AN INTRODUCTION TO STRATEGIC MANAGEMENT

Transcription

1 AN INTRODUCTION TO STRATEGIC MANAGEMENT Timeframe: Learning outcomes: Recommended reading: Multimedia: 8 hours Examine strategic management concepts and principles. Exploring Strategy. Text and Cases (Johnson, Whittington & Scholes, 2011) Management Principles: A Contemporary Edition for Africa (Smit et al., 2011) Management Principles (Hellriegel et al., 2008) Strategic Management: Key Learnings (Hilarious One) [Video clip] YouTube (Vaghela, 2011) What is Strategy? [Video clip] YouTube (Mohtasebi, 2009) Content Strategy Examples & Documents (lofwebdesign.com, 2013) Every organisation that exists is developed for a certain purpose. That purpose is created during strategy formulation. Where an organisation wants to be, what it wants to do, what function it wants to fulfil, are a few examples of the decisions made during the strategic planning process. Section overview: This section will enable learners to: Discuss the various levels of strategy; Describe and develop strategic statements; Understand how managers approach strategy; and Discuss the three branches of strategy. Introduction This section is a brief review of concepts and principles covered in Strategic Management 1 and 2. The purpose of this section is to refresh learner s knowledge of previous modules. It serves as the foundation of the sections to follow.

2 Strategy Defined Please visit the following Website for a light-hearted reminder of strategic management terms and concepts: Strategic Management: Key Learning s (Hilarious One ) [Video clip] YouTube (Vaghela, 2011: Explain what you have learned from the Strategic Management: Key learning video clip. Consider the following definitions of the term strategy : The determination of the long-run goals and objectives of an enterprise and the adoption of courses of action and the allocation of resource necessary for carrying out these goals. Alfred Chandler Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value. Michael Porter A pattern in a stream of decisions. Henry Mintzberg The long-term direction of an organisation. Exploring Strategy (Johnson, Whittington & Scholes, 2011: 3) s 1. Compare the various definitions of Strategy by Chandler, Porter, Mintzberg and Exploring Strategy. 2. Drawing on the important principles highlighted in Chandler, Porter, Mintzberg and Exploring Strategy s definitions, develop your own definition of Strategy that is applicable to your organisation. Please view the following clip for an explanation of strategy by Michael Porter:

3 What is Strategy? [Video clip] YouTube (Mohtasebi, 2009) Each of the given definitions illustrates important yet distinct elements of strategy. Explain what you have learned from the What is Strategy video clip that is relevant to your organisation. Examples of strategy statements: Increase sales through additional sales staffing. Increase sales by increasing the number of locations. Increase profitability by laying off staff. Decrease cost by outsourcing production. Reduce overhead by improving inventory control. Boost price of the company's stock by increasing the dividend. Boost price of the company's stock by buying shares back. Increase research and development expenditures to develop new products. Acquire a competitor. Sell a part of the company that is no longer a profitable division. Develop a strategic statement suitable to your organisation.

4 TABLE 1: DIFFERENT APPROACHES TO STRATEGIC MANAGEMENT Chandler Porter Mintzberg Adopts a logical thought process, starting with the development of goals and objectives, leading to the allocation of resources. Places emphasis on choices, differences and competition. Acknowledges the fact that strategies do not always unfold according to plan and that, at times, organisations are required to improvise due to unforeseen circumstances. (Johnson, Whittington & Scholes, 2011: 4) Assuming that you own an organisation, which approach to strategic management would you adopt? Explain your answer. Levels of Strategy According to Johnson, Whittington and Scholes (2011: 7), there are three levels of strategy that may exist within organisations: Corporate-level strategy Corporate-level strategy deals with the range of the organisation and how value is added to the organisation. For example: Geographical scope; Diversity of products and services; Resource allocation; Mergers and acquisitions. Business-level strategy Business-level strategy focuses on competition; in other words, on how the organisation will compete within the environments in which it operates.

5 For example: Innovation strategies; Scale appropriateness strategies; Response strategies. Operational strategies Operational strategies are concerned with the effective organisational delivery of corporate and business strategies. The focus is on resources, policies and people. Successful strategies are dependent on decisions that are made and activities that occur at the operational level of the organisation. For example: Retail businesses apply specific operational strategies to promote sales. For example, Walmart s operational strategy is to increase faster sales by using lower inventory levels and prices. A low inventory enables Walmart to keep their prices low for clients and allow them to replace old stock with new products when the stock is sold. This strategy also increases demand for the product. High demand and low prices contribute to increasing sales for Walmart. Online businesses apply different operational strategies to brick and mortar retailers. For example, many online merchants adopt an operations strategy of developing a user-friendly and reliable website for their customers. B2B or business to business companies sell products and services to other companies. They apply different operational strategies to retailers, who sell directly to consumers. An example of an operational strategy for a B2B company is to establish the business as industry experts or thought leaders by speaking at events, appearing in the media or publishing articles. When companies are regarded as market leaders, they often generate more business than those who are not well known in the industry. (Newton, 2013)