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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 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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 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.
rowena ginafe p. vargas,mba, business 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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 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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 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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 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. rowena ginafe p. vargas,mba, business 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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 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.
rowena ginafe p. vargas,mba, business 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.

rowena ginafe p. vargas,mba, business 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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 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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 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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 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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