Business Policy & Strategic Management
“ Plans are nothing,
Planning & Implementation is everything.”
Business Policy & Strategic Management
Business Policy:
General Management Orientation
Focus on Functional Integration
Strategic Management:
Focuses on Long Range
Focuses on Strategy [Competition & Environment]
Components of an Organization’s Aspirations
Questions Addressed by Aspirations
and Competitive Strategy
Two Dimensions
of the Value of
Organizational
Aspirations
Coherence
and Alignment
of Organizational
Aspirations
A Hierarchy of Strategy Statements
Mission & Goals
External Analysis Strategic Choice Internal Analysis
Opportunities and Threats Strengths and Weaknesses
Implementation
Performance
Measurement
Definition of Strategy
A comprehensive master plan stating HOW
the corporation will achieve its mission and
objectives.
“Creation of a unique and valuable
positions involving a different set of
activities”
9
Concept of Strategy
“Strategy is the direction and scope of an
organization over the long term, which
achieves dynamic sustainable competitive
advantage for the organization through its
configuration of resources within the
changing environment, to meet the needs of
markets and to fulfil stakeholders’
expectations”
Strategy v/s Operational Efficiency
• Strategy is about “doing the right things” whereas
Operational Effectiveness is about “doing things
right”
• Strategy is all about “differences or differentiation”
OE is all about “performing similar activities better
than rivals”
• The function of strategy is to create competitive
advantage based on differences between you &
competitors but being different alone doesn’t confer
CA.
• Strategy means deliberately choosing
different set of activities to deliver unique
value.
• So OE is necessary but not enough for
sustainable CA whereas Strategy builds on
uniqueness.
• Sustainable Strategic position requires
Trade-offs
• Right fit important for CA & Sustainability.
The Strategic Sweet Spot
Three Key Strategic Questions
• Where is the organization now?
• If no changes are made, where will the
organization be in one, two, five or ten
years? Are the answers acceptable?
• If the answers are not acceptable, what
specific actions should management
undertake? What are the risks and payoffs
involved?
14
Triggering Events
•New CEO
•External Intervention
•Threat of change in ownership
•Performance Gaps
Strategic Decision Making is Political, Rational & Intuition based
Rediscovering Strategy
• Failure to Choose
• Leadership Crisis
• Growth Trap
Deliberate versus Emergent Strategies
In
St tend
rat ed
eg
y
Del
ibe ra t e
Stra
tegy
Sustained
Realized Superior
Unrealized Strategy Performance
Strategy
Emergent Strategy
Adapted from: Mintzberg, H. “The Strategy Concept I: Five Ps for Strategy” California Management Review. Volume 30 Number1,
Fall 1987.
How to Ensure that Deliberate/Intended
Strategy equal to realized strategy
-Existence of precise intentions (articulated,
concrete)
- Shared or Controlled intentions
-Collective actions realization
(No external force (market, tech., political)
Environment perfection predictable, totally
benign
or full control)
-Consistency in action
Definition of
Strategic Management
Strategic Management
That set of managerial decisions and
actions that determines the long-run
performance of a corporation.
19
Composition of
Strategic Management
Strategic Management is Composed of
1. Environmental scanning
2. Strategy formulation
3. Strategy implementation
4. Evaluation and control
20
Basic Elements of the Strategic
Management Process
Evaluation
Environmental Strategy Strategy
and
Scanning Formulation Implementation
Control
21
The Strategy Process
POLICIES
•A policy is a broad guideline for decision making that -
•Links the formulation of strategy with its implementation
•Companies use policies to make sure that employees throughout
the
•firm make decisions
•Take decisions that support the corporation’s mission, objectives
•and strategies.
Examples
3M : Researchers should spend 15% of their time working on
something rather than their primary project.
(supports product development strategy.)
Intel : Cannibalize your product line (undercut the sales of your
current products) with better products before a competitor does
it to you.
(supports objective of market leadership).
Phases of Strategic Management
Basic Financial Planning:
One Year Budgeting
Forecast-Based Planning:
Focuses on Long Range
Time Consuming & Political
Strategic Planning [External Orientation]
Strategic Management
[Formulation, Implementation & Control]
Strategic Thinking
Strategic Flexibility
Formal vs Informal Strategic Management
Formal:
•Clearer Sense of Vision
•Focus on direction
•Understand changing environment:
Informal:
• Where is the organization now
• If no change, where we will be
• If answer not acceptable, what specific action
and associated Risk & payoff
Characteristics of
Strategic Decisions
• Rare
• Consequential
• Directive
27
Modes of Strategy Formulation
• Entrepreneurial
• Adaptive
• Planning
• Logical incrementalism
28
Definition of
Corporate Strategy
Corporation’s overall direction and the
management of its businesses
29
Definition of
Business Strategy
Emphasizes improving the competitive
position of a corporation’s products or
units
30
Definition of
Functional Strategy
Maximizes resource productivity
31
Hierarchy of Strategy
Corporate Strategy
Business
(Division Level)
Strategy
Functional
Strategy
32
Definition of Strategy
Implementation
Strategy Implementation
The process of putting strategies and policies
into action
33
Definition of Evaluation
and Control
Evaluation and Control
The process of monitoring corporate
activities and performance results so that
actual performance can be compared with
desired performance
34
Benefits of Strategic Management
• Clearer sense of strategic vision
• Sharper focus on what is strategically
important
• Improved understanding of rapidly
changing environment
35
Origins of Strategic Positions
-Variety based positioning
- Needs based positioning
(Targeting a segment of customers)
-Access based positioning
-Geography
-Customer Scale
Types of Strategy
Planned Strategy
-Clear & Articulated intention (centralized planning?)
-Formal Control
-Predictable environment
Entrepreneurial Planning
-Force of pattern or consistency in action driven by
individual vision (general sense of direction
-Crisis management under leadership
-Intention difficult to identify & less specific
Ideological Planning
-Shared Vision (Credo)
Types of Strategy
Umbrella Strategy
-Less control (bureaucracy , personal & ideology)
-only general guidelines
-Real life
Process Planning
-In complex environment
Unconnected Planning
Consensus Planning
-mutual adjustment vs ideology
Imposed Planning
-external interventions
Trade-Off in positioning
-Inconsistencies in image
-activities themselves(inflexible people,
machines, process)
-limit of coordination & control
Fit in unique set of activities
-Simple consistency
-reinforcing activities
-optimization of efforts
Sustainability of Competitive Positioning
-Leadership
-Lower chance of duplication of all unique
activities
Attacking Strategies
Frontal: Head-on Confrontation
Flanking-begin by supplying segment
Encirclement-Supply a number of different segment
By-pass-Completely by-pass the existing suppliers through a
technology break-through
Guerrilla-Spasmodic attacks on different parts of offering of key
firms
Evaluating Strategies
Consistency
Are the external strategies consistent with (supported by) the
various internal aspects of the organization?
Consonance
Are the strategies in agreement with the various external trends
(and sets of trends) in the environment?
Feasibility
Is the strategy reasonable in terms of the organization's
resources?
Money and capital
Management, professional, and technical resources
Time span
Evaluating Strategies
Advantage
Does the strategy create and/or maintain a competitive
advantage?
Resources, Skills or Position
Organizational Types: Miles & Snow
theory holds that in order to be superior:
•there must be a clear and direct match between the
organization's mission/values (their definition),
•the organization's strategies (their basic strategy set),
•and the organization's functional strategies (their
characteristics and behavior).
Organizational Types: Defenders
Defenders are organizations
1. which have narrow product-market domains.
2. Top managers in this type organization are highly expert in their
organization’s limited area of operation
3. but do not tend to search outside their narrow domains for new
opportunities.
Basic strategy set:
Aggressively maintain prominence within its chosen market
segment
Ignore developments outside of this domain
Penetrate deeper into current markets
Normally, growth occurs cautiously and incrementally
Organizational Types: Defenders
Characteristics & behavior:
Single core technology, often vertically integrated,
updates current technology to maintain efficiency
Stable structure and process
Dominant coalitions are finance and production
Planning is intensive, not extensive
Functional structure
Extensive division of labor and high degree of
formalization
Centralized control
Vertical information flows
Simple and inexpensive coordination
Organizational Types: Prospectors
Prospectors are organizations:
1. which almost continually search for market opportunities, and
2. they regularly experiment with potential responses to emerging
environmental trends.
3. Thus, these organizations often are the creators of change and
uncertainty to which their competitors must respond.
Basic strategy set:
Broad domain, in a continuous state of development
Monitors a wide range of environmental conditions, trends, and events
Creators of change in their industries
Growth primarily from new markets and new products
Uneven, spurt-like growth
Organizational Types: Prospectors
Characteristics & behavior:
Not efficient
Changing structure and technology
Frequent prototype production, multiple technologies
Technologies in people not machines
Dominant coalitions are marketing and research and development
Key executives as likely to come from outside as inside
Executive tenure is shorter than defender’s
Planning is broad, not intensive
Product based structure
Less division of labor, low formalization
Control is results-oriented
Info flow to decentralized decision-makers
Complex and expensive coordination
Conflict directly confronted and resolved
Organizational Types: Analyzers
Analyzers are organizations
1. which operate in two types of product-market domains, one relatively
stable, the other changing.
2. In their stable areas, these organizations operate routinely and
efficiently through use of formalized structures and processes.
3. In their more turbulent areas, top managers watch their competitors
closely for new ideas, and then rapidly adopt those which appear to be
the most promising.
strategy set:
A mixture of products and markets, some stable, others changing
Successful imitation through extensive marketing surveillance
Avid follower of change
Growth normally occurs through market penetration
Growth may also occur through product and market development
Organizational Types: Analyzers
Characteristics & behavior:
Dual technology core, moderate efficiency
Dominant coalition is marketing, applied research, and production
Planning is both intensive and comprehensive
Structure is matrix, functional and product
Control difficult; must be able to trade off efficiency and effectiveness
Coordination is both simple and complex
Managerial is dual efficiency versus past, effectiveness versus similar
organizations
Organizational Types: Reactors
Reactors are organizations
1. in which top mangers frequently perceive change and uncertainty
occurring in their organizational environments
2. but are unable to respond effectively.
3. Because this type of organization lacks a consistent strategy-structure
relationship, it seldom makes adjustments of any sort until forced to do
so by environmental pressures.
Basic strategy set:
1. Management fails to articulate a viable organizational strategy
2. Management articulates an appropriate strategy, but technology,
structure, and process are not linked to strategy appropriately
3. Management adheres to a particular strategy-structure relationship
that is not relevant to the environment
Organizational Types: Reactors
Reactors are organizations
1. in which top mangers frequently perceive change and uncertainty
occurring in their organizational environments
2. but are unable to respond effectively.
3. Because this type of organization lacks a consistent strategy-structure
relationship, it seldom makes adjustments of any sort until forced to do
so by environmental pressures.
Basic strategy set:
1. Management fails to articulate a viable organizational strategy
2. Management articulates an appropriate strategy, but technology,
structure, and process are not linked to strategy appropriately
3. Management adheres to a particular strategy-structure relationship
that is not relevant to the environment
Strategic Group
•Possess similar core competences;
•Pursue similar strategies;
•Serve a similar customer group and similar
market segments;
•Employ similar technology;
•Utilize similar distribution channels;
•Produce similar products or services of
comparable quality