Business Policy and Strategic Management

UNIT—1

Definition of business policy:

 Business Policy defines the scope or spheres within which decisions can be taken by
the subordinates in an organization. It permits the lower level management to deal with the
problems and issues without consulting top level management every time for decisions.

 Business policies are the guidelines developed by an organization to govern its actions.
They define the limits (Do’s & Don’t’s) within which decisions must be made.

 Business Policy includes guidelines, rules and procedures established to support efforts
to achieve stated objectives. They are guides to decision making and address repetitive or
recurring situations. It defines the area in which decisions are to be made, but it does not give
the decision.

 A policy is a verbal, written, or implied overall guide, setting up boundaries that supply
the general limits and direction in which managerial action will take place.

 According to Christensen : “Business Policy is the study of the function and

responsibilities of Senior Management, the crucial problems that affect success in the total
enterprise, and the decisions that determine the directions of the organisation and shape of its
future.”

 This definition covers four aspects/nature of business policy :

Firstly- it is considered as the study of functions and responsibilities of senior management

related to those organizational problems which affect the success of total enterprise.

Secondly- it deals with the determination of future course of action that an organization has to
adopt

Thirdly- it involves choosing the purpose and defining what needs to be done in order to mould
the character and identity of an organization.

Fourthly- it is concerned with the mobilization of resources which will help the organization to
achieve its goals.
 Examples of Business Policies :
 HR Policy – Hiring-Firing, Employee profile, Training, Transfers, Promotions, Wages,
Incentives & Bonus
 Materials Policy – Quality-Quantity, Vendors, Payment terms, Stores & Handling,
Documentation
 Quality Policy – Standards, Checks & Controls, Feedbacks, Corrective Measures
 Marketing Policy - What to sell, Where, To Whom , Through Whom, Communication

Features/ parameters of Business Policy:

An effective business policy must have following features-
 Specific- Policy should be specific/definite. If it is uncertain, then the implementation will
become difficult.

 Clear- Policy must be unambiguous. It should avoid use of jargons and connotations.
There should be no misunderstandings in following the policy.

 Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed

by the subordinates.

 Appropriate- Policy should be appropriate to the present organizational goal.

 Simple- A policy should be simple and easily understood by all in the organization.

 Inclusive/Comprehensive- In order to have a wide scope, a policy must be

comprehensive.

 Flexible- Policy should be flexible in operation/application. This does not imply that a
policy should be altered always, but it should be wide in scope so as to ensure that the
line managers use them in repetitive/routine scenarios.

 Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in
minds of those who look into it for guidance.

Objectives of business policy:

A business policy serves the following purposes-
1. Integrates - the knowledge and methods learnt in functional courses such as production ,
finance ,marketing , HR etc.
2. Develops - the analytical skills and decision-making capabilities of students through case
studies, industry specific study and data.
3. Promotes Positive Attitudes - ,ethical values and healthy ways of thinking taking a holistic
view of the internal as well as external stakeholders of an organization.
4. Business Policy tends to emphasize on the rational-analytical aspect of strategic
management.

The Objectives of business policy can also be discussed under following heads :

1. Knowledge generation
2. Skill creation
3. Attitudinal changes to cope with business situations

(Refer Pg 9--NS Gupta)

Scope of Business policy:

Business policy manifests an integrative approach to the functioning of the whole organization.
It is a comprehensive concept to ensure efficiency and durability to the organization. Hence, it
focusses on strategic planning and strategic management. It incorporates the following
elements:
 Mission, objectives and goals.
 Environmental Analysis
 SWOT Analysis
 Strategis alternatives
 Strategic analysis
 Strategic implementation
 Strategic evaluation and control.
Six major business operations are to be integrated into the business policy process. These are:
1. Production
2. Marketing
3. Finance
4. Personnel
5. R&D
6. Legal

Diagram:

Importance of Business Policy

Business policies are important due to the following reasons:

1. Coordination - Reliable policies focus on organisational activities and help in ensuring

uniformity of action throughout the organisation. Policies encourage cooperation and promote
initiative.
2. Quick decisions - Policies help subordinates to take prompt action and quick decisions.
They demarcate the section within which decisions are to be taken. They help subordinates to
take decisions with confidence without consulting their superiors every time. It saves time by
predicting frequent problems and providing ways to solve them.
3. Effective control - Policies provide logical basis for assessing performance. They ensure
that the activities are synchronised with the objectives of the organisation. It prevents
divergence from the planned course of action.
4. Decentralisation - Well defined policies help in decentralisation as the executive roles and
responsibility are clearly identified. Authority is delegated to the executives who refer the
policies to work efficiently.
5. Learning the course - Business policy makes the study and practice of management more
meaningfulas one can view business decision making in its proper perspective.
6. Understanding the business environment - Business policy helps to create an
understanding of how policies are formulated. This further helps in understanding the
complexities of the environment that the senior management faces.
7. Understanding the organization - A business policy provides a basic framework for
strategic decision making to a middle level managerand enables him to handle general
management responsibilities.
8. Personal development - An understanding of business policy enables executives to avail
an opportunity or avoid risk with regard to career planning and development. It also provides
an adequate grounding for understanding macro factors and their impact at micro level. This
understanding helps an executive in identifying the growth areas.
9. Better Performance - A thorough understanding of business policy may also lead to an
improvement in job performance.
10. Reduced conflicts - An understanding of business policy has far reaching implications for
managerial functions like communication and hence, helps in avoidance of interdepartmental
conflicts.

Definition of Strategy:
The term is derived from the Greek word strategos which means generalship or leading an
army.
In general a strategy is a method or plan chosen to bring about a desired future, such as
achievement of a goal or solution to a problem.

It can also be described as the art and science of planning and marshalling resources for their
most efficient and effective use.

According to Alfred D Chandler "Strategy is the determination of the basic long-term goals
of an enterprise, and the adoption of courses of action and the allocation of resources
necessary for carrying out these goals."
This definition covers three aspects:
1. determination of the basic long-term goals and objectives.
2. adoption of courses of action to achieve these goals.
3. allocation of resources necessary for adopting the course of action.

According to William F Glueck. strategy means " A unified, comprehensive and integrated
plan designed to assure that the basic objectives of the enterprise are achieved."

Unified means that the plan joins all the parts of an enterprise.
Comprehensive means it covers all the aspects of an enterprise.
Integrated means that all parts of the plan are compatible.

Johnson and Scholes define strategy as follows:

"Strategy is the direction and scope of an organization over the long-term: which achieves
advantage for the organization through its configuration of resources within a challenging
environment, to meet the needs of markets and to fulfill stakeholder expectations".

In other words, strategy is about:

* Where is the business trying to get to in the long-term (direction)
* Which markets should a business compete in and what kind of activities are involved in such
markets? (markets; scope)
* How can the business perform better than the competition in those markets? (advantage)?
* What resources (skills, assets, finance, relationships, technical competence, facilities) are
required in order to be able to compete? (resources)
* What external, environmental factors affect the businesses' ability to compete?
 (environment)
* What are the values and expectations of those who have power in and around the business?
(stakeholders)

Strategy at Different Levels of a Business/Different levels of strategy:

Strategies exist at several levels in any organization - ranging from the overall business (or
group of businesses) through to individuals working in it.

Diagram:

 Corporate Strategy - Corporate level strategy occupies the highest level of strategic
decision-making and covers actions dealing with the objectives of the firm, acquisition and
allocation of resources and coordination of strategies of various SBUs for optimal performance.
Top management of the organization makes such decisions. The nature of strategic decisions
tends to be value-oriented, conceptual and less concrete than decisions at the business or
functional level. Corporate strategy is often stated explicitly in a "mission statement”

 Business Unit Strategy - applicable in those organizations, which have different

businesses-and each business is treated as strategic business unit (SBU).
For example, Reliance Industries Limited operates in textile fabrics, yarns, fibers, and a variety
of petrochemical products. For each product group, the nature of market in terms of customers,
competition, and marketing channel differs.
At such a level, strategy is a comprehensive plan providing objectives for SBUs, allocation of
re-sources among functional areas and coordination between them for making optimal
contribution to the achievement of corporate-level objectives. Such strategies operate within
the overall strategies of the organization.

 Operational Strategy - relates to a single functional operation and the activities involved
therein. Decisions at this level within the organization are often described as tactical. Such
decisions are guided and constrained by some overall strategic considerations. Functional strategy
deals with relatively restricted plan providing objectives for specific function, allocation of resources
among different operations within that functional area and coordination between them for optimal
contribution to the achievement of the SBU and corporate-level objectives. Below the functional-
level strategy, there may be operations level strategies as each function may be dividend into
several sub functions. For example, marketing strategy, a functional strategy, can be subdivided
into promotion, sales, distribution, pricing strategies with each sub function strategy contributing to
functional strategy

Characteristics of different levels of strategies: Diagram (Pg-36)-SL Gupta

Evolution of Business policy and Strategic management:

Business policy as a field of study originated in 1911 when an integrated course in management
was introduced at Harvard Business School as a part of curriculum.
The course was designed with the main objective of improving general management
competence.
Following a number of expert studies on business education about fifty years later, the Business
policy course was made compulsory for all Business Schools in USA.
Since then, Business Policy was introduced as an integral course in the management
degree/diploma programmes in many countries including India.
However, there has been a shift in focus of the Business Policy course since the 1980s. The
latest approach is focussed on Strategic Management.

Historical Evolution of Strategic Management & Business Policy

1911: Harvard Business School Introduced Course in Management

1959: Introduction of Business Policy in Academics
1969: The American assembly of Collegiate Schools of Business, a regulatory body for
business schools, made the course of Business Policy a mandatory for the purpose of
recognition
1980-2000: Business policy has become an integral part of Management Curriculum

The term Business Policy has been used traditionally till the end of 20th century. After that the
new titles Strategic Management, Corporate Strategy and Policy have been used.
The Business Policy evolution has undergone Four Paradigm Shifts. This transition is of
overlapping nature. Development of subject of Business Policy has always followed the
demands of real life business.

These four paradigm shifts are given by Hofer and others.

Paradigm I: 1900 to 1930 – Paradigm of Ad hoc policy making

Era of Mass Production – Maximizing output, Normally a Single Product, Standardized and low
cost product, catering to unique set of customers servicing limited geographical area – Informal
control and co-ordination. The Strategic planning was centered on maximizing output.

Paradigm II – 1930 to 1940 - Paradigm of Integrated Policy Formulation.

Environmental changes from 1930 to 1940 in US — planned policy formulation replaced ad hoc
policy making.
Changes in Technology , Turbulence in Political environment, Emergence of new industries,
Demand for novelty products even at higher costs, Product Differentiation, Market
segmentation in increasingly competitive and changing markets.
These all made investment decisions increasingly difficult. This was era of integrating all
functional areas and framing policies to guide managerial actions
– Based on this second paradigm, the emphasis shifted to the integration of functional
areas in a rapidly changing environment.

Paradigm III – 1940 to 1960 – The Concept of Strategy.

Planned policy paradigm become irrelevant due to increased complexity and accelerating
changes in the environment.
Demand for a critical look at the basic concept of business and its relationship with environment.
Firms had to anticipate environmental changes.
A strategy needed to be formed with critical look at basic concept of Business and its
relationship to the existing environment then.

Paradigm IV – 1980 onward – The Strategic Management.

The focus of Strategic Management is on the strategic process of business firms and
responsibilities of general management. The initial focus of strategic management was on the
intersection of two fields of enquiry:
1. The strategic processes of business firms
2. The responsibilities of general management

Evolution based on Managerial Practices

Use of planning techniques by Managers can be observed an important part of development of

the term Business Policy.

Along with day to day planning and practices, managers began planning for future, including
budgets and other resources.

We can use following simple chart to understand the evolution of the term Strategic
Management…

Short term planning (day to day) —— replaced by —-> Long range Planning
Long range planning ———— replaced by ——> Strategic Planning

Strategic Planning —— replaced by——-> Strategic Management

The term Strategic Management is now a days used to describe the process of Strategic
Decision Making.

Differences between Policy and Strategy:

Strategy
1. A strategy deals with the allocation and deployment of physical and human resources so as
to achieve the desired goals in the face of environmental pressures.
2. A strategy deals primarily with environmental constraints and opportunities.
3. A strategy is designed to deal with situations about which all facts are not known and,
therefore, alternatives can not be evaluated in advance.
4. A strategy cannot be delegated because it requires a last minute executive-decision.
5. It is a means of putting a policy into effect within certain time limits.
6. Deals with crucial decisions whose implementation requires constant attention of top
management.

Policy
1. A policy is a guide to thinking and action for those responsible for making decisions.
2. A policy is concerned mainly with internal management.
3. A policy is a contingent decision and it lays down the response to be made whenever the
specified contingency arises.
4. The implementation of policy can be delegated.
5. It is a general course of action with no defined time limits.
6. Once policy decisions are formulated these can be delegated and implemented by others
independently.

Definition of Strategic Management:

According to Glueck Strategic Management is "a stream of decisions and actions, which
leads to the development of an effective strategy or strategies to help achieve corporate
objectives".

According to Garry D. Smith Strategic management is the process of examining both present
and future environments, formulating the organization's objectives, and making, implementing,
and controlling decisions focused on achieving these objectives in the present and future
environments

Thus strategic management is the art & science of formulating, implementing, and evaluating,
cross-functional decisions that enable an organization to achieve its objectives’.

Nature/ Characteristics of Strategic Management:

1. It involves a long time perspective:- the directional decisions in strategic management can
be expected to have effects on the organization for three to five years .
2. It is an intellectual process:- in strategic management, key individuals perceive,
analyze,and choose between alternatives, interrelating such elements as definitions of
businesses,objectives, and functional/program strategies.
3. It involves wide ramifications:- Strategic Management activities are related to the total
system. These activities may be change in organizational goals, or managerial strategies that
have implications throughout the organization or business unit.
4. It is a continuing dynamic social process:- Strategic Management is not just a course to
be undertaken a few times each year when top management meets to decide critical issue
5. It uses critical resources towards perceived opportunities or threats in a changing
environment:- the most important human, financial, and other resources are brought to bear
in certain situations, which provide the organization with an opportunity to manage the elusive
environment

Purposes of Strategic Management:

Strategic management basically aims at formulating and implementing effective strategies.

Effective strategies of course, are those that help a superior fit between the organization and
its environment and the achievement of strategy goals.

To remain competitive organizations develop strategies that focus on core competence,

develops synergy and creates value for customers.

1. Core Competence: An organization’s core competence is something it does exceptionally

well in comparison to its competitors. It reflects a distinct competitive advantages (like superior
research and development, mastery of a technology distribution channel manufacturing
efficiency of customer service) that provides the firm (1) access to variety of products /markets
(2) contributes greatly to custom benefits in the end products and (3) is an exclusive and
inimitable preserve of the firm that is long lasting and cannot be easily copied by competitors.

2. Synergy:When organizational parts interact to produce a joint effort that is greater than the
sum of the parts acting alone, synergy occurs.
Some call this the 1+1 = 3 effect.
In strategic management managers are urged to achieve as much market, cost, technology
and management synergy as possible when arriving at strategic decisions (such as mergers
acquisitions new products new technology etc). When one product or service strengthens the
sales of one or more other products or services, Market synergy occurs.

3. Value Creation: Exploiting core competencies and achieving synergy help organizations
create value for their customers. Value is the sum total of benefits received and costs paid by
the customer in a given situation. Ideally the purposes of a strategy should be to create a lasting
value that is greater than the cost of resources that are used to create the same.

Benefits/Importance of strategic management:

The major benefit of strategic management is to facilitate organizations to devise viable policies
through the use of a more systematic, logical, and rational approach to strategic choice.
Financial Benefits: Numerous management Researches have revealed that organizations
using strategic-management concepts are more gainful and successful than those that do not.
They generally exhibit superior long-term financial performance relative to their industries.
Non-financial Benefits: Strategic management provides other tangible benefits, such as an
enhanced wakefulness of external threats, better understanding of competitors' strengths,
increased employee productivity, reduced resistance to change, and a clearer understanding
of performance-reward relationships. In addition to empowering managers and employees,
strategic management often brings order and discipline to an otherwise struggling firm.

According to Greenley, strategic management has following benefits:

1. It allocates for identification, prioritization, and exploitation of opportunities.
2. It provides an objective outlook of management problems.
3. It characterizes a framework for improved synchronization and control of activities.
4. It reduces the effects of adverse conditions and changes.
5. It allows major decisions to better support established objectives.
6. It allows more effective distribution of time and resources to identified opportunities.
7. It permits fewer resources and less time to be devoted to correcting erroneous or ad hoc
decisions.
8. It generates a framework for internal communication among personnel.
9. It helps integrate the behaviour of individuals into a total effort.
10. It provides a foundation to clarify individual responsibilities.
11. It promotes forward thinking.
12. It provides a cooperative, integrated, and enthusiastic approach to tackling problems and
opportunities.
13. It encourages a positive attitude toward change.
14. It gives a degree of discipline and formality to the management of a business

Limitation:
Besides numerous benefits, Strategic Management has following disadvantages:

1. Strategic Management is based on certain principles and if the properties do not hold
suitable the strategy or plans based on them would not be sensible or effectual.

2. SWOT analysis is an important exercise in Strategic Management which requires lot of

action and information. When these two are lacking the usefulness of the SWOT analysis
is questionable and it could even lead to formulation of wrong or effective strategies.

3. In Strategic Management, effective implementation is essential that demands many

factors such as resource allocation, leadership implementation, right structure and
effective evaluation and control. Company may face serious issues if there is lack of
involvement of the internal people in the strategy formulation and when they are not
equally taken into confidence.

4. Strategic Planning is a multifaceted and complex task which requires people with vision,
expertise and commitment and an appropriate system therefore, strategic management
is an expensive process.

5. Major drawback of Strategic Management is that it sometimes makes the organization

over determined and resultant failure to reach the goals cause disturbance. Impractical
strategies may lead to serious problems.

Strategic Management Process:

Strategic management process has following four steps:

1. Establishing the hierarchy of strategic intent - Defining the vision, business mission,
purpose, and broad objectives.
2. Formulation of strategies - Strategy formulation is the process of deciding best course of
action for accomplishing organizational objectives and hence achieving organizational purpose.
After conducting environment scanning, managers formulate corporate, business and
functional strategies.
3. Implementation of strategies - Strategy implementation implies making the strategy work
as intended or putting the organization’s chosen strategy into action. Strategy implementation
includes designing the organization’s structure, distributing resources, developing decision
making process, and managing human resources.
4. Evaluation of strategies - Strategy evaluation is the final step of strategy management
process. The key strategy evaluation activities are: appraising internal and external factors that
are the root of present strategies, measuring performance, and taking remedial / corrective
actions. Evaluation makes sure that the organizational strategy as well as it’s implementation
meets the organizational objectives.

Page 40-43 Azhar Kazmi

The process takes place in the following stages:

1. The Strategic Planner has to define what is intended to be accomplished (not just desired).
This will help in defining the objectives, strategies and policies.
2. In the light of stage I, the result of the current performance of the organization are
documented.
3. The Board of Directors and the top management will have to review the current performance
of the documented.
4. In view of the review, the organization will have to scan the internal environment for strengths
and weaknesses and the external environment for opportunities and threats.
5. The internal and external scan helps in selecting the strategic factors.
6. These have to be reviewed and redefined in relation to the Mission and Objectives.
7. At this stage a set of strategic alternatives and generated.
8. The best strategic alternative is selected and implemented through programmed budgets
and procedures.
9. Monitoring, evaluation and review of the strategic alternative chosen is undertaken in this
mode. This can provide a feedback on the changes in the implementation if required. As can
be seen, this provides a rational approach to strategic decision-making and it can be
successfully practiced by Indian organizations, which now have to operate in a competitive
environment.

Strategic Intent--

Definition:
It refers to the purpose for what an organization strives for. Organizations must define “what
they want to do” , “why they want to do”.
This “why they want to do” underlines the end result and in management terms it is known as
strategic intent.

HAMEL AND PRAHALAD coined the term strategic intent.

A few aspects about strategic intent are as follows:

1. It is an obsession with an organization.
2. This obsession may even be out of proportion to their resources and capabilities.
3. It envisions a derived leadership position and establishes the criterion; the organization will
use to chart its progress.
4. It involves the following:
(a) Creating and Communicating a vision
(b) Designing a mission statement
(c) Defining the business
(d) Setting objectives
Vision serves the purpose of stating what an organization wishes to achieve in the long run.
Mission relates an organization to society.
Business explains the business of an organization in terms of customer needs, customer
groups and alternative technologies.
Objectives state what is to be achieved in a given time period.

Strategic Intent has a hierarchy: Vision, Mission, Goals and Objectives

Attributes of Strategic Intent :

1. Sense of Direction : Strategic Intent implies a particular view about long-term market or
competitive position that an organization hopes to build in future. It should be a view of the
future – conveying a sense of direction.
2. Sense of Discovery : Strategic intent is differential as each organization differs from others;
it implies a competitively unique point of view about the future. It holds out to employees of
exploring new competitive territory.
3. Sense of Destiny : Strategic intent has an emotional edge to it. It is an end result that
employees perceive as inherently worthwhile.
Hierarcy of strategic Intent -
Diagram -VSP rao Pg 69
VISION

According to Burt Nanus, vision is defined as : “a realistic, credible, and attractive future for
an organization.”
Realistic : A vision must be based on reality to be meaningful for an organization; it should not
be merely day-dreaming but a dream to be converted into reality.
Credible: A vision must be believable to be relevant to members of the organization concerned.
One of the purposes of a vision is to aspire those in the organization to achieve a level of
excellence, and to provide direction for their actions.
Attractive: A vision must be attractive so as to inspire and motivate organizational members.

A vision is not for the present; it is for the future. Simply, a vision is not where an
organization is now but where it will be in future.

According to Oren Harari, vision is defined as : “ a set of ideals and priorities, a picture of the
future, a sense of what makes the company special and unique, a core set of principles that
the company stands for, and a broad set of compelling criteria that will help define organization
success.”

Features of a Good Vision:

1. A good vision is idealistic (vision should be realistic so that people believe that it is
achievable, but idealistic enough so that it can not be achieved without stretching.
2. A good vision clarifies direction of the organization concerned (where the organization go
in future?)
3. A good vision inspires organizational members and encourages commitment from them.
4. A good vision reflects the uniqueness of the organization, its distinct competence, what it
stands for, and what it is able to achieve.
5. A good vision is appropriate for the organization and for the times. It implies that the vision
should be consistent with organization’s values and culture and its place in its environment.
6. A good vision is well articulated and easily understood by those who are responsible to
convert it into reality.

Envisioning
This is the process of creating vision. It is a difficult and complex task. A well conceived vision
must have:
1. Core ideology - It consists of core values and core purpose. Core values are essential
tenets of an organization. Core purpose is related to the reasoning of the existence of
organization.
2. Envisioned Future - Envisioned Future will basically deal with following:
- - The long term objectives of the organization.
- - Clear description of articulated future.

Advantages of Having a Vision

A few benefits accruing to an organization having a vision are as follows:
1. They foster experimentation.
2. Vision promotes long term thinking
3. Visions foster risk taking.
4. They can be used for the benefit of people.
5. They make organizations competitive, original and unique.
6. Good vision represent integrity.
7. They are inspiring and motivating to people working in organization.

Examples of Vision
1. RIL – To achieve global leadership in polymers, fibres and resin businesses through
innovative research and technology development in materials, products, and applications
through efficient, disciplined, target-oriented, and cost-effective research and development
activities.
2. Infosys – To be a globally respected company that provides best of breed software solutions
by best-in-class people.
3. Tata Tea – to be India’s foremost tea-based beverage company.

MISSION

It's is a statement which defines the role that org. plays in society

According to Hunger and Wheelen mission is defined as : “ purpose or reason for the
organization’s existence."

DAVID F. Harvey states “ A mission provides the basis of awareness of a sense of purpose,
the competitive environment, degree to which the firm’s mission fits its capabilities and the
opportunities which the government offers."

Thompson states mission as the “ essential purpose of the organization, concerning

particularly why it is in existence, the nature of the business it is in, and the customers it seeks
to serve and satisfy."

The above definition reveals the following:

(i) It is the essential purpose of organization

(ii) It answers “ why the organization is in existence”.
(iii) It is the basis of awareness of a sense of purpose.
(iv) It fits its capabilities and the opportunities which government offers.

Nature/Characteristics/Features of a mission statement:

1. It gives social reasoning. It specifies the role which the organization plays in society. It is
the basic reason for existence.

2. It is philosophical and visionary. It relates to top management values. It has long term
perspective.
3. It legitimizes societal existence.

4. It is stylistic objectives. It reflects corporate philosophy, identity, character and image of

organization.
5. It should be realistic and achievable. Impossible statements do not motivate people. Aims
should be developed in such a way so that may become feasible.

6. It should neither be too broad not be too narrow. If it is broad, it will become meaningless.
A narrower mission statement restricts the activities of organization. The mission statement
should be precise.

7. It should be clear. A mission statement should not be ambiguous. It must be clear for action.
Highly philosophical statements do not give clarity.

8. A mission statement should be distinct. If it is not distinct, it will not have any impact. Copied
mission statements do not create any impression.

9. It should have societal linkage. Linking the organization to society will build long term
perspective in a better way.

10. It should not be static. To cope up with ever changing environment, dynamic aspects be
looked into.

11. It should be motivating for members of the organization and of society. The employees of
the organization may enthuse themselves with mission statement.

12. The mission statement should indicate the process of accomplishing objectives. The
clues to achieve the mission will be guiding force.

Purpose of a mission statement

The mission statement guides the day-to-day operations and decision-making of the
organization. It helps in tactical planning and "rallying the troops" around a common near- to
medium-term goal. The mission statement helps members of the organization get on the same
page on what they should do and how they should do it.

Examples of Mission Statements

Infosys: To achieve our objectives in an environment of fairness, honesty, and courtesy
towards our clients, employees, vendors and society at large."

Tata Tea: Achieve market and thought leadership for branded tea in India. Be recognized as
the foremost innovator in tea and tea based beverage solutions Drive long-term profitable
growth Co-create enhanced value for all stakeholders Make Tata Tea a great place to work

Mission vs Purpose

A few major points of distinction are as follows:

(i) Mission is the societal reasoning while the purpose is the overall reason.
(ii) Mission is external reasoning and relates to external environment. Purpose is internal
reasoning and relates to internal environment.
(iii) Mission is for outsiders while purpose is for its own employees.

Mission Statement vs. Vision Statement

1. About :
A Mission statement talks about HOW you will get to where you want to be. Defines the purpose
and primary objectives related to your customer needs and team values.
A Vision statement outlines WHERE you want to be. Communicates both the purpose and
values of your business.
2. Answer :
A Mission statement answers the question, “What do we do? What makes us different?”
A Vision statement answers the question, “Where do we aim to be?”
3. Time :
A mission statement talks about the present leading to its future.
A vision statement talks about your future.
4. Function :
A Mission statement lists the broad goals for which the organization is formed. Its prime function
is internal; to define the key measure or measures of the organization's success and its prime
audience is the leadership, team and stockholders.
A vision statement lists where you see yourself some years from now. It inspires you to give
your best. It shapes your understanding of why you are working here.

5. Change :
A mission statement may change, but it should still tie back to the core values, customer needs
and vision.
As the organization evolves, it might feel tempted to change it's vision. However, mission or
vision statements explain your organization's foundation, so change should be kept to a
minimum.
6. Developing a statement :
A mission statement includes - What do we do today? For whom do we do it? What is the
benefit? In other words, Why we do what we do? What, For Whom and Why?
A vision statement includes - Where do we want to be going forward? When do we want to
reach that stage? How do we want to do it?
7. Features of an effective statement:
A mission statement should have - Purpose and values of the organization: Who are the
organization's primary "clients" (stakeholders)? What are the responsibilities of the organization
towards the clients?
A vision statement should have - Clarity and lack of ambiguity; Memorable and engaging
expression; realistic aspirations, achievable; alignment with organizational values and culture.

Some of the benefits of having a vision and mission statement are discussed below:

Above everything else, vision and mission statements provide unanimity of purpose to
organizations and imbue the employees with a sense of belonging and identity. Indeed, vision
and mission statements are embodiments of organizational identity and carry the organizations
creed and motto. For this purpose, they are also called as statements of creed.
Vision and mission statements spell out the context in which the organization operates and
provides the employees with a tone that is to be followed in the organizational climate. Since
they define the reason for existence of the organization, they are indicators of the direction in
which the organization must move to actualize the goals in the vision and mission statements.
The vision and mission statements serve as focal points for individuals to identify themselves
with the organizational processes and to give them a sense of direction while at the same time
deterring those who do not wish to follow them from participating in the organization’s activities.
The vision and mission statements help to translate the objectives of the organization into work
structures and to assign tasks to the elements in the organization that are responsible for
actualizing them in practice.
To specify the core structure on which the organizational edifice stands and to help in the
translation of objectives into actionable cost, performance, and time related measures.
Finally, vision and mission statements provide a philosophy of existence to the employees,
which is very crucial because as humans, we need meaning from the work to do and the vision
and mission statements provide the necessary meaning for working in a particular organization.
OBJECTIVES AND GOALS

Definition of objectives:

– Objectives refer to the ultimate end results which are to be accomplished by the overall plan
over a specified period of time.
– The vision, mission and business definition determine the business philosophy to be adopted
in the long run. The goals and objectives are set to achieve them.

– Objectives are open ended attributes denoting a future state or out come and are stated in
general terms.

– When the objectives are stated in specific terms, they become goals to be attained.

– In strategic management, sometimes, a different viewpoint is taken.

Goals denote a broad category of financial and non-financial issues that a firm sets for it self.

Objectives are the ends that state specifically how the goals shall be achieved.

It is to be noted that objectives are the manifestation of goals whether specifically stated or
not.

– Difference between objectives and goals.

The points of difference between the two are as follows:
1. The goals are broad while objectives are specific.
2. The goals are set for a relatively longer period of time.
3. Goals are more influenced by external environment.
4. Goals are not quantified while objectives are quantified.

Broadly, it is more convenient to use one term rather than both. The difference between the
two is simply a matter of degree and it may vary widely.

Need for Establishing Objectives (Role of objectives):

The following points specifically emphasize the need for establishing objectives:
1. Objectives provide yardstick to measure performance of a department or SBU or
organization.

2. Objectives serve as a motivating force. All people work to achieve the objectives.
 3. Objectives help the organization to pursue its vision and mission. Long term
perspective is translated in short-term goals.

4. Objectives define the relationship of organization with internal and external

environment.

5. Objectives provide a basis for decision-making. All decisions taken at all levels of
management are oriented towards accomplishment of objectives.

Scope of Objectives :

According to Peter Druker, objectives may be set in the area of market standing ,innovation
productivity, physical and financial resources, profitability, manager performance and
development, worker performance and attitude and public responsibility.

Researchers have identified the following areas for setting objectives:

1. Profit (Performance) Objective – It is the most important objective for any business
enterprise. In order to earn a profit, an enterprise has to set multiple objectives in key result
areas such as market share, new product development, quality of service etc.
2. Marketing Objective may be expressed as: “to increase market share to 20 percent within
five years. or “ to increase total sales by 10 percent annually. They are related to a functional
area.
3. Productivity Objective may be expressed in terms of ratio of input to output. This objective
may also be stated in terms of cost per unit of production.
4. Product Objective may be expressed in terms of product development, product
diversification, branding etc.
5. Social Objective may be described in terms of social orientation. It may be tree plantation
or provision of drinking water or development of parks or setting up of community centers.
6. Financial Objective relate to cash flow, debt equity ratio, working capital, new issues, stock
exchange operations, collection periods, debt instruments etc. For example a company may
state to decrease the collection period to 30 days by the end of this year.

7. Human resources objective may be described in terms of absenteeism, turnover, number

of grievances, strikes and lockouts etc. An example may be “to reduce absenteeism to less
then 10 percent by the end of six months.

Characteristics of Objectives:
The following are the characteristic of corporate objectives:
1. Multiplicity of Objectives
Business objectives are multiple in character. That is, a business does not have only one
objective. It has many or multiple objectives. This is because a business has to satisfy
different groups, i.e. shareholders, employees, customers, creditors, vendors, society, etc.
The business has to fix different objectives for each group.

2. Hierarchy of Objectives

Hierarchy means to write down the objectives according to their importance. The most
important objective is written first, and the least important objective is written last. All
objectives are important. However, some objectives are more important than others. Some
objectives need immediate action while others can be kept aside for some time.

3. Periodicity of Objectives

Based on period, business objectives can be classified into two types, viz.,

1. Short-term objectives, and

2. Long-term objectives.

The short-term objectives are made for a short-period, i.e. maximum one year. Short-term
objectives are more specific.

The long-term objectives are made for a long-period, i.e. for five years or more. Long-term
objectives are more general. They are like a Master Plan.

4. Flexibility of Objectives

The business is flexible. Therefore, the business objectives must also be flexible. If the
objectives are rigid, the business will not survive. This is because the business environment
keeps on changing. There are continuous changes in the technical, social, economic and
political environment. The business has to change its objectives according to the changes in
the business environment. The hierarchy of objectives must also be changed from time to
time.

5. Qualitative and Quantitative Objectives

There are two types of objectives, viz., Quantitative and Qualitative objectives.

1. Quantitative objectives are easy to measure. It is expressed in numbers. For e.g. in

Dollars, Rupees, Percentage, etc. Quantitative objectives are visible, tangible and
countable.
2. Qualitative objectives are not easy to measure. It is not expressed in numbers. For
e.g. Employee performance, employee satisfaction, etc. These objectives cannot be
measured. Qualitative objectives are invisible, intangible and uncountable.

Today modern methods are used to measure qualitative objectives. A business must have
both quantitative and qualitative objectives.
6. Measurability of Objectives

The objectives must be clear and specific. It must be easy to measure. For e.g. Each
salesman must sell 100 units of water purifier per month. This is a clear and specific
objective. It is easy to measure the performance of the salesman. If a salesman sells 200
units of water purifier in a month then his performance is good. He can be given bonus and
promotion. However, if a salesman sells only 10 units of water purifier in a month then his
performance is bad. He needs more training. Measurable objectives motivate the employees
to work hard. This is because they know their target clearly. Their performance can also be
measured easily.

7. Network of Objectives

Network means an interconnection between different objectives. A business has many

different objectives, viz., corporate objectives, departmental objectives, sectional objectives
and individual objectives. It also has objectives for shareholders, customers, employees, etc.
All these objectives must be interconnected. They must support each other. They must not
clash with each other. They must move in the same direction. If not, the business will not
survive. Similarly, the objectives of all the departments, must support each other. They must
not clash or conflict will each other.

8. Attainability of objectives
Objectives must be within reach and is also challenging for the employees. If objectives set
are beyond the reach of managers, they will adopt a defeatist attitude. Attainable objectives act
as a motivator in the organization.

Process of Setting Objectives :

Glueck identifies four factors that should be considered for objective setting.
These factors are:
1. The forces in the environment - Environmental forces, both internal and external,
may influence the interests of various stake holders. Further, these forces are
dynamic by nature. Hence objective setting must consider their influence on its
 process.

2. Realities of an enterprise’s resources and internal power relations - As objectives

should be realistic, the efforts be made to set the objectives in such a way so that
objectives may become attainable. For that, existing resources of enterprise and internal
power structure be examined carefully.

3. The value system of top executives - The values of the top management influence the
choice of objectives. A philanthropic attitude may lead to setting of socially oriented
objectives while economic orientation of top management may force them to go for
profitability objective.

4. Awareness by the management of the past objectives - Past is important for strategic
reasons. Organizations cannot deviate much from the past. Unnecessary deviations will
bring problems relating to resistance to change. Management must understand the past
so that it may integrate its objectives in an effective way.

Critical Success Factors:

Critical Success Factors (CSFs) - CSFs are the limited number of areas in which satisfactory
results will ensure successful competitive performance for the individual, department or
organization.

"Critical success factors are those few things that must go well to ensure success for a manager
or an organization, and, therefore, they represent those managerial or enterprise area, that
must be given special and continual attention to bring about high performance. CSFs include
issues vital to an organization's current operating activities and to its future success."

The concept of "success factors" was developed by D. Ronald Daniel of McKinsey & Company
in [Link] process was refined into critical success factors by John F. Rockart between 1979
and 1981.

Also called Key Success Factors (KSF) or Key Result Areas (KRA).

It has been said that what gets measured, gets done but finding an easy way to evaluate how the
organization is doing is what keeps many in leadership from doing so.

A quality improvement tool that many organizations use is Critical Success Factors (CSF) which
are indicators that measure how well an organization is accomplishing its strategic plan and
objectives.
CSF are customized to each organization and help provide focus to steer the organization
toward fulfilling its mission and vision through strategic objectives.

These indicators of success are used to identify those things, that if done well, lead to
breakthrough results.

Most organizations have between eight and twelve CSF and adjust them as strategy and
strategic plans change.

Having too many measures can make it difficult to target those things that would achieve the
greatest results. Having too few limits the organization’s ability to move to the next level.

It is important to have SMART Goals attached to the CSF measures so there is a strategy and
time line for achieving targets.

As a general rule of thumb, CSF should target those things that affect quality, cost, customer
satisfaction, market share and increased revenues.

Strategic, Tactical and Operational Planning:

I. Strategic Plan
A strategic plan is a high-level overview of the entire business, its vision, objectives, and
value. This plan is the foundational basis of the organization and will dictate decisions in the
long-term. The scope of the plan can be two, three, five, or even ten years.

Managers at every level will turn to the strategic plan to guide their decisions. It will also
influence the culture within an organization and how it interacts with customers and the
media. Thus, the strategic plan must be forward looking, robust but flexible, with a keen focus
on accommodating future growth.

The crucial components of a strategic plan are:

1. Vision 2. Mission 3. Values

II. Tactical Plan

The tactical plan describes the tactics the organization plans to use to achieve the ambitions
outlined in the strategic plan. It is a short range (i.e. with a scope of less than one year), low-
level document that breaks down the broader mission statements into smaller, actionable
chunks. If the strategic plan is a response to “What?”, the tactical plan responds to “How?”.

Creating tactical plans is usually handled by mid-level managers.

The tactical plan is a very flexible document; it can hold anything and everything required to
achieve the organization’s goals.

There are some components shared by most tactical plans:

1. Specific Goals with Fixed Deadlines 2. Budgets

3. Resources 4. Marketing, Funding, etc.

Finally, the tactical plan should list the organization’s immediate marketing, sourcing, funding,
manufacturing, retailing, and PR strategy. Their scope should be aligned with the goals
outlined above.

III. Operational Plan

The operational plan describes the day to day running of the company. The operational plan
charts out a road map to achieve the tactical goals within a realistic time frame. This plan is
highly specific with an emphasis on short-term objectives.

“Increase sales to 150 units/day”, or “hire 50 new employees” are both examples of
operational plan objectives.

Creating the operational plan is the responsibility of low-level managers and supervisors.

Operational plans can be either single use, or ongoing, as described below:

1. Single Use Plans

These plans are created for events/activities with a single occurrence. This can be a one-time
sales program, a marketing campaign, a recruitment drive, etc. Single use plans tend to be
highly specific.
2. Ongoing Plans

These plans can be used in multiple settings on an ongoing basis. Ongoing plans can be of
different types, such as:

• Policy: A policy is a general document that dictates how managers should approach a
problem. It influences decision making at the micro level. Specific plans on hiring
employees, terminating contractors, etc. are examples of policies.
• Rule: Rules are specific regulations according to which an organization functions. The
rules are meant to be hard coded and should be enforced stringently. “No smoking
within premises”, or “Employees must report by 9 a.m.”, are two examples of rules.
• Procedure: A procedure describes a step-by-step process to accomplish a particular
objective. For example: most organizations have detailed guidelines on hiring and
training employees, or sourcing raw materials. These guidelines can be called
procedures.

Ongoing plans are created on an ad-hoc basis but can be repeated and changed as required.

Operational plans align the company’s strategic plan with the actual day to day running of the
company. This is where the macro meets the micro.

Running a successful company requires paying an equal attention to now just the broad
objectives, but also how the objectives are being met on an everyday basis, hence the need
for such intricate planning.