Specific outcome 1: Explain strategic management as an innovative approach to managing organisations. Assessment criteria: a) Define strategy, strategic planning and strategic management.

Strategy:Strategy can be described as the long-term direction of the organisation, a pattern in a stream of decisions, the means by which organisations achieve their objectives and the deliberate choice of a set of activities to achieve competitive advantage.

Strategic planning:Strategic planning is the first phase of an integrated strategic management process, based on the concepts of strategic thinking and strategy, and comprises the following three main decision stages:(1) Deciding on the future of the organisation(2) Analysing the organisation's external and internal environments(3) Selecting appropriate competitive strategies – strategic choice

Strategic management:Strategic management involves managers from all parts of the organisation in the formulation and implementation of strategies. It integrates strategic planning and management into a single process.

b) Illustrate and explain the strategic management process. The structure of the traditional process approach to strategic management is as follows:1. Strategic planning or strategy formulation Deciding on the organisation's strategic direction and its long-term objectives Analysing the organisation's external and internal environments Selecting appropriate competitive strategies – strategic choice2. Strategy implementation or execution requirements Leadership and culture Implementation competencies Learning organisation Systems, policies and procedures Organisational architecture and structure3. Strategy review, feedback and control Control measures ensuring that strategies are on trackTraditionally the strategic management process is portrayed as a neat, cognitive (rational), logical and sequential process. This is evident from above structure. The traditional approach stems from microeconomics, and is widely criticised for its lack of consideration of the role of people at all levels in the organisation and changes in the environment.

c) Explain the rationale for new perspectives on strategy. Traditionally, strategic management has been defined as setting strategic direction, setting goals, crafting a strategy, implementing and executing the strategy, and then over time initiating whatever corrective adjustments are deemed appropriate. However, more recent research has suggested strategy is not this sequential and discrete, but is rather more messy, overlapping and iterative. Due to shortcomings, such as these, identified in the traditional approach to the strategic management process, the view on this process has started to change and new perspectives has come to light that highlights the importance of strategists throughout the organisation, as well as dynamic environments.All strategies were originally assumed to be formally planned, these are now referred to as “intended strategies”. However, strategies are also now categorised as “deliberate”, which is when an intended strategy is realised. They may be referred to as either “unrealised” or “abandoned strategies” when they are not realised. Another category that came to light through the new perspective, was “emergent strategy”. Emergent strategies are not planned and emerge over time. Emergent strategy is the true reality of strategy, as it adapts to the changing environment and can keep up with a messy strategic environment that is fraught with failure.

d) Explain the nature of strategic decisions. Strategic decisions are those decisions that affect the long-term performance of an organisation and which relate directly to its vision, mission and objectives. Strategic decisions are generally ill-structured and characterised by uncertainty, risk and conflict. However, managers are expected to make effective decisions in the face of these challenges. Regarding their characteristics, strategic decisions:• Are typically taken at higher organisational levels • Contribute to and are directed by the organisation's vision • Impact directly on an organisation's long-term direction

• Performance and sustainable success optimally exploit the links between the organisation's internal and external environments

• Require large amounts of the organisation's resources• Are usually irreversible once made• Are entirely future oriented and likely to affect the whole organisation• Are shaped by the values and expectations of stakeholders• Usually have multifunctional or multi-business consequencesTactical decisions at middle management level, unlike long-term strategic decisions at higher levels, have an impact in the medium term, and tactics tend to be more changeable than strategies. Operational decisions occur on a daily basis at the lowest organisational levels. These decisions support the achievement of tactical and functional strategies at middle management level, which in turn support the organisation’s overall strategy to realise its long-term objectives.

e) Describe the different levels of strategy in organisations. There are four levels of strategy in a corporate entity and three in a single business entity:1. Corporate level strategy:

This level is non-existent in a single business entity. For a corporate entity this involves strategic decisions made by the CEO, board of directors and corporate staff.

2. Business level strategy:For a corporate entity, this involves strategic decisions made by divisional managers and staff of separate business units. For a single business entity, this involves strategic decisions made by the executive manager and senior staff.

3. Functional level strategy:For both a corporate entity as well as a single business unit, this involves strategic decisions made by functional level managers and staff in each functional area of the business unit.

4. Operational strategy:For both a corporate entity as well as a single business unit, this involves strategic decisions made by frontline managers in operations departments.

f) Explain the importance, benefits and risks of strategy. Importance and benefits of strategy: Strategy is a coherent narrative about the future direction of an organisation. Strategy combines the views and thinking of many members of the organisation and communicates the

outcome back to the organisation so that everyone follows the same strategy. Strategy provides members of the organisation with a framework to guide their decision-making. It provides an actionable blueprint for achieving its aspirations. More specifically, the importance of strategy

and, hence, strategic management is confirmed in the following broad terms: It provides for cohesive strategic thinking and an innovative and future-oriented decision framework for

the organisation. It pools the contributions by organisational members, thereby facilitating the communication of strategy

to all. It is the verbalisation of the organisation's aspirations and serves as a source of motivation for everyone

in the organisation.Risks of strategy:Despite its acclaimed benefits, strategic management also deals with risks of a strategic nature. Even though there are different perspectives on risk, strategic risk is defined as “an array of external events and trends that can devastate a company's growth trajectory and shareholder value”.Strategic risk can be categorised into seven major categories, namely:1. Industry risk2. Technology risk3. Brand risk4. Competitor risk5. Customer risk6. Project risk7. Stagnation riskThere is a common view that strategic risk is about managing risk strategically instead of examining it as a category similar to operational, financial and other risk areas. This is a common view that mainly stems from the complexity and difficulty of identifying strategic risk.

g) Describe the tests for a winning strategy. The following three tests could be used to assess the success of an organisation's strategy:1. The “goodness of fit” test measures how well the strategy fits the organisation's situation in matching the

organisation to the industry and competitive conditions.2. The “competitive advantage” test measures whether the strategy can help the organisation achieve a

sustainable competitive advantage.3. The “performance” test measures performance of the strategy in terms of profitability, financial strength,

competitive strength and market standing.

Specific outcome 2: Have a sound understanding of and insight into the traditional process perspective as well as the more recent strategy-as-practice approach to strategic management, strategising and the role of strategists in strategic management. Assessment criteria a) Explain the traditional process perspective on strategic management.

The traditional view of strategic management is that it is a process with distinct stages or phases. The three stages or phases of the process perspective of strategic management are:1. Strategy formulation:The strategy formulation stage is the starting point. This is the stage where top management decides what to do. Part of this phase is the setting of strategic direction, in other words, deciding on the future of the organisation and setting the overarching goals of the organisation. In addition to a slogan, a range of management tools can be used to set strategic direction, such as a vision, a purpose or mission statement, or statement of strategic intent. During the strategy formulation stage, various analyses take place and the senior managers gather information about the operations, resources and capabilities of the organisation. The senior management team also scans the environment to identify potential opportunities and threats, as well as to evaluate the market or industry in which the organisation operates and collect information on competitors. Once all the information has been collected and analysed, the senior management team then considers the various strategic options and chooses those strategies where the fit between what the organisation can do with the opportunities is the strongest.2. Strategy implementation:The strategy implementation stage and is considered the most challenging stage in any strategic management process. Once the strategies of the organisation have been selected, they need to be put into action (‘doing’). This requires the involvement of everyone in the organisation. Not only should the organisation members be told what the strategies and overarching objectives of the organisation are, but the senior management team also need to ensure that there is understanding and buy-in, because the wider the organisational support, the greater the chances of successful implementation. Operationalising strategies entails the translation of overarching and strategic objectives into specific tasks and activities. The middle and lower management levels in the organisation are responsible for this. By translating the strategic goals or long-term objectives into shorter-term goals and activities, the organisation members become aware of their roles in the strategic success of the organisation. Actions to successfully implement strategies are ensured through certain drivers such as leadership, culture and management. By rewarding the actions, tasks and behaviour that contributes towards successful implementation of strategies, middle managers can enhance the chances of strategy success. The way that the organisation is structured also impacts on the strategy implementation process. The organisational structure not only indicates the line of authority and reporting, but also the process and lines for strategy implementation. Coupled with the structure of the organisation are the inherent systems and policies inside the organisation. Organisational systems, processes and policies are used to direct the execution efforts, which should be aligned with the overall strategic direction of the organisation. Leaders and managers in the organisation need to empower the organisation members to carry out tasks to implement the strategies. This requires the appropriate allocation of financial, human, physical and informational resources. 3. Strategic control:Strategy review and control involves monitoring the progress of strategy implementation, identifying problems and instituting any corrective actions. Although give as a third and final stage, it is a continuous process. Different methods of strategy review exist. Continuous environmental scanning can be considered a review method as it provides feedback on changes in the environment that may impact strategic choices and their execution. Another form of strategy review is implementation control. Similar to operational control, this is where deviations from the plans are identified and addressed as they occur. This implies that corrective measures are taken during the strategy implementation process to ensure that the strategic management process continues successfully. The balanced scorecard can also be used to review strategies. It is mostly senior

and middle managers who are involved in the strategy review process. Most important is the feedback from the review that needs to serve as input in the amendment of existing strategies and goals, or the possible total reconsideration of the strategies and goals. Continuous feedback forms the foundation of the strategic management process.

b) Explain the importance of strategic thinking and strategic direction setting in strategic planning and strategic management. The importance of strategic thinking relates to the conceptual nature of strategy and strategy formulation, which is referred to as the thinking part of strategic management. Strategic thinking is, in fact, the starting point of strategizing, strategy formulation and strategic management. At the top level of the organisation, strategic thinking is the ability to see the total enterprise, to spot the trends and understand the competitive landscape, to see where the business needs to go and to lead it into the future. Strategic thinking may occur at the following three successive hierarchical levels in organisations: Lower level: self-awareness, critical thinking, intellectual curiosity and openness Intermediate level: exercising good judgement and understanding the business – problem solving, decision

making, business acumen and customer focus Higher level: successfully creating ”new and different” – dealing with ambiguity, innovative management and

perspective takingSelf-awareness at the lower level arises from the ability to think critically, in conjunction with intellectual openness. These, in turn, provide the basic business skills required at the intermediate level. The higher one rises in the organisation, the more these skills are needed, and as they are developed, they build the next layer up – the ability to embrace change and ambiguity – and in so-doing, creating something new.Strategic direction refers to the long-term goals of the organisation which can be expressed as, for example, vision and mission statements. It is the key element against which all strategic decisions should be measured. It is also the very first step in the strategic management process and means that all plans will be formulated in line with it. All strategies must be formulated with the strategic direction in mind, as such one could see it as the backbone of the process. Here are some advantages of having clear strategic direction: It provides direction It guides all the organisational efforts towards achieving the same goals It binds the organisation members to work together towards achieving the overarching goal of the

organisation It communicates to internal and external stakeholders what the organisation wants to achieve in the long

run It guides decision making It distinguishes the organisation from other organisations It promotes a sense of shared expectations It contributes to synergy among managers and employees

c) Criticise the traditional process perspective on strategic management. The major criticisms of the process perspective include the following: It is viewed as a rational and linear process, comprises consecutive phases and does not effectively embrace

new competitive realities. Because it is a linear process, the effects of the complex and dynamic nature of the external environment are

not fully considered. Strategy formulation and strategy implementation are seen as separate phases. It supports the notion that it is only the top management team or senior managers who develop strategy,

thus ignoring potentially valuable contributions by all levels of staff. It essentially ignores the development of strategy through dialogue, conversation and inputs from all

organisational levels, and on occasion, external expertise.Although the traditional process perspective had merit in earlier ears, when business environments were less dynamic, it has become outdated in almost every sense due to its rigidity. Strategic management has been found to have become as dynamic a discipline as the environments organisations have to operate in, as such it has become necessary to move away from the traditional approach to something more suited to the modern business. The traditional approach, however, remains a valuable basis to work from, for any person wishing to understand strategy and strategic management.

d) Differentiate meaningfully between deliberate and emergent strategies as a basis for strategic decision making and strategising.

Deliberate strategies Emergent strategiesDeliberate strategies are implemented and realised as intended. In order for this to happen, three conditions need to be satisfied:1. The management team must know

precisely what they wish to achieve and what they intend for the organisation before any actions are taken

2. Organisation means collective action. All members of the organisation must believe in the strategy and work towards it

3. The strategy must be realised exactly as intended, with no external interference. This is difficult given the pace of change in the contemporary business environment

Emergent strategies are actions taken by middle managers within the organisation. Middle managers are more involved with the operations of the organisation and are in the position to make changes to the strategies when required. This means that some strategic initiatives may arise without the awareness of the senior management team. Emergent strategy implies learning what works – taking one action at a time in search of that viable pattern of consistency. It is also frequently the means by which deliberate strategies change. Strategies are open, flexible and responsive to allow the organisation to learn and adapt to its environment. Emergent strategizing enables management to act before everything is fully understood. It enables the senior management team, who cannot be close enough to the situation or who cannot know enough about the varied activities of its organisation, to surrender control to those middle level managers who have the information current and detailed enough to shape realistic strategies.

e) Explain strategy-as-practice as an effective approach to managing new strategic realities.Strategy-as-practice researchers recognise the complexity of the process and the potential influence of organisational members, not only through formal organisational processes, but also in everyday activities. The strategy-as-practice research field is not only focused on the micro-activities, but also on the context within which these micro-activities take place.The strategy-as-practice perspective supports and builds on the strategy process perspective and views strategy as a situated, socially accomplished activity – meaning it is done by people and influenced by their context. It refers to activities that are connected with particular practices such as strategic planning, annual reviews, strategy workshops and their associated discussions.The strategy-as-practice perspective distinguishes between strategy praxis (the work), strategy practitioners (the workers) and strategy practices (the tools). The strategy praxis, practitioners and practices are discrete, but interrelated social phenomena. It is not possible to study one without also drawing aspects of the others.

f) Explain the concept of strategising and the role of strategists and managers in the context of strategy-as-practice. People bring with them their own personalities and backgrounds in the form of culture, education, politics, and religion. Strategizing is therefore not only a cognitive activity, but is fuelled by the individual’s quest for personal power. Strategizing is essentially what strategists do, and can be described as devising or influencing strategies. Through their actions, strategists influence the allocation of the organisation’s resources and control or influence key actions. Strategizing and strategy making are often used interchangeably and include strategizing activities. Strategizing not only involves those within the organisation, but also consulting firms, business schools, business media, academic journals, professional societies, enterprises and management in a joint endeavour that all recognise as somehow strategic.

Specific outcome 3: Explain the role and strategic importance of analysing an organisation's broad or macro-environment and its task or industry environment as part of its strategic planning process. Assessment criteria a) Explain the structure of the external environment that organisations have to deal with.

The structure of the external environment includes the following: The macro-environment (at both the global and the country levels) over which the organisation has virtually

no control• The industry environment which may be influenced by organisations to a degree• The organisation's internal environment which is typically controllable by organisations as suchAll businesses operate in the macro-environment − comprising the political, legal, economic, sociocultural, technological and natural environments, as well as population demographics. The competitive industry environment and its components are, however, of more immediate interest to organisations mainly for reasons relating to the competitive nature of industry involvement. Executives and strategic managers should be able to respond appropriately to these factors and forces by adapting to or managing important macro-environmental

trends and, where possible, influence their industry environments to enhance the competitiveness, profitability and growth of their businesses.

b) Explain the strategic importance of analysing the external environment. The boundaries and interfaces that exist between organisations and their external environments are relatively fluid and cannot be easily or clearly defined. As a result, the external environment will spring surprises on organisations from time to time, and managers need to be prepared to react. Under such conditions, timely and accurate information about the environment is critical for strategic decision making and planning. For example, if organisations know very little about the likes and dislikes of their customers and future trends, they will have difficulty designing new products or services, setting up a production schedule, or developing marketing and strategic plans. Ideally, for strategic decision making and planning to work, managers must not only understand the context of their competitive environments, but also the context of their future competitive environment.The business environment of the organisation consists of all the external influences that affect its decision making and performance. The general idea is that, when undertaking a study of the organisation in relation to its environment and key role players, strategic decision making and planning should Take advantage of internal strengths and identified opportunities arising from the external environment Overcome weaknesses, or neutralise identified threats found in the external environment Ensure the strategic ‘fit’ or consistency between its internal and external environmentsStrategic direction is an outcome of melding the desires of key organisational stakeholders with environmental realities. Therefore, a profound understanding of the external environment, coupled with an understanding of its key role players, is paramount to charting an organisation’s road to success. This understanding should lead to the identification of strategic alternatives and provide a basis for formulating strategies as well as providing the organisation with a foundation for all other tasks of strategic management.

c) Discuss the relevant macro-environmental factors and forces. The most important elements and components of the broad environment can be identified using the traditional PEST framework and comprise the following factors: political, economic, social and technological. The traditional PEST model can be extended to include a consideration of legal (L) and environmental (E) factors to yield PASTLE.Analysing these environmental forces and trends at both a domestic and global level is important because they have a tremendous impact on an organisation and its task environment. Below are just a few examples of the implications they hold for industries and organisations: Political legal forces. No organisation is fully exempted from government legislation and regulations.

However, not all laws and regulations apply equally to all organisations. Some pertain to only specific industries, whereas other legislation cuts across entire industries.

Economic forces. Economic forces impact largely on the demand for products and services, so it is important for managers to monitor and forecast events in the domestic and global economies. Economic forces are often interdependent with sociocultural forces, for example an ageing population can impact significantly on unemployment figures and salaries of a younger workforce. To assess the effect of these interdependent forces, organisations should model their business environments by proposing and evaluating different scenarios to help managers make better decisions.

Sociocultural forces. Stakeholder groups are products of society. Their values, morals, beliefs and subsequent behaviours and lifestyles are therefore influenced by society at large. For example, health and fitness lifestyle trends have created opportunities in the home fitness, nutritional supplement, low carb food and even bicycle industries. Organisations therefore stand to gain if managers can identify and assess the effects and opportunities presented by sociocultural forces as well as managing and sustaining their relations and reputations with stakeholder groups.

Technological forces. The innovation and technology fields have grown exponentially in recent years. They are continuously driving the development of new products and services, thereby even creating new industries. They also have the power to transform society and revolutionise the way business is conducted. This is evidenced in the rise of the internet as well as in the communication and computing industries. Innovation and technology can spill over from one industry to another, especially if they are closely related. Organisations should therefore monitor developments in innovation and technology in neighbouring or related industries. Managers need to evaluate the consequences for their own products and services, creating strategies that could take advantage of the chances.

Global (G) factors can be included as an additional force to the PESTLE framework to yield PESTLE/G. Scholars at the Penn State Centre for Global Business Studies identified 12 global trends which have the potential to significantly affect and challenge leaders in the next 30 years:

1. Increasing population2. Increasing urbanisation3. The spread of infectious disease4. Natural resource crises5. Environmental degradation6. Economic integration7. Knowledge dissemination8. Information technology9. Biotechnology10. Nanotechnology11. Increasing conflict12. GovernanceThe implications of these global trends for leaders and organisations are far reaching. They have the potential to shake up individual companies, entire industries or even entire economies. Companies attuned to these challenges, which prepare for them and respond appropriately, will likely thrive; those that ignore them will do so at their own peril.

d) Explain the need for macro-environmental analysis in strategy formulation. A company’s performance and success is to a certain extent determined by the characteristics of the industry in which it exists and competes. Furthermore, different industries are characterised by different competitive conditions and dynamics. Hence, when viewed in relation to competitors as well as competitive threats and opportunities existing in the external environment, all organisations have inherent strengths and weaknesses. Strengths are internal organisational resources and capabilities that can lead to a competitive advantage. Weakness are internal resources and capabilities that a firm may not possess yet but are necessary, resulting

in competitive disadvantage until the firm acquires them. Opportunities are conditions in the external environment that allow a firm to take advantage of

organisational strengths, overcome weaknesses, and/or neutralise environmental threats. Threats are conditions in the external environment that may stand in the way of organisational

competitiveness or achievement of stakeholder satisfaction.Therefore, if managers do not understand how the environment affects their organisations, or cannot identify significant opportunities or threats, their ability to make decisions and execute plans will be severely limited.

e) Explain the various methods for macro-environmental analysis. There are four important techniques which can be employed when analysing the external environment:1. Scanning involves detecting and identifying early signs of potential environmental changes and trends. It

entails studying all segments in the broad environment and often reveals ambiguous, incomplete and or unconnected data. Many firms use special software to help them identify current events and trends using public sources on the internet. For instance, Amazon.com records information about individuals visiting its website. Environmental scanning will enable managers to forecast changes in the expected profitability of the industry and to adjust their strategies accordingly.

2. Monitoring concerns the detection of meaning through ongoing observations of environmental changes and trends. Analysts observe environmental changes when monitoring to see if an important trend is emerging from among those spotted through scanning. For example, a large food retailer in SA may plan to add diverse ethnic cuisine to its offering. In order to do that, it will monitor growing demand for various foods from ethnic groups settling in urban areas. The food retailer will also need to identify important stakeholders and to understand its reputation among these stakeholders as the foundation for serving their unique needs. Scanning and monitoring are particularly important in industries with high technological uncertainty.

3. Forecasting comprises developing feasible projections of what might happen, and how quickly as a result of the changes and trends identified through scanning and monitoring. For example, analysts may want to forecast the time that will be required for a new technology to reach the marketplace because this will give an organisation an idea of how much time will be available to train employees to deal with the anticipated changes. Forecasting events and outcomes accurately is nevertheless a challenging task for most organisations.

4. Assessing is about determining the time and importance as well as the implications of environmental changes and trends for organisations’ strategies and their management. Through scanning, monitoring and forecasting, analysts are able to understand the general environment and assess the implications of trend and changes. Without assessment, the firm is left with data that may be interesting but of unknown competitive relevance. In other words, although the gathering and ordering the information is important,

the appropriate interpretation of that intelligence to determine if an identified trend, change or event in the external environment is an opportunity or a threat should be paramount.

f) Explain the term “industry” in the context of the external environment. An industry is not merely defined as a market or composed of companies competing with each other. A distinction should be made between an organisation’s industry it belongs to and a market it serves. As an example, a company could exist in the automobile industry, but may choose to compete in the commercial vehicle market. An industry is therefore defined as a group of companies offering products and services that are close substitutes for each other. The basic customer needs that are served by a market define an industry’s boundaries.

g) Analyse the structure, dynamics and attractiveness of industries. Structure:According to the ‘market position’ school of strategy (of which Michael Porter is the leading exponent), the first and fundamental determinant of an organisation’s profitability is industry structure. The general types and features of an industry are depicted in the table below. The industry structures are generic, so real industries may not conform exactly to descriptions. However, they offer managers a good insight of the likely features of each type of industry.

Industry type / Features

Monopoly Oligopolistic Monopolistic competition Perfect competition

Example The electric energy sector where Eskom holds a monopoly over supply and distribution of electricity in SA

The SA mobile market with Vodacom, MTN, Cell C and Virgin Mobile as the dominant mobile network operators

The SA banking industry with its five major commercial banks, who offer largely differentiated products and services

Although hypothetical, two examples of markets that display characteristics of perfect competition would be the currency market and the internet

Features One firm where high entry and exit barriers exist. Low degree of competition. Market is stable and predictable

Few firms where significant entry and exit barriers exist. Moderate degree of competition and market is stable

Many firms of similar size where significant barriers to entry and exit exists. Moderate to high degree of competition. Low to moderate degree of market stability

Large number of identical firms with no barriers to entry and exit. High degree of competition. Low degree of market stability

Using this table to examine the principle features of an industry, it is possible to predict the type of competitive behaviour likely to emerge and the resulting level of profitability: A monopoly player, such as a state-owned enterprise, serving in a closed domestic market, will have a total

advantage while it retains government support. There will be virtually no legitimate competition. The organisation’s market will be stable and predictable, and the managers will typically adopt a defensive approach to strategy to maintain barriers to prevent entry into the market.

Oligopolistic structures are characterised by a few large organisations with substantial shares of the market. They try to maintain their own long-term competitive advantage through crafting largely defensive strategies.

Monopolistic competition has more rivals of a similar size that can result in less stability and short-term competitive advantage. This leads to aggressive strategic approaches and more intense competition.

As the industry nears perfect competition, it is likely that an aggressive strategic approach would be required. The market would be volatile with frequent entry and exit of players.

Extreme industry structures such as oligopoly (industry characterised by sellers) and monopoly (single seller), have a direct effect on the nature of, or lack of competition in, the industry. The general principle is that ‘the greater the number of firms, the greater the level of competition’.

Dynamics:

Industry dynamics means the rate of change in industries over time, in particular the competitive and structural changes. Traditional industry boundaries are blurring as many industries converge and overlap, especially in information-based industries. It is important to understand some of the underlying trends that are affecting the structure of industries. Industry revolutionIndustry changes over time are an important determinant of the strength of the competitive forces in the industry and the nature of threats and opportunities. The strength and the nature of each force also change as an industry evolves, particularly the two forces of risk of entry by potential competitors and rivalry among existing firms. A useful tool for analysing the effects that industry evolution has on competitive forces is the industry life cycle, which closely resembles the life cycle.In combination with assessing the type of industry structure and the degree of concentration, it is useful to consider the stages of maturity of the industry. This model describes four stages in the industry life cycle: introduction, growth, maturity and decline. The model is useful in estimating the current level of competitive intensity within an industry, as well as making predictions about the future level of competition at different stages in the life cycle. The task managers face is to anticipate how the strength of competitive forces will change as the industry environment evolves, and to formulate strategies that take advantage of opportunities as they arise and counter threats as they emerge. Industry drivers of changeAll industries are affected by new developments and ongoing trends that alter industry conditions, some more speedily than others. Many of these changes are not important enough to require a strategic response. Since the five competitive forces have such significance for an industry’s profit potential, managers must remain alert to the changes most likely to affect the strength of the five forces. It is important to focus on the most powerful agents of change – those with the biggest influence in reshaping the industry landscape and altering competitive conditions.Many drivers of change originate in the outer ring of the organisation’s external environment, but others originate in the organisation’s immediate industry and competitive environment. Some of the most common industry drivers are:

Changes in the industry’s long-term growth rate Increasing globalisation Changes in who buys the product and how they use it Technological change Emerging new internet capabilities and applications Product and marketing innovation Entry or exit of major firms Regulatory influences and government policy changes Changing societal concerns, attitudes and lifestyles

There are many potential drivers of change. The key questions are: What factors are driving industry change and what impact will they have on the organisation? The true analytical task is to evaluate the forces of industry and competitive change carefully enough to separate the major factors from the minor factors. Just identifying the drivers of industry change is not sufficient for strategic analysis; a more important step in dynamic industry analysis is to determine whether the prevailing change drivers, on the whole, are acting to make the industry environment more or less attractive. The real pay-off for strategy making comes when managers draw some conclusions about what strategy adjustments will be needed to deal with the impacts of the changes in industry conditions. So, dynamic industry analysis is not to be taken lightly. It has practical value and is basic to the task of thinking strategically about where the industry is headed and how to prepare for the changes ahead.

Attractiveness:According to Porter, customers, suppliers and competitors are the primary determinants of industry competition. Competitors in turn, are comprised of existing competitors (incumbent rivals), potential competitors (new entrants to the industry) and substitute providers (alternate products and services from other industries). This results in five forces that are primarily responsible for industry attractiveness (in terms of the nature of competition in an industry and its profitability):1. Customers (power of buyers). Some customers exert greater economic power than others and have a

greater ability to dictate prices and other contract terms as they negotiate with sellers. As a result, powerful customers and buyers may actually reduce the profitability levels of industries from which they buy. The power of buyers is high when:a) They are few in number and/or when they have the ability to buy in bulk

b) The product or service being offered is similar, making it easier to switch to alternate suppliersc) The value of the buyers’ purchases is a significant portion of the seller’s total income; andd) The buyers can move backwards into the supply chain by acquiring or developing the ability to produce

the products or services themselves.2. Power of suppliers. Since suppliers provide all the required inputs to the organisation, including materials,

capital and labour, they have the power to influence pricing and profitability as well as create uncertainty in the buying industry. Supplier power is high when:a) There are only a few major suppliers and they are highly concentrated in relation to the industry they

serve;b) Suppliers to the industry are not similar, thereby making it difficult for incumbents to switch to alternate

suppliers;c) Few or no alternate substitute products or services exist;d) The suppliers can move forward into the supply chain; ande) The value of the industry’s purchases represents but a small portion of the supplier’s total income.

3. Existing competitors (rivalry among firms). Competitive rivalry is characterised by strategic manoeuvring and retaliatory countermoves on the part of industry incumbents. This leads to increased competitive pressure resulting in profitability being affected. The degree of rivalry is dependent on industry growth rate as well as the number of players, their relative size and competitive abilities. Competitive rivalry is high when:a) There are a large number of rivals who are relatively equal in size and power;b) The industry is growing slower and incumbents are vying for the support of existing customers rather

than seeking new customers;c) Incumbents carry huge fixed costs;d) Rivals have excess capacity; ande) Existing players are unable to exit the industry due to the high costs associated with ceasing operations

or high exit barriers.4. Potential competitors (threat of entry). Existing industry players want to retain their market share and

positions and are weary of new entrants since these can increase the level of competition leading to reduced profits. Organisations therefore create entry barriers which are forces intent on keeping potential competitors out while offering protection to existing industry incumbents. There are six barriers to entry:a) Capital required;b) Access to distribution;c) Cost disadvantages not related to size;d) Economies of scale;e) Government legislation and regulation; andf) High switching costs.

5. Substitute providers (substitute products and services). Organisations providing products that serve as replacements, alternatives or substitutes to the products of an organisation in a specific industry could be regarded as indirect competitors. For example, sucralose contained in artificial sweeteners is a substitute for sucrose in cane sugar. Substitute goods and services pose enormous threats to most industries and often place a cap on a particular industry’s pricing. They definitely affect its profitability. However, a large part of what constitutes a substitute is a matter of personal judgment. Managers should be vigilant and closely monitor neighbouring sectors, industries and markets for any changes in technology or cost structures. From a strategic perspective, substitutes that show improvements in price performance relative to industry averages should be closely scrutinised, especially if produced by substitute providers who have huge financial resources.

Porter argues that the greater the collective strength of the five forces, the less profitable and less attractive the industry is likely to be. The way an industry is defined will therefore hold implications for the way substitutes and competing products/services are treated. Also, the way an industry group is defined has implications for the analysis of customers, suppliers and entry barriers.

h) Identify the impact of industry forces on profitability. Customers. Note the four requirements for powerful customer buying power that would increase industry

competitiveness and reduce industry profitability. Power of suppliers. Note the five requirements for powerful suppliers that can increase industry

competitiveness and reduce industry profitability. Existing industry members and rivalry. Note the five requirements for intense rivalry and their effect of

increasing industry competitiveness and reducing profitability where they prevail.

Potential competitors and threat of entry. Note the numerous underlying elements that could potentially influence this factor, the critical question being the ease of entry, or stated otherwise, the industry's “barriers to entry”. Familiarise yourself with the six barriers to entry referred to and the fact that ease of entry will increase industry competitiveness and adversely affect profitability.

Providers of substitute products and services. Note the meaning of substitute products. It is possible that an increase of substitutes coming from outside the immediate industry but which could replace industry products would increase competitiveness and reduce industry profitability.

Government intervention. Note that government intervention could be enhancing (e.g. deregulation) or constraining (e.g. nationalisation, competition policy). It could affect the structure, competitiveness and profitability of industries, especially where interventions are industry specific (e.g. telecommunications, energy and licensing in the retail liquor sector).

Complementors as additional forces. Complementors are products that enhance an industry member's own products (e.g. lease financing that enhances the sale of cars; or handsets to use the service provided by mobile communication providers such as MTN, Vodacom and CellC).

To summarise, where the original five factors all have high ratings, industry competition increases and profitability decreases, and vice versa.

i) Describe the importance of and approach to competitor analysis. The next and final stage in analysing the environment moves towards an understanding of the non-structural features. Critical to an effective competitor analysis is gathering data and information that can help the firm understand its competitors’ strategic intentions and the strategic implications resulting from them. Competitor analysis thus focuses on two main issues:1. The identification of competitors2. The prediction of competitors’ behaviourIntense rivalry creates a strong need to understand competitors and this competitive intelligence is the information about the four dimensions: objectives, strategies, assumptions and capabilities. The acquired intelligence helps the firm prepare an anticipated response profile for each competitor. If managers fail to do this, it may place the firm at a disadvantage. However, firms must follow laws and regulations as well as carefully articulated ethical guidelines when gathering competitor intelligence.Competition vs Cooperation:While an organisation is largely unable to influence those elements stemming from the broad environment, it can exert considerable influence on those elements (such as stakeholders) in its task environment. In fact, organisations can create cooperative strategies with these stakeholders or pursue a variety of other management techniques to enhance their competitive positions. There is thus a need to look at some of the factors likely to influence the actual process on interaction between individual organisations and the pressures that may exist to lead them to choose competition or cooperation, or some intermediate stage between the two extremes. Competition is often regarded as a ‘zero sum’ game or head-on conflict, where one party can only benefit at the expense of another. Collaboration however, is usually seen as a ‘non-zero sum’ game, where all parties to the collaboration may gain at least some benefit.The benefits of collaboration have been recognised for some time and collaboration between competitors seem to be in fashion. No single firm possesses or has access to all the requisite resources to bring a product to fruition or to market. Each partner must contribute something distinctive such as basic research, product development skills, manufacturing capacity or access to distribution. The aim is to create advantage in relation to companies outside the alliance, while preventing a wholesale transfer of core skills to the partner. It is also important to note that coalitions are not static, they develop and evolve. Partners in the early stage of a product/market evolution frequently become competitors at a later stage. Cooperation is a good way to reduce uncertainty facing the firm stemming from economic or political power of certain stakeholders. Those stakeholders who can influence organisational outcomes are often identified as suitable candidates for cooperative relationships.The competitive profile matrix:The competitive profile matrix (CPM) identifies a firm’s major competitors and its strategic strengths and weaknesses in relation to its competitors. Although this comparative analysis could use a combination of industry success factors and internal company strategic information, the numbers reveal the relative competitive strength of firms. However, the implied precision of number is an illusion since a quantification of strategic strength and weaknesses is not ‘magic’. The use of these tools must be accompanied by intuitive judgment rather than a robotic examination of weights and ratings. The aim is not to arrive at a single number, but rather to assimilate and evaluate information in a meaningful way that assists decision making.

Specific outcome 4: Have a sound understanding of the internal analysis of an organisation's strengths and weaknesses, its resources, capabilities and competencies as sources of competitive advantage, and the relationship between its competitive advantage and its strategy. Assessment criteria a) Describe the importance of internal analysis in identifying organisational strengths and weaknesses for

strategy formulation. Analysing an organisation's internal environment serves to identify its main sources of competitive advantage and to explain the important relationships between an organisation's resources, capabilities and competencies, its competitive advantage and its strategy.An organisation has a competitive advantage over its rivals when its profitability is greater than the average of all the organisations in its industry. It has a sustainable competitive advantage when it is able to maintain this above-average profitability over time. Note that internal analysis therefore aims at identifying the sources of an organisation's competitive advantage that should enable it to build a sustainable competitive advantage. Based on an organisation's vision, mission and long-term objectives, the outcomes of internal analysis combined with those of the organisation's external analysis largely provide managers with the information they need to devise and select the competitive business level strategies that will enable them to attain a sustainable competitive advantage in pursuing their long-term objectives. Notwithstanding some differences in the approach to internal analysis, this typically requires the following three steps: Managers need to understand the process by which organisations create value for customers and profit for

the organisation, and the role of resources, capabilities and competencies in this regard. Managers need to understand the importance of superior effectiveness, efficiency, innovation, quality and

customer responsiveness in the process of creating value and generating above-average profitability. Managers must be able to identify and analyse their organisation's sources of competitive advantage to

know what drives the profitability of the organisation and where opportunities for further improvement might lie.

Essentially, from a strategy perspective, managers should ask two critical questions: “What are the sources of competitive advantage?” and “What is the link between competitive advantage, strategy and profitability?”

b) Describe an organisation's strategic resources, capabilities and competencies. Resources:Resources are the productive assets owned by an organisation and can be grouped into five primary categories:1. Financial capital (e.g. the organisation’s ability to generate funds, internally or through loans and

investments)2. Physical capital (e.g. operational and manufacturing plant equipment, location and access to raw materials)3. Human capital (e.g. knowledge, management and employee insight, intellect, relationships, training,

experience and judgment)4. Organisational capital (e.g. reporting structure and management, including planning, coordinating,

controlling and networks)5. Technological capital (e.g. ICT systems)Resources can be used as the basis for the formulation and implementation of strategies, but not all are strategically relevant. Some have little or even a negative impact on the performance of an organisation. Resources that can contribute positively to an organisation’s strategy and lead to sustained competitive advantage need to be identified.Although resources of organisations in the same industry are typically similar, organisations themselves are never identical. They will therefore possess some resources that are differentiating, valuable, rare and inimitable (cannot be imitated), and will accordingly pursue different strategies and achieve different levels of success. This heterogeneity in resources can be acquired and sustained over a longer period within an industry as it may not be perfectly mobile across organisations.Resources include individual, social and organisational factors. To determine the resources of an organisation, a comprehensive directory should be developed. The directory should differentiate between tangible and intangible resources and capabilities, and human resources (tacit knowledge). Capabilities:Capabilities are the capacity of an organisation to deploy resources for a unique end result. They are organisation-specific clusters of activities developed through complex interactions between tangible and intangible resources over time and reflect what an organisation excels at compared to other organisations. They can also be information based.Key characteristics of capabilities are that they are valuable across various products and markets, embedded in routines and tacit. Capabilities are what the organisation can do exceptionally well. Whereas resources are static

and will generally deplete over time, capabilities will increase with use and become more valuable. Capabilities can be within business functions, can be linked to technologies or product design, can involve the ability of the organisation to manage linkages between elements of the value chain or refer to the capacity of the organisation to deploy resources through processes.It is important to distinguish between capabilities and dynamic capabilities. Capabilities are ‘high level routines that, together with its implementing input flows, confers upon an organisation’s management a set of decision options for producing significant outputs of a particular type’. A capability is reflected in high-level activities (routines) that produce important outputs of significant value that contribute to an organisation’s competitive advantage. Examples of capabilities are SABMiller’s ability to develop strong brands and MTN’s ability to operate cellular businesses in developing countries.Competencies:Core competencies (also referred to as distinctive capabilities) are those capabilities or competencies that distinguish an organisation from others in an industry and form the basis of its competitive advantage, strategy and performance. Core competencies make a disproportionate contribution to customer value and the efficiency of its delivery, and serve as a basis for market entry. Core competencies that are internal strengths of an organisation enable it to capitalise on opportunities that are identified in the environment.Core competencies involve the combination of various resources and capabilities. The development of core competencies usually takes place over a period of time and is a process of accumulation and learning how to use a unique combination of resources and capabilities. It also often involves communication and an intense commitment to working across organisational boundaries. It can entail the coordination of diverse production skills and integration of multiple streams of technology.

c) Explain resources, capabilities and competencies as sources of sustainable competitive advantage. Resources:Intangible resources are a subset of the strategic resources of an organisation and the broad categories include knowledge, intellectual capital, human capital, structural capital, customer capital, organisational capital, innovation capital and process capital.Intangibles are strategic firm resources that enable an organisation to create sustainable value, but are not available to a large number of firms (rarity). They lead to potential future benefits which cannot be taken by others (appropriability), and are not imitable by competitors, or substitutable using other resources. They are not tradable or transferable on factor markets (immobility) due to corporate control. Because of their intangible nature, they are non-physical, non-financial, are not included in financial statements, and have a finite life. In order to become an intangible asset included in financial statements, these resources need to be clearly linked to a company’s products and services, identifiable from other resources, and become traceable results of past transactions.Intangible resources are not easy to identify, but are usually much more valuable and superior to tangible resources. Intangible resources include the reputation of an organisation and that of its product, employee know-how, perception of quality, ability to manage change, ability to innovate, team-working ability and participative management style.Competitors find it difficult to understand, acquire, substitute or imitate intangible resources, therefore organisations often rely on intangible resources for their core competencies and capabilities. Consequently, more intangible and unobservable resources will lead to more sustainable competitive advantage.There are three types of intangible resources:1. Human resources (including knowledge, trust and managerial capabilities)2. Innovation resources (including ideas, scientific capabilities and capacity to innovate)3. Reputational resources (including brand name, reputation with customers, perceptions of product quality and reliability)The human resources (people owning, working and managing in an organisation) are the source of knowledge and this can be a valuable and even primary contributor to competitive advantage, as knowledge can contribute to the uniqueness of an organisation. The ability to use information makes knowledge a resource. When data and information are used to do things, such as decide on how to solve a management problem, train the sales team or improve operational processes, knowledge is created.Not all knowledge is a source of competitive advantage as some knowledge is public. Private knowledge, however, can be valuable. Examples of private knowledge are an organisation’s intellectual property rights, systems, procedures and processes, or recipes. Knowledge can be explicit or tacit: Explicit knowledge can be taught of conveyed with ease.

Tacit knowledge is gained through experience, insight and intuition, and is difficult to share or record, making it virtually impossible to emulate or sell. Therefore tacit knowledge can be very valuable and can lead to competitive advantage.

Individual resources have limited worth and do not lead to competitive advantage, but a combination of resources, both tangible and intangible, can create valuable organisational capabilities.Capabilities:Dynamic capabilities are geared towards effecting and driving organisational change; they are essentially strategic in nature and accordingly define the firm’s path of evolution and development. Described in a different way, dynamic capabilities are those capabilities that help organisations to learn the new capabilities they require to adapt to environmental changes. Absorptive capacity (the ability to acquire, assimilate and use external information) is an example of a dynamic capability that drives organisational learning and change.Carefully developed capabilities from the basis of competitive advantage and are therefore primary differentiators of organisations from their competitors. Building difficult-to-imitate capabilities is of great importance to an organisation as this ensure differentiation.Competencies:Core competencies distinguish an organisation from others in the industry. An important characteristic of core competencies is that they are difficult to imitate – hence their importance as a basis for sustainable competitive advantage.Their complex coordination, integration and harmonisation across production skills, technologies and capabilities make core competencies difficult to imitate. They enable access to a variety of markets and significantly contribute to perceived customer benefits from products and services. Most successful organisations will have only one or two core competencies, while many average organisations will have no distinguishing core competencies at all.

d) Explain how the value of resources, capabilities and competencies is appraised. Capabilities and resources have the potential to become core competencies and these core competencies can result in competitive advantage, but only if they meet certain conditions. A resource-based framework for analysis of an organisation will determine the resources and capabilities that will result in core competencies. For resources and capabilities to become the core competencies, they should be valuable (V), rare (R), inimitable and non-substitutable (I), and exploitable by the organisation (O), (VRIO). These measures can be used to test the strategic value of resources and capabilities.Value:Valuable (V) implies the ability of the organisation to transform a resource into a product or service at a lower cost or with a higher value to the customer. Capabilities are valuable when they enable an organisation to implement a strategy that improves efficiency and effectiveness. To be valuable, the capabilities must either increase efficiency with regard to outputs or inputs or increase the revenue of an organisation. For example, an information system could reduce customer service agents required or increase the number of calls that the same number of agents can answer. Alternatively, effectiveness must increase, meaning that some new sources of revenue not previously held should be enabled. For example, the opening of a new regional campus that will access the student market. Value is dependent on the type of strategy, for example a low-cost strategy such as Kulula.com or a differentiator strategy that enhances features such as African Pride hotels may require different capabilities.Rarity:A valuable resource and/or capability that an organisation owns that other organisations do not have, and that is not generally availability in the open market, is rare (R).Inimitability:Inimitable capabilities (I) and core competencies are valuable, unique and complex resources, including intangible resources (such as reputation, networks, client trust and intellectual property) and capabilities (such as knowledge, the culture of the organisation, skills and experience) that make it difficult for competitors to copy what an organisation is doing, resulting in sustained competitive advantage. It is easy copying something valuable that an organisation started doing first, its competitors will soon follow and in the process erode any competitive advantage.Imitation by competitors is prevented if: they do not understand the reason for success they do not have the same unique historical conditions the cause of the effectiveness is uncertain due to social complexity (for example, trust, teamwork and

informal relationships)

Non-substitutability is also part of inimitability of resources and capabilities and means that there are no equivalent resources, duplicates, substitutes or imitations that can be exploited to implement the same strategies. The strategic value of a capability or core competency of an organisation increases when it is difficult for competitors to substitute it and also when it is difficult for them to identify, discern or observe it. Specific knowledge of the organisation and trust relationships are not easily observable and therefore difficult to copy.Organisation:The organisation’s structure and systems (O) should be suitable for a specific competitive advantage. If an organisation cannot be geared to exploit a resource or capability, it will have little value. Managerial awareness, of both the potential competitive advantage and the action required to realise it, is essential.

e) Explain the role of the resource-based view in internal analysis. Strategy formulation originally included a market-focused mission statement addressing what the organisation was about, its business, the market and needs it served, and its customers. In a volatile and ever-changing environment, this external focus became risky and in the 90s, attention shifted towards internal strengths, resources and capabilities of organisations.The resource-based view (RBV) is a model for analysing the internal strengths and weaknesses of the organisation in terms of its resources and linking them to opportunities in the external environment. It determines where the organisation can build competitive advantage, superior performance and customer value.An assessment of the organisation starts with a general internal evaluation to determine its strengths, specifically as related to the industry in which it operates. Important considerations for assessment are: the strategic direction as conveyed in the vision, mission, purpose and values the key internal stakeholders, including managers, their experience, strength, weaknesses and management

style the owners of the organisation operational issues such as sales, assets and location the type and level of employees and culture of the organisationResources and capabilities are determined by the value chain activities of the organisation, including: supply chain and operational management financial management research and development people management marketing management intangible resources, such as reputation, patents, brand names, networks etc.This unique combination of resources, capabilities and core competencies is then used to develop a strategy to address the needs of customers and also contribute to competitive advantage.

f) Explain the use of the value chain in internal analysis. An organisation's value chain links the value of its activities to its main functional parts, and is used to assess the contribution that each part makes to the overall added value of the business. Value chain analysis allows an organisation to understand the parts of its operations that create value and those that do not. For the purposes of internal analysis using the value chain, Porter linked the following two areas together:1. identifying the added value that each part of the organisation contributes to the whole organisation2. identifying the contribution that each of these parts might then make to the competitive advantage of the

whole organisationThe relevant information from value chain analysis can assist management in their decision-making about those activities that contribute value, those of which the costs can be reduced, and those that can be eliminated, all of which should make a positive contribution to a sustainable competitive advantage.Primary activities of the value chain: inbound logistics operations outbound logistics marketing and sales serviceSupport activities of the value chain: administration and infrastructure human resource management technology development procurement

g) Explain the concept of sustainable competitive advantage.

Sustainable competitive advantage is determined by the durability of the relevant resources and capabilities and how inimitable they are. Durability refers to the length of time over which a capability is relevant and can contribute to competitive advantage of the organisation. For example, a strongly ingrained durable culture is extremely durable and long-lasting, while technical competencies is of much shorter duration. Imitability refers to how easy or difficult it is for competitors to copy the competitive advantage and is determined by transferability and how replicable the capability is. Transferability is how easy or difficult it is to buy or acquire a resources. For example, raw materials, components, machines and human resources are all easily transferable, while immobile and intangible resources, such as organisational culture, are not easy to transfer. The latter are more valuable because they may be specific to the organisation or lose worth when transferred. Replicability refers to the ability to use the resource in other settings.

Specific outcome 5: Have an understanding of the prevailing institutional and external environments for business in Africa as well as of the strategies for emerging markets in general and markets in Africa in particular. Assessment criteria a) Explain the structure of the external environment that organisations have to deal with and the institutional

environment of Africa in broad terms, with specific reference to the African Union (AU) and the Southern African Development Community (SADC). Of particular interest to our understanding of strategic management in the African context in the sub-Saharan region, and specifically in the Southern African Development Community (SADC) group of countries within the AU. The SADC countries have existing trade and other political assistance treaties in place between them as well as strategic alliance from which individual countries compile policies. The SADC member countries are largely subjected to the same strategic issues facing Africa as a whole. All current governments of the SADC community have some form of strife underlying the governance process. In cases such as South Africa, considered to be the leader of the region, continuous allegations of fraudulent and other illegal dealings mar the country’s status and position in the global arena. Further key issues that guide and govern African strategic development are found in the various documents of the AU and SADC. These relate primarily to economic growth, education, health and regional integration and may be summarised as follows:• Poverty alleviation• Improved political and military stability (on the continent)• Economic growth including increase in exports (on the continent)• Improved education and health service and service delivery• Improved public-private partnerships (on national and international levels)• Improved infrastructure developmentAll of these need to be done against a backdrop of environmental conservation and sustainability. In the South African context, the business strategic planning cycle is further complicated by employment equity ratios. The impact of these ratios on the HR component of a business in turn reflects on the organisational disposition in that cross-skilling is required. Whereas in the past businesses only had to plan for strategic development in the economic sense, they now need to plan for an internal process of development within the time horizon of the implementation (leading) cycle. Control has to be both internally based (maintaining economic stature in order to remain competitive and contribute to the economy) and externally based (having to comply with judicial and legislative restrictions as laid out by the National Department of Trade and Industry).In other words, strategy formulation for both state and private enterprise needs to reflect not only the government’s goals for 2030, but also legislation in terms of human resource management, social development and growth expectations. Companies are required to conform to the broad-based black economic empowerment (BBBEE) plans as well as equal employment opportunity for all previously marginalised groups.Special incentives are being offered to organisations employing young workers, for example the skills levy. These incentives will influence the way organisations adopt and adapt their strategies for the future. They may start considering early retirement for older (skilled) workers in order to employ younger and cheaper labour. This could lead to a drop in the experience level in organisations.In the case of the SADC countries, the two-fold approach is applied. Strategic plans are formulated to address growth, health and education of not only the organisation and its employees, but the nation as a whole. Water shortages and conflict are often issues that also need to be addressed.Based on the manifestos of the AU and SADC communities, the strategic process in Africa should by no means differ from the theoretical model, but at the same time, Africa needs to strategize for its own future.

b) Explain the external environment relating to Africa as a frame of reference for doing business in Africa.

By 2014, some of the fastest-growing economies in the world were in Africa, presenting new opportunities for multinationals from developed countries as well as other organisations, including those from South Africa, to invest in Africa.• Local customs and customer preferencesInvestors, as well as organisations exporting to countries in Africa, should bear in mind that countries are diverse and differ in terms of the following: their political stability; legal system; size of their economy as indicated by GDP and GNP levels; level of economic development; rate of economic growth; size of the country; population size; levels of disposable and discretionary income; sophistication of infrastructure; industry characteristics; market size and consumer needs; and culture, as well as customs and especially religious traditions. These are but a few determinants that business leaders need to contemplate as a start. Comprehensive country analysis would, for example, further involve country risk analysis and taking into account information derived from the Human Development Index and information made available by organisations such as Transparency International.The rationale for this brief overview is to reaffirm that an organisation's international or global strategy which is successful in its home country in most cases will not work in Africa. The message is clear − deciding on business involvement in Africa must be preceded by extensive research and strategic analysis, most importantly about the actual market needs and customer preferences.• LegislationInvestors and business leaders should be aware of the legal dispensation of the country they are involved in or contemplating becoming involved in. An intimate knowledge of a country's legal system, laws and regulations as well as the extent to which the rule of law and effective law enforcement prevail is indispensable. Relevant issues would include those relating to ownership, labour relations, taxation, customs and excise, direct investment, securities exchange and listing requirements, repatriation of profits and dividends to parent organisations in the home country, foreign exchange controls and transfer pricing rules.• Political considerationsOwing to the political complexities that organisations face when setting up business in African countries, ways that could be considered to circumvent or overcome such complexities include the following:

partnering with local stakeholders for a number of reasons, including ease of entry into the country, shared ownership (international joint ventures) or involvement by agreement (strategic alliances) as a source of local market knowledge, potentially favourable government relations, and sharing risks, especially in the early stages of a venture where uncertainty is high

responding positively to an awareness of community, cultural and social needs in terms of customised products; certain human resource management practices and an awareness of political events and national priorities could enhance organisation-government relations. See the experience of SABMiller below.

• Creative supply chain managementOwing to underdeveloped infrastructure in many of the countries in Africa, organisations have to devise their own, innovative supply chain solutions, especially in terms of logistics relating to procurement and inbound transportation and the distribution of products to markets. Study the following ways in which these challenges can be addressed:

investing in own infrastructure product innovation to meet specific market needs developing local suppliers to ensure consistent supply of raw materials developing distribution channel strategies that are sufficiently flexible to cope with both formal and

informal distribution via wholesalers and retailers to serve their markets effectivelyIn the case of land-locked countries, logistics could present a nightmare. Not only could customs clearance at a country's nearest port take relatively long, but cross-border customs clearance en route could cause further delays, while poor infrastructure, especially roads and ineffective rail transport, add to already existing time delays that all translate into higher costs, potential production delays and getting products to market. • Investing heavily in talentThe lack of skills, and especially key managerial skills, remains a drawback in African countries. Organisations doing business in Africa need to identify, attract and retain talent, but also invest in training and development, including mentorship.

c) Identify and explain the drawbacks and obstacles in doing business in Africa. There are some key strategic issues facing Africa as a whole, and Sub-Saharan Africa in particular, which present challenges to investors and business in Africa:

Lack of infrastructure

The lack of infrastructure is a significant damper on investment and business in Africa. In addition, the state of the infrastructure that does exist is generally poor, with many governments unwilling or unable to spend the amount of money required to keep the roads in basic repair. The lack of infrastructure compounds the high poverty and low food security levels in sub-Saharan Africa, as it hampers the distribution of food and food aid, and information. For businesses, the lack of infrastructure may translate into a supply chain and distribution system that is inadequate and disorganised, with much of retail sales occurring through informal channels. Good infrastructure is crucial if Africa is to become competitive. Lack of industrial developmentWhat has also been identified by the African Union is the need to improve and increase manufacturing capability. Most of the member countries apply primary resource development and then export the raw product for secondary and tertiary economic processing. This results in extensive imports as the final products then need to be brought back into these countries for local consumption. Development in secondary and tertiary industrial activities would negate this and result in greater creation of wealth and greater independence from imports. Should the African Union member countries be successful in meeting this strategic objective, it could lead to greater production capabilities which in turn could stimulate exports, thus creating not only jobs, but also wealth. Political instabilityFrom a business perspective, political instability in Africa takes the form of unpredictable government decision making that leads to volatility or armed conflict, making foreign investment extremely risky at best. Armed conflict and its effects are also prevalent on the continent. Of the 53 African countries, 15 are involved in war or are experiencing post-war tension or conflict. These wars are generally over natural resources such as land, oil or diamonds. High levels of povertyIn Africa a significant portion of the population fall in the economic bracket termed by Prahalad as ‘the bottom of the pyramid’ (families surviving on less than the international poverty line of $2 per day). While the causes of poverty are many and varied, it is the impact of poverty that should be of serious concern to strategists. Those living at the bottom of the pyramid often endure poor living conditions and are susceptible to diseases, yet do not have access to good healthcare. They are also unable to obtain an adequate education, which forces them into a cycle of poverty. A large portion of the SA population survive on welfare grants and other social services funded by tax. This means massive expenditure on social welfare instead of investments. While the welfare grants have increased the spending power of the poor for now, this is not a sustainable solution. CorruptionWhile levels of corruption may differ from country to country, the cumulative effect of endemic corruption on business and the African economy is massive. Corruption hampers business and the provision of decent public services. Transparency International points out the danger of corruption as follows:‘Looking at the Corruption Perceptions Index 2012, it’s clear that corruption is major threat facing humanity. Corruption destroys lives and communities, and undermines countries and institutions. It generates popular anger that threatens to further destabilise societies and exacerbate violent conflicts.’ An inefficient public sectorIn 2013, economic growth for the African economy was negative. This dismal failure to alleviate poverty in sub-Saharan Africa, where per capita income is now less than it was in 1994, can be attributed to an inefficient public sector. Lack of key skillsDue to limited access to education at various levels, African markets often present investors with lack of people with key business skills and an oversupply of semi-skilled and unskilled workers.

d) Compare the approach to strategy and strategic management in emerging economies to the approach in the developed world. The obvious point of departure when doing business in Africa, or contemplating doing business, is the need to consider the relevant challenges. In order to formulate relevant strategies for emerging markets, managers need to at least consider the economic, political, legal, sociocultural, technological, ecological, infrastructural and demographic dispositions of the country or countries in which their organisations are already involved or if they are planning such involvement. Suffice it to say that conflict, as well as the general underdeveloped infrastructure in SSA, generally poses serious challenges in many African countries, and this has an adverse effect on foreign investment and business. Note that emerging markets have become popular business destinations in recent decades for the following reasons: 1. They present increasingly attractive market opportunities to international companies wishing to expand

business and operations to foreign markets.

2. They currently reflect the potential for increasing levels of demand for internationally recognised brands and relatively more sophisticated products and services.

3. They could serve as manufacturing bases and destinations for outsourcing activities. 4. They serve as destinations for sourcing strategic materials and commodities. Benefits for developing

economies invariably include higher economic growth and higher income levels, a better quality of life, improved skills, increased technology transfer and more competitive consumer markets.

Despite their attractive growth prospects, emerging economies typically involve high inherent risks, which apply even more so to Africa and SSA, the latter a vast "developing" region. According to Parker, SSA has been plagued by perennial problems such as self-serving governments, weak institutions, ethnic and religion induced civil wars, weak property rights, low productivity, the scourge of bureaucratic red tape and corruption.According to Prahalad, the poor can be the engine of the next round of global trade and prosperity. However, this untapped source is virtually uncharted territory in terms of multinational corporations' understanding of the strategies required to capture this opportunity, an observation that has particular relevance for doing business in SSA. A critical fact, however, is that a high percentage of the population in Africa lives on less than 2$ a day, the people at the so-called “BOP”, which suggests that business in Africa needs to be approached differently when compared to business practices in developed economies. MNCs therefore need to develop specific strategies to meet the needs of the different consumer classes that make up the national markets in emerging economies, including the countries in SSA. This is especially relevant for those potential consumers at the BOP.

e) Describe suitable approaches for strategies in emerging markets in general and markets in Africa and sub-Saharan Africa in particular.In recent decades, many multinational companies from developed countries have approached emerging and especially Bottom Of Pyramid markets in developing countries based on flawed analyses, inappropriate strategies, and with existing portfolios of products and services developed and priced for Western markets. Such products are often out of reach of both existing and potential customers in BOP markets.It is imperative that MNCs understand the structure and needs of markets in emerging economies in general, and SSA market structures and market needs in particular. While these requirements obviously also apply to local companies in developing countries, it is of even greater importance for foreign MNCs wanting to compete in these economies. While there could be other strategic approaches to serve BOP markets, and acknowledging the fact that circumstances are bound to differ from one country to the next, the approach below proposed by Khanna and Palepu to strategically structure country or regional markets into various levels or tiers, including the BOP level, should not be seen as being prescriptive, or the only way in which to approach emerging and BOP markets. In fact, it should rather be seen as a valuable basis for thinking about and contemplating other strategic options for emerging markets in general and SSA markets in particular. The following market structures proposed by Khanna and Palepu reveal strategically important considerations.Khanna and Palepu maintain that most product markets in emerging economies, and arguably also in SSA markets, comprise the following four distinct tiers: A "global" customer segment that wants products of global quality and with global features – offerings with

the same qualities and attributes that goods in developed countries have – and customers willing to pay global prices for them

A "glocal" segment that demands products of global quality but with local features at less-than-global prices A "local" segment that wants local products with local features at local prices. A BOP segment that can afford to buy only the most inexpensive productsThis four-tiered structure of markets in emerging economies poses significant challenges for local organisations, but significantly more so for rival foreign organisations. From the perspective of foreign MNCs, which would include South African companies venturing into emerging markets and SSA country markets in particular, the first imperative is to realise that emerging markets differ in structure compared to developed country markets, and require MNCs to decide where and how to compete. Owing to "institutional voids" in most emerging economies − a general lack of specialised intermediaries such as regulatory systems, adequate distribution systems, skilled market research firms and pools of skilled managerial talent − foreign MNCs find it difficult, at least initially, to serve anything but the global tier in emerging product markets as a result of the following: A general lack of market research organisations and absence of reliable market intelligence which make it

difficult for MNCs to identify and understand local customers’ preferences and tastes The generally poor distribution networks that make it largely impossible to serve customers in rural areas

effectively The MNC’s deficient knowledge about the local talent pool (at least initially) and inability to attract

competent local employees at the four different market levels, which poses an enormous challenge

According to Khanna and Palepu, MNCs typically rush into the global tier, while local companies dominate the local tier and, to a certain extent, the BOP tiers. However, opportunities exist at the BOP tier, but MNCs, both local and foreign, need different competitive and marketing strategies to compete successfully at this level. Over time, the glocal tier becomes the battleground between local and foreign rivals.With their superior knowledge of local conditions, local companies tend to serve glocal customers better than their foreign counterparts. Companies depend on the extent of their competitive advantage for their success. For local firms, being able to circumvent institutional voids, tailoring their strategies to local markets better than foreign MNCs and being able to tap into capital and talent markets in developed countries, often give them the competitive edge in serving the glocal, local and BOP market tiers. Note that the basic requirements for cost leadership and differentiation business level strategies still apply, but that the approach to reconfiguration of products and services and their execution may need to be adapted. An example is the provision by MTN of prepaid mobile phone subscriptions costing a few dollars only, so that BOP customers could afford airtime, which increased their sales dramatically. Key success factors to successfully engage in emerging markets and, accordingly, SSA markets, appear to be critical for any degree of success. Despite the large proportion of consumers at the BOP level in most African countries, there is evidence that a number of unfavourable perceptions of the BOP segment have prevailed partly because of multinationals' misconceptions about these markets. These misconceptions include the following:• The poor cannot afford their products and services.• The poor do not have use for the products sold in developed countries.• Only developed country customers appreciate and pay for innovations.• Because of low income levels, BOP markets are not critical for the long-term growth of MNCs.• It is difficult to recruit managers for BOP markets.In recent years, the situation in countries in Africa has shown improvement in a number of areas, including the quality of life and buying power of the people, the availability of good quality products and services, and, in particular, advancement in and use of information and communications technology (ICT). By June 2012, there were 167 million internet users in Africa representing around 15% of the total population of about one billion people. Also significant at the macro level is that by mid-2010, private capital flows to SSA − primarily from BRICS countries, private sector investment portfolios and remittances − exceeded official development assistance (ODA) for the first time ever.

f) Explain the role of governments in enhancing business conditions in Africa. Governments can enhance or deter economic growth and development through their strategies, policies and investment decisions, but their main purpose, apart from ensuring political stability is, inter alia, to create an environment conducive to economic growth, foreign investment, export promotion, job creation and poverty alleviation, especially in the context of countries in Africa.Governments are enablers of economic growth through their policy and investment decisions, and African governments will need to create an environment suited for investment and job creation. Africa will need to move away from what can only be described as a mono-cultural economy (being dependent on a single agricultural source) to a multicultural one in order to become more competitive in the international trade. Current African strategies do not address this aspect, although it is a stated objective in the AU manifesto.African countries will need to become more assertive in their international trade terms. Too much is moving out of Africa or across borders. As mentioned earlier, African countries’ strategies should be focused on improvement of infrastructures in order to initiate competitiveness on a tertiary economic front. Foreign direct investment (FDI) should be aimed at the improvement of infrastructure to become self-sufficient and not serve as a bail out. African countries have long been following a strategy of primary purpose with FDI being used as a stopgap rather than focusing on sustainability.Strategic management in Africa should also address the current weak infrastructure as per the AU and SADC manifestos as it inhibits the growth and especially the competitiveness of a region. Infrastructure is needed to distribute both imported and exported. Through an improved infrastructure, the mono-cultural economies of the African region could be turned into an advantage by applying complementarities to the production of goods and services. This will have to be done through strong strategic management under the auspices of the AU and SADC executive councils.For Africa to grow and not only comply with the AU and SADC strategic objectives, countries in Africa will need to be more focused on improvement and growth, with maintenance of the infrastructure paramount in their development strategies. Africa has sufficient resources, but lack skills at various levels which implies that a concerted effort needs to be made to up-skill the human resource component. Poverty alleviation will then be a de factor spin-off. Nkrumah is of the opinion that a united African economy, therefore strategy, is the only option to address the current shortfalls in growth, poverty alleviation, lack of education and health issues. It

could prove more successful to adopt a geographically united approach, although problems could arise surrounding religious beliefs. African countries should also start thinking beyond their normal product and mineral exports and consider products which African is rich in and the international community requires. Even more focus should be on renewable energy.

Specific outcome 6: Explain what sustainable organisations are and evaluate strategic decisions to determine how they contribute to sustainability. Assessment criteria a) Explain why corporate sustainability is important.

If we talk about business or organisational sustainability, we are referring to the ability of the organisation to endure and survive in the long run. However, for every successful organisation that is sustainable, there are many more that do not manage to survive in the long term. These include businesses that fold (and as a result are declared bankrupt or liquidated), but may also include public organisations, such as state-owned enterprises (SOEs) that continually perform poorly, but are “bailed out” by government with taxpayers money, such as South African Airways (SAA).Any business operates with the basic underlying goal of surviving and perhaps prospering in the long-term – in other words, being sustainable. However, achieving this goal is much easier said than done. It requires the organisation to take a long-term view in its decision making rather than a short-term one, which may require giving up profits in the short term in exchange for survival and wealth creation in the long term.

b) Describe the four pillars of corporate sustainability. Wilson argues that corporate sustainability has four pillars:1. Sustainable development - Boundaries of the subject matter and description of a common societal goal.2. CSR – Ethical arguments as to why organisations should work towards sustainability goals. 3. Stakeholder management – Business arguments as to why organisations should work towards sustainability

goals.4. Business ethics (corporate accountability theory) - Ethical arguments as to why organisations should report

on sustainability performance.c) Explain what sustainable organisations are and why they are important.

As in (a)d) Explain the “triple-bottom line” and why it is important.

The notion of sustainable development had its roots in economics, ecology and social justice, what we refer to today as the triple bottom line of economics, environment and society. Sustainable business hinges on three main factors, namely ethical profits (economic bottom line), a healthy physical environment (environmental bottom line) and healthy communities (social bottom line).

e) Explain what corporate social responsibility (CSR) is and give examples of CSR activities in a company.CSR is a broad concept that refers to the role of business in society. It is based on the principle that managers have an ethical obligation to consider and address the needs of society, not merely to act solely in the interests of the shareholders or their own self-interest. In South Africa, CSR is more often used as a specific term referring to the externally orientated sustainable development activities of organisations. There is no recipe for CSR investment, but most large companies generally invest in a relatively broad range of social and environmental causes, such as education, training and combating HIV/AIDS. Instead of being purely reactive, most organisations have a range of CSR causes in which invest and also attempt to invest in causes that will benefit them in the long run.

f) Explain the importance of stakeholders and stakeholder management for sustainable business.Any organization is the sum of its stakeholders. While all have a common interest in the organisation’s success, stakeholders have different perspectives on the organisation, each looking to take something out of it and all have an ability to influence that success. To achieve a competitive advantage an organisation needs to meet the needs of the stakeholders which means adding value. Adding value can be defined as adding certain characteristics to the product/services that the competitor and customer (or other stakeholders) cannot do for themselves. Anyone who is directly influenced by the acts of the organization is seen as a stakeholder. Stakeholders usually have divergent goals and are driven not only by profit or other financial aspects. To ensure sustainability and long term survival of the organization it is important to ensure that the claims of the stakeholders are met. In the event of their claims not being met, organisations will lose their competitive advantage and ultimately losing their sustainability over the long run. Stakeholders are those entities that can affect or be affected by the organisation’s actions. Some examples of key stakeholders are creditors, directors, employees, government, owners, suppliers, unions, the environment and the community from which the business draws its resources. Not all stakeholders are equal. For example,

customers are entitled to fair trading practices, but they are not entitled to the same consideration as the company’s employees. Any strategic decision taken by an organisation is likely to have positive and negative consequences for different stakeholders. When a company needs to cut costs and plans a round of lay-offs, this negatively affects the community of workers in the area and therefore the local economy. Shareholders, however, may be positively affected, as the company may return to profitability after this decision. The extent to which organisations should consider stakeholders in their decision making is thus a point of contention.The shareholder view argues that the claims of shareholders, the owners of the business, are paramount to any business. Without this focus on shareholders, the organisation would not attract investors and this would affect sustainability. Supporters of this view argue that in the long run, profit benefits all stakeholders.On the other hand, the stakeholder perspective argues that shareholders cannot be the sole focus – if they are, other stakeholders may withdraw their support for the organisation to its detriment. Supporters of this view accordingly argue that all stakeholders should be considered in the strategic decision-making processes of the organisation.As a middle ground, some observers have argued that there should not be a great chasm between the two views, as an enlightened shareholder perspective is really no different to an enlightened stakeholder perspective. In terms of sustainable strategy, the organisation should thus try to balance the needs and claims of its key stakeholders. In determining the relative importance of stakeholders, the organisation needs to weigh up the claims of stakeholders and the relative power and influence of stakeholders. In the case of a strike, a union may demand a substantial increase in their pay, which the employers usually claim they cannot afford. Whether the demand constitutes a legitimate claim is an issue of debate, but in the meantime the workers are exerting their power by withholding labour, to the detriment of the company. The stakeholder salience model can assist managers in determining the relative importance of stakeholders of the organisation. It should be noted that the importance of stakeholders will differ from firm to firm and from industry to industry.The determining factors are as follows: Stakeholder power is determined by the extent to which stakeholders control the resources required by the

organisation. The more resources and the higher the degree of control, the more powerful the stakeholders. Employees and unions, for example, have direct control over the human resources of the organisation, whereas the community does not always have similar control.

Stakeholder legitimacy is determined by the extent to which the stakeholders are affected by the decision of the organisation, and the more affected, the higher the legitimacy. Once again, the employees of the organisation are directly affected by the organisation’s decisions, and therefore have a high level of legitimacy.

Stakeholder urgency is determined by the time sensitivity of the stakeholder’s claim, and the level of importance to the stakeholder. The more urgent and important the claim, the higher the level of urgency.

We can use these attributes to classify stakeholders into three broad classes: Latent stakeholders have only one attribute, either power, or legitimacy or urgency. For example, for many

organisations the environment may be such a stakeholder. It has legitimacy, as it is affected by the decisions of the organisation, but may not have power or urgency.

Expectant stakeholders have two or three attributes. For example, the government may have power and urgency, but may not have a high level of legitimacy.

Salient stakeholders have the strongest claim, and will be most important to the organisation. For example, unions have high power, high legitimacy and high urgency. However, it could be said that shareholders in this case are also salient stakeholders, which may help to explain the deadlock between management and labour regarding the remuneration claims of the union.

g) Conduct an analysis of stakeholder salience and make recommendations based on your analysis. To assist managers, the stakeholder salience model can be used for prioritising stakeholder claims based on their relative importance. The stakeholder salience model includes three determining factors, namely stakeholder power, stakeholder legitimacy and stakeholder urgency. These factors are used to categorise stakeholders into 3 broad classes: latent stakeholders, expectant stakeholders and salient stakeholders.It is essential for the organisation to understand the claims of stakeholders and to be aware of the salience of each stakeholder’s claim. For this purpose, in the table below the claim of each stakeholder is stated as an example, and its salience assessed by rating its power, legitimacy and urgency as high (H), moderate (M) and low (L). Higher ratings suggest higher salience (importance) and thus more attention from union management.Table 6.2: Stakeholder salience in the platinum strike: an AMCU perspective

STAKEHOLDER CLAIM POWER LEGITIMACY URGENCY

Union members Higher wages H H H

Non-union employees Right to work L H H

Government Peaceful strike; settlement as soon as possible L M L

Community Peaceful strike; settlement as soon as possible L H H

Union management Higher wages for members L H H

Competing unions Right to work L H H

Political parties Exposure due to affiliation with the union L L L

Shareholders of mines

Settlement as soon as possible at lower wage increase than demanded H H H

Employers Settlement as soon as possible at lower wage increase than demanded H H H

In this analysis it seems that the union members, employers and mine shareholders are the salient stakeholders, suggesting that their claims should enjoy preference. However, since the claims were almost opposites, the result was a deadlock and the longest strike in South African mining history. The community, competing unions and non-union employees are examples of expectant stakeholders. They lack the power to influence AMCU, but have legitimate and urgent claims which were evident in the economic devastation that followed the strike in the Rustenburg area. Government and political parties are examples of latent stakeholders with relatively little power and control over resources, low legitimacy with regard to their claims and low levels of urgency. Their claims are accordingly the least important to deal with from an AMCU perspective.

h) Explain the importance of ethical business and give examples of what organisations can do to promote it. In strategic management it is important to have a code of conduct that will guide the actions of management and will help the organisation to avoid ethical pitfalls. The corporate governance process attempts to create such a code of conduct.In the final pillar of corporate sustainability we address the issue of ethical business, an essential element of corporate accountability. While everyone can give examples of unethical or ethical business, it is a concept that is quite difficult to define and apply in practice. It is ultimately up to every organisation to define what ethical business means in its context and how it will deal with it. What we do know is that when ethics fail, there may be far-reaching and serious consequences for the organisation and all of its stakeholders.• Guidelines for the ethical behaviour of executives

Be honest in all communications and actions. Ethical executives are, above all, worthy of trust and honesty is the cornerstone of trust.

Maintain personal integrity. Ethical executives earn the trust of others through personal integrity. Integrity refers to a wholeness of character demonstrated by consistency between thoughts, words and actions.

Keep promises and fulfil commitments. Ethical executives can be trusted because they make every reasonable effort to fulfil the letter and spirit of their promises and commitments.

Be loyal within the framework of other ethical principles. Ethical executives justify trust by being loyal to their organisation and the people they work with.

Strive to be fair and just in all dealings. Ethical executives are fundamentally committed to fairness. Demonstrate compassion and a genuine concern for the well-being of others. Treat everyone with respect. Obey the law. Pursue excellence all the time in all things. Ethical executives are conscious of the responsibilities and opportunities of their position of leadership

and seek to be positive ethical role models. Build and protect the organisation’s good reputation and the morale of its employees.

Be accountable. Ethical executives acknowledge and accept personal accountability for the ethical quality of their decisions and omissions.

i) Explain the role of corporate governance in corporate sustainability.Whereas sustainability examines the strategic decisions of an organisation, corporate governance refers to the frameworks provided for governing sustainability. Corporate governance is described as the system by which corporations are directed and controlled, and it performs the following functions: It specifies the distribution of rights and responsibilities among different participants in the corporation. It specifies the rules and procedures for making decisions in corporate affairs. It provides a structure through which corporations set and pursue their objectives, while reflecting the

context of the social, regulatory and market environments. It is a mechanism for monitoring actions, policies and decisions of corporations. It is a mechanism for aligning the interests of different stakeholders.In most countries, corporate governance frameworks have been adopted to provide corporations with specific guidelines on how to implement and manage corporate governance procedures. Ultimately the role of governance frameworks is to provide mechanisms to help corporations to attain sustainability.In SA, the King Code (King III) is widely regarded as a state-of-the-art code for corporate governance. Although some aspects of governance are legislated, the governance guidelines are mostly for voluntary compliance, described as ‘comply or explain’. It provides guidelines on boards and directors, accounting and auditing, risk management, internal auditing, integrated sustainability reporting, compliance and stakeholder relationships, business rescue, fundamental and affected transactions, IT governance, and alternative dispute resolution mechanisms. The Pubic Finance Management Act (PFMA) of 1999 is regulatory framework that regulates the governance of public sector institutions. It is like the King Code for public sector entities, with the difference that it is legislation and thus legally enforceable. The objectives of the PFMA are to:• Modernise the system of financial management in the public sector• Enable public sector managers to manage, but at the same time be held more accountable• Ensure the timely provision of quality information• Eliminate waste and corruption in the use of public assets

j) Evaluate corporate sustainability in a practical setting. How exactly should this be evaluated? Is this in context of sustainable development, corporate social responsibility, stakeholder theory and corporate accountability theory? What should be included in a successful evaluation of corporate sustainability? Please be specificThere is a section in the textbook referring to the evaluation of the sustainability of strategies, but I cannot simply assume that this evaluation also applies to corporate sustainability.

k) Make recommendations on how organisations can improve their sustainability. Sustainability, according to the study material, is the ability of an organisation to survive in the long-term…therefore any recommendations made should then answer to a set measure of what would be ideal. Can you please help with these measures? If we are to assume that this measure is in fact the evaluation of sustainability of strategies, then would recommendations be to improve in order to obtain the following? not harm the physical environment in which the organisation operates contribute positively to the communities in which they operate economic success and contribution of the organisation, typically measured by financial measures such as

profits, return on equity and economic value added strategy implementation processes as well as internal role players such as the board of directors,

management, employee effectiveness, corporate governance, and so on (what is a measure here?) the organisation must, as far as possible, develop strategies that balance the demands of multiple

stakeholders strategies of the organisation are aligned with the internal and external environments, and processes and

capabilities exist to adapt to changes in the environment.Other than instituting policies and procedures, what other recommendations can be made to assist an organisation in obtaining these goals? Please assist with some examples

Specific outcome 7: Examine the various generic competitive business level strategies available to organisations and explain their appropriateness in specific situations. Assessment criteria a) Explain the importance of choosing appropriate business level strategies.

Corporate level strategies essentially deal with the number of products and services that the company will offer and the markets which they will pursue. Business-level, or competitive, strategies consider how to compete successfully in these markets. In other words, these strategies focus on how to position a company within an industry in such a way that it has competitive advantage.There are many variations in business-level strategies, but if one strips away the detail to get to the real substance, the biggest and most significant differences among competitive strategies are reduced to the following:• Whether an organisation’s target market is broad or narrow• Whether an organisation is pursuing a competitive advantage linked to low cost or product differentiation• A combination of the aboveWhen you ask customers why they buy a specific product or service, they will tell you that it is because the product is cheaper than, different from or provides a better value proposition than competing alternative options.

b) Explain the levels of strategy in organisations. The levels and strategies are as follows: corporate level strategies business level strategies functional level or tactical strategies operational level strategiesOperational level strategies are often omitted when the levels of strategy are considered. The four levels of strategy in corporate organisations and the three levels of strategy in single business organisations need to be totally aligned in both these types of organisations for any degree of success.The corporate centre is typically the head office of a multi-business organisation and manages a portfolio of businesses with a view to maximise the value of the portfolio for the benefit of the shareholders. The corporate head office will typically add value to strategic business units (SBUs) by means of specific capabilities or shared corporate services. SBUs are organisational units that exercise control over most of the resources they require to be successful. They have their own set of competitors, and can be internal to the organisation or external. These SBUs, in turn, compete in their respective markets and industries with a view to establishing competitive advantage as a means of creating competitive advantage for their corporate owners. The complexity of strategic choice lies in the alignment between choices and the realities found in the operating environment in which it operates.

c) Distinguish between the different types of business level strategies. Four distinct generic competitive strategy approaches stand out:1. Cost leadership strategy. This strategy involves becoming the lowest cost organisation in a domain of activity

by a significant margin. The strategy will normally target a broad spectrum of buyers. It is important to note that cost leadership does not necessarily imply low price – in fact, having low production cost and low price will result in average returns, and no real competitive advantage.

2. A differentiation strategy. This strategy involves uniqueness along some dimension that is sufficiently valued by consumers to allow a price premium. This strategy may focus on either a broad section of buyers or a narrow buyer segment.

3. A focus strategy. This strategy involves targeting a narrow segment or domain of activity and tailors its products or services to the needs of that specific segment to the exclusion of others.

4. A best cost provider strategy. This hybrid strategy involves giving customers more value for their money by offering upscale product attributes at a lower production cost than rivals.

d) Explain how business level strategies are chosen. These strategies relate to the organisation’s deliberate decisions on how to meet its customers’ needs, how to counter the competitive efforts of its rivals, how to cope with the existing market conditions, and how to sustain or build its competitive advantage. Once an organisation has selected potential strategies, it needs to evaluate these options to choose the most appropriate strategy or combination of strategies.

e) Assess the advantages and disadvantages of each type of business level strategy. Cost leadership strategy:The advantages of cost leadership strategies include the following: an increasing in competitiveness and market share through sustainable cost advantages

protection for the organisation against competition as a result of its durable cost advantage protection against powerful suppliers because of large-scale purchases and the resultant potential of

discounts protection against the power of buyers because of the low-cost advantage and competitive pricing

possibilities durable cost advantages serving as barriers to imitation, barriers to the threat of substitute products and

barriers to the threat of new entrants to the market, which should be evident from analysis of the organisation's competitors

The potential disadvantages of cost leadership strategies include the following: not keeping up with changes in the external environment, for example, where core competencies relate to

and are sensitive to changes in technology which are not recognised not being aware of changing consumer needs and preferences with regard to products and services in the

low-cost market sector that could seriously affect competitive market position not being aware of industry dynamics, changing industry competitive forces, and the actions of competitors

as far as imitating, or even worse, improving on an organisation's low-cost core competencies, is concerned − the so-called "curse of complacency".

Differentiation strategy:The advantages of differentiation strategies include the following: They could safeguard an organisation against competition as a result of brand loyalty. They could enhance profit margins by slightly higher pricing than their competitors. Powerful suppliers are rarely a problem. Differentiators are unlikely to experience problems with powerful buyers. Threats of substitute products really depend on competitors' products to meet or exceed customer needs

before customers would be willing to switch products. Effective differentiation and brand loyalty could act as barriers to entry.The disadvantages of differentiation strategies: They basically relate to the organisation's inability to maintain uniqueness from a customer perspective −

not fully responding to the durability challenge of competitive advantage. Another danger stems from the design or physical features of a product, which are much easier to imitate

than uniqueness, which stems from intangible sources like innovation, quality of service, reliability, brand and prestige.

Focus low-cost leadership and differentiation strategies:The advantages of focus strategies include the following: protection from competitive rivals owing to the uniqueness of product(s) or service(s) power over buyers because of significant uniqueness and exclusivity passing supplier price increases on to customers customer loyalty as a protection against substitute products as well as new entrantsThe disadvantages of focus strategies include the following: high production costs, basically because of the inability to realise economies of scale not being aware of changing technology and consumer preferences not being able to effectively ward off an attack by rival differentiatorsBest-cost provider strategy:The advantages of a best-cost provider strategy are seen to essentially stem from the implications of Porter's five forces model for industry analysis. To recap, the five forces are threats from competitors, powerful suppliers, powerful buyers, and the threat of substitute products and new entrants. An organisation that is a cost leader is protected from industry competitors by its cost advantage, and is relatively safe as long as it can maintain this advantage because low prices are important for consumers. Differentiation strategies will be successful when the variety of products offered meets customer needs better than those of competitors in a sustainable way. As stated above, the distinguishing feature of a best-cost provider strategy is that it uniquely combines low cost and differentiation, while maintaining quality and providing good value at a reasonable price compared to competitors.The disadvantages of a hybrid best-cost provider could result from not being aware of a changing competitive industry environment, and the risk that the cost leadership and/or differentiation features that underlie this strategy do not measure up to market expectations, leaving this strategy "stuck in the middle", and therefore uncompetitive.

f) Explain how business level strategies are

I don’t understand this question. What exactly does this “how it is” relate to? Are you asking to explain suitability, acceptability and feasibility? Please be specific