MS618 Business Policy and Strategic Management

S4 MBA

Business Policy
The origin of Business policy can be traced back to 1911 when the Harvard Business School introduced an integrative course in Management aimed at providing general management capability.
The term Business policy has been used traditionally though new titles such as Strategic Management, Corporate Strategy and Policy and so on are now used extensively for the course

Definition
The practical adaptation of the means at a general's disposal to the attainment of the object in view.

Strategy

The term strategy is derived from the Greek word Strategia which means generalship. In the military , strategy is often refers to the branch of military science dealing with military command and the planning and conduct of war.

Definition

The art of the employment of battles as a means to gain the object of war

Strategy according to Henry Mintzberg

Henry Mintzberg wrote a book, The Rise and Fall of Strategic Planning, in 1994.It has pointed out that people use strategy in several different ways, the most common are Strategy is like a plan, a how, a means of getting from here and there

Cont.

Strategy represents a pattern in actions over time; for example, a company regularly markets very expensive products is using a high end strategy Strategy represents position: it reflects decisions to offer particular products or services in particular markets Strategy represents perspective like vision and direction of the company

Characteristics

Strategies are specific actions suggested to achieve the objectives Strategies are action oriented Everyone is empowered to implement the strategy Strategies are means to an end Strategies are concerned with uncertainties Strategy is deployed to mobilize the available resources in the best interest of the company

Policies
Policies are statement or a commonly accepted understanding for decision making. Policies are thought oriented. Policies are in general concerned with course of action to fulfill the set of objective, policy is governs and control the managerial action of the organization.

Types of Business Policy

On the basis of Management On the basis of functional areas On the basis of expression On the basis of nature of origin On the basis of scope of organization On the basis of nature of management function

On the basis of Management

Top Management Policies Middle level Management policies Lower level Management policies Operating forces Policies

On the basis of functional areas

Production policies Marketing and sales policies Financial policies Human resource development policy

On the basis of expression

Express policy are those policies which are expressed in terms of clear words either orally or in writing

Oral Policies Written Policies Implied Policies Originated Policies Appealed Policies

Implied Policies

These are policies which are implied from the code of conduct or from mode of behaviour of business executive: but they are not stated orally Eg. Smoking & Drinking

Originated Policies
Originated policies emanate from the company objectives which are determined by the top management, who are primarily responsible for shaping business policies to guide and direst them and the subordinate in the attainment of organizations objectives these are framed by the board of directors, the president and the general manager etc.. And passes on to the executives in hierarchy for implementation

Appealed Policies
Appealed policies are often known as suggested policies. Because they are framed on the suggestions of the subordinates or those who implement the policies

Difference between policy and Strategy

The term policy should not be considered as synonymous to the term strategy.

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.

Cont.

A strategy is a plan to do things a certain way to achieve a desired outcome.

A policy is a rule designed to ensure consistency in governance and to avoid undesirable outcomes. Example: The strategy might be to phone 100 people everyday to meet the sales target. The policy might be that I am not allowed to phone them after 9 pm.

Cont.
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.

Strategic Management

Peter Drucker Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking and commitment of resources to actions Joel Ross and Michael Kami Without a strategy the organization is like a ship without a rudder

Meaning
Strategic management is the stream of instructions, guidance, directions and actions with view to develop effective long-term planning of the organization

Elements
Strategic management is a part of every successful business. The process of outlining a strategy involves: Vision Goals Plan of Action Implementing the Plan Evaluating Progress.

Vision

By way of a Mission Statement Once you have outlined your mission you have defined what your company or organization is about. This often includes statements such as "increase the wealth of shareholders." If the mission statement is too limiting, it will limit the vision of the company.

Goals

Setting Long and Short Term Objectives The next step is to set specific goals through a process of written "Objectives." These are more targeted than a mission statement. Objectives are subject to change as goals are met. They are your short and long term goals.

Plan of Action

Developing Strategy is a plan of action. It is a way of reaching the objectives. This is where operations often take the lead. Think of it as a task analysis. When you analyze a task, even mentally, you define the work, where the work will be done, and the steps to accomplish the work. This is Strategic Management.

Implementing the Plan

First and foremost is a good line of communication not only from top to bottom of management hierarchy, but laterally and from bottom to top. This type of communication helps aid in the best exchange of ideas and concerns.

Evaluating Progress
Evaluating progress and the effectiveness of your strategy is the next important step in the cycle. Now is when you will find the bottlenecks, what works, and what needs to be changed. There are a number of different evaluation styles. Often the style used by the company is determined by its size, and layout. Some companies bring in outside analysts to observe and report what they see.

Strategic Management Process

Strategic management process includes a set of managerial decisions which determined the ling-term planning and effective performance of superior objectives and goals of the organization

Strategic Management Process/Steps

Define organization or company mission Analysis of business environment Identifying the present strategies and objectives Evaluating the present strategy Analysis strategic choice Development of strategy Formulation strategy Implementation of the strategy Control, monitor, guide and evaluate the strategy

Strategic Management Model

Strategic Management model provides three major functions It provides a visual representation of the major components of the entire strategic management process. This model also shows how the components are related and how they are related throughout the process. This model provides the general overview of the strategic management process of the organization This model recommends the strategy formulation, implementation and control, monitor, guide and evaluation of the organizational objectives

Components of Strategic Management

Company Mission Company Profile Environment analysis Strategic analysis and choice Long-term objectives Grand Strategies Annual Objectives Functional Strategies Policies Institutionalizing Strategy Control and evaluation strategy

Organization/Company Mission

Organization /company mission statement is the basic issue point of the strategic management. It will guide future execution policies and objectives.

Company Profile

Company profile is to determine strength , weakness, opportunity and threats of the business. It involves to the internal environment of the organization and its functions like marketing, production, accounting, finance, research and development, human resource management and customer relationship.

Environment analysis
It is the analysis of the organization external environment. External environment consists of all conditions and forces are typically beyond the control of organization. The strategic management component shows the external environment which consists of the operating/micro and macro environment.

Strategic analysis and choice

The comparison of the strength, weakness, opportunity and threats are normally referred to SWOT analysis. This process result in the selection of strategic choice. It is meant for the combination of the longterm objectives and grand strategy that will optimally position the organization in encompass functional level, business level and global strategies.

Long-term objectives
Long term objectives typically seek five year or more period of time. Long term objectives are typically involved the following areas of the organization

Profitability Return on investment Competitive position Technological leadership Productivity Employee relations Public responsibility Employee development To be greatest each objective must be measurable & achievable

Grand Strategies / Generic Strategy

Grand strategies is the combination of the stability, expansion, retrenchment, concentration, market development, product development, innovation, horizontal integration, vertical integration, joint venture, concentric diversification, divestitute and liquidation strategy.

Annual Objectives

Annual/short term objectives typically seek results of the organization within a period are annual/short term objectives.

Functional Strategies
Business functions strategies are marketing, finance, accounting, production, R&D and human resource strategy. These are specific and integrative plan of action. Most strategic managers attempt to develop an operating strategy for each related to set of annual/ short term objectives.

Policies
Policies are directives which are designed to board guidelines of the organization. It concerned with thinking, decisions, actions and responsibilities of managers and their subordinates for implementing the organizations strategy.

Institutionalizing Strategy

Institutionalizing Strategy is the combination of the structure, leadership and culture of the organization.

Control and Evaluation

An implementation of strategy must be monitored and controlled to determine the extent to which objectives, mission, vision, philosophy and goals are to be achieved.