Changes In Strategy And Strategic Direction In The Last Decade: A Case Study Of Dangote Group

GSBS6060 : Evolution of Strategic Management

The Emergence and Evolution of Strategic Management

Strategic management as a field emerged as an important and distinct discipline in the late 1950s. Back then, it was in an embryonic phase. Even ten years ago, strategic management largely focused on planning, budgets and controls which revolved around financial planning (Karadag 2015). However, now, strategic planning takes into account marketing, human resources, operations management and accounting (Meyer, Neck and Meeks 2017). All of these factors together contribute to the success of the organization as a whole. As a matter of fact, the main aim of strategic planning is to ensure that an organization attains favorable position with respect to its competitors (Greco, Cricelli and Grimaldi 2013). A few years ago strategic management of organizations emphasized on microeconomics. However, the past decade has been characterized by unstable and volatile business environments and economic crises all over the world. As a result, it was deemed important to change strategic management for the betterment of the organizations (Nickels, McHugh and McHugh, 2013). In the essay below, the various changes in strategic management have been discussed that have occurred over the past few years. These changes have also been applied to Dangote Group, and a business analysis of the company has been carried out.

The Dangote Company was established in the year 1981 and focused mainly on the manufacture of cement. However, over a period of time, the company expanded its horizons to other aspects like salt. By the year 1990, the company had become one of the frontrunners in the global cement industry. The company is driven by a vision to become a world class enterprise, by enhancing the quality of life of people around the world and taking into account the interests of their stakeholders (Dangote Cement Plc. 2018). The following paper would study the strategic management and leadership implemented at Dangote Group, by emphasizing on its strengths and weaknesses and practices of strategic leadership implemented by the executives.

According to Hitt and Duane Ireland (2017), the field of strategic management is a relatively new concept which has essentially matured over a period of fifty years. In the past few decades, a number of theories and models have evolved which enhance the process of strategic management at an organization. Meyer, Neck and Meeks (2017) argue that in the last ten years, there are mainly a few reasons why strategic management has undergone a drastic transformation. For example, a large number of topics are now considered to be under the banner of strategic management. For example, internationalization or globalization, cooperation between organizations, competitive forces determining brand position of the company, strategic leadership, human resource management and corporate social responsibility are just a few aspects of strategic management. At present, strategic management may be explained as the key factor which determines the success or failure of an organization. It explains why some firms are more successful than others. In other words, strategic management entails highlighting of the various factors that lead to the success of an organization.

Strategic Management at Dangote Group

In the past ten years, certain trends have emerged as part of strategic management. One of them would be corporate social responsibility. Every organization is an enterprise, and as such, its operations would have an impact on the surrounding environment and the communities. Any organization would affect its stakeholders and surrounding communities, which could either be positive or negative in nature (Baumgartner and Rauter 2017). Thus, there is an increasing pressure on organizations to integrate corporate social responsibility as part of its strategic management (Engert, Rauter and Baumgartner 2016). A number of organizations around the world are adopting various social and environmental programs which would win the goodwill of the stakeholders and create a favorable reputation for the company. According to Barney (2017), a new concept of strategic management at present is that of the strategic fit or complementarity. It is of immense significance for an organization to implement strategies which are compatible with the capabilities and resources of a firm. As part of strategic management, the concept of the nature of the organization has undergone a change as well. Most of the traditional models of organization have ceased to exist today. The new concepts that have emerged embrace the idea that a firm is prone to changes and uncertainty. It also claims that the performance of a firm should be revolving around adaptability and not just optimization.

In the last decade, leadership has emerged as one of the most important aspects of strategic management.  According to Covin and Slevin (2017), strategic leadership refers to the ability of people to be able to influence or affect the decisions or actions of people in such a way that it enhances the productivity of the organization as a whole and also contributes to its long term success. Such a leadership success would result in financial stability of the whole organization. Schoemaker, Krupp and Howland (2013) argue that the purpose of strategic leadership is to ensure that the operations and the operational management of an organization are aligned with the business goals and objectives. Every organization has a mission of its own. The duty of a strategic leader is to ensure that these goals are accounted for and to provide direction for attainment of these objectives (Malewska and Sajdak 2014).

Earlier, strategic leadership was only restricted to the financial objectives of a company. However, Carter and Greer (2013) opine that the concept of strategic leadership have undergone a change in the recent years. Now, strategic management refers to the practice of using various management styles which would entail the vision of the company and help it achieve favorable competitive positioning in the market. Such a leader would not simply be goal oriented. He would also take into account the human resources which are chief assets of the company (Simsek et al. 2015). A strategic leader would have to motivate and inspire his subordinates and ensure high levels of employee engagement so as to optimize the levels of productivity at the organization. The sole aim of strategic leadership is to boost productivity, promote a culture of innovation, streamline operations and boost the morale of the employees (Strand 2014). He would first need to understand the main aim of the company and what it strives to achieve (Galvin et al. 2013). As a result, the strategic leader would also be able to optimize internal communications and improve employee organization relationships (Men and Stacks 2014)

Factors that Influenced Changes in Dangote Group’s Strategic Management

According to Shirey (2013), the concept of strategic leadership is no longer studied in isolation as it was done until a few years ago. Now, change management has emerged as one of the most important facets of strategic leadership. A strategic leader is expected to have the ability to anticipate change and even forecast events based on a careful analysis of external environment of the organization. Various changes are implemented in organizations from time to time which are expected to enhance the levels of performance. However, implementation of change at an organization can be called successful only when it is managed properly and led by an effective strategic leader. Such a leader would be entrusted with the task of convincing his team members about the positive aspects of implementing change and reducing resistance to change to a bare minimum.

The strategic management at Dangote Group has evolved to be customer and product oriented. As a world class organization, the executives at Dangote group are driven by an urge to satisfy the needs of their customers. The customer oriented business strategies at the organization are based on principles of integrity, honesty and intimacy (Ogbechie 2018). Also, a policy of innovation is followed at the company. The management continues to develop business by employing state of the art technology and marketing strategies which would improve their positioning with respect to the rivals (Ogbari, Dayo and Ibidunni 2018). The main purpose of strategic management at Dangote group is to ensure a competitive vantage in the market. However, the increasing competition in the global industry and the dynamic and volatile construction business, it was important for Dangote to incorporate a few changes into its strategic management policies. For instance the threat of substitutes, the rivalry with other companies and technological, social, political and environmental factors demanded a change in business strategy. In the section below, a detailed analysis of these factors has been provided.

Michael Porter devised a set of five business tools which can determine the current status of a company and at the same time analyze the potential factors that could make or break the company in the market (Dobbs 2014). The following factors would help one understand the causes behind the evolution of strategic change and management at Dangote:

• Rivals– The threat from rivals within the global cement industry is moderate. Across the world, there are a few major players who control the economy. Thus, in different countries around the world, the cement industry is highly concentrated. However, since there is only one product at stake, the rivalry between these companies can be quite intense.
• Threat of substitutes– The threat of substitutes in this industry is relatively low. This is because there are no products which can replace cement or its role in construction. Thus, Dangote need not necessarily worry about new substitutes replacing it in the market.
• Buyers’ bargaining power– The power of buyers is low in the case of industry. Buyer power would have been high if there had been the monopoly of one buyer in the industry. However, a manufacturing company like Dangote has a large number of buyers, thus distributing the bargaining power of buyers.
• Supplier power– The power of suppliers in this industry is moderately high. Cement manufacturing companies like Dangote have a fixed set of raw materials that are required for the manufacturing process and only a few suppliers who can provide these materials. This provides the suppliers with greater degree of power.
• Threat of new entrants– The threat of new entrants in this industry is moderate. In order to start a new manufacturing company, huge sums of money would be required as investment. Such capital cannot be afforded by small scale firms. That is why the competition mainly exists between the companies that have already established themselves in the business.

                             

                                                             (Figure: Diagram for Dangote group)

The Role of Strategic Leadership, Structure, Culture, Business Functions, Market Forces, and Environment in Shaping Dangote Group’s Strategic Direction

The STEEP analysis or the STEEP model is a tool commonly used in the field of marketing which would help in the study of the myriad external factors affecting strategic management within an organization (Jurevicius 2013). The framework has been used to analyze the various factors which contributed to the evolution and growth of the company, resulting in changes in the strategic management:

• Social factors– The main social factor that affects the cement industry would be that of employment. The Dangote Group generates tremendous scope for employment in the countries it operates in. Moreover, the company is guided by several moral constraints which are related to corporate social responsibility (Erhemjamts, Li and Venkateswaran 2013). At present, this is one of the most crucial aspects of strategic management.
• Technological factors– The need of the hour is to come up with innovative new technology that makes manufacturing of cement an easier and more efficient practice. Additionally, there is increasing pressure on cement manufacturing companies like Dangote to come up with environment friendly technologies which reduce the impacts on surrounding natural resources.
• Economic factors– Globally, the cement industry is expanding at a rapid rate. Despite the global economic crises, the cement manufacturing industry has not suffered too many setbacks. Thus, Dangote has tremendous scope for expansion into the global industry through efficient management practices and strategic leadership.
• Environmental factors– It has been concluded that manufacture of construction materials like cement takes a massive toll on the environment for it leads to both water and air pollution (Adeniyi and Imade 2017). Thus, the onus is on the manufacturing companies to take necessary measures to reduce pollution as far as possible.
• Political factors– In every country, there are numerous policies and regulations related to tariff, trade, manufacture, pollution, workforce and so on. All of these legal aspects must be accounted for to ensure smooth functioning of operations.

                             

As far as strategic leadership is concerned, the company has undergone quite a few changes in the past few years. The company may be termed as an indigenous conglomerate, promoting a traditional culture in the workplace. As a result, an authoritative leadership culture was considered appropriate in the beginning. The company also lacked female leaders, as they were considered incapable of working in leadership roles. However, recently the company made some changes to its leadership strategies. Olakunle Alake, the CEO of the company was appointed as the managing director and some female employees were also appointed in leadership roles. In a period of five to six years, the style of strategic leadership too changed at Dangote. Accordingly, a policy of strategic leadership was adopted by the company. The company has a huge workforce, which calls for effective leadership practices to facilitate a flow of communication between the various levels of the organization (Van der Voet 2013). The strategic leadership practices at Dangote have now become a combination of organizational leadership, transformational leadership and action oriented leadership. The team leaders and the executives at Dangote group are responsible for fulfilling the long term and short term goals of the company and implement processes accordingly. Such operational leadership practices ensure that the day to day operations within the organization are implemented successfully, with minimal hurdles. It also entails resolution of conflicts and allocation of tasks to employees. The transformational leaders at Dangote facilitate open lines of communication between the management and the other employees. This leadership practice is based on motivation and inspiration to inculcate a warm and accepting working environment for the employees (Avolio and Yammarino 2013).

The three main business functions that played a key role in the evolution of strategic management at Dangote group were marketing strategies, human resources and finance. Marketing is of prime importance for any organization since it is through marketing that an organization is able to reach out to its target audience. Over the last ten years, the company has come up with innovative and unique marketing practices which provide it with a competitive edge. The management at Dangote, over the last few years, has come to the realization that human resources are the chief assets of the company. The company has adopted efficient means of employee engagement and human resource management. This has led to a decrease in employee turnover rates. Finance and accounting too would play a crucial role in ensuring efficient strategic management. The role of finance in evolution of strategic management has been two fold. On one hand, it has helped the company set budgets and allocate resources for business operations and on the other hand, it has helped in increasing the profitability and revenue outcome of the company. The figure below shows the official financial statement of Dangote in the last ten years, showing a significant increase in profit turnover.

                           

                             

                                                   (Figures: Financial statement from 2009-2017)

Organizational structure refers to the hierarchical structure within a firm which encompasses all entities and individuals who come together and collaborate in order to attain one common aim of success (Fan, Wong and Zhang 2013). Any corporation, like Dangote, would comprise a number of groups of entities who work together to improve the overall effectiveness of the company (Lee, Kozlenkova and Palmatier 2015). Only be segregating the various departments and groups within an organization can effective managerial practices be employed (Guadalupe, Li and Wulf 2013). The group initially lacked coherence in its structure. However, the growth of the company infrastructure demands a strong framework of organizational structure which would provide potential for enhancement of the firm’s innovation capability, labor force relationships, competitive power and optimization of managerial issues. Accordingly, certain structural changes were incorporated based on principles of smooth communication, formalization and centralization. At present, the structure of Dangote is tailor made to suit customer needs. The stakeholders of the company refer to the various individuals or groups of individuals who stand to be affected by the processes and implementation of change an organization (Doh and Quigley 2014). The internal stakeholders would mean the employees and management, the manufacturers, the people working in factors – these are entities that are directly affected by the operations of the company (Mok, Sheri and Yang 2015). The company has a global workforce of more than 30,000 people has specific human resources policies in place which look after the interests of these employees. The external stakeholders refer to the customers or the suppliers who are indirectly affected by the operations or policies of the company.

Dangote Group is one of the largest manufacturers and exporters of cement across the world, with a capacity of production nearing 200mmtpa. The company is renowned for producing top class products. It also has a well defined transportation system of three thousand trucks which drastically reduce costs related to transport. It has a number of functional and efficiently managed cement factories around the world (Gebremichael and Rao 2014). Additionally, the company has a strong workforce with low employee turnover rates which facilitate the smooth flow of operations. However, the company has certain weaknesses as well. The company began operating in 1992, while most of its competitors entered the global market much earlier. The Dangote group has a localized popularity. It is popular only in its home country, which is Nigeria. In the global cement industry, it has not been able to make a significant mark yet. The company only manufactures cement so far. However, it has tremendous scope for expanding its horizons into other aspects of construction as well. It also must make the most of available opportunities of increasing its global presence by entering and operating in new markets. One of the major threats to the company’s success is the competition it faces from global organizations in different parts of the world.

STRENGTHS	WEAKNESSES	OPPORTUNITIES	THREATS
· World class products · Well defined transportation system · Functional and efficient factories · Low employee turnover rates	· Localized popularity · No international presence · Only one product, namely cement.	· The global construction industry is on the rise, which is a major opportunity for the company.	· Its chief threat is sever competition from several international brands who have made a mark in the global market.

                                                                   (Figure: SWOT table for Dangote)

Conclusion:

To conclude, it can be said that the concept of strategic management has changed drastically over the last decade. A few years ago, strategic planning and management were mainly reserved to financial budgets and controls. However, gradually other aspects of an organization like human resources, strategic leadership, marketing, organizational culture and so on were also taken into account. At present, strategic management is also closely associated with the concept of change management. The above paper analyzes the evolution of strategic management and the prevalent trends in 2018. It also analyzes strategic leadership as one of the most crucial aspects of an organization. These principles have also been applied to the Dangote Group, to study the practices of strategic management evident at the organization. A STEEP and SWOT analysis of the company reveals its competitive positioning in the market with respect to its rivals and the possible opportunities in the near future.

References:

Adeniyi, S.I. and Imade, O.G., 2017. Environmental Cost and Its Implication on Environmental Reputation in Nigeria: A Study of Cement Industry. International Journal of Accounting Research, 42(90), pp.1-7.

Avolio, B.J. and Yammarino, F.J. eds., 2013. Introduction to, and overview of, transformational and charismatic leadership. In Transformational and Charismatic Leadership: The Road Ahead 10th Anniversary Edition (pp. xxvii-xxxiii). Emerald Group Publishing Limited.

Barney, J.B., 2017. Resources, capabilities, core competencies, invisible assets, and knowledge assets: Label proliferation and theory development in the field of strategic management. The SMS Blackwell handbook of organizational capabilities, pp.422-426.

Baumgartner, R.J. and Rauter, R., 2017. Strategic perspectives of corporate sustainability management to develop a sustainable organization. Journal of Cleaner Production, 140, pp.81-92.

Carter, S.M. and Greer, C.R., 2013. Strategic leadership: Values, styles, and organizational performance. Journal of Leadership & Organizational Studies, 20(4), pp.375-393.

Covin, J.G. and Slevin, D.P., 2017. The entrepreneurial imperatives of strategic leadership. Strategic entrepreneurship: Creating a new mindset, pp.307-327.

Dangote Cement Plc. (2018). Dangote Cement Plc.. [online] Available at: https://www.dangotecement.com/

Doh, J.P. and Quigley, N.R., 2014. Responsible leadership and stakeholder management: Influence pathways and organizational outcomes. Academy of Management Perspectives, 28(3), pp.255-274.

1. Dobbs, M., 2014. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.

Engert, S., Rauter, R. and Baumgartner, R.J., 2016. Exploring the integration of corporate sustainability into strategic management: a literature review. Journal of cleaner production, 112, pp.2833-2850.

Erhemjamts, O., Li, Q. and Venkateswaran, A., 2013. Corporate social responsibility and its impact on firms’ investment policy, organizational structure, and performance. Journal of business ethics, 118(2), pp.395-412.

Fan, J.P., Wong, T.J. and Zhang, T., 2013. Institutions and organizational structure: The case of state-owned corporate pyramids. The Journal of Law, Economics, and Organization, 29(6), pp.1217-1252.

Galvin, T., Gibbs, M., Sullivan, J. and Williams, C., 2014. Leadership competencies of project managers: An empirical study of emotional, intellectual, and managerial dimensions. Journal of Economic Development, Management, IT, Finance, and Marketing, 6(1), p.35.

Gebremichael, B.A. and Rao, P.M.S., 2014. Supply Chain Management for Sustainable Competitive Advantage (SCA). Journal of Business Management and Social Sciences Research, 3(2), pp.88-94.

Greco, M., Cricelli, L. and Grimaldi, M., 2013. A strategic management framework of tangible and intangible assets. European Management Journal, 31(1), pp.55-66.

Guadalupe, M., Li, H. and Wulf, J., 2013. Who lives in the C-suite? Organizational structure and the division of labor in top management. Management Science, 60(4), pp.824-844.

Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic management research. The Blackwell handbook of entrepreneurship, pp.45-63.

Jurevicius, O., 2013. Pest & pestel analysis. Strategic Management Insight, 13, p.2013.

Karadag, H., 2015. Financial management challenges in small and medium-sized enterprises: A strategic management approach. EMAJ: Emerging Markets Journal, 5(1), pp.26-40.

Lee, J.Y., Kozlenkova, I.V. and Palmatier, R.W., 2015. Structural marketing: Using organizational structure to achieve marketing objectives. Journal of the Academy of Marketing Science, 43(1), pp.73-99.

Malewska, K. and Sajdak, M., 2014. The intuitive manager and the concept of strategic leadership. Management, 18(2), pp.44-58.

Men, L.R. and Stacks, D., 2014. The effects of authentic leadership on strategic internal communication and employee-organization relationships. Journal of Public Relations Research, 26(4), pp.301-324.

Meyer, G.D., Neck, H.M. and Meeks, M.D., 2017. The entrepreneurship?strategic management interface. Strategic entrepreneurship: Creating a new mindset, pp.17-44.

Mok, K.Y., Shen, G.Q. and Yang, J., 2015. Stakeholder management studies in mega construction projects: A review and future directions. International Journal of Project Management, 33(2), pp.446-457.

Nickels, W., McHugh, J. and McHugh, S., 2013. Understanding business.

Ogbari, M.E., Dayo, A.T. and Ibidunni, O.S., 2018. Concise Adoption of Generic Business Strategies, Virtues for Accomplishing: Corporate Mission in Multinational Firms in Nigeria. Canadian Social Science, 14(1), pp.9-19.

Ogbechie, C., 2018. Strategic Management Practices in Africa. In Indigenous Management Practices in Africa: A Guide for Educators and Practitioners (pp. 167-184). Emerald Publishing Limited.

Schoemaker, P.J., Krupp, S. and Howland, S., 2013. Strategic leadership: The essential skills. Harvard business review, 91(1), pp.131-134.

Simsek, Z., Jansen, J.J., Minichilli, A. and Escriba?Esteve, A., 2015. Strategic leadership and leaders in entrepreneurial contexts: A nexus for innovation and impact missed?. Journal of Management Studies, 52(4), pp.463-478.

Strand, R., 2014. Strategic leadership of corporate sustainability. Journal of Business Ethics, 123(4), pp.687-706.

Van der Voet, J., 2014. The effectiveness and specificity of change management in a public organization: Transformational leadership and a bureaucratic organizational structure. European Management Journal, 32(3), pp.373-382.