bpsm 1 introduction prof. sangita

7/29/2019 BPSM 1 Introduction Prof. Sangita

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P R O F . S A N G I T A

BUSINESS POLICY &STRATEGIC MANAGEMENT


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Learning Objectives

Understand the nature of Business Policy andStrategic Management

Understand the concept of Strategy and Strategic

Management


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Features of Business Policy

Specific- Policy should be specific/definite. If it is

uncertain, then the implementation will become difficult.

Clear- Policy must be unambiguous. It should avoid use of

jargons and connotations. There should be no

misunderstandings in following the policy.

Reliable/Uniform- Policy must be uniform enough so

that it can be efficiently followed by the subordinates.

Appropriate- Policy should be appropriate to the present

organizational goal.


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Features of Business Policycontinue

Simple- A policy should be simple and easily understood by all in the

organization.

Inclusive/Comprehensive- In order to have a wide scope, a policy

must be comprehensive.

Flexible- Policy should be flexible in operation/application. This does

not imply that a policy should be altered always, but it should be wide in

scope so as to ensure that the line managers use them inrepetitive/routine scenarios.

Stable- Policy should be stable else it will lead to indecisiveness and

uncertainty in minds of those who look into it for guidance.


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STRATEGY

Definition Strategy is a plan or course of action that is

expected to contribute to the achievement oforganisational goals.

Strategy can also be an idea or a thought that isviewed to be productive to complete a course ofaction.

Strategy is defined by Arthur Sharplin as, a planor course of action which is of vital pervasive, orcontinuing importance to the organisation as a

whole.


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Definition

Alfred D. Chandler defines strategy as, thedetermination of the basic long-term goals andobjectives of an enterprise and the adoption of thecourses of action and the allocation of resources

necessary for carrying out these goals.

James Brain Quinn defines the term strategy as,the pattern of plan that integrates anorganization`s major goals, policies and actionsequences into a cohesive whole.


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Analysis of Definitions of Strategy

Strategy is a central understanding of the strategicmanagement process.

Strategy is the determination of basic long-termgoals and objectives of an organisation.

It helps in determining the courses of action to attainthe predetermined goals and objectives.

It points to allocation of necessary resources forimplementing the course of action.

It develops the company from its present position tothe desired future position.

It is a set of decision-making rules having a common

thread.


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Criteria for Effective Strategy

Clear, decisive objectives Maintaining the initiative- the strategy preserves

freedom of action and enhances commitment.

Concentration of superior power.

Flexibility Coordinated and committed leadership

Surprise-the strategy should make use of speed,secrecy and intelligence to attack exposed or

unprepared competitors at an unexpected time. Security-the organisation should secure or develop

resources required, securely maintain all vitaloperating points for the enterprise.


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Difference between Policy and

Strategy

Policy is a blueprint of the organizational activitieswhich are repetitive/routine in nature. Whilestrategy is concerned with those organizational

decisions which have not been dealt/faced beforein same form.

Policy formulation is responsibility of top levelmanagement. While strategy formulation is

basically done by middle level management.


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Policy deals with routine/daily activities essentialfor effective and efficient running of anorganization. While strategy deals with strategicdecisions.

Policy is concerned with both thought and actions.While strategy is concerned mostly with action.

A policy is what is, or what is not done. While a

strategy is the methodology used to achieve atarget as prescribed by a policy.

Difference between Policy and Strategy


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Need for Strategy

To have rules to guide the search for newopportunities both inside and outside the firm.

To take high quality project decisions.

To have an assurance that the firm`s overallresource allocation pattern is efficient.

To save time, money and executive talent.

To identify, develop and exploit potential

opportunities.


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Henry Mintzberg 5 Ps of strategy

Mintzberg (1987) defines strategy in terms of 5Ps. Henry Mintzberg, in his book, The Rise and Fall of

Strategic Planning, 1994,points out that "strategy" isused in several different ways, the most common

being :

Plan

Ploy

Pattern Position

Perspective


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PLOY

Ploys are the competition strategies designed tomaintain, reinforce, achieve or improve the relativecompetitive position of the organization.

The real strategy (as plan, that is, the realintention) is the threat, not the new practice areaitself, and as such is a ploy.

Threatened litigation often falls into this category.


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PATTERN

A pattern is a stream of actions.

Defining strategy is incomplete and needs an outline thatencompasses the resulting behavior.

The outcome of strategy does not derive from the design,or plan, but from the action that is taken as a result.

A pattern makes a strategy consistent in behavior,whether or not intended. Patterns are the consistency of

firm decision making Strategy is a pattern in actions over time; for example, a

company that regularly markets very expensive productsis using a "high end strategy.


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Position implies a specific means of locating a firm inits environment.

In management terms: a "domain" consisting of a

particular combination of services, clients andmarkets.

Position is defined competitively.

Strategy is position; that is, it reflects decisions to

offer particular products or services in particularmarkets.

POSITION


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PERSPECTIVE

Perspective is the main business concept or idea andthe means by which that concept or idea is put intopractice or implemented.

Perspective looks inward into the firm.

Strategy is a perspective shared by members of anorganisation, through their intentions and / or by theiractions.

In effect, when we talk of strategy in this context, we are

entering the realm of the collective mind - individualsunited by common thinking and / or behaviour.

Strategy is perspective, that is, vision and direction.


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STRATEGIC MANAGEMENT

Definitions

Strategic management is concerned with decidingon strategy and planning how that strategy is to be

put into effect. According to Samuel C. Certo and J. Paul Peter,

Strategic management is a continues, interactive,cross-functional process aimed at keeping an

organisation as a whole appropriately matched to itsenvironment.


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Definitions Schellenberger and Bosenan define the term

strategic management as, the continuous processof effectively relating the organization's objectives

and resources to the opportunities in theenvironment.


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Analysis of Definitions of StrategicManagement

Strategic management is a continuous process.

Strategic management consists of a series of stepsrepeated cyclically.

Strategic management process integrates humanresources with marketing, production/operationsand finance.

Organisations must modify their strategies in

accordance with the changing environment.


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Strategic Management Process

Strategic Management Process

The process by which managers choose a set of strategies forthe enterprise to pursue its vision.

Four phases of Strategic Management Process

1. Establishment of Strategic intent

2. Formulation of strategies

3. Implementation of Strategies

4. Strategic Evaluation.


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Defining the Mission and Setting Top-Level Goals

External Analysis of Opportunities and Threats

Internal Analysis of Strengths and Weaknesses

Selection of Appropriate Strategies

Implementation of Chosen Strategies

Strategic Planning

Basic Strategic Planning Model


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The basic characteristic of strategicmanagement

Flexibility: It is one of the important features instrategic management.

Integration: To take planning under the strategic

management, it is essential to integrate goals objectsalongside the internal and external sides of theinstitution.

Speed: To bring the dynamism under the strategic

management, it is inevitable to access the importantaffairs so that it may be possible to speed up the paceof action at present and future.


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Innovation: Innovation or creativity is animportant feature in the case of strategicmanagement. We know, environment is everchanging.

Long-term plan: Long-term planning is veryessential to bring good result.

Determination of alternatives: It is a very

urgent thing to implement goals. Consideration of environment


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Need for Strategic management

Due to Change

To provide Guidelines

Developed field of study by research

For better performance Systematise business decisions

Improves communication

Improves coordination Improves allocation of resources

Helps the managers to have a holistic approach


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Benefits of Strategic Management

Strategic management helps an organisation to beproactive rather than reactive in shaping its future.

It helps organisations not only to respond to its relevantenvironment, but also to initiate and influence its

environment and thereby exert control over its destiny. It helps organisations to make effective strategies

through the use of a more systematic, logical and rationalapproach to strategic choice.

It helps organisations to achieve understanding andcommitment from all managers and employers.Employee empowerment is the act of strengthening anindividual`s sense of effectiveness.


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Benefits of Strategic Management( continue)

It encourages the organisations to decentralise themanagement process involving lower level managersand employees.

A significant number of research studies havesuggested that a well-designed strategicmanagement can boost profits.

It often brings order and discipline to a firm.

It minimises the effect of adverse conditions andchanges.


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Strategy hierarchy

1. Corporate strategy: 1) growth strategy, 2) stabilitystrategy, 3) retrenchment strategy.

2. Business unit strategy: 1) cost leadership, 2)

differentiation, 3) focus, 4) mixed.3. Functional strategy.


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Growth strategies

Growth strategies:They result increase in sales, market share and profit: the

types:

Internal growth: Increase internal capacity of organization

without acquiring other firms. Conglomerate Diversification: Acquiring unrelated

business.

Merger: Two roughly similar size firms combine into one.

To benefit of synergy. Strategic alliance: Temporary partnerships


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Retrenchment strategies

Types:1- Turnaround:

Eliminating unprofitable outputs, pruning/cuttingassets, reducing size of work force, rethinking firmsproducts lines and customer groups.

2- Divestment: sell one of business units

3- Liquidation: last resort strategy


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Business StrategyBusiness strategy refers to the actions andapproaches crafted by management to createsuccessful performance in one particular line of

business. It is also concerned with creatingcompetitive advantage in each of the strategic

business units of the organization.

Focuses on improving competitive position of

companys products or services within the specificindustry or market segment


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Functional or departmental strategy Functional or departmental strategy concerns the

managerial game plan for running a major functionalactivity or process within a business such as researchand development unit, marketing unit, financial unit,production unit, H R development unit and so on. A

business requires as many functional strategies as ithas strategically critical activities.

bpsm 1 introduction prof. sangita

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