UNIT-1 (INTRODUCTION)

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.
Business policies are the instructions laid by an organization to manage its activities. It identifies the range within
which the subordinates can take decisions in an organization. It authorizes the lower level management to resolve
their issues and take decisions without consulting the top level management repeatedly. The limits within which the
decisions are made are well defined. Business policy involves the acquirement of resources through which the
organizational goals can be achieved. Business policy analyses roles and responsibilities of top level management and
the decisions affecting the organization in the long-run. It also deals with the major issues that affect the success of
the organization.
TERRY, GEORGE- A Business Policy is an implied overall guide setting up boundaries that supply the general limits and
directions in which action will take place.

Difference between Policy and Strategy

The term policy should not be considered as synonymous to the term strategy.
The difference between policy and strategy can be summarized as follows-
1. 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.
2. Policy formulation is responsibility of top level management. While strategy formulation is
basically done by middle level management.
3. Policy deals with routine/daily activities essential for effective and efficient running of an
organization. While strategy deals with strategic decisions.
4. Policy is concerned with both thought and actions. While strategy is concerned mostly with
action.
5. 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.
BUSINESS OBJECTIVES
Business Objectives are the end result of planned activity. They state what is to be accomplished by when and should
be quantified if possible. The achievement of corporate objective should result in the fulfillment of a corporate mission.
The areas in which a company might establish its goals and objective are profitability, growth, shareholder's wealth,
utilization of resources etc.
Business objectives are important to give direction to a business. If you are running a business without any business
objectives, you shall not be able to grow successfully in any direction. Having business objectives, gives you a much
better understanding of where you stand, how to improve and what changes in your current method of working will be
required to reach your objectives. Not having business objectives leads to an un-coordinated business that has a very
low probability of being successful.
When setting business objectives, one must make sure that they are: Quantitative, Time-frame specific, Flexible,
Understandable, Realistic:

STRATEGIC MANAGEMENT
Strategic management is a systematic approach of analyzing, planning and implementing the
strategy in an organization to ensure a continued success. Strategic management is a long term
procedure which helps the organization in achieving a long term goal and its overall
responsibility lies with the general management team. It focuses on building a solid foundation
that will be subsequently achieved by the combined efforts of each and every employee of the
organization.
HARRISON & ST. JOHN defines Strategic Managements as the process through which
organization analyze and learn from their internal and external environment, establish strategic
directions , create strategies that are intended to help achieve established goals and execute
these strategies, all in an effort to satisfy key organizational stakeholders.
Set of managerial decisions and actions that determines the long-run performance of a corporation.
It includes-
-Environmental Scanning (both external and internal),
-Strategy Formulation (strategic or long-range planning),
-Strategy Implementation, and
-Evaluation and Control.
Benefits of Strategic Management
o Long term orientation and fit between environment, strategy, structure and processes may lead to
competitive advantage
Challenges: Globalization & E-Commerce

MODEL OR PHASES OF STRATEGIC MANAGEMENT

1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing
information for strategic purposes. It helps in analyzing the internal and external factors influencing an
organization. After executing the environmental analysis process, management should evaluate it on a continuous
basis and strive to improve it.

2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing
organizational objectives and hence achieving organizational purpose. After conducting environment scanning,
managers formulate corporate, business and functional strategies.
Mission Statement
Setting Objectives & Goals
 A statement of purpose (strategic intent) committing the organization to ambitious overarching (stretch)
objectives.
o Provides a sense of direction and purpose.
o Drives strategic decision making and resource allocations.
o Forces the seeking of significant performance improvements to attain objectives
Customer Orientation and Business Definition

Selecting Strategy
Corporate strategy (Stability, Growth, Retrenchment)
Business strategy (Competitive, Cooperative)
Functional strategy (Technological Leadership, Technological Followership)
Defining Policies
Guidelines for decision making that links formulation to implementation
3. Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the
organizations chosen strategy into action. Strategy implementation includes designing the organizations
structure, distributing resources, developing decision making process, and managing human resources.

4. Evaluation&Control- Strategy evaluation is the final step of strategy management process. The key strategy
evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring
performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as
well as its implementation meets the organizational objectives.

STRATEGIC DECISION MAKING- Strategic decision making is an ongoing process that involves creating
strategies to achieve goals and altering strategies based on observed outcomes. Strategic decisions are the
decisions that are concerned with whole environment in which the firm operates, the entire resources and the
people who form the company and the interface between the two.
o Strategic decisions redistribute a major portion of a firms resources in order to be more
competitive.
o Netflix chose to focus their payroll dollars, technology spend, product fulfillment and
marketing on an e-commerce business model instead of a traditional in-store business
model. Their strategic decision gave them a long-term competitive edge over Blockbuster
Video and other in-store movie companies.
o When pizza companies introduced 30-minute delivery, they had to rethink their production
processes and invest in faster cooking methods in order to achieve that goal. $5 Tuesdays
and other marketing gimmicks are not considered strategic plans, because they do no
require a major redistribution of the firms resources.
o Amazon made the strategic decision to focus on electronic delivery of books through the
Kindle Reader and the Kindle Read App and gained an unstoppable competitive edge vs
Borders and Barnes & Noble, eventually forcing Borders to close stores due to declining
traffic.

Characteristics of Strategic Decisions

Rare
Strategic decisions are unusual and typically have no precedent to follow.
 Consequential
Strategic decisions commit substantial resources and demand a great deal of commitment from people at all
levels.
Directive
Strategic decisions set precedents for lesser decisions and future actions throughout the organization.

Mintzbergs Modes of Strategic Decision Making

Entrepreneurial Mode:
- Strategy is made by one powerful individual
- Focus is on opportunities
- Strategy is guided by the founders own vision of direction
- Dominant goal is growth of the corporation.
Adaptive Mode: (Muddling Through)
- Characterized by reactive solutions to existing problems, rather than proactive search for new opportunities
- Bargaining on priorities of objectives
- Strategy is fragmented and is developed to move the corporation forward incrementally.
Planning Mode:
- Includes both the proactive search for new opportunities and the reactive solution of existing problems
- Involves the systematic gathering of appropriate information for situation analysis, the generation of feasible
alternative strategies, and the rational selection of the most appropriate strategy.
Logical Incrementalism
- is a synthesis of the planning, adaptive, and entrepreneurial modes of strategic decision making.