Workbook for students

Chapter 17 – Business and Technology Strategy

Updated:
6 Feb 2020 WP Nel

Students’
Guide

Based on METS-3

Based on: ‘Management for Engineers,

Technologists and Scientists’ (METS-3)

Open Rubric
Suggested solution
Chapter 17,

Section 17 A – True/false questions

This question consists of true/false questions. State whether the following statements are true or
false. In your answer book, write down “true” or “false” and provide a brief explanation for your
answer.

Examples (questions and answers)

-

Other True/False questions (without answers)

-
______

Section 17 B – Multiple choice questions

This section consists of multiple-choice questions. In your answer book, write down the number of
the question, and next to it the number representing the correct option, for example ‘17.9 [1]’.

Examples (questions and answers in Part 1)

17.1 Read the following three statements:

a) An organisation’s vision usually states where an organisation wants to be in the
future.
b) Unisa’s vision is: “Towards the African university in the service of humanity”

c) The reason for an organisation’s existence is usually described in its mission

statement.

Which of the above statements is/are correct? (2)

[1] a, b and c
[2] b and c
[3] a and b
[4] b
[5] None of the options (1, 2, 3, or 4) is correct.

METS-3 Workbook, Ch 17 (Updated: 6 Feb 2020) Page 2

17.1 Answer: [1]; a) Correct. METS-2, p. 358; b) Correct; c) Correct. METS-2, p. 359 (2)

______

Other MCQs (without answers)

17.2 Strategic management is the process whereby managers:

a) establish an organisation’s long term direction.
b) establish short term objectives
c) implement chosen action plans.
Which of the above statements is/are correct? (2)
[1] a, b and c
[2] b and c
[3] a and c
[4] a and b
[5] None of the options (1, 2, 3, or 4) is correct.

17.3 Which one of the following is not one of the five competitive forces in Porter’s model for
analysing an industry environment.
[1] Competition between industries.
[2] Threat of new entrants
[3] Bargaining power of buyers
[4] Threat of substitute products or services
[5] Bargaining power of suppliers

17.4 Read the following three statements:

a) One of the steps in the strategic management process is for an organisation to
“select from possible alternative courses of action”.
b) A SWOT analysis is about analysing the strengths and weaknesses of an
organisation and the opportunities and threats in the business environment in
which the organisation operates.
c) Some of the components of the external environment of a business follow:
political and regulatory, social, economic, technological and ecological.
Which of the above statements is/are correct? (2)

METS-3 Workbook, Ch 17 (Updated: 6 Feb 2020) Page 3

 [1] a, b and c
[2] b and c
[3] a and c
[4] a and b
[5] None of the options (1, 2, 3, or 4) is correct.

_______

Section 17 C – short and long questions

Examples (questions and answers)

-
______

Other questions (without answers)

Question 17C.1

List four critical tasks and responsibilities of strategic management. (4)

Question 17C.2

A. Define a ‘mission statement’ and discuss the reasons why a large organization should
have a mission statement. (3)
B. Unisa’s mission statement: “Unisa is a comprehensive, open distance learning
institution that produces excellent scholarship and research, provides quality tuition
and fosters active community engagement. We are guided by the principles of lifelong
learning, student centredness, innovation and creativity. Our efforts contribute to the
knowledge and information society, advance development, nurture a critical citizenry
and ensure global sustainability.” (http://www.unisa.ac.za)
Facebook’s mission statement is: “To make the world more open and connected”.

METS-3 Workbook, Ch 17 (Updated: 6 Feb 2020) Page 4

 Source:
http://www.freemake.com/blog/mark-zuckerberg-quotes-8-remarkable-sayings-of-
facebook-ceo/

Define ‘mission statement’ and discuss the reasons why a large organization should
have a mission statement. (3)

Question 17C.3
Name the steps in the strategic management process (6)

Question 17C.4 (Vision)

A. List four (4) benefits of management with vision (i.e. the reason why management
should have a vision for the organisation). (4)
B. Unisa’s vision is “Towards the African university in the service of humanity.” Briefly
describe the purpose of a vision. (2)
[6]

Question 17C.5 (SWOT analysis)

A. Briefly explain what a SWOT (strengths, weaknesses, opportunities and threats)
analysis is and describe its purpose. (4)
B. Discuss SWOT analysis as a planning tool (5)

Question 17C.6
List and very briefly describe 5 components of the external environment of a company. (6)

Question 17C.7 (also see chapter on marketing)

Explain the link between business strategy and technology strategy. Describe the elements of
a technology strategy and explain how the "first-to-market" and "fast follower" strategies
influence each of these technology strategy components. [10]

METS-3 Workbook, Ch 17 (Updated: 6 Feb 2020) Page 5

Question 17C.8
Differentiate between strategic planning and strategic thinking. (8)

Question 17C.9
a) Briefly describe Porter’s Five Forces Model for industry environment analysis. (6)
or
b) List four of the five forces upon which the nature and intensity of competition in industry
hinges. (4)

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Section 17D – Mini-projects

Question 17D.1 [Industry analysis]

Do an extensive analysis of the current state of any industry of your choice. (e.g. the gold-
mining industry, car industry, energy industry, pump-manufacturing industry and
manufacturing industry.) You must use Michael Porter’s Five Forces Model in this analysis.
This should ensure that part of your analysis is of a strategic nature. You may also use other
tools and methodologies to do this analysis. You may also briefly refer to technological trends
that have an impact on this industry if you want to refer to the technology strategies of
different role players in this industry.

Question 17D.2 [Strategic advice to a coal mining company regarding the emerging
low-carbon economy]
The fossil fuel industry has been under attack for some time by people who are extremely
concerned about climate change. We are seeing the beginning of a transition to a low-carbon
economy – away from the fossil fuel economy. This means that many coal mining and oil
exploitation companies worldwide have difficult decisions to make – whether to continue on
their current trajectories and possibly face further pressure into the future, or to start making
some changes. In short, climate change is a phenomenon that has to be considered in capital
allocation and when fossil fuel miners do strategic planning.

It seems that climate change may be behind some of the decisions taken by a number of
countries and companies – in some cases, climate change may not have been the only
factor. For example, France has indicated that it will stop the sale of petrol and diesel vehicles
by 2040 while the UK has pledged that half of all new cars will be hybrid or electric by 2030.

METS-3 Workbook, Ch 17 (Updated: 6 Feb 2020) Page 6

BP now stands for “Beyond Petroleum”, Glencore has announced the capping of coal
production, South 32 is divesting from its coal assets, Russia has sold off parts of Rosneft,
Saudi Arabia wants to diversify its economy away from oil by selling (privatising) parts of the
state-owned Aramco and various companies, investors and investment funds no longer invest
in fossil fuel stocks and production (Bloomberg, 2016: 7; Boehling, 2019: 51; Fickling, 2019;
Goldthau et al, 2018: 1, 3; Jordans, 2019; Naidoo, 2019; Schwartz, 2016; The Economist,
2017: 13).

There is a risk that the infrastructure required to exploit, process and transport fossil fuels to
markets may become stranded assets. High carbon taxes may result in the non-extraction of
some fossil fuel (e.g. coal and oil) reserves that may otherwise have been economically viable.
Such coal reserves on the balance sheets of coal companies are referred to as stranded assets
(EY, 2015: 43). Companies such as Shell (2018: 6) and Rio Tinto are taking action to reduce
potential stranded assets. Certain investors, such as Norway’s sovereign wealth fund and the
Church of England, are either reducing their investments in such assets or no longer investing in
such assets (Biersheuvel, 2017).

Despite this seemingly negative outlook for coal, 1 160 coal plants are planned or under
construction in 62 countries worldwide and they will need coal for many years to come (Bulbulia,
2019). It is impossible for South Africa’s state owned enterprise (SoE), Eskom to change
overnight from being reliant on coal for the largest part of its energy mix to renewables. It will
take time and other problems have to be sorted out as well, such as that of creating enough
energy storage capacity as intermittent renewables make a bigger contribution towards the
energy mix of the country in the future. This can happen very quickly, however, as illustrated by
the British case. In the UK, where the industrial revolution and mass utilisation of coal started
and where about 80% of electricity was produced from fossil fuels only ten years ago, more
electricity was generated from renewables in the third quarter of 2019 than from fossil fuels
(Ambrose, 2019). The UK has decreased its carbon intensity by 35% over the past ten years
(PWC, 2019). There is also the possibility that the coal miners and coal-fired power stations may
implement clean coal technologies such as carbon sequestration. That will make coal more
acceptable as an energy source.

The management team of a large coal mining company is busy with long term strategic
planning and has contacted you for some advice. At this point in time they are not diversified
across different jurisdictions and mineral commodities. Their core skills are to mine and
process coal extracted from both surface and underground mines.

METS-3 Workbook, Ch 17 (Updated: 6 Feb 2020) Page 7

You may want to include the following in your report:

• Statistics regarding people’s opinions about climate change. How many think it is a
threat to people and the planet? How many demand action from their governments?

• How do you think governments of oil or coal-rich countries (e.g. USA, Australia,
Russia, Saudi Arabia, South Africa, Poland and the Czech Republic) will respond to
demands for climate change? What pledges have they made as part of the Paris
Agreement on Climate Change?

• Define and refer to the EY concept of stranded assets.

• Do you think existing carbon taxes will be increased in future?

• How does the economics of the low-carbon economy compare to that of the fossil-
based economy. Can the world afford renewables?

References

Ambrose, J. 2019. Renewable electricity overtakes fossil fuels in UK for first time. Available at:
https://www.theguardian.com/business/2019/oct/14/renewable-electricity-overtakes-fossil-
fuels-in-uk-for-first-time (accessed on 14 Oct 2019).
Biersheuvel, T. 2017. One of the World’s Biggest Miners is about to go coal-free. Available at:
https://www.bloomberg.com/news/articles/2017-11-10/one-of-the-world-s-biggest-miners-is-
about-to-go-coal-free (accessed on 19 Apr 2018).
Bloomberg, 2016, Risks could make Saudi Oil a slippery proposition. Sunday Times.
10 Jan 2016, p. 7
Boehling, A. 2019. SA’s Energy future - lessons from Germany. Engineering News. p. 51.
Bulbulia, T. 2019. South Africa must continue to invest in coal – Bayoglu. Mining Weekly
Online. Available at: https://www.miningweekly.com/article/south-africa-must-continue-to-
invest-in-coal-bayoglu-2019-09-18
EY 2015. Business risks facing mining and metals 2015-2016: Moving from the back seat to the
drivers’s seat.
Fickling, D., 2019. Wily Glencore earns brownie points in play to green gallery. Sunday Times’
Business Times. p. 24 (24 Feb).
Goldthau, A. & Keating, M.F. eds. 2018. Handbook of the International Political Economy of
Energy and Natural Resources. Edward Elgar Publishing.
James, N. 2019. The Coal Debate. Mining Weekly. Creamer Media. pp. 10-11 (30 Aug 2019).

METS-3 Workbook, Ch 17 (Updated: 6 Feb 2020) Page 8

Jordans, F. 2019. Commodities giant Glencore to cap coal output over climate. AP News.
Available at: https://www.apnews.com (accessed on 19 April 2019).
Naidoo B., 2019. South 32 progresses divestment of coal assets. Mining News. Available at:
https://miningnews.co.za/2019/11/07/south-32-progresses-divestment-of-coal-assets/
(accessed on 7 Nov 2019).
PWC, 2019. The Low Carbon Economy Index 2019: Emissions Relapse. Available at:
https://www.pwc.co.uk/services/sustainability-climate-change/insights/low-carbon-economy-
index.html (accessed on 19 Oct 2019).
Schwartz, J. 2016. Investment funds worth trillions are dropping fossil fuel stocks. The New York
Times. Available at: https://www.nytimes.com (accessed on 19 Apr 2019).
The Economist, 1 April 2017. Coal’s decline: Sunlight over soot. p. 13.

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Section 17E – Case studies

Case 17E.1 ()
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Section 17F – Sources on the world wide web

• What is strategy Michael E Porter - https://www.youtube.com/watch?v=Zq9-JT8moU4

• Good Strategy /Bad Strategy: the difference and why it matters -
https://www.youtube.com/watch?v=UZrTl16hZdk

- - - - End of suggested solutions (Chapter 17) - - - -

METS-3 Workbook, Ch 17 (Updated: 6 Feb 2020) Page 9