ABERDEEN BUSINESS SCHOOL

FOR UNIVERSITY USE

PG Coursework Assignment
ONLY

Number: 0914106 Surname: WOOD Forename: HENRY

FT

Course: MBA (OIL & GAS) MGT X

Date Due: 05/1/11 Extn Granted FOR UNIVERSITY USE ONLY

Module No: BSM 2536 Module NAME : Strategic Management

Coursework (e.g. CW1, CW2, CW3): Module Co-Ordinator: Yvonne Turner

Notes

DECLARATION

I Confirm…

(a) The work undertaken for this assignment is entirely my own and I have not made use of any unauthorised assistance.

(b) The sources of all referenced material have been properly acknowledged.

(c) A statement of word count is included on the front of my work.

(d) I agree that an electronic copy of my coursework may be requested and made subject to random testing.
(e) I have read all notes in this document.

Signed: Henry victor wood Date: 14/3/11

EXTRACT – Academic Regulations, Section A3 Student Conduct, Appeals and Complaints

WORD COUNT -

STRATEGIC MANAGEMENT COURSE WORK 1 Page 1

INTRODUCTION

A careful analysis of the case material highlights several issues which can
be hinged on two critical forces acting simultaneously (Hax & Majluf,
1984a). These two opposing forces, emergent and deliberate seem to
have largely and jointly contributed to the success of the organization
despite its divergent leanings and paradoxical nature. It can be argued
that this strategic paradox(s) that the company embraced guided it with a
sense of direction, flexibility and most importantly, a responsive attitude
to changes in the external environment (Hax & Majluf, 1984a; Mintzberg
& Water’s, 1985). So what strategy did Pep adopt, one might ask? It is
difficult to answer such a question knowing the inherent contradiction and
paradox that characterizes effectiveness in organizations (De Wit &
Meyer, 2004). This essay also recognizes the contradiction in the
adoption of a competitive strategy of resource based view of the firm by
Pep (inside out strategy) as well as the market based strategy (outside in
strategy) based on the constantly changing external environment and the
need to achieve a fit and adaptability with the external forces of
control(Mintzberg,1979). Peter Drucker’s strategic use of questioning
(cited in Dale, E.Z.2010) such as: who is the customer? Where are
customers located, what does the customer want, how do we find out
what the customers want? etc seem to have generated the right strategic
answers with improvement and value addition for the customers of Pep,
harnessing and integrating marketing, financial, operational, human
resource and change management strategies . These questions, as this
essay will highlight, depicts a fine and all inclusive theory that holds a
balance of the strategic tensions in the case study (De Wit & Meyer,
2004).

It can be argued that Pep’s growth and expansion in the rural heartland
was as a result of a business model targeting a huge population which is
at base of the income pyramid. It is therefore logical to conclude that the
apartheid era business environment brought a measure of stability and
ease of prediction as to how and what the market will be like for Pep’s
target group. Pep thus rode on the back of an external marketing
environment that brought with it immense opportunities for its chosen

STRATEGIC MANAGEMENT COURSE WORK 1 Page 2

market, thus becoming a dominant player or seeming monopoly.
However, changes in the external market environment during the 90’s
presented great challenges and difficulties/disadvantages for the company
necessitating a change and adjustment of the corporate strategy to reflect
the change in the environment (Lynch, R. 2000). The political climate
lacked stability and certainty; the socio-economic factors were all fragile.
Another key element that threatened Pep’s business model was the shift
in demographics resulting in rural urban migration and change in
customer taste and behaviour. This change will also affect its store
location strategy as well.

Looking at the organization, decisions made internally had not taken

cognisance of the external environmental considerations. Moreover, the
main weakness in a new environment was the Pep Brand which needed to
reflect on the new operating environments taste and style. Generally, the
organization exhibited weak links in its value chain and financial
performance. The main strengths of the company can be seen as its
dominance in the target market with its store network as well as the
experience and vision of its management team who can scan the
environment and come out with strategic decisions that can aid the
company to effectively compete in a new environment.

The competitive environment in the post apartheid era shows an

oligopolistic new market environment of stiff competition and intense
rivalry.

STRATEGIC ISSUES AND DIRECTION

From the case material, Pep is faced with an issue of change and an
adoption of a turnaround strategy, which it implemented through the
adoption of internal and external marketing strategies. Its internal
strategy was the appointment of new management who set out a new
vision, mission and values thus reflecting a change in long term objectives
and goals. Broadly speaking, its new internal marketing strategy was
premised on the assumption that, in order to achieve the new vision of
delighted customers and address the decline in sales, the firm needed to
project and reflect a satisfied employee (George, W.R.1997). Pep’s new
management thus recognised that with this new internal marketing
strategy, the retention and motivation of high quality staff is very ‘critical
in situations where the quality of service is the only differentiating factor

STRATEGIC MANAGEMENT COURSE WORK 1 Page 3

between competitors’ (Ahmed & Rafiq).Its thinking turns to lean towards
a prescriptive and rational perspective, than an emergent and generative
perspective of strategy(De wit & Meyer,2010; Lynch,R.2000).The rational
reasoning perspective stresses on the importance of ‘data gathering on all
development external to the organization’’ to identify specifically the
threats and opportunities(De wit & Meyer,2010). It is therefore logical
and capable of real insights into the problems of an organization and
focuses on the major issue that the company needs to address’’ (Lynch,
R.2000) Pep’s prescriptive and rational leanings provide an overview and
objectives and summarize the demands on resources. However, writers
such as Mintzberg have described as ‘dangerous’ the assumption that the
prescriptive and rational approach holds, and rather proposes and
champions the emergent approach. Moreover, it is ‘entirely unrealistic to
expect board members at corporate level to sit and watch companies
potter along as they wish’ (Lynch, R.2000) as Mintzberg advocates.
Although Pep’s strategic thinking leans towards a more prescriptive and
rational approach, there are instances in the case material that also
suggests an embrace of creativity such as the creation and invention of
the corporate culture (Liedtka, 2000).Another issue in its internal
marketing strategy discussed above seeks to create more satisfied
customer- contact employees who value ‘clearly the logic and benefit of
courteous, empathetic behaviour when dealing with customers, thus
reflecting on the greater ‘customer delight and satisfaction’ vision
proposition by Pep. The strategic tool for achieving this, as noted by Berry
& Parasuraman (1991) is the treatment of employees as customers.
Grunroos, C. (1981) extends the internal marketing strategy to customer
orientation by emphasizing on customer oriented and sales minded
personnel due to the interactive marketing nature of contact – employees.
Grunroos thus emphasized on the importance of not only developing a
motivated personnel to perform better, but to instil a sales minded
culture in them as it is identified in Pep’s mission statement and the
Sikhula Kunye culture in the achievement of its R1bop Strategy. This
motivated and evoked customer consciousness, market orientation and
sales mindedness of its personnel by the application of internal marketing
–like activities (Grunroos, C. 1985).

Internal marketing at Pep and the role it plays as a vehicle in the

implementation of strategic aims and objectives is captured by
Winter(1985) as ‘aligning, educating and motivating staff towards
institutional objectives, the process by which personnel understand and
recognise not only the value of the programme, but their place in it’’ as
shown at Pep. All this indicates the steps that the new management is

STRATEGIC MANAGEMENT COURSE WORK 1 Page 4

taking to gradually refocus the strategic position and goals of the
company to ensure growth and profitability.

Glassman & McAffee (1992) adds another dimension by seeing IM as a

holistic integration process of managing multiple and cross functional area
of the organization and as a philosophy for managing the organisational
human resources and other segments such as team management and
ensuring an atmosphere of continuous development(Torrington &
Hall,2008) and standards of performance . Pep’s migration from the old
era business model (targeting coloured people) into a new era definition
of its business model(embracing all races ) thus needed an internal
marketing strategy to act as a change management vehicle for
implementation of its new and explicit mission as well as overcoming
change resistance as noted by Ahmed & Rafiq (1993). This cross
functional management is seen with the adoption of a functional
organisational structure by Pep with a centralised strategic control and
clear mandates (responsibilities).However, this functional organizational
structure has its disadvantages such as difficulty in coordination,
encouragement of inter-functional rivalry, slow pace in implementing of
change(Lynch,R.2000).Bartol & Martin (cited in Senior & Fleming, 2002)
defines it as a ‘ formal pattern of interaction and coordination designed by
management to link tasks of individuals and groups in achieving
organizational goals’ and should have the strategy – structure relationship
in responding to environmental forces. The structure of
departmentalization on regional divisions, as some argue, would have
been the obvious choice to take as regional managers would be close to
conditions in a locality (Senior, 2002).

Organizational change processes are represented by two extremes (as

noted by (Lynch, R.2000; Johnson & Scholes, 2008; De wit & Meyer,
2010) and other writers, who all seem to agree that the environment is
the leading cause of strategic change in many organizations. The change
strategy adopted by Pep, giving the new competitive landscape and socio
cultural change in the environment, seems to have tilted towards a slow /
adaptive and evolutionary organizational change (Lynch, R.2000; Johnson
& Scholes, 2008). This approach is in line with the preference by most
organizations due its lower cost of implementation and lesser disruptions.
Additionally, such an incremental approach builds on skills and beliefs and
is more likely to be understood and win commitments (Johnson &
Scholes, 2008) Other writers have also advocated for organizations to be
‘ambidextrous’ by adopting both evolution and revolutionary path to
change (Tushman & O’Reilly cited in De wit & Meyer, 2010), but this

STRATEGIC MANAGEMENT COURSE WORK 1 Page 5

approach will prove to be ‘incompatible once a form of change has been
chosen and will limit the ability to simultaneously use the other’. From the
essay outlined above, it is noted that the IM strategy adopted by Pep
synthesizes several phases of employee motivation and satisfaction,
customer orientation and focus as well as cross functional coordination
which forms a cohesive force in the realization of its new mission, vision,
and value and change strategy. However, there are drawbacks
/disadvantages of this strategy, such as: a) employees can be coerced
due to the contractual nature of employment, b) unlike the external
marketing, the “product” the employees are sold may be unwanted by
them, or possess negative utility.

Leadership style has also been identified as a strategic issue in the case
material. Its importance has been stressed by many writers such as
Mintzberg (1979) and Senior & Fleming (2006) .Pep’s new decision
making structure and customer oriented philosophy required skilled
managers like Labuschaigne. The second level of leadership change that
occurred with the appointment of Steyn as manager, focused on return of
asset and growth. There are arguments that define leadership in terms of
possessing universal (personal and cognitive) characteristics and that
predicts their performance level. Labuschaign’s ‘people’ personality
proved him to be a competent leader, but can be questioned in the face of
new challenges. In contrast, the cognitive approach to leadership offers a
broad framework where other variables such as (strategy, peer, task etc)
can be taken into account in analysing organizational outcomes and
leadership styles. Leaders can adapt their leadership styles to their
prevailing situations as organizations continually achieve external and
internal adaptation (Schein, 1998; Fiedler, 1967).

Strategic control is an important issue identified in the case. This involves

the monitoring of plans, activities and results (Goold & Quinn, 1996). This
is a rational procedure providing information for triggering strategy
modification or strategic reorientation or tactical adjustment (Lorange, et
al, 1986). Pep’s external marketing and brand reposition strategies asked
rational questions such as: a) Do we have enough merchandize to run the
promotion, b) Have we got point of sales support for the promotion etc.
Additionally, the company put up surveillance of the environment and
received feedback concerning how effective these strategies are.

STRATEGIC MANAGEMENT COURSE WORK 1 Page 6

STRATEGIC ORIENTATION

The paradoxical nature of strategy, and as shown in the case covers

several different approaches to the strategic alignment of the organization
with the environment. As the situation dictates, organizations can focus
on either competitors or customers or ‘perhaps attempt the difficult task
of simultaneously monitoring both with equal emphasis’ (Heieus,R.A
2000). There are 4 approaches according to Heieus,R.A to strategic
orientation, broadly termed as ‘customer preoccupied’, ‘marketing
warriors’, ‘strategically integrated’, and ‘strategically inept’. Writers such
as (Drucker, 1954; Keith, 1960; Levitt, 1960) cited in Heieus(2000) have
long advocated for customer satisfaction as the sole aim of every
business. However, this advocacy (concept) has been reduced to an
article of “faith than a practical business management” (Day, G.S.1994)
thus prompting research on marketing concepts (Jaworski & Kohli, 1993;
Narver & Slater, 1990). Although a broader research perspectives have
been done, “practitioners maybe influenced to operate with a strong focus
on competition” (Reis & Trout, 1996 cited in Heieus, 2000). On one part,
Pep’s orientation tends to focus on organisational culture that has a “far
reaching effects on the firm with the most important aspect of it being the
“fundamental shared set of beliefs and values that put the customer at
the in the centre of the organizations thinking about strategy and
operations”(Despande & Webster,1989). However, with the external
environment consisting of both customers and competitors as noted by
Kotler(1997), strategies must be developed by the “organization to
generate, disseminate, and use information about both customers and
competitors”(Kohli & Jaworski). Pep’s strategic orientation can thus be
defined as an integrated one, in view of its focus and equal emphasis to
the collection, dissemination and use of customer and competitor
intelligence. Focusing attention on either the customer or competitor in
decision making would have led to an “incomplete business strategy,
leaving the organization handicapped by a reactive posture and biased
picture of reality”(Day & Wensley,1998).With the market approach, Pep
strove to achieve competitive advantage by adopting cost leadership,
differentiation and focus strategies.

These strategies however come with some disadvantages or weaknesses,

such as: a) the ability to be duplicated and remain a trap, cost difference
decline over time. b) Technological changes can nullify past learning
experience .c) the cost of differentiation between low cost competitors
and the differentiated business becomes too great for differentiation to
hold brand loyalty.

STRATEGIC MANAGEMENT COURSE WORK 1 Page 7

In conclusion, this essay has attempted to analyse the case company
(Pep), and the turnaround strategies it adopted from the contraction
phase, consolidation and rebuilding phases. The case company per the
analysis has also shown effective management of strategic paradoxes,
key among which is the embracing of the customer – competitor paradox.
Whilst some argue that it’s corporate culture fostered unity internally,
perhaps it was just good at managing paradoxes, as strategic
management is all about paradoxes and nothing else.

References:

Ahmed, P.K. & Rafiq, M. (2002) Internal marketing: Tools and concepts
for customer focused management. Butterworth –Heinermann. England

Berry, L.L & Parasuraman, A. (1990) Delivering Quality Service. New

York. The free press.

Day, G. S. (1994) The Capabilities of Market-Driven Organizations.

Journal of Marketing.iss 58 pp. 37-52.

Deshpande, R. & Frederick E. W. (1989). Organizational Culture and

Marketing: Defining the Research Agenda, Journal of Marketing,iss 53 pp
3-15.

Drucker, P. F. (1954) The Practice of Management. New York: Harper and

Row Publishers.

De wit. & Meyer.(2010)Strategy: process,content,context.4th ed.Cengage

learning

Glassman. & McAffee, B.(1992) Integrating the personnel and marketing

functions.Business Horizons.iss 35 pp 52-9

Grunroos,C.(1985) Internal Marketing –theory and practice. American

Marketing Association service conference proceedings.pp 41-7 Quotation
from p.42

Jaworski, B. J. & Kohli,A.K.(1993) Market Orientation: Antecedents and

Consequences. Journal of Marketing.iss 57, pp 53-70.

STRATEGIC MANAGEMENT COURSE WORK 1 Page 8

Kotler, P. (1977) From Sales Obsession to Marketing Effectiveness."
Harvard Business Review 55.pp 67-75.

Levitt, T. (1960) Marketing Myopia. Harvard Business Review 38: 45-56.

Lorange, et, al. (1986)

Winter, J.P. (1985) Getting your house in order with internal marketing: A
marketing prerequisite. Health marketing quarterly.iss 3 pp 69-77

STRATEGIC MANAGEMENT COURSE WORK 1 Page 9