In 2002 SAB succeeded in acquiring a major brand in a developed market when it acquired 100 per cent
of Miller Brewing Company, the second largest brewery in the USA, and becoming SABMiller in the
process. The acquisition gave the group access, through a national player, to a growing beer market with
the world’s largest profit pool, and at the same time diversifying the currency and geographic risk of the
group. This acquisition made SABMiller the second largest brewery by volume in the world.
SABMiller appointed Norman Adam, previously Head of its Beer South African business, as Head of
Miller who introduced the traditional SAB system of employee performance rating, making clear that
employees who consistently score unsatisfactorily would be dismissed. This was a considerable change
from Miller’s previous system of performance rating which routinely rated all employees at the highest
level. SABMiller also announced that there would be rationalisation of Miller’s product portfolio from 50
brands to 11-12, meaning that market share would be down before it could go up again.
Having established a substantial presence in developed economies, the focus of SABMiller’s strategy
seems to have shifted back to developing economies. The 2006 report notes that “Our ability to succeed
in developing markets (a skill we owe to our African origins) has proven to be a competitive advantage
on the world stage”.
The business in South Africa saw ongoing momentum in consumer spending with lager and soft drinks
sales continuing to rise. While the growth in volumes moderated in the second half, earnings continued
to benefit as consumers traded up to the premium segment. To meet the demands of changing
consumption patterns,
SAB miller introduced new sales and distribution systems and enhanced the flexibility of their
production facilities.
The licensing of more Shebeens is bringing these previously unofficial outlets into the retail mainstream.
This means that they can operate more professionally and the firm can deliver to them directly which in
turn raises the performance of the business. During the year the organisation trained over 6000 newlylicensed tavern operators in business skills.
The business in Africa continued to grow, helped by broader distribution and a clearer segmentation of
the organisation’s brands. Volumes in Botswana were affected by the devaluation of the currency, but
results were good in Tanzania, Uganda and Mozambique. The firm sees plenty of opportunity to keep
improving efficiency in these relatively underdeveloped countries and the outlook for Africa as a whole
is encouraging.
The worldwide trend towards premium brands makes this segment the fastest growing in the global
beer market. Within the segment, it’s the international brands that are growing most rapidly at nearly
four times the rate of the beer market as a whole. To compete in this segment SABMiller has a portfolio
on international brands, each with its own distinct personality and attributes. While sales volumes are
still small, they are growing rapidly. The largest brand, Miller Genuine Draft has been particularly
successful in Russia while Pilsner Urquell is growing in Europe and the USA. Peroni Nastro Azzurro was
recently repackaged and re-launched with a major global campaign and is growing particularly strongly
in the UK.
Compared to mainstream and economy brands, the premium segment requires greater nurturing and
specialised approaches to marketing, sales and distribution.
These capabilities are now being refined across the group – notably through a new programme to
establish common techniques and disciplines for rolling out international premium brands in new
markets. The programme was piloted during the year in Poland and the lessons learned are now being
applied.
The 2006 report shows a change in emphasis stressing the need for consolidation rather than acquisition
and emphasising the importance on global portfolio to ensure ‘that it is balanced geographically and
exposes the organisation to markets at different stages of development – one that offers long-term
growth in the form of new, developing markets while generating cash from profitable developed
markets’.
Having survived and grown for over hundred years, SABMiller had emerged onto the world market at a
time when it appears that the twenty-first century may prove globally as turbulent as the twentieth
century was in South Africa. The company notes that its operational productivity, which is already being
benchmarked by competitors, cannot be a source of sustained competitive advantage. Its Africanist
culture and fearlessness in tackling emerging markets is much less inimitable.
However, as developed world tastes shift to wine and spirits SABMiller may find that the developing
world is increasingly coveted by its competitors, with the battle with Anheurser-Busch over Harbin a
foretaste of what is to come.
Required:
1. Using PESTEL Framework, discuss the impact of three (3) external factors on SABMiller, explaining
how the organisation has responded to the impact.
The PESTEL framework is used to analyse the macro environmental that affect the operations of
organisations. The influences emanate from Political, Economic, Sociocultural, Technological,
Ecological and Legal factors. With reference to SABMiller, they are social, economic and legal factors
that have had an impact on operations of the brewing conglomerate.
Social Factor
The changing consumption patterns of the consumer, with most of them preferring premium brands
has led to an increasing demand of SABMiller’s premium bears and wines. Responding to this
increase in demand, SABMiller had to introduce new sales and distribution systems and enhanced
flexibility of their production facilities.
Legal factor
The licensing of more Shebeens is bringing previously unofficial outlets into the retail mainstream.
This means that they can now operate more professionally and hence increasing business for
SABMiller. SABMiller can deliver beer to them directly. In response to this opportunity for growth
SABMiller has even trained 6000 newly licensed tavern operators in business skills.
Economic Factor
The devaluation of currency in Botswana posed a great threat to SABMiller. This has a direct impact
on profits. However the organisation has been able to manage this threat through operating in
different countries. When there was a devaluation of currency in Botswana, countries like Tanzania,
Uganda and Mozambique were doing well.
2. Conduct a partial SWOT analysis to establish SABMiller’s strengths and weaknesses.
SABMiller’s strengths
 Brand name
 Corporate culture
 Broader distribution networks
 Portfolio of international brands, each with distinct personality which makes the organisation
compete favourably on the international market
 Very clear segmentation of the organisational market
 Fearlessness in tackling emerging markets
SABMiller’s weakness
 It has not fully developed its capabilities of nurturing premium brands, giving them the
specialised marketing they need
3. Establish SABMiller’s distinctive resources/core competences and determine the extent to which
they match its Critical Success Factors.
Distinctive resources and core competences are those that underpin competitive advantage. They
are valuable to the organisation and customers, rare, difficult to imitate and the organisation has
systems and processes in place to support them.
Critical success factors are the few areas in an organisation where things must go right for it to
flourish. In the case if SABMiller one can say that the critical success factors, going by the proposed
strategy of consolidation are; sustainable competitive advantage and customer retention.
SABMiller’s’ distinctive resources are its brand name and corporate culture.
SABMiller’s brand name is of value to the organisation because it acts as a strong marketing tool. It
is also valuable to the customers because it makes them identify the products with ease. It is rare in
the sense that there is only one organisation by that name no other organisation can register itself
under the brand name. It is difficult to imitate because it is the brand is protected through patents.
It can therefore be classified as a distinctive capability offering the organisation sustainable
competitive advantage.
SABMiller’s corporate culture is valuable to the organisation and customers in that it determines
how things are done in this organisation. It is rare that no other organisation can do operate in
exactly the same way SABMiller does. It is difficult to imitate as it is an intangible capability. The
organisation has processes and systems in place that fully support this culture and as a result it can
be classified as a distinctive capability that can give an organisation sustainable competitive
advantage.
4. Evaluate acquisition as a strategy that SABMiller used for growth as well as entering international
markets.
Advantages of acquisition as a growth strategy
 Quick access to markets- The Acquisition of Miller by SAB gave the group access, through a
national player, to a growing beer market with the world’s largest profit pool.
 Spreading of risk- Acquisitions enabled the group to diversify the currency and geographic risk.
This means that devaluation of currency in other regions where it has its operations can be
cautioned by the firms in regions that are stable. A good example is when volumes in Botswana
were affected by the devaluation of the currency, this was cushioned by results that were good
in Tanzania, Uganda and Mozambique
 Increased market share - Acquiring other large firms e.g. Miller Increased the organisation’s
market share making it the second largest brewery by volume in the world. This enable the
organisations to enjoy benefits of economies of scale
 Exposure to markets which at different stages of development-– some that offer long-term
growth in the form of new, developing markets while generating cash from profitable developed
markets.
Disadvantages of Acquisition as a growth strategy

Corporate culture clash - SABMiller appointed Norman Adam as Head of Miller who introduced
the traditional SAB system of employee performance rating making clear that employees who
consistently score unsatisfactorily would be dismissed. This was not readily welcomed by Miller’s
employees who were used to a performance rating system which routinely rated all employees
at the highest level, and this could probably lead to de-motivation amongst employees.
 Changes in the structure of the organisation- Rationalisation of Miller’s product portfolio from 50
brands to 12 resulting in the market share going down for a while, meant also that some
employees were going to be laid off and some changing their position in the organisation. This
can also lead to de-motivation on the employees’ part and hence negatively affect productivity.
5. Discuss with the help of a diagram the short-term and long-term restructuring outcomes of
Downsizing, down scoping and Leveraged buyout.
Extra Special Foods Limited is a medium sized food processing company situated in an industrial area in
Kitwe. The company which is still owned and managed by its original founders has a diversified market
and produces a wide range of packaged products. The company has its own packaging plant and
produces several food lines under its own label, two of which are for Maheu Energy Drink, which is a
segment of the food market it entered into five (5) years ago.
The company has a good reputation and distributes over 80% of its products through three (3) large
supermarket chains. Twice in the last five years, the directors of the company have managed to avoid
being taken over by large competitors.
The early 2000’s were not good for the company. Coming out of the recession in the earlier part of the
2000’s and facing stiff competition towards the end of 2005, the directors divested from some of the
products lines in order to increase overall profitability and reduce inefficiencies. However promotional
activities from competing firms caused a lot of problems and the company began to lose its market
share. In addition, the company is now facing considerable pressure from imports, particularly from
South Africa and COMESA states, which have made significant advances in the Zambian processed food
market. Although input and labour costs steadily increased over the past few years the competitive
nature of the market resulted in a period of relatively low increases in market price, and as a result,
Extra Special Foods’ products were marginally over-priced, and its profit margins are down.
Indeed several months ago a senior buyer from an important supermarket chain mentioned that his
company, although satisfied with quality standards of the company’s food lines was concerned over the
recommended selling prices on some lines. He said that his company was beginning to review medium
term contracts.
As previously mentioned, the company is operating in a highly competitive segment of the food market
since it is competing with small producers, other medium sized companies and with multinational firms
who have well established brands. Some of its competitors have been taken over by larger firms, mainly
to acquire their production plants, since food production capacity and location are significant factors in
the industry, particularly in Kitwe and other towns along the line of rail.
Furthermore the company has been financially cautious, avoiding large scale expenditures which would
require borrowing. The latest Maheu Energy Drink producing plant which came on stream in 2005 was
financed out of retained profits.
However, it is clear that significant changes are occurring in the industry and Extra Special Foods Ltd
engaged Strategy Services Ltd (SSL), a firm of management consultants, to conduct a survey of its
market segments the main findings of (SSL) were:





Forecast market growth likely to continue at the rate of 6% per annum.
Forecast of increased competition after 2010 with firms seeking to establish Regional/COMESA
brands, and tastes
Significant costs involved in meeting COMESA standards in packaging and manufacturing from
2010, particularly for firms operating older plants.
Continuing trend to “healthier” and “natural” products, including low sugar/sugar free, and
additive-free food and to “white meat”
Increased dominance of supermarket chains such as Shoprite’s, Spar’s and Pick ‘n’ Pay’s selling
“own label” as well as branded products.
Faced with such developments, Extra Special Foods Limited is developing a strategy to see it through to
2020 aimed at preserving its independence, and increasing both its profitability and sales.
Assume the role of an independent management consultant and prepare a confidential report for the
directors of Extra Special Foods Limited covering the following areas:
1. The strengths and weaknesses of Extra Special Foods Limited in light of forecast trends and
developments
ANALYSIS OF STRENGTHS
 Extra Special Foods appears to be in a strong financial position, having purchased its Maheu
Energy Drink processing plant out of retained earnings. The case states that “the company has
been cautious, avoiding large scale expenditures which would require borrowing”
 Extra Special Foods has a good brand reputation and has a balanced distribution pattern.
 The company is attractive to its large competitors. This can be seen from the take-overs that have
occurred in the industry, and also company has been targeted for take-over in past five years.
 The company has a wide product-mix which provides sales, cost and investment synergies.
 Company has a good reputation, and hence customers are satisfied with the quality of its
products. This is an important point for the firm.
 The company has a strong distribution network as evidenced by the linkages with the three (3)
supermarkets.
 Ownership of company is in the hands of the managers. This could be one key
factor that has led to the survival of Extra Special Foods as an independent
company.
 The attitude of the directors in commissioning a survey of the industry and this
report, is indicative of a readiness to face up to the challenges that are occurring
in the company’s environment.
ANALYSIS OF WEAKNESSES




Extra Special Foods has experienced increased input and labour costs over the past few years.
There is strong likelihood that the company could be labour intensive. This can be seen from its
policy of avoiding large capital expenditures.
Reliance of company on the founders who fill the most senior positions. Need to consider
managerial succession.
Decreasing profit margins due to over pricing.
2. The strategic options open to Extra Special Foods Limited
STRATEGIC OPTIONS AND RECOMMENDATIONS
Four strategic options needed to be considered and evaluated
MARKET CONSOLIDATION AND PENETRATION
This involves Extra Special Foods concentrating on its existing products and markets. but increasing
efficiency and effectiveness. It is recommended that Extra Special Foods rationalizes its product
range, by dropping products for which it has low sales volume and low profitability.
NEW PRODUCT DEVELOPMENT
This involves developing products for existing markets. It is recommended that Extra Special Foods
researches the potential for extending its product range by introducing environmentally friendly
food products.
NEW MARKET DEVELOPMENT
This involves developing new markets for existing products. It is recommended that Extra Special
Foods extends its sales into the wholesalers markets and reduce its overreliance on main
supermarkets by also opening up markets in the COMESA countries.
COMPLETE DIVERSIFICATION
This is a far-reaching measure and very risky. It is not recommended for Extra Special Foods.
3. The strategy you recommend, and proposals for implementation.
STRATEGY IMPLEMENTATION






The strategic decisions should be fully backed by the Board of Directors and must
communicated to all members of staff.
The strategies need to be funded and this may involve additional capital which
can be raised in a variety of ways. These financing routes need to be carefully
appraised and evaluated.
The strategies need to be coordinated. This will not be a pause a problem given
the structure of the organization as well as the personal involvement of the
owners of Extra Special Foods. Furthermore, regular meetings will be needed to
agree and review options and progress.
If growth is to be managed and organized effectively, new managers will need to
be recruited. The selection decisions will be critical for the succession plans of the
firm.
Control and information systems need to be established to monitor the
implementation of the strategies. Additional marketing research, including sales
analysis may be desirable. More sophisticated financial control systems,
particularly budgets, should be developed if not already in place.
In the longer term, growth will require new organization structures, especially
when the founders become less personally involved in the operation of the
company.
Smart Attire Enterprises was established in the early 1990s during the euphoria of economic
liberalization and privatization by Mwiko Nawa who had retired from the Zambian civil service after
serving for twenty-five years. Using his retirement benefits and a loan from the Development Bank of
Zambia, he decided to set up a retail shop in Lusaka which specialized in selling men’s shirts. When
Smart Attire Enterprises began in the 1990s, it faced competition from other retail outlets owned
principally by Asians who sold a variety of clothing to the low and middle class. Mwiko quickly
discovered that Asian-owned shops were a force to reckon with: they operated as a cartel and, as a
group, were able to buy merchandise in bulk and at a discount from wholesalers who in turn bought
merchandise from suppliers based in India. This enabled these shops to sell their merchandise at
relatively low prices. Because they collaborated closely, they were also good at supporting each other by
exchanging market information. One example of this collaboration was that no individual shop
experienced stock-out situations as they were able to supply each other merchandise at short notice.
However, most Asian owned shops were also renowned for low quality, hence their strategy to target
the low and middle class.
When Mwiko first entered the retail business, he realized that his business, along with other Africanowned businesses, were small operators with little purchasing power. To generate store traffic, Mwiko
decided to stock and specialize in men’s internationally branded shirts from well-known companies in
South Africa and Italy. Since the African owned retailers did not have high sales volume, the South
African and Italian companies set the price. This meant that the retailers had to look for other ways to
cut costs, which they did by emphasizing self-service in stripped-down stores located in the suburbs
where land was cheaper.
Retailers such as Smart Attire Enterprises purchased their merchandise through wholesalers, who in
turn bought from manufacturers. The wholesaler would come into a store and write an order, and when
the merchandise arrived, the wholesaler would come in and stock the shelves, ensuring that the
branded merchandise received the best display in the shop. Retailers were expected to pay wholesalers
for this ‘expertise’ in displaying merchandise. However, Smart Attire Enterprises found this arrangement
unsatisfactory because it added to the cost a consumer would pay for a shirt. Moreover, at the
instigation of suppliers, wholesalers were not enthusiastic about serving a company that built its stores
in places away from the city centre. They would do it only if retailers paid higher prices. The founder of
Smart Attire Enterprises, Mwiko Nawa, refused to pay higher prices. Instead he took his fledgling
company public and used the capital raised to build a distribution centre to stock merchandise. The
distribution centre would serve not only his store but other stores within a 10-kilometre radius, with
trucks leaving the distribution centre daily to restock the stores. Because the distribution centre was
serving a collection of stores and thus buying in larger volumes, Nawa found that he was able to cut the
wholesalers out of the equation and order directly from manufacturers in South Africa or Italy. The cost
savings generated by not having to pay profits to wholesalers were then passed on to consumers in the
form of lower prices which enhanced the growth of Smart Attire Enterprises. This growth increased its
buying power and thus its ability to demand deeper discounts from manufacturers. Today Smart Attire
Enterprises has turned its buying process into an art form. Industry sources estimate that as much as 10
percent of all retail sales in Zambia are made in a Smart Attire Enterprises store. This has made the
company the largest single buyer of clothes and given the company enormous bargaining power over its
suppliers. Suppliers of nationally branded products are no longer in a position to demand high prices.
Instead, Smart Attire Enterprises is now so important to its suppliers that it is able to demand deep
discounts from them. Moreover, Smart Attire Enterprises has itself become a brand that is more
powerful than the brands of manufacturers. People don’t go to Smart Attire Enterprises to buy branded
goods; they go to Smart Attire Enterprises for the low prices. This simple fact has enabled Smart Attire
Enterprises to bargain down the prices it pays, always passing on cost savings to consumers in the form
of lower prices. Since 2010 Smart Attire Enterprises has become a preferred distributor to suppliers of
clothing.
1. Describe the competitive forces that obtained in the industry.
Using Michael Porter’s model of five competitive forces, the nature of competition of competition
which obtains in the industry described in the case falls into three categories. First, there is industry
rivalry among retailers of clothing. All retailers– both Asian retailers and African retailers traded in
clothing and in this respect they were rivals to each other. The Asian-owned shops, however,
seemingly had a competitive advantage in pricing and product availability over the African owned
retailers because of their link to Indian suppliers and the collusion that existed among them.
However, the Asian owned retail shops had to contend with the image of low quality. Second, there
is bargaining power of the supplier characterized by the ability of wholesalers to determine prices
and offer merchandise of low quality to retailers. Smart Attire Enterprises are however able to
respond through product differentiation by specializing in men’s shirts and sourcing their
merchandise from South Africa and Italy. Smart Attire can be said to have pursued a product
differentiation strategy. Third, the action by Smart Attire Enterprises of establishing a distribution
centre and eventually growing into a big buyer that now sought discounts from the suppliers and
was a preferred buyer to suppliers created a situation characterized by bargaining power of a buyer.
2. Evaluate the extent to which the nature of competition has affected the strategic position of Smart
Entire Enterprises
When Smart Attire Enterprises began its operations, it faced competition characterized by the
bargaining power of suppliers. It bought merchandise from wholesalers who determined the quality
of its merchandise and set prices. So powerful were wholesalers that they could walk into a Smart
Attire Enterprises shop and decide on how the merchandize they supplied would be displayed and
at what price it could be sold. Even when a retailer decided to lower costs by trading in a cheaper
location, wholesalers could only supply them with merchandise at a higher cost. Smart Attire
Enterprises found itself in a situation in which supplier (the wholesaler) power was high: there was a
concentration of suppliers; the retailers were many and fragmented; the switching costs from one
supplier to another were high; the wholesaler could easily enter into the business of the retailer or
refuse to supply to a retailer when the margins were low as was the case when retailers chose to
locate in cheaper areas. Upon having an own distribution centre, Smart Attire Enterprises gained
power over its suppliers. It had bargaining power of the buyer because its volume of purchases were
high; it was able to buy directly from manufacturers and thereby circumvented wholesalers; it could
negotiate discounts from suppliers; the suppliers business now depended on securing the buyer’s
patronage; and there were implicitly other sources of supply.
THE ZAMCHICK INN (ZCI) BUSINESS ENTRY INTO BAROTSELAND
It has been said that many investors find it difficult or a trick exercise to set up business in Barotseland.
Zambeef decided to enter this market with their fast food business. Although the initial reception in
Mongu was great, Zamchick Inn (ZCI) still had a number of obstacles to overcome. The local people were
uncomfortable with the idea of fast food and franchising. They saw fast food as artificial – especially
with non-village chickens, and the process which is mechanical and unhealthy. ZCI’s agency in the area Western Café Fast Foods Limited, knew that it had to build trust in the ZCI brand and it went to Zambeef
in Lusaka to do it. There it filmed the most authentic version of the process possible. To show the
philosophy of ZCI – the Lusaka city hospitality and authentic home cooking, the agency first created the
quintessential western Barotse mother. With “My original Zamchick Home” and local lozi music playing
in the background, showing a mother in a local traditional dress – the musisi making and feeding her
grandchildren the ZCI chicken made with 11 secret spices. It conjured up scenes of good home cooking
from the Central Province town of Chisamba where Zambeef originates delivered straight to the people
of Barotseland. In the end, the Barotse people could not get enough of this special chicken made with 11
spices. The campaign was largely successful, and in less than 4 years, ZCI expanded its presence to all the
towns in Western Province across the Kafue National Park down to Sesheke and Shangombo. Many
people in Barotseland now know the delicious chicken from the home of Zamchick Inn by heart.
1. Discuss any four (4) strategies that may have been available to Zamchick Inn to enter the Barotse
land market.
There are a variety of distant market entry strategies from which to choose. Each has particular
advantages and shortcomings depending on company strengths and weaknesses, the degree of
commitment the company is willing or able to make, and market characteristics. These strategies
are discussed below.
DIRECT INVESTMENT
This is the biggest involvement any national company will venture in. It is the entering of a
distant market like is the case with Barotseland by developing distant based assembly or
manufacturing facilities in that area.
Advantages
The firm may have:
a. Lower costs in form of cheaper labour or raw materials
b. Barotse Royal Establishment authority investment incentives,
c. Foreign savings for invest
d. The firm keeps full control over its investments and hence long term investment efforts can
be created
The firm may improve its image in Barotseland because it creates jobs and secondary services.
Disadvantages
The main disadvantage of direct investment is that the firm faces main risks such as:
a. Hostile cultural environment
b. Falling or worsening markets
c. Government takeovers
d. Unstable or violent political situations
In some cases the firm has no choice but to accept these risks if it wants to operate in a host
market area.
CONTRACT MANUFACTURING:
A major means of foreign market development is manufacturing within the distant market. This
strategy is employed when the demand justifies the investment involved.
A company may manufacture locally to capitalize on low-cost labour, avoid, reduce the high costs
of transportation to the market, gain access to raw materials, and/or as a means of gaining entry
into other markets.
The disadvantages of this form of entry include:
a. Social hostility to company and its products that is coming from somewhere else;
b. Excessive loyalty to local and indigenous companies and products;
c. Cultural norms and practices that are against products offered by ZIC; and
d. Lack of cooperation by or poor relations with the local leadership.
2.





FRANCHISING:
Franchising is a rapidly growing form of licensing in which the franchiser provides a standard
package of products, systems, and management services, and the franchisee provides market
knowledge, capital, and personal involvement in management. The combination of skills permits
flexibility in dealing with local markets conditions and yet provides the parent firm with a
reasonable degree of control. The franchiser can follow through on marketing of the products all
the way to the point of final sale. It is an important form of vertical market integration.
Potentially, the franchise system provides an effective blending of skill centralization and
operational decentralization, and has become an increasing important form of international
marketing.
MANAGEMENT CONTRACTING:
Quite a different kind of arrangement is the management contract where a management
company agrees to manage some or all functions of another company’s operations in return for
management fees, a share of the profits, and sometimes an option to purchase stock in the
company at a given price. The management contract can assure operating control in joint
ventures or consortia or be used when a company wishes to gain an immediate return for
services rendered. A company that has been expropriated or “purchased” by a local government
may be able to maintain a profitable position by consenting to operate the enterprise through a
management contract. It often permits participation in a foreign venture without capital risk or
investment and is a major toll for maintaining managerial control in situations where
governments require nationals to own a majority of stock interest.
Regardless of the alternative market entry strategies used or the number of countries where a
company markets, operating without some overall integrating process can result in spotty world
marketing performance. The complexities encountered in multinational marketing make it
difficult to coordinate worldwide process that focuses simultaneously on a broad range of
environments
Discuss any five (5) promotion methods, Zamchick Inn and any of its agents would use to make
its targeted customers be aware of its product in Barotseland.
Promotion Mix
Once a product is developed to meet target market needs and is properly priced and distributed,
the intended customers must be informed of the products availability and value.
Advertising and promotion are basic activities in an international company’s marketing
mix. A well – designed promotion mix that ZCI will use may include
Advertising
Sales promotion
Personal selling
Direct Mail
Public relations
ADVERTISING
Intense competition for distant markets and the increasing sophistication of consumers have led
to a need for more sophisticated advertising strategies. Increased costs, problems of
coordinating desire for common countrywide company or product image have caused large
diversified companies to seek greater control and efficiency without sacrificing local
responsiveness. One of the most widely debated policy areas pertains to the degree of
advertising variation necessary from place to place. One view sees advertising customized for
each area or region because every market is seen as posing a special problem. At the other
extreme end of advocates are those who suggest that advertising should be standardized for all
markets.
SALES PROMOTION
Other than advertising, personal selling, and public relations, all marketing activities that
stimulate consumer purchases and improve retailer or middlemen effectiveness and cooperation
are sales promotion. Discounts, in-store demonstrations, samples, coupons, gifts, product tie-ins,
contests/raffles, sweepstakes, sponsorship of special events such as concerts and fairs, and point
of-purchase displays are types of sales promotion devices design to supplement advertising and
personal selling in the promotion mix. Sales promotions are short-term efforts directed to the
consumers and/or retailers to achieve specific objectives.
PERSONAL SELLING
A national salesforce is composed of personnel from the parent company, local personnel
directed by a national sales or local sales managers operating in area of operations, or a group of
individuals from both the parent company and Barotseland in which business are being sought.
Although the trend for large companies is to hire local personnel to conduct sales, the
Barotseland salesperson remains important for a vast number of companies. Communications
and the art of persuasion, knowledge of the customer and product, the ability to close a sale, and
after-sale service are all necessary for successful selling.
DIRECT MAIL
Direct mail is a viable medium in distant market areas. It is especially important when other
media are not available. As is often the case in distant marketing, even such a fundamental
medium is subject some add and unconventional problems. For example, in some districts in
Barotseland, direct mail is virtually eliminated as an effective medium because the house and
postal addresses are poorly labelled or developed if they exist, which may attract extra costs to
customers for receiving such mails . The advertisers cannot afford to alienate customers by
forcing them to pay for unsolicited advertisements.
Despite some limitations with direct mail, many companies have found it a meaningful way to
reach their markets. This form of entry would to a large extent be effective in Mongu which is
urbanized and organised.
3. Evaluate three benefits Zamchick Inn would gain from the strategic alliance with Lusaka City
hospitality and authentic home cooking.
Strategic appeal or benefits for such Strategic Alliances may include:
i. Gaining better access to attractive markets.
ii. Capturing economies of scale in production and/or marketing cost reduction can be the
difference that allows a company to be cost-competitive.
iii. Filling gaps in technical expertise and/or knowledge of local markets (buying habits and
product preferences of consumers, local customers and so on.
iv. Sharing distribution facilities and dealer networks, thus mutually strengthening their access
to buyers.
v. Distant or Cross border allies can direct their competitive energies more toward mutual
rivals and less toward one another, teaming up may help them close the gap on leading
companies.
vi. Benefit comes into play when companies desirous of entering a new distant or isolated
market, conclude that alliances with local companies are an effective way to tap into a
partner’s local market knowledge and help it establish working relationships with key
officials in the local area leadership.
Indaba Corporation has been in existence for the past 40 years. The firm had experienced
unprecedented growth between 10 to 30 years of its existence. Growth has however, stalled in the past
5 years, averaging 3% compared to 12% during the golden years. The change in management after the
reorganization that was carried out 3 years ago has not changed fortunes.
The board met to address the various issues facing the firm especially the slow growth in its long
tradition product lines. One of the resolutions was to appoint the new CEO who was head hunted and
had already assumed office. The other resolution was to engage a consultant to work with the new CEO
in improving strategic management, especially in the area of objective realization. The last key
resolution was to significantly increase investment in information communication technology.
The new CEO having attended a seminar on strategic planning came across the concept of gap analysis.
Given the pressure from the board to ensure that objectives are realized, the CEO has called upon the
consultant to provide more information and see how the concept can assist the firm in objective
realization.
The new CEO has also started reviewing the investment into information technology to find ways in
which this investment can better be monitored to ensure that the firm gets a return on the same
investment. The challenge the CEO faces is how this can be implemented by managing the investment
into ICT. The amount to be invested is expected to increase from K2 Billion to K4 Billion in the next 2
years as one of the attempts to close the planning gap in the immediate future. It is also expected that
this investment will make the firm transform its business in the way it produces products and markets
them to customers. One key feature has been the investment in enterprise resource planning solutions.
1. Differentiate between fixed gap analysis and continuous gap analysis in the context of Indaba
Corporation.
Indaba Corporation can benefit from gap analysis. Gap analysis is the analysis of how the firm can
pursue strategies to close the gap between extrapolated current performance and the long-term
objective.
 The fixed gap analysis is the one that has remained the same for a period of time.
 The continuous gap analysis carries out changes to the gap from year to year.
A clear distinction between fixed and continuous gap analysis must be appreciated by the firm.
Indaba can pursue the closing of the gap that has remained stagnant for years. This may either
prove easy or difficult depending on the changes that have taken place within the organization and
the external environment.
Indaba can also continue to revise the gap based on changes in current results that can either make
the objective farfetched or too easy to achieve. There is a possibility that the firm pursued fixed gap
analysis and this could have led to complacency, especially during the glory years. The firm now
requires revising the gap in regard to current performance and its impact on the long term objective
when extrapolated.
2. Demonstrate how growth strategies can be pursued by Indaba Corporation in closing the planning
gap.
Growth strategies can be pursued to close the planning gap. The speed at which this is achieved will
depend on the type of growth strategies.
Below is the demonstration of how growth strategies can close the planning gap.
i. Organic growth-this is where the firm ploughs back its profits, uses debt or its reserves to
grow. For the firm because of its size and strategic posture in the market, this may not be the
best way to close its planning gap especially after years of stagnation.
ii. Mergers-this is where the firm combines resources on a 50/50 combination to create a new
enterprise. The pulling of these resources offers much needed capital to break barriers of
entry or fund many projects. The increased size also offers a bigger and greater market
strategic posture. The combination of these objectives can help the firm close the planning
gap much quicker. The biggest challenge in mergers closing the planning gap lies in the cost of
integration and overcoming the cultural barriers. This is something Indaba must resolve to
close the planning gap.
iii. Acquisition-this is where Indaba takes over another firm. This can be done by seeking firms
with strategic advantages where Indaba is weak or has limitations. These can range from cash
resources to markets. For example if the entry into a new market is a way to close the
planning gap, then acquiring a firm that has presence in that market will be the fastest way to
close the planning gap. The advantage with this strategy is that it is easy to go past the cost of
integration and cultural barriers as Indaba can impose these on the acquired entity.
iv. Franchising-the other strategy Indaba can pursue in closing the planning gap relate to offering
its technical know- how and systems to someone with the money/capital to undertake its
activities at a monthly fee. The Franchisee rides on Indaba brand name, management
competence and operational knowledge. This strategy is cheaper than the above 2 strategies.
My recommendation is that Indaba considers acquisitions as a way to closing the planning gap.
3. Demonstrate how the pursuit of strategies in accordance to Ansoff Matrix will differ from growth
strategies in closing the planning gap.
The Ansoff Matrix offers Indaba strategic choices that work in a different way in which they close
the planning gap compared to growth strategies. Ansoff Matrix looks at the direction of competition
and growth as defined by current or new products versus current or new markets serviced by the
firm.
The strategies are as follows:i. Market penetration-Indaba can consider the possibility of increasing the market share in
markets where there is still potential. Withdrawing from unprofitable markets can help
redirect resources to markets that are profitable. Given the scenario, this may prove a difficult
way to close the planning gap.
ii. Product development-Indaba can develop new products or acquire firms that have new
products the firm can use to improve its profitability. Apple did it with strategic movement
into smart phones.
iii. Market development-acquisitions can still be pursued into newer markets by buying firms
that can help distribute its products. This can see increased revenues.
iv. Diversification-related diversification can be pursued by Indaba by looking at other businesses
that are either related or unrelated to current operations. This is considered to be very risky
and the returns may not be worth it.
Growth strategies can be pursued in the areas of product development and market development.
This many help the firm close the planning gap.
4. Recommend the approaches that Indaba Corporation can take to manage its investment in
information technology that it intends to significantly increase in the next 2 years.
The firm can take various approaches in managing the investment in information technology:
The 3 Es-this is called the value for money concept.
 Economy looks at spending the minimal expense per quality standard,
 Efficiency looks at the usability of the technology in the firm and
 Effectiveness focuses on whether ICT is helping the firm achieve its objectives.
Performance pyramid looks at how the firm can cascade the ICT Vision into departmental and day to
day operations.
Moon and Fitzgerald model looks at developing key performance indicators around financial,
internal customer satisfaction, flexibility, innovativeness and responsiveness of the ICT department.
Targets can still be set in terms of performance expectations in areas like speed, efficiency and user
satisfaction.
5. Recommend how the information technology department can be re-structured in an attempt to
improve the return on investment on the money spent and to be invested in the next 2 years.
The investment in ICT is significant. Introduction of responsibility accounting can help in achieving
the above approaches to measuring the performance of this investment.
Cost Centre-this is where the responsibility is to ensure that expenditure is in line with budget. This
is inward and ideal for less significant expenditure in ICT.
Revenue Centre-this is where the department is expected to charge for services to users. It’s the
right step in the right direction to begin to look at the marketability of the department’s services.
Investment Centre-this is the ideal as the department is also responsible for the investment, costs
and profits. A return on investment target will be set. The department must control not just its
budget, but the competitiveness of its services to user departments.
Bwana Electronic Services operates in a high labour cost environment in Western Province of Zambia
and imports electronic products from China. It re-brands and re-packages them as Bwana products and
then sells them to business and domestic customers in the local geographical region. Its only current
source of supply is SISK electronics. Bwana regularly places orders for SISK products through the SISK
web-site and pays for them by credit card.
As soon as the payment is confirmed SISK automatically e-mails Bwana a confirmation of order, an order
reference number and likely shipping date. When the order is actually despatched, SISK sends Bwana a
notice of despatch e-mail and a container reference number. SISK currently organises all the shipping of
the products. The products are sent in containers and then trans-shipped to SABOT, the logistics
company used by SISK to distribute its products. SABOT then delivers the products to Bwana factory.
Once they arrive, they are quality inspected and products that pass the inspection are re-branded as
Bwana products (by adding appropriate logos) and packaged in specially fabricated Bwana boxes. These
products are then stored ready for sale. All customer sales are from stock. Products that fail the
inspection are returned to SISK.
Currently 60% of sales are made to domestic customers and 40% to business customers. Most domestic
customers pick up their products from Bwana and set them up themselves. In contrast, most business
customers ask Bwana Electronic Services to set up the electronic equipment at their offices, for which
Bwana Electronic Services makes a small charge. Bwana Electronic Services currently advertises its
products in local and regional newspapers. Bwana also has a web site which provides product details.
Potential customers can enquire about the specification and availability of products through an e-mail
facility on the web site. Bwana then e-mails an appropriate response directly to the person making the
enquiry. Payment for products cannot currently be made through the web site.
Feedback from existing customers suggests that they particularly value the installation and support
offered by the company. The company employs specialist technicians who (for a fee) will install
equipment in both homes and offices. They will also come out and troubleshoot problems with
equipment that is still under warranty. Bwana also offers a helpline and a back to base facility for
customers whose products are out of warranty.
Feedback from current customers suggests that this support is highly valued. One commented that “it
contrasts favourably with your large customers who offer support through impersonal off-shore call
centres and a time-consuming returns policy”. Customers can also pay for technicians to come on-site to
sort out problems without a warranty equipment.
1. Analyse the primary activities of Bwana using value chain model. Comment on the significance of
each of these activities and the value that they offer to customers.
A simple value chain of the primary activities of Bwana is shown below.
2.









3.
Comments about value might include:
Inbound logistics: Excellent quality assurance is required in inbound logistics. This is essential for
pre-configured equipment where customers have high expectations of reliability. As well as
contributing to customer satisfaction, high quality also reduces service costs.
Operations: This is a relatively small component in the Bwana value chain and actually adds little
value to the customer. It is also being undertaken in a relatively high cost country. Bwana might
wish to re-visit the current arrangement.
Outbound logistics: Customer feedback shows that this is greatly valued. Products can be picked
up from stock and delivery and installation is provided if required. Most of the company’s larger
competitors cannot offer this service. However, it is unlikely that this value can be retained when
Bwana begins to increasingly supply outside the geographical region it is in. Marketing and sales:
This is very low-key at Bwana and will have to be developed if the company is to deliver the
proposed growth. The limited functionality of the web site offers little value to customers.
Service: Customer feedback shows that this is greatly valued. Most of the company’s competitors
cannot offer this level of service. They offer support from off-shore call centres and a returns
policy that is both time consuming to undertake and slow in rectification.
However, it is unlikely that this value can be retained when Bwana begins to increasingly supply
outside the geographical region it is in.
Discuss the role IT/IS in creating competitive advantage for businesses like Bwana Electronic
Services.
Organizations that have embraced ICT have competitive advantage gained through reduced costs
in purchasing processes and marketing of its products. The operations become efficient.
Bwana through embracing ICT is able to do and benefit from the following:
Places orders through SISK website
Pays for these orders by credit card
SISK emails Bwana confirmation of order
SISK sends a note of dispatched order through email
Advertises its products through regional newspaper electronically
Bwana has a website which provides product details
Communicates with customers through e-mail.
However, the demerits are:
Competition is able to easily imitate the firms systems and processes
Information is exposed to hackers
Therefore ICT might not give a firm sustainable competitive advantage
Effective Internal Analysis entails the systematic evaluation of the key internal features of an
organization. As a strategist, discuss critical areas that need to be considered when conducting
an effective internal analysis.
4. Using practical examples provide a distinction between Value Chain and Value System and
explain ways that companies can use to create value addition.
Smart Attire Enterprises was an exclusive men’s shop that sold only shirts of famous international
brands. It was founded by Mwiko Nawa in the 1990s who believed that there was an emerging
middle class in Zambia that was male, young, educated, and trendy that wished to stand out in a
society awash with poverty. Nawa opened his shop to cater to the needs of this niche by importing
famous brands from Europe and South Africa. When Nawa began in the 1990s, he was a small
operator with little purchasing power. To generate the store traffic to sustain his business, he
depended in large part on wholesalers who purchased the merchandise from the manufacturers and
in turn sold the merchandise to Nawa. So dependent was Nawa on these wholesalers that they in
fact determined the brand, the manufacturer and the price at which the shirts could be sold. This
arrangement was satisfactory to Nawa until 2000 when Nawa decided to open another shop in
Western Province. However, the wholesalers were not interested in serving customers located in far
flung areas from Lusaka unless Nawa paid the extra costs.
Mwiko Nawa, refused to pay the wholesalers any more than he was already paying them for fear that
he would price himself out of the rural market. Instead he decided to go public and used the capital
he raised to build a distribution centre that stocked merchandise and served not only Nawa’s stores
but all stores within a 500-kilometre radius of Lusaka. Because the distribution centre was serving a
collection of stores and thus buying in larger volumes, Nawa found that he was able to cut the
wholesalers out and order directly from manufacturers. The cost savings generated by not having to
pay profits to wholesalers were then passed on to consumers in the form of lower prices which
helped Smart Attire Enterprises continue growing. This growth increased the buying power of Smart
Attire Enterprises to the extent that the company was able to demand deeper discounts from
manufacturers.
Today Smart Attire Enterprises has turned into a power to reckon with. It has opened outlets in all
the ten provincial centres of Zambia and additionally serves other shops that take advantages of its
country-wide transportation service network. Smart Attire is now known to handle about 15 per cent
of retail sales in men’s shirts in Zambia is now in a position to exercise bargaining power to its
suppliers. Its suppliers are no longer in a position to demand high prices; not only is Smart Attire
Enterprises in a position to demand discounts on branded shirts it buys but is also being relied on by
manufacturers to advise on issues pertaining to the clothes market in Zambia. To cap it all, Smart
Attire has become a brand: people are now proud to buy a shirt from a Smart Attire shop. As one of
the company’s customers recently boasted, ‘Men of distinction wear A Smart Attire shirt’.
1. Identify and analyse the type of competitive forces Smart Attire faced when it began its
operations.
The scenario described in the case illustrates Porter’s model of competitive forces that
affect industry profitability. In this case, the competition Smart Attire faced when it began
its operations and before it established a distribution centre depicts what Porter referred to
as the Bargaining Power of a Supplier where the profitability of Smart Attire was threatened
by the wholesalers – the firms that supplied it with shirts. After the establishment of the
distribution centre, it was the wholesalers whose profitability was threatened by the fact
that Smart Attire Enterprises as their buyer had established a distribution centre.






Bargaining Power of Suppliers: This situation is characterized by the existence of a powerful
supplier who influences the profit of his/her customers by using his/her power to raise
prices of inputs or reduce the quality of inputs he supplies to his/her customers. Specifically,
when a supplier is powerful relative to the buyer, he/she can threaten the profitability of
his/her buyers by raising the price of inputs or reducing the quality of the inputs. Referring
to the case, the dealers who supplied branded shirts to Smart Attire Enterprises were a
threat to the profitability of the latter because they determined the not only the quality of
the shirts that Smart Attire Enterprises could stock but also the price at which Smart Attire
could sell the shirts.
The factors that made the dealers powerful relative to Smart Attire Enterprises comprised
the following:
The input was differentiated – the shirts were high quality brands and as such, were crucial to
the business of Smart Attire Enterprises. The nature of business of Smart Attire Enterprises was
trading in branded shirts which could be sourced only by dealers from overseas manufacturers
who of famous brands. Thus the product was unique rather than standard.
Information about the shirts was rather difficult to obtain by Smart Attire Enterprises since it
was the dealers who knew where to source the branded shirts.
The switching costs of supplier were high – Smart Entire Enterprises depended on dealers and
could not switch to other suppliers. Thus, Smart Entire Enterprises was locked to the dealers.
Threat of forward integration – the dealers could easily enter into the business of Smart Attire
Enterprises. This was evidenced by the fact that they were wholesalers to Smart Attire
Enterprises. The retailing of shirts done by Smart Attire Enterprises could easily be undertaken
by the dealers.
The Profitability of dealers was not influenced by the single purchase of Smart Attire
Enterprises. As dealers they probably supplied to other retailers other than Smart Attire
Enterprises.
2. Evaluate the bargaining power of Smart Attire Enterprises as buyers after establishing the
distribution centre.
Bargaining Power of Buyers: The establishment of a distribution centre by Smart Attire
Enterprises shifted power from dealers to Smart Attire Enterprises because the distribution
centre assumed the role that was played by dealers. Using its own distribution centre, Smart
Attire Enterprises was able to buy in wholesale directly from manufacturers and hence
eliminated the need to depend on dealers for its merchandise. More specifically, it could
bargain directly with manufacturers on matters of price and the quality of shirts. It was now
Smart Attire Enterprises that was a threat to the profitability of the suppliers of shirts by
being in a position to bargain down prices and insist on higher quality shirts.
The factors that made Smart Attire Enterprises powerful relative to the dealers were as
follows:
By having its own Distribution Centre which acted as wholesaler, Smart Attire Enterprises was
in a position to source merchandise from a variety of manufacturers instead of relying on the
local dealers




Information about the merchandise and where to source it was available to Smart Attire
Enterprises; in fact, the suppliers were anxious to seek market information about Zambia from
Smart Attire Enterprises.
The switching costs of suppliers was low; presumably Smart Attire Enterprises had some
latitude in the sourcing of possible suppliers
Smart Attire had virtually entered the dealers’ business by doing their own wholesaling.
The Profitability of dealers depended on Smart Attire Enterprises. In this case, the
establishment of a Distribution Centre in essence cut off the dealers.
INTEL’S TWO STRATEGIC INFLECTION POINTS
An inflection point is an event that results in a significant change in the progress of a company, industry,
sector, economy or geopolitical situation and can be considered a turning point after which a dramatic
change, with either positive or negative results, is expected to result. Companies, industries, sectors and
economies are dynamic and constantly evolving. Inflection points are more significant than the small
day-to-day progress typically made, and the effects of the change are often well known and widespread.
(http://www.investopedia.com).
Intel Corporation had two such strategic inflection points within the past 30 years. The first came in the
mid-1980s, when memory chips were Intel’s principal business and Japanese manufacturers, intent on
dominating the memory chip business, began cutting their prices 10% below the prices charged by Intel
and other U.S companies but managed to match the Japanese price cuts. The Japanese manufacturers
responded with another 10 percent price cut. Intel’s management explored a number of strategic
options to cope with the aggressive pricing of its Japanese rivals building a giant memory chip factory to
overcome the cost advantage of Japanese producers, investing in research and development (R&D) to
come up with a more advanced memory chip, and retreating to niche markets for memory chip which
were not of interest to the Japanese.
At the time, Gordon Moore, Intel’s chairman and co-founder, and Andrew Grove, Intel’s chief executive
officer (CEO), jointly concluded that none of these options offered much promise and that the best longterm solution was to abandon the memory chip business even though it accounted for 70 percent of
Intel’s revenue. Grove, with the concurrence of both Moore and the board of directors then proceeded
to commit Intel’s full energies to the business of developing ever more powerful microprocessors for
personal computers; Intel had invented microprocessors in the early 1970s and had recently been
concentrating on memory chips because of strong competition and excess capacity in the market for
microprocessors. Grove’s bold decision to withdraw from memory chips, absorb a $173 million write-off
in 1986 and go all out in microprocessors produced a new strategic vision for Intel-becoming the
preeminent supplier of microprocessors to the personal computing industry making the personal
computer (PC) the central appliance in the workplace and the home, and being the undisputed leader in
the driving PC technology forward. Grove’s new vision for Intel and the strategic course he charted in
1985 produced spectacular results. Since 1996, over 80 percent of the world’s PCs have been made with
Intel microprocessors and Intel has become the world’s most profitable chip maker.
Intel encountered a second inflection point in 1998 opting to refocus on becoming the preeminent
building block supplier to the Internet economy and spurring efforts to make the Internet more useful.
Starting in early 1998 and responding to the mushrooming importance of the Internet, Intel’s senior
management launched major new initiatives to direct attention and resources to expanding the
capabilities of both the PC platform and the Internet. It was this strategic inflection point that led to
Intel’s latest strategic vision of playing a major role in getting a billion computers connected to the
Internet worldwide, installing millions of servers and building an Internet infrastructure that would
support trillions of dollars of e-commerce and serve as a worldwide communication medium.
1. Explain the impact of the two Intel’s strategic inflection points on its overall performance in the
industry.
The two inflection points, the first being the one that occurred in mid-1980’s and the second which
started in early 1998 had long term profitability and in making it a market leader in its area of
business.
The first inflection, in which it had serious price undercutting from Japanese manufacturers in the
memory chip business, had to make a dramatic change in its operations. Its serious change of
business into more powerful microprocessors for personal computers as a resulted it being a
market leader in driving the PC technology forward and by 1996 over the 80 percent of world’s PC
being made with Intel microprocessors as well as the world’s profitable chip maker.
The second inflection that started in early 1998, when Intel opted to refocus on becoming the
preeminent building block supplier to the Internet economy and spurring efforts to make the
Internet more useful. It was this strategic inflection point that led to Intel’s latest strategic vision of
playing a major role in getting a billion computers connected to the Internet worldwide, installing
millions of servers and building an Internet infrastructure that would support trillions of dollars of
e-commerce and serve as a worldwide communication medium.
2. Discuss with illustrations, any five (5) company values that Intel Corporation or any business
organisation may adopt as part of its mission or vision.
Common Company shared Values
i.
Fair treatment of all employees and Stakeholders,
ii.
Integrity in the way business will be conducted by those entrusted with business of the
company,
iii.
Accountability shall be reflected in all company dealings to all stakeholders,
iv.
Ethical behaviour shall be expected in all business conduct and operations,
v.
Innovation shall be key in company operations and development,
vi.
Teamwork shall be encouraged and expected from all employees,
vii.
Top-notch quality service and products shall be given to all customers,
viii.
Superior customer service shall be availed to all our customers,
ix.
Corporate social responsibility shall be our relationship with the society and
x.
Community citizenship shall be our top priority in and around the community we operate
in.
3. Describe any five (5) payoffs an organisation will derive from a well-conceived and clear vision
statement.
Payoffs that an organisation will derive from a well-conceived and clear Vision statement:
i.
It crystallises management’s own vies about the firm’s long term direction.
ii.
It reduces the risk of rudderless decision making;
iii.
It is a tool for winning support of the organisational members for internal changes that will
help in making the vision a reality;
iv.
It provides a beacon for lower level- level managers in forming departmental mission,
setting departmental objectives and functional strategies that fit into the company’s
overall strategy;
v.
It helps the organisation prepare for the future.
DELL COMPUTERS’ BUSINESS MODEL
It has been said that Michael Dell, founder and CEO of Dell Computers, became the Henry Ford of the
information age – as a mass producer of standardized products. Dell assembles and sells PCs and laptops
and, more recently, servers and storage hardware. The company began when Dell was a university
student in the 1980s. In the early days Dell sold only to the business market, and, although this remains
important, home consumers have been a vital growth area. The business model was simple and
powerful – and unusual for the industry.
Dell buys in standardized components in order to minimize the need for any expensive R & D. The
company has relied extensively on Intel chips. Sales are direct to customers, typically over the Internet
or telephone. Together with a telephone helpline, this alleviates the need for middlemen and the
consequential distributor margins. Dell builds to order and carries very little inventory of finished
products. This cannot happen effectively without strict attention to detail and constant process reengineering. The assembly time for a PC was reduced to 4 minutes, with a further 30 seconds allowed to
fix the holograms and logos for Microsoft and Intel.
Dell never set out to be a high-technology company, but instead relied on sales and logistics, driven by
low costs. As a result Dell had relatively low costs. It then adopts a very aggressive pricing policy in order
to seize market share from any competitor who has ‘taken its eye off the ball’ and let its costs increase.
The assumption was that this business model could be used for other consumer electrical products such
as digital music players and flat screen televisions. Some critics always argued that the model has to be
limited as a substantial proportion of consumers would be unwilling to buy without being able to inspect
a model in a store. But the logic of this argument becomes thinner as more and more of us know people
who have bought a Dell – we can inspect others. However by 2005 it was apparent that the sales growth
was slowing. New products –servers and printers, which amounted to two-thirds of sales – were not as
successful as PCs, where Dell was selling 1 in every 3 bought in the USA. It was less successful with
notebooks, which were being supplied direct from manufacturers in Taiwan. Competitors, especially
Hewlett Packard and Acer, had narrowed the price advantage. Between 2000 and 2005 Dell’s cost
advantage reduced from 20 percent to 10 percent and its price advantage more dramatically from 25
percent to just 5 percent. In addition it was developing a reputation for inadequate service when
something was wrong with a product.
In 2006 the CEO resigned. Kevin Rollins had worked as an external management consultant for Dell prior
to joining the business full-time in 1996. He was Number Two to Michael dell and replaced him as CEO in
2004. He had been responsible for much of the manufacturing efficiency and cost saving. But Dell was
accused of ‘tunnel vision with its sales model’ and Michael Dell felt it necessary to take over again.
Alongside job cuts, the company soon announced a renewed emphasis on product design, confirmed it
would increase sales through third party vendors, including systems installers, and seek to acquire other
businesses which had more of a customer services focus.
1. Explain the competitive strategy that would be suitable for Dell Computers for it to avoid the loss
of competitiveness that it has been experiencing.
Dell started by utilizing the cost leadership strategy as it focused on being the lowest cost producer
in the industry by mass producing standardized products, sourcing directly from the suppliers and
maintaining very low levels of inventory. Then it started a price war by adopting an aggressive
pricing policy to capture market share from its competitors. This made the company to take its
eyes off the type of products which it was producing and for an industry where product
innovations are the most important competitive factor, the consequential slowing down in sales
was inevitable. The customers in this industry are more interested in innovative features than
product prices.
This was why the company, under a new CEO, soon announced a renewed emphasis on product
design to infuse innovativeness into the products it was supplying to the market.
Hence the company should go back to product customization which had been the source of much
of its earlier market success instead of pursuing the mass production of standardized products
which led it to be accused of ‘tunnel vision with its sales model’.
Thus the appropriate competitive strategy to stem the loss of competitiveness which Dell was
experiencing should be the differentiation-focus strategy which should meet the needs of its
market and ensure customer satisfaction. This strategy helps the organization to be unique by
providing innovative products to its chosen market segment.
2. In addition to what dell experienced briefly state any five (5) sources of competitive advantage
over its rivals.
Sources of Company Competitive advantage
i.
Quality products in many consumer and industrial markets- Product innovation skills
ii.
Respected name among buyers of its products- distinctive competence
iii.
Financial power- Cost advantage- Well-conceived financial area strategies
iv.
Technical leadership in many sectors - acknowledge market leader
v.
Superior and Skilled Human Capital- proven management and - good competitive skills
vi.
Access to economies of scale
3. Explain how IT influenced the choice and implementation of Dell Computers’ competitive strategy.
The IT industry is a very technological intensive industry where innovation in terms of processes
and products is the major source of competitive advantage. There has been and continues to be a
lot of changes in this industry in terms of product range and features which are important to the
customers. Dell was mainly selling its products over the Internet and telephone networks, which
means that Dell’s business model and competitive strategy were anchored on the utilization of IT.
Without IT, Dell would not be able to reach its target market or its customers to reach the
company. All the products which Dell was producing were for the IT industry and the company
relied mainly on system installers to install its products at customers’ premises. Hence the
developments in IT influenced both the choice and implementation of its competitive strategy.
4. Describe how technological change impacted the operational efficiency and effectiveness of Dell
Computers.
Dell never intended to become a high-technology company but it relied mainly on sales and
logistics to serve its target market. More of its new product lines like servers and printers which
accounted for the bulk of its sales were experiencing a slowing down of sales growth, a sign that
competitors were enjoying a bigger market share than the company. Even its margins were being
eroded by competitors as a result of reductions in both cost advantage and price advantage.
But now its founder, Michael Dell, is being called the Henry Ford of the information age to indicate
how the company is strongly dependent upon IT and hence any technological change in that
industry does seriously affect both the efficiency and effectiveness of the company. For example,
the company has relied extensively on Intel chips and sales are direct to customers, typically over
the Internet or telephone. Together with a telephone helpline, this alleviates the need for
middlemen and the consequential distributor margins. Dell builds to order and carries very little
inventory of finished products. This cannot happen effectively without strict attention to detail and
constant process reengineering which is required to adjust to constant technological change. The
assembly time for a PC was reduced to 4 minutes, with a further 30 seconds allowed to fix the
holograms and logos for Microsoft and Intel, which are necessary due to technological change.
These improvements are needed to enhance both the efficiency and effectiveness performance
levels. The company’s announcement of a renewed emphasis on product design was aimed at
responding to changing circumstances in the industry.
THE ENGLISH PREMIER LEAGUE
It is debatable whether the English Premier League is the foremost football league in the world. Some
would definitely argue it is. Matches are televised for a global audience. The leading teams have relied
on overseas players for many years – there are matches when Arsenal may not even include one English
player in their line-up. Chelsea is not far behind in this. There are several foreign managers in charge of
the top clubs. A number of these clubs have become public companies, but at the same time a number
of the leading clubs have been bought by wealthy foreign businessmen. Although it is not this simple,
two broad types are prominent: Russian (and other) oligarchs (such as the owner of Chelsea) and
owners of USA sports franchises (Manchester United and Liverpool). The owner of Fulham is Mohamed
Al-Fayed (owner of Harrods) and until recently the owner of Manchester City was the ex-Prime Minister
of Thailand. In September 2008 the ownership of City moved to that of the Abu Dhabi Investment Group
for a reported £200 million. In contrast many of the leading clubs in Europe still tend to be dominated by
family dynasty ownership.
The big clubs are attractive because of their earnings potential. They are global brands which can be
exploited in various ways and they are also a route to huge television earnings. But as businesses they
carry risks. Success on the football field becomes something of a prerequisite, but only a few can
succeed – and that success may not be sustainable (football) season after (football) season. In turn that
success implies huge wage bills with some players earning well over £100,000 every week. It seems
wage bills have been increasing at 12 per cent per year. Huge transfer fees are paid for top players,
whose loyalty may change after just a few seasons and they choose to leave. New stadia, often linked to
hotel and leisure complexes, are essential – but costs and planning restrictions are not always easily
dealt with. By 2008 the total indebtedness of English football was some £3 billion, with £2.6 billion of
this attributable to the Premier League. According to Deloitte (February 2009) Manchester United was
£604 million in debt, Chelsea £620 million, Liverpool £350 million and Arsenal £268 million.
However, this needs to be balanced by the value of the current Premier League TV deal for 2007– 2010,
which is £2.7 billion. BSkyB attracted 171,000 new customers in the last six months of 2008, with fans
apparently deciding it was cheaper to watch games at home rather than on large screens in their local
pub. Attendances for the top clubs are also holding up, with only five clubs – Wigan, Blackburn, Bolton,
Sunderland and Middlesbrough – using only 80 per cent of their seating capacity. Yet the average price
of a ticket in the Premier League is £34, more than double the price of a similar ticket for the Bundesliga
in Germany, where a similar pattern exists – namely the attendances of the top clubs remaining strong
and only struggling clubs, performance wise, suffering any significant drop.
Early in 2009 the point was made that the credit crunch had yet to really hit English football. Contracts,
sponsorship and season ticket sales for (at least) the 2008/9 season were in place. But what about
further down the line? Is there a real risk a Premier League club could go into receivership?
Moreover, football governing bodies in Europe are suggesting this is unsustainable and clubs with huge
debts should be banned from European competitions. Cynics would comment that this happened when
England’s top four clubs were particularly strong, if not dominant, in Europe. It is also an issue that these
clubs are all able to service their debt. Chelsea is exceptional, of course.
The money is owed to (the) owner and benefactor Roman Abramovitch, so is it realistically any more
than a paper figure? A second problem that might have to be faced is the call from certain quarters to
limit the number of overseas players in any one team. One other related and contentious issue is that as
the Premier League has got stronger and stronger, the fortunes of the English team, which has won
nothing since the 1966 World Cup, have waned.
1. Analyse the English Premier League as an industry using Porter’s Five Forces and determine whether
it is profitable or otherwise. Draw a diagram of the Five Forces Model.
There are five forces that determine the profitability of an industry: threat of new entrants, threat of
substitute products, bargaining power of suppliers, bargaining power of buyers and rivalry among
the existing firms in the industry.
Threat of New Entrants
These are the new competitors who can enter the industry if it is perceived to be attractive in terms
of profitability or other returns.
The English Premier League is arguably the foremost football league in the world. Matches are
televised for a global audience. The leading teams have relied on overseas players for many years–
there are matches when Arsenal may not even include one English player in their line-up. Chelsea is
not far behind in this. This increases the threat as it indicates the attractiveness of the industry.
There are several foreign managers in charge of the top clubs. A number of these clubs have
become public companies, but at the same time a number of the leading clubs have been bought by
wealthy foreign businessmen. The two prominent broad types are Russian (and other) oligarchs
(such as the owner of Chelsea) and owners of USA sports franchises (Manchester United and
Liverpool). In September 2008 the ownership of City moved to that of the Abu Dhabi Investment
Group for a reported £200 million. In contrast many of the leading clubs in Europe still tend to be
dominated by family dynasty ownership.
The big clubs are attractive because of their earnings potential. They are global brands which can be
exploited in various ways and they are also a route to huge television earnings. This increases the
threat of new entrants. But as businesses they carry risks because success on the football field
becomes something of a prerequisite, but only a few can succeed – and that success may not be
sustainable (football) season after (football) season. In turn that success implies huge wage bills with
some players earning well over £100,000 every week. It seems wage bills have been increasing at 12
per cent per year. This reduces the threat.
Huge transfer fees are paid for top players, whose loyalty may change after just a few seasons and
they choose to leave. New stadia, often linked to hotel and leisure complexes, are essential – but
costs and planning restrictions are not always easily dealt with. By 2008 the total indebtedness of
English football was some £3 billion, with £2.6 billion of this attributable to the Premier League. All
these are risks that can reduce the threat of new entrants. Fans too have apparently been deciding
that it was cheaper to watch games at home rather than on large screens in their local pub.
Attendances for the top clubs are also holding up, with only five clubs using only 80 per cent of their
seating capacity. Yet the average price of a ticket in the Premier League is more than double the
price of a similar ticket for the Bundesliga in Germany, where a similar pattern exists – namely the
attendances of the top clubs remaining strong and only struggling clubs, performance wise, suffering
any significant drop. This increases the threat. Contracts, sponsorship and season ticket sales for (at
least) the 2008/9 season were in place. But football governing bodies in Europe are suggesting the
debt levels were unsustainable and clubs with huge debts should be banned from European
competitions. But this also happened when England’s top four clubs were particularly strong, if not
dominant, in Europe. Moreover, these clubs are all able to service their debt so they are solvent.
This increases the threat.
Threat of Substitute Products
Football has always been the most popular sport of England. Hence this threat is not significant.
Bargaining Power of Suppliers
The leading teams have relied on overseas players for many years. Huge transfer fees are paid for
top players, whose loyalty may change after just a few seasons and they choose to leave. New
stadia, often linked to hotel and leisure complexes, are essential – but costs and planning
restrictions are not always easily dealt with. By 2008 the total indebtedness of English football was
some £3 billion, with £2.6 billion of this attributable to the Premier League. All these are risks that
can reduce the threat of new entrants. Contracts, sponsorship and season ticket sales for (at least)
the 2008/9 season were in place. Hence the bargaining power of suppliers is high.
Bargaining Power of Buyers
Although fans have apparently been deciding that it was cheaper to watch games at home rather
than on large screens in their local pub, attendances for the top clubs are still holding up and are
strong. Hence the bargaining of buyers is high.
Rivalry among the Existing Firms in the Industry.
There is a lot of rivalry among the teams in the English Premier League in terms of attracting the
best players, popularity among fans, winning the most silverware, branding, stadia, and sponsorship
deals. This industry is therefore not profitable at all.
2. Explain a SWOT analysis of this industry and advice potential investors accordingly.
SWOT is an acronym that stands for strengths, weaknesses, opportunities and threats.
For the English Premier League as an industry, its strengths are its global reputation ( it is the
foremost football league in the world), global branding, the global audiences whereby matches are
televised for a global audience, a number of these clubs have become public companies, a number
of the leading clubs have been bought by wealthy foreign businessmen, lucrative TV deals and
sponsorships, contracts, huge television earnings, ability to service debts, high ticket prices and
seasonal tickets.
The weaknesses are dependency upon foreign managers and players, foreign ownership, ownership
by family dynasties, success on the field unsustainable seasonally, and excess stadia capacity.
The opportunities are high attendances, increasing popularity of football, wealthy foreign investors,
new stadia and globalization.
The threats are the high unsustainable indebtedness levels, high costs of stadia, players and transfer
fees, lack of loyalty among players, fans preferring to watch matches at home, and debt causing
banning of clubs, planning restrictions, and the credit crunch.
Advice: Since the strengths and opportunities are more than the weaknesses and threats, this
industry is still viable in terms of investment.
3. Describe the corporate governance issues which could help the English League to become
sustainable.
Localizing club ownership and player recruitment can help the league become sustainable since it
reduces the complexities of cultural diversity. Employing more locals should improve relations with
the local communities. Avoiding sole ownership or ownership by a single wealthy investor or family
dynasties should be encouraged. The managements of the clubs should pursue continuous
improvements relentlessly so that costs are minimized which reduces indebtedness and increases
returns to the key stakeholders. There should be strong boards to control the foreign managers who
have become celebrities and hence not easy to control. The appropriate corporate governance
mechanisms should be utilized to improve corporate governance in the English Premier League as
an industry.
Zambezia Insurance Company (ZIC) was established in 1996 by Mr. Oliver Wamui and was located in
Lusaka. Prior to establishing ZIC, Wamui had worked for the Zambia State Insurance Company (ZSIC) for
fifteen years. On his retirement in 1992, he was engaged by ZSIC as an insurance broker. In 1996, Wamui
decided to form his own insurance company, known as Zambezia Insurance Company, and employed
three people who had been colleagues at ZSIC. Selling insurance is difficult in Zambia and to drum up
business, Wamui and his partners essentially wooed individuals and institutions they had known while in
employment with ZSIC. While this approach had worked somewhat successfully in the initial period,
business began to thin out with the liberalization of the insurance industry in the 2000s. For ZIC, there
was the added problem that Wamui and his colleagues were getting older and they did not have the
energy levels of the earlier years. Wamui therefore decided to reorganize the management of the
company by turning himself and his three colleagues into a Board of Directors and leaving the day to day
running of the business to a management team headed by a General Manager. These organizational
changes took place in 2010.
Unfortunately, business did not pick up and by 2015 two General Managers had been recruited and
fired. It was at this point that Lubasi Nawa was recruited. Lubasi was a holder of a CA Zambia. What
impressed the Board of ZIC about him were not only his educational credentials but his relative youth
and desire for success. Lubasi was born in 1980 in Kalabo and was only 35 years old at the time he was
recruited as General Manager of ZIC in 2015. But he had had to struggle and work hard all his life. His
father was a fisherman and his mother was a housewife. The family was blessed with eight children and
Lubasi was the first born. As a fisherman, Nawa senior had struggled to raise his family, and only Lubasi
could be sent to school albeit with the assistance of white missionaries. However, Lubasi had proved to
be an intelligent and hardworking pupil. His effort, hard word work and perseverance at school paid off
and culminated in an award of CA - Zambia in October, 2014.
When he appeared for the job interview at ZIC, Wamui and the other Board members did not mince
words with him. They told him point blank that his task was to turn the company around, failure to
which his services would be terminated as had happened to his predecessors.
As soon as he took over as General Manager, Lubasi embarked on meeting the challenge he faced head
on. Aware of the enormous task of convincing people to take up insurance, he decided that he would
first target low and medium income households in the sprawling townships of Lusaka. This segment of
the Lusaka population had been largely ignored in the past by traditional insurance companies
ostensibly because it was perceived to be too poor to afford insurance. Although Lubasi also realized
that these households were generally averse to taking up insurance because of income limitations, he
was nevertheless convinced that they could be persuaded to insure some items they valued. Lubasi
came up with a unique way of selling insurance to households. ZIC salespeople would physically visit
households and interact with various members of household to get a feel of what items were treasured
in a home and would then propose to a household an insurance policy that matched the pocket and
value. This novel way of selling insurance ensured that insurance was customized and avoided the
hassles associated with selling insurance at arm’s length.
Another approach used by ZIC was to capitalize on the vacuum created in rural areas by the departure of
some large insurance companies who considered rural areas unprofitable.
It also dawned on Lubasi and his management team that one of the reasons ZIC had remained small was
because the company had confined itself to Lusaka. Management of ZIC therefore decided to take the
company to areas beyond Lusaka and appointed insurance brokers not only in Lusaka but also in all the
provincial centres of Zambia. Insurance brokers were urged not to sit in their offices but ‘to go out there
and catch the uninsured wherever they could be found.’ The company was pleasantly surprised when
some brokers reported that they had sold insurance to vendors in public markets who, fearing for the
safety of their merchandise in view of frequent fires and thefts in public markets, had taken up
insurance the way fish takes to water. Lubasi also noticed that with growing affluence, there was an
increase in travel for business and leisure by many Zambians from all walks of life. These travellers
needed money from their banks to facilitate their travels. ZIC approached some commercial banks and
entered into an alliance with them to sell ZIC travel insurance to those customers who wanted foreign
exchange to travel abroad.
By the end of 2017, ZIC had achieved some measure of success over the pre-Lubasi Nawa era. The
number of people and institutions that had taken up insurance with the company had doubled and
revenue had tripled. To cap it all, the success of ZIC did not go unnoticed to the insurance fraternity and
the financial sector. The company received ‘The Most Promising Insurance Company’ Award in 2017 at
the Lusaka Agricultural and Commercial Show. On its part, the Board of Directors was so satisfied with
the performance of the company under the management of Lubasi Nawa that it awarded a bonus to all
employees, approved a dividend for the shareholders, and an increase in the sitting allowance for
members of the board of directors.
1. Compare and contrast the roles played by the Board of Directors and Lubinda Nawa as General
Manager in the governance of Zambezi Insurance Company.
a. The Board of Directors is a body of persons who represent the interests of shareholders.
Those interests are reflected by Wamui as the founder of the company. As Wamui has also
turned himself into a member of the board of directors, these interest have not changed and
are in fact illustrated by his instruction to Lubasi Nawa to turn the company around in the
light of the previous poor performance.
b. The Board of Directors at Zambezia Insurance Company (ZIC) thus constituted the policy
making and governing body of the firm. In this regard, they articulated the general direction
of the company given the previous poor performance and hired general managers, including
Lubasi Nawa, to adhere and follow this direction. It is also at this level that the strategic
direction was presented, discussed, approved or rejected. Thus when the direction of bringing
profit to the firm was not being met by the predecessors of Lubasi Nawa, the duty of the
board was to terminate their services and hire a new general manager who could desired
results.
c. In contrast, a General Manager is the chief executive officer of the company and responsible
for the day-to-day running of the firm. He is thus accountable to the Board of Directors by
meeting the expectations of the Board and other stakeholders. He is therefore expected to
initiate, defend and implement the strategy of the organization. He/she is the chief strategist
and guides the Board in the selection, evaluation and implementation of strategy.
2. What strategies did ZIC employ under Lubasi Nawa in order to meet the expectations of the Board
of Directors?
The expectation of the Board of Directors was for the company to improve its performance. Lubasi
Nawa was hired against a background of unsatisfactory performance by his predecessors. His
mandate as given to him by the Board of Directors was to turn things around. To bring success to
the company, the following strategies were deployed under the stewardship of Lubasi Nawa:
a. Market development strategies by (I) extending to other markets, namely, the targeting of
households with customized insurance policies; (ii) the extending of operations beyond
Lusaka through the engagement of brokers
b. Service/Product innovation strategy by customizing insurance among households
c. Leadership strategy by filling up the vacuum left by established large insurance firms that
had decided to abandon areas they considered unprofitable
d. Alliance/Product innovation strategy by introducing travel insurance to travellers through
an alliance with commercial banks
3. Draw a diagram of the strategic clock and discuss the strategies which ZIC had employed since its
inception.
4. Explain why the strategies Nawa used worked to turn the company around.
 Focused strategies - for price conscious customers.
 Low-price strategies- offer better value than competitors.
 Focus is in line with market segmentation – designs products/services that meet needs of a
particular market.
 Can be used with both cost leadership and differentiation, thus providing the benefits of
three strategies.
Shoprite Holdings Limited is an investment holdings company whose combined subsidiaries constitute
the largest fast moving consumer goods (FMCG) retails operation on the African continent. Today the
Shoprite Group trades with 1068 corporate and 275 franchise outlets in 17 countries across Africa,
bringing the total number of stores in the Group to 1343.
The Shoprite Group of Companies started from small beginnings in 1979 with the purchase of a chain of
8 Cape-based supermarkets for R1 million. In 1983 the Group opened its first branch outside the
Western Cape-in Harts water in the Northern Cape. A year later Shoprite sped up its growth by buying
six food stores from Ackerman’s. In 1986 the Group expanded to the Free State, opening a store in
Bloemfontein. Shoprite was listed on the JSE Securities Exchange South Africa with a market
capitalisation of R29 million. Two years later Shoprite opened two stores in the former Transvaal
province, the first of which is situated in Polokwane (Pietersburg).
In 1990 Shoprite opened in Namibia; in 1991 it acquired the national Checkers chain of supermarkets; in
1997 Shoprite acquired the OK Bazaars Group; in 2000 the Group opened its first supermarkets in
Zimbabwe, Uganda, Malawi, Lesotho and Egypt; 2002 saw the acquisition of the French-owned
Champion supermarket group in Madagascar and Score Supermarkets' Tanzanian operation; in 2004
Shoprite started trading as a wholesale operation in India; in 2005 the Group acquired both Food world,
with 13 stores, and Comp ticket, as well as opening the first Shoprite Liquor Shop and it entered Nigeria;
and in 2007 Shoprite announced an investment of US$80 million into the Democratic Republic of the
Congo.
Shoprite Holdings Ltd comprises the following entities: the Shoprite Checkers supermarket group, which
consists of 380 Shoprite supermarkets; 132 Checkers supermarkets; 24 Checkers Hyper; 148 Usave
stores; 20 distribution centres supplying group stores with groceries, non-foods and perishable lines;
199 OK Furniture outlets; 14 OK Power Express stores; 46 House & Home stores; and 125 Hungry Lion
fast food outlets. Through its OK Franchise Division, the Group procures and distributes stock to 26 OK
MiniMark convenience stores; 24 OK Foods supermarkets; 75 OK Grocer stores; 43 Megasave wholesale
stores; 26 OK Value stores and 81 Sentra stores and buying partners.
Shoprite’s expansion plan into Zambia started in 1995 with the purchase of six buildings in a
privatization deal. By 1996, a full chain of state-owned retail stores were under Shoprite control. The
first refurbished Shoprite retail store opened in Cairo Road, Lusaka. Shoprite Zambia currently operates
18 retail supermarkets (trading as "Africa Supermarkets") together with seven Hungry Lion outlets,
Shoprite’s fast food initiative. Freshmark, the company’s distributor of fresh fruit and vegetables, also
operates depots in Lusaka and Kitwe.
The Group’s primary business is food retailing to consumers of all income levels. Freshmark is South
Africa’s largest fruit and vegetable distributor. They distribute produce to over 440 Shoprite Group
stores as well as other retail outlets. The Shoprite Group has two furniture outlets, namely OK Furniture
and House & Home. OK Furniture is aimed at the general public, while House and Home caters for the
more discerning buyer.
Operating in all Shoprite, Checkers and Checkers Hyper stores, the Meat Market Division (the largest
fresh meat supplier within Africa) offers prime cuts and top quality fresh meat. Fast foods are sold
through its Hungry Lion outlets. There are 47 Hungry Lion outlets in South Africa and 18 in other African
countries. The Group also operates 32 liquor stores. It further offers all major service providers’ starter
packs and pre-paid/re-charge vouchers; bus tickets in-store; Medi-Rite is a pharmacy inside selected
Shoprite stores; and airline tickets, now available in more than five hundred retail outlets countrywide.
The Shoprite group employs 81 000 people out of which 1692 are employed in Zambia. Zambia remains
the Group’s largest and most mature business outside South Africa. With 39 percent of the domestic
retail market (Zambia Investment Centre), it is the largest retailer in the Zambian market. Shoprite’s
objective is to provide all communities in Africa with food and household items in a first-world shopping
environment, at the lowest prices.
Its key objective is to control its supply chain. More than a decade’s worth of investment in
infrastructure, software solutions, skills and knowledge delivered both a mechanism by which to sustain
low price points for a longer duration than competitors, while at the same time maintaining a high level
of product availability from its own distribution centres. This has been a winning recipe for maintaining
customer loyalty and boosting sales growth at minimal cost. The Group’s strategy to control the supply
chain not only provides a distinct competitive advantage and an ability to manage risk, but it also has
made sound business sense. The Group also continues to actively manage and control its value chain
while maintaining a strong drive to improve efficiencies. The focus has been on four primary areas
namely inventory management, transport optimisation, operational productivity and store processes.
These efficiencies continue to drive costs down and improve cash flow. Although inventory levels have
increased, a scientific approach to forward buying was adopted. This allowed the Group to sustain its
“low price” position and simultaneously to achieve high levels of product availability.
The Money Market concept constitutes an increasingly important part of the sales offering of the
Group’s two major chains, Shoprite and Checkers. Its main objective is to save consumers time by
enabling them to undertake most of what they have to do “in town”-buying groceries, settling accounts,
reserving seats for a show or a sports event, booking a flight-all in one place. In this way it contributes to
positioning the Group’s supermarkets as destination stores that offer consumers a unique range of
services. Outside South Africa, Shoprite is focusing on markets with growth potential and rich natural
resources, which will drive future economic growth and therefore increased GDP per capita and
consumer spending figures. Shoprite models its cross-border investments on its shopping centre
developments in South Africa, featuring a Shoprite supermarket as the anchor store.
These shopping malls change local consumption and urban environments dramatically. Locally-owned
internet stores and music outlets often make up part of this cluster. In a number of cases, the Shoprite
Group establishes partnerships with a local group. Shoprite Holdings Ltd is a public company listed on
the JSE Limited, with secondary listings on both the Namibian and Zambian Stock Exchanges. Its
ownership therefore lies in the hands of it’s almost 5 000 shareholders. The more significant services
added in the last 18 months is the real-time transfer of money to any Shoprite or Checkers supermarket
of the Group anywhere in South Africa. The service is aimed primarily at lower-income consumers
without bank accounts, and offer people with no collateral the opportunity to send up to R5 000 at a
time to friends, family or business associates at a cost far lower than charged by any financial institution.
1. In the early 1990’s Shoprite pursued an acquisition strategy for its business. Explain the reasons for
pursuing this strategy.
2. Evaluate some problems that a business like Shoprite would encounter in achieving acquisition
success.
3. Discuss the business model that Shoprite has adopted overtime and explain its key strategic focus
areas.
4. Discuss major elements that you would consider in developing a corporate strategy for Shoprite
which is an investment holdings company whose combined subsidiaries constitute the largest fast
moving consumer goods (FMCG) retails operation on the African continent.
The consolidating steel industry
For a long time, the steel industry was seen as a static and unprofitable one. Producers were nationally
based, often state owned and frequently unprofitable– between the late 1990s and 2003, more than 50
independent steel producers went into bankruptcy in the USA. The twenty-first century has seen a
revolution. For example, during 2006, Mittal Steel paid $35bn (£19.6bn; A28bn) to buy European steel
giant Arcelor, creating the world’s largest steel company. The following year, Indian conglomerate Tata
bought Anglo-Dutch steel company Corus for $13bn. These high prices indicated considerable
confidence in being able to turn the industry round.
In the last 10 years, two powerful groups have entered world steel markets. First, after a period of
privatization and reorganization, large Russian producers such as Severstal and Evraz entered export
markets, exporting 30 million tonnes of steel by 2005. At the same time, Chinese producers have been
investing in new production facilities, in the period 2003–2005 increasing capacity at a rate of 30 per
cent a year. Since the 1990s,
Chinese share of world capacity has increased more than two times, to 25 per cent in
2006, and Chinese producers have become the world’s third largest exporter just behind Japan and
Russia.
Steel is a nineteenth-century technology, increasingly substituted for by other materials such as
aluminium in cars, plastics and aluminium in packaging and ceramics and composites in many high-tech
applications. Steel’s own technological advances sometimes work to reduce need: thus steel cans have
become about one-third thinner over the last few decades. Key buyers for steel include the global car
manufacturers, such as Ford, Toyota and Volkswagen, and leading can producers such as Crown
Holdings, which makes one-third of all food cans produced in North America and Europe. Such
companies buy in volume, coordinating purchases around the world. Car manufacturers are
sophisticated users, often leading in the technological development of their materials. The key raw
material for steel producers is iron ore. The big three ore producers – CVRD, Rio Tinto and BHP Billiton –
control 70 per cent of the international market. In 2005, iron ore producers exploited surging demand
by increasing prices by 72 per cent; in 2006 they increased prices by 19 per cent.
The industry has traditionally been very fragmented: in 2000, the world’s top five producers accounted
for only 14 per cent of production. Most steel is sold on a commodity basis, by the tonne. Prices are
highly cyclical, as stocks do not deteriorate and tend to flood the market when demand slows. In the
late twentieth century demand growth averaged a moderate 2 per cent per annum. The start of the
twenty-first century saw a boom in demand, driven particularly by Chinese growth. Between 2003 and
2005, prices of sheet steel for cars and fridges trebled to $600 (£336; A480) a tonne. Companies such as
Nucor in the USA, Thyssen-Krupp in Germany as well as Mittal and Tata responded by buying up weaker
players internationally. New steel giant Mittal accounted for about 10 per cent of world production in
2007. Mittal actually reduced capacity in some of its Western production centres.
1. Porter’s five forces framework was developed as a way of analysing the changing attractiveness
(profit potential) of an industry. Evaluate the global steel Industry presented above using Porter’s
Model.
2. In recent years, which of the five forces has become more positive for steel producers? Justify your
answer giving examples of the Steel Industry in Zambia.
3. In the future, what might change to make the steel industry less attractive or more.
4. Evaluate the limitations of using the five forces framework.
Stills Beverages Plc (Stills) is a major European producer of non-alcoholic drinks. It was formed by the
merger of two rival companies in 1992, and now has an overall market share of approximately twelve
percent (12%) of the European soft drinks market. The main products of Stills are shown in the table
below, together with information relating to the market position of each.
Sector
Children
(un-carbonated)
Children (Carbonated)
Adults (un-carbonated)
Adults (carbonated, low
Sugar)
Adult (Carbonated, full
sugar)
Stills Products
(Market Share
%)
Jolly Juice (18)
Sparkles (24)
Baltic Spring
(8)
Diet Jazz (22)
Jazz (22)
Main Sector rival(s)
(Market Share %)
Spring Fresh (25)
Junior Juice (12)
Fizzy Delight (19)
Go-Juice
(26)
FruitFresh
(18)
Good Day
(9)
Lazy-B Lite
(21)
Diet Mexx
(17)
Lazy-B
(19)
Mexx
(15)
Market sector
conditions
Growing
quickly
Declining
Declining
slowly
Growing
quickly
Declining
slowly
1. Briefly explain the use of the Boston Consulting Group (BCG) matrix in product strategy formulation.
Market growth high
low
BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to portray firm’s
brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis) and speed of
market growth (vertical axis) axis. The Boston Consulting group's product portfolio matrix (BCG
matrix) is designed to help with long-term strategic planning, to help a business consider growth
opportunities by reviewing its portfolio of products to decide where to invest, to discontinue or
develop products. It's also known as the Growth/Share Matrix.
The BCG Matrix (also known as the Boston Consulting Group analysis, the Growth-Share matrix, the
Boston Box or Product Portfolio matrix) is a tool used in corporate strategy to analyse business units
or product lines based on two variables: relative market share and the market growth rate. By
combining these two variables into a matrix, a corporation can plot their business units accordingly
and determine where to allocate extra (financial) resources, where to cash out and where to divest.
The main purpose of the BCG Matrix is therefore to make investment decisions on a corporate level.
Depending on how well the unit and the industry is doing, four different category labels can be
attributed to each unit: Dogs, Question Marks, Cash Cows and Stars.
2. Produce a BCG matrix for the products of Stills, as described above, and recommend an appropriate
strategy for each product, and for the product portfolio as a whole. You should identify any possible
risks to the strategies you have proposed.
QUESTION MARKS
STARS (Invest)
(Analyse)
Diet Jazz
Jolly Juice
DOGS (Divest)
CASH COWS (Milk)
Baltic Spring
Jazz
Sparkles
Low
Market Share
High
Question marks. Question marks are the brands that require much closer consideration. They hold
low market share in fast growing markets consuming large amount of cash and incurring losses. It
has potential to gain market share and become a star, which would later become cash cow.
Question marks do not always succeed and even after large amount of investments they struggle to
gain market share and eventually become dogs. Therefore, they require very close consideration to
decide if they are worth investing in or not.
In other words, these are products or businesses that compete in high growth markets but where
the market share is relatively low. A new product launched into a high growth market and with an
existing market leader would normally be considered as a question mark. Because of the high
growth environment, they can be a “cash sink”.
Strategic choices: Market penetration, market development, product development, divestiture
Stars. Stars operate in high growth industries and maintain high market share. Stars are both cash
generators and cash users. They are the primary units in which the company should invest its
money, because stars are expected to become cash cows and generate positive cash flows. Yet, not
all stars become cash flows. This is especially true in rapidly changing industries, where new
innovative products can soon be outcompeted by new technological advancements, so a star
instead of becoming a cash cow, becomes a dog.
In other words, Successful question marks become stars. I.e. market leaders in high growth
industries. However, investment is normally still required to maintain growth and to defend the
leadership position. Stars are frequently only marginally profitable but as they reach a more mature
status in their life cycle and growth slows, returns become more attractive. The stars provide the
basis for long term growth and profitability.
Strategic choices: Vertical integration, horizontal integration, market penetration, market
development, product development
Cash cows. Cash cows are the most profitable brands and should be “milked” to provide as much
cash as possible. The cash gained from “cows” should be invested into stars to support their further
growth. According to growth-share matrix, corporates should not invest into cash cows to induce
growth but only to support them so they can maintain their current market share. Again, this is not
always the truth. Cash cows are usually large corporations or SBUs that are capable of innovating
new products or processes, which may become new stars. If there would be no support for cash
cows, they would not be capable of such innovations.
These are characterised by high relative market share in low growth industries. As the market
matures the need for investment reduces. Cash Cows are the most profitable products in the
portfolio. The situation is frequently boosted by economies of scale that may be present with
market leaders. Cash Cows may be used to fund the businesses in the other three quadrants.
Strategic choices: Product development, diversification, divestiture, retrenchment
Dogs. Dogs hold low market share compared to competitors and operate in a slowly growing
market. In general, they are not worth investing in because they generate low or negative cash
returns. But this is not always the truth. Some dogs may be profitable for long period of time, they
may provide synergies for other brands or SBUs or simple act as a defence to counter competitors
moves. Therefore, it is always important to perform deeper analysis of each brand or SBU to make
sure they are not worth investing in or have to be divested.
In other words, these describe businesses that have low market shares in slow growth markets.
They may well have been Cash Cows. Often they enjoy misguided loyalty from management
although some Dogs can be revitalised. Profitability is, at best, marginal.
Strategic choices: Retrenchment, divestiture, liquidation
3. Leadership is a vital ingredient in developing the purpose and strategy of organizations. Leaders
have potential to influence the overall direction of the company. However, despite the extensive
research reaching back to the 1950s, there is no general agreement on leadership analysis. Discuss
three main approaches to leadership
4. General Electric, a pioneer of strategic management techniques, once defined strategy as “a
statement of how what resources are going to be used to take advantage of which opportunities to
minimize which threats to produce a desired result.” Evaluate this definition and identify issues that
strategy must address.
5. The purpose of organizational control from a strategic perspective is to get the job done despite
environmental, organizational and behavioural obstacles and uncertainties. Identify and explain
three types of control and the components common to all control systems
6. Mr. Mwabila is a butcher operating in Kasempa. He is swamped with complaints from his customers
that the beef he is selling of late is too hard. Mr. Mwabila realizes that this is true because the
animals he buys from villagers around Muselepete area are rather old and the villagers have been
unwilling to sell him young animals which would enable him to supply tender meat in his butchery.
Analyse the significance of a backward integration strategy to Mr. Mwabila.
7. Contemporary corporate governance started in 1992 with the Cadbury report in the United
Kingdom. Cadbury was the result of several high profile company collapses. Corporate governance is
concerned primarily with protecting weak and widely dispersed shareholders against self-interested
Directors and Managers, Discuss the pillars of good corporate governance citing appropriate
industry examples.
 Accountability
Ensure that management is accountable to the Board
Ensure that the Board is accountable to shareholders
 Fairness
Protect Shareholders rights
Treat all shareholders including minorities, equitably
Provide effective redress for violations
 Transparency
Ensure timely, accurate disclosure on all material matters including;
The financial situation, performance, ownership and corporate governance
 Independence
Procedures and structures are in place so as to minimise, or avoid completely conflicts of
interest
Independent Directors and Advisers i.e. free from the influence of others
8. The purpose of organizational control from a strategic perspective is to get the job done despite
environmental, organizational and behavioural obstacles and uncertainties.
(a) Identify and explain three types of control and the components common to all control systems.
(b) Suggest ways that management can use to identify control problems.
(c) Mention any symptoms of inadequate control.
9. (a)Strategic leadership is the ability to shape the organization’s decisions and deliver high value over
time, not only personally but also by inspiring and managing others in the organization. Evaluate
the evolution of leadership theory stating the areas of emphasis at the time.
(b) Managerial success is firmly linked to the ability to exercise the right sort of influence at the right
time.
(c) Identify and describe any five (5) generic influence tactics used in modern organizations.
(d) Explain the concept of emotional intelligence in terms of Goleman’s four leadership traits.
10. (a) Competition is a factor in the external environment that can present an opportunity or a threat
to a firm.
Discuss alternative strategic responses that firms may consider as options in order to have a strong
competitive position in the market place.
(b) The notion of ‘synergy’ has long been a key concept in the area of corporate strategic planning.
Synergy is said to occur where the sum of combining resources is greater than the sum of the parts
which are combined. It is frequently referred to as ‘2+2=5’.
(c) Identify some of the more frequent areas and sources of potential synergy in organizations.
11. Describe why mission and vision statements are so important in the strategic-management process.
12. Briefly discuss the risks of using a Market focus strategy.
13. Discuss the five major types of external forces that should be examined thoroughly as part of an
external audit?
The 2017 National Budget was presented to the National Assembly by the Minister of
Finance on 11 November 2016 under the theme “Restoring Fiscal Fitness for Sustained Inclusive
Growth and Development”. An interesting twist to the budget is the pronouncement that the
procurement of finished petroleum products will be undertaken by the private sector from 1st
March 2017.
14. Discuss any four measures that government should put in place to ensure successful
implementation of this policy taking into account the interests of key stakeholders in this sector.
15. (a)Discuss the role of analysis in strategy formulation and explain three major approaches that are
used to analyse the internal environment.
(b)A butcher is swamped with complaints from his customers that the beef he is selling is too hard.
The butcher realizes that this is true because the animals he buys from villagers are rather old and
the villagers have been unwilling to sell him young animals which would enable him to supply tender
meat in his butchery. Analyse the significance of a backward integration strategy to the butcher.
16. (a)Outline with appropriate examples the fundamental differences between outside-in and insideout thinking about strategic management, and their influence on strategy
(b)With the aid of a diagram, discuss the broad stages of the entire strategic management process
from cradle to grave.
17. Competition is a factor in the external environment that can present an opportunity or a threat to a
firm. Discuss alternative strategic responses that firms may consider as options in order to have a
strong competitive position in the market place
18. Strategy formulation is an important aspect of strategic management. Imagine you have just been
appointed as Chief Executive Officer for Zambia State Insurance Corporation, and the Board of
Directors expect you to formulate a winning strategy for the company that will enable it gain a
strong market position given the intensity of completion in the insurance industry. Discuss the key
components that you would consider in the development of strategy and clearly show how these
apply to ZSIC.
19. The formulation of a suitable strategy entails analysing the external environment for opportunities
and threats and then assessing the strengths and weaknesses. This is what is known as the SWOT
analysis.
Using a SWOT analysis, determine the appropriate strategies in the following scenarios:
(a) Coca-Cola Company Ltd. is a market leader in the soft drink industry in America but finds that the
American market has become saturated and that the demand for soft drinks among Americans has
slowed down principally because Americans perceive Coke as sweet and Americans are wary of
developing diabetes.
The study manual offers the following definition of strategy: ‘…the direction and scope of an
organisation over the long term, which achieves advantage in a changing environment through its
configuration of resources and competences with the aim of fulfilling stakeholder expectations.'
Implicit in this definition is the notion of the external environment (depicted by opportunity/threat)
and resources and competences (depicted by strength/weakness). SWOT is an acronym for
Strength, Weakness, Opportunity and Threat. Thus a SWOT analysis is a technique that may be used
to determine an appropriate strategy of an organization given the opportunity/threat in its
environment and its capability to prosecute the opportunity/threat.
Using the Boston Consulting Group Portfolio Analysis, the two situations can be analysed as follows:
Coca-Cola: The situation of Coca-Cola can be described as follows:
 Opportunity/Threat: The company is facing a threat because demand for coke is low
 Strength/Weakness: The company has the strength because it is the acknowledged market
leader
 Situation – Given the low demand and its strength, the company is a cash cow
 Appropriate strategy – diversify to a different industry because there is no/low opportunity
in the American economy; it has the strength to sell its product where there is demand for
coke
(b) A subsistence farmer has been assured by the Government of the Republic of Zambia that the
Food Reserve Agency will in the next season buy a 50 kilogramme bag of maize at K120. The
meteorology department has also forecast that there will be a good rainfall for growing maize next
season. However, as is the case with most subsistence farmers in Zambia, the farmer does not have
money to buy the requisite inputs, such as, seed and fertilizer.
Subsistence farmer: The situation of the subsistence famer can be described as follows:
 Opportunity/Threat: The farmer is facing an opportunity because the forecast for maize
growing is favourable and the demand for maize is high since the Food Reserve Agency has
undertaken to buy whatever maize is grown
 Strength/weakness: The subsistence has a weakness because he has no resources with
which to buy inputs;
 Situation: Given the opportunity and the weakness characterized by lack of capital, the
subsistence farmer is a question mark or problem child
 Appropriate strategy is to raise capital and then grow maize
20. Three years ago, at a state owned enterprise in Zambia, there was an open conflict between the
Board of Directors and the Chief Executive Officer which culminated in the government dissolving
the board and terminating the services of the Chief Executive Officer. Board members accused the
CEO of having concealed that one of the companies that had won a contract to rehabilitate the
corporate head office was actually owned by the brother of the CEO; in turn, the CEO alleged that
the board chairman was calling for far too many meetings than was provided for by the company’s
statutory requirements.
(a) Contrast and compare the roles of a board of directors and a chief executive officer.
Role of a Board of Directors (BOD) versus the role of a chief executive officer (CEO)
• A BOD represents those who have an equity interest in the firm or those who own
strategic resources; hence board members are usually appointed to the board by their
respective principals to represent them. In contrast, a CEO is ordinarily an employee of the
firm appointed by the BOD to run the day-to-day affairs of a firm.
• A BOD receives, discusses, monitors and approves or rejects strategic decisions, such as,
the budget and strategic plans, bearing in mind the interests of the principals; a CEO is
accountable to the Board for the formulation and implementation of strategy. As such, a
CEO is expected to initiate, defend and implement strategy under the superintendence of
the BOD
• A BOD is the heart of the corporate governance of a firm; the CEO is the chief strategist
and guides the Board in the selection, evaluation and implementation of strategy. More
specifically, the BOD must perform the following tasks inn advancing corporate
governance:
 inquire, critique and oversee management’s strategic proposals in order to determine
whether the proposals meet the interests of owners
 evaluate the calibre of the CEO and senior management in order to ensure that they
have the skills and experience to formulate and implement strategy
 design a compensation scheme for the CEO and senior managers that will not only
motivate management to craft a strategic direction that will maximize share-holder
wealth but that will also adequately compensate the CEO and senior management for
the successful accomplishments of benefits for all stakeholders.
(b) Explain the meaning and significance of transparency and accountability in corporate governance
in the context of what transpired at this state owned enterprise.
The meanings and significance to governance of accountability and transparency.
Corporate governance consists of prescribed relationships and behaviours between a company's
shareholders, directors, and management in which objectives of the company are set, and the
means of achieving those objectives are determined.
Accountability and transparency are essential elements of good governance.
 Accountability:
This refers to the need for stakeholders to be ‘answerable’ for the consequences of their actions.
This is necessary because all actions must primarily enhance promote the interests of owners or
those who have a stake in the well-being of an organization.
The actions that are performed must accordingly be justified from the perspective of those who
have invested in the firm. As representatives of those who have an equity interest in the firm,
members of the board are accountable to their principals, and a CEO who is appointed by the board
to run the day-to-day affairs of a firm, must be accountable to the board for the consequences of
what he/she does.
The diversity of stakeholders can result in conflict where the pursuit of an objective by one party
may not be in the interest of another party. Good governance therefore calls for any one party to be
mindful of the consequences of their actions to the interests of others. The need for accountability
has been triggered by many instances of corporate scandal where officers of a firm have been
caught in acts of omission, dishonesty, or negligence which have harmed other stakeholders. It is
thus necessary for the offending officer to be held accountable for their actions.
In the case cited, it is necessary for the BOD to be held accountable for any action which results in
harm to the organization, such as holding too many meetings which deplete resources of an
organization.
The specific benefits of holding anyone accountable are:
i. To safeguard the resources of those parties that have invested in a firm.
ii. To harness the resources that have been staked in the firm to optimum application in the
pursuit of the firm’s objectives
iii. To attract new investment
iv. To give the firm a good image
 Transparency:
This refers to the need to be open among the various stakeholders and not to conceal anything
which is material in the development of a firm; in other words, nondisclosure can potentially harm
the long-term interests of an organization.
In the case cited, for instance, the non-disclosure by the CEO that he is related to one of the bidders
may result in the contract being awarded to a bidder who less is deserving if the CEO, by being one
of the decision makers, influenced the decision to award in favour of his relation. If the award had
gone to a more deserving candidate had there been full disclosure, the company and society at large
suffer in the process when a contract ends up in a less deserving bidder who benefits from lack of
disclosure. In the case cited, the brother of the CEO had an unfair advantage over others, in that he
could have benefitted from inside information through the CEO or the CEO could have unfairly
swayed the opinion of the firm in his brother-in-law’s favour. By not having the best bidder win the
contract, the interest of the shareholder were compromised.
In fairness to all partied, the CEO should have declared interest in the matter and left it to neutral
minds to select the best bidder.
21. A company that uses energy as an input it its mining operations is now faced with high costs for its
input because its supplier has decided to raise by fifty percent the price it pays for the energy. The
mining company has determined that its current workforce is not sustainable and that it must
accordingly reduce its workforce in order to remain and continue in business.
(a) Explain the relationship between strategy and organization structure.
A strategy encompasses the direction or objective of an organization over the long run.
Underlying strategy are three questions:
 Where is an organization?
 Where does an organization wish to be?
 How does the organization get to where it wishes to be?
These three questions indicate the link between an objective and its implementation. The second
question addresses the objective and the second question is concerned with the means of achieving
the objective. An organization structure is the arrangement of people, tasks and relationships in a
way which facilitates the achievement of an objective. The principal function of an organization
structure in strategic management is therefore to facilitate the implementation of strategy. An
organization structure necessarily begins with a clear determination and understanding of strategy.
Once the strategy is understood, the next step is to execute the strategy by developing an internal
organization structure that is responsive to the needs of strategy.
A responsive organization structure comprises the following steps:
 Identification of the tasks to be performed
 Recruitment of people with the requisite skills to perform the tasks
 Assigning people to the tasks to be performed. The assigning of people can be on the following
criteria:
 The specific functions to be performed – functional organization structure
 The market (customers or region) to be served – market or geographical organization
structure
 The product to be made – product organization structure
 Providing for authority to each unit.
 Providing coordination among the units/sections/departments
(b) Evaluate the link between organization structure and strategy in the context of what has
transpired at the mining company.
In the case of what has transpired at the mining company, the strategy which initially warranted the
recruiting of people and assigning them to specific functions, that is, steps (a) and (b) above, has
changed and the organization structure must correspondingly be realigned to the new strategy.
Since the mining company has to scale down its operations in order to remain profitable, some
functions could have become unnecessary and the employees performing such functions have to be
retrenched if company still wishes to pursue profitability. Retrenchment is the rearrangement of
people and tasks in response to the revised objective in view of the situation the company finds
itself.
22. Mr. Kapila has always wanted to start a manufacturing business in Lusaka to manufacture motor
vehicles that are especially suited for the difficult Zambian terrain. Mr. Kapila wants this business
venture to become successful as it was going to strongly impact other industrial sectors like
transport, agriculture, mining and others that can reduce the poverty levels in the country. In this
vein, he has approached you to provide consultancy services to him in the form of sound business
advice that shall ensure sustainable success for his business in the face of serious competition from
imported vehicles, for example. Thus, advise him regarding the following:
(a) The complete strategic planning process that can lead to the production of a good business
strategy, including the appropriate analyses. Use a diagram.
The Strategic Planning Process is composed of the following components:
Mission: This defines the purpose of the organization, guides strategic decisions and provides a
sense of direction. It reflects the values or expectations of stakeholders and answers the question:
What business are we in?
Objectives: These are the more specific aims or purposes and are usually quantified. They represent
the targets or the things that should be achieved by the organization.
Environmental Analysis: Involves analysing the internal and external environments in which the
business operates to ascertain the opportunities, threats, strengths and weaknesses which
represent the strategic factors that are necessary for the strategy to become successful.
Position Audit: This determines the organization’s strategic position in terms of three main groups of
influences that have to be considered – the environment, strategic capability (resources and
competences or strengths and weaknesses) and expectations of stakeholders, especially those
groups that have a less formal relationship with the organization.
Corporate Appraisal: Made up of environmental analysis and position auditing.
Strategic Options: These are the alternative strategies from which the organization can choose the
strategies that it may implement.
Strategic Choice: The strategies are chosen from the alternatives to achieve competitive advantage
and are based on the understanding of customers and markets.
Strategic Implementation: This involves the putting of the chosen strategy into action by considering
major issues that include structuring, enabling and change management.
Strategic Control: This ensures that the organization is achieving what it set out to accomplish, i.e.
that the implemented strategy is working as expected. It compares actual performance achieved
with the desired results or desired performance and then provides the feedback necessary for
management to evaluate results and take corrective action as required.
(b) The different business strategies which he could utilize to become competitive in his chosen
industry, using a suitable diagram.
Business-level strategy refers to the plan of action that strategic managers adopt to use a company’s
resources and distinctive competencies to gain a competitive advantage over its rivals in a market or
industry.
Choosing a Generic Business-Level Strategy:
Companies pursue a business-level strategy to gain competitive advantage that allows them to
outperform rivals and achieve above-average returns.
They can choose from three basic generic competitive approaches: cost leadership, differentiation,
and focus and various combinations of the three.
These strategies are called generic because all businesses or industries can pursue them regardless
of whether they are manufacturing, service, or not-for-profit enterprises.
Each of the generic strategies results from a company’s making consistent choices on product,
market, and distinctive competencies – choices that reinforce each other.
In other words, a company must achieve a fit among the three components of business-level
strategy.
Cost-Leadership Strategy. A company’s goal in pursuing a cost-leadership strategy is to outperform
competitors by doing everything it can to produce goods or services at a cost lower than theirs.
Differentiation Strategy. The objective of the generic differentiation strategy is to achieve a
competitive advantage by creating a product (good or service) that is perceived by customers to be
unique in some important way.
Cost Leadership and Differentiation Strategy. Recently, changes in production techniques – in
particular, the development of flexible manufacturing technologies – have made the choice
Between cost-leadership and differentiation strategies less clear-cut. With technological
developments, companies have found it easier to obtain the benefits of both strategies. The reason
is that the new flexible technologies allow firms to pursue a differentiation strategy at a low cost;
that is, companies can combine these two generic strategies. In this manner, some firms are
managing to reap the gains from cost-leadership and differentiation strategies simultaneously.
Focus Strategy. This strategy differs from the other two chiefly because it is directed toward serving
the needs of a limited customer group or segment. A focus strategy concentrates on serving a
particular market niche, which can be defined geographically, by the type of customer, or by
segment of the product line.
Once it has chosen its market segment, a company pursues a focus strategy through either
differentiation or a low-cost approach. In essence, a focused company is a specialized differentiator
or a cost leader.
(c) How he could choose the suitable business strategy that can help his business to gain
competitive advantage in his industry.
Strategic choices are made at both the corporate and business unit levels. At the corporate level,
strategy is primarily about scope which is concerned with the overall product/business portfolio, the
spread of markets and the relationship between business units and the corporate centre.
Stakeholder power and interest influence the direction in which strategy evolves.
(d) The limiting factors that could affect the competitive advantage for the organization.
Every organization operates under resource constraints and a limiting factor is an example of such
constraints. A limiting factor or key factor is a factor which at any time or over a period may limit the
activity of an entity, often one where there is a shortage or difficulty of supply.
The following are some of the limiting factors that could affect this organization:
 Production under capacity or lack of capacity to produce the vehicles due to excessive
demand.
 Shortage of suitably qualified personnel with the requisite technical knowledge in terms of
the various functions like procurement, production, sales, accounting, etc.
 Shortage of financial resources leading to insufficient working capital.
 Limited domestic market in terms of size.
 Inadequate research design capability to develop new products and services to meet the
changing needs and conditions.
23. In 1998, Fingerhut Company had been a thriving mail order retailer with annual revenues of $2
billion. It was making a successful transition to electronic commerce. This venerable catalogue
company was rapidly opening Internet Web sites and buying equity stakes in other online retailers.
With its expertise in filling and shipping catalogue orders, Fingerhut successfully marketed its order-
fulfilment competency on a contract basis to other companies, such as eToys and Wal-Mart.
Business analysts were impressed by Fingerhut’s diversification strategy. Impressed with the
company’s performance, Federated Department Stores acquired Fingerhut in 1999 for $1.7 billion.
Federate d’s management confidently predicted that the corporation’s overall Internet sales would
reach $2 to $3 billion by 2004 with the addition of Fingerhut. But just 2 years after this purchase,
Federated found out that things were getting bad and not better as it had earlier predicted.
Management found that while Fingerhut had an excellent strategy for the Internet and its catalogue
businesses, its implementation of that strategy had been poor. (Adapted from Edwards: Federate
d’s Fingerhut Fiasco, Business Week, 2000).
1. Describe the organizational structure which Federated adopted after acquiring Fingerhut.
Federated used the multi-divisional organizational structure which divides the organization into
semi-autonomous divisions that may be differentiated by territory, product or market.
Federated was the holding company in that setup and the holding company structure is an
extreme form in which the divisions are separate legal entities. Communication between
divisions and head office is restricted, formal and related to performance standards. Influence
is maintained by headquarters’ power to hire and fire the managers who are supposed to run
each division.
2. Describe the most common problems businesses encounter with that type of organizational
structure when they implement their strategies.
Problems of the Multi-Divisional Organizational Structure
 A division is partly insulated by the holding company from shareholders and capital
markets, which ultimately reward performance.
 Different product-market divisions might function better as independent companies.
 The divisions are more bureaucratic than they would be as independent corporations,
owing to the performance measures imposed by the strategic apex.
 Headquarters management have a tendency to usurp divisional profits by management
changes, cross-subsidies, head office bureaucracies and unfair transfer pricing systems.
 In some businesses, it is impossible to identify completely independent products or
markets for which divisions would be appropriate.
 Divisionalization is only possible at a fairly senior management level, because there is a
limit to how much independence in the division of work can be arranged.
 It is a halfway house, relying on personal control over performance by senior managers
and enforcing cross-subsidisation.
 Many of the problems of divinisation are those of conglomerate diversification. Each
business might be better run independently than with the others. The different businesses
might offer different returns for different risks which shareholders might prefer to judge
independently.
3. Using a diagram, describe a technique that helps an organization to align its objectives and
measures to its mission and strategy during the strategy implementation process which is
commonly utilized.
The Balanced Scorecard
This approach emphasizes the need for a broad range of Key Performance Indicators (KPIs) and
builds a rational structure that reflects longer term prospects as well as immediate
performance. It seeks to translate mission and strategy into objectives and measures, and
focuses on four different perspectives:
 Financial perspective – To create shareholder value for financial success.
 Customer perspective – To create customer value.
 Internal business process perspective – Internal processes and decision making
improvements.
 Innovation and Learning perspective – Continuing to create value and maintain the
company’s competitive position.
Performance targets are set once the key areas for improvement have been identified, and the
balanced scorecard is the main monthly report.
The scorecard is balanced in the sense that managers are required to think in terms of all four
perspectives, to prevent improvements being made in one area at the expense of another. But
the scorecard should be used flexibly since the four perspectives may not be perfect for all
organizations. It may be necessary to add further perspectives related to the environment or to
employment. The process of deciding what to measure forces a business to clarify its strategy.
4. Provide a seasoned advice to the business community at large regarding how to select a proper
organizational structure when implementing strategies to ensure superior organizational
performance.
There are 9 tests that may be used to assess proposed organizational structures, with the first 4
tests relating to the organization’s objectives and the restraints under which it operates while
the last 5 relate to matters of design principle.
 Market advantage. Where processes must be closely coordinated in order to achieve
market advantage, they should be in the same structural element.
 Parenting advantage. The structure should support the parenting role played by the
corporate centre.
 People test. The structure must be suited to the skills and experience of the people that
have to function within it.

Feasibility test. This test sweeps up all other constraints, such as those imposed by law,
stakeholder opinion and resource availability.
 Specialized cultures. Specialists should be able to collaborate closely.
 Difficult links. It is highly likely that some inter-departmental links will be subject to
friction and strain.
 Redundant hierarchy. The structure should be as flat as is reasonably attainable.
 Accountability. Effective control requires clear lines of accountability.
 Flexibility. The structure must allow for requirements to change in the future, so that
unexpected opportunities can be seized, for example.
24. Mr. Mwikisa Muyumbana, until 31 December of last year worked as Director, Business development
in a privately owned group of companies. The Board recently appointed him to the position of
Managing Director and CEO of the organization. He has been requested by the board to develop a
new corporate strategy and winning strategies that must stand a test of time.
(a) State any four (4) functions of corporate strategy.
 Building and Managing a high –performing portfolio of business units (strengthening
existing business positions, divesting businesses that no longer fit into management’s
plans).
 Capturing the synergy among related business Units and turning it into a competitive
advantage
 Synergy leads to creation of opportunities and transfer of skills and Share of Experts or
facilities
 Establishing investment priorities and steering corporate resources into businesses, with
the most attractive opportunities.
 Reviewing/revising/unifying the major strategic approaches and moves proposed by SBU
managers.
(b) Discuss with illustrations three (3) tests that can be used to evaluate the merits of one strategy
over another and to gauge how good that strategy is.
The Goodness of Fittest
A good strategy is well matched to the company’s situation – both internal and external factors and
its own capabilities and aspirations.
The competitive Advantage test
A good strategy leads to sustainable competitive advantage. The bigger the competitive edge that a
strategy helps builds the more powerful and effective it is.
The performance Test
A good strategy boosts company performance. Two (2) kinds of performance improvements are the
most telling, firstly in gains in profitability and secondly gains in the company’s long-term business
strength and competitive position.
25. (a)Mukula Forestry Company is a private company operating in the Northern Province of Zambia
dealing with both growing and harvesting of the various tree species sold on the international
market. Due to various misunderstandings of its operations by major stakeholders, the company
needs to redefine its objectives and publicise them in clear terms.
Using the Ashridge College Model of Mission, advice management on how this model can be used to
expand the mission of the Company.
The Ashridge College Model of Mission presents four (4) separate elements in an expanded
definition of the mission:
I. Purpose: Fundamental questions to help redefine the mission include: Why does an organization
exist and who does it exist for?
 Is it to create wealth for the owners?
 To satisfy the needs of all stakeholders?
 To reach some higher goal such as advancement of society?
II. Values: These refer to the beliefs and moral principles that underlie the organization’s culture.
III. Strategy: This provides the commercial logic for the company, and so addresses questions such
as; what is our business? What should it be?
IV. Policies and standards of behaviour: These provide guidance on how the organization’s business
should be conducted.
(b) Management at Mukula Forestry Company further realizes the need to formulate a strategic
marketing plan as the company enters the international market.
Outline the contents of the strategic marketing plan.
I. The Executive Summary: This is the finalized planning document with a summary of the main goals
and recommendations in the plan.
II. Situational Analysis: This consists of a SWOT analysis and forecasts.
III. Objectives and Goals: These refer to what the organization is hoping to achieve, or needs to
achieve i.e. in terms of market share or profitability.
IV. Marketing strategy: This considers selection of target markets, the marketing mix and marketing
expenditure levels.
V. Strategic marketing plan: These are long-term plans with a strong external orientation which aims
to match the activities of the organization to its distinctive competences.
VI. Tactical Marketing plan: These are usually annual plans and generally based on existing products
and markets. They are concerned with marketing mix issues.
VII. Action plan: These set out how the strategies are to be achieved for example the marketing mix
strategy which may vary for each segment.
VIII. Budgets: These are developed from the action programme.
IX. Controls: These will be set up to monitor the progress of the plan and the budget.
26. The Industrial Development Corporation (IDC) that was constituted to help in developing capacity of
the state owned business enterprises has identified strategic leadership deficiencies among top
executives of a number of them. This has accounted for poor implementation of what IDC
management considers to be very good strategies most companies have developed. As an expert in
the area of organization leadership you have been appointed to come up with a list of core
characteristics of strategic leadership that are needed in strategy execution.
Evaluate in detail any five (5) of such characteristics you would include that will be observed in a
strategic leader.
Vision, Eloquence and Consistency
One of the key tasks of leadership is to give the organization a sense of direction of vision. The
leaders are also eloquent enough to communicate this vision to others within the organization in
terms that can energise people and they consistently articulate their vision until it becomes part of
the culture of the organization.
Commitment
A strong leader is someone who demonstrates commitment to his/her particular vision, often
leading by example. Leading by example can mean doing what one preaches; this kind of
commitment is a powerful signal to employees within the organization. If it is cost minimization the
CEO is the first to do it.
Being Well Informed
Good leaders develop a network of formal and informal sources that keep well informed about what
is going on within their organization. They develop feedback- channels of finding out what is going
on within the organization so that they do not have to rely on formal information.
Willingness to delegate and empower subordinates
 Good leaders are good delegators. They recognize that unless they do delegate, they can
quickly become overloaded with responsibilities.
 They also recognize that empowering subordinates to make decisions is a good motivational
tool.
 Delegating also makes since when it results in decisions being made by those who must
implement them.
 Although good leaders will delegate many decisions to lower level employees, they will not
delegate those they judge to be critical to the future success of the organization under their
leadership.
Astute use of Power
Good leaders tend to be very astute in their use of power, which means three things; First, Good
leaders play the power game with skill preferring to build consensus for their ideas; Secondly, Good
leaders often hesitate to commit themselves publicly to detailed strategic plans or precise objectives
since in all probability, the emergency of unexpected contingencies will require adaptation. Thirdly,
a Good leader poses the ability to push through programmes in a piecemeal fashion. The successful
leaders tries to push through his ideas, one piece at a time so that they appear incidental to other
ideas, though in fact they are part of a larger programme or hidden agenda that moves the
organization in his desired direction.
27. University of Chilanga is a recently opened public university that is offering degree and diploma
programmes. Due to competition from both private and public universities, its Council has
requested management to come up with clear mission and vision statements. Management has
requested you specifically to present and enlighten the council members at its next sitting on the
same.
(a) Define a mission statement and a vision statement and state any one major difference between
them.
Mission Statement

A mission statement of an organisation is an explicit sentence that spells out a concept of the
business which gives a general purpose of the firm
 It outlines “who we are” “what we do”, and “where we are headed to”.
 The mission gives a special identity, character and path for development and gives the
personality and philosophy of the firm.
Vision Statement
 A Vision Statement is one that communicates both the purpose and values of the organization.
 It communicates the ultimate future desired state of an organization as owners would want
stakeholders to experience it.
Difference
Whereas the mission states the purpose of the organization, the vision indicates where the
organization should be.
(b) Explain any three (3) major aspects of a mission that the university will need to be aware of.
(I) Understanding the Business
The firm should give an understanding of what business the company is really in. This business
definition is influence by 3 factors
Customer needs
What are the need(s) that are being satisfied by the company’s offerings? It is necessary for the
company to have a customer need profile. It is important to understand these needs clearly.
Customer groups
Whose needs will the company product(s) or service satisfy (Customers) when providing the service
or which customers have you targeted for your product(s)?
Technologies
These techniques that will be used to satisfy targeted customers and functions that will be
performed. In short, how will the customers’ needs be satisfied?
(ii) Deciding When to Change the Mission
This aspect deals with deciding when to change strategic mission and alter the organization’s course.
Times and conditions change such as composition of key stakeholders, aspirations levels of
managers could alter goal orientation, change product life cycles or even social events which can
bring about crises leading a change of the mission may.
(Iii) Communicating the Mission
This aspect ensures that the mission is communicated in ways that are clear, exciting and inspiring
to all stakeholders. Mission statements should inspire, calling for the best out of company
employees and owners. It should use simple, concise terminology repeated over and over in a
challenging and convincing fashion.
28. ZICTA has officially announced that they have given a notification to award a 4th mobile network
operator license to UZI Zambia Limited, based on reviews carried out over the past 2 years. The
notification is for a Network License under the International Market Segment and a Service License
under the National Market Segment. The two licenses were up for competition after a call for
proposals ended last year. Only two proposals were received and UZI has been awarded the
licenses. UZI Zambia Limited has pledged a US$350 million investment and will see the creation of
450 direct employment opportunities. ZICTA Manager of Corporate Communications Ngabo
Nakonde said the regulator realized the “need for deeper competition on the market with a view to
attain improvements in the quality of service offered on the market, attain more competitive pricing
outcomes as well as enhance the levels of investment on the market.” Government approved a law
in June last year allowing more mobile phone voice service providers to boost competition. UZI will
reportedly be rolling out 4G/LTE and 5G network capabilities to over 100 universal access sites in
Zambia.
(a) Imagine you are the new Business Development Manager for Zamtel, explain the competitive
strategies that you would consider in order to respond to competitive pressure from UZI Zambia
Limited.
Porter (1980) believes there are three generic strategies for competitive advantage to consider.
These are:
(i) Cost Leadership strategy: Porter suggests that a cost leadership strategy seeks to achieve the
position of lowest cost producer in the industry as whole. By producing at the lowest cost, the
manufacturer can compete on price with every other producer in the industry, and earn the higher
unit profits. As new business development manager for Zamtel, overall cost leadership can be
achieved by using the latest technology to reduce costs and enhance productivity and by minimizing
overhead costs.
(ii) Differentiation: A differentiation strategy assumes that competitive advantage can be gained
through particular characteristics of a firm’s products. This strategy can be used by building up a
good brand image and creating a difference that customer can easily experience in the mobile
service delivery.
(iii) Focus (or niche) strategy: A focus strategy requires a firm to concentrate its attention on one or
more particular segments or niches of the market and does try to serve the entire market with a
single product. The advantage of this strategy is that a firm does not spread itself too thinly and a
niche is more secure and a firm can insulate itself from competition.
NOTE: Candidates should relate these strategies to Zamtel.
(b) Collaboration between buyers and sellers and between potential competitors can reduce costs
below those of operating independently. In this regard collaboration is considered a valid strategic
option.
State the reasons why collaboration is a valid strategic option.
Collaboration is a valid strategic option because of the following reasons:
(i) Buyers and sellers may collaborate to ensure high quality, share the cost of research or reduce
inventory levels.
(ii) Collaboration between members of a fragmented market increases buyer power as when small
retailers co-operate to buy in large quantities.
(iii) Collaboration between suppliers in an industry over such matters as marketing and research and
development can help to build barriers to entry and against substitutes.
(iv) Collaboration may be the best way to obtain entry to some foreign markets; aspiring entrants
can obtain local knowledge and access to local infrastructure.
(v) Suppliers may collaborate with consumers for a variety of reasons i.e. assembly of furniture and
self-assessment for tax liability.
(vi) Knowledge sharing may be required in the public sector as a form of best practice. Also
collaboration may be required to improve standards.
29. Out of 50 beers drunk by South Africans, 49 are brewed by South African Breweries (SAB).
Founded more than a century ago, SAB controlled most of the local beer market by 1950 with
brands like Castle and Lion, and now new brands have been included like Mosi and Nile. When the
government repealed the ban on the sale of alcohol to blacks in the 1960s, SAB and other brewers
competed for the rapidly growing market. SAB fought successfully to retain its dominance of the
market. With the end of apartheid, foreign brewers have been tempted to break SAB’s nearmonopoly, but have been deterred by the entry barriers SAB has erected in terms of huge capital
investments. (Adapted from: Wheelen& Hunger, Strategic Management and Business Policy,
Prentice Hall, 2002).
(a) Draw a Value Chain and use it to explain the source of the competitiveness for SAB as evidenced
by its success in its industry sector.
Competitive advantage cannot be understood by looking at a firm like SAB as a whole.
It stems from the many discrete activities a firm performs in designing, producing, marketing,
delivering, and supporting its products.
Each of these activities can contribute to a firm’s relative cost position and create a basis for
differentiation.
The value chain disaggregates a firm into its strategically relevant activities in order to understand
the behaviour of costs and the existing and potential sources of differentiation.
A firm gains competitive advantage by performing these strategically important activities more
cheaply or better than its competitors.
Value chain activities can be categorized into two types:
Primary activities include inbound logistics, operations, outbound logistics, marketing and sales, and
service.
Support activities include infrastructure, human resource management, technology development
and procurement.
These support activities are integrating functions that cut across the various primary activities within
the firm.
Managerial Significance
Competitive advantage is derived from the way in which firms organize and perform these discrete
activities within the value chain.
To gain competitive advantage over its rivals, SAB must deliver value to its customers through
performing these activities more efficiently than its competitors or by performing the activities in a
unique way that creates greater differentiation.
(b) Use the SWOT business analysis model to explain SAB’s approach to strategy and the benefits
the company could be deriving from such an approach for optimum performance.
The TOWS matrix (Threats, Opportunities, Weaknesses, and Strengths) emphasizes the importance
of threats and opportunities. It is thus a positioning approach to strategy. It also categorizes
strategic options as follows:
SO strategies employ strengths to seize opportunities.
ST strategies employ strengths to counter or avoid threats.
WO strategies address weaknesses so as to be able to exploit opportunities.
WT strategies are defensive, aiming to avoid threats and the impact of weaknesses.
These four groups of strategies tend to relate well to different time horizons in terms of planning.
The SO strategies may be expected to produce good short-term results, the ST and WT strategies are
more relevant to the medium term while the WO strategies are likely to take much longer to show
results.
(c) Describe the process of strategic choice that companies like SAB use to choose the best business
strategy that can help them compete successfully in their industry and markets.
Strategic choices are done at both the corporate and business unit levels. At the level of the
business unit, these choices are about how to achieve competitive advantage and are based on an
understanding of customers and markets.
There are three generic business strategies for competitive advantage. The cost leadership strategy
involves being the lowest cost producer in the industry as a whole. The differentiation strategy
involves the exploitation of a product or service which the industry as a whole believes to be unique
in some important characteristic. The focus strategy involves a restriction of activities to only part of
the market or market segment.
Business unit competitive strategy selection involves making a choice between the three generic
business strategies or the firm may risk ending up being stuck-in-the-middle. Such a choice involves
assessing each strategy in terms of its ability to make the organization achieve competitive
advantage.
Companies pursue a business-level strategy to gain competitive advantage that allows them to
outperform rivals and achieve above-average returns. Each of the generic business strategies results
from a company’s making consistent choices on product, market, and distinctive competencies –
choices that reinforce each other. In other words, a company must achieve a fit among the three
components of business-level strategy.
The cost leader chooses a low level of product differentiation because differentiation is expensive –
if the company expends resources to make its products unique, then its costs rise. The cost leader
also normally ignores the different market segments and positions its product to appeal to the
average customer. This is because developing a line of products tailored to the needs of different
market segments is an expensive proposition. In developing distinctive competencies, the overriding
goal of the cost leader must be to increase its efficiency and lower its costs compared to its rivals.
The development of distinctive competencies in manufacturing and materials management is
central to achieving this goal. Achieving a low-cost position may also require that the company
develop skills in flexible manufacturing and adopt efficient materials-management techniques.
A differentiator chooses a high level of product differentiation to gain a competitive advantage.
Product differentiation can be achieved in three principal ways – quality, innovation, and
responsiveness to customers.
For the focus strategy, differentiation can be high or low because the company can pursue a lowcost or a differentiation approach. As for customer groups, a focused company chooses specific
niches in which to compete rather than going for a whole market, as a cost leader does, or filling a
large number of niches, as a broad differentiator does. The focused firm can pursue any distinctive
competency because it can seek any kind of differentiation or low-cost advantage. Differentiation
can be high or low because the company can pursue a low-cost or a differentiation approach. As for
customer groups, a focused company chooses specific niches in which to compete rather than going
for a whole market, as a cost leader does, or filling a large number of niches, as a broad
differentiator does. The focused firm can pursue any distinctive competency because it can seek any
kind of differentiation or low-cost advantage.
30. Mindolo Beverages Company is seeking to diversify into the opaque beer industry on the Copper
belt which is not only highly competitive but also profitable. The company has carried out a market
research and recognizes that it would get a good return on its investment in this industry but it also
realized that there is likely to be some barriers to entry into this market.
(a) Demonstrate to this company any five (5) entry barriers it is likely to face as it embarks on this
choice of strategy.
The Company is likely to face any of the following:
 Economies of scale due to as barriers to small entrants and the inability to gain access to
technology and specialized know how
 Threat to market share due to existing firms by large entrants
 Learning and Experience Curve Effects
 Brand preference and customer loyalty
 Capital requirement - The larger the total dollar investment needed to enter the market
successfully the more limited the pool of potential entrants
 Cost disadvantages independent of size. Existing firms may have cost advantages not available
to potential entrants regardless of entrants’ size e.g. access to cheapest raw materials
patents.
 Access to distribution channels.

Regulatory policies - Government agencies can limit or even bar entry requiring licenses and
permits e.g. banks, lottery, radio and TV station, insurance.
 Tariffs and International trade restrictions
(b) Advise the company on whether to enter this industry or not. Justifying your answer
The company can enter the industry since most of the five forces are weak except the barriers to
entry since there some established companies in the industry. The company can easily get through
the barriers since they are not high enough.
31. Business performance at Choma Cooperative Union Limited has gone through a very difficult time in
the last five years. The Board and management has decided to review its strategic plan for those five
years and have appointed you to give an independent evaluation.
Evaluate any five (5) limitation of a strategic plan.
Limitations of a strategic plan include the following:
ENVIRONMENT MAY PROVE DIFFERENT FROM THAT EXPECTED
Forecasting is not an exact science and plans that are based upon predictions that prove incorrect
may fail. Unexpected events in government action such as a contract cancellation, a change in
labour union activities, a decline in economic activity, or a sudden price discount by a major
competitor – all are uncertainties that make planning difficult.
INTERNAL RESISTANCE
In many organisations the introduction of a formal planning system raises anti-planning biases that
can prevent effective planning. In larger organisations, old ways of doing things, old rules, and old
methods may be so entrenched that it is difficult to change them.
PLANNING IS EXPENSIVE
In a typical corporate planning effort of even a medium-sized company a significant effort is
required to do effective planning. The time of many people is occupied and costs are incurred for
special studies and information. Planning is expensive and managers throughout the planning
process must continuously apply a cost-benefit gauge.
CURRENT CRISES
Formal strategic planning is not designed to get a company out of sudden current crises. It should
therefore be looked at a long term solution to its present problems.
PLANNING IS DIFFICULT
Planning is hard work. It requires a high level of imagination, analytical ability, creativity, and
fortitude to choose and become committed to a course of action. Planning involves a different type
of mental process from that generally employed in dealing with day to day operating problems.
PLANS WHEN COMPLETED LIMIT CHOICE
Plans are commitments, or should be, and thus they limit choice. They tend to reduce initiative in a
range of alternatives beyond the plans. This should not be a serious limitation but should be noted.
IMPOSED LIMITATIONS
Besides the intrinsic limitations of strategic planning, there are imposed limitations that deserve
note. Planning systems will probably not be effective when they are excessively ritualistic and
formal, when line managers try to delegate the task to staff, when managers give lip service to
planning but make their attention to short-range problems and neglect thinking about the future.
32. You have recently been appointed as a Strategy Manager of Kantu Breweries of Lusaka. As a starting
point, you have been requested to give a management brief to both the board and management on
what goes into strategy making. Discuss any five (5) determinants or factors that influence the
makeup of a strategy in and around the organization
SOCIETAL, POLITICAL, REGULATORY AND CITIZEN CONSIDERATIONS
What an enterprise can and cannot do strategies is always constrained by what is legal, by what is in
compliance with government regulations and policies, by what is considered socially acceptable and
by what constitutes community citizenship. More and more companies now consider societal values
and priorities, community concerns and for the potential for onerous legislation and regulatory
requirements. The concept of corporate, social responsibility is now showing in company’s mission
statements.
INDUSTRY ATTRACTIVENESS AND COMPETITIVE CONDITIONS
Industry attractiveness and competitive conditions are big strategy – determining factors. When a
firm concludes its industry environment has grown unattractive, and it is better of investing
company resources elsewhere, it may craft a strategy of disinvestments and abandonment. When
competitive conditions intensify significantly, a company must respond with strategic actions to
protect its position. A strategist therefore, has to be a student of industry and competitive
conditions.
SPECIFIC COMPANY OPPORTUNITIES AND THREATS
A well-conceived strategy aims at capturing a company’s best growth opportunities and defending
against external threats to its wellbeing and future performance. The particular business
opportunities a company has and the threats to its position that it faces are key influences on
strategy.
ORGANISATIONAL STRENGTHS, WEAKNESSES, AND COMPETITIVE CAPABILITIES
Experience shows that in matching strategy to a firm’s internal situation, management should build
strategy around what the company does well and avoid strategies whose success depends heavily
on something the company does poorly or has never done at all. A company’s strategy ought to be
grounded in what it is good at doing (i.e. its organisational strength and competitive capabilities and
avoid what it is not so good at doing (i.e. its organisational and competitive weaknesses
THE PERSONAL AMBITIONS, BUSINESS PHILOSOPHIES AND ETHICAL BELIEFS OF MANAGERS
Managers decisions are often influenced by their own vision of how to compete and how to position
the enterprise and by what image and standing they want the company to have managers personal
ambitions business philosophies, and ethical beliefs are usually woven into the strategies they craft
sometimes the influence of the manager’s personal values and experiences is conscious and
deliberate, at other times it is unconscious. Attitudes toward risk also have a big influence on
strategy. Risk avoids favour “conservative” strategies that minimise downside risk, have a quick
payback and produce sure short term profits. Risk takers lean more toward opportunistic strategies
where bold moves can produce a big pay off over the long term. Risk takers prefer innovation to
imitation and strategic offensives to defensive conservation. Managerial values also shape the
ethical quality of a firm’s strategy.
THE INFLUENCE OF SHARED VALUES AND COMPANY CULTURE ON STRATEGY
An organisation’s policies, practices, traditions, philosophical beliefs and ways of doing things
combine to give it a distinctive culture. A company’s values and culture sometimes dominate the
kind of strategic moves it will consider or reject. This is because culture related values and beliefs
become so embedded in management’s thinking and actions that they condition how the enterprise
responds to external events.
33. There is a lot of debate about the relevance of some management models due to changes in the
market forces from the time the models were introduced and where the market forces are now. It is
therefore, necessary to challenge the assumptions on which these models were based. One example
of such models is the ‘value chain’ and ‘5 forces model.’
(a) Analyse the impact of information technology on the value chain model.
Information Communication Technology has affected the value chain as follows:i. Inbound logistics-these can now be carried out by use of computer tracking systems to
inform the organization on the actual whereabouts of the items being brought in.
ii. Operations-most manually performed tasks are now being carried out by information
technology. Software will include computer aided manufacturing, flexible manufacturing
systems and computer aided design.
iii. Outbound logistics-similar to inbound logistics.
iv. Procurement-databases can be created about suppliers making for easy comparison prices.
v. Marketing and sales-the use of software such as customer relationship management can
help the firm build stronger links with the customers which help in customer retention.
(b) Evaluate the extent to which you agree with Porter that the modern business environment and
information technology invalidates most of the assumptions about the five forces model.
How ICT is invalidating the Porters 5 Forces model:
Rivalry amongst current competitors-the assumption that only firms in the local market can pose a
threat is not correct as ICT can help firms across boarder easily break entry barriers via e-commerce.
Threat of new entrants-the assumption that existing firms can collude to retaliate against the new
entrant. ICT can make the new entrant collude with existing firms to drive some firms out of the
market by building rival products targeted at eliminating some firms out of the market.
Substitute products-the assumption that customers can easily switch to these provided they were
either cheaper or of superior quality. It’s very easy to use ICT to build features in the substitute
products in the existing products. For example, how cell phones are able to do what computers
does.
Customer power-the assumption that these are static-it’s possible for the customer to become the
supplier.
Supplier power-the assumption that it’s difficult to have information on all suppliers. ICT make it
possible through search engines to build a lot of information about suppliers.
Though this remains a vital tool, it’s important to note that the times have changed and the tool
must be modified to suit the modern business environment.
34. Sky Software manufactures a wide range of software for use by both corporate and individual
clients. The software includes: accounting, customer relationship management, enterprise resource
planning and other specialised software for corporate and individual use. The way the sales teams
are organized has created challenges in the way clients are serviced, especially the corporate clients.
(a) Analyse the challenges faced by Sky software manufacturers as a result of organizing the sales
team around various product lines.
The challenges of organizing the sales team around product lines includes:
 Different types of salesmen from the same organization having to visit the same client as
they are all selling specialized products.
 The sales teams having to defend their product lines even when these have stopped being
popular with clients due to fear of sources of employment if these were halted to be
produced.
 Refusal by sales persons to understand other products.
(b) Recommend the changes that can be made to the way the sales team is organized in an attempt
to make it more efficient and effective.
The changes would include:
 Organize according to customer so that each sales person can sell all the Sky software range
of products.
 Give sales team training across product lines.
 Build an integrated solution to clients than specialized solutions.
(c) Identify and discuss the resistance to change that is likely to be encountered during
implementation of the recommended changes in (b).
The resistance to above changes will include:
 Resistance to build new product knowledge due to specializations.
 Resistance to go beyond selling and begin to embrace marketing.
 Resistance to relocate as offering of integrated solution may mean some teams having to
change town.
 Resistance to working with teams from other product lines.
These challenges will need to be addressed if the structural change will be successful.
35. Organisational performance is about creating value for the primary beneficiaries of the organisation.
Strategic thinking and planning can help keep the focus of staff members on this value creation, and
not on management tools or practices for their own benefit.
Discuss the meaning and uses of the following options of corporate strategic planning. Support your
answer with diagrams.
(a) Gap analysis
Gap analysis is a technique used in corporate strategic planning to identify the extent to which
existing strategies will fail to meet the performance objectives in the future. This will consist of
listing the characteristic factors (such as attributes, competencies, performance levels) of the
present situation. The cross listing of factors required to achieve future objectives, and finally
highlighting the GAPS that exist and need to be filled. This is most easily explained using a simple
diagram as shown below.
In the diagram it has been assumed, that the firm is a single product/single market company. The
company is currently achieving a 15% return on capital and wishes to at least maintain this level of
performance over the next four year period. This is shown by the line, AC, indicating the required
level of return. However, the line, AB, in the diagram illustrates what the likely rate of return will
actually be if the company simply continues with its existing strategies over the planning period
shown. The forecast for this likely level of performance shows a steadily declining return on capital
perhaps. This might be due to increased competition, increasing labour costs and deteriorating plant
and equipment.
Because of this, if the company has unchanged strategies over the next four years it will have a ‘gap’
between its desired and actual level of return on capital. Once this gap has been identified and the
reasons for it established, then the company can decide how to best fill the gap by developing new
strategies. Gap analysis is a useful technique for beginning to explore required new strategies for
the future.
(b) BCG Matrix
The Boston Consulting Group (BCG) matrix method is based on the product life cycle theory that can
be used to determine what priorities should be given in the product portfolio of a business unit. The
BCG Matrix is a four celled (2 x 2) graphical portrayal of differences among divisions (of a firm) in
terms of relative market share position and industry growth rate.
Divisions in the respective cells in the BCG Matrix are called Stars, Question Marks, Cash Cows, and
Dogs. As a means to ensure its long-term value creation, a company develops a portfolio of products
that contains both high-growth products in need of cash inputs and low-growth products that
generate a lot of cash. This means that the company will look at two aspects of its strategy and
these will be Market Share and Market Growth. The basic idea behind it is that the bigger the
market share a product has or the faster the product's market grows the better it is for the
company.
BCG matrix has four cells, with the horizontal axis representing relative market share and the
vertical axis denoting market growth rate.
Resources are allocated to the business units according to their situation on the grid.
Stars - (=high growth, high market share)
Stars represent business units having large market share in a fast growing industry. They may
generate cash but because of fast growing market, stars require huge investments to maintain their
lead. Net cash flow is usually modest. SBU’s located in this cell are attractive as they are located in a
robust industry and these business units are highly competitive in the industry. If successful, a star
will become a cash cow when the industry matures.
Cash Cows - (=low growth, high market share)
Cash Cows represents business units having a large market share in a mature, slow growing industry.
Cash cows require little investment and generate cash that can be utilized for investment in other
business units. These SBU’s are the corporation’s key source of cash, and are specifically the core
business. They are the base of an organization. These businesses usually follow stability strategies.
When cash cows lose their appeal and move towards deterioration, then a retrenchment policy may
be pursued.
Question Marks - (= high growth, low market share)
Question marks represent business units having low relative market share and located in a high
growth industry. They require huge amount of cash to maintain or gain market share.
They require attention to determine if the venture can be viable. Question marks are generally new
goods and services which have a good commercial prospective. There is no specific strategy which
can be adopted. If the firm thinks it has dominant market share, then it can adopt expansion
strategy, else retrenchment strategy can be adopted. Most businesses start as question marks as
the company tries to enter a high growth market in which there is already a market-share. If
ignored, then question marks may become dogs, while if huge investment is made, then they have
potential of becoming stars.
Dogs - (=low growth, low market share)
Dogs represent businesses having weak market shares in low-growth markets. They neither
generate cash nor require huge amount of cash. Due to low market share, these business units face
cost disadvantages. Generally retrenchment strategies are adopted because these firms can gain
market share only at the expense of competitor’s/rival firms. These business firms have weak
market share because of high costs, poor quality, ineffective marketing, etc. Unless a dog has some
other strategic aim, it should be liquidated if there is fewer prospects for it to gain market share.
Number of dogs should be avoided and minimized in an organization.
36. The Mukuba Group is a large conglomerate with 37 companies within the group; engaged in
activities as diverse as building, printing, catering, turf accounting, light engineering and cosmetics.
It has now been decided that the fortunes of the group and certainly of the larger individual
companies will be best served if these larger companies are hived off as separate individual public
companies, in which Mukuba plans to retain a 40% stake only.
(a) Explain three value creating roles of a corporate parent in managing a business
A 'conglomerate' is a group of companies which do not have any common denominator in the way
of products or markets.
The advantages of the conglomerate are as follows.
 The overall group cash flow is secure, in that a weak cash flow may be offset by that of a
stronger firm.
 As the subsidiaries operate in different areas, it is unlikely that they will all be susceptible to the
same aspects of a recession or a falling-off in demand.
 Tax losses may be offset through group relief.
 Constituent firms can utilise the efforts and management expertise of each other (e.g. firm X, a
manufacturing company, can use the facilities of firm Y which is a transportation company).
Disadvantages are as follows.
 There might be a fight for the group's financial resources between member companies.
 Senior management finds it difficult to create a 'team' approach within the group because of
the widely differing activities.
 Detailed corporate planning on a group basis is very difficult because of the different problems,
needs and environmental influences on the subsidiaries.
(b) Discuss the advantages and disadvantages of a conglomerate type of an organization.
The value creating roles of a corporate parent to its SBUs are:
Envisioning (Corporate intent): The corporate parent is concerned with the overall purpose and
scope of an organisation. This is then communicated to individual SBUs through objectives.
Intervention (Controlling and developing): SBUs are subject to financial discipline at low shared
costs. There is also provision of some key competences at lower costs than could be acquired
outside by the SBU Resources allocation and co-ordination: Finance expertise and offering central
services in all activities, in an attempt to get economies of scale. (Different examples to be stated)
(c)

What are the likely reasons for the divestment decision?
Divestment means getting rid of something. In strategic planning terms, it means selling off
parts of the group's operations as a possible way of promoting future growth in key
identified activities. Mukuba Group has chosen to pull out of certain product-market areas
which it considers to be non-core. This decision has probably been taken for the following
reasons.
 It undertook a strategic appraisal and decided to concentrate on core businesses
and hive off (although retain a minority stake in) fringe activities.
 Mukuba may have decided that some of the larger companies have an uncertain
future and want to hand over control while the going is good whilst retaining a
stake.
 It may be very profitable for Mukuba to sell these companies. For example, they
may have developed significant goodwill which can be realised.
 The divestment may be intended to raise funds that the group can invest elsewhere,
say in further core activities.
 Discuss briefly the further decisions implied for the group when divestment has been
implemented.
The disposal of the controlling interest will generate new sources of capital specifically to
that subsidiary, leaving the group to concentrate on other activities and possibly invest in
new acquisitions that are easier to control or perhaps related closer to the mainstream or
'base industries' of the conglomerate.
Resulting decisions after the divestment would include the following.
 The reconsideration or revision of the capital structure, possibly replacing loan
funds with equity
 A review of the relationship of the remaining subsidiaries with HQ
 Possibly the revision of the organisational structure
 New cash flow, profit and ROCE forecasts
 Compilation of a new corporate plan
37. (a) Describe Porter and Miller process for capturing new IT-based opportunities.
Competing in information age
Step 1. Assess information intensity
Step 2. Determine the role IT in industry structure
Step 3. Identify and rank the ways in which IT might create competitive advantage.
Step4. Investigate how IT might spawn new businesses.
Step 5. Develop a plan to exploit IT.
(b) An organization is experiencing poor performance due to rampant changes that are taking place
at both the micro and macro-economic levels. As a consultant you have been approached by
management to help improve the matter. After deep reflection you feel that you could use one of
the business models in particular the McKinsey model to re-engineer the business. Draw and
describe this model and how you are going to use it in this assignment.

Structure. Determines the division of tasks in the organization and a hierarchy of authority from
the most senior to junior.
 Strategy. A way in which an organization runs to outperform its competitors or how it intends to
achieve its objectives.
 Systems. The technical systems. These are the hard elements which are easily quantified or
defined, and deal with facts and rules.
 Staff. People in the organization.
 Shared values. Guiding beliefs of people in the organization about why it exists.
 Style. The shared assumptions, ways of working and attitudes of management.
 Skills. Things that the organization does well
These are the soft elements which are equally important.
38. (a) Strategic alliances may provide strategic appeal or benefits to companies that are involved.
Discuss such benefits that may be gained from these alliances.
Strategic Alliances are a favourite and potentially fruitful means for entering a foreign market or
strengthening a firm’s competitiveness in world markets. Many foreign companies are particularly
interested in strategic partnerships that will strengthen their ability to gain a foothold in foreign
markets. Strategic appeal or benefits for such Cross-border Alliances include the following:
 Gaining better access to attractive country markets.
 To capture economies of scale in production and/or marketing cost reduction can be the
difference that allows a company to be cost competitive.
 To fill gaps in technical expertise from either partner and/or knowledge of local markets
(buying habits and product preferences of consumers, local customers and so on).
 To share distribution facilities and dealer networks, thus mutually strengthening their access
to buyers.
 Cross border allies can direct their competitive energies more toward mutual rivals and less
toward one another, teaming up may help them close the gap on leading companies.
 Benefit comes into play when companies desirous of entering a new foreign market,
conclude that alliances with local companies are an effective way to tap into a partner’s
local market knowledge and help it establish working relationships with key officials in the
host-country government.
 Alliances can be a particularly useful way for companies across the world to gain agreement
on important technical standards – they have been used to arrive at standards.
(b) Entering into the foreign market requires a lot of strategic planning effort, but does not provide
all answers to success in foreign markets. Explain any five limitations of strategic planning.
ENVIRONMENT MAY PROVE DIFFERENT FROM THAT EXPECTED
Forecasting is not an exact science and plans that are based upon predictions that prove incorrect
may fail. Unexpected events in government action such as a contract cancellation, a change in
labour union activities, a decline in economic activity, or a sudden price discount by a major
competitor – all are uncertainties that make planning difficult.
INTERNAL RESISTANCE
In many organisations the introduction of a formal planning system raises anti-planning biases that
can prevent effective planning. In larger organisations, old ways of doing things, old rules, and old
methods may be so entrenched that it is difficult to change them.
PLANNING IS EXPENSIVE
In a typical corporate planning effort of even a medium-sized company a significant effort is
required to do effective planning. The time of many people is occupied and costs are incurred for
special studies and information. Planning is expensive and managers throughout the planning
process must continuously apply a cost-benefit gauge.
CURRENT CRISES
Formal strategic planning is not designed to get a company out of sudden current crises. It helps the
company to improve its current performance in the future given the current poor state.
PLANNING IS DIFFICULT
Planning is hard work. It requires a high level of imagination, analytical ability, creativity, and
fortitude to choose and become committed to a course of action.
Planning involves a different type of mental process from that generally employed in dealing with
day to day operating problems.
PLANS WHEN. COMPLETED LIMIT CHOICE
Plans are commitments, or should be, and thus they limit choice. They tend to reduce initiative in a
range of alternatives beyond the plans. This should not be a serious limitation but should be noted.
IMPOSED LIMITATIONS
Besides the intrinsic limitations of strategic planning, there are imposed limitations that deserve
note. Planning systems will probably not be effective when they are excessively ritualistic and
formal, when line managers try to delegate the task to staff, when managers give lip service to
planning but make their attention to short-range problems and neglect thinking about the future.
39. Outline any 10 factors that may drive change in an industry thereby forcing a company to change its
growth and competitive strategy.
Changes in the Long-term industry growth rate
Changes in the long- term industry growth rate shifts in industry growth up or down are a force for
industry change because they affect the balance between industry supply and buyer demand, entry
and exit and how hard it is for a firm to capture additional sales.
Changes in who buys the product and how they use it.
Shifts in buyer demographics and emergence of new ways to use the product can force adjustments
in customer service offerings (credit, technical assistance, maintenance and repair), open the way to
market the industries products through different mix of dealers and outlets.
Product innovation
Product innovation can broaden and industries customer base, rejuvenate industry growth, and
widen the degree of product differentiation among rival seller.
Technological change
Advances in technology can dramatically alter an industry’s landscape, making it possible to produce
new/or better products at a lower cost and opening up who knew industry frontiers – capital.
Process Innovation
Technological change can also alter unit costs, capital requirements, minimum efficient plant sizes,
desirability of vertical integration and learning or experience curve effects.
Marketing Innovation.
When firms are successful in introducing new ways to market their products can spark off buyer
interest, widen industry demand, increase product differentiation and lower costs – which may
affect competitiveness with rivals.
Entry or exit of major firms
The entry of one or more foreign companies into a market once dominated by domestic firms nearly
always produces a big shake up in industry conditions. Entry by a major firm produces a “new
ballgame” not only with new key player but also the competitive rules – while exit changes industry
structure by reducing the number of market leader.
Diffusion of Technical know-how
As knowledge about how to perform a particular activity or to execute a particular manufacturing
technology spreads, any technically – based competitive advantage held by firms possessing this
know how erodes. This occurs through scientific journals, trade publications, on site plant tours,
word-of-mouth among suppliers and customer, and hiring away of knowledgeable employees.
Increasing Globalization of the industry
Global competition usually changes patterns of competitive advantage among key players; certain
firms may launch aggressive long term strategies to win a globally dominant market position.
Changes in cost and efficiency.
In industries where significant economies of scale are emerging or strong learning effects are
allowing firms with the most production experience to undercut rivals’ price, large market share
becomes a distinct advantage that all firms are pressured to adopt volume building strategies.
Emerging Buyer Preference for a Differentiated instead of a commodity product (or for a more
standardised product instead of strongly differentiated products) Sometimes growing numbers of
buyers decision, that a standard product at a bargain price meets their needs as effectively as a
premium priced brands offering more features and options
Regulatory Influence and government policy changes
Regulatory and government actions can often force significant changes in industry practices and
strategic approaches.
Changing societal concerns, Attitudes and life Styles
Emerging social issues and changing attitudes and life – styles can be powerful instigators of industry
change. Consumer concerns about salt, sugar, chemical additives, cholesterol, and nutrition are
forcing the food industry to re-examine food processing techniques and introduce healthier
products.
Production uncertainty and business risk
A young, emerging industry is typically characterized by an unproven cost structure and much
uncertainty over potential market size, R and D costs and distribution channels. Emerging industries
tend to attract only the most entrepreneurial companies.
40. Gil, a management consultant has been tasked to work with BM a private limited company which
produces home-made cheese. Her assignment is to undertake an assessment of the company’s
position in order to come up with the company’s strategic plan. She is collecting information from
various areas of business. She has requested for information of the company’s competitors from the
Marketing Director. Information on whether market growth rate is high or low and information on
the size of BM‟s market share. Surprisingly the Marketing Director says that the company does not
undertake any competitor analysis and does not know its market share.
(a) Explain the importance of competitor analysis in strategy formulation and why it is important for
the Marketing Director to understand the concept of high/low market growth and market share.
Competitor analysis can be defined as „the identification of current and potential competitors‟
relative strength and weaknesses which could be of significance in the development of a successful
competitive strategy.‟
All companies should be on the lookout for potential competitors, who could have an impact on
their profit, and the companies need to be able to respond to any threats.
It is important to identify competitors correctly. In the case of BM, competitors would include other
family businesses producing „home-made‟ cheese, but also larger producers of cheaper cheese or
producers of home-made milk products. BM would undertake competitors analysis in order to
assess the impact of competition of BM profits; predict competitors‟ likely response to BM strategic
initiatives e.g. if BM cuts prices, they may do the same- can BM meet that response; copy profitable
strategies used by competitors; identify and respond to aggressive actions by competitors
A competitor analysis should aim at answering such questions as who are our competitors, how big
are they, what is their market share, what are their goals and strategies, what are their strength and
weaknesses in terms of advertising and marketing, how profitable are they and what are their debt
and gearing position.
Market growth
An important consideration when analysing competitors is how fast the market has grown in recent
years, particularly over the past year. BM‟s strategy will affect its decision to get involved in a fast
growing or more gradually developing market.
Specifically, BM will need to estimate how much the demand for home-made cheese has grown and
is likely to grow. This may be based on sales volume or sales value.
Market growth might be influenced by factors not within BMs control. If there is a recession,
demand for cheese is not likely to increase because in Zambia it is considered a luxury?
High or low growth
The rate of growth is an important consideration for BM. Whether the rate of growth is high or low
depends on the conditions of the market. The most important of these conditions is its size. A new,
smaller market can grow rapidly, but a mature market may grow only slowly. A small, fast growing
market is a good source of opportunities for BM but also for its competitors, who can penetrate
such a market relatively easily. By contrast, a mature market has barriers to entry, although there is
not the potential for growth.
Market share
Is the proportion of a market that is being services by an organization for example BM may have
10% of the Zambian market in home-made cheese, but only 2% of the Zambian cheese market
overall. Increased market share is not necessarily the same as market growth: a market can grow as
more competitors come into it, so that an organization’s market share declines even if the
organization is growing. It is generally considered to be of strategic advantage to have a large and
growing share of a particular market for the following reasons; economies of scale, leverage over
suppliers, greater influence over prices.
Market share is a useful tool for BM in analysing its performance against that of its competitors. In
the short term profitability may be sacrificed for market share as margins are squeezed to increase
sales. However, once a high market share is achieved, BM may well be able to influence prices and
reduce costs through economies of scale. This will increase profitability in the long run.
41. Explain the role of Critical Success Factors (CSFs) in Strategic Management.
Once a strategy has been chosen, the next logical step in the formulation of strategy is to validate
the choice of the chosen strategy by determining whether the organization has the capacity to
prosecute the preferred choice.
The capability means the organization’s demonstrated or potential ability to accomplish, against
competition and circumstance, whatever it sets out to do. One of the ways of establishing an
organization’s capability is to analyse a firm’s distinctive competence. A firm’s distinctive
competence refers to a unique or outstanding strength a company possesses that enables it to
deploy resources in a way which enables it to outperform competitors.
As a technique, the identification of critical success factors allows a firm to map out particular
competences needed to sustain a specific strategy and outperform competitors. Critical success
factors can be in any functional area (activity) of a firm.
The following are some of the areas in which a firm might create critical success factors:
- Product quality
- Innovation
- Offering the customer superior service
- Network of dealers and/customer
Johnson and Scholes (1997:419)5 have offered the following steps in developing critical success
factors:
- Identify critical success factors for any specific strategy
- Identify the nature and scope of linkage between the identified critical success factors and other
support activities
- Ensure that the list of success factors gives you a competitive advantage
- Identify performance standards which need to be achieved to outperform competition
- Assess the extent to which competitors can imitate each underpinning competence; and
- Decide on the impact of potential competitive moves and how these might need to be
counteracted.
42. (a)In the context of Zambia, discuss how an organization can use the Boston Consulting Group
matrix in the formulation of strategy.
Once an organization has determined what strategy it might pursue, the next step is to analyse its
capability to prosecute the chosen strategy. This involves looking at the separate activities that are
undertaken and at the way linkages between the various activities should be linked in order add
value. Additionally, strategic capability involves analysing the extent to which an organization’s
business units are balanced as a whole.
The Boston Consulting Group Analysis is one of the techniques used to assess this balance. It
involves balancing an organization’s external environment with its capability.
Specifically, it seeks to balance market growth and relative market share. These two variables can be
classified as high and low. The resulting matrix is illustrated in Figure 1 and depicts four scenarios.
A Star product has a high market share in a growing market. It may be spending heavily to achieve
high market share but it has a higher profitability than competitors. A growth strategy would be
appropriate.
A Question mark is also in a growing market, but does not a high market share. It has relatively low
market share and it may be necessary to increase an increase in resources and competence to
enable it exploit the opportunities in the growing market.
Developing countries with vast investment opportunities but lacking in funds typify this scenario.
The cash cow has a high market share in a mature market. This implies that investment
opportunities are low in the existing industry but the high market share implies that it can use its
resources to finance the question mark. Investors who come to developed countries and seek to
invest their resources illustrate this scenario.
A Dog has a low market share in astatic or declining market. This represents the worst scenario and
an appropriate strategy would be to exit from this industry/market.
(b) Using the case of Zambia, explain how government (political activity) has influenced business
strategy.
A Government is considered as an external factor in the formulation of strategy. The analysis of the
external environment is intended to identify opportunities and threats. This suggests what might be
done or what might not be done. It points to the future direction firm might or might not follow. The
Zambian experience provides many examples of this. In 1991, the government of the day decided to
move away from the socialist principles of the previous government whose ideology was socialism
through government participation in the economy and government regulation to a free market
economy characterized by privatization and liberalization. This change of policy opened up
opportunities for private individuals not only to enter business but to expand their business beyond
the horizons of the national borders. On the negative side, the recently announced upward revision
of royalty taxes has raised concern among mining companies about their future in Zambia. The
owners of Lumwana mines have threatened to pull out of Zambia if the proposed tax is not revised
or withdrawn. Yet another example that could be cited is that of Finance Bank Zambia Limited. The
bank had soured relations with the previous government which resulted in Government taking
possession of the bank and selling it. When the current government came to power, it reversed the
sale of the bank and returned the bank to its previous owners. It is an acknowledged fact that the
bank is openly friendly with the bank and its actions are perceived to be ‘politically correct’ by the
Government of the day.
(c) Explain the role of organizational culture on an organisations’ strategy.
Organizational culture is taken here to mean a rich system of values, beliefs, attitudes, and customs
of an organization, shared by its members, that distinguishes it from other organizations. Kenneth
Andrews argues that Organizational 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.
Among the factors that influence organizational culture are (I) the founder whose strong belief in
some ideology will influence not only the mission of the organization but will pervade to those who
surround him who must share in the ideology of the founder; (b) the organization’s history will have
been characterized by a way of doing things, that is, repeated actions which translate into tradition
precedent; and (c) systems for rewarding those whose performance is in line with the ideology of
the organization and systems for punishing those whose performance is at variance with the
established way of doing things. In this way, organizational culture influences members of an
organization toward the implantation of strategy.
43. Discuss any six (6) strategic ways an organization can use to address the unfavourable contribution
to the value chain of a product that originates from the internal operational side of a business firm.
The strategic approaches that an organization can use to address the unfavourable contribution to
the value chain of a product that originates from the internal operational side of a business firm will
include:
 Initiate internal budget tightening measures.
 Improve production in methods and work procedures
 Try to eliminate some cost – producing activities altogether
 Relocate high cost activities to geographical areas where they can be performed cheaper
 Subcontract certain activities that will be cheaply be done by others than can be done
internally.

Invest in cost saving technological improvements (automation, robotics, computerised
controls etc.)
 Innovate around the troublesome cost components as new investments are made in plant
and equipment
 Simplify the product design and make it easier to manufacture
 Reduce internal cost disadvantage by cutting costs in the backward and forward portions of
the chain.
44. Discuss the significance of the relationship between market segmentation and corporate strategy?
Market Segmentation
A single product item can seldom meet the needs and wants of all customers. Typically, consumers
vary as to their needs, wants and preferences for products and services.
Successful marketers adapt their programs to fulfil these preference patterns. For example, ice
cream has multiple flavours- vanilla, strawberry, chocolate, etc., and comes in different packagescone, cup and cartons. None of these combinations is equally preferred.
However, while a single product item cannot meet the needs of all consumers, it can almost always
serve more than one consumer. Thus there are usually groups of consumers who can be served well
by a single product item. If a particular group can be served profitably by a firm, it is a viable market
segment. A firm can therefore develop a marketing mix to serve the group or market segment.
Market segmentation is thus the process of dividing a market into groups of similar consumers.
However, is not enough to segment a market. A firm should go further and select a group or market
segment to focus on. This is what is known as Target marketing.
As already observed, the benefit of market segmentation is that it facilitates the allocation of
resources to those market segments where they will produce the most results by providing strategy
guidelines for the firm. This is done by helping a firm answer the following questions:
- In what product-markets should the firm engage?
- To what extent should each market be pursued?
A valid basis for market segmentation is the 20/80 principle, which holds that for most businesses,
20 percent of customers account for 80 per cent of the profit of a firm; conversely 80 percent of a
firm’s customers account for only 20 per cent of the firm’s profit.
It is therefore prudent for a firm to focus on the most profitable segment (s) of the market.
It is therefore important that a company relates its strategy to the segment that will provide the
highest return on its investment. Therefore segmentation should be one of the issues in its
corporate strategy.
45. Culture facilitates strategy implementation in the process of developing strategy. Therefore, culture
and strategy must be compatible. Evaluate the five (5) factors that are necessary for an effective
strategy implementation.
Issues that are necessary for effective implementation of strategy:
 Structure that is appropriate,
 Shared values
 Staffing – people orientation
 Systems – practice, procedures and routines of the organization
 Skills – distinctive competencies
 Styles of management.
46. Resource planning at operational level requires the planner to put the detailed plan in a strategic
framework by ensuring that three (3) central questions are addressed. State the three (3) questions
with the help of a diagram.
Although resource planning at operational level is detailed, it is nonetheless important to conceive it
in a strategic manner. In particular, it is important to understand how the detailed operational
resource plans underpin in the strategies of the organisation. It is therefore helpful to put the
detailed plan in a strategic framework by ensuring that three central questions are addressed.

Resource identification – exactly what resources will a strategy require, and how should
these resources be configured?
 Fit with existing resources – to what extent do these resources build on or are they a change
from existing resources?
 Fit between resources – can the required resources be integrated with each other?
47. (a) Discuss alternative basic strategy-making styles used by managers in the process of formulating
strategy.
There are variations in the organizational process of formulating strategy and this bring about
variations in the way the manager, as chief entrepreneur and organizational leader, personally
participates in the actual work of strategic analysis and strategic choice.
The four basic strategy-making styles used by managers are:
 The Master Strategist Approach – Here the manager personally functions as chief strategist
and chief entrepreneur, exercising strong influence over the kinds and amount of analysis
conducted, over the details of strategy. This does not mean that the manager personally
becomes the chief architect of strategy and wields a proactive hand in shaping some or all of
the major pieces of strategy. The manager acts as strategy commander and has a big
ownership stake in the chosen strategy.



The Delegate It to Others Approach – Here the manager in charge delegates the exercise of
strategy-making to others, perhaps a strategic planning staff or a task force of trusted
subordinates. The manager then personally stays off to the side, keeps in touch with how
things are progressing via reports and oral conversations, offers guidance if need be, smiles
or frowns. Recommendations are informally run by him/her for reaction, then puts a stamp
of approval on the “strategic plan” after it has been formally presented and discussed and a
consensus emerges. But the manager rarely has much ownership in the recommendations
and, privately, may not see much urgency in pushing truly hard to implement some or much
of what has been stated in writing in the company’s “official strategic plan.”
The Collaborative Approach This is a middle approach whereby the manager enlists the help
of key subordinates in hammering out a consensus strategy that all “the key players” will
back and do their best to implement successfully. The biggest strength of this style of
managing the formulation process is that those who are charged with strategy formulation
are also those who are charged with implementing the chosen strategy. Giving subordinate
managers a clear-cut ownership stake in the strategy they subsequently must implement
enhances commitment to successful execution.
The Champion Approach – In this style of presiding over strategy formulation, the manager
is interested neither in a big personal stake in the details of strategy nor in the timeconsuming tiresomeness of leading others through participative brainstorming or a
collaborative “group wisdom” exercise. Rather, the idea is to encourage subordinate
managers to develop, champion, and implement sound strategies. Here strategy moves
upward from the “doers” and the “fast-trackers.” Executives serve as judges, evaluating the
strategy proposals reaching their desks. This approach is especially well-suited for large
diversified corporations where it is impossible for the CEO to be on top of all the strategic
and operating problems facing each of many business divisions.
(b) Discuss any two (2) advantages and three (3) disadvantages of joint ventures
Advantages
 Joint ventures permit coverage of a large number of countries since each one requires less
investment.
 It reduces the risk of government intervention.
 Provide close control over operations.
 When with an indigenous firm it provides local knowledge, and can also allow firms a route
into markets they might otherwise struggle to enter.
 It is a learning exercise, as each party gains access to other’s competences
 It is often an alternative to seek to buy or build a wholly owned manufacturing operation
abroad.
Disadvantages


Profits from the venture are shared, reducing the amount earned by each partner.
It may not be fully supported by its parent companies due to the feeling of none ownership.

Gained confidential information by partners could subsequently be used competitively by
one partner against another.
48. Competitive advantage is the leverage that a business has over its competitors.
a. Explain the concept of “competitive advantage” and validate how a business organization
can achieve superior profitability.
b. Strategy involves people especially managers who decide and implement strategy. Explain
any five characteristics of strategic decisions.
c. Strategic management is a process that involve; environmental scanning, strategy
formulation, strategy implementation and evaluation and control. To be effective, however,
strategic management need not always be a formal process. Discuss an alternative approach
managers may consider to engage in effective strategic management.
1. The master strategic approach.
 Here the manager personally functions as chief strategist, and chief entrepreneur, exercising
strong influence over the kinds and amount of analysis conducted, over the strategy
alternatives to be explored, and over details of strategy.
 This does not mean that the manager personally does all of the work but that the manager
is the chief architect of strategy and wields a proactive hand in shaping some or all of the
major pieces of strategy.
 The manager acts as strategy commander, with a big ownership stake in the chosen
strategy.
2. The delegate-to-others approach.
 Here manager in charge delegates virtually all of the strategic planning to others, perhaps a
planning staff or a task force.
 The manager does little more than suggest minor changes and place a stamp of approval on
the plan that emerges, ending up with little personal stake in the formal strategy statement.
 The great hazard facing the planners and the company whose chief executive turns too
much of the strategy formulation task over to others is that the resulting plan will gather
dust on the shelf rather than become a blueprint for action.
 When the ownership of the proposed strategy rests with those who wrote the plan instead
of those who must responsibility for carrying out the recommended strategy, the stage is set
for the plan to be largely ignored as nothing more than a ceremonial exercise.
3. The collaborative approach.
 This is a middle approach whereby the manager enlists the help of key subordinates in
hammering out a consensus strategy which all “the key players” will support and do their
best to implement successfully. The greatest strength of this style of managing the
formulation process is that those who are charged with strategy formulation are also those
who are charged with implementing the chosen strategy.
 Giving subordinate managers a clear-cut ownership stake in the strategy they subsequently
must implement not only enhances commitment to successful execution but also when
subordinates have had a hand in proposing their part of the overall strategy they can be
held accountable for making it work-the “I told you it was a bad idea” alibi won’t work.
4. The champion approach.
 In this style of presiding over strategy formulating, the manager is interested neither in a big
personal stake in the details of strategy nor in the time-consuming tedium of leading others
through participative brainstorming or a collaborative “group wisdom” exercise.
 Rather, the idea is to encourage subordinate managers to develop, champion, and
implement sound strategies. Here strategy moves upward from the “doers” and the fasttrackers”.
 The executive serves as a judge, evaluating the strategy proposals that reach his desk.
 This approach is especially well suited for large diversified corporations where it is
impossible for the CEO to be on top of all the strategic and operating problems facing each
of many business divisions. Therefore, if the CEO is to exploit the fact that there are many
people in the enterprise who can see strategic opportunities that he cannot, then he must
give up some control over strategic opportunities order to foster strategic opportunities and
new strategic initiatives.
 The CEO may well articulate general strategic themes as organization wide guidelines for
strategic thinking, but the real skill is stimulating and rewarding new strategy proposals put
forth by a champion who believes in an opportunity and badly wants the latitude to go after
it.
 With this approach, the total “strategy” is strongly influenced by the sum of the championed
initiatives that get approved.
d. Explain key characteristics of a well-crafted mission statement.
Organizations are founded for a purpose.
-Although the purpose may change over time, it is essential that stakeholders understand
the reason for the organization’s existence that is the organization’s mission.
-The mission is an enduring statement of purpose that distinguishers one business from
other similar firms.
A mission statement reveals the long-term vision of an organization in terms of.
What it wants to be,
Where exactly it wants to go,
Whom it wants to serve
-The obvious purpose of a mission statement is to give a public announcement to insiders
and outsiders about what the firm’s stands for, what makes the firm different.
-The mission statement is generally expressed in a board manner and it is unlikely that it can
be ever achieved completely.
I. Clarity:
 The mission statement should be clear enough to lead to action.
 The corporate dream must be presented in crystal-clear manner preferably in a positive
tone.
For example: SBI – “with you, all the way”.











ii) Broad and enduring:The mission statement is a grand design of the firm’s future. So, it should be in a board
manner.
However, a mission statement should not be so narrow as to restrict the firm’s operations
nor should it be too general to make itself meaningless.
To make things clear, mission statements come in two forms ; primary mission (a general
category of business to be engaged in and secondary mission defining everything more
specifically Telco for example is in the transportation business primary business.
iii) Realistic:
Missions should be register and achievable.
Air India would be deluding believing that is not true itself if it adopted the mission to
become the world’s favourite’s airline.
Iv. Specific:
Mission should be specific.
Mission must define the competitive scope within which the company will operate that is
the range of industries in which a company will operate industrial goods consumer goods
services.
Range of products and applications the company will supply.
Range of products and applications the company will supply.
Range of regions countries in which a company will operate.
Company’s core competencies.
Example: Mc Donald’s could probably enter the solar energy business but that would not
take advantage of its core competencies providing low cost food and fast service to large
number of customers.
V) Identity and image:
-The mission sets a firm apart from other firms of its style.
-Through the mission statement the firm wants to maintain its distinct image and character
in terms of excellent quality and service latest technology a unique produced offerings etc.
49. Explain possible ways the company can purse to ensure an organization achieve its: Cost leadership
goals and Differential goals.
50. Competition is a factor in the external environment that can present an opportunity or a threat to a
firm. Discuss alternative strategic responses that firms may considers options in order to have a
strong competitive position in the market place.
-Strategic Cost Analysis
-Competitor Analysis
-Product Differentiation
-Market Focus
51. Critically analyse the process or key components of strategy formulation
This is the development of long-range plans for the effective management of environmental
opportunities and threats, in light of corporate strengths and weaknesses. It includes defining the
corporate mission, specifying achievable objectives, developing strategies, and setting policy
guidelines.
52. When choosing a strategy, firms make choices among competing alternatives as the pathway for
deciding how they will pursue strategic competitiveness. Explain the concept of strategic
competitiveness and demonstrate using the industry examples how firms achieve strategic
competitiveness.
Strategic competitiveness is achieved when a firm successfully formulates and implements a valuecreating strategy. By implementing a value-creating strategy that current and potential competitors
are not simultaneously implementing and that competitors are unable to duplicate, a firm achieves
a sustained or sustainable competitive advantage.
-Strategy Formulation
-Strategy Implementation
53. Discuss with the help of a diagram the options available for a global business in managing its value
system.
54. (a) Explain the major elements of strategic management and state the highly rated benefits of
strategic management by industry.
MAJOR ELEMENTS OF STRATEGIC MANAGEMENT
Strategic management includes the following elements:
· Environmental scanning (both external and internal)
· Strategy formulation (strategic or long-range planning)
· Strategy implementation
· Evaluation and control
The Benefits of Strategic Management
Research has revealed that organizations that engage in strategic management generally
outperform those that do not.
A survey of nearly 50 corporations in a variety of countries and industries found the 3 most
highly rated benefits of strategic management to be:
· Clearer sense of strategic vision for the firm
· Sharper focus on what is strategically important
· Improved understanding of a rapidly changing environment
(B) Describe why mission and vision statements are so important in the strategic management
process
 A vision or strategic intent is the desired future state of the organization. It is an aspiration
around which a strategist, perhaps CEO, might seek to focus the attention and energies of
members of the organization. A vision is a picture of what the firm wants to be and, in broad
terms, what it wants to ultimately achieve. A vision statement tends to be relatively short and
concise, making it easily remembered
 A mission is a general expression of the overall purpose of the organization, which is in line
with the values and expectations of major stake-holders. It answers the challenging question:
What Business Are We In? A mission should establish a firm’s individuality and should be
inspiring and relevant to all stakeholders. Together, vision and mission provide the foundation
the firm needs to choose and implement one or more strategies. Even though the final
responsibility for forming the firm’s mission rests with the CEO, the CEO and other top-level
managers tend to involve a larger number of people in forming the mission.
(c) Strategists conduct a competitor analysis in response to the intensity of competition. Explain the
prime objective of conducting such an analysis.
This involves a careful assessment of a company’s relative competitive standing and an
understanding of the firm’s relative strengths and weaknesses in say, the following areas:
 product design – convenience, comfort
 product innovation
 pricing strategies
 distribution network
 advertising/sales promotion
 customer service
The objective of this analysis is to explore ways in which the firm might retain or improve its
standing on the competitive ladder. The rungs on the ladder can be broadly categorized by:
 Dominant leader-who usually has the largest market share and is therefore the
acknowledged leader in innovation and sales
 One of the industry’s top leaders-this is characterized by a few firms dominating the
industry

Middle-of-the-pack- this category comprises a large group of firms who are basically
followers
 Firms on the fringe-these are firms whose individual market share is small and insignificant.
55. (a) Explain the significance of the following strategy terms in strategic management. Strategic Intent,
Business Model and Strategic competitiveness.
Strategic intent is internally focused and is concerned with leveraging the firm's internal resources,
Capabilities and core competencies to accomplish what at first may appear to be unattainable goals
in the competitive environment. It reflects what the firm is capable of doing given its core
competencies and the unique ways these core competencies can be used to develop a sustainable
competitive advantage that will result in above-average returns.
A business model describes the structure of product, service and information flows and the roles of
the participating parties. For example, a traditional model for manufactured products is a linear flow
of product from component manufacturers to product manufacturers to distributor to retailers to
consumers. But information may flow directly between the product manufacturer and the final
consumer (advertising and market research).
Strategic competitiveness is achieved when a firm successfully formulates and implements a valuecreating strategy. By implementing a value-creating strategy that current and potential competitors
are not simultaneously implementing and that competitors are unable to duplicate, a firm achieves
a sustained or sustainable competitive advantage.
(b) Outline with appropriate examples the fundamental difference between “outside-in” and
“inside-out” thinking about strategic management, and their influence on strategy.
(c) Scholes defines strategy as the direction and scope of an organization over the long-term, which
achieves advantage in a changing environment through its configuration of resources and
competences with the aim of fulfilling stakeholder expectations.
Discuss the key components of this definition citing practical industry examples.
 The long-term direction of an organisation. Brad Garlinghouse explicitly recognised that
strategic change in Yahoo! would require a ‘marathon and not a sprint’. Strategy at Yahoo!
involved long-term decisions about what sort of company it should be, and realising these
decisions would take plenty of time.
 The scope of an organisation’s activities. For example, should the organisation concentrate
on one area of activity, or should it have many? Brad Garlinghouse believed that Yahoo! was
spread too thinly over too many different activities.
 Advantage for the organisation over competition. The problem at Yahoo! Was that it was
losing its advantage to faster-growing companies such as Google. Advantage may be
achieved in different ways and may also mean different things. For example, in the public
sector, strategic advantage could be thought of as providing better value services than other
providers, thus attracting support and funding from government.
 Strategic fit with the business environment. Organisations need appropriate positioning in
their environment, for example in terms of the extent to which products or services meet
clearly identified market needs. This might take the form of a small business trying to find a
particular niche in a market, or a multinational corporation seeking to buy up businesses
that have already found successful market positions.
 The organisation’s resources and competences. Following ‘the resource-based view’ of
strategy, strategy is about exploiting the strategic capability of an organisation, in terms of
its resources and competences, to provide competitive advantage and/or yield new
opportunities.
 The values and expectations of powerful actors in and around the organisation. These actors
– individuals, groups or even other organisations – can drive fundamental issues such as
whether an organisation is expansionist or more concerned with consolidation, or where the
boundaries are drawn for the organisation’s activities. The beliefs and values of these
stakeholders will have a greater or lesser influence on the strategy development of an
organisation, depending on the power of each.
 Complexity is a defining feature of strategy and strategic decisions and is especially so in
organisations with wide geographical scope, such as multinational firms, or wide ranges of
products or services. For example, Yahoo! faces the complexity both of a fast-moving
market environment and poorly organised internal businesses
 Uncertainty is inherent in strategy, because nobody can be sure about the Future. For
Yahoo!, the Internet environment is one of constant and unforeseeable innovation
 Operational decisions are linked to strategy. For example, any attempt to coordinate
Yahoo!’s business units more closely will have knock-on effects on web-page designs and
links, career development and advertiser relationships. This link between overall strategy
and operational aspects of the organisation is important for two other reasons. First, if the
operational aspects of the organisation are not in line with the strategy, then, no matter
how well considered the strategy is, it will not succeed. Second, it is at the operational level
that real strategic advantage can be achieved. Indeed, competence in particular operational
activities might determine which strategic developments might make most sense.
 Integration is required for effective strategy. Managers have to cross functional and
operational boundaries to deal with strategic problems and come to agreements with other
managers who, inevitably, have different interests and perhaps different priorities. Yahoo!
for example needs an integrated approach to powerful advertisers such as Sony and
Vodafone from across all its businesses.
 Relationships and networks outside the organisation are important in strategy, for example
with suppliers, distributors and customers. For Yahoo!, advertisers and users are crucial sets
of relationships.
 Change is typically a crucial component of strategy. Change is often difficult because of the
heritage of resources and because of organisational culture. According to Brad Garlinghouse
at least, Yahoo!’s barriers to change seem to include a top management that is afraid of
taking hard decisions and a lack of clear accountability amongst lower-level management.
(D) Discuss why it is important for the strategic decision makers to understand thoroughly their
organisation’s resources, capabilities
(e) Explain clearly using industry examples how an organization can utilize specific and nonspecific
resources.
 Specific resources can only be used for highly specialized purposes and are very important
to the organization in adding value to goods and services. . Tangible resources are assets
that can be observed and quantified. Production equipment, manufacturing facilities,
distribution centres, and formal reporting structures are examples of tangible resources.
As tangible resources, a firm’s borrowing capacity and the status of its physical facilities are
visible. The value of many tangible resources can be established through financial
statements, but these statements do not account for the value of all the firm’s assets,
because they disregard some intangible resources. The value of tangible resources is also
constrained because they are hard to leverage—it is difficult to derive additional business or
value from a tangible resource. For example, an airplane is a tangible resource, but “You
can’t use the same airplane on five different routes at the same time. You can’t put the
same crew on five different routes at the same time. And the same goes for the financial
investment you’ve made in the airplane.”
Although production assets are tangible, many of the processes necessary to use these assets
are intangible. Thus, the learning and potential proprietary processes associated with a
tangible resource, such as manufacturing facilities, can have unique intangible attributes,
such as quality control processes, unique manufacturing processes, and technology that
develop over time and create competitive advantage.
 Assets that are less specific are less important in adding value, but are more flexible.
Intangible resources are assets that are rooted deeply in the firm’s history and have
accumulated over time. Because they are embedded in unique patterns of routines,
intangible resources are relatively difficult for competitors to analyse and imitate.
Knowledge, trust between managers and employees, managerial capabilities, organizational
routines (the unique ways people work together), scientific capabilities, the capacity for
innovation, brand name, and the firm’s reputation for its goods or services and how it
interacts with people (such as employees, customers, and suppliers) are intangible
resources.
In fact, in the global economy, “the success of a corporation lies more in its intellectual and
systems capabilities than in its physical assets. [Moreover], the capacity to manage human
intellect—and to convert it into useful products and services—is fast becoming the critical
executive skill of the age. Because intangible resources are less visible and more difficult for
competitors to understand, purchase, imitate, or substitute for, firms prefer to rely on them
rather than on tangible resources as the foundation for their capabilities and core
competencies. In fact, the more unobservable (i.e., intangible) a resource is, the more
sustainable will be the competitive advantage that is based on it. Another benefit of
intangible resources is that, unlike most tangible resources, their use can be leveraged.
For instance, sharing knowledge among employees does not diminish its value for any one
person. To the contrary, two people sharing their individualized knowledge sets often can
be leveraged to create additional knowledge that, although new to each of them,
contributes to performance improvements for the firm. This is especially true when
members of the top management team share knowledge with each other to make more
effective decisions. The new knowledge created is then often shared
56. (a) The purpose of organizational control from a strategic perspective is to get the job done despite
environmental, organizational and behaviour obstacles and uncertainties. Identify and explain three
types of control and the components commons to all systems.
 Feed forward
The active anticipation and prevention of problems, rather than passive reaction.
 Concurrent
Monitoring and adjusting ongoing activities and processes
 Feedback
Checking a completed activity and learning from mistakes.
(b) Discuss the key element of strategic management postulated by Johnson et al (2005).
(c) Using practical industry examples, explain how the strategic management role differs in nature
from other aspects of management.
57. (a) Discuss how an organizational structure facilitates the implementation of strategy.
Structure follows strategy. In a classic study of large US corporations, Alfred
Chandler concluded that structure follows strategy – that is changes in corporate strategy lead to
changes in organizational structure (Wheelen & Hunger 1998:187). Chandler also concluded that
organizations follow a pattern of development from one trend of structural arrangement to another
as they expand.
According to Chandler, these structural changes occur because the old structure, having been
pushed too far has caused inefficiencies that have become too obviously detrimental to bear.
Chandler, therefore found that in their early years, corporations tend to have a centralized
organizational structure that is well suited to producing and selling a limited range of products.
As they add new product lines, purchase their own distribution networks, they become too complex
for highly centralized structures. To remain successful, this type of organization needs to shift to a
decentralized structure with several semiautonomous divisions.
Changes in the environment tend to be reflected in changes in a corporation’s strategy, thus leading
to changes in a corporation’s structure. Strategy, structure, and the environment need to be closely
aligned; otherwise, organizational performance will likely suffer (Jennings and Seawan, July 1994:
459-475).
Although there is a general agreement that organizational structure must vary with different
environmental conditions, which, in turn, affect an organizational strategy, there is no agreement
about an optional organizational design. Organisations in the same industry, however, tend to
organise themselves similarly. The general conclusion seems to be that organisations following
similar strategies in similar industries tend to adopt similar structures.
(b) Explain the principal requirements of designing an effective organizational structure.
 All units in the organisation are linked to strategy either directly or indirectly
 An organisation structure must be flexible and respond to any changes or modifications of
strategy necessitated by changing circumstances. Rigid or flexible. Organisational structure
may be rigid and bureaucratic, characterised by behaviour being governed by a strict set of
rules which state how the organisation is to be run, the criteria for promotion, etc. On the
other hand, the structure may be flexible and open to change to meet new challenges. Such
organisations are not overburdened by rules and precedents.
 There is no typical or universal organisational structure. It must be tailor made for an
organisation. In a centralised structure decisions are taken at the top and passed down
through the layers of management. A decentralised structure spreads much of the decisionmaking to various parts and levels of the organisation.
Some modern organisations have gone beyond decentralisation and are deploying the
concept of empowerment. Empowerment means freeing employees from the close control
associated with decisions about their work being taken higher up in the organisation.
Empowerment allows employees to make decisions at the point where work is being carried
out, although these decisions will be guided by the core values of the organisation, e.g.
“quality” or “customer care”.
 Decide on whether to go with a TALL or FLAT structure. A tall organisational structure has
many layers of management; in contrast a flat organisation has relatively few layers
between top management and the front-line operators of the organisation. Many modern
organisations are using the technique of delayering (i.e. the stripping out of layers or levels
of management) to convert traditional tall structures into flat structures
58. (a) Strategy by nature of its definition implies some progress toward some long-term goal and that
progress toward some goal implies that it must be observed and measured. Discuss the two 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:
• Is the firm the dominant or acknowledge leader?
• Is the firm a follower, or in the middle of the pack?
• Is the firm on the fringe of the market?
• Is the firm among the top 5% of 10% in the industry?
Non-economic Expectations
Performance can also be measured by the extent to which an organization meets non-economic
expectations. For instance, to what extent are the company’s operations conducted in accordance
with legal and ethical requirements? Is the behaviour of individuals socially unacceptable, in bad
taste or against good judgement?
Budget
A budget is a projection of hoped-for performance. Positive or negative variances reflect differences
between budgeted and actual performance. An analysis of management accounts for example is a
way of measuring expected performance against actual performance across activity lines.
In setting standards and measurement of performance, the following precautions should be
exercised:
• The evaluation program should not encourage performance which detracts from overall strategy;
rather it should support the overall strategy.
• In some instances it may be better to base measurement of performance on multiple criteria as
opposed to a single criterion, such as profitability.
• All levels of management, subordinate and superior, must agree on achievements which must be
accomplished during a specified period
(b) Identify and describe any five generic influence tactics used in modern organisations.
• Eight Generic Influence Tactics
• Consultation
• Rational persuasion
• Inspirational appeals
• Ingratiating tactics( making others behave or think like you)
• Coalition tactics
• Pressure tactics
• Upward appeals
• Exchange tactics
59. (a) Explain the meaning of the BCG Matrix
The Boston Consulting group's product portfolio matrix (BCG matrix) is designed to help with longterm strategic planning, to help a business consider growth opportunities by reviewing its portfolio
of products to decide where to invest, to discontinue or develop products. It's also known as the
Growth/Share Matrix.
(b) Discuss the rationality of this model.
This chart was created with the purpose of helping companies analyse their different business units
or product lines. The analysis helps these companies to allocate resources where they are most
appropriate as well as to use the results in brand marketing, product management, strategic
management, and portfolio analyses.
The chart is a graphical planning tool, where the company’s products and services can be plotted to
help make key business decisions. These decisions include whether to keep a particular business
unit, sell it or to invest more in it. The y-axis of the graph represents rate of market growth while the
x-axis represents market share.
The matrix helps add input to the decision making process but does not take into account all
possible factors that a company may face. The tool is not predictive and also doesn’t take into
account any new or disruptive products that may enter and change the market, nor does it account
for shifts in consumer demand.
(c) What are the models limitations?
 Market growth is one of many factors that determine industry attractiveness and relative
market share is only one of many factors that determine competitive advantage. This matrix
does not take into account any other factors that may have a bearing on both industry
attractiveness and competitive advantage.
 There is an underlying assumption that the business units are operating in isolation in
relation to each other. In reality, a dog may be helping another unit gain a competitive
advantage for example.
 The definition of a market is taken in the broad sense. This fails to take into account
different situations such as a business unit that is dominating a niche but is overall less
dominant in the larger industry. The way a market is defined in such an instance may change
its definition from a dog to a cash cow.