11th edition

Heinz Weinrich
Harold Koontz

Chapter no. 5
Strategies, Policies and
Planning Premises

M. Kashif Siddiqui
Strategies & Policies
• Strategies
 ‘The determination of the basic long-term objectives
of an enterprise and the adoption of courses of action
and allocation of resources necessary to achieve
these goals’

• Policies
 ‘General Statements or understandings that guide or
channel thinking in decision making’

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The Strategic Planning Process
A Conceptual Process with Key Elements

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The Strategic Planning Process

• Inputs to Organization

 Various direct inputs including the goal inputs of the

claimants / stake holders

 Already covered in chapter # 1

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The Strategic Planning Process

• Industry Analysis
• (Michael Porter)

 Formulation of a strategy requires the evaluation of

the attractiveness of an industry by analyzing the
external environment

 Kind of Competition
 Possibility of new Firms entering the Market
 Availability of Substitutes
 Bargaining Position of the Suppliers & Buyers

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The Strategic Planning Process

• Enterprise Profile

 It is usually the starting point for determining that

where the Company is & where it should go…

 TheEnterprise’s Mission
 Geographical Orientation
– One city / some cities
– Throughout the Country
– Various Countries

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The Strategic Planning Process

• Orientation, Values & Vision of Executives

 Enterprise profile is shaped by the Executives

 Executive’s orientation, values and vision are the key

drivers in organization’s strategy formulation

 Executive’s set of values and preferences impacts the

overall organization’s strategies

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The Strategic Planning Process

• Mission, Major Obj. & Strategic Intent

 Mission (Purpose): A statement that answers the

question – “What are our Business?”

 Major Obj.: The end points toward which the activities

of the enterprise are directed

 Strategic Intent: Commitment to win in the competitive

environment. The obsession of Winning!

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The Strategic Planning Process

• Present & Future External Environment

 Must be assessed in terms of Threats & Opportunities

 Assessment & Evaluation focus:
 Competitive situation
 Economic factor
 Social, political & legal factors
 Demographic & geographic factors
 Technological developments
 Alternate products or services

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The Strategic Planning Process

• Internal Environment

 Must be evaluated & audited in terms of Strengths &

Weaknesses
 Evaluation focus:
 Production & operations
 Procurement
 Marketing
 Human & financial resources
 Company image & organizational structure
 Planning & control systems
 Customer relationship

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The Strategic Planning Process

• Development of Alternative Strategies

 Based on external & internal environment analysis

 Examples:
 Specialize or Generalize
 Diversify
 Form Joint Venture (JV) or Strategic Alliance
 Liquidation
 Retrenchment

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The Strategic Planning Process

• Evaluation & Choice of Strategies

 Careful evaluation is required based on:

 Risk involved
 Timings
 Intensity of reaction from competitors

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The Strategic Planning Process

• Medium & Short term Planning,

Implementation through Reengineering,
Staffing, Leadership & Controls
 Not as such a part of Strategic Planning Process but
interrelated functions

 Feedback loop is important

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The Strategic Planning Process

• Consistency Testing & Contingency Planning

 Continuous monitoring during all phases of strategic

planning process is essential

 As future cannot be predicted with accuracy,

contingency plans need to be prepared.

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The TOWS Matrix

• Modern Tool for Analysis of the Situation

 Analyzing the competitive situation of the company

that leads to the development of four distinct sets of
strategic alternatives

 TOWS matrix is a conceptual framework for a

systematic analysis that facilitates matching of the
external threats & opportunities with the internal
weaknesses & strengths of the organization

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The TOWS Matrix

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The TOWS Matrix

• Time Dimension & the TOWS Matrix

 External & internal environment are dynamic

 Some factors change with time and vice versa
 Strategy designers prepare several matrices at
different point in time
 Helps relate both internal & external environments in
past, present & future

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The TOWS Matrix

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The Business Portfolio Matrix

• A Tool for Allocating Resources

 Shows linkages between the ‘Growth Rate’ of the

businesses and the relative ‘Competitive Position’ of
the firm in terms of Market Share

 Suitable for large organizations with multiple business

portfolios

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The Business Portfolio Matrix

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The Business Portfolio Matrix
 Stars
 These kind of businesses have opportunities for growth with good profits
due to high market share

 Question Marks
 Usually requires investment so that they become stars

 Cash Cows
 Usuallywell established markets. Production costs become low to earn
super-normal profits

 Dogs
 Usually non profitable businesses and generally should be disposed off

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Major Kind of Strategies & Policies

Major strategies and policies that give an overall direction

to business operations are likely to be:

 Product or Services
 Marketing
 Growth
 Finance
 Human Resource
 Public Relations

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Hierarchy of Company Strategies
• For Large Organizations having Diversified Portfolios

 Corporate-Level Strategies
 From top Executives, mainly for the selection of Business Portfolios

 Business Strategies
 From General Managers / Business Heads, to gain competitive adv. in
a particular area or product line

 Functional Strategies
 Devised for departments or units to support the Business & Corporate
Strategies

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Industry Analysis & Generic Competitive
Strategies
Strategy formulation requires analysis of the attractiveness of an
industry & the company’s position within that industry

• Industry Analysis
Michael Porter’s Five Forces Model
 Competition among companies
 Threats of new companies entering the market
 Possibility of using substitute products or services
 Bargaining power of suppliers
 Bargaining power of customers

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Industry Analysis & Generic Competitive
Strategies
Based on Industry Analysis, a Company may
adopt Generic Strategies

Overall Cost Leadership Strategy

 Aims at reduction in costs
 Mainly based on experience
 Continuous and close watch on costs
 Objective is to have a low-cost structure compared to the
competitors

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Industry Analysis & Generic Competitive
Strategies
Differentiation Strategy
 To offer something unique to the competitors

Focused Strategy
 Instead of serving entire market, emphasize on specific
segment of the market
 Concentrate on special groups of customers of a
particular product line

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Premising & Forecasting
 Planning Premises
 The anticipated environment in which plans are expected to
operate
 Include assumptions or forecasts of the future and known
conditions that will affect the operation of plan

 Environmental Forecasting
 Continuous monitoring is essential to develop effective plans
 Forecasting with Dephi Technique (page 137)

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