2021

BUSINESS MANAGEMENT 3A
Exam
BMNG7311

BACHALOR OF COMMERCE IN DIGITAL MARKETING

 Question 1

The five tests for a winning strategy include the goodness of fit test, the competitive
advantage test, the performance test, the social impact test, and the environmental system
test.

Goodness of fit test:

This test assesses how well a strategy fits the organisation’s situation. In order for an
organisation to be sustainable, there needs to be a strategic link/ conceptual fit between both
the internal and external environments. This link can be achieved by using either an inside-
out or outside-in perspective (Louw & Venter, 2019).

Competitive advantage test:

This test assesses whether strategy is helping the organisation achieve a competitive
advantage. If the competitive edge over rivals is larger, it will result in the competitive
advantage being more sustainable (Louw & Venter, 2019).

Performance test:

This test assesses whether strategy is resulting in above-average organisational

performance by means of adding value. Above-average profit gains, an increase in
competitive strength and market standing, and financial strength are all indicators (Louw &
Venter, 2019).

Social impact test:

This test assesses whether strategy is contributing towards the expectations of stakeholders
(Louw & Venter, 2019).

Environmental system test:

This test assesses whether strategy is contributing towards the protection as well as the
sustainability of natural resources in addition to the ecological system (Louw & Venter,
2019).

Question 2

Q2.1 Five sources of competitive intelligence include primary information, observation of

competitors facilities and operations, reverse engineering competitive products and
mystery shopping, publicly available information, and institutional information.

Primary information: this information can be obtained from customers,

competitors’ employees, regulators, and other stakeholders. This can be in the form
 of either structured or unstructured interviews. For example, as a means of
gathering information, some organisations might conduct ‘job interviews’ with the
former employees of competitors (Louw & Venter, 2019).

Observation of competitors’ facilities and operations:

Establishing the level of activity through observing the facilities and operations of
competitors can be a useful external source of primary information (Louw & Venter,
2019).

Reverse engineering and mystery shopping:

These are also commonly used methods of collecting information about

competitors. For example, contacting a competitor with the purpose of observing
how they operate (Louw & Venter, 2019).

Publicly available information:

Publicly available information available from the press, on the internet, as well as
marketing information from competitors. For example, a product brochure can serve
as a secondary external source of information. Consumer complaints, blogs, and
online customer reviews are all possible sources of useful information regarding
competitors (Louw & Venter, 2019).

Institutional information:

Institutional information within the public domain. For example, another source of
secondary external information is the patent office and registrar of companies
(Louw & Venter, 2019).

Q2.2 The complexities reflected by the information required for strategic decision making
are:

 Proactive decisions are enabled by forward and backward-looking information.

These will direct the organisation in the future.

 In order to align internal resources with external opportunities and threats, the
organisation needs an internal and external focus.

 Strategic decisions need to focus on the ‘big issues’ as it cannot focus on every
single detail.

 Information can be obtained from several different sources. Good strategic

information combines the different types of information from these various
 sources in order to develop a ‘big picture’. This ‘big picture’ is of the
organisation’s environment and its place within that environment.

 Information is not objective. Depending on their personal characteristics and

goals, different managers may interpret the same information differently. Thus,
the interpretation of information has both a political and a cognitive component
(Louw & Venter, 2019).

Question 3

Q3.1

Q3.2

Q3.3 The four perspectives of the balanced scorecard.

Financial perspective: this perspective is based on financial performance which

provides the ultimate definition regarding the success of an organisation. The
question asked here is: ‘how do we appear to our stakeholders?’ This is because the
objective of every organisation is to deliver maximum value to their stakeholders
(Louw & Venter, 2019).

Customer perspective: the question asked here is, ‘how do we appear to our
customers?’ In order to survive and grow, organisations need to have the ability to
deliver quality goods and services which will satisfy the needs of customers.
Measures such as satisfaction, growth, and retention are all indicators of customer
success (Louw & Venter, 2019).

Internal business processes: subsequent improvements in customer and financial

outcomes can be the result of identifying the key business processes at which an
organisation must excel in order to meet customer expectations and strategic goals.
The question asked here is, ‘what must we excel at?’ (Louw & Venter, 2019).

Learning and growth perspectives: with this perspective the focus is on the root
causes of competitive sustainability and describes how technology, people, and the
organisational climate can be combined in an effort to support the strategy. The
question asked here is, ‘how can we continue to improve and create value?’ (Louw &
Venter, 2019).
 Question 4

The capability life cycle suggests that capabilities, such as products and industries, are
vulnerable to both internal and external forces which can cause them to evolve, and it builds
on the idea of dynamic capabilities. Founding, development, and maturity are three stages of
capability evolution. These capabilities may potentially branch out into other ones, or they
may ‘die’ and other capabilities will replace them (Louw & Venter, 2019).

Question 5

Q5.1 Six political-legal risks that management should be aware of are:

 The government nationalisation of industries.

 The inadequate protection of intellectual property rights.

 Unfair competition from the public sector.

 An absence of the rule of law.

 The expropriation of property in addition to private sector assets.

 Government intervention with regards to business operations and activities (Louw

& Venter, 2019).

Q5.2 Four examples of technological developments with vast commercial potential are:

 Genetic engineering.

 Robotics and continuous advancement in artificial intelligence.

 Genetically modified food products.

 The manufacturing of electric and self-driving vehicles (Louw & Venter, 2019).
 Question 6

Porter’s five forces model includes the following five forces, the rivalry between existing
competitors, the threat of new entrants, the threat of substitutes, the bargaining power of
buyers, the bargaining power of suppliers. This framework is fairly valuable at the level of
strategic business units whereby the focus is on an individual industry. Within the five forces
framework pressure on one force could potentially trigger a change or shift within other
sources of competition, as these forces are interrelated as opposed to being independent
(Louw & Venter, 2019).

When looking at the competition within an industry, there are four basic forms, these include:
monopolies, perfect competition, oligopolies, and hypercompetition. Within the banking
industry, the type of competition seen is oligopolistic competition, with just a few large banks
dominating the market (e.g. ABSA, FNB, WesBank, Standard Bank, Discovery Bank etc.).
Thus, competition is concentrated (Louw & Venter, 2019).

The degree of rivalry between existing competitors

Competitive rivals can be seen as organisations with similar products and/or services which
target the same customer groups. Under the degree of rivalry between existing competitors,
there are numerous factors which influence this level of rivalry, these include: the number
and size of competitors, the rate of industry growth, fixed costs or perishable products,
switching costs and differentiation, high exit barriers, diverse strategies, and expansion
(Louw & Venter, 2019).

The threat of new entrants

Incentives for competitors to enter a market are created whenever an industry becomes
profitable. However, the success of these entries is dependent on the existing barriers to
entry within the industry. These barriers to entry include time, economies of scale, control of
distribution channels, good relationships, legal restraints, capital cost of entry, retaliation,
and differentiation (Louw & Venter, 2019).

The threat of substitutes

Substitutes can be defined as the products or services which customers within an industry
can turn to as those products or services satisfy the same basic need. These substitutes
normally take the form of new business models or new technologies, and there are three
types of substitution which include product-for-product substitution, generic substitution, and
substitution of need (Louw & Venter, 2019).
The bargaining power of buyers

The relative bargaining power of customers/ buyers can potentially impact the prices that
competitors in an industry can change. The less powerful a buyer, the more freedom
competitors have to charge high prices. On the other hand, if the buyer is more powerful, the
ability of competitors to charge high prices or to raise them, will be negatively impacted. The
determinants of the bargaining power of buyers are, switching costs, backward vertical
integration, buyer concentration, ratio of purchase price to total cost, and information (Louw
& Venter, 2019).

The bargaining power of suppliers

The relative bargaining power of suppliers plays a role in determining the supplier
opportunity cost. Input prices, and thus the profitability of competitors is affected by this. The
determinants for this force are, forward vertical integration, switching costs, dependence on
a single industry, lack of substitutes, and supplier concentration (Louw & Venter, 2019).

Question 7

Accounting for up to 60% of electric car sales in the first 3 quarters of 2019, Tesla has
become one of the most popular electric car manufacturers in the world. Tesla was quickly
put ahead of the competition by not only providing customers with an electric car that meets
their needs but by also being the first to make use of a cost-effective motor and a powerful
battery which could run almost 250 miles on a single charge, all whilst maintaining the
acceleration and top speeds comparable to traditional sports cars (Innovative Automation
Inc, 2020). Within the following essay the determinants of resource value as well as how
valuable the Tesla vehicle drivetrain is as a resource to Tesla, will be assessed and
discussed.

When determining the value of a resource, there are certain determinants which need to be
considered. These factors/ determinants include: the degree to which the resource/
resources are a feasible source of competitive advantage, the degree to which this
competitive advantage is sustainable as time goes on, the degree to which the organisation
has the ability to appropriate the returns which have been generated by the resource/
resources, and the degree to which these resources could be exploited for the purpose of
future growth (Louw & Venter, 2019).
References

Louw and Venter. eds. 2019. Strategic management. Towards sustainable strategies in
southern Africa. 4th ed. Cape Town: Oxford University Press Southern Africa.

Innovative Automation Inc. 2020. Exploring Tesla’s unique electronic vehicle drivetrain.
Innovative Automation, 11 September 2020. [Online]. Available at:
https://www.innovativeautomation.com/exploring-unique-electric-vehicle-drivetrain/
[Accessed 19 April 2021].