SUBJECT – Business Policy and Strategy

SESSION NO. – 1-8

TOPIC – Unit I
NAME OF THE FACULTY- Dr. Menka Sharma

ITM GROUP OF INSTITUTIONS

◈ Unit I: Introduction to Business Policy, Understanding
Strategy, Strategic Decision-Making. Process of Strategic
Management and Levels of Strategy. Strategic Intent, Vision,
Mission, Business Definition, Objectives and Purpose.
 Comparison Chart between strategy and Policy
BASIS FOR COMPARISON STRATEGY POLICY

Meaning Strategy is a Policy is the guiding

comprehensive plan, principle, that helps the
made to accomplish the organization to take logical
organizational goals. decisions.
What is it? Action plan Action principle

Nature Flexible Fixed, but they allow

exceptional situations
Related to Organizational moves and Organizational rules for
decisions for the situations the activities which are
which have not been repetitive in nature.
encountered previously.
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 Comparison Chart between strategy and Policy

BASIS FOR STRATEGY POLICY

COMPARISON
Orientation Orientation Thought and Decision

Formulation Top Level Management and Top Level Management

Middle Level Management
Approach Extroverted Introverted

Describes Methodology used to What should be done and

achieve the target what should not be done.

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Strategy
◈ The term strategy is derived from Greek word strategos,
which means generalship-the actual direction of the military
force.
◈ Definition of strategy:
◈ Henry Mintzberg from McGill University defined strategy as
"a pattern in a stream of decisions"
◈ Max McKeown (2011) argues that "strategy is about shaping
the future" and is the human attempt to get to "desirable
ends with available means".
◈ Strategy could be:
◈ A plan or course of action or a set of decision rules making a pattern or creating a
common thread.
◈ The pattern or common thread related to the organization's activities which are
derived from policies, objectives and goals.
◈ Related to pursuing those activities which move an organization from its current
position to desired future state.
◈ Concerned with the resources necessary for implementing a plan following a course
of action.
◈ Connected to the strategic positioning of a firm, making trade-offs between its
different activities and creating a fit among these activities.
◈ The planned or the actual coordination of the firm’s major goals and actions, in time
and space that continuously co-align the firm with its environment.
LEVELS AT WHICH STRATEGY OPERATES

◈ For many companies, a single strategy is not only inadequate but also inappropriate.
◈ The need is for multiple strategies at different levels. In order to segregate different
units or segments, each performing a common set of activities, many companies
organise on the basis of operating divisions or, simply, divisions.
◈ These divisions may also be known as profit centres or strategic business units (SBUs).
◈ An SBU, as defined by Sharplin, is "any part of a business organisation which is
treated separately for strategic management purpose."
◈ Generally SBUs are involved in a single line of business. A number of SBUs form a
cluster of units under a corporate umbrella.
◈ Each of the SBUs has its own functional departments or a few major functional
departments while common functions are grouped under the corporate level. The
different levels of strategy could be at the corporate level, the SBU level and at the
functional level.
Different levels of strategy

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Corporate Level Strategy

◈ Corporate level strategy occupies the highest level of strategic

decision-making and covers actions dealing with the objective of
the firm, acquisition and allocation of resources and coordination of
strategies of various SBUs for optimal performance.
◈ Top management of the organization makes such decisions.
◈ The nature of strategic decisions tends to be value-oriented,
conceptual and less concrete than decisions at the business or
functional level.
 Business-Level Strategy

◈ Business-level strategy is – applicable in those organizations,

which have different businesses-and each business is treated as
strategic business unit (SBU).
◈ The fundamental concept in SBU is to identify the discrete
independent product/market segments served by an organization.
◈ Since each product/market segment has a distinct environment, a
SBU is created for each such segment.
◈ For example, Reliance Industries Limited operates in textile
fabrics, yarns, fibers, and a variety of petrochemical products.
◈ For each product group, the nature of market in terms of
customers, competition, and marketing channel differs.
◈ There-fore, it requires different strategies for its different
product groups.
◈ Thus, where SBU concept is applied, each SBU sets its own
strategies to make the best use of its resources (its strategic
advantages) given the environment it faces.
 Functional-Level Strategy

◈ Functional strategy, as is suggested by the title, relates to a single functional operation and
the activities involved therein.
◈ Decisions at this level within the organization are often described as tactical.
◈ Such decisions are guided and constrained by some overall strategic considerations.
◈ Functional strategy deals with relatively restricted plan providing objectives for specific
function, allocation of resources among different operations within that functional area
and coordination between them for optimal contribution to the achievement of the SBU
and corporate-level objectives.
◈ Below the functional-level strategy, there may be operations level strategies as each
function may be dividend into several sub functions.
◈ For example, marketing strategy, a functional strategy, can be subdivided into promotion,
sales, distribution, pricing strategies with each sub function strategy contributing to
functional strategy.
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 Step 1: Strategic Intent

◈Vision- Vision is the statement that expresses organization’s ultimate long-run objectives. It is what the firm
ultimately like to become. Vision once formulated is for forever and long lasting for years to come. Vision is
closely related with strategic intent and is a forward thinking process.
◈Eg- Microsoft- ’A computer software on every desk and in every home’.

◈• Mission- It tells who we are and what we do as well as what we’d like to become. Mission of a business is the
fundamental, unique purpose that sets it apart from other firms of its kind and identifies the scope of its operations in
product and market terms.
◈Eg-Microsoft- ‘Empower every person and every organization on the planet to achieve more’.

◈• Objectives- These are the end results of planned activity that state what is to be accomplished by when and
should be quantified if possible and their achievement should result in the fulfillment of a corporation’s mission.
Objectives state specifically how the goals shall be achieved. Following are the areas for setting objectives profit
objective, marketing objective, production objective, etc.

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Step 2: Strategy Formulation
◈ Strategy formulation refers to the process of choosing
the most appropriate course of action for the
realization of organizational goals and objectives and
thereby achieving the organizational vision. For
choosing most appropriate course of action, appraisal
of organization and environmental is done with the
help of SWOT analysis.

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◈Environmental Appraisal- The environment of any organization is "the aggregate of all conditions,
events and influences that surround and affect it". It is dynamic and consists of External & Internal
Environment . The external environment includes all the factors outside the organization which provide
opportunities or pose threats to the organization. The internal environment refers to all the factors
within an organization which impart strengths or cause weaknesses of a strategic nature.

◈ Organizational Appraisal- It is the process of observing an organizational internal environment

to identify the strengths and weaknesses that may influence the organization's ability to achieve
goals. The analysis of corporate capabilities and weaknesses becomes a pre-requisite for
successful formulation and reformulation of corporate strategies. This analysis can be done at
various levels: functional, divisional and Corporate

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 Step 3: Strategy Implementation
◈Strategy implementation is the action stage of strategic management. It refers to decisions that are made to install
new strategy or reinforce existing strategy.

◈• Designing structure, process & system- Strategy implementation includes the making of decisions with regard to
organizational structure, developing budgets, programs and procedures in order to accomplish certain activities.

◈• Functional Implementation- Functional implementation is carried out through functional plan and policies in five
different areas- marketing, finance, operation, personnel and Information management.

◈• Behavioral Implementation- It denotes mobilizing employees and managers to put and formulate strategies into
action and require personal discipline, commitment and sacrifice. It depends upon manager’s ability to motivate
employees.

◈• Operationalizing strategy- It includes establishing annual objectives, devising policies, and allocating resources.

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 Step 4: Strategy Evaluation & Control

◈• Strategy evaluation- It is the primary means to know when and why particular
strategies are not working well. It is the process in which corporate activities and
performance results are monitored so that actual performance can be compared with desired
performance. Thus strategic evaluation activities include reviewing external and internal
factors that are the basis for current strategies.
◈
◈• Strategic control- In this step, organizations Determine what to control i.e., which
objectives the organization hopes to accomplish, set control standards, measure
performance, Compare the actual with the standard, determine the reasons for the deviations
and finally taking corrective actions and review the policies and activities if needed.

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Strategic intent
◈ By strategic intent we refer to the purposes the organisation strives for.
◈ These may be expressed in terms of a hierarchy of strategic intent.
◈ Broadly stated, these could be in the form of a vision and mission statement for the
organisation as a corporate whole.
◈ At the business level of firms, these could be expressed as the business definition and
business model.
◈ When stated in precise terms, as an expression of aims to be achieved operationally, these
may be the goals and objectives.
◈ Here we take the position that strategic intent lays down the framework within which
firms would operate, adopt a predetermined direction and attempt to achieve their goal.
 VISION (The dream)

◈ Your vision communicates what your organization believes are the ideal conditions for your
community – how things would look if the issue important to you were perfectly addressed.
◈ Definition of vision:
◈ Kotter (1990) defines it as a “description of something (an organisation, a corporate
culture, a business, a technology, an activity in the future".

◈ El-Namaki (1992) considers it as a ‘mental perception of the kind of environment an

individual, or an organisation, aspires to create within a broad time horizon and the
underlying conditions for the actualisation of this perception’.

◈ Miller and Dess (1996) view it simply as the ’category of intentions that are broad, all-
inclusive and forward thinking’.
Characteristics of Vision
A vision statement should:
◈ Understood and shared by members of the community
◈ Broad enough to encompass a variety of local perspectives
◈ Inspiring and uplifting to everyone involved in your effort
◈ Easy to communicate - for example, they should be short enough to fit on a T-shirt

Here are a few vision statements which meet the above criteria:
◈ Healthy children
◈ Safe streets, safe neighborhoods
◈ Every house a home
◈ Education for all
◈ Peace on earth
MISSION (The what and why)
◈ While the essence of vision is a forward-looking view of what an organisation wishes to become,
mission is what an organisation is and why it exists.
◈ Defining Mission
◈ Thompson (1997) defines mission as the 'essential purpose of the organisation,
concerning particularly why it is in existence, the nature of the business(es) it is
in and the customers it seeks to serve and satisfy’.
◈ Hunger and Wheelen (1999) say that ‘mission is the purpose or reason for the
organisation's existence’.
 Characteristics of a Mission Statement

◈ In order to be effective, a mission statement should possess the following

seven characteristics:
◈ It should be Feasible
◈ It Should be Precise
◈ It should be Clear
◈ It should be Motivating
◈ It should be Distinctive
◈ It should Indicate the Major Components of Strategy
◈ It should Indicate how Objectives are to be Accomplished
◈
 BUSINESS DEFINITION

◈ Understanding business is vital to defining it and answering the question ‘What is our business?’
◈ It could also be a pointer to answers to questions such as: ‘What will it be?’ and ‘What should it be?’
◈ Vision and mission statements can use the ideas generated through the process of understanding and defining
business.

Defining Business: An Illustration

◈ The wrist watch has traditionally been considered to have just one function — to display the time.
◈ Today, it is becoming a fashion accessory, which might also mean that you need to have more than one watch.
◈ It is a reflection of one’s personality and status: it makes a statement. High-value, rare watches could also be
pieces of art.
◈ Exhibit illustrates the many options available to a company in the timekeeping business.
Understanding the business of timekeeping
Dimensions of Business Definition
◈ Derek Abell, in a path breaking analysis, suggests defining a business along the three dimensions
of customer groups, customer functions and alternative technologies. Customer groups relate to
‘who’ is being satisfied, customer needs describe ‘what’ is being satisfied and alternative
technologies means ‘how’ the need is being satisfied.
◈ Figure presents a diagrammatic view of these three dimensions.
◈ Customer groups are created according to the identity of customers.
◈ Customer functions are based on what the products or services provide for the
customers.
◈ Alternative technologies describe the manner in which a particular function can be
performed for a customer.

Applying Abell's three-dimensional model to the illustration of timekeeping business,

we could identify the three dimensions as follows:
◈ Customers groups could be individual customers or industrial users.
◈ Customer functions could be finding time, recording time, using watches as a fashionable
accessory, a gift item or a piece of art.
◈ Alternative technologies could be the mechanical, quartz digital and quartz analogue
types.
 GOALS AND OBJECTIVES (how much of what will be accomplished by when)

◈ Goals denote what an organisation hopes to accomplish in a future period of time. They
represent the future state or outcome of effort put in now. A broad category of financial
and non-financial issues are addressed by the goals that a firm sets.
◈ Objectives are the ends that slate specifically how the goals shall be achieved. They are
concrete and specific in contrast to goals that are generalised. In this manner, objectives
make the goals operational. While goals may be qualitative, objectives tend to be
mainly quantitative in specification. This way they are measurable and comparable.
◈ This fine distinction between goals as broadly stated aims and the objectives as
specifically stated aims is not necessarily maintained in practice by organisations.
◈ Any organisation always has a potential set of goals.
◈ It has to exercise a choice from among these goals.
◈ This choice must be further elaborated and expressed as operational and measurable
Characteristics of objectives
◈ Objectives should be Understandable
◈ Objectives should be Concrete and Specific
◈ Objectives should be Related to a Time Frame
◈ Objectives should be Measurable and Controllable
◈ Objectives should be Challenging
◈ Different Objectives should Correlate with Each Other
◈ Objectives should be Set within Constraints
◈ It's important to understand that these different types of objectives aren't
mutually exclusive. Most groups will develop objectives in all three categories.
◈ Examples of objectives include:
◈ By December 2023, to increase by 30% parent engagement (i.e., talking,
playing, reading) with children under 2 years of age. (Behavioral objective)
◈ By 2024, to have made a 40% increase in youth graduating from high school.
(Community -level outcome objective)
◈ By the year 2026, increase by 30% the percentage of families that own their
home. (Community-level outcome objective)
◈ By December of this year, implement the volunteer training program for all
volunteers. (Process objective)
 Thanks!
Any questions?
You can find me at:
[email protected]

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