|
 




Business Policy
&
Strategic Management
 
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!
˜ Strategy Formulation
˜ Strategic Intent Vision
˜ Mission
˜ Business Definition
˜ oals & Objectives
 
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!
Strategy Formulation :-

˜
e strategy you formulate sould reflect environmental

analysis,, lead to fulfillment of your organizational vision
analysis vision,,
and result in reacing organizational objectives
objectives..

˜ Special tools formulating strategies include critical

question analysis,
analysis, SWO
analysis
analysis,, business portfolio
analysis,, Porter's model for industry analysis,
analysis analysis, and
resource--based model
resource model..

˜
ese five strategy development tools are related but

distinct. One can use te tool or combination of tools tat
is most appropriate for organization and business
environment..
environment
 
!
!
Strategy Formulation :-

˜ ritical Question Analysis

˜ SWO
Analysis

˜ |
 

o factors contribute to your strengts: ability and resources available.

 is evaluated on 3 counts:
˜ Versatility: your ability to adapt to an ever canging environment.
˜ Growth: your ability to maintain a continuing grot.
˜ Markets: your ability to penetrate or create ne markets.

˜
e strengt of

 as tree dimensions:

± ' ailability: your ability to obtain te resources needed.
± Quality: te quality and up
up--to
to--dateness of te resources employed.
± 'llocation: your ability to distribute resources bot effectively and efficiently.
 
!
!
Strategy Formulation :-

˜ SWO
Analysis


˜ our eaknesses are determined troug failures, defeats, losses
and inability to matc up it te dynamic situation and rapid
cange.
e eaknesses may be rooted in lack of managerial
skills,, insufficient quality
skills quality,, tecnological backardness, inadequate
systems or processes
processes,, slo deliveries, or sortage of resources.

˜
ere are tree possible outcomes to te analysis of your

eaknesses :-:-
Vorrection of an identified defect.
Protection troug cover
cover--up and prevention strategies to
reduce te exposure of your eaknesses.
˜ '

ression to divert te attention from your eaknesses.
 
!
!
Strategy Formulation :-

SWO
Analysis

˜ 
 are abundant. ou must develop a formula ic ill

elp you define at comes itin te ambit of an opportunity to
focus on tose areas and pursue tose opportunities ere
effectiveness is possible.
e formula must define product/service,
target market, capabilities required and resources to be employed,
returns expected and te level of risk alloed.
˜ Weaknesses of your competitions are also opportunities for you.
ou can exploit tem in to folloing ays:
± Marketin
warfare:
Marketin
warfare: attacking te eak leader's position
and focusing all your efforts at tat point, or making a
surprise move into an uncontested area.
± Vollaboration: you can use your complementary
strengts to establis a strategic alliance it your
competitor.
 
!
!
Strategy Formulation :-

˜ SWO
Analysis




˜ xternal treats arise from political, economic, social, tecnological

(PS

PS
 forces.
ecnological developments may make your
offerings obsolete. Market canges may result from te canges in
te customer needs, competitors' moves, or demograpic sifts.
e
political situation determines government policy and taxation
structure.
 
!
!
Strategy Formulation :-

˜ Business Portfolio Analysis - Business portfolio analysis as an

organizational Strategy Formulation tecnique is based on te pilosopy
tat organizations sould develop strategy muc as tey andle investment
portfolios.

ree most popular business portfolio tools are te

˜ B rot-Sare Matrix
e Boston onsulting roup (B  developed
a portfolio analysis tool tat elps managers develop organizational strategy
based on market sare of businesses and te grot of markets in ic
businesses exist.

|
!|!
e first step in using te B rot-

Sare Matrix is identifying te organization¶s strategic business units
(SBUs. All SBUs are a single business (or collection of businesses, ave
teir on competitors and a manager accountable for operations, and can
be independently planned for.
 
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!
Strategy Formulation :-


 |! 
˜ After SBUs ave been identified for a particular organization, te next step
is to categorize eac SBU itin one of te folloing four matrix quadrants:

˜ |tars ± SBUs tat are ³stars´ ave a ig sare of a ig-grot market
and typically need large amounts of cas to support teir rapid and
significant grot. Stars also generate large amount of cas for te
organization and are usually segments in ic management can make
additional investments and earn attractive returns.

˜ VashVows ± SBUs tat are cas cos ave a large sare of a market tat
is groing only sligtly.
ese SBUs provide te organization it large
amounts of cas, but since teir market is not groing significantly, te cas
is generally used to meet te financial demand of te organization in oter
areas, suc as te expansion of a star SBU.
 
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!
Strategy Formulation :-


 |! 

˜ QuestionMarks ± SBUs tat are question marks ave a small sare of a

ig-grot market.
ey are dubbed ³question marks´ because it is
uncertain eter management sould invest more cas in tem to gain a
larger sare of te market or deempasize or eliminate tem. Management
ill cose te first option en it believes it can turn te question mark into
a star, and second en it tinks furter investment ould be fruitless.

˜ Do
s ± SBUs tat are dogs ave a relatively small sare of a lo-grot
market.
ey may barely support temselves; in some cases, tey actually
drain off cas resources generated by oter SBUs.
 
!
!
Strategy Formulation :-

 Multifactor Portfolio Matrix - Wit te elp of McKinsey and ompany, a

leading consulting group, te eneral lectric ompany (  developed a
popular business portfolio analysis tool called te  Multifactor Portfolio
Matrix.
is tool elps managers develop organizational strategy tat is
based primarily on market attractiveness and business strengts.

˜ ! "
# ac of te organization¶s strategic business units

(SBUs is plotted on a matrix of to dimensions: industry attractiveness and
business strengt. ac of tese to dimensions is actually a composite of
a variety of factors.

˜ jndustryattracti eness migt be determined by suc factors as te rate of

industry grot, te number of competitors in an industry, and te
eakness of competitors itin an industry.

˜ Businessstren
ths migt be determined by suc factors as a company¶s

core competencies and capabilities, financially solid position, its good
bargaining position over suppliers, and its ig level of tecnology use.
 
!
!
Strategy Formulation :-

Matsusita Strategy Matrix
e cost and time required to create a ne
product or service are so large tan lack of a perfectly aligned and
executed innovation strategy can be extremely asteful.

˜ ou must create an innovation strategy tat is aligned it not only
your firm's core mission and values, but it your future tecnology,
supplier, and manufacturing strategies. Lack of alignment beteen
product and process arcitectures rapidly increases cost and risk. If
your development process and organization structure are not
matced to eac oter and 
$

%
, you're in even
deeper trouble.
 
!
!
Strategy Formulation :-

&!"
e goal of te road-mapping is to develop te

innovation strategy - to coose and do te rigt tings.
e goal of
innovation management is to implement tis strategy ell.

˜
oad-mapping leads to effective project portfolio development and
management. It provides for company-ide tecnological strategy
development and tecnology assessment, as ell as division-level
project evaluation and strategic aligning.
oad-mapping tools
provide also a common language for innovation and building bridges
beteen tecnologists and business managers itin your
corporation, and it you major suppliers and customers..
 
!
!
Strategy Formulation :-

Porter's model for industry analysis - outlines te primary forces tat determine
competitiveness itin an industry and illustrates o tose forces are related.

˜
e model suggests tat in order to develop effective organizational strategies,

strategies,
managers must understand and react to tose external forces itin an industry tat
determine an organization's level of competitiveness itin an industry.

˜ '
$ (

%"!
(

%"!
e ne era of rapid, systemic and radical
cange requires more flexible, systemic and dynamic approaces to strategy
formulation.
us today, corporate strategy formulation sould be a combination of
different currently practiced approaces described above ± judgmental designing,
intuitive visioning
visioning,, and emergent learning; it sould be about transformation as ell as
perpetuation; it as to involve individual cognition and social interaction, co-
co-operative
as ell as conflictive; it must include analyzing before and programming after as ell
as negotiating during; and all of tis must be in response to at can be a demanding
environment.
 
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!
Strategy Formulation :-

˜
esource Based -
e currently dominant vie of corporate strategy ± resource
resource--based
teory or resource
resource--based vie (
BV of firms ± is based on te concept of economic rent
and te vie of te company as a collection of capabilities.
is vie of strategy as a
coerence and integrative role tat places it ell aead of oter mecanisms of strategic
decision making.

˜
raditional strategy models suc as Micael Porter\

Porter\'s five forces model focus on te
company's external competitive environment. Most of tem do not attempt to look inside
te company. In contrast, te resource-
resource-based perspective igligts te need for a fit
beteen te external market context in ic a company operates and its internal
capabilities.

˜ In contrast to te Input / Output Model (I/O model, te resource-

resource-based vie is grounded in
te perspective tat a firm's internal environment, in terms of its resources and capabilities,
is more critical to te determination of strategic action tan is te external environment.
Instead of focusing on te accumulation of resources necessary to implement te strategy
dictated by conditions and constraints in te external environment (I/O model, te
resource--based vie suggests tat a firm's unique resources and capabilities provide te
resource
basis for a strategy.
e business strategy cosen sould allo te firm to best exploit its
core competencies relative to opportunities in te external environment. .
 
!
!
Strategic Intent :- By setting out strategic intent, clarifies company¶s goals and elp
set te pat for future successes.

e main tenets of strategic intent planning are direction, discovery and destiny.
˜ |$)
 includes an understanding about te long long--term market or
competitive position tat a firm aims to build over te next decade. our sense of
direction sould be a vie of te future tat conveys a unifying and personalizing
sense of direction.
*|$)+
, our strategic intent sould retain a sense of discovery and
*|$)+
,our
excitement about te future.
is elps create a competitively unique outlook and
gives employees te opportunity to explore ne competitive territory.
*|$), Strategic intent as an emotional edge to it and it sould be a
goal tat bot you and your employees perceive as inerently ortile.
 
!
!
Strategic Intent :- By setting out strategic intent, clarifies company¶s
goals and elp set te pat for future successes.

But strategic intent is not just a concept; it¶s also a tree

tree--step process.
*| |
(aving
|
(aving all tree caracteristics stated above.
*|  - find appropriate callenges and communicate tem
to te entire orkforce.
ese callenges are te means to get into te
Strategic Intent. (For example: Suppose te Strategic Intent of oogle is:
Allo end users to access all of te information of te Internet it te click
of a mouse. A strategic callenge could be: ome up it a searc engine
capable of producing accurate searc results.
*.
/

$ |
-
e
|
-
e strategic intent orks best
en everyone is invested in its goals. Managers and business oners
sould keep in mind te ³isdom of te antill´ and callenge traditional
donard communications styles.
 
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!
Vision :-
˜
e overall goal of an organization tat all business
activities and processes sould contribute toard
acieving.
˜ Ideally, te orkforce sould be committed to, and
driven by, te vision, because it is tey o make it
appen.
˜ As te vision nears acievement, a ne corporate vision
or an evolution of te existing one sould be establised.
˜ orporate vision is usually summed up in a formal vision
statement.
 
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!
Mission ±

˜ Written declaration of a firm's core purpose and focus ic normally

remain uncanged, ereas business strategies and practices may
frequently be altered to adapt to te canging circumstances.

˜ Properly crafted mission statements

(  serve as filters to separate at is important from at is not,

(2 clearly state ic markets ill be served and o, and
(3 communicate a sense of intended direction to te entire organization
organization..

˜ A mission is different from a vision in tat te former is te cause and te
latter is te effect; a mission is someting to be accomplised ereas a
vision is someting to be pursued for tat accomplisment.

˜ Also called company mission,

mission, corporate mission, or corporate purpose.
purpose.
 
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!
Business Definition -

˜ A  (also called a 



,, 

 or $

$

 is a legally
recognized organization designed to provide goods and/or services
to consumers
consumers..[ 

˜ Businesses are predominant in capitalist economies

economies,, most being
privately oned and formed to earn profit tat ill increase te
ealt of its oners and gro te business itself.

˜
e oners and operators of a business ave as one of teir main



i


i 



i  in excange
objectives i


i


i 



i 
for ork and acceptance of risk
risk.. Notable exceptions include
cooperative enterprises and state
state--oned enterprises.
enterprises. Businesses
can also be formed not
not--for
for--profit or be state
state--oned.
oned.
 
!
!
Business Definition - (ontd«

˜
e etymology of business relates to te state of being busy eiter

as an individual or society as a ole, doing commercially viable
and profitable ork.

˜
e term business as at least tree usages, depending on te

scope ² te singular usage (above to mean a particular company
or corporation
corporation,, te generalized usage to refer to a particular market
sector,, suc as te music business and compound forms suc as
sector
agribusiness,, or te broadest meaning to include all activity by te
agribusiness
community of suppliers of goods and services.

˜ oever, te exact definition of business, like muc else in te

pilosopy of business
business,, is a matter of debate and complexity of
meanings
 
!
!
oals & Objectives ±

˜ In many situations people use ords goals and

objectives as intercangeable. et, in te context of goal
setting, te difference beteen goals and objectives as
an important practical meaning.

˜ After you set your important goals you move to setting

objectives. Objectives are also goals, but tey are don
te ierarcy.
ey are sub goals set it te only
purpose to 
+ your goals.
 
!
!

e Difference Beteen goals and objectives ±

˜ oals are broad objectives are narro.

˜ oals are general intentions; objectives are precise.

˜ oals are intangible; objectives are tangible.

˜ oals are abstract; objectives are concrete.

˜ oals can't be validated as is; objectives can be

validated.
 
!
!

e Difference Beteen goals and objectives ±

˜ oals are broad objectives are narro.

˜ oals are general intentions; objectives are precise.

˜ oals are intangible; objectives are tangible.

˜ oals are abstract; objectives are concrete.

˜ oals can't be validated as is; objectives can be

validated.
 
!
!
˜ (,.,|,,.,', -

˜ ($
,

($
, are o and to at degree a government
intervenes in te economy. Specifically, political factors include
areas suc as tax policy,
policy, labour la,
la, environmental la,la, trade
restrictions,, tariffs
restrictions tariffs,, and political stability. Political factors may also
include goods and services ic te government ants to provide
or be provided (merit
(merit goods
goods and tose tat te government does
(demerit goods or merit bads. Furtermore,
not ant to be provided (demerit
governments ave great influence on te ealt ealt,, education
education,, and
infrastructure of a nation.

˜ .
$
 include economic grot,grot, interest rates,
rates,
excange rates and te inflation rate.
rate.
ese factors ave major
impacts on o businesses operate and make decisions. For
example, interest rates affect a firm's cost of capital and terefore to
at extent a business gros and expands. xcange rates affect
te costs of exporting goods and te supply and price of imported
goods in an economy
 
!
!
˜ (,.,|,,.,', -

˜ |$
include te cultural aspects and include ealt consciousness
|$
include consciousness,, population
grot rate,
rate, age distribution,
distribution, career attitudes and empasis on safety.
rends in social
factors affect te demand for a company's products and o tat company operates. For
example, an ageing population may imply a smaller and less-less-illing orkforce (tus
increasing te cost of labor. Furtermore, companies may cange various management
strategies to adapt to tese social trends (suc as recruiting older orkers.

˜   factors include ecological and environmental aspects, suc as
&D activity,
automation,, tecnology incentives and te rate of tecnological cange
automation cange..
ey can
determine barriers to entry,
entry, minimum efficient production level and influence outsourcing
decisions. Furtermore, tecnological sifts can affect costs, quality, and lead to
innovation..
innovation

˜ .+

 factors include eater, climate, and climate cange
cange,, ic may
especially affect industries suc as tourism, farming, and insurance. Furtermore, groing
aareness to climate cange is affecting o companies operate and te products tey
offer--
offer --it
it is bot creating ne markets and diminising or destroying existing ones.

˜ ' factors include discrimination la,

la, consumer la,
la, antitrust la,
la, employment la,
la, and
ealt and safety la.
la.
ese factors can affect o a company operates, its costs, and te
demand for its products.
 
!
!
xternal nvironment : Oter factors effecting xternal nvironment«

|
- Suppliers are tose organizations ic provide resources to business

organizations. It is good for any organization to keep long term relationsip it
suppliers for quality, effective and prompt delivery of resources. Suppliers may be of
different types.
ey are ra material supplier, macinery supplier, uman resource
supplier, financial resource suppler etc.

&
 -
egulator controls te policy and beavior of an organization. So te
organization is affected by is activities.
e regulators are also of to types.
ey
are
egulatory Agencies and Interest groups.
egulatory agency is a unit formed by
government ic provides protection to people an organization by curbing unfair
business practices. It protects consumer rigts. Interest groups are formed to
influence an organization. Suc groups orks for te interest of its members or group


.+


 - International marketing involves dealing it many nations
tat are different from te ost nation, nations tat may be developing or tat may be
someat developed but tat ave different traditions as ell as different lifestyles
tat affect at is marketed and to om. Many of te differences are environmental,
ic means tat marketers must deal it tem
 
!
!
Organizational Analysis :
˜ SWO
(Strengt, Weakness,
Opportunities &
reats Analysis

˜ Organizational apability Profile (OP

˜ Strategic Advantage Profile (SAP

 
!
!
Strategy Formulation :-

˜ ritical Question Analysis

˜ SWO
Analysis

˜ |
 

o factors contribute to your strengts: ability and resources available.

 is evaluated on 3 counts:
˜ Versatility: your ability to adapt to an ever canging environment.
˜ Growth: your ability to maintain a continuing grot.
˜ Markets: your ability to penetrate or create ne markets.

˜
e strengt of

 as tree dimensions:

± ' ailability: your ability to obtain te resources needed.
± Quality: te quality and up
up--to
to--dateness of te resources employed.
± 'llocation: your ability to distribute resources bot effectively and efficiently.
 
!
!
Strategy Formulation :-

˜ SWO
Analysis


˜ our eaknesses are determined troug failures, defeats, losses
and inability to matc up it te dynamic situation and rapid
cange.
e eaknesses may be rooted in lack of managerial
skills,, insufficient quality
skills quality,, tecnological backardness, inadequate
systems or processes
processes,, slo deliveries, or sortage of resources.

˜
ere are tree possible outcomes to te analysis of your

eaknesses :-:-
Vorrection of an identified defect.
Protection troug cover
cover--up and prevention strategies to
reduce te exposure of your eaknesses.
˜ '

ression to divert te attention from your eaknesses.
 
!
!
Strategy Formulation :-

SWO
Analysis

˜ 
 are abundant. ou must develop a formula ic ill

elp you define at comes itin te ambit of an opportunity to
focus on tose areas and pursue tose opportunities ere
effectiveness is possible.
e formula must define product/service,
target market, capabilities required and resources to be employed,
returns expected and te level of risk alloed.
˜ Weaknesses of your competitions are also opportunities for you.
ou can exploit tem in to folloing ays:
± Marketin
warfare:
Marketin
warfare: attacking te eak leader's position
and focusing all your efforts at tat point, or making a
surprise move into an uncontested area.
± Vollaboration: you can use your complementary
strengts to establis a strategic alliance it your
competitor.
 
!
!
Strategy Formulation :-

˜ SWO
Analysis




˜ xternal treats arise from political, economic, social, tecnological

(PS

PS
 forces.
ecnological developments may make your
offerings obsolete. Market canges may result from te canges in
te customer needs, competitors' moves, or demograpic sifts.
e
political situation determines government policy and taxation
structure.
 
!
!
Organizational Analysis :


 (
$( -
e division of labour

encourages te development of differentiated knoledge, and
terefore of distinctive capabilities, ic are µknoledge o'
rater tan µknoledge tat' ± a distinction akin to tat beteen
tecnology and science.

˜
e consequent problems of co-co-ordination may be andled by

access or control, ic suggests a coice beteen markets or
firms; but market relationsips must be managed, and no person
can kno enoug to control a complex firm.

˜ µManaging capabilities' is itself a capability, and must be limited by

differences beteen knoledge bases, ic may be acute even
en capabilities are closely complementary.
 
!
!

 (
$( ±
is includes ±

Financial apability ±
is includes ±

˜ Factors related to sources of funds ± apital str., procurement of

capital, controllersip, financing pattern, orking capital
availability, borroings, capital & credit availability, reserves &
surplus & relationsip it lenders, bank & F.I«.

˜ Factors related to te usage of funds ± apital Investment, fixed

asset acquisition, current assets, loans & advances, dividend
distribution, & relationsip it sareolders«

˜ Factors related to te management of funds ± Financial,

accounting, & budgeting systems, Mgmt .ontrol Systems, state of
financial ealt, cas, inflation, credit, return & risk management,
cost reduction & control, & tax planning & advantages«
 
!
!

 (
$( ±
is includes ±

Marketing apability ±
is involves ±

˜ Product related factor ± Variety, differential, mix quality, positioning,

packaging & oters«

˜ Price related factor ± Pricing objectives, policies, canges, protection,

advantages, among oters«

˜ Place related factors ± Distribution, transportation & logistics, mktg.

cannels, mktg. intermediaries & so on«

˜ Promotion related factors ± Promotional tools, sales promotion, advtg.,

public relations & so on«

˜ Integrative & Systemic factors ± Mktg. mix, mkt. standing, co. image.,
mktg. organization, mktg. system, mktg. MIS & so on«
 
!
!

 (
$( ±
is includes ±

Operational apability ± Includes ±

˜ Factors
elated to te Production System ± apacity, location,
layout, product or service design, ork systems, degree of
automation, extent of vertical integration & oters«

˜ Factors
elated to te Operations & control System ± aggregate
production planning, material supply, inventory, cost & quality
control, maintenance systems & procedures & so on«

˜ Factors
elated to te
& D System ± Personnel, facilities,
product development, patent rigts, level of tecnology used,
tecnical collaboration & support & so on«
 
!
!

 (
$( ±
is includes ±

Personnel apability ± Includes ±

˜ Factors related to te Personnel systems ± System for manpoer

planning, selection, development, compensation, communication &
appraisal, position of te personnel dept itin te organization,
procedures & standards & so on«

˜ Factors related to te Organizational & employees caracteristics

± orporate image, quality of managers, staff & orkers,
perception about & image of te organization as an employer,
availability of developmental opportunities for employees, orking
conditions & so on«

˜ Factors related to te industrial relations ± Union management

relationsip, collective bargaining, safety, elfare & security,
employee satisfaction & morale among oters«
 
!
!

 (
$( ±
is includes ±

Information Management apability ± Includes

˜ Factors related to te general management system ± Sources, qty., quality &
timeliness of information, retention capacity & security of information«

˜ Factors related to te processing & syntesis of information ± Database

management, computer system, softare capability & ability to syntesize
information«

˜ Factors related to te retrieval & usage of information ± Availability &

appropriateness of information format & capacity to assimilate & use information«

˜ Factors related to te transmission & dissemination ± Speed, scope, idt & dept
of coverage of information & illingness to accept information«

˜ Integrative, systemic & supportive factors - Availability of I
Infrastructure, its

relevance & compatibility to organizational needs, up gradation of facilities,
illingness to invest in state of te art systems, availability of computer
professionals & top mgmt. support«
 
!
!

 (
$( ±
is includes ±

eneral Management apability ± Includes

˜ Factors related to general management systems - Strategic Mgmt. system,

processes related to setting strategic intent, strategy formulation & implementation
macinery, strategy evaluation system, MIS, corporate planning system, reard &
incentives system for top management & so on«

˜ Factors related to general managers ± Orientation, risk

risk--propensity, values, norms,
personal goals, competence, capacity for ork, track record, balance of functional
experience«

˜ Factors related to external relationsips ± Influence on & rapport it te govt.,
regulatory agencies & financial institutions, public relations, sense of social
responsibility, pilantropy, public image as corporate citizen & so on«

˜ Factors related to organizational climate ± O. ulture, use of poer, political

processes, balance of vested interests, introduction, acceptance & mgmt. of
cange, nature of Organizational str. & so on«
 
!
!
|
!+(
$|( ±

˜ Based on detailed information presented in OP, it is possible to

ompany
prepare concise cart (for eg. for Bicycle ompany

˜ Please refer attaced excel seet«

 |
!+(
$|(

|,  0
| (






1 Finance Weakness ig ost of apital,

eserves & Surplus position
unsatisfactory

2 Marketing Neutral Fierce competition in industry,,.,company's position

secure at present

3 Operations Strengt P&M in excellent condition,,capative sources for

parts & components avail.

4 Personnel Neutral Quality of managers & orkers comparable it tat

in competitor companies

5 Information Neutral omputerized MIS in te process of dev.,traditional

function suc as payroll & acctng.computerized.

6 eneral Mgmt. Strengt ig Quality & exp.
op mgmt,generally adopts a
proactive stance it regard todecision making.
ÈÈÈ
 ÈÈÈ

V