INTRODUCTION TO

BUSINESS POLICIES AND

STRATEGIC ANALYSIS

PREPARED BY- JAYA RANI DAS

CONTENTS
• VISION
• MISSION
• GOALS AND OBJECTIVES
• IMPORTANCE of BUSINESS POLICY
• STRATEGIC ANALYSIS
• What do you mean by strategy?
• A company’s strategy is its action plan for outperforming its competitors
and achieving superior profitability.
It considers choice about how to compete, these include choices about-
How to attract and please customers
How to compete against rivals
How to position the company in the marketplace
How best to respond to changing economic and market conditions
How to capitalize on attractive opportunities to grow the business
How to achieve the company’s performance targets.
What makes a strategy a winner?
• Three test can be applied to determine whether a strategy is a winning
strategy-
• The fit test- to qualify as a winner, a strategy has to be well matched to industry and
competitive conditions, a company’s best market opportunities, and other pertinent
aspects of the business environment in which the company operates.
• External fit-sync with prevailing marketing condition, strategy must be tailored to the
company’s resources and competitive capabilities
• Internal fit- company’s ability to execute the strategy in a competent manner.
• Competitive advantage test- winning strategy enable the company to achieve a
competitive advantages over key rivals that is long lasting. The bigger and more durable
the competitive advantage, the more powerful it is.
• The performance test- the mark of a winning strategy is strong company performance.
Good financial performance or gains in market share, competitive position, or
profitability are signs of a winning strategy.
• Why crafting and executing strategy are important task-
• how well a company performs is directly attributable to the caliber of its strategy and the
proficiency with which the strategy is executed.
• Good strategy + Good strategy execution= Good management
The managerial process of crafting and executing a company’s strategy consists
of five integrated task-
Developing a strategic Crafting a strategy to
vision, mission and core Setting objectives
achieve
values

Executing the strategy

Revise as needed in light of the Monitoring developments,

company’s actual performance, evaluating performance
changing conditions, new and initiating corrective
opportunities, and new ideas adjustments
What is Vision
• It describes management’s aspirations for future and delineates the
company’s strategic course and long time direction.

• Distinctive and specific to particular organization.

• Real purpose of a vision statement is to serve as a management tool

for giving the organization a sense of direction.
What is Mission
• Organizations are formed to achieve mission or purpose. Mission or
purpose is a generalized statement about the major course of activity
with a view to serve people or society.
• It is the basic premise for business policy to be meaningful and
socially relevant. No company can afford to exist in society ,
howsoever , profitable may be, if it conflicts with National or Public
interest.
• Simply it indicates the activity carried by the organization for the
betterment of people and society.
What is Objective
• Open ended postulates, organization want to achieve in long run. They
give direction to the organization , they are timeless and boundaryless
postulates, which may not necessarily be achievable. They are neither
precise nor specific.

What is Goal
• Close ended postulates, which are specific and bound by the time-frame.
• Consequently they are achievable. Goals pertaining to products,
production, marketing, personnel or finance are specific, implementable
within the time-frame.
Policy and Strategy
Policy
• It refers to the guidelines, methods, procedures,
rules, norms and administrative practices to
support the course of action towards achieving
desired goals. Operating policies may be for short-
term duration also.
• Service policy provides the guidelines for decision
making that may be delegated downward.
• Policy is contingent on decisions
• Policies support the strategy.
Strategy
• Strategy is an integrated and unified plan of action
to achieve the basic long term goals and objectives
of the organization. However, there are also
functional strategies.
• Strategy cannot be delegated as it is formulated
only by top management.
• Strategy is the role for making decisions.
• Strategy influences policy.
Nature and scope of Business Policy-
1. It deals with future perspective of business- seeks to incorporate long term
goals and objectives, which form the basis for business operation. After finalization of
goals and objectives, actual implementation is carried out by operational managers,
additional responsibility is on strategic manager to monitor and evaluate the
performance to ensure realization of goals with efficiency.
2. Vital role of top management- business policy is formulated by the top
management comprising board of directors and managing directors. With the present
political, socio-economic and technological changes within the country, top
management may decide different strategic decisions like expansion, diversification,
acquisition, merger , disinvestment or liquidation.
3. Emphasis on research and development- business policy requires a strong R &
D base. The R & D department continues to analyse and improve the quality of goods
and services supplied by the organization in light of its own strengths and weaknesses,
strength and weaknesses of the competitors and changes in environmental setting.
4. Greater involvement of experts- experts are needed to advise and assist top
managers to take vital decisions. They are needed at the functional level, R &D level. They
play significant role at planning, execution , evaluation and control levels.

Importance of business policy-

1. Business policy as a course of study
2. Understanding and scanning of environment
3. Imparting knowledge regarding the human and structural aspects of the organization.
4. Emphasis on social responsibility and ethical aspects of business
5. Better understanding of intra-personal , inter-personal, and organizational level
development.
The business policy course provides the knowledge and content base to people and the
enterprise. The course strives to prepare young executives to take effective decisions in
diverse business situations. It seeks to integrate knowledge and experience gained over
time to provide a firm base to take business decisions.
 Benefits of business policy

Financial benefits Non-financial benefits

Resort to systematic planning to prepare
Helps in identification , prioritization and
themselves for future fluctuations in external
exploitation of opportunities
and internal env

Most of the business failures including

Framework for improved coordination and control
bankruptcies, foreclosures, and liquidations
of activities
can be averted through business planning

Minimizes the effects of adverse conditions and

changes

Major decisions supporting the established

objectives etc
 A company strategy- Making Hierarchy
4 distinct types-
Corporate strategy by the CEO and other senior executives
• Managing a set of business in a diversified/multi-business company, turning the company into competitive advantage-what business to hold, which market to enter, how to best
enter the new market

Business Strategy(one for each

business the company has By the general managers , business unit heads
diversified into)
• How to gain and sustain a competitive advantage for a single line of business

Functional Area
Strategies( within each Heads of respective functional activities
business)
• Prepare game plan for the company’s product lineup in tune with what the buyers are looking for
• Actions for managing particular functions within a business- like R &D ,production ,sales and marketing part of the business.

each functional area)

Operating strategies (within

• How to manage activities of strategic

By brand managers ,operating managers of plants , distribution centers and
significance within each functional area, purchasing centers and the managers those are strategically important
Strategic analysis
• Selection of strategy depends on its cost effectiveness and financial
viability.
• Tested by some important tools of financial analysis-
1. Cost analysis-
• Cost of production depends on the size of production.
• With the increase in the level of production, the cost of production
continues to fall.
Reason- with the increase in the number of units/outputs, fixed cost
tends to decrease. Variable cost does not influence the cost of production
owing to the changes in the volume of production.
2. Break even analysis/ cost-volume-profit analysis-
• It helps to determine the level of production when the total cost becomes
equal to the total revenue or the earnings realized.
• Strategic managers may take decisions regarding the volume of production
to generate stipulated profit- Profit planning.

3. Sensitivity analysis-
• most sensitive instrument is the price, which is determined by market
forces and marginal cost (variable cost).
• Fixed cost is not a sensitive instrument, as it doesn't influence price.
4. Portfolio analysis-
• Relates to the corporation having diverse business/products/subsidiaries.
• It seeks to optimize ROI by deploying it in these activities in such a manner
that the return gets maximized.
• Corporate manager keeps on making investment in diverse areas and
activities in such a manner that the overall portfolio balance is maintained or
improved.
• The objective- to allocate resources optimally in such a way that aggregate
return on investment is optimal.
 Strategic options
• Strategic options related to new courses of action to make the organization
healthier so as to face all odds and adversities with courage and conviction.
With the growing competition , every organisation shall have to find its
strategy to survive and grow with the passage of time.
• It has many options like-
a. Optimising production to reduce the cost of production
b. Diversification to strike an appropriate product mix or market mix.
c. Acquisition of other concerns to increase its asset holding or to increase
market share.
d. Merger with another company if it is too weak to sustain itself
independently .
• Possible techniques to work on the decisions-
- brain-storming sessions
- Special meetings
- Services of outside consultants
- Joint meetings of the consultants and senior members of the organization.

• Options may be very risky , moderately risky and least risky depending on
the nature of goods and the policy of the organization.
Option 1: Expansion-
• Increase production of the existing product or products which may be
necessitated by cost consideration
• Strategic managers may adopt expansion as a strategic option to expand the
volume of production at least to the extent of installed capacity so that the cost
of production could come down and the product may be more competitive in the
market. (expansion of market demand)
• They may be compelled to explore new market or to exploit the potential of the
existing market with a view to make the product cost-competitive in the market.
• They may also adopt Horizontal expansion by adding new products to the same
line to make better use of economies of scale of production or to shift or add
product of market emphasis. Eg- the company which started with the
manufacture of radio and transistors may add such products to the same
electronics line as Black and White TV sets, Colour TV sets, calculators and finally
computers.
Option 2 : Diversification-
• It may be stated as that strategic decision which leads to addition of new products
to the line or new lines of manufacture and or addition of new markets so as to
improve its operating efficiency.
• Reason of diversification may be-
a) Psychological desire to change
b) Danger of over specialization in a particular product or process or technology
which is shortly reaching the state of decline
c) Realisation of economies of scale of production
d) Innovation prompting the strategic manager to change and diversify without
which it will not be able to sustain in the market.
• Diversification becomes necessary sometime for SYNERGISTIC EFFECT (situation in
which the combined effect of two elements working together is far greater than
individual contribution of two elements. It arises with the optimal utilization of
entire infrastructure and manpower which reduces wastages in production process.
Option 3- Merger
• When two or more companies decide to merge their individual identities
into a new company. The new company may be the holding company and
the merged companies may be subsidiary companies.
• It is necessitated by the following considerations-
a) Improving economies of scale
b) Gaining managerial expertise
c) Dominance in the market
d) Acquiring new product or the brand name
e) Curtailing the risk and the borrowing cost etc

Eg- Vodaphone –idea merger (Vi)

Option 4: Acquisition-
• Under this, the powerful and prosperous company takes the other company in
exchange for the consideration already agreed to buy both the parties.
• The acquired company loses its identity and is merged with the acquiring company.
• Benefits-
 Gaining additional capacity to supply to a market already being serviced by the
acquirer
 Gaining extended product lines
 Achieving diversification of the product base
 Gaining facilities to produce goods purchased earlier
 Gaining facilities to process or distribute goods sold earlier.
 Gaining access to additional markets

Eg- Zomato acquired Uber Eats

• Acquisition may be effected through INTEGRATION.
• Integration may be of two types-
1. Vertical integration-
• a company takes over such other companies which are related to its line.
• By taking direct ownership of various stages of its production process rather
than relying on external contractors or suppliers.
• A company may achieve vertical integration by acquiring or establishing its own
suppliers, or retail locations rather than outsourcing them.
• It has two types-
a) Forward vertical integration- relates to diversifying business towards the final
consumer by taking over the control of distribution and logistics channels.
b) Backward vertical integration- here a manufacturing company takes over the
companies producing parts or raw materials so as to ensure proper supply of
materials and parts.
 Forward integration Backward integration

Raw material

Manufacturing

Distribution

Retail
2. Horizontal integration-
• Relates to acquiring or controlling a number of similar but separate
activities in the same kind of business
• Generally the acquired firm is a competitor.
• For example, a petrol pump acquires a network of petrol pumps. This
results in lowering the cost of production or service by sharing the fixed
costs.
Thank you ….