I.

NATURE AND SIGNIFICANCE OF BUSINESS STRATEGY

1. Nature and Significance of Strategy

Strategy is a plan, choice or decision used to guide a company to greater profitability or success.
Business context: objective is the generation of profit.
Developing a strategy
Where is the org? (situational analysis) -> Where does the org wish to go? (objectives and strategic
choices) -> how does it get there? (strategic implementation)

2. Strategic Choices/Alternatives

Strategic Choices
No Change/Do ● When a firm is satisfied with its current strategy and sees no need/justification to
Nothing Strategy change it
● Success is being achieved from current strategies
● Continuation of the existing strategy, because a change of direction when all is well
might be retrogressive

Concentration/ ● Seeking progress by directing resources towards continued and profitable growth
Specialization/ of a “single” product/market/technology
Single Business ● This is perceived to be more beneficial than spreading resources across many
Strategy products, markets or processes

Market ● This strategy involves seeking progress by extending into new markets that are not
Development served or developing new uses for existing products
Strategy

Product ● This involves substantial modification or additions to present products in order to

Development increase their market penetration within existing customer groups.
Strategy ● It is intended to prolong or extend the life cycle of an existing product. This provides a
firm the opportunity to make money over a longer period.

Innovation Strategy ● It involves replacing existing products with new ones as opposed to modifying them.
● Innovation provides growth by retaining and increasing market share, revenues,
growth and profit.

Strategic ● This means allowing any of a company's functions to be performed by an

Outsourcing independent specialist company that can perform a function more competently.
● The principal reason for outsourcing is that a company may not have the competence
to perform a function to be outsourced, and it may thus be uneconomical for a
company to carry out the function. E.g. cleaning, security and subcontracting.
Strategic in Competitive Industries
● Competition means rivalry among participants for market share/profit.
● Competition is consequently a threat to the profitability of a firm.
● A competitive strategy gives a competitive advantage over a rival.

Market Focus ● This strategy means deciding on a market segment that offers a firm a competitive
Strategy advantage over its rivals. Serve a targeted market better than its rivals.
● Market Segment: set of people who share a similar need for a particular product with
a larger population.
● Examples: Income, demand, location

Product ● This strategy involves obtaining a competitive advantage over rivals by making,
Differentiation creating, and selling a product in a way that satisfies customers differently from and
Strategy better than rivals. The ai is to make a product stand out among rival products.
● Differentiation: Innovation, Quality, Brand, Customer Service

Low-Cost ● This strategy means that a company will have a competitive advantage of a lower
Strategy price for its product if it is able to lower its cost structure (production costs) and hence
sell its product at a lower price than its rivals.
Competitive Advantage
● Where firms charge similar prices for their products: A company with a lower cost
structure will be more profitable than its competitors because of its lower costs.
● Where a company offers its product at a lower price: A company with a lower cost
structure can attract customers away from its rivals and still sustain its operations.
Strategic in Declining Industries
Many industries experience, sooner or later, a decline, whereby the size of the total market starts to
contract.
● The decline of a market can be attributed to many causes, such as:
● Technological changes
● Emergence of substitutes
● Shifts in tastes and preferences
● Falling incomes.
Leadership Strategy ● This strategy aims at growing in a declining industry by picking up the market share
of companies that are leaving the industry.
This strategy is only possible when:
● A company has distinctive strengths that allow it to capture the remaining share and
● The rate of decline is slow, and intensity of competition is not severe.

Niche Strategy ● In a decline, it is possible that the rate of decline is not uniform and that there exist
pockets of the market where demand is stable or declining slowly.
● The niche strategy calls for a company to focus and exploit the opportunity in such
markets. This strategy is appropriate when a company has the strength to exploit
such pockets of demand.

Harvest Strategy ● This is used when a company wishes to get out but would like in the process to
optimize cash flow.
It involves repositioning and consolidating its position by:
● Cutting off all new investments
● Reducing costs wherever possible (retrenchment).
● seeking survival by concentrating on core activities and/or on those activities in
which the company has a distinctive competence.

Voluntary This involves ceasing operations in the current industry in part or in full. It can take any of the
Liquidation/Exit following measures:
● Sell business in piecemeal to different buyers
● Sell the business in its entirety
● Auction off assets

External Growth Strategies

Acquisition, May be due to the following: other firm has an opportunity, is a threat or has a
Merger or Joint strength/capability
Venture These involve the purchase of, or entering an arrangement with, or forming joint ventures with
firms that are behind or ahead in a firm’s value-added chain.
● Backward integration: This is where a firm merges with, acquires or forms a joint
 venture with a firm that supplies it with key raw materials, e.g., a butcher acquiring a
ranch
● Forward integration: This is where a firm merges with, acquires or forms a joint venture
with a firm that has retailing facilities.
● Horizontal integration: This is where a firm acquires, merges with, of forms a joint
venture with a firm which is a rival.
●

Diversification ● This involves adding new businesses to the company that are distinct from its core
business.
● For example, UNILUS can diversify by going into the hospitality business to its core
business of disseminating knowledge.
It is triggered by the desire for more profit:
● When there is an opportunity in a different industry
● When there is a threat to profit in the current line of business.

3. Strategies and Functions of the CEO

● The primary responsibility of a CEO is to deliver success.
● Strategic management is about guiding a firm to success by steering the total enterprise toward
success.
● It follows that strategic management falls within the functions of a CEO

Supervising ● The CEO must achieve results in the present against the continuously rising
Current Operations expectations of stakeholders. The stakeholders include: Shareholder (s)/Owners of
equity, Strategic partners, Suppliers/buyers, Employees, Government, Society at large
● Must attend to people who want to see them. Receive reports on the business
● Know and physically see all parts of the operations
● Must be continuously informed: current performance, emerging opportunities, any
threats/crises, learn from others in the industry

Preside over ● He/she must plan for success in the future against known and unknown odds and
policy-making determine where he wants the firm to be in three, five or ten years from now.
decisions ● This means having a vision (of success) and working with and inspiring others, to bring
success to the organization.

Mobilize resources ● Mobilise resources, develop an organization structure and deploy its people in such a
way as to permit both business success and individual satisfaction and expression
● He must search for and bring to the organization resources and competences that will
enable the organization to achieve success
● He must design systems which encourage performance and design systems which
discourage nonperformance.
● He must make painful decisions to remove or reassign people
● He must make his company attractive to recruits; and
● He must penalize as well as reward in the interest of progress.

Make Distinctive ● excelling in some technical or social way

Personal ● demonstrating that he/she deserves to be in the position he occupies
Contribution ● participating in matters of concern to his community, industry and trade association
and the nation at large
● being a good family man/woman and be a role model to all and sundry.
 II. FORMULATION OF STRATEGY

The formulation of strategy comprises the following variables:

● The analysis of the company’s external environment.
● Determination of a company’s strategic capability (internal environment).
● Influence of personal values and aspirations of decision makers.
● Obligation to Society
Strategy is a framework a firm may employ to achieve success or higher profitability. This framework consists of:
1. Determining what a firm might do arising from an identification of opportunities and risks in its external environment.
2. Second, the framework consists of a firm determining it can prosecute a possible course of action.
3. Third, a firm must decide on what it wants to do based on the personal values and aspirations of the stakeholders.
4. Fourth, a firm must decide on what it should do as a matter of its responsibility to advancing public interest
1. The External Environment
● An effective strategy begins by identifying opportunities and risks in a company’s external environment.
● A company’s ‘external environment’ refers to events or factors, outside a firm’s control, which nevertheless affect a firm’s success.
● Strategic choice thus refers to a company’s response to an opportunity or threat in its external environment
Type of Environment -> Identification of Opportunity/Threat -> Response to Opportunity/Threat (Strategy)
Environment Notes

Globalization Globalization refers to the interaction between countries. Key Drivers of Globalization:
(Opportunity & Threat) a. Convergence of needs/preferences: countries trade with each other when needs are similar. Firm satisfies needs in home
markets then progresses to satisfy similar needs in other countries
b. Route to Growth: Direct route to growth as no country can exist on its own (e.g. zambia needs to export copper)
c. Economies of Scale: Globalization means access to a wider market, and therefore an increase in volume goods
produced/marketed. This results in economies of scale when costs are spread over a larger volume leading to lower cost
per unit and greater efficiency.
d. Easing of political tensions: Economic cooperation between nations usually follows political tolerance between nations
Market growth opportunities: Globalization creates an opportunity of doing business in other markets,hence increasing the
prospect of increased profitability.
Strategy: market development (e.g. copper abroad)
The threat of competition: Globalization necessarily implies that nations must open their doors to each other, which means letting
in competition and hence reducing the profit due to a firm. E.g ZM textile industry
Strategy: see any competitive strategies

Technological ● Refers to innovations and developments that are generated through the application of science and technology. (e.g.
(Opportunity & Threat) inventions, product development, automation, mechanization)
● Technological advances can be a threat to the established way of doing business when established firms fail to modernize
their services.
Examples: Impact of Technological Advances
 a. Transport: Increased transportation capability. Technological advances in transportation have resulted in increased
masterly of greater distances in less time and at less cost
Strategy: Market development - These developments have facilitated market development, enabling firms to acquire more
customers and hence attain higher levels of profitability/success.
b. Energy: Technological developments in energy have boosted masterly of energy through the generation of energy of
greater magnitudes and intensity, and hence facilitating higher level of production.
Strategy: Product innovation, Product development
c. Ability to extend and control life and serviceability: Some technological advances have led to longer life for living things,
especially that of perishable foods and other organic products, or reduced deterioration of physical goods
Strategy: Market Development, Product development
d. Increased ability to alter characteristics of materials: the development of new properties from old products, thus giving
products a new or extended lease of life such as in cases of welding and recycling
Strategy: Product Development, Innovation, Market Development
e. Mechanization: the process of substituting human labour with machines
Strategy: Product innovation, Product development, Market Development

Competition Perspectives of Competition

(Threat) *******
a. Industry rivalry
● Industry is a group of firms that offer a product or class of products for which there is a high cross-elasticity of demand
(competition between supermarkets)
● Industry rivalry intensifies when:
○ Participants are numerous, and are of about equal size and power
○ industry growth is slow, stagnant or declining, thus intensifying fight for market share
○ the product is homogeneous, this creates a buyer’s market
○ the product is perishable, thus increasing pressure to sell a product within a product’s life.
○ fixed costs are high, this exerts pressure on a firm to generate enough sales to cover the fixed costs
○ there are no exit barriers: An exit by a participant offers an opportunity to the remaining firms to pick up the share
left by firms that have exited the market.
Strategy
● Product Differentiation: achieves a competitive advantage over its rivals by making a different and better product through:
○ Product: designs, features or performance (durability, brand name) of product
○ Price: Lower price to attract customers/penetrate market
○ Place: capitalizing on time and place product is delivered
○ Promotion: Print/electronic media, messaging, responsiveness to customers
● Market Focus: offering a product to a market segment in which it has an advantage over its rivals
● Low Cost: firm achieves a competitive advantage over its rival by producing products at a lower cost, which translates into
offering a product at a lower price than its rivals. Lower cost through economies of scale, cheaper sources of supply, more
advanced technology
*********
b. The market perspective
● Competition is market-driven, that is, competition is based on the choice a consumer makes by electing NOT to buy a
product. A choice NOT to buy product X effectively a denies product X of profit (e.g. decision NOT to smoke/drink/diet)
● The failure to recognize this threat came to be known as marketing myopia
Strategy
● Innovation Strategy by being a step ahead of a customer by anticipating needs of a customer
***********
c. Porter’s Model of Competitive Forces (5 FORCES)
1) Threat of New Entrants
● Risk to profitability of established firms attributed to companies that are not currently in the industry but have the capability
to enter the industry if they should choose to do so.
● Potential entrants to an industry pose a threat by seeking to gain market share through better valued or lower priced
products when and if they eventually decide to enter an industry.
Strategies
● Economies of scale (offering customers a lower price cause established firms are better placed to achieve economies of Sc)
● Denying entrant access to the market: firm has good retention policy for customers, or is more familiar with the market than
entrant
● Expected retaliation: firm may retaliate by improving quality of product, undercutting competitors price, investing in more
advertising and strengthening relationship with customers/distributor
● Lobbying govt for protection: restrict foreign participation, raise bar for new investments, restrictive tax/profit remittance
regulations
● Enhancing brand loyalty: Customer loyalty to an existing brand will discourage switching to the newcomer and compel
new entrant to spend heavily on advertising, customer service and product differentiation to attract customer away from
established firms

2) Bargaining Power of Suppliers

● Bargaining power of a supplier refers to the relative power of a supplier over a buyer with respect to: Raising prices of inputs
or Providing poor quality inputs/services
Conditions under which a supplier’s Bargaining Power over a buyer will intensify:
● Product/service – if the input supplied is unique
● Supplier – if there is one or a few suppliers
● Buyers – if the buyers are numerous and fragmented
● Profitability of supplier – if the profitability of a supplier is not under threat from any retaliatory action a buyer may take.
Strategies
● Search for an alternative supplier/substitute input: e.g. switch from ZESCO (powerful supplier) to solar
● Enter suppliers business (merger, acquisition, joint venture).e.g. Zambeef

3) Bargaining Power of Buyers

 ● The bargaining power of a buyer refers to the relative power of a buyer over its suppliers with respect to the following: the
setting of price for the supplies and the quality of the products. E.g FRA has bargaining power over farmers
Conditions under which a buyer will have bargaining power over a supplier:
● Product – if the product is standard rather than unique
● Buyer – if there is one or a few buyers
● Suppliers – if suppliers are numerous and fragmented
● Profitability of buyer – if the profitability of a buyer is not threatened by any action a supplier may take.
Strategies
● Market development: Buyers become powerful when they are few, concentrated and buy in large volumes. By looking for
other buyers, a firm becomes less dependent on a single buyer
● Enhance Brand of Product: Make the product unique so that buyers will not be inclined to look for other suppliers. A buyer
becomes powerful if a product is standard or undifferentiated. A buyer’s freedom of choice can be curtailed if a supplier’s
product is unique.
● Increase switching costs to the buyer: Create a situation where a buyer will find it difficult to switch to another supplier. E.g.
creating a strong working relationship with a buyer OR suppliers forming a cooperative and acting in unison.

4) Power of Substitutes (Market Perspective)

Substitutes are products of different industries or businesses that satisfy the same customer needs. Forms of substitution
● Product for Product Substitution (mealie meal, rice, potatoes
● Generic Substitution, clothing vs food (compete for disposable income of a household
● Doing without (avoiding smoking/drinking/going on diet). Reduce purchases of these products
Strategies
● Innovative/Product development: Substitutes are products from other industries that satisfy the same need. An effective
response to the threat of substitutes is to anticipate needs of customers through Innovation/product development by
embarking on diligent and constant research and development

5) The threat of industry rivalry

SEE INDUSTRY RIVALRY NOTES

Political ● A political environment refers to activities carried out by individuals elected to public office (President, VP, MPs, Mayors,
Councilors)
● Pervasive nature of politics: affects all areas of life: Agriculture, education, health, commerce, etc.
● Other areas of governance
○ Legislature: enact laws which businesses operate (investment and development, trading, taxation)
○ Judiciary: Administration of laws and arbitration of disputes between businesses and other parties
● Government role in economy
○ Ownership and participation: may own and run businesses
○ Regulator: how business will be conducted (nature and scope of investment, competition, production and marketing
- advertising, price controls)
 ○ Client: Government custom is large and lucrative and is a big opportunity to profit. This is attested by the prevalence
of bribery and corruption in government projects
● Nationalism: Refers to the belief among nationals of a country that they are better than, and/or different from, nationals of
other countries
○ Opportunity: patriotism – the love and pride of citizens for their country resulting in preference for domestically
produced goods over goods of foreign origin
○ Threat: when it is a barrier to imports from other countries
● Political Stability: This refers to the extent to which the environment is conducive to business. Political instability has a
negative impact on investment or business operations
● Political Sovereignty: refers to a nation’s desire to assert its authority and complete power over foreign businesses which
operate within its borders. Any negativity towards foreign firms.
Strategies
● form joint ventures with host government or nationals
● hold back in home countries critical elements in production or process technology
● open political alliance with government through, friendships, donations, invitations to prominent citizens to sit on
board

Legal This comprises a nation’s laws and regulations pertaining to business.

● At national level: These are laws whose jurisdiction is confined to the country. For example: License and investment laws,
Trading regulations, Taxes, Regulations with respect to production, consumption, or advertising
● At international level: These are laws whose jurisdiction applies to two or more countries. They originate from treaties,
conventions or agreements between concerned countries. Examples of international laws are patents and trademarks
The strategic impact of these laws is that they give patent or trademark holder a monopoly.

Cultural/Social Cultural/social environment refers to a system of shared ideology, beliefs, or values by members of a group.
Dimensions of Organizational Culture
a. Material Culture: refers to a way of life of a society characterized by a desire for materialism, such as possession of
physical things, tools, or skills. Rich vs Poor, Developed vs. Underdeveloped
Impact of Material Culture on Strategy
● Materialism is the longing for and possession of material things.
● When a society craves material things, it provides an opportunity for a company to satisfy what is longed for.
● Conversely, the absence of materialism in a community denies a firm an opportunity to satisfy a need and make money.

b. Language: refers to a way members of a community communicate with each other.

Impact of Language on Strategy
It can be an opportunity when it facilitates interaction with a prospective market; a language barrier inhibits an exchange between a
firm and its market
c. Aesthetics: refers to a community’s conceptualization of beauty and good taste (art, product design, music, dancing).
Demand for a product is premised on a product being perceived to be in good taste
 Impact of Aesthetics on Strategy
Market appeal of product design, colour, brandname, music.
d. Education: pursuit of knowledge through formal education. It is a value shared by members of a community. It involves
transmitting of knowledge from one member to another
Impact of Aesthetics on Strategy
● Opportunity: It facilitates success
○ Economic development/success is a function of education. Nations that are poor in education characteristically also
lag behind in economic progress.
○ Production/innovation is triggered by the application of Research and Development
○ Consumption/use is influenced by education. What is used or consumed is learnt from others: Food, Tools or
equipment, computers, drugs
● Threat: Retards progress. Consumption is based on knowledge –people consume what they know and will not consume
what they don’t know.

e. Religion: Religion is a belief in the spiritual. It creates conformity to a doctrine; in turn conformity can be a threat to the
success (profit) of a firm when a doctrine inhibits consumption or use of a product
Impact of Religious Beliefs on Strategy
● Animism: religion and philosophy associated with primitive people (traditional witchcraft, ancestor worship)
○ Tends to promote a traditionalist and conservative attitude to innovation
● Hinduism: religion largely prevalent in India. Based on a caste system in which heredity predetermines a person’s specific
occupational and social roles.
○ It promotes the veneration of the cow and It restricts the role of women
● Islam: It is based on the Sharia - a body of Islamic doctrine
○ Forbids commercialization of pork, alcohol and western style of dress
○ Restricts the role of women, such as in promoting goods and services, or even in open driving
● Shinto: This is a national religion of Japan.
○ It creates a sense of nationalism among the Japanese by inducing love for and pride in Japan and Japanese-made
products
● Christianity: Many Christian doctrines are also renowned for prescribing what should be consumed/ used in the name of
God or salvation and thus indirectly creating a threat to business
○ Catholicism- Church laws prescribe certain forms of abstinence or forbids the use of some products. For instance,
the Church prohibits use of contraceptives
○ SDA: Pork products and certain types of fish
○ JW: laying of wreath

Economic a. Gross National Product: a measure of economic performance of a country, it gives an indication of the material well being
of a country.
b. Level of Economic development: refers to the degree (stage)of economic wellbeing of a country
i. Developing Country: low level of afflucence. Revenue is earned mostly from exporting the endowed resource. The
 manufacturing sector is usually undeveloped and characteristically a country produces simple/elementary goods
and services
Opportunities
● There is high potential in many sectors of the economy, notably in agriculture and in the extractive sectors.
● There is need for capital goods to develop the extractive industries.
● There is also relatively high consumption of consumer goods.
● The economy is import dependent.
Threats
● Low income and high levels of poverty.
● A large pool of unskilled labour.
● High unemployment levels
● Poor infrastructure
● High levels of Inflation
● Weak and unstable currency, Monetary instability
ii. Developed Economies: A highly developed manufacturing and service sector. Exporters of manufactured and
consumer goods
iii. Middle-Income Economicies: South Africa, Egypt
● Emerging manufacturing sector
● Growing export sector for manufactured goods
● Growing import sector – inputs of steel, raw materials, and heavy machinery to sustain manufacturing
● A growing service sector to service the manufacturing sector
● Rising middle class with wants for all sorts of goods, a rich class which feeds and gives impetus to the
manufacturing sector
c. Market Size and Growth Rate: Demand is a function of market size and the market growth rate.
Opportunity: A high population growth rate can be an opportunity when it translates into a potential and vibrant market.
Risk: However, a high population growth rate can be a threat if it places a strain on resources and inhibits growth and economic
development.
d. Distribution of Income: Income is a determinant of demand. However, rarely is income evenly distributed. A viable market
depends not only on population size but also on people with income and a willingness to spend income. In areas where
there are variations in income, market segmentation can be used as a guide in exploiting economically viable sections of the
population (e.g. urban vs. rural area)
e. Nature of the economy
i. Physical Features: comprising natural endowments, such as, minerals, fertile land as opposed to a desert, forests
and timber
ii. Climate: can create opportunities (tourism, agriculture, ice-cream business)
iii. Topography: refers to surface features such as land, rivers, mountains
iv. Infrastructure: transportation and communication
 2. A Company’s Strategic Capability

The capability of an organization is its demonstrated or potential ability to accomplish, in the face of
opportunity or threat, whatever it sets out to do.
Strategic capability (strength/weakness) involves:
● Resources possessed by a firm
● Competences of the firm
Resource Audit ● What is the nature of the resource(s) available? (e.g. finance/human
resources,equipment, skills)
● What is the inherent strength or weakness of these resources?
Types of Resources
a. Physical Resources (plant/factory, machinery, equipment, land)
b. Human Resources (# of people, skills, adaptability of skills)
c. Financial Resources (capital, debt, managing cash)
d. Intangibles assets (name, reputation, image, network of distributors, suppliers,
customers

Forms/Indicators ● Quality: A competence based on quality is the ability to match or exceed expectations
of Distinctive of a customer. Design, features, performance, durability, reliability, style. Example:
Competence mercedez benz
● Innovation: Ability to create new products or processes
● Product innovation is the development of products that are new to the world or have
attributes which are new and different from existing products.
● Process innovation refers to the development of a new procedures of producing
products and/or delivering them to customers (deliver/offer amazing customer service,
repairs and maintenance, warranties and guarantees)

Techniques for a. Value Added Analysis: This refers to the ability of a firm to create benefits(V) for a
Analyzing Strategic customer or to reduce costs (Price) to a customer, or to create benefits and reduce
Capability costs
○ Consumer Surplus = Benefits to Customer (Cost, V) - Price (P)
○ Value Added: Ability of a firm to increase benefits to a customer, reduce the
price to a customer, or a combination of both. This can be done by increasing
the benefits (make product attractive, superior design, quality, functionality),
lowering P or both.

b. Efficiency: the ability to produce some given output with less inputs(sacrifice). E =
outputs / inputs. The lower or fewer inputs produce a given output, the more efficient
(competent) a company is. Measure of efficiency:
○ Employee Productivity: output per employee
○ Economies of Scale: ratio of costs to volume or cost per unit in
production/distribution/advertising/sales promotion

c. Comparison with Industry Norms: the ability to make or deliver something in a

better way than other industry participants. It is measured by a firm’s relative share of
the total market in comparison with its rivals.

d. Benchmarking: This measures a firm’s performance against its own standard without
having to compare itself to others.

e. Financial Analysis: Assess company’s financial position. Competence of the financial

performance can be indicated by a number of ratios calculated from a company’s
 balance sheet and income statement:
● Profit Margin: Return from use of assets
○ Gross Profit Margin = sales revenue - cost of goods sold / sales revenue
○ Net profit Margin = net income/sales revenue
○ Return on Total Assets: net income available to common stakeholders/total
assets OR net income available to common stockholders/stockholder’s equity
● Liquidity Ratios: A company’s liquidity is a measure of its ability to meet short-term
obligations. An asset is deemed liquid if it can be readily converted into cash
○ Current Ratio = Current Assets / Current Liabilities
○ Quick Ratio = (Current Assets - Inventory) / Current Liabilities
● Activity Ratios: indicate how effectively a company is managing its assets
○ Inventory Turnover = cost of goods sold / average inventory
○ Days Sales Outstanding/Average collection Period (DSO) = Accounts
Receivable/ (Total Sales/360). This ratio is the average time a company has
to wait to receive its cash after making a sale
● Leverage Ratios: This measures the extent to which borrowed funds have been used
to finance a company’s investment
○ Debts-to-Assets Ratio = Total Debt / Total Assets
○ Debt-to-Equity = Total Debt / Total Equity
● Cash Flow: This is simply cash received minus cash distributed. A positive cash flow
occurs when cash inflow exceeds cash outflow. This enables a company to fund future
investments without having to borrow money from bankers or investors. A weak or
negative cash flow means that a company must turn to external sources to fund future
investments

f. SWOT Analysis (Product Portfolio Analysis

Relative Market Share

High (Strength) Low (Weakness)

Market Growth Rate High (Opportunity) Star Question Mark

Low (Threat) Cash Cow Dog

● STAR (High market growth rate, Strong relative market share): The company
should use its strong relative market share to grow and invest in the opportunity
presented by the high rate of market growth. Strategy: Growth/Investment
● QUESTION MARK (High market growth rate, weake relative market share): Firm is
in a weak position. The company must target growth but first seek to gain a favourable
market share. Strategy: Cash Mobilization THEN Growth/Investment
● CASH COW (Low rate of market growth, strong relative market share): Firm is a
market leader, it enjoys a relative larger market share and higher profit margins but
must look for an opportunity to use its resources. This can be achieved through market
diversification. Strategy: Market Diversification
● DOG (Low rate of market growth, weak relative market share: An appropriate
strategy is to quit the market or go into voluntary liquidation. Strategy: Exit/Liquidation
 3. Management Orientation

Examines how strategy formulation is influenced by the personal values and aspirations of
Management those charged with formulating strategy, that is, shareholders, the Board of Directors, the Chief
Orientation: Executive and senior managers other than the CEO.
Personal Values ● A value is thus distinctive or characteristic of the individual or group
and Aspirations of Types of Value Orientations
Senior Managers 1. Theoretical orientation – characterized by curiosity or intellectual interest, empirical,
critical, and rational approach to issues
2. Economic orientation – characterized by a materialistic approach to life, such as
interest in the creation and use of wealth. Interest in matters of production and
consumption
3. Aesthetic orientation – characterized by what is in good/bad taste, or beautiful,
interest in works of art, or design. Interest in symmetry, order or harmony.
4. Social orientation – characterized by love and concern for the welfare of people,
warmth of human relationships.
5. Political orientation – characterized by love for power. Desire to influence and be
recognized.
6. Religious orientation – characterized by fascination with mystery, and interest in the
supernatural. Interest in moral and ethical issues.
Stakeholders and their Value Orientations
1. Shareholders (own a firm) and Strategic Partners (provide critical resources):
individuals who have an equity interest in the firm. Their value orientation is economic,
based on a desire for an economic return on their investment.
2. Board of Directors: are Members of the Board are representatives of shareholders/
strategic partners. Their value orientation parallels that of their principals. It is at the
board level, that strategic decisions are presented, discussed, and approved
3. The Chief Executive Officer (CEO): The CEO is responsible for the day-to-day
running of the firm. He/she is the chief strategist and guides the Board in the selection,
evaluation and implementation of strategy. He/she has the greatest latitude in the
choice of strategy subject to approval by the board.
4. Senior (Top) Management: These are the functional managers who directly assist the
CEO in initiating and implementation of strategy

4. Corporate Social Responsibility

Obligation to Corporate Social Responsibility is the intelligent and objective concern by a firm for the
Society (Corporate welfare of society. This concern has two aspects:
Social ● Using profit to address issues of concern to society
Responsibility) ● Restraint from behaviour and activities that are harmful to society, no matter how
profitable such behaviour or activities might be
● CSR is not intended to advance profit for a firm. On the contrary, it is intended to
advance the wellbeing of society using its profit to provide assistance to a community
or forfeiting profit if a strategy will be harmful to society.

Areas of Concern ● Contributing to the industrialization/development of a country instead of merely

exploiting a country’s resources
● Sharing ownership instead of insisting on sole ownership
● In a joint venture, sharing profits in terms not proportionate to the actual contribution
of the other partner
● Training nationals for skilled jobs so that they develop their country
● Meeting material and social needs of society.
 ● Cooperation in matters of taxes, bribery or corruption.
● Assistance toward occasional disasters such as floods, earthquakes, drought
● Mitigation/alleviating negative environmental consequences of manufacturing
processes
● Alleviating and control of harm to the environment arising from disposable products.
○ Providing waste bins for the disposable bottles, plastic bags and empty
packages
○ Assistance toward cleaning the environment
● Promotion of underprivileged groups.
○ Employment – empowering through offer of employment
○ Providing material assistance
● Avoiding investments which disrupt existing cultures and traditions of a community
○ Development of commercial farms in land occupied by villagers
○ Development of Industrial plants which displace settlements
● The offer of needed social amenities to the community: Schools, Clinics, Sport
● Contribution toward the welfare of employees
○ Leave to undertake unrelated activities, e.g., church work
○ Investments in recreational facilities
● Construction and/ or maintenance of infrastructure for the immediate benefit to society:
road, schools, health facilities
● Offer of employment opportunities to the local community
● The freedom afforded to the individual employee to participate in social causes beyond
the corporate effort: Church, Community programs, Sports, Service in Government

CSR and Strategy Relationship between CSR and Strategy

● Business Strategy guides a company to greater profitability/success. Hence, its
primary concern economic success. CSR is concerned with advancing the welfare of
society. Hence its primary concern is social success.
● CSR (Contribution to the welfare of society) depends on an effective strategy which
generates the profit which is used to advance the welfare of society.
The Case Against CSR (Economic Isolationist Argument)
● That the primary purpose of business is economic, that is, to maximize revenue.
○ Deviation from this principle is self-defeating and can lead to economic
inefficiency.
○ Moreover, the pursuit of the economic motive results in good for society as a
whole.
● The undesirable social consequences of business activity should be left to government
to regulate or correct.
● Business should however live up to its legal obligations, such as paying taxes or bills,
keeping honest expense accounts and labelling and weighing its products accurately.
The pursuit of profit may in any case also benefit society
● Adam Smith in his famed book, Wealth of Nations, argued that under perfect
competition, as characterized by atomized markets, entrepreneurs seek to make profit
by satisfying the needs of customers.By seeking profit for themselves they
inadvertently satisfy the needs of the public.
The Case for Involvement in CSR (The Social Interventionist)
● Inadequacy of government regulation. This is because government regulation is
○ Not never specific: Laws are invariably not specific enough as they may have
loopholes;
○ Not knowledgeable: Laws do not cover every single case of abuse; there are
grey areas that are not addressed
○ Not timely: Laws come after the abuse and are never enacted on time (made
after the fact most times)
● Wanton irresponsibility. It is considered unethical and irresponsible for a firm to
deliberately and knowingly engage in activities that are harmful to the public just
 because of profit.
● Government lacks capability to address the multitude of social concerns.
Governments, especially of developing nations, do not have capability to solve the vast
and diverse array of social and economic problems which beset society
● The trend toward care for the less fortunate. It is therefore not asking too much to
expect f modern corporations not to confine themselves to the narrow pursuit of
self-interest and to ignore social programs which improve the welfare of the community
in which they make profit.
● Cooperation rather than confrontation. It is in the of firms to avoid a possible backlash
which may eventually arise when firms are perceived uncaring in the face of intractable
problems which face the public

III. IMPLEMENTATION OF STRATEGY

● An Organizational structure
● Systems for influencing performance
● Organizational politics
● Organizational culture
● Management development
● Leadership

1. An Organization Structure and (2) Systems for Influencing Performance

Nature and ● An organizational structure is a mechanism for achieving success: it refers to the way
Significance of an people and tasks are arranged to facilitate the accomplishment of purpose.
Org Structure ● It involves the management of people so that they work toward the accomplishment of
an objective.

Influence of Org a. Purpose

Structure b. People
c. Tasks (key activities carried out in systematic manner to achieve objectives)
d. Success
E.g. Political Power.
Purpose: win power to rule, People: members or supporters, Tasks: draw program to win
elections, success: achieve results by winning election.

Designing an 1. Determine a company’s distinctive purpose/strategy: it is important to define the

Organizational objective necessitating bringing people together
Structure 2. Identify Tasks to be performed: Once the strategy or purpose is clearly defined and
understood, the required tasks to accomplish the objective must be identified
3. Assign tasks to individuals/groups: Once the appropriate tasks are identified, they
must be assigned to individual or groups to be carried out. Ways of assigning tasks:
○ Functional organizational structure: people are assigned to functions to be
performed
○ Product Organizational Structure: people are assigned to a product that is to
be produced/marketed
○ Customer/Market/Geographic Organizational structure: In this structure people
are assigned to customer, market or region to be served
4. Providing for coordination of inherent divided responsibility: Assigning work to
individuals or groups implies divided responsibility (assign to functional/product/market
org structure). Ways to achieve coordination:
 ○ Supervision and control
○ Committees
○ Project Approach
5. Designing an Information System: Communication is intended to provide members
with information needed to perform their respective tasks and create synergy with the
work of others.
○ Awareness information (understand one and other’s work)
○ Progress information
○ Red-flag information (threats to success)

Additional Related ● Flexibility: An organizational structure should be flexible and be responsive to any
Concepts (Design) changes in strategy, particularly with respect to emerging opportunities or threats
(opportunity to enter new markets, downsize org if loss of opportunity)
● Customization: There is no structure which will be suitable for every strategy.
Accordingly, there is no typical or universal organizational structure which fits all
situations. An organizational structure must be in response to specific circumstances
of a firm or peculiarities of a strategy
● Height and Width of Structure. The height of a structures (tall structure) refers to the
number of hierarchical levels between the top and bottom. The width of a structure (flat
structure) refers to the span of control. Tall structures tend to have narrower spans of
control and flat structures tend to have wider spans of control. Implication on
performance.
○ Tall Structure and Performance. Adv: it allows for easier control because of the
narrower span of control. Disadv.decision making processes become tortuous,
long-winded and ultimately ineffective
○ Flat Structure and Performance: Decision making is likely to be faster and
effective because of the relatively short distance between a subordinate and a
superior. Disadv: Control can be problematic if the span of control is too wide
● Centralization vs. Decentralization:This refers to the location of authority and
control between the top (boss-driven) and at the lower/operational level
(subordinate-driven).
○ Centralisation is when decision - making or authority is at the top
(boss-driven). Adv: facilitates control and allows top managers to remain fully
aware of performance at operational level. Disadv:Centralization may stifle
individual initiative and motivation
○ Decentralization is when decision - making or authority is at lower levels (
subordinates-driven). Adv:Easier and faster response to local conditions.
Disadv: Coordination of performance is relatively more difficult to accomplish

Systems for Systems influence performance by: encouraging behaviour which advances strategy or
Influencing discouraging behaviour which does not advance strategy:
Performance 1. Basic Pay: This is a commonly used system of influencing performance. It is a reward
for satisfactory performance. Guidelines to make it more effective:
○ Align pay to the characteristics of the work to be carried out (nature of work,
familiarity to work, work demands)
○ Nature and number of decisions to be made
○ Responsbility of the job-incumbent for people and property
○ Risks associated with the job
○ Quality of performance
○ Logical relationship of individual bais pay to what is paid to others
○ External Factors (regional difference of cost of living, cost of taxation)
○ Relevant?: Age, Length of service, Potential, Material Needs
2. Monetary Incentives
○ Allowances:These are intended to compensate a worker for any hardship
encountered in the course of work (housing, transport, medical allowance)
 ○Other monetary incentives: profit sharing, stock options, executive bonuses,
pension schemes, savings plans
3. Non-Monetary Incentives
○ satisfaction derived from doing work
○ pride in doing the work
○ sense of accomplishment
○ friendly and honest associates
○ climate for free expression and innovation
○ good/pleasant physical environment

3. Organizational Politics

Definition Organizational politics is human behaviour that has a positive and negative impact on the
implementation of strategy. It refers to behaviour which is illegitimate, that is,
it is not authorised,
it is not the accepted way of behaving or
it is not certified

Types of Political 1. Insurgency Game

Games ● It is played by resisting the established authority, ideology or expertise, by seeking to
effect change outside the established procedure. It can range from a “protest” to an
open rebellion/insurrection
2. Counterinsurgency Game
● This game is played by those with legitimate power who fight insurgency with
illegitimate means against. when subordinates refuse to disclose their identity for fear
of reprisals from their superiors when they comments about their superior/work
situation
3. Sponsorship Game
● This game is played by subordinates to build a power base by invoking a superior in
vain. It involves an individual attaching self to someone with legitimate power, in
authority, or of higher status, by holding out that their behaviour has the support of
their superior when this is not so
4. Alliance-Building Game
● This is played among peers, such as general workers or even line managers. It is
played by a group to build a power base to advance partisan interests at the expense
of the organization
5. Empire-Building Game
● This game is played by the CEO or departmental superiors on select subordinates to
elicit personal loyalty.
6. Expertise Game
● This game involves non-sanctioned use of expertise to build a power base by
exploiting one’s technical skills and knowledge, emphasizing one’s expertise,
uniqueness, criticality or irreplaceability. It is strengthened by keeping one’s skills from
being programmed or by keeping knowledge to self.
7. Line vs. Staff Game
● This is a sibling- like rivalry. It is aimed at showing that one is more important to the
organization than the other. It is characterized by rivalry between:line managers and
advisors, core workers versus support staff, technical staff and non-technical staff
8. Rival Camps Game
● This is played by those in different departments and is intended to merely defeat a
rival
9. Whistle-blowing Game
 ● It is played by an insider, usually a lower participant, to seek change by “blowing the
whistle” on an insider – usually a superior - about what a subordinate perceives to be
questionable or illegal behaviour
10. Young Turks Game
● It is played by a small group of “youngish” people in the organization who are close to
power but not at the centre of power.

Functional and Dysfunctional/Destructive Politics

Dysfunctional ● it is divisive, costly and burns up energies that could be channelled into collective and
Politics cooperative effort
● it results in organizational paralysis, that is, when performance comes to a standstill

Constructive/Functional Politics
● It corrects certain deficiencies in an organization’s legitimate systems of influence
which impair organizational performance.
● It brings about progress even though it may bring conflict with those interested in
maintaining the status quo.
● When it leads to resolution of conflict ultimately and leads to improved cooperation and
better performance
● When it enhances flexibility as opposed to rigidity as might be the case with legitimate
systems of influence:
○ the system of authority defers open discussion to a central hierarchy, and this
is often favoured by those in authority;
○ the system of ideology means deferring to tradition or the accepted way of
doing things
○ the system of expertise gives deference to the expertise or to experience

4. Organizational Culture

● organizational culture is a system of man-made behavioural traits to which members of a society

subscribe and which influences their decisions.

Development of Stage 1: An ideology determines a sense of mission

Culture The root of organizational culture is an ideology
An ideology is a mission - what the organization seeks to achieve over the long term

Stage 2: Development of tradition from ideology

In furtherance of its stated mission, a firm makes decisions and takes actions based on its
ideology.
When these decisions and actions are repeated over time, they reinforce behaviour
Reinforced behaviour in turn translates itself into tradition - a way of doing things

Stage 3: Reinforcement of ideology through identifications

At this stage, the organization is a living system with its own distinct personality and culture.
It is characterized by Membership or identification with the organization. For new members and
existing members.
 5. Management Development

Mana ● Management development is the resharpening of old skills/competences to make them

appropriate for the challenges of the day.

Rationale of Management Development

● The quality or standard of performance will over time decline because the skills
needed to perform required tasks will fall short because the demands of the
organization will grow.
● Additionally, underperformance can arise because individual skills are outgrown by the
dynamics of the organizations
● These developments will necessitate that old skills are re-sharpened or new skills be
acquired by an individual

Critique of Manpower Development

● People are born with business acumen/skills: It is argued that management is not
necessary because some men and women are born with qualities of energy,
shrewdness of judgement, ambition and capacity for responsibility.
○ Counter: Over time it is necessary to acquire knowledge, skills and attitudes
to fill the gap between an identifiable skill and emerging developments which
may render old and existing skills less appropriate
● Experience is the best teacher: Experience refers to improvement of skills which come
with repeated performance of a job. It is the best preparation for a job as opposed to
training, which is done away from the job.
○ Counter: Experience does not provide all round experience. Experience is
certainly relevant if one is going to be doing the same job one has been doing.
Experience alone will not be sufficient when there are new job demands
triggered by advances in technology, the internationalisation of markets, and
the progress of research in science and information processing
● Horizontal recruitment: It sometimes argued that if an organization does not have
adequate numbers of men with appropriate skills for the job at hand, it may bring in
such persons from other companies
○ Counter: It is both risky and expensive to prefer hiring from outside instead of
having a deliberate manpower development scheme within the organization.
First, it is difficult to precisely appraise the quality of outsiders. The outsider is
a stranger to an organization, and it may be difficult to have an accurate
assessment of an individual who has been unknown
● Relevance: Some programs of manpower development have content which is abstract
and not directly helpful in improving performance. Such modes of learning include
workshops, seminars or training sessions conducted by consultants hired from outside
the country.
○ Counter: The problems of relevance can be resolved through discipline and
proper planning and administration. Effective management development
programs must be rationalized by shortcomings of requisite skills. Necessarily,
the process should begin by a need assessment involving the identification of
individuals who are found wanting

Influence of Org e. Purpose

Structure f. People
g. Tasks (key activities carried out in systematic manner to achieve objectives)
h. Success
E.g. Political Power.
Purpose: win power to rule, People: members or supporters, Tasks: draw program to win
elections, success: achieve results by winning election.
 6. Leadership
● Strategy can be considered as a guide to the achievement of success
● A leader is responsible for steering a firm to success.
● A leaders influences the achievement of purpose in two ways:
○ By applying his/her individual attributes to the achievement of results, and
○ By using his individual attributes to inspire subordinates to achieve results. This is
commonly referred to as achieving results through other people
○
Framework of Leadership Attributes that Influence Achievement of Results

Attitudes and a. A generalist attitude: A leader must exercise a broader rather than a narrow
Values of a Leader approach to issues. A leader deal with issues with a generalist perspective and not as
a specialist. Broad perspective, balanced interest and impartial approach
b. Practitioners Orientation: leader must be prepared and be willing to roll his/her
sleeves and get down to any task in the organization
c. Professional Orientation: A leader must show occupational commitment in the
performance of his/her task and in the way he/she relates to others.
d. Innovation Orientation: innovation orientation means that the basis and vehicle of
innovation must be the present state of activities, products, services and processes,
rather than change for its own sake. innovation orientation also means a willingness to
develop new products and services, which may or may not succeed.
e. Positive Orientation: positive attitude conveys a leader’s legitimacy, pride, confidence
and commitment in the organisation and in its products, services and staff.

The Roles of a a. Visionary Role: This refers to the ability of a leader to carve a future of success for
Leader the organisation, and to bring all on board so that the picture of success engages the
support of all stakeholders and constituents.
b. Champion Role: This refers to the leader’s ability to enthusiastically promote, support,
or defend the a strategic choice.
c. Hero/Heroine Role: A leader must stand out and distinguishes himself/herself from
others through exceptional courage, Individual achievement and superior qualities
d. Role Model: A leader must be able to set the standard for others to follow
e. Wanderer Role:This refers to the need for the leader to be visible to his/her followers.
It also refers to the leader to be physically familiar with every aspect of his organization
and the staff and see for himself or herself what is happening within his domain rather
than relying on what is reported to him.
f. Coach Role: A leader must also provide guidance when needed. In this way, he will
improve the performance of his team of subordinates
g. Surgeon Role: This involves cutting off functions, products, services or processes
when it is ascertained they are no longer required

Traits and ● A leader who sees himself as part of the problem as opposed to a leader who presides
Characteristics of a over the mess
Leader ● A leader who is a problem solver and advice giver, as opposed to a leader who is
invisible, gives orders to staff, and expects them to be carried out
● A leader who makes people comfortable in his presence as opposed to a leader who
makes people uncomfortable.
● A leader who manages by walking about as opposed to a leader who is invisible.
● A leader who arrives early, leaves late as opposed to a leader who arrives late, leaves
on time, or leaves early
● A leader who is a good listener as opposed to a leader who is a good talker
● A leader who is available as opposed to a leader who is hard to reach
● A leader who is humble as opposed to a leader who is arrogant
 ● A leader who sees a mistake as a learning opportunity to develop as opposed to a
leader who sees mistakes as punishable offences and the means of scapegoating
● A leader who is tough, and confronts nasty problems as opposed to a leader who is
elusive, and is an artful dodger
● A leader who prefers discussion vas opposed a leader who prefers written reports.
● A leader who shares credit with others as opposed to a leader who monopolizes/takes
credit
● A leader who takes the blame as opposed to a leader who looks for scapegoats
● A leader who gives honest, frequent feedback as opposed to a leader who amasses
information

Types of a. Traditiona Leader: This is one whose position as a leader is assured by birth and
Leadership heredity, e.g. When one becomes a leader (CEO) by virtue of being related to the
owner of a business
b. Appointed Leader: This is one whose position as a leader is legitimised by an open
and transparent selection, assessment and appointment process. An appointed leader
earns leadership by virtue of possessing attributes or skills required to perform a job.
c. Known Leader: This is an individual whose position as a leader is generally
acknowledged by peers and others
d. Functional/Expert Leader: This is where one becomes a leader by virtue of his
expertise, or command of resources/ technology one may have
e. Charismatic Leader: This is where one secures the position of leadership by the
sheer force of his personality which others find appealing and elicits loyalty
f. Informal Leader: This is where leadership is not formally bestowed but one is
accepted or considered a de facto leader by colleagues by virtue of his
personality, charisma, expertise, command of resources

Styles of ● Decision making can be depicted on a continuum ranging from whether the
Leadership decision-making is boss-centred or subordinate-centred.
● Boss-centred decision making reflects an autocratic leadership style where decision
making is centralised, and subordinate-centred decision making reflects a democratic
leadership style where decision making is democratized.
● Regarding performance, centralized leadership facilitates control of performance while
decentralized leadership enhances motivation in carrying out tasks.
● Within these two extremes, and depending on the nature of work, a leader must
determine the niche that gives better results for the organization

Succession and There is greater need for plans of succession to ensure continuity of legacy of the leader in an
Continuity entrepreneurial enterprise.
● Machine/Mature Context
○ Ownership and governance are not in the individual of a founder, but rather
fragmented across three levels of governance
○ Strategy originates from the top of the hierarchy, where the perspective is
broadest and the power most focused.
○ There is usually a rational and objective way of arriving at a strategy which
makes all political, economic, social and technological factors relevant. PEST,
Political, Economic, Social/Cultural and Technological factors

STRATEGY

Benefit of ● It helps in articulating goals/the direction of a firm. This helps a firm avoid drifting
Consciously without purpose.
Considered ● It will facilitate the mobilization of effort toward a defined and understood purpose.
Strategy ● It will open the possibility of stating goals in other terms other than maximizing profit.
● It helps a firm plan ahead especially in situations with long lead times.
● Conscientious strategy management helps in avoiding improvisation in dealing with the
complexities of modern business.
● Planning ahead helps a firm cushion itself against negative effects of unforeseen
events
● It will help managers influence rather than merely respond to environmental change.
● The environments and circumstances in which businesses operate are dynamic.
Merely adapting to developments may leave a company in a weaker position against
its rivals. Organizations that ‘play catch up’ are often weak against competition

Function of From the point of view of implementation, the most important function of strategy is to serve
Strategy as:
● the focus of organizational effort,
● the object of commitment and
● the source of constructive motivation and self-control in the organization itself.

Limitations of ● Strategy involves planning, but is planning ahead may not be really possible or
Strategy practical.It is argued that planning becomes difficult in the face of increasing
complexity and accelerating rate of change. Long-range plans cannot be detailed
precisely and quantitatively with much confidence in unstable environments
characterized by social upheavals, economic instability or political uncertainty.
○ Counter: It is precisely dynamic and uncertain futures that call for some
contemplation of what can happen, and which poses the highest risk of failure.
● Commitment or over-dedication to plan may result in lost opportunity. Planning means
that one must stick to a plan, but such dedication to a chosen plan necessarily implies
closing one’s mind to other alternative plans.There is thus an opportunity cost to
commitment to a plan to the exclusion of other plans.
○ Counter: Yes, commitment to fixed plans provides a needed focus of
approach and effort. However, realistic planning calls for some room for
accommodating uncertainty through reasoned flexibility.
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