Business Policy and Strategy

UNIT-I
Unit-I
⚫ Introduction to Business Policy and Strategic
Management
⚫ Nature, Scope and Importance of Business Policy,
Evolution, Forecasting, Long-range planning and
Strategic Management

⚫ Strategic Management Process

⚫ Overview
⚫ Strategic Intent
Business Policy- What is it? ( Nature)
❑ Business Policy defines the scope or spheres within which
decisions can be taken by the subordinates in an
organization.
❑ It permits the lower level management to deal with the
problems and issues without consulting top level
management every time for decisions.
❑ 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 also deals with acquisition of resources
with which organizational goals can be achieved.
❑ Business policy is the study of the roles and responsibilities
of top level management, the significant issues affecting
organizational success and the decisions affecting
organization in long-run.
 Features of Business Policy
⚫ An effective business policy must have following features-
1. Specific- Policy should be specific/definite. If it is
uncertain, then the implementation will become difficult.
2. Clear- Policy must be unambiguous. It should avoid use
of jargons and connotations. There should be no
misunderstandings in following the policy.
3. Reliable/Uniform- Policy must be uniform enough so
that it can be efficiently followed by the subordinates.
4. Appropriate- Policy should be appropriate to the
present organizational goal.
 Features of Business Policy
5. Simple- A policy should be simple and easily
understood by all in the organization.
6. Inclusive/Comprehensive- In order to have a wide
scope, a policy must be comprehensive.
7. 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.
8. Stable- Policy should be stable else it will lead to
indecisiveness and uncertainty in minds of those who
look into it for guidance.
Scope of Business Policy
⚫ It should cover all the aspects of business.
⚫ It includes the functions and responsibility of senior
employees.
⚫ Deal with determination of future course of action.
⚫ Involves a choice of purpose and defining the needs.
⚫ Include the resources by the help of which
organization can achieve its goal.
• Scope Of BPSM
• Mission , Vision , Objectives etc.

• Corporate objectives

• Functional Objectives
• Qualitative Functional Goals
• General Organisational Activities
• Formulation, implementation, and control of Strategy
• Scanning of External and Internal Environment

• SWOT analysis
Importance of Business Policy
⚫ Policies are the key for success of the business.
⚫ Policies offer great advantages to the management if
they are stated with clarity.
⚫ It raises the confidence of the line managers; they
make the decisions within a given boundary.
⚫ The managers act without the need for consulting the
senior managers every time which minimizes the need
for close supervision.
⚫ It also builds the confidence of the managers.
 Importance of Business Policy
1. Control: Policy facilitates effective control on the working of the organization.
It indirectly controls the managers at different levels without directly
interfering in their routine working.

2. Effective Communication: Generally policies are written and well drafted

statements. Hence there is not a remote chance of confusion or
miscommunication. By setting policies the management ensures that decisions
made will be consistent and in the best interest of the organization. Clearly laid
down policies try to eliminate personal hunch and biasness.

3. Clarity: Policies clarify the viewpoint of the management for the purpose of
running a particular activity / activities.

4. Motivation: Policy enables the line managers to be self reliant. They take the
decision on their own in the confined border of the policy. This raises their
confidence and motivates them. A well drafted policy provides a pattern within
which delegation of authority is possible.
 Importance of Business Policy
5. Policy Review: Regular review of policy is must to see to it that the existing
policies are relevant in the given situation. If required policy may be modified
or altered depending on the business environment. Review of policy at regular
intervals provides a method of anticipating future conditions and situations
and helps to resolve how to deal with them.
6. Economical and Efficient: Policy enables the management to carry out its
operations effectively and efficiently. It enhances the working of the
organization.

7. Coordination of Efforts: Policies ensure coordination of efforts and

activities at different levels in the organization. Activities and duties are
assigned in such a way that all activities in the organization are integrated
effectively. Policy coordinates with individual efforts.
8. High Morale: A well crafted policy can raise the overall morale of an
enterprise. Policy enables the managers to understand the intention of the
management.
Purpose of Business Policy
(Application/Utility)

⚫ To integrate the knowledge gained in various functional

areas of management

⚫ To adopt a generalist approach to problem-solving.

⚫ To understand the complex inter-linkages operating within

an organization through the use of systems approach to
decision making and relating them to changes taking place
in the external environment.
Evolution of Business Policy

•The genesis of strategic management

•Evolution based on managerial practices

•Historical Perspective
Historical Perspective
Hofer and others have viewed the evolution of strategic
management in terms of four paradigm shifts:

Paradigm of Paradigm of
Paradigm of Ad Strategy
Planned policy Strategic
hoc policy (till Paradigm
(1930s and Management
mid 1930s) (1960s)
1940s) (1980s)
Evolution of strategic management
▪ Phase 1- Basic financial planning

▪ Phase 2- Forecast- based planning

▪ Phase 3- Externally oriented (strategic) planning

▪ Phase 4- Strategic Management

Forecasting
⚫ Forecasting is the process of making statements about
events whose actual outcomes have not yet been
observed.
Business Strategy
⚫ Business strategy can be understood as the course of
action or set of decisions which assist the
entrepreneurs in achieving specific business objectives
⚫ It is nothing but a master plan that the management of
a company implements to secure a competitive
position in the market, carry on its operations, please
customers and achieve the desired ends of the business.
⚫ It is the long-range sketch of the desired image,
direction and destination of the organisation. It is a
scheme of corporate intent and action, which is
carefully planned and flexibly designed.
⚫ In the language of business, there is no definite meaning
assigned to strategy
❖ It can be a plan or course of action
❖ The pattern or common thread related to the organization’s
activities
❖ Concerned with resources necessary for implementing a plan
❖ Connected to strategic positioning of a firm
❖ The planned or actual coordination of firm’s major goals and
actions
Business Strategy -Purpose
⚫ Achieving effectiveness,
⚫ Perceiving and utilising opportunities,
⚫ Mobilising resources,
⚫ Securing an advantageous position,
⚫ Meeting challenges and threats,
⚫ Directing efforts and behavior and
⚫ Gaining command over the situation.
Levels of strategy
Schools of Thought on Strategy
Formation

•The Prescriptive Schools

•Design School
•Planning School
•Positioning School

•The Descriptive Schools

•Entrepreneurial School
•Cognitive School
•Learning School
•Power School
•Cultural School
•Environmental Process

•The Integrative School

•Configuration School
 Sbus- Strategic Business Unit
⚫ It is a business term used to present an independently
managed entity or unit of a large company.
⚫ These units often have their own visions, missions,
objectives, and course.
⚫ Moreover, their planning is done separately from other
businesses, and their goals are different from the parent
enterprise and elemental to the long-term performance of
the business.
⚫ E.g.: Unilever, Nestle, Tata
Strategic Management
⚫ The dynamic process of formulation, implementation,
evaluation and control of strategies to realize the
organization’s strategic intent.
⚫ Dynamic- not one time, static or mechanistic, but
continual, evolving, iterative
⚫ Next part focuses on four phases in the strategic
management process
Strategic Management
⚫ It is a set of managerial decisions and actions that help
determine the long-term performance of an
organization
⚫ It includes environmental scanning, strategy
formulation, strategy implementation, evaluation and
control
⚫ Strategic management has evolved from Business
Policy
 Nature of strategic management
⚫ It is a well-organized approach that is based on
effective principles and process of management to
recognize the corporate objective or mission of
business.
⚫ Strategic management is both the process and beliefs
to determine and control the organizational affiliation
in its vibrant environment.
⚫ As a philosophy, it changes the viewpoint of
manager to deal with competitors, customers,
markets and even the organization itself.
⚫ Both art and science contribute to its application
Dimensions (Scope) of strategic
management
Need for strategic management
To Keep Pace with Changing Environment

It emphasis long-term growth (prepare for the future)

To identify opportunities

To Boost Employees Efficiency

To strengthen organizational structure

To Furnish a Strong Base For Unified Decision

Making
Strategic Management Process
 Elements in Strategic Management
Process
A. Establishing the Hierarchy of Strategic Intent
⚫ Creating and communicating a vision
⚫ Designing a mission statement
⚫ Defining the business
⚫ Adopting the business model
⚫ Setting objectives
B. Formulation of Strategies
⚫ Performing environmental appraisals
⚫ Doing organizational appraisals
⚫ Formulating Corporate-level strategies
⚫ Formulating Business- level strategies
⚫ Undertaking strategic analysis
⚫ Exercising strategic choice
⚫ Preparing strategic plan
 Elements in Strategic Management
Process
C. Implementation of Strategies
⚫ Activating strategies
⚫ Designing structure, systems and processes
⚫ Managing behavioral implementations
⚫ Managing functional implementations
⚫ Putting strategies into operation
D. Performing Strategic Evaluation & Control
⚫ Performing strategic evaluation
⚫ Exercising strategic control
⚫ Reformulating strategies
SWOT Analysis
Strategic Intent- Vision
⚫ Vision- A vision statement provides the direction and
describes what the founder wants the organization to
achieve in the future; it’s more about the “what” of a
business.

E.g. Vision of Google

“to provide access to the world’s information in one
click.”
Process of Envisioning
Core Values Core Long term audacious goals
Purpose Vivid description of
achievement

Core Ideology Envisioned

Future

Well Conceived
Vision
 Strategic Intent- Mission
⚫ Mission- It describes the purpose of an organization
and more about the “how” of a business.

E.g. Google’s Mission- “to organize the world’s

information and make it universally accessible and
useful.”
Characteristics of a Mission statement
⚫ It should be feasible
⚫ It should be precise
⚫ It should be clear
⚫ It should be motivating
⚫ It should be distinctive
⚫ It should indicate the major components of strategy
⚫ It should indicate how vision is to be accomplished
Strategic Intent- Business Definition
⚫ Business Definition- it describes the businesses of the
organization in terms of customer groups and
alternative technologies

E.g. The Google business model is a Multisided

platform-Google’s business model is a multinational
internet-related product & service business model
which includes their main product – a search engine,
online advertising technologies, Google cloud
computing, software, and hardware.
Dimensions of Business Definition
Levels at which Business could be
defined
⚫ Corporate level
⚫ Business level/ SBU

⚫ A single business firm is active in just one area so its

business definition is simple
⚫ A large conglomerate, operating in several businesses,
would have a separate business definition for each of
its businesses
Business Model
⚫ How does the Organization make money?- Answer to
this defines Business Model
⚫ A business model is defined as “ a representation of a
firm’s underlying core logic and strategic choices for
creating and capturing value within a value network.”
Goals & Objectives,
⚫ The goals denote what an organization hopes to
accomplish in a future period of time

⚫ objectives of an organization states what is to be

achieved in a given time period to achieve the goals
 Role of Objectives
⚫ Objectives define the organization’s relationship with its
environment
⚫ Organizations help an organization pursue its vision and
mission
⚫ Objectives provide the basis for strategic decision-making
⚫ Objectives provide the standards fro performance appraisal

Managers who set objectives for themselves and their

organizations are most likely to achieve them than those
who do not.
Characteristics of Objectives
⚫ Understandable
⚫ Concrete & Specific
⚫ Related to time-frame
⚫ Measurable & Controllable
⚫ Challenging
⚫ Correlate with each other
⚫ Should be set within constraints
Issues in Objective-setting
⚫ Specificity
⚫ Multiplicity
⚫ Periodicity
⚫ Verifiability
⚫ Reality
⚫ Quality
Objectives Formulation
⚫ Glueck identifies four factors to be considered for
objective setting-
⚫ The forces in the environment
⚫ The realities of enterprise’ resources
⚫ The value system of the top executive
⚫ Awareness by the management
⚫ Objective setting is a complex task and is based on
consensus building
⚫ Objective setting has no precise beginning or end
Balance Scorecard Approach to
Objective setting
A Typical Strategy Map
Critical Success Factors (CSFs)
⚫ Strategic factors or key factors for success those are
crucial for organizational success
⚫ E.g. of CSFs for a shoe manufacturing company
⚫ High manufacturing quality
⚫ Cost efficiency
⚫ Sophisticated retailing
⚫ Flexible product mix
⚫ Creation of product image etc.
Key Performance Indicators
(KPIs)
⚫ Metrics or measures in terms of which performance is
measured, evaluated, or compared
⚫ They are measured in terms of CSFs
⚫ Major benefit in using KPIs is that it helps an
organization define and measure progress towards its
objectives
⚫ It gives everyone in organization a clear picture of
what is important and what they need to do to
accomplish objectives
⚫ It is applied in business intelligence to gauage business
trends