4.2: Business: Strategic Management & Production Management Systems

strategic planning

• strategic planning is the formal process through which a business defines its long-term direction, sets goals and priorities, and allocates resources to achieve a sustainable competitive advantage

• it is both a decision-making and management tool that aligns the organisation’s activities with its mission, vision, and external environment

• purpose:

  • to establish a clear direction and vision for the business

  • to identify opportunities and risks in the internal and external environment

  • to ensure efficient allocation of resources to meet objectives

  • to build commitment among stakeholders and staff

  • to provide a framework for evaluating performance and guiding long-term success

• the strategic planning process allows businesses to move from a reactive approach to a proactive one — anticipating change rather than responding to it

• key features of a strategic plan

  • a well-developed strategic plan contains several key components that outline the business’s vision, environment, strategies, and evaluation mechanisms

  • mission and objectives

  • environmental scan

    • PEST

    • Porter’s Five Forces

    • SWOT strategies

  • strategic formulation

  • strategic implementation

  • evaluation and control

mission and objectives

• mission statement (or vision statement):

  • a concise statement defining the core purpose, values, and direction of the business

  • it communicates the organisation’s philosophy, culture, and long-term vision to stakeholders

  • should be specific enough to provide direction but broad enough to cover the business’s future growth areas

• example (generic):

  • “to deliver sustainable, innovative products that enhance customer lifestyles while contributing to global environmental responsibility”

• objectives:

  • translate the mission into measurable outcomes

  • objectives should be smart – specific, measurable, achievable, relevant, and time-bound

  • they act as checkpoints for evaluating strategic performance

environmental scan (situation analysis)

• an environmental scan involves assessing the internal and external environments that influence a business’s performance and opportunities

• it provides the foundation for informed decision-making and strategy development

• purpose:

  • to identify current position and anticipate future trends

  • to ensure the business adapts to market, political, technological, and social changes

• tools used:

  • PEST analysis

  • Porter’s five forces

  • SWOT analysis

PEST analysis (macro environment)

• a tool used to assess external macro-environmental factors that can impact a business’s operations and profitability

factor	description	examples of influence
political/legal	laws, government policy, trade regulations	taxes, labour laws, trade barriers
economic	overall economic conditions affecting business performance	inflation, exchange rates, interest rates
social/cultural	demographics, values, lifestyles, cultural norms	consumer attitudes, ethics, education, religion
technological	rate of innovation, automation, R&D	e-commerce, digital platforms, production tech

• purpose:

  • helps businesses anticipate external changes and adjust strategies accordingly — especially important for global firms dealing with multiple political and economic systems

Porter’s Five Forces (industry competitiveness)

• a model that analyses the level of competition within an industry and helps assess its attractiveness or profitability

force	description	strategic implications
threat of new entrants	ease of entering the market	high barriers reduce competition
power of suppliers	influence suppliers have on price and quality	few suppliers = less bargaining power
power of buyers	influence of customers on price and product demand	strong buyers = reduced margins
threat of substitutes	availability of alternative products	more substitutes = reduced customer loyalty
industry rivalry	degree of competition among existing businesses	high rivalry = lower profits

• purpose:

  • guides businesses on whether to enter a market, adjust pricing, or differentiate products to gain a competitive advantage

SWOT analysis (internal and external overview)

• a framework to identify a business’s internal capabilities and external environment to guide strategy formulation

category	description
strengths	internal advantages that enhance performance (eg brand reputation, innovation)
weaknesses	internal limitations or inefficiencies (eg high costs, skill shortages)
opportunities	external factors that can benefit the business (eg new markets, technological advances)
threats	external risks or challenges (eg competition, changing regulations)

• purpose:

  • to align internal strengths with external opportunities while managing weaknesses and threats

strategic formulation

• developing a plan of action that outlines how the business will achieve its mission and objectives using the insights gained from the environmental scan

• process:

  1. analyse environment and position (using SWOT, PEST, Porter’s)

  2. set clear strategic direction – define mission, values, and measurable goals

  3. develop business-level strategies (marketing, operations, finance, hr)

  4. create specific projects and action plans at departmental levels

• common strategy types:

  • growth/market penetration: expanding market share in existing markets

  • market development: entering new markets or regions

  • innovation: developing new products or processes to increase competitiveness

  • strategic alliances: forming partnerships or joint ventures to share expertise and resources

• purpose:

  • to establish competitive advantage, improve performance, and ensure long-term sustainability

strategic implementation

• the process of putting strategies into action by allocating resources, assigning responsibilities, and coordinating activities

• key activities:

  • communicating the strategic plan to all staff

  • setting short-term action plans and measurable targets (kpis)

  • ensuring departments align their operations with strategic goals

  • allocating financial and human resources effectively

• purpose:

  • ensures that the formulated strategies are translated into operational outcomes that contribute to achieving organisational goals

• challenges:

  • resistance to change

  • insufficient resources

  • poor communication or unclear responsibilities

evaluation and control

• the process of monitoring and assessing the performance of implemented strategies to ensure goals are achieved and corrective actions are taken where necessary

• key steps:

  1. collect data – internal reports, KPIs, financial ratios

  2. compare results to targets – measure performance against goals

  3. analyse variances – identify causes of deviations

  4. take corrective action – modify strategies, goals, or timeframes

• key questions:

  • are the goals and objectives being achieved?

  • are timeframes realistic and being met?

  • have there been unanticipated external changes?

• purpose:

  • to maintain continuous improvement, ensure accountability, and adapt strategies to changing environments

  • the evaluation process feeds back into the environmental scan, restarting the planning cycle

strategic planning cycle

step	process	outcome
1 environmental scan	assess internal/external environment	understand current position
2 mission & objectives	define purpose and goals	clarify direction and expectations
3 strategy formulation	develop action plans	set pathways to achieve goals
4 implementation	execute strategies	convert plans into operations
5 evaluation & control	measure, monitor, and adapt	continuous improvement

strategic management summary

aspect	definition	purpose/outcome
strategic planning	a long-term management process for setting direction and allocating resources	aligns business with its mission and environment
mission statement	defines the business’s purpose and values	communicates direction and inspires stakeholders
environmental scan	analysis of internal and external conditions	identifies opportunities, threats, strengths, and weaknesses
PEST analysis	examines political, economic, social, and technological factors	helps anticipate macro-environmental trends
Porter’s five forces	evaluates industry competition	determines market attractiveness and entry strategies
SWOT analysis	internal/external evaluation tool	aligns strengths with opportunities; manages risks
strategy formulation	development of long-term plans and goals	builds competitive advantage
strategy implementation	execution of the formulated strategies	achieves practical outcomes through resource allocation
evaluation & control	measurement and feedback process	ensures continuous adaptation and performance improvement

production management systems

• a production management system is the process of planning, organising, directing, and controlling the production function of a business
  it transforms inputs (labour, capital, raw materials, technology, and knowledge) into outputs (finished goods and services) through a controlled and efficient transformation process

• purpose

  • to maximise productivity by achieving the highest possible output from given inputs

  • to produce goods and services in the right quantity, quality, and time while minimising costs

  • to ensure that all stages of production — from input sourcing to delivery — are efficient, integrated, and consistent with business goals

  • to coordinate operations with other business functions (marketing, finance, hr) for business success

  • to achieve customer satisfaction, profitability, and competitiveness in the market

• key features

component	description
inputs	labour, capital, raw materials, technology, and intellectual property
processes	the transformation process, including methods, quality control, technology, and inventory management
outputs	finished goods and services that meet quality and client expectations
monitoring	tracking productivity, efficiency, and quality across all stages of production
integration	links with sales, inventory, and customer systems for planning and forecasting

goals of production management

• achieve business goals: ensure customer satisfaction and profitability

• build a positive image: deliver quality products on time, leading to repeat purchases and reputation growth

• support other functions: provide operational data to assist managerial decision-making

• be competitive: enable lower costs, innovation, and efficiency to gain a market advantage

product development

• product development is the process of conceiving, designing, testing, and launching new or improved products or services to meet market needs and maintain competitiveness

• purpose

  • to meet changing consumer needs and preferences

  • to maintain or grow market share through innovation

  • to create new revenue opportunities and extend product lifecycles

  • to build brand loyalty through innovation and continuous improvement

• features

type	description	example
incremental innovation	gradual improvement to existing products or processes to maintain competitiveness	longer battery life, software updates, new features
disruptive innovation	creation of a new product or process that transforms or creates an entirely new market	cloud computing, driverless cars, 3d printing

stages of product development

1. idea generation – research customers, markets, and technology trends

2. idea evaluation – assess feasibility, costs, and market potential

3. concept development – refine design, features, and target market

4. prototype testing – develop and test a model for feedback

5. market testing – trial product on a limited scale to gauge response

6. product launch – full-scale introduction supported by marketing and distribution

success factors of product development

• market and environmental research

• skilled staff and technological capabilities

• IP protection and financial investment

• effective planning and risk assessment

quality management

• quality management ensures that all processes result in consistent, high-quality outputs that meet or exceed customer expectations

• purpose

  • to prevent errors and defects before they occur

  • to build customer trust and brand reputation

  • to minimise waste, costs, and rework

• key elements

element	description	purpose
quality control (QC)	monitoring products and comparing them against set quality standards at different production stages	to detect defects and take corrective action
quality assurance (QA)	establishing processes, systems, and culture to prevent defects often involves certification (eg iso standards)	to ensure consistent quality through proactive systems
quality improvement (QI)	continuous improvement culture aimed at enhancing efficiency, product quality, and employee involvement (eg kaizen, total quality management)	to maintain competitiveness through innovation and improvement

benefits of quality management

• increased customer satisfaction and loyalty

• motivated workforce

• reduced waste and costs

• enhanced public image and profitability

inventory control

• inventory control (or inventory management) involves ensuring the right amount of stock is available to meet customer demand while minimising holding costs and waste

• types of inventory

  • raw materials: basic inputs for production

  • work in progress (wip): partially completed goods

  • finished goods: completed products ready for sale

• types of inventory control

  • just-in-time (JIT)

  • just-in-case (JIC)

just-in-time

• an inventory management system where materials and goods are ordered and received only when needed for production or customer orders

• features:

  • minimal stock levels and storage costs

  • requires accurate forecasting, efficient suppliers, and strong technology systems

  • operates as a “pull” system — production begins once a customer order is received

• advantages:

  • lower inventory and overhead costs

  • reduces waste and obsolescence

  • improves cash flow and efficiency

  • encourages continuous improvement and quality focus

• disadvantages:

  • high risk if suppliers are unreliable or deliveries are delayed

  • vulnerable to disruptions in the supply chain

  • requires advanced technology and coordination

• best suited for:
  businesses with reliable local suppliers and stable demand (eg luxury brands, automotive industry)

just-in-case

• an inventory management system that maintains large stock levels to ensure customer demand is met even during supply disruptions

• features:

  • operates as a “push” system, producing stock in anticipation of demand

  • involves high storage and insurance costs

  • provides a safety buffer against unpredictable supply or demand

• advantages:

  • ensures business continuity during supply chain issues

  • allows immediate fulfilment of orders and higher customer satisfaction

  • economies of scale from bulk purchases

• disadvantages:

  • high storage and insurance costs

  • risk of obsolete or expired stock

  • reduced flexibility for product customisation

• best suited for:
  businesses facing international supply chain issues or unpredictable demand (eg food retail, global importers)

comparison of just-in-time vs just-in-case summary

• which to use in international supply chain issues

  • when a business faces international supply chain problems (eg shipping delays, cost increases, political instability), the just-in-case (JIC) method is more appropriate because:

    • it ensures continuous production and customer satisfaction despite disruptions

    • allows the business to avoid downtime and lost sales

    • provides flexibility in uncertain global environments

factor	just-in-time (JIT)	just-in-case (JIC)
inventory levels	minimal, ordered as needed	high, stockpiled
cost efficiency	lower storage costs, but risk of delays	higher storage costs, but stable supply
supplier dependence	high – must be reliable	lower – safety stock acts as buffer
risk level	higher (supply disruptions affect production)	lower (supply issues less damaging)
best for	local suppliers, stable demand	global suppliers, uncertain demand