(4) Global recession leading to high interest rates and low capital markets.
(5) High fatality rate in the organisation .
(6) Fluctuations of raw material (resource) prices.

• Policies
Policies are the means through which the objectives can be achieved. Policies
forms the guidelines and procedures established to support efforts in the achieve-
ment of objectives.

• Strategies
Strategies are the means through which long-term objectives are achieved.
Strategies are action plans from top management that affect the organisation’s
long-term prosperity.

• Strategist
Strategists are people who are responsible for the success or failure of an organi-
sation. They are accorded a specific job title, such as CEO or chair of the board,
or executive decision.
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• Vision and mission statements

A vision statement is a declaration of the organisation’s future objectives. It is
aimed at directing the organisation’s internal decision-making and at helping them
align with their philosophy and their declared set of goals, as well as at focusing
its efforts on the core competencies it needs to achieve its goals. It should be
general enough to outline the organisation’s interest and strategic direction while
articulating the business’s dreams and hopes (what it would like to ultimately
achieve and gives purpose). It is the anchor point of any business strategic plan.

Example: To be the leading construction company in Southern Africa.

A mission statement articulates an organisation’s purpose – that is, why they

exist – and its approach to reaching those objectives.

Example: To provide quality health care services.

STUDY: David & David (2017:36–41)

Watch online: Watch the following video clip related to strategy.

“Keynote on strategy” by Prof Michael Porter (1:12:15). Available at https://www.

youtube.com/watch?v=EvvnoNAUPS0

1.5 STRATEGIC MANAGEMENT MODEL

The strategic management model represents a proven framework that is also a
widely accepted and practical approach for the formulations, implementation and
evaluation of strategies. However, the model does not guarantee success (David &
David, 2017:42). Most employees think that the strategic management process is
undertaken by the Chief Executive Officer (CEO) and senior management, but this
is not so. The CEO and senior managers may be responsible for implementing the
organisational strategic process, but there are a number of organisational role players
with specific responsibilities related to strategic management. Let us, however, first
review the strategic management model, as illustrated in figure 1.2. As you can see,
different aspects of the model will be dealt with in different learning units in the
study guide, as linked to different chapters of the prescribed book.

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 in different learning units in the study guide, as linked to different chapters of the
LEARNING UNIT 1:  Strategic management introduction and essentials
prescribed book.

Strategy types
(Chapter 4)

Vision & mission Internal audit

(Chapter 5) (Chapter 6)

Selection & Strategy External audit

generation (Chapter 7)
(Chapter 8)
Strategic management STRATEGIC FORMULATION
model
Strategy implementation
(Chapter 9)

STRATEgIC IMPLEMENTATION
Strategy execution
(Chapter 10)

Strategy monitoring STRATEgIC EVALUATION

(Chapter 11)

Figure 1.2: Strategic management modelFIGURE

(Adapted 1.2
from David & David, 2017:42)
Strategic management model (Adapted from David & David, 2017:42)
Study: David & David (2017:41-42)
STUDY: David & David (2017:41-42)
Activity 1.5. Key individuals in the strategic management process
List nine individuals that are key role players in the strategic management process and
ACTIVITY
indicate 1.5: ‌KEYforINDIVIDUALS
four responsibilities IN THE STRATEGIC
each.
MANAGEMENT PROCESS
List nine individuals that are key role players in the strategic management process
and indicate four responsibilities for each.
27

ACTIVITY 1.6: ‌ADVANTAGES AND DISADVANTAGES OF

STRATEGIC MANAGEMENT
Implementing a strategic management model has number of benefits. List
five advantages and disadvantages of an organisation implementing strategic
management.

STUDY: David & David (2017:42-46; Van Nieuwenhuizen, 2017:42–46).

Strategic planning is a complicated process taking an organisation into an unknown

environment. Strategic management is a journey that offers a framework to address
questions and solve problems. You can review several drawbacks that an organisation
should try to avoid in David and David (2017:16).

As previously indicated, there are various organisational role players with specific
responsibilities related to strategic management.

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ACTIVITY 1.7: STRATEGIC

‌ MANAGEMENT ROLE PLAYERS AND
RESPONSIBILITIES
Implementing a strategic management model has number of benefits. List five
benefits (advantages) for an organisation that implements strategic management.

1.6 COMPARING BUSINESS STRATEGY WITH MILITARY

STRATEGY
Strategic management has a strong history linked to military strategy from which
terminology such as objectives, mission, strengths, and weakness emerged. A military
strategy’s objective is to weaken the opponent while continuing to fight and end the
war. However, in a business strategy, an organisation seeks to achieve its objectives.
It allows top management to capitalise on their competitors’ weaknesses rather
than succumb to business pressure or challenges. Military strategy, like business
strategy, has had to evolve in response to our ever-changing environment. This
has prompted an accelerated focus on the approach taken to armed conflict which
is one of rendering opponents unable to fight as an effective, coordinated whole.
However, military principles cannot be fully applied in the business environment,
as organisation compete aggressively for strategic competitive advantage in their
arena. In a military setting, commanders strategically assess complex war situations,
make effective decisions, and formulate tactically superior plans to carry out those
decisions. The same strategy is used by top managers in organisations as they
assess complex business situations, make effective decisions and formulate a strategic
plan for implementation (David & David, 2017:46). Sun Tzu’s “Art of war” is an
ancient Chinese military strategy on how to be a great leader and has been applied
in many non-military settings (Jackson, 2014).

STUDY: David & David (2017:42-46; Van Nieuwenhuizen, 2017:46–49).

Watch online: Watch the following video clips related to Sun Tzu’s strategy:

“The art of war explained in 5 minutes” by The Life Guide (5:09). Available at
https://www.youtube.com/watch?v=Hz4FNBj1APA

The nine situations – The art of war by Sun Tsu by Eudaimonia (2017) (10:40).
Available at https://www.youtube.com/watch?v=otMaORoiH7w

1.7 SUMMARY
All organisations want to achieve a specific strategy and objective so as to ensure
that they are competitive in the marketplace. Organisations thus need to develop
and manage their organisational strategy through effective strategic management
planning by making use of the strategic management process.

This learning unit has given you an overview of and introduction to strategic
management and we have reviewed the differences between business, strategic and
safety management. We have also considered the importance of developing and
planning a strategy through considering different management concepts and strategic
risks. You have been introduced to key strategic management terminology and we
have considered what questions should be asked when planning and developing

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 LEARNING UNIT 1:  Strategic management introduction and essentials

strategic management. You have also been introduced to the strategic management
process which will be discussed in more detail later in the module.

In the next learning unit, we look at the strategic direction and how this direction
is formulated and planned.

1.8 SELF-ASSESSMENT QUESTIONS

(1) Define management.
(2) Define business management.
(3) Define strategic management and explain why it is important.
(4) Define safety management.
(5) Differentiate between business, strategic and safety management.
(6) List strategic risks found within an organisation.
(7) In an organisation, at which three hierarchical levels would strategy formula-
tion, implementation and evaluation of activities occur?
(8) Investigate why organisations do and do not engage in strategic planning.
(9) Differentiate between various strategic terminology.
(10) What questions can be asked to ensure that organisations are on the right
track pertaining to strategic management?
(11) List the role players involved in strategic management.
(12) Explain the responsibilities of role players in strategic management.
(13) Differentiate between the advantages and disadvantages of strategic
management.
(14) Strategic management is about gaining and maintaining competitive advantage.
Using practical examples, explain whether you agree or disagree.
(15) Based on the role players you have listed, identify which three role players (strat-
egists) you have engaged with and to what level this engagement took place?
(16) Strategic management is not a solution for success. Give five examples of an
unplanned aspect of the planning process.
(17) What is the difference between a business and military strategy?
(18) Rank five reasons (in order of priority) why organisations do not have stra-
tegic plans.
(19) In your opinion should strategic management be hidden or transparent?
Explain why.
(20) In your opinion should strategic management be more people-oriented or a
paper exercise? Motivate your answer.

1.9 ADDITIONAL READING

Jackson, E. 2014. Sun Tzu’s 31 best pieces of leadership advise. [Online] Available
at https://www.forbes.com/sites/ericjackson/2014/05/23/sun-tzus-33-best-
pieces-of-leadership-advice/#5d49c6565e5e. [Accessed on 14 April 2020]

1.10 REFERENCES
Clemons, EK, Santamaria JA. 2002. Maneuver Warfare: Can Modern Military Strateg y
Lead You to Victory? [Online] Available at https://hbr.org/2002/04/maneuver-
warfare-can-modern-military-strategy-lead-you-to-victory. [Accessed on 09
April 2020].

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David, FR & David, FR. 2017. Strategic management. A competitive advantage approach,
concepts and cases. 16th edition. New York: Pearson.
Gregg Learning.2018. Strategic management: [Online] Available from https://youtu.
be/eOFqekOF9ZI. [Accesses on 1 February 2021].
Jackson, E. 2014. Sun Tzu’s 31 best pieces of leadership advice. [Online] Available at https://
www.forbes.com/sites/ericjackson/2014/05/23/sun-tzus-33-best-pieces-of-
leadership-advice/#5d49c6565e5e. [Accessed on 14 April 2020]
Keynoter speaker on strateg y. 2017. Prof Michael PORTER. [Online] Available at https://
www.youtube.com/watch?v=EvvnoNAUPS0. [Accessed on 14 April 2020]
Overview of the Strategic Planning Process. 2016. [Online] Available at https://youtu.be/
sU3FLxnDv_A. [Accessed on 30 April 2020].
Rahman M, 2016. Difference between strategic risk and operational risk.
Strategic management process. 2014. YouTube video. Afra ALNZIMI. [Online] Available
at https://youtu.be/o0U0gwvnhek. [Accessed on 01 May 2020].
Strateg y vs operational risk manager 2018. Alex SIDORENKO. [Online] Available at
https://www.youtube.com/watch?v=rNPWmV5zPHw. [Accessed on 01 May
2020].
Sun Tzu The art of war explained in 5 minutes. 2017. The life guides. [Online] Available
at https://www.youtube.com/watch?v=Hz4FNBj1APA. [Accessed on 01 May
2020].
The nine situations. The art of war by Sun Tsu. 2017. Eudaimonia. [Online] Available at
https://www.youtube.com/watch?v=otMaORoiH7w. [Accessed on 01 May
2020].
The difference between operations and strateg y. [Online] Available at https://www.you-
tube.com/watch?v=EQCo-7SMJ_c. [Accessed on 30 April 2020].
Van Nieuwenhuizen, PJ. 2017. Strategic direction, planning and management. An introduction.
Cape Town: EDGE Learning Media.
What are the key areas of safety management? 2016. [Online] Available at https://www.
getsmarter.com/blog/career-advice/key-areas-safety-management-faqs/. [Ac-
cessed on 01 May 2020].
Weller, N. n.d. Strategic and operational risks. [Online] Available at https://www.ac-
caglobal.com/us/en/student/exam-support-resources/professional-exams-
study-resources/strategic-business-leader/technical-articles/strategic-and-
operational-risks.html. [Accessed on 01 May 2020].

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