MNG4801: STRATEGIC MANAGEMENT

TOPIC 1: DEVELOPMENT OF STRATEGIC MANAGEMENT AS A MANAGEMENT APPROACH Discuss Mintzberg’s view on the nature of strategy Refer to SG pg 10 and TB pg 16 a. Strategy as a plan provides overall direction and a course of action for the organisation. Strategic decisions are formal, logical and a top down process. This approach seeks to attain a match or strategic link between the internal organisational capabilities and external opportunities. The planning approach to strategy has been criticised for being a too rational. Top down management approach and not being realistic enough given the unpredictability of the competitive environment b. Strategy as a position looks at the way an organisation positions itself in the market and the industry. As a position, strategy looks downwards (meeting customer needs) and outwards, towards the external competitive market. The focus is on an outsidein perspective c. Strategy as a perspective refers to the organisation’s way of doing things and how strategies in an organisation emerge over time, as past strategies serve as a foundation for current strategies which are again adapted by future strategies. As a perspective, strategy looks inside the organisation-inside the mindset of the collective strategists- and “upwards” towards the strategic purpose, intent and direction of the organisation (inside-out perspective) d. Strategy as a ploy refers to outwitting a competitor – in line with this viewpoint many people believe strategy to be a chess game in business where you need to think several moves ahead to win the game. The strategy is about creating a threat or ploy to a competitor e. Strategy as a pattern concerns consistent behaviour over time. Strategy needs to be planned (intended strategy) and as pattern strategies also evolve over time. When the pattern realised is not explicitly intended it is referred to as an emergent strategy. Emergent strategies are unplanned responses to unforeseen circumstances. Strategic management terminology -Competitive advantage: indicates the edge that an organisation has over competitors. The main component of competitive advantage is the ‘value added’ – perceived or real – to the product or service. This leads to an advantage which is relative to competitors -Strategic survival – the extent to which an organisation can maintain and sustain competitive advantage over time. It is important to note that strategic survival means surviving in the long term. MNG4801 EXAM REVISION Page 3 -Above-average returns: are therefore returns greater than the average returns in a particular industry, or returns greater than the expected returns from organisations which exhibited the same levels of risk. Average returns indicate a lack of competitive advantage, and below-average returns indicate some form of institutional or market-related failure. Possible example: For shareholders returns would, for example, include dividends paid on shares. Investors will typically invest in organisations where they expect to earn aboveaverage returns. This means that if the market has an average 10% return on investment, a shareholder that expects above-average returns would be looking at investing in companies that offer returns of, say, 20% over the long term. -Profit maximisation yardstick for determining whether an organisation has survived the past year, but it does not tell us much about the chances of the organisation surviving in the future. Profit is therefore a poor indicator of future success. -Wealth maximisation is the yardstick by which strategic survival can be measured. It modifies the goal of profit maximisation in order to deal with the complexities of the contemporary business environment, both the external and the internal environments. It takes a long-term view of the success of an organisation, which is often in conflict with the short-term yardstick of profit maximisation. -Intended strategy is a deliberate, preconceived plan which outlines the measures and the course of action which the organization will to take to reach its objectives. Planned strategies are termed intended strategies, and when realised, are termed deliberate strategies. -Emergent strategy refer to those consistent unplanned patterns of behaviour which appear, during implementation of an intended strategy or by chance, as organizations respond to changes in the macro environment -Discontinuous change: Its characterised by rapid shifts with lower levels of predictability. Revolutionary changes are usually discontinuous changes. Possible example: The internet, for example, triggered a major upheaval and had an impact on the way we communicate, interact and do business. Possible example: The advent of the smart phone. This device became a substitute for various other devices, provided increase in user reach and connectivity.