DRIVE WINTER 2013

Bachelor of Business Administration- BBA

SEMESTER-2

SUBJECT CODE & NAME - BBA202: BUSINESS STRATEGY

Q1. Define business policy. Explain the importance of business policy. Differentiate
between business policy and Strategy. (Definition of business policy, Importance of
business policy, Difference between business policy and strategy) 2, 4, 4

ANS:

Definition of a Business Policy

"Business Policy is the study of functions and responsibilities of general management and the
problems which affect the character and success of the total enterprise" – Learned Andrews
Christensen and Gath

"The study of issues and problems encountered by managers whose principal responsibility is the
long-term development of the total enterprise" – Thomas Denis

"A business policy is nothing more than a well-developed statement of directions and goals. Goals
involve definitions of precisely what the business is or should be and the particular kind of company it
should be. Directions guide the actions of the firm to accomplish these goals." Edmond & Gray.

Importance of Business Policy

The Business Policy is expected to play a very significant role in any business enterprise. Business
Policy is the medium through which the Management can expect to achieve its goals over a period of
time. In the absence of sound and clear cut policy decisions, it will be impossible to handle various
issues like the form of the organization, the method of production to be followed, raising funds for
nurturing the growth of the business and the marketing of goods etc. There are a host of day-to-day
problems which can be solved by the managers at the operating level with the help of policies to guide
them. In short, the policies help managers at different levels of the Managerial Pyramid in discharging
their duties efficiently and thereby help them in achieving the corporate goals by integrating the
various business operations. Business Policy, as a distinct field of study, was introduced at Harvard
University as early as in 1911. If you have just started out in business or have been in business for
years, it's imperative to thoroughly develop company policies. A company policy is a rule or guideline,
a company follows when faced with a particular problem or issue. The more situations or policies you
develop, the smoother your business will operate. Without a policy the organization will function
arbitrarily in an anarchic way and may not reach its objectives.

Difference between business policy and strategy

After going through a host of factors having influence on Business Policy, now try to list out the basic
differences between business policy and strategy. This is very much important because many times
these words are used interchangeably even though they basically convey different meanings.

Q.2. What are the objectives of Strategic Management? What are the causes for failure
of Strategic Management? (Objectives of Strategic Management, Causes for failure of
Strategic Management) 5, 5

ANS:

Objectives of Strategic Management

The different objectives are given below:

a) To keep pace with the changing business environment: The present day world is often
called as a flat world because of revolution in transport, communication and technological
advancement. The present day environment in which the business enterprises operate is so dynamic
and fast-changing that the business enterprises are finding it extremely difficult to operate. There are
high level of uncertainties, threats and constraints from different quarters and due to this business
corporations are finding it extremely difficult to survive. Strategic Management principles and
practices, if used, can help those business firms in exploring the possible opportunities and also
achieve an optimum level of efficiency by minimizing the effect of expected threats.
b) To motivate Employees: We are aware of the fact that managing men and women, is the most
challenging task for any business unit. Human resources can turn out to be highly productive and
useful to a firm provided necessary motivation and guidance are provided to them which, in turn,
increase their confidence level. Adopting Strategic management techniques helps as a morale booster
and ultimately rewards the organization in terms of efficiency and loyalty to the organization.

c) To strengthen the decision making process: Strategic management aims at effective decision
making process by taking into consideration the objectives of the business concern as a whole in a
transparent manner. Hence, any decision taken should find wide acceptance among the rank and the
file as there will be no resistance to change within the business enterprise.

Causes for failure of Strategic Management

No doubt, Strategic management yields highly favourable results for any organization which has
implemented it. There are, however, certain cases where despite adopting the techniques of Strategic
management, firms have not met with the desired success. Let us always remember that Strategic
Management is not like a magic wand which can always ensure success to everyone. So, let us try to
list out the different causes responsible for such a failure:

a) Strategic management is always based on certain fundamental premises. If these premises do not
hold good, the strategy or the plans based on them would be unrealistic or ineffective.

b) Strategic management is only a means to achieve the corporate goals. So, if there is lack of realism
it will be reflected in the strategy. In other words, we should always remember to be realistic while
framing our mission statement or declaring our objectives and not highly optimistic.

c) Many a time, the young Managers try to be over-ambitious and start dreaming of success overnight
by adopting Strategic management techniques. This results in failure to reach the goals set and causes
frustration.

d) Sometimes, the management may be always chanting the ‘mantra’ of strategic management and
overlook or ignore several lucrative opportunities and thereby fail.

e) Failure in implementing the strategy effectively will end up in producing poor result. Let us
remember the plight of a patient who has not taken the best medicine prescribed for his illness
grumbling about the sickness.

f) Strategic planning requires high level of calibre, experience and knowledge with the best vision. If
people do not have adequate experience, expertise and commitment, the business organization may
not succeed.
g) Often people complain about the cost associated with planning and implementation, ignoring the
benefits derived in the medium and long term.

Q.3. Write a brief note on the following: 5,5

a) Core competencies and their importance

b) Strategic leadership.

ANS:

a) Core Competencies and their Importance in Strategy Formulation

The term “Core Competency” has its origin in an article titled “The Core Competence of
the Corporation”, written by C. K. Prahalad and Gary Hamel for the Harvard Business
Review in 1990. In this article, core competency has been defined as “The collective
learning and coordination skills behind the firm's product lines”. The authors
illustrated that the core competencies of an organization led to the development of core
products, which in turn, can be used for personalization of products for end users. An
organization’s core competency is developed through 7continuous evolution over a period of
time. Core competencies are also essential to succeed in global market. The authors claimed
that – “In the 1990s managers will be judged on their ability to identify, cultivate, and exploit
the core competencies that make growth possible - indeed, they'll have to rethink the
concept of the corporation itself”. (C K Prahalad and G Hamel, 1990.) When the core
competencies are matched with the market opportunities, new businesses are created. By
combining and matching core competencies to market opportunities, multiple businesses can
also be created. The core competencies help to bind the business units together so as to form a
comprehensive portfolio. Let us look at the factors which help to identify the core competency
of the organization –

a) It should provide the company with a wide variety of markets

b) It should contribute significantly to product benefits

c) It should be difficult for competitors to imitate or duplicate

Some examples of core competencies of organizations are Philips’ dominance in optical media,
Sony’s core competency in miniature electronics and Microsoft’s core competency in proprietary
software. All these products or services can be sourced in a wide variety of markets, have
significant benefits to the customer and are difficult to copy or imitate, there by making the
company a powerhouse in that area. In order to measure core competencies, the company has to
ascertain the core product share, instead of market share. A company having low brand value may
have high core product share in the market. Core competencies are capabilities which are essential
for the establishment of competitive advantage for the business. In order to analyse the core
competencies, the business must recognise that competition involves the core competence
mastery as well as market position and power. Core competencies also help in value creation and
value addition for the product. Leadership of an organization can also be considered a core
competency, as the leader can be effective for the success of the organization.

b) Strategic Leadership

Strategic leadership refers to those leaders who are responsible for the creation as well as the
implementation of the strategic vision of the organization. The strategic leader of an organization
needs to provide the necessary direction in the following ways –

a) Vision – An effective leader has a vision for the growth of the organization. Normally, he is
able to predict future trends and is ahead of times in providing value to customers. Due to the
vision, the strategic leader is able to guide the course of business for the organization.

b) Organizational structure – A strategic leader is able to analyse the internal conditions of

the organization and the demands of the market place in order to arrive at a suitable
organizational structure. Such a structure helps in deciding on the action plans and allocation of
work, thereby making the implementation of the vision easier.

c) Pragmatic approach – Such an approach is practical, goal-oriented and is positive in nature.

A strategic leader has the ability to adopt a pragmatic approach in times of crisis and can turn the
business around.

d) Communication – An effective leader possesses good communication skills and is able to

clearly provide instructions for action. He also has the ability to establish proper communication
networks for his organization, which aid in the free flow of crucial information and provides the
framework for better action. Such a leader also makes informed decisions as he has formal and
informal channels of communication.

e) Culture – Due to the establishment of an efficient organizational structure and open

communication network as well as his personal qualities of reliability and consistency, a strategic
leader is able to forge a healthy work culture. He is also sympathetic to the problems faced by the
employees and provides solutions to ease their troubles, thereby establishing a good environment
for employees.

f) Change Management – The strategic leader is capable of effective management of change as

he is able to anticipate and prepare for such change. He is always aware of the market conditions,
technological developments as well as the internal conditions of his organization and has the
ability to adapt to change quickly. Most efficient leaders also plan in advance to minimise
damages due to changes in environment. Hence, such leaders are better equipped to lead the
organization during times of crisis or change.

g) Corporate Governance – An effective leader practises the principles of good corporate

governance, as he recognises that the individual cannot be greater than the organization. He
implements strategies to ensure that there is transparent functioning within the organization.
This serves to boost the morale of employees. Such a leader also ensures that there is an effective
succession planning so that the organization’s existence is not threatened by hostile takeovers.