POLYTECHNIC OF NAMIBIA
OFFICE MANAGEMENT & TECHNOLOGY
ADMINISTRATIVE OFFICE MANAGEMENT 4A
(AOM411S)
2015
Strategic
Planning:
Longterm goals/forecasting
UNIT 4
WEEK 5
Announcements week 5
• Read through the course outline to see if you
have any questions.
• Read Pages Read Pages Read Pages 192 – 211
in your textbook – Management principles,
5th Edition, 2011.
• Complete revision questions.
TOPICS
OBJECTIVES
Strategic Planning:
To explain the formulation
Translating the mission into of long-term goals and
long-term goals
various tools and
Challenges for management: techniques.
Forecasting
Translating the mission into long-term
goals
• Mission statement reflects reality as it guides decision making
• Basis for performance contracts with managers and workers
• Mission statement is normally broad and has to be translated into
measureable long-term goals for everyone to understand – can use
balanced scorecard(BSC) for this purpose
• BSC include financial measures to measure profitability, liquidity
etc
• Kaplan and Norton added three additional dimensions to measure
o operational measures on customer satisfaction
o internal processes
o organisation’s innovation activities as these drive future financial
performance
Four BSC perspectives measure the
following
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

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Financial perspectives includes measures such as operating
income, ROCE, economic value added
Customer perspectives look at measures such as number of new
customers, customer retention, customer satisfaction etc.
Internal bus processes deals with continuous improvement,
throughput and quality, egg no of mistake during a certain process –
egg registration process at university
Learning and growth perspective focus on competency of
employees, innovative ideas generated by employees, staff
retention etc.
NOTE: Should not operate in isolation.
Organisations should adapt above perspectives to reflect their own
unique key drivers
Choosing a strategy
 Guided by organisations mission statement and
its long-term goals
 Strategies
• Generic strategies – core idea as to how to best
compete in the market place
• Low-cost leadership – to maximise sales by minimising cost
per unit (Learning curve) and hence prices
• Differentiation – expand size of operations to bring costs
per unit down economies of scale. Distinguish products from
that of competitors
• Focus – focus on specific product line or market segment
Grand strategies
• once generic strategies or core idea is chosen – decide
on more specific grand strategy for each business –
single or multi-business organisations
• The choice of strategy depends on a business’s
strengths and weaknesses and opportunities and
threats
• Can look at:
 Growth strategies – internal or external
- decline strategies
- corporate combination
strategies
Growth strategies
• Internal growth strategies – Low in risk as
business concentrates on what it does well
already.
 internal growth strategies
 Concentration – improving on what one is already
doing – look at known product in known market etc.
Can be through increasing consumption of existing
customers, attracting new ones, poaching from
competition etc
Susceptible to knew competitors and innovations
 Market development…..
Growth strategies
 Market development – organisation sells its
present products in new markets by opening new
additional units or attracting other market
segments
 Product development – modification of existing
products or additions to existing products e.g.
hybrid cars
 innovation – continuously searching for original
or novel ideas e.g. First National Bank that started
with cell phone banking
Growth strategies
• External growth strategies
 Integration
 Backward vertical integration to increase control over
supply e.g. Sappi acquiring a plantation
 Forward vertical integration – closer to customer e.g.
paper producer buying a bookstore. Good if organisation
receives bad service from distributor
 Horizontal integration – taking over one or more similar
organizations for scale of operation benefits and larger
market share – new markets an get rid of competition
 Diversification……..
Growth strategies
 Diversification – for organisations that cannot
achieve growth objectives in current industry
with their current products and markets
 Reason for diversification:
 Markets of current businesses approaching saturation
or decline phase
 Risk can be distributed more evenly
 Current bus. Generate surplus cash that can be
invested more profitable somewhere else
 Synergy is possible when diversifying into new
businesses
Growth strategies
 Concentric diversification – addition of a business
related to an organisation i.t.o . technology, markets or
products. Must be highly compatible with current
business. Can use one of distinguished strengths e.g
Knowledge- Nandos selling sauces to Retail chain like
Shoprite
 Conglomerate diversification – acquiring business with
most promising investment opportunity. Can be to
offset deficiencies, lack of cash etc
Decline strategies
• Organisations selling off some of their major
assets.
• Is justified in situations in which an
organisation needs to:
o refocus activities to cut cost
o where long-run growth and profit opportunities
are unavailable
o where other opportunities are more attractive
o where there is period of economic uncertainty
Decline strategies
• Decline strategies are:
 Turnaround
 Divestiture
 Harvesting
 Liquidation
Decline strategies
• Divestiture – sale of major component of business to change
scope of operations
Reasons – mismatch in business, cash flow problems
• Harvesting – to maximise cash flow – business unlikely to be
sold for profit but can generate cash during harvesting.
• Liquidation – entire organisation ceases to exist – planned
liquidation to be able to sell assets for more than value of
shares
• Turnaround – when profits are declining but business is
worth saving egg SAA/ Air Namibia
 Focus on eliminating inefficiencies
 looks at cost and asset reduction to reverse declining sales and profits
Corporate combinations
• Joint venture – commitment of resources and services by
two or more legally separate entities to a combine
undertaking for mutual benefit egg to build roads
• Strategic alliances – two or more businesses join resources
for a certain period and are not in competition but provide
similar products directed towards same target market egg
hotel with car rental company
• Mergers – two companies combine their resources to from
a new company.
• Acquisitions – Large company buys a smaller one and
incorporates the acquired company’s operations into its
own.
Selection of grand strategies
• Why did FNB decide to close 34 of their
branches in RSA?
• Why would Wyeth, a world leader in
pharmaceutical and healthcare products,
merge with Pfizer?
• Can be answered by looking at the strategy
selection process
Selection of grand strategy: process
 NOTE: Choice of a strategy/strategies requires clear decision that allows
the organisation to attain its goals
 Factors to consider when choosing different strategies:

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



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Corporate governance guidelines pertaining to risk management – move away
from profit for shareholders as bottom line – look at economic, social and
environmental aspects as well.
Previous strategies chosen – very difficult to change unless you can change key
strategies to lessen the influence past strategies
Dependence on one or more external factors egg customers Egg gym also
offering computer services
Attitude towards risk egg of CEO - being risk –averse limits alternatives
Personalities of strategists /management
Alignment with the organisation’s mission and long-term goals – heavily
influences strategic choices
Proper timing – disastrous if undertaken at the wrong time
Selection of grand strategy: process
 Portfolio analyses
 Businesses offering only one service or product choose a
strategy for this one bus. Only
 Choice of strategy for multi-business organisation is more
complex egg City Lodge hotel group
 Knowing how to manage multiple businesses or units calls
for knowledge of portfolio management – each business is
managed as a separate business or profit centre
 portfolio approach provides visual way of identifying and
evaluating alternative strategies for the allocation of
corporate resources
 Our focus is on Boston Consulting Group growth/share
matrix (BCG matrix)
BCG matrix
• Each strategic business unit (SBU) is plotted
according to its
o market growth rate (% growth in sales); and
o relative competitive position (market share) in the
industy (porters model)
• Horizontal axis represent the market share of
each business unit of a fictitious organisation
relative to the industry leader (org with largest
market share in industry)
• Vertical axis represents the annual market
growth rate for each SBU’s particular industry
BCG matrix
• PP 121 BCG matrix for a company with
multiple SBUs
• Each circle represent a business unit
• Size of the circle represents the portion of
corporate reserves generated by that SBU
• They are classified as stars, cash cows,
question marks and dogs
BCG matrix
• Stars are rapidly growing markets with large market shares –
businesses are quite profitable
Requires large investment to maintain market share
• Cash cows – low market growth but high market share – generates
large amounts of cash – can be used to support other SBUs egg
question marks
• Question marks – high growth, low market share – require lot of
cash to maintain. Should we invest more or phase out?
• Dogs – Low market share and growth – candidate for divestiture or
liquidation. Is in saturated, mature market with intense competition
and low profit margins
• NOTE: After portfolio analyses management should be able to
select grand strategy. E.g. – For dog business – cut on maintenance
or research and development - Harvesting
Ways to prepare for environmental
changes
• Environmental scanning is needed to have
knowledge of possible changes in the environment.
• Environment is changing constantly therefore
management should scan it to keep up with change.
• To determine whether factors in the environment
can cause a threat to the organisation.
• Environmental scanning is needed to discover
opportunities for the business.
• References
• Smit, P.J., Cronje, G. J., Brevis, T., Vrba, M. J. (2011).
Management principles. A contemporary edition for
Africa. (5th ed.). Cape Town, Juta.
• Robbins, S. P, DeCenzo, D. A. (2005). Fundamentals of
Management: essentials concepts and applications.
(5th ed.). New Jersey, Pearson Prentice Hall.
Announcements week 5
• Read through the course outline to see if you
have any questions.
• Read the course objectives for week 6.
• Read Pages Read Pages 192 - 211 in your
textbook – Management principles, 5th
Edition, 2011.
• Complete Activities: multiple choice
questions
Additional readings
• eBook: Singh, Vishnu P. Principles of
Management. (2007).
http://site.ebrary.com/lib/polynam/docDetail.
action?docID10417348