What is Business Policy

A Business Policy is the statement of a well developed business philosophy of the general management or the top management to provide guidelines and directions to the decision making process in the organization. It visualizes the whole organization and its total business and provides directions to all tasks and targets accordingly.

What is Business Policy

Business policy is, therefore, considered as guidelines for accomplishment of objectives and goals of the organization. Five basic elements of Business Policy projected by Melvin J. Stanford includes: Objectives The environment The firm Strategy and Time

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What is Business Policy

Thus the top management policy guides, directs and facilitates the thinking and acting process of all managers and executives in an organization, since the policy is formulated in accordance with the mission and purpose of the organization. While it enables the general management to gain perception of the organization as a whole, it guides and directs the thinking and acting process of all the functional areas and departments, strategic business units and profit centres. Thus, it creates a sense of mission and purpose in the executive value judgment.

The complex and sophisticated business environment has created an urgent need for strategic management for an organization. To deal effectively with the challenges of environment, including competitors, when profits are at stake; Suppliers, when resources are becoming even more scarce; Government Agencies, when adhering to growing number of regulations has become essential and Customers who have more and more expectations from products in the form of quality, service, cost and delivery to their satisfaction.

Nature and Scope of Strategic Management

Strategic Management Process

The Strategic management process facilitates to optimally position a firm in a given competitive environment as it: (1) permits more realistic and accurate assessment of the anticipated environmental changes and (2) prepare the organization for being pro-active to face the competition. The Strategic management process also ensures preparedness of Companies for reacting to unexpected internal or external pressures and sustain them.

Definition of Strategic Management

The word Strategy is derived from the Greek word Strategia that was evolved during 400 B.C. The word Strategia meant science of guiding and directing Military forces. In the present context, strategic management is understood as a process of formulating objectives of an organization and developing methods to achieve them.

Definition of Strategic Management

Strategic Management can be defined as follows: Strategic Management is the process of systematically analyzing various opportunities and threats vis-a vis organizational strengths and weaknesses, formulating and arriving at strategic choices through critical evaluation of alternatives and implementing them to meet the set objectives of the organization.

Definition of Strategic Management

Alfred D. Chandler made a detailed analysis of various inter-relationships among environment, strategy and organization structure in 70 manufacturing firms in U.S and defined strategy as follows: the determination of basic long-term goals and objectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out these goals

Definition of Strategic Management

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It is important to note that Alfred D. Chandler has made reference to three basic aspects of strategic process: Determination of basic long-term goals. Adoption of course of actions to achieve these goals Allocation of resources necessary for carrying out these goals.

Concept of Corporate Strategy

Strategy is the action plan. Corporate strategy is applicable to the whole organization and its whole business. It is the pattern of decisions made at the corporate level which , determines, shapes and reveals its objectives, purposes and goals, produces the principle policies and plans for achieving these goals; and defines the business the company intends to be in.

Growth / Expansion A Intensification Market Penetration Market Development Product Development Innovation B Diversification Vertical Horizontal

Retrenchment Divestment Turnaround Liquidation Bankruptcy

Stability Incremental Growth Profits Sustainable Growth Pause Strategy

Combination Joint Venture Strategic Alliance Consortia

Concept of Corporate Strategy

Therefore, Corporate Strategy is an important tool in the tool kit of corporate management, forming the very essence of both strategic planning and corporate policy. In articulating the corporate strategy, the corporate management is concerned with: (i) Scanning of the external environment which provides opportunities and threats; (ii) The available and potential resources of the company and its competitors; (iii) The internal consistency of the company; (iv) The satisfactory degree of risk.

Steps in an effective Corporate Strategy

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Scanning and assessment of the environment with special reference to external environment Corporate self-appraisal An organization structure enough to meet the challenges Adequate manpower to handle strategic planning and operation Ensure consistency in strategies Set clear-cut objectives and goals Ensure consistency with environmental needs

Steps in an effective Corporate Strategy

(viii) Incorporate contingency strategies to tackle contingency situations (ix) Fix up appropriate operational plan taking into account competitors (x) Allocation of adequate resources (xi) Formulation of strategy (xii) Implementation of strategy (xiii) Evaluation of strategic options, actions and performance

Corporate Level Strategists

The Board of Directors and the Chief Executive Officers (CEO,s) are the primary groups involved with corporate level strategy making. In the case of start-ups or family owned businesses, the entrepreneur is both the General Manager and the Chief Strategist. The ultimate legal authority in businesses is that of Board.

Corporate Level Strategists

Boards are held responsible to the stockholders for the following duties: (i) Ensuring the Continuity of Management ( Replacing or retiring ineffective managers (ii) Protecting the use of stockholders resources. (iii) Ensuring that managers take prudent action regarding corporate objectives.

Corporate Level Strategists

(iv) Approving major financial and operational decisions of the managers. (v) Representing the company with other organizations and bodies in Society. (vi) Maintaining, revising and enforcing the Corporate Charter and By-laws. (vii) The Board is legally mandated to control the organization and be centrally concerned with maintaining operations and effectiveness.

Corporate Level Strategists

With more active outsiders, more and more boards are involved in linking strategy with subsequent corporate action. They are beginning to support new strategies, attract resources, and protect the organization from outside threats.

The CEO as Strategist

The CEO is responsible for defining what business the firm is in and matching the best product opportunities with the best use of the enterprises resources. The CEO must conceptualize the strategy and then initiate and maintain the strategic management process.

Concept of Synergy and its relevance to strategy

Synergy refers to the idea that the whole is greater than sum of its parts (2+2=5). If a firm can find new activities which utilize the strengths and benefits of old activities, it is likely to create more value for all activities.

Concept of Synergy and its relevance to strategy

The Enterprise while performing its functions should give careful attention to the utilities provided to customers e.g. cost, time , location, convenience etc For instance, Sears began its move into providing financial services to complement its existing insurance business by using its broad base of retail outlets and a large number of customers as a point of departure.

Concept of Synergy and its relevance to strategy

Synergy can be developed through internal expansion but it is usually discussed through external expansion (Mergers). Synergy exists when the strengths of two companies more than offset their joint weaknesses. Sales synergy arising from many Products having same sales people, warehouses, distribution channels, and advertising.

Concept of Synergy and its relevance to strategy

Investment synergy arises from many products having the same plant, inventories, R&D and machinery. Operating synergy arises from many products making possible a higher utilization of facilities and personnel and the spreading of overheads. Management Synergy arises from management experience in handling problems in one location or industry that helps to solve problems in another.

Concept of Synergy and its relevance to strategy

Synergy can be negative too. In most mergers, at least or more than one factor can be negative. In theory, the concept of synergy is appealing, but there has been little systematic proof that synergy actually exists. However, the combined resources of two companies, if properly integrated, can create a stronger operation that stand alone firms.

Strategic Decision Making

(1) Decision Making Criteria:

The criteria for making decisions is governed by the objectives that the decision maker attempts to lay down. The criteria can be maximization of profits or maximization of return on investment. The aim is to achieve objectives at their maximum level with available resources.

Strategic Decision Making

(2) Rationale:
Rationality in decision making implies presence of logical reasoning in arriving at acceptable decisions. A number of alternatives may be created and by paired comparison or through elimination process, strategic alternatives are arrived at.

Strategic Decision Making

(3) Creativity:
Creativity and innovations bring in most unusual ideas. The alternatives generated may lead to breakthrough ideas. Companies taps the creativity of their people through various techniques i.e. brain storming, attribute listening to generate alternative strategic options.

Strategic Decision Making

(4) Variability:
No two people can think alike in a given business situation. The two managers who are in the process of strategic decision making will usually arrive at different decisions. The difference may arise due to different perceptions of a problem. Additionally, the two managers may differ in their approach due to their experience, mindset etc.

Strategic Decision Making

(5) Personality or Individual Factors:

The Age, Experience, Training, Qualification, Intelligence, Values etc play a vital role in decision making and quality of a decision.

(6) Group Dynamics and Individual Decision Making:

Group dynamics affects the decision making process and the decision making is generally through consensus.

Strategic Decision Making

The personal factors may not be in tune with the entire group and differences are expected to arise in decision making. The availability of information to the group and to the individual is different, which creates variability in decision making. When groups are small, individual decision making thrives. But as the group becomes large, the need for acceptance of ideas by the group becomes more difficult.

A Case Study of PepsiCo, Inc about the Timing and Strategic Management
From within the ranks of the consumer product marketing giants, PepsiCo, Inc has emerged as this generations innovator and new product leader. Pepsi has accumulated a wide variety of consumer product successes despite recent slips and tumbles experienced by other industry powerhouses such as Philips, Proctor & Gamble and Coca-Cola.

A Case Study of PepsiCo, Inc about the Timing and Strategic Management
Besides having the nations best selling soft drink, Pepsi has helped Taco Bell and Pizza Hut became two of the fastest growing restaurant chains in the country. The backbone of this confidence is a fastmoving, risk-oriented management with an exquisite sense of timing.

A Case Study of PepsiCo, Inc about the Timing and Strategic Management
While Pepsi employs analytical research and test marketing tools similar to those of its rivals, it also realizes the importance of instinct or intuition as decision making asset . Because of the rapidly changing demands of the regional, national and even international markets, a degree of intuition is essential to flexibility in keeping a step ahead of the competition.

A Case Study of PepsiCo, Inc about the Timing and Strategic Management
Executives of Pepsi value their instincts so much that they have risked millions by being the first out with a 100% NutraSweet formula, even before a test market could be performed for fear that Coca-Cola would be tipped off. Pepsis top management allows its managers to operate with a great deal of autonomy and encourages quick actions in return for expected performance.

A Case Study of PepsiCo, Inc about the Timing and Strategic Management

When opportunities arise, usually the difference between success and failure is not that of failing to recognize the opportunity but instead that of not correctly and quickly acting upon the opportunity before the competition does.

A Case Study of PepsiCo, Inc about the Timing and Strategic Management
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Questions Does a point exist where even the best intuition or good hunch wont be enough to go on when determining investment allocations? Whether the risk and comfort level o each individual management team differs and the factors affecting the risk and comfortable level.

Strategic Management Process

The forecasts ( Economic, Political and Technological ) made become a significant part of strategic management process. The information generated can be fruitfully used by strategy managers in the process of evolving strategies keeping in view the vision of the company.

Strategic Management Process

The forecasts opens avenues for development. The gaps that emerge due to study of forecasts can be planned to be filled up through research of causes of these gaps. Companies may even change their vision and mission statements and may like to alter their strategies for growth and survival in view of research made.

Corporate Mission, Purpose & Objectives

The corporate mission of companies develop in stages during its growth. The basic values for which it comes into existence are of great importance-some of which may emerge from the strengths and proprietary knowledge of entrepreneur. As the company grows, it faces more complex and intricate business solutions and the company may alter its mission and defines new benchmarks for being successful.

Social Responsibilities of Business

Social Responsibility is the common denominator and the basis of claims of all the driving forces of business. Discharge of pollutants, disposal of waste and conservation of natural resources etc are pertinent issues which must be addressed by strategy managers. The companies should be open to social audits wherein the social responsibility of a company must be evaluated and adhering of the company to social responsibility must be addressed. Many companies mention their social achievements in their Annual Reports. Thebe claimed true profits should be claimed only after paying social dues.