Strategic Business Management I - Study Guide Notes

Study Material

The course includes this study guide along with prescribed reading/viewing materials and individual assignments.

Prescribed Resources

Books

Botha, S. & Musengi, S. (2022). Introduction to business management: Fresh perspectives. (3rd ed.). Pearson.

Articles

Kuang, J.X., Li, Z. & Yang, D. (2020). "The effect of transparency and voice on managerial decisions and employee effort in hierarchical organizations." European Accounting Review, 31(4).
Landry, L. (2019, April 03). "Why emotional intelligence is important in leadership." Harvard Business School Online.
Roberts, J. (2018). "Managing only with transparency: The strategic functions of ignorance." Critical Perspectives on Accounting, 55, 53-60.

Multimedia

Arnold, K. (2012). The extraordinary team [Video]. YouTube.
Fincham, J.E. (n.d.). Basic management principles [Slides].
MindTools. (2012). The McKinsey 7s Framework: Learn how to align all parts of your organisation’s strategy [Video]. YouTube.
MindTools. (2014). Lewin’s change management model: Kurt Lewin’s unfreeze-change-refreeze theory [Video]. YouTube.
NVS Business Solutions. (2011). Business plan development process [Video]. YouTube
Thomsen, S. (2013). Kotter’s 8 step organizational change model [Video]. YouTube.
Wedell, G. (2011). What is change management? [Video]. YouTube.

Introduction to the Course

Aim: To understand the fundamentals of business management, providing insight into general management concepts and developing an understanding of the business environment.
Applicability: The knowledge and skills are applicable at all levels of management.
The course introduces general management followed by an in-depth discussion of the management functions.

Learning Outcomes

Upon completing this course, students should be able to:

Describe the organisational environment.
Explain the basic economic systems in which organisations operate.
Explore the different forms of enterprise or legal ownership.
Discuss the various management functions.
Examine the roles of the different levels of management.
Discuss how and why management style has progressed.
Explain corporate social responsibility.
Demonstrate knowledge of emotional, spiritual, and intellectual intelligences and its relevance to self and others.
Describe the strategic management process.
Explain change management models and processes.

An Introduction to General Management

Learning Outcomes

Describe the organisational environment.
Explain the basic economic systems in which organisations operate.
Explore the different forms of enterprise or legal ownership.
Explain corporate social responsibility.
Examine the roles of the different levels of management.
Discuss how and why management style has progressed.
Describe the strategic management process.

Definition of Management

Management involves getting things done with the aid of people and other resources (Boddy, 2014).
It encompasses the attainment of organisational goals in an effective and efficient manner through planning, organising, leading, and controlling organisational resources (Daft, 2014).
Management is the process of getting things done effectively and efficiently through and with other people (Robbins, De Cenzo & Coulter, 2015).
It is also defined as planning, decision making, organizing, leading, motivation, and controlling human, financial, physical, and information resources to reach goals efficiently and effectively (iEduNote, 2022).
Managers work with staff and resources to achieve goals effectively and efficiently.
Managers learn through experience, experimentation, and education.
Henri Fayol (1841-1925) suggested that management consists of five functions:
- Planning
- Organising
- Commanding
- Co-ordinating
- Controlling
The functions of management have been redefined as four:
- Planning
- Leading
- Organising
- Controlling

Planning

Prepares the organization for the future by determining where the organization wants to go, involving both long-term and short-term plans.
Revolves around the vision of decision-makers.
An organization’s mission is how it is going to achieve its vision.
Planning is deciding what, how, when, by whom, and with what resources to accomplish something.

Organising

Allocates human, financial, and physical resources to operationalise plans and achieve objectives and goals.
Includes aligning the organisational structure to long- and short-term plans and strategies.
Involves preparations that must be made before the plan is implemented, and resources must be allocated while the plan is unfolding.

Leading

Directs and motivates the human resources of the organization to achieve goals.
Influencing members of the organization is crucial in making sure the overall goals are met.

Controlling

Ensures that activities and outcomes conform to expectations.
May involve making adjustments as plans are implemented so that the organization moves in the right direction.

Organisations

An organisation is a group of people who agree on a set of goals and work together to reach them.
It refers to a collection of people involved in pursuing defined objectives (Business Jargons, 2022).
It is a social arrangement for achieving controlled performance towards goals that create value (Boddy, 2014).
All organisations have levels of authority, also called a hierarchy of authority.

Levels of Management

Top Management

Consists of executives who control the organisation and take responsibility for executing the strategy.
Focuses on long-term planning and the strategic planning process.
Devises overall goals, policies, and strategies.

Middle Management

Co-ordinates employee activities and team lead first-line managers.
Carries out top management’s directives by delegating authority and responsibility to subordinates.
Responsible for functional areas and executing policies, plans, and strategies.
Concerned with managing group performance and allocating resources.

First-Line Management

Displays good technical skills and abilities.
Responsible for the production of goods or services.
Interfaces with employees and reports to senior managers about day-to-day operations.
Supervises the finer details of organising.

Functional and General Management

Functional management refers to specialized managers in charge of specific functions such as finance, HR, and marketing.
General management integrates all functions and focuses on the entire business.

Managerial Skills

Skills are abilities related to performance, developed through knowledge, ability, and competence (Indeed, 2021).
Managers need self-awareness and the ability to manage themselves.

Types of Management Skills (Katz, 2022)

Conceptual skills: Analysing and diagnosing problems, thinking abstractly and rationally, and formulating solutions.
Interpersonal communication skills: Communicating with people at work, understanding (emotional intelligence), and motivating others.
Technical skills: Specialized knowledge or expertise.
Differing skills are needed at various management levels.
Top management needs conceptual and interpersonal skills but low technical skills.
Middle management needs interpersonal skills for team leadership.
First-line management needs technical skills to oversee day-to-day operations.

The Role of Managers

Roles are organized sets of behaviors identified with the position (Management Study HQ, 2022).
Managerial roles deal with people and their interpersonal relationships.

Interpersonal Roles

Managers spend time interacting with people within and outside the organization; these interactions involve interpersonal roles:
- Figurehead: Symbolically representing the organisation and executing social and legal obligations.
- Leader: Leading and coordinating the activities of subordinates while motivating them.
- Liaison: Managers must maintain a network of contacts within the internal and external environments.

Informational Roles

Managers process information about the organization and its environment; these roles involve:
- Monitor: Gathering and studying information about the organisation and the external environment.
- Disseminator of information: Communicating information to subordinates, peers, and other members.
- Spokesperson: Representing the unit by either transmitting information to people outside their unit or making some demands on behalf of their unit.

Decisional Roles

Based on environment information, managers make decisions. These roles involve:

Entrepreneur: Managers continuously improve their units. Constantly seeking new ideas to improve or add products.
Conflict handler (or trouble-shooter): Solving conflicts by acting as arbitrators. Anticipating problems and acting.
Resource allocator: Prioritising projects and making budgetary allocations.
Negotiator: Representing units and the organisation in negotiations.

The Development of Management Theory

A theory explains and predicts.
Management theories can be classified into two main schools of thought: classical approaches (1910-1950) and contemporary approaches (1960-present).

Classical Approaches (1900s-1950s)

Scientific school: Focus on increasing productivity through observation, job analysis, job measurement, job redesign, and financial incentives.
Management process school: Focus on top management and universal management principles.
Behavioral school: Focus on psychological and sociological factors.
Quantitative school: Utilizing quantitative techniques to improve decision-making.

Contemporary Approaches (1950s-Present)

Systems approach: Viewing an organization as an interrelated set of elements functioning as a whole.
Contingency approach: Integrating ideas from different schools of thought.
Strategic approach: Aligning organizational goals and objectives with trends in the business environment.
Total quality management (TQM): Involving all members in improving processes, products, services, and culture.
Re-engineering: Focusing on core business and outsourcing non-core activities.
Diversity management: Embracing workforce differences to gain a competitive advantage.

Diversity Management

Intranational Diversity Management: managing a workforce in a single national context and providing employment opportunities to ethnic groups
Cross-National Diversity Management: International Diversity Management, managing a workforce of citizens from different countries including immigrants seeking employment.

Systems Theory

A theory meant to explain and predict in business
The systems theory attempt to offer a way to understand an organization more completely.

Functional Approach vs. Systems Theory

A function is made up of all similar activities that together help the function achieve what it is meant to achieve;
Systems theory notes that the various functions of an organization do not stand alone. It attempts to offer a way to understand an organization more completely.
Functions within an organisation are closely linked.
The systems theory approach says the parts of a business are interdependent, meaning they work together to reach a goal (Marx, van Rooyen, Bosch & Reynders 1998).
An organization is a dynamic and ever-changing system continuously influenced by its external environment (policies, technology, economy, competitors, globalization) and its internal environment (changing organizational structure, culture, budgets, and systems such as HR management systems, information and communication, and financial management).

Regenesys’ Integrated Leadership and Management Model

The degree of synergy and alignment between organizational, team and individual goals and objectives, determines the success or failure of an organization.
Hence, an effective work environment should be characterised by the organizational systems, strategies, structures and culture being aligned; together with people who operate synergistically.

Corporate Social Responsibility

Corporate social responsibility (CSR) refers to “strategies that companies put into action as part of corporate governance that are designed to ensure the company’s operations are ethical and beneficial for society” (Corporate Finance Institute, 2022).
The United Nations Industrial Development Organisation (2022) describes CSR as a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders.
Beal (2014) makes the necessary points: business organisations have a moral and practical obligation to act in a way that society expects of them.

Milton Friedman’s View of Corporate Social Responsibility

*There is one and only one social responsibility of business to increase its profits so long as it stays within the rules of the game (Milton Friedman, 1970).

Corporate Governance

Corporate governance entails how the managers of an organisation relate to the organisation, to the owners, to each other and to other stakeholders (Fields, O’ Kelley, Sanderson & Russel Reynolds Associates, 2022).
The Institute of Directors in Southern Africa established the King Committee on Corporate Governance on 18 July 1992 (Institute of Directors South Africa, 2022).

Global Trends Predicted for 2022

Assertive investors willing to vote for change
Higher standards of climate disclosure and action
Enhanced board effectiveness being the norm
Further emphasis on equity, diversity, and inclusive culture initiatives at the board and corporate level.

Business Legislation

Managers in all organizations should read the legislation that pertains to their organization.
In South Africa, businesses are regulated by the Companies Act of 2008

The Organisational Environment

"A strategy is the overall plan guiding a firm. It influences the firm’s business activities and its response to market forces, such as competition and the economy."
"Strategy means finding the match between what a company can do (organisational strengths and weaknesses) within the universe of what it might do (environmental opportunities and threats).

Strategic Management vs Strategic Planning

Strategic management is: the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organisation to achieve its objectives.
Strategic planning can be defined as the process of proactively aligning the organisation’s resources (internal environment) with threats and opportunities caused in the external environment.

Strategy Formulation

This phase of strategic management is important because it reflects the organisation's present status and where the organisation strives to be in the future.

Developing a Company Vision, Mission and Objectives

The vision must be a statement that will lead the organisation to success in the future. It must be inspiring to both internal and external stakeholders.
The mission statement defines the purpose of the organisation in terms of the product or service it produces, the market it serves and the technology it applies in serving the market.
After analysing the organisation’s situation, management should set objectives, ie the “long-range and short-range performance targets it hopes to attain."

Environmental Analysis (Internal and External)

The second step in phase one of the strategic management process involves a detailed analysis of the business environment.
Managers have to know what is going on in the three environments and be able to react to the respective situations.
The microenvironment includes all the business functions and tasks within an organisation. They are:
Information technology;
Production;
Logistics;
Finances;
Human resources;
Sales;
Marketing;
Public relations; and
Security.
The market is where organisations sell their goods or services.
There is also a wider macroenvironment exists, containing variables that directly or indirectly exert an influence on the business and its market environment
There is much wisdom contained in this model. Marketers would be well advised to look at their market – the area in which they sell – through each of these five forces in turn. That will enable marketing managers to better understand the environment in which they work.

Porter’s Five Forces

Threat of New Entrants
Bargaining Power of Suppliers
Bargaining Power of Buyers
Threat of Substitute Products or Services
Rivalry Among Existing Firms

The Political-Legal Environment

Management decisions are continually affected by a country’s politics, especially the political pressures exerted by the government and its institutions
The policy of the South African government is still based on the maintenance of the benefits of the free-market system derived from:
Free enterprise; Private ownership;
Freedom of vocation; A proper respect for the market mechanism; and
Democratisation of the economy and public service.

The Economic Environment

Economic factors such as wage levels, inflation and interest rates affect an organisation’s income and costs. The state of the economy is also of major influence on capital investment decisions
Economic indicators are very important management information

The Social Environment

People are the products of their community. As members of a given community they accept and assimilate its language, its values, its faith, expectations, laws and customs.
Demographics (the size and characteristics of a country’s population) can have a significant effect on what a country is able to achieve, and its general standard of living
A further trend that must be considered is consumerism, or the social force that protects the consumer by exerting legal, moral, economic, and even political pressure on management

The Technological Environment

Technological innovation originates in research and development by business as well as the state and results not only in new machinery or products but also in new processes, technologies and even new approaches to management that bring about change in the environment.

The Physical Environment

The physical environment embraces the limited resources from which the enterprise obtains its raw materials, as well as the environment into which it discharges its waste

The International Environment

Organisations with international operations find themselves in a far more complex business environment, because every country has its own unique environmental factors, with its own.
Technology, Culture, Laws, Politics, Markets, and Competitiveness.

Phase 2: Strategy Implementation

In this phase, the (overall) strategic plan is implemented. The organization's structure, systems and culture might have to change so that they align to the new organisational strategy.
Phase 3: Strategy evaluationThe third and final phase of strategic management consists of two phases: the control phase and the feedback phase.

The Economic Environment

Economic factors such as wage levels, inflation and interest rates affect an organisation’s income and costs. The state of the economy is also of major influence on capital investment decisions

Key Economic Factors

The economic growth rate
Consumer income levels
Inflation
Monetary policy
Fiscal policy
Fluctuations of these forces.

The Economic Principle

The economic principle can be described as: obtaining the greatest possible benefit with the limited resources available (Strydom, 2009)

Four Basic Resources

Natural resources: Resources such as crude oil or gold that has not yet been touched.
Human resources: The people who perform specific duties within an organisation
Capital: The money or assets that are used to deliver something to the consumer
Entrepreneurship: the process through which the production factors of natural resources, human resources and capital are combined so as to manufacture goods or offer a service in order to make a profit.

The Economic Systems In Which a Business Operates

The business environment is divided into four basic economic systems.

A free-market economy
Command economy
Socialism
Mixed economy

Forms of Enterprises

There are three categories of co-operatives: primary co-operatives, secondary co-operatives, and tertiary co-operatives.

Seven Business Entities listed in the Companies Act of 2008

Sole proprietor
Partnerships
Co-operatives
Private companies (Pty) Ltd
Personal liability companies – Inc
Public companies (Ltd)
State-owned companies – SOC

The Basic Elements of Planning

Planning is the first step in the management process and involves activities that determine the mission and goals of an organisation. It further indicates how resources will be used to achieve these goals. The goals of the organisation determine the type of organisation, the leadership required and the control to be exercised.

Introduction To Planning

Planning is the foundation upon which of all the functions of management should be built. It involves an evaluation of where the business is now and where it would like to be in future. From this evaluation a plan is made to allow the organisation to move towards its desired future state.

The Importance of Planning

Planning provides the organisation with its direction and it determines the actions that management must take. Planning is important because it provides direction, promotes co-ordination between the various departments and people in the organisation and forces managers to look to the future

Before Making Plans, Management Must Consider:

The influence of external environmental factors on the organisation;
The strengths and weaknesses associated with the organisation;
The different strategic options that will enable the organisation to meet its long-term objectives; and
The cost and benefits associated with each alternative.

Types of Plans

On each level of management, different kinds of plans must be made. The three types of planning are strategic planning, functional planning and short-term planning.

Strategic Planning

Strategic planning involves long-term planning in order to achieve organisational goals and priorities. Strategic planning ensures that organisations remain competitive by being responsive to changes in the external and internal environment.A strategic plan looks to the future with a focus on accommodating future growth.

Functional Planning

Functional planning refers to medium-term planning and is usually carried out by middle management.

Short-Term Planning

This type of planning is usually done for a period of a year. It is the responsibility of first-line management, based on the company’s functional and tactical goals. It is usually concerned with the day-to-day performance of tasks and allocation of resources

Characteristics of An Effective Plan

Organisational plans are devised to ensure that little is left to chance and that risks are mitigated. An organisational plan should include the characteristics explained below.

Characteristics

Comprehensive: A thorough analysis of all relevant factors has been conducted and all significant options and impacts are being considered.
Efficient: The process optimises time, money and effort.
Inclusive: Everyone affected by the plan has an impact on decision-making.
Informative: Communication with stakeholders takes place extensively, to ensure that they understand the results.
Integrated: The plan is aligned to the overall strategic goals of the organisation.
Logical: The plan flows in a coherent way.
Transparent: People involved understand how the process operates. (Adapted from Litman, 2020)

Planning Framework

A framework is used to provide a conceptual structure intended to support and guide the development of a plan. It explains important principles that are necessary to understand as a basis of embedded knowledge.

Planning Process

Planning can be seen as the development and implementation of a plan or schedule that is based on goals and objectives. As mentioned earlier in this section, it is vital to note that without planning, the next step in the management process cannot take place

Step 1: Scope

The first step in the planning process is to determine the scope, be it a business strategy, a project or a management plan. ISO Quality Services Limited (2022) says that a business scope can cover:
The whole organisation;
Specifically identified functions;
Specifically identified sections of the organisation;
One or more functions across a group.
A project scope is how a project's goals and objectives are defined.