Business Studies Grade 12 Term 1 Week 6 2021

Directorate: Curriculum FET SUBJECT AND BUSINESS STUDIES GRADE 12 GRADE TERM 1 WEEK 6 4 HOURS TOPIC BUSINESS STRATEGIES OBJECTIVES OF At the end of the lesson, you should be able to answer the following questions: THE LESSON • Outline/Describe/Explain/Discuss the strategic management process. • Outline/Explain/Discuss steps in developing a strategy. • Apply the strategic management process to solve business-related problems. • Describe/explain/discuss the different types of business strategies. • Recommend/Suggest business strategies to deal with challenges identified from given case studies/scenarios. • Discuss/Elaborate on the effectiveness (positives/advantages) of EACH type of business strategy). • Outline/Explain/Recommend/Advise businesses on the steps in strategy evaluation RESOURCES PAPER BASED RESOURCES DIGITAL RESOURCES • WCED Grade 12 Business Studies Core Notes (2020): Pg. 27 - 38 https://wcedeportal.co.za/eresource/131601 • BSTD Revision for the Final Exam Workbook (2019): Environments https://wcedeportal.co.za/eresource/131726 • Via Afrika Business Studies Grade 12 Learner's Book https://wcedeportal.co.za/eresource/79756 • Platinum Business Studies Grade 12 Learner's Book • Oxford Successful Business Studies Grade 12 Learner's Book https://www.investopedia.com/ask/answers/051315 • Solutions for a Business Studies Grade 12 Learner's Book /what-are-some-examples-horizontal-integration.asp • Focus Business Studies Grade 12 Learner's Book INTRODUCTION Why is it important for you to understand the strategic management process? Businesses operates in a dynamic/changing environment that pose many challenges, but may also offer opportunities. It is therefore important for a business to be aware of any challenges and/ or opportunities that may arise in the different business environments, be it in the micro-, market or macro environment. Business must conduct the strategic management process because by doing that, they will be in a position to respond to challenges and act on possible opportunities. CONCEPTS AND STEP 1: Know your Key concept(s): You are required to know and understand the following concepts and their meaning in SKILLS order to gain a better insight into the content regarding strategy formulation.

https://ultradeep.co.za 2 CONCEPTS: RELATING TO THE STRATEGIC MANAGEMENT PROCESS: that you may encounter and that will enhance understanding of this content. Strategy i) a long term plan of action to achieve a goal or ii) a plan of action to address an opportunity or to solve a problem. iii) business needs a strategy/strategies to achieve its vision and mission. Strategic decisions Decisions normally taken by top management. Strategic management A process which ensures that suitable business strategies are developed and implemented in response to challenges in the business environment. Business strategies An outline of the actions and decisions a company plans to take to reach its business goals and objectives. The strategy defines what the business needs to do to reach its goals, which can help guide the decision-making process. The strategies may be for expansion (i.e., Integration-, Intensive and Diversification strategies) survival or to sustain (Defensive strategies), the business. Dynamic business A business, characterized by constant change, activity, or progress. Challenges A problem/obstacle that can prevent a business from achieving a goal. (Strategies will be developed/implement in response to challenges) Opportunity A time or set of circumstances that makes it possible to do something. Often arises out of challenges faced by business. Vision It is the desired future position of the company. What the business wants to achieve in the long run i.e., the overarching ideal. what you do/the core of the business, and from it come the objectives and finally, what it takes to reach those objectives. Mission Spells out why it the business exists, its reason for being. A Mission Statement defines the company's business, its objectives and its approach to reach those objectives. Integration It is the process of acquiring or merging with competitors, leading to industry consolidation. Vertical integration E.g., Vertical integration- involving businesses at different levels of production but in the same industry i.e., having an alignment, such that the top is directly above the bottom. Horizontal integration E.g., Horizontal integration being at/or involving businesses at the same level of production and in the same industry. https://tvetpapers.co.za

https://ultradeep.co.za 3 Integration strategies Strategies that allow a business to gain control over distributors, suppliers, and/or competitors Development An event constituting a new stage in a changing situation. For example, growing the business by increasing sales, exploring new markets, modifying products or creating new products/services to increase the businesses’ market share. Development strategies Is threefold and focuses on increasing sales/gaining bigger market share through the introduction of existing/modified and/ or new products in an existing market or by entering a new market. Diversification The process of a business enlarging or varying its range of products or field of operation. Diversification strategies These strategies are used to extend the company's product lines and operate in several different markets • STEP 2: Key Content: Make sure you know/understand/are in a position to apply knowledge about the following and pay particular attention to the cognitive demand. The cognitive verbs serve as a guide to how you must respond. Lower and/ or Middle Order Question Middle Order Question 1. Outline/Describe/Explain/Discuss the strategic management 2. Outline/Explain/Discuss steps in developing a process strategy • Refer to WCED 2020 Business Studies Gr 12 Core Notes: • Refer to WCED 2020 Business Studies Gr 12 Core Page: 30. Notes: Page: 30. • The Gr 12 Business Studies textbook issued to you. • The Gr 12 Business Studies textbook issued to you. • Common errors and misconceptions about the strategic • Common errors and misconceptions about the management process: strategic management process: • You must not confuse the steps to be followed in the strategic • You must remember that Development of management process with problem solving steps despite the strategies/ Strategy formulation forms part of the fact that some of the steps may be more or less the same, the strategic management process and cannot be seen finer details differ completely. In fact, problem solving forms in isolation. Business will develop/formulate part of Business Roles and will therefore be assessed in Paper strategies based on the results obtained from the 2, while the strategic management process forms part of environmental scanning (See step 2 and 3 of the Business Environments and assessed in Paper 1. strategic management process.) • This is how the two processes differ from one another: • You must not confuse steps in the strategy STEPS IN STRATEGIC STEPS IN development with steps in strategy evaluation MANAGEMENT PROBLEM (discussed below) or with steps in problem (Paper1 work) SOLVING solving (part of Roles). Both strategy development (Paper2 work) and strategy evaluation forms part of the strategic management process. Note the similarities and https://tvetpapers.co.za

https://ultradeep.co.za 4 1. Have a clear vision, a 1.Identify the addition to the steps under the strategic mission statement and problem. management process and the steps/process of measurable objectives in 2. Define the strategy development/ place. problem. Formulation. 2. Identify strengths/ 3. Identify possible STEPS IN STRATEGY DEVELOPMENT: weaknesses/opportunities/ solutions to the o Application of SWOT analysis/PESTLE/Porter's threats by conducting problem. Five Forces model for environmental scanning environmental scanning. 4. Select the most of the business environments. appropriate o Formulate strategies to meet 3. Use industrial analysis tools alternative. objectives/Develop measurable strategic goals/ available, i.e., 5. Develop an objectives. SWOT/PESTLE/ Porter's action plan. o Implement strategies using action plans, etc. Five Forces model, for 6. Implement the o Evaluation of strategies/Compare the expected environmental scanning. suggested performance with the actual performance/ solution/action Measure business performance in order to plan. determine the reasons for deviations and 4. Formulate strategies to 7. Monitor the Analyse these reasons, etc. respond to the challenges. implementation of the solution/ • Question can range from lower- to middle order in 5. Develop action plan(s), action plan. which case part marks/split marking apply. You including the tasks to be 8. Evaluate the must answer the question in complete sentences done/deadlines to be implemented and refrain from giving vague and/or one word met/resources to be solution. answers. Doing this will ensure that you score full procured, etc. marks for each response. To ensure that you 6. Implement selected adhere to this when making summaries and strategies by studying for test and exams, ask yourself questions communicating it to all like How, Why, What, etc. in order to ensure stakeholders. depth and a complete response. 7. Continuously evaluate strategies in order to take corrective action. Note the similarities and differences between the two. The strategic management process is done to scan both the internal and external environment. https://tvetpapers.co.za

https://ultradeep.co.za 5 Also note that this question can range from lower order to middle order. So, make sure that you are in a position to write full (in depth) sentences like the ones above. In the case of middle order questions e.g., Describe, Explain or Discuss more detail are required in your response because split marking is applicable. The strategic management process is done to scan both the internal and external environment Middle Order Question 3. Describe/explain/discuss the different types of business strategies. • Refer to WCED 2020 Business Studies Gr 12 Core Notes: Pages: 35-38 • The Gr 12 Business Studies textbook issued to you. • https://www.investopedia.com/ask/answers/051315/what-are-some-examples-horizontal-integration.asp 1. INTEGRATION STRATEGIES: 2. DIVERSIFICATION STRATEGIES: o HORIZONTAL INTEGRATION- takes place when a o HORIZONTAL DIVERSIFICATION- business takes control of/ Occurs when the business adds new products /incorporate/integrate with a competitor, that is a or services that are unrelated/ different to similar business(es) at the same level of production existing products, but which may appeal to and in the same industry. existing customers in order to expand market share. Example: One of the most definitive examples of horizontal integration was Facebook's acquisition of Instagram for a reported $1 billion. Both Facebook and Instagram operated in the same industry (social media) and shared similar production stages in their photo-sharing services. Facebook sought to strengthen its position in the social sharing space and saw the acquisition of Instagram as an opportunity to grow its market share, reduce competition, and gain access to new audiences. Facebook realized all of these For example: The Mazda car dealership car through its acquisition. Instagram is now owned by Facebook dealership now offer car financing service to but still operates independently prospective car buyers instead of them going to a bank like Standard bank for financing. o VERTICAL INTEGRATION: takes place when a business o CONCENTRIC DIVERSIFICATION takes control of//incorporate/integrate with another Occurs when the business adds a new product or business(es) who is at a different level of production, service that is related to existing products and but in the same industry. Two types of vertical which will appeal to new customers integration: https://tvetpapers.co.za

https://ultradeep.co.za 6 A) BACKWARD VERTICAL INTEGRATION: This typically happens when the business takes over its supplier. See example below: An example of concentric diversification would be if a smartphone company like Samsung and Huawei began to sell smartwatches o CONGLOMERATE DIVERSIFICATION The business adds new products or services that are unrelated to existing products which may appeal to new groups of customers. • Conglomerate diversification means that a business grows into new products, services and markets. An example is the Virgin Group Ltd. founded by Example: Apple Inc., maker of the entrepreneurs Sir Richard Branson and Hugely popular mobile device, I-phone Nik Powell. Included in the group are, has excelled vertical Virgin Air travel, Virgin trains, Virgin Active gyms, Supermarkets, Virgin integration by doing backward Mobile, and many more! integration by manufacturing the chipset used in its popular device. https://tvetpapers.co.za

https://ultradeep.co.za 7 FORWARD VERTICAL INTEGRATION business combines 4. DEFENSIVE STRATEGIES – there are business with or take over its distributors. Involves expansion three types that you must focus on: of business activities. o DIVESTITURE/ DIVESTMENT The business disposes of/sells some assets/divisions that are no longer profitable/ productive. Businesses may sell off divisions/product lines with slow growth potential or to gain control over the direct distribution of the products. For example: Asian Bank Limited is a Commercial Bank providing branch banking, investment banking, and payment services. The Bank is having a Example: Apple Inc., the company large investment in Land parcels and has also done forward integration by investments in various companies listed on opening its retail stores popularly the local bourses. The Bank decided to known as Apple Stores to sell its entire shore up its capital base to increase its lending capability and decided to divest its product offering. investment in Listed Companies and Noncore assets like land parcels. o RETRENCHMENT - Terminating the employment contracts of employees for operational reasons. Decreasing the number of product lines/Closing certain departments may result in some workers becoming redundant. This was particular. For Example, in 2020 Mining company Samancor Chrome said it will cut close to 2,500 jobs in response to weak chrome prices and power supply problems. o LIQUIDATION - All assets are sold to pay creditors due to a lack of capital/cash flow. https://tvetpapers.co.za

https://ultradeep.co.za 8 - Selling the entire business in order to pay all liabilities/close down the business. - Creditors may apply for forced liquidation in order to have their claims settled - Examples EDCON The massively indebted Edcon, owner of Edgars and Jet, was in a battle for survival before the coronavirus crisis. But the national lockdown which initially has banned clothing sales, may have dealt the company a lethal blow. INTENSIVE STRATEGIES: o MARKET PENETRATION o MARKET DEVELOPMENT New products penetrate an existing market at a low price, A growth strategy where businesses aim until it is well known to the customers and then the prices to sell its existing products in new increase. markets. For example, Willy’s Water Limited originally sold and deliver the water only in the Cape Winelands district, but will now expand its business to For example: when the Coca Cola company sells the new Coca include the whole of the Western Cape. Cola energy drink for an introductory price of R10, but increased the price to R15 once consumers got used to it https://tvetpapers.co.za

https://ultradeep.co.za 9 o PRODUCT DEVELOPMENT A growth strategy where businesses aim to introduce new products into existing markets or modifies an existing product. The example shows Apple Inc.’s product development: Middle Order Question 3. Discuss/Elaborate on the effectiveness (positives/advantages) of EACH type of business strategy). • Refer to WCED 2020 Business Studies Gr 12 Core Notes: Pages: 37 • The Gr 12 Business Studies textbook issued to you. • Common errors and misconceptions regarding the effectiveness of the different types of business strategies o Candidates discuss the type of strategy instead of discussing/elaborating on the effectiveness of the strategy. It is important to understand what the meaning of the word “effectiveness”. So, when asked to discuss effectiveness remember to elaborate on the degree to which the strategy is successful in producing a desired result in other word advantages of the strategy. o The effectiveness or advantages of a strategy is embedded in the reason(s) why businesses use it successfully. Higher Order Question 4. Recommend/Suggest business strategies to deal with challenges identified from given case studies/scenarios • Refer to WCED 2020 Business Studies Gr 12 Core Notes: Pages: 35-37 • The Gr 12 Business Studies textbook issued to you. • See assessments below • Common errors and misconceptions when you deal with case studies. o to provide incomplete quotes or rewrite quotes in their own words from scenarios/ case studies. Please quote in full and do not rewrite quotes in your own words. Quote as is from the scenario/case study! o Another common error is confusing integration strategies with diversification and/or intensive strategies and vice versa. To avoid this type of mistake, make sure that you know the different types of business strategies, reasons why businesses resort to using it and possible examples of how these strategies are used in businesses around you, so that your understanding of this topic is enhanced and solidified. Write down the different categories of business strategies in pencil or in the margin of your question paper when you are confronted. This way you can easily deduce which one are being referred to in the different scenarios or case studies. https://tvetpapers.co.za

https://ultradeep.co.za 10 Higher Order Question Low-, Middle and or Higher Order Question 5. Apply the strategic management process to solve business- 6. Outline/Explain/Recommend/Advise related problems. businesses on the steps in strategy evaluation • Refer to WCED 2020 Business Studies Gr 12 Core Notes: • Refer to WCED 2020 Business Studies Gr 12 Core Pages: 27-38 Notes: Page: 37 • The Gr 12 Business Studies textbook issued to you. • The Gr 12 Business Studies textbook issued to you. • Common errors and misconceptions about the strategic evaluation: o Candidates confused the steps in strategy evaluation with problem- solving steps or with the strategic management process. o You must remember that strategy evaluation forms part of the strategic management process and cannot be seen in isolation. Compare the two sets in two columns to see the see similarities and differences. STEPS IN STRATEGY EVALUATION: o Examine the underlying basis of a business strategy. o Look forward and backwards into the implementation process. o Compare the expected results in order to determine the reasons for deviations and analyse these reasons. o Take corrective action so that deviations may be corrected. o Set specific dates for control and follow up. o Draw up a table of the advantages and disadvantages of a strategy. o Decide on the desired outcome. o Consider the impact of the strategic implementation in the internal and external environments of the business. o https://tvetpapers.co.za

https://ultradeep.co.za 11 ASSESSMENT/ Section A-Type questions ACTIVITIES Question 1 1.1 Complete the following statement: 1.1.1 Chunky Cheese Ltd chose the … integration strategy when they took over Daisy Dairy Farm. (2) 1.1.2 A … is the plan of action used by businesses to solve challenges. (2) 1.2 Choose the description in COLUMN B that matches the term in COLUMN A. COLUMN A COLUMN B 1.2.1 Backward integration A. when a business takes over his competitor B. takes place when a business takes over its supplier. (2) 1.3 Choose the correct option from the ones given below 1.3.1 John, a vegetable farmer, implemented the ... integration strategy when he bought the fruit and vegetable stall that sells his products. A backward B forward C intensive D horizontal Section B - questions Question 2 2.1 Identify the type of defensive strategy that Meje Construction applied in EACH statement below: 2.1.1 Meje Construction sold all their assets in order to pay their creditors 2.1.2 They terminated the employment contracts of many employees to reduce cost. 2.1.3. The management of Meje Construction decided to close their unproductive information technology department. (3x2=6) Question 3 3.1 Read the scenario below and answer the questions that follow. GITA’S UNIQUE CAKES (GUC) Gita’s Unique Cakes specialises in designing birthday cakes. Gita scanned the environment as part of the strategic management process. She only needed a small amount of capital to start her business. Serg Wholesalers is the only provider in the area from whom she buys her baking ingredients. 3.1.1. Explain to Gita how she can apply the strategic management process. Do NOT refer to environmental scanning. (6) 3.1.2 Discuss THREE types of diversification strategies. (6) https://tvetpapers.co.za

https://ultradeep.co.za 12 Question 4 4.1 Read the scenario below and answer the questions that follow. CULLAN’S TRENDY SHOES (CTC) CULLAN’S TRENDY SHOES sells handcrafted leather shoes in Cape Town. The management of CTC opened a branch in North West due to the high demand for these shoes. 4.1.1 Identify the type of intensive strategy that CTC applied. Motivate your answer by quoting from the scenario above. (3) 4.1.2 Outline THREE advantages of intensive strategies for CTC as a business. (6) 4.1.3 Differentiate between the OTHER TWO types of intensive strategies. Not the one identified in 4.1.1. (8) 4.1.4 Advise CTC on the steps they should consider when evaluating a strategy. (8) CONSOLIDATION In conclusion: Given the continuously changing environment within in which businesses operates, conducting the strategic management process is imperative. The development/implementation of growth strategies will enable businesses to stay ahead of competitors and increase their market share, whilst the implementation of defensive strategies may allow businesses to recover from unstable economic conditions. Strategy evaluation enable businesses to keep abreast with changes in the business environments. VALUES • Caring: You are our most important clients in the educational landscape; therefore, it is important that that we provide you with the necessary resources for self-directed study. • Responsiveness: It’s our responsibility to make sure that quality lesson plans are developed timeously and distributed to you. • Competence: After working through the lesson plans you should be able to demonstrate the skills and knowledge acquired, to complete the required assessments tasks successfully. https://tvetpapers.co.za