Professional Documents
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Business Policy & Strategic Management
Business Policy & Strategic Management
Strategic
Management
Shashank Divekar
Pune, India
Business Policy & Strategic Management
What is Business Policy ?
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 Policy defines the scope or spheres within which
decisions can be taken by the subordinates in an organization.
It permits the lower level management to deal with the
problems and issues without consulting top level management
every time for decisions.
Threat
Opportunity
RESOURCES
Strategy needed
to direct
Environment Environment
activities of its
people, finance,
factories etc.
Opportunity Threat
Economy at large
Suppliers Substitutes
Legislation &
Technology Regulation
Firm
Rivals Buyers
New Entrants
Population
Societal Values & Lifestyle Demographics
Business Policy & Strategic Management
Environmental Threat & Opportunities Profile (ETOP)
ETOP analysis is a management tool that analyses environmental
information and determines the relative impact of threats and
opportunities for the systematic evaluation of the environment.
Cheaper technology
TECHNOLOGY development, skilled and
trained indigenous talent.
Mintzberg’s 5 Ps of Strategy
Mintzberg presented 5 different approaches or
concepts of
strategy. These are known as ‘5 Ps’ of strategy.
1. Plan
2. Ploy
3. Pattern
4. Position
5. Perspective
Business Policy & Strategic Management
Mintzberg’s 5 Ps of Strategy
Strategy as a Plan :
Planning is something that comes naturally to
us. As such, this is the default, automatic approach that is
adopted. This involves brainstorming options and
planning how to exploit the opportunity.
By this definition, strategy has two essential characteristics :
a) They are made in advance of the actions to which they apply.
b) They are developed consciously and purposefully.
As plans, strategies can be general or specific.
Business Policy & Strategic Management
Mintzberg’s 5 Ps of Strategy
Strategy as a Ploy :
Mintzberg’s 5 Ps of Strategy
Strategy as a Position :
Mintzberg’s 5 Ps of Strategy
Strategy as a Perspective :
This approach is based on the way an organisation views the world
around itself – the customers, competitors and the environment.
Accordingly the conduct their business and deal with situations.
It is every organisation’s perspective that becomes the basis for all
its actions and the way it reacts to situations. Some companies are
aggressive marketers, some believe in developing new
technologies while there are some who believe in productive
efficiency.
Business Policy & Strategic
Management
Mintzberg’s 5 Ps of Strategy
Mintzberg’s 5 Ps of Strategy
As such, there are three points in the strategic planning process
where it's particularly helpful to use the 5 Ps:
LEVELS OF
STRATEGY
LEVELS OF
STRATEGY
Operational strategy
Also called the ‘Go-to-Market Strategy’ or ‘Functional Strategy’,
it decides the operational methods to implement the tactics.
Are concerned with how the component parts of an
organisation deliver effectively the corporate and business-level
strategies in terms of resources, processes and people.
Business Policy & Strategic
Management
• Str
ate
gic
• De
vel
op
me
nt
• Stra
tegic
Simultaneous Approach
• Impl
eme
ntat
Business Policy & Strategic
Management
A Comprehensive Strategic Management Model
External
Audit
Internal
Audit
Walmart
“To become the worldwide leader in retailing”.
Vision
Samsung
"Leading the Digital Convergence Revolution"
Vision
Samsung
"Digital-∈ Company"
Mission
There are two requirements for being "Digital-∈
Company", and the first is clearly about being
"Digital" producing not just digital products, but
products that inspire digital integration across our
entire company.
COMMON OBJECTIVES :
• SURVIVAL
• STABILITY
• GROWTH
• EFFICIENCY
• PROFITABILITY
Business Policy & Strategic Management
Characteristics of
Objectives :
• Objectives help an organization in pursuit of its vision
and mission.
• Objectives provide the basis for strategic decision-making
• Objectives should define an organization's relationship
with its environment.
• Objectives should provide the standards for performance
appraisal.
• Objectives should be concrete and specific.
• Objectives should be measurable, controllable and challenging.
• Objectives should be set within constraints.
ENVIRONMENTAL
Business Policy & Strategic Management
APPRAISAL
Environment is the sum of various external and some
internal forces that affect the functioning of business.
"The environment includes factors outside the firm which can lead to
opportunities for, or threats to the firm. Although there are many
factors, the most important of the sectors are socio- economic,
technological, supplier, competitors, and government. “
- Glueck & Jauch
"Environment factors or constraint are largely if not totally, external and
beyond the control of individual industrial enterprises and their
managements. These are essentially the 'givers' within which firms and
their managements must operate in a specific country and they vary,
often greatly, from country to country.“
- Barry M. Richman & Melvyn Copen
Business Policy & Strategic Management
ENVIRONMENTAL APPRAISAL
DEMOGRAPHIC
ECONOMIC
LEGAL / REGULATORY
GOVERNMENT
MACRO
ENVIRONMENT POLITICAL
CULTURAL
TECHNOLOGICAL
GLOBAL
Business Policy & Strategic Management
Types of strategies
Integration
Forward Integration : Gaining ownership/ increased control
over channel partners
Backward Integration : Ownership/ control over suppliers
Intensive
Market Penetration : Seeking increased market share in
existing markets through extra efforts.
Market Development : Introducing existing product (s) into new
geographic areas or consumer segments
Product Development : Improving existing products or developing
new products
Business Policy & Strategic Management
Types of
strategies
Diversification
Related Diversification : Adding new but related products
or services
Unrelated
Diversification : Adding new, unrelated products
or services
Defensive
Retrenchment : Regrouping through cost and asset reduction
to reverse declining sales/ profits
Divestiture : Selling/ hiving off a division or part of the
organisation
Liquidation : Selling all the assets, in parts, for their
tangible worth
Business Policy & Strategic Management
Suppliers Buyers
(Bargaining Power)
Industry Rivalry (Bargaining Power)
Product
Substitutes
Business Policy & Strategic Management
Competitive Analysis : Porter’s Five-Forces
Model
The Five-forces model is used in three steps to
determine what competition is like in a given industry :
1. Identify the specific competitive pressures/ key
elements associated with each of the five forces, that
impact the firm.
2. Evaluate how strong are the pressures comprising each
of the five forces (Fierce, strong, moderate to normal
or weak).
3. Determine whether the collective strength of the five
competitive forces is conducive to earning attractive profits.
Business Policy & Strategic Management
Generic Strategies
Industry Force Cost leadership Differentiation Focus
Develops core
Ability to cut price - in Customer loyalty can
competencies that
Entry Barriers retaliation deters discourage potential
can act as entry
potential entrants entrants
barriers
Large buyers have Large buyers have
Ability to offer lower
lesser power to lesser power to
Buyer Power prices to powerful
negotiate due to few negotiate due to few
buyers
close alternatives. alternatives.
Despite low volumes,
Better able to pass on a differentiation-
Better insulated from increased supplier focused firm is better
Supplier Power powerful suppliers costs to the able to pass on
customers increased supplier
costs to customers.
Specialised products
Can use low prices as Differentiating
and core-competency
Substitutes defense against attributes reduce the
protect against
substitutes. threat of substitutes
substitutes.
Rivals cannot meet
Better able to Brand loyalty protects differentiation-
Rivalry compete on price against rivals focused customer
needs
Business Policy & Strategic Management
Corporate Social Responsibility as Business
Strategy
• Ethical : Driven not just by profits but also doing what is right,
just and fair.
• Setting Objectives
• Generating Alternatives
• Choosing one or more alternative (s)
• Implementing the chosen alternative(s)
Strategy Alternatives
Intensification Diversification
Forward Backward
Business Policy & Strategic Management
Strategy Implementation
Strategic-management process does not end when the firm
decides what strategies to pursue. There must be a transition of
strategic thought into strategic action. Implementing strategy
affects an organisation from top to bottom; it affects all the
functional and divisional areas of a business.
A technically imperfect plan that is implemented well, will
achieve more than the perfect plan that never gets off the
paper on which it is typed. Change comes through
implementation and evaluation and not through the plan.
Strategy execution deals with the managerial exercise of
supervising the ongoing pursuit of strategy, making it work,
improving the competence with which it is executed and
showing measurable progress in achieving the targeted results.
Business Policy & Strategic Management
Strategy formulation is fundamentally different
from strategy implementation :
Strategy Formulation Strategy Implementation
Positioning forces before the Guiding forces during the action
action
Focuses on effectiveness Focuses on efficiency
Strategy formulation concepts and tools do not differ greatly for small, large,
for-profit or non-profit organisations. However, strategy implementation
varies substantially among different types.
Business Policy & Strategic Management
Social
Values Connecti
-vity
Control
Beliefs
Systems
Business Policy & Strategic Management
McKinsey’s 7 S Framework
Developed in the early 1980s by Tom Peters and Robert Waterman,
two consultants working at the McKinsey & Company.
The basic premise of the model is that there are seven internal
aspects of an organization that need to be aligned if it is to be
successful.
Organisational
New Strategy is New administrative
performance
formulated problems
declines
Improved New
Organisational Organisational
Performance Structure
2. Measurement of performance
3. Analysing variance
4. Corrective action
Business Policy & Strategic Managementc
Difficulties in Strategy Evaluation : Strategy evaluation in modern
business environment has become a difficult and complicated
process because of certain factors :
• Increase in environment complexity
• Difficulty in predicting the future accurately
• Increasing number of variables
• High rate of obsolescence of even the best laid plans
• Increase in domestic world events
• Decreasing time span for planning certainty
• Change in assets
• Change in profitability
• Change in sales
• Change in productivity
• Change in profit margins
Balanced Sorecard
Business is a strategy
Policy performance
& Strategic Managementc
management tool that can be used by managers to keep
a track of the execution of activities by the staff within
their control, and to monitor the consequences arising
from these actions.
The concept involves creating a set of measurements for four
strategic perspectives. These include :
1. Financial
2. Customer
3. Internal Processes
4. Learning & Growth
As a model of performance, the Balanced Scorecard is effective
since "it articulates the links between leading inputs (human
and physical), processes, and lagging outcomes, and focuses on
the importance of managing these components to achieve the
organization's strategic priorities."
Managementc
Balanced Scorecard lets executives see whether they have
improved in one area at the expense of another. Knowing that
will protect companies from posting sub-optimal performance.
Contd..
Business Policy & Strategic Managementc
What Balanced Scorecards
Do :
Contd..
CUSTOMER INTERNAL
How should our customers VISION & At which processes should
perceive us? STRATEGY we excel?
MISSION
Why we STRATEGY STRATEGIC
exist MAP : OUTCOMES
Translate the SATISFIED
strategy SHAREHOLDERS
VISION STRATEGY DELIGHTED
What we Our game CUSTOMERS
want to be plan
EXCELLENT
BALANCED
PROCESSES
SCORECARD :
VALUES Measure & MOTIVATED
What is Focus WORKFORCE
important to
us
Thank You !