TRYMPH EDUCATION (Formerly RORA TUTORIALS)
MNG3701: STRATEGIC PLANNING
EXAM REVISION CLASS PACK
Presented By Rolland Simpi Motaung
MOBILE/WHATSAPP: 0848317417
EMAIL: trympheducation@gmail.com
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MNG3701-STRATEGIC PLANNING: KEY EXAM CONCEPTS
2023
LESSON 1/CHAPTER 1
THE RELATIONSHIP BETWEEN GENERAL MANAGEMENT PRINCIPLES AND
STRATEGIC MANAGEMENT
Explain the evolution of the management thought.
Scientific approach: According to F W Taylor, scientific management is to find the „one
best way‟ to perform each task. Henry Gantt (1861-1919) best known for the Gantt chart, but
he also made significant contributions to management with respect to pay-for-performance
plans and the training and development of workers. A Gantt chart visually indicates what
tasks must be completed at which times to complete a project.
Bureaucratic management - Max Weber (1864-1920) was a German sociologist who
viewed bureaucracy as the exercise of control based on knowledge, experience or expertise
rather than ruling by virtue of favouritism or personal or family connections. People in a
bureaucracy would lead by virtue of their knowledge, experience and expertise
Administrative management- Henri Fayol (1841-1925) had an interest in those actions that
had an impact on the productivity of businesses. Fayol argued that the success of a
business generally depends much more on the administrative ability of its leaders than
on their technical ability.
Human relations approach to management - The human relations approach to
management focuses on people, particularly the psychological and social aspects of work.
This approach to management views people not as extensions of the machinery and
equipment that are used in organisations, but as valuable organisational resources. Mary
Parker Follet and Elton Mayo made important contributions to the human
relations approach to management
Operations management- Operations management is concerned with the transformation or
conversion of inputs into goods and services as efficiently as possible. Operations
management involves the daily production of goods and services.
Systems approach to management - The systems approach to management views the
organisation as a system, comprising of various subsystems, which are simply smaller
systems within larger systems. It is a line of thought that stresses the interactive nature and
interdependence of external and internal factors in an organization
Distinguish between traditional and contemporary management thought.
Traditional management theories from evolving from the 1800 were concerned with finding
the best way to manage an organization. The traditional theories include Scientific approach,
Bureaucratic management, Administrative management, Human relations approach,
Operations management and Systems approach
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Contingency approach to management- The contingency approach to management,
states that the application of management principles depends on the specific situation that
managers face at a given point in time in the business. Managers therefore need to adapt
their management approaches to suit the unique situation of the business.
Discuss the relationship between responsible management and strategic
management
The overall goal of strategic management is to achieve a sustained competitive
advantage. An organisation has a sustainable competitive advantage if it has the
ability (or potential) to perform better than its rivals over the long term. Strategic
management refers to the process for planning, implementing and controlling the strategy of
the organisation. It therefore consists of three components, namely strategic planning,
strategic implementation and strategic control.
Responsible management is a type of management that integrates sustainability,
responsibility, and ethics into managerial practices. A responsible organisation aims to
achieve a sustained competitive advantage while creating value for society and the
environment by integrating responsible business factors and principles in the strategic
management process. In the context of responsible management, responsibility focuses on
stakeholder engagement with the aim to optimise stakeholder value.
Differentiate between responsible competitiveness and irresponsible
competitiveness.
Responsible competitiveness is defined as the achievement of competitive advantage for
an organisation through the strategic management process, while also creating above
average responsible business performance. A responsible organisation aims to achieve a
sustained competitive advantage while creating value for society and the environment by
integrating responsible business factors and principles in the strategic management process
Irresponsible competitiveness occurs when an organisation is competitive at the cost of
society and the environment
Discuss the different stakeholders who have an impact on the organisation
with specific reference to their expectations of the organisation.
Stakeholders are different views of who constitute the stakeholders of an organisation.
These are considered as either „narrow‟ or „broader‟ views of stakeholders.
-Internal stakeholders are those stakeholders who operate inside the organisation like
shareholders/business owners, employees and management.
-External stakeholders are those individuals or groups who are not operating directly in the
organisation, but they are affected by the strategies, plans and actions of the organisation.
External stakeholders include the community, government, organised labour (trade unions),
customers, suppliers and many more
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-Narrow views of stakeholders- This attempts to define relevant groups in terms of their
direct relevance to the organisation‟s core economic interest. This view considers only
stakeholders who are directly linked to the organisation – it focuses on where the
organization conducts its business and includes employees, suppliers, customers and
financial institutions.
-Broader views of stakeholders Looks beyond the stakeholders within the organisation
and includes those that are on the outside. This view is oriented towards the social
responsibility of organisations as it adds other stakeholders, such as the broader community,
local and/or national economy, non-governmental organisations and any other person or
group of people who are affected by an organisation‟s activities.
CASE STUDY ACTIVITY: Capitec Bank
Capitec entered the banking scene focusing on the low-income segment of the South African
consumer market. It has since worked its way up towards the middle and upper middleincome segments. Currently it has 11.4 million clients, 13 774 employees and 840 branches.
Capitec prides itself in creating employment in local communities, remunerating fairly
and its commitment to providing equal opportunities. The Capitec brand has increased
in value by 35% to R6.8 billion, surpassing First National Bank as South Africa‟s strongest
brand.
LESSON 2/ CHAPTER 2
THE ROLE OF STRATEGIC MANAGEMENT IN AN ORGANISATION
Explain what strategic management is, with specific reference to the
components of the strategic management process.
Strategic management refers to the process for planning, implementing and controlling the
strategy of the organisation. It therefore consists of three components, namely strategic
planning, strategic implementation and strategic control.

Strategic planning/formation/formulation- refers to the planning and thinking
phase of strategic management . It consists of the three elements process (“how”
strategies are developed), context (“why” of the strategy-strategy takes place in
certain internal and external context) and content (“what” of strategy)

Strategic implementation- its the doing part where both human and non-human
factors in the organisation are applied to ensure that the strategy is executed in line
with the devised plans. It consists of three elements namely change management,
organizational learning and resource allocation

Strategic control- entails control measures ensuring that strategies are on track. It
reviews and provides feedback to the formulation and implementation phases
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Describe the different levels of strategy in organisations./Explain the different
levels of strategy and decision making in organisations/Explain the different
levels of strategy and decision making in organisations/
1. Corporate Level strategy
Corporate level strategy handles what the scope of the business should be and relates to an
organisation‟s overall performance Top management make strategic decisions for the long
term performance of an organisation, these corporate body includes, CEO, board of
directors and corporate staff. The main goal is shareholder value and the types of strategies
includes mergers, buy-outs and acquisition
2. Business level strategy
It is how an organisation competes and attains competitive advantage in the market and
creates value for customers . Types of managers include divisional managers and staff of
separate business units. Types of Strategies are: Cost Leadership, Focus, Differentiation
and Best Cost
3. Functional level strategy
The main function of the functional strategies is to make sure they link effectively and
efficiently with business strategies to achieve a competitive advantage so that in turn every
function contributes to business unit strategies and the overall business strategy. Types of
managers include department/functional level managers and staff in each functional area in
a business unit. Some of the types of strategies and Marketing strategy and HR strategy
4. Operational level strategy
The main goal is to execute day to day strategies to achieve overall strategies. Types of
managers here are frontline managers in operations and supervisors. Types of strategies
include operational strategies.
Identify and explain the universal principles of strategic management
1. Strategy is ultimately about change, as it moves the organisation from where it is, to
where it would like to be.
2. Strategy takes a long-term view as it focuses on the long-term sustainability of a
business.
3. Strategy is complex, as the organisation operates in an environment that is constantly
changing and is often very unpredictable. As a result of this, strategic managers have to deal
with high levels of uncertainty and risk.
4. Strategy has an internal and external focus. Because strategy involves moving the
whole organisation in a specific direction, it is crucial that managers understand not only
what is happening inside (resources and capabilities), but also what is happening outside the
business (opportunities and threats). These factors will have an influence on the choice of
strategy and the way in which it will be implemented.
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5. Strategy is both deliberate and emergent. Those specific strategies that an
organisation pursue – like low cost leadership or differentiation – are deliberately chosen.
However, strategies are developed, implemented and influenced by individuals, which
means that strategies sometimes “emerge” that were not initially planned.
6. Strategy involves various different thought processes. Some thought processes are
rational and cognitive, for instance when strategic workshops are conducted to formulate
strategies. Strategists also have to think analytically so that they can determine how the
external as well as the internal environments have an impact on the strategic options. In
order to formulate strategies, managers have to think creatively to determine possible
strategic options. Lastly, strategic decisions are often influenced by political processes.
Strategists will not necessarily agree on the best course of action to achieve strategic goals
and may use their sphere of power and influence or persuasive (or dissuasive) language to
sway others towards their preference.
7. Strategy happens at different levels such as corporate, business, functional and
operational levels
CASE STUDY ACTIVITY: Shoprite Group
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LESSON 3 /CHAPTER 3: SETTING STRATEGIC DIRECTION
Critically compare the process perspective on strategic management with the
strategy-as-practice perspective.
•
Traditional process perspective •
-It does not consider the complexity of the environment.
-It views strategy as a linear process with consecutive phases.
-It assumes that only top management and senior management formulate strategies and
other managers are responsible for the implementation of the strategies.
-Strategy is something that the organization has.
- Ignores the rise in so-called „„emergent strategies‟‟, as opposed to the more traditional,
deliberate strategies of organisations, also stemming from rapidly changing business
environments
Strategy-as-practice perspective
-It considers the complexity of the environment and continuously adapts to what happens in
this environment.
-It is a continuous process of conversation and input from stakeholders at all levels of the
organisation.
-Managers at all levels of the organization are involved in the formulation of strategy as the
inputs of all stakeholders are considered.
-Strategy is something that the people in the organisation do.
- Involves rise in so-called „„emergent strategies’’, as opposed to the more traditional,
deliberate
Discuss the characteristics of a well-formulated vision statement/ Appraise the
vision statement to determine whether it meets the characteristics of a wellformulated vision.
The vision statement expresses a desired future position and it is often referred to as the
dream of the organization
The characteristics of a well-formulated vision statement are as follows:
a. Future oriented- present a clear picture of where the organisation would like to be in
the future.
b. Powerful- It paints a picture of the kind of company that management is trying to
create and the market position(s) the company is striving to stake out.
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c. Ambitious- vision statement is bold and indicates why the direction makes good
business sense and is in the long-term interests of stakeholders
d. Imaginable- It is within the realm of what the company can reasonably expect to
achieve in due course.
e.
Motivational- specific statement that has the ability to inspire the whole organisation
f.
Flexible- vision statement must be flexible enough to allow the organisation to
adapt to changes in the environment
g. Guide decisions making-Vision statement must be specific enough to provide
managers with guidance in making decisions and allocating resources.
h. Easy to communicate- It is explainable in five to ten minutes and, ideally, can be
reduced to a simple and understandable memorable slogan.
CASE STUDY ACTIVITY: The Foschini Group
The Foschini Group’s Vision „To be the leading fashion lifestyle retailer in Africa whilst
growing our international footprint by providing innovative products and creative customer
experiences‟
Discuss the components of a well-formulated mission statement/Evaluate the
mission statement to determine whether it meets the requirements of a wellformulated mission statement.
A mission statement provides an explanation of what the organisation does and why it
exists. It is often referred to as a purpose statement.
A well-formulated mission statement should provide at least the following information:
a.
b.
c.
d.
e.
The product and/or service that the organisation offers
The target market(s) that the organisation serves or target customers
The method (technology) used to deliver this product or service to the market
Commitment to stakeholders (customers, business partners and employees):
The organisation‟s orientation towards survival and growth: This is often
expressed through stating their commitment toward economic objectives.
f. The organisational philosophy: This provides an indication of how the organization
plans to do business and it is often linked to ethical standards.
g. Organisational values: Principles that set the standard of how the organisation
wants to do business. The values of an organisation are so important that many
organisations actually have separate value statements.
CASE STUDY ACTIVITY: PicknPay
Our mission statement We serve, with our hearts we create a great place to be, with
our minds we create an excellent place to shop.
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Explain the characteristics of well-formulated strategic goals/ Appraise
strategic goals to determine whether they demonstrate the characteristics of
well-formulated strategic goals.
Once the strategic direction has been set, strategic goals and objectives must be formulated
to indicate what the organisation has to do to move from where it is to where it would like to
be.
The SMART principles can be used to formulate good strategic goals. It says that strategic
goals should be:
108S – specific
109M – measurable
110A – achievable
111R – realistic
112T – linked to time
Over and above meeting the SMART principles, strategic goals should also:





Be congruent with the components of the mission statement
Be congruent with the overall strategic direction of the organisation
Focus on the key performance areas of the organisation (the next section will focus
on the use of the Balanced Scorecard to identify these areas)
Be acceptable – people tend to pursue goals that are consistent with their
preferences and perceptions.
Be flexible – organisations function in a turbulent business environment, which
makes it necessary to allow for goals to be modified due to changing circumstances
CASE STUDY ACTIVITY: Mr Price Group
Strategic Goal: To increase online presence.
LESSON 4/ CHAPTER 5
ANALYSING THE EXTERNAL ENVIRONMENT OF THE
ORGANIZATION
Discuss the relevant macro-environmental factors and forces. (PESTLE)
1. Political-legal-From a business perspective, the extent of political stability and a
government„s ability to ensure a stable business environment are possibly the two main
political considerations for business. The most important legal considerations from a
business perspective are the appropriateness of a country„s legal system, the effectiveness
of law enforcement and whether the country adheres to the rule of law
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2. Economic-they impact largely on the demand and supply for products and services, so it
is important for managers to monitor and forecast events in the domestic and global
economies
The following four economic factors are important from a business perspective: the growth
rate of the economy, the level of interest rates, the currency exchange rates and price
inflation
3. Socio-cultural-Socio-cultural factors and forces refer to existing and changing social
values, beliefs, attitudes, traditions and lifestyles in a society that could affect the preference
and demand for certain products and services over time. Changes in socio-cultural factors
may create a demand for new products and services, creating totally new opportunities and
thereby changing the rules of industry competition.
4. Technological- (research and development, new products and processes and new
technologies)
Organisations should monitor developments in innovation and technology in other or related
industries. Managers need to evaluate the consequences for their own products and
services, creating strategies that could take advantage of the changes
5. Ecological (the natural environment)-Preservation of the ecology worldwide is
threatened by continuous air, water and land pollution. Global climate change and global
warming have been accelerated by humanity„s activities. Corporate strategies worldwide are
affected by environmental legislation and the cost implications of such legislation. On the
positive side, however, increasing legislation and regulation have also created opportunities
for new products and services that are environmentally friendly and increasingly demanded
by consumers.
Use a suitable model to analyse the industry of a business/ Analyse the market
environment to identify opportunities and threats facing an organization
(Porters Five Forces Model)
a. Customers: Powerful customer buying power increases industry competitiveness and
reduces industry profitability. The power of buyers is high when: (a) they are few in number
or when they have the ability to buy in bulk; (b) the product or service being offered is
similar, making it easier to switch to alternate suppliers; (c) the value of the buyers'
purchases is a significant portion of the seller‟s total income; and (d) the buyers can move
backwards into the supply chain by acquiring or developing the ability to produce the
products or services themselves.
b. Power of suppliers: Powerful suppliers can increase industry competitiveness and
reduce industry profitability. Supplier power is high when: (a) there are only a few major
suppliers and they are highly concentrated in relation to the industry they serve; (b) supplies
to the industry are not similar, thereby making it difficult for incumbents to switch to
alternative suppliers; (c) few or no alternative or substitute products or services exists; (d)
the suppliers can move forward into the supply chain; and (e) the value of the industry‟s
purchases represents but a small portion of the suppliers total income (i.e. suppliers' income
is derived from serving other or multiple industries).
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c. Intense rivalry of exiting competitors: has the effect of increasing industry
competitiveness and reducing profitability where they prevail. The degree of rivalry is
dependent on industry growth rate as well as the number of players, their relative size and
competitive abilities. Competitive rivalry is high when: (a) there are a large number of rivals
who are relatively equal in size and power; (b) the industry is growing slower and
incumbents are vying (competiting) for the support of existing customers rather than seeking
new customers; (c) incumbents carry huge fixed costs; (d) rivals have excess capacity; and
(e) existing players are unable to exit the industry either due to the high costs associated
with ceasing operations or high exit barriers
d. Potential competitors and threat of entry: Ease of entry will increase industry
competitiveness and adversely affect profitability. Organisations, therefore, create entry
barriers, which are forces intent on keeping potential competitors out, while offering
protection to existing industry incumbents. There are six barriers to entry, namely: (a) capital
required; (b) access to distribution; (c) cost disadvantages not related to size; (d) economies
of scale; (e) government legislation and regulation; and (f) high switching costs.
e. Providers of substitute products and services: It is possible that an increase of
substitutes coming from outside the immediate industry, but which could replace industry
products, would increase competitiveness and reduce industry profitability.(cold drinks,no
name brands)
f. Government intervention: Note that government intervention could be enhancing (e.g.
deregulation) or constraining (e.g. nationalisation, competition policy). It could affect the
structure, competitiveness and profitability of industries, especially where interventions are
industry specific (e.g. telecommunications, energy and licensing in the retail liquor sector).
g. Complementors: Complementors are products that enhance an industry member's own
products (e.g. lease financing that enhances the sale of cars or handsets to use the service
provided by mobile communication providers such as MTN, Vodacom and Cell C)
CASE STUDY ACTIVITY: Spur Corporation
The South African sit-down and quick-service restaurant market is extremely competitive,
with both local and international brands operating in the market. In recent years, Competition
for share of stomach has increased due to the growing presence of standalone restaurants,
new brands, international restaurant and fast food brands entering the South African market,
as well as through the availability of quick meals from convenience stores and supermarkets.
There are three major players in this market: Spur Corporation; Famous Brands; and Taste
Holdings. Other major companies in the fast food market include YUM (KFC), Grand Parade
Investments (Burger King), Shanduka (McDonald‟s) and Nando‟s. There is also a large
number of businesses that operate in the individual “mom and pop” category.
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Group chief executive Pierre van Tonder said the group reported “…a competitive
performance in an environment of continued slowdown in middle-income spending and
consumer confidence sinking to its lowest levels in over a decade”. Spur takes pride in
adhering to the strictest food and safety standards as regulated by the department of health,
department of labour and South African Bureau of Standards. For existing franchisees,
increases in the cost of the meat, vegetables and fruit reduce profit margins, affecting their
return on investment and ultimately impacting the financial sustainability of the business.
Vegetable prices grew rapidly for most of last year as a result of the drought. This has
started to feed into the price of meat, which continues to climb.
Discuss the challenges that organisations face when doing business in Africa
and recommend actions that they can take to overcome these challenges.
a. The lack of infrastructure-Inadequate infrastructure (roads, harbours, electricity nor
railways) in African countries is a huge concern for investors and business alike.
For the economic activity of a country in general and business in particular, lack
infrastructure invariably translates into inadequate supply chains which adversely affect the
sourcing of strategic raw materials for production as well as the distribution of much-needed
to markets, especially those in rural areas.
b. Lack of industrial development- Manufacturing capability needs to be improved and
increased. Most of the member countries in the AU apply primary resources development
(mining or harvesting) and the export the raw product for secondary and tertiary economic
processing. This results in extensive imports as the final products (tertiary) economic
products then need to be brought back into these countries for local consumption.
Development in secondary and tertiary industry activities are important to curb this and result
in greater creation of wealth (the strategic goal) and greater independence of imports
c. Political instability-Political instability typically results from uncertain and unpredictable
government actions. These may include social and economic disruption or even armed
conflict, as well as nationalisation of industries or expropriation of property and assets of
business organisations, all of which, for investors and business alike, translate into
uncertainty and risk.
d. High levels of poverty- In most African countries and in many other developing
countries, a large proportion of the population lives on less than two US dollars a day. A
large proportion of South African population survive on welfare grants and other services
funded by tax payers. This means there is a massive expenditure on social welfare that
could be spent on other services or invested. While the welfare grants have increased the
spending power of the poor for now, this may not be a sustainable solution to the poverty
problem
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e. Corruption. According to various international indices such as Transparency
International‟s Corruption Perception Index, 90% of the countries in Africa, on average,
scored 33, well below the symbolic pass mark of 50.Curruption destroys lives and
communities, and undermines countries and institutions. It generates popular anger that
threatens to further destabilise societies and exacerbate violent conflicts (workers strikes
and community protests)
f. An inefficient public sector A disappointing economic growth of the African economy in
recent years can be largely attributed to an inefficient public sector.
g. Lack of key human resource skills- Due to limited access to education at various
levels, African markets often present investors with a lack of people with key business and
especially managerial skills, and an ample and often over-supply of a semi-skilled and
unskilled workforce
LESSON 5/CHAPTER 6
ANALYSING THE INTERNAL ENVIRONMENT OF THE
ORGANIZATION
Explain the importance of resources, capabilities and core competencies in
strategic management
1. Resources are the productive assets owned by an organisation and can be grouped
into the following five categories: financial capital resources, physical capital
resources, human capital resources, organisational capital resources and
technological capital resources
Organisational resources can be further classified into tangible and intangible resources.
Tangible resources are an organisation‟s physical resources that include physical
infrastructure, land, plant, vehicles, manufacturing equipment, computer hardware, physical
inventory and money,
Intangible resources typically include the knowledge and know-how of managers and
employees gained through experience; the intellectual property of the organisation including
patents, trademarks and copyrights; software; human capital; brand names; and the
reputation of the organisation
2. Capabilities refer to an organisation‟s resource coordinating skills and productive
use. Capabilities are organisation-specific clusters of activities such as business
processes, routines and systems developed through complex interactions between
tangible and intangible resources over time. It reflects what an organisation excels at
compared to other organisations. More generally, a company‟s capabilities are the
product of its organisational structure, processes, control systems and hiring
systems. Represent complex combinations of assets, people and processes that are
used to create value by transforming inputs into outputs through high level of routine.
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3. Core competencies - are those capabilities or competencies that are unique to an
organisation. Therefore, these competencies differentiate an organisation from its
competitors distinguish an organisation from others in the industry, they are difficult
to imitate – hence their importance as a basis for sustainable competitive advantage.
Core competencies – arise from a combination of resources and capabilities as an
intangible resource
Explain the RBV and its role in internal analysis/Explain the role of the
resource-based view in internal analysis.
The RBV is a model for analysing the strengths and weaknesses of an organisation which
can then be linked to environmental opportunities and threats as inputs to the formulation of
competitive business level strategies. Combining external opportunities and threats with
internal strengths and weaknesses is the basis for SWOT analysis
An assessment of the organisation starts with a general internal evaluation to determine its
strengths, specifically as related to the industry in which it operates. Important
considerations for assessment are:





The strategic direction as conveyed in the vision, mission, purpose and values
The key internal stakeholders, including managers, their experience , strengths,
weakness and management
The owners of the organisation
Operational issues such as sales, assets and location
The type and level of employees and culture of the organisation
Explain the use of the value chain in internal analysis.
The main function of an organisation is to add value successfully in the process of producing
products and /or delivering services, therefore the activities of an organisation are affectively
combined to create customer value. Activities are divided into five primary and four support
categories
Primary activities and related capabilities include the following:





Inbound logistics-receiving, storing and distributing inputs for the manufacturing of
products. Capabilities- purchasing, material and inventory control systems
Operations- activities that transform inputs into final products. Capabilities: design
and product development, quality control and component manufacture
Outbound logistics- collecting, storing and distributing of products and services to
customers. Capabilities: distribution coordination and warehousing
Marketing and sales- marketing sales and purchasing of products and services.
Capabilities: innovative promotion and advertising , and a motivated sales force/team
Customer services- everything involved in improving and maintaining the value of a
product for the customer. Capabilities: parts , warranty and servicing arrangements
and the quality and training of employees
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Support activities include the following:



Administrative and infrastructure support the entire value chain and include
general management, planning, legal issues and quality management. Capabilities:
risk management and integration of the value chain
Human resource management- involves the appointment, development and
retention of employees at all levels, compensation and all matters relating to their
employment. Capabilities: training, skills development, staff recruitment and retention
Technology development involves all technology related to the operations and
management of the organisation. Capabilities: integrated management information
systems and technology-managed design and manufacturing
Requirements/Characteristics/Conditions for a sustainable competitive
advantage/For capabilities and resources to become core competencies that
result in a competitive advantage, they have to meet certain
conditions/Characteristics. Explain these conditions/characteristics
VRIO Framework
1. Valuable (V) implies the extent to which resources and capabilities can be transformed to
enable the creation of higher value for the consumer through differentiation or low cost.
2. Rare (R) too difficult or costly to imitate- exists when organisations own a valuable
resource or possess a rare and valuable capability that competitors do not have, or is not
available to them
3. Inimitable (I) implies that resources and capabilities should in some way be protected
against imitation to be valuable. This could involve being too difficult or too costly to imitate,
or there should be no viable substitutes. Attributes of value can include knowledge,
embedded organisational skills, organisation culture, networks, intellectual property and trust
relationships
4. Organisation (O) refers the exceptional deployment of organisational resources,
capabilities and distinctive or core competencies in satisfying customer needs and market
demands better than the competitors do
CASE STUDY ACTIVITY: CLICKS GROUP
Clicks was conceived as a drugstore in 1968 but legislation at the time prevented corporate
ownership of pharmacies in South Africa. This meant that Clicks operated as a drugstore
without drugs until legislation was changed in 2003 to allow corporate pharmacy ownership,
and the first Clicks pharmacy opened in 2004. Over the past decade the group has grown
into a leader in the healthcare market where Clicks has a 24.6% share of the retail pharmacy
market. The group has 15 413 knowledgeable and talented employees across retail stores,
distribution centres and head office. R144 million was invested in training and development
in 2019. Over 1 900 new private label products launched, reflecting investment in innovation.
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In the Sunday Times Top 100 Companies survey for 2019, Clicks Group was ranked as the
third best performing company on the JSE for the second consecutive year, based on a fiveyear compound growth in shareholder value. The group continues to support their organic
growth strategy with ongoing investment in new stores, refurbishments, supply chain and
information systems. Clicks continues to offer value through competitive everyday pricing
and appealing promotions which is increasingly attractive to hard-pressed consumers.
LESSON 6/CHAPTER 7
DEVELOPING APPROPRIATE BUSINESS-LEVEL STRATEGIES
Distinguish between the different types of business level strategies/Critically
distinguish between the different types of business level strategies for
creating and sustaining competitive advantage. Provide practical examples for
each business level strategy discussed
a. Cost Leadership
The aim of this strategy is to underprice competitors by building and sustaining their
competitive advantage through the reduction of costs, or keeping lower than those of their
competitors, while providing products and services that customers want, at the same or a
higher quality than their competitors.
In fact, cost leadership strategies are most suitable in situations characterised by large
markets that allow high production volumes of standardised products for customers that are
price sensitive and have low switching costs.
b. Differentiation strategy
The aim of a differentiation strategy is to produce products and services that are unique in
the industry for customers that are not price sensitive and are willing to pay a premium price
for products and services with unique, differentiated features that they desire
The uniqueness can be achieved in the following ways, inter alia:
• based on dimensions widely valued by customers in an effort to achieve higher market
share than one‟s rivals, demonstrating how product or service functions and features better
meet customer needs compared to those of competitors
• basing differentiation on the organisation's own core competencies that could lead to a
sustainable competitive advantage
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c. Focus low-cost leadership strategy and Focus differentiation strategy
An organisation may often find itself in a situation where neither a low-cost strategy nor a
true differentiation strategy is feasible across a broad range of the market. One option is to
identify and serve a niche or focus market competitively.
A focus strategy − cost leadership or differentiation − becomes attractive when one or more
of the following conditions exist:
• The existence of a relatively small target or niche market
• Successfully avoiding industry leaders as a result of the relatively small market
• The existence of effective barriers to the entry of multi segment competitors
• The possible existence of a multiplicity of niches
• Few rivals and acceptable profit potential, notwithstanding the small market
• The organisation's ability to resist challengers
d. Best-cost provider strategy
The distinguishing feature of a best-cost provider strategy is that it uniquely combines low
cost and differentiation, while maintaining quality and providing good value at a reasonable
price compared to competitors.
The sources of cost advantage could originate from:
• Market size and economies of scale
• Specialised equipment and facilities
• The ability to keep overhead costs low
• The intention to relentlessly pursue exceptional quality
Explain the evaluation of strategic choices
1. Suitability. This is the degree to which an organisation‟s strategy deploys its core
competencies to exploit external opportunities and overcome external threats and
internal weaknesses. Methods that are available to test suitability include SWOT
analysis, the five forces industry analysis, and scenario analysis and planning.
2. Acceptability. This requirement relates to the ability of the strategy to produce the
expected results over both the short and the long term in line with stakeholder
expectations. It also considers the evaluation of factors such as benefits, risks and
stakeholder reactions. Sensitivity analysis, financial analysis and break-even analysis,
inter alia, can be used to assess acceptability.
3. Feasibility. Feasibility implies that the organisation is capable of executing the strategy.
The following questions need to be answered:
– Can the strategy achieve the set objectives?
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– Can the strategy be implemented effectively and efficiently?
– Are the required resources and capabilities available for implementation of the strategy?
For the feasibility measure, the organisation‟s financial and human resources as well as
resource integration need to be evaluated.
Once formulated, strategies need to be evaluated according to the above-mentioned
measures discussed in this section if they are to be deemed „„fit for purpose‟‟.
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