1
Lesson 1 The relationship between general management principles and strategic management
1.1 THE PURPOSE OF A BUSINESS ORGANISATION
The purpose of a business organisation is to create value. Value means different things to different
individuals or groups. For instance:
The entrepreneur who starts the business would like to make a profit and to ensure its long-
term survival.
In order to generate a profit, the business organisation produces products and services that
provide value to the consumers that buy these products and services.
The employees of the business organisation receive value in the form of the salary/ wage
As the organisation grows, it might start selling shares and the shareholders of the business
will receive value in the form of dividends that they earn from the business.
These individuals and groups are known as the stakeholders of the business.
A stakeholder is any person or group of people that have, or claim to have, an interest in an
organisation and its activities.
Customers want quality products and excellent service.
Suppliers want to be paid on time.
The community expects the business organisation to give back to them/invest in them by
supporting community projects and by contributing to the community in the form of
sponsorships and financial contributions to worthy causes.
Organised labour would like the organisation (the employer) to treat employees with
fairness, dignity and respect
There are two types of stakeholders, namely internal stakeholders and external stakeholders:
Internal stakeholders are those stakeholders who operate inside the organisation like
shareholders/business owners, employees and management.
External stakeholders are those individuals or groups who are not operating directly in the
organisation, but they are affected by the strategies, plans and actions of the organisation. External
stakeholders include the community, government, organised labour (trade unions), customers,
suppliers and many more.
Traditionally, the primary goal/outcome of business organisations was to realise a profit and
thereby satisfy the needs and expectations of its owners (or shareholders). However, in the modern
business world, Businesses are expected to perform in three areas, which is referred to as the triple
bottom line.
be profitable
(Environmental responsibility) (planet)
meet its social responsibilities towards the community in which it operates (people)
The purpose of a business organisation is to create value.
The performance of the business is determined by how well it reaches the following desired
outcomes: y
profit for the owner/shareholders
environmental responsibility (planet)
, 2
social responsibility (people
In this figure you will see that management essentially has four characteristics:
1. It is a process consisting of four interrelated tasks, namely planning, organising, leading and
control.
2. It involves working with and through others.
3. It aims to achieve organisational goals and objectives, balance effectiveness (“doing the right
things”) and efficiency (“doing things right”) and make the most of limited resources.
4. It takes place in an ever-changing environment that consists of three sections, namely the
internal environment, the market environment (industry) and the remote environment (macro
environment).
For the purpose of this book, management is defined as: the process of working with and through
others to achieve the organisational objectives in a changing environment.
, 3
Micro-environment
External environment
Market environment
1.6 Intermediaries
1.4 THE VARIOUS LEVELS AND AREAS OF MANAGEMENT
Distinguish between the different levels at which managers in organisations operate:
The role of a manager is to ensure that the goals and objectives of the organisation are achieved. In
order to do this, planning has to be done at various levels in the organisation.
Top (senior) management (directors, partners, chief executive officers, management
committees and other governing bodies) are responsible for the long-term strategic planning
of the business organisation. They also have to display leadership and control in order to
ensure that the strategies they developed are implemented successfully.
Middle management (functional managers) are responsible for the implementation of the
strategies, policies and plans formulated by top management. They are therefore involved in
tactical planning (medium-term to short-term planning). Control is a large part of their
responsibility as they have to ensure that the short- to medium-term plans of the business
organisation are implemented.
Lesson 1 The relationship between general management principles and strategic management
1.1 THE PURPOSE OF A BUSINESS ORGANISATION
The purpose of a business organisation is to create value. Value means different things to different
individuals or groups. For instance:
The entrepreneur who starts the business would like to make a profit and to ensure its long-
term survival.
In order to generate a profit, the business organisation produces products and services that
provide value to the consumers that buy these products and services.
The employees of the business organisation receive value in the form of the salary/ wage
As the organisation grows, it might start selling shares and the shareholders of the business
will receive value in the form of dividends that they earn from the business.
These individuals and groups are known as the stakeholders of the business.
A stakeholder is any person or group of people that have, or claim to have, an interest in an
organisation and its activities.
Customers want quality products and excellent service.
Suppliers want to be paid on time.
The community expects the business organisation to give back to them/invest in them by
supporting community projects and by contributing to the community in the form of
sponsorships and financial contributions to worthy causes.
Organised labour would like the organisation (the employer) to treat employees with
fairness, dignity and respect
There are two types of stakeholders, namely internal stakeholders and external stakeholders:
Internal stakeholders are those stakeholders who operate inside the organisation like
shareholders/business owners, employees and management.
External stakeholders are those individuals or groups who are not operating directly in the
organisation, but they are affected by the strategies, plans and actions of the organisation. External
stakeholders include the community, government, organised labour (trade unions), customers,
suppliers and many more.
Traditionally, the primary goal/outcome of business organisations was to realise a profit and
thereby satisfy the needs and expectations of its owners (or shareholders). However, in the modern
business world, Businesses are expected to perform in three areas, which is referred to as the triple
bottom line.
be profitable
(Environmental responsibility) (planet)
meet its social responsibilities towards the community in which it operates (people)
The purpose of a business organisation is to create value.
The performance of the business is determined by how well it reaches the following desired
outcomes: y
profit for the owner/shareholders
environmental responsibility (planet)
, 2
social responsibility (people
In this figure you will see that management essentially has four characteristics:
1. It is a process consisting of four interrelated tasks, namely planning, organising, leading and
control.
2. It involves working with and through others.
3. It aims to achieve organisational goals and objectives, balance effectiveness (“doing the right
things”) and efficiency (“doing things right”) and make the most of limited resources.
4. It takes place in an ever-changing environment that consists of three sections, namely the
internal environment, the market environment (industry) and the remote environment (macro
environment).
For the purpose of this book, management is defined as: the process of working with and through
others to achieve the organisational objectives in a changing environment.
, 3
Micro-environment
External environment
Market environment
1.6 Intermediaries
1.4 THE VARIOUS LEVELS AND AREAS OF MANAGEMENT
Distinguish between the different levels at which managers in organisations operate:
The role of a manager is to ensure that the goals and objectives of the organisation are achieved. In
order to do this, planning has to be done at various levels in the organisation.
Top (senior) management (directors, partners, chief executive officers, management
committees and other governing bodies) are responsible for the long-term strategic planning
of the business organisation. They also have to display leadership and control in order to
ensure that the strategies they developed are implemented successfully.
Middle management (functional managers) are responsible for the implementation of the
strategies, policies and plans formulated by top management. They are therefore involved in
tactical planning (medium-term to short-term planning). Control is a large part of their
responsibility as they have to ensure that the short- to medium-term plans of the business
organisation are implemented.
