Assignment-Strategic Management -MBM702 PDF

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LECTURER: SIFANI JOHN

MODULE: STRATEGIC MANAGEMENT (MBM702)

Topics: 1. STRATEGIC MANAGEMENT PROCESS IN RELATION TO PERFORMANCE MANAGEMENT 2. WHAT IS STRATEGY AND WHY IS IT IMPORTANT IN ORGANIZATIONS 3. WHY IS CORPORATE MANAGEMENT

GOVERNANCE

IMPORTANT

IN

Midlands State University Faculty of Commerce DATE OF SUBMISSION: 30 MARCH 2018

BY:

RICHARD.GWALA

STUDENT NO. MSU183812R

STRATEGIC

Table of Contents Introduction......................................................................................................................3 Discuss the Strategic Management Process in relation to performance management.....................................................................................................................4 What is strategy...............................................................................................................7 Why is corporate governance important in strategic management.........................10 Conclusion:....................................................................................................................12 References......................................................................................................................13

1. Introduction Strategic management process means defining the organization’s strategy. The strategic management process begins with an understanding of strategy and performance. The process goes through four stages, i.e. Environmental scanning, strategy formulation, strategy implementation and strategy evaluation and monitoring. Strategy is a plan of action designed to provide direction of long-term objectives of the organization by aligning the necessary resources in an effort/attempt to achieve desired goals by gaining advantage over competitors. Strategy therefore looks at the long-tern view of the organization by developing action oriented activities and matching resources in order to create opportunities that leapfrog the organization into a competitive position over competitors. Strategy is undertaken at three different levels as identified by [ CITATION Ger05 \l 1033 ], i.e. corporate level strategy, business unit strategy and operational level strategy. Strategy is important to the organization because it provides direction, catalyst in resource allocations, for planning purposes, etc. Corporate governance is defined as the exercise of ethical and effective leadership by governing body toward the achievement of governance outcomes, i.e. ethical culture, good performance, effective control and legitimacy [CITATION Kin16 \l 1033 ]. Corporate governance has become the “modus operandi” for doing business in the 21 st century because businesses are judged by their corporate citizenry. Corporate governance plays a key role in strategic management and among other things in strategy formulation and implementation, internal control and direct, etc.

2. Discuss the Strategic Management Process in relation to performance management Strategic management process is defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. [ CITATION Dav13 \l 1033 ], identified the four steps in Strategic management process as follows: (a) Environmental Scanning- A process of collecting, scrutinizing and providing information for strategic purposes. It helps in analysing the internal and external factors influencing an organization. At this stage of the strategic management process, a situation analysis of the internal environment has to be conducted it entails identification and evaluation of current mission, strategic objectives, strategies. Business executives need to constantly scan the external environment for trends and events that affect the overall organization, and monitor changes in the particular industry in which the organization operates. There are management tools available to be used in this process, e.g. SWOT analysis (strengths, weaknesses, opportunities, and threats), PEST or PESTEL frameworks in evaluating the external competitive environment of the organization. (b) Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. It involves developing specific strategies and actions. After conducting environment scanning, managers need formulate corporate, business and functional strategies.

Successful situation analysis is followed by creation of long-term objectives. Long-term objectives indicate goals that could improve the company’s competitive position in the long run. They act as directions for specific strategy selection. In an organization, strategies are chosen at three different levels: 

Business level strategy. This type of strategy is used when strategic business units (SBU), divisions or small and medium enterprises select strategies for only one product that is sold in only one market. Uses differentiation strategies like cost leadership, differentiation and focus strategies.

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Corporate level strategy. At this level, executives at top parent companies choose which products to sell, which market to enter and whether to acquire a competitor or merge with it. Examples of strategies like integration, intensive, diversification and defensive strategies.

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Global strategy. Strategy looks at which new markets to develop and how to enter these markets.

The choice of strategic alternatives depends on the organization’s objectives, results of situation analysis and the level for which the strategy is selected. (c) Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the organization’s chosen strategy into action. Strategy implementation includes designing the organization’s structure, distributing resources, developing decision making process, managing human resources and embed corporate culture. At this stage managerial skills are more important than using analysis. Communication in strategy implementation is essential as new strategies must get support all over organization for effective implementation. Strategy implementation examples that could be used as highlighted by [ CITATION Dav13 \l 1033 ], are as follows:

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Setting annual objectives;

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Revising policies to meet the objectives;

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Allocating resources to strategically important areas;

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Changing organizational structure to meet new strategy;

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Managing resistance to change;

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Introducing new reward system for performance results if needed.

(d) Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as well as its implementation meets the organizational objectives. Implementation need to be monitored for it to be successful. Due to constantly changing external and internal conditions managers must continuously review both environments as new strengths, weaknesses, opportunities and threats may arise. If new circumstances affect the company, business executives must take corrective actions as soon as possible. At this stage tactics rather than strategies are changed to meet the new conditions, unless the organization is faced with a severe external changes. Measuring performance is another important activity in strategy monitoring. Performance has to be measurable and comparable. Managers have to compare their actual results with estimated results and see if they are successful in achieving their objectives. Business executives need to therefore either change the reward system or Introduce new or revise existing policies if the objectives are not met. Instruments like Balance Score cards or Process improvement could play a pivotal role at this stage.

The key element in strategy monitoring is to get the relevant and timely information on changing environment and the company’s performance and if necessary take corrective actions.

3. 3.1 What is strategy The word “strategy” is derived from the Greek word “strategos”; stratos (meaning army) and “agein” (meaning leading/moving). Strategy entered the field of management from the military services where it refers to the application of the forces against an enemy to win a war [ CITATION Lyn10 \l 1033 ]. Strategy is defined below by well-known management writers: [ CITATION Ger05 \l 1033 ] , defines Strategy as the direction and scope of an organization

over the long term, which achieves advantage in a changing environment through its configuration of resources and competencies with the aim of fulfilling stakeholder expectations. Alfred Chandler in his book Strategy and Structure (1962) defined Strategy as the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and allocation of resources necessary for carrying out these goals. Looking at the definitions above one can deduce that strategy is a plan of action designed to provide direction of long-term objectives of the organization by aligning the necessary resources in an effort/attempt to achieve desired goals by gaining advantage over competitors.

Strategy therefore looks at the long-tern view of the organization by developing action oriented activities and matching resources in order to create opportunities that leapfrog the organization into a competitive position over competitors. In medium and large organization, strategy is found at different levels. [ CITATION Ger05 \l 1033 ], in their book Exploring Corporate Strategy identified three levels of Strategy: (a) Corporate-level Strategy - is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by shareholders in the organization and acts as basis for all other strategic decision-making throughout the organization. Corporate strategy is often stated explicitly in a "mission statement". Example of corporate-level strategy would be geographical expansion, integration, intensive, diversification and defensive strategies. (b) Business Unit Strategy - is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc. For example market share growth. Examples of strategies here are cost leadership, differentiation and focus strategies. (c) Operational Strategy - is concerned with how each part of the business is organized to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc.

3.2 The importance of strategy in the organization Strategy is fundamental to the long-term success and sustainability of any organization and it is important to the organization for the following reasons: (a) Strategy as a plan provides the overall direction and course of action

The planning viewpoint of strategy views strategic decisions making as a formal, logical, top-down structured process in which strategy is formulated by means of a rational analysis of the organization, its performance, and external environment [ CITATION Lyn10 \l 1033 ]. Organizations need to understand the purpose, destination and the course of actions that they need to take to get where they want to go. Without a strategy the organization will be wandering aimlessly without destination and priorities to focus on. (b) Understanding the company and industry Strategy allows organizations to develop a clearer understanding of their own organization and what’s required for them to succeed. Strategy helps organizations to understand their core capabilities, identify and address weaknesses and mitigate risks. Strategy can as well help organizations better design themselves so that they are focusing on the right things that are most likely to deliver the best performance, productivity and profit both now and in the future. (c) Resource allocation The most common thing in any organization irrespective of size i.e. large, small or medium the resources are finite. One would wish they were infinite, but that will never be the case. Strategy is about making alternative choices. The products, services or markets form part of the future and what organizations should not do. These types of decisions are critical in ensuring that limited resources are being deployed to the most promising opportunities that will provide the greatest return on investments to the organization. (d) Skills & Knowledge Having a strategy in place and knowing what and where the organization intends to achieve and where to be over the long-term will provide the organization with a much better idea of the kinds of capabilities that will be needed in order to achieve desired goals. Strategy defines and drives decisions in organizational design. Meanwhile by

proactively employing and pursuing new skills and knowledge, the organization is being readied for the desired future state and thereby increasing the chances for success. (e) Strengths and Weaknesses Strategy allows the organization to leverage on its competitive advantages (strength) and close capability gaps in the organization (weaknesses). Strategy creates a higher level of awareness within the organization and provides greater focus on activities that will make the organization more successful. (f) Planning Creating and tracking progress against an annual operating plan is an essential management tool for any company. What is often missing is the relationship these plans have to the future. Too often annual operating plans are created from the rear view mirror. What happened last year and where should the organization go in the coming year? These are all good intentions. However, without a clear picture of what the organization want the future to look like, it will always be more reactive than proactive. A well-articulated 3 to 5 year long term view of the company should serve to inform the annual operating plan. The annual plan then becomes the stepping stone toward the achievement of the longer term goals. 4. Why is corporate governance important in strategic management

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Corporate governance, in strategic management, “refers to the set of internal rules and policies that determine how a company is directed. Corporate governance decides, for example, which strategic decisions can be decided by managers and which decisions must be decided by the board of directors or shareholders” [ CITATION Bab12 \l 1033 ].

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Strategy integrates internal environment including corporate governance and external environment. This has impact on strategic management considering that corporate governance has to do with system control and direction as defined by (Cadbury Committee, 1992), "the system by which companies are directed and

controlled". Therefore, strategic management is under the preview, control and the provisions of corporate governance and practices of a company [ CITATION Bab12 \l 1033 ]. 

Corporate governance is critical in the strategic management process with regard to strategy formulation, implementation, control and evaluation [ CITATION Tie10 \l 1033 ].

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Corporate governance fulfils the interests of all stakeholders by regulating and controlling the misinformation and unethical behaviours of the board and executive team.

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Corporate Governance plays a role in the formulation of choice of strategy and in the implementation of the organization’s strategy.

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Corporate Governance ensures transparency which in the end translates into a strong and balanced strategic objectives of profit maximization. This also means stakeholder interest is safeguarded.

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Corporate Governance provide entrepreneurial leadership by setting and implementing strategies within a framework of effective internal controls, and to ensure the best performance of resources for stakeholders.

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Corporate Governance deals with determinations of methodologies to take effective strategic decisions. This is done by giving full authority and absolute responsibility to the board.

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Corporate Governance is important for stakeholders (customers, employees) and shareholders for the survival and sustainable growth of the organization.

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One of the most important role of corporate governance is to ensure that strategic decisions are made in the interest of those with a stake in the success of the organization. Meaning interest of stakeholders is impacted by decisions that the organizations are making thereby giving corporate governance an increasingly strategic role.

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Corporate governance establishes and enforce policies deemed necessary for the effective operation of the organization. These could be codes of ethical conduct towards stakeholders and shareholders as well as approval of functional

positions, corporate culture and responsibilities that affect the transparency or opaqueness of strategic decision making. 

Corporate governance is an important part of strategic management that can improve performance of the organization.

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Corporate governance Improves strategic thinking at the top by injecting independent board members who bring with them a wealth of experience and new ideas

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Corporate governance rationalizes the management and monitoring of risks that the organization is exposed to in the global markets

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Corporate governance emphasizes on the adoption of transparent procedures and practices by the board thereby ensuring integrity in financial reporting.



Corporate

governance

establish

standards

for

management,

monitor

performance, approve procedures for strategy implementation and insures the integrity of internal control and management information systems. 

Corporate governance determines the strategy of the organization and how the strategy is to be implemented.



Corporate Governance, framework determines who the organization is there to serve and how the priorities and purposes of the organization are determined.

5. Conclusion: In conclusion, Strategic management process defines the organization’s strategy. It begins with an understanding of strategy and performance. The process goes through four stage s, i.e. Environmental scanning, strategy formulation, strategy implementation and strategy evaluation and monitoring.

Strategy is a plan of action designed to produce alternative choices of action. Strategy differentiates the organization from its competitors. Corporate governance is defined as the exercise of ethical and effective leadership by governing body toward the achievement of governance outcomes, i.e. ethical culture, good performance, effective control and legitimacy. Corporate governance is an important part of strategic management that can improve performance of the organization.

6. References Alfred, C. (1962). Strategy and Structure Chapters in the history of the American Industrial Enterprise. Washington D.C: Beardbook. Babu, K. (2012, December 3). so13/papers.cfm?abstract_id=2184235. Retrieved from www.papers.ssrn.com: http://www.papers.ssrn.com/ Committee, C. (1992, December 01). The Financ...