AM4B-E
BUSINESS POLICY Sun. 8:00-11:00am
Chapter 1: Evolution of Business Policy
DIFINITION OF TERMS:
Strategy- from the Greek word stratego referring to
a general which in turn traces its root from the
words army and lead, Bracker cited.
- Strategy as essentially referring to top
managements plan to attain the outcome consistent
with the organizations mission and goals.
Business Policy- Generally refers to set of rules that
guide the conduct of the business in pursuit of profit
and other objectives of the business organization.
Stratego- means to plan the destruction of ones
enemies through effective use of resources
Strategic management- involves the formulation and
implementation of the major goals and initiatives
taken by a company's top management on behalf of
owners, based on consideration of resources and an
assessment of the internal and external environments
in which the organization competes.
1.1 BACKGROUND
For an organization to operate and
effectively focus its efforts on every task and deviate
away from targets, a sense of direction needs to be set
and some rules or guidelines have to be established
and observed. In the world of business, these set of
rules that guide the decisions and actions of the
members of the organization that is called Business
Policies. These may be informal or in writing that
comes in the form of operational manual, personnel
handbook, and memoranda composed or issued from
time to time and as need arises. They may also in the
form of minutes of meetings and documentation of
Sun. 1:00-4:00pm
other forms of formal discussions that includes
workshops and year-end activities.
As time goes by, it was realized that it is not
enough to have a set of business policies, written or
unwritten, but it is more important to address the
operational strategies knowing that business is not a
short- term but a long-term journey to seeking profit.
And along with challenges and opportunities posed
by information and communication technology like
the usage of computers and popularization of so
called e-Commerce/e-Business, the notion of being
more concerned with internal operational procedures
has alarmed business executives that they are now
more concerned with being externally oriented and is
concerned with strategic management concepts.
1.2 CONCEPTS OF BUSINESS POLICY
The basic theory of the term management
which evolves around the idea of planning,
organizing, staffing, coordinating, controlling and
evaluating still holds true. The processes of planning
are a variety of plans taking the form of budget,
policy, strategy, rules, procedures, etc. Common to
these plans is that all are done ahead of time and
these terms serve ass guideposts or perimeters in
which decisions have to be based upon.
Business policies are meant to be followed
and observed that top management is traditionally
practice and done. These are considered as marching
orders for middle management to implement, rank
and file personnel to do their actions. In context, it
generally refers to set of rules that guide the conduct
of the business in pursuit of profit and other
objectives of the business organization.
 Policies in the business are developed in
consistency with the duties and responsibilities of
various functional units (human resource, production,
sales /marketing and the like). These are usually
expressed in broad directions and made specific to
serve a s guidelines or rules in decision-making and
in doing organizational activities. Aside from that, it
is looked upon as general management orientation
traditionally viewed as largely inward-looking as
well as more biased with guiding how personnel in
the organization would act or to follow as long as one
is part of the organization. It gives the fundamental
framework for plans and provides middle managers a
basis for decision-making.
1.3 CONCEPTS OF STRATEGY
Wright, Kroll, and Parnell (1936) defined
strategy as essentially referring to top managements
plan to attain the outcome consistent with the
organizations mission and goals. The authors regard
strategy in three vantage points (1) strategy
formulation or developing the strategy, (2) strategy
implementation (putting strategy into action), (3)
strategic control (modifying either the strategy or its
implementation to ensure that desired outcomes are
attained).
The same authors categorized strategy into
either intended or realized. Intended strategy refers to
the original strategy that management plans and
intends to implement. Realized strategy on the other
hand, refers to actual and eventual strategy that
management actually implements. Thus, it often
differs to the first one because unforeseen
environmental or organizational events occur that
necessitate modification in the intended strategy.
Thompson and Strickland (1999) strategy
at the operational level referring to it as a set of
competitive moves and business approaches that
management is employing to run the company.
Among others, strategy is managements game
plan to achieve the following:
a) Attract and please customers
b) Stake out a market position
c) Conduct operations; and
d) Compete successfully.
e)
1.4 CHARACTERISTICS OF STRATEGY
- There are several characteristics on the
nature of strategy as shared by human
authors and scholars. The following are just
a few of the characterizations on the nature
of the word strategy:
a.) Strategy is traditionally meant to be a grand
plan made in the light of what it was
believed an adversary might or might not do.
b.) Strategy derives its relevance given from the
existence competition in business.
c.) It is done on the presumption of the
existence of a negative scenario.
d.) It also connotes general program of action
and deployment of emphasis and resources
to attain comprehensive objectives.
e.) A process on deciding on objectives of the
organization, changes on objectives, on the
resources used to attain these objectives.
f.) It involves determination of the basic long
term goals of an enterprise and the adoption
of action and the allocation of resources
necessary to carry out goals.
 g.) A decision about how to use available
resources to secure a major objective in the
face of obstruction.
h.) Implies actions and guides decision-making,
spelling out directions to be taken.
i.) Strategy may, in some extreme or necessary
cases, exist without a policy.
1.5 STRATEGY VS. POLICY
- Business policies and strategies often collide
thereby inviting dilemma and creating
confusion.
- Dilemmas begin when the conflict of the
two exist.
The following are situations where strategy and
policy come in collision course in making it difficult
to operationalize a strategy within the bounds of
standing policy:
a.) The business policies exist amidst absence
of business strategy and strategies exist
without established business policies:
b.) If ever they exist, business policies are
generally directional in nature and strategy
is more operational in context.
c.) Business policies are often formal and
strategies may be informal.
1.6 ORIGIN AND NATURE OF STRATEGY
- Jeffrey Bracker of Georgia State University
who elaborated the historical development
of the concept of strategic management.
- He cited that numerous authors have focused
their attention on the concept of strategy but
have failed.
- Homer, Euripides, and other early writers
discussed the underlying principles of
strategy.
- One of the first known applications of
strategy to business occurred when Socrates
consoled Nichomactides.
- The concept of strategy in military has
remained prominent throughout history, and
has been discussed by major writers.
1.7 EVOLUTION OF STRATEGIC
MANAGEMENT
- The concept of strategy as related to
business became greater after World War II.
As business moved from relatively stable
environment to competitive environment,
the change in context attributed to two
factors:
a. The marked acceleration of the rate of
change within the firms
b. The accelerated application of science
and technology to the process of
management.
- Because of the fact that the concept of
strategy sets out a sense of direction to
achieve objectives, strategy as to business
 has been largely associated with business Stahl and Grigsby (1992) defined strategic
policy. management as referring to the entire process of
- By historical account of some authors in strategic decision-making that relates to its
management science, business policy is a environment, guides internal activities, and
precursor of strategic management. Strategic determines the long-term performance of the
management is not only a concern of the organizations
organization should operate and hence the
Wheelen and Hunger (2004) described strategic
need for internal policies, but also how the
management as a set of managerial decisions and
business itself should conduct its business in
actions that determine the long-run performance of a
the light of prevailing external and
corporation. It includes environmental scanning (both
environmental realities.
external and internal), strategy formulation (strategic
- Strategic management as a tool for
and long-range planning), strategy implementation,
managing the business organization,
evaluation and control. The study of strategic
business policy has been expanded its role in
management, therefore, emphasizes the monitoring
developing business.
and evaluation of external opportunities and threats in
- Strategic management theories and
the light of a corporations strengths and weaknesses.
principles have outshined the context of
business policy and continue to be popular Williamson, Jenkins, et al. (2004) approached
also in the public organizations. strategic management as framework that evolves
- While the theories behind business policy around the idea of shaping the destiny of an
remained recognized as vital component of organizations. It is about:
managing an organization.
a) Putting an organization into a competitive
position;
b) Sustaining and improving that position by
1.8 THE NATURE OF STRATEGIC
developing an acquisition of appropriate
MANAGEMENT
resources and by monitoring and responding
As a field of management science, various to environmental changes; and
authors have described and contextualized strategic c) Monitoring and responding to the demands
management remains premised or anchored upon the of key stakeholders.
well-established principles of management. Much
To achieve the aforementioned concerns,
more than simply applying planning principles,
Williamson, Jenkins, et al. (2004) postulated that
strategic management takes into consideration
organizational strategists must be able to answer the
various external as well as internal factors and
following key questions:
environment in general as well as competitiveness
and sustainability over the long-term period in the a) Where is the organization going?
industry or sector it belongs. b) What options are open to the organization?
 c) What is the best way forward for the sense that being externally-oriented and driven by
organization? macro and micro environmental conditions, managers
d) How can this be done? have to be always conscious that business being an
ongoing wealth creation endeavour, appropriate
Wright, Kroll and Parnell (1996) define strategic
efforts have to be made to ensure profitable
management in a broader term that encompasses
operations and survive in times of trouble. There is
managing not only the stages or vantage points they
an old adage which says that the only thing constant
have identified but also the earlier stages determining
in this world is change; hence, strategic managers
the mission and goals of an organization within the
should take a cue from such saying and be always
context of external and internal environment. The
prepared for any eventualities.
authors emphasized that maintaining compatible fit
between the business and its environment is
necessary for competitive viability. Specifically,
1.9 BENEFITS OF STRATEGIC
these authors viewed that strategic management
MANAGEMENT
involves a series of steps in which top management
should accomplish the following tasks: Given the concepts and views on strategy as well
as its fusion with strategic management and the tasks
a) Analyze the opportunities and threats or
expected from it especially those enumerated by
constraints that exist in the external
Wright, Kroll and Parnell (1996), there is no doubt
environment;
that substantial benefits can be expected from the
b) Analyze the organizations strengths and
practice of strategic management. As it promises and
weaknesses in its internal environment;
articulates a series of activities or tasks meant to
c) Establish the organizations mission and
ensure achievement of desired outcomes both on the
develop goals;
producers and consumers side, embracing the ideals
d) Formulate strategies (at corporate level,
of strategic management and doing it well does not
business unit level, and functional level) that
only stand to benefit business owners but the industry
will match the organizations strengths and
and the society at large (including in particular the
weaknesses with the environments
prospective clients of the business organizations) as it
opportunities and threats;
factors in the internal and environmental
e) Implement the strategies; and
considerations in light of offering products and
f) Engage in strategic control activities to
services to satisfy targeted markets.
ensure that the organizations goals are
attained. To be particular, Wheelen and Hunger (2004)
cited a research covering nearly 50 corporations in
Wright, Kroll and Parnell emphasized Wright,
various countries and industries. These authors found
Kroll and Parnell emphasized that strategic
the three most highly rated benefits of strategic
management is a continuous process. Indeed it is
management to be:
considered a continuous and dynamic process in the
 a) Clearer sense of strategic vision for the firm; efficiency is emphasized. In the variable
b) Sharper focus on what is strategically areas, innovation is emphasized.
important; and
c) Improved understanding of a rapidly d) Reactors. This type includes companies that
changing environment. lack a consistent strategy-structure-culture
relationship. Their (often ineffective)
responses to environmental pressures tend to

1.10 STRATEGIC TYPES be piecemeal strategic changes.

In pursuit of developing business strategies for

the firm or any organization for that matter 1.11 STRATEGY VS. TACTICS
strategy may come in the form of various types.
Other than business policy and strategy as
Wheelen and Hunger theorized that strategic type is
common terminologies often mentioned in the world
a category of firms based on common strategic
of strategic management, the term tactics and its role
orientation and a combination of structure, culture,
concretizing the intents and purposes of business
and process consistent with strategy. Competing
policy and strategic management is equally
firms within a single industry can be categorized on
important. Tactics are more operational and done in
the basis of their general strategic orientation into
context with or as a support activity or operation to
four types as follows:
achieve a strategy. Strategy and tactics are

a) Defenders. This type includes companies differentiated in many ways as follows:

with a limited product line that focus on
STRATEGY TACTICS
improving the efficiency of their existing Level of Developed at the highest Employed at and related
operations. This cost orientation makes them Conduct levels of management to lower levels of

unlikely to innovate in a new area. management

Regularity Formulation is both Determined on a periodic
continuous and irregular cycle with fixed time
b) Prospectors. This type of companies schedule
includes firms with fairly broad product Subjective Decision making is heavily Decision making is not

lines that focus on product innovation and Values weighed with subjective heavily weighed with
values of managers subjective values of
market opportunities. The sales orientation
managers
makes them somewhat inefficient. They tend Range of Greater total possible range
to emphasize creativity over efficiency. Alternatives of alternatives
Uncertainty Much greater in both
formulation and
c) Analyzers. This type includes business
implementation of strategy
organizations that operate in at least two than in deciding upon and
different product-market areas, one stable knowing the results of tactical
and one variable. In the stable areas, decisions
Nature of Generally unconstructed and More structured and
Problems tend to be one of a kind often repetitive in nature image and culture of the company would
Information Requires large amount of Rely more heavily on
like to project.
Needs information internally generated data
d) Programs and polices - These are specific
Time Intended to, and do last for Cover a short duration
Horizon long periods of time and are more uniform for program and policies set forth by the
all parts of operating organization policy makers (i.e., Board of
programs directors and top manager) in pursuit of
Reference Original in the sense that it is Formulated within and in
short and long term goals given certain
the source of origin for pursuit of strategies
development of tactics consideration at hand.
Details Broad and may have fewer May have lots of details
details
Appr4oaches to identifying policies and strategy
Personal Most part are formulated by Large number of
a) Policies / strategy profile
Involved top management, and staff, managers and
fewer in number employees are usually
participate in process - This approach involves systematic
Ease of Easier to measure the
examination of present company policy/
Evaluation effectiveness and
strategy implicit and explicit. It is more of
efficiency of tactics
Context Formulated from corporate Developed principally eternal approaches whereby existing policies
Point of viewpoint from a functional point of and operational strategies are examined by
View view
the officers and employees of the firm aided
Importance Highest importance to an Considerably less
by an external consultant as may be
organization significant
necessary.
b) Gap analysis in this approach, the stimulus
1.12 BASIS OF POLICIES AND STRATEGIES is an examination of weather an end that has
been established is likely to be achieved.
a) Legal mandate it is formulating on the
c) Competitive strategy analysis
basis of the provision of the charter or legal
- It involves a thorough analysis of
basis for creation or existence of the
the competitive forces operating in a firm
business organization including the
environment and searching for an alternative
applicable provision of laws and policies of
option.
the government and its statutory.
b) Vision and mission statement it refers to Richard Whittington (2001) who theorized
the leadership bias as well sense of the that strategy come in four generic
direction and mission for which for which approaches differ fundamentally along two
the organization was conceived or establish. division:
c) Specific objective the stated objective of
the business organization may be a product 1. Outcomes of the strategy

of a desire to be competitive of the kind of 2. Process by which is made

 Outcomes B. Bottom-top approach. In this approach, policy
Profit maximizing
and strategy initiatives emanate from the bottom or
rank and filed from which top management develops
Processes Classical Evolutionary
Emergent concrete policies and strategies for the lower ranked
Deliberate
Systematic Processual employees to observed or follow.

C. Top bottom top. In this approach, policy and

Plural
Figure 1. Generic Perspective of Strategy
1. Classical Approach this approach follows a
pattern of analyzing, planning and commanding or
directing. Profitability is the supreme goal and
rational planning the means to achieve it.
2. Evolutionary This approach is conscious on
keeping costs or expense low with open option.
Whittington believed that evolutionary theorists do
not necessarily prescribe rational planning method.
3. Processual - this approach is more adaptive to
situation by playing by the local rules. It assumes that
both organization and markets are often sticky, messy
phenomena, from which strategies emerge with much
confusion and in small steps
4. System this approach is more caution staying
close to the ground and going with the flow where
the direction is going. It will retain faith in the
capacity of the organization plan forward and act
effectively within their environment.
strategy initiatives are taken by the top management
then filtered down to lower ranked personnel for
consultations then returned back to the top
management for refinements.
1.15 Strategic Decision
In any business organization decision making is a
daily if not an all the time task or duty. In tje context
of strategic management, it is not just simply making
decision but it is important to exercise strategic
decision or something like hard and unusual
decisions that need to be done for certain strategic
considerations. At certain times, strategic decisions
are made contrary to existing policies, norms and
practices all in the name of strategic reasons or
considerations.
A. Rare. Strategic decisions are unusual and typically
have no president to follow.
B. Consequential. Strategic decisions should commit
substantial resources and demand a great deal of
commitment from people at all levels.

C. Directive. Strategic decisions set president for

1.14 Developing Policy and Strategy
lesser decisions and future actions throughout the
A. Top-bottom approach. In this approach, organization.
initiatives in developing policies and policies and
strategies come from the top management with rank
and file tasked to implementing or following the
policies and strategies.
1.16 Modalities in Strategic Decision

The four most typical approaches or modes of Step 4. Scan and assess the internal corporate
strategic decision making. environment to determine the strategic factors that
are strengths and weaknesses.
1. Entrepreneurial mode. Strategy is made by one
powerful individual and the focus is on opportunities;
problems are secondary.
Step 5. Analyze strategic (SWOT) factors to a
2. Adaptive mode. Sometimes referred as "muddling pinpoint problem areas, and review and revise the
through "this mode is characterized by reactive corporate mission and objective as necessary.
solutions to existing problems, rather than proactive
search for new opportunities.
Step 6. Generate, evaluate and select the best
3. Planning mode. This decision making mode
alternative strategy in the light of the analysis
involves the systematic gathering of appropriate
conducted in step 5.
information for situation analysis, the generation of
feasible alternative strategies, and the rational section Step 7. Implement selected strategies via programs,
of the most appropriate strategy. budgets, and procedures.

4. Logical mode. It can be viewed as a synthesis of Step 8. Evaluate and implement strategies via
planning, adaptive and to a lesser extent, the feedback systems and the control of activities to
entrepreneurial modes. ensure their minimum deviation from plans.

1.17 Strategic Decision making Process 1.18 role of the board of directors

Wheelen and Humger(2004) developed model that Summary:

outlines the process of decision making.
The board of directors have directly and
Step 1.Evaluate current performance results in terms indirectly involvement in the policy and strategy
of return on investment, profitability, and so forth, development process. They are to monitor business
and the current mission,objectives,strategies, and policy and strategy as a matter of oversight duty. The
policies. main function of the board of directors is to ensures
adherence to business policies and strategies, simply
Step 2. Review corporate governance that is the
because such policies and strategies are geared
performance of the firms Board of Directors and Top
towards earning profit and return on investment in
Management.
the form of dividends.
Step 3. Scan and assess external environment to
determine the strategic factors that pose opportunities
and threats.
Board of Directors are some members of the top
management (e.g. President, CEO, Treasurer, VP for
Finance etc.

Low (passive) Degree of involvement in strategic

management high (active)

(low) Phantom no degree of involvement, Rubber

stamp permit officer to make decisions, in votation
involvement, Minimal review reviews selected
issues that brought in attention, Nominal
participation reviews selected key decisions,
indicators/programs of mgt, Active Participation
approves questions, makes final decisions, an active
board committee, and performs fiscal and mgt audits.
Catalyst (high) lead in establishing and modifying
mission objective and the like. A very active strategy
committee. (increasing manner)

Specific roles of the Board of directors in a business

org.

a. Monitor acting through committee or a

part of the mgt. team, can keep abreast of
development in both sides of the
corporation. Board should carry out this
task.
b. Evaluate and Influence examine mgts.
proposal decisions, and actions; agree or dis
agree; give advice and offer suggestions;
outline alternatives. An active board perform
the task in addition to monitoring one.
c. Initiate and Determine delineate a
corporations mission and specify strategic
options to its mgt. only the most active
boards take on this task in addition to the
two previous one.