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Strategic Management Topic: Business Policy and Strategic Management Introduction Business policy as a field of study originated in 1911

when an integrated course in management was introduced at Harvard Business School as a part of curriculum . The course was designed with the main objective of improving general managemen t competence. Following a number of expert studies on business education about f ifty years later, the Business policy course was made compulsory for all Busines s Schools in USA. Since then, Business Policy was introduced as an integral cour se in the management degree/diploma programmes in many countries including India . However, there has been a shift in focus of the Business Policy course since t he 1980s. The latest approach is focussed on Strategic Management. This chapter is devoted to an exposition of the concept of business policy formu lation by corporate management, followed by a discussion of the process of strat egic planning and management in detail, Nature of Business Policy Business Policy, in a wider sense, refers to decisions about the future of an on going enterprise. These are decisions which only the top management of an enterp rise can take having investigated market opportunity, appraised the distinctive competence and total resource of the company, and having combined the present an d potential resources with the opportunities. These are vital, strategic decisio ns inasmuch as they determine the relationship between the enterprise and its en vironment, what it ought to be doing in the years to come, and how it should pos ition itself to take advantage of the future market opportunities. Thus, busines s policy involves setting long-term objectives which will guide the destiny of t he enterprise, its size and position in the product-market, as well as deciding on the resources of human abilities, capital plant and equipment, materials and energy which will be needed to achieve the objectives. In short, business policy consists of top management decisions relating to the future direction of busine ss and the crucial problems that affect the success of the total enterprise. The necessity of guiding the future direction of business arises at some stage i n the case of every enterprise. So long as a firm is concerned with its survival , its main pre-occupation is with the existing problems of operational managemen t and decisions are aimed at establishing a stable foothold in the market. Soone r or later, however, the management must pause and think over what business the company is in and what business it would like to be in whether it will continue to be active in the same line of business or combine new lines of activity with the existing business, enter new market segments, or seek to acquire a dominant position in the same market, and so on. An ongoing enterprise having a satisfactory record and continuing to grow and pr osper must also review and assess the evolving socio-political, economic and tec hnological environments so as to modify its goals in accordance with the changin g product-market situations. The dynamic nature of business environment, the pre sent and potential opportunities and threats, the risks of undertaking new ventu res, entering new markets, and such other aspects of business policy are of cruc ial importance in decision-making with long-term implications.

What specific products or services should be produced? Which products should rec eive the maximum emphasis? What ought to be the price-quality relationship of th e product lines? What are the distinctive characteristics of the product as comp ared with those of similar competing products? At what point of time should the new products be launched? What are the basic objects to be pursued? What is the rate of return on investme nt to be sought? What are the growth objectives to be pursued with respect to sa les, and over what time period? What is the minimum return on investment to be a chieved? Strategic decisions are different from operating decisions which relate to day-t o-day activities or current operations, e.g., resource allocation among function al areas and product lines, scheduling operations, monitoring performance and ap plying controls. The operating decisions are aimed at maximising profitability o f current operations through pricing and marketing policies, production planning and scheduling, inventory management and control. Strategic decisions also diff er from administrative decisions which are concerned with structuring the firm's resources so as to create a maximum performance potential. These are decisions concerned with establishing authority-responsibility relationships, work-flows, communication, distribution channels, location of facilities, as well as acquisi tion and development of resources, developing source of raw materials supply, pe rsonnel training and development, financing and acquisition of plant and equipme nt.

If the elements of strategic vision and corporate mission are combined in a sing le statement, it may be regarded as a future-oriented mission statement. The mis sion then helps to communicate both corporate vision and purpose. According to s

ome writers, the distinction between strategic vision and corporate mission is r elevant because the majority of corporate mission Statements, presumably in the United States, say more about what our business is now than what our business will b er . Can corporate mission statement be the starting point for developing the strateg ic vision? For one thing, the mission statement indicates what business the comp any is in, and that ought to be the basis of charting a strategic path for the f uture. Secondly, the product-market coverage of a company needs to be kept in vi ew while communicating the strategic vision as a corporate commitment. A company producing video cassettes may be projected as being in entertainment business o r information business, or both. Its strategic vision would naturally depend upo n what is projected in the mission statement. The mission of Cadbury India is to attain leadership position in the confectionery market and achieve a strong nat ional presence in the food drinks sector. This is clearly a direction-setting st atement from which the strategic vision should emerge.

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