UNIVERSITY OF SOUTH AFRICA
ASSIGNMENT : 01
MODULE : STRATEGIC MANAGEMENT (MNG4801)
DUE DATE : 16 APRIL 2018
STUDENT NUMBER : 36126284
UNIQUE NUMBER : 746625
Table of Contents
Types of strategies 1
Different levels of strategy 2
Strategic competitiveness 3
Repositioning costs 4
Strategy development is not only for top management but it also involves middle and lower management.Strategy is the center of every organization. A good strategy enables organization to have a competitive advantage over other organizations. In some instances strategy is more of what you actually happens than what is intended to do, the actual strategy develops on the way and may not be in line with plans (Henry Mintzberg). Strategy results from the detailed strategic planning process”. (Management Study Guide). According to Mintzberg and Waters, there are different kinds strategies. For the purpose of this topic I have explained five strategies below:
1. Intended strategy is an expression of desired strategic direction purposefully developed or planned by managers (Johnson, Scholes and Whittington (2005:565)). Any company can fall in either deliberate or emergent strategy in the basis of daily operations. For a strategy to be deliberate there must be an intended action and the strategy must be realized (Of deliberate strategies& Emergent, Mitzberg& Waters).This is normally when external factors did not affects the strategy, this would mean that the organization had thoroughly analyzed the environment (Emergent, Mitzberg& Waters). Emergent strategies is unplanned strategy that arises response to unexpected opportunities or challenges. Sometimes the intent is not formally documented but emerges as the organization is responding to external factors (Strategic Management Niel Ritson 2011). Can be set of actions that emerges as top managers is trying to adapt to changing external factors and the ways in which intended strategy is interpreted” (Louw & Venter, 2013). They are normally developed & implemented at business unit (Mcgee, Thomas & Wilson 2005). Realized strategy is a combination of intentions and emergence, which can be interpreted by reference to the strength of pressure from the external environment—a kind of environmental determinism (Mcgee, Thomas & Wilson 2005). Strategies that were not realized are called unrealized strategies or abandoned strategies (L Louw and P. Venter 2013).
David H. McConnell wanted to be the best-selling author (intended/unrealized strategy), when he discovered that his books sales were low he decide to make fragrances and giving them to people who were buying his books as a marketing strategy (Emergent strategy). McConnell noticed that his customers were more interested in the fragrances than the books (realized strategy), which made him start California Perfume Company which was empowering women. California Perfume Company changed its company name in 1939 to Avon, and its direct marketing system continued popular and it is still popular. In the 19th century David H. McConnell wanted to offer women a chance financial independence and it was practically unheard of women running their businesses (Deliberate strategy) (http://www.avoncompany).
2. Strategy is the core of every organization survival. A good strategy enables organization to have a competitive advantage over it competitors (Free management ebooks, the three Levels of strategy). Micheal Porter indicates that, organisations must formulate business strategy that incorporates costs leadership, differentiation or focus to achieve sustainable competitive advantage and long-term success. An organization which wants to be successfully will know that it is crucial to develop a strategy at each level but to gain maximum benefit of planning it is critical to align the plans at every level. There are different levels of strategy which I have discussed. First level of strategy is corporate strategy. It is linked to the future and structure of the company, and it has an impact on the rationale of the company and the business in which it intends to compete in (Strategic Management Niel Ritson 2011). Corporate strategy affects the entire organization which will affects several functions of the organization (Louw & Venter). When organisation is starting a strategic initiative for implementing a corporate-level strategy, it is developing a fresh business model. Telkom decided to create a new business model having noticed that technology was evolving to mobile phones, for Telkom to compete with the likes of MTN& Vodacom they decided to create (8ta) (Telkom website). The objective of the corporate strategy is to outperform competitors thus gaining a competitive advantage in the industry. Business level is more specific since it relate to smaller segment of the organization, it also explains how many parts of the organization will be managed. This strategy is more focused on making sure that the organization thrives on the chosen market. It will explain how we will deal with issues such deciding pricing of products, developing a product (Strategic Management Niel Ritson 2011). For example when Telkom created 8ta they then came up with low cost data and other strategies to gain support from customers. Functional level of strategy explains how the day to day activities are to be managed to ensure that the organization moves to a right direction (Free management ebooks, the three Levels of strategy). This is the bottom level strategy where you have to think about other departments within the organization. With this kind of strategy the focus is more about making improvements to the business functions to support business and corporate strategy (Leading strategic initiatives). The functional level seeks to keep such a position but also look for external danger signs. When it happens that events outside the organisation’s control lead to a weakening of its position, strategic elements from a functional level must signal to the corporate level that an implementation of alternative strategies is required. Functional level of strategy is a plan that deals with functional areas such as Marketing, Finance, Human resources, Creditors, Information Technology etc. An example of functional-level strategy: In 2008, Swiss Life Group, a Zurich-based insurance company (ranked #373 on the Fortune Global 500 list) announced a change in its Information Technology functional strategy priorities. The implications of this was a decision to considerably scale back the number of IT projects in order to reduce costs through re-prioritization. This was successful as shown in this November 2010 announcement, “Swiss Life increased its net profit in the first half of 2010 over the prior-year period from CHF 139 million to CHF 269 million. NIKE directed at improving the effectiveness of operations within the company. NIKE is employing this strategy within its manufacturing, marketing, product development, and customer service processes (Nike website). Thus, in order to improve its customer services, NIKE strives to represent the highest service standard within its industry, and tries to build loyal customer relationships around the world. This improvement is mainly attributable to the significant operational progress made (Leading strategic initiatives).”
3. An organization can be seen as having achieved strategic competitiveness when it has developed and implemented a value adding strategy successfully (Martha Szabo White. Strategic Management competitiveness and globalization) Strategic competitiveness is a kind of strategy that an organization can plan to achieve their organizational goals even though there are many competitors in the industry. This can be achieved if an organization successfully when an organization develops special strategy that allows the organization to create wealth to its organization when it is executed or executing value crating strategy. An organization is seen as having competitive advantage when it has developed a strategy that enables it customers to have higher value, the strategy is too expensive to execute for the organizations competitors and they are unable to duplicate it (Martha Szabo White). This strategy enables the organization to gain an edge over its competitors and it enables the organization to generate successful performance over an extended period of time. This means that competitive advantage is the organizations ability to perform duties efficiently and effectively over its competitors. So for an organization to maximize their wealth they must have skill to analyze the market so that they will have a better understanding so that they can exploit its competitive advantage. When an organization exploit competitive advantage above average returns will be achieved. For example Cellc when they came to the market they had free for weekend when a customer buys R10 airtime during the week qualifies to have free calls on the weekend. Above average returns these returns are in excess of what an investor expect to earn from other investments with a similar amount of risk. Survival strategy helps the organization to manage the expectations of stakeholders and also balances their conflict of interest. This strategy helps the organization to prepare for potential challenges that might hinder the organization from achieving their goals.
4. It is difficult to change an organizations strategy. It needs the organization to commit to creating and combining new resources and abandon certain activities of the current strategy which is not in line with the new strategy. Costs experienced by an organization when moving from one strategy to another are called as Repositioning costs. Repositioning costs are costs linked to changing the strategy of the organization. The escalation of repositioning costs depends on the length of time an organization in implementing its current strategy. For example, the size of repositioning costs associated with a change to a decentralized, customer-focused business strategy could depend on how the firm’s previous strategy had been implemented, the organizational costs associated with changing routines and culture, as well as the physical asset costs associated with the development of a supporting information technology infrastructure. I have briefly discuss two categories of repositioning costs: distance and history and time-based costs. These are the internal costs incurred by the organization executing actions required to change its activity system. Distance-based repositioning costs represent the organizations start of the activity to the desired activity. The longer it takes the organization to reach it desired activity the higher the repositioning costs for the organization. For example, repositioning costs might be changes in competences needed to perform from the start to the desired activity systems, the challenges in moving from the original system to the desired system (e.g., changing existing operations and unwinding linked commitments), or costs to reconfiguring one or more activities. The idea that a change’s difficulty corresponds to its distance is a core tenet in strategic management. Productive of resources become less effective as their use increases (Montgomery ; Wernerfelt, 1988). History and time-based repositioning costs shows a firm’s history that follows its beginning. These cost have roots in the strategic change literature. Sosa (2012), for example, advocates understanding firms’ differential R;D productivities based on their different “pre-histories.” Generally, a firm’s past experiences change the internal costs to changing its activity systems. As such, two firms with similar beginning and desired activity system (the same “distances”) may have different repositioning costs as a result of their historical differences. From a modeling perspective, history-based repositioning cost functions yield as their arguments the firm’s actions prior to the previous period (e.g., accounting for a path-dependence of two or more periods) as well as the origin and destination actions and states. Those costs are seldom accounted for in the payoffs in typical multi-period games, except when history can be summarized with a single statistic such as “experience.” Accounting for history-based repositioning costs requires that such costs be a function of either the relevant history or a set of history-related summary statistics. As the degree of change increases (e.g., change involves increasing numbers of activities) and it becomes more consequential, the precise mechanism associated with commitment costs becomes harder to identify. But ignoring such costs because they cannot be precisely quantified is both unwise and unnecessary. A fruitful path to better understand higher-level strategy dynamics, perhaps combining empirical and theoretical work, would entail exploring general structures of repositioning costs.