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Lecture in Business Policy 2
Lecture in Business Policy 2
July, 2019
Business Policy - is the study of the roles and responsibilities of top- level management,
the significant issues affecting organizational success and the decisions affecting
organization in the long-run.
Business policies are the guidelines developed by an organization to govern its actions.
defines the scope or spheres within which decisions can be taken by the
subordinates in an organization
permits the lower level management to deal with the problems and issues
without consulting every time for decision
defines the area in which decisions are to be made, but it does not give the
verbal, written, or implied overall guide, setting up boundaries that supply the general
limits and direction in which managerial action will take place.
1. HR Policy
2. Materials Policy
2.1 Quality
2.2 Quantity
2.3 Payment Terms
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2.4 Stores
2.5 Handling
2.6 Documentation
3. Marketing Policy
3.1 What to sell
3.2 Where,to sell
3.3 To whom
3.4 Through whom
4. Quality Policy
4.1 Standards
4.2 Checks and control
4.3 Feedbacks
4.4 Corrective Measure
Strategy - refers to the art and science of planning and marshalling resources for their
most efficient and effective use.
refers to the integration of all organizational activities and utilizing and
allocating the scarce resources within the organizational environment so
as to meet organizational goals.
refers to a broad palette of actions that are typically used as a means of
competing effectively versus hostile environment
Michael Porter – Guru in designing effective business strategies.
Criteria for effective strategies:
1. It should not be about operational effectiveness
2. It should be about unique activities.
3. Strategic positions require trade-offs
4. It should fit the strategist in order to be sustainable
5. It needs to be constantly revised.
Competitive Advantage - is an advantage over competitors gained by offering consumers
greater value, either by means of lower prices or by providing greater benefits and service
that justifies higher prices.
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Major factors that influence competitive advantage:
1. Internal factors
2. External factors
Internal factors – financial capability, human resources, research collaboration,
marketing strategies
External factors - political, economic, social, technical and culture
Strategic Management – is the process of formulating, implementing and evaluating
cross-functional decisions that enable the organization to define and achieve its
mission and ultimately to create value
is the managerial process that focusses on identifying and building
competitive advantage by Generating good ideas and implementing them
effectively.
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2.3 Should provide the standards for performance appraisal.
2.4 Should be concrete and specific.
2.5 Should be measurable, controllable and challenging.
2.6 Should be set within constraints.
3. Strategies
4. Policies – are the constraints that the firm chooses to live with. It serve as a
documentation of the firm’s core values, beliefs and ideals. It includes
5. Programs – first implementation components
6. Budgets
7. Procedures
8. Performance Measures – metrics to be used to evaluate the performance of the
people who are responsible of the entire program.
Levels of Strategies:
1. Corporate Level
2. Business Level
3. Functional Level
4. Operational Level
Corporate Level - highest level where CEO is primarily concerned both managing
portfolio business.
create a distinctive way ahead for an organization, using whatever skills and
resources it has, against the background of the environment and its constraints
Business Level - the head is the president - responsible in ensuring the profitability of
the business through continuous pursuit of marketable competitive advantage.
The president’s performance shall be valuated by the CEO.
Functional Level – pertains to strategies that are pursued by functional specialists
within a business unit.
Operational Level – pertains to the actual operations that are undertaken in an
organization by the people down the lines
Major areas in strategic management areas:
1. Formulation – deciding what to do
1.1 Identification of Opportunity and risk
1.2 Determining the company’s material, technical, financial and managerial
resources
1.3 Personal values and aspirations of senior management
1.4 Acknowledgement of non-economic responsibility to society
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2. Implementation – achieving results
2.1 Organization structure and relationships
2.1.1 Division of Labor
2.1.2 Coordination of divided responsibility
2.1.3 Information system
2.2 Organizational processes and behavior
2.2.1 Standards and measurement
2.2.2 Motivation and Incentive system
2.2.3 Control systems
2.2.4 Recruitment and development of managers
2.3.1 Strategic
2.3.2 Organizational
2.3.3 Personal
Basic Elements of the Strategic Management Process:
1. Environmental Planning
2. Strategy Formulation
3. Strategy Implementation
4. Evaluation and Control
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4. Perspective - how organization views the sorroundings – the customers,
competitors and the environment. It becomes the basis for all its actions and the
way it reacts to situations.
Organizational Structures:
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The Chief Executive Officer (CEO) – refers to the person on top of a group of
companies.
Management roles/CEO roles:
1. Interpersonal role
2. Informational role
3. Decisional role
Interpersonal roles:
1. Figurehead – CEO serves as the symbolic personification of the company
2. Leader – leader of all the leaders
3. Liaison – primary representative
Informational roles:
1. Monitor – should know the in and out of the company/ identify trends ---
strengths and opportunities.
2. Disseminator – filter for what information need to be known by the organization or
by the outside world.
3. Spokesperson – the CEO generally the most credible spokesperson for the
organization.
Decision roles:
1. Entrepreneur - CEO is the most important entrepreneur in the organization.
2. Disturbance handler - the person who is the most authoritative to attend and
resolve the conflict.
3. Resource allocator
4. Negotiator – CEO is the most influential person in the organization and holds the
power as a principal negotiator.
Crucial roles of CEO:
1. Vision formulation - what do we want to be
2. Long-term Planning – how do we get there
3. Capacity building – how do we get the resources
Categories of environment in terms of strategic management process:
1. Macro-environment
2. Micro-environment
Macro-environment – refers to the external environment at large featuring the
elements that are beyond the power and influence of a firm and which reflect the
realities of the outside world.
Micro-environment – refers to the environment that the firm may have control.
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Elements of macro environment (in strategic management process)
1. Political
2. Economic
3. Socio-cultural
4. Technological
5. Legal Environment
Political – pertains to government policies, directions and initiatives that may have an
effect on operations and well being.
Socio-cultural – refers to the cultural facts, norms and behaviours of the groups and
sub-groups that need to be considered by the firm.
Elements of Micro-environment:
1. Customers
2. Suppliers
3. Marketing intermediaries
4. Shareholders
5. Stakeholders
6. Competitors
Michael Porter’s Five Forces Model – is a famous and popular framework that seeks to
explain competitive pressures within an industry.
Five forces according to Michael Porter
1. Industry rivalry
2. Bargaining power of suppliers
3. Bargaining power of buyers
4. Threat of potential entrants
5. Threat of potential substitutes
Industry rivalry – pertain to the actual and direct competition that occurs between
competing firms in the industry.
Internal environment – refers to the totality of a firm’s tangible and intangible resources,
capabilities and potential.
Elements of internal environment:
1. Core values
2. Mission and vision
3. Management structure
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4. Human resources
5. Tangible resources
6. Intangible resources
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Value Chain refers to the chain of activities that a firm manages to transform inputs
into outputs that provide value for customers. It is generalized schematic of
how a firm operates, giving strategists a useful tool for identifying the firm’s
primary sources of value as well as activities that may not be generating value
for the firm.
1. Firms infrastructure
2. Human Resource Management
3. Technology
4. Procurement
Primary activities refers to the organizational processes that directly add value to a
firm’s products and services. This includes the following:
1. Inbound logistics – this pertains to the logistics that allows the firm to get the
needed supplies and raw materials. Value can be found in the firm’s ability to
ensure reliability and timeliness of its inbound delivery systems.
2. Operations – this pertains to the actual production or processes that a firm
performs in order to directly transform inputs into marketable outputs. Value can
be found in a firm’s ability to be highly efficient in managing operations,
production output at a greater quality or a lower cost than competitors can.
3. Outbound Logistics – this pertains to the systems and channels that the firm uses
to bring its products and services to its customers. This includes warehousing of
finished products, distribution to intermediary channels, and managing the quality
of the product to the consumer level.
4. Marketing and Sales – this pertains to the activities that communicate, inform and
educate the consumers about the value of the firm’s products and services. This
includes advertising, sales strategies , public relations and publicity, promotions
and incentives such as discounts and sales.
5. Services – also known as after-sales services. This pertains to all activities that
a firm is obligated to provide to consumers after consummation of sales. These
include warranties, home servicing, maintenance, managing customer hotlines
and training.
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Secondary activities or support activities – this pertains to organizational activities
that, while not directly adding value to the products and services, add value
to the management and coordination of primary processes. This includes
the following:
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