CHAPTER 1
INTRODUCTION TO STRATEGIC MANAGEMENT
Strategy
• Strategy is a specific set of actions used by a Biz against one or more rivals, to attain specific
goals and long-term objectives
• Strategy is a form of long-term planning that considers internal and external factors and then
chooses a direction
1. Where did we come from
2. Where are we now
3. Where do we want to go to
4. How will we get to the desired future
Management
• Leading, overseeing & mentoring
• Assuming responsibility / control of org.
• Correct allocation of resources
• Ensuring Biz runs profitably & sustainably
• Devise actions to achieve max results, with least possible wastage
Strategic management - Synonymous with ‘Strategic Planning’
SM is the art and science of formulating, implementing and evaluating cross functional actions
that will enable an organisation to achieve its objectives.
At the core of the definition lie the following questions
a. How can we grow turnover
b. How can we outperform competition
c. How can we continually adapt to environmental changes
It is the process that prepares an organisation to move forward.
Lynch – it is the identification of the purpose of the organisation and the plans and actions to
achieve the purpose
Thompson – SM is the game plan indicating the choices managers need to make regarding
customer’s needs, how to compete successfully, how to grow the organisation, how to manage the
organisations architecture, how to develop dynamic capabilities and how to implementing
strategies successfully to achieve performance targets
,KEY DEFINITIONS
Vision andr strategic intent – desired future state; the aspirations of the organisation
It clarifies exactly where they want to go, therefore future orietated
Mission – the overriding purpose of the organisation (e.g to constantly innovate)
Goal – a specific aim that the organisation wants to achieve (e.g provide better service)
Objective – a measurable long-term goal which is to be achieved within a certain time
Unique resources or core competencies – the unique resources, processes or skills that provide
the organisation with a ‘competitive advantage’
Competitive advantage – this is the edge that an organisation has over others and lies in the
ability of a company to differentiate itself from all others
Strategic control – the monitoring of strategies as they are implemented in order to;
Ensure that they are effective and achieve the objectives
It also involves the process of modifying and reviewing strategies if they are not achieving the
intended results
THE 5 P’s OF STRATEGY (Pl, Pa, Pe, Po. Pl)
1. Plan – management plans how to attain outcomes
2. Pattern – strategy develops a consistent pattern of behaviour over time
3. Position – strategy seeks to position the business in the market place
4. Perspective – this refers to a company’s unique way of doing things in order to remain
competitive
5. Ploy – an action which is intended to outwit the competition
8 CHALLENGES SOUTH AFRICAN COMPANIES FACE
1. Rapidly increasing competition
2. Changing demographics and psychographics
3. New technology
4. New global economy
5. Shift from manufacture to service
6. Proliferation (explosion) of corporate stakeholders
7. Managing the new workforce
8. Rapid rise of the green environment
,STRATEGIC MANAGEMENT PROCESS – THE OUTLINE
BUILDING BLOCK 1 BUILDING BLOCK 2 BUILDING BLOCK 3 BUILDING BLOCK 4 BUILDING BLOCK 5
(PHASE 1) (PHASE 2) (PHASE 3) (PHASE 4) (PHASE 5)
Formulating a Setting specific Strategy Strategy Strategy evaluation
strategic direction objectives for the formulation & implementation
Org. selection
Developing a
strategic vision and
mission
THE BUILDING BLOCKS OF STRATEGIC MANAGEMENT
1. The formulation of a strategic direction / developing a strat. vision and mission
• Top management needs to get clarity on strategic direction
• Perform an external audit, industry audit and internal audit to determine strengths &
weaknesses; and
• To determine growth opportunities for org.
The outcome of this assessment should result in:-
• Formulation of long-term vision; &
• Formulation of a mission for the org.
2. The formulation of long-term goals & objectives
• It is now time to put into words what org. wants to achieve
• Setting & stating long term goals & objectives
e.g. we want to be the number one producer in the market we serve
3. Strategy formulation & selection
• We now understand org. environment & where we want to go
• We now need to investigate & formulate a number of strats that will lead us to the
proposed future
• Aims should be:-
- To develop org. competitive advantage in short run; &
- Ensuring profitability & sustainability in long run.
• The future is unpredictable, therefore this stage with involve:-
- Quantitative analysis; &
- Intuition & insight from management
4. Strategy implementation
• This is the ‘Achilles’ Heel’ (weakness) as management often doesn’t have stamina to
implement
• Org. structure & culture must be ready - successful implementation requires exceptional
management; & leadership by top management
5. Strategy evaluation
• Environment continually changes, even during implementation
• Management may also run into unexpected challenges
• It is important to review & adjust strat if/when required
- Consider micro & macro environment
- Measure success of implementation
- Adjust course if necessary
, UNDERSTANDING COMPETITIVE ADVANTAGE
Competitive advantage – this is the edge that an organisation has over others and lies in the
ability of a company to differentiate itself from all others
A superiority gained by an organization when it can provide the same value as its competitors but
at a lower price, or can charge higher prices by providing greater value through differentiation.
Competitive advantage results from matching core competencies to the opportunities.
There are 8 dimensions of competitive advantage – these relate to P&S :-
1. Time T
2. Execution E
3. Manoeuvrability M
4. Process P
5. Cost C
6. Differentiation D
7. Knowledge K
8. Value V
It is not always possible to focus on all 8 dimensions as time and resources do not always allow
Sometimes a company will select only a few BUT focuses intensely on mastering them
1. TIME
MOVE BOTH RAPIDLY AND CAUTIOUSLY
- When approached with opportunity, evaluate costs and benefits carefully, yet swiftly
2. EXECUTION
- This refers to how, and how well a Co. does things
3. MANOEUVRABILITY
- This refers to a company’s reaction to changing circumstances (internal or external)
- This must be done rapidly in order to outperform competitors
4. KNOWLEDGE
This does not refer to qualifications, but rather to:-
- The knowledge everyone in Co. has of P&S
- Ability to find right answers at right time
- Knowing where to find best solution/resource
- Knowing how to handle situations
- Understanding the implications of change in competitive environment
- Identifying strengths and weaknesses
- Understanding and exploiting competitors weaknesses
- Responding to competitors strengths
5. VALUE
This refers to the customer’s perception of the Co.’s P&S
- High value perception = loyal customers
Consider the following while building a competitive advantage base:-
- Easier access to P&S
- Offering different mixes
- Adding additional P&S to provide client with more flexibility
INTRODUCTION TO STRATEGIC MANAGEMENT
Strategy
• Strategy is a specific set of actions used by a Biz against one or more rivals, to attain specific
goals and long-term objectives
• Strategy is a form of long-term planning that considers internal and external factors and then
chooses a direction
1. Where did we come from
2. Where are we now
3. Where do we want to go to
4. How will we get to the desired future
Management
• Leading, overseeing & mentoring
• Assuming responsibility / control of org.
• Correct allocation of resources
• Ensuring Biz runs profitably & sustainably
• Devise actions to achieve max results, with least possible wastage
Strategic management - Synonymous with ‘Strategic Planning’
SM is the art and science of formulating, implementing and evaluating cross functional actions
that will enable an organisation to achieve its objectives.
At the core of the definition lie the following questions
a. How can we grow turnover
b. How can we outperform competition
c. How can we continually adapt to environmental changes
It is the process that prepares an organisation to move forward.
Lynch – it is the identification of the purpose of the organisation and the plans and actions to
achieve the purpose
Thompson – SM is the game plan indicating the choices managers need to make regarding
customer’s needs, how to compete successfully, how to grow the organisation, how to manage the
organisations architecture, how to develop dynamic capabilities and how to implementing
strategies successfully to achieve performance targets
,KEY DEFINITIONS
Vision andr strategic intent – desired future state; the aspirations of the organisation
It clarifies exactly where they want to go, therefore future orietated
Mission – the overriding purpose of the organisation (e.g to constantly innovate)
Goal – a specific aim that the organisation wants to achieve (e.g provide better service)
Objective – a measurable long-term goal which is to be achieved within a certain time
Unique resources or core competencies – the unique resources, processes or skills that provide
the organisation with a ‘competitive advantage’
Competitive advantage – this is the edge that an organisation has over others and lies in the
ability of a company to differentiate itself from all others
Strategic control – the monitoring of strategies as they are implemented in order to;
Ensure that they are effective and achieve the objectives
It also involves the process of modifying and reviewing strategies if they are not achieving the
intended results
THE 5 P’s OF STRATEGY (Pl, Pa, Pe, Po. Pl)
1. Plan – management plans how to attain outcomes
2. Pattern – strategy develops a consistent pattern of behaviour over time
3. Position – strategy seeks to position the business in the market place
4. Perspective – this refers to a company’s unique way of doing things in order to remain
competitive
5. Ploy – an action which is intended to outwit the competition
8 CHALLENGES SOUTH AFRICAN COMPANIES FACE
1. Rapidly increasing competition
2. Changing demographics and psychographics
3. New technology
4. New global economy
5. Shift from manufacture to service
6. Proliferation (explosion) of corporate stakeholders
7. Managing the new workforce
8. Rapid rise of the green environment
,STRATEGIC MANAGEMENT PROCESS – THE OUTLINE
BUILDING BLOCK 1 BUILDING BLOCK 2 BUILDING BLOCK 3 BUILDING BLOCK 4 BUILDING BLOCK 5
(PHASE 1) (PHASE 2) (PHASE 3) (PHASE 4) (PHASE 5)
Formulating a Setting specific Strategy Strategy Strategy evaluation
strategic direction objectives for the formulation & implementation
Org. selection
Developing a
strategic vision and
mission
THE BUILDING BLOCKS OF STRATEGIC MANAGEMENT
1. The formulation of a strategic direction / developing a strat. vision and mission
• Top management needs to get clarity on strategic direction
• Perform an external audit, industry audit and internal audit to determine strengths &
weaknesses; and
• To determine growth opportunities for org.
The outcome of this assessment should result in:-
• Formulation of long-term vision; &
• Formulation of a mission for the org.
2. The formulation of long-term goals & objectives
• It is now time to put into words what org. wants to achieve
• Setting & stating long term goals & objectives
e.g. we want to be the number one producer in the market we serve
3. Strategy formulation & selection
• We now understand org. environment & where we want to go
• We now need to investigate & formulate a number of strats that will lead us to the
proposed future
• Aims should be:-
- To develop org. competitive advantage in short run; &
- Ensuring profitability & sustainability in long run.
• The future is unpredictable, therefore this stage with involve:-
- Quantitative analysis; &
- Intuition & insight from management
4. Strategy implementation
• This is the ‘Achilles’ Heel’ (weakness) as management often doesn’t have stamina to
implement
• Org. structure & culture must be ready - successful implementation requires exceptional
management; & leadership by top management
5. Strategy evaluation
• Environment continually changes, even during implementation
• Management may also run into unexpected challenges
• It is important to review & adjust strat if/when required
- Consider micro & macro environment
- Measure success of implementation
- Adjust course if necessary
, UNDERSTANDING COMPETITIVE ADVANTAGE
Competitive advantage – this is the edge that an organisation has over others and lies in the
ability of a company to differentiate itself from all others
A superiority gained by an organization when it can provide the same value as its competitors but
at a lower price, or can charge higher prices by providing greater value through differentiation.
Competitive advantage results from matching core competencies to the opportunities.
There are 8 dimensions of competitive advantage – these relate to P&S :-
1. Time T
2. Execution E
3. Manoeuvrability M
4. Process P
5. Cost C
6. Differentiation D
7. Knowledge K
8. Value V
It is not always possible to focus on all 8 dimensions as time and resources do not always allow
Sometimes a company will select only a few BUT focuses intensely on mastering them
1. TIME
MOVE BOTH RAPIDLY AND CAUTIOUSLY
- When approached with opportunity, evaluate costs and benefits carefully, yet swiftly
2. EXECUTION
- This refers to how, and how well a Co. does things
3. MANOEUVRABILITY
- This refers to a company’s reaction to changing circumstances (internal or external)
- This must be done rapidly in order to outperform competitors
4. KNOWLEDGE
This does not refer to qualifications, but rather to:-
- The knowledge everyone in Co. has of P&S
- Ability to find right answers at right time
- Knowing where to find best solution/resource
- Knowing how to handle situations
- Understanding the implications of change in competitive environment
- Identifying strengths and weaknesses
- Understanding and exploiting competitors weaknesses
- Responding to competitors strengths
5. VALUE
This refers to the customer’s perception of the Co.’s P&S
- High value perception = loyal customers
Consider the following while building a competitive advantage base:-
- Easier access to P&S
- Offering different mixes
- Adding additional P&S to provide client with more flexibility
