CHAPTER 5: MACRO-ENVIRONMENT BUSINESS STRATEGIES

Introduction The units in this topic will deal with the development of strategies in response to the challenges in business environments and the types of business strategies and strategic evaluation.

Planning Unit TG

Pages L B Pages Week Hours Resources needed

Unit 1: Development of strategies in response to the challenges in business environments

35 104-114 8, 9 5 • Learner's Book • Flipchart paper • Koki pens • • Learner's notebook • Visual aids • Wallcfiart • Example of a business vision,

mission statement, objectives and strategic plan

Unit 2: Types of business strategies and strategic evaluation

36 115-124 9, 10 6 • Learner's Book • Flipchart paper » Koki pens • Learner's notebook * • Wall chart • Example of a business vision,

mission statement, objectives and strategic plan

Exam Practice 39 126-127 10 1 • Learner's Book

Unit 1: Development of strategies in response to the challenges in business environments Teaching guidelines . l iK ; ^ te.^. ~ - i i s r ; s;; • Time allocation: Weeks 8, 9 (5 hours) Facilitate a class discussion on defining the terms 'strategy' and 'challenge'. This can be done either with the class as a whole or by dividing the learners into smaller groups for discussion.

Activity 1 | Ana lyse the c a s e study LBpage108 ; t ^ - ^ j ^ - c ; , . ; > a :

Resources Learner's Book, flipchart paper, koki pens, learner's notebook Teaching guidelines Revise the creative thinking techniques learnt in Grades 10 and 11 with the learners. This can be done by dividing the learners into groups of three or four to brainstorm what they can recall. Allow time for

feedback and discussion. Learners are to complete Activity 1 in their notebooks. Allow time for learners to compare their answers in their groups.

Answers (Learners'answers will vary.) Any two of the following techniques, which are discussed in detail on pages 85 to 88 in the Learner's Book, could be used:

Mind mapping • •, • Brainstorming • Force-field analysis

Empty chair . , Delphi technique

• Nominal group technique • Forced combinations

Scamper Learners need to demonstrate that they are able to apply the technique to solve the business-related problem. (8)

Ctiapter 5, Unit 1 35

Activity 2: A n a l y s e and d i s c u s s strategy

LB page 114 : - , ^ . Resources Learner's Book, visual aids, learner's notebook, wall chart Teaching guidelines Divide the learners into pairs before the lesson. Each pair will prepare a lesson/oral on strategy formulation and strategy implementation, with one person presenting each topic. Encourage the learners to use visual aids. At the start of the lesson, ask them to sit in their pairs and present their orals to each other. Learners are to complete Activity 2 in their notebooks. Allow time for feedback and discussion. Display the keywords found in the Learner's Book on a wall chart in the classroom. „ . . .

Answers 1. Setting objectives: The key component of

any strategy statement is to set the long-: term objectives of the organisation.

Evaluating environments: The general economic and industrial environments then need to be evaluated. Setting goals: An organisation must decide on its long-term goals in order to achieve its mission and vision. Using contexts: Based on its overall objectives and an analysis of both internal and external factors, the company must create a specific business or competitive strategy that will fulfill its corporate goals. Analysing performance: Performance analysis includes discovering and analysing the gap between the planned and actual performances of the organisation. Choosing strategy: The best course of action must be chosen after considering organisational

: goals, strengths, potential and limitations as well as external opportunities. (12)

2. Resources Organisational structure • ' Motivated staff ' ' Organisation policies ' Involvement of management Solve ongoing problems Adapt Dynamic and strategic leadership Learners should provide relevant answers that explain the steps. (16)

3. Actual performance can be compared with desired performance. Be able to notice a strategy that is no longer working, and be able to recognise whether it needs to be updated or changed. Evaluation and feedback provides the foundation for successful future strategy formulation. (6)

Unit 2: Types of business strategies and strategic evaluation Teaching guidelines Time allocation: Weeks 9, 10 (6 hours) Introduce the four different types of business strategies. This can be done by referring to the chart in the Learner's Book and briefly discussing the four strategies.

Activity 3: LB page 118

Debate integration strategy

Resources

Learner's Book, flipchart paper, koki pens

Teaching guidelines Ensure that the learners understand the different types of integration strategies, namely: forward, backward and horizontal. This can be done by referring to the diagrams in the Learner's Book. Write the following statement on the chalkboard: 'The cell phone industry is a multinational industry.' Divide the learners into groups of three or four to discuss and complete Activity 3. Allow time for feedback and discussion, v ; Answers Forward integration: occurs when the business merges with its distributors so as to gain control of the direct distribution of goods. This is often achieved by purchasing a franchise or part of a business. (Examples need to be appropriate to the question.) Backward integration: This is a form of vertical integration that combines an organisation with its suppliers in order to reduce dependency. The manufacturers purchase, take over or increase control over their suppliers so that they can have a greater influence over the prices of the raw materials and quality and quantity of supply of raw materials. (Examples need to be appropriate to the question.)

36 Term 1

Horizontal integration: This is the incorporation of businesses in the same field. This strategy can be utilised to reduce the threat of the competition and acquire complementary or substitute goods. The advantage of this is that the business gets an increase in the market share and therefore gets increased sales and profits. (Examples need to be appropriate to the question). Conclusion: Horizontal integration would be the best strategy for a cell phone company to use to grow and develop their profit. (18)

Activity 4: LB page 119

Compare intensive strategies

Resources ;̂ Learner s Book, learner's notebook

Teaching guidelines ~ ' ' '' ' Ask the learners to read the section in their Learner's Books on Intensive strategies before the lesson. Divide the learners into pairs to discuss the various types of Intensive strategies, namely: market penetration, product development, market development and diversification. Allow time for feedback and discussion. Learners are to complete Activity 4 in their notebooks.

Answers Market penetration: The organisation focuses on selling existing products into existing markets. The company does not look for any new customers and they do not develop any new products. (Examples used may vary.) Market development: The organisation tries to sell its existing products into new markets. The product remains the same while the business tries to expand the market to which they sell their products. (Examples used may vary.) Product development: The organisation tries to introduce new products into existing markets. The market or customer base remains the same while the business changes or brings in new products into the market. (Examples used may vary.) (12)

Activity 5:

LB page 120

Expla in diversif ication strategies

Resources Learner's Book, learner's notebook

Teaching guidelines Facilitate a class discussion on the term 'diversification'. What do the learners understand diversification to be? Learners are to complete Activity 5 in their notebooks. Allow time for learners to compare and discuss their answers. Answers 1. 1.1 C

1.2 B - - V -<:^..-- .

1.3 A ' ( 6 ) 2. Learners need to provide an example showing

how the business adds new products or services that are unrelated to existing products, but may

' appeal to existing customers. (2) 3. Learners need to provide an example showing

how the business adds new products or services related to existing products that will appeal to new customers. (2)

Activity 6: D i s c u s s diversif ication strategies

LB page 122 ;

Resources

Learner's Book, flipchart paper, koki pens

Teaching guidelines Facilitate a class discussion on the strategies which could be used to diversify or expand a market. Divide the learners into groups of three or four to ' discuss and complete Activity 6. Answers Any two of the following strategies could be followed (ensure that the examples used are in context with the question): • Market development: '

Look at new regions for marketing, by expanding to a global market or a different region, e.g. using internet to market globally

- Improvements to packaging material or changing the way products are packaged, e.g. packaging crisps in tubes rather than plastic packets for better transportation.

- Changing pricing policies so that the market is expanded and reaches a larger variety of people, e.g. lower prices so that a lower income bracket can afford the product.

- Changing the way the products are distributed to reach a different market, e.g transport the products by sea so that they can reach further destinations.

Chapter 5, Unit 2 37

Additional sales staff: The company can employ more sales staff to promote more of the products in the hope that more products will be sold. Develop new performance incentives: The more staff are motivated, the more productive they are and the more profit the business is likely to make. Staff are likely to be more motivated and productive if the business develops new ways to incentivise them for good performance. Devising new policies: Policies that describe the business s culture and how it operates should be revised. It is often good to get staff involved as this encourages them to buy into the proposed strategies and creates a happy working environment. (12)

Activity 7: A n a l y s e and d i s c u s s intensive strategies

LB page 124

Resources Learner's Book, learners' notebook, wall chart -

Teaching guidelines - . Facilitate a class discussion on the importance of evaluating strategies and making recommendations for improvement. Learners are to complete Activity 7 in their notebooks. Allow time for feedback and discussion. Display the keywords found in the , / Learner's Book on a wall chart in the classroom.

Answers ^ ' a ; 1. Intensive strategy:

Advantages: Lots of different ways that intensive strategies can be implemented. Some of the strategies can have a large impact

with a small amount of capital input. Can fit into long-term vision of company. ^ Disadvantages: Often does not have a large enough impact. It can be expensive to develop new products. Can be labour intensive and place extra strain on staff. (6)

2. Examining the underlying bases of an organisation's strategy: It is essential to understand why the organisation chose the strategy they did. This will give more detail and information on the actual effectiveness of the strategy. Comparing expected results with actual results: Every organisation should set targets and, although they will have an idea of what they want to achieve, it is essential for them to measure what they actually achieved against these expectations. This will evaluate part of the success of the strategy. Taking corrective actions to ensure that performance conforms to plans: I f the performance is constantly less than expected,

s the organisation must carry a detailed analysis of why this is so. The organisation must ensure that their targets and expectations are realistic and that the organisational potential is discovered and matched to these. (12)

38 Term 1

EXAM PRACTICE MEMORANDUM

CHAPTER 5 LB page 126

Section A Question 1 1.1 B 1.2 B ^ - ' 1.3 C - . , = , (6) Question 2 . , . . 2.1 C 2.2 G 2.3 K . - , 2.4 A 2.5 E • -2.6 L 2.7 B --'^ -2.8 J -c.^ : 2.9 1 2.10 H 2.1 1 D ^ 2.12 F - - - (24)

[30]

Section B Question 3 * 3.1 PESTLE analysis: A P ESTLE analysis looks

at each of these external factors and assesses whether there will be a positive or negative impact and to what extent the impact will affect the business. SWOT analysis: A SWOT analysis discusses: — The strengths of the business — The weaknesses of the business — The opportunities that the environment

may provide — The threats that the environment may

provide (4) 3.2 Power of supplier: Access to suppliers and their

control over you and prices. Power of buyer: Number of buyers and their ability to influence prices. Competitive rivalry: The power of the competitors (the number of them and their ability to control your market). Threat of substitution: The ability of someone else doing or selling what you do, better or differently. Threat of new entry: How easy it is for new businesses to enter into your market. (10)

[14]

Quest ion 4 , 4.1 Intensive Strategies . . , . . (2) 4.2 Market penetration is using an existing

product in an existing market ( / / ) and market development is using an existing product in a new market. ( / • ) (4) Any relevant example. - i . ; , : : , - ; : . ,. (2)

4.3 Product development (2) 4.4 Concentric diversification

The organisation adds new products or services that are related to existing products and which will appeal to new customers. Horizontal diversification The organisation adds new products or services that are unrelated to existing products, but which may appeal to existing customers. Conglomerate diversification The organisation adds new products or services that are unrelated to existing products, but which may appeal to new groups of customers.

(6) (16)

Section C Quest ion 5

Example introduction The process of strategy formulation involves six main steps: setting objectives, evaluating environments, setting goals, using contexts, analysing performance and choosing strategy.

Each of these processes should be carefully followed when formulating and implementing a business strategy. There are many benefits and advantages for businesses when following each of these processes. (Any other relevant introduction related to the formulating and implementing a business strategy.)

(any 3 x 1 = 3 ) Formulation 1. Setting objectives: The key component of

any strategy statement is to set the long-term objectives of the organisation.// The objectives define the destination of the organisation while the strategy defines the journey. • / These are based on the vision and mission of the company. / /

2. Evaluating environments: The general economic and industrial environments then need to be evaluated. / / This includes reviews of the

Exam Practice Memorandum 39

organisation's competitive position and existing product line. This is to make sure that the factors necessary for competitive success can be discovered so that the management can identify their own strengths and weaknesses as well as those of their competitors. / /

3. Setting goals: An organisation must decide on its long-term goals in order to achieve its

' mission and vision. / / An example would be at least 10 per cent sales growth every year. / /

4. Using contexts: Based on its overall objectives and an analysis of both internal and external factors, the company must create a specific business or competitive strategy that will fulfill its corporate goals. / / An example would be using niche-marketing strategies. / • Each department must create specific strategies analysing macroeconomic trends. / /

5. Analysing performance: Performance analysis includes discovering and analysing the gap between the planned and actual performances of the organisation. / / A critical evaluation of past performance, present condition and the desired future outcomes must be done. / / An attempt must be made to estimate the probable future condition if the current trends persist. / /

6. Choosing strategy: The best course of action must be chosen after considering organisational goals, strengths, potential and limitations as well as external opportunities. / / The company then implements the business strategy by taking specific steps. / / These steps could include partnerships or price adjustments. / /

(Two marks per fact and two marks per discussion and/or example.) . . _ , (max 16)

Implementation: 1. Resources: Use the available resources creatively.

/ / Allocate and plan for an appropriate implementation budget.

2. Organisational structure: Develop an organisational structure that includes a management plan. / /

3. Motivated staff: Leadership and management need to motivate staff to carry out plan effectively and efficiently. / /

4. Organisation policies: Develop and follow organisation policies that support the implementation strategy. / /

5. Involvement of management: Management needs to be 1 OO'Mi on board and supportive of the implementation of the strategy. / /

6. Solve ongoing problems: Solve problems and challenges as and when they appear through active involvement and creative thinking. / /

7. Adapt: Adapt where necessary. / • , 8. Dynamic and strategic leadership: Make sure

that the business has the appropriate leaders guiding the way. / / A '

(Two marks per fact and two marks per discussion and/or example.) (max 16

Example conclusion In order for businesses to improve productivity and improve profits, they need to put careful strategies in place. These strategies involve careful and strategic formulation and implementation. (Any other relevant conclusion related to formulating and implementing a business strategy)

(any 1 x 2 = 2] (Content maximum 32 marks]

E s s a y marking grid

Maximum Marks CONTENTS Introduction 3 x 1 = 3

Maximum marks 32

Body Maximum marks 32

Conclusion 1 x 2 = 2

Maximum marks 32

Contents (Total) 32 INSIGHT Layout (L) 2 Analysis (A) 2 Synthesis (S) 2 Originality (O) 2 LASO (Total) 8 TOTAL 40

Additional guidelines for using LASO when marking essay questions

For each component of LASO (layout, analysis, synthesis and originality), where all

' requirements are met, allocate a maximum of 2 marks. Where some requirements are met, allocate 1 mark. Where requirements are not met at all, allocate 0 marks.

• Marks should be awarded where a component of LASO is relevant in more than one subtopic.

TOTAL MARKS: 100

40 Term 1