Strategic management process 2, The

A South African perspective

Lazenby, K, Lazenby, K

• Publisher: Van Schaik Publishers
• Year: 2018
• ISBN:
  9780627036149
• Topic: Education
• Subtopic: Higher Education

An understandable and practical approach to strategic management which will enable every reader to understand not only how vital the process is to any organisation but also exactly what it entails. Makes use of numerous figures and "strategy in action" case studies to support the theory. Aimed at students in strategic management as well as at organisations, from corporate and public companies with management training programmes to small business ventures that are trying to gain a competitive advantage in a cut-throat environment.

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The strategic management process

KOBUS LAZENBY

LEARNING OUTCOMES

After studying this chapter, you should be able to do the following:

• Understand the definition and explanation of strategic management
• Differentiate between the key elements of strategy
• Identify the people involved in strategic management
• Understand the characteristics of strategic planning
• Understand the strategic management process as well as why strategy is important
• Recognise the benefits of strategic management
• Recognise the risks of strategic management
• Understand all the drivers of the organisation’s environment
• Perceive the link between strategy and ethics

1.1 Introduction

One of the most important questions in the business world and also in not-for-profit organisations is why some organisations are successful and others struggle or even fail. Why will a company like Woolworths be successful, while another company will experience financial distress? The question can also be asked whether intuition and luck play a role. Not all managers have these and not all can utilise them correctly. Often success is achieved through experience in an industry or through other relevant management experience. An example where intuition plays a role is in the case of Richard Branson. All his successes with the Virgin Group were due mainly to strategic vision and intuition. This phenomenon is often referred to as a manager’s “gut feeling”.

Although luck and intuition may play a role, organisations are usually successful because they plan for the future – they engage in strategic planning and are able to manage their resources and capabilities effectively and efficiently. In an environment where competition is tough, managers of any organisation must ensure that they cope with any challenges and be prepared for whatever the future holds. Strategic management requires all organisations to plan for the future and prepare themselves for any unforeseen circumstances.

In developing southern Africa, the practice of strategic management is even more important. Here there are so many factors and complicated environmental changes, including economic, social and political ones, that strategic management should be seen as essential to the management process of any organisation. Whether your 2organisation is a public or private company, close corporation, partnership, sole ownership, sports club, church or government organisation, you cannot survive the volatile future without proper strategic management.

In this chapter, which is an introduction to strategic management, you will get a feeling for what strategic management is. You will also learn why it is important, and what the advantages and disadvantages of strategic management are. There will also be a discussion of some alternative perspectives on strategic management. This book will try to enhance managers’ performance of strategic management and introduce the student of strategic management to its possibilities. The fact that you will work in an organisation one day means that it is important to understand how and why strategic decisions are made. This will help you to understand the important role you have to play in helping your organisation to move to a better strategic position.

1.2 What is strategic management?

1.2.1 Defining strategic management

The ultimate objective of strategic management is to position the organisation optimally for the future. There are many different definitions of strategic management. In terms of the different phases of strategic management, one can define strategic management as the art and science of formulating, implementing and evaluating strategic cross-functional decisions that enable the organisation to achieve its goals and objectives (David, 2001). Harrison and St. John (2002) describe strategic management as the process through which organisations analyse the internal and external environment of the organisation to establish goals and create strategies to achieve these goals to the satisfaction of the organisation’s stakeholders. From these explanations of strategic management, strategic management can be defined as a process whereby the internal and external environments are analysed to identify strategic goals and develop strategies in line with the organisation’s vision and mission, and that must be implemented through a coordinated and integrated effort of different functional areas to achieve the strategic goals of the organisation with the ultimate purpose of gaining a competitive advantage. Strategic management is concerned with the decisions that organisations must make about their future direction. Developing and implementing these strategies will enhance the organisation’s competitiveness. This will add value to all the different stakeholders. By looking at different definitions of strategic management, it is obvious that different tasks can be identified:

• Formulating a strategic vision, mission and values, indicating the long-term direction of the organisation
• Identifying resources and capabilities through internal environmental analysis
• Analysing the external environments to identify challenges and opportunities for the organisation
• Identifying the long-term goals and the most applicable strategies to deliver value to the stakeholders 3
• Coordinating and integrating the efforts of people, structures, technologies and allocated resources to implement the identified strategies
• Evaluating the success and implementation of the strategic choices through strategic control and evaluation

When an organisation is successful in formulating and implementing a value-creating strategy, it will achieve strategic competitiveness. A strategy can therefore be defined as an effort or deliberate action or a course of action that an organisation must implement to outperform its rivals. In other words, it can be regarded as a set of related actions that decision makers must take to increase the organisation’s performance. It is concerned with the organisation’s direction for the future – its fundamental sense of purpose with the associated plans or actions to be developed to put the purpose of the organisation into practice.

An important concept in strategic management is “competitive advantage”. There is a story of two hunters who were walking in the bush, when they saw a lion about to attack. One hunter immediately put his backpack down and got out a pair of running shoes. The other hunter looked at him and with a smile on his face told him that there was no way of outrunning the lion. However, the hunter with the running shoes responded, “Perhaps I can’t outrun the lion, but I can definitely outrun you!”

This is what competitive advantage is – to have something that your competitors do not have. Competitive advantage is the edge that an organisation has over others. In the past, a competitive advantage lasted much longer than it does today. Competitors emulate your strategy and they also retaliate in such a way that your competitive advantage is eroded, unless an effort is made to improve the sustainability of the competitive advantage. The concept of competitive advantage and associated strategies will be discussed in more detail in Chapter 8.

1.2.2 Origins of strategy

The term “strategy” comes from the Greek word strategos – meaning a military commander. It is clear that strategy has a military origin, because the earliest strategic decision makers designed a battlefield in such a way that they gained an edge over their enemy. In terms of this military strategy, the idea was to identify the enemy’s weak points and then you would use your own strengths to attack where the enemy was most vulnerable. Military operations still work by developing a strategy. There are many games that children play today on computers and PlayStations that use strategy. Strategy is a common concept involving the process of analysing the situation and then developing a strategy (plan) for outsmarting your opponent.

In the early 20th century, managers started to explore and define management tasks. Frederick Taylor and Henry Fayol were especially concerned with a detailed analysis of organisational functions in order to improve individual management tasks. Although this cannot be directly related to strategic management, it formed the broad perspective of how to perform better. It is only since the 1960s that strategic management has really become a distinct academic field as researchers began to study organisations, managers and strategies (Coulter, 2008). These researchers 4tried to understand the relationship between strategic decisions and organisational performance, because organisational performance is a primary goal of the strategic management process. In the 1970s, the world experienced major oil price increases. The business environment was suddenly confronted with an unpredicted change that caused organisations to reconsider the value of prediction in corporate strategy. This is the time when strategic management really took off as a separate discipline.

1.2.3 Key elements of strategy

It is clear from the above discussion that there are some key elements of strategic decisions. The purpose of a strategy is to add value to its stakeholders and to allow an organisation to compete successfully in the market environment. The key elements are as follows:

• Sustainability: strategic decisions must be maintained over a long time. Strategies take time to be implemented and for the benefits of a strategic move to be seen. Organisations want to survive in the long term and therefore strategies must be sustainable.
• Competitive advantage: strategy takes place in a competitive environment and the purpose of strategy is to outsmart the competition. Achieving a competitive advantage is important, but more important is achieving a sustainable competitive advantage.
• Alignment with its environment: the internal environment of th...