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STRATEGY V/S POLICIES

Strategy has often been used as a synonym of policy. However, both are different and should
not be used interchangeably.
Policy is the guideline for decisions and actions on the part of subordinates. It is a general
statement of understanding made for achievement of objectives. Policies are statements or a
commonly accepted understandings of decision making. They are thought oriented. Power is
delegated to the subordinates for implementation of policies. In general terms, policy is
concerned with course of action chosen for the fulfillment of the set objectives. It is an
overall guide that governs and controls managerial actions. Policies may be general or
specific, organizational or functional, written or implied. They should be clear and
consistent.
Policies have to be integrated so that strategy is implemented successfully and effectively.
For example, when the performance of two employees is similar, the promotion policy may
require the promotion of the senior employee and hence he would be eligible for promotion.
5.Strategies on the other hand are concerned with the direction in which human and physical
resources are deployed and applied in order to maximize the chances of achieving
organizational objectives in the face of environmental variable. Strategies are specific actions
6.suggested to achieve the objectives. Strategies are action oriented and everyone in the
organization are empowered to implement them. Strategy cannot be delegated downward
because it may require last minute decisions.
Strategies and polices both are the means towards the end. In other words, both are directed
towards meeting organizational objectives. Strategy is a rule for making decision while
policy is contingent decision.
• STRATEGY V/S TACTICS
Strategies are on one end of the organizational decisions spectrum while tactics lie on the
other end.
Carl Von Clausewitz, a Prussian army general and military scientist defines military
strategy as ‘making use of battles in the furtherance of the war and the tactics as “the use of
armed forces in battle”. A few points of distinction between the two are as follows:
(i) Strategy determines the major plans to be undertaken while tactics is the means by
which previously determined plans are executed.
(ii) The basic goal of strategy according to military science is to break the will of the army,
deprive the enemy of the means to fight, occupy his territory, destroy or obtain control
of his resources or make him surrender. The goal of tactics is to achieve success in a
given action and this forms one part of a group of related military action.
(iii) Tactics decisions can be delegated to all the levels of an organization while strategic
decisions can not be delegated too low in the organization. The authority is not
delegated below the levels than those which possess the perspective required for taking
decisions effectively.
(iv) Strategy is formulated in both a continuous as well as irregular manner. The decisions
are taken on the basis of opportunities, new ideas etc. Tactics is determined on a
periodic basis by various organizations. A fixed time table may be made for following
tactics.
(v) Strategy has a long term perspective and occasionally it may have a short term
duration. Thus, the time horizon in terms of strategy is flexible but in case of tactics, it
is short run and definite.
(vi) The decisions taken as part of strategy formulation and implementation have a high
element of uncertainty and are taken under the conditions of partial ignorance. In
contrast tactical decisions are more certain as they work upon the framework set by the
strategy. So the evaluation of strategy is difficult than the evaluation of tactics.

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(vii) Since an attempt is made in strategy to relate the organization with its environment, the
requirement of information is more than that required in tactics. Tactics uses
information available internally in an organization.
(viii) The formulation of strategy is affected considerably by the personal values of the
person involved in the process but the same is not the case in tactics implementation.
(ix) Strategies are the most important factor of organization because they decide the future
course of action for organization as a whole. On the other hand tactics are of less
importance because they are concerned with specific part of the organization.
Strategy- A unified, comprehensive and integrated plan that relates the strategic
advantage of the firm to the challenges of the environment.
Policy- Guideline for decisions and actions on the part of subordinates and is a
general statement of understanding made for the achievement of
objectives.
Tactics- It is the Means by which previously determined plans are executed.
Programmes- A single use comprehensive plan laying down the principal steps for
accomplishing a specific objective and sets an approximate time limit for
each stage.
Procedures- A series of functions or steps performed to accomplish a specific task or
undertaking.
Rules- A principle to which an action or a procedure conforms or is intended to
Conform.
Objective:
Objectives refer to the ultimate end results which are to be accomplished by the
overall plan over a specified period of time. The vision, mission and business
definition determine the business philosophy to be adopted in the long run. The goals
and objectives are set to achieve them.
Meaning
l Objectives are openended attributes denoting a future state or out come and are
stated in general terms.
l When the objectives are stated in specific terms, they become goals to be
attained.
l In strategic management, sometimes, a different viewpoint is taken.
l Goals denote a broad category of financial and non-financial issues that a firm
sets for itself.
l Objectives are the ends that state specifically how the goals shall be achieved.
l It is to be noted that objectives are the manifestation of goals whether
specifically stated or not.
Difference between objectives and goals
The points of difference between the two are as follows:
l The goals are broad while objectives are specific.
l The goals are set for a relatively longer period of time.
l Goals are more influenced by external environment.
l Goals are not quantified while objectives are quantified.
Broadly, it is more convenient to use one term rather than both. The difference
between the two is simply a matter of degree and it may vary widely.
Need for Establishing Objectives
The following points specifically emphasize the need for establishing objectives:
l Objectives provide yardstick to measure performance of a department or SBU
or organization.
l Objectives serve as a motivating force. All people work to achieve the

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objectives.
l Objectives help the organization to pursue its vision and mission. Long term
perspective is translated in short-term goals.
l Objectives define the relationship of organization with internal and external
environment.
l Objectives provide a basis for decision-making. All decisions taken at all levels
of management are oriented towards accomplishment of objectives.
What Objectives should be set?
According to Peter Druker, objectives should be set in the area of market standing,
innovation productivity, physical and financial resources, profitability, manager
performance and development, worker performance and attitude and public
responsibility. Researchers have identified the following areas for setting objectives:
Profit Objective: It is the most important objective for any business enterprise. In
order to earn a profit, an enterprise has to set multiple objectives in key result areas
such as market share, new product development, quality of service etc. Ackoff calls
them performance objectives.
Marketing Objective may be expressed as: “to increase market share to 20 percent
within five years” or “to increase total sales by 10 percent annually”. They are related
to a functional area.
Productivity Objective may be expressed in terms of ratio of input to output. This
objective may also be stated in terms of cost per unit of production.
Product Objective may be expressed in terms of product development, product
diversification, branding etc.
Social Objective may be described in terms of social orientation. It may be tree
plantation or provision of drinking water or development of parks or setting up of
community centers.
Financial Objective relates to cash flow, debt equity ratio, working capital, new
issues, stock exchange operations, collection periods, debt instruments etc. For
example a company may state to decrease the collection period to 30 days by the end
of this year.
Human resource Objective may be described in terms of absenteeism, turnover, number of
grievances, strikes and lockouts etc. An example may be “to reduce
absenteeism to less then 10 percent by the end of six months”.
Characteristics of Objectives
The following are the characteristics of corporate objectives:
i) They form a hierarchy. It begins with broad statement of vision and mission and
ends with key specific goals. These objectives are made achievable at the lower
level.
ii) It is impossible to identify even one major objective that could cover all
possible relationships and needs. Organizational problems and relationship
cover a multiplicity of variables and cannot be integrated into one objectives.
They may be economic objectives, social objectives, political objectives etc.
Hence, multiplicity of objectives forces the strategists to balance those
diverse interests.
iii) A specific time horizon must be laid for effective objectives. This timeframe
helps the strategists to fix targets.
iv) Objectives must be within reach and is also challenging for the employees.
If objectives set are beyond the reach of managers, they will adopt a
defeatist attitude. Attainable objectives act as a motivator in the
organization.

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v) Objectives should be understandable. Clarity and simple language should be the

hallmarks. Vague and ambiguous objectives may lead to wrong course of action.
vi) Objectives must be concrete. For that they need to be quantified.
Measurable objectives help the strategists to monitor the performance in a
better way.
vii) There are many constrants internal as well as external which have to be
considered in objective setting. As different objectives compete for scarce
resources, objectives should be set within constraints.
Process of Setting Objectives
Glueck identifies four factors that should be considered for objective setting. These
factors are: the forces in the environment, realities of an enterprise’s resources and
internal power relations, the value system of top executives and awareness by the
management of the past objectives. They are briefly narrated below:
i) Environmental forces, both internal and external, may influence the interests of
various stake holders. Further, these forces are dynamic by nature. Hence
objective setting must consider their influence on its process.
ii) As objectives should be realistic, the efforts be made to set the objectives in such
a way so that objectives may become attainable. For that, existing resources of
enterprise and internal power structure be examined carefully.
iii) The values of the top management influence the choice of objectives. A
philanthropic attitude may lead to setting of socially oriented objectives while
economic orientation of top management may force them to go for profitability
objective.
iv) Past is important for strategic reasons. Organizations cannot deviate much from
the past. Unnecessary deviations will bring problems relating to resistance to
change. Management must understand the past so that it may integrate its
objectives in an effective way.
Environmental scanning and forecasting
Scanning is acquiring information.It is gathering intelligence.Environmental scanning
involves obtaining information from the environment to detect emerging trends and create
scenarios.It monitors and interprets changes already underway.It forecasts identify
opportunities that have potential impact.It is used to identify opportunities and threats to
formulate strategy.
 According to Azhar Kazmi :The process by which organizations monitor their
relevant environment to identify opportunities and threats affecting their business is
known as environmental scanning.
 Changes in Micro environment :They consisting of politicalegal,economic,social
cultural,and technological process.
 Structure of the market :They can be competition,monopoly,monopolistic
competition.
 Nature of competition :Strengths and weakness of
competitors;leaders,followers,and nicher type competitors.
 Customers :The needs and behaviors of customers groups.
 Products mix :Differentiation,positioning,threat of invasion from imitation and
substitute products.
The outcome of environmental scanning is creation of scenarios.They can be :
 Most probable scenarios
 Most favourable scenarios
 Least favourable scenarios

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Environmental Scanning
The second component of environmental analysis is to develop information about the
environment. Information has two primary strategic role - in objective setting and
in strategy formulation. As managers scan the environment, they interpret environmental
influence in the light of their own perceptions, expectations, and values.
Environmental scanning is the process of gathering information about events and their
relationships within an organization's internal and external environments. The basic purpose
of environmental scanning is to help management determine the future direction of the
organization. The most widely accepted method for categorizing different forms of scanning
divides into the following three types:
1. Irregular scanning systems: These consist largely of ad hoc environmental studies.
2. Regular Scanning systems: These systems revolve around a regular review of the
environment or significant environmental components. This review is often made
annually.
3. Continuous scanning systems: These systems constantly monitor components of
the organizational environment.
Before managers can begin to formulate an effective strategy, they must make a critical
examination of the firms's environment.
Assessing the strategic situation is the first phase in determining the content of the
proper strategies for a firm. This process begins with an assessment of the general
environment of the firm, in terms of economic, technological, social, and political/legal
influences.
Analyzing the organization's industry is the second major aspect of assessing the firm's
strategic situation. An industry structure analysis identifies the major forces affecting
competition in an industry and determines the strengths and weaknesses of the business
relative to the industry.
Michael Porter has identified five basic competitive industry forces: the threat of new
entrants in the industry, the intensity of rivalry among existing competitors, the pressure
from producers of substitute products or services, the bargaining power of buyers of the
industry's outputs, and the bargaining power of suppliers to the industry's companies.
Management must find for a firm a position in the industry from which it can best
defend itself against these competitive forces or can influence them to its advantages.
Another major element of the industry environment is the product/market life cycle
which assumes that all products, and, therefore, industries, move through stages of a life
cycle.
In analyzing an industry, its is also useful to determine if the industry is a global
industry, that is, an industry that requires global operations to compete effectively.
The organization's internal environment is the third aspect of assessing the strategic
situation, which must be done before strategy alternatives are formulated.
Several techniques are available to help management develop a worthwhile
environmental analysis.
Environmental scanning involves studying and interpreting social, political, ecological,
and technological events in an effort to spot budding trends and conditions that could
affect the industry.
Strategic managers must not only understand the current state of the environment and
their industry but also be able to forecast its future states. Moreover, once having
implemented the environmental analysis process, management should continually
evaluate and strive to improve it.

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Environmental Scanning - Internal & External Analysis of Environment

Organizational environment consists of both external and internal factors. Environment
must be scanned so as to determine development and forecasts of factors that will influence
organizational success. Environmental scanning refers to possession and utilization of
information about occasions, patterns, trends, and relationships within an organization’s
internal and external environment. It helps the managers to decide the future path of the
organization. Scanning must identify the threats and opportunities existing in the
environment. While strategy formulation, an organization must take advantage of the
opportunities and minimize the threats. A threat for one organization may be an opportunity
for another.
Internal analysis of the environment is the first step of environment scanning. Organizations
should observe the internal organizational environment. This includes employee interaction
with other employees, employee interaction with management, manager interaction with
other managers, and management interaction with shareholders, access to natural resources,
brand awareness, organizational structure, main staff, operational potential, etc. Also,
discussions, interviews, and surveys can be used to assess the internal environment.
Analysis of internal environment helps in identifying strengths and weaknesses of an
organization.
As business becomes more competitive, and there are rapid changes in the external
environment, information from external environment adds crucial elements to the
effectiveness of long-term plans. As environment is dynamic, it becomes essential to
identify competitors’ moves and actions. Organizations have also to update the core
competencies and internal environment as per external environment. Environmental factors
are infinite, hence, organization should be agile and vigile to accept and adjust to the
environmental changes. For instance - Monitoring might indicate that an original forecast of
the prices of the raw materials that are involved in the product are no more credible, which
could imply the requirement for more focused scanning, forecasting and analysis to create a
more trustworthy prediction about the input costs. In a similar manner, there can be changes
in factors such as competitor’s activities, technology, market tastes and preferences.
While in external analysis, three correlated environment should be studied and analyzed —
 immediate / industry environment
 national environment
 broader socio-economic environment / macro-environment
Examining the industry environment needs an appraisal of the competitive structure of the
organization’s industry, including the competitive position of a particular organization and
it’s main rivals. Also, an assessment of the nature, stage, dynamics and history of the
industry is essential. It also implies evaluating the effect of globalization on competition
within the industry. Analyzing the national environment needs an appraisal of whether the
national framework helps in achieving competitive advantage in the globalized
environment. Analysis of macro-environment includes exploring macro-economic, social,
government, legal, technological and international factors that may influence the
environment. The analysis of organization’s external environment reveals opportunities and
threats for an organization.
Strategic managers must not only recognize the present state of the environment and their
industry but also be able to predict its future positions.
Environmental Scanning
Every organization has an internal and external environment. In order for the organization to be
successful, it is important that it scans its environment regularly to assess its developments and
understand factors that can contribute to its success. Environmental scanning is a process used
by organizations to monitor their external and internal environments.

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Environmental Scanning
The purpose of the scan is the identification of opportunities and threats affecting the business
for making strategic business decisions. As a part of the environmental scanning process,
the organization collects information regarding its environment and analyzes it to forecast the
impact of changes in the environment. This eventually helps the management team to make
informed decisions.

As seen from the figure above, environmental scanning should primarily identify opportunities
and threats in the organization’s environment. Once these are identified, the organization can
create a strategy which helps in maximizing the opportunities and minimizing the threats.
Before looking at the important factors for environmental scanning, let’s take a quick peek at
the components of an organization’s environment.
Components of a Business Environment

As you can see above, the internal environment of an organization consists of various elements
like the value system, mission/objectives of the organization, structure, culture, quality of
employees, labor unions, technological capabilities, etc. These elements lie within the
organization and any changes to them can affect the overall success of the business.
On the other hand, an organization cannot operate in a vacuum. Also, there are many factors
outside the walls of an organization which affects the functions of the business. These factors
constitute the external environment of an organization.
The internal environment offers strengths and weaknesses to business while the external
environment brings opportunities and threats. The four influencing environmental factors
known as SWOT Analysis are:
1. Strength – an inherent capacity of an organization which helps it gain a strategic
advantage over its competitors.

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2. Weakness – an inherent constraint or limitation which creates a strategic

disadvantage for a business.
3. Opportunity – a favorable condition in the organization’s environment enabling it to
strengthen its position.
4. Threat – an unfavorable condition in the organization’s environment causing damage
to the organization.
Important Factors for Environmental Scanning
Before scanning the environment, an organization must take the following actors
into consideration:
 Events – These are specific occurrences which take place in different environmental
sectors of a business. These are important for the functioning and/or success of the
business. Events can occur either in the internal or the external environment.
Organizations can observe and track them.
 Trends – As the name suggests, trends are general courses of action or tendencies
along which the events occur. They are groups of similar or related events which tend to
move in a specific direction. Further, trends can be positive or negative. By observing
trends, an organization can identify any change in the strength or frequency of the events
suggesting a change in the respective area.
 Issues – In wake of the events and trends, some concerns can arise. These are Issues.
Organizations try to identify emerging issues so that they can take corrective measures
to nip them in the bud. However, identifying emerging issues is a difficult task. Usually,
emerging issues start with a shift in values or change in which the concern is viewed.
 Expectations – Some interested groups have demands based on their concern for
issues. These demands are Expectation