BUSINESS POLICY
AND
STRATEGY
UNIT 1
Introduction
-Nature, Scope, and Importance of Business Policy
-Evolution of Business policy
-Forecasting and Long - Range Planning, Strategic Planning and
Strategic Management
Strategic Management Process
-Formulation Phase- Vision, Mission, Objectives and Strategy
-Implementation phase- Strategic Activities, Evaluation and
Control
A policy is typically described as a principle
or rule to guide decisions and achieve rational
outcome(s).
Policies are generally adopted by the Board of
or senior governance body within an
organization where as procedures or
protocols would be developed and adopted
by senior executive officers.
STRATEGY-
Strategy is a well defined roadmap of an organization. It defines
the overall mission, vision and direction of an organization. The
objective of a strategy is to maximize an organization’s strengths
and to minimize the strengths of the competitors.
Strategy, in short, bridges the gap between “where we are” and
“where we want to be”.
FEATURES OF
BUSINESS POLICY
EVOLUTION
OF
BUSINESS POLICY
Hofer: In terms of 4 Paradigmatic Shifts
FORCASTING
Understanding Business Forecasting
Organizations employ forecasting methodologies to
facilitate the formulation of business plans. Historical
data is gathered and examined in order to identify
recurring patterns.
In contemporary times, the integration of big data and
artificial intelligence has significantly revolutionized the
methodologies employed in corporate forecasting.
There exist multiple methodologies employed in the
creation of a business forecast. All the methodologies
can be categorized into two broad approaches:
Qualitative and Quantitative.
While there might be large variations on a practical level when
it comes to business forecasting, on a conceptual level, most
forecasts follow the same process:
1. A problem or data point is chosen. This can be something like "will people buy a
high-end coffee maker?" or "what will our sales be in March next year?"
2. Theoretical variables and an ideal data set are chosen. This is where the forecaster
identifies the relevant variables that need to be considered and decides how to collect
the data.
3. Assumption time. To cut down the time and data needed to make a forecast, the
forecaster makes some explicit assumptions to simplify the process.
4. A model is chosen. The forecaster picks the model that fits the dataset, selected
variables, and assumptions.
5. Analysis. Using the model, the data is analyzed, and a forecast is made from the
analysis.
6. Verification. The forecast is compared to what actually happens to identify problems,
tweak some variables, or, in the rare case of an accurate forecast, pat themselves on the
back.
LONG - RANGE PLANNING
Understanding Long-Range Planning
Long-range planning involves setting goals and establishing a framework for
achieving those goals over an extended period, typically ranging from three to
five years or more.
It focuses on forecasting future trends, market conditions, and potential
challenges to develop a roadmap for the organization.
Long-range planning provides a broad view of the organization’s desired
outcomes and outlines the steps required to reach them.
Long range planning is the process used to implement an organization’s
Strategic Plan.
It is about aligning the business’ long-term goals and developing action plans in
line with the strategic plan.
However, planning long-range helps your business engage in self-scouting by
assessing strengths and weaknesses and creatively proposing solutions that will
propel your organization forward.
It will also provide the concrete immediate benefit of charting a path to future
success that can focus and drive the collective efforts of your team, resulting in
greater productivity and vision.
The times scale for long range plans can vary from three years to one or two decades
depending on the type of business.
For example, companies where returns are measured over long periods of time will
need a longer outlook whet thinking about their long range planning.
A long range plan is not about fixing immediate issues, but about changing the
direction of the organization to meet its long term goals.
Benefits of Long-Range Planning
1. Vision and Direction
Long-range planning allows organizations to articulate a clear vision and direction
for the future. By envisioning what they want to achieve over an extended period,
organizations can align their resources, strategies, and actions accordingly.
2. Goal Alignment
Long-range planning facilitates the alignment of short-term objectives with long-
term goals. It enables organizations to break down ambitious goals into
manageable milestones, ensuring consistent progress toward the desired outcomes.
3. Resource Allocation
Long-range planning helps organizations allocate resources effectively. By
understanding future requirements, organizations can make informed decisions
about investments, budgets, and resource allocation to support their long-term
objectives.
4. Risk Mitigation
Long-range planning enables organizations to identify potential risks and
challenges in advance. This proactive approach allows them to develop
contingency plans and mitigation strategies, minimizing potential disruptions to
the business.
5. Stakeholder Engagement
Long-range planning promotes collaboration and engagement among stakeholders.
Understanding Strategic Planning
Strategic planning focuses on the formulation and
execution of strategies that position an organization to
achieve its long-term objectives.
It involves analyzing the internal and external factors that
impact the organization’s success and designing strategies
to exploit opportunities and overcome challenges.
Strategic planning provides a roadmap for achieving the
long-term goals outlined in the long-range plan.
Benefits of Strategic Planning
1. Competitive Advantage
Strategic planning helps organizations gain a competitive edge in the market. By
conducting thorough analyses of the industry, competitors, and customer needs,
organizations can identify unique value propositions and develop strategies to
differentiate themselves from the competition.
2. Adaptability and Agility
Strategic planning equips organizations with the ability to adapt to changing market
dynamics. It enables them to anticipate trends, identify emerging opportunities, and adjust
their strategies accordingly, ensuring they stay ahead of the curve.
3. Resource Optimization
Strategic planning allows organizations to optimize resource allocation. By identifying
areas of strength and weakness, organizations can allocate their resources strategically,
focusing on activities that yield the highest return on investment.
4. Alignment and Focus
Strategic planning ensures alignment across the organization. It provides a framework for
setting priorities, making decisions, and allocating resources, fostering a sense of
direction and focus among employees at all levels.
5. Continuous Improvement
Strategic planning promotes a culture of continuous improvement. By regularly reviewing
and evaluating strategies, organizations can identify areas for refinement and
enhancement, enabling them to stay relevant and responsive to market changes.
Strategic Management
By the term strategic management we mean, the
process that helps the organization to assess their
internal and external business environment forms
strategic vision sets objectives, establish direction,
formulate and implement strategies that are aligned
towards the achievement of the goals of the
organization.
Strategic management aims at gaining sustained
competitive advantage, so as to supersede
competitors and attain a dominating position in the
entire market. Further, it assesses, guide and adjusts
the enterprise, according to the changes in the
business environment.
The figure provided below explains the strategic process,
in the sequence of various stages.
STRATEGIC MANAGEMENT PROCESS
1. Situation Analysis
2.Strategy Formulation
a. Mission/ Vision
b. Strategies/Policies
3. Strategy Implementation
a. Programs/Activities
b. Budgets/Procedures
4. Strategy Evaluation and Control
a. Performance
b. Actual Results
I) SITUATION ANALYSIS
A. Internal environment
1.organizational culture
2.employees interaction
B. External environment
1.customers
2. suppliers
3. competitors
4. stakeholders
II) STRATEGY FORMULATION
This involves the development of company strategies. It
composed of three organizational levels;
1. Operational Strategies are short term and are
associated with the various operational departments
of the company such as human resources, finance,
marketing, and production.
STRATEGY FORMULATION
2. Competitive Strategies are those related
to the techniques in competing in a certain
industry, company must identify the SWOT of
competitors, formulate strategies to gain
competitive advantage.
3. Corporate Strategies are long-term and
are involved in providing direction for the
organization .
III. STRATEGY IMPLEMENTATION
This involves the development of procedures,
programs, and activities to put the strategies
into practice.
It is also the time to determine which
strategies should be implemented first.
Communication is very important in Strategy
Implementation.
IV. STRATEGY EVALUATION
It includes appraising the company performance.
All employees are involved in strategy evaluation.
The evaluation helps in the selection of the best
possible policy. If any of the alternatives are not
acceptable and not consistent with company’s
objectives then the process reverts back to the
identification of alternatives where fresh
alternatives are looked for. The search begins
again.
After the policy has been made, it becomes
necessary to review it from time to time so that it
does not become obsolete.
STRATEGIC MANAGEMENT:
PLANNING PHASES
Phase1 Planning Financial Aspects- This is usually the phase
when Financial data budget is planned.
Phase 2 Forecasting- For long term planning, 5-year plans are
made, managers propose projects and have tendency to outdo
each other in terms of getting larger share of funds.
Phase 3 External Planning- This is usually the task of top
management, gathering and formulating strategies for the
company on a five-year period
Phase 4 Strategic Management – This is the process of getting
the rudiments of strategies in details, called strategic p.lans, a
detailed version of Phase3
GLOBALIZATION
Since the market is now a vast area where there are
various brands competing with each other,
companies now have to sell their brands in every
continent around the world.
To maintain quality and competitive pricing,
companies have redesigned their organizational
structures and strategically placed regional or
country units instead of having one international
division to serve all international transactions.
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