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Summary BMNG7321 Test 1 Notes
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Business Managament 3A (BMNG7321 )Test 1 Notes for Vega and Varsity College students. Written by top performing student at Vega Pretoria for Business Managment 1A and 2A.
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Business Management Test 1 NotesBMNG7321
Written by: Claudia Freese
LU 1: STRATEGY
LO1: EXPLAIN THE CONCEPT OF STRATEGY.
A strategy is like a manager’s gameplan where they lay-out where they are currently, where they are going, and how
they will get there.
LO2: EXPLAIN THE DEVELOPMENT OF STRATEGY IN THE 20TH AND 21ST CENTURY.
Due to the rapid increased rate of change and spread of wealth in the 20th century, companies realised a need for
strategy. At first focused on the external environment and an outside in perspective to gain market leadership,
positioning, and profits. Later came a shift towards the internal organisational environment where companies began
to look at their unique resources and capabilities to achieve competitive advantage, taking on an inside-out
perspective.
In the 21st century, companies had to consider the present and future environments due to globalisation and
increased competition. Strategies need to incorporate CSR and sustainability. Blue ocean strategies focus on value
innovation to create new markets without disrupting current ones.
LO3: DISCUSS THE NATURE OF STRATEGY.
Mintzberg outlines the 5 Ps of Strategy which include using strategy as a plan, position, perspective, ploy, or pattern.
• When using strategy as a plan, a company will use it for their overall direction and course of action, it is formal,
logical, and intended.
• When using strategy as a position, a company will look at their external and internal environments to establish a
viable position in the market (outside-in).
• When using strategy as a perspective, a company will look at their beliefs, values, and company culture as well as
their past strategies and the collective experience of individuals within the company (inside-out).
• When using strategy as a ploy, a company will apply a specific plan to outsmart their competitors.
• When using strategy as a pattern, the strategy may be intended or emergent (unplanned), but then result in the
realised strategy that actually happens. Therefore, this strategy is a result of consistent behaviour over time
whether this is intended or not.
LO4: DISCUSS THE ROLE OF STRATEGY.
A strategy is used to set a direction, focus efforts, and provide consistency for sustainable value creation. The main
goal is to achieve a competitive advantage and increase profitability.
There are three levels of strategy: corporate, business, and functional level.
• The role of corporate level strategy is to look at the overall purpose of the organization and create value at all
business levels.
• The role of business level strategy is to link the internal and external environments to strengthen market position
and gain a competitive advantage.
, • The role of functional level strategy is to set goals and direction for each functional area within the business.
LO5: EXPLAIN THE CONCEPT OF STRATEGIC MANAGEMENT.
Strategic management is concerned with the effectiveness of strategic decisions and choice of direction. It aims to
ensure that all actions taking place are successful in producing the desired outcome.
Good strategic management involves good strategic planning and good strategic implementation.
• Good strategic planning looks at the internal and external environments of a company and forms strategic links in
order to create a competitive advantage and sustainable stakeholder value.
• Good strategic implementation looks at the processes, systems, and structure of organization as well as the
leadership activities and management of risk.
LO6: COMPARE THE TWO PERSPECTIVES ON MANAGING STRATEGICALLY.
There are two perspectives on managing strategically: The outside-in perspective and the inside-out perspective.
Outside-in Perspective (Market-driven)
When using an outside-in perspective one first looks at the external environment and finds an opportunity within an
attractive industry (one that suggests above average returns). They then form a strategy to link their internal
resources and capabilities with the external environment. Sometimes these companies may need to adapt their
resources (strategic fit) to take advantage of the opportunity. The company will then implement this strategy and
gain superior returns.
Inside-out Perspective
When using an inside-out perspective one first looks at their unique internal resources and capabilities to create
value that cannot easily be imitated by competitors. This leads to a competitive advantage. They then find an
attractive industry in the external environment to use their unique resources and capabilities. The company may
need to adapt their resources (strategic stretch) to take advantage of the opportunity. From here the process is
similar to the outside-in perspective, where the company will implement their strategy, and finally gain superior
returns.
LO7: SUMMARISE THE CONCEPT OF THE STRATEGIC LINK.
The concept of the strategic link refers to the connection of the internal and external environments through
strategies.
LO8: EXAMINE THE TESTS FOR A WINNING STRATEGY.
A winning strategy has a strategic link, builds a competitive advantage, increases organisational performance, meets
stakeholder expectations, meets socio-economic requirements, and involves feedback and monitoring.
There are 5 tests that can be used to test for a winning strategy. These are the goodness of fit test, competitive
advantage test, performance test, social impact test and environmental system test.
• The goodness of fit test asks how well the strategy fits the organization’s situation. There needs to be a strategic
link between the internal and external environments.
• The competitive advantage test asks whether the strategy is helping the organisation achieve a competitive
advantage.
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