BUS 3.

1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

BUSINESS POLICY

Introduction:

Business policy is the study of the functions and responsibilities of senior management, the
crucial problems that affect success of the total enterprise and the decisions that determine the
direction of the organization and shape its future. The problem of policy in business, have to do
with the choice of purpose of the moulding of organizational identity and character, the
continuous definition of what need to be done and mobilization of resources for the attainment of
goals in the face of competition or adverse condition. (The nomenclature of business policy is
assigned to a compulsory course included in a typical management studies curriculum). Almost
all the management education programs offered by universities, management institutes or
business schools in India include the business policy course, by whatever nomenclature it might
be addressed, normally in the later part of the degree or diploma program. (The content of the
business policy course is drawn from the field of strategic management).

Origins:

Business policy as a distinct field of study was introduced at Harvard business school way back
in 1911. The course aimed at improving the general management capabilities of students. It was
intended to tie together and give proper focus to first year courses by showing how the functions
of business, both internally and as between businesses, were closely interrelated in practice and
how a chief executive had to recognize and deal with those relationships. The course, however,
received wide spread acceptance only after the publication of two report in 1959. The Gordon
and Howell report sponsored by the Ford foundation predicted that a course on the business
policy would give student an opportunity to put together what they have learned in the separate
business fields and utilize this knowledge for the analysis of complex business problems. The
Pierson report sponsored by the Carnegie foundation also recommended introduction of the
strongly. Following these reports the business policy course was made mandatory in all business
schools in US for the purpose of recognition. (During the two decades, Business policy has
become an integrative and comprehensive course in management curriculum. The contents of the
course, the methodology, etc may vary from institution to institution, but basically concept is
same. Business policy is considered as a capstone, integrative course offered to students who
have previously been through a set of core functional area courses. The term “Business policy”
has been traditionally used, though new titles such as “Strategic management”, “Corporate
strategy & policy”, etc are now being used extensively.

Evolution:

I. Evolution based on managerial practices:

Glueck views the development in business policy as arising from the use of planning
techniques by managers. Starting from day to day planning in earlier times, managers
Page1

began to anticipate the future through preparation of budgets and control systems like

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

capital budgeting and management by objectives with the inability of these techniques to
adequately emphasize the role of preparing for the future, long range planning came to
be used. Soon long range planning was replaced strategic planning and later, by strategic
management - a term which is currently used to describe the process of strategic decision
making. Strategic management is the theoretical frame work for business policy course
today.
II. Historical perspective of evolution of Strategic management and Business Policy:
Hofer and others view the evolution of business policy in terms of four paradigm shifts.
For the sake of convenience these shifts may be considered as four overlapping phases in
the development of the subject of business policy.
1. First Phase: Paradigm of Ad hoc policy (till mid 1930’s):-
Ad hoc policy making necessitated by the expansion of American firms in terms
of products, markets and customers and the consequent need to replace informal
control and coordination by framing functional policies to guide managers.
2. Second Phase: Paradigm of planned policy (1930’s – 1940’s):-
Replacement of Ad hoc policy making by planned policy formulation and
shifting attention towards integration of functional areas, in line with
environmental requirements.
3. Third Phase: Strategy Paradigm (1960’s):
Rapid force of environmental changes and increasing complexity of managerial
functions demanding a critical look at the concept of business in relation to its
environment; hence the need for strategic decisions.
4. Fourth Phase: Paradigm of Strategic management (1980’s):-
Shifting of focus to the strategic management process and the responsibility of
general management in resolving strategic issues.

Indian Scenario:-

Management education received a big boost in early 60’s after the setting up of IIM’s and the
Administrative staff college curriculum along the lines followed in reputed American business
schools. The case method of study was an important pedagogical tool, employed in IIM,
Ahmadabad all these years several university departments, meanwhile, have started MBA
(Master in Business Administration) programs at various location throughout the country. After
the opening of Indian economy in early 90’s, the AICTE was set up to provide proper direction
to the growth of management education. The business policy and strategic management course
has gave wider acceptance as an integrative discipline in over 1500 management institutes that
have come up in the recent past A number of doctoral and post doctoral studied have also been
undertaken to enrich the knowledge in this area, especial with a clear focus on Indian companies.
A professional association called strategic management forum of India has also been for in 1996
– which is exclusively devoted to the development of issues relating to strategic management. A
Page1

number of publications covering the concepts, techniques and case study relating to business

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

policy and strategic management have also gone up impressively, especially after 90’s, such as
strategic marketing, business standards etc.

Definition:

A Business Policy is an implied overall guide setting up boundaries that supply the general limits
and direction, in which management action will take place. -Terry.

(or)

A Business policy represents the best thinking of the company management as to how the
objectives may be achieved in the prevailing economic and social conditions.

– Newman & Logan

(or)

Business policies are guides to action or channels to thinking. - Steiner, Miner & Gray.

Objective/ Purpose of Business policy course:

The business policy course is offered in various management institutions to serve three important
purposes.

1. Integrate: Integrate the knowledge and methods learned in previous course having a
functional flavor such as production, finance, market and accounting etc.
2. Develop: Develop analytical skills and decision making capabilities of participants
through the extensive use of ease, research reports, industry specific studies, and
micro and macro economic data.
3. Promote: Promote positive attitude, genuine ethical values and healthy ways of
thinking taking a holistic view of the concerns of internal as well as external stake
holders of the organization.

Nature/ Characteristics:

1. Business policy deals with decisions regarding the future of an ongoing enterprise.
2. Business policy decisions are taken at the top level after carefully evaluating the
organizational strengths and weakness in relation to its environment.
3. Business policy once established shape the future of company channel the available
resources along desired lines and direct the energies of people working at various levels
towards predetermined goals.
4. Business policy implies the choice of purpose, the shaping of organizational identity and
character, the continuous definition of what is to be achieved and the deployment of
resources for achieving corporate goals.
Page1

5. Business policies, generally, have a long life.

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

6. Business policies are dynamic and flexible as they should change in response to changing
environment and internal system conditions.
7. Business policy is an integrative course as knowledge and methods from various
functional areas are integrated for the purpose of making strategic decisions which is
basis for business policy.
8. Business policy is a multi disciplinary course. i.e. Business policy course concepts,
theories and knowledge has been gathered from other disciplines like economics,
psychology, management and statistics etc.

Scope:

Scope of business policy covers many types of policies in organization. There are different types
of policies - marketing policies, financial policies, production policies, personnel policies to
name a few in every organization. Within each of these areas, more specific policies are
developed. For example personnel policies may cover recruitment, training, promotions and
retirement policies. Viewed from a system angle, policies form a hierarchy of guides to managers
thinking. At top level policy statements are broad. The management is responsible for
developing and approving major comprehensive company policies. Middle managers usually
establish less critical policies relating to the operation of their sub units. Policies tend to be more
specific at lower levels. The manager’s job is to ensure the consonance of these policies; each
must contribute to the objectives of the firm and there should be no conflict between the sub
system policies. So, a pyramid of business policies is given below from its scope.

Pyramid of Business policy

Page1

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

Pyramid of Business policy

Importance/ significance/ Benefits/ Advantages:

1. Helps the participants to understand why functional bound are created and appreciate
why the various sub units have to move close coordination while realizing the overall
objective.
1. Helps to resolve the differences between individual and organizational goals. Every
Page1

attempt is made to pull all the functions and activities together.

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

2. Help participants to work in an orderly manner appreciate the work put in by others. They
understand and adjust with each other by developing mutual trust, cooperation and
understanding i.e. production knows its target; maintenance keeps equipment in good
order, finance arranges funds and security takes care of goods & services.
3. Creates an understanding of how overall objectives and policies are formulated; why
everyone has to focus attention on pre determined targets and goals; why one should
appreciate the view point of other while translating rhetoric into action; why one need to
anticipate changes and adjust accordingly.
4. The course will certainly improve the capabilities of participants in monitoring events,
forecasting problems and solving them proactively rather than reactively.

Page1

STRATEGIC MANAGEMENT

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

Introduction:

Strategic management is the process by which organization try to determine what need to be
done to achieve a corporate objectives and more importantly how these objectives are to be met.
i.e. Strategic decision making is done through the process of strategic management. It is a
process by which senior management examine the organization and the environment in which it
operates and attempts to establish an appropriate and optimal fit between the two to ensure the
organizations success. In other words, the term “Strategic management process” refers to the
steps by which management converts a firm’s mission, objectives into a workable strategy. In a
dynamic environment each firm need to tailor its strategic management process in a way that
best suit its own capabilities and situational requirement viewed broadly. The strategic
management process has two parts an information process and a decision process. The model for
strategic management is given below.

Which Provide Who engage in

Strategists
Information to

External Organizational rationale

Environment
Alternatives
*Opportunities Corporate. Corporate
* Threats Mission Objectives

Choice
Corporate Business level
Which Strategies Objectives about

modify Business level Functional Implementation

Internal Strategies objectives
Environment
*Strengths Functional Assessment
*Weaknesses Strategies

Information Strategic direction component Decision Process

Process
Page1

Definition:

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

It is a stream of decisions and actions which lead to the development of an effective strategy or
strategies to help achieve corporate objectives. - Glueck & Jauch

(or)

It is a continuous process of effectively relating the organizations objectives and resources to the
opportunities in the environment. - Schellen berger & Boser

(or)

It is set of decisions and actions resulting in formulation and implementation of strategies

designed to achieve the objectives an organization. - Pearce and Robinmso

Nature:

1. Strategic management is a dynamic process. i.e. it is no one time, static or mechanistic

process.
2. Strategic management is a continual, evolving, iterative process. i.e. Strategic
Management is not stepwise collection of a few activities arranged in a sequential order.
Rather it is a continually evolving mosaic of relevant activities. By being iterative, an
activity may not be required to be performed only once but repeated as time and situation
demands.
3. Strategic management is not rigid and follows no order. i.e. Managers perform different
activities in strategic management and these activities are performed in any order
contingent upon the situation they face at a particular time.

Scope:

Strategic management process consists of a number of elements, which are discrete and
identifiable activities performed in logical and sequential steps. As many as twenty different
activities/ element could be identified in strategic management. All these elements fall in scope
of strategic management.

A. Establishing the hierarchy of strategic intent

1. Creating and communicating a vision
2. Designing a mission statement
3. Defining the business
4. Adopting the business model
5. Setting objectives
B. Formulation of strategies
6. Performing environmental appraisal
7. Doing organizational appraisal
8. Formulating Corporate level strategies
Page1

9. Formulating Business level strategies

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

10. Undertaking strategic analysis

11. Exercising strategic choice
12. Preparing strategic plan
C. Implementing of strategies
13. Activating strategies
14. Designing the structure, systems and processes
15. Managing behavioral implementation
16. Managing functional implementation
17. Operationalzing strategies
D. Performing strategic evaluation and control
18. Performing strategic evaluation
19. Exercising strategic control
20. Reformulating strategies

Process:

Strategic Intent Strategy Formulation Strategy

Vision Environment organizational Implementation
Appriasal Appraisal Project Strategic
Mission
SWOT Analysis Procedural
Business Definition
Corporate level strategies Resource Evaluation
Business model Business level strategies Allocation
Objectives Strategic analysis & choice Structural
Strategic plan Behavioral
Functional &
Operational

Strategic control

The process of strategic management is depicted through a model which consists of four phases;
each phase having a number of elements. Bird’s-eye view of the different elements of the process
as given below.

1. The hierarchy of strategic intent laid the foundation for the strategic management of any
organization. In this hierarchy, the vision, mission, business definition, business model
and objectives established. The strategic intent makes clear what the organization stands
for. The element of vision in the hierarchy of strategic intent serves the purpose of stating
what the organization wants to achieve in the long run. The mission relates the
organization to society. The business definition explains the businesses the organization
in terms of customer needs, customer groups and alternative technologies. The business
Page1

model clarifies how the organization creates revenue. The objectives of the organization

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

says what is to be achieved in a given time period. These objectives then serve as yard
sticks and benchmarks for measuring organizational performance.
2. Environmental and organizational appraisal deals with identifying the opportunities and
threats operating in the environment and the strength and weaknesses of the organization
in order to create a match between them in such a manner that opportunities could be
availed of and the impact of the threat neutralized and to capitalize on the organizational
strengths and minimize the weaknesses.
Formulation of strategies takes place at four levels: Corporate, Business, Functional and
Operational. Among these levels, the major ones are the corporate and business level
strategies. Corporate strategies relate to the strategic decisions regarding the management
of portfolio of business. Business strategies aim at developing a competitive advantage in
the individual businesses that company has in its portfolio.
Strategic alternatives and choice are required for evolving alternative strategies, out of
many possible options and choosing the most appropriate strategy or strategies in the
light of environmental opportunities and threats and corporate strengths and weaknesses.
Strategies are chosen at corporate level and the business level. The process used for
choosing strategies involves strategic analysis and choice. The end result of this set of
elements is a strategic plan to be implemented.
3. For implementing of strategy, the strategic plan is put into action through six sub
processes:- Project implementation, Procedural implementation, Resource allocation,
Structural implementation, Behavioral implementation and functional & operational
implementation. Project implementation deals with setting up of an organization.
Procedural implementation deals with regulatory frame work within which an
organization has to operate. Resource allocation relates to the procurement and
commitment of resources for implementation. The structural aspects of implementation
deals with the design of appropriate organization structure and systems and reorganizing
so as to match the structure to the needs of strategy. The behavioral aspects consider the
leadership styles for implementing strategies and other issues like corporate culture,
corporate politics and use of power, personal values and business ethics and social
responsibility. The functional aspects relate to the policies to be formulated in different
functional areas. The operational implementation deals with the productivity, process,
people and pace of implementing the strategies. The emphasis in the implementation
phase of strategic management is on action.
4. The last phase of strategic evaluation appraises the implementation of strategies and
measuring the organizational performance. The feedback from strategic evaluation is
meant to exercise strategic control over the strategic management process. Strategies may
be reformulated, if necessary.
Page1

Benefits:

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

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 strategic goals. Strategies necessarily change overtime to
suit environmental changes but, to remain competitive organizations develop strategies that focus
on core competence, develop synergy and create value for the customers. That means with the
help of strategic management, organizations are benefited with below said benefits
1. Core competence: An organizations core competence is something it does exceptionally
well in comparison to its competitors. It refers a distinctive competitive advantage that
provides a firm
a) Access to variety of products/ markets.
b) Contribute greatly to customer benefits in the end products.
c) It is an exclusive and inimitable preserve of the firm that is long lasting and
cannot be 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 marketing cost,
technology and management synergy as possible when arriving at strategic decisions.
Eg:- Cost synergy can occur in almost every dimension of organization effort. When two
or more products can be designed by the same engineers, produced in the same facilities,
distributed through the same channels or sold by the same sales persons over all costs
will be lower than if each product received separate treatment.
3. Value creation: Exploiting core competencies and achieving synergy help organization
create value for their customers. Value is the some told of benefits received and cost paid
by the customer in a given situation. Ideally, the purpose 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.

Page1

STRATEGIC DECISIONS

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

Introduction:

Strategic decisions are the essence of strategic management. Strategies can be put into practice
only after choices (decisions) have been made. Strategic decisions are mainly concerned with the
selection of the product mix that the firm intends to produce and the markets in which it will sell
its products. Such decisions affect the organization as a whole over long period of time. Strategic
decisions by their very nature are characterized by considerable risk and uncertainty. Strategic
decisions involve more than one area of an organization. They require sizeable allocation of
resources. They are future oriented with long term implication. They can either take a company
to commanding heights or make it a bottom less pit.

A Chief executive officer (CEO) is the principal strategist. Others include the Board of
Directors, Line managers; Staff assistants to CEO, Corporate Planners, Public relations advisors,
Legal Officers assist CEO. CEO is responsible for an organization’s overall direction, success or
failure. The CEO is expected to ask and seek answers to the following questions while managing
the show (taking strategic decisions).

 Where have we been?

 Where are we now?
 Where we want to go?
Key Questions  Where should we go?
 Where can we go?
 Where shall we go?

Dimensions of Strategic decisions:

1. Top Management Involvement:

Strategic issues require the CEO to carefully assess the likely impact on various
divisions, allocate resources thereafter and oversee the implementation process closely.
At every stage, strategic decisions require consistent support and continued blessing from
top management.

2. Allocation of large doses of resources:

As mentioned above, strategic decisions require commitment of large doses of internal as
well as external resources over an extended period.
Page1

3. Effect on long term prosperity of the firm:

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

Strategic decisions have long term effects on firms for better or worse. Once the firm
embraces a particular strategy, its image and competitive advantages are invariably linked
to that strategy. It gains recognition in certain markets, for certain products with certain
technologies. The firm would seriously jeopardize all its previous gains if it shift focus
from these markets, products or technologies by adopting a radically different strategy.

4. Future Oriented:
Strategic decisions are built around forecasts. The emphasis is on selecting a suitable
course of action from the available alternatives and moving ahead with confidence. In the
turbulent environment, a firm will succeed only if it takes a proactive stance toward
change.

5. Multi functional or Multi business consequences:

Strategic decisions have complex implications for most areas of the firm. They impact
various strategic business units especially in areas relating to product mix, customer mix,
organization structure, competitive focus etc.

6. Focus on external groups:

In order to successfully position a firm in a competitive environment, strategists must
look beyond its operations. They must keep in mind how the other stake holders are
likely to react to its own strategic moves from time to time.

Process of strategic Decision making:

Here we have four steps in strategic decision making. They are

1. Objectives to be achieved are determined.

2. Alternative ways of achieving the objectives are identified.
3. Each alternative is evaluated in terms of its objective achieving ability and
4. The best alternative is chosen.

Issues in strategic Decision making:

1. Criteria for decision making:

The process of decision making requires objective setting. These objectives serve as
yardstick to measure the efficiency and effectiveness of the decision making process. In
this way, objectives serve as criteria for decision making.
a) The first is the concept of maximization. It is based on the thinking of the economist
who considers objectives as those attributes which are set at the highest point. The
behavior of the firm is oriented towards achieving these objectives and, in the process,
maximizing its returns.
Page1

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

b) The second view is based on the concept of satisficing. This envisages setting
objectives in such a manner that the firm can achieve them realistically, through process
of optimization.
c) The third view point is that of the concept of incrementalism. According to this, the
behavior of the firm is complex and the process of decision making, which includes
objective setting, is essentially a continually evolving political consensus building.
Through such an approach, the firm moves towards its objectives in small, logical and
incremental steps.

2. Rationality in decision making:

Rationality, in the context of strategic decision making, means measuring a choice from
among various alternative courses of action in such a way that it leads to the achievement
of objectives in the best possible manner. The economists who support the maximizing
criterion consider a decision to be rational it leads to profit maximization. Behaviorist,
who are the proponents of the satisfying concept, believe that rationality takes into
account the constraints under which a decision maker operates. Incrementalists are of the
opinion that the achievement of objectives depends on the bargaining process between
different interested coalitions groups existing in an organization and therefore, a rational
decision making process should take all these interests into consideration.

3. Creativity in decision making:

To be creative, a decision must be original and different. A creative strategic decision
making process may considerably affect the search for alternatives where novel and
untried means may be looked for an adopted to achieve objectives in an exceptional
manner. Creativity, as a trait, is normally associated with individuals and is sought to be
developed through techniques such as brain storming.

4. Variability in decision making:

It is common observation that, given an identical set of conditions, two decisions makers
may reach totally different conclusions. This often happens during case discussions also.
A case may be analyzed differently by individuals in a group of learners and, depending
on the differing perceptions of the problem and its solutions, they may arrive at different
conclusions. Such things happen due to variability in decision making. It also suggests
that every situation is unique and there are no set formulas that can be applied in strategic
decision making.

5. Person related factors in decision making:

There are a host of person related factors that play a role in decision making. Some of
these are age, education, intelligence, personal values, cognitive styles, risk taking ability
Page1

and creativity. Attribute like age, knowledge, intelligence, risk taking ability and
creativity are generally supposed to play a positive role in strategic decision making. A

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

cognitive style which enables person to assimilate a lot of information, interrelate

complex variable sand develop an integrated view of the situation is especially helpful in
strategic decision making. Values as enduring prescriptive beliefs are culture specific and
important in matter of social responsibility and business ethics issues that are important
to strategic management.

6. Individual vs Group Decision making:

Owing to person related factors, there are individual differences among decision makers.
These differences matter in strategic decision making. An organization, possessing
special characteristics, operates in unique environment. Decision makers who understand
an organization’s characteristics and its environment are in vantage position to undertake
strategic decision making. Individuals such as chief executives or entrepreneurs play the
most important role as strategic decision makers. But as organization becomes bigger and
more complex and face an increasingly turbulent environment, individuals come together
in groups for the purpose of strategic decision making.

Differences between strategic, administrative and operational decisions:

Strategic Decisions Administrative Decisions Operating Decisions

1. It is concerned with It is concerned with It usually absorbs bulk of
external, rather than internal structuring the firm resources firm’s energy & attention.
problems of the firm. in way which creates a i.e. Resource allocation,
i.e. Selection of product mix maximum performance scheduling, supervision,
& markets/ choice of potential. control actions.
resources commitment i.e. Organization flow, Eg: Pricing, Marketing
Distribution channels, Strategy, production schedule
Location of facilities, and inventory levels,
Acquisition and development Expenditure R&D, marketing
of resources, raw materials, operations etc.
Training and development,
Financing and acquisition of
facilities & equipment
2. Objective: 2. Objective: 2. Objective;
To produce a resource To provide climate for To maximize the efficiency of
allocation pattern, which will meeting objectives. firms resource conversion
offer best potential for process or To maximize
meeting the firm’s objectives. profitability of current
operations.
3. Duration: 3. Duration: 3. Duration:
Long term Short term based Medium term based
Page1

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

4. In Accordance with: 4. In Accordance with: 4. In Accordance with:

Organization’s Mission and Strategic and Operating Strategic and Administrative
Vision decisions decisions

5. Related to: 5. Related to: 5. Related to:

Over all counter planning of
all organization.
6. Deal with:
Organizational growth
7. Frequency of usage:
Rarely
Working of employee in
organization.
6. Deal with:
Welfare of employee working
in organization.
7. Frequency of usage:
Daily
Production.
6. Deal with:
Production and factory
growth.
7. Frequency of usage:
Not frequently taken

Page1

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

STRATEGIC PLANNING

Introduction:

The necessity for planning arises because of the fact that business organizations have to operate,
survive and progress in a highly dynamic environment where change is the rule, not the
exception. The change may be sudden an extensive, or it may be slow and almost imperceptible.
Planning is the process of deciding in advance what should be accomplished and how it should
be realized. It involves selecting objectives and how to achieve them. Strategic planning is type
of planning. But unlike short term planning, strategic planning involves an extended time frame,
the deployment of large percentage of the resources of an organization, a wide spectrum of
activities and a major eventual impact. Strategic planning, thus, is long term in nature. It tends to
top management responsibility. It requires looking outside the organization for threats and
opportunities. In simple terms, strategic planning is the process of determining the major
objectives of an organization and the policies and strategies that will govern the acquisition, use
and disposition of resources to achieve those objectives.

Definition:

It is concerned with the determination of the basic long term goals and objectives of an enterprise
and the adoption of course of action and allocation of resources necessary for carrying out these
goals. - Alfred chandler

Or

It is a stream of decisions and actions, which lead to the deployment of an effective strategy or
strategies to help achieve corporate objectives, decisions and actions, which determine whether
an enterprise excels, survives or dies. - William Glueck

Features of Strategic Planning:

1. It is high level.

2. It is general.

3. Its time span is long range.

4. It affects the whole organization.

5. It is usually developed from the ground upwards.

6. It covers a wide range of activities.

7. It exploits a particular concept.

Page1

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

Levels of Strategic Planning:

1. Corporate level strategic planning:

It is the process of defining the overall character and purpose of the organization, the
business it will enter and leave and how resources will be distributed among those
businesses. Strategy at this level is typically developed by top management. The
decisions are broad based, carry greater risk and affect most parts of the organization.

2. Business level strategic planning:

It is the planning process concerned primarily with how to manage the interests and
operations of a particular unit within the organization, commonly known as a strategic
business unit (SBU). A SBU is a distinct business with its own set of competitors that can
be managed reasonably independently of other businesses within the organization.
Generally, the heads of the respective business units develop business strategies, with the
approval of top management. Strategies at this level are aimed at deciding the
competitive advantage to build, determining responses to changing market situations,
allocating resources within the business unit and coordinating functional level strategies
developed by functional managers.

3. Functional level strategic planning:

It is a process of determining policies and procedures for different functions of an

enterprise like marketing, finance, personnel etc. These are developed by functional
managers and are typically reviewed by business unit heads.

Benefits of strategic planning:

1. It provides the road map for the firm. It shows the way for achieving targets.

2. It helps the firm utilize the resources in the best possible manner. It allows more
effective allocation of time and resources for identifying opportunities.

3. The firm can respond to environmental changes in a better way by exploiting

opportunities to its advantage and avoiding costly mistakes in investment decisions.

4. It minimizes the chances of mistakes and unpleasant surprises. It seeks to prepare the
firm to confront future challenges through certain proactive steps and even shape the
future to its advantage. Strategic planning allows an organization to initiate and influence
activities and thus exert control over its own destiny.

5. It creates a frame work for internal communication among personnel.

Page1

6. It helps to integrate the behavior of individuals into total effort.

VISION INSTITUTE OF MANAGEMENT:: BAPATLA

BUS 3.1: BUSINESS POLICY AND STRATEGIC ANALYSIS UNIT 1

7. It provides the basis for clarification of individual’s responsibility.

8. It gives encouragement to forward thinking.

9. It encourages favorable attitude towards change.

10. It provides a cooperative, integrated and enthusiastic approach for tackling problems and
realizing opportunities.

Pitfalls in Strategic planning:

1. Strategic planning is laborious and time consuming.

2. There are very few satisfactory short cuts.

3. Immediate results are rarely obtained.

4. Establishing and maintaining a formal system involves many expense.

5. Sophisticated strategic planning systems are a luxury for small scale organizations.

6. Trying to reach 100% perfection is an ideal intention that can never be satisfied
through strategic planning.

7. Many executives, enthralled by strategic planning, tend to overdo fact gathering job.
Much time and efforts is wasted thus collecting all sorts of data that is not fully put to
fruitful.

8. Strategic planning, quite often, restricts the organization and executives to the more
rational and risk free options. Managers are wedded to a philosophy of adopting those
strategies or objectives that bear weight of careful scrutiny and detailed analysis. In
the process, many attractive opportunities may be lost since they are characterized by
a high degree of risk and uncertainty.

Page1

VISION INSTITUTE OF MANAGEMENT:: BAPATLA