Defining Business

Defining Business
Learning objectives
• Explain the three dimensions of business definition
• Describe business model and their relationship with strategy
© Azhar Kazmi & Adela Kazmi, 2015 1

Defining Business Policy
• Business Policy refers to the scope within which
decisions can be taken by subordinates.
• Problems and issues can be dealt by lower level
management without reaching to top
management.
• Business policies are the guidelines developed
by an organization to govern its actions.
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Kazmi, 2015
Difference between Policy and
Strategy
1. Policy is a blueprint of the organizational activities which are
repetitive/routine in nature. While strategy is concerned with those
organizational decisions which have not been dealt/faced before in
same form.
2. Policy formulation is responsibility of top level management. While
strategy formulation is basically done by middle level management
within the authority allocated to them.
3. Policy deals with routine/daily activities essential for effective and
efficient running of an organization. While strategy deals with strategic
decisions.
4. Policy is concerned with both thought and actions. While strategy is
concerned mostly with action.
5. A policy is what is, or what is not done. While a strategy is the
methodology used to achieve a target as prescribed by a policy.

Kazmi, 2015
Abells’ Three Dimensions for Defining a
Business of a Watch Company
Customer functions:
Utility / ornamental
Alternative technologies:
Mechanical / quartz
technology
Customer groups:
children, men or
women
Based on: D.F. Abell: Defining the Business: The Starting Point of Strategic Planning Englewood Cliffs,
N.J. Prentice-Hall, 1980

Dimensions of a Business
• Defining business along the three dimensions of customer groups,

customer functions, and alternative technologies.
• Customer groups are created according to the identity of customers
and relate to ‘who’ is being satisfied.
• Customer functions are based on what the products or services
provide for the customers and answer ‘what’ is being satisfied.
• Alternative technologies describe the manner in which a particular
function can be performed for a customer and describes ‘how’ the
need is being satisfied.

Business Definition and
Strategic Management
• A clear business definition is helpful for strategic
management in many ways. For instance, a business
definition can indicate the choice of objectives, helps in
exercising a choice among different strategic
alternatives, facilitate functional policy implementation,
and suggests an appropriate organisational structure.

Kazmi, 2015
Levels of Business
• Like strategy, business could be defined at the corporate or SBU
levels.
• A single-business firm is active in just one area so its business
definition is simple.
• A large conglomerate, operating in several businesses, would have
a separate business definition for each of its businesses.
• At the corporate level, the business definition will concern itself with
the wider meaning of customer groups, customer functions, and
alternative technologies.
• A highly diversified company organised on a divisional basis could
benefit by having a business definition covering all the three
dimensions. Each division could again have more accurate
business definition at the SBU-level.

Product/Service Concept
• A product / service concept is the manner in which a company

assesses the user’s perception of its product or service. Such
a perception is based on how the product or service provides
functions that satisfy customer needs.
• A product / service concept - carefully and innovatively
defined - can prove to be of significant worth to strategists in
different phases of strategic management.

Business Model
• Business model could be defined as “a representation of a

firm's underlying core logic and strategic choices for creating
and capturing value within a value network.”
• Business models have an intimate relationship with the
strategy of an organization. Strategies result in choices;
a business model can be used to help analyze and
communicate these strategic choices
Shafer, Scott M. & Smith, H. Jeff & Linder, Jane C., 2005. "The power of business models," Business Horizons, Elsevier, vol. 48(3),
pages 199-207

Goals and Objectives
• 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.
• Objectives are the ends that state specifically how the
goals shall be achieved. They are concrete and specific
in contrast to goals that are generalised.
• Goals may be qualitative, objectives tend to be mainly
quantitative in specification.

A Typical Strategy Map
Long term shareholder value
Financial Improve cost Improve cost Improve cost Improve cost

perspective structure structure structure structure
Customer Customer Value proposition

perspective Price Quality Availability Selection Functionality Service Partnership Brand
Internal perspective Operations Customer Innovation Processes Regulatory & Social

Management Management Processes
Processes Processes
Learning / Human capital

innovation Information capital
perspective Organisation capital
Culture Leadership Alignment Teamwork
Source: Based on R.S. Kaplan & D.P. Norton: The Strategy-focused orientation: How Balanced Scorecard
Companies Thrive in the New Business Environment (Boston: Harvard Business School Publishing, 2000) and
R.S. Kaplan & D. P. Norton: The Balanced Scorecard: Translating Strategies into Action (Boston: Harvard
Business School Press, 1996).

Kazmi, 2015
Critical Success Factors
• Critical success factors (CSFs) are crucial for organisational
success. When strategists consciously look for such factors and
take them into consideration for strategic management, they are
likely to be more successful, putting in relatively less efforts.
• Rockart has applied the CSFs approach to several organisations

through a three-step procedure for determining CSFs. These steps
are: to generate the success factors (`what does it take to be
successful in business?'), refining CSFs into objectives (`what
should the organisation's goals and objectives be with respect to
CSFs?) and identifying measures of performance (`how will we
know whether the organisation has been successful on this
factor?').
John F. Rockart, "CEs define their own data needs", in Harvard Business Review (Mar-Apr. 1979): 89.
Key Performance Indicators
• Key performance indicators(KPIs) are the metrics or
measures in terms of which the critical success factors are
evaluated.
• KPIs help an organization define and measure progress
toward its objectives. They give everyone in the organization
a clear picture of what is important and what they need to do
to accomplish objectives. They are a helpful tool for
organizations to motivate their employees towards
achievement of objectives. KPIs are applied in business
intelligence to gauge business trends.

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© Azhar Kazmi & Adela Kazmi, 2015 1

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• Defining business along the three dimensions of customer groups,

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• A product / service concept is the manner in which a company

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• Business model could be defined as “a representation of a

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• Goals denote what an organisation hopes to accomplish

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Financial Improve cost Improve cost Improve cost Improve cost

Customer Customer Value proposition

Internal perspective Operations Customer Innovation Processes Regulatory & Social

Learning / Human capital

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• Rockart has applied the CSFs approach to several organisations

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