Business Policy

(Strategic Management)

Chapter 1
 Business Policy
If we know where we are and something about how we got there,
we might see where we are trending – and if the outcomes which
lie naturally in our coure are unacceptable, to make time change.

-Abraham Lincoln-
If a man takes no thought about what is distant, he will find
sorrow near at hand. He who will not worry about what is afar off
will soon find something worse than worry.
-Confucius-
Without strategy, an organization is like a ship without a rudder,
going around in circles. It’s like a tramp; it has no place to go.
-Joel Ross & Michael Kami-

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policy
 Business Policy
• Strategic Planning originated in the 1950’s and
was very popularized between mid-1960’s and the
mid-1970’s.
• A strategic plan is, in essence, a company’s game
plan.
• A strategic plan results from tough managerial
choices among numerous good alternatives, and
it signals commitment to specific markets,
policies, procedures and operations in lieu of
other “less desirable” courses of action.

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policy
 Business Policy
Three Stages of Strategic Management:
• Strategy Formulatioin
• Strategy Implementation
• Strategy Evaluation

Strategy Formulation: includes developing a

vision and mission, identifying an
organization’s external opportunities and
threats, determining internal strength and
weaknesses, establishing long-term
objectives, generating alternative strategies
and choosing particular strategy to pursue.
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policy
 Business Policy
• Strategy Implementation: requires a firm to establish annual
objectives, devise policies, motivate employees, and allocate
resources so that formulated strategies can be executed.
• Includes developing a strategy –supportive culture, creating an
effective organizational structure, redirecting marketing efforts,
preparing budgets, developing and utilizing information systems,
and linking employee compensation to organizational
performance.
• Strategy Evaluation: is the final stage in strategic management.
Fulfilling the need to know of managers when particular strategies
are not working well; strategy evaluation is the primary means for
obtaining this information

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policy
 Case Presentation
I. Introduction
II. Mission/Vision
III. Internal Assessment
I. Strengths
II. Weaknesses
IV. External Assessment
I. Opportunities
II. Threats
V. Strategy Formulation
VI. Strategy Implementation
VII. Strategy Evaluation
VIII.Conclusion/Recommendation
Page: 354363 of Strat. Mgt. FRD

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policy
 Business Policy
• Strategists: are the individuals who are most responsible for the success
and failure of an organization.
o Responsibilities of the CEO:
– He, working closely with the board of directors, must elaborate the
major policies of a firm
– He, working closely with the board of directors, and his top managers,
must define the objectives of the firm.
– He, working closely with his top manager, and develop strategies and
the long-range plan for achieving these objectives.
– He must develop an organization which most efficiently carries out the
copany’s strategic plan.
– He, working together with his top managers, must develop te operating
policies which ease the burden of decision-making to carry out the plan.
– He, depending upon his philosophy of management (degree of
decentralizaztion of authority and responsibilties) will, also be involved
in controlling the operations of the firm and in problem solving.

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policy
 Business Policy
• Major Policies – deal with the firm’s fundamental nature,
its identity, and the direction in which it is expected to
move. They provide a framework within which the
objectives can be established.
• Objectives – the firm’s objectives or goals (these are two
terms used interchangeably) specify, usually in quantitative
terms (e.g. Dollars, percentages, or time periods), whre the
firm is expected to be at some time in the future.
• Strategy – is the approach developed to achieve the
objectives which have been defined. The development of
strategy is a critical part of long-range planning. A firm’s
strategy (it’s strategic plan) defines in detail how the firm is
to get from where it is now to where the objectives state it
should be at some time in the future.

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policy
 Business Policy
• Operating Policies
• Operating policies are guides for decision-
making. The operating policies of a firm flow out
of its objectives, its strategy, and its organization.
The objectives, plus, the policies, define the
character or personality of the firm.
• They proivde a framework within which
management can make decisions that are
consistent in themselves and are in accordance
with the strategic plan and its objectives.

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policy
 Business Policy
• Major Policies of an Enterprise:
• Are usually stated in the “Statements of Purpose” of the
company.
– “This company will be one of the leading firm in the manufacturing of all
types of textiles, and eventually of ready-made clothing. Full ownership
shall remain in th hands of members of the family”.
• It can also be stated that the Major Policy for a company is to
“maximize profits or minimize losses consistent with other
major policies and objectives.”
• Another Policy could be expressed in terms of products and/or
services the company will produce and sell.
• A usual Policy is stated in terms of anticipated position within
the firm’s industry.

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policy
 Business Policy
• Major Policies of an Enterprise:
• Some executives feel that a firm must either grow or die.
• They feel if a firm does not have growth as its goal, it will not be an
innovator; it will merely replace machinery as they wear out and
replace men as they retire.
– A policy of “NO GROWTH” may even be consistent with long life and increasing
profits if it is accompanied by an active strategy of the correct amount of
marketing effort, innovation, and perhaps diversification to maintain present
sales values.
• Another type of policy will concern the geographic market for the
product or service. The firm may now sell only in a given region/area.

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policy
 Business Policy
• Major Policies of an Enterprise:
• Another policy may also indicate the product quality.
– If the company makes furniture; the management may wish to
establish a reputation as a manufacturer of modern mass-
produced furniture, or it may wish to concentrate on cheap
reproduction or just stylish furniture.
• Another policy involves ownership.
– A family may wish to retain 100% ownership, or may it wish to
maintain only management control over the enterprise.
• Finally, a Policy could also include the degree of the
company’s social responsibility to which the company
will devote itself.

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policy
 Why some firms Do No Strategic
Planning???
• Poor reward structures- but quick to punish
• Firefighting – reactive management
• Waste of time-does not believe in planning as an
investment.
• Too expensive
• Laziness
• Content with success
• Fear of failure
• Overconfidence

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policy
 Business Policy
• Reasons for not doing Strategic Planning
– Prior bad experience
– Self-interest
– Fear of the unknown
– Honest difference of opinion
– Suspicion
• Business Ethics
– Principles of conduct within organizations that guide decision
making and behavior.
– Good Business Ethics is a pre-requisite for good strategic
management. Good Business ethics is Good Business.
– Good ethics also mean environmentally sensitive.

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policy
 Business and Military
• Strategy
Strategy
– Defined by the Webster’s New Dictionary as the
“Science of planning and directing large-scale military operations, of
maneuvering forces into the most advantageous position prior to
actual engagement with the enemy”.
– came from the Greek term Strategos
• Statos means the Army
• Ago means to Lead
– Based on history strategic management in business and
military means “Gaining competitive advantage”
• Sun tzu’s Art of War
– All warfare is based on deception

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policy