Devise/Formulate strategies of how a business can respond to the challenges

of the Macro Business environment

By Amanda Juries and Ross Mileham Session 227 March

Overview

Business

strategies

Strategic manageme

ntBusine

ss strateg

ies

Tools

SWOT

PORTER 5 Forces

PESTLE

Intensive

Integration

Diversification

Defensive

Advantages and

disadvantages

Goal Setting• Short or

long term goals?

• Identify and customize process for you

Analysis• Gather

information • Understand

the needs.

Strategy Formulation • Review

information • Determine

resources

Strategic management process

Implementation• Action stage• Make sure

everyone is ready

Monitoring• Review internal

and external issues

• Control action • Performance

measurement

Evaluation • Define what is

success?• Compare actual

vs actual plan

Continued

Set objectives

• What must be done?

Evaluate • Use tools to evaluate the M.M.M

Set targets• Set the target s to be reached

Use contexts

• think about each department in turn.

Analyse performanc

e• Mind the Gap?

Choose strategy

Formulate the strategy

Allocate resources

Ensure The structure of the organisation

Motivate stuff

Organisational polices

Management must be involved

Solve any on going problems

Adapt

Implement the strategy

Process of monitoring business activities and performance results.

Actual performance can be compared with the desired performance.

Evaluation and feedback provides the foundation for successful future strategy formulation.

Evaluate the strategy

1)Identify goals and measure achievement against the goals

2)Compare expected results with the actual results

3)Determine the deviations and reasons therefore

4)Develop actions that can be implemented to prevent similar deviations

5)Implement the actions to correct the deviations

Steps in strategy evaluation:

My business Tool set.

SWOT

Porters Five

Forces

Pestle

Industrial tools

Strength [Internal].Skilled workers.

Weakness[Internal]Not enough Money ?

Opportunities[External]

New markets

Threats[External]Lots of competition

SWOT

Strength Weakness Opportunities Threats

Rivalry

Threat of substitut

e

Power of consume

rs

New entrants

Power of suppliers

Porters FIVE forces

Any other

energy supplier

s?

Can we use other energy

sources?

Do consumers have any

other options?

Can any other

business start in our

market?

Will Coal increase?

Or run out?

Example

Eskom

PESTLE Po

litic

al P

Eco

nom

ic ESoci

al S

Tech

nolo

gic

a l T

Legal L

Envir

onm

ent al E

A.A Inflation

Crime New Tech

Labour laws

Pollution

Business Strategies

Integration

Intensive

Diversification

Defensive

Integration(bring together)

Horizontal

Vertical

Supplier of parts

Your business

the factory

Shop that sells your goods

Forward

Backwards

VerticalForward

And backward

Horizontal competitor

Micro (the business)

Market(consumers etc.)

Macro

Intensive build up

Intensive(aims to increase sales)

Market

Old market

Same Product

and same market

Market penetration(same product , same market)

Market development(same

product ,new market

Product development(new

product , new market)

Same product.

New market

New product same market

Add Chip's

Fried chicke

n

Add on

Original

product

Diversification

Car sales

Customer

Customer

Customer

Finance Cars For sale

Concentric(Ad on) Horizontal

Conglomerate

Many different products/companies.

-$

+$

+$

DefensivePeopl

e

Divestiture

Unprofitable part of business sold

Retrenchment

People leave the company

Defensive Continued

Liquidation(Asset’s into cash)

Advantages and disadvantages

Strategy Advantages(good)

Disadvantage (Bad)

Integration Reduce costIncrease growth

Legal process of franchising is time consuming.

Can be expensive

Intensive Lots of options to implementLarge impact on limited capital

Research and development can be expensive.Labour intensive

Diversification Exciting and motivating for staff.

Requires skilled staff.Can distract from main business objective.

Defensive Can reduce costIncrease profit selling non profit departments

DemotivatingTime consuming

Developing new performance incentives.

• The more motivated the staff, the more productive they will be, thereby increasing productivity and profit levels of the business

Other Business Strategies

Business must ensure that the correct individuals are employed in the right positions

• Replacing an employee takes place when they don't fit in; cannot cope; resign; retire or are promoted

The company repositions itself by replacing one or more individuals

As the business grows it will be necessary to revise its mission so it can adapt to the changing environment

• As trends changes, the business must be aware of it and adapt its mission to the latest trends

Revising a business mission

Additional shares could be made available to the public to ensure that the business has sufficient capital to finance any expansion or growth of the business.

Issuing stock to raise capital

Additional staff could be employed to increase sales figures and to service any new customers

that the business may have acquired

Adding additional salespersons

1. Identify the type of strategy that is being implemented by Charlie's Pizza Den from those given below:

Short questions:

1.1 Frozen pizzas are to be exported to Namibia and Botswana. Answer: Market development

(2)

1.3. Management decides to buy a cheese factory. Answer: Reverse vertical integration

. 1.2.The sales manager decides to reduce the mark-up on all l large pizzas. Answer: Market penetration

1.5. The restaurant adds strawberries and ice-cream as a new product to its menu.

Answer: Product development

1.4. A decision is taken to stop the delivery service and sell

the motorbike delivery fleet.Answer: Divesture

Business can use different types of strategies to respond to the challenges of the macro environment. Describe the steps to be followed is the formulation of strategies.Discuss using examples the various types of integration and Intensive strategies that a business can use to increase turn over. Outline the steps to be followed in the evaluation and control process of implementation. (40)

Long Questions

ESSAYS QUESTIONS

Introduction -

Strategies is how a business can respond to the challenges of the Macro Business environment

2 Facts

BODY    STEPS  MARKS1 Set objectives 6X22 Evaluate the

environmentsOne mark to name and one mark to explain

3 Set targets4 Use contexts5 Analyse

performance6 Choose

strategy

BODY

INTEGRATION

HorizontalThe same two type of business integrate

Mr Price and Milady

VerticalThe same industry

Foschini , Sterns, Sport Scene, Total Sports fashion

Reverse-BackwardsIntegrate with your supplier

Simba chips with the potatoes farmer

Forward IntegrationIntegrate with your distributor

Zoom shoes integrate with Foschini

BODY INTENSIVE EXAMPLEMarket DevelopmentNew customers in new areas

A new branch

Product developmentBetter products

Samsung S6

Market penetrationSell at a cheaper price to attract customers

3 packets Lays for R20

Business should be continuously scanning the market.

Redefine its goals, mission and vision to remain competitively.

Remember 2 single facts (2x1)

CONCLUSION

Thank You

BODY: STRATEGY EVALUATION

MEASURE ACHIEVEMENTS AGAINST

GOALS

COMPARE EXPECTED

RESULTS TO ACTUAL

PERFORMANCE

DETERMINE

DEVIATIONS AND

IDENTIFY THE

REASONS

ANALYSE NEW STRATEGY

CARRY OUT

ACTIONS TO

CORRECT DEVIATIO

NS