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Business Policy, Planning and
Strategy
Prof. L.Raghavan Iyer.
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Contents during the session
Meaning.
Objective of Strategic Management
Importance of Strategic Management. Origin
Strategic Management Process.
Vision, Mission, Goals and Objectives.
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What is Strategic Management?
The set of decisions and actions
that result in the formulationand implementation of plans
designed to achieve a companysobjectives.
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Multi-Disciplinary
Integrative and inter-workings of finance, accounting,
marketing,research and development, human resources, operations,
informationmanagement,
These are the functional specialties that contribute to the
generalmanagement of the firm.
You have studied these fundamentals separately.
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Strategic Management
Strategy: The unifying theme that gives coherence anddirection
to the decisions of an organizationStrategic Management: Consisting
of the analysis,decisions, and actions an organization undertakes
inorder to create and sustain competitive advantages.
Or, the Strategic Management Process is:The full set of
commitments, decisions, and actionsrequired for a firm to create
value and earn above-average returns. (Hitt, Hoskinson, &
Ireland, 2004, p. 4)
Strategic Management basically seeks to answer the question:How
and why do some firms outperform
others?
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Other Definitions of Strategy
Oxford Dictionary: The art of war, especially the planning
of
movements of troops and ships etc., into favorable positions;
planof action or policy in business or politics etc.
Chester I. Barnard: Strategy is intended to focus on the
interdependence of the adversaries decisions and on their
expectations about each others behavior.
Alfred D. Chandler Jr.: The determination of the long run goals
and
objectives of an enterprise, and the adoption of courses of
action
and the allocation of resources necessary for carrying out
these
goals.
Kenneth Andrews: Strategy is the pattern of objectives, purposes
or
goals and the major policies and plans for achieving these
goals,
stated in such a way as to define what business the company is
in
or is to be in and the kind of company it is or is to be.
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The Origins of Strategy
Know the other and know yourself: Triumph without peril.
Know Nature and know the Situation: Triumph completely.
- Sun Tzu (~360 B.C.)
Business strategy is a relatively young field of study but
its
roots go back to early military strategy.
Strategy comes from the Greek word strategos, which is
formed from stratos, meaning army, and ag, meaning to
lead.
Carl von Clausewitz wrote in the early 1800s
thattactics[involve] the use of armed forces in the
engagement, strategy [is] the use of engagements for the
objects of war.
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More Recent Historical
Development of Business Strategy
Not until very large companies with the ability to influence
thecompetitive environment within their industries did
strategicthinking in the business world begin to be articulated.
Alfred Sloan, CEO of GM, 1923 1946 - One of the first to analyze
competition,
Ford, and devise a strategic plan based on its strengths and
weaknesses.
Chester Barnard, Senior Executive of New Jersey Bell, 1930s
-Argued managersshould pay attention to strategic factors which
depend on personal ororganizational action.
Wartime (WWI and WWII) efforts also impacted strategicthinking
and use of formal strategic tools and concepts: Allocation of
scarce resources
Use of quantitative analysis in planning
The concept of learning curves
The concept of distinctive competence - first mentioned by
Philip Selznick, asociologist, in a debate about whether or not to
combine the military forces intoa single unit (i.e., no Army, Navy,
Air Force, Marines, just the US Military).
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More Recent Historical
Development of Business Strategy
Not until very large companies with the ability to influence
thecompetitive environment within their industries did
strategicthinking in the business world begin to be articulated.
Alfred Sloan, CEO of GM, 1923 1946 - One of the first to analyze
competition,
Ford, and devise a strategic plan based on its strengths and
weaknesses.
Chester Barnard, Senior Executive of New Jersey Bell, 1930s
-Argued managersshould pay attention to strategic factors which
depend on personal ororganizational action.
Wartime (WWI and WWII) efforts also impacted strategicthinking
and use of formal strategic tools and concepts: Allocation of
scarce resources Use of quantitative analysis in planning
The concept of learning curves
The concept of distinctive competence - first mentioned by
Philip Selznick, asociologist, in a debate about whether or not to
combine the military forces intoa single unit (i.e., no Army, Navy,
Air Force, Marines, just the US Military).
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DOMINANTTHEME
1950s 1960s-early 70s Mid-70s-mid-80s Late 80s
1990s 2000s
Budgetary Corporate Positioning Competitive Strategicplanning
& planning advantage innovationcontrol
Financial Planning Selecting Focusing on Reconcilingcontrol
growth &- sectors/markets. sources of size with
diversification Positioning for competitive flexibility
&leadership advantage agility
Capital Forecasting. Industry analysis Resources &
Cooperativebudgeting. Corporate Segmentation capabilities.
strategy.Financial planning. Experience curve Shareholder
Complexity.planning Synergy Portfolio analysis value. Owning
E-commerce. standards. Knowledge Management
Coordination Corporate Diversification. Restructuring. Alliances
&& control by planning depts. Global strategies.
Reengineering. networksBudgeting created. Rise of Matrix structures
Refocusing. Self -organizsystems corporate Outsourcing. ation &
virtual
planning organization
MAINISSUES
KEYCONCEPTS
&TOOLS
MANAGE-MENT
IMPLIC-ATIONS
The Evolution of Strategic Management
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What is Strategy?
Large-scale, future-oriented plan for
interacting with competitive
environment to achieve objectives
Companys game plan
Framework for managerial decisions
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How does strategy fit in.
strategy is the process by which individuals
and organisations make choices about scarce
resources so as to satisfy wants over time in
an environment of uncertainty. They areaided in this process by
market and non-
market forces.
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Art & science offormulating,
implementing, andevaluating, cross-functional decisions that
enable an
organization to achieve its objectives.
Strategic Management Defined
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Definition: Strategic management consists of the
analysis,decisions, and actions an organization undertakes in
order
to create and sustain competitive advantages.
Key Attributes of Strategic Management: Directs the organization
toward overall goals and
objectives.
Involves the inclusion of multiple stakeholders in
decisionmaking.
Needs to incorporate short-term and long-termperspectives.
Recognizes tradeoffs between efficiency and effectiveness.
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What is strategic Management about
Understanding how firms create,capture, andsustain competitive
advantage.
Analyzing strategic business situations andformulating strategic
plans. [strategycontent]
Implementing strategy and organizing the firmfor strategic
success. [strategy process]
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Fundamental Objective of Strategic
Management is.
To Identify,
Develop and
Maintain
Sustainable Competitive Advantage.
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Sustainable competitive advantageoccurs when a firmimplements a
value-creating strategy of which othercompanies are unable to
duplicate the benefits or findit too costly to imitate.
An important basis for sustainable competitiveadvantage is the
development of resources andcapabilities.
Core competencies are resources and capabilities(often related
to functional-level skills) that serve as asource of competitive
advantage for a firm over itsrivals.
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Strategic Management
Managers ask such questions as...
What changes and trends are occurring?
Who are our customers?
What products or services should we offer?
How can we offer these products or services
most efficiently?
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Strategic management
Analysis: To understand the strategic
positioning of the firm
Choice: Formulate courses of action to achieve
the desired strategic position
Implementation: Plan and manage necessary
changes in organisation
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Provides a frameworkfor thinking about the business
Creates a fit between the organization and its external
environment.
Provides a process of coping with change and
organizationalrenewal
Fosters anticipation, innovation, and excellence
Facilitates consistent decision-making
Creates organizational focus
Acts as a process of organizational leadership.
Finally and most importantly: To help the organization to
succeed(outperform) against itscompetition!!
Why is SM, as a field of study, necessary?
Why are all these theories/tools needed ?
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Strategy, Survival and Success
The ultimate goal of the organizations is to be
successfulsuccess is: Survival (long-term success)
Achievement ofGoals
Above average returns/Profitability (probably most
important,because it determines the ability to achieve the above
two)
Strategy can help achieve success, but it doesntguarantee
itcertain features of strategy directlycontribute to success:
1. Goals that are simple, consistent, and long-term.
2. Profound understanding of the competitive environment.3.
Objective appraisal of resources.
4. Effective implementation.
These observations concerning the role of strategy can bemade in
relation to most human endeavors be it warfare,
chess, politics, sport or business.
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Competition and Competitive Advantage
Competition provides the rationale forstrategy without
competition, strategy isof no concern.
The essence of strategy is the
interdependence of competitorsor theestablishment ofsustainable
competitiveadvantage over rivals.
The study of strategy involves how we goabout identifying,
establishing, andsustaining competitive advantage.
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Thinking Strategically:The Three Big Strategic Analysis
Questions
1.Where are we now? What is our situation?
2.Where do we want to go?
Business(es) we want to be in and market positions we want to
stake
out
Buyer needs and groups we want to serve
Outcomes we want to achieve
3.How will we get there?
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Critical Tasks of Strategic Management
1 Formulate the companys mission
2 Develop company profile, reflecting its internal
conditions
3 Assess companys external environment
4 Analyze companys options
5 Identify most desirable options
6 Select long-term objectives and grand strategies
7 Develop annual objectives and short-term strategies
8 Implement the strategic choices
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Evaluate success of the strategic process
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Strategic Management Process
Implement
Strategy via
Changes in:
Leadership
culture,
Structure, HR,
Information &
control systems
SWOT
Formulate
Strategy
Corporate,
Business,
Functional
Define new
Mission Goals,
Grand Strategy
Identify Strategic
Factors Strengths,
Weaknesses
Identify Strategic
Factors
Opportunities, Threats
Scan Internal
Environment Core
Competence, Synergy,
Value Creation
Evaluate Current
Mission, Goals,
Strategies
Scan External
Environment
National, Global
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Objectives need to meet five specifications
1. An objective should be clear, single, specific topics (It
sould
not be stated in vague form)
2. An objective should relate to a result, not to an activity to
be
performes (The objective is a result of an activity, not to
performing the activity)
3. An objective should be measurable (An objective should be
stated in quantitive terms whenever feasible)
4. An objective should contaion a time deadline and a
responsible person of its achievement
5. An objective should be challenging but achievable.
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A possible definition of goal-strategy system
Mission or Objective: WORDS long-term (3-5 yrs ?) somewhat
visionary,
business right to be in, our ambition
Goals:NUMBERS stretch, specific by year, sales, profit,
competitiveposition (share), back-up sheets
Strategies: WORDS, HOW to, FOCUS sustainable competitive
advantage,long-term direction
Measures: NUMBERS one or two per strategy, readiliy optainable,
sensitiveto permit 3-monthly readings
Tactics: KEY NEXT PROJECTS recommended by Strategy Owner, agreed
bytop management, prioritized, time-defined, owners
