STRATEGIC MANAGEMENT

Course Outline
• Objectives
This course is intended to introduce the student to the
nature and problems of strategic management as seen
from the perspective of those charged with running a
business, and to offer the student an opportunity to
understand and appreciate the challenges of
responding to an ever-changing business environment.
The student is expected to integrate knowledge and
skills gained in prior courses to enhance understanding
and facilitate analysis of concepts, formulation and
implementation of corporate strategy.
Instruction Method
• Lectures will constitute the principal method
of instruction. Students are required to read
widely and beyond what is covered in class.
• Students are additionally expected and
required to be actively involved in class
discussions and share their experiences with
others.
• Student participation in class will be
recognized and rewarded
Course Content
I. Nature of Strategy
• What is strategy?
• The Chief Executive and Strategy
• Strategic Options
• Benefits of Strategy
• Limitations of Strategy
II. Formulation of Strategy
• The interrelationship between
formulation and implementation
• A Company and its External Environment
• Strategy and a Company’s Capability
• Strategy and Stakeholder Orientation
• Strategy and Society
III. Strategic Options
• No change strategies
• Internal Growth Strategies
• Competitive Strategies
• Strategies in Declining industries
• External Growth Strategies
IV. Implementation of Strategy
• Organization Structure and Relationships
• Organization Processes and Behavior
– Incentives and Rewards
– Organization Politics
– Organization Culture
• Leadership
V. Strategy in Context
– The Entrepreneurial context
– The Mature context
– The Professional context
– The Innovation context
 
Figure 1: Components of Corporate Strategy

FORMULATION IMPLEMENTATION
(What to do) (Achieving results)

1. Identification of 1. Organization
Corporate
opportunity and structure and its
risk relationships
Strategy:
2. Determining 2. Organizational
competences process and
and resources behaviour
Pattern of purposes
3. Personal values 3. Top leadership
and aspirations
and policies
of senior defining the
managers company and its
4. Obligations to business
society other
than
stakeholders
Source: Kenneth R. Andrews, The Concept of Corporate Strategy, Homewood, Illinois:
Dow Jones-Irwin, 1971
• A word of caution on flow: Although the
structure suggests strategy formulation
precedes strategy implementation, in practice
the two are interchangeable, and there may
be some situations where issues arising from
implementation may trigger the occurrence of
strategy.
Texts
• Lectures and class discussions will largely be
based on prescribed readings. However,
students are encouraged to source other
relevant materials and bring up for discussion
any topical issue.
• The prescribed readings should be
supplemented by individual experiences
which should be shared with others
Selected Reading material
• Henry Mintzberg and James Quinn, The Strategy
Process: Concepts, Contexts and Cases [Englewood
Cliffs, New Jersey: Prentice Hall]
 
• Arthur A. Thompson, A J Strickland, John E. Gamble
and Arun K. Jain, Crafting and Executing Strategy:
Concepts and Cases [New York: McGraw Hill, 2007]
 
• Gerry Johnson and Kevin Scholes, Exploring
Corporate Strategy [London: Prentice Hall]
• Kenneth R. Andrews, The Concept of
Corporate Strategy, (Homewood, Illinois: Dow
Jones-Irwin, 1971).

• Charles W. L. Hill & Gareth R. Jones, Strategic

Management (Boston: Houghton Mifflin
Co.,2007)
 
Course Evaluation
Assessment in the course will be based on:
• Two assignments, a test and a final
examination.
• The assignments will be given out at the end
of residential school, but will be due one
month before the end of the semester.
• The test will be administered on the last day
of residential school.
• CA (the two assignments and the test) will
comprise 40% of the course assessment. The
two assignments will jointly be weighted at
20% and the test will carry 20%. The final
examination will carry 60%.
• Class participation will be an added
advantage.
• The assignments must be typed in 1.5 font size and
each assignment should be no more than 10
pages.
• No LATE assignments will be accepted and no
excuse for late submission will be entertained.
• Students are free consult. The contact is:
• Prof. J.M. Tembo
• Tel. 0977853179
• Email: dr_jmtembo@yahoo.com
What the student should expect to gain from the
course:
• (a) provide the student with direct albeit distant
preparation to assume the responsibilities of top
leadership,
• (b) instill in the student the sense of appreciation of
accepting the frustrations and satisfactions associated
with setting direction in the midst of a complex
environment and conflicting interests,
• (c) provide the student with skills of how to structure
situations which appear unorderly,
• (d) sensitize the student to the challenges of
working without complete information, or
with limited resources
• (e) offer the student the skills of identifying
significant trends in the environment and of
determining the opportunity and risk
associated with any environment and
• (f) develop a dislike for organizational drifting.
What is strategic management?
• By its nature, strategy implies progress.
• Progress means that one seeks some betterment
by moving from one position to a more favorable
one.
• Setting goals necessarily means moving away from
a less favorable position to a more favorable one.
• Strategy can thus be described simply as the
process by which an organization charts a direction
for itself and establishes a means of getting there.
• Strategy in this regard is characterized by three
questions:
– Where is the organization?
– Where does the organization wish to go?
– How does it get there?
• However moving from one point to another means
navigating through circumstance.
• How well how well a firm navigates through and
around circumstance to get to where it wants to be is
what strategy is about!  
Amplifying on the meaning of strategy
• In order to deepen and appreciate this
conceptualization of the meaning of strategy,
we will turn to an examination of the meaning
of strategy from three perspectives:
(a) From the way a select few scholars have defined
strategy;
(b) From the way it has been applied in the military
and sports; and
(c) From the way it has developed in the corporate
world.
Select definitions of strategy
• 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”.
• Andrews argues that strategy is about setting
objectives and goals.
• The setting of goals is an expression of what is
desirable, which implies the status quo is not a
desirable state of being.
• To move from the status quo to some desirable
state implies progress.
• Note that Andrews also refers to means by which
goals will be achieved.
• 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”.
• Ansoff recognizes the importance of
navigating through circumstance in order to
realize success. Thus strategy is about how
well (relating) an organization deals with its
environment in order to achieve success
• Progress is measured by how well one deals
with an environment
• 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”.
• This definition points to a direction – or an
objective
• It also points to the rationale of charting a
direction – advantage, which implies progress
• It also highlights the role of means, that is,
resources in facilitating the move in a particular
direction.
• Finally progress is measured by fulfilling
stakeholder expectations.
• 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.”
• This definition recognizes success (to attract
and please customers, compete successfully,
grow the business, conduct operations, and
achieve targeted objectives), and the need to
navigate through circumstance (competition).”
• J.L. Thompson has defined strategy as “the
concern with the establishment of a clear
direction for the organization and a means of
getting there … to create a strong competitive
position”.
• This definition highlights a direction for
purposes of achieving progress ( a strong
competitive position) and the means for
achieving that progress.
• 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”.
• Chandler’s definition highlights the aspect of
an objectives – a desirable state – and a
means of achieving the desired state.
• As pointed out before, an objective implies an
assessment of the current situation and a
desire to seek betterment by stating where an
organization would like to be. To move toward
a desirable state means progress.
Main points from the definitions:
Strategy is a conscious effort to seek progress by
stating an objective. Strategy is thus associated
with a positive outcome (progress and/or
success).
Secondly, strategy calls for means (resources and
competences for achieving that that success) to
be in place.
The Military Perspective
• The concepts and theories of business
strategy have their antecedents in the
military.
• The word “military strategy” has been
used and practiced in the military to
depict the “deployment of resources to
establish a favourable position over the
enemy.”
• Implicit in military strategy are the following:
– An Objective – to win a war
– Understanding and analysis of
circumstance, that which has to be
overcome
– Means – the deployment of resources in
order to have an advantage over an
adversary. The defining factor in winning a
war is indeed the availability and
deployment of resources
Brain teaser
Why is strategy used in sports?
The Corporate Experience
Grant (2008) has argued that business strategy has developed out
of the need to seek progress/success in the face of circumstances.
He identified the following eras (historical circumstances), their
features and the corresponding strategies:
 1950-60 era of growth
 After the second World War, many (Western) nations felt the
need to grow following the devastation of their economies
 They accordingly embarked on search for opportunities by
looking for raw materials away from home in order to grow
their economies at home.
 This constituted the mobilization of resources (means)
• There were many opportunities for growth
characterized by the state of underdevelopment
and the abundance of resources.
• The era became to be known as the growth era
because businesses took advantage of the
opportunities to grow.
• The challenge many institutions faced was how
to manage growth. This was the beginning of
what was to be known as Strategic Planning.
• Format of a strategic plan
– What growth to achieve in a specified period.
– An attempt to understand the environment characterized by a
forecast of economic trends
– The setting of goals and objectives
– The established priorities for or positioning of different
product, business areas, markets and,
– The allocation of resources (capital expenditure) to the
different portfolios.
• This was the beginning of corporate planning as we know
it today, and was the forerunner to corporate strategy.
1970-1980 era: known as the era of
economic turbulence and characterized
by
– Macroeconomic instability
– Oil shortages
– Emergence of international
competition
• This resulted into a shift from planning
to strategy making. Planning for growth
was clearly unsuitable and impracticable
in the face of shortages and competition.
• The emphasis in this era was on
positioning companies in relation to
shortages and competition.
• It was recognized that competition
was a central characteristic of the
business environment and
competitive advantage as the
primary goal of strategy.
Late 1990: the era of technology
• This era was characterized by
– Digitalization
– Mobile telephony and
– The internet
• This was the era of technology and brought about
entrepreneurial opportunities in which firms were
called upon to ‘reinvent’ themselves by seeking new
ways of doing business by being innovative.
• This called for firms to seek growth and seek
competitive advantage through strategic innovation.
The 2001-2002: The era of business ethics
• This was characterized by concern over the
excessive greed known as exemplified by the
demise of many of the stars of the technology,
media and telecommunications (TMT) sector,
such as, Enron.
• It gave rise to renewed interest in business
ethics and corporate social responsibility.
Functions of a CEO
•The focus of strategic management in an
organization is a Chief Executive Officer (CEO).
•A CEO is concerned with general management.
General Management is the management of a total
enterprise or an autonomous unit.
•While there are wide variations in detail of what
constitutes general management, those charged
with the responsibilities of general management
generally perform the following functions which go
toward complementing strategic management:
• Supervising Current Operations

– The CEO or GM must achieve results in the

present against continually rising expectations of
planned earnings per share and return on the
shareholders’ investment
– The GM is expected to remain continually
informed and be ready to intervene in crises.
– The GM is also expected to take part in divisional
or corporate ceremonial activities, to receive
visitors of his own stature, and to entertain
important customers.
– The GM will see in his own office far more
people who want to see him than he would
even take the initiative to see.
– The GM will be expected to physically see
and acquaint himself with domestic and/or
overseas operations.
– His reputation and rewards ride on current
results that others may have largely
determined, purposefully or unwittingly,
years before.
• The GM must preside over the process of
making policy decisions affecting future
results.
• He/she must plan for the future against
known and unknown odds and determine
where he wants the firm to be in three,
five or ten years from now.

• This implies working at a survival or growth

plan against future odds.
• The GM must develop and change the organization
structure and deploy its people in such a way as to
permit both business success and individual
satisfaction and expression.
• He must preside over systems of intended
cooperation which produce inevitable conflict;
• If growth is planned, he must make painful
decisions to remove or reassign people;
• He must make his company attractive to
recruits; and
• He must penalize as well as reward.
• The CEO is also expected to make a
distinctive personal contribution by:
• Excelling in some technical or social way
• Demonstrating that he deserves to be in
the position he occupies
• Participating in matters of concern to his
community, industry and trade
association and the nation at large
• Being a good family man/woman and a
role model to all and sundry.
 STRATEGIC ALTERNATIVES
NO CHANGE strategy
• This strategy is followed when a firm is
satisfied with its current corporate or
competitive strategies 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.
• Strategic management does not, therefore,
mean change for its own sake. If a strategy
that is being followed is sound and effective,
and is producing results that management is
satisfied with, it is sensible to continue with
the strategy.
• This certainly can be justified in the short-term
but not be prudent in the long term because
changing circumstances might call for change.
BUSINESS STRATEGY AND CORPORATE STRATEGY

• Business strategy is concerned with how

the firm competes within a particular
industry or market. If the firm is to
prosper within an industry, it must either
grow or establish a competitive
advantage over its rivals. Hence, this area
of strategy can involve internal growth
strategies and competitive strategies.
• Corporate strategy defines the scope of
the firm in terms of industries and
markets in which it competes. Corporate
strategy decisions typically involve
investments in diversification, vertical
integration, acquisitions/mergers of new
ventures, and the allocation of resources
between different businesses of the firm.
 BUSINESS LEVEL (INTERNAL GROWTH) STRATEGIES

a) Concentration or specialization (single

business strategy)
This involves directing resources towards continued
and profitable growth of a “single” product in a
“single” market, using a “single” technology.
This can accomplish:
– Attracting new users or customers
– Increasing the consumption rate of existing users
– Attracting consumers away from competitors
 b)Market development
•This strategy is closely related to
concentration because it entails building on
existing strengths, skills and capabilities.
•Market development focuses on positioning
a product in markets by extending into new
markets that are not served, or developing
new uses for existing products. These may
require some modification of the product.
 c)Product development
• Involves substantial modification or
additions to present products in
order to increase their market
penetration within existing customer
groups.
• Intended to prolong or extend the
product life cycle, e.g. revised edition
of a book, restyling of an engine.
d) Innovation
Implies 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)
e) Strategic outsourcing
•This involves a company allowing any of a
company’s 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
•Product differentiation is the process of 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 by
– Innovation
– Excellent quality
– Responsiveness to customers.
– Branding
Market Focus is the process of deciding which
kind of product(s) to offer to which customer
segment(s).
• Customer segments are the sets of people
who share a similar need for a particular
product. However, a particular product may
satisfy different kinds of needs.
• Within each group, there are subgroups that
may have a more specific need for a product.
Market focus aims at targeting these needs
more narrowly.
A Low Cost strategy is based on a company
lowering its cost structure so that it can make and
sell its product(s) at a lower cost than its rivals.
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.
The severity of the decline can be exacerbated by the
intensity of competition.
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) the company has distinctive strengths that
allow it to capture the remaining share and

– (b) 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 strengths 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 entails :
 Cutting all new investments and reducing costs wherever
possible.
 Consolidation and Repositioning where a company seeks
survival by concentrating on those activities in which it has
a distinctive competence. This can be accomplished
through retrenchment.
 Consolidation and repositioning can also be justified where
money is not invested for growth purposes, but rather
money raised may be reinvested to develop a competitive
advantage
Liquidation or Exit
This involves ceasing operations in the current
industry. It can take any of the following forms:
• The sale of a complete business
• The sale of a business in piecemeal to
different buyers
• By auctioning assets
EXTERNAL GROWTH STRATEGIES
• These are often implemented through acquisition,
merger or joint venture.
• 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.
• They are premised on the fact that, singly, the
business does not have the capacity to grow in the
way it desires.
• The key objective is to increase market share and
find new opportunities that can generate synergy.
A firm can thus seek integration as follows:
• A manufacturer acquiring a firm that supplies
it with key raw materials, e.g. a butcher
acquiring a ranch
• A manufacturer purchasing a firm that has
retailing facilities
• 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 considered 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 ENVIRONMENT
• By ‘external environment’ we mean events or
factors outside a firm’s control, but which
nevertheless affect a firm’s possible direction.
• One purpose of strategic management is to seek
“environmental fit,” that is , relating the
company to its environment
• This is called for because any progress a firm
makes is done under conditions of ignorance,
and the environment is a principal cause of any
such ‘ignorance’.
•It is therefore important for firms to understand or scan the
environment in which they operate in order to discern or
identify opportunities and threats inherent in the environment.

•Opportunities and threats influence the direction a firm may

Specifically, these refer to opportunities or threats that exist in a
firm’s external environment.

• The purpose of an environmental analysis is therefore to

identify opportunities and threats which obtain in the
environment, in order to determine what strategy might or
might be pursued.
 
Globalization
 
• Globalization refers to the influence that might arise
from conducting operations beyond one’s national
borders.

• A company’s sphere of operations typically evolves

from an immediate environment to a global level, such
as, a town, to a province, to a national level, to a
regional level and to the world beyond the region, viz:
Key influences toward globalisation include:
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 universal rather than
distinct among nations of the world. Consider, for instance,
the demand for the following goods and services:
• Electric/electronic gadgets, e.g.
» Stoves, kettles, pressing iron, refrigerators etc
» hi-fi systems
» TV, cameras, video recorders
» Mobile phones
• Machinery and equipment used in the following in extraction, agriculture,
manufacturing or commerce:
» Earth-moving equipment
» Heavy equipment used in extraction
» Tractors

• Military equipment
» Guns
» Bombs
» Tanks

• Professional and other services offered across national boundaries:

» accountancy or auditing,
» medicine
» entertainment and sport

• Consumer goods
» Cars
» Clothing
» Food
» Sports
Route to Growth
It is generally accepted that the most obvious
and direct route to growth is to operate beyond
one’s immediate border. Among the many
reasons why firms seek external growth are:
• To find new market for a product that has been
introduced, reached maturity stage or os in decline
• To spread the risk of operating in one market
• To seek additional market.
To seek efficiency through economies of scale
• Many companies seek efficiencies that come
with economies of scale through mass
production for both domestic and overseas
market in
• manufacturing
• product research
• marketing
To take advantage of eased political tensions
• There is greater political understanding and
tolerance in international politics than was the case,
say, fifty years ago.
• Political understanding has eased the way for greater and
increased markets
• East-West tensions have eased have enabled trade between
eastern (communist) and western (capitalist) nations
• Change of political ideology in South Africa has enabled more
trade to take place between South African firms and
neighbouring counties and vice-versa.
The strategic impact of globalization
The strategic impact of globalization is two-fold:
• One is that it creates opportunities of doing
business in new markets.
• Second and paradoxically, in as much as
opportunities for new markets overseas are created
through economic liberalization, national economies
also become exposed to foreign competition by way
of imports and entry of foreign investment.
20.01.2017
 THE COMPETITIVE ENVIRONMENT

• Competition is yet another factor in a company’s

environment that can present an opportunity or a
threat to a firm. Competition is an opportunity
when a company has a competitive advantage over
its rivals. A company is said to have a competitive
edge over its rivals when its profitability is greater
than the average profitability of all companies in its
industry. Competition is a threat to a firm when its
rivals have the ability to erode a firm’s profitability
base.
Figure 1: Porter’s Model of Five Competitive Forces

Threat of New
Entrants

Bargaining Power Industry Bargaining Power

of Suppliers Rivalry of Buyers

Threat of
Substitutes

Source: Michael Porter, How Competitive Forces Shape Strategy,

Harvard Business Review, March/April, 1979
The Threat of New Entrants
• The threat of new entrants refers to the risk of
entry posed by companies that are not currently
in the industry but have the capability to enter
the industry if they should choose to do so.
• Potential entrants to an industry pose threat by
seeking to gain market share, or by bringing into
the industry better valued or lower priced
products. This has the effect of shifting
customers and profitability away from firms in
the industry to the new comer
Some barriers to entry in order to preserve its profit
• Economies of scale – They refer to unit costs of a
firm falling as volume increases. Economies of scale
may be realized through cost reductions gained by
mass-production of a standardized product;
quantity discounts on purchases of raw materials;
or the ability to spread fixed costs over large
volumes of output. When such costs are realizable
by established firms, a new firm will be at a cost
disadvantage.
• The capital requirements of entry-these refer
to investment needed to set up the requisite
plants, machinery or distribution outlets.
• Access to distribution channels-this refers to
the ease or difficulty of establishing customer
contacts, either directly or through
intermediaries.
• Expected retaliation from existing firms through
• price cuts
• clout with customers/distributors
• advertising
• more investment in the business.
• Government policy-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.
• licence requirements
• work permits
• regulations relating to taxation, remittance of profits
• pressure for protection of local industry
• access to raw materials and labour
• Brand loyalty-this refers to the extent to which
consumers have a preference for 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.

• 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 raise prices of inputs or raise costs
by providing poor quality inputs or poor
services. This has the effect of reducing profits
of buyers.
Suppliers may become powerful under the following
circumstances:
• When the product that suppliers sell is unique and
vital to the buyers such that switching costs to the
buyer are high
• The profitability of suppliers is not significantly
affected by the purchases of buyers in the industry,
that is, the buyers are not important customers to
the supplier.
• When buyers are likely to incur significant switching
costs if they moved their patronage to a different
supplier because they depend on the supplier’s
product.
• The profitability of suppliers is not significantly affected
by the purchases of buyers in the industry, that is, the
buyers are not important customers to the supplier.
• When buyers are likely to incur significant switching
costs if they moved their patronage to a different
supplier because they depend on the supplier’s product.
• When suppliers can threaten to enter the buyers’
industry and use their inputs to produce products that
would compete with products of their buyers.
• When buyers cannot threaten to enter their supplier’s
industry and make their own inputs.
• When the supplier’s customers are highly fragmented
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 bargain down prices or to raise the costs of
suppliers by demanding better quality and service. This
has the effect of squeezing the profits of the supplier.
The power of buyers manifests itself when:
• The buyers are few, concentrated and buy in large
volumes.
• The products bought are standard or undifferentiated.
• The industry’s product is unimportant to the quality of
the buyer’s products or services
• The supply industry depends on buyers for a
large percentage of its business
• Buyers can threaten to enter the supplier’s
industry and pose a credible threat of
backward integration to make the industry’s
product.
• Switching costs are low to the buyer such that
the buyer is in a position to play off supplying
companies against each other in order to force
down prices.
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 are good
substitutes. threat of substitution can take the
following forms:
– Product-for-product substitution, as is the case of the fax
and postal service, and the e-mail and the fax.
 – Substitution of need by a new product making an
existing product superfluous, as is the case with
maize-meal and cassava, rice and potatoes; pain
killers (Panado, Aspirin, Aspro); or soft drinks (Coke,
Fanta, Sprite, Orange).
– Generic substitution occurs when different products
compete for need; for example furniture
manufacturers and retailers compete with suppliers of
television sets, cars and holidays for household
expenditure.
– Doing without, as might be the case with abandoning
smoking, drinking or when one goes on diet.
 
• Intense rivalry flourishes or intensifies under the
following situations:
• when competitors are numerous, and are of about
equal size and power
• industry growth is slow, stagnant or declining and
hence the fight for market share
• when the product is perishable, thus creating
strong temptation to cut prices
• when fixed costs are high, thus exerting pressure
on increasing sales volume
• when there are exit barriers; such barriers may be
economic, strategic or emotional
Technological Environment/Advances
• The Technological Environment refers to
developments that come about because
of science and technology and are
manifested in
• the discoveries of science
• the impact of related product
development, and
• the progress of automation
Technological advances:
• Are the fastest and most dynamic
environmental changes
• Have the most far-reaching impact in
extending or contracting opportunity for an
established company.
In our part of the world, we experience not only
accelerating rate of change from the developed
economies, such that new developments appear
before we have had time to absorb existing ones
Some major areas of
technological change:
(i) Increased transportation capability
• Technological advances in transportation have
entailed increased transportation capability,
resulting in increased masterly of greater
distances in less time and cost.
• This opportunity has enabled firms to move
and operate in space, under seas, and in
otherwise inaccessible areas
• Consider for a moment the relative opportunities and
limitations for business of the following:
• Pedestrian
• Bicycle
• Oxcart
• Road transportation – passenger and freight
• Railway system
• Air transportation
• Water/Sea transportation Air transportation
Impact of technological Advances in selected areas:
Increased transportation capability
– Technological advances in transportation have entailed
increased transportation capability, resulting in increased
masterly of greater distances in less time and cost.
– This opportunity has enabled firms to move and operate in
space, under seas, and in otherwise inaccessible areas
 
• Impact on Business
• Reach of distant markets.
• Proximity of competition
 
(ii)Increased masterly of energy
• Advances in this area have led to
massive opportunities for growth in
industrialization through availability
of greater magnitude and intensity of
power
• In the absence of power, no
meaningful production can take place
(iii)Increased ability to extend and control life
and serviceability
– Longer life for living things
– Reduced deterioration of physical goods
– Longer life for perishable foods and other organic
products
– Tolerance for extremes of climates
– Control of growth
– Greater resistance to accident and illness
 
(iv)Increased ability to alter characteristics of
materials
• This involves developing properties from old
materials or the combination of materials to
provide new and unique characteristics
• New opportunities arise from altered
characteristics of materials
• Consider opportunities that emerge from
turning scrap metals into other products
(v)Growing mechanization of physical activity
Growing mechanization of physical activity has
increased productivity and efficiency and led to
increased growth

• Consider the impact of mechanization in the

following areas:
– Production
• direct labour
• materials handling
• packaging
• testing and inspection
 –Distribution
•shipping and receiving
•warehousing
•loading
 
– Communication
• messenger
• postal services
• fax
• electronic mail
– Extractive industries and construction
• earthmoving
• mining
• lumbering and agriculture
(vi) Growing mechanization of
intellectual processes
• This has had positive effects in the
following areas:
Information processing, and
 Problem solving in industry and
medicine (diagnostic tools)
The Political Environment
 The Political Environment comprises elected public
officials such as the President, cabinet ministers
who head ministries, members of parliament,
councilors, individuals appointed by politicians to
offices such statutory bodies.
 The actions of these people individually and
collectively are tinted with political considerations,
resulting in pursuit of strategies/directions which
must be politically correct.
 The resultant Progress or the direction is thus
spiced with politics.
Political Factors that influence the strategic
direction of a firm
– The political decisions made by the President and executive
wing of government
 Decisions made by a president, ministers or government officials can
have a bearing on whether a business will or will not be in existence;
the scope and direction of its operations or the way a business will
conduct itself.
 As examples, consider the following cases:
Zambia Railways
Zamtel
Finance Bank
Traders in tujili jili
Street vending
Mining companies
– The influence of politicians on organs of
governance
Organs of governance consist of the executive,
legislature (parliament) and the judiciary
These organs sometimes make decisions based on
political considerations
i. The executive is headed by politicians (ministers) and these
officials run ministries on the basis of the political ideology
of the political party to which they profess membership
ii. The legislature make laws which they believe are in the
public interest; what is ‘public interest’ is what they believe
their constituents want
iii. The head of the judiciary must be politically acceptable; it
is this criterion that will earn him/her the nomination of
the president and ratification of parliamentarians
– The influence of politicians in initiating
major events, such as, major construction,
hosting national, regional or international
events which give rise to business
opportunity by
• Winning contracts to build or supply
facilities or consumables
• Affording companies the opportunity to
advertise themselves or their products
– Government Role in the economy
Government has the power to determine what role it
will play in the economy
These can be roles of ownership and participation,
regulatory or that of being a client
When government decides to own and participate
in the economy, it reduces competition by creating
a monopoly for itself
Government may also opt to set rules for others to
follow
Government may also act as a major client to
business
– 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 on the negative side it
leads to prejudice against other countries
It creates an ‘us versus they’ mentality
Such a mentality creates pride in
domestic product and a negative attitude
towards foreign made goods
• Political Stability
This refers to change to be peaceful, gradual
and non-violent
Political instability creates an unconducive
environment for business
Some indicators of political instability
– Violent change
– Civil wars or disobedience, religious or ethnic
intolerance, political assassinations, armed crimes
• Political sovereignty
• This refers to a nation’s desire to assert its
authority and complete power to govern over
foreign businesses which operate within its
confines, sometimes bordering on hostility
toward foreign owned businesses.
• The desire for political sovereignty may
manifest itself in any of the following:
• rebuke of the foreign owned business for
perceived transgressions
• awarding contracts on a selective basis, the
criterion determined by political
considerations
• (punitive) taxes
• foreign exchange controls and remittance of
profit
• 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, such as,
License and investment Laws, Trading, Taxes, and Laws regulating
conduct with respect to production, consumption, and advertising
 
• At international level: treaties, conventions and agreements
between nations, e.g. bilateral treaties of friendship. Notable
among international laws which have an impact on business, such
as, patents and trademarks
 
The Cultural Environment
This consists of “that complex whole which includes knowledge,
belief, art, morals, law, custom and any other capabilities and
habits acquired by individual members of a society”.
 
Elements of culture that have an impact on business consist of:
• 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. A fruit tree per se is not part
of a culture, but an orchard is part of a culture.
• The concept of a “technology gap” among nations reflects culture.
Thus, references to nations being “backward”, “in the space age”,
“industrialized” or “underdeveloped” refer to how a particular society
has organized its economic way of life as distinct from other nations.
• 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.
 
Impact of Material Culture on Strategy
• Materialism is the craving we have for material things. The
nature and intensity for goods and services to satisfy our needs
determines materialism. When a society craves for material
things, it triggers the motivation to produce that which is
needed. Thus, the craving for material things inherently creates
an opportunity for those goods to be produced so that they can
be consumed or used to satisfy need.
• Materialism flourishes when consumption goes beyond
satisfying basic needs. The fashion industry, real estate and the
food industry are not just about satisfying the basic needs for
clothing, shelter or hunger; rather they thrive because of the
craving for a good life implicit in the desire to wear designer
clothes, to live in a mansion, or eat at a restaurant
LANGUAGE
• Language is the most obvious distinguishing
characteristic between cultures. It constitutes
a way members of a community communicate
with each other. The versatility of a language
has an effect on how society conducts its
affairs.
• It can facilitate the conduct of business with
customers and other stakeholders
• It can also hinder or prevent the conduct of
business
AESTHETICS refers to a community’s conceptualization
of beauty and good taste as expressed in fine arts,
music, art, drama, dancing or colour.
 
Impact of Aesthetics
• Product design is influenced by what is considered in
good taste or beautiful. Architectural designs, for
example, are associated with certain cultures.
• The significance and importance of colour can be
readily seen in the following instances:
• Home furnishing
• Trademarks and product brands
• At ceremonies and 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.
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
– 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 has an impact on business to the extent that it
accentuates or restricts consumption or participation. Here are
some examples:
– Animism: 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 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.

–
– 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.
– Shinto is the national religion of Japan. Its major
feature is reverence for the special or divine origin
of the Japanese people, and reverence for the
Japanese nation and the imperial family as head of
the nation.
– Its major impact is the patriotism of the Japanese
people and their love and pride in Japanese-made
products. In international trade, this has
manifested itself in Japan exporting more than it
imports. Contrast this with the Zambians’ near
disdain for locally made products in preference for
foreign-made products.
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
• 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.
Seventh Day Adventist
• Prescribe against consumption of pork, alcohol and fish without
scales
Jehovah’s Witnesses
• Prescribe against use of flowers at funerals
The Economic Environment
The following are some of the most important factors to analyze:
• Inflation and Unemployment – affects the demand for goods in
the market place
• Level of Economic Development – affects demand through the
implicit standard of living; may also affect production capacity
• Interest rates – affects the cost of doing business
• Taxation – affects how much investment a country may attract
• Government spending – affects how much business may be
forthcoming from suppliers
• Market size and growth rate – affects the
overall economic profile of a nation in
terms of Gross Domestic Product
• Distribution of income – affects relative
demand for a product or service
• Nature of the economy – comprising
physical endowments, a country’s
topography; a country’s climate; a
country’s infrastructure
On the positive side, the level and distribution of
income have a significant influence on the
economic direction of a firm:
• Production in the extractive and
manufacturing industries is conditioned by
economic feasibility
• Economic growth is influenced by income
distribution.
• Tourism is dependent on the level of
disposable income
 DETERMINING CORPORATE COMPETENCE AND RESOURCES

Introduction
• Analysing and understanding the external environment in which an
organization operates facilitates the process of identification of
opportunities and threats. Once opportunities have been identified,
the next step is to validate the choice among the several
opportunities by determining whether the organization has the
capacity to prosecute the preferred choice.

• The capability of an organization is its demonstrated or potential

ability to accomplish, against competition and circumstance,
whatever it sets out to do. The examination of the components of
strategic capability and techniques consists of:
Resource Audit
A resource audit must seek answers to 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?
• 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 firm-specific strengths that allow a company

to deploy its resources in a unique or special way to sustain
excellent performance.
The primary objective of strategy is to achieve a sustained
success against circumstance which in turn which in turn will
lead to profitability.
Accordingly, the importance of distinctive competence to
strategy formulation rests with:
– The unique capability it gives an organization in capitalizing on a
particular opportunity, and/or
– The competitive edge it may give a firm in the market place.
FORMS OF DISTINCTIVE COMPETENCE:
Quality as Excellence and Reliability
• A product is defined as a bundle of attributes. For a physical
product, the attribute include their form, features, performance,
durability, reliability, style and design.
• 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 in many other cars. Thus we can
refer to a Mercedes Benz as a high-quality product. Consequently,
the manufacture of quality products is a competence.
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
– the quality of delivery service
– repairs and maintenance
– warranties and guarantees
– The policy on returns and/or refunds.
TECHNIQUES FOR ANALYZING STRATEGIC CAPABILITY
Value added analysis
• 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 creates value by converting inputs that cost
C into a product on which customers place a value of V.
• A company can create more value for its customers
either by
• lowering C, or
• 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).
• Each activity can therefore be performed to maximize
the perceived value, or to minimize the delivered cost.
 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.
1.1.1. Historical Analysis

This is an assessment of the deployment of resources of an

organization over time, e.g.
2000 2001 2002

Sales ………. ………. ……….

Sales ………. ………. ……….

expenses

Profit
 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 to 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
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
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.

Question mark:
• A company tries to enter a high-growth rate in which there is
already a market leader.
• There are however opportunities for growth characterized by a
high growth rate
• The company must target growth and may therefore require a
lot of cash to spend money on plant, equipment and personnel
to keep up with the fast-growing market, and because it wants
to overtake the market leader.
Star
• This represents a market leader in a high-growth market
• The company must spend substantial sums of money to keep up with the
high market growth and fight off competitors’ attacks
Cash Cow
• A company produces a lot of cash.
• The company does not have to finance capacity expansion because the
market growth rate has slowed down.
• Because it is a market leader, it enjoys economies of scale and higher profit
margins.
Dog
• Typically generates low profits or incurs losses.
• An appropriate strategy here might be to sell or liquidate the business.
 The Boston Group’s Growth-Share Matrix
High Low

High Question
Star
Mark

Market

Growth

Rate

Cash Cow Dog

Low

Relative Market Share

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”.

• There are salient features in this definition of personal values

and aspirations and these are as follows:
– A personal value is a conceptualization of what the individual or group
of individuals desire
– What is desirable influences an action

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

Harvard Business Review, Sept-Oct 1965, pp 123-32
• 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 – characterized by intellectual
interest in an empirical, critical, rational approach to issues.
• The economic orientation – characterized by a materialistic
approach to practical affairs, such as the production and
consumption of goods and creation and use of wealth.
• The aesthetic orientation – manifested by what the
individual has come to believe is in good taste, such as,
what is considered beautiful, in bad taste, as exemplified in
works of art, in the form or design of objects, in symmetry,
or harmony.
• The social orientation – characterized by love and
welfare of people, and/or warmth of human
relationships.
• The political orientation – manifested by the love for
power, influence and recognition.
• The religious orientation – manifested by fascination
with mystery, and interest in the supernatural, and
with developing of satisfying and meaningful
relationship with moral and ethical issues.
STAKEHOLDERS AND THEIR 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
• They exercise their wishes through the Board of
Directors or at the annual general meeting
(b)The Board of Directors
• Members of the Board represent those who
have an equity interest in the firm or those who
own strategic resources being used by the firm,
e.g. Banks that might have loaned funds to a
firm.
• Constitute the policy making and governing
body of a firm
• It is 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 is the chief strategist and guides the Board in the
selection, evaluation and implementation of strategy.
• Has the greatest opportunity to influence the direction
of the firm.
• Power and influence derive from the mandate received
from the Board.
(d) Senior (Top) Management
• These are the functional managers who directly
assist 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 value of their contribution to the
formulation and implementation of strategy.
 Corporate Social Responsibility

WHAT IS SOCIAL RESPONSIBILITY?

• Social responsibility is the intelligent and objective
concern for the welfare of society. This concern
has two aspects:
– To contribute to human better, by using corporate
profit to address issues of concern
– To restrain individuals and corporations from
behaviour and activities that are harmful to society, no
matter how immediately profitable such behaviour or
activities might be.
 The areas of concern
• The problems of the world society:
– the opportunity to contribute to industrialization in
underdeveloped countries;
– the willingness to undertake joint ventures rather than insist on
full ownership;
– the willingness to share in management and profits in terms not
immediately related to the actual contributions of other
partners;
– 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:
– Occasional disasters such as floods, earthquakes,
drought or civil strife.
– Environmental consequences of manufacturing
processes.
– Promotion of underprivileged groups.
• The problems of the community in which the
company operates:
– Impact of new investments on existing cultures
and traditions
– The need for social amenities offered to the
community
– Employment opportunities to the local community
• Industry-specific problems:
– environmental concerns 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:
– the welfare of employees;
– the quality of goods and services being offered to
the public – the active role played or disinterest or
indifferences shown;
– the freedom afforded to the individual employee
to participate in social causes beyond the
corporate effort.
 
THE CASE AGAINST VOLUNTARY ASSUMPTION OF SOCIAL
RESPONSIBILITY
The centrality of corporate social responsibility is profitability:
to use profit to address matters of concern to society
The case of the economic isolationist rests on the following
principles:
• That 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.
• 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.
PROPONENTS OF THE ECONOMIC ISOLATIONIST VIEW
Adam Smith’s Wealth of Nations
• In his work, The Wealth of Nations, Adam Smith argued that
perfect competition, as characterized by atomized markets,
produces not only the optimum allocation of resources, but
also satisfaction of the general interest.
• The “invisible hand” of competition keeps the people who
seek to promote self (profit), striving against each other by
competing for the customer, and thereby from harming the
public.
• Thus is seeking to advance self-interest, perfect competition
ensures that the capitalist behaves in the best interest of
the general public.
• In a famous quote, 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’
• The counter argument to Adam Smith’s
proposition is that perfect competition does not
exist in its pure idealized form as envisaged by
Smith: in reality, what obtains is imperfect
competition characterized by few large suppliers
who control markets and incomplete knowledge
on the part of the buyers of sources of supply
and prices.
Theodore Levitt & Reavis Cox 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 INVOLVEMENT(The Social
Interventionist)
The case for the social interventionists rests on the
following arguments:
• 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, to prevent grossly improper and
dishonest behaviour; however, it is not an effective
instrument for reconciling private and public
interests, nor an effective substitute for self-
restraint.
• This is because government regulation
are generally not sufficiently specific,
knowledgeable and timely to check or
forestall all potential abuse.
• Laws are invariably not specific enough
to cover every case; neither are can they
be premised on prior knowledge of all
possible misdeeds; nor are laws enacted
on time.
• Secondly, regulation cannot possibly design
the ideal relationship between corporation
and society. A regulation or law is premised on
preventing some anticipated errant behaviour.
This implies some divergence of interest to
necessity conformity to accepted norms of
behaviour. A law is thus an imposition on
aberrant behaviour and is not itself sufficient
to fight off the inclination toward bad
behaviour.
• In this day and age, it is wanton
irresponsibility to argue that a businessman
should knowingly ignore the consequences of
his company’s impact upon its 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.
• In an industrial society, corporate power – vast in its
potential strength – must be brought to bear on
certain social problems if they are to be solved at
all. Governments in most developing nations do not
have the capacity to solve the vast and diverse
social and economic problems which beset them.
 
 
• Corporate executives of the caliber, integrity,
intelligence and humanity required to run modern
companies cannot be expected to confine
themselves to the pursuit of narrow economic
interest and to ignore its social programs.
Communities, societies and nations are increasingly
becoming less divisive and more accommodating as
evidenced by positive developments in resolving
cultural, religious and ethnic differences, and the
appeal of globalization and international relations.
• The dangers and problems of corporate
participation in public affairs can be dealt with
through research, education, government
control and self-regulation. The voluntary
participation in working towards a common
good is preferable to a standoff between
government and business.
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

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.
RELATIONSHIP BETWEEN STRATEGY AND
ORGANIZATIONAL STRUCTURE
• Strategy is a purpose.
• An organization is a collection of people and tasks
• 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.
• An organizational structure is however consequent
upon and proportionate to the diversity and size of
the undertaking.
The Process of Designing an Organization Structure
– Determine strategy or the company’s distinctive purpose

• Whatever is to be undertaken is for a purpose. It is therefore

important to define and understand the strategy which brings
people together. Purpose gives focus and meaning to
organizational activity.

– Identify the tasks to be performed

• Once the strategy or purpose is clearly understood, the

identification of the tasks to be performed will follow.
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?
 – 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. If the organization
grows beyond his capability to carry out each and every task, he
must then decide:
• When and to whom should he delegate?
• What authority is commensurate with delegation?
 
Functional Structure
• In this format, the organization is structured on the basis of
functions to be performed. Thus, in a typical manufacturing
firm, activities are organized along the basic functions of
production, marketing and finance. In a trading firm, the
functions might be grouped along the functions of buying,
inventory control and selling.
Product Structure
• In this type of organization, the tasks are
centred on a product. An example of a
product structure might be at a farm where
activities might be grouped around poultry,
crop, dairy and orchard products being
produced. All tasks to be performed revolve
around a product.
Customer/Market/Geographic
• Tasks are centred on the Customer, Market or
Geographic area. The tasks may be varied in
nature but are grouped together on account of
facilitating service delivery to a customer, market
or geographic area.
 – Provide for coordination of inherent divided responsibility
through:

• Hierarchy of supervision
Functions at one level typically are accountable
to a higher level, which serves as point of
coordination. Thus, in any organization, the
Chief Executive Officer, coordinates the
functions of the functional managers of, for
example, finance, manufacturing and
marketing. In turn, each of the functional
managers coordinates the sub activities falling
under them.
• Establishment/use of 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 is a point of coordination of the views if the
different managers who comprise its membership.
 
• Project form of organization
Coordination may also be accomplished when people
work together on a project.
 – 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 one to things that are not going
well or emerging threats.
• 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 basis for division is its relationship to corporate purpose.. The grouping of
tasks must advance strategy or purpose.

• 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

• 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

• Decide on whether to have a flat or tall organization structure. Tall structures

are characterized by many hierarchical levels between the top and bottom,
and flat organizational structures have few hierarchical levels between the
top and bottom.

•  
• 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.
• Tall structures are appropriate where product and service delivery are
capital intensive, requiring few but often expert staff at the front line.
Assembly operations and Banking characterize tall structures.
• However, there are a number of disadvantages associated with tall
structures. The first is that decision making processes become long,
convoluted and ultimately ineffective. Secondly, the different
administrative and support functions become the domain of powerful and
dominant interests. Thirdly, tall structures tend to lead to rigidity and
entrenched authority. Fourthly, specific responsibility at a hierarchical level
may not always be apparent. The advantage of flat structures is that
decision making is faster. However, span of control can be problematic
• Determine whether you will have a centralised or decentralised
structure. Centralisation is an authority relationship between those in
overall control of the organization and the rest of its staff. The tighter
the control exercised at the centre, the greater the degree of
centralization.
• Decentralization is when there is relatively more control at the lower
or operational levels. The advantage of centralization is that top
managers remain fully aware of operational as well as strategic issues
and concerns. Other advantages of centralization include:
responsiveness to local conditions, speed of operational decisions
and greater motivation and morale to lower placed staff.
• 201405185 – both assignments
• 201405746 – group assignment
• 201405672 – individual assignment
ORGANIZATIONAL PROCESSES AND BEHAVIOUR

• Organizational performance does not depend only on the structure

put in place. It depends also on the extent to which individual
energy is successfully directed toward organizational goals.
• Man-made and natural systems and processes are available for
individual development and performance. In any organization, the
system which influences behaviour consists of six elements:
– Standards for measuring performance
– The measurement of performance
– Incentives for inducing design performance
– Rewards for satisfactory performance
– Penalties for unsatisfactory or undesirable performance
– Systems of restraint and controls
THE ESTABLISHMENT OF STANDARDS AND
MEASUREMENT OF PERFORMANCE
– Strategy by nature of its definition implies some
progress toward some long-term goal.
– Progress toward some goal implies that one is able
to observe and measure that progress.
– Measurement in this case implies that there is
some idea of where an organization is compared
to where it ought to be.
– To state where an organization ought to be is to
set a standard.
The following are some of the criteria used to
measure performance:
• Profitability
– Profitability represents a return on investment and is a reflection of
how economically efficient operations have been conducted.
– Profitability can be monitored on a periodic basis, such as quarterly,
half-yearly or annually.
• Competitive Position
– This attempts to assess a firm’s position in the market place given a
competitive situation.
– A firm’s market share is used to determine the standing of a firm
relative to its competitors.
• Non-economic Expectations
 – MOTIVATION AND INCENTIVE SYSTEMS
• If the executive does not wish to leave the
implementation of strategy to chance, he has a
number of options of encouraging behaviour which
advances strategy and deterring behaviour which
does not. Motivation and incentive systems are
positive elements of encouraging desired
performance, while systems of restraint and control
are considered as negative elements. Whatever
systems are in place, they must be visible, planned
and known.
 • THE POSITIVE ELEMENTS – THE BASIC COMPENSATION
The positive elements largely comprise compensation of executives. In
determining the compensation of executives, it is important to bear in mind the
following:
• Characteristics of the work
• Complexity of the work, such as:
• overseas versus domestic operations
• nature and intensity of competition
• size of the organization
• General education required
– MBA versus other qualifications
– technical versus non-technical sills

• Responsibility of job-incumbent for people and property

• nature and number of decisions to be made
• the risks involved
• Quality of performance
 Individual versus organizational performance
• Logical relationship to rewards paid to others in the same
organization.
• The relevance of the following:
– Age?
– Length of service?
– Potential?
– Materials needs?
• External influencing factors
– regional difference in the cost of living
– regional hardships to individual and his family
– market price of qualification, in order to pre-empt raid by
competitors
– Level of local taxation.
Forms of compensation
• Financial rewards, including executive basic salary and allowances such as
housing, transport, entertainment.
 
• Monetary Incentives for individual performance
– profit sharing
– stock options
– executive bonuses
– pension/savings plans
 
• Non-monetary incentive systems including:
– pride in or sense of accomplishment
– climate for free expression and innovation
– good/pleasant environment
– able and honest associates
– pleasant surroundings – clean and quiet
– office location, size and furnishings
– satisfaction deriving from doing work
 Organizational Politics

Non-performance or poor implementation of strategy can at times be

attributed to organizational politics, especially when it results in conflict. An
organization may be described as functioning on the basis of a number of
systems of influence:

Authority: This is based on legally sanctioned power, e.g. a directive from

a superior/boss.

Ideology: This is based on widely accepted beliefs, e.g. adherence to a

Church’s doctrine or a political party’s manifesto.

Expertise: This is based on power that is officially certified

These systems can be considered as legitimate. The system of politics, in

contrast, reflects power that is technically illegitimate because it is not
formally authorized, widely accepted or officially certified. The result is that
political activity is usually divisive and conflictive, pitting individuals or
groups against more legitimate systems of influence.
• Forms of Political Activity (Games)
– Insurgency Game
• Usually played to resist authority, ideology or expertise, or to
effect change in the organization outside established
procedure
• It can range from “protest” to open rebellion
• Usually played by “lower participants” who feel the greatest
weight of formal authority
– Counterinsurgency Game
• Played by those with legitimate power who fight back with
political as well as legitimate means, e.g. suspension,
dismissals or excommunication from a church.
• It is all too often manifested by subordinates who make
comments about their company but refuse to disclose their
identity for fear of reprisals from their superiors.
Sponsorship Game
• It is played to build a power base by invoking superiors
• It originates in an individual attaching self to someone
with legitimate power, in authority, or of higher status,
professing loyalty in return.
• It is played by special assistants to CEO or family
members in a family company.
– Alliance-building Game
• It is played among peers, such as line managers or experts
• It is aimed at negotiating implicit contracts of support for each
other in order to build a power base to advance selves in the
organization
– 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 not just to defeat a rival, but also to enhance
personal power.
• It pits line managers with formal decision-making authority
against staff advisers with specialized expertise e.g.
Consultants in an organization.
– Rival Camps Game
• This is played to defeat a rival
• It occurs when two major power blocs emerge from other
games
• It takes the form of conflict between functional units or
between rival personalities.
– Whistle-blowing Game
• It is typically brief and simple
• It is played an insider, usually a lower participant, to
“blow the whistle” to an influential outsider on
questionable or illegal behaviour by the organization by
revealing privileged information
• The information is given to an outsider in order to
effect change in the organization
– Young Turks Game
• It is played by a small group of “young Turks” who are
close to but not at the centre of power.
• It is aimed at questioning legitimate power, perhaps
even to overthrow it, and thereby reorient
organization’s basic strategy, displace a major body of
its expertise, replace its ideology or rid it of its
leadership.
The Dysfunctional influence of politics in
organizations:
• Politics is divisive and costly,
• Politics burns up energies that could instead
go into operations
• Politics leads into all sorts of aberrations
whose ultimate result is paralysis of the
organization to a point where its effective
functioning comes to a halt and nobody
benefits.
The Functional roles of politics in organizations:
• Where it is necessary to correct certain deficiencies in an organization’s legitimate systems of
influence.
• Where it is expedient to provide for certain forms of flexibility discouraged by the legitimate systems.
• In ensuring that the strongest members of an organization are brought into positions of leadership. It
may be argued that effective leaders have an inclination toward power and being assertive. Political
games can serve as a testing ground or one to demonstrate potential for leadership.
• Politics provides a forum for that all sides of an issue are to be fully debated, whereas other systems
of influence seek at best to solicit adherence to the status quo or at worst blind subservience to
legitimate systems of influence. For instance, 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.
• Politics can stimulate change that is blocked by legitimate systems of influence. Resistance to change
comes from who those who feel secure in maintaining the status quo and political games are often
played to overcome such resistance particularly when an organization is either too slow or unwilling
to embrace change. Many reforms undertaken by organizations can be attributed resistance to
legitimate systems of influence.
• The system of politics can ease the path for the execution of duties. That is, once people are
convinced about the merits of a strategic option, they are more likely to implement the decision with
renewed vigour and commitment.
 
 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.
  Culture rests on the premise that group effort or influence can positively
affect performance. It draws heavily on general systems theory where,
through synergy, parts of a system produce more in working together than
they can if they worked apart. Stated simply, it is the proposition that while
2 + 2 = 4

the systems theory, on which organizational culture is based, holds that

2 + 2 = 5

That is, an organization working as a system, can entice from its members more
than the individuals would produce if they worked apart. This is attributable to a
motivational element which obtains when people work in groups.
• Groups, as working system, are said to have a
mood, atmosphere or chemistry, intangible yet
real, which induces effort over and above the
ordinary. This mood, atmosphere or chemistry
is the driving or influencing force of collective
behaviour and is rooted in an ideology.
• Ideology or organizational culture is taken here
to mean a rich system of values and beliefs about
an organization, shared by its members, that
distinguishes it from other organizations.
The development of an ideology proceeds in three stages:
• Stage 1: The rooting of ideology in a sense of mission
• An organization is usually founded when a single prime
mover identifies a mission. This mission is identified as
either a product or service.
• The individual 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
prime mover and the fledgling organization. An example of
this might professionals coming together to start a firm in
order to create something unusual or exciting.
• When people come together in this fashion, they can be
said to share a common sense of purpose.
Stage 2: Development of ideology through traditions and
sagas
• As the new organization establishes itself, or an existing
one establishes a new set of beliefs, it makes decisions and
takes actions that serve as commitments and establish
precedent:
• these decisions and actions are repeated over time and
lead to reinforced behaviour
• 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. This process of identification with and loyalty to
the organization is manifested through the following:
– New members find the culture attractive and rich and want to be
identified with the organization.
– New members may be subjected to a selection process, to see
whether they “fit in” with the existing beliefs
– For existing members, promotion to higher positions is made on the
basis of strength of loyalty to those beliefs and values of the
organization.
– Identification may also be evoked through the use of socialization and
indoctrination to reinforce natural or selected commitment to the
system of beliefs.
TOP LEADERSHIP AND ACHIEVEMENT OF PURPOSE
 

• Our proposition here is that leadership affects performance.

The key functions of a leader are to achieve results by
working hard and effectively and by inspiring others to do the
same. There are two distinct influences that arise from
leadership types. Transformational leadership stimulates
interest among colleagues, inspires a different outlook on the
work, generates an awareness of the goals of the organization,
develops workers to higher levels of ability and motivates
workers to consider the interests of the group over their
individual interests. Transactional leadership bases
performance on rewards and punishment by emphasizing
work standards, task completion, and employee compliance.
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
1.Attitudes and values
All those who aspire to leadership, senior and key positions must
have a distinctive and powerful set of attitudes and values
involving:
(i)A generalist orientation
•  
 Looking at issues in a broader rather than a narrow perspective
 It involves having a breadth and depth of expertise and approach
 This will lead to a frame of mind necessary to adapt and influence a versatile of
challenging circumstances.
 It helps to explain why those who have specific and tried expertise in one area
often fall short of full success when faced with in familiar situations.

 
 This refers to the delivery of results through practical and
demonstrable achievement to the satisfaction of customers,
suppliers, financial interests and backers in particular sets of
circumstances requiring

 It implies a willingness to act on the basis of incomplete

information, related past experiences and the present and
envisaged state of the social, political and economic
environment

 It also means a willingness to be seen in action in different sets

of circumstances and, where necessary, to accept responsibility
for failure.
• A professional orientation
 
• This refers to a personal and occupational commitment in the
application of effort in any particular set of circumstances, and the
extent to which a leader in the best interests of the organisation.
• This refers to an informed and educated frame of mind necessary to
adapt and influence thinking in particular directions.

• An innovation orientation
 
• The capability and willingness to look at the present state of
activities, products, services and processes as being a vehicle for
further development.
• The ability to develop new products and services, which may or may
not succeed
• A positive orientation
• This requires a leader taking an optimistic and buoyant
approach to whatever presents itself.
• This should apply to products and services, marketing
campaigns and activities, staff, expertise and
technology, 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.
1.Roles of a leader
•  A leader needs expertise to fill a range of
different roles. The nature of these roles and
the frequency with which they are required
varies between and within organisations.
However, these roles include:
 
• 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
• The champion role- this involves enthusiastically
supporting, promoting, defending or fighting for the
strategy in question. Championing the organisation and its
activities, products and services is not always easy because
other people in the organization may hold the view that
the CEO and his top managers are overcompensated given
the results.
• The cheerleader role: this is carried out by a combination
of visibility, presentation, charisma and accessibility
possessed by those in leadership positions. The absence of
cheerleading always gives rise to perceptions of lack of
faith, belief or commitment.
• 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 visibility among staff and
gaining the broadest possible perspective on the effectiveness of
organisation performance. The primary purpose of wandering is so that
the leader sees 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 new lessons and seeing different ways of doing things. The best
leaders 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. If those in leadership positions are going to
translate their ideas into practice, then those in other executive positions
need to know how this should be done and the required outcomes; in
many cases, they need guiding through this by the person in charge.
 
• The surgeon role- this involves cutting functions, products,
services or processes when it is deemed they are no longer
required.
LEADER NON-LEADER
•Traits and Characteristics
 Carries water for
people
 Presides over the mess Table5: A Contrast of Traits and Characteris
 Open door  Invisible, gives orders to staff,
problem solver, expects them to be carried out
advice giver,
cheer leader
 Comfortable with  Uncomfortable with people
people in their
workplaces
 Manages by  Invisible
walking about
 Arrives early,  In late, usually leaves on time
leaves late
 Good listener  Good talker
 Available  Hard to reach
 Decisive  Uses committees
 Humble  Arrogant
 Tough, confronts  Elusive, the artful dodger
nasty problems
 Often takes the  Looks for scapegoats
blame
 Gives credit to  Takes credit
others
 Gives honest,  Amasses information
frequent
feedback
 Knows when and  Ducks unpleasant tasks
how to discipline
people
 Prefers discussion  Prefers long reports
rather than
written reports
 Sees mistakes as  Sees mistakes as punishable
learning offences and the means of
opportunities and scapegoating
the opportunity
to develop
Types of leader
• A key characteristic of the leadership position relates
to the type of leader that 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. kings and
family businesses whereby the child succeeds the
parent as CEO
• 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
• 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.
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 and fully
integrating communications with the rest of the organisation.
• The ability to integrate the management of crises and emergencies into the
overall direction and purpose of the organisation.
• The development of leadership 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.
General Manager as the Architect of Strategy
 As architect of strategy, the GM is required to possess
the following skills:
– analytical ability
• searching out and analysing strategic alternatives beyond advice
received from functional managers
• making or ratifying decisions among competing choices
– creativity (role of innovator)
• ability to find strategic choices which are not routine
• ability to determine strategy uniquely adapted to external
opportunities and internal strengths of his organization
– a sense of personal purpose
– a sense of social responsibility
 
• General Manager as Organization Leader
– GM must act as promoter and defender of strategy
– A leader must remain focused and keep the organization on course against the
tendency of organizations to veer off course in response to circumstances,
special interest and sudden opportunity
– GM must act as mediator and integrator
– A leader must deal with conflict among special interest groups
– A leader must balance the need for present profitability against the need to
invest in future success
– A leader must balance the desirability for uniformity against the requirements
for flexibility.
– GM is responsible for creating a conducive climate in 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
– A leader must instil high standards of moral integrity
General Manager as a Personal Leader
• Business leaders generally are characterized by such personal qualities as:
– drive
– intellectual ability
– initiative
– creativeness
– social ability
– flexibility

• 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. On the other end, a leadership style may be
characterized by:
» inquiring objectively and calmly into reasons for failure
» without unnecessary fuss, establishing a new schedule to match new conditions, or
» working through intermediaries in calling attention to lapses from standards.

• Within these extremes and possibilities, he must carve out a distinctive style which
will characterize his performance and his expectations of others.
 

 
 STRATEGY IN CONTEXT
The Entrepreneurial Context  
Features of an entrepreneurial organization include the following:
• 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
• The 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
 
• Management Consultants
• Guest Houses
• Restaurant
• Clinic, Law firm, Architectural firm (Professional)
• Trading, Hair saloon, Garage
 
• How strategy is formulated
 
• Its vision, policies and operations are bounded and determined by the Chief Executive
Officer
• The industries in which entrepreneurial organizations are started and operate are
often characterized by bust-and-boom cycles. It is this characteristic that forms the
basis of opportunity and risk. Thus, a PEST analysis is cardinal, in which economic
considerations are paramount.
• The resource capability is all too often limited, and the competences are scarce.
• The personal aspirations and value of the entrepreneur are an important aspect in
the formulation of strategy as the organization is founded on the basis of some
inspiration (strong idea) and championed by an aggressive and energetic risk taker
• 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
or formality 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.
• 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 or former ZCCM
• Supermarket chain – Shoprite
• Government/Public Enterprises
• Service companies, such as Zambia State Insurance
Corporation, Zambian Airways, Zambia Railways
• 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
• 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 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