Prescribed book

Chapter 1

The strategic management process

 Introduction
• The current competitive landscape, characterized by the significant
change has altered strategic management.
• The impact & the spread of the World Wide Web, digitalization & the
birth of the 4th industrial revolution as well as the generation gaps &
their impact on the workplace have altered strategic management.
• This has led to the statement that ‘’ strategists must develop a new
mind set’’
• Organisations work in a VUCA world in current times
 Introduction
• Volatile- immense rate of change in the business world
• Uncertain-businesses are not clear about the future but can only plan
for it
• Complex- Competing in today’s business world requires an
understanding of multiple key factors.
• Ambiguous- Lack of clarity about the meaning of an event or a
situation. Things aren’t as as simple and straight forward as it was in
the past
• In order to survive in this VUCA world, organisations need to plan &
anticipate these uncertainties. Imagine & fold the future in.
 What is strategic management
• A process whereby all the organizational functions & resources are
integrated & coordinated to implement formulated strategies which
are aligned to the environment in order to achieve the long term
goals of the organization & therefore gain a competitive advantage by
adding value for the stakeholder.
• Strategy can therefore be defined as an effort that an organization
implements to outperform its rivals
• It is the direction & scope of an organization over the long-term
 Definitions & views on strategy
4 well known definitions by leading strategy theorists
• Alfred D Chandler defines strategy as the determination of the long-
run goals & objectives of an enterprise & the adoption of courses of
action & the allocation of resources necessary for carrying out these
goals
• Michael porter opines that strategy is all about differentiation( what
the business is doing differently from competitors).
• Henry Mintzberg refers to strategy as a set of patterns that develop
over a period of time.
• Johnson views strategy as the long term direction of the business
 Definitions & views on strategy
• Johnson and Scholes- Strategy is the direction and scope of an
organization over the long term, which achieves advantage for the
organization through its configuration of resources within a
challenging environment, to meet the needs of markets & fulfill
stakeholder expectations.
 Characteristics of strategies
• It takes account of SWOT
• It maps out the fundamental & longer term direction of fields of
activity & ranges of services
• It can relate to various units (whole organization, business functions,
products)
• It must be revised if changes are made to the basic external or
internal environment.
• It also means deciding what should not be done
 People involved in the strategic
management process.
• Employees are the catalyst in taking the strategies of the firm &
implementing them successfully. At the 1st stage of the strategic
management process-environmental analysis is the responsibility of every
manager from top management to middle & down to supervisory level. It
is headed by top management with inputs from all levels
• The second stage is also the responsibility of top management to
formulate strategies according to the results of the environmental
analysis conducted.
• The last stage is the strategy implementation phase where all formulated
strategies should come to life. This can be done only through effective
communication with all levels of employees
 Strategic planning champions
• Refers to strategy practitioners who introduce, promote &
guide the strategic planning process in an organization.
• They are experts in strategic thinking & have mastered
specific technical and analytical strategy skills that allow
strategists to apply concepts, tools and models of strategy.
External consultants are often used as SPCs.
An SPC should be the following:
• A social craftsperson- who has the ability to bring different
expectations from the different groups involved together &
in the process be sensitive to tension that might arise in the
process
• An artful interpreter- who has enough understanding of
local norms, routines & positions of other role players to be
able to adjust the strategic planning process to the rules of
the local game
 Strategic planning champions

• A known stranger- An SPC should not be too well known or

be too much of a stranger but has to stay as neutral as
possible. Should not be regarded as a threat or a pawn to
any of the players
Strategic intuition-qualitative & quantitative
decisions
• Intuition is the ability to understand or know something based on
your feelings rather than facts.
• Strategic intuition -is an extraordinary ability that some managers
have, which is based on experience in management or industry.
• Qualitative decisions are based on the strategic manager’s intuition
• Quantitative decisions are built on proper strategic analysis. Strategic
plans are developed after a thorough assessment of the environment
 The strategic management process
1. Strategic visualization- the graphic representation of strategic
content can assist strategic managers in their planning process. The
strengths of visualization & how it can assist with strategizing are
summarized in Table 1.3 on page 11.
2. Organizational direction & environmental analysis- is done by
creating a vision statement & a mission statement to guide the
organization into the future. Organizational direction provides
strategic direction. The environmental analysis consists of SWOT
analysis. Visualization methods such as bar & pie charts in this stage
may help to structure vast amounts of information.
The strategic management process
3. Strategy formulation- Given the strategic direction & environmental
analysis, long-term goals which are more quantifiable, can now be
formulated from the mission statement. Strategies such as the growth
strategy and Decline strategy can be looked into.

4. Strategy implementation to implement strategies, there has to be

leadership, culture, reward systems, organizational structures &
allocation of resources. Strategic control through quality control &
continuous improvement should not be neglected
The strategic management process
• 5. Strategic control through continuous improvement. Aspects such
as total quality management can be used to control the strategic
management process.
The strategic management process
5. Contemporary applications of strategic management
All organizations should engage in strategic planning and management.(
NGOs, schools, academic institutions & churches).
 Benefits of strategic management
• Higher profitability- improvement in turnover & profit
• Higher productivity- through better planning, resources are efficiently
used and better outputs are delivered.
• Improved communication across the different functions in the
organization- An understanding of why the organization does things
in a certain way & where it is heading will make stakeholders more
committed to the cause.
• Empowerment- involving employees in the strategic management
process will ensure their commitment to implement the strategies
successfully.
Benefits of strategic management
• Discipline & a sense of responsibility to the management of the
organization- develops because the management team involved in
strategic management takes full responsibility for its strategic plans,
which shows good corporate governance.
• More effective time management-all strategic plans must be
implemented by certain due dates, giving employees an idea of their
own time management
• More effective resource management- resources are controlled as
they are allocated to different functions according to the strategies
due for implementation
Benefits of strategic management
• Change management- Provides a roadmap thus reduces resistance to
change from employees
Risks of strategic management
• Time- most argue that a lot of time is spent on planning & not enough
time on implementing plans
• Unrealistic expectations from managers & employees- several ideas
& strategic suggestions will not be accepted because strategic
management requires a careful analysis. This can demotivate some
employees.
• The uncertain chain of implementation- strategic plans are
formulated at managerial levels but mostly implemented by
employees at lower levels. A culture of participative & clear
communication channel can reduce the risk of unclear goals.
Risks of strategic management
• Negative perception of strategic management- top management &
everyone in the organization should recognize the importance of strategic
management so that there aren’t any negative attitude towards it.
• No specific goals & measurable outcomes- management doesn't know
whether strategies have been implemented successfully or not because
there are usually no measures in place to gauge that.
• Culture of change- a positive culture of change would increase the positive
acceptance of new ideas & strategies.
• Success groove- managers become overconfident & focused on their current
success that they do not foresee any difficulties in the future & the need for
strategic management and preparedness.
Strategic issues & concepts leading into the
future
• Ethics & strategy- link between ethics & strategy
• Stakeholder management.- strategic management should create a balance
between the interests of diverse stakeholders who are involved in the
operation of the business
• Internal stakeholders- employees & managers
• External stakeholder- Economic ( suppliers, shareholders, banks) Political
(government agencies) Technological (standards agencies) Community (local
residents)
• Innovation economy & knowledge management- in the innovation economy,
information is shared in order for businesses to get hold of external ideas to
innovate.
Strategic issues & concepts leading into the
future
• Knowledge management is a generic process though which
organizations generate value from knowledge
• Knowledge may be defined as being either tacit or explicit
Tacit knowledge- (know-how) is the kind of knowledge that is difficult
to transfer to another person by means of writing it down or verbalizing
it. E.g. hitting a nail with a hammer.
Explicit- (Know what) explicit knowledge normally conveyed in
processes, formal written documents, textbooks & educational
institutions & can be easily transferred between organizations &
individuals.
Strategic issues & concepts leading into the
future
• Organizations are flooded with more & more information than they
can handle. Knowledge management tries to solve this problem by
designing processes that oversee the creation, distribution &
utilization of knowledge to fulfill organizational goals.
• Innovation management- deals with issues relating to how the
innovation process may be managed effectively. The necessity to
constantly improve innovation strategy is 1 of the major difficulties
facing organizations that are involved in knowledge management
Strategic issues & concepts leading into the
future
• Knowledge innovation- is the creation, evolution, exchange &
application of new ideas into marketable goods & services, leading to
the success of an enterprise, the vitality of a nation’s economy &
advancement of society.
Multiculturalism of South African
organizations & knowledge management
• An advantage of multiculturalism is the diversity of ideas, influences &
cultures, which can lead to new & innovative thinking
Corporate entrepreneurship
• Is the process in which an individual or a group of individuals in
alliance with an existing organization, creates a new organization or
instigate innovation within the organization. The 3 dimensions of
corporate entrepreneurship are:
• Innovativeness- which is the ability to generate ideas that will result
in the production of new products.
• Risk taking- willingness to make resources available to pursue
opportunities that might succeed or fail.
• Proactiveness- reflects a managerial orientation of initiative,
competitive aggressiveness & boldness in pursuing oppourtunities
Change management

• Knowledge management, innovation management, knowledge

innovation & corporate entrepreneurship will inevitably lead to
change.
Strategic leadership
• Leadership’s task is strategic in the sense that it has to move the
business towards the future. Strategic leadership guides the
organization in becoming a profitable, effective & efficient business.
• Strategic leadership is a process of influencing an organisation in its
pursuit of the company’s vision, mission, and goals