MNG3701 Strategic Planning Summaries. Detailed working, solutions, memo, notes & explanations. Lesson 1: The Relationship between General Management Principles and
Strategic Management.
1. THE PURPOSE OF A BUSINESS ORGANISATION
The purpose of a business organisation is to create value. Value mea...
,Lesson 1: The Relationship between General Management Principles and
Strategic Management.
1. THE PURPOSE OF A BUSINESS ORGANISATION
The purpose of a business organisation is to create value. Value means different things to different
individuals or groups. For instance:
The entrepreneur who starts the business would like to make a profit. This profit is used to satisfy
his/her own needs and part of the profit is reinvested in the business organisation in order to grow and
develop the business and to ensure its long-term survival.
In order to generate a profit, the businessorganisation producesproducts and servicesthat provide
value to the consumers that buy these products and services.
The employees of the business organisation receive value in the form of the salary/ wage that they
earn and also in the security that the job provides to them (knowing that they can provide in their own
needs and those of their families).
As the organisation grows, it might start selling shares and the shareholders of the
business will receive value in the form of dividends that they earn from the business.
These individuals and groups are known as the stakeholders of the business. It is important that you
understand what stakeholders are and also what they expect from the business organisation.
Explain what a stakeholder is:
A stakeholder is any person or group of people that have, or claim to have, an interest in an
organisation and its activities.
Explain what the following stakeholders expect from the organisation:
Customers want quality products and excellent service.
Suppliers want to be paid on time.
The community expects the business organisation to give back to them / invest in them by
supporting community projects and by contributing to the community in the form of
sponsorships and financial contributions to worthy causes.
Organised labour would like the organisation (the employer) to treat employees with fairness,
dignity and respect.
,2. THE PRIMARY OUTCOMES OF THE BUSINESS ORGANISATION
There are two types of stakeholders, namely internal stakeholders and external stakeholders.
Internal stakeholders are those stakeholders who operate inside the organisation like
shareholders/business owners, employees and management.
External stakeholders are those individuals or groups who are not operating directly in the organisation,
but they are affected by the strategies, plans and actions of the organisation. External stakeholders include
the community, government, organised labour (trade unions), customers, suppliers and many more.
Traditionally, the primary goal/outcome of business organisations was to realise a profit and thereby
satisfy the needs and expectations of its owners (or shareholders). However, in the modern business world,
a much broader perspective is used to evaluate the performance of a business organisation.
Businesses are expected to perform in three areas, which is referred to as the triple bottom line. The
triple bottom line not only focuses on the expectation of shareholders (profit), but simultaneously on the
expectations of all other stakeholders, namely people and the planet. Therefore, to be regarded as
successful, a business organisation needs to deliver the following outcomes:
be profitable
take responsibility for the physical environment in which it operates (environmental responsibility)
(planet)
meet its social responsibilities towards the community in which it operates (people)
Explain the purpose and desired outcomes of a business organisation.
The purpose of a business organisation is to create value.
The performance of the business is determined by how well it reaches the following desired outcomes:
profit for the owner/shareholders
environmental responsibility (planet)
social responsibility (people)
EXAMPLE OF SPUR CORPORATION
The Integrated Report of Spur Corporation for 2017
(http://www.spurcorporation.com/investors/results-centre/) reveals the following:
In 2017 Spur Corporation earned an operating profit of R 178.3 million (page 5)
Their shareholders earned a dividend of R 1,32 per share (page 10)
They established the ASHA Trust ECD (early childhood development) training programme that
supports local women in the community of Alexandra, Gauteng in the establishment of holistic age-
appropriate learning centres for children aged nought to four. In 2018 they had 20 centres and their
objective was to extend their programme to equip teachers with the necessary skills to help children
with disabilities and support their inclusion in the educational system, as well as integration back into
their communities (page 60)
The group supports environmentally responsible franchisees with environmental initiatives like
reduced electricity and water consumption and waste reduction, as well as by opening new revenue
streams linked to income generated through recycling (page 19)
Looking at the above, it is clear that Spur Corporation is performing well in all three areas of the
triple bottom line, which means that it is a successful company that adds value to its stakeholders.
, 3. THE ROLE OF MANAGERS IN ACHIEVING THE OUTCOMES OF THE ORGANISATION
The role of managers in achieving the outcomes of the organisation. In this figure you will see that
management essentially has four characteristics:
1. It is a process consisting of four interrelated tasks, namely planning, organising, leading and
control.
2. It involves working with and through others.
3. It aims to achieve organisational goals and objectives, balance effectiveness (“doing the
right things”) and efficiency (“doing things right”) and make the most of limited resources.
4. It takes place in an ever-changing environment that consists of three sections, namely
the internal environment, the market environment (industry) and the remote environment
(macro environment).
4. THE VARIOUS LEVELS AND AREAS OF MANAGEMENT
Managers work with and through others to achieve the objectives of the organisation. Their
activities take place in different areas and at different levels in the organisation.
3 Levels at which management activities take place, namely top management, middle
management and lower-level management. It also depicts the seven (7) areas in which middle
managers operate (we refer to these as business functions or functional areas).
(1) Top (senior) management includes the board of directors, partners, the managing director,
chief executive officers, management committees and other governing bodies. They are
responsible for the long-term strategic planning of the business organisation. They also have
to display leadership and control in order to ensure that the strategies they developed are
implemented successfully.
(2) Middle management refers to the functional managers of the business organisation, like
the marketing manager, financial manager, production manager, public relations manager,
and so forth. They are responsible for the implementation of the strategies, policies and
plans formulated by top management. These managers are therefore involved in tactical
planning (medium-term to short-term planning). Control is a large part of their responsibility
as they have to ensure that the short- to medium-term plans of the business organisation are
implemented.
(3) Lower-level management comprises the supervisors or first-line managers of the
organisation. We often refer to them as operational managers. They are responsible for
even smaller segments of the organisation, for instance the workshop manager, warehouse
manager and the production supervisors who take responsibility for a specific sub-section of
the production function. Their management activities revolve around the daily activities of
their relevant sections and sub-sections. They focus on short-term planning and the
implementation of the plans of middle management. Their primary concern is to apply
policies, procedures and rules in order to achieve a high level of productivity and efficiency,
to motivate subordinates and to accomplish day-to-day objectives.
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