Introduction to Business Policy & Strategic Management

A definition of business policy

“Business Policy, basically, deals with decisions regarding the future of an ongoing enterprise. Such policy decisions are taken at the top level after carefully evaluating the organizational strengths and weaknesses in relation to its environment”.

- RE Thomas

Origin of Business Policy Course

• BP as field of study was introduced at Harvard Business School in 1911.

• Main objective was imparting general management competence among students.

• In 1969 BP course was made mandatory for all business schools by American Assembly of Collegiate Schools of Business (AACSB)

• In every B- schools BP focused on the task of the top management.

Indian Context• In India management education started in the late 1950s• In early 60s IIM and Administrative Staff College of India

(ASCI) started and adopted the teaching methodology as HBS.

• Several universities all over the country started MBA and PGDM programmes. Almost all the institutes have offered business policy and strategic management course in their courses.

• AICTE was set up in 1990 to regulate technical and management education in India. AICTE prescribed BP&SM as a compulsory course in curriculum.

• A professional body called SMFI was also set up in 1996, which is exclusively devoted to the development.

Objectives of BP

• Integrates the knowledge and methods learnt in functional courses such as production , finance , marketing , HR etc.

• Develops the analytical skills and decision-making capabilities of students through case studies, industry specific study and data.

• Promotes positive attitudes ,ethical values and healthy ways of thinking taking a holistic view of the internal as well as external stakeholders of an organization.

Features of BP

• Top Management Function

• Understanding the big picture

• Integration of functional areas

• Resource focus

• Externally Tuned

Business Policy and Strategic Management

• Business Policy and Strategic Management both are concerned with policy and strategy issues of an organization.

• Today Strategic Management is the preferred name of the subject- Business Policy.

Strategic Management

• Strategic Management can be described as the identification of the purpose of the organization and plans & actions to achieve that purpose.

• It is the set of managerial decisions and actions that determine the long term performance of a business enterprise.

• It involves formulating & implementing strategies that will help in aligning the organization & its environment to achieve organizational goal.

A definition & meaning of Strategic Management

• SM involves those management processes in organization through which future impact of change is determined and current decisions are taken to reach a desired future.

• In Short – SM is about the envisioning the future and realizing it.

Why Strategic Management?

Strategic Planning

• SP goes far beyond the planning involves a long range planning and under conditions & uncertainty & complexity.

• SP involves :-1. Strategic thinking2. Strategic decision making3. Strategic approach

• Strategic thinking – Where are we now?Where do we want to go? How will we get there?

• Strategic decision making – choosing the best alternatives among many. It deals with long term.

• Strategic approach - Change Oriented towards the future

External emphasis Assuring a good fit between envmt &

organizationFocuses on competitive advantage

Characteristics of SM

• Long term

• Recognize changes

• Oriented towards the future

• External emphasis

• Concerned with scope of organization

• Competitive advantage

Strategic Management Process

AnalyzingCurrent

Situation

Decidingon

Strategies

PuttingStrategiesin Action

Evaluating andChanging Strategies

SituationAnalysis

StrategyFormulation

StrategyImplementation

StrategyEvaluation

Importance of SM

• It helps the firm to be more proactive than reactive

• It provides the road map for the firm.• It allows the firm to anticipate the change

and prepared to manage it.• It minimizes the risk• It provides clear objectives and direction for

employees.

Earlier = Business Policy

Now = Strategic Management

Questions

CONCEPT OF STRATEGY

• The term strategy is derived from the Greek word “strategos” which means “the art of the general” or “to command an army”.

• In other words it means the general who commands the army and his or her art of winning in the battlefield.

An Introduction to Strategy

A definition of strategy

• Goal-directed decisions and actions in which capabilities and resources are matched with the opportunities and threats in the environment.

• “Strategy is a consistent stream of decisions and actions to deal with the environment”.

-Henry Mintzberb

Mintzberb has identified 5Ps of strategy

A Plan

A Pattern

A Position

A Ploy

A Perspective

Levels of Strategy

Operational Strategy

Corporate level Strategy

Business level Strategy

Functional Strategy

• Corporate level Strategy - It is concerned with overall direction and scope. It is also concerned with the expectations of owners ,the shareholders and stock market. It is the basis of other strategy.

• Business level Strategy - It is second level. Concern about the new opportunities in markets , which product/services should be developed , how to meet with customer needs.

• Functional Strategy – they are the detailed action plans in functional areas to achieve short tem objectives. Functional areas such as marketing , HR etc to implement the business strategy.

• Operational strategy – fourth level is an operating end of an organization. OS concern with how the component parts of an organization deliver effectively the corporate and business – level strategies.

Who does strategy?

The Role of Top Management Responsible for decisions and actions of every employee Providing effective leadership

Other Organizational Employees Implement— put the strategies into action and monitor performance Evaluate—do the actual evaluations and take necessary actions

Questions

Vision

Vision

• The first task in the process of strategic management is to formulate the organization’s vision and mission statement.

What is Vision?

• A vividly descriptive image of what a company wants to become in future.

Nature of Vision

• A vision represents the animating dream about the future of the firm.

• By nature it is hazy and vague. That’s why Collins describes it as a BHAG

• For any organization it is a powerful motivator.

Characteristics

According to Thompson & Strickland – some important characteristics of vision statement.

• Easily communicable • It must be graphic• It must be directional• It must be feasible• It must be focused• It must be appealing• It must be flexible

Comparison between Vision and Mission

• Vision describe the future world and mission depicts what the organization is and does the current picture of organization.

• Vision is the future picture and mission is the more immediate and broader purpose of an organization.

• Write Importance of Vision statement.

Advantages of Vision

• Good vision fosters long term thinking.

• It creates common identity.

• It is inspiring and exhilarating.

• A good vision is competitive , original and unique.

• A good vision represents integrity.

• It fosters risk taking and experimentation.

Three approaches to formulate vision statement

• Leader dominated approach

• Pump-priming approach

• Facilitation approach

Reason For Vision Failure?

Questions

Mission

Definition

• Mission - “Purpose or reason for the organization’s existence”.

Hunger and Wheelen

Characteristics of Good Mission Statement

• Not lengthy – it should be brief.

• Clearly articulated

• Inspiring

• Relevant

• Current

• Unique

Components of Mission Statement

• Basic products & services

• Primary Markets

• Company Philosophy

• Company self concept

• Concern for public image

• Concern for employees

• Concern for quality

Questions

Strategic Intent

Strategic Intent

Vision Mission

Goals Objectives

Meaning

• Strategic intent of a company describes how a company is going to realize its vision. Strategic intent provides a particular point of view about the long term vision or aspiration of the company.

Strategic Fit

• Strategic fit express the degree to which an organization is matching its resources and capabilities with the opportunities in the external environment.