BUSINESS POLICY

AND
STRATEGIC MANAGEMENT

B. HIRIYAPPA, PHD.
Assistant Professor
Government First Grade College
Thirthahalli(Bangalore)

PREFACE

Strategic management is a stream of decisions and actions with view to develop effective
long term and short term planning and policies with technological business forecasting that
 would help the organization achieve its superior goal. Strategic management includes
strategic analysis, strategy formulation strategic choice, and strategy implementation and
control strategic decisions for an organization might to be to deploy resources into new
opportunities.

In writing this book I have drawn on a vast amount of literature in strategic management.
Naturally, I owe an intellectual debt to numerous authors who have enriched the stream of
literature in strategic management by their contributions. My prefounded debt is to
American scholars to George Stenier, Ansoff, Newman, Warren, Peter Drucker, Akcoff,
Christenson, Kenneth, Bower and Vacil, Acherman, Robinson, Piere, Wheeler and Hunger,
Porter, Charles W.L.Hill and Gareth R.Jones. In the UK I owe a great debt to Argeni, Hussey,
and Barnard Taylor, Thomson and other scholars

Bangalore
B.HIRIYAPPA. Ph. D.,
drbhiriyappa@gmail.com

CONTENTS OF THE BOOK

CHAPTER 1 DILEMMA OF BUSINESS

 Dilemma of business 15
 Traditional Definition of business 17
 Motives of business 19
 Innovative Characteristics of business 20
 Branches of business 21
 Kinds of industry 21
 Creative Objectives of a business 22
 Long term objectives of a Firm 27
 Expert opinion of Business policy 28
 Need of business policy 30
 Different types of business policy 31

CHAPTER 2 BUSINESS STRATEGY AND CORPORATE STRATEGY

 Introduction 41
 Means and Ends of Business 42
 Dilemma of strategy and structure of Strategy 47
 Dilemma of corporate strategy 48
  Concept of strategy 48
 Characteristics of corporate strategy 50

CHAPTER 3 INTERNAL ENVIRONMENT ANALYSIS

 Internal Environmental analysis 52
 Environment influence on SWOT 53
 Components of business environment 54
 Relationship between organization and its environment 55
 Internal analysis of the organization / company 57
 The value of systematic internal assessment 58
 Steps/process in the development of a organizational / company profile 59
 Identification of strategic factors 59
 Functional approach 59
 The value chain approach 64
 Primary activities 64
 Identifying support activities 65
 Using value chain in internal analysis 68
 Evolution of strategic internal factors 68
 Stages in product / market evolution or product life cycle 69
 Quantitative versus qualitative approaches in evaluating internal factors of the
organization 70

CHAPTER 4 MICRO AND MACRO ENVIRONMENT ANALYSIS

 Introduction 72
 Environmental scanning 73
 Micro / operating environment 73
 Suppliers 75
 Customers 75
 Competitors 76
 Marketing intermediaries 77
 Publics 77
 Organization 77
 Market 78
 Macro / remote environment 79
 Economic environment 80
 Political - legal environment 82
 Socio –cultural environment 84
 Demographic environment 85
 Natural environment 88
 Technological environment 89
 Global environment 92
 Why do companies go global? 95
 Strategic response to the environment 100
 Competitive environment 101

CHAPTER 5 FRAMEWORK AND SCOPE OF STRATEGIC MANAGEMENT

  Introduction 105
 Meaning of strategic management 105
 Framework of strategic management 107
 Importance of strategic management 108
 Characteristic/nature of strategic planning 109
 Scope of strategic management 110
 Dimensions of strategic decisions 112
 Tasks in strategic management 114
 Strategic management model 115
 Levels at which strategy operates / strategic 117
 Levels in organization 117
 Role of mangers at various levels 117
 Corporate level 118
 Business level 119
 Functional level 119
 Characteristic of strategic management decisions at different levels 119
 Benefits of strategic management 121
 Risks of strategic management 122
 Strategic management process / steps 122
 Components of strategic management 123
 Tasks in strategic management 129

CHAPTER 6 DEVELOPMENT OF VISION AND MISSION

 Introduction 130
 Some fundamental questions related to related to mission & vision 130
 The vision 130
 Elements of a strategy vision 132
 Development of strategic vision 133
 Mission 133
 The need for explicit mission of organization 134
 Fundamental elements of mission 135
 Components of mission statement 135
 What is our mission? And what business are we in? 136
 Defining organization mission 136

CHAPTER 7 NATURE AND SCOPE OF CORPORATE STRATEGY

 Introduction 139
 Corporate strategy 139
 Nature, scope and concerns of corporate strategy 139
 The stages of corporate strategy formulation implementation process 144
 A need for long term and short term objectives 148
 Qualities of long term objectives 150

CHAPTER 8 FRAMEWORK OF STRATEGIC ANALYSIS

 Introduction 159
 Strategic analysis 159
  Issues to consider for strategic analyses 161
 Situational analysis 163
 Framework of strategic analysis 167
 The methods of industry and competitive analysis 168
 The concept of strategic groups 173
 Swot analysis 178
 Significance of swot analysis 180

CHAPTER 9 GENERIC STRATEGIES

 Introduction 185
 Strategic alternatives 185
 Michael porter’s generic strategies 185
 Cost leadership strategies 187
 Advantages of cost leadership strategy 188
 Strategic choices 188
 Disadvantages of cost leadership strategy 189
 Advantages of differentiation strategy 190
 Disadvantages of differentiation strategy 191
 Focus strategy 192
 Advantages of focus strategy 193
 Disadvantages of focus strategy 193
 Strategic choices of focus strategy 194
 Generic strategies comparative skills and resource requirement 194
 Best cost provider strategy 196
 Distinctive features of the generic competitive strategies 197

CHAPTER 10 FORMULATION OF FUNCTIONAL DEPARTMENTAL STRATEGY

 Introduction 200
 Reasons for functional strategies are needed to firms 201
 Marketing strategy formulation 202
 Developing the marketing mix 205
 Marketing strategy techniques 210
 Financial strategy formulation 214
 Production strategy formulation 222
 Research and development strategies 225
 Human resource strategies formulation 229

CHAPTER 11 GRAND STRATEGIES STRUCTURES IN ENTERPRISES

 Grand strategies / directional strategies 239
 Features of grand strategies 241
 Characteristics and scope of various grand strategies 242
 Stability strategy 242
 Characteristics of stability strategy 242
 Expansion strategy 243
 Characteristics of expansion strategy 243
 Retrenchment/ divestment strategy 246
  Characteristics of retrenchment/ divestment strategy 246
 Combination strategy 246
 Major reasons for organizations adopting different grand strategies 247

CHAPTER 12 DIVERSIFICATION STRATEGIES FOR ENTERPRISES

 Introduction 250
 Diversification 250
 Types of diversification 250
 Related diversification 251
 Unrelated diversification 251
 Internal diversification 252
 External diversification 252
 Horizontal diversification 252
 Vertical diversification 252
 Active diversification 252
 Passive diversification 252
 Concentric diversification 256
 Conglomerate diversification 257

CHAPTER 13 TURNAROUND, RETRENCHMENT DIVESTMENT, AND

LIQUIDATION STRATEGIES FOR ENTERPRISES
 Introduction 260
 Turnaround strategy 260
 The causes of corporate decline 261
 Main elements of successful turnaround strategies 264
 Issues for successful turnaround strategies 266
 Contribution elements for turnaround in firm’s 266
 Divestment/cutback strategy 267
 Reasons to adopt divestment strategy in firms 267
 Liquidation strategies 268
 Liquidation – the strategy of last resort 268
 End game strategies 269

CHAPTER 14 TOWS MATRIX ANALYSIS, BCG MATRIX, ANSOFF’S MATRIX,

ADL MATRIX, THE GENERAL ELECTRIC MODEL
 Introduction 270
 Tows matrix 270
 Portfolio analysis 271
 Advantage of portfolio analysis 272
 Strategic business units 272
 Characteristics of SBUs 273
 Advantages of SBUs organizational structure 273
 Disadvantages of strategic business unit organizational 273
 Stages in product / market evolution or product life cycle 274
 Advantage of product life cycle 275
 BCG matrix 276
  Mission of BCG 276
 Available strategies to pursue 278
 Limitations of the BCG matrix 279
 ANSOFF’s product - market growth matrix 280
 ADL matrix 283
 The general electric model 285

CHAPTER 15 PORTER’S FIVE FORCES MODEL AND MCKINSEY’S 7’S

FRAMEWORK
 Introduction 287
 Competitive advantage 287
 Five force model 287
 Potential competitors 289
 Rivalry among established companies 290
 The bargaining power of suppliers 293
 The bargaining power of buyers 293
 The threat of substitute products 294
 Mckinsey’s 7’s framework 295

CHAPTER 16 VALUE CHAIN CONCEPT ANALYSIS

 Introduction 298
 The value chain 298
 Basic concepts of value chain 298
 The value creation process 299
 Primary activities 300
 Supporting activities 300
 Achieving superior efficiency 305
 Economies of scale 305
 Flexible manufacturing efficiency 306
 Materials management efficiency 306
 R&D strategy and efficiency 307
 Human resource strategy and efficiency 307
 Infrastructure and efficiency 307
 Superior quality 308
 The TQM concept 308
 Implementing TQM 309
 Superior innovation 310
 Building competitive steps in innovation - customer responsiveness 311

CHAPTER 17 VERTICAL INTEGRATION AND STRATEGIC ALLIANCES

 Introduction 316
 Vertical integration 316
 Upstream/backward integration 317
 Downstream/forward integration 317
 Creating value through vertical integration 318
 Disadvantages of vertical integration 320
  Strategic alliances 321
 Short term contracts and competitive bidding 321
 Building long term 322

CHAPTER 18 ACQUISITIONS AND JOINT VENTURES

 Introduction 324
 Acquisitions and versus internal new venture as entry strategy 324
 Failure of acquisitions 326
 Guidelines for successful acquisition 327
 Advantages of acquisition strategy 328
 Disadvantages of acquisition strategy 329
 Pitfalls of internal new venture 329
 Joint venture 331
 Advantages of joint venture strategy 332
 Disadvantages of joint venture strategy 332
 Life cycle of joint venture 333
 Joint venture as a entry strategy 336
 Drawback of joint ventures arrangements 336

CHAPTER 19 TAILORING STRATEGY ANALYSIS

 Introduction 337
 Companies competing in emerging industries of the future 337
 Companies competing in turbulent, high velocity markets 340
 Companies competing in mature, slow growth industries 343
 Companies competing in stagnant or declining strategies 347
 Companies competing in fragmented industries 349
 Companies in competitively weak positions 352

CHAPTER 20 STRATEGY FOR FRAGMENTED INDUSTRIES

 Introduction 358
 Strategy in fragmented industries 358
 Chaining 359
 Franchising 360
 Horizontal merger 360
 Strategy in embryonic and growth industries 360
 Strategy in mature industries 362
 Strategies to manage rivalry immature industries 365
 Price signaling 365
 Price leadership 366
 Non price competition 366
 Capacity control 367
 Focus causing excess capacity 368
 Choosing a capacity control strategy in mature industries 368
 Supply and distribution strategy in mature industries 369
 Strategy in declining industry 370
 Strategy selection in a declining industry 379
CHAPTER 21 STRATEGIC CHANGE MANAGEMENT
 Introduction 372
 Nature of strategic management change 372
 Organizational politics and power 375
 Source of organizational politics 375
 Power 377
 Source of power 377
 Organizational conflict 379
 Process of the organizational conflict 381
 Managing conflict strategically 382
 Conflict resolution strategies 383
 Implementing strategic change steps in change process 383

CHAPTER 22 STRATEGIES FOR COMPETING IN GLOBLIZING MARKETS

 Introduction 386
 Globalization market 386
 Reasons for globalization 387
 Advantages of globalization 387
 Disadvantages of globalization 388
 Why companies expand into foreign markets 388
 The difference between competing internationally and competing globally 389
 Cross country differences in cultural, demographic and market conditions 390
 Multi-global /global country competition 391
 Strategy options for entering and competing in foreign markets 391
 Difference between multicountry strategy and global strategy 396
 Pursuing competitive advantage by competing globally 398
 Strategic alliance and joint venture with foreign country partners 400
 Competing in emerging foreign markets 401
 Strategies for local companies in emerging markets 401

CHAPTER 23 CORPORATE CULTURE AND LEADERSHIP

 Introduction 403
 Concept of corporate culture 403
 Corporate culture 404
 Contents of corporate culture 405
 Strength of corporate culture 406
 Strong culture companies 406
 Weak culture companies 407
 Unhealthy cultures 407
 Adaptive culture 408
 Thickness culture 408
 Extent of sharing 408
 Clarity of ordering culture 408
 Deciphering culture 409
  How culture influences 409
 Building ethics into the culture 410
 Strategic leadership 411
 The role of the CEO 413
 Key considerations in managerial assignment to implement strategy 413
 Managerial assignment situations 414

CHAPTER 24 STRATEGIC CONTROL SYSTEMS

 Introduction 416
 Establishing strategic controls 416
 Strategic control systems 416
 Characteristics of strategic control systems 416
 Steps/process in designing an effective control system 417
 Levels of control 418
 Types strategic control 418
 Premise 419
 Implementation 420
 Strategic surveillance 421
 Special alert control 421
 Market 421
 Output control 422
 Operational control systems 422
 Types of operational control systems 422
 Strategic reward systems 424

CHAPTER 25 MATCHING STRUCTURE AND CONTROL ANALYSIS

 Introduction 426
 Matching structure and control analysis at the functional level, business level 426
 Global structure 430
 Multidomestic strategy and structure
 International strategy and structure 429
 Global organizational structure 430
 Matching structure control at corporate level 437

CHAPTER 26 STRATEGY IMPLEMENTATION AND CONTROL

 Introduction 439
 Interrelationships between strategy formulation and implementation 439
 Basic elements in Strategic management 440
 Strategy formulation and implementation matrix 442
 Contrast between strategy formulation and implementation 445
 Issues in Strategy implementation 447

CHAPTER 27 BUSINESS PROCESS REENGINEERING AND BENCHMARKING

 BPR 453
 Different forms of Business Process 457
 Key elements in BPR 460
  Rationale BPR 461
 BPR approach 463
 Steps in BPR 463
 Problems of BPR 467
 Benchmarking 469
 Benchmarking Process 472
CHAPTER 28 SIX SIGMA AND MANAGEMENT
 What is Six Sigma? 472
 Focus Areas in Six Sigma 475
 Six Sigma Méthodologies 476
 What’s New About Six Sigma 479
 Importance of six sigma in organization 480
 Six Sigma Act as a System of Management 481

CHAPTER 29 CONTEMPORARY STRATEGIC ISSUES

 Introduction 486
 Strategies for internet economy 486
 What is internet technology? 487
 Strategy shaping characteristics of the e-commerce environment 488
 Strategic management in non profit and government organization 490
 Educational institutions 491
 Medical organizations 491
 Governmental agencies and departments 492

Index