Business Policy &

Strategic Management
Module 1.0
(09.03.2017, 23.03.2017)
BBA – D (Semester 6)

Faculty: S. Venkatanarayanan
Amity University, Dubai
 Introduction to
Strategic Management & Strategic Intent
Module 1.0
(09.03.2017, 23.03.2017)
Strategic Situation
Example
(Class Discussion)
 Strategy – What is it?
Perspectives
• Strategy is about making deliberate choices between what to do; and also
what not to do.

• Strategy defines and communicates an organization’s unique position and it

should determine how organizational resources, skills and competencies
should be combined to create sustainable competitive advantage. (Michael
Porter)

• Competitive Strategy is about being different. It means deliberately choosing

a different set of activities to deliver a unique mix of values. (Michael Porter)
 Strategy – What is it?
Perspectives
• Strategy determines the direction and scope of an organization over
the longer term and it should determine how resources should be
configured to meet the needs of market and stakeholders. (Gerry
Johnson & Kevan Scholes - “Exploring corporate Strategy”)

• Strategy is an integrated and co-ordinated set of commitments and

actions designed to exploit core competencies and gain a competitive
advantage. (Hitt, Ireland & Hoskisson, 1997)

• Strategy is about determining how to win in the period ahead.

 Business Strategy
Strategy is the pattern of decisions in a company that,
• determines and reveals its objectives, purposes or goals
• produces the principal policies & plans for achieving those goals
• defines
• the range of business the company is to pursue
• the kind of economic and human organization it is or intends to be,
and
• the nature of the economic and noneconomic contribution it intends
to make to its shareholders, employees, customers, and communities.

Kenneth Andrews, ‘The Concept of Corporate Strategy’

(Homewood, IL: Richard D. Irwin, 1971)
 Strategic Business Unit (SBU)
A Strategic Business Unit is an operating division of a firm which
serves a distinct product-market segment or a well-defined set of
customers or a geographic area.
The SBU is given the authority to make its own strategic decisions
within the ambit of corporate guidelines as long as it meets
corporate objectives.
 Strategic Decisions
Dimensions/Characteristics
1. Top management decisions (decision of Ford to restructure operations on a
global scale)
• Perspective to understand the broad implications
• Power to authorize necessary resource allocations
2. Substantial resources (people, physical assets, finance)
3. Long-term implications
• Time horizon will vary from industry to industry (fashion vs oil extractive industries)
4. Long-term commitment / irreversible (decision of Marks & Spencer to build
out-of-town shopping centers)
5. Risky
• Irreversibility and substantial commitment (decision of Boeing to manufacture its first jumbo jet)
 Strategic Decisions
Dimensions/Characteristics
6. Visionary / Future oriented (decision of Dunhill to redefine its
business as luxury consumer goods for men than just pipes & tobacco)
7. Unique - Emphasis on projections
• Break from the past rather than what is known (many building societies in the
UK changing status from mutual status to banks)
8. Complex, companywide implications (multi-functional, multi-
business)
9. Attention to external environment
10. Infrequent (decision of Daimler-Benz in 1990 to change its method
of manufacture from cost-plus to price-minus)
 Decision-making Hierarchy
Three Levels of Strategy

Level 1
Corporate Strategy (Landmark Group)
(Multiple BU Firm)

Level 2 Business Strategy (Business X, Business Y, Business Z)

(BU/SBU/Division) (EMax, Centrepoint, Home Centre etc.)

Level 3 Functional Strategy

(Team)

Marketing Operations Financial Human Resources

Strategies Strategies Strategies Strategies
 Corporate Strategy
• Overall strategy of a firm (corporation) that is made up of multiple
business units operating in multiple markets.

How do we structure/support the overall firm/business, so that all of

its parts create more value together than they would individually?

• Responsibility of Board of Directors, Chief Executive, Top

Management, Founder-Entrepreneur
 Corporate Strategy
Areas of engagement
• Overall responsible for the firm’s financial performance and non-
financial goals.
• Make choices - industries, product-markets, geographies to compete in.
• Build strong internal competencies.
• Share technologies & resources between business units.
• Raise capital cost-effectively.
• Develop & nurture a strong corporate brand.
• Decide on investments, acquisitions and divestitures.
• Decide on vertical integration.
 Business Strategy
(Competitive Strategy)
How do we compete/win successfully in the chosen product-markets,
businesses, industries to establish & sustain competitive advantage?

(Business strategy needs to be linked to the objectives identified in the

corporate strategy.)

• Responsibility of Business Manager, Divisional Manager, SBU Head,

General Manager of a Business Unit, Senior Management
 Business/Competitive Strategy
Areas of engagement
• Translate the statements of direction and intent generated at the
corporate level into concrete objectives and strategies for individual
business divisions or SBUs.
• Understand the opportunities & threats in the market.
• Deploy core competencies to meet market needs.
• Strengthen competitive position.
• Create and exploit new opportunities.
 Functional Strategy
How will every function contribute towards execution of the business
and corporate strategy?

(Functional Strategy must align with and lead directly to achievement

of business and corporate strategies.)

• Responsibility of Managers of product, geography and functional

areas
 Functional Strategy
Areas of engagement
• Develop annual objectives and short-term strategies in functional
areas – marketing, operations, finance, human resources
• Implement best practices to help teams meet its objectives efficiently
and effectively in every function.
• Ensure success of products and services in the market
• Implement activities that optimize operational excellence, quality,
customer service, supplier management etc.
 Strategic Plan

A systematic process set by Board of Directors and top management for

making competitive decisions, setting priorities, allocating resources
and defining direction on how to achieve strategic goals.
 Tactical Plan

A measurable detailed process, developed by middle management,

that focusses on what activities, resources and budgets will be used
over the mid-term to achieve the strategic goals.
 Operational Plan

Developed by first level management to achieve short-term operational

goals, by narrowly focusing on specific parts of the organization’s
activities on how to use people & resources to produce goods/services.
 Strategic Management

Strategic Management is the set of decisions & actions that result

in the formulation, implementation and evaluation of effective
strategies and plans to help achieve company’s objectives.

Strategic Management process is the way in which strategists

determine objectives and make strategic decisions.
Strategic Management Model
3 Key Questions

1. Where are we now?

2. Where do we want to go?

3. How do we get there?

 Strategic Management Process
3 Key Stages

Strategy
Strategy Strategy
Implementatio
Formulation Evaluation
n

(Planning Stage) (Action Stage) (Review Stage)

 Strategic Management Model
Company, External Internal factors / Strategic
Long term
mission, vision environment capabilities and analysis and
objectives
and values and analysis analysis choice

Feedback

Strategic Short-term
Resources and Policies and Generic and
evaluation and objectives and
structure plans grand strategies
control strategies
 Strategic Management
Critical tasks
1. Formulate the company’s mission, vision and values.
2. Assess the company’s external environment – immediate industry &
competitive and macro-environment factors, both, present and future).
3. Undertake an analysis of the company’s internal strengths,
weaknesses and conditions.
4. Analyze the company’s strategic options/choices by matching its
resources with the external environment.
5. Identify the most desirable options/choices by evaluating each option
in light of the company’s mission and vision.
 Strategic Management
Critical tasks
6. Select a set of long-term objectives and grand strategies that
will achieve the most desirable options.
7. Develop annual objectives and short-term strategies
(compatible with the long-term objectives and grand strategies).
8. Implement the strategic options/ by means of budgeted
resource allocations for the required tasks, people, structures,
technologies etc.
9. Review and evaluate the success of the strategic process for
future decision making.
 Strategic Management
Key Terms
Objectives

Specific results that an organization seeks to achieve in pursuing

its basic mission.

Should be challenging, measurable, consistent, reasonable, clear.

 Strategic Management
Key Terms
Long-term Objectives
Results that an organization seeks to achieve over a multiyear
period.

Annual Objectives (Short-term Objectives)

Desired results that provide specific guidance for action during a
period of one year or less.
Short-term milestones that organizations must achieve to reach
long-term objectives.
 Strategic Management
Key Terms
Strategies

The means by which long-term objectives will be achieved.

Geographic expansion, diversification, acquisition, market

penetration, market development, product development,
retrenchment, divestiture, liquidation and joint ventures.
 Strategic Management
Key Terms
Generic Strategies
Fundamental basic options for the design of strategies.
(Low Cost, Differentiation, Focus)

Grand Strategies
The means by which objectives are achieved.
(15 basic approaches)
 Strategic Management
Key Terms
Functional Tactics

Short-term narrow-scoped plans that details the means or

activities that a company will use to achieve short-term objectives.
 Strategic Management
Key Terms
Plans and Policies are guides to decisions and actions. They indicate
how resources are to be allocated and how tasks assigned to the
organization might be accomplished so that functional-level
managers can execute the strategy properly.

Policies are predetermined decisions that substitute for managerial

discretion in recurring situations and repetitive decision making.
They include guidelines, rules and procedures established to support
efforts to achieve stated objectives.
 For and Against Strategic Management

Allows firms to anticipate changing conditions and plan accordingly.

Planning, especially, long-term planning is difficult as conditions change so rapidly.
Provides clear objectives and direction for employees.
Objectives may often remain vague and general.
The process can be very helpful as research in strategic management is advancing.
Managers pay little attention to research and studies are not done properly.
Firms because of strategic management are more effective and reap good results.
There are many other reasons for success and many firms are effective without
formal planning.

(Pros, Cons)
 Strategic Alignment Mandate

on

Vis
ss i

ion
Mi
Values

Corporate Strategy
(Multiple BU Firm)

Business Strategy
(BU/SBU/Division)

Functional Strategy
(Team)

Marketing Operations Finance Human Resources

 Vision
A well-conceived vision of a company consists of the following:
1. Core Ideology
a) Core Purpose (Mission)
b) Core Values
2. Envisioned Future
a) Big, hairy, audacious goals (BHAG)
b) Vivid descriptions of future achievement

Harvard Business Review

 Core Values
Envisioned
Future
Vision

Reason for Being

(Why we exist)

Guiding Principles
(What we stand for)
Mission
(Core Purpose)

Ambitious LT Goals
Vivid Description

Harvard Business Review

 Mission

Declares the reason for being/existence and provides the framework,

guiding principles and direction of the organization.

What is our business?

What do we want to be?
Who we are?
Who do we serve?
 Mission
Core Purpose
• Is an organization’s real, deeper and most fundamental reason for
being/existence (beyond just making money – creating customer or social value).
• Is the unique purpose that sets a company apart from others of its type and
identifies the scope of its operations.
• Reflects people’s idealistic motivations for doing the company’s work.
• Does not just describe the organization’s output or target customers, but
captures the soul of the organization.
• Is broad in scope and addresses important needs/problems (beyond
products/services).
 Mission
Core Purpose
• Lasts a long, long time (say, 100 years) (markets, competition,
strategies, structures & conditions may change but not the mission).
• Is short, inspiring and memorable so that it can be lived and practiced
by employees on a day-to-day basis.
• Is like a guiding star on the horizon – forever pursued but never
reached or fully realized.
• Helps resolve disputes about future direction of the company.
• Not all firms have a formal mission statement.
 Mission Statements
(Examples)
3M – To solve unsolved problems innovatively.
Google – To organize the world’s information and make it universally
accessible and useful.
Hewlett-Packard – To make technical contributions for the advancement
and welfare of humanity.
Walt Disney – To be one of the world’s leading producers and providers of
entertainment and information. (To make people happy.)
Merck – To preserve and improve human life.
Dell – To be the most successful computer company in the world at
delivering the best customer experience in markets we serve.
 Mission Statements
(Examples)
Facebook – To give people the power to share and make the world more
open and connected.
Sony – To experience the joy of advancing and applying technology for
the benefit of the public.
Ford – We are a global family with a proud heritage passionately
committed to providing personal mobility for people around the world.
Wal-Mart – To give ordinary folk the chance to buy the same things as
rich people.
McKinsey & Company – To help leading corporations and governments
be more successful.
 Elements of a good mission statement
1. Customers—Who are the firm’s customers?
2. Products or services—What are the firm’s major products or services?
3. Markets—Where does the firm compete?
4. Technology—Is the firm technologically current?
5. Concern for survival, growth, profitability—Is the firm committed to growth and
financial soundness?
6. Philosophy—What are the basic beliefs, values, aspirations and ethical priorities
of the firm?
7. Self-concept—What is the firm’s distinctive competence or major competitive
advantage?
8. Concern for public image—Is the firm responsive to social, community and
environmental concerns?
9. Concern for employees—Are employees a valuable asset of the firm?
 Mission Statement
Critical Evaluation

We aspire to make PepsiCo the world’s premier consumer products

company, focused on convenient foods and beverages. We seek to
produce healthy financial rewards for investors as we provide
opportunities for growth and enrichment to our employees, our business
partners and the communities in which we operate. And in everything we
do, we strive to act with honesty, openness, fairness and integrity.
 Mission Statement
Critical Evaluation

We aspire to make PepsiCo the world’s (3) premier consumer products

company, focused on convenient foods and beverages (2). We seek to
produce healthy financial rewards for investors (5) as we provide
opportunities for growth and enrichment to our employees (9), our
business partners and the communities (8) in which we operate. And in
everything we do, we strive to act with honesty, openness, fairness and
integrity (6).
 Business Definition
What business are we in?
A precise statement/description of the products/services, functions or activities
and markets that the firm presently pursues.
• Products/services are the outputs of value created by the system to be sold to
customers. (Mode of transport to use – land, air, water – to move passengers and/or
cargo)
• Markets refer to classes/types of customers or geographic regions where the product or
service is sold. (Customers in the US)
• Functions refer to technologies or processes used to create and add value. (Specific
means of transport – bus, taxi, car, truck, train, helicopter, ship)
(E.g. We design, develop, produce, market and service microprocessor-based personal
computers in the Middle East.)
 Core Values
Core Values (also called Code of Conduct) are a small set of deeply held and
timeless guiding principles (usually about 3-5) by which a company navigates.
• Are the essential and enduring tenets of an organization.
• Might be a competitive advantage but, more importantly, they define for the
company/employees – what they are, what they stand for and how they will
conduct their business.
• Have intrinsic value and importance to those inside the organization and does not
require external justification.
• Are largely independent of the current environment, competitive needs or
management fads.
• Very often emerges from the founders’ beliefs.
 Core Values
(Examples)
Walt Disney
• No cynicism
• Creativity, dreams and imagination
• Nurturing and promulgation of ‘wholesome American values’
• Fanatical attention to consistency and detail
Merck
• Corporate social responsibility
• Unequivocal excellence in all aspects of the company
• Science-based innovation
 Core Values
(Examples)
Merck (contd.)
• Honesty and integrity
• Profit, but profit from work that benefits humanity
Sony
• Elevation of the Japanese culture and national status
• Being a pioneer – not following others; doing the impossible
• Encouraging individual ability and creativity
 Vision

Clear verbal description of what we need to do in a defined period of

time to fulfill the mission.
 Envisioned Future
(A) Vision-level BHAG
• 10-to-30 year big, hairy, audacious goal (lofty goals and ambitious
plans that rev up the entire organization).
• Is an aspirational statement about the future direction and impact of
a company.
• Is clear and compelling.
• Serves as a unifying focal point of effort.
• Acts as a catalyst for team spirit.
• Has a clear finish line.
 Envisioned Future
(A) Vision-level BHAG
• Is tangible, energizing and highly focused.
• Applies to the entire organization.
• Is visionary rather than just strategic or tactical.
• Requires extraordinary effort to reach the goal.
• Is a task of creation of a future and not prediction.
• Visions may change occasionally over time unlike missions.
 Envisioned Future
(B) Vivid Description
• Vibrant engaging and specific description of what it will be like to
achieve the BHAG.
• Translates the vision from words into pictures/images to make the
BHAG tangible in people’s minds.
• Should evoke passion, emotion and conviction in the employees.
E.g. ‘On the cover of Business Week as a model success story’
E.g. ‘The Fortune most admired top-ten list’
E.g. ‘The best business management graduates want to work here’
 Vision Statements
(Different Types)
1. Quantitative or Qualitative
• Democratize the automobile (Ford Motor Company, early 1900s)
• Become the company most known for changing the worldwide poor
quality image of Japanese products (Sony, early 1950s)
• Become a $125 billion company by the year 2000 (Wal-Mart, 1990)
2. Common-enemy BHAGs
• Crush Adidas (Nike, 1960s)
• Knock off RJR as the number one tobacco company in the world
(Philip Morris, 1950s)
 Vision Statements
(Different Types)
3. Role-model BHAGs
• Become the Harvard of the West (Stanford University, 1940s)
• Become the Nike of the cycling industry (Giro Sport Design, 1986)
4. Internal-transformation BHAGs (large, established companies)
• Become number one or two in every market we serve and
revolutionize this company to have the strengths of a big company
combined with the leanness and agility of a small company (General
Electric Company, 1980s)
 Strategic Intent

A stretch vision with a strategic plan for getting there.

Gary Hamel and C. K. Prahlad

 References
Strategic Management, Formulation, Implementation and Control (12th Edition) – Pearce, Robinson, Mital
Business Policy and Strategic Management (7th Edition) – Lawrence R. Jauch, Rajiv Gupta, William F. Glueck
Strategic Management and Business Policy (3rd Edition) - Kazmi
HBR and online articles
Module
End