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Successful strategy formulation does not at all guarantee successful strategy implementation. It
is always more difficult to actually carry out something than to say you are going to do it.
Strategy implementation requires support, discipline, motivation and hard work from all
managers and employees. Managers should pay careful attention to a number of key issues
while executing the strategies. Chief among them are how the organisation should be structured
to put its strategy into effect and how such variables as leadership, power and organisational
culture should be managed to enable employees to work together while implementing the
firms strategic plans. Organisations in stable, predictable environments often become relatively
tall, with many hierarchical levels and narrow spans of control. On the other hand, companies in
dynamic, rapidly changing environments usually adopt flat structures with few hierarchical
levels and wide spans of control.

Leadership is the art and process of influencing people so that they will strive willingly and
enthusiastically towards achievement of the organisations purpose. Specific styles of leadership
are often associated with specific approaches to the crafting and execution of strategies. The
organisations purpose and strategy do not just drop out of a process of discussion, but are
actively directed by an individual with strategic vision, whom we call strategic leader.
Strategic leadership establishes the firms direction by developing and communicating a vision
of the future and inspiring organisation members to move in that direction. Unlike managerial
leadership which is generally concerned with the short-term day-to-day activities, strategic
leadership is concerned with determining the firms strategy, direction, aligning the firms
strategy with its culture, modeling and communicating high ethical standards, and initiating
changes in the firms strategy when necessary. The most successful leadership is not just to
define the vision and mission of an organisation in a cold, abstract manner but to communicate
trust, enthusiasm and commitment to strategy.

Role of a Strategic Leadership

Leaders play a central role in performing six critical and interdependent activities in
implementation of strategies:

1. Clarifying strategic intent

2. Setting the direction
3. Building an organisation
4. Shaping organisation culture
5. Creating a learning organisation
6. Instilling ethical behaviour

1. Clarifying strategic intent: Leaders motivate employees to embrace change by setting

forth a clear vision of where the businesss strategy needs to take the organisation.
2. Setting the Direction: Leaders set the direction and scope of the organisation through
formulating appropriate corporate and business strategies.
3. Building the organisation: Since leaders are attempting to embrace change, they are
required to rebuild their organisation to align it with the ever changing environment
and needs of the strategy. And such an effort often involves overcoming resistance to
change and addressing problems like the following:
(a) Ensuring a common understanding about organisational priorities
(b) Clarifying responsibilities among managers and organisational units
(c) Empowering managers and pushing authority lower in the organisation
(d) Uncovering and remedying problems in coordination and communication across
the organisation
(e) Gaining personal commitment from managers to a shared vision
(f) Keeping closely connected with whats going on in the organisation.
4. Shaping organisational culture: Leaders play a key role in developing and sustaining a
strategy supportive culture. Leaders know well that the values and beliefs shared
throughout their organisation will shape how the work of the organisation is done. Andwhen
attempting to embrace accelerated change, reshaping their organisations culture is Notes
an activity that occupies considerable time for most leaders.
5. Creating a learning organisation: Leaders must also play a central role in creating a
learning organisation. Learning organisation is one that quickly adapts to change. The
five elements central to a learning organisation are:
(a) Inspiring and motivating people with a mission or purpose
(b) Empowering people at all levels throughout the organisation
(c) Accumulating and sharing internal knowledge
(d) Gathering external information
(e) Challenging the status quo to stimulate creativity
6. Instilling ethical behaviour: Ethics may be defined as a system of right and wrong. Business
ethics is the application of general ethical standards to commercial enterprises. A leader
plays a central role in instilling ethical behaviour in the organisation.
The ethical orientation of a leader is generally considered to be a key factor in promoting
ethical behaviour among employees. Leaders who exhibit high ethical standards become
role models for others in the organisation and raise its overall level of ethical behaviour.
In essence, ethical behaviour must start with the leader before the employees can be
expected to perform accordingly.

Leadership Approaches
Research has found that some leadership approaches are more effective than others for bringing
about change in organisation. Three types of leadership that can have a substantial impact are
transactional, transformational and charismatic leadership. These types of leadership are briefly
explained below:

1. Transactional Leadership: Transactional leaders clarify the role and task requirements of
subordinates, initiate structure, provide appropriate rewards, and try to be considerate to
and meet the social needs of subordinates. The transactional leaders ability to satisfy
subordinates may improve productivity. Transactional leaders excel at management
functions. They are hardworking, tolerant, and fair minded. They take pride in keeping
things running smoothly and efficiently. Transactional leaders often stress the impersonal
aspects of performance, such as plans, schedules and budgets. They have a sense of
commitment to the organisation and conform to organisational norms and values. In
short, transactional leaders use the authority of their office to exchange rewards such as
pay and status for employees and generally seek to enhance an organisations performance
steadily, but not dramatically. In other words, transactional leadership is important to all
organisations, but leading change requires a different approach, viz. transformational

2. Transformational Leadership: Transformational leaders have a special ability to bring

about innovation and change. They encourage the followers to question the status quo. They
have the ability to lead change in the organisations mission, strategy, structure and
culture as well as promote innovation in products and technologies. Transformational
leaders do not rely solely on tangible rules and incentives to control specific transactions
with followers. They focus on intangible qualities such as vision, shared values, and ideas
to build relationships and find common ground to enlist in the change process.

3. Charismatic and Visionary Leadership: Charismatic leadership goes beyond transactional

and transformational leadership. Charisma is a fire that ignites followers energy and
commitment, producing results above and beyond the call of duty. The charismatic
leader has the ability to inspire and motivate people to do more than what they would
normally do, despite obstacles and personal sacrifice. Followers transcend their own selfinterests
for the sake of the leader.
Charismatic leaders are often skilled in the art of visionary leadership. A vision is an
attractive, ideal future that is credible yet not readily attainable. Visionary leaders see
beyond current realities and help followers believe in a brighter future. They speak to the
hearts of their followers, letting them be part of something bigger than themselves. Thus,
visionary leaders have a strong vision for the future and can motivate others to help
realise it. They have an emotional impact on subordinates because they strongly believe
in the vision and can communicate it to others in a way that makes the vision real,
personal and meaningful to others.
When charismatic and visionary leaders respond to organisational problems, they can
have a powerful, positive influence on organisational performance.
Organizational system
These are many types of organizational systems each one playing its own role in
the implementation of a strategy. An organization has to perform a preset tasks in
order to achieve the goals and objectives. It is therefore very important to evolve
systems that will combine these divisions and departments in a well coordinated
way. Communications between various sections are also specifically laid down.
1. Information System
For any strategy to be properly implemented, communication channels are
essential so that information from one manager can be sent to another. The
structure of the organization divides the total responsibility of the whole
organization while the information system is required to co-ordinate the
responsibility that has been divided sectional wise. Information system is essential
to enable the manager to get the necessary information required to perform his task
effectively. It is also known as Management Information System. It is a link
between various activities within the organization so that they can be effectively
performed. Strategies should be aware of the effects of the strategic changes on the
requirements of the information system because this information system provides
the base of the administration and design of the other organizational systems.
2. Motivation System
The motivation system is essential as it plays a positive role in getting the desired
and required behaviour of an individual or a group of individuals. This is required
so tat managers are encouraged to work efficiently and effectively towards the
achievement of the corporate goals.
An organization comprises of different types of individuals, from all walks of life ,
from different backgrounds and cultures. The individual objectivesof the
organizational members may not be consistent with the objectives of the
organization. This hence requires a system of motivation through the system
incentives Strategists have to deal with all the issues related to the design and
administration of the motivation system which induce the desired positive
behaviour from an individual.
3. Control System
The main function of the control system is to enforce a particular desired
behaviour. Here the top management measures the performance of each section /
departments and determines corrective action on those that are away from the
duration. This is done keeping in view the goals and objectives of the company so
that they can effectively attained. The management evaluates the performance
against some pre-set standards. Controls thus enables the implementation of the
strategy to be adopted according to predetermined plans. A control system is
required only when the owner-manger cannot do all the work himself. Hence he
allocated the responsibility to another individual. In order to ensure that the other
person does the work properly, controls are necessary. Controls are devices to
enforce strategic behaviour so that the organization can operate as one entity
towards a preset goal.
4. Appraisal System
The appraisal system is required to evaluate the performance of an individual /
section so that the required behaviour can be made best use of. This system
evaluates an individuals / sections / management performance with respect to the
organizational objectives. It serves as an auditing system. It is through appraisal
that personal salary, rewards, promotions are fixed. It is very important to have a
proper mix of qualitative and quantitative factors so that the appraisal of an
individual / section can be viewed as a whole. The person who does the appraisal
of another should not have close contact with that other person. It is only then that
he will be able to evaluate the performance of the other individual /section.
Appraisal should be done at regular intervals and not yearly just before the yearly
increments / promotion. In the case of committees appointed for a specific
assignment, appraisal is done at the completion of that assignment.
5. Planning Systems
Planning systems are essential for the formulation of the strategy only. In some
companies planning of strategies are done as a staff function and they provide the
strategies to the line personnel to be executed. In othercompanies those managers
who are responsible for the achievement of the goals are also part of the
formulation of plans. This is essential as they alone will know which plan / goal is
feasible and will try their best to achieve their targets. Thus when these managers
are consulted in the formulation of targets and plans the successful implementation
of these targets enchanced. Planning systems can work in a centralized manger in
the case of an entrepreneurial firm but in case of a very large organization a
decentralized one will be more successful with the active participation of all the
divisional leads Thus it is important to adapt the planning system according to the
strategy being implemented.
6. Development Systems
Development of skills, knowledge of top management is a must in todays fast
competitive world. Here the systematic improvement of the attitude, skills,
knowledge, performance of top managers is done systematically through class
sessions, seminar and out stations trips. Career planning of managers to prepare
them for future strategic tasks. This is required as if the managers are unhappy,
then their unhappiness can percolate to those in his section also. These managers
should also be updated with the latest development in the organization. This is
done through training and education of managers through internal and external
training programme
Business policy is important as a course in the management curriculum
and as a component of executive development programmes for middle-level
managers who are preparing to move up to the senior
management level. To highlight the importance of business policy, we
shall consider four areas where this course proves to be beneficial.
For learning the course
For Understanding the business environment
For understanding the business organization
For personal development
For Learning the course
Business policy seeks to integrate the knowledge and experience
gained in various functional areas of management. It enables the
learner to understand and make sense of the complex interaction that
takes place between different functional areas.
Business policy deals with the constrains and complexities of real-life
business. In contrast, the functional area courses are based on a
structured, specialized and well developed body of knowledge,
resulting from a simplification of the complex overall tasks and
responsibilities of the management.
For Understanding the Business Environment
Regardless of the level of management of person belongs to, business
policy helps to create an understanding of how policies are formulated.
This helps in creating an appreciation of the complexities of the
environment that the senior management faces in policy formulation.
By gaining an understanding of the business environment, managers
become more respective to the ideas and suggestions of the
management. Such an attitude on the part of the management makes
the task of policy implementation simpler.
For Understanding the Organization
Business policy presents a basic framework for understanding strategic
decision making while a person is at the middle level of management.
Such a framework, Combined with the experience gained while
working in a specialized functional area, enables a person to make
preparations for handling general management responsibilities. This
benefits the organization in a variety of ways.
For Personal Development
A study of business policy offers considerable scope for personal
development. It is a fact of organizational life that the different
subunits within an organization have a varying value and importance
at different times.
It often happens that a company which has followed a production
orientation as a matter of policy gradually shifts emphasis to
marketing, maybe due to increasing competition.


The Business policy of an organization is influenced by various interrelated and

interacting, factors. These factors can be classified as internal and external factors.
The determinants which are internal to the firm/organization and which influence
the decisions directly are known as the internal factors. External factors include all
those factors which act from outside the firm and influence the organization
externally. We discuss these determinants one by one below:

Internal Factors The determinants include the Business mission, Business

objectives, Business resources and the management values which are all internal to
the organization and play a very important role in the formulation of Business
1. Business Mission: The policy maker has to understand the Business mission, so
that the policy is in tune with it. Business mission provides the company with the
meaning for which it exists and operates. Because policy provides guidelines for
managerial action, it has to be made in a manner that it accomplishes the Business

2. Business Objectives: Another internal determinant of Business policy are the

Business objectives. All organizations frame organizational objectives and work
towards their achievement. Policy makers must take into account the economic,
financial and other objectives of the company.

3. The Resources: The organization has to carry out its activities keeping in mind
the resources it has. The Business policy has to identify the various
resources available and then only call it be made sound. The size of plants, capital
structure, liquidity position, personnel sk0is and expertise, competitive position,
nature of product etc. all help in the formulation of Business policy.

4. Management Values: Business policy reflects the values imbibed in the

organization. The personal values of the managers forming Business policy
influences its formulation. Management values differ from organization to
organization. It is an important determinant of Business policy.

External Factors These include the forces external to the firm. The external
determinants of Business policy are industry structure, economic environment and
political environment.
1. Industry Structure: The formulation of Business policy is influenced by the
industry ill which the firm exists. The structure of industry comprises of size of
firms, the entry barriers, number of competitors etc. The Business policy is
formulated keeping in mind competitors, strategies, policies, etc.

2. Economic Environment: Economic environment comprises of the demand,

supply, price trends, the national income, availability of inputs, the various
institutions etc. It includes all these factors which influence the policies of the firm.
Therefore, it becomes one of the most important determinants of Business policy.

3. Political Environment: The firm has to carry Out its activities in accordance
with the government regulations and policies. If these are not complied with the
firm would not be able to meet its objectives in ail efficient manner. The various
policies like monetary policy, fiscal policy, credit policy influence the Business
policy of the firm.

4. Social Environment: The firm affects various sections of the society. The
various sections ill turn influence the activities of the firm. The social beliefs of the
managers influence policies. The religious, cultural and ethnic dimensions have to
be dealt with while formulation policies of an organization.

5. Technology: Every now and then, new technologies are entering the market. An
organization has to change with the changes in the environment. It has to remain
up to date with respect to technology it uses. Thus technology also plays an
important role in formulation of Business policy.