• Prof. Juvenalis M.

Tembo
• Email: dr_jmtembo@yahoo.com
• Mobile: 0977 853 179
Learning Outcomes:
At the end of the course, the student is
expected to:
(i) Understand and appreciate the nature and
significance of business strategy.
(ii) Develop the ability to formulate and
implement strategy
 Course outline
Part 1: Formulation of strategy
1. Nature and significance of business strategy
2. The analysis of the external environment
3. The analysis of the internal environment
4. The role of personal values in the formulation
of strategy
5. Obligations to society
 Course outline, cont’d

Part 2: Implementation of Strategy

1. Organizational Structure and Relationships
2. Organizational Processes and Behaviours
3. Top leadership
 Selected Reading material
• Mintzberg, Henry and Quinn, James, The
Strategy Process: Concepts, Contexts and Cases
[Englewood Cliffs, New Jersey: Prentice Hall]
• Thompson, Arthur A., Strickland, A J, Gamble
John E. and Arun K. Jain, Crafting and Executing
Strategy: Concepts and Cases [New York:
McGraw Hill, 2007]
• Johnson, Gerry and Scholes, Kevin Exploring
Corporate Strategy [London: Prentice Hall]
What strategic management is about
• Strategy is applied in various situations
and although it may take different forms,
its underlying significance is generic.
• Consider the following contexts in which
strategy is used:
• Military
• Sports
• David and Goliath
Context
• Strategy is used here in the context of a
business firm and refers to plans, choices
or decisions that are made to guide a
firm to success/profitability
• In short, strategy is deployed to lead a
firm to success or the creation of wealth
for the owner(s).
Critical variables in the formulation of strategy:
– Opportunity: external factors that positively
influence the achievement of success
– Threat: external factors that are a risk to
achieving success
– Capability: internal factors that provide a
means to exploit opportunity and to
overcome threat.
 Evolution of business strategy
Grant (2008) has argued that business strategy
as we know it today has evolved through the
following four stages which reflected:
– The external circumstance that prevailed
– The impact of circumstance on success
– The strategic choice
 1950-60 era of growth
 Circumstance:
• Economic devastation following the end
of the 2nd World War
• Resultant negative effect on the
profitability of business
• Strategic choice: seek success by
undertaking investment decisions.
• Typically, this was done through strategic
planning
• Features of Strategic planning:
– Economic forecast of economic trends in
order to identify opportunities and threats
– The determination of goals - what growth to
achieve in a specified period.
» What products?
» Where?
» Which markets?
– The allocation of resources (capital
expenditure) to the different portfolios.
1970-1980 era: the era of economic turbulence
• External environment: This era was
characterized by macroeconomic instability,
specifically:
– Oil shortages
– Emergence of international competition
• Planning for growth was clearly inappropriate
and impracticable in the face of shortages and
competition
 Firms realized that the external environment
could no longer be considered as harboring
opportunity for profit/growth
 Instead, firms realized that competition was
an important aspect of the external
environment, and threat to
profitability/success
Strategic response:
– The emphasis in this era was then on
positioning and relating companies to the
circumstance of shortages and competition.
– Business sought success by:
• Looking internally for ways to achieve
success by better management of internal
resource (resource-based strategy)
• Seeking competitive advantage
(competitive strategies)
Late 1990s: the era of technology
External Environment: This era was
characterized by the emergence of technological
advances in the form of:
– New discoveries
– Mobile telephone and
– The internet.
• On the positive side, it signaled new ways of
achieving success; on the negative side, the new
technologies entailed threats to old ways to
making success and were thus known in some
circles as ‘destructive technologies
• Strategic response:
– Firms had to ‘reinvent’ themselves by seeking
new ways of doing business;
– It called for an entrepreneurial spirit, in which
firms could succeed if they aligned themselves
to new discoveries and technological advances
Food for thought:
• How has technology affected:
a) Zambia Postal Services?
b) Zambia Railways Limited?
The 2001-2002: The era of business ethics
• Environment:
– This was characterized by unethical ways of
making money as exemplified by the excessive
greed of firms and business executives resulting in
– This was exemplified by the demise of many of
the stars and giants of technological advances that
were found to behave unethically in their pursuit
of profit , such as, Enron.
Strategic Response – firms had to adapt to a
moral and ethical way of achieving success
Nature and significance of business strategy
• The basic purpose of a business is to create and
maximize wealth for its owners/stakeholders.
• The ultimate test of success for a business is the
extent to which those charged with running a
business organization create and maximize
wealth for the owners.
• Strategy refers to plans, choices or decisions that
are made to guide a firm to success/profitability
• Determinants of Strategy
– Opportunity in the external environment
– Threats in the external environment
– The capability to exploit opportunities and
overcome threats to success
• Strategic management is therefore the
process of navigating through circumstance
by deploying resources in a way that will lead
to greater success and/or profitability.  
Underlying questions
– Where is the organization?
• In what business is the company?
• Is it accomplishing its mission?
– Where does the organization wish to go?
• Where should the company be?
– How does it get there?
• Is the company in a strong or weak position
to get to where it desires to be?
Analysis of formal definitions from selected
sources
Kenneth Andrews has defined corporate strategy
as:
“the pattern of major objectives, purposes or
goals and essential policies and plans for
achieving those goals, stated in such a way as to
define what business the company is in or is to
be in and the kind of company it is or is to be”.
• Success: Major objectives, purposes or goals -
An objective is an expression of what is
desirable (success)
• Capability: Plans for achieving those goals
H.I. Ansoff has defined strategy as:
“the positioning and relating of the firm or
organization to its environment in a way which
will assure its continued success and make it
secure from surprises”.
• Strategy is about positioning and relating to
the environment to ensure continued success
and to avoid surprises
• Implication is that the environment harbours
threat to success
Johnson and Scholes have defined strategy as:
“the direction and scope of an organization over
the long term which achieves advantage for the
organization through its configuration of
resources within a changing environment, to
meet the needs of markets and to fulfill
stakeholder expectations”.
• Success is defined as the extent to which needs
of the market are met and expectations of
stakeholders are fulfilled
• Strategy is described as a direction that is
advantageous by the way resources are
configured in a changing environment
• Arthur Thompson, AJ Strickland, JE Gamble
and AK Jain have defined strategy as:
“consisting of the competitive moves and
business approaches that managers employ to
attract and please customers, compete
successfully, grow the business, conduct
operations, and achieve targeted objectives.”
• Success is defined in various ways:
– attracting and pleasing customers,
– competing successfully,
– growing the business,
– achieving targeted objectives)
• Strategy defined as competitive moves used to
achieve the named success
• Implicit recognition of competition as a barrier
to success
• Alfred Chandler has defined strategy as:
“… the determination of the basic long-term
goals and objectives of an enterprise, and the
adoption of courses of action and allocation of
resources necessary for carrying out these
goals”.
• Success – determination of long-term
objectives
• The means of getting there
 STRATEGIC ALTERNATIVES
• Business strategy is concerned with how a firm seeks
progress within a particular industry or market.
– Internal growth strategies
– Competitive strategies
• Corporate strategy is concerned with how a firm seeks
success by going beyond its traditional industry or by
merging with another firm. These strategies are driven by
the realization that on its own a firm cannot achieve success.
– Mergers, acquisitions or joint ventures
– integration
• The difference is thus one of scope
No Change or Do Nothing strategy
• This strategy is followed when a firm is satisfied
with its current business or corporate and
therefore sees no justification for change of
course.
• A “No Change” strategy thus entails a
continuation of the existing strategies,
whatever these strategies might be.
• The implication is that to change direction
when all is well might be retrogressive
 BUSINESS LEVEL (INTERNAL GROWTH) STRATEGIES

a) Concentration or specialization (single business

strategy)
• This involves seeking progress by directing
resources towards continued and profitable
growth of a “single” product in a “single”
market, or pursuing a “single” technology.
• This is perceived to be more beneficial than
spreading resources across too many ventures
a) Concentration or specialization (single
business strategy)
• This involves seeking progress by directing
resources towards continued and
profitable growth of a “single” product in a
“single” market, or pursuing a “single”
technology.
• This is perceived to be more beneficial than
spreading resources across too many
ventures
 b)Market development
–This strategy involves seeking progress by
building on existing strengths, skills and
capabilities to extend into new markets that are
not served, or developing new uses for existing
products.
–Progress can be manifest by:
• Acquiring new markets/extended profit
• Increasing use of an existing product
–Market development may require some
modification of the product.
c)Product development
– This involves substantial modification or
additions to present products in order
to increase their market penetration
within existing customer groups.
– It is intended to prolong or extend the
product life cycle of an existing product.
 Innovation
–This involves significant or changes to a
product or service.
–It involves replacing existing products with
new ones as opposed to modifying them.
–Innovation provides growth by increasing
market share, revenues, growth and
profit.
•Joseph Schumpeter (1934) identified, among
others, the following as constituting innovation:
–The introduction of a good product, which is new to
consumers, or one of higher quality than was
available in the past.
–Introducing new methods of production, which are
new to a particular industry
–Introducing new sources of competition, that lead
to the restructuring of an industry
Schumpeter, J. A., The Theory of Economic
Development (Boston: Harvard University
Press,1934)
Strategic outsourcing
•This entails a company allowing any of its
value chain activities or functions to
be performed by an independent
specialist company.
•The principal reason for outsourcing is that
the company may not have a distinctive
competence, or competitive advantage, in
the activity or function to be outsourced.
 BUSINESS-LEVEL STRATEGIES IN
COMPETITIVE INDUSTRIES
A Market Focus
• A Market Focus strategy refers to deciding on a
market segment that offers a firm a competitive
advantage over rivals.
• A customer segment is a set of people who share a
similar need for a particular product
• This strategy means that a firm opts for a market
segment away from a rival. It assumes that a rival will
be disadvantaged or unwilling in operating in the
chosen market segment.
• Thus, a market focus strategy aims at targeting
such a group of people in a way which precludes a
rival from participating profitably essentially
because of demographic characteristics of the
chosen market segment, such as:
– Income
– Location/distance
– Occupation
• However, within each group, there are maybe
subgroups that may have a more specific need for
a product. Market focus aims at targeting these
needs more narrowly.
 Some examples of a market focus strategy:
a) Informal sector versus the formal sector
b) An investor that comes to a developing
country as opposed to operating in home
country
c) Supermarket (Shoprite) vs. Retailer in the
township
d) Urban versus a rural market
Product differentiation
This strategy involves obtaining a
competitive advantage over rivals by making,
creating, and selling a product in a way that
satisfies customers differently and better
than rivals.
•A company can devise strategies to
differentiate a product through
– Innovation
– Excellent quality
– Responsiveness to customers,
particularly in service industries.
– Branding
A Low Cost strategy
•This strategy is based on a company gaining a
competitive advantage over rivals by lowering its
cost structure so that it can make a product or
provide a service at a lower cost and sell the
product or service at a lower price than its rivals.
•This is attested by generally lower price that
prevails in competitive industries than in
monopolies, e.g. in the cement and
telecommunications sector
This offers a competitive advantage in two ways:
– Where firms charges similar prices for their
products, the company with a lower cost
structure will be more profitable than its
competitors because of its lower costs.
– Where a company offers its product at a
lower price, a company with a lower cost
structure is able to sustain its operations by
attracting customers away from its rivals.
STRATEGIES IN DECLINING INDUSTRIES

•Many industries experience sooner or later a

decline, whereby the size of the total market
starts to contract. The decline stage can be
attributed to many causes, including:
–Technological changes
–Emergence of substitutes
–Shifts in tastes and preferences
–Falling incomes.
Leadership Strategy
•This aims at growing in a declining industry by
picking up the market share of companies that are
leaving the industry.
•This strategy is appropriate when:
• A company has distinctive strengths that allow
it to capture the remaining share and
• The rate of decline is slow and intensity of
competition is not severe. The tactical steps
may include aggressive marketing and making
new investments.
Niche Strategy
• This calls for a company to focus on pockets of
demand in which demand is stable or
declining slowly.
• This strategy is appropriate when a company
has a strength to exploit the pockets of
demand.
Harvest Strategy
This is used when a company wishes to get out but
would like in the process to optimize cash flow. This
strategy involves consolidation by:
 Cutting off all new investments and reducing
costs wherever possible.
 Repositioning by seeking survival by
concentrating on core activities and/or on those
activities in which the company has a distinctive
competence. This is known as the retrenchment
of non-core activities.
Voluntary Liquidation or Exit
•This is used when the decline is severe and a
company sees no chance of resuscitation.
•It involves ceasing operations in the current
industry, or diversifying from the current
industry. It can take any of the following forms:
– The sale of a complete business
– The sale of part of a business
 EXTERNAL GROWTH STRATEGIES
• These involve seeking success by integrating with an
another company through acquisition, merger or joint
venture.
• They are premised on the belief that, singly, the business
does not have the capacity to grow in the way it desires,
either because another company has:
• an opportunity it does not have
• a threat to success
• the capability or
• all
• They involve the purchase of, or entering into
an arrangement with, firms that are behind or
ahead of a business in the added value
channel.
• The key objective is to increase market share
and find new opportunities that can generate
synergy.
A firm can thus seek integration as follows:
• Backward: A manufacturer acquiring a firm
that supplies it with key raw materials, e.g. a
butcher acquiring a ranch
• Forward: A manufacturer purchasing a firm
that has retailing facilities
• Horizontal: A firm acquiring a rival
• A firm acquiring an unrelated business but
which might have resources/facilities it needs
Diversification
It involves adding new businesses to the
company that are distinct from its core industry.
Diversification means operating in two or more
industries.
II The Formulation of strategy
Introduction
Having looked at the nature of strategy, this
section examines the variables that must be
taken into account in the formulation of
strategy.
• The following are considered in turn:
 A company’s external environment
 A company’s internal environment
 The personal values and
aspirations of the managers
 Obligations to society
THE COMPANY AND ITS EXTERNAL
ENVIRONMENT
• A company’s ‘external environment’ refers to
events or factors outside a firm’s control, but
which nevertheless have an affect on a firm’s
success or failure.
• Such events can be found in a company’s
industry, the business community, its town or
city, its country, and the world at large.
Significance of the external environment
• Determination of a suitable strategy begins in
identifying opportunities and threats in a
company’s environment.
• An analysis of the external environment is aimed
at identifying opportunities that will influence
success and threats that undermine success.
• Business success is partly dependent on
opportunities and threats that obtain in the
external environment.
Types of external environments
– Globalization
– Technological environment
– Political environment
– Legal environment
– Economical environment
– Competitive environment
– Social/cultural environment
(a)Globalization
• This refers to relationships between a country
and other countries.
• Such relationships may be economic, political
or cultural.
• These relationships are necessitated by the
fact that a nation cannot exist in isolation of
other countries.
• Opportunities and threats may therefore
ensue from interacting with other countries.
Examples:
• Zambia’s economic dependence on sale of
copper to other countries
• Impact of economic sanctions on a country
• Impact of imports and exports on
survival/profitability of a firm
Factors influencing globalisation:
Convergence of needs and preferences
• Increasingly, many countries of the world have the
same needs and preferences for goods; that is, the
functional utility of most goods tend to be the
universal rather than different among nations of
the world.
• This is giving impetus for counties to trade with
one another.
• For example, nations all over the world share a
common need for the following:
• Electric/electronic gadgets, e.g.
–Stoves, kettles, pressing iron,
refrigerators etc.
–hi-fi systems
–TV, cameras, video recorders
–Mobile phones
• Machinery and heavy equipment
used in extraction, agriculture,
manufacturing or commerce:
–Earth-moving equipment
–Heavy equipment used in
extraction
–Tractors
• Consumer goods and services
»Automobiles
»Clothing
»Food
»Accommodation
»Education
»Tourism
Route to Growth
• Trading between nations has historically been
recognised as the route to growth as no nation is self
contained.
• Modern international business is motivated by a
number of factors, among which are the following:
• To find new market for a product that has reached
maturity stage or is in decline in the home market
• To spread the risk of operating in only in the
(domestic) market
To seek efficiency through economies of scale
• To lower the per unit costs that arise from increased
volume when a firm produces and markets for both the
domestic and overseas market.
Eased political tensions
• Political cooperation goes hand in hand with economic
cooperation
• There is now greater political understanding and tolerance
in international politics than was the case, say, fifty years
ago, which has led to heightened economic relations
• Some examples:
• East-West political understanding has
resulted in an increase in trade between
western nations and eastern nations
• Change of political ideology in South
Africa has led to economic cooperation
and trade between South African firms
and neighbouring counties and vice-
versa.
The strategic impact of globalization
The strategic impact of globalization is two-fold:
• Opportunity for market growth – a firm may
increase its profitability by marketing its
product beyond its national borders.
• Threat of competition – globalization
necessarily implies that nations have to open
their doors to firms from other countries.
• Examples:
– Effect of imported ‘salaula’ on the local
textile industry
– The demise of the Tip Top line of soft drinks
– The effect of imports from South Africa and
Chinese made products on the local
industry
– Effect of South African-Zambian economic
trade on firms in either country
Technological Environment/Advances
The Technological Environment refers to
developments that are generated through
the application of science and technology
and are manifested in:
• the discoveries of science
• product development, or
• the progress from
automation/mechanization
• Technological advances have a great
impact in influencing possible
success of a firm and in posing a
threat to profitability of firms that do
not embrace technological advances.
• Examples:
–Zambia Railways
–ZAMPOST
Some major areas of technological advances:
(i) Increased transportation capability
• Firms need to reach markets
• The economic significance of transport to
profitability lies in how easily the gap between
production and consumption can be closed
• Technological advances have resulted in
increased masterly of greater distances in less
time and cost.
• Technological advances in transportation have
enabled firms to move and operate in space,
under seas, and in otherwise inaccessible
areas
• This has provided an opportunity for market
development strategy.
• Consider the opportunity/limitations to success and
profitability of the following:
• Pedestrian
• Bicycle
• Oxcart
• River transportation
• Railway transportation
• Road transportation
• Air transportation
(ii)Increased masterly of energy
• Energy facilitates production
• Advances in energy have involved generating
greater magnitudes and intensity of power.
• This has facilitated (industrial) production and
provided an opportunity for product
development and product innovation.
(iii)Increased ability to extend and control
product life and serviceability
This has been characterized by the following:
– Longer life for living things,
– Reduced deterioration of physical goods, or
– Longer life for perishable foods and other
organic products
(iv)Increased ability to alter characteristics of
materials
•This involves developing new properties from
old materials or the combining of materials to
provide new and unique characteristics
•Manufacturing is the science of transforming
raw materials into finished goods
•This technology has resulted in innovation from
old products
(v) Growing mechanization of physical activity
• Growing mechanization of physical activity has
increased productivity and efficiency and led
to increased growth/profitability.
– market growth
– product/service development and
– enhanced competitive advantage
• Impact of mechanization is evident from the
following:
– Production
• direct labour
• materials handling
• packaging
• testing and inspection
– Distribution
• shipping and receiving
• warehousing
• loading
–Banking: Automatic Teller
Machines
–Communication
• Human communication to
electronic mail
– Extractive industries and
construction
• earthmoving
• mining
• lumbering and
• agriculture
(vi) Growing mechanization of
intellectual processes
• This enhances intellectual capability
and results in increased competence,
e.g:
Information processing, and
 Problem solving in industry and
medicine (diagnostic tools)
The Economic Environment
• Strategy was described as consisting of plans,
choices and decisions that guide a company to
greater profitability and success.
• An analysis of the economic environment is an
attempt at understanding the economic
opportunities and threats that have a bearing
on profitability.
Economics and Business Strategy
• Economics deals with the material well-being of
people
• People derive the material-well being from the
flow of products and services available for their use
• The flows of products and services is known as a
nation’s product (GNP) or income.
• An effective strategy must accordingly be aligned
with the production and distribution of the
national income, and the resultant consumption of
products and services.
(a) Level of Economic Development
– Nations of the world can be placed on a continuum
of income they possess ranging from less developed
counties (LDC) to developed countries (DC).
– Features of Less Developed countries
• Majority of the people subsist on extracting a raw
material (agriculture, mining, fishing, timber…)
• The extractive industry is however not developed
but provides revenue from exporting the raw
material.
–The manufacturing sector is non-existent or at best
underdeveloped and consequently there are
simple goods and services
–The nation relies on imported goods and services to
a large extent
–There is a captive market restricted to foreigners
and a small elite of wealthy locals.
–Ravaged by high levels of poverty, inflation and
monetary instability and high levels of local
unemployment.
–Characterized by poor physical infrastructure
• Historically LDCs have been regarded as
producers of primary goods and consumers of
manufactured goods
• Often perceived as sources of cheap labour,
with genesis in slave trade but also
characteristically exporters of skilled labour to
developed countries.
Implications for strategy
•On the positive side, LDCs offer potential for growth and
profitability, as attested by the flow to LDCs of investors
looking for economic opportunity
–Sourcing of raw materials and cheap labour to enhance
growth of developed countries
–Market for goods and services produced in DCs such as:
• Consumer and business goods
• Services of all sorts
On the negative side, LDCs are often associated
with:
– low per capita income and high poverty
levels
– high population growth rates
– high inflation levels
– Poor infrastructure
All of which can be a threat to the success and
profitability of a firm
(b) Income distribution
 Markets require not only people, but people
with disposable income.
 It is the availability of money and the
willingness to spend it which makes markets
viable. With income, people are able to buy
goods of their choice.
 The distribution of per capita income defines
where investment goes
 Indicators of economic prosperity include:
– A boom in housing and other construction
– Personal possessions and indulgencies, e.g.
automobile, home furnishings, life style
• holiday
• entertainment
• clothing
– Eating habits
(c)Nature of the economy
This refers to any of the following:
• A nation’s physical endowments, e.g. its natural
resources
– Timber where there are forests
– Fishing where there are rivers, oceans or seas
– Agriculture where there is arable land, or
– Mining where there are minerals
 
• A country’s topography, that is, a country’s
surface features such as
– land,
– rivers, lakes,
– forests, deserts, mountains.
 
 – A country’s climate
• Tourism where there is wild game and a
good climate
• Extreme climates may also give rise for
technological developments intended to
control climatic conditions, e.g.
refrigeration, air conditioning, heating.
 
• A country’s infrastructure
– Telecommunications
– Road, air or river network and
– Available modes of transportation)
facilitates economic activity
 
THE COMPETITIVE ENVIRONMENT
Introduction
• Competition is a feature of an external
environment
• By its nature, competition is a threat to a
firm’s profitability.
• Thus, a firm may achieve progress by
developing competitive strategies that serve
to protect its profit.
An analysis of competition serves two purposes:
 To provide an understanding of the different
types of competition
 To appreciate the context in which
competitive strategies are formulated.
Perspectives of competition
• Industry perspective
• The market perspective
• Porter’s Model of Competition
– Threat of New Entrants
– Bargaining Power of Suppliers
– Bargaining Power of Buyers
– Power of substitutes (Market Perspective)
– The threat of industry rivalry
Industry Perspective
• An industry is defined as a group of firms that
offer a product or class of products for which
there is a high cross-elasticity of demand.
• It is manifested by the threat of industry
participants fighting for market
share/profitability
• The industry perceptive of competition is
implicit in the majority of discussions of
competition and marketing strategy.
• Intensity of industry competition occurs:
– when competitors are numerous, and are of
about equal size and power
– industry growth is slow, stagnant or
declining, thus intensifying fight for market
share
– When the product is homogeneous
– The industry perceptive of competition is
implicit in the majority of discussions of
competition and marketing strategy.
– when fixed costs are high, thus exerting
pressure on increasing sales volume to
cover the fixed costs
– when there are exit barriers
Generic competitive strategies:
• Product differentiation – where a firm achieves
competitive advantage over its rivals by making a
different and better product
• Market Focus – where a firm achieves
competitive advantage over its rivals by offering a
product in a market segment away from its rival
• Low cost – where a firm achieves competitive
advantage by reducing product costs, and hence
offering a product at a lower price than its rivals
The market perspective of competition
• In the industry perspective of competition,
the focus is on companies making the same
product or offering the same service.
• In contrast, in the market perspective of
competition, the focus is on companies
that try to satisfy the same customer needs
or that serve the same customer groups.
• It is characterized by customers seeking to
satisfy a need by seeking different products
from other industries.
• This is type of competition is driven by
customer choice beyond an industry and may
occur even when a company is a monopoly
• Failure to recognize that a threat may be
outside an industry has come to be known as
marketing myopia
• Examples:
• Zambia Railways
• Zambia Postal Services
• Strategic response: One way of countering this
type of competition is through innovation and
product development
Michael Porter's Model of Five Competitive Forces
• Porter argued that industry profitability can be
threatened by the following forces:
– Threat of new entrants
– Bargaining power of suppliers
– Bargaining power of buyers and
– Threat of substitutes
– Industry rivalry
The Threat of New Entrants
• The threat of new entrants refers to the risk of
entry posed by companies that are currently not
in the industry but have the capability to enter
the industry if they should choose to do so.
• The competitive threat of potential entrants is
that the profit of established firms will be
eroded when and if such firms eventually enter
the industry.
• Threat: Potential entrants to an industry will
pose a threat to established firms by gaining
market share if they bring into the industry,
better valued or lower priced products.
• This has the effect of shifting customers and
profitability away from established firms in the
industry to the new comer.
Strategies (barriers) against new entry by
established firms in order to preserve profit
(i) Economies of scale
Established firms can use their experience in
the industry by producing/marketing at
lower cost per unit through economies of
scale and passing the advantage of a lower
price to customers in the form of a lower
price per unit .
• Economies of scale may be realized
through:
 Mass-production of a standardized
product when costs are fixed; this
has the effect of spreading fixed
costs over large volumes of output.
 Quantity discounts on purchases.
(ii) Limiting Access to distribution channels
This refers to the ability of established firms to
make it difficult for customers to switch to a
new entrant because of economic, physical or
social barriers.
Example: Coca-Cola’s investment in the business
of retailers of coke by providing refrigeration for
chilled drinks at the premises of their customers
(iii) Insisting on the new entrant making (high)
capital requirements as a condition of entry
 With the support of the government, this
refers to raising the bar in the investment
needed to set up the requisite plants,
machinery or distribution outlets.
 This has the effect of making it relatively more
difficult for a new business to get established
An example:
 Raising investment levels
 Requiring new entrant to match the
investment made by established firms in
brick and mortal
 Directing new entrant to less profitable
or more challenging areas
• (iv) Expected retaliation from existing
firms through:
• price cuts
• clout with customers/distributors
• heavier advertising
• more investment in the business.
• (v) Lobbying Government for protection
This refers to measures and policies enacted by
government that may facilitate or inhibit entry
into the industry. Examples include:
• Regulations governing investment, that is,
specifying who may invest in what, where
and how much.
• Government bureaucracy in obtaining
licence or work permits
• regulations relating to taxation,
remittance of profits
• pressure for protection of local
industry
• access to raw materials and labour,
such as insistence that local inputs be
used in production or indigenous
personnel be hired
• (vi) Brand loyalty
• This refers to the extent to which
consumers prefer the quality they see in
the products of established firms.
• Customer loyalty to an existing brand will
compel new entrant to spend heavily
on advertising, customer service and
product differentiation.
• (v)Customer switching costs
This refers to the time, money and
energy spent by a customer in
switching from products offered by
established firms to the products
offered by a new entrant.
The Bargaining Power of Suppliers
• Suppliers refer to providers of inputs to an
industry.
• Inputs include raw materials, components,
services or labour.
• Powerful suppliers exert bargaining power on
industry participants to the extent that they are
able to (i)raise prices of inputs or (ii) raise costs
by providing poor quality inputs or poor services.
• A good example in Zambia of a firm that has
bargaining power of a supplier is that of
Zambia Electricity Supply Corporation (ZESCO)
which supplies energy to industry.
• For example, the profit of ZESCO’s customers
is negatively affected when ZESCO (i) increases
electricity tariffs, or (ii) provides power
inefficiently.
Conditions which make a supplier powerful
• Product – is unique rather than standard
• Supplier – there is one or few suppliers
• Buyers – there are many buyers
• Profit – the profitability of a supplier is not
threatened by any retaliatory action of a buyer
• Entry into supplier’s business – it is difficult for
buyers to enter into the business of a supplier
Strategies against a powerful supplier
• Search for cheaper and alternative sources of
supply – Suppliers become powerful when the
product that they sell is unique and vital to the
buyers such that switching costs to the buyer
are high.
• Search for alternative inputs - If a buyer is able
to find substitute inputs; e.g. substitute to
electricity – solar energy, charcoal
• Enter into the supplier’s business – buyers
enter the suppliers business through
acquisition, merger or joint venture, or
through backward integration.
– For example: Zambeef has effectively
neutralized the power of suppliers of meat
for their butcheries by having its own
ranches which supply meat to their
butcheries
Bargaining Power of Buyers
• Buyers consist of consumers, users or distributors of a
product.
• Bargaining power of buyers refers to the ability of buyers
to (i) bargain down prices or to (ii) raise the costs of
suppliers by demanding better quality and service. This
has the effect of squeezing the profits of the supplier.
• Examples of firms that this kind of bargaining power
include FRA, Shoprite and the giant copper mining
companies
Conditions which make a buyer powerful
• Product – the product is standard rather than
unique
• Buyer – there is only one buyer rather than
numerous buyers
• Suppliers – suppliers are numerous and fragmented
• Profit – the profit of a buyer is not threatened by
any retaliatory action of supplier
• Easy entry into supplier’s business
Strategies against powerful buyers
• Alternative markets – Buyers become powerful
when they are few, concentrated and buy in large
volumes.
By looking for other buyers, a firm becomes
less dependent on a single buyer
• Differentiate the products – make the product
unique so that buyers will particularly look for it.
• Increase switching costs to the buyer such that
the buyer is not in a position to play off
supplying companies against each other in
order to force down prices.
• This can be done through brand loyalty or
investing in assistance to, or developing
marketing relations with the customer which
will make it difficult for the buyer to switch to
another supplier
The Threat of Substitutes
• Substitutes are products of different industries
or businesses that can potentially satisfy similar
customer needs.
• Firms in one industry are quite often in close
competition with firms in another industry
when their respective products satisfy the same
need, making them good substitutes to each
other.
Threat of substitution can take the following forms:
(a) Product-for-product substitution: When a need
is satisfied better by another product making an
existing product superfluous: as is the case with
 maize-meal and cassava,
 rice and potatoes;
 pain killers (Panado, Aspirin, Aspro);
 soft drinks (Coke, Fanta, Sprite, Orange).
 fax and postal service, and the e-mail and the
fax.
(b) Generic substitution occurs when different
products compete for the same quantum of
money; for example furniture manufacturers and
retailers compete with suppliers of television sets,
cars and holidays for household expenditure.
(c)Doing without, as might be the case with
abandoning smoking, drinking or when one goes
on diet.
 
Strategies against substitutes
• Product improvement and innovation so that the
firm is constantly ahead of the customer
• Firms should invest in market research so that they
are aware of trends of consumer behaviour
• This calls for market intelligence of
– Competitor behaviour
– Consumer behaviour
– Technological developments
Industry rivalry
• This form of competition is characterized by many
participants and product homogeneity.
Participants seek to increase their respective
market share.
• Generic strategies when there is industry rivalry:
– Product differentiation
– Market Focus, and
– Low cost
The Political Environment
 The Political Environment comprises individual
elected to public office, such as, the President,
Members of Parliament, Mayors, and Councilors
 It is these elected officials who form government.
 The actions of these people, either individually or
collectively, are tinted with political considerations
or public interest
 Business organizations must make decisions or
formulate strategies which are politically correct.
Importance and influence of the political
environment
(a) Governance
Office of the President
• In terms of governance, this is the most
important and influential office in the land
• As head of government and together with his
appointees, the influence of the President
covers all spheres of life, including corporate
life. A President can intervene and influence
the direction and success of a firm.
Consider the following cases:
 Zambia Railways
 Zamtel
 Former Finance Bank
 Traders in alcohol
 Street vending
 Mining companies
 Organs of Governance
• The Executive and ministries
Like other activities, all business-related
activities, necessarily involve
interaction with some ministry and
might require the personal involvement
of a minister or the minister to oversee
the operation in one way or another.
• Legislature
This organ of governance regulates how
business and other units must operate.
Legislation is initiated and administered by
politicians
– Investment laws and licenses
– What to produce and consume
– Taxation on profit made from business
• Judiciary
This is the organ that settles disputes between
parties and it is controlled by politicians or
bodies created by politicians.
– The prosecution and defence
– The courts of law
– Correction services
 Areas of influence on corporate life
(a) Role in the economy
Government can play the following roles in
corporate life:
 Ownership and participation:
Government may decide to own and run
business through the creation of state
owned enterprise. This may deny others
the opportunity to own business and
have access to profit
Regulator
Government may also decide to regulate
how business conducts' itself.
• What to produce and consume
• Who will participate and the form of
participation
• What will be consumed, when and by
who
Client
Government may also be a client or
customer to business
Government has many requirements
and may opt to buy from business to
meet such requirements
Because of its sheer size, government
business is often lucrative
Other aspects of political influence
Nationalism
• This refers to the belief among nationals of
a country that they are better than and/or
different from nationals of other countries.
• On the positive side, it leads to love for
one’s country and may lead to a preference
for locally made goods over foreign made
goods.
• On the negative side it creates an ‘us
versus they’ mentality and can lead to
nations denying other nations the
opportunity to benefit from trading
with them.
• Consider the following in Zambia:
• fate of textile companies in Zambia
• the Buy Zambia campaign
Political Stability
 A politically stable environment creates a conducive
environment in which to conduct business and
achieve success/profitability.
Political instability creates an unconducive
environment for business and may impede success
Some indicators of political instability:
– Violent riots or demonstrations
– Civil wars or disobedience,
– Religious, political or ethnic intolerance,
– Armed crimes
Political sovereignty
• This refers to a nation’s desire to assert its authority and
complete power to govern foreign businesses which operate
within its confines, sometimes bordering on hostility or
violence toward foreign owned businesses.
• It is a fight between economic power against political power
• Foreign owned businesses may find themselves under attack
from those who have political power but have no economic
power.
• The desire for political sovereignty may manifest itself in any of
the following:
• Rebuke of the foreign owned business for
perceived transgressions
• Denial of contracts to deserving foreign firms or
awarding contracts to foreigners on untenable or
difficult conditions
• (punitive) taxes
• foreign exchange controls
• Controls on remittance of profit
• Nationalization (indigenization
• domestication or indigenisation
» gradual transfer of ownership to
nationals
» nationals in top level jobs
» more products produced locally for
manufacturing/assembly
• expropriation or nationalization – seizure of
foreign owned property by a host country
supposedly in the public interest
• Corporations can craft strategies against
seizure, such as:
–seeking joint ventures with host
government or nationals
–holding back in home countries critical
elements in
»research
»process technology (formula)
–seeking open political alliance with
government through
»friendships
»donations
»invitations to prominent citizens to
sit on board
 –supporting and financing social
programs like
»sport, entertainment
»education, health
»support in times of national
disasters
 
The legal environment
• This comprises a nation’s laws and regulations
pertaining to business.
• Such laws and regulations can be at national
and international levels:

 
At national level:
•These are laws and regulations enacted within a country
and whose jurisdiction is restricted to that country, e.g.:
–Investment laws
–Trading laws
–Taxes, and
–Laws relating to production, consumption, and
advertising
 
At international level:
– These refer to laws whose jurisdiction between the
nations concerned, e.g. bilateral treaties of
friendship. applies to two or more countries
– They originate from treaties, conventions and
agreements
– For example laws relating to patents and
trademarks
– Patents and trademarks give a firm a monopoly over
a patented or trademarked product.
The Cultural Environment
Edward Taylor (1871:1) in Primitive Culture
(London: John Murray, 1871) defined
culture as:
“that complex whole which includes
knowledge, belief, art, morals, law, custom
and any other capabilities and habits
acquired by individual members of a
society”.
Essential features of culture:
• It is founded on a community (tribe, clan, nation) that
surrounds a company
• It consists of behavioural traits shared by members of
the community, e.g.
– Tradition
– Beliefs
– Language
• Such traits may provide an opportunity or be a threat to
the profit of a company
Some behavioural traits shared in a society:
– Materialism
– Language
– Education
– Aesthetics
– Religion
MATERIAL CULTURE
• This involves techniques and physical things
made and fashioned by man, such as tools,
artefacts and technology, as opposed to those
found in nature.
• Materials culture relates to the way of life of a
people – the way that society organizes its
economic activities. For instance, a fruit tree
per se is not part of a culture, but an orchard
is part of a culture.
• For instance:
– The “American Way of Life” reflects a culture steeped
in materialism, that is, the good things of life, such as
a house, car, TV, fridge or general life style.
– The tradition of keeping animals among the Tonga
tribe reflects material culture
– The nomadic life of bushmen which precludes
possession of physical things
 
Impact of Material Culture on Strategy
•Materialism is the craving members of a
community have for material things:
–Cars
–Clothing, from basic to designer/fashion
–Home furnishings
–Entertainment
•When a society craves material things, it triggers
demand and the more demand, the more
prospects for profitability
LANGUAGE
• Language is the most obvious distinguishing
characteristic between cultures.
• It consists of the way members of a
community communicate with each other.
• It can facilitate the conduct of business with
customers and other stakeholders
• It can also hinder or prevent the conduct of
business
AESTHETICS
THIS refers to a community’s conceptualization
of beauty and good taste as expressed in:
 arts
 Entertainment (music, or dancing )
 design
 colour
 names
Impact of Aesthetics
• Product design/name is influenced by what is considered
in good taste or beautiful.
• A community will more readily accept what it considers in
good taste and shun that which it considers in bad taste
• The significance and importance of colour can be readily
seen in the following instances:
• Home furnishing
• Trademarks and product brands
• ceremonies and music at functions
EDUCATION
• Education in the broader sense is the process
of transmitting skills, ideas and attitudes as
well as training in particular disciplines. In the
narrower sense, it is the pursuit of formal
education.
• Education provides impetus to knowledge,
skills and competence
Impact of education:
– The relationship between education and
economic development is well known as
exemplified by the effect of Research and
Development in business development
• Innovation and economic development
– Consumption and application of modern products
require some prerequisite education. For
instance, proper and effective use of computers,
drugs, or preparation and consumption of some
foods require some schooling
RELIGION
• Religion is a belief in the mystery and divinity.
• The religious beliefs of a society can be a
threat/opportunity to a business particularly
when such beliefs influence the use or
consumption of certain products.
• Some examples:
Animism
• This the religion and philosophy of primitive
people founded or based on traditional
witchcraft, ancestor worship, taboos and
fatalism.
• It tends to promote a traditionalist and
conservative attitude and may result in slow
acceptance, or rejection of innovation.
Hinduism
– This religion is largely prevalent in India and
is based on a caste system in which heredity
casts specific occupational and social roles.
Its major features are the veneration of the
cow and restrictions on women.
– It does not promote progress associated
with cows or women.
– The reverence for the cow closes any
opportunity for business in beef. As for
restrictions placed on women, this has
the potential of depriving business of the
value women add to business in such
areas as decision-making, sales
promotion, or public relations.
Islam
– It is followed and practised by those known as
Moslems in most parts of Africa, the Middle East and
Asia and is growing rapidly in other parts of the world.
– Based on a fatalistic belief that everything which
happens, whether good or evil, proceeds directly
from the Divine Will and is preordained. The Sharia
prescribes what man should do and believers must
religiously follow and obey Sharia law in whatever
they do.
– It promotes non-secularism and hence tends to
dominate all aspects of life.
• Impact of Islam on business strategy
– Restricts growth of markets in the forbidden
products such as alcohol, pork and western type
of clothing
– Restricts the promotion of certain types of
entertainment, such as dancing
– In certain aspects, it restricts the role of women,
such as in promoting goods and services, or even
in open driving
Christianity
Many Christian doctrines are also renowned for prescribing
what should be consumed in the name of God or salvation.
Catholicism
• Centrality of the church and sacraments as the medium
to salvation
• Church laws prescribe certain forms of abstinence and
fasting which have an impact on business. For instance,
the Church prohibits use of contraceptives, condoms and
other devices to control birth.
Protestants
• Centrality of the direct link to God and the value
of pleasing God through a personal relationship
with God
• What is pleasing to God is devotion to God
through hard work and love for family
• Often associated with capitalism when perceived
from the perspective of hard work for self and
family as virtues
Seventh Day Adventists
• Prescribe against consumption of pork,
alcohol and fish without scales
Jehovah’s Witnesses
• Prescribe against use of flowers at funerals
 CORPORATE CAPABILITY
Introduction
1. A subsistence Farmer:
• It is 2017 and the price for maize is so low that
the farmer is unable to send his children to
school
• By asking around, he learns that the maize can
fetch a good price in neighbouring Congo
• What does the farmer have to do to take
advantage of the opportunity in Congo?
2. A small scale entrepreneur
• Knox Chibale makes home furniture from
his small stand at Soweto market. His
customers are principally people who shop
at Soweto. Chibale is thus an informal
trader and does not make a lot of money
• He has received a big order worth K500000
to make furniture for an NGO that has
opened a school in Mtendere.
• What must he do to meet the order?
• The two scenarios described above illustrate
the role of ‘capability’ in strategic
management.
• An Analysis and understanding of the external
environment in which an organization
operates facilitates the process of identifying
of opportunities and threats in order to
determine what strategy might be pursued.
• Once an opportunity or threat has been been
identified, it is then necessary for a firm to
validate its choice of a strategy by determining
whether or not the organization has the
capacity to prosecute the preferred strategy.
What is capability?
• The capability of an organization is its
demonstrated or potential ability to
accomplish, against competition and
circumstance, whatever it sets out to do.
• Such capability consists of:
– An organization’s resources
– An organization’s competences
Resource Analysis
A resource audit must seek to determine
whether an organization is in a strong or weak
position by answering the following two
questions:
– What is the nature of the resources
available?
– What is the inherent strength of these
resources in terms of age, condition,
location or capability?
Nature of resources
• Physical resources
– plants
– machinery
– land
• Human resources
– number and types of skills
– adaptability
• Financial resources
– the ease of obtaining capital
– control of debtors and creditors
– managing cash
• Intangibles
– name and reputation
– image
– contact network of distributors, suppliers or
customers
• All these resources, individually and in
combination, enable an organization to pursue
a particular strategy.
• Consider the influence of financial capital: it is
not enough for an organization to ‘dream’
about it might do – it requires capital to make
a dream bear fruit
• To exploit the opportunities that abound in
Zambia, not only is capital required but also
physical resources such as machinery
Distinctive Competences
• This refers to the unique or special way a firm
deploys its resources to sustain excellent
performance which leads to success or
profitability.
• The importance of distinctive competence to
strategy formulation rests with:
– The unique capability it affords an organization
to capitalize on a particular opportunity, and/or
– The competitive edge it may gives a firm in the
market place.
FORMS OF DISTINCTIVE COMPETENCE:
Quality as Excellence and Reliability
• A product is said to be of superior quality when
customers perceive that its attributes provide
them with higher utility (value, usefulness,
convenience, function) than the attributes of
products sold by rivals.
• For example, a Mercedes Benz has attributes-
design, performance, and reliability-that
customers perceive as being superior to the
same attributes of other cars
Innovation
• This refers to the act of creating new products
or processes. Product innovation is the
development of products that are new to the
world or have superior attributes to existing
products.
• Process innovation is the development of a
new process for producing products and
delivering them to customers.
• Innovativeness includes:
– Offering the customer superior service
– Delivering the quality service
– Offering excellent repairs and
maintenance
– Sustaining warranties and guarantees
TECHNIQUES FOR ANALYZING STRATEGIC
CAPABILITY (STRENGTHS & WEAKNESSES)
Value added analysis
 This refers to the ability to create consumer
surplus
 A business system is conceived as a series of
activities which add perceived value to the
product or service
 Value for the customer is the perceived stream
of benefits that accrue from obtaining the
product or service
 Price is what the customer is willing to pay for
that stream of benefits
 At the same time, each activity in the business
is performed at a cost.
 The value created by a company is measured
by the difference between the value to a
customer (V) and the costs of production.
 This can be illustrated as follows:
 P-C

P
C C

V = Value to customer
P = Price
C = Costs of Production
V – P = Consumer surplus
P – C = Profit margin
• A company can create more value for its
customers either by:
– increasing benefits to the customer by
making the product more attractive through
superior design, functionality, quality, etc.
so that consumers place a greater value on
it and, consequently, are willing to pay a
high price (V increases).
– lowering C, or by doing both
Cost efficiency

• Efficiency is the ratio of inputs to outputs

E= Outputs
Inputs
• The more efficient a company is, the lower or
fewer its inputs required to produce a given
output should be.
• The most important component of
efficiency for many companies is
employee productivity, which is usually
measured by output per employee.
• Additionally, efficiency can be attained at
corporate level by striving toward
economies of scale in production,
distribution and advertising or sales
promotion.
 Historical Analysis
2014 2015 2016

Sales 100 120 150

Expenses 50 70 90

Profit 50 50 60
 Comparison with industry norms
• This involves comparing a company with other
companies in the same industry. This is a
measure of competitive positioning or
advantage by using, for example, the “market
share” concept.
Benchmarking
• What is “best” is stretched to similar
activities in a different industry, e.g.
market share or innovation.
 Financial Analyses
• This involves an analysis of the company’s
financial condition. Although analysing
financial statements can be quite complex, in
general a company’s financial position can be
determined through the use of ratio analysis.
• Financial performance ratios can be calculated
from the balance sheet and income
statement. These ratios can be classified into
five different subgroups:
Gross profit margin (GPM)

• GPM = Sales Revenue – Cost of Goods

Sold/Sales Revenue

• Net profit margin = Net Income/Sales

Revenue
 
• Return on total assets
= Net income available to common
stockholders/Total assets

• Return on stockholders’ equity

= Net income available to common
stockholders/Stockholders’ equity
Liquidity Ratios
• A company’s liquidity is a measure of its ability to meet
short-term obligations. An asset is deemed liquid if it
can be readily converted into cash. Liquid assets are
current assets such as cash, marketable securities,
accounts receivable, and so on.
Current Ratio
= Current Assets
Current Liabilities
Quick Ratio
= Current Assets – Inventory
Current Liabilities
Activity Ratios
Activity ratios indicate how effectively a company is
managing its assets.
• Inventory Turnover
= Cost of Goods Sold
Inventory
This measures the number of times inventory is turned
over. It is useful in determining whether a firm is carrying
excess stock in its inventory.
 
– Days sales outstanding (DSO), or average
collection period
This ratio is the average time a company
has to wait to receive its cash after making a
sale.
DSO = Accounts Receivable
Total Sales/360
Days sales outstanding (DSO), or average
collection period
This ratio is the average time a company has
to wait to receive its cash after making a sale.
DSO = Accounts Receivable
Total Sales/360
Leverage Ratios
A company is said to be highly leveraged if it uses debt
rather than equity, including stock and retained
earnings.
 
• Debt-to-assets ratio
= Total Debt
Total Assets
This measures the extent to which borrowed funds
have been used to finance a company’s investment.
 
Debt-to-equity ratio
This indicates the balance between debt and
equity:
Debt-to-equity Ratio =Total Debt/Total Equity
Cash Flow
• This is simply cash received minus cash
distributed.
• A positive cash flow enables a company to
fund future investments without having to
borrow money from bankers or investors.
• A weak or negative cash flow means that a
company has to turn to external sources to
fund future investments.
Product Portfolio Analysis
• This is an analytical tool, developed by the
Boston Consulting Group, for classifying a
company’s business by its profit potential.
• It uses two variables: market growth rate and
relative market share.
• It can be used to determine an appropriate
strategy given an external environment and a
company’s capability
• Market Growth Rate can be depicted as an
external variable where an opportunity exists
if the market growth rate is high, and a threat
when the market growth rate is low
• Relative Market Share can be depicted as
capability where a strength exists if the
relative market share is strong, and a
weakness obtains if relative market share is
weak.
 Relative Market Share

Strong Weak

Market Star Question

Growth High mark
Rate

Cash Dog
Low cow
• When Market Growth Rate and Relative
Market Share are considered simultaneously,
four scenarios (matrixes) emerge:
– A Star scenario is when a product/company
is in an industry with a high market growth
rate and the product has a strong relative
market share
– A Question Mark scenario is when a
product is in an industry with a high growth
rate but the product has a weak relative
market share
– A Cash Cow scenario is when a product is in
an industry where the market growth rate is
low but the product is enjoying a strong
relative market share
– A Dog scenario is when a product in in an
industry where the market growth rate is
low and the product is experiencing a low
market share
 Appropriate strategies for each scenario
Scenario Strategy
Star No Change (Do nothing);
Continue to grow

Question mark or problem Seek growth by first

child looking for resources

Cash Cow Diversify to a market with

high growth rate

Dog Liquidate
 QUIZ on product portfolio
Zambia Pork Products Limited
Zambia Pork Products Limited is a leading processor of pork products in
Zambia. One of its flagship products is bacon which has a commanding market
share on the Zambian market. During the first quarter of 2020, the company
has experienced a 25 per cent decline in its sales of pork. The company’s
marketing manager has informed the managing director that the drop in sales
of pork is due to two factors. First, the rise in converts to Islam, a religion that
forbids the consumption of pork and, second, an increasing awareness among
affluent Zambians that pork is fattening and not a healthy food.

Required:
a) Identify opportunity/threat
b) Identify strength/weakness 
c) Recommend strategy
 PERSONAL VALUES AND ASPIRATIONS OF SENIOR
MANAGERS

Introduction
• An analysis of the environment is intended to
facilitate understanding of what a company
might do as revealed by the opportunities or
threats obtaining in the environment.
• As analysis of a company’s capability
addressed the question of what the company
can do in terms of its state of resources and
competences.
• Strategy formulation also depends on what
the chief executive and his senior managers
wish to do.
• What the Chief Executive and senior managers
wish to do is a reflection of their values and
aspirations.
• Under this variable as a component of strategy
formulation, an analysis is made of how the
personal values and aspirations of the top
leaders influence the formulation of strategy.
WHAT ARE PERSONAL VALUES AND ASPIRATIONS?
W.D. Guth and R. Tagiuri defined a value as
“a conception, explicit or implicit, distinctive of an
individual or characteristic of a group, of the desirable
which influences the selection of available modes,
means and ends of action”.

W.D. Guth and R. Tagiuri, Personal Values and Corporate

Strategy, Harvard Business Review, Sept-Oct 1965, pp 123-
32
• Salient features of the definition of personal
values and aspirations:
– A personal value is what an individual thinks
is desirable to them
– It is distinctive or characteristic of the
individual
– It influences the choice or decision an
individual makes
Thus, a strategy may be influenced by the
desires of those running an organization
• Values are acquired over time
• They are formed early in life as a result of the
interplay of :
– what the individual learns from those who bring
him/her up,
– the times and circumstances of his upbringing and
– his particular individuality
TYPES OF VALUE ORIENTATIONS (GUTH AND
TANGIURI)
•  The theoretical orientation:
This when the choice of strategy is based on an empirical,
critical, rational approach of those responsible for running an
organization.
• The economic orientation:
This is when the choice of a strategy is based on a
materialistic (economic), that is, a desire to create wealth
• The aesthetic orientation:
This is when the choice of strategy is influenced by a sense
of ‘good taste’ as characterized by a desire symmetry or
harmony
• The social orientation:
This is when the choice of strategy is based on
love, welfare and concern for people.
• The political orientation:
This is when the choice of strategy is driven by
love for power, influence and recognition.
• The religious orientation:
This is when the choice of strategy is based
moral and ethical considerations.
STAKEHOLDERS AND THEIR POSSIBLE VALUE ORIENTATIONS

(a) Shareholders
• Shareholders are individuals who have an
equity interest in the firm.
• Their power and influence derive from
ownership and control of strategic
resources, such as capital or a patent.
• Their orientation is often economic
because they are strongly motivated by
the return on their investment
(b)The Board of Directors
• Members of the Board are representatives of
those who have an equity interest in the firm or
those who own strategic resources being used
by the firm.
• They constitute the policy making and
governing body of a firm and it at this level that
strategic decisions are presented, discussed,
approved or rejected.
• Their power and influence are derived from
their principals or those they represent.
(c) The Chief Executive Officer (CEO)
• The CEO is responsible for the day-to-day running of
the firm.
• He/she is accountable to the Board for the formulation
and implementation of strategy. As such, he/she is
expected to initiate, defend and implement strategy.
• He/she is the chief strategist and guides the Board in
the selection, evaluation and implementation of
strategy.
• He/she has the greatest opportunity to influence the
direction of the firm
• His power and influence derive from the mandate
received from the Board.
(d) Senior (Top) Management
• These are the functional managers who directly
assist the CEO in initiating and implementation
of strategy.
• They are the embodiment of the expertise,
knowledge and capability necessary for the
search, analysis, selection and implementation
of strategy.
• Their power and influence derives from the
perceived expertise to the formulation and
implementation of strategy.
STRATEGY AND OBLIGATIONS TO SOCIETY
(CORPORATE SOCIAL RESPONSIBILITY)
• Strategy was defined as those plans, choices and
decisions that guide a company to greater
profitability and success.
• The focus of strategy is success to a firm, viz, the
strategic alternatives
– No change
– Internal growth strategies
– Competitive strategies
– Strategies in declining in a declining industry
– External growth industries
• Corporate Social responsibility (CSR) is the
intelligent and objective concern for the
welfare of society.
• The focus of CSR is the welfare of society –
this is not economic success but social
success:
– To contribute to human betterment, by using
corporate profit to address issues of concern
– To restrain corporations from behaviour and
activities that are harmful to society, no matter
how immediately profitable such behaviour or
activities might be.
Implications of CSR
• CSR is a voluntary undertaking by a firm
• CSR is primarily intended to benefit society
and not the firm as attested by the fact that
firms do not pursue CSR for economic
prosperity
• CSR does not directly bring in profit to a firm;
rather it takes away or transfers profit from a
firm to society
• Society achieves a measure of success from
CSR
 The areas of concern that call for CSR
• Contribution to the development of
underdeveloped countries
– The willingness not to deplete resources in
underdeveloped countries without leaving anything
in return
– the willingness to undertake joint ventures rather
than insist on full ownership;
– the willingness to share in management and profits in
terms not proportional to the actual contributions of
a host developing partner/country
– the training of nationals for skilled jobs;
– the willingness to enter business to meet social as
well as material needs;
– cooperation in matters of taxes, bribery or
corruption.
• The problems within a country’s borders:
– Assistance toward occasional disasters such as
floods, earthquakes, drought or civil strife.
– Assistance toward mitigating or prevention of
negative environmental consequences of
manufacturing processes.
– Promotion of underprivileged groups.
• The problems of the community in which the
company operates:
– Restraint from undertaking new investments that
disrupts existing cultures and traditions
– The offer of needed social amenities to the
community
– Offer of employment opportunities to the local
community
• Industry-related problems:
– Alleviating and control of harm to the
environment arising from disposable
products;
– road maintenance in the case of heavy
users of roads;
– ethical and moral issues in the provision of
services
• The quality of life within a company:
– Contribution toward the welfare of
employees;
– The freedom afforded to the individual
employee to participate in social causes not
related to a firm and its search for
profitability.
 
THE CASE AGAINST CORPORATE SOCIAL
RESPONSIBILITY-(THE ECONOMIC ISOLATIONIST
ARGUMENT)
• The primary purpose of business is economic,
that is, to maximize revenue.
– Deviation from this principle is self-defeating and
can lead to economic inefficiency.
– Moreover, the pursuit of the economic motive
results in good for society as a whole, particularly
when business organizations are allowed to reinvest
the profit that goes to supporting non-economic
causes.
• The undesirable social consequences of
business activity should be left to government
to regulate or correct.
• Business should however live up to its legal
obligations, such as paying taxes or bills,
keeping honest expense accounts and
labelling and weighing its products accurately.
• Usually, CSR is administered by company
executives and not by those who have an
equity interest in a firm.
PROPONENTS OF THE ECONOMIC ISOLATIONIST
VIEW
Adam Smith’s Wealth of Nations
• In his work, The Wealth of Nations, Adam Smith
argued that when firms operate under conditions
of perfect competition, not only is there optimum
allocation of resources, they also operate in the
public interest by generating satisfaction for all.
• This is because, by nature, perfect competition, in
seeking to advance self-interest (profit), the
capitalist must behave in the best interest of the
public and avoiding harming the public.
• Thus, Adam Smith asserted that:
‘It is not from the benevolence of the butcher,
the brewer, or the baker that we expect our
dinner, but from their regard for their own
interest’
• Public interest (dinner) is assured not through
acts of benevolence but when self interest is
allowed to take course
• Adam Smith’s proposition is naïve perfect
competition does not exist as idealized by
Smith: in reality, what obtains is imperfect
competition where a few large suppliers as
opposed to atomized suppliers obtain who
control markets and the buyers have
incomplete knowledge about sources of
supply and prices.
Theodore Levitt & Reavis Cox have argue that:
– The only responsibility of business is to
make profit.
– The need to make profit in the present is so
great and so pressing that self-interest
necessarily excludes public service.
– It is government’s role to check abuse,
prescribe rules and codify public
aspirations.
Milton Friedman (in Capitalism and Freedom)
– In a free society, there is one and only one
social responsibility of business and that is
to use its resources and engage in activities
designed to increase its profits, so long as it
stays within the rules of the game.
– Direct intervention or the doctrine of social
responsibility is “fundamentally subversive”
in a free society.
THE CASE FOR CORPORATE SOCIAL RESPONSIBILITY
(The Social Interventionist Argument)
• Ineffectiveness of government regulation to arrest
harm to society caused by actions of a firm as it
seeks profit
In response to the argument from the economic
isolationists that the undesirable consequences of business
should be left to Government to regulate, the social
interventionists argue that Government regulation is, yes,
called for to prevent grossly improper and dishonest
behaviour; however, regulation per se is not an effective
instrument for reconciling private and public interests, nor
an effective substitute for self-restraint.
This is because government regulation generally
is not sufficiently on time, specific, and
comprehensive.
Legislation is never enacted on time
Legislation is never specific and all too
often has loopholes, and
Legislation does not cover all potential
harmful areas
• Wanton irresponsibility
In this day and age, it is wanton
irresponsibility to argue that a firm should
knowingly ignore the consequences of its
actions on the physical and social
environment until new laws are put in place.
The public constantly expects and demands
that businesses behave not only legally but
within visible regard for the rights of
competitors, customers and the general
public.
• Government’s lack of capability
Governments particularly in most developing
nations do not have the capacity to solve the
vast and diverse social and economic problems
which beset them.
Corporations on the other hand have vast
resources/capability to address some of the
social concerns of society if they are to be
solved at all.
 
 
• The trend toward care for the less fortunate
 The world is moving toward greater tolerance for
the less fortunate.
 Communities, societies and nations are increasingly
becoming less divisive and more accommodating as
evidenced by concern about conflicts and problems
of others and positive developments in resolving
problems of other nations
 Modern firms are therefore not expected to confine
themselves to the pursuit of narrow economic
interest and to ignore problems of society at large.
• Cooperation rather than confrontation
 Governments will not sit idly by when some
section of the community is in need od
assistance, nor will the community suffer quietly.
Social and economic instability and public
insecurity may result when social concerns are
not addressed.
 It is in the interest of all to voluntarily work
towards a common good rather than have a
standoff.
SUMMARY
In summary, there are three reasons for a strategist to examine
the impact of his policy choices upon the public good:
• his professional concern for legality, fairness and decency; his
professional contempt for returns improperly or unfairly
secured;
• his humane concern for the progress of society and his
perception of the proper uses of corporate power in dealing
with problems not directly related to his present business;
and
• the threat of regulation that will be ultimately forthcoming if
business behaviour does not meet the standards applied to
it by society.
 
IMPLEMENTATION OF CORPORATE STRATEGY

Introduction
The Implementation of Strategy means the
accomplishment of purpose. It can be subdivided
into the following sub-topics:
• The design of organizational structure and
relationships;
• The effective administration of organizational
processes and behaviour; and
• The development of effective personal leadership.
ORGANIZATIONAL STRUCTURE
Introduction
• The formulation of strategy described thus far is
essentially an intellectual process involving an
analysis of the external environment;
determining the capability of an organization;
the making of individual personal choice and
determining one’s attitude to society.
• It is a process which the strategist can
accomplish by himself and by possibly using
some input fro others in the organization
• Strategy is a purpose.
• An organization is a collection of people, tasks
and relationships
• An organizational structure is therefore a way
in which an organization arranges its people
and jobs so that work can be performed and
its goals can be met.
• However, the process does not end there
• Strategy has to be implemented, requiring
support and commitment from other people
in the organization.
• The task of implementation involves not only
ideas and facts but people as well; it is not
only intellectual but also administrative as well
 How an organizational structure facilitates
strategy implementation

1. Determine and understand the company’s

strategy or distinctive purpose
• A key to effective performance is an understanding is
to understand what has to be accomplished.
Whatever is to be undertaken is for a purpose. It is
therefore important to define and understand the
strategy which necessitates bringing people together.
Purpose gives focus and meaning to organizational
activity.
 2. Identify the tasks to be performed
Once the strategy or purpose is clearly understood,
the tasks to be performed must be identified. All
work must be aligned to purpose or strategy.
A change of strategy implies a review of the tasks.
Pertinent questions to ask are:
– Does the strategy call for new or additional tasks?
– Will old tasks be deleted or retained from current
portfolio?
– Will personnel have to be retrenched or
retrained?
3. Assign responsibility for
accomplishing these tasks to
individuals or groups
A Chief Executive Officer is ultimately responsible for the
accomplishment of each and every task. Recruitment
occurs when the CEO or those already in an organization
cannot possibly perform the required work.
As work demands grow in nature and complexity, a CEO
will find it necessary to hire people for the diversity of
work that has to be done. This is the essence of
departmentalization.
Thus, as the work of an organization grows
beyond the capability of a CEO or founder, the
work to be done must be assigned to other
individuals or groups.
The CEO must then decide:
• When and to whom should he delegate?
• What authority is commensurate with
delegation?
 
Ways of assigning tasks
(i) Functional organizational Structure
 In this format, people are assigned to
functions to be performed.
 Thus, in a typical manufacturing firm,
people are assigned to the basic functions
of production, marketing and finance. In a
trading firm, people are assigned to the
functions of buying, inventory control and
selling.
Product Structure
• In this type of organization, people are assigned to the
tasks linked to a product to be produced/marketed.
• An example of a product structure might be at a mixed
farm where people are grouped around the products,
such as:
– poultry
– crop,
– dairy and
– orchard products being produced.
• The product determines the nature of the tasks to be
performed.
Customer/Market/Geographic structure
• In this structure people are assigned to the
customer/market or region to be served.
• Tasks are focused on satisfying the needs of the
market
• This kind of structure is common in service
industries, or when an organization is pursuing a
competitive strategy.
4.Provide for coordination of inherent
divided responsibility through:
• Hierarchy of supervision
 This occurs when subordinate functions report to and
are accountable to a higher position in a hierarchy. The
higher position, through a span of control of the lower
positions, serves as a point of coordination.
 For example, a Chief Executive Officer, coordinates the
functions of the managers who directly report to him,
such as, finance, manufacturing and marketing.
 In turn, each of the functional managers coordinates
the sub activities falling under them.
• Committees
 Committees provide a forum at which diverse
views, or people from different departments, are
brought together in an attempt to reach
consensus on an issue.
 A planning committee typically draws its
membership from a cross-section of stakeholders
 Similarly, a management committee serves to
coordinate the opinions of different managers so
that a common position on an issue is reached
• Project form of organization
 Coordination may also be accomplished when
various people are brought together to work
on a project.
 The different tasks and people are coordinated
through the singularity of the project, such as,
the introduction of a new product
 5.Design of an Information
System
 This is intended to provide members with
information needed to perform their tasks and
relate their work to that of others.
 It is important for the organization’s strategy
to be clearly understood and for every
employee to understand how they contribute
to the achievement of strategy.
A good information system should provide for:
• Red-flag information – alerts an organization
threats to an organization, or when things are not
going well for an organization,
• Progress information – monitors progress by
comparing actual performance to desired
performance.
• Awareness Information – creates awareness of
what is happening and connects employees to
changing business challenges and hence facilitates
quicker adjustments to changing business
conditions.
PRINCIPAL REQUIREMENTS OF STRUCTURE
The rationale for any organization is to advance
strategy, or the purpose of an organization. The
following should accordingly be borne in mind in
designing an organizational structure:
• Flexibility
 The design should be flexible and allow for a
more complex structure as the organization
grows in size.
 It is strategy and its attendant circumstances
which determine organizational structures and
not the other way round
• Customization
 There is no typical or universal
organizational structure.
 An organizational structure must be tailor-
made for an organization; avoid choosing
or adopting a “typical” pattern of
organization
 No organizational structure can be applied
universally
• Flat and Tall structure
 Decide on whether to have a flat or tall
organization structure. The choice will
depend on the dictates of strategy.
 Tall structures are characterized by many
hierarchical levels between the top and
bottom, while flat organizational structures
have few hierarchical levels between the
top and bottom.
• Critique of a tall structure:
A tall structure is appropriate for a large and diverse
organization such as the civil service or a large
corporation.
The advantage of a tall structure is that it allows for
easier control because of the narrow rather than wide
span of control. However, it can be faulted for the
following:
 Many different levels or ranks, within the total, may
result in a long hierarchical and psychological
distance between top and bottom, and this may
impair performance.
 Decision making processes become long,
convoluted and ultimately ineffective.
 The different administrative and support
functions become the domain of powerful and
dominant interests.
 Tall structures tend to lead to rigidity and
entrenched authority.
 Accountability may not be specific
Critique of a Flat structure
• A flat structure is usually associated with small
organization. The advantage of a flat structure is
that decision making is faster because the
relatively short distance between a subordinate
and a superior.
• However, span of control can be problematic
because of the relatively more subordinates a
supervisor has to look after.
Centralization vs. decentralization
• This refers to whether control is at the centre
or at the lower or operational level.
• Centralisation is when authority and control
are at the top and decentralization is when
authority and control are at lower levels. The
tighter the control exercised at the centre, the
greater the degree of centralization.
• The advantage of centralization is that top
managers remain fully aware of operational as
well as strategic issues and concerns.
However, it mat stifle individual initiative
• The advantages of decentralization include:
– Easier and faster responsiveness to local
conditions
– speedier operational decisions and
– greater motivation and morale to lower
placed staff.
ORGANIZATIONAL PROCESSES AND BEHAVIOUR

• Introduction
– Organizational performance does not depend only
on the structure put in place.
– It depends also depends on the extent to which
individual energy is successfully directed toward
organizational goals.
– Many systems and processes are available for
influencing individual performance.
– The following are used individually or in combination
by organizations:
• Standards for measuring performance
• The measurement of performance
• Incentives for inducing desired
performance
• Rewards for satisfactory performance
• Penalties for unsatisfactory or
undesirable performance
THE ESTABLISHMENT OF STANDARDS
– Strategy by definition implies progress.
– Progress implies that one is able to observe
and measure the difference between where
an organization is compared to where it
desires to be. In strategic management,
progress is measured by comparing where
an organization is to where it wants to be.
– To set a standard is to state where an
organization desires to be.
The standards for measuring performance:
• Profitability
– Profitability is used to measure how
successful a strategy has been because
it reflects how well the means
(resources) have ben deployed to
move a firm from where it is to where
it desires to be.
– It represents a return on investment
made in the resources used to achieve
the desired goal.
• Competitive Position
–This is used to measure how well a
firm has performed in managing a
threat in the environment.
–A firm’s market share is used to
determine the standing of a firm
relative to its rivals.
• Non-economic Expectations
– A measure of a successful strategy is how well a
company meets the expectations of the society in
which it operates.
– This is done by either avoiding harming the public
in the course of making profit, or using the profit
made to address issues of concern to society.
– This standard is non-economic because it is
ethically or morally based.
 POSITIVE SYSTEM OF INFLUENCING PERFORMANCE:
MOTIVATION AND INCENTIVE SYSTEMS
• The implementation of strategy cannot be left to
chance, and management has a number of
options of encouraging behaviour which advances
strategy and deterring behaviour which does not.
• Motivation and incentive systems are positive
systems for encouraging desired performance,
while systems of restraint and control are negative
systems for discouraging undesired performance.
• Motivation consists of incentives and rewards.
Incentives precede performance and rewards
come after performance.
• A major form of reward is the basic pay which
is given after performance.
• While it is generally acknowledged that basic
pay provides an incentive to work, it does not
guarantee that it will lead to desired
performance.
Guidelines to making Basic Pay more effective
(a) Characteristics of the work – basic pay should
be commensurate to the characteristics of the
work, e.g.
(i)Complexity of the work
• overseas versus domestic operations
• nature and intensity of competition
• General education required
–MBA versus other qualifications
–technical versus non-technical skills
• Responsibility of job-incumbent
for people and property
• nature and number of decisions to
be made
• the risks involved
• (b)Quality of performance
• The quality of individual performance should be
distinguished from organizational performance
• (c) Logical relationship of basic pay to rewards paid
to others in the same organization.
– The CEO and other functional managers
– Functional managers and supervisors
– The CEO and other employees
– Core staff and support staff
• (d) Justify the relevance of the following if
used:
– Age?
– Length of service?
– Potential?
– Materials needs?
• (e)External influencing factors
– regional difference in the cost of living
among
– regional hardships to individual and his
family
– market price of qualification, in order
to pre-empt raid by competitors
– Level of local taxation.
Other Forms of compensation
• The significance of allowances: housing,
transport, entertainment.
 Monetary Incentives for individual
performance
– profit sharing
– stock options
– executive bonuses
– pension/savings plans
 
• Non-monetary incentive
– satisfaction derived from doing work
– pride in doing the work
– sense of accomplishment
– climate for free expression and innovation
– good/pleasant environment
– able and honest associates
– pleasant surrounding
• clean and quiet office location,
• size of office and furnishings
Organizational Politics
Introduction
• The implementation of strategy refers to the
extent an organization is able to get desired
results from a strategy.
• From the perspective of strategy, the
proposition being made is that organization al
politics can facilitate or undermine the
achievement of results.
• The following will be addressed under this
topic:
– The meaning of organizational politics
– Types of political games
– Functional and dysfunctional roles of
politics
What is organizational politics?
• From the perspective of strategy
implementation, organizational politics refers
to performance which is not based on
legitimacy
• Performance can be legitimate or illegitimate
• The question is: is the result of legitimate or
illegitimate
• The bases of legitimacy:
– Authority: when
performance/action/behaviour is officially
sanctioned
– Ideology: when performance/action is
based on a widely held belief, or the
generally accepted way of doing things
– Expertise : when performance/action is
based on official certification
• Forms of Political Activity (Games)
– Insurgency Game
• This is usually played by “lower
participants” who are subservient to
formal authority
• It is played by resisting the formal
authority, ideology or expertise, or to
effect change outside the established
procedure
• It can range from a “protest” to open
rebellion
– Counterinsurgency Game
• This is played by those with legitimate
power who fight back against insurgency
with political as well as legitimate means,
e.g. suspension, dismissals or
excommunication from a church.
• It may be manifested by subordinates who
make comments about their company but
refuse to disclose their identity for fear of
reprisals from their superiors.
Sponsorship Game
• This game is played by subordinates to
build a power base by invoking a superior
• It is based on an individual attaching self
to someone with legitimate power, in
authority, or of higher status, by
projecting the impression that their
actions are mandated by their superiors.
• It is played by special assistants to CEO or
family members in a family company.
Alliance-building Game
• This is played among peers, such as line
managers or experts
• It is aimed build a power base to advance
selves in the organization at negotiating
implicit contracts of support for each
other in order to enhance partisan
interests
• For example: workers’ union
Empire-building Game
• It is played by line managers or even CEO
• It is played individually with select
subordinates to foster a unique sense of
loyalty to the boss
Expertise Game
• It involves non-sanctioned use of
expertise to build a power base either by
flaunting it or feigning it. It is manifested
by exploiting one’s technical skills and
knowledge, emphasizing the uniqueness,
criticality and irreplaceability of one’s
expertise
• It is reinforced by keeping skills from
being programmed or by keeping
knowledge to self.
Line versus Staff Game
• This is like a sibling-type rivalry
• It is played between those who do core work
and those who do support work, such as
rivalry between
– a production manager and an accountant
– line managers and advisors
– teaching staff and non-teaching staff in a
university
• It pits two types of power that otherwise must
complement each other
Rival Camps Game
• This is played by those in different
departments and is intended to merely
defeat a rival
• It occurs when one personality or
department wishes to exert power over
another person or department and will
result in two power blocks that do not
see eye to eye
Whistle-blowing Game
• It is played by an insider, usually a lower
participant, to seek change by “blowing
the whistle” on an insider – usually a
superior - about what a subordinate
perceives to be questionable or illegal
behaviour
• The questionable or illegal behaviour is
reported to an influential outsider in
order to force change on the organization
• The reporting to an outsider of what is
going on inside the organization is
resented by those responsible for what is
being revealed to outsiders and can lead
to retaliation to the whistle blower
Young Turks Game
• It is played by a small group of “youngish”
people in the organization who are close
to but not at the centre of power.
• It involves questioning or even
challenging in a subtle way those who
have legitimate power, with a view of
changing the direction of an organization.
The destructive influence of politics in
organizations:
• Politics can undermine the implementation of
strategy when it is divisive, costly and burns
up energies that could be channelled into
collective and cooperative effort
• At its worst, it can lead to organizational
paralysis where performance comes to a
standstill.
On the other hand, politics can be constructive
when:
• It corrects certain deficiencies in an organization’s
legitimate systems of influence which impair
organizational performance.
• It brings about progress even though it may bring
conflict with those interested in maintaining the
the status quo
• It enhances flexibility as opposed to rigidity which
is implied by legitimacy
• It improve performances by allowing all sides of an
argument to be heard:
• Legitimate systems of influence at times can kill
the spirit of debate by requiring adherence to the
status quo:
– the system of authority defers open discussion to a
central hierarchy, and this is often favoured one by
those in authority;
– the system of ideology imposes restraint through a
system of common beliefs; and the system of expertise
gives deference to the expert or experience. In
contrast,
– the system of politics encourages a broader and
researched articulation of issues which challenges the
status quo.
• In the final analysis, politics can be an effective
platform for the effective implementation of
strategy:
– It can allow the pessimist to be better informed,
and once persuaded
– All can then work together for the good of the
organization. People who agree to everything
undermine an organization by failing to point out
what may stand in the way of progress
 ORGANIZATIONAL CULTURE
• Culture comprises a system of man-made
behavioural traits to which members of a
society subscribe and which influences their
choice of modes or decisions.
• The objective is that Organizational culture
must facilitate the implementation of strategy
by influencing behaviour
• Strategy is man-made trait because is is
crafted by management
• How organizational culture influences
implementation of strategy is based on the
following:
– The existence of an organization comprising
members. This is the firm and individuals who
are employees.
– The existence of a behavioural trait
(ideology). This refers to a strategy.
– Members subscribing to a behavioural trait: A
pledge to the strategy (ideology) by members
of the organization.
– Cultural Influence on choice/decisions:
• Collective pledge to strategy
• As Andrews (1971) asserted, a group,
working as a systems, has a mood,
atmosphere or chemistry which induces
effort over and above the ordinary.
• This mood, atmosphere or chemistry is
rooted in an ideology and is the driving
or influencing force of collective
behaviour
The development of an ideology
Stage 1: The rooting of ideology in a sense of
mission
• An organizational culture begins when a
founder/CEO states a mission – a statement of
what the organization seeks to achieve.
• A mission: this is a statement of purpose -
what the organization seeks to achieve.
• The founder/CEO then collects a group around
him or her to accomplish that mission.
• The individuals who come together do not do
so at random, but coalesce because they share
the values associated with the prime
mover/CEO and the fledgling organization.
• Organizational culture is rooted in an ideology
which serves as a sense of mission as
articulated by the founder/CEO
• Examples:
– An entrepreneur enterprise
– A political party
– A church
• When people come together in this fashion,
they can be said to share a common sense of
purpose (mission).
Stage 2: Development of ideology through
traditions and legends
• As the new or an existing organization
establishes itself, it makes decisions and
takes actions that serve as commitment to its
mission and establish precedent
• These decisions and actions are repeated over
time and lead to reinforced behaviour
• The reinforced behaviour in turn translates
itself into tradition - a way of doing things
which members share
• The organization transcends the individual and
becomes a self, distinctive personality or
identity
• This distinctive personality captures the
allegiance and commitment of members of
the organization.
Stage 3: Reinforcement of ideology through
identifications
• At this stage, the organization is a living system with
its own culture.
• Membership of the organization becomes cardinal
through identification.
– Employees as members of the organization begin to
identify themselves with the organization by showing
commitment and loyalty to the organization through
the following:
– New members find the culture attractive and rich
and want to be identified with the organization.
– For existing members, promotion to higher
positions is made on the basis of strength of
loyalty to those beliefs and values of the
organization.
– New members may be subjected to a selection
process, to see whether they “fit in” with the
existing beliefs
– Identification may also be evoked through the use
of socialization and indoctrination to reinforce
natural or selected commitment to the system of
beliefs.
Organizational culture in application
Discuss how organizational culture affects
success in the following instances:
a) A family
b) A church
c) A political party
d) A business firm
 MANAGEMENT DEVELOPMENT
• Rationale of Management Development
– It is myopic to hold the view that the quality or
standard of performance will always match the
demands of the organization.
– Underperformance can arise because individual
skills are outgrown by the dynamics of the
organizations, necessitating that old skills be re-
sharpened or new skills be acquired.
• Management development is a recognition that
skills and competences may overtime become
stale and there is therefore need to sharpen
them, or new skills acquired, in order to make
them appropriate for the challenges of the day.
• Implicit in effective performance is that
managers must all the time have appropriate
skills for the realization of organizational goals.
• Management development is therefore aimed at
creating an individual who has the capability to
give his best to the organization.
The critique of manpower development
1. Good management is instinct in action. A
number of men and women are born with
qualities of energy, shrewdness of judgement,
ambition and capacity for responsibility. These
become leaders of business.
It is argued that this, for instance, explains why
some people of humble education can become
quite successful at business, or why certain ethnic
groups – such as Jews, Asians, and West Africans
– seem to have a natural flair for business.
Rejoinder:
Yes, men/women are, of course, born with
different innate characteristics, but none of these
precludes the necessity to acquire knowledge,
skills and attitudes which fill the gap between an
identifiable trait and success over time.
– Basic instincts may be necessary for effective
performance in lesser and lower jobs.
– Different and additional skills are required for one
to successfully exploit the opportunities and
challenges of the dynamics of the corporate world.
• Manpower development gives an individual a
state of preparedness for higher responsibility
and for new and emerging challenges.
• The development or growth of a corner shop
in a township to a modern supermarket
cannot be entirely attributable to basic
instinct.
2. A man prepares himself for advancement by
performing well in his present job. In other
words, experience on the job is the best teacher:
it is indeed the man or woman who does best
among peers who is best qualified to lead them.
People naturally want somebody they can look
up to be their leader - a foreman, head of
department, manager or indeed general
manager - for inspiration and guidance
Rejoinder:
Advances in technology, the internationalisation of
markets, and the progress of research in science and
information processing and organizational behaviour
easily challenge the notion that one can naturally
have such knowledge and naturally adapt to these
changing times, or that a man will learn all he needs
to know from what he is currently doing.
3. If an organization does not have adequate
numbers of men with innate qualities of
leadership who are equal to higher
responsibilities, it may bring in such persons
from other companies.
Rejoinder:
Experiences in human resource management
reveal that there are advantages and
disadvantages to hiring from within and
outside.
It is therefore naïve to be rigid about a hiring
and promotion policy. It is both risky and
expensive to prefer hiring from outside instead
of having a deliberate manpower
development scheme within the organization.
 For one, it is difficult to appraise the quality of
outsiders;
Secondly, it is questionable whether outsiders can
effectively transfer to another organization their
technical effectiveness, knowledge and experience
which blossomed and matured in a different
organization;
Thirdly, hiring from outside inevitably impacts
negatively on natural internal motivation and
incentive systems.
The realistic approach is to be open and objective
and hire as circumstances dictate.
4.Men/women with proper amount of ambition
to do not need to be “motivated” through
training in order for them to show their
personal qualities which qualify them for
advancement. Such people are successful
because they are internally driven.
Rejoinder:
The counter argument to this is that ambition is not a
recipe for success in each and every circumstance.
Indeed, ambition can be misplaced. Ambition must be
nurtured through a realistic assessment of
opportunities and constraints.
Freedom to make mistakes and achieve success through
a process of learning is more productive in developing
executive skills than the practice of following detailed
how-to-do-it instructions designed by superiors or
specialists.
 
TOP LEADERSHIP AND ACHIEVEMENT OF PURPOSE
 

Introduction
• The success or failure of an organization is
invariably attributed to the leadership of an
organization because a leader is responsible
for the achievement of results.
• This is why leaders are held personally liable
for the failure of an organization or are
accredited with the success of an organization.
• The performance of an organization comprises
the individual contribution of a leader and the
contribution of others through the influence
of a leader
• This is attested by the fact that the success of
an entire organization is attributed to the
person of a leader and to the inspiration a
leader gives to others.
• A leader must accordingly play a role in the
implementation of strategy.
Nomenclatures of leaders
–General manager
–Chief Executive Officer
–Managing Director
–Executive Director or simply
–Manager
General Manager as a Personal Leader
• Business leaders generally are characterized by
such personal qualities as:
–drive
–intellectual ability
–initiative
–creativeness
–social ability
–flexibility

 
Conducive environment
GM is responsible for creating a conducive
climate in which to achieve results for his
organization
–A leader must ensure an absence of
political manoeuvring for position or
attention
–A leader must reject preferment on
grounds other than merit
–A leader must create interpersonal amity
and tolerance of individual differences
Expectations of all stakeholders
The CEO must achieve results in the present against
continually rising expectations of shareholders and
other stakeholders. These include:
• Owners of equity
• Strategic partners
• Suppliers
• Employees
• Government
• Society at large
– The GM see and attend in his own office
people who want to see him/her.
• To receive reports on progress
• To receive reports on problems and any
difficulties which hinder success and
resolve such difficulties or hindrances
– The GM will be expected to physically see
and acquaint himself/herself with all
operations.
– The GM is expected to remain continually
informed and be ready to intervene in
crises.
• Must be informed about new
opportunities which affect current
• Must be informed about threats to
success and be ready to intervene in crisis
• Must receive visitors of his own stature to
share experiences and learn from others
– The GM is also expected to take part in
divisional or corporate ceremonial activities
where effort is recognized and rewarded.
– The GM must constantly be an example for
others to follow
• Must maintain the momentum of past
success
• Must be exemplary in his personal and
working relationships
• The GM must mobilize resources, develop an
organization structure and deploy its people in
such a way as to permit both business success
and individual satisfaction and expression.
• He must search for and bring to the
organization resources and competences
that will enable the organization to achieve
success
• He must bring all on board to strengthen
team effort.
Determinants of effective leadership
• The attitudes and values of a leader
• The roles of a leader
• Traits and characteristics of a leader
• Types of leader
• Leadership styles
• Succession and continuity
Attitudes and values
 A generalist attitude
  Looking at issues in a broader rather than
a narrow perspective
 A balanced interest and approach to all
different sections
 A leader should be impartial in all matters
A practitioner’s orientation
• A leader should be prepared and willing to roll
his/her sleeves and get down to any task in
the organization
• A leader should be willing to be seen in all sets
of circumstances and be willing to accept
failure
• A leader should be ready to act even on the
basis of incomplete information
A professional orientation
– A leader should have and exhibit
personal and occupational
commitment in the performance of
his/her task and in the way he/she
relates to others
– A measure of this is the extent to
which a leader is perceived to work in
the best interests of the organisation.
An innovation orientation
– A leader should have the capability and
willingness to look at the present state
of activities, products, services and
processes as a basis and vehicle for
any innovation
– A leader should be willing to develop
new products and services, which may
or may not succeed
A positive orientation
A leader should have an optimistic and
buoyant approach to whatever presents
itself with respect to:
• products and services,
• marketing campaigns and activities,
• staff, communities and clients, as well as
crises and emergencies.
– A positive attitude is a reflection of the
legitimate pride, confidence and
commitment in the organisation and
its products, services and staff.
2. Roles of a leader
• Depending on the nature and size of an
organization, a leader is expected to fill a
range of different roles:
• The visionary role: the ability to see the
future of the organisation, and to translate
this vision into language that engages the
support of all stakeholders and constituents
– A visionary role requires a leader to be
able to analyse circumstances and
exploit the opportunities and deal with
the threats in a way which creates a
niche for his organization.
– The champion role - this involves
enthusiastically supporting, promoting,
defending or fighting for the strategy in
question.
• The enthusiast role: this is reflected by
the extent to which a leader projects
interest and passion in the way he or she
carries out their duties and by the way a
leader relates to staff, shareholders,
backers, suppliers, customers and clients.
• Hero or heroine role: this is distinguished
from others by virtue of exceptional
courage, achievement and superior
qualities.
• Role model: this is demonstrated by
management’s ability to set the standard
for others to follow. Others in the
organisation take their cue in terms of
required, desired and demanded
standards of performance from those in
overall charge.
• The wanderer role: this refers to the
need for the leader to be visible and be
physically familiar with every aspect of
his organization and the staff and see for
himself or herself what is happening
within his domain rather than relying
solely on what is reported back to him.
 • Wandering may also involve visiting other
organizations with a view to learning
from others. In addition, leaders can also
take time out to attend courses,
conferences or professional association
meetings in order to meet with others
with similar problems and learn from
them.
 
• The coach role-this refers to guidance and
steerage provided. This reinforces the
need for visibility, capability and clarity in
all those in leadership positions.
• The surgeon role - this involves cutting
functions, products, services or processes
when it is deemed they are no longer
required. This might mean making painful
decisions in the greater interest of the
organization
Traits and Characteristics
• Research studies have revealed that there are
desirable attributes of a “leader” that have an
inspirational effect on performance of
subordinates
• Some of these traits and characteristics are as
follows:
• Carries water for people vs. Presides over the
mess
• Open door problem solver, advice giver, cheer
leader vs. Invisible, gives orders to staff,
expects them to be carried out
• Comfortable with people in their workplaces
vs. Uncomfortable with people
• Manages by walking about vs. Being invisible
• Arrives early, leaves late vs. In late, usually
leaves on time
• Good listener vs. Good talker
• Available vs. Hard to reach
• Humble vs. Arrogant
• Sees mistakes as learning opportunities and
the opportunity to develop vs. Sees mistakes
as punishable offences and the means of
scapegoating
• Tough, confronts nasty problems vs. Elusive,
the artful dodger
• Prefers discussion rather than written reports
vs. Prefers long reports
• Gives credit to others vs. Takes credit
• Often takes the blame vs. Looks for scapegoats
• Gives honest, frequent feedback vs. Amasses
information
Types of leader
A key characteristic of leadership relates to the
type of leader a particular individual is. The
following types of leader may be distinguished:
• The traditional leader is one whose position
as a leader is assured by birth and heredity,
e.g.
– Monarchies
– Family businesses
• The known leader is one whose position as a
leader is secure by the fact that everyone
understands their position, e.g. kings are
known to be leaders by their subjects and
priests are known to be leaders by the
congregation
• The bureaucratic leader is one whose position
is legitimised by the position held, a police
officer or a supervisor
• The appointed leader is one whose position is
legitimised by virtue of the fact that he or she
has gone through a selection, assessment and
appointment process
• The functional or expert leader is one whose
position is secured by virtue of expertise,
command of technology or resources.
• The charismatic leader is one whose position
is secured by the sheer force of known or
understood personality
• The informal leader is one whose position is
secured also by virtue of personality,
charisma, expertise, command of resources,
and who is therefore the de facto leader in a
particular situation
Leadership Styles
• It is usual to classify leadership styles on an
autocratic-democratic continuum as illustrated
below: in a boss-centred leadership, the
leader makes all decisions relating to the work
of the subordinate; in a subordinate-centred
leadership, the subordinate has relative
freedom in decision that affect his work.
• In reality, there is considerable variation in
leadership styles. On one extreme end is the
petty tyrant who uses power to abuse those
whom he considers offenders, and uses
reports to find some discrepancy with which
to needle a subordinate.
• He/she thus lacks the level-headedness to
inquire objectively into reasons for failure
without raising his voice.
Succession and Continuity
• The final main element of strategic leadership is to
ensure continuity of priorities, direction, policy and
culture.
• The keys to this are:
– Full communication between the CEO and the top
management team
– The ability to integrate the management of crises
and emergencies into the overall direction and
purpose of the organisation.
– The development of leadership skills and strategic
expertise in all those in senior positions and all those
who aspire to such positions.
– The identification of a range of individuals from
within the organisation who show promise,
capability and willingness to be developed into
strategic positions.
– The identification of sources of expertise from
outside the organisation so that as and when fresh
talent and thinking are required, these sources can
be accessed quite quickly.
– The integration of strategic thinking, awareness and
expertise into all management development
programmes. This includes action learning, project
work, secondments and MBA and other organisation
leadership programmes.
 STRATEGY IN CONTEXT
The Entrepreneurial Context
Features of an entrepreneurial organization include
the following:
• Usually founded and run by a single individual or
run by a single individual assisted by few staff
• It has no established formal structure; where a
structure exists, it is a simple, basic structure
• It has few or no staff
• It has a small managerial hierarchy
• Relationships tend to be informal and rather
flexible rather than formal and rigid.
• CEO exercises a high personal profile, and the
organization is driven by the sheer force of the
personality of the CEO through
–The vision he has
–The Charisma he may have or
–The style of leadership
 
Examples of entrepreneurial organizations
– Small to Medium type of businesses
–Manufacturing in the informal sector
and as characterised by SMEs
–Guest Houses
–Restaurant
–Trading, Hair saloon, Garage
 
How strategy is formulated
• Its vision, policies and operations are bounded
and determined by the Chief Executive Officer
• The opportunity and threats are often
characterized by economic boom-and-bust
cycles
• It is often the opportunities associated with a
boom which trigger the enterprise and which
influence the formulation of a strategy
• Resources are limited
• The personal aspirations and value orientation
of the founder is a major determining factor in
the formulation of strategy
• Issues of corporate social responsibility are
insignificant and are not likely to prevail
How strategy is implemented
• The importance of structure in the
implementation of strategy is limited by the
nature and kind of organization.
• Decisions concerning strategy and operations
tend to be centralised in the person of the
founder. Its performance is largely determined
and bounded by the limitations of the founder
• Systems of incentives and rewards may be
characterized by informality but will hardly be
politicized.
• The strong sense of mission rather than guidelines,
procedures, rules or formal controls are the driving
force in the implementation of strategy. The ideology
of the entrepreneur is usually rooted in the deep
knowledge of product/service in question, and
places heavy reliance is placed on the intuition,
knowledge, experience, energy and ambition of the
entrepreneur.
• Politics will be not so dominant.
• Limited management development
• Leadership is critical to the successful
implementation of strategy
The Mature/Machine Context
Features of the machine organization
• The entrepreneurial organization will ordinarily
evolve into a machine or mature organization over
time.
• There is an elaborate organization and
administrative structure characterized by
• specialization of tasks
• departmentalisation by function, product,
customer or territory
• line vs. staff
• Operating work tends to be simple and
repetitive and eventually develops into
routine, hence facilitating standardization and
automation of work processes, hence the
name “machine” organization.
Examples of a machine operation
• A commercial bank, along the likes of Standard,
Barclays
• A mining company – Mopani, Konkola
• Supermarket chain – Shoprite
• Government/Public Enterprises
• Service companies, such as Zambia State
Insurance Corporation, Zambian Airways
How strategy is formed
Strategy originates from the top of the hierarchy, where
the perspective is broadest and the power most focused.
• There is a clear delineation of roles in the formulation
of strategy between the Board of directors, the CEO
and his management team
• Decisions tend to be rational and objective, based on
PEST/SWOT analyses
• Wide latitude for sourcing resources/competences
• Issues of corporate social responsibility feature in the
formulation of strategy
 
Strategy implementation
• Elaborate structure provides for supervision
and the monitoring of assigned task to ensure
performance of task
• Operations tend to be more efficiently run
through
• standardization
• automation, and
• elaborate control systems
• There are usually problems of motivation and
job satisfaction
• routine, little thinking involved
• breeds boredom, absenteeism and
sabotage, undermining
• sloppy workmanship
• The organization tends to breed conflict, and
political games tend to be pervasive
• Culture is called for but difficult to achieve
• Different forms of leadership may be
manifested, but leadership skills are called for.
The Professional Context
• Features of a professional organization
• The operating core are the professionals
themselves
• Administrative structures tend to be flat and
democratic, characterized by elective,
rotational or honorary leadership, and
collective decision-making as opposed to
directives.
 
• The CEO’s roles are largely of being
–fire extinguisher/fighting
–liaising officer with external bodies
–buffer and defender of against
“external” forces
• Power and influence are expertise-based and
need not be tied to formal position
• Work tends to be project-based, as for
example
• engineers in construction
• surgeons on an operation
• researchers in a university
• lawyers as a defence team
• auditors in an audit team
• Examples of a professional organization
– Doctors in a hospital
– Academic staff in a university
– Lawyers in a law firm
– Engineers in a construction firm
– Accountants/Auditors
Strategy Determination
• This can be done at any of the following levels or
using a combination of any of these levels:
• Professional Judgement by Individual: Based
on individual values and professional needs
as dictated by clients, professional
affiliations and funding agencies.
• Administrative Fiat (Administrator/Managing
or Senior Partner): this involves articulations
from Government, donors, public, business
concerns
• Collective Choice: This involves
interactive process that deliberately
seeks out a combination of professionals
and non-professionals/administrators
from a variety of levels and units.
• Professional competence is the mainstay
and a necessity
• Personal values are often subordinated to
professional values
• Limited role for CSR
Strategy implementation
• Professionals largely apply individual discretion
in their work as no two professionals ever apply
their knowledge/skills in exactly the same way,
hence it is difficult to standardize their work,
and there is need for wider consultation and
team work the more complex the task.
• Self-discipline and externally determined
standards and a code of conduct by the
professional body ensure quality assurance in
performance.
• Tends to breed high levels of productivity
because effort is based on
• individual skill/professionalism
• work is regarded as a calling
• autonomy and democratic principles.
• May breed problems of coordination
attributable to the professional individualism
and arrogance
The Innovation Context
Features
• The tasks are highly specialized and complex,
often requiring expert training
• The environment is dynamic, complex and
unpredictable.
 
• Examples of Innovation Context
– High-tech research industries, such as
information technology, electronics industry
and drug manufacturing
– Entertainment industry, such as music,
advertising or the movie industry
– Work of arts, such as painting
– Fashion designers
– Universities
– Research Centres
– Space agencies
• Strategy Determination
– It cannot rely on deliberate strategy because if
must respond continuously to a complex and
unpredictable environment. Its actions are
decided upon individually, according to the needs
of the moment.
– Decisions are serial and incremental. Strategy is
formed rather than formulated because it derives
from the series of actions and is not
predetermined.
 
• Strategy implementation
– To innovate is to break away from established
patterns. Accordingly, the innovative organization
cannot rely on any form of standardization of the
work processes. There is therefore minimum
division of labour and formalized behaviours.
– Information and decision processes are allowed to
flow flexibly and informally, wherever they must
go, in order to promote innovation.
– Different specialists must join forces in
multidisciplinary teams, each formed around a
specific project of innovation.
– Because of the fluid nature of their structures,
there is a high cost associated with
communication.
– Top managers do not spend much time
formulating explicit strategies; rather they spend
time in the battles that ensue over the selection
among strategic choices and in handling
disturbances which arise from the environmental
forces
– Top managers additionally spend time in
monitoring projects and liaising with the external
environment
END