BUSINESS POLICY & STRATEGIC MANAGEMENT

PROF. SANGITA

Learning Objectives
Understand the nature of Business Policy and

Strategic Management Understand the concept of Strategy and Strategic Management

BUSINESS POLICY
Definition

Business policies are the guidelines developed by

an organization to govern its actions. They define the limits within which decisions must be made. Business Policy defines the scope within which decisions can be taken by the subordinates in an organization.

Features of Business Policy

Specific- Policy should be specific/definite. If it is

uncertain, then the implementation will become difficult.

Clear- Policy must be unambiguous. It should avoid use of

jargons and connotations. There should be no misunderstandings in following the policy.

Reliable/Uniform- Policy must be uniform enough so

that it can be efficiently followed by the subordinates.

Appropriate- Policy should be appropriate to the present

organizational goal.

Features of Business Policy continue

Simple- A policy should be simple and easily understood by all in the

organization.
Inclusive/Comprehensive- In order to have a wide scope, a policy

must be comprehensive.
Flexible- Policy should be flexible in operation/application. This does

not imply that a policy should be altered always, but it should be wide in scope so as to ensure that the line managers use them in

repetitive/routine scenarios.
Stable- Policy should be stable else it will lead to indecisiveness and

uncertainty in minds of those who look into it for guidance.

STRATEGY
Definition Strategy is a plan or course of action that is

expected to contribute to the achievement of organisational goals. Strategy can also be an idea or a thought that is viewed to be productive to complete a course of action. Strategy is defined by Arthur Sharplin as, a plan or course of action which is of vital pervasive, or continuing importance to the organisation as a whole.

 Definition Alfred D. Chandler defines strategy as, the

determination of the basic long-term goals and objectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out these goals. James Brain Quinn defines the term strategy as, the pattern of plan that integrates an organization`s major goals, policies and action sequences into a cohesive whole.

Analysis of Definitions of Strategy

Strategy is a central understanding of the strategic

management process. Strategy is the determination of basic long-term goals and objectives of an organisation. It helps in determining the courses of action to attain the predetermined goals and objectives. It points to allocation of necessary resources for implementing the course of action. It develops the company from its present position to the desired future position. It is a set of decision-making rules having a common thread.

Criteria for Effective Strategy

Clear, decisive objectives Maintaining the initiative- the strategy preserves

freedom of action and enhances commitment. Concentration of superior power. Flexibility Coordinated and committed leadership Surprise-the strategy should make use of speed, secrecy and intelligence to attack exposed or unprepared competitors at an unexpected time. Security-the organisation should secure or develop resources required, securely maintain all vital operating points for the enterprise.

Difference between Policy and Strategy

Policy is a blueprint of the organizational activities

which are repetitive/routine in nature. While strategy is concerned with those organizational decisions which have not been dealt/faced before in same form. Policy formulation is responsibility of top level management. While strategy formulation is basically done by middle level management.

Difference between Policy and Strategy

Policy deals with routine/daily activities essential

for effective and efficient running of an organization. While strategy deals with strategic decisions. Policy is concerned with both thought and actions. While strategy is concerned mostly with action. A policy is what is, or what is not done. While a strategy is the methodology used to achieve a target as prescribed by a policy.

Need for Strategy

To have rules to guide the search for new

opportunities both inside and outside the firm. To take high quality project decisions. To have an assurance that the firm`s overall resource allocation pattern is efficient. To save time, money and executive talent. To identify, develop and exploit potential opportunities.

Henry Mintzberg 5 Ps of strategy

Mintzberg (1987) defines strategy in terms of 5Ps.
Henry Mintzberg, in his book, The Rise and Fall of

Strategic Planning, 1994,points out that "strategy" is used in several different ways, the most common being : Plan Ploy Pattern Position Perspective

PLAN
Strategy is a plan, It is a set of consciously intended

course of action, a guideline (or set of guidelines) to deal with a situation. By this definition strategies have two essential characteristics:1)They are made in advance of the actions to which they apply 2)They are developed consciously and purposefully.

PLOY
Ploys are the competition strategies designed to

maintain, reinforce, achieve or improve the relative competitive position of the organization . The real strategy (as plan, that is, the real intention) is the threat, not the new practice area itself, and as such is a ploy. Threatened litigation often falls into this category.

PATTERN
A pattern is a stream of actions. Defining strategy is incomplete and needs an outline that

encompasses the resulting behavior. The outcome of strategy does not derive from the design, or plan, but from the action that is taken as a result. A pattern makes a strategy consistent in behavior, whether or not intended. Patterns are the consistency of firm decision making Strategy is a pattern in actions over time; for example, a company that regularly markets very expensive products is using a "high end strategy.

POSITION
Position implies a specific means of locating a firm in

its environment. In management terms: a "domain" consisting of a particular combination of services, clients and markets. Position is defined competitively. Strategy is position; that is, it reflects decisions to offer particular products or services in particular markets.

PERSPECTIVE
Perspective is the main business concept or idea and

the means by which that concept or idea is put into practice or implemented. Perspective looks inward into the firm. Strategy is a perspective shared by members of an organisation, through their intentions and / or by their actions. In effect, when we talk of strategy in this context, we are entering the realm of the collective mind - individuals united by common thinking and / or behaviour. Strategy is perspective, that is, vision and direction.

STRATEGIC MANAGEMENT
Definitions

Strategic management is concerned with deciding

on strategy and planning how that strategy is to be put into effect. According to Samuel C. Certo and J. Paul Peter, Strategic management is a continues, interactive, cross-functional process aimed at keeping an organisation as a whole appropriately matched to its environment.

 Definitions Schellenberger and Bosenan define the term

strategic management as, the continuous process of effectively relating the organization's objectives and resources to the opportunities in the environment.

Analysis of Definitions of Strategic Management

Strategic management is a continuous process.

Strategic management consists of a series of steps

repeated cyclically. Strategic management process integrates human resources with marketing, production/operations and finance. Organisations must modify their strategies in accordance with the changing environment.

Strategic Management Process

Strategic Management Process

The process by which managers choose a set of strategies for the enterprise to pursue its vision. Four phases of Strategic Management Process 1. Establishment of Strategic intent 2. Formulation of strategies 3. Implementation of Strategies 4. Strategic Evaluation.

Strategic Planning

Basic Strategic Planning Model

Defining the Mission and Setting Top-Level Goals

External Analysis of Opportunities and Threats

Internal Analysis of Strengths and Weaknesses Selection of Appropriate Strategies Implementation of Chosen Strategies

The basic characteristic of strategic management

Flexibility: It is one of the important features in

strategic management. Integration: To take planning under the strategic management, it is essential to integrate goals objects alongside the internal and external sides of the institution. Speed: To bring the dynamism under the strategic management, it is inevitable to access the important affairs so that it may be possible to speed up the pace of action at present and future.

 Innovation: Innovation or creativity is an

important feature in the case of strategic management. We know, environment is ever changing. Long-term plan: Long-term planning is very essential to bring good result. Determination of alternatives: It is a very urgent thing to implement goals. Consideration of environment

Need for Strategic management

Due to Change

To provide Guidelines
Developed field of study by research For better performance

Systematise business decisions

Improves communication Improves coordination

Improves allocation of resources

Helps the managers to have a holistic approach

Benefits of Strategic Management

Strategic management helps an organisation to be

proactive rather than reactive in shaping its future. It helps organisations not only to respond to its relevant environment, but also to initiate and influence its environment and thereby exert control over its destiny. It helps organisations to make effective strategies through the use of a more systematic, logical and rational approach to strategic choice. It helps organisations to achieve understanding and commitment from all managers and employers. Employee empowerment is the act of strengthening an individual`s sense of effectiveness.

Benefits of Strategic Management( continue)

It encourages the organisations to decentralise the

management process involving lower level managers and employees. A significant number of research studies have suggested that a well-designed strategic management can boost profits. It often brings order and discipline to a firm. It minimises the effect of adverse conditions and changes.

Strategy hierarchy
Corporate strategy: 1) growth strategy, 2) stability strategy, 3) retrenchment strategy. 2. Business unit strategy: 1) cost leadership, 2) differentiation, 3) focus, 4) mixed. 3. Functional strategy.
1.

Corporate Strategy
The first level of strategy (corporate strategy) is related to

determining the corporate strategy. It is fundamentally and simply concerned with deciding what type of business the organization should be in and how the overall group of activities should be formed and managed. Corporate strategy deals with issues of strategic management at the level of the firm as a whole. Such issues involve the basic character, capability and competence of the firm; the direction in which it should develop its activity; the nature of its internal architecture; governors and structure; the nature of its relationships with its sector, its competitors and the wider environment. Corporate strategies usually fit within the three main categories of stability, growth and retrenchment.

Growth strategies
Growth strategies: They result increase in sales, market share and profit: the types: Internal growth: Increase internal capacity of organization without acquiring other firms. Conglomerate Diversification: Acquiring unrelated business. Merger: Two roughly similar size firms combine into one. To benefit of synergy. Strategic alliance: Temporary partnerships

Retrenchment strategies
Types:

1- Turnaround: Eliminating unprofitable outputs, pruning/cutting assets, reducing size of work force, rethinking firms products lines and customer groups. 2- Divestment: sell one of business units 3- Liquidation: last resort strategy

Business Strategy
Business strategy refers to the actions and approaches crafted by management to create successful performance in one particular line of business. It is also concerned with creating competitive advantage in each of the strategic business units of the organization. Focuses on improving competitive position of companys products or services within the specific industry or market segment

Functional or departmental strategy

Functional or departmental strategy concerns the

managerial game plan for running a major functional activity or process within a business such as research and development unit, marketing unit, financial unit, production unit, H R development unit and so on. A business requires as many functional strategies as it has strategically critical activities.