Evolution of Business Policy and Strategy

Business Policies
The set of rules that guides the decisions and actions
of the members of the organization.
Concept of Business Policy:
 Idea of planning, organizing, staffing, coordinating,
controlling and evaluating still holds true.
 To be observed or followed since it is done by the top
management;
 Marching orders for middle management to implement
and rank and file personnel have to do the actions.
Strategy refers to top management’s plan to attain
the outcomes consistent with the organization’s
mission and goals.
Concepts of Strategy:
Wright,Kroll and Parnell regards strategy in three
vantage points:
a. Strategy formulation or developing the strategy
b. Strategy implementation (putting the strategy
into action)
c. Strategic control (modifying either the strategy or
its implementation to ensure that the desired
outcomes are attained)
• Intended strategy refers to original strategy that
management plans and intends to implement.
• Realized strategy – refers to actual and eventual
strategy that management actually implements.
THOMPSON AND STRICKLAND
Characterized strategy as the operational level
referring to it as a set of competitive moves and
business approaches that management is employing
to run the company.
Strategy is management’s “gameplan” to achieve
the following:
a. Attract and please customers;
b. State out a market position;
c. Conduct operations;
d. Compete successfully
Characteristics of Strategy
a. A grand plan made in the light of what it was
believed an adversary might or might not do.
b. Derives its relevance given from the existences
competition in business;
c. It is done on the presumption of the existence of
a negative scenario;
d. It connotes general program of action and
deployment of emphasis and resources to attain
comprehensive objectives
e.A process of deciding on objectives of the
organization, on changes in these objectives, on the
resources used to attain these objectives, use and
disposition of these resources.
f. It involves 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 to carry out those goals.
g. A decision about how to use available resources to
secure a major objective in the face of obstruction.
h. Unlike policy, strategy implies actions and guides
decision-making, spelling out directions to be taken.
i. Strategy may, in some extreme or necessary cases,
exist without a policy.
STRATEGY VS. POLICY
The following are situations where strategy and
policy oftentimes come in collision course making it
difficult to operationalize a strategy within the
bounds of standing policy:
a. In many instances, business policies exist amidst
absence of business strategy and strategies may
exist without established business policies;
b. Business policies are generally directional in
nature and strategy is more operational in
context;
c. Business policies are often formal or written and
strategies may be informal and not necessarily
written and often confidential.
Policy is viewed as internal matters whereas strategy
is viewed more as an external orientation that the
firm’s management should practice to sty
competitive in the industry or sector it belongs.
ORIGIN AND NATURE OF
STRATEGY
Bracker cited the word strategy originated from the
Greek word “stratego” referring to a “general” which
in turn traces its root from the words “army” and
“lead”.
Stratego means “to plan the destruction of one’s
enemies through effective use of resources.”
BENEFITS OF STRATEGIC
MANAGEMENT
A. Clearer sense of strategic vision for the firm;
B. Sharper focus on what is strategically important;
C. Improved understanding of a rapidly changing
environment.
STRATEGIC TYPES
A category of firms based on common strategic orientation
and a combination of structure, culture and process
consistent with strategy.
a. Defenders – this type includes companies with a limited
product line that focus on improving the efficiency of their
existing operations. This cost orientation makes them
unlikely to innovate in a new area.
b. Prospectors- includes firms with fairly broad product lines
that focus on product innovation and market
opportunities. Tend to emphasize creativity over
efficiency.
c. Analyzers – includes business organizations that
operate in at least two different product-market
areas, one stable and one variable. In the stable
areas, efficiency is emphasized. In the variable areas,
innovation is emphasized.
d.Reactors – includes companies that lack a
consistent strategy-structure-culture relationship.
Their responses to environmental pressures tend to
be piecemeal strategic changes.
STRATEGY VS. TACTICS
Tactics are more operational and done in context with or
as a support activity or operation to achieve a strategy.
They are differentiated as follows:
a. As to level of conduct, strategy is developed at the
highest levels of management whereas tactics are
employed at and related to lower levels of management;
b. As to regularity, formulation of strategy is both
continuous and irregular whereas tactics are determined
on a periodic cycle with fixed time schedule.
c. As to subjective values, strategic decision making is
more heavily weighed with subjective values of managers
than is tactical decision-making;
d. As to range of alternatives, the total possible range of
alternatives from which management must choose is far
greater in strategic than in tactical decision-making.
e. As to uncertainty, uncertainty is usually much greater
in both the formulation and implementation of strategy
than in deciding upon and knowing the results of tactical
decisions.
f.In terms of nature of problems, strategic problems are
generally unstructured and tend to be one of a kind. Tactical
problems are more structured and often repetitive in nature.
g. As to information needs, formulating strategy requires
large amount of information. Tactical information needs in
contrast rely more heavily on internally generated data (i.e.
accounting systems).
h.Time horizon – strategies are intended to and do last for
long periods of time; tactics cover a short duration and are
more uniform for all parts of operating program.
i.By reference, strategy is original in the sense that it
is the source of origin for development of tactics.
Tactics are formulated within and in pursuit of
strategies.
j.As to details, strategies are usually broad and may
have fewer details from tactics.
k. Personnel involved, strategies are for the most
part formulated by top management, and staff, fewer
in number in tactics large numbers of managers and
employees usually participate in the process.
l.As to ease of evaluation, it is usually considerably
easier to measure the effectiveness and efficiency of
tactics than strategies.
m.From the context point of view, strategies are
formulated from corporate viewpoint, whereas
tactics are developed principally from a functional
point of view.
n. As to importance, strategies are of the highest
importance to an organization, while tactics are
considerably less sifnificant.
BASES OF POLICIES AND
STRATEGIES
a. Legal mandate – this refers to formulating policies
on the basis of the provisions of the charter or legal
basis for creation or existences of the business
organization including the applicable provisions of
laws and policies or pronouncement of the
government and its statutory or regulatory bodies.
Business policies are based on the provisions of the
articles of incorporation and by laws of the
organization.
b. Vision and mission statement-it emanates from its founders
and the previous or incumbent leaders or managers of the
organization.
c. Specific objectives – stated objectives of the business
organization may be a product of a desire to be competitive of
the kind of image and culture the company would like to project.
d. Programs and policies – these are specific programs and
policies set forth by the organization’s policymakers in pursuit of
short and long term goals given certain considerations at hand.
Approaches to Identifying
Policies and Strategies
Using the following approaches by which policies and
strategies are developed can be of help:
a. Policy/strategy profile – this approach involves a
systematic examination of present company
policy/strategy- implicit and explicit. This is a sort of self
examination, audit and introspection.
b. Gap analysis – in this approach the stimulus is an
examination of whether an end that has been established
is likely to be achieved., If not the question becomes
“What strategies and policies must be adoped to reach the
sought ends?’
c. Competitive strategy analysis – this involves a
thorough analysis of the competitive forces operating
in a firm’s environment and searching for an
alternative option.
Developing Policy and
Strategy
a. top-bottom approach – initiatives in developing
policies and strategies come from the top
management with rank and file tasked to
implementing or following the policies and
strategies.
b. bottom-top approach – policy and strategy
initiatives emanate from the bottom or rank and file
from which top management develops concrete
policies and strategies for the lower-ranked
employees to observe or follow.
c.top-bottom-top : policy and strategy initiatives are
taken by the top management then filtered down to
lower-ranked personnel for consultations then
returned back to the top management for
refinements.
STRATEGIC DECISION
It usually take into account a lot of external factors and
deal with the long-run future of the entire organization.
What it takes for a decision to be considered strategic is
described by Wheelen and Hunger as follows:
a. Rare –strategic decisions are unusual and typically
have no precedent to follow;
b. Consequential – strategic decision should commit
substantial resources and demand a great deal of
commitment from people at all levels.
c. Directive – strategic decisions set precedents for lesser
decisions and future actions throughout the organization.
MODALITIES IN STRATEGIC DECISION:According to
Mintzberg, there are 4 most typical approached or modes:
a. Entrepreneurial mode – in this mode strategy is made by
one powerful individual and the focus is on opportunities;
problems are secondary.Strategy is guided by the founder’s
own vision of direction and exemplified by large,bold
decisions.The dominant goal is growth of the corporation.
b. Adaptive mode – sometimes referred to as “muddling
through”, this mode is characterized by reactive solutions
to existing problems, rather than proactive search for new
opportunities.Strategy is fragmented and is developed to
move the corporation forward incrementally.
c. Planning mode- this decision-making mode 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.
d. Logical mode – In this mode, top management has
a reasonably clear idea of the corporation’s mission
and objectives, but in its development of strategies it
chooses to use “an interactive process in which he
organization probes the future, experiments and
learns from a series of partial commitments rather
than through global formulation of total strategies.
STRATEGIC DECISION-
MAKING PROCESS
Step 1.Evaluate current performance results in terms
of a.return on investment,profitability, and so forth
and b.the current mission, objectives,strategies and
policies.
Step 2. review corporate governance, that is the
performance of the firm’s Board of Directors and Top
Management.
Step 3. Scabn and assess external environment to
determine the strategic factors that pose
Opportunities and Threats.
Step 4 Scan and assess the internal corporate
environment to determine the strategic factors tat
are Strengths and Weaknesses.
Step 5. Analyze strategic (SWOT) factors to
a.pinpoint problem areas
b.Review and revise the corporate misision and
objectives as necessary
Step 6. Generate, evaluate and select the best
alternative strategy in the light of the analysis
conducted in Step 5

Step 7. Implement selected strategies via programs,

budgets, and procedure.
Step 8 Evaluate and implement strategies via
feedback systems and the control of activities to
ensure their minimum deviation from plans.
Role of Board of directors
a) Monitor – the board can keep abreast of developments
inside and outside the corporation, bringing to
management’s attention development it might have
overlooked.
b) Evaluate and influence- a board can examine
management’s proposals, decisions and actions; agree or
disagree with them; give advice and offer suggestions; and
outline alternatives
c) Initiate and determine- a board can delineate a
corporation’s mission and specify strategic options to its
mangement