NOTE: THESE ANSWERRS WAS NOT CHECKED BY ANYONE SO
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NOTE: THESE ANSWERRS WAS NOT CHECKED BY ANYONE SO THE CORRECTNESS CANNOT BE GARUNTEED. MOST OF THE ANSWERS WAS SOURCED FROM OTHER DOCUMENTS WHICH WAS FREELY AVAILABLE ON PUBLIC FORUMS. I DO NOT MAKE CLAIM THAT ALL THIS WORK TO BE MY OWN AND GIVE CREDIT TO ALL THOSE WHO HAS HELPED. I MERELY REORGANISED THE ANSWERS SO THAT IT FIT THE MOCK EXAM PAPERS AVAILABLE ON myUNISA SEMESTER 1 2012 First paper Section A 1. Explain how success is measured in strategic management terms Profit is not the only measure of organisation success Strategic management is about surviving in a changing environment To survive continuously, strategic managers need to make decisions that will enable them to achieve strategic competitiveness and above average returns If they achieve the organisations primary objective, namely wealth maximization for stakeholders To survive in the long term. 2. Describe the impact of the King 11 report with regard to Corporate Governance on strategic planning. It identify 7 primary characteristics of good corporate governance a. Discipline – management to adhere to behaviour that is correct and proper b. Transparency – ease with which outsider make analysis of a company’s actions c. Independence – minimise / avoid conflict of interest d. Accountability – decision makers need to be accountable for their decisions. e. Responsibility – pertains to behaviour, allows corrective action. f. Fairness – must be balance in taking into account all those that have and interest g. Social responsibility – must be aware and respond to social issues. - It recommends moves from single to triple bottom line measurement and reporting - Directors, management, employees and suppliers have a commitment to maintain the highest level of confidentiality in relation to the activities and assets of the business operations. - Disclosure and transparency relate to the communications of outcomes, that is the results of performance. 3. Briefly discuss how meaningful comparisons can be made in and internal environment analysis If an organisation cannot decide on a specific strategic direction to follow and if it does not know what it can and cannot do and internal analysis can match what it can do with what it might do. This allows it to develop its vision, pursue its strategic mission and select and implement its strategies. In order to devise an efficient and effective strategy it needs to know strengths and weaknesses 4. Identify and explain 5 macro environmental variables that may have an impact on an organisation Section B 5. Discuss the role of the mission statement in the strategic management process The mission statement answers the question of “what is our business” it is derived from the vision/strategic intent. Is and enduring statement of purpose that distinguishes an organisation from other similar ones. It identifies the scope of the operations, market and technology. Indicates a reason for being. Embodies the philosophy, character and identity of an organisation and also reflects the image it wants to project. It is a statement of intent, attitude, outlook and orientation. 4 focus areas: a. Purpose b. Identifies the organisation strategy in terms of the nature of the business c. refers to the organisations behaviour standards and culture in terms of the way it does business d. 4 focus areas ate the values, beliefs and moral principles that support the behavioural standards Components of the mission statement: Product/service, market and technology Survival, growth and profitability Philosophy of the organisation Public image Self concept of the organisation Customers and quality Stakeholders in the mission statement The inclusive approach as applied by the king 3 reports recognises that the interests of the stakeholders should be considered when formulating strategy. Mission statement forms the basis from which strategies are chosen and therefore it is very important for organisations to recognise the legitimate claims of their stakeholders when formulating a mission statement. Inclusive approach also requires the organisation to communicate its purpose and values to all stakeholders. 6. Differentiate between a vision statement, a mission statement and strategic intent Vision statement 0 Is the 1st step in the strategic planning and serves as a roadmap of the organisation 0 It answers the question”What we want to become” Focus on the future 0 It also serves as a basis for formulation the mission statement. Mission statement 0 Often derived from the vision statement 0 A statement of purpose that distinguishes an organisation from others 0 Strives to address the interest of the organisations stakeholders 0 It answers the question “What is our business” focus on the present Strategic intent 0 Gives a sense of direction and forms a basis for resource allocation 0 It contains elements of both vision and mission 0 Can also be the basis for the mission statement 7. Identify and discuss the claims and expectations of various stakeholders of an organisation Share holders – dividends, capital growth & safe investment Employees – job security, compensation & job satisfaction Customers – High quality products and good service, value for money Suppliers – regular payments, continuity of business & long term relationship. Financial institution.- interest, security of loan Competitors - Fair business , practices ethical competition Government – taxes, employment skills & development of BEE Media and press – transparent and honest reporting General community – fair employment, socially and environmentally responsible actions and no discrimination. 8. Explain what corporate citizenship entails. Corporate social responsibility – Refers to the organisational decision making linked to ethical, legal requirement and respect for communities and the environment. Environmental responsibility – refers to steps that organisations should take to ensure that they do not harm the environment. Sustainability – refers to development that meets the needs of the present generation without compromising the ability of future generations to meet their needs. Sustainable reporting and the triple bottom line – refer to reporting on the economic, social and environmental impact of organisations activities. Stakeholder engagement – deals with identifying stakeholders and how stakeholder’s relationship should be managed. 9. The resource based view contends that organisational performance is primarily determined by internal resources. Identify and differentiate between the main internal resources of a organisation. The internal resources are a).tangible assets, b). intangible assets and c). organisation capabilities. Tangible assets are easy to identify because an organisation location, building and equipment are visible. The value of tangible assets can be determined by looking at the financial statements, especially the balance sheet. Intangible assets on cannot touch but it create the real competitive advantages. As intangible assets are less visible i is more difficult for competitors to understand, imitate and replace Capabilities are the glue that emerges over time and binds the organisation together. It comprises the ability to combine assets (people and processes) to transform the organisation inputs into outputs 10. Describe the steps in conduction a value chain analysis Identify and classify activities – The First step in performing a value chain analysis(VCA) is to identify the various primary and secondary activities carried out by an organisation. Allocate costs – The next step is to try and allocate costs to every activity, as each activity occurs. Identify the activities that differentiate the organisation from its competitors – this will serve as competitive advantage. Examine the value chain – the last step is to scrutinise the results and to classify the various activities as strengths / weaknesses of the organisation. 11. Critically discuss the use of the functional approach in conduction and internal analysis. It is an internal audit using a functional approach It is an assessment of the various functional areas of the organisation The functional approach aims to determine how well / poorly these functions are being performed and what resources these functional areas need to perform effectively Some functional areas are: 0 finance and accounting 0 Marketing 0 Production 0 Research and development 0 Human resources Disadvantages of this approach: 0 The attention is entirely focussed on the functional areas 0 There is no determination if the functional approach makes an important contribution to the organisation competitive advantage. 0 The bigger picture is missing 0 The approach should not be used in isolation 0 It should be used in combination to one or both of the other two approaches – Resource based view and Value chain approach. 12. Explain the importance of an industry assessment as part of an external environmental assessment. - The organisation and the environment in which it operates influence each other. - The organisation cannot be successful if it’s not in step with its environment. - It helps with the underlying problem of an organisation, the environment changes faster than the organisation can adjust. - Because of the increasing changes in markets and industries around the world, external environmental analysis becomes important for strategic management. - It enables managers to formulate strategies to take advantage of opportunities and reduce the impact of treats. - It helps to develop a clear vision and mission. 13. Diagrammatically depict the position of strategic choice in the strategic planning process. Diagrammatically depict the strategic planning process. (7) NB: During exam we may ask this differently, for example: Diagrammatically depict the position of Long term goals in the strategic planning process. Strategic direction: vision, mission, strategic intent Internal environmental analysis External environmental analysis Strengths & weaknesses Opportunities & threats Formulation of long-term goals Strategy selection Generic strategies & grand strategies 14. Explain the difference between generic and grand strategies Generic strategies - Identify bases from which organisations can pursue competitive advantages. It is not always clear how a particular competitive advantage is achieved. Grand strategies - Also referred as business strategies are more specific strategies that organisations can pursue in order to achieve cost leadership, differentiation or focus. Enable organisations to attain their long term objectives. 15. Explain the various internal and external growth strategies. Use relevant examples to support your explanation. Internal growth strategies: Concentrated growth, also referred to as market penetration o A strategy that seeks to increase the market share of an organization through concentrated marketing efforts. Present market and present products. Market development o Present products or services are introduced to new areas or countries. E.g. MTN enter African markets. Product development o Improve the products and services of the organization to increase sales. E.g. Toyota with new sporty looks. Innovation o Use innovation to create new products or services. External growth strategies: Related or concentric diversification o Adding new but related products to the production line. Canon camera also copy machines. Unrelated or concentric diversification o Adding new unrelated products to the production line to reach new markets. Vertical integration o Extend the scope and operations of an organisation to other activities within the same industry. Backward vertical integration o Gaining ownership or increased control of organisations suppliers. E.g. Toyota gaining ownership of Armstrong shocks. Forward vertical integration o Gaining ownership over distributors/retailers. Horizontal integration Organisation seeks ownership or increased control over certain value chain activities of its competitors. E.g. merges of Volkskas, United, Trust bank and Allied into ABSA. Second Paper Question A 1. Explain what strategic management entails Is the process whereby all the organisational functions and resources are integrated and coordinated to implement formulated strategies which are aligned with the environment, in order to achieve the long term goals of the organisation and therefore gain a competitive advantage through adding value for the stakeholders. Or It’s is a deliberate effort by the organisation to allocate resources in such a way that the organisation could realize an above average return on order to have a competitive advantage over its competitors over long term for the wealth maximization of all its stakeholders. 2. Explain what corporate citizenship entails Corporate social responsibility refers to the organizational decision making linked to ethical, legal requirement and respect for communities and the environment. Environmental responsibility refers to steps that organisations should take to ensure that they do not harm the environment. Sustainability refers to development that meets the needs of the present generation without compromising the ability of future generations to meet their needs. Sustainable reporting and the triple bottom line refer to reporting on the economic, social and environmental impact of organisations activities. Stakeholder engagement deals with identifying stakeholders and how stakeholder’s relationship should be managed. 3. Comment on the use of forecasting techniques and scenario planning in strategic planning. Forecasting is one of 4 components of the external environmental analysis. Forecasting is based on monitored changes and trends, where a projection of anticipated outcomes is develop. Forecasting are educated assumptions about future trend and events and is not perfect. Scenario planning is that part of strategic planning which relates to the tools and techniques for managing the uncertainties of the future. Scenario planning cannot happen meaningfully without proper forecasting. 4. - Differentiate between long term strategic goals and shot term tactical objectives Long term goals: Strategic importance of individual goals is high The nature of the goals is to provide strategic direction The time frame can be 1 to 5 years High level mangers is involved in the decision making The specificity is low And there is few high level goals Short term goals Strategic importance of individual goals is lower The nature of the goals is operational The time frame can be annual, quarterly, monthly or weekly Lower level mangers is involved in the decision making The specificity is high Numerous lower level goals is associated with a long term goal. Section B 1. Discuss arguments for the use of strategic management in the contemporary business environment. - The strategic management process applies to all kinds of organisations. - Not for profit organisations and international organisations have other options & strategies to consider - Managers regards strategic management as a tool to be used only by big corporate firms - Not for profit organisations main goal is not Profit & growth. - Because of this they lose focus - For long term sustainability & survival these organisations should implement strategic management to build their success and growth. - Strategic management is also about maximising the stakeholder’s wealth. - Not for profit organisations usually have more time to go through the process & do not operate in a cut-throat and fast moving environment 2. Explain the importance of setting strategic direction in strategic planning - Strategic planning begins with the setting of strategic direction for the organisation. Before a strategy can be proposed or implemented, the organisation must develop a clear idea of where it is going and why. As this is the first step in the strategic planning process, all other steps follow this one. It offers the overall theme for all activities that follow. Strategic direction has an impact on various stakeholder and all strategic decisions should be aligned with the interests of society. Strategic direction also has an impact in the natural environment. Good corporate citizenship and governance principles should be considered when setting strategic direction. 3. Identify and explain four components of the mission statement The 3 core components of a mission statement are the basic products and services of the organisation, the primary market and the principal technology used for the production or delivery of the products and services. Products and services that the organisation offers or plans to roll out in future. Markets have to do with where the organisation does its business. Technology has to do with how the organisation does its business. Survival, growth and profitability deal with the economic goals of the organisation. An organisation’s philosophy reflects its beliefs and values, as well as commitment in terms of how the organisation will be managed. The public, as well as present and potential customers, has certain perceptions and expectations of the organisation. Organisational self-concept deals with an organisations ability to know itself. Organisation use customers and quality as important component of the mission statement. 4. Comment on the recommendations of the King 11 report regarding the responsibility of directors to formulate a mission statement Corporate Governance refers to the formal system of accountability of the board of directors to shareholders. King II report promotes the highest standards or corporate governance in S.A. It identifies 7 characteristics of good corporate governance, namely discipline, transparency, independence, accountability, responsibility, fairness and social responsibility. Recommendations remain self-regulatory and include the code of practices and conduct. Looks at matters such as, risk management, boards and directors, internal auditing, accounting, relations with shareholders and communication. The mission statement forms the basis from which strategies are chosen Stakeholders have a legitimate claim to have the purpose and values to be communicated to them by an organization 5. Use a diagram to depict the position of environmental analysis in the strategic planning process Diagrammatically depict the strategic planning process. (7) NB: During exam we may ask this differently, for example: Diagrammatically depict the position of Long term goals in the strategic planning process. Strategic direction: vision, mission, strategic intent Internal environmental analysis External environmental analysis Strengths & weaknesses Opportunities & threats Formulation of long-term goals Strategy selection Generic strategies & grand strategies 6. - Briefly comment on the limitations of the SWOT analysis in assessing the environment The focus on the external environment may be too narrow It is perhaps a static assessment – a one shot view of a moving target The strengths that are identified may perhaps not lead to an advantage It may lead to an overemphasis of a single feature or strength and a disregard for other important factors that may lead to competitive success. The strengths and weaknesses are located in the internal environment. The opportunities and threats are located in the external environment. 7. Describe the characteristics that make a resource valuable - Value – if organisational resources is valuable it adds value i.e. a resource is valuable if it helps the organisation to exploit the external opportunities - Superiority – if the resource is superior to those that the competitor has and it fulfil a customer need better then the resource is superior and valuable - Scarcity – if the resource is in short supply and no other organisation possesses it then it becomes a distinctive competence for the organisation - Inimitability – if the resource is hard to imitate it is likely to offer a long term competitive advantage to the organisation i.e. reputation, patented product, good location and organisational culture - Capacity to exploit the resources 8. Explain how Porter’s five forces model is used to assess the attractiveness of an industry With a clear understanding of where your power lies, you can take fair advantage of the situation of strength, improve a situation of weakness and avoid taking wrong steps. Five Forces Analysis assumes there are five important forces that determine competitive power situations: Threat of New Entry Power is affected by the ability of people to enter your market. It cost little in time and money to enter your market and compete effectively, if there are few economies of scale in place, or if you have little protection for your key technologies, then new competitors can quickly enter your market and weaken your position. If you have strong and durable barriers to entry then you can preserve a favourable position and the fair advantage of it. Competitive Rivalry What is important here is the number and capability of your competitors – if you have many competitors, and they offer equally attractive products and services then you are most likely to have little power in the situation. If suppliers and buyers don’t get a good deal from you, they will go elsewhere. On the other hand, if no-one else can do what you do, then you can often have tremendous strength. Buyer Power Here you ask yourself how easy it is for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your product and services to those of someone else, and so on. If you deal with few, powerful buyers, they are often able to dictate terms to you. Supplier Power Here you assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, cost of switching from one to another and so on. The fewer supplier choices you have, the more you need supplier’s help, the more powerful your suppliers are. Threat of Substitution This is affected by the ability of your customers to find a different way of doing what you do – for example, if you supply a unique software product that automates an important process, people may substitute by doing the process manually or by outsourcing it. If substitution is easy and substitution is viable, then this weakens your power. 9. Identify and explain the focus areas of long term goals - The components of the mission statement provide guidelines for the areas that long term goals should focus on. Long term goals could focus on issues such as market, product, technology, survival, growth, profitability, customers and quality. Other components are public image, philosophy and self-concept of the organisation. Focus areas could include issues such as continuous improvement, customer service, employee efficiency, innovation, sales and financial criteria such as Return of investment, earnings per share, revenue and turnover. The focus areas of long term goals will differ from organisation to organisation and from industry to industry. 10. Use a diagram to depict the dimensions of the balanced scorecard 11. Identify and explain the types of decline strategies Referred to as defensive strategies. Pursued when organisation finds itself in a vulnerable situation. Retrenchment or turnaround o A turnaround strategy focuses on strengthening the distinctive competencies of the organisation in order to break the downward spiral with regards to sales and profits. o Activities focus on ways to reduce costs and ways to recovery. o Activities including selling assets, outsourcing activities that are not core competencies, the reduction of staff and curtailment of bonuses. o Appropriate for organisations that have poorly managed their distinctive competencies Divestiture o Involves selling a division or part of the organisation to raise capital for further acquisitions or investments. o Part of overall retrenchment strategy to get rid of unprofitable business units Liquidation o Entails selling all the assets of an organisation in an attempt to avoid bankruptcy. o Pursued when efforts to turn an organisation around through retrenchment and divesture have been unsuccessful, and ceasing operations is the only alternative to bankruptcy. o Planned and orderly way of converting assets into cash in an attempt to minimise losses, Bankruptcy An organisation that has no hope of turning its activities around may decide to close its doors and declare bankruptcy. Creditors are compensated to the extent to which cash resources allow and the rest of the debt is written off. 12. Identify and explain the types of corporate combination strategies 3 types of combinations Joint ventures o Temporary partnership formed by 2 or more organisations for the purpose of capitalising on a particular opportunity. o Usually enter joint venture to seek some degree of vertical integration, to acquire or learn partner’s distinctive skills in some value creating activity. Strategic alliances o Differ from joint ventures in that the organisations involved do not share ownership in a specific business venture. Share skills and expertise. Consortia o Are large interlocking relationships between organisations in a particular industry. o These relationships represent the most sophisticated for of strategic alliance as they involve multipartner alliances and highly complex linkages between groups of organisations. Risks of combination strategies Partners become incompatible over time Become too dependent on each other Run the risk of providing too much insight regarding their knowledge and skills. Can be cost intensive Third paper Section A 1. Differentiate between the three phases of strategic management process Strategic planning -It is the first stage in SPP(strategic planning process) and focuses on the organisations strategic direction. Involves the formulation or review of a company’s vision, mission and long term goals. It also evaluates the environments in which the organisation operates to identify SWOT. Strategy implementation- Once an organisation has decided on the destination and the strategy it will take to get there, it obviously needs to move towards that specific destination. Is the action stage on strategic management process and requires input from everyone in the organisation. Strategic control- Aims to assess the progress made towards achieving the desired outcome. Gives feedback and alerts top management to problems before a situation becomes critical. 2. Explain corporate governance and its relevance to strategic management Ties down the principles of responsible leadership, sustainability and corporate citizenship into concrete governance of organisations. Concerned with “holding the balance between economic, social goals and between individual and communal goals… the aim is to align as nearly as possible the interests of individuals, corporations and society” Corporate governance refers to the formal system of accountability of the board of directors to shareholders. Furthermore, it is about the formal and informal relationships between the corporate sector and its stakeholders and the impact of the corporate sector on society in general. Corporate governance is important during all stages of the strategic management process. Good corporate governance reassures stakeholders that the company in being run well. It follows corporate governance deals with the organisation and aligns its own goals with that of the stakeholders and managers; it’s a relationship with both its internal and external stakeholders. 3. Explain what makes a resource valuable - Value – if organisational resources is valuable it adds value ie a resource is valuable if it helps the organisation to exploit the external opportunities - Superiority – if the resource is superior to those that the competitor has and it fulfil a customer need better then the resource is superior and valuable - Scarcity – if the resource is in short supply and no other organisation possesses it then it becomes a distinctive competence for the organisation - Inimitability – if the resource is hard to imitate it is likely to offer a long term competitive advantage to the organisation ie reputation, patented product, good location and organisational culture - Capacity to exploit the resources 4. Discuss the use of forecasting techniques in the strategic planning process - Forecasts are educated assumptions about future trends and events Forecasting tools: quantitative techniques and qualitative techniques Quantitative forecasts: most appropriate when historical data is available and where the relationship between the key variables is expected to remain the same in the future. The choice of suitable forecasting method is dependant on the availability of historical data, cost, time and the accuracy of the required information Forecasting is not perfect Scenario planning: is that part of strategic planning which relates to the tools and techniques for managing the uncertainties of the future Quantitative – built on proper strategic analysis and choice Qualitative – based on intuition of strategic manager Section B 1. Differentiate between the different levels of strategy corporate strategy is strategy for guiding a firm's entry into and exit from different businesses, for determining how a parent company adds value to and manages its portfolio of businesses, and for creating value through diversification. Business level strategy is more concerned about developing and sustaining a competitive advantage for the goods and services that are produced. It is strategy for competing against competitors within a particular industry. functional level, decisions involve the development and coordination of resources through which business unit level strategies can be executed efficiently and effectively 2. Explain the different views of strategic management View Industry space Responsibility Traditional view Strategy as fit with resource Strategy as positioning in existing industry space Strategy as a top management activity Exercise As an analytical exercise Direction Strategy as extrapolating from the past Emerging view Strategy as stretch and leverage Strategy as creating new industry space Strategy as a total and continuous organisational process As an analytical and organisational exercise Strategy as creating the future 3. Discuss any 5 risks of strategic management If strategic planning and strategic management are executed incorrectly, it could negatively affect an organisation's productivity, profitability and competitive advantage. > Time – Managers sometimes so busy fire –fighting (solving short term difficulties ) that there is really no time for strategic management . > Unrealistic expectations from managers and employees – Even though the process of strategic management should include as many participants as possible, this is not always practically achievable. > The uncertain chain of implementation – Strategic plans are formulated at higher managerial levels of the organization. This means that it usually someone else who has to implement them. It is important that there is a clear chain of implementation down to the lower levels. This can be done by identifying clear responsibility areas and outcomes. > Negative perception of strategic management – Everyone in the organization should support the use and importance of strategic management especially every individual in top management. If this does not take place the organization risks a possible negative attitude from top management which would directly flow down to employees – implementation team. > No specific objectives and measurable outcomes – There are no frequent measurement tools to see whether the organization is better off or not after the implementing strategies. Well formulated long term objectives and the balanced scorecard can help overcome this risk. > Culture of change – Strategic management and organizational change go hand in hand. A positive culture would increase the positive acceptance of new ideas and strategies while the opposite is even more true. > Success groove – Managers become over confident and focused on their current success that they do not foresee any difficulties in the future and therefore do not see strategic management as necessary. 4. Discuss any 4 components of strategic leadership - Determining the company’s purpose or vision – determine the direction of the company resides with the CEO, work with top management to provide guidelines as to where the company wants to go and how to get there. - Exploiting and maintaining core competencies – Resources and capabilities that ensure and competitive advantage over the rivals - Developing human capital – Entails the knowledge and skills of an organisations entire workforce through them a competitive advantage become a reality. - Sustaining an effective organisational culture – refers to the complex set of ideologies, symbols and core values that are shared throughout the organisation. The culture is rooted in the history of the organisation and reflects what the organisation has learned over time. – Valued source of competitive advantage. - Emphasising ethical practises – base decisions on honesty, trust and integrity. Will be inspirational to employees and develop organisational culture. - Establishing balanced organisational controls – are needed to guide work in a way that performance goals are reached. 5. Explain the concept of responsible leadership Organisation has to be responsible towards its stakeholders in ensuring sustainable success. Defined as “exercise of ethical, value based leadership in the pursuit of economic and societal progress and sustainable development” Take ownership of the consequences of their business activities on an economic, social and environmental level. Act ethically within a set of guiding principles enshrining values associated with responsible leadership. All stakeholders are important. Inclusive mindset. The 2 main business responsibilities are corporate social responsibility and corporate sustainability. 6. Comment on the limitations of the Swot analysis - The focus on the external environment may be too narrow - It is perhaps a static assessment – a one shot view of a moving target - The strengths that are identified may perhaps not lead to an advantage - It may lead to an overemphasis of a single feature or strength and a disregard for other important factors that may lead to competitive success. The strengths and weaknesses are located in the internal environment. The opportunities and threats are located in the external environment. 7. Differentiate between primary and secondary activities in the value chain analysis Primary activities Primary activities are those activities involved in the physical creation of the product. Primary activities typically include the following: Input or inbound logistics – is associated with the receiving, storing and distributing of inputs to the product Operations – activities associated with the transformation of the inputs into the final product Output or outbound logistics – refer to all the issues related to the distribution of the product of services to customers Marketing and sales – refers to all the inducements used to get customers to make the purchases Customer service – Basic activities that the organization must undertake to make sure the value of the product is maintained such as installation, repairs, training etc Secondary activities Secondary activities, also called support activities, provide infrastructure or inputs to allow the primary activities to take place on an ongoing basis. These Activities literally support the primary activities and the performance of the Primary activities depend on the support activities. Support activities include Procurement –refers to the actions that can be taken to optimize the quality and speed of the procurement of inputs, and not to the inputs themselves Technological development – include the different processes and equipment throughout the entire value chain Human resource management – the recruitment, selection and training and development will affect all levels in the organisation General administration and infrastructure – effective and efficient planning systems Financial management – All activities must adhere to effective financial recording and control 8. Diagrammatically depict the position of external environmental assessment in the strategic planning process Diagrammatically depict the strategic planning process. (7) NB: During exam we may ask this differently, for example: Diagrammatically depict the position of Long term goals in the strategic planning process. Strategic direction: vision, mission, strategic intent Internal environmental analysis External environmental analysis Strengths & weaknesses Opportunities & threats Formulation of long-term goals Strategy selection Generic strategies & grand strategies 9. Discuss and 4 limitations of Porte’s five force model to conduct an industry analysis One of the criticisms of the five forces is that it assumes a relatively static market structure. It does not take into account new business models and the dynamics of markets in the current rapid change environment. For example, the computer industry is often considered a highly competitive industry; such an industry structure is being revolutionized in innovation. In this case the five forces model is of limited value since it represents a snapshot of a moving picture – it would not be advisable to develop a strategy solely on the basis of Porters model. The model can never be applied in isolation. Another limitation is that it provides a good framework for analysis but does not consider issues around implementing changes to reposition for strategic advantage. It does not consider alliances, Electronic linking of information systems of all companies along the value chain, virtual enterprise networks, fair play, give and take or other such strategies. The model assumes that all competition is hostile This model focuses on the industry as a whole and not the individual firms. There can be a vast variance in the profit rate of individual companies within an industry. A Company may not be profitable just because it is placed in an attractive industry. Organisation specific factors (like specific organizational competencies) are more important to the individual organization’s success than the industry factors. The model claims to access the profitability of the industry not individual Buyer and supplier power relate to the product and resource markets respectively, in both these markets the conditions are more complex that the model implies. The markets in which the products are sold (buyer power) need more analysis to determine their strength. Product and resource markets are not adequately covered by the model The model implies that all the five forces apply equally to all competitors in an industry. In fact the forces differ from organization to organization. For example the model implies that if the bargaining power (and supplier power) is strong it will apply to all the organizations in the industry – this is not true, a supermarket like Pick n Pay will be less affected by bargaining than the small corner retailer on the corner, likewise the threat from suppliers power is less for pick n pay than for a smaller retailer 10. Explain what is meant by the concept sustainable competitive advantage Competitive strategy is all about activities an organisation undertakes to gain a competitive advantage in a particular industry The competitive advantage of an organisation is the answer to: what competence/advantage should the organisation use to distinguish it from its competitors? Competitive advantage should: Relate to an attribute with value and relevance to the targeted customer segment. Be perceived as a competitive advantage Be sustainable i.e. not easily imitated Should be based on the organsiations resources, strengths or distinctive competencies relative to competitors, but must also be perceived as such by its customers. . SUSTAINABILITY-SUSTAINABLE DEVELOPMENT MEETS THE NEEDS OF THE PRESENT GENERATION WITHOUT COMPRIMISING THE ABILITY FUTURE GENERATIONS TO MEET THEIR OWN NEEDS 11. Differentiate between the four generic strategies Competitive strategy is about formulating a strategy that enables the organisation to compete with other organisations in its industry or sector The generic strategies were developed by Michael porter An organisation can strive to supply a product or service in 3 distinct ways: 1. by being more cost-effective than its competitors: Cost leadership 2. by adding value to the product of service through differentiation and command higher prices: differentiation 3. by narrowing its focus to a special product market segment which it can monopolise: Focus 4. by combing the cost and differentiation advantage, the organisation can offer the lowest prices compared to rivals offering products with comparable attributes: best-cost Fourth Paper Section A 1. Explain the importance of corporate governance in the strategic planning process All strategic decisions should be taken within the context of good corporate governance. Organisations should pay close attention to the King II Report when developing or changing strategic direction. The King II Report forms an integral part of any organisation operating in South Africa. King II report 7 characteristics of good governance: discipline, transparency, independence, accountability, responsibility, fairness and social responsibility. Recommendations remain self regulatory and included the code of practices and conduct Look at matters such as risk management, boards and directors, internal auditing, accounting, relations with shareholders and communication. 2. Explain what external assessment means in strategic management terms The importance of external environmental assessment: the organisation and the environment in which it operates is not a closed system, because they influence each other The environment usually changes faster than the organisation can adjust to it External environmental analysis focuses its attention on identifying and evaluating trends and events beyond the control of a single organisation, and also reveals key opportunities and threats confronting the organisation that could have a major influence of the organisations strategic actions An opportunity is a favourable condition in the external environment, if seized by the organisation to its advantage, strategic competitiveness can be achieves A threat is an unfavourable condition in the external environment that may hinder an organisations efforts to achieve strategic competitiveness 3. Explain how the balanced scorecard is used to set long term goals - The balanced score card is a set of measures that are linked directly to the vision, mission and strategy of the organisation It balances short and long-term measures; financial and nonfinancial measures and internal and external performance perspectives. Comprises of 4 perspectives: financial, internal business, innovation and learning and the customer perspective Can be used as a framework for setting long-term goals as each perspective has clearly stated objectives, measures, targets and initiatives 4. Discuss the factors that impact on strategic choice - There are various factors that play a role in selection of a strategy. The different components of the strategic planning process would impact on the choice of strategy. A change of any component of the strategic planning process may require a change in strategy. Other factors that impact the choice of strategy are the preferences of top management, organizational leadership, organizational culture as well as the history of the organisation. Section B 1. Explain the different views of strategic management View Industry space Responsibility Traditional view Strategy as fit with resource Strategy as positioning in existing industry space Strategy as a top management activity Exercise As an analytical exercise Direction Strategy as extrapolating from the past Emerging view Strategy as stretch and leverage Strategy as creating new industry space Strategy as a total and continuous organisational process As an analytical and organisational exercise Strategy as creating the future 2. Differentiate between a vision statement, a mission statement and strategic intent Vision statement 0 Is the 1st step in the strategic planning and serves as a roadmap of the organisation 0 It answers the question “What we want to become” Focus on the future 0 It also serves as a basis for formulation the mission statement. Mission statement 0 Often derived from the vision statement 0 A statement of purpose that distinguishes an organisation from others 0 Strives to address the interest of the organisations stakeholders 0 It answers the question “What is our business” focus on the present Strategic intent 0 Gives a sense of direction and forms a basis for resource allocation 0 It contains elements of both vision and mission 0 Can also be the basis for the mission statement 3. Identify and explain the six tasks of strategic leadership - Recognise the dual nature of strategy ( short term as well as long term)- should balance today for today strategies with today for tomorrow strategies. - Start with vision, mission and distinctive profile – Must have a clear vision of the company he wants to create , a clear sense of mission and a clear sense of their distinctive profile to create and framework for strategy definition and action. - Replace “resource based” strategy with a new basis of strategy – in today’s markets competencies and resources have to be closely aligned with future opportunities. - Focus on strategy as being the alignment between the external and the internal worlds of the company – Must work on upstream alignment alignment of the core strategy Downstream alignment alignment of the internal organisation with the changing core strategy - Competing through business systems, not through businesses – creating value happens by means of a system as a whole, a leaders task is to reduce time delays, this coordination between all the elements is the vale creating process. - Recognise that there is a growing decentralisation of strategy making and leadership – new managerial framework and assistance from the top. 4. Explain the concept of responsible leadership Organisation has to be responsible towards its stakeholders in ensuring sustainable success. Defined as “exercise of ethical, value based leadership in the pursuit of economic and societal progress and sustainable development” Take ownership of the consequences of their business activities on an economic, social and environmental level. Act ethically within a set of guiding principles enshrining values associated with responsible leadership. All stakeholders are important. Inclusive mindset. The 2 main business responsibilities are corporate social responsibility and corporate sustainability. 5. Discuss the limitations of the SWOT analysis The focus on the external environment may be too narrow It is perhaps a static assessment – a one shot view of a moving target The strengths that are identified may perhaps not lead to an advantage It may lead to an overemphasis of a single feature or strength and a disregard for other important factors that may lead to competitive success. The strengths and weaknesses are located in the internal environment. The opportunities and threats are located in the external environment. 6. Discuss the steps in conducting a value chain analysis Steps in value chain analysis Identify and classify activities – first step in performing a value chain analysis is to identify the various primary and secondary activities carried out by organisation Allocate costs – the next step is to try and allocate costs to every activity, as each activity occurs. Identify the activities that differentiate the organisation from its competitors - this will serve as competitive advantage Examine the value chain – the last step is to scrutinise the results and to classify the various activities as strengths or weaknesses of the organisation. 7. Differentiate between primary and secondary activities in the value chain analysis VCA is a systematic method of determining how the organisations various activities contribute to creating value for the customer. It’s a value-creating activity. Identifies where most value is added and where you can add more value. Primary activities Input logistics – receiving, storing and distributing of inputs to the product. Operations – include all those that are associated with the transformation of the inputs into the final product. Output logistics – refers to all the issues related to the distribution of the products to customers. Marketing –refers to the method used to persuade customers to make the purchases. Customer service – installation, repair, training, the supply of parts and perhaps product adjustment. Support activities Procurement - refers to the function of purchasing the inputs. Technological development – what is the level and quality of technological development? Human resource management - deals with recruitment, selection, training and remuneration of employees and how it will affect all levels of the organisation General administration and infrastructure – important to reach overall goals. That why this in place. Financial management – important to have sound financial practice and placed throughout the value chain. 8. Describe the components of the macro environmental analysis Macro environment Political/legal environment o Has 3 parts, namely existing laws, laws of amendments and unannounced new laws or suspended clauses of existing laws. o These laws may reduce the profit potential of organisations. Economic environment o The health of a nation’s economy effects an organisation that’s why it is important to identify changes and trends. E.g. inflation, recession, interest rates. Social environment o It is a continuous process of change; it’s about society’s attitude and cultural values. o Although it’s difficult to translate all the social and culture changes, it remains important to be successful with strategic planning. Technological environment o Technological changes effects many aspects of society. No organisation can afford to stay behind in technological development. Ecological environment o It is the natural environment o Manufacturing process need to become more environmentally friendly. o Refers to the relationship between human beings, organisation and the air, soil and water in the environment. 9. Discuss the guidelines on how to perform a competitor analysis The external environment is done to identify opportunities and threats. The external environment is divided into 3 major areas, namely Macro, Industry and Market environment. Organisations must understand and be aware of all the dimensions of the external environment to achieve strategic competitiveness. Organisations cannot directly control the external environment segments and elements These elements have a major influence on organisations. Organisations need to empower their managers and employees to identify, monitor, forecast and evaluate the key external forces to enable them to identify opportunities and threats. 10. Diagrammatically depict the position of the long term goals in the strategic planning process Diagrammatically depict the strategic planning process. (7) NB: During exam we may ask this differently, for example: Diagrammatically depict the position of Long term goals in the strategic planning process. Strategic direction: vision, mission, strategic intent Internal environmental analysis External environmental analysis Strengths & weaknesses Opportunities & threats Formulation of long-term goals Strategy selection Generic strategies & grand strategies 11. Briefly differentiate between long term goals and short term goals Long term goals: - Strategic importance of individual goals is high - The nature of the goals is to provide strategic direction - The time frame can be 1 to 5 years - High level mangers is involved in the decision making - The specificity is low - And there is few high level goals Short term goals - Strategic importance of individual goals is lower - The nature of the goals is operational - The time frame can be annual, quarterly, monthly or weekly - Lower level mangers is involved in the decision making - The specificity is high - Numerous lower level goals is associated with a long term goal. 12. Explain what is meant by the concept sustainable competitive advantage Competitive strategy is all about activities an organisation undertakes to gain a competitive advantage in a particular industry The competitive advantage of an organisation is the answer to: what competence/advantage should the organisation use to distinguish it from its competitors? Competitive advantage should: Relate to an attribute with value and relevance to the targeted customer segment. Be perceived as a competitive advantage Be sustainable i.e. not easily imitated Should be based on the organsiations resources, strengths or distinctive competencies relative to competitors, but must also be perceived as such by its customers. . SUSTAINABILITY-SUSTAINABLE DEVELOPMENT MEETS THE NEEDS OF THE PRESENT GENERATION WITHOUT COMPRIMISING THE ABILITY FUTURE GENERATIONS TO MEET THEIR OWN NEEDS 13. Comment on the criticism levelled against the use of a generic strategy framework Criticism against the generic strategy framework Porter’s generic strategy frame work has also been the target of increasing criticism The most important objections are: An organisation can employ a successful hybrid strategy without being stuck in the middle Low cost strategy does not in itself sell products Prices can sometimes be used to differentiate 14. Identify and explain four types of decline strategies Referred to as defensive strategies. Pursued when organisation finds itself in a vulnerable situation. Retrenchment or turnaround o A turnaround strategy focuses on strengthening the distinctive competencies of the organisation in order to break the downward spiral with regards to sales and profits. o Activities focus on ways to reduce costs and ways to recovery. o Activities including selling assets, outsourcing activities that are not core competencies, the reduction of staff and curtailment of bonuses. o Appropriate for organisations that have poorly managed their distinctive competencies Divestiture o Involves selling a division or part of the organisation to raise capital for further acquisitions or investments. o Part of overall retrenchment strategy to get rid of unprofitable business units Liquidation o Entails selling all the assets of an organisation in an attempt to avoid bankruptcy. o Pursued when efforts to turn an organisation around through retrenchment and divesture have been unsuccessful, and ceasing operations is the only alternative to bankruptcy. o Planned and orderly way of converting assets into cash in an attempt to minimise losses, Bankruptcy An organisation that has no hope of turning its activities around may decide to close its doors and declare bankruptcy. Creditors are compensated to the extent to which cash resources allow and the rest of the debt is written off.
