BUSINESS POLICY

AND
STRATEGIC MANAGEMENT

EVOLUTION OF BUSINESS
POLICY
GENESIS OF BUSINESS POLICY
Origin of this course can be traced back to 1911,
when the Harvard Business School introduced
an integrative course in management aimed at
providing general Management capability.
This course took a clear shape after the Gordon
and Howell report, sponsored by ford foundation
and the Pierson report, sponsored by carneige
corporation was incorporated into curriculum at
business school in USA in the 1959s.

Historical Perspective

Hofer and other have viewed the evolution policy in

terms of four Paradigm shifts.
1st Phase(Mid-1930s) - emphasis on ad-hoc policy
making due to the nature of the American business
firms of that period.
2nd Phase(1930s 1940s) Replacement of ad-hoc
policy making with planned policy formulation due to
environmental changes.
3rd Phase(1960s) Replacement of planned policy
formulation with strategy making concept due to
increasing complexity,environmental changes and long
term needs of business.

Historical Perspective
4th

Phase(1980s) Emphasis on strategic

management which mainly focuses on
intersection of two broad field of enquiry:
a) strategic process of business firms and
b) the responsibilities of general management
in resolving the strategic issues.

NATURE OF BUSINESS
POLICY
According to Christensen & others, Business Policy is
The study of the function & responsibility of senior
management, the crucial problems that affect success
in the total enterprise and the decision that determine
the directions of organisation and shape its future. The
problems of policy in business, like those of policy in
public affairs have to do with the choice of purposes,
the moulding of organisational identity and character,
the continuous definition of what needs to be done,
and the mobilization of resources for the attainment of
goals in the face of competition.

Nature of Business Policy

1)

2)

3)

4)

Study of function and responsibilities of senior

management.
It deals with the determination of future course
of action.
It involves choosing the purpose and defining
what needs to be done in order to mould the
character and identity of the organisation.
It is concerned with the mobilisation of
resources which will help the organisation to
achieve its goals.

Why do some organizations

succeed while others fail?
Strategy is a set of related actions that managers take
to increase their companys performance.

Strategy Formulation
Strategy Implementation
Strategy Evaluation

Competitive Advantage results when a companys

strategies lead to superior performance compared
to competitors
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Strategic Management
Concept

of Strategy
Derived from the greek word strategos, which
means generalship-the actual direction of
millitary force.
Strategy is the direction and scope of an
organisation over long term, ideally which
matches its resources to the changing
environment and in particular to its mkt,
customers or clients so as to meet
stakeholders expectation.

WHAT IS STRATEGY ?

Strategy is a planned or emergent course of action that is

expected to contribute to the achievement of organizational
goals.

Strategy is defined as, a unified, comprehensive, and

integrated plan that relates to the strategic advantages of
the firm and to the challenges of the environment.

Alfred D. Chandler defines Strategy is the determination of

the basic long-term goals and objectives of an enterprise,
and the adoption of courses of action and the allocation of
resources necessary for carrying out these goals.

Analysis of Definition of Strategy

Determination

of basic long-term goals and

objectives and course of action
Allocation of necessary resources for the
implementing the course of action.
Common thread that pulls the policies, plans,
goals, objectives of the different functional areas.
Connected to the strategic positioning of a firm,
making trade-offs between its different activities
and creating a fit among these activities.

Characterstics of Strategy
Strategic

decisions are likely to be concerned

with scope of an organisation.
Strategy is to do with matching of activities of an
organisation to the environment.
Strategy is also to do with matching of
organisational activities to its resource capability.
Strategy decisions have major resource
implications for an organisation.
Strategic decisions likely to affect operational
decisions.

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 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.

 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.

Levels of Strategy: The

three level of Strategy are: Corporate Level

Strategic Business Unit level/ Competitive
level
Functional / Operational Level

Levels of Strategic
Management

Key Question for Each Level

Corporate

Strategy what business(es)

should the organization be in?
Business Strategy how should the
organization compete?
Functional Strategy how should the
organizations resources be best employed to
support business strategy?

Corporate level

It defines the overall character & mission, products &

services and allocation of resources & management.
Formulated by Top level (BOD, CEO)
Long term strategy encompassing the entire organisation.
For eg: Major financial policy decisions involving Acquisition,
Diversification and structural Redesigning belong to this
category.

Aspects of Corporate Strategy

1.
2.

1.
2.

Formulation of Strategy/ Strategic Planning

Strategic Implementation
Strategic planning is defined as the process of
deciding on objectives, on the changes in the
objectives, on the resources used to attain
these objectives, and on the policies that are to
govern the acquisition, use and disposition of
these resources.
Strategic formulation requires :
Identification of Opp. & Threats
Appraisal of the cos Strengths & weaknesses

SBU / Competitive level Strategy

Concerned with which products & services should be

developed & offered to which market.
This translate the general statement of direction into
concrete functional objectives .
SBU strategy is related to Unit within the whole &
Corporate strategy is related to organisation as a whole.
For Eg: Policies involve New product Development,
marketing mix, research & development

Functional strategy
Decision

Making with respect to specific

functional areas-prod, finance, marketing
Concerned with doing things right,

Corporate Planning:

Corporate planning is a comprehensive planning process

which involves continued formulation of objectives and the
guidance of affairs towards their attainment by Top
Management.
Object is to identify new areas of investment & marketing
which implies two things: a) the imposition of planning
discipline on the present operations b) a reappraisal of
business and of the direction in which it should be heading.
The comprehensive nature of corporate planning process
lies in that operational planning, project planning and
strategic planning are its constituents.

Operational planning:

Operational planning involves the study of market

conditions for existing range of pdts to maintain and
improve the position of the firm in the face of
competition.
Short term exercise, degree of uncertainty is of low
order.
But firms cannot ignore long term changes in the new
market for the existing products.
But in order to look for new market for existing product,
develop new products, create a market for the same
and utilise the existing facilities and expertise to meet
new requirements characterise the need for project
planning.

Project Planning:
It

is a forward looking exercise, concerned with

new markets, new products and new facilities.
It involves a greater degree of risk, uncertainty
and demands a higher order of judgement on the
part of planners due to the risk involved.

Strategic planning refers to the formulation of a unified,

Strategic
Planning
comprehensive
and integrated plan aimed at relating the
strategic advantages to the firm to the challenges of the
environment.
Strategic implementation depend on Org. structure,
Organisation processes, & pattern of leadership
It is concerned with translation of strategy into action.
It is likely to involve mobilisation & allocation of resources,
structuring authority, responsibility, task & relationship flow &
establishing policies.
Time span of discretion is much longer, the degree of
uncertainty and corresponding risks involved are much
greater and judgement to be exercised.

Advantages of Strategic Planning:

1)

2)

3)

4)
5)

6)

Providing necessary guidance about what is expected

to be achieved and how,
Making managers more alert to new opportunities and
potential threats
Unifying organisational effort leading to greater
harmony and goal congruence,
Creating a more proactive management posture
Promoting a constantly evolving business model so
as to ensure bottom-line success for the enterprise
Providing the ratonale for evaluating competing budget
requests for steering resources with strategysupportive & result producing areas.

Strategic Management:
As

a overall process, it is defined as a set of

decisions and actions resulting in formulatin and
implementation of strategies designed to achieve
the objectives of an organisation.
Strategic managemnet is a stream of decisions
and actions which leads to the development of
an effective strategy or strategies to help achive
corporate objectives.

Benefits of Strategic mangement:

Financial

benefits
Enhanced capability of problem prevention
Improved quality of strategic decisions through
group incentives.
Greater employee motivation
Reduction of gaps and overlays in activities.
Minimum resistance to change.

Process Of Strategic Planning & Management

1.
2.

3.

4.
5.

6.
7.

Developing a strategic vision

Analysis and dignosis of current & likely future
envt., identifying Opp. & threats.
Analysis of internal capabilities- strength &
weaknesses
Setting corporate objectives in broad terms.
Formulation of alternate strategies, evaluation
of strategic options & choice of strategy
Implementation of choosen strategy
Review of strategy, monitoring the results of
strategy implementation.

Modes of Strategic -Making

1)
2)
3)

Strategy making involves linking together of a

no. of decisions to form strategies.Acc.to Henry
Mintzberg, there are three types of modes:
Entrepreneurial
Adaptive
Planning

Entrepreneurial Mode:
An

entrepreneur is a Creative thinker, an

innovator,a risk-bearer, practical in nature & is
motivated by a powerful need for achievement &
independence.
Dominated by active search for opportunities
Personal power
Dominant goals consists of growth & expansion
in terms of assets, market share and turnover.
Broadly speaking, strategy in this mode
chracteristically pushes ahead in the face of
environmental odds.

Adaptive Mode:

It is basically remedial in nature.

Executive in this mode is concerned with solving problems of immediate
importance rather than developing long-term strategies which implies
bargaining with suppliers, compromising with competitors, reducing
conflicts among coalitions of interest groups within the organisation.
Reactive Approach
Decision making power is divided among members of the coalitiongroups-Trade union,mgrs govt. agencies
Decisions are made in sequential, increamental steps, onething at a
time.
On conclusive note, it consists of piecemeal, remedial decisions resulting
from the interactions among power-group in the organisation.

Planning Mode

a)
b)
c)
d)

It is based on a study of the

fundamental socio-economic purposes of the organisation
Values of top management
Evaluation of the external & internal opportunities & threats
Evaluation of company strengths and weaknesses.

On conclusive note: it implies a process having both proactive

& reactive thrusts, systematic and structured in its
approach, and results in integrated decision-making.

Factors governing the mode

Choosing of strategy-making depend upon following:

Characterstics of the firm (eg. Size, leadership pattern, etc)

Nature of environment in which it is placed (eg. Degree of

competition, stability and predictability)
Apart from these factors, others are:
a.
Small, young organisations which have made few
commitments would inclined to Entrepreneurial mode.
b.
Adaptive mode would be conducive to large established
organisation with power group having diverse interest.
c.
Planning mode should find favour with organisations which
are fairly large, well endowed with the capacity to bear the
cost of employing technically compenent analysts in envt.

McKinseys 7- S Framework

1)
2)
3)
4)
5)
6)
7)

It is developed in the late 70s by McKinsey company, a

reputed management consultancy firm in the United States.
7-S model suggests that there are multiple factors which
influence an orgaisations ability to change.
The relevance of this model to strategic management is
based on 7-S which stand for policy areas vital for success.
Strategy
Structure
System
Style
Skills
Staff
Shared values

McKinseys 7- S Framework
1)
2)
3)
4)

5)
6)
7)

Strategy: means to achieve organistaional purpose

Structure: structure of activities, work specialisation & ways
in which task are integrated and coordinated.
System: constitute rules, regulations and procedures
Style: determine the effectiveness of organisational change
effort pattern of actions of top mgt team over a period of
time, reporting relationship & aspects of organisational
culture.
Skills:Distinctive competence which reflects dominant skills
of org.
Staff: Way of inducting young recruits & manage their
career.
Shared values: set of values and aspirations that go
beyond the formal statement of corporate objectives.

Importance of McKinseys 7- S Framework in Strategic

Planning & Mangement
1)

2)

It highligts several organisational interconnections having

critical significance for organisational change.
It underlines the criticality of action plans in 7-S reflecting
an organisational capability of brinrging about shifts in
strategy

Strategic Management Process

Establishment of
Strategic Intent
1.
Vision
2.
Mission
3.
Objectives
4.
Goals

Formulation of
Strategies
1.
SWOT Analysis
2.
CP Strategies
3.
BU Strategies
4.
Strategic Choice
5.
Strategic Plan

Strategic Evaluation
And
Strategic Control

Strategy Implementation
1.
Project
2.
Procedural
3.
Resource Allocation
4.
Structural
5.
Behavioural
6.
Functional & operational

STRATEGIC MANAGEMENT PROCESS

1.

a)

b)

c)

d)

Establishment of Strategic Intent: Refer to the purpose

the org. strives for- in the form of hierarchy ofVision: What the firm or person would like to become, vision
statement: Core ideology (character) & envisioned future
(Time and what it will be- tech.)
Mission: purpose or reason for its existence(Present
capabilities or scope)
Misssion statement: defines the fundamental unique
purpose & identifies the scope of Cos in terms of Pdt & Svc.
Objectives: Ends results of planned Activity, stated in
quantitatively & qualitatively terms.
Goals: Short, intermediate result to be achieved by a certain
time as a part of Grand plan, stated specifically & in
quantitatively terms.

The Mission
The mission is a statement of a companys reason for
existence today.

What is it that the company does?

Who is being satisfied

(what customer groups)?
What is being satisfied
(what customer needs)?
How customer needs are being satisfied
(by what skills, knowledge, or distinctive competencies)?

A companys mission is best approached from

a customer-oriented business definition.
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Abells Framework
for Defining the Business

Source: D. F. Abell, Defining the Business: The Starting Point of

Strategic Planning (Englewood Cliffs, Prentice Hall, 1980), p. 7.
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The Vision
What would the company like to achieve?

A good vision is meant to stretch a company by

articulating an ambitious but attainable future state.
The vision of Ford is to become the worlds
leading consumer company for automotive
products and services.
Nokia is the worlds largest manufacturer of
mobile phones and operates with a simple but
powerful vision: If it can go mobile, it will!
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Major Goals
A goal is a precise and measurable desired future state
that a company must realize if it is to attain its vision or
mission.

Key characteristics of well-constructed goals:

1. Precise and measurable

to provide a
yardstick or standard to judge performance
2. Address crucial issues with a limited
number of key goals that help to maintain focus
3. Challenging but realistic to provide
employees with incentive for improving
4. Specify a time period to motivate and
inject a sense of urgency into goal attainment

Focus on long-run performance and competitiveness.

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STRATEGIC MANAGEMENT PROCESS

Strategic Intent: of IOC

Vision: aims to achieve international standards of excellence

in all aspects of energy and diversified business with focus
on customer delight through quality products & services.
Mission: Maintaining national leadership in oil refining,
marketing & pipe line Transportation
Objectives: Focused on cost, Quality customer care, value
addition

STRATEGIC MANAGEMENT PROCESS

2.
a)

b)

c)

Formulation of Strategies:
Environmental Scanning:Before an organisation begin
strategic formulation, it must scan the ext envt. To identify
possible threats & opportunities & its envt for strengths and
weaknesses.
Strategies at different level to be identified(Corporate level
Strategy and Business- level strategies)
Strategic Analysis and Choice: this process is divided into 4
stages- focussing on alternatives, considering the selection
factors, evaluation of strategic alternatives, making the
strategic choice(plan).

STRATEGIC MANAGEMENT PROCESS

3.

a)

b)

c)

d)

e)

Implementation of Strategies: the strategic plan is put into

action through four sub processes:
Activating strategies:
Project implementation-no. of steps in setting up of org.
Procedural implementation- regulatory Framework
Resource Allocation-procurement & commitment of Res.
Structural : deals with designing of structures & system &
reorganising to match the structure to the needs of Strategy
Behavioural: consider leadership styles, corporate culture,
corporate politics.
Functional : relate to functional plan and policies in different
functional areas
Operational: deals with the productivity, processes, people
and pace of implementing the strategies.

STRATEGIC MANAGEMENT PROCESS

4)
a)

b)

Evaluation & Control

Evaluation operates at two level:
Strategic- consistency of strategy with the environment
Operational- assessing how well the organisation is
pursuing a given strategy.
Control operates at two level:
Strategic- premise, implementation, strategic surveillance
and special control
Operational- basic control operations.