College of

Accounting
Sciences
Department of
Management
Accounting
University of
South Africa,
Pretoria

Open Rubric
 PART TOPIC CHAPTERS
PART A The strategy process 1
PART B The organisational 4&5
ecosystem
PART C Generating strategic 2, 3, 7 & 9
options
PART D Making strategic 6&8
choices
PART E Strategic control 10 & 11
PART F Digital strategy MAC4866

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Introduction

Dear Student

A sincere welcome as a registered student of the module ENTERPRISE

STRATEGY. We trust that studying the tutorial matter will not only be interesting
and stimulating, but will also provide new knowledge and insights that will stand you
in good stead in your career and future studies.

Before starting your studies, it is important that you take note of the important
aspects which follow below.

General objectives of this module

This module will be useful to strengthen and deepen managers' and aspiring managers'
knowledge of enterprise strategies in organizations. It will also serve as preparation for
writing various papers at CIMA. The study material has been designed to equip you to
• integrate skills across functions, though it concentrates on developing the
knowledge and skills used in designing and implementing strategy
• develop strategy in a context by understanding in depth how the organization’s
external environment and stakeholders affect strategy development
• implement strategy by making sound theoretical judgements in choosing the right
tools and techniques associated with change management
• apply tools to assist in the evaluation of the performance implications of a given
strategy

In setting the tutorial matter and assignment questions for this module, particular attention
was paid to the general objectives of tuition at postgraduate level. Independent research
on your part, and working out answers to assignment questions, should provide sufficient
exercise to broaden your knowledge, develop your ability to think critically and identify
and solve problems and help you prepare for the CIMA examinations.

Learning outcomes of this module

Your undergraduate studies provided you with adequate background knowledge. In this
module, MAC4863, we will help you to expand this knowledge by giving you the
opportunity to gain insight in the important field of managing financial and management
information.

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 On this level (NQF 8) it is believed that you should have mastered the following:

• the ability to deal with unfamiliar concrete and abstract problems and case studies
using evidence-based solutions and theory-driven arguments.
• the ability to present and communicate information and opinions in well-structured
arguments, showing an awareness of audience and using academic/professional
discourse appropriately.
• a capacity to operate in variable and unfamiliar learning contexts, requiring
responsibility and initiative.
• a comprehensive knowledge of enterprise Strategies in organizations.

Prescribed literature

The prescribed book for this module is:

CIMA Study Text: E3 Strategic Management. Latest publication. Kaplan Publishing. The
student may not need to make use of the textbook, considering how this Tutorial
letter was prepared.

You can access additional online resources associated with the CIMA Official books, via the
EN-gage website at: www.EN-gage.co.uk.

Refer to the inside of the cover page of the prescribed books for detailed guidelines on
how to access these online resources, where you will also find the unique pass key
(behind the scratch-off panel).

These tutorial letters are only wraparound “guides” for this module, so it is imperative that
you buy the prescribed textbook(s) listed above.

Supplementary literature

You are required to use the prescribed study material as the core and basis of your studies
and when answering assignment and examination questions. Thereafter you can use
supplementary literature as additional and/or complementary sources.

Visit the official CIMA Global website www.cimaglobal.com and click on the “Students”
tab for additional resources and material.
2021

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CIMA verbs

Please be aware that CIMA places great emphasis on the definition of verbs. These verbs
will be used to guide students when answering assignment and examination questions.
Verbs used include:

• List – As it says, just provide a list. Each of the items on your list should be expressed
in terms of a full sentence for clarity, but there’s no need to go any further than
that.
• State – Again, pretty obvious. Just say what you need to say in a fairly concise
manner. No need to explain or clarify, unless you think that what you’ve written isn’t
clear.
• Define – This is really asking for a dictionary or textbook definition, but your own words
can be used instead. Asking you to define something is simply a test of memory – a
pretty low-level skill – but if you use your own words you’re actually doing ‘describe’ or
‘explain’, which is fine.
• Describe – A straightforward ‘what it is’ statement. Think of it as the next step on from
‘list’ or ‘state’. However, you might need a short paragraph, rather than a single
sentence, depending on how complex or technical the issues are.
• Distinguish – One or more lists. You can only distinguish between things, so there
needs to be two or more things given in the question. The trick here is only to list the
features of each of the things that make them different from each other.
• Explain – A tricky one. Quite often examiners ask you to explain something but get a
description instead. Think of it this way – if you are asked to describe a dog, it's easy:
Furry animal, four legs, goes ‘woof’. Now explain a dog. See what I mean? You need
more guidance as to what approach to take, or you need to decide on your own
approach. It’s not possible to explain what a dog is, but it’s easy to explain why people
keep dogs as pets, or how a dog may be trained. If you’re asked to explain something,
use a paragraph: Write a sentence that makes your point, then write another to explain
why the first sentence is so, or the consequences of the first sentence. If your point
still isn’t clear, write a third sentence that makes it clearer.
• Identify – To do this, it’s really necessary to have a scenario. It’s not really application
of your knowledge, but more a selective use of it. Think of ‘identify’ as meaning ‘explain
in this situation’. Go through what you’ve learned and pick out only the bits that apply
to the situation described in the question.
• Calculate – Obvious. Do the maths.
• Analyse – Now we’re starting to get into the really difficult stuff. This is asking for a
series of detailed explanations, often opinions rather than facts, each with an
illustration (if appropriate). Think about ‘analyse the published accounts’: Calculate
some ratios, explain what you think they mean, relate them to each other, relate them
to the context of the question. Alternatively, what about ‘analyze the variances’? The
same set of steps? I think so.
• Compare and contrast – Fairly obvious – an explanation of the similarities and
differences between two (or more) things. Compare and contrast a dog and a cat?
They’re both furry animals, but one goes ‘woof’ and the other ‘miaow’.
• Discuss – This is a tricky one. In order to discuss something, there needs to be an

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 ‘argument’. In other words, you need two or more differing or opposing viewpoints.
Also, any discussion should, if possible, end in a conclusion. Think about advantages,
disadvantages, conclusion. Or: reasons why, reasons why not, conclusion. Or: maybe
this, maybe that, conclusion. Can you ‘discuss’ one viewpoint? Sure. Examiners often
ask you to ‘discuss the advantages of’. Does that mean you have to do the
disadvantages as well? No. Simply go through the advantages, saying whether they
apply in this situation, or whether they’re each a major advantage or a relatively minor
one.
• Advise – Tell them what you think they could, or should, do. Construct a good,
comprehensive argument that leads to one or more options for the owners or
managers (normally) to consider pursuing.
• Evaluate – The second of our ‘top level’ verbs, and another tricky one. Think of
evaluate as a higher level ‘discuss’. It might mean calculations, but it might not. You
can say how valuable something is in qualitative terms, as well as monetary. This is
easier to illustrate than to explain, so I’ll give an example later.
• Recommend – Just that. Tell them what to do. Often, when recommend is used in an
exam question, it’s the last requirement. If there are three requirements (a, b and c),
you might find that part (a) says ‘explain’ or ‘identify’, part (b) says ‘discuss’ or
‘evaluate’, and part (c) says ‘recommend’. Are these the three stages of the
recommend answer? I think so. If you get an exam question that asks you to
recommend, without any preceding requirements to identify and evaluate, you need
to do a series of things: identify and explain any reasonable options, evaluate each,
conclude and recommend. Once again, notice how you are breaking a high- l e v e l
verb down into a series of steps, using verbs from lower in the hierarchy.

Test your understanding

The prescribed textbooks provide comprehensive examples, practical applications, as well

as a wide range of case study type questions on each topic with suggested solutions. It is
important that you work through the examples to compare your answers with the
suggested solutions. Please avoid the situation where you merely look at the suggested
solutions and then assume you understand them ‒ unfortunately it does not work like this
in the examination!

Note that your answers to questions in your textbooks should not be submitted for
assessment and correction. These questions are there to assist you in your studies.
Should you encounter problems answering them, this will be an indication that you do not
have the necessary knowledge on the subject matter.

Assignments and examination

Questions in assignments and examinations may require you to integrate material from
different parts of the syllabus. Analysis and integration form an important part of studies
at postgraduate level.

Conclusion

We trust that the preceding sections will assist you in approaching your studies in the
module MAC4863 methodically and with greater understanding. Some of the literature and
questions in this module will obviously be unfamiliar to you, and you will meet new

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concepts, but by the end of the module you will realize that you have not really moved
beyond the framework of the preceding guidelines.

Finally, we trust that you will enjoy doing this module. All the best with your studies. MAC4863

Lecturer

PART A:
The strategy process

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CONTENTS

PART A: Evaluating strategic position and strategic options (18%) ...................9

LEARNING UNIT 1: The strategy process ............................................................................ 10
SUB-UNIT 1.1: Introduction – organisational ecosystem and value creation ......................... 10
SUB-UNIT 1.2: The purpose of strategy ...............................................................................15
SUB-UNIT 1.3: Levels of strategy .......................................................................................... 16
SUB-UNIT 1.4: Approaches of strategy ................................................................................. 18
SUB-UNIT 1.5: Perspectives to strategic planning ................................................................. 20
SUB-UNIT 1.6: The role of the management accountant ....................................................... 23

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PART A: The strategy process (18%)
The purpose of this learning unit is to determine the processes involved in strategic formulation,
the roles and responsibilities of the board of directors and the chartered management accountant
in strategic formulation, and understanding the ecosystem in which the organisation exists.

It is important that you go through all the “test your understanding” exercises in the prescribed
book.

Learning outcomes
After studying this topic, you should be able to:

• define and explain the purpose of strategy

• discuss the types and levels of strategy
• outline the rational and emergent processes of arriving at strategy
• describe and discuss the value creation process.
• discuss the business ecosystems and identify players in each category of the ecosystem
applied to the context of each organization and its unique circumstances

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TOPIC 1: The strategy process

This learning unit consists of the following sub-units:

SUB-UNIT 1.1: Introduction – the organisational ecosystem and value creation

SUB-UNIT 1.2: The purpose of strategy
SUB-UNIT 1.3: Levels of strategy
SUB-UNIT 1.4: Approaches to strategy
SUB-UNIT 1.5: Perspectives to strategic planning SUB-
UNIT 1.6: The role of the management accountant

SUB-UNIT 1: Introduction – the organisational ecosystem and value creation Learning

outcomes

At the end of this unit, you should be able to

• discuss an organisational ecosystem and components of the ecosystem

• explain and discuss how the UN Sustainability Development Goals are integrated in
strategy
• analyse the ecosystem and be able to advise how an entity should develop its strategies
based on the analysis
• explain the components of the value creation process
• discuss the importance of stakeholders in the value creation process.
• discuss and recommend non-market strategies that an entity may employ in a situation

Business strategy has been an evolving subject over the years. Strategy as a word was borrowed
from war, so basically strategy should be viewed as a way in which businesses combat their rivals.
For an organisation to come up with the most appropriate strategy for its business, it must
understand the ecosystem in which it exists. A business ecosystem is the network of organisations
(including suppliers, distributors, customers, competitors, government agencies, and so on)
involved in the delivery of a specific product or service through both competition and cooperation.

To fully have a detailed understanding of what a business ecosystem is, one should think of an
organisation and the environment it lives in (internal or microenvironment, market environment
and external or macro environment).

Business ecosystems differ from entity to entity, and for an entity to be able to design and
implement a proper strategy, it must have a sound understanding of its own ecosystem. We shall
look deeper into the organisational ecosystems as we cover the units which follow. For now,
essentially we should understand the importance of the ecosystems and the fact that these
ecosystems influence, and are influenced by, business decisions and activities.

Important in the business ecosystems is the identification of various stakeholder groups

associated with each category of the ecosystem. Since there are three environments in the
business ecosystem, we also need to identify the various stakeholder groups in each of these

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environments/categories.

The core contributors are the primary stakeholders, sometimes referred to as the internal
environment of the entity (these have contracts with the entity), thus those who directly influence
and are directly influenced by the business’ activities. This will also include management and
employees of the entity. A supportive business ecosystem is one which also has favourable
conditions in terms of the factor markets.

The extended enterprises are those players with no contract with the entity but their behaviour or
the behaviour of the entity is important to either party. Regulatory bodies, supplier of suppliers,
environmental bodies are an essential consideration. Businesses today are regarded as people,
thus each business is a juristic person with rights, obligations, and responsibility within the
community it lives. One should consider what businesses are expected to do within the community
as well. For instance, entities are expected to comply with the United Nations Sustainability
Development Goals, which must be considered in strategy by entities.

WWW.UN.ORG

As businesses consider the ecosystem in the development of its strategies, it becomes mindful of
the essential components which must be taken into consideration to acquire business success.
The extended enterprises are also known as the market environment.

The business ecosystem or external environment plays a very crucial role as the players in this
environment bring about Opportunities and Threats to the entity. The entity has no control of the
factors that may emanate from the external environment, though they may influence through what
we call NON-MARKET STRATEGIES.

Discussion Activity 1 (for student participation and interaction)

https://www.mtn.com/wp-content/uploads/2020/03/MTN-Integrated-report.pdf

Based on the above MTN integrated report, you have been appointed as a strategic
management consultant for MTN. You are required by the board to explain what the
organisational ecosystem is and further discuss the ecosystem that MTN is exposed to.
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 Your discussion is supposed to include ethical considerations and the application of the
UN SDGs. (50 marks)

Please post your answer in the discussion forum on myUnisa under the heading Discussion Activity 1. Please
apply your own understanding to the factors; do not just copy and paste the factors as they are presented in
the study material.

Solution guide

In answering such a question, you need to first establish the verbs that have been provided
to you. The question requires you to EXPLAIN (organisational ecosystems) and DISCUSS
(MTN ecosystems). The first part of the question is theory based, thus an explanation of
organisational ecosystems. The second part of the question is based on the application of
the scenario. MTN’s ecosystems are to be considered with the ethics consideration as well
as suggested in the last sentence. These ethical considerations should include the
application of UN SDGs.

Also consider the way to write such a question. Clearly this is an essay, meaning that it
would require an introduction, a body, and a conclusion. Let us highlight the three (3)
components of an essay.

INTRODUCTION: The introduction is guided by whether the essay question is

scenario/case based or a generic question based on theory. In this case, the question is
double barrelled, and where a question is double barrelled, we develop our introduction
as a scenario-based question. An example of a good introduction would be as below.

Organisations in the modern business environment find themselves exposed to overly complex
environments known as ecosystems (OPENING STATEMENT). Organisational ecosystems can
be defined as networks of organisations that are overly dependent on each other through
collaborations, partnerships and competition, to mention just a few forms of relationships inherent
in an ecosystem (DEFINITION OF KEY TERM(S)). MTN finds itself exposed to various
stakeholders which make up its ecosystems (DIRECTION STATEMENT).

A good introduction would require an opening statement. The purpose of the opening
statement is to lure the marker to love reading your work. You would also need to define
key terms; in this case our key term is organisational ecosystems. Lastly, the direction
statement is meant to show the examiner/marker that you know the journey you are taking
them on. There will be a difference between a case-based direction statement and a generic
direction statement, since the case-based one mentions the entity in question.

The body is the write-up of what is required. To write a good body, one must separate each
point in one paragraph. Firstly, this question requires an explanation of organisational
ecosystems which should be answered first. The second part should be discussing the
application of the company’s (MTN’s) ecosystems. You should use joining words (such as
also, furthermore, moreover, more-so, etc.) as you write your paragraphs.

A conclusion is dependent on the verb(s) in question. There are two types of conclusions,
i.e., a generic conclusion and a conclusive conclusion. In the former, you should not
assume your own judgement on the subject, but in the latter you should conclude by
giving your own judgement. The verbs, which may require a conclusive
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conclusion, include EVALUATE, ANALYSE, ASSESS, etc. In this case, your conclusion
should be generic.

Non-market strategies

This refers to an organisation’s relationship with its non-market environment, such as

governments, regulators, charities, pressure groups and the public at large. The non-market
participants bring about factors of the external environment, thus the PESTEL factors.

The organisation may try to influence these groups using corporate political activities such as:

• Lobbying: In politics, lobbying, persuasion, or interest representation is the act of lawfully

attempting to influence the actions, policies, or decisions of government officials, most
often legislators or members of regulatory agencies. Businesses may lobby through
making offers to the government or by trying to shed more light to policy makers on how
the economy may benefit if the policy makers make policies which support the business
and its strategies.
• Offering directorship to politicians and civil servants, which may facilitate business deals
for the entity. This, however, has come under deep ethical scrutiny in many countries
across the globe. In South Africa in particular, businesses with an association with
Politically Exposed Persons (PEP) no longer get support from the government and
financial institutions and if one is to operate a business in the South African context, this
strategy might not be especially useful to implement.
• Influencing public opinion may also be a good tool for the business, and whatever the
public supports, is normally what policy makers must go with. An entity may employ
services of a public relations officer or use of the media.
• Donations to political parties may also help an organisation in influencing political parties
to back the companies’ course. Clicks at some point, due to its negative publicity, had
to back the EFF to gain support from the EFF and its subscribers, thereby regaining
traction.
• Setting up trade and other associations is an essential part of business operations. Trade
associations are an informal type of association that businesses develop with other players
within the ecosystem. These associations are essential to provide insights and facilitate
business deals. Exposure is gained through connections as well as many types of
associations.
• Direct legal action may be useful when an entity has been targeted by government or
political parties and other bodies within the non-market environment. This, however, may
result in further tension and might be unwise in economies where political and other
reforms are not so favourable. In many African economies the judicial system is captured
by the ruling parties. In South Africa, however, our constitution clearly sets a divorce
between the judiciary and the state and state has no control over the judicial process.
• It is essential that, in all cases the organisation considers the ethical implications of the
corporate activities it wishes to undertake and its applicability or usefulness in the
economy in question.

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Mastering the knowledge of the business ecosystem is essential to a business to enable it to create
value for its stakeholders. One needs to apply the knowledge of the ecosystem to the nature of the
business to identify the stakeholders that matter to the business. Primarily any organisation needs
to create and capture sustainable value for the organisation and its main stakeholders
(shareholders in the context of a profit driven entity). To do this, an entity needs to have knowledge
of its VALUE CREATION PROCESS and the knowledge of all other influential stakeholders. For
an entity to capture value for itself, it must first deliver value to other stakeholders due to the
interdependence of parties within the organisational ecosystem. As the entity adds value to other
parties within the ecosystem, the parties within the ecosystem will help the entity achieve its own
goals.

Discussion Activity 2 (for student participation and interaction)

Ndanduleni PLC is a global fast-moving consumer goods (FMCG) entity that has its primary
listing on the JSE and secondary listings on the NYSE and the LSE. As an entity, it has
been affected negatively by many challenges, including the effects of the pandemic. From
a practical perspective, considering the ecosystem of the organisation, discuss the non-
market strategies Ndanduleni may employ to gain a competitive advantage where
necessary. (20 marks)

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Please post your answer in the discussion forum on myUnisa under the heading Discussion Activity 2. Please
apply your own understanding to the factors; do not just copy and paste the factors as they are presented in
the study material.

Solution guide

The question requires a discussion of non-market strategies that Ndanduleni can employ
to gain a competitive advantage. This question requires an integration of theory
(knowledge of the non-market strategies) and a practical application of the non-market
strategies to the company’s situation. Not discussing a practical application in terms of
the entity’s situation will result in the student earning less than 33% of the marks, since
more marks are awarded for application than for theory.

Non-market strategies
• lobbying
• appointing politicians as directors
• direct legal action
• influencing political opinion
• donations to political parties

www.cimaglobal.com

Summary

In this learning unit we covered the organisational ecosystems and the value
creation process. Students were introduced to the components of the ecosystem
and components of the value creation process as well as the United Nations
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Sustainability Development Goals. It is essential that students understand how the
discussions in this Learning Unit affect the development of organisational strategy.

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SUB-UNIT 2: The purpose of strategy

This learning unit offers an understanding of why strategy is important to the

organisation’s success. We also look at the drawbacks of strategy. You are expected
to

• explain the advantages and disadvantages of strategy development

• advocate a case for and against strategy development

The term “strategy” has different meanings for different people, making it almost impossible to
come up with only one definition. However, CIMA defines strategy as:

A course of action, including the specification of resources required, to achieve a specific objective.

The purpose of strategy is a set pathway or direction to the entity’s objectives so that the entity
may have knowledge of where it is going and how to get there. A business cannot afford to merely
operate without a sense of direction or without a sense of where it is going. The importance of
strategy in business can never be overemphasised. Many business executives and non-executive
directors spend many hours in strategic meetings which consume most of their time. Strategy lies
at the heart of businesses because the key decisions of the businesses emanate from strategy.
Strategy is a broad term that can further be divided into many facets, such as operational strategy,
financial strategy, information strategy and risk strategy etc.

Strategy can be a formal or informal process in an organisation and the organisation has to choose
its approach to strategy. An entity may also apply a mix of approaches to its strategy to acquire
maximum results in the strategy process.

The following are some advantages of formal strategic planning (long-term planning):

➢ identifies risks by forcing managers to look ahead

➢ ensures no strategic drift
➢ easier for business to raise capital
➢ helpful for less skilled/experienced managers

The following are some disadvantages of formal strategic planning (long-term planning):

➢ too rigid (stifles innovation)

➢ bounded rationality (key issues may be missed)
➢ time consuming and slow, which is a major problem in fast moving industries
➢ expensive

Summary

In this learning unit we covered the purpose of strategy. Students are expected to understand
the advantages and disadvantages of strategy development.

Discussion Activity 3 (for student participation and interaction)

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As a newly appointed head of strategy at Madzvova Ltd, you have been asked to present a
report to the board, detailing the purpose of strategy. (20 marks)

Please post your answer in the discussion forum on myUnisa under the heading Discussion Activity 3. Please
apply your own understanding to the factors; do not just copy and paste the factors as they are presented in
the study material.

Solution guide

This is a theory-based question which requires no application at all. The only tricky part in
the question is the knowledge of how to write a report. The format of a report is as follows:

1. Report title
2. Date
3. Audience (addressed to who?)
4. Introduction
5. Write-up

Report structure and content are the important components of any report, and since this
module is a business-related module, the use of sound business English is also essential for
success in the exam or assignment.

This question counts 20 marks, covering the purpose of strategy. Consider carefully how to
write this question by also outlining the importance of strategic planning.

Solution points

• strategy sets out a direction for a business

• it helps in anticipating the future
• it helps in understanding the organisational ecosystem
• it provides the business with a way to navigate the ecosystem and the ability to
manipulate knowledge of the ecosystem
• it helps the business to manage its risks well
• it assists an entity to build a competitive advantage
• it helps to remove uncertainties

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SUB-UNIT 3: Levels of strategy

This learning unit focuses on the levels of strategy and what each of the levels entails.
It also looks in detail at the examples of strategies that are covered in each level.
Students are expected to:
• discuss the various levels of strategy
• develop and advise what strategies should be developed at every level of strategy
• analyse what strategy is being used and the level of such strategy

Figure 1 : Levels of Strategy

Corporate
strategy
What business should we be in?

Business strategy
Tactics to beat the competition

Functional strategy
Operational methods to
implement tactics

Source: MN Mupa (2020)

There are three levels of strategy. Functional level strategies (sometimes referred to as operational
strategies) are those strategies that explain the day-to-day operational processes of a business.
They are lower-level strategies to ensure that the daily operations of the entity are well structured
and that no flaws are present in the operation process. These strategies explain what is required
in operations to achieve the higher-level strategies. In principle, the functional strategies are the
last to be developed since they are dependent on what is required at a business level. A corporate
or business level strategy will only succeed if it is supported by an appropriate operational strategy.

Business level strategies are sometimes referred to as generic strategies. They are focused on
how an organisation can compete in its chosen markets and how each strategic business unit
should operate. Business level strategies ensure that the business is competitive and facilitate a
level of differentiation in comparison to the entity’s rivals. Business level strategies create a brand
for the entity, so that customers may observe its real value. To be successful these strategies should
be supported by matching operational strategies and business tactics.

Corporate level strategies define the business sector and markets in which the organisation

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 should operate and how it should diversify and plan. Business strategy addresses the competitive
operations, whereas corporate strategy is concerned with the identification of rivals. Business
strategy specifically refers to the operational plans a business should employ to achieve its
objectives within a particular business sector.

Discussion Activity 4 (for student participation and interaction)

http://www.sharedata.co.za/data/000647/pdfs/SHOPRIT_ar_jun20.pdf

Based on the Shoprite Integrated Report, above, you have been appointed as a senior
manager in the management accounting department and have been tasked to write a report
to the board discussing the strategies that Shoprite has employed and possible strategies
it can further employ at all levels of strategy. (50 Marks)

Please post your answer in the discussion forum on myUnisa under the heading Discussion Activity 4. Please
apply your own understanding to the factors; do not just copy and paste the factors as they are presented in
the study material.

Solution guide

This is a case-based report which requires identification of the strategies employed by

Shoprite. To be effective in answering the question, the strategies need to be identified in the
form of their levels, i.e., tactical strategies, business strategies and corporate strategies.
When answering a case-based question like this one, it is vital to quote the source of the
information to substantiate your point.

Considering the strategies identified from the case, propose other strategies that Shoprite
may employ. You should also use the three levels of strategy in your proposal.

SUMMARY
This learning unit covers the various levels of strategy. Students should be able to identify and
develop strategies at each level of the entity.

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SUB-UNIT 4: Approaches to strategic planning

In this learning unit we explore the various approaches to strategy development and
attempt to identify the best approach for a situation. Students are expected to

• explain the approaches to strategic planning

• assess a situation and propose the best approach strategy for the particular
situation

There are four different approaches to formal strategic planning. The approaches are (1) Top-
down approach, (2) Bottom-up approach, (3) A combination of the top-down and bottom-up
approaches, and (4) Team approach.

1. Top-down approach

In a centralised company, this planning is done by the top management of the corporation and the
divisions are informed of the operations directly. In a decentralised company, the CEO or the
president may provide the divisions with guidelines and request their inputs. After reviewing by top
management, the suggested plans are accepted or returned to the divisions for modifications.

2. Bottom-up approach

The top management provides no guidelines to the divisions, but requests them to submit plans.
Such plans may contain information on:
(i) major opportunities and threats
(ii) major objectives
(iii) strategies to achieve the objectives
(iv) specific data on sales/profits/market share sought
(v) capital requirements, etc.

These plans are reviewed at top management level and the same process as in the top-down
approach is followed.

3. Mixture of the top-down and bottom-up approaches

This approach practised in most large decentralised companies. In this approach the guidelines
provided by the top management to the divisions are broad enough to permit the divisions sufficient
flexibility in developing their own plans. Sometimes the top management may decide on basic
objectives after dialogue with divisional managers in respect of sales and return on investments,
especially when divisional performance is measured according to these criteria.

4. Team approach

In small centralised companies, the chief executives often use their line managers to develop
formal plans. The same approach is also used by the presidents of a large companies. In other
companies the presidents meet and interact with their groups of executives on a regular basis to
manage all the problems facing the company. By doing this, the group can develop written strategic
plans. Within each of these approaches, there are many alternatives, for example:

(i) Using a SWOT analysis

In some companies the divisions provide the top management with perceived opportunities and
threats as well as the strategies required to exploit opportunities and avoid threats.

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 (ii) Depth of analysis
Some companies do not use in-depth analysis of all aspects of planning at the initial stage. They
gradually increase the intensity of analytical exercise as experience is gained.

(iii) Degree of formality

Regarding formality, divergent methods are practiced. Some large companies with centralised
organisational structures, a comparatively stable environment and homogeneous product lines,
planning is less formal. In large diversified companies with decentralised and semi-autonomous
product division structures, planning is more formal. High technology companies usually have
more formal systems, but they recognise informality in decision making and in the managerial
activities associated with planning.

(iv) Reliance on staff

The managers in a company have the choice of deciding the extent of delegation.

(v) Using a corporate planner

Large corporations employ corporate planners to assist in the planning process. Smaller
companies cannot afford this luxury.

(vi) Linkage with plans

(vii) Getting the process started

Strategic planning may start with an effort to solve a particular problem. It may start by applying a
SWOT analysis or simply with a review of the current strategy.

(viii) Degree of documentation

A balance has to be struck between too little and too much paperwork.

(ix) Role of the CEO

The chief executive officer’s role is critical, depending on the degree of complexity of organisations.

Discussion Activity 5 (for student participation and interaction)

There are several approaches to strategic planning. As the head of strategy at

Fhatuwani (Pty) Ltd, you are required to explain these approaches to strategy and
suggest whether there is a best approach. (15 marks)

Please post your answer in the discussion forum on myUnisa under the heading Discussion Activity 5. Please
apply your own understanding to the factors; do not just copy and paste the factors as they are presented in
the study material.

Solution guide

Explain, and suggest whether there is a best approach.

To begin with, there is no best approach to strategic planning and the conclusion to
your solution is a given. The strategic planning approach is situational. If it were a
detailed scenario-based question, you could have a best approach in that situation.

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• top-down
• bottom-up
• mixed
• team approach

Summary

This learning unit covers the four approaches to strategic planning and how each of these
approaches is used by an entity to achieve the best plan for the entity’s strategy.

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SUB-UNIT 5: Types and perspectives of strategic planning

This learning unit identifies the types and perspectives of strategic planning. You
should be able to

• explain the perspectives to strategic planning

• identify and recommend the best perspective to strategic planning in a particular
circumstance

The types of strategies can be divided into intended strategies and unintended strategies.
Intended strategies (sometimes referred to as deliberate strategies) are strategies that an
entity approaches willingly. Unintended strategies are forced on an entity by market conditions.
Both intended and unintended strategies may amount to realised or achieved strategies, or
unrealised or unachieved strategies. The entity may decide to approach their strategic plans by
employing different perspectives.

5.1 The traditional approach/rational model

This approach is used to first determine who the organisation’s stakeholders are and what their
objectives are. before strategies are planned. It is called the rational model, since it is a deliberated
process that considers the organisation’s environment or ecosystem prior to any plan being
designed. This approach is followed in this syllabus. The traditional or rational model may take
time to construct, but it has more benefits than drawbacks.

Source: Strategic Management

CIMA official study text

5.2 A market-led or positioning approach

This approach first considers the markets and competitors before strategies are planned. The
positioning approach is based on understanding whether the entity is a market leader or a market
follower, and strategies are developed to either defend that position or to find a better position
within the market, depending on what the entity’s objectives may be.

5.3 A resource-based or competence-led approach

This approach considers what the organisation is especially good at, i.e., what gives it an
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advantage over other organisations. The resource-based view focuses on the entity’s internal
environment, i.e., the entity’s resources, competencies, and all its internal strengths. This
approach maintains that the entity should always employ strategies for which it has a capacity.

Study the information on this topic in your prescribed textbook and complete the “Test your
understanding” exercises.

5.4 The emergent approach – Mintzberg

Research done by Mintzberg in 1987 proposes that little of the strategies followed by organisations
in the real world are as deliberately planned, as the rational model would suggest. They are rather
a blend of planned strategy and unanticipated emergent strategy. The dictionary definition for
emergent is a process of becoming something.

The emergent approach is based on the continuous scanning of the external environment, where
the entity seeks to identify the issues in the environment and capitalise on that.

5.5 Logical incrementalism

Incrementalism argues that formal planning is a waste of management time and, instead, the
organisation should adopt strategies that are small-scale extensions of past, successful strategies.

In this less formal approach, small and slow changes are made, rather than once-off changes.

5.6 Freewheeling opportunism

In this less formal approach opportunists ignore any formal planning, instead taking advantage of
opportunities as they arise.

Strategic planning for not-for-profit organisations (NFP’s)

Not-for-profit organisations have their own objectives, which are normally concerned with the
efficient use of resources. The strategic planning process can be more complex for NFPs since:

➢ multiple objectives are hard to prioritise

➢ objectives are more difficult to measure – usually non-financial
➢ influence/objectives of funding bodies
➢ recipients of the service are not the ones who pay for it

One way to address this problem is to use the “three E’s approach” of the Audit Commission to
measure performance: effectiveness, efficiency and economy.

Effectiveness
The skill to select suitable goals and achieve them. Doing the right things.

Efficiency
The skill to make the best use of available resources in the process of achieving goals. Doing things
right.

Economy
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 Keeping costs down.

Study the information on this topic in your prescribed textbook and complete the “Test your
understanding” exercises.

Discussion Activity 6 (for student participation and interaction)

Give a detailed explanation of the different perspectives to strategic planning. (15 marks)

Please post your answer in the discussion forum on myUnisa under the heading Discussion Activity 6. Please
apply your own understanding to the factors; do not just copy and paste the factors as they are presented in
the study material. Please apply your mind and present this on your own understanding and do not copy and
paste.

Points to consider:

• traditional/rational approach
• resource-based view
• position/market approach
• freewheeling opportunism
• emergent approach
• incrementalism

Summary

The study unit explores the various perspectives to strategic planning in detail and the way that not-
for-profit entities are managed. The learning unit also gives a practical understanding towards the
application of the perspectives to strategic planning.

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SUB-UNIT 6: The role of the management accountant

This study unit provides an understanding of how the management accountant fits
into the strategy process and how organisations can make use of the services of a
management accountant. You should be able to

• explain what the management accountant does

• explain the importance of the management accountant in the
strategy process
• advise in a scenario how a management accountant can be of
value

In this section the role of the management accountant in helping to develop the organisation’s
strategy is discussed. Traditionally the management accountant provided internally orientated
information to management. However, with strategic management accountants the emphasis is
placed on information which relates to factors external to the organisation, as well as non-financial
information and internally generated information.

The strategic management accountant’s role is different to that of a traditional management

accountant, as it is more forward looking and has a more external focus.

The strategic management accountant will produce information as needed by management to

help support their business decisions. This may include (but is not limited to):

➢ competitor analysis
➢ customer profitability analysis
➢ product decisions – pricing, portfolio analysis, brand analysis
➢ investment decisions – acquisitions, disposals, mergers, strategic management systems.

Study the information on this topic in your prescribed textbook and complete the “Test your own
understanding “exercises.

Discussion Activity 7 (for student participation and interaction)

As a management accountant at mMangwiro PLC, describe your role in helping

support business decisions. (25 marks)

Solution guide

This is a description type of a question. Therefore, it must be aided with practical

examples. You must formulate your own scenarios.

Points to consider:

• pricing and product portfolio decisions

• analysis of acquisitions and disposals
• customer analysis
• competitor analysis
• activity-based management (ABM)
• business process re-engineering/analysis
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• Value analysis/engineering
• Investment, financing, and dividend decisions.

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Summary

This learning unit explored the importance of the management accountant in the strategic
management process.

THE END

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