strtgc mngmnt

8/10/2019 strtgc mngmnt

1/44

ZAD INSTITUTE OF IT & MANAGEMENTBusiness Policy & Strategic Analysis (MBA!r"#

$ %at is Business Policy' o) "oes Business Policy *a+e te stu"y o, Manage*ent

*ore *eaning,ul'

Ans-Business Policy-

Business Policy means the general guidelines, which are meaningful for the management to

make their task easy and to solve the crucial problem that affects the success of an enterprise. It

includes study of functions and responsibilities of management related to organizational

objectives. The senior management consists of!

"hief #$ecutive %fficer

President

&eneral 'anager

#$ecutive (irector.

The term Business Policy may be used interchangeably with )trategic 'anagement, "orporatePlanning etc.

Primarily the term Business Policy means a long!term planning for the total business!*as a

whole+

BUSINESS.or/orate0O1erall ,unctioning

PO2I.3 Planning0For*ulation o, Strategies

Thus Business Policy means a long!term planning of any organization for the purpose of its!

G4O%T

SU45I5A2

E6PANSION

De,inition o, Business Policy-

Accor"ing to .ristensen-

-( Institute of IT 'anagement /0/1110223 Page 4o ! 5 !


2/44


*Business Policy is the study of the functions and responsibilities of )enior 'anagement, the

crucial problems that affect success in the total enterprise, and the decision that determine the

direction of the organization and shape its future+.

6rom the above definition it may be understood that Business Policy attempts to study what path

the %rganization is going to take in future.

GAP

Actual Position Antici/ate" Position

Planning Designing I*/le*enting Ste/s

Nature o, Business Policy-

5. Business Policy is a Stu"y ! It is a study what the top level 'anagers do and what guides

their activities.

7. To/!Manage*ent ! Business policy deals with the long term perspective of the

%rganization. These decisions are taken by the managers at the senior level of management.

Therefore, Business policy attempts to study the functions and responsibilities of the senior

management which primarily concerns itself to the crucial problems or decisions of the

organization.

3. Future!Oriente"-! Business Policy if future!oriented. The senior level managers anticipate

and predict the future and take a policy decision in the present.

8. .oice o, a Position ! The study of a Business Policy involves evaluating various course ofaction and various desired future positions and ultimately choosing one of the best suitable

future positions.

2ea"er

Follo)er

.allenger

Initiator



3/44


9. .oice o, a Strategy- Italso involves an evaluation and choice of a strategy to reach up to

the desired future position.

Merger & Ac7uisitions

8oint 5enture

Di1ersi,ication

Integration

1. Mo9ili:ation o, 4esources- The study of Business Policy is also concerned with the

optimum and mobilization of the available and the re:uired resources in an organization for

the achievement of the

Organi:ational Goals

Sortter* Goals 2ongter* Goals

$ %at are te o9;ecti1es o, Business Policy'

Ans- Te o9;ecti1es o, Business Policy a1e 9een state" 9y autors suc as .ristensen

an" Steiner an" oters in ter*s o, The learners of business policy have to understand the various concepts involved. 'anyof these concepts, like, strategy, policies, plans and programmes are encountered in the

functional area courses too.@> ;nowledge of the e$ternal and internal environment and how it affects the functioning of

an organization is vital to an understanding of business policy. Through the tools of

analysis a learner can understand the environment in which a firm operates.

!> Information about the environment helps in the determination of the mission, objectives,and



4/44


(B# In Ter*s o, S+ills-

5. The attainment of knowledge should lead to the development of skills so as to be able to

apply that which has been learnt.

7. The study of business policy should enable a student to develop analytical ability.

3. Business policy increases the mental ability of the learners and enables them to link

theory with practice.

(.# In Ter*s o, Attitu"e-

?> The attainment of the knowledge and skill objectives should lead to the inculcation of an

appropriate attitude among the learners.

@> 6or a general manager information and suggestions are important to possess a liberal

attitude and be receptive to newideas.

(D# Oter O9;ecti1es- So*e oter o9;ecti1es are-

5. (etermination of mission and objectives.

7. To face the practical difficulty of issue.

$ Descri9e te Process o, Strategic Manage*ent

Ans- Strategic Manage*ent-

)trategic management is about taking strategic decisions. It starts where strategic thinking ends.It applies strategic thinking to lead the organization to its vision.

Features o, Strategic Manage*ent-

5. )trategic 'anagement coordinates and integrates business activities.

7. )trategic 'anagement satisfies customers.

3. )trategic 'anagement strengthens the competitive position.

8. )trategic 'anagement works toward achieving performance Target.

De,initions o, Strategic Manage*ent



5/44


Accor"ing to Gluec+

*)trategic 'anagement as a stream of decisions and actions which leads to the development of

an effective strategy or strategies to help achieve corporate objectives.+

Accor"ing to Sar/lin

*)trategic 'anagement as the formulation and implementation of plans and carrying out of

activities relating to the matters which are of vital, pervasive or continuing importance to the

total organization+.

Strategic Manage*ent Process

The process of strategic management is depicted through a model which consists of different

phases, each phase having a number of elements. There are four phases in strategic managementprocess!


6/44



Strategy I*/le*entation

Project Procedural

>esource -llocation

)tructural

Behavioural

6unctional %perational

Strategic E1aluation

Performing )trategic #valuation

#$ercising )trategic "ontrol

>eformulating )trategies

Esta9lising Strategic Intent

?ision

'issionBusiness definition

%bjectives

For*ulation o, Strategies

#nvironmental -ppraisal

%rganisational -ppraisal )@%T -nalysis"orporate Aevel )trategies

Business Aevel )trategies

)trategic "hoice )trategic Plan


7/44


5. Esta9lising Strategic Intent )trategic intent lays the foundation for the strategic

management of any organization. In this hierarchy, the vision, mission, business

definition and objectives are established. The strategic intent makes clear what an

organization stands for.


8/44


9/44


5ision


10/44


11/44


7. Procedural Implementation

3. >esource -llocation

8. )tructural Implementation

9. Behavioral Implementation

1. 6unctional and %perational Implementation

5= Pro;ect I*/le*entation ! )trategies lead to plans, programmes, and projects. The

Project 'anagement Institute of the D) defines a project as *a one!shot, time limited,

goal !directed, major undertaking, re:uiring the commitment of varied skills and

resources+. - project passes through various phases which are!

a. "onception Phase.b. (efinition Phase.

c. Planning and organizing Phase.

d. Implementation Phase.

e. "lean!up Phase.

7= Proce"ural I*/le*entation- -ny organization which is planning to implement

strategies must be aware of the procedural framework within which the plans,

programmes, and projects have to be approved by the government at the central, state andlocal levels. The regulatory elements to be reviewed are as below!

a. 6ormation of a company

b. Aicensing Procedures

c. )ecurities and #$change Board of India >e:uirements

d. 'onopolies and >estrictive Trade Practices >e:uirements.e. Import and #$port >e:uirements.

f. #nvironmental Protection and pollution control >e:uirements

g. "onsumer Protection >e:uirements.

h. 6oreign #$change management -ct >e:uirements

3. 4esource Allocation ! - strategic plan is the representation of the hopes and aspirationsof strategies. Project Implementation is meant for the creation of an infrastructure to

enable them to put such a plan into action. Procedural implementation provides the Ego!

aheadC signal. But nothing really happens until resources are procured and allocated to

tasks for the accomplishment of objectives.

>esource allocation deals with the procurement and commitment of financial, physical

and human resources to strategic tasks for the achievement of organizational objectives.



12/44


8. Structural I*/le*entation--n organization structure is the way in which the tasks

and subtasks re:uired to implement a strategy are arranged. It includes!


13/44


large firm the corporate!level strategy is about managing the various businesses to ma$imize

their contribution to the overall corporate objectives.

"orporate!level strategies are basically about decisions related to allocating resources

among the different businesses of a firm, transferring resources from one set of businesses to

others, and managing a portfolio of businesses in such a way that the overall corporate

objectives are achieved.

Ty/es o, Strategies- Tere are ,our alternati1e strategies-

5. )tability )trategies 7. #$pansion )trategies 3.>etrenchment

)trategies 8. "ombination strategies



14/44


.O4PO4ATE!2E5E2 ST4ATEGIES

STABI2IT3 E6PANSION 4ET4EN.MENT .OMBINATI

4o!changeG Profit PauseGProceed )imultaneous )e:

)imultaneous

with "aution Turnaround (ivestment Ai:uidation )e

"oncentration Integration (iversification "ooperation Internationalisation?ertical Internation

Horizontal

'ultidomes

"oncentric "onglomerate

'arketing!related

'erger Takeover oint &lobal

Technology!related Horizontal ?enture



15/44


'arketing and technology related ?ertical 6riendly Hostile



16/44


?> Sta9ility Strategies!The stability strategy is adopted by an organization when it attempts

at an incremental improvement of its functional performance by marginally changing one or

more of its businesses in terms of their respective customer groups, customer functions, and

alternative technologies!either singly or collectively. These strategies are usually followed

by small and medium!sized firms. )tability strategies can be used in short run when such

firms are satisfied with their current performance.

)tability )trategies could be of three types all of which are discussed below!


17/44


18/44


$- E/lain tese sta9ility cor/orate le1el strategies (a# Nocange or "onoting (9#

/ro,it= an" (c# /ause0/rocee" )it caution>

-ns! Sta9ility Strategies!

The stability strategy is adopted by an organization when it attempts at an incremental

improvement of its functional performance by marginally changing one or more of its

businesses in terms of their respective customer groups, customer functions, and alternative

technologies!either singly or collectively. These strategies are usually followed by small and

medium!sized firms. )tability strategies can be used in short run when such firms are

satisfied with their current performance.

Ma;or 4easons ,or a"o/ting Sta9ility Strategies-


19/44


&rowth is a way of life. -lmost all organization plans to e$pand. )o e$pansion strategies are

most popular corporate strategies. "ompanies aim for substantial growth.

The e$pansion grand strategy is followed when an organization aim at high growth by

substantially broadening the scope of one or more of its businesses in terms of their

respective customer groups, customer functions, and alternative technologies! singly or

jointly!in order to improve its overall performance.

Ma;or reasons ,or a"o/ting e/ansion strategies-


20/44



21/44


offering hire!purchase service to institutional customers also starts consumer

financing for the purchase of durable to individual customers.

Mar+etingan" tecnologyrelate" concentric "i1ersi,ication- @hen a similar

type of product or service is provided with the help of related technology, for

e$ample, a raincoat manufacturer makes other rubber!based items, such as,waterproof shoes and rubber gloves, sold through the same retail outlets.


22/44


international environment, evaluate its own capabilities, and devise strategies to

enter foreign market.

Ty/es o, Internationalisation Strategies-


23/44



24/44


-ns! .ie, Eecuti1e O,,icer

Or

Managing Director

Or

Eecuti1e Directors

Or

Strategist

Or

Presi"ent or General Manager

Intro"uction-

The "#% is the most important strategist who is responsible for all aspects of strategicmanagement, from, the formulation to the evaluation of strategy. The "hief #$ecutive

%fficer is the person who is overall in charge of the management. HeGshe provides

ade:uate information to the board for setting objectives and taking policy decisions.

HeGshe also e$ecutes plans and policies decided at the top management. The "#% is

variously designated as the managing director, e$ecutive director, president or &eneral

manager in business organizations. The "hief #$ecutive %fficer performs the followingfunctions!

5. To /resent te o9;ecti1es an" "e,ine te /olicies- "hief e$ecutive officer is

responsible for presenting and defining objectives.



25/44


7. el/,ul in Eecution- The plans and policies decided by the Board of (irectors are

e$ecuted through the chief e$ecutive. HeGshe e$plains various policies and plans to

departmental managers and gives proper directions for their proper e$ecution. HeGshe

also monitors the progress of various plans and takes corrective actions, if needed.

3. .oor"inating Acti1ities- "hief #$ecutive acts as a coordinator among different

departments. HeGshe helps various departments in reconciling their objectives with

one another.

8. Ensuring Pro/er Per,or*ance- "hief #$ecutive is responsible for overall

performance of the organization. HeGshe regularly reviews the performance of

various departments and reports the performance to Board of (irectors. In case

performance is not as per the plans then necessary corrective actions are taken.

HeGshe regularly holds meetings with department heads and keeps himself abreast

with their working.!

9. Sta,,ing- ! "hief #$ecutive performs staffing function at higher level. HeGshe

appoints senior personnel and fi$es pay structure, performance standard, promotion

criteria etc. HeGshe formulates staffing policies dealing with different aspects of

employment.

1. For*ulation o, Strategy--s the chief strategist, the "#% plays a major role in

strategic decision!making. "#%s formulate the strategies in strategic management

process.

. I*/le*entation o, Strategy! HeGshe plays a important role in implementing thestrategy.

0. E1aluation o, Strategy--s the chief strategist, the "#% plays a major role in

evaluation of strategy.

/. Pro1i"e Directions- "#% performs the strategic tasks which are necessary to

provide a direction to the organization so that it achieves its purpose.

52. (efining the role of middle management.

55. Provide suggestions in decision!making.

57. Setting te co*/anys *ission- HeGshe plays a important role in setting the

mission of the organization.

53.The role of "#% is basically to manage the e$ternal environment relationship inorder to create conditions for growth.



26/44


58. To maintain a link between the Board of (irectors and the entire organization.

59. To present the economic report of the activities of the organization.

51.To give ade:uate and appropriate orders and directions for the efficient working of

the organization.

$- %at are te roles or Functions o, Su9.o**ittee'

Ans- In Su9.o**ittee )e inclu"es-


27/44


'iddle level management is basically concerned with the task of implementing the

policies and plans laid down by the top management. It works as a necessary link

between the top management and the lower level management. It helps in

communication between both levels.

4ole-


28/44



29/44



30/44


Business firm undertake )@%T analysis to understand their e$ternal and internal

environments. In looking at the various aspects of e$ternal internal environment we have

to look at the strength weakness of the company as also to an e$tent opportunities

threats. @e canCt ignore even a single aspect of )@%T analysis. There are several ways to

understand such analysis!


31/44



32/44


Uses o, S%OT analysis-

esource -llocation


33/44



34/44


a. )ources of technology

b. Technological development

c. Impact of technology on human beings

iii Su//lier en1iron*ent-)ome of important factors are !

a. "ost, availability and continuity of supply of raw materials.

b. "ost availability of energy used in production

c. "ost availability of finance for implementing plans and projects.

iv Econo*ic En1iron*ent! )ome of important factors are !

a. The economic )tructure! - "apitalistic, )ocialistic, or mi$ed economy.

b. #conomic Policies! Industrial policy, monetary policy and fiscal policy.

c. #conomic Planning! 6ive year plans, annual budgets etc.

v 4egulatory En1iron*ent! )ome of important factors are !

a. Policies relating to licensing, foreign investment etc.b. Policies relating to imports and e$ports.

c. Policies relating to public sector, small scale industries etc.

vi International En1iron*ent! )ome of important factors are !

a. &lobalisation, its process, content and direction.

b. &lobal financial system, source of financing.

c. &lobal market and competitiveness.

Internal En1iron*ent-! The internal #nvironment refers to all factors within an

organisation which impart strengths or cause weaknesses of a strategic nature! )trength

@eakness

It includes!a. #mployees their skill base

b. Aevel of technology available

c. %rganisational (esign and structure.

@> General 5ersus 4ele1ant En1iron*ent-

&eneral #nvironment! The e$ternal environment consists all those factors whichprovide opportunities or pose threats to an organisation. In a wider sense, the e$ternal

environment encompasses a variety of factor, like international, social changes,

political system and many other macro level factors. )uch a wider perception of the

environment could be designated as the general environment.

>elevant #nvironment! #very business organisation is concerned with a set of

environment aspects, which have a direct, or an immediate affect on the business.



35/44


This part of the general environment which is of an immediate concern to the

business is termed as relevant environment.

3. In"ustry En1iron*ent-To analyse the industry environment we should understand the

purpose of all the firms related to that industry. It includes industry trends, market size

the factors which affect industry attractiveness.

8. .o*/etiti1e En1iron*ent! In this type of environment an organisation has to study

their competitors i.e. their profitability, their position and their chance of growth in theeconomy. 6or this purpose )@%T analysis can be done.

$- %at are te rules an" /rinci/les o, cor/orate strategy'

-ns! Tactics ,or .or/orate Strategies-- tactic is a sub!strategy. It is *a specific plan

detailing how a strategy is to be implemented in terms of when and where it is to be put into

action. By their nature, tactics are narrower in their scope and shorter in their time horizon

than are strategies+. @e shall consider here the two tactics!


36/44


market the firm aims at while applying its corporate strategies. #very industry has a

number of firms that offer the same or substitute products or services. %ne firm has the

largest market share, some other firms have a relatively larger market share, a few

others have a small market share.

'arket location could be classified according to the role that firms play in the target

market and the types of corporate tactics they adopt to play such a role.

%n the basis of the role that firms play in the target market, market location tactics could

be of four types Aeader, "hallenger, 6ollower and 4ichers.


37/44


-ns! .or/orate Port,olio Analysis-"orporate portfolio analysis could be defined as a set

of techni:ues that help strategists in taking strategic decisions with regard to individual

products or businesses in a firmCs portfolio. It is primarily used for competitive analysis and

corporate strategic planning in multiproduct and multi!business firms.

There are a number of techni:ues that could be considered as corporate portfolio analysis

techni:ues. The most popular is the Boston .onsulting Grou/ (B.G# Matri or Pro"uct

Port,olio Matri>

BOSTON .ONSU2TING G4OUP- The Boston "onsulting &roup 'atri$, provides a

graphic presentation for an organisation to e$amine the different businesses in its portfolio

on the basis of their relative market shares and industry growth rates. Business could be

classified on the B"& 'atri$ as either low or high according to their industry growth rate

and relative market share. There are two a$is!


38/44


esorts, Aight "ommercial ?iechle, Home Improvement

Products.

Ans- GE Nine.ell Matri--nother corporate portfolio analysis techni:ue is based on the

pioneering efforts of the &eneral #lectric "ompany of the Dnited )tates supported by the

consulting firm of 'c;insey "ompany. There are two a$is in 4ine!"ell 'atri$ !

?ertical -$is! The vertical a$is represents industry attractiveness, which is a weighted

composite rating based on eight different factors. These factors are!(i# 'arket )ize and &rowth rate.

(ii# Industry Profit 'argin



39/44


(iii# "ompetitive Intensity

(i1# )easonality(1# "yclicality

(1i# #conomies of )cales

(1ii# Technology

(1iii# )ocial, #nvironmental, legal and human impacts.

ori:ontal Ais- The horizontal a$is represents business strengthGcompetitive position,

which is again a weighted composite rating based on seven factors. These factors are!

elative 'arket )hare

ed one! E)topC

&reen one! Based on the green zone the signal is Ego aheadC to grow and build,

indicating e$pansion strategies. Businesses in the green zone attract majorinvestment.

Lellow one!6or the yellow zone, the signal is Ewait and seeC indicating hold and

maintain type of strategies aimed at stability.

>ed one! 6or the >ed zone, the signals is EstopC indicating the retrenchment

strategies of divestment and li:uidation.

GENE4A2 E2E.T4I. NINE.E22 MAT4I6

ZONE ST4ATEGI.

)I&4-A

&>##4 I4?#)TG

#MP-4(

L#AA%@ )#A#"TG#->4

-( Institute of IT 'anagement /0/1110223 Page 4o ! 3/ !


40/44


>#( (I?#)T

HI&H

'#(ID'

A%@

)T>%4& -?#>- @#-;

BUSINESS ST4ENGT0.OMPETITI5E POSITION

.onclusion- The nine!cell matri$ offers some distinct advantages> "ompared to B"&

'atri$, it offers an intermediate classification of medium and average ratings. It

incorporates a larger variety of strategic variables like the market share and industry size.

The matri$ is also a powerful analytical tool to channel corporate resources to

businesses that combine to high industry attractiveness with an average to strong businessstrengthGcompetitive position. %n the other hand, the major drawback of the 'atri$ is

that it only provides broad strategic prescriptions rather than the specifics of businessstrategy.

$- %3 IS A DI4E.TIONA2 PO2I.3 MAT4I6 NAMED AS SU.'

-ns!Directional Policy Matri-The directional policy matri$


41/44


Dnattractive -verage -ttractive

@eak

-verage

)trong

$- %rite asort note on

Gran"

Strategy

Matri>

Ans! Gran" Strategy Matri-In addition to the B"& 'atri$, !4ine "ell 'atri$, the

&rand )trategy 'atri$ has become a popular tool for formulating alternative strategies.

-ll organizations can be positioned in one of the &rand )trategy 'atri$Cs four strategy:uadrants. &rand )trategy is based on two evaluative dimensions!

%4&.OMPETITI5E "%'P#TITI?#

POSITION P%)ITI%4

$ua"rant III $ua"rant I5

5. >etrenchment 5. "oncentric (iversification

7. "oncentric (iversification 7. Horizontal (iversification

3. Horizontal (iversification 3. "onglomerate (iversification.8. "onglomerate (iversification 8. oint ?enture

9. Ai:uidation

)A%@ MA4


42/44


$ua"rant I-

6irms located in Fuadrant I of the &rand )trategy matri$ are in an e$cellent strategicposition. 6or these firms, continued concentration on current markets


43/44


Fuadrant III organizations compete in slow!growth industries and have weak competitive

positions. These firms must make some drastic changes :uickly to avoid further demise and

possible li:uidation. #$tensive cost and asset reduction Degree o, te Fir*s Eternal De/en"ence-- comprehensive strategy is meant toeffectively guide a firmCs performance in the larger e$ternal environment. %wners,

suppliers, customers, government, competitors, and unions are a few of the elements in a

firmCs e$ternal environment. - major constraint on strategic choice is the power of

environmental elements in supporting this decision. The greater a firmCs e$ternaldependence, the lower its range and fle$ibility in strategic choice.

!> Attitu"es to)ar" 4is+- -ttitudes towards risk e$erts considerable influence on

strategic choice. @here attitudes favor risk, the range and diversity of strategic choice

e$pend. @here management is risk averse, the diversity of choices is limited. >isk

oriented managers prefer offensive, opportunistic strategies.

4IS< A5E4SE 4IS< P4ONE

(ecrease "hoices(efensive )trategies

)tability

'inimize company weaknesses

#$pand "hoices%ffensive )trategies

&rowth

'a$imize company strength



44/44


> Ti*ing .onsi"erations-The time element can have considerable influence on strategic

choice. - good strategy may be disastrous if it is undertaken at the wrong time.

C> .o*/etiti1e 4eaction! In weighting strategic choices, top management fre:uently

incorporates perceptions of likely competitor reactions to different options.

> Internal /olitical .onsi"erations! PowerGPolitical factors also influence strategic

choice. - major source of power in most of the organizations is the chief e$ecutive

officer. In small enterprise, the "#% consistently the dominant force in strategic choice

and this is also in large firms, particularly those with a strong or dominant "#%.

strtgc mngmnt

Documents