12731896 Strategic Management Concepts

8/7/2019 12731896 Strategic Management Concepts

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QUAID-E-AZAM UNIVERSITY ISLAMABADDEPTT. ADMIN SCIENCES

Assignment # 01BUSINESS POLICY


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What is Strategic Planning?(The Strategic Planning Process, n.d.) Strategic planning is the process that clearly defines busineobjectives and assesses both the internal and external situation to formulate and implement thstrategy, evaluate the progress, and make adjustments as necessary to stay on track.The Strategic Planning Process can be shown with the help of following process:

Mission &Objectives

EnvironmentalScanning

StrategyFormulation

StrategyImplementation

Evaluation& Control

The image of Strategic Planning Process (Strategic Planning Process, n.d.)

What is a vision?Visualization or mental picture is the literal meaning of vision. A vision describes how a

organization views itself and where it will be in next 3 or 5 or 10 years and so on. A visiostatement indirectly describes the futuristic view of an organization e.g. vision of Mobilink adescribed in (Mobilink GSM, n.d.) is To be the leading telecommunication services provider iPakistan by offering innovative communication solutions for the customers while exceedinshareholder value and employee expectations. It is a broad view of a companys futuristic views.

What do you mean by mission of a company?The literal meaning of mission is duty, job or operation. Hence mission of a company is the reasoof existence of a company. As written by Wheelen and Hunger (2002) An organizations mission the purpose or reason for the organizations existence.

The mission of a company usually tells what the company is providing i.e. either it is some good or servicThe mission of Mobilink as described in (Mobilink GSM, n.d.) is To be the unmatchable mobi


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system of communications in Pakistan. It provides the best value to its customers, employeebusiness partners and shareholders.

A well defined mission statement speaks a lot about the company and bestows it with honor bseparating it from other companies of its own type. It also identifies the scope of companyoperations by defining the products and targeted market.

What do you mean by tactics?

Tactic means the approach towards workflow or the method of performing things. In terms strategic management we have a solid definition given by Wheelen and Hunger (2002, p.123) tactic is a specific operating plan detailing how a strategy is to be implemented in terms of wheand where it is to be put into action. Tactics are narrower in scope and shorter in their time acompared to strategies.There are two types of tactics as given by Wheelen and Hunger (ibid)

Timing tactic

Market Location tactic

What is a budget?As the name indicates, a budget is a financial or monetary plan. It lists down the resources availabl

and cost of each program. Wheelen and Hunger (2002, p.15) says that a budget lists the detailecost of each program. The budget thus helps the management in planning for its expenses ansetting cost limits using the available resources.

What is program?A program means agenda, plan, curriculum or syllabus. It defines and describes the work flow of aaction or a task. Wheelen and Hunger (2002, p.15) defines a program in the following words program is a statement of activities or steps needed to accomplish a single use plan. It may involvrestructuring of organization, changing the companys internal culture or beginning a new researceffort. Hence we may conclude that it is a component of a project which describes the workflowthroughout.

What is a policy?Policy means guiding principle or course of action. Wheelen and Hunger (2002, p.14) definespolicy in the following words A policy is a broad guideline for decision making that links thformulation of strategy with its implementation. Companies use policies to make sure themployees throughout the company make decisions and take actions that support the companymission, objectives and strategies.

Hence a policy in collaboration with companys objectives and mission is a guiding principle femployees which define them their limits of action. It has lesser scope than a strategy.

What is meant by the term goals?Goal means objective or target. Every corporation that exists in this world has some goals tachieve. Some of them maybe general and some are specific. A general goal maybe to be the markleader of the oil company but a specific goal is the achievement of getting additional profit bachieving sales target.

Wheelen and Hunger (2002, p.12) defines goals in the following words a goal is an open endestatement of what one wants to accomplish with no quantification of what is to be achieved and ntime period for completion.Hence a goal has

No quantification


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No time period

What are the objectives?Objective means the purpose. Sometimes it is interchangeably used with the word goal but in thlanguage of strategic management it has a different meaning. According to Wheelen and Hung(2002, p.12) Objectives are the end result of a planned activity. They state what is to baccomplished by when and should be quantified if possible

What is a strategy?Literally, strategy means a plan or policy but in terms of strategic management it has slightldifferent meanings. It means a comprehensive and long term plan. Wheelen and Hunger (2002p.13) defines a strategy in the following words a strategy of a corporation forms a comprehensivmaster plan stating how the corporation will achieve its mission and objectivesThere are three types of strategies i.e.

Corporate Strategy

Business Strategy

Functional Strategy

What is a procedure?Procedure means mode of operation or course of action. Wheelen and Hunger (2002, p.15) definesprocedure in the following words system of sequential steps or techniques that describe in detahow a particular task or job is to be done. They typically detail the various activities that must bcarried out in order to complete the corporations programs

Often the companies name their standard procedures as Standard Operating Procedure or SOPThese procedures are combined, compiled and published within the company for taking guidelinthrough this manual. An example is the SOP of Mobilink offices.

What is Business Policy?

The term policy means guideline or a course of action. It is actually a general phenomenoWheelen and Hunger (2002, p.14) wrote that Business policy has a general managemeorientation and tends primarily to look inward with its concern for properly integrating thcorporations many functional activities. Hence business policy is the general policy whicdetermines the limits of employees towards different actions. It is general in nature and is relativesimple.

What is Strategic Management?Strategic management in contrast with business policy is a technical approach having five stepmodels. It determines the long run performance of a company ad Wheelen and Hunger (2002, p.02wrote that strategic management is that set of managerial decisions and actions that determine th

long run performance of a company. It includes environmental scanning, strategy formulationstrategy implementation and evaluation and control.

Therefore strategic management if compared to business policy

Determines the long run performance of a company

Has 5 steps model

Is more technical approach as compared to business policy

It incorporates long range planning and strategy

What are the benefits of strategic management?


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Studying different books has revealed on me that the organizations that incorporate strategmanagement are more efficient and effective performer as compared to those that do not incorporait in their business. Lets take an example;

Karger and Malikstudied studied 273 firms in the chemicals and drugs, electronics, anmachinery industries. All were $ 50 to 500 million corporations. Those practicing strategmanagement were contrasted with those who didnt (planners with no planners). Very significantdifferences were found in the machinery and chemical industries and some positive findings in th

drug and electronics group Glueck (1980, p.17).

Hegarty studied 46 firms in Fortunes second 500 companies from 1970 to 1973. he founthat the more directly the firm linked its objectives to its strategies and thus formalized its strategmanagement process, the more the firm prospered. Glueck (1980, p.19).

Hence there is a difference between the firms that apply strategic management and those who dnot. As described by Glueck (1980, pp.16-17) there are the following advantages of strategmanagement:

Strategic management helps analyze and scan the environment therefore future problem

and opportunities could be well anticipated

It allows a firms top management to anticipate changes and provide track and control fthe enterprise

It provides clear cut mission, vision and objectives of enterprise to all the employees

It allows a firm to take decisions on the basis of long range forecast

It is widely practiced in industry

Businesses where strategic management is applied are better performers and their employee

According to Wheelen and Hunger (2002, p.4) strategic management has the following advantages

The followers of strategic management are the outperformers

It provides clearer sense of companys strategic vision

It helps understanding the rapidly changing environment

What is general environment?Glueck (1980, pp. 93-102).General environment is the external environment before an organizatio

starts strategy formulation; it must scan the external environment to determine the strengths anweaknesses. Wheelen and Hunger (2002, p.52). Environmental scanning is the monitorinevaluating and disseminating of information from the external and internal environments to kepeople within the corporation. There are some important variables in external environment.

Economic forces.

Technological forces.

Political legal forces.

Socio cultural forces. Demographic forces.

Lets have a brief idea of each of them.

Economic ForcesEconomic forces include the following;

GDP trends.

Interest rates.

Money supply in the economy.

Inflation rate.


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Unemployment level.

Wage/price control.

Devaluation /revaluation.

Energy availability and cost.

Disposable income.

Technological forcesTechnological forces include the following;

New product development. Availability and cost of raw material.

Availability and cost of money.

Availability and cost of labor.

Technological changes.

Political Legal ForcesPolitical legal forces include the following;

Government subsidies.

Government purchases.

Policy changes. Environmental protection laws.

Tax laws.

Special incentives.

Stability of Government.

Socio cultural/Demographical ForcesSocio cultural/demographical include the following;

Life stile changes.

Career expectations.

Population growth rate. Age distribution of population.

Regional shift in population.

Life expectancy.

Birth rate.

Death rate.

Educational level.

Market ForcesMarket forces include the following;

Changes in population. Age shifts.

Income distributions.

Product/service life cycle.

Entry and exit of competitors.

Availability of substitutes.

Strategic changes by competitors.

What are the types of business policy?Wheelen and Hunger (2002, p.13) There are three types of business policies;

i) Corporate policyii) Business policy


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iii) Functional policy

Corporate policyCorporate policy describes a companies overall direction in terms of its general attitude towardgrowth and the management of its various businesses and product lines. It typical fit within the thremain categories of stability, growth and retrenchment.

Business policy

Business policy usually occurs at the business unit or product level and it emphasizes improvemenof the competitive position of a corporation products or services in the specific industry or marksegment served by that business unit. Business strategies may fit within the two overall categorieof competitive or cooperative strategies.

Functional policyFunctional policy is the approach taken by a functional area to achieve corporate and business unobjectives and strategies by maximizing resources productivity. It is concerned with developing annurturing a distinctive competence to provide a company or business unit with a competitivadvantage.

What is the strategic management process?Wheelen and Hunger (2002, pp. 9-16). Strategic management process consists of four baselements.

Environmental scanning.

Strategy formulation.

Strategy implementation.

Evaluation and control.

Environmental ScanningIn the Environmental scanning we monitor, evaluate and disseminate information from the extern

and internal environment to the corporation. The external environment consists of forces such economic forces, technological forces, political forces, socio cultural forces and demographicforces. The internal environment consists of variables that are within the organization. They includthe corporation culture, people and resources.

The simplest way of scanning the environment is through SWOT analysis in which the strengthweakness, opportunities and threats or an organization are analyzed because they are the strategfactors of a company.

Strategy FormulationStrategy formulation is the development of long range plans of a company in order to gain effectiv

and efficient business procedure. Strategies are formulated by keeping in view the long termprospective of a firm. It includes the following steps:

Mission

Objectives

Strategies


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Policies

Strategy ImplementationStrategy implementation is that step in which the plans and policies are actually implementethrough the help of programs budgets and procedures.

ProgramsA program is a subset of a big project. It determines the set of activities that are undertaken whiaccomplishing a plan.

BudgetA budget is a financial plan of an organization which is formed on the basis of funds available.

ProceduresA procedure is a set of instructions which are required to do a job. Mostly, the companies make thestandard operating procedures for the sake of convenience of their employees.

Evaluation and ControlEvaluation and control is the final step in the strategic management process. It determines theffectiveness of the strategies implemented. It helps to determine the performance results and actuperformance is measured through effective evaluation process.

What is competitive environment or 5 forces model?

The image of the five forces model (Five Forces Analysis, n.d.)


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(Marketing Teacher, n.d.) The five forces model is also known as Porters model. It was developeby Michael E. Porter of Harvard Business. It is a model for the industry analysis and businestrategy development. Wheelen and Hunger (2002, pp. 60-63) It highlights five key forces namely

1. Threats of Entry2. The power of buyers3. The power of suppliers4. The threat of substitutes

5. Competitive rivalry

Threats of EntryNew industry entrants usually bring new threats to the existing companies because they may havsuch a competitive advantage that they may capture the market share of existing companitherefore they are a big threat. The entry barriers or obstructions may provide a safe side to thexisting companies.The possible barriers may be:

Economies of scale

The cost of entry

Distribution channels Cost advantages not related to the size of the company

Government action

Product differentiation

The Power of BuyersBuyers are the persons for whom the businesses are operated. There is no business whichcould survive without having any buyer for their products. Therefore through the forces ofdemand and supply, buyers have the power to bring down the prices by lowering theirdemand and inflate the prices by increasing their demand. Buyers are truly called powerfulif they fulfill the following factors

This is high where there a few, large players in a market e.g. the large grocery chains.

If there are a large number of undifferentiated, small suppliers e.g. small farming business

supplying the large grocery chains. Changing suppliers cost is little

The Power of Suppliers

The power of suppliers tends to be a reversal of the power of buyers. Suppliers are the providers goods. They also have the ability to change the prices i.e. through increasing the supply or viceversa. Either of the situations can bring down the prices and may also raise it to the higher level

The power of suppliers is high when:

Where the switching costs are high e.g. Switching from one construction company to another

Supplier is a renowned and strong brand e.g. Dell

There is a possibility of the supplier integrating forward

Customers are fragmented so that they have little bargaining power e.g. Gas/Petrol stations in

remote places. Substitutes are few or not at all available e.g. Microsoft windows

The threat of substitutes


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Substitutes are those products which could be used alternatively with each other e.g. Canderellsweetener is widely used as a substitute of pure white sugar. The threat of substitute may have agreat effect on industry. E.g. Fanta and Mirinda are the substitutes of each other. As the price ofFanta goes down, the Mirinda drinkers will soon switch over to Fanta. Therefore in order tosave its market, Mirinda will also have to lower down its price. The threat of substituteincreases when:

Where there is product-for-product substitution e.g. email for fax

Where there is substitution of need e.g. better toothpaste reduces the need for dentists Where there is generic substitution (competing for the currency in your pocket)

Competitive Rivalry

Wheelen and Hunger (2002, p.62) state that according to Porter rivalry is related to presence ofseveral factors such as

Number of competitors

Role of industry growth

Product or service characteristics

Amount of fixed costs

Capacity

Exit barriers

Diversity of rivals

There is the threat of substitute where entry is easy. This is why it is always seen in the center ofthe diagram.


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References

Five Forces Analysis [Image] (n.d.). Retrieved September 13, 2008, fromhttp://www.marketingteacher.com/Lessons/lessonfivefoces.htm

Glueck, F., William. (1980). Environmental Analysis and Diagnosis. In Business Policy and StrategicManagement(3rd Ed.). (pp. 88-102). USA: McGraw Hill.

Glueck, F., William. (1980). Why Strategic Management. In Business Policy and Strategic Management(3Ed.). (pp. 16-19). USA: McGraw Hill.

Mobilink GSM (n.d.) Mobilink Mission. Retrieved September 13, 2008, fromhttp://www.mobilinkgsm.com/mission

Mobilink GSM (n.d.) Mobilink Vision. Retrieved September 13, 2008, fromhttp://www.mobilinkgsm.com/vision

Quick MBA Knowledge to Power Your Business (n.d.). The Strategic Planning Process. RetrieveSeptember 13, 2008, from http://www.quickmba.com/strategy/strategic planning

The Strategic Planning Process [Image] (n.d.). Retrieved September 13, 2008, fro

http://www.quickmba.com/strategy/strategic planning

Wheelen, L., Thomas & Hunger, David, J. (2002). Basic Concepts of Strategic Management (8 th Ed.). InStrategic Management and Business Policy (pp.9-16). NewJersy: Prentice Hall.

Wheelen, L., Thomas & Hunger, David, J. (2002). Benefits of Strategic Management. In StrategicManagement and Business Policy (8th Ed.). (p. 4). NewJersy: Prentice Hall.

Wheelen, L., Thomas & Hunger, David, J. (2002). Competitive Tactics. In Strategic Management andBusiness Policy (8th Ed.). (p. 123). NewJersy: Prentice Hall.

Wheelen, L., Thomas & Hunger, David, J. (2002). Environmental Scanning and Industry Analysis. InStrategic Management and Business Policy (8th Ed.). (pp.52-53). NewJersy: Prentice Hall.

Wheelen, L., Thomas & Hunger, David, J. (2002). Environmental Scanning and Industry Analysis InStrategic Management and Business Policy (8th Ed.). (pp.60-63). NewJersy: Prentice Hall.

Wheelen, L., Thomas & Hunger, David, J. (2002). Environmental Scanning and Industry Analysis InStrategic Management and Business Policy (8th Ed.). (pp.62). NewJersy: Prentice Hall.

Wheelen, L., Thomas & Hunger, David, J. (2002). Strategy Formulation. In Strategic Management andBusiness Policy (8th Ed.). (p. 10). NewJersy: Prentice Hall.
http://www.marketingteacher.com/Lessons/lessonfivefoces.htmhttp://www.mobilinkgsm.com/missionhttp://www.mobilinkgsm.com/visionhttp://www.marketingteacher.com/Lessons/lessonfivefoces.htmhttp://www.mobilinkgsm.com/missionhttp://www.mobilinkgsm.com/vision


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Wheelen, L., Thomas & Hunger, David, J. (2002). Strategy Formulation. In Strategic Management and

Business Policy (8

th

Ed.). (p. 12). NewJersy: Prentice Hall.

Wheelen, L., Thomas & Hunger, David, J. (2002). Strategy Formulation. In Strategic Management andBusiness Policy (8th Ed.). (p.13). NewJersy: Prentice Hall.

Wheelen, L., Thomas & Hunger, David, J. (2002). Strategy Implementation. In Strategic Management andBusiness Policy (8th Ed.). (p. 15). NewJersy: Prentice Hall.




Wheelen, L., Thomas & Hunger, David, J. (2002). The Study of Strategic Management. In StrategicManagement and Business Policy (8th Ed.). (p. 02). NewJersy: Prentice Hall.

Wheelen, L., Thomas & Hunger, David, J. (2002). The Study of Strategic Management. In StrategicManagement and Business Policy (8th Ed.). (p. 02). NewJersy: Prentice Hall.


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12731896 Strategic Management Concepts