Professional Documents
Culture Documents
Business Policy defines the scope or spheres within which decisions can be taken
by the subordinates in an organization. It permits the lower level management to
deal with the problems and issues without consulting top level management every
time for decisions.
Business policies are the guidelines developed by an organization to govern its
actions. They define the limits within which decisions must be made. Business
policy also deals with acquisition of resources with which organizational goals can
be achieved. Business policy is the study of the roles and responsibilities of top
level management, the significant issues affecting organizational success and the
decisions affecting organization in long-run.
Business policies are important and affect everything from legal liabilities to employee satisfaction
and a positive public image. Policies make sure everyone is on the same page when it comes to
expectations of certain things. A business might have policies pertinent to different aspects of the
company. There may be safety policies, human resources hiring policies and anti-discrimination
policies. There may also be policies that pertain to employees' dress code, lunch schedules, time off
and holidays. Other policies are relevant to the customer experience including greeting customers,
phone call management and product delivery specifics.
All of these policies create a positive work environment. Employees who feel safe at work from injury
or discrimination are happier and more productive. This is an important aspect of productivity that
every business owner must consider. When employees have specific directives on dress code,
scheduling and requesting time off, it levels the field and shields employees from favoritism. It sets
the tone of the office dynamic and the foundation for teamwork. Simply organizing schedules
requires working as a team, or at least considering others on the team.
When it comes to policies on operations and the customer experience, this is imperative to
consistent operations and being able to troubleshoot potential problems. If the policy is to follow up
after a product is delivered, and that doesn't happen, managers can target that segment of the
process to higher returns.
OBJECTIVES
The objective of Business policy is to achieve its common goals.Business policy is the study
of roles and responsibilities of top level management,the significant issues affecting
organizational success and the decisions affecting organization in the long run.these
includes guidelines,rules and procedures to reach its common goals.the main objective of
the business organization is profit maximization and customer satisfaction.
What is Strategy?
Strategic Management
Strategic management is the process of building capabilities that allow a firm to create
value for customers, shareholders, and society while operating in competitive markets It
entails the analysis of internal and external environments of firms to maximize the use
of resources in relation to objectives . Strategic management can depend upon the size
of an organization and the proclivity to change the organization’s business environment.
Strategic Intent
Definition: Strategic Intent can be understood as the philosophical base of strategic
management process. It implies the purpose, which an organization endeavor of
achieving. It is a statement, that provides a perspective of the means, which will
lead the organization, reach the vision in the long run.
Strategic intent gives an idea of what the organization desires to attain in future. It
answers the question what the organization strives or stands for? It indicates the
long-term market position, which the organization desires to create or occupy and
the opportunity for exploring new possibilities.
Strategic Intent Hierarchy
1.
1. Vision: Vision implies the blueprint of the company’s future position.
It describes where the organization wants to land. It is the dream of
the business and an inspiration, base for the planning process. It
depicts the company’s aspirations for the business and provides a peep
of what the organization would like to become in future. Every single
component of the organization is required to follow its vision.
2. Mission: Mission delineates the firm’s business, its goals and ways to
reach the goals. It explains the reason for the existence of business. It
is designed to help potential shareholders and investors understand the
purpose of the company. A mission statement helps to identify, ‘what
business the company undertakes.’ It defines the present capabilities,
activities, customer focus and business makeup.
3. Business Definition: It seeks to explain the business undertaken by
the firm, with respect to the customer needs, target audience, and
alternative technologies. With the help of business definition, one can
ascertain the strategic business choices. The corporate restructuring
also depends upon the business definition.
4. Business Model: Business model, as the name implies is a strategy
for the effective operation of the business, ascertaining sources of
income, desired customer base, and financing details. Rival firms,
operating in the same industry relies on the different business model
due to their strategic choice.
5. Goals and Objectives: These are the base of measurement. Goals are
the end results, that the organization attempts to achieve. On the other
hand, objectives are time-based measurable actions, which help in the
accomplishment of goals. These are the end results which are to be
attained with the help of an overall plan, over the particular period.
The vision, mission, business definition, and business model explains the
philosophy of business but the goals and objectives are established with the
purpose of achieving them.
Strategic Intent is extremely important for the future growth and success of the
enterprise, irrespective of its size and nature.
Unit 3
Corporate level strategy
GRAND – STABILUTY- EXPANSION- RETRENCHMENT - COMBINATION
Grand Strategies
Definition: The Grand Strategies are the corporate level strategies designed to identify the
firm’s choice with respect to the direction it follows to accomplish its set objectives. Simply, it
involves the decision of choosing the long term plans from the set of available alternatives. The
Grand Strategies are also called as Master Strategies or Corporate Strategies.There are four
grand strategic alternatives that can be followed by the organization to realize its long-term
objectives:
1. Stability Strategy
2. Expansion Strategy
3. Retrenchment Strategy
4. Combination Strategy
The grand strategies are concerned with the decisions about the allocation and transfer of
resources from one business to the other and managing the business portfolio efficiently,
such that the overall objective of the organization is achieved. In doing so, a set of alternatives
are available to the firm and to decide which one to choose, the grand strategies help to find
an answer to it.
Business can be defined along three dimensions: customer groups, customer functions and
technology alternatives. Customer group comprises of a particular category of people to
whom goods and services are offered, and the customer functions mean the particular service
that is being offered. And the technology alternatives covers any technological changes made
in the operations of the business to improve its efficiency.
Stability Strategy
Definition: The Stability Strategy is adopted when the organization attempts to maintain its
current position and focuses only on the incremental improvement by merely changing one
or more of its business operations in the perspective of customer groups, customer functions
and technology alternatives, either individually or collectively.
Generally, the stability strategy is adopted by the firms that are risk averse, usually the small
scale businesses or if the market conditions are not favorable, and the firm is satisfied with
its performance, then it will not make any significant changes in its business operations. Also,
the firms, which are slow and reluctant to change finds the stability strategy safe and do not
look for any other options.
Stability Strategies could be of three types:
1. No-Change Strategy
2. Profit Strategy
3. Pause/Proceed with Caution Strategy
To have a better understanding of Stability Strategy go through the following examples in the
context of customer groups, customer functions and technology alternatives.
1. The publication house offers special services to the educational institutions apart from its
consumer sale through the market intermediaries, with the intention to facilitate a bulk buying.
2. The electronics company provides better after-sales services to its customers to make the
customer happy and improve its product image.
3. The biscuit manufacturing company improves its existing technology to have the efficient
productivity.
In all the above examples, the companies are not making any significant changes in their
operations, they are serving the same customers with the same products using the same
technology.
Expansion Strategy
is adopted by an organization when it attempts to achieve a high growth as compared to its
past achievements. In other words, when a firm aims to grow considerably by broadening the
scope of one of its business operations in the perspective of customer groups, customer
functions and technology alternatives, either individually or jointly, then it follows the
Expansion Strategy.
The reasons for the expansion could be survival, higher profits, increased prestige,
economies of scale, larger market share, social benefits, etc. The expansion strategy is
adopted by those firms who have managers with a high degree of achievement and
recognition. Their aim is to grow, irrespective of the risk and the hurdles coming in the way.
The firm can follow either of the five expansion strategies to accomplish its objectives:
1. Expansion through Concentration
2. Expansion through Diversification
3. Expansion through Integration
4. Expansion through Cooperation
5. Expansion through Internationalization
Go through the examples below to further comprehend the understanding of the expansion
strategy. These are in the context of customer groups, customer functions and technology
alternatives.
1. The baby diaper company expands its customer groups by offering the diaper to old aged
persons along with the babies.
2. The stockbroking company offers the personalized services to the small investors apart from
its normal dealings in shares and debentures with a view to having more business and a
diversified risk.
3. The banks upgraded their data management system by recording the information on
computers and reduced huge paperwork. This was done to improve the efficiency of the
banks.
In all the examples above, companies have made significant changes to their customer
groups, products, and the technology, so as to have a high growth.
Retrenchment Strategy
Definition: The Retrenchment Strategy is adopted when an organization aims at
reducing its one or more business operations with the view to cut expenses and
reach to a more stable financial position.
In other words, the strategy followed, when a firm decides to eliminate its activities
through a considerable reduction in its business operations, in the perspective of
customer groups, customer functions and technology alternatives, either
individually or collectively is called as Retrenchment Strategy.
1. Turnaround
2. Divestment
3. Liquidation
1. The book publication house may pull out of the customer sales through market intermediaries
and may focus on the direct institutional sales. This may be done to slash the sales force and
increase the marketing efficiency.
2. The hotel may focus on the room facilities which is more profitable and may shut down the
less profitable services given in the banquet halls during occasions.
3. The institute may offer a distance learning programme for a particular subject, despite
teaching the students in the classrooms. This may be done to cut the expenses or to use the
facility more efficiently, for some other purpose.
In all the above examples, the firms have made the significant changes either in their
customer groups, functions and technology/process, with the intention to cut the expenses
and maintain their financial stability.
Combination Strategy
means making the use of other grand strategies (stability, expansion or retrenchment)
simultaneously. Simply, the combination of any grand strategy used by an organization in
different businesses at the same time or in the same business at different times with an aim
to improve its efficiency is called as a combination strategy.
Such strategy is followed when an organization is large and complex and consists of several
businesses that lie in different industries, serving different purposes. Go through the following
example to have a better understanding of the combination strategy:
* A baby diaper manufacturing company augments its offering of diapers for the babies to
have a wide range of its products (Stability)and at the same time, it also manufactures the
diapers for old age people, thereby covering the other market segment (Expansion). In order
to focus more on the diapers division, the company plans to shut down its baby wipes division
and allocate its resources to the most profitable division (Retrenchment).
In the above example, the company is following all the three grand strategies with the
objective of improving its performance. The strategist has to be very careful while selecting
the combination strategy because it includes the scrutiny of the environment and the
challenges each business operation faces. The Combination strategy can be followed either
simultaneously or in the sequence.
Turnaround Strategy
Definition: The Turnaround Strategy is a retrenchment strategy followed by an
organization when it feels that the decision made earlier is wrong and needs to be
undone before it damages the profitability of the company.
Simply, turnaround strategy is backing out or retreating from the decision wrongly
made earlier and transforming from a loss making company to a profit making
company.
Now the question arises, when the firm should adopt the turnaround strategy?
Following are certain indicators which make it mandatory for a firm to adopt this
strategy for its survival. These are:
▪ Continuous losses
▪ Poor management
▪ Wrong corporate strategies
▪ Persistent negative cash flows
▪ High employee attrition rate
▪ Poor quality of functional management
▪ Declining market share
▪ Uncompetitive products and services
Divestment Strategy
Definition: The Divestment Strategy is another form of retrenchment that
includes the downsizing of the scope of the business. The firm is said to have
followed the divestment strategy, when it sells or liquidates a portion of a business
or one or more of its strategic business units or a major division, with the objective
to revive its financial position.
The divestment is the opposite of investment; wherein the firm sells the portion of
the business to realize cash and pay off its debt. Also, the firms follow the
divestment strategy to shut down its less profitable division and allocate its
resources to a more profitable one.
An organization adopts the divestment strategy only when the turnaround strategy
proved to be unsatisfactory or was ignored by the firm. Following are the
indicators that mandate the firm to adopt this strategy:
It is the most crucial and the last resort to retrenchment since it involves serious
consequences such as a sense of failure, loss of future opportunities, spoiled
market image, loss of employment for employees, etc.
The firm adopting the liquidation strategy may find it difficult to sell its assets
because of the non-availability of buyers and also may not get adequate
compensation for most of its assets. The following are the indicators that
necessitate a firm to follow this strategy:
STEPS IN STRATEGY
IMPLEMENTATION
Step #1: Define your strategy framework
You need to start with a simple framework that introduces a strategy lexicon that
everyone can understand and get behind. When someone asks 'how are our
strategic objectives going' - everyone should be on exactly the same page about
what that actually means. At Cascade we use the following 'strategy house' to
define the different elements of our strategy:
You can learn more about this approach in our How to Write a Strategic Plan
Guide and if you like it, we've also got a free template you can download to plug
your own strategy in. But the essence is that it gives us a clear way to both
structures and talk about strategy implementation. It avoids using too much
jargon. Also, we've deliberately chosen to include only a vision statement, rather
than the more popular 'vision/mission' combo. The reason we've done this is
because we found that people often struggle to understand the difference
between the two. Confusion of any kind is the last thing we want when talking
about strategy implementation, so we went for the approach of just including a
vision statement.
If you need to add more depth to your strategy, consider using a strategy
framework such the Balanced Scorecard or McKinsey's Strategic Horizons.
We've written a guide to help you decide which framework is right for you.
Whichever framework you choose though, be sure to keep things as simple as
possible. (All of the frameworks in our guide pass this test with flying colors!).
The next step of our guide to strategy implementation is where you will start
creating your plan. Now that you've got your framework(s) in place, you're to
move onto the actual creation of your strategic plan. We've previously written in-
depth guides to writing strategic plans so we won't cover that again here - but
assuming you're using a framework similar to the one above, here's how we'd
suggest approaching the creation of your plan:
1. Gather the leaders of the organization (founders, CEO, directors, etc) to agree on
your vision. You might do this in a workshop, and we've written a really popular
post that should also help.
2. At the same workshop, start to write down the values that the organization holds.
If you're struggling, check out this post about creating values, or this post about how
we did it here at Cascade.
3. Finally (same workshop still) write down 3 or 4 focus areas that the team think
need to be addressed in order to reach the vision. Our focus area guide is here if
you need it.
4. Then stop! Don't be tempted to move onto creating strategic objectives just yet.
5. Take your basic framework back to your team(s) and start to get them to
independently input ideas for strategic objectives under each of the focus areas.
You might want to assign one focus area to each member of your leadership
team, and have them lead the charge for getting that focus area fleshed out. This
is a great way to ensure buy-in to the final product of your strategic plan.
6. Once you've fleshed out the strategic objectives, get back together as a group
and ask yourself a series of hard questions:
- If we deliver each of these strategic objectives under a given focus area, will we
have nailed that focus area?
- If we deliver all of our focus areas, will we reach our vision?
- Will our values help or hinder us along the way?
7. If you're green across the board, it's time to go ahead and launch your strategic
plan - check out our tips for the best way to do that here.
Missing something?
You might notice that we haven't covered the bottom layer of our strategy house
yet: projects and KPIs. That's because part of the strategy implementation
process should be about empowering people throughout the organization to
come up with their own projects. Now that you've got a solid foundation in place,
the risks of that process are greatly diminished and will help you gain momentum
and buy into your strategic plan.
• Keep them simple. Don't try to come up with complex ratios that only a small
group of people understand. Make them simple and relatable to everyone in the
organization.
• Choose at least 1 KPI for each of your strategic objectives. More than 1 is fine - but
keep the total number for the organization to no more than 6 or 7.
• Don't make them too hard to measure quickly. I've seen great-looking KPIs that
can only start to be measured years after the strategy begins. That simply isn't
going to work for keeping your strategy implementation efforts focused in the
early days.
• Don't make them all about the $$$ - sure, profit and revenue might be your end-
game, but KPIs should be the drivers of those things - measuring the outcomes
alone adds little value.
Here are our focus areas and the KPIs we use for each:
- Client NPS
Clients Stay & Grow - Average length of a subscription (days)
- Average revenue per subscription
Push The Industry Forward - Total google searches for industry keywords
I think we can do a bit better for our KPIs in the 'Industry' and 'People' space - let
me know in the comments if you've seen any really good KPIs that cover this. But
overall, these KPIs have been a huge part of helping us to implement our
strategy.
One final point: You need to update progress of your KPIs at least once per
month, or you risk quickly losing focus on them. Spend the time now as part of
your strategic planning process to figure out how to get access to the stats/data
that you need.
Step 4 of our guide to strategy implementation is where you can start to establish
your strategy rhythm. The ironic thing about strategy implementation is that even
though everyone acknowledges how important it is - it's often the first thing to be
forgotten about when the going gets tough. People get so caught up in the day-
to-day that they don't have time to focus on the big picture items that will keep
the organization moving forward. This rapidly becomes a self-fulfilling cycle and
is one of the most common reasons why strategies fail.
Decide upfront what your strategy rhythm is going to be - i.e.:
If you're looking for a good starting point, this is what we'd suggest:
A monthly meeting called 'Strategy Checkpoint' with the leadership team. One
hour in the diary. Preferably in a board/conference room. An alternating chair
person (strategy shouldn't be seen as the domain of the CEO alone) who goes
through an agreed upon reporting framework, inviting updates from the owners of
all of the key initiatives under the strategy.
Follow this up with a quarterly all-staff session where you share the highlights of
progress against the strategy and call-out teams that have made a particularly
big push.
This style of report is great for the leadership meeting because it's detailed
without being over-bearing. However, when you're updating the wider business,
you might want to go with a more visually attractive approach. Try something like
a Strategy Dashboard (another example below from Cascade):
Whichever style you go with, try to keep the same format time-after-time so that
people know exactly what to expect.
The first 5 steps of our guide to strategy implementation are the absolute basics
to ensure that you successfully implement your strategy. But organizations who
truly succeed are those who manage to weave strategy implementation into the
fabric of their existence. An easy way to get started with this is to create a formal
link between strategy and performance reviews. Nothing shows people how
important strategy is more than when it impacts their reviews and potentially
even their reward/remuneration.
There are a few ways that you can do this. One is to invest in a performance
management system that has these links built into its HR processes. But even if
you're doing performance reviews the old-fashioned way, you can still make a
point of awarding specific credit to employees who embrace strategy execution in
their role and can clearly demonstrate how they've contributed.
2. Ineffective training
A new strategic initiative will never get off the ground without the proper
training for employees who are expected to execute. There are many reasons
companies skimp on proper corporate and learning opportunities for
employees, and we broke them down in an earlier blog post.
There are multiple modern options for unobtrusive, yet highly effective training
that fit into employees’ busy schedules
3. Lack of resources
The most common direct costs of executing a new strategy are associated
with the consultants or board members brought in to plan, execute, and
provide training, as well as the cost of any new associated technology. This
can be prohibitive for a company of any size, especially small- to mid-sized
companies and non-profits.
4. Lack of communication
Communication is key in the execution of any new strategy. An effective
communication plan must be initiated from the top down. Transparent, honest
communication is not only the quality of an effective organization, but it is a
necessary step for any new roll out. Lack of communication results in
disjointed teams and widespread uncertainty.
Strategic alignment
Strategic alignment is the process and the result of linking an organization's structure and
resources with its strategy and business environment (regulatory, physical, etc.) Strategic alignment
enables higher performance by optimizing the contributions of people, processes, and inputs to the
realization of measurable objectives and, thus, minimizing waste and misdirection of effort and
resources to unintended or unspecified purposes. In the modern, global business environment,
strategic alignment should be viewed broadly as encompassing not only the human and other
resources within any particular organization but also across organizations with complementary
objectives (i.e., performance/business partners).
"Strategic alignment" can also refer to a state in which a "company's business and product
development strategies are aligned with its customers, users, and marketplace," leading to economic
success.
STRATEGIC ALIGNMENT (verb): The process of aligning an organization’s decisions and
actions such that they support the achievement of strategic goals.
Projects that are aligned with strategy deliver clear and quantifiable benefits to
your organization. Those that are not aligned to strategy may deliver some
financial benefit (they’d better!) but they don’t really help you achieve real value
growth in the business. By killing off low-value projects and focusing resources on
high-value ones, you will, naturally enough, deliver more value.
4. Eliminate waste
We’ve all seen them - projects that just shouldn’t be there. Pet projects get jammed
through, or projects that exist because they were important at some point in the
past. Well, aligning projects to strategy means those projects go away… and in our
experience, this “waste” is typically 10% - 40% of your portfolio. Imagine saving
up to 40% - you’d be a hero!
5. Secure the PMO
According to ESI, 72% of PMOs are being called into question by their executives.
Why? Because they are not seen to add value…. But if you see the benefits listed
in points 1 - 4, you will be seen to be adding heaps of value. Don’t just survive,
THRIVE!
6. Clearer resource allocation decisions
Now we’re getting a little more tactical. One benefit of picking projects that are
aligned with strategy is that you have to quantify which projects add more (or less)
value. This resolves one of the PMO (and resource “owner”) biggest problems;
how to allocate resources. With clarity over which projects are most important,
those resourcing decisions become a lot easier and a lot less political. No more
“Loudest voice wins!”
7. Stronger benefits realization
How can you realize benefits that you don’t understand? Going through the
process of aligning your projects with strategy means that you have to be clear
about what you’re trying to achieve and that, naturally, helps you achieve it. As
that great sage, Yogi Berra, said, “If you don’t know where you’re going, you’ll
end up someplace else!”
8. Project team focus
And if you know where you’re going, you can use this in your kick-off planning to
work out what you need to do to deliver the results. Instead of being focused on
delivering a rather dry list of features, brief your team on what you’re trying to
achieve, work backwards from there to “what needs to get done” and to “what key
milestones and decisions are needed” and watch your project team really soar!
9.Saves time
There is a saying, “lost time is never found again.” Time is a very important and
delicate resource in the business world. The way you use your time could
determine where you will be among your peers. Managers that do not adopt
strategic alignment tend to embark on activities that, while being good ideas, are
simply not the right fit at that very moment. If they are lucky, they will find out in
time that they are operating off course, and wasting time.
To avoid this situation, ensure that your business strategies align with your
company’s goals and objectives.
Creation
This is the stage where you consider How Goals and Objectives Help Your
Business Succeed with consideration for the changing marketplace. Therefore,
focus on drilling down to strategically align your action plans. You see, in a bid
to retain business identities, many refuse any bit of change regardless of
current trends or customer preferences. On the other hand, some businesses
bend to the will of every customer, thereby losing their identity. A mindset
towards strategic alignment helps you apply a systems approach to
maintaining a healthy balance between these two extremes, thus helping you
sustain your business.
Communication
Execution
Execution is the stage where you produce the desired outcomes. Therefore,
while executing the various objectives, it is important to continually assess and
ensure that you consider the company’s structure and goals. Many
organizations miss it here and end up damaging employee engagement and
trust. In a thrust to adapt to changes in the market, ensure you don’t stray
away from your business identity. Your business identity is what makes you a
brand.
1. Try to win the early race employing broad or focused differentiation strategy.
2. Push to perfect the technology, improve the product and quality.
3. Adopt dominant technology quickly.
4. Form strategic alliances with suppliers
5. Acquire or form alliances with companies that have related or complementary
technological expertise.
6. Try to capture first mover advantages
7. Pursue new customer groups, new user applications and entry into new geographical
areas.
8. Begin to shift advertising to increase the frequency of use and building brand loyalty.
9. Use price reductions to attract the next layer of price-sensitive buyers into the market.
These companies have to craft a portfolio of strategic initiatives covering three horizons.
Short-term horizon: Strategies typically include adding new items to the company's present
product line, expanding into new geographic areas, and launching offensives to take market
share away from competitors.