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Strategic Management Has Played an Important Role in Corporate South Africa's Response to the Global Recession

Essay by   •  May 17, 2011  •  Term Paper  •  1,347 Words (6 Pages)  •  2,431 Views

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1. INTRODUCTION

Strategic Management is defined as the "systematic analysis of the factors associated with customers and competitors (the external environment) and the organization itself (the internal environment) to provide the basis for rethinking the current management practices. Its objective is to achieve better alignment of corporate policies and strategic priorities" (BusinessDictionary, 2011)

The global recession had a fundamental impact upon the world economy and has subsequently changed the external environment to such a degree that this has led to most organisations reviewing their internal environments in order to take advantage of a changing market place. Jack Welsh said "business strategy is less a function of grandiose predictions than it is a result of being able to respond rapidly to real changes as they occur. That's why strategy has to be dynamic and anticipatory." This dynamism is leadership driven and forms the basis of a successful defence to changes in the external environment. Therefore the major factors that impact the effects of strategic management are leadership and innovation.

2. LEADERSHIP

The tone of strategic management is ultimately determined by the leadership, which devise the overall strategy in terms of the organisation's objectives. Until recently strategic management has focused on planning and efficiencies but has now shifted its focus to knowledge management and guidance. This shift defines the future growth and long-term health of an organisation in terms of product or service innovation and market viability. Strategically, it also creates market differentiation which is of strategic value in a global economy where markets are no longer fully defined by geographical or chronographic boundaries. Strategic management is about ultimately about surviving in the volatile business environment, and consists of two phases:

* Strategic planning - the process through which strategies are devised that will enable the organisation to reconcile its resources with the threats and opportunities created by technological innovation, a borderless world, virtual businesses, globalisation, intense competition, work ethics etc.

* Strategy implementation and control - focuses on the execution of these strategies by coordinating and integrating all the resources and functions of the organisation to ensure that the selected strategies lead to competitive advantage.

3. STRATEGY INNOVATION

The global recession "forced" leadership in South Africa to re-evaluate their business models and to provide a mechanism to incorporate strategy change within their organisations. "This is strategy innovation and is the capacity to re-conceive the existing industry model in ways that create new value for customers, wrong-foot competitors, and produce new wealth for all stakeholders."(Doz and Hamel, 1998) Innovation is one of the primary means by which companies can achieve sustainable growth and companies that ignore these pressures do so at their own risk. "Companies innovation strategies are often inadequate to accommodate the highly complex and uncertain nature of these new demands across the economy and social spectrum as a whole, partly due to an excessive focus on the firm or industry" (Hall and Vredenburg, 2003) . A strategy that integrates the goals of innovation and sustainable development is needed to ensure sustainable competitive advantage, rather than conventional, market-driven innovations approaches. Sustainable development innovation (Hall and Vredenburg, 2003) is in fact driven by science that has yet to be accepted fully by the scientific, political and managerial communities, and the industry sector. To be truly considered strategy innovations, new products and initiatives that alter a firm's business model must first turn a consistent profit, a fundamental necessity of both Porter's (Porter, 1980) and Barney's (Barney, 1996) models. Strategy innovation can be an incremental change, which involves minor changes to the firm's business model, resources and capabilities, or it can be a radical change, as when a firm decides to make a positioning shift, and market its existing products and services to new customer groups. Strategy innovations can occur in any part of an organisation: customer service, marketing, advertising, selling, production or distribution. "Successful strategy innovations have one thing in common: They result from discovering new ways to create value for customers, as measured by bottom-line results to the sponsoring company." (Tucker, 2001)

4. THE SOUTH AFRICAN ENVIROMENT

The threat of global recession had a devastating effect on international markets as well as some of the most vibrant world economies but to a large extent these effects were not as damaging on the South African economy as some

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