Subject : BA 107 – BUSINESS POLICIES AND STRATEGIES

Topic Report : CHAPTER I: BASIC CONCEPTS IN BUSINESS POLICY AND STRATEGY

Reporters : MISAN E. VALDVIEZO

CHAPTER I: BASIC CONCEPTS IN BUSINESS POLICY AND STRATEGY

What is Strategic Management?

 a set of management decisions and actions that determines the long-run performance of a corporation. It
includes environmental scanning, strategy formulation, strategy implementation and evaluation and control to
achieve the objectives of an organization.
 The study of strategic management emphasizes the monitoring and evaluating of external opportunities and
threats in light of a corporation’s strengths and weaknesses.
 As per Fred R. David, strategic management is an art and science of formulating, implementing and evaluating
cross functional decisions that enable an organization to achieve its objectives.
 As per Channon, strategic management is defined as that set of decisions and actions that result in formulating
of strategy and its implementation to achieve the objectives of the corporation.
 Most important part is developing strategic plans
- Plans must remain current as changes occur inside and outside the company
 Involves many levels of management
- Top level formally develops basic plans
- Different departments may be asked to develop plans for their own areas
- A solid plan guarantees that plans are coordinated and are supported by everyone in the company
 Strategic Management includes all the decisions and actions set by the managers and provides a gauge on the
performance of a particular organization.

Strategic Management Process

SITUATION ANALYSIS

STRATEGY FORMULATION
Mission/Vision Strategies/Policies

STRATEGY IMPLEMENTATION
Programs/Activities Budget/Procedures

STRATEGY EVALUATION AND CONTROL

Performance Actual Results

 SITUATION ANALYSIS
- includes environmental scanning
- provides the information necessary to formulate the company’s vision/mission statement
- involves scanning and evaluating the organization, which includes the external environment
- analyzing the environment using several techniques
- internal environment should be observed, includes employee interactions with one another regardless of
rank
- analyze the external environment, this comprises of customers, suppliers, creditors, and competitors
The environment is observed internally on the organizational culture – how employees interact with
each other, how relationships are formed and enhanced. Their behavior is observed, employees are interviewed
and focused group discussions are done. These techniques are used to provide a better picture of organizational
culture.
In the external environment, customers, suppliers, competitors, among others are observed. Who are
the customers and who are the direct and indirect competitors? What is the relationship of the company and
the suppliers?
 STRATEGY FORMULATION
Developing the grand- and business-level strategies to be used by the company
- Company’s strengths/weaknesses and threats/opportunities shape the strategies
 - First step is to understand the current position of the company
 Identify mission, identify past and present strategies, diagnose the company’s past and present
performance, set objectives for the company’s operation
Identify the mission statement
 Outlines why the company exists
 Describes the company’s basic products and/or services and defines markets and sources of revenue
 Designed to accomplish several goals and ensures a common purpose within the company

Identifying Past and Present Strategies

 Companies need to understand and appreciate their corporate history
 Strategic managers should ask
- Has past strategy been developed?
- If not, can past history of the company be analyzed to identify the strategy that has evolved?
- If yes, has the strategy been recorded in writing?
- Strategic Management Process
Diagnosing Past and Present Performance
 A corporate planner must decide if past strategies worked and if strategic changes are needed by
asking:
- How is the company currently performing?
- How has it performed during the past few years?
- Is the performance trend moving up or down?
Setting Goals
 Concise statements that provide direction employees and set standards for achieving the company’s
strategic plan
 Established in many areas
 Goals must be reevaluated as the environment and opportunities change
 Multiple goals are used to reflect the desired performance
Policies, Procedures, and Rules
 Policies are broad general guides to action that establish boundaries within which employees must
operate
- “answering all written customer complaints in writing within 10 days”
 Procedures are detailed series of related steps/tasks written to implement a policy
- Define methods through which policies are achieved
- “the customer service representative must note the complaint of Form 622 and forward the
yellow copy of the form…”
 Rules detail specific and definite corporate actions that employees must follow
- Leave little doubt about what is to be done
- “no smoking in the conference room”

 STRATEGY FORMULATION
- involves the development of company strategies
- composed of three organizational levels: operational, competitive and corporate

Operational strategies are short-term and a associated with the various operational departments of the company
such as human resources, finance, marketing, and production. The traditional definition of operational strategies
refers to solely to the set of processes and structures. There were no strategies that direct overall performance and
day-to-day priorities specific functions.

Competitive strategies are those related to the techniques in competing in a certain industry. The company must
identify the strengths and weaknesses of its competitors; thus, formulate strategies to gain competitive advantages.
These strategies deal with establishing competitive strength against competitors.

Corporate strategies are long-term and are involved in providing direction for the organization.
- to be able to improve both operational and competitive strategies
- there should be a synergy between the operating units and thus, competitive strategies should support overall
corporate strategies
- these strategies solidify all the other strategies that will result to overall organizational performance

Competitive Advantage
- looks at quality
- it is tantamount to superior quality wherein a customer would pick out a particular brand and no other,
 because of the belief that a particular brand provides excellent performance
- the brand name’s image and reputation speaks quality
- customer can rely on the product and it is long-lasting
- building a competitive advantage means that the
product or service provides efficiency on the part of the company producing, supplying or giving
- more goods or services are provided with minimum cost of production without sacrificing product or service
quality
- a competitive edge also covers continuous innovation
- the product or service matures in the product life cycle, it is enhanced or improved
- continuous improvement means the company wants to maintain its customers, no brand
switching
- also achieved when the company always anticipates what the customers need and want
- it responds to customers’ suggestions, and attends, analyzes, and monitors customer’s complaints

 STRATEGY IMPLEMENTATION

- the action stage of strategic management

- involves the development of procedures, programs and activities to put the strategies into practice
- it also the time to determine which strategies should be implemented first.
- should arrest potential hazards like communication of the strategies to be implemented
- failure to communicate the strategies to the entire organization loses the ability of the
organization to implement the strategies

 STRATEGY EVALUATION

- the process of monitoring corporate activities and performance results so that actual
performance can be compared with desired performance
- it includes appraising the company’s performance
- all employees are involved in strategy evaluation
- there is always a need to modify strategies because the environment is constantly
changing
- there is always a quest for these modifications to make the strategies more attuned these
changes

STRATEGIC MANAGEMENT: PLANNING PHASES

1. Planning Financial Aspects. This is the phase when financial data such as next year’s budget is planned.
Four Planning Phases
1. Identify and clarify business goals
2. Research and modify a target audience
3. Identify changes to the online ordering process
4. Identify the optimal degree of website customization

2. Forecasting. For long-term planning, five-year plans are made. It takes a while before final projects are
evaluated and approved.
- Use this data to predict the future
- Gather and analyze data about the past
ELEMENTS OF A GOOD FORECAST:
- Timely - Meaningful
- Reliable - Written
- Accurate - Easy to use

3. External Planning. This is usually the task of top management. They gather and formulate strategies for the
company on a five-year period.
Strategic planning requires that, in thinking about the future, managers must have information about both
the external economic environment in which the farm business operates and the internal characteristics of the
farm business.

Steps in Planning

1. Being aware of opportunity 5. Comparing alternatives in light of goals sought

 2. Setting objective or goals 6. Choosing an alternative
3. Considering planning premises 7. Formulating supporting plans
4. Identifying alternatives 8. Numbering plans by making budgets

4. Strategic Management. In this phase, the strategies formulated will be worthless without the commitment of
the employees.
Strategic Management is all about identification and description of the strategies that managers can
carry so as to achieve better performance and a competitive advantage for their organization.

GLOBALIZATION
 It is the internationalization of markets and corporation.
 Is a process of interaction and integration among the people, companies, and governments of different nations,
a process driven by international trade and investment and aided by information technology.

GLOBALIZATION AND ITS CHARACTERISTICS:

The idea of globalization may be simplified by identifying several key characteristics:

 IMPROVED TECHNOLOGY IN TRANSPORTATION AND TELECOMMUNICATIONS - Nowadays, a phone, instant

message, fax, or video conference call can easily be used to connect people.
 MOVEMENT OF PEOPLE AND CAPITAL - Most migration takes place within or between developing countries,
possibly because of lower standards of living and lower wages push individuals to places with a greater chance
for economic success.
 DIFFUSION OF KNOWLEDGE - When a new invention or way of doing something pops up, it does not stay secret
for long.

POSITIVE ASPECTS OF GLOBALIZATION

 As more money is poured into developing countries, there is a greater chance for the people in those countries
to economically succeed and increase their standard of living.
 Global competition encourages creativity and innovation and keeps prices for commodities/services in check.
 Developing countries are able to reap the benefits of current technology without undergoing many of the
growing pains associated with the development of these technologies.
 Governments are able to better work together towards common goals now that there is an advantage in
cooperation, an improved ability to interact and coordinate, and a global awareness of issues.
 There is a greater access to foreign culture in the form of movies, music, food, clothing, and more. In short, the
world has more choices.

NEGATIVE ASPECTS OF GLOBALIZATION

 Outsourcing, while it provides jobs to a population in one country, takes away those jobs from another country,
leaving many without opportunities.
 Although different cultures from around the world are able to interact, they begin to meld, and the contours
and individuality of each begin to fade.
 There may be a greater chance of disease spreading worldwide, as well as invasive species that could prove
devastating in non-native ecosystems.
 There is little international regulation, an unfortunate fact that could have dire consequences for the safety of
people and the environment.
 Large Western-driven organizations such as the International Monetary Fund and the World Bank make it easy
for a developing country to obtain a loan. However, a Western focus is often applied to a non-Western situation,
resulting in failed progress.

THE ELECTRONIC AGE

Electronic age refers to the period of vast electronic transactions using the Internet.
  E-BUSINESS
“e-Business” is an integration of business software in order to create value for the enterprise, its clients, and its
partners.
E-Business Strategy
1. Audits 4. Retailers Experience
2. Trainings 5. Analytics
3. Consumer Experience 6. Innovation

 E-COMMERCE
“e-Commerce”, consists of the buying and selling of products or services over electronic system such as the
internet and other computer network.
- Web Design - Accounting Services
- Web Hosting - Credit Card
- Consulting - Payment Gateway
- Marketing - Merchant Account

 E-MARKETING
“e-Marketing” – efforts from the company to communicate about, promote and sell products and services by
electronic means.
- Direct Marketing - Public Relations
- Tradeshow Promotion - Events
- Advertising - Loyalty Programs

ORGANIZATIONAL ADAPTATION
 Organizational adaptation refers to modifications and alterations in the organization or its components in order
to adjust to changes in the external environment. Its purpose is to restore equilibrium to an imbalanced
condition.
 Aside from globalization and electronic commerce, a company should always be updated on what is in store in
all facets of the business environment.

THEORIES IN ORGANIZATIONAL ADAPTATION

1. Population Ecology
• explains that when a company is able to take hold of a formidable position in the industry, the tendency is for
that company not to adapt to changing conditions

2. Institution Theory
• focuses on the more obvious and important aspects of the social structure which includes norms, rules and
policies which form the basis for social behavior

3. Strategic Choice Perspective

• theorizes that an organization not only adapts to a changing environment but also tries to reshape its
environment

4. Organizational Learning Theory

• uses knowledge as an important component for the company to respond in a changing environment

Two Views of Organizational Learning Theory

• Technical View – focuses on the processing, preparation and interpretation of the processes to respond to both
internal and external forces in the organization.

• Social View – includes the experiences of people at work and their relevance to organizational performance.