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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
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Overview
Business
strategies
Strategic manageme
ntBusine
ss strateg
ies
Tools
SWOT
PORTER 5 Forces
PESTLE
Intensive
Integration
Diversification
Defensive
Advantages and
disadvantages
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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
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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
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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
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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
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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
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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:
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My business Tool set.
SWOT
Porters Five
Forces
Pestle
Industrial tools
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Strength [Internal].Skilled workers.
Weakness[Internal]Not enough Money ?
Opportunities[External]
New markets
Threats[External]Lots of competition
SWOT
Strength Weakness Opportunities Threats
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Rivalry
Threat of substitut
e
Power of consume
rs
New entrants
Power of suppliers
Porters FIVE forces
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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
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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
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Business Strategies
Integration
Intensive
Diversification
Defensive
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Integration(bring together)
Horizontal
Vertical
Supplier of parts
Your business
the factory
Shop that sells your goods
Forward
Backwards
VerticalForward
And backward
Horizontal competitor
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Micro (the business)
Market(consumers etc.)
Macro
Intensive build up
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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
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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.
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-$
+$
+$
DefensivePeopl
e
Divestiture
Unprofitable part of business sold
Retrenchment
People leave the company
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Defensive Continued
Liquidation(Asset’s into cash)
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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
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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
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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
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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
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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
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Additional staff could be employed to increase sales figures and to service any new customers
that the business may have acquired
Adding additional salespersons
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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)
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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
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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
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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
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ESSAYS QUESTIONS
Introduction -
Strategies is how a business can respond to the challenges of the Macro Business environment
2 Facts
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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
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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
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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
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Business should be continuously scanning the market.
Redefine its goals, mission and vision to remain competitively.
Remember 2 single facts (2x1)
CONCLUSION
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Thank You
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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