INTRODUCTION TO BUSINESS

POLICY AND STRATEGIC

MANAGEMENT

- Abhijeet Chavan
 Meaning and Definition and
importance of Business Policy
 In early 20th Century ‘Sustainability’ word was referred to
competitive advantage only.
 But John Elkington in 1994 introduced the term Triple Bottom Line
for business sustainability. These triple bottom lines in annual
report comprises of
 Traditional Profit/Loss
 People Account—The social responsibility of the organization
 Planet Account—The environmental responsibility of the organization

This triple bottom line has become increasingly important to business today.

https://www.youtube.com/watch?v=A_AzAoL5dR4

Discussion will be initiated after watching this video

 Policy Concept: A policy is typically described as a
principle or rule to guide decisions and achieve
rational outcomes.
 “Business policies are the guidelines developed by
an organization to govern its actions. They define
the limits within which decisions must be made.
Business policy also deals with acquisition of
resources with which organizational goals can be
achieved. 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 long-
run”.
Source: https://www.managementstudyguide.com/business-
policy.htm
Difference Between Strategic Management and Business
Policy
Strategic Management Business Policy
1) Deals with strategic decisions It offers guidelines for managers
that decide the long-term to take appropriate decisions.
health of an enterprise. It is a
comprehensive plan of action
designed to meet certain
specific goals.
2) It is a means of putting a It is a general course of action
policy into effect within with no defined time limits.
certain time limits.
3) Deals with those decisions It is a guide to action in areas of
which have not been repetitive activity.
encountered before in quite
the same form, for which no
predetermined and explicit set
or ordered responses exist in
the organization and which
are important in terms of the
resources committed or the
precedents set.
4) It deals with crucial decisions, Once policy decisions are
whose implementation formulated, these can be
Difference Between Strategic Management and
Business Policy Cont…
Strategic Management Business Policy
5) Strategies are specific actions Policies are statements or a
suggested to achieve the commonly accepted
objectives. understanding of decision
making.
6) Strategies are action oriented. Policies are thought oriented.
7) Everyone is empowered to Power is delegated to the
implement the strategy. subordinates for implementation.

8) Strategies are means to an Policies are guidelines.

end.
9) Strategy is concerned with Policy is in general concerned
uncertainties, competitive with the course of action to fulfill
situations, and risks etc. that the set objectives.
are likely to take place at a
future date.
10) Strategy is deployed to Policy is an overall guide that
mobilize the available governs and controls the
resources the best interest of managerial action.
the
Source: Drcompany.
Tripti Vijaywargia, Biyani's Think Tank, Concept based Notes on BPSM, 2012
 Compare
 https://youtu.be/r5OCFaXqS5I?si=EisUjpO
der6WGrfh

 https://youtu.be/6DEOW9ZQ2BI?si=aYhb
XSJ5eCeKXBnp
Defining the corporate vision &
mission

•https://pe.tatamotors.com/knowus/vision-mission-
corevalues.php

• http://www.jiolifeglobal.com/missionvision.html
 Specifying achievable
objectives
 SMART Objectives

Source: https://thedigitalprojectmanager.com/project-
 Strategic Management
 Strategic management is a set of
managerial decisions and actions that help
determine the long-term performance of an
organization. It includes environmental
scanning (both external and internal),
strategy formulation (strategic or long-
range planning), strategy implementation,
and evaluation and control.

 https://www.youtube.com/watch?v=nnwqtZiY
MxQ
 https://www.youtube.com/watch?v=0yHwUp8
7xcI
 Strategy Management

Environmen Strategy Strategy Evaluation

tal Formulation Implementat & Control
Scanning ion
• Devel • Monito
• Gath oping
• Putting
Strate ring
ering Long- gy into Perfor
Infor range Action mance
mati Plans
on
Example of Strategy
An example of its strategy to keep with
the changing times is the Toyota Way
2001, which focuses on CSR and
customer orientation, innovative
management, and the nurturing of its
employees’ creativity and teamwork,
mutual trust, and respect between labor
and management. At the heart of the
Toyota Way are two pillars—continuous
improvement and respect for people.
These are supported by five values:
challenge, continuous improvement
(kaizen), seeing for yourself (genchi
genbutsu), respect, and teamwork.

https://www.hawkins.io/book/the-toyota-way/
 Benefits of Strategic
Management
 Survey of nearly 50 corporations in a
variety of countries and industries found
the three most highly rated benefits of
strategic management to be:
 Clearer sense of strategic vision for the firm.
 A sharper focus on what is strategically
important.
 An improved understanding of a rapidly
changing environment
Additional benefits of Strategic
Management
 Improved organizational performance
 Achieves a match between the
organization’s environment and its
strategy, structure and processes
 Important in unstable environments
 Strategic thinking
 Organizational learning
 Phases of Strategic
Management
Frederick W. Glueck, Stephan P. Kaufman, and
A. Steven Walleck, studied the evolution of
strategic management in 120 companies.
They suggested that strategic planning in most
organizations must evolve through four
sequential phases.

 Phase 1: Basic financial planning

 Phase 2: Forecast-based planning
 Phase 3: Externally oriented strategic
planning
 Phase 4: Strategic management
Phase 1: Basic financial planning
 Organizations in phase 1 emphasize
preparing and meeting annual budgets.
 Financial targets are established and
revenues and costs are carefully monitored.
 The emphasis is short-term, and the primary
focus is on the functional aspects of the
organization.
 Most organizations in this phase exhibit few
other characteristics relating to the future

CONSIDERS ACTIVITIES FOR ONE YEAR

 Phase 2: Forecast-based
planning
 Organizations in phase 2 usually extend of the
time frames covered by the budgeting process.
 Managers tend to seek more sophisticated
forecasts and to become aware of their
external environment and its effect on their
organizations.
 Therefore, organization in phase 2 has more
effective resource allocation and more timely
decisions relating to organization's long-range
competitive position.

THE TIME HORIZON IS USUALLY 3-5 YEARS

 Phase 3: Externally oriented
strategic planning
 Phase 3 is characterized by the attempt to
understand basic marketplace phenomena.
 Organization begin to search for new ways to
define and satisfy customer needs.
 Moreover, phase 3 differs from the earlier phases
that the corporate planners are expected to
generate a number of alterative courses of action
for top management.
 Top management begins to evaluate strategic
alternatives in a formalized manner to planning
and actions.

TOP LEVEL MANAGEMENT DOES ALL THE PLANNING

 Phase 4: Strategic
management
 Phase 4 is characterized by the merging of
strategic planning and management into a
single process.
 This integrated approach is accomplished
through the presence of three elements:
pervasive strategic thinking (managers all
levels have learned to think strategically),
comprehensive planning process, and
supportive value system.

PLANNING BY FORMING A TEAM FROM ALL

LEVELS IN THE COMPANY
 Scope of Strategic
Management
J. Constable has defined the area addressed
by strategic management as "the
management processes and decisions
which determine the long-term structure
and activities of the organization". This
definition incorporates five key themes:
 Management process.

 Management decisions.

 Time scales.

 Structure of the organization.

 Activities of the organization.

http://www.iibmindialms.com/library/management-basic-subjects/strategic-management/strategic-management-model/
 Environmental Scanning
 Eastman Kodak
 Baldwin Locomotives
 Bajaj Scooters
There always two sides of failure due to
environment change
- Failure to adapt
- While creating new opportunities it will
destroy the old opportunities
 There must be a strategic fit between what
the environment wants and what the
corporation has to offer, as well as between
what the corporation needs and what the
environment can provide.
 Meaning

 “Environmental scanning is an
overarching term encompassing the
monitoring, evaluation, and
dissemination of information
relevant to the organizational
development of strategy” – Thomas
Wheelen et al.
 It has two broader categories
 External Environment
 Internal Environment
 External Environment Scanning
 It includes following environments
 The Natural Environment
 Physical resources, wildlife, and climate that are an inherent
part of existence on Earth.
 The Societal Environment
 mankind’s social system that includes general forces that do
not directly touch on the short-run activities of the
organization, but that can influence its long-term decisions.
 Economic forces that regulate the exchange of materials,
money, energy, and information.
 Technological forces that generate problem-solving
inventions.
 Political–legal forces that allocate power and provide
constraining and protecting laws and regulations.
 Sociocultural forces that regulate the values, mores, and
customs of society.
 The Task Environment
 Those elements or groups that directly affect a corporation and, in
turn, are affected by it. These are governments, local communities,
suppliers, competitors, customers, creditors, employees/labor unions,
special-interest groups, and trade associations.
The Natural Environment
 Factors which needs to be considered for
Natural Environment
 Fresh Water
 Clean Air
 Global Warming
 Carbon Footprints
 The Societal Environment
Sociocultural TechnologicalVariables
Economic Ecologica Political-Legal
l
Lifestyle Total government GDP trends Environme Antitrust regulations
changes spending for R&D Interest rates ntal Environmental
Career Total industry Money supply protection protection
expectations spending Inflation rates laws laws
Consumer for R&D Unemployment Global Global warming
activism Focus of levels warming legislation
Rate of family technological Wage/price impacts Immigration laws
formation efforts controls Non- Tax laws
Growth rate of Patent protection Devaluation/ governmen Special incentives
population New products revaluation tal Foreign trade
Age distribution New developments Energy organizatio regulations
of in alternatives ns Attitudes toward
population technology transfer Energy Pollution foreign
Regional shifts from lab to availability impacts companies
in marketplace and cost Reuse Laws on hiring and
population Productivity Disposable and Triple promotion
Life improvements discretionary bottom Stability of
expectancies through income line government
Birthrates automation Currency Recycling Outsourcing
Pension plans Internet availability markets regulation
Health care Telecommunication Global financial Foreign “sweatshops”
Level of infrastructure system
education Computer hacking
Living wage activity
Unionization Thomas et al (2018) Pg. No. 44-45
 Eight current sociocultural trends
 Increasing environmental
awareness - Busch Gardens,
for example, has eliminated
the use of disposable
Styrofoam trays in favor of
washing and reusing plastic
trays.
 Growing health
consciousness - Chile
decided to ban toys that are
included in various fast-food
meals.
 Expanding seniors market
- The pet care industry to
grow by more than 5%
annually in the United States.
 Impact of millennials - This
cohort is expected to have a
strong impact on future
products and services.
 Eight current sociocultural trends
 Declining mass market - The
advent of craft chocolate
making and flavored chocolates.
 Changing pace and location
of life – OTT media services,
virtual meetings.
 Changing household
composition – Single Parenting
 Increasing diversity of
workforce and markets -
Over time, group percentages of
the total U.S. population are
expected to change as follows:
Non- Hispanic Whites—from
90% in 1950 to 74% in 2050;
Hispanic Whites—from 9% in
1995 to 22% in 2050; Asians—
from 4% in 1995 to 9% in 2050.
Creating a Scanning System.
 WebFountain - In 2002 IBM created a tool
called WebFountain to help the company
analyze the vast amounts of
environmental data available on the
Internet
Task Environment
Porter’s Five Forces
 Strategy Formulation
 Strategy Formulation, often referred to
as strategic planning or long-range
planning, is concerned with developing
a corporation’s mission, objectives,
strategies, and policies.
 It begins with situation analysis: the
process of finding a strategic fit
between external opportunities and
internal strengths while working
around external threats and internal
weaknesses.
 Types of Strategies
 Corporate Strategies

 Business Strategies

 Functional Strategies
Corporate Strategies
 Concentration: It means bringing in
resources into one or more of a firm’s
business keeping customer needs, customer
functions, alternative technologies, singly or
jointly so as to expand.
 Integration: Integration means joining
activities related to the present activities of a
firm.
 Horizontal
 Vertical – Forward & Backward
 Corporate Strategies Cont.
 Diversification: Adding a new customer
function(s), customer group(s), or alternative
technologies to an existing business is known
as diversification.
 Concentric diversification –

 Conglomerate or unrelated diversification

 Horizontal Diversification
 Corporate Strategies Cont.

 Internationalization
 Digitalization
 Cooperation
 Combination Strategy
 Stability Strategies
 Retrenchment Strategies
 Turnaround strategy
 Disinvestment
 Divestment strategy
 Sell-off or hive-off – to sell off a non-core business
divisions;
 Spin-off – demerging the business activities;
 Split-off – division of business into two separate
ownership;
Business Level Strategies

 Cost Leadership
 Generating economic value by having
lower costs than competitors.

 Toyota drive its cost lower through

 investments in efficient scale facilities,
 tight cost and overhead control,
 cost minimization
 BLS cont.

 Product Differentiation
 Generate value by offering a product that
customers prefer over competitor's product.
 BLS cont.

 Focus
 The ability of a company to provide
unique and superior value to a
particular buyer group, segment of
the market line, or geographic
market.
Functional Level Strategies
 Functional strategy is the approach a
functional area takes to achieve
corporate and business unit objectives
and strategies by maximizing resource
productivity. It is concerned with
developing and nurturing a distinctive
competence to provide a company or
business unit with a competitive
advantage
 Types of Functional Strategies
 Marketing Strategy

 Financial Strategy

 Research and Development (R&D) Strategy

 Operations Strategy

 Purchasing Strategy

 Logistics Strategy

 Human Resource Management (HRM) Strategy

 Information Technology Strategy

 Process of Strategic
Formulation
 The process of strategy formulation
basically involves of the following five
steps. Though these steps do not follow a
rigid chronological order, however they
are very rational and can be easily
followed in this order.
Steps involved in Strategy Formulation
 Strategic Intent
 Mission
 Vision
 Values
 Situational Analysis
 External
 Internal
 Industry
 Setting Long-term Quantitative Objectives
or Goals
 SMART
 Formulation of strategic Alternatives
 Find & Evaluate
 Selection of Strategy
 A fit between the environment and the strategic intent
Strategic Choice or Alternatives
 Creating Scenarios is the way to evaluate
alternatives
 Corporate Scenarios
 Use Industry analysis to make
assumptions
 Develop common size financial
statements
 Construct detailed financial statements
 Manager’s attitude towards risk
 Pressures from stakeholders
 Pressure from corporate culture
 Needs & Desires of key managers
 Obstacles in Strategy
Formulation
 Lack of Information
 Too Much Data
 Confusion and Dilution
 Old Mindset. Business runs in a
cyclical mode
 Prior Bad Experience and Fire-
Fighting
 Content with Current Success
 Other Impediments
 Fear of failure
 Distrust in management
 Strategy Implementation
 Strategy implementation is the sum total of the
activities and choices required for the execution of
a strategic plan. It is the process by which
objectives, strategies, and policies are put into
action through the development of programs,
budgets, and procedures.
 To begin the implementation process, strategy
makers must consider these questions:
 Who are the people who will carry out the strategic plan?
 What must be done to align the company’s operations in
the new intended direction?
 How is everyone going to work together to do what is
needed?
Who Implements
Strategy?

VP

Plant
Manager
Operation
s
Manager
 DEVELOPING PROGRAMS,
BUDGETS, AND PROCEDURES

Program
s

Strategy
Implementati
on

Procedure
s Budget
s
 *
Program
 Action Oriented
 For example, when Xerox Corporation
undertook a turnaround strategy, it
needed to significantly reduce its costs
and expenses.
 Lean Six Sigma.
 Top Executives
 250 Individual Six Sigma Projects
 $6 million in savings
 * Budget

 Cadbury Schweppes’
 Dependent on cocoa from
 Increase yield training
 Ghana produced 70% of Cadbury’s
worldwide supply
 “Cadbury Cocoa Partnership” on January
28, 2008,
 Budgeted $87 million over a 10-year
period
 * Procedures
 Standard Operating Procedures
(SOPs

 For example, a company following a

differentiation competitive strategy
 sales force more closely
 long-term customer relationships
 the foundation for product development
and improvement.
 Strategy Implementation means changes in
Structure

Stage I Stage II Stage III Stage IV Stage V

Dominan Birth Growth Maturity Decline Death
t Issue
Popular Concentr Horizontal Concentric Profit Liquidatio
Strategie ation and and strategy n or
s in a niche vertical conglomerat followed bankruptc
growth e by y
diversificatio retrenchm
n ent

Likely Entrepren Functional Decentraliza Structural Dismemb

Structur eur managemen tion surgery erment
e dominate t into profit or of
d emphasized investment structure
centers
Thank You