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UNIT - 4 STRATEGIES & POLICIES

Prof Sapana Singh

STRATEGY DEFINED:
The term strategy originated from military. It is the set of comprehensive action plans to ensure achievement of organizational objectives.

Strategy refers to the determination of the mission & the basic long-term objectives of an enterprise & the adoption of courses of action & allocation of resources to achieve those objectives. - Harold Koontz
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Strategies help in providing direction to the priorities of an enterprise. It helps in determining various moves to cope up with external environment. It also helps an organization to identify the areas and points on which it must concentrate to gain command. Eg: Wal-Marts low cost strategy

Prof Sapana Singh

Characteristics of Strategy
Formulated by

top mgmt Generally long range in nature Flexible & dynamic Action oriented Concerned with scanning external environment & finding ways to cope with it More specific than objectives

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Types of Strategies

CORPORATE Level BUSINESS Level

FUNCTIONAL Level

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Prof Sapana Singh

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Strategic Planning Process

MISSION & OBJECTIVES

ENVIRONMENTAL SCANNING

STRATEGY FORMULATION

STRATEGY IMPLEMENTATION

EVALUATION & CONTROL

Prof Sapana Singh

SWOT ANALYSIS
STRENGTH
Goodwill Brand name Quality product Advanced technology Trained & skilled employees

WEAKNESS
o Weak distribution network o Lack of efficiency o Lack of expertise in some areas o Weak brand name

OPPORTUNITY
New technology Joint venture or merger Accessing unfulfilled customer needs New market

THREAT
Substitute products Increasing competition Trade barrier Changing technology New regulations Changing tastes & preferences
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TOWS MATRIX

Prof Sapana Singh

TOWS MATRIX
Internal Factors External Factors

STRENGTH

WEAKNESSES

OPPORTUNITIES

S-O Strategies W-O Strategies

THREATS

S-T Strategies

W-T Strategies

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PORTFOLIO MATRIX
BCG Growth-Share Matrix: It is a portfolio planning model developed by Bruce Henderson of Boston Consulting Group. It is mainly for large corporations with various divisions. It helps organizations to manage their business portfolio & develop business level strategies. It also helps them in evaluating the relative performance of various businesses(SBUsStrategic Business Units. It is a tool for allocating resources.
1)
Prof Sapana Singh

BCG approach helps focusing on three aspects of a business unit:Volume of Sales

Growth of Market Size

Cost center or Profit center

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Prof Sapana Singh

Prof Sapana Singh

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2) GE Portfolio Matrix or Mckinsey Matrix

General Electric portfolio matrix was an improvement over BCG portfolio matrix. This matrix has 9 cells in which business units (SBUs) are plotted.

This matrix has two dimensions: 1. Industry Attractiveness (replaced market growth) 2. Business Strength (replaced market share)

Prof Sapana Singh

Prof Sapana Singh

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INDUSTRY ATTRACTIVENESS (Product-market attractiveness)

BUSINESS STRENGTH

Market size Market Growth rate Intensity of competition Demand variability Global opportunities Industry profitability Macro-environmental factors (PEST)

o Market share o Production capacity o Profit margins relative to competitors o Customer loyalty o Relative brand strength o Distribution channel access
Prof Sapana Singh

Segment 1(GREEN): This is the best segment. The business is strong and the market is attractive. The company should allocate resources in this business and focus on growing the business and increase market share. Segment 2 (YELLOW): The business is either strong but the market is not attractive or the market is strong and the business is not strong enough to pursue potential opportunities. Decision makers should make judgment on how to further deal with these SBUs. Some of them may consume to much resources and are not promising while others may need additional resources and better strategy for growth.

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Segment 3:(RED) This is the worst segment. Businesses in this segment are weak and their market is not attractive. Decision makers should consider either repositioning these SBUs into a different market segment, develop better costeffective offering, or get rid of these SBUs and invest the resources into more promising and attractive SBUs.

Prof Sapana Singh

Generic Competitive Strategies by Porter

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Porters 5 Competitive Forces

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Effective Implementation of Strategies

Proper and clear communication of formulated strategies to all. Before planning, the planning premises must be developed by scanning the environment, and this premises must be communicated to all. Such action plans must be developed that contribute to the accomplishment of objectives. The organizational structure should fit the plans. Organization should be proactive to deal with environmental changes. Time to time evaluation & control.

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POLICIES
Policies

are the guidelines or the general limits within which the members of an organization act. Each and every policy has a specific purpose behind it. They exist at all the levels of an organization. They are the guidelines that help in decision making.

Prof Sapana Singh

Types of Policies
ORIGINATED POLICY IMPLIED or TRADITIONAL POLICY BY FAIT APPEALED POLICY EXTERNALLY IMPOSED POLICIES
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Principles of Formulation of Policies

A

policy should contribute to the achievement of organizational objectives. It should be definite and in writing. It should be durable(stable) and flexible. Policies for all the departments should be complementary (lower level policies should be derived from higher level policy). It should be just, fair & equitable. Time to time review & modification.
Prof Sapana Singh

DECISION MAKING

Decision making can be regarded as the mental processes (cognitive process) resulting in the selection of a course of action among several alternatives. Every decision making process produces a final choice.

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Types of Decisions
1.

BASIC & ROUTINE DECISIONS PERSONAL vs. ORGANISATIONAL DECISIONS PROGRAMMED & NON-PROGRAMMED DESICIONS

2.

3.

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1) BASIC & ROUTINE DECISIONS

Basic Decisions: They are unique, one-time decisions demanding large investments, creativeness & good judgment on the part of managers.

Routine Decisions: They are repetitive in nature, require little discussion & are generally concerned with short term.
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2) PERSONAL vs. ORGANIZATIONAL DECISIONS

Personal Decisions: E.g.- decisions like watching T.V, studying, playing etc. Such decisions are taken by managers in their individual dimensions.These cannot be delegated.

Organizational Decision: These decisions are made by managers in their official or formal dimensions.They are aimed at promoting the interests of the organization.
Prof Sapana Singh

3)
PROGRAMMED
Routinized & repetitive Least risk & uncertainty

NON-PROGRAMMED
Fresh, Unique & important High level of risk & uncertainty

Made within framework of policies, No existing policies or procedures rules & specific procedures. to guide Require little discussion & thinking Known outcomes Requires creative problem solving Unknown outcomes
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Characteristics of Decision Making

It

is a human process. There is always a purpose behind every decision making. Involves selecting a particular course of action from various alternatives. Dependent on circumstances. Involves problem identification & analysis. Ends up with final choice.
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Decision Making Process

Identifying the Problem Analyzing the Problem Developing Alternative Solutions Weighing Alternative Solutions Choosing the Best Solution Implementing & Verifying the Decisions Prof Sapana Singh

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Individual Decision Making Models

Prof Sapana Singh

RATIONAL ECONOMIC MODEL

According to this model, the decision-maker is assumed to make decisions that would maximize his/her advantage economically by searching & evaluating all possible alternatives. Assumptions:
Decision All

making is a goal-oriented process.

choices are known. of preference.

Prof Sapana Singh

Order

Maximum advantage.

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Problematic Factors:
1. 2. 3. 4. 5. 6.

Impossible to state problems accurately. Not fully aware of problems. Imperfect knowledge. Limited time & resources. Cognitive limits. politics

Prof Sapana Singh

Descriptive Decision Theory (Behavioral Theory)/ The Administrative Model

Proposed by Herbert A Simon and developed by Richard Cyert & James March. Objective: To explain the decision-making behavior of individuals & organizations. Acco. To Simon, people carry only a limited view of problems confronting them because of following reasons Lack of full information about problem. Lack of knowledge of all possible alternative solutions to the problem & their consequences.

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Lack of ability to process competitive environment & technical information. Lack of time & resources. Bounded Rationality: a concept that suggests that the ability of managers to be perfectly rational in decision-making is limited by such factors as cognitive capacity & time constraints.

Satisficing Model: a model stating that managers seek alternatives until they find one that looks satisfactory, rather then seeking the optional decision.
Prof Sapana Singh

THE POLITICAL MODEL

This model is useful for making nonprogrammed decisions, whena) Conditions are uncertain. b) Information is limited. c) There is disagreement among managers about what goals to seek & what course of action to pursue. Such complex decisions are resolved through forming alliances among managers, known as Coalition Building. It gives managers an opportunity to contribute to decision making.

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