MODULE BUSINESS POLICY AND STRATEGY

Introduction to the Course

Course Description:

The importance of business policy and strategy has surged to the forefront
of the business world. Globalization of business, deregulations, mergers,
acquisitions, strategic alliances, and international joint ventures, coupled with a
new emphasis on creating shareholder value, have created great uncertainties in
the global environment.

Learning Outcomes:

• Examining the underlying bases of the firm’s strategy

• Comparing expected result with the actual result
• Corrective action to ensure performance conforms to plan.
• Define functional areas of business without considering broad policies and
the interrelationships among the various functions and the external
environment.
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CHAPTER 1
THE IMPORTANCE OF BUSINESS STRATEGY AND THE EXTERNAL BUSINESS
ENVIRONMENT

Objectives:
1. Define the importance of business strategy
2. Identify and explain the importance of the strategic
planning

THE HYDRA

Having many centers or branches a hydra-headed organization.

The term “Hydra” is from Greek mythology .The Hydra was a giant swamp
monster with seven dragonlike heads, each on a long, spiny, dragonlike neck. Each of
the monster’s heads turned, moved, and attacked with the speed of a cobra. To
complicate matters, the Hydra’s breath was toxic enough to bring death. Thus, if a
would-be dragon slayer was brave enough to survive the sheer fright created by the
Hydra’s physical appearance, and fortunate enough to evade the beast’s ferocious
heads snapping and attacking, he was still at mortal risk from the Hydra’s noxious
breath. Also, the Hydra had been granted the power of regener- ation by the Gods.
STRATEGIC PLANNING DEFINED
Strategic planning is the development of a competitive strategy or the planning
that sets the long-term direction of the organization. Its purpose is to guide the
organization to accomplish its mission and to organize the allocation of resources.
Strategic planning seeks to maintain a viable fit between the organization and its ever-
changing environment. The objec- tive of strategic planning is to continuously shape
and adjust the organi- zation’s business and outputs to ensure that they produce the
desired return on invested capital.
THE IMPORTANCE OF STRATEGIC PLANNING
All things being equal, the organization that plans the best will perform the best. The
importance of strategic planning and the concepts associated with it surfaced in the
1970s. Strategic planning is an ongoing process. The strategic plan may look
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ahead five, ten, or even twenty years but it should be revisited annually. It is necessary
to review the strategic plan, the assumptions on which it is based, and include new inter
nal and external information to maintain the validity of the plan. Plans of this nature are
known as rolling plans. The relevance of strategic planning and its benefits include:

 Strategy is an ongoing process. An organization must continue to adapt each year

as the environment changes, while analyzing the validity of its past predictions.
 It seeks to maintain a viable fit between the organization and its
 ever-changing environment.
 It assists organizations to adapt to the ever-changing environment, thus
increasing the stability relational fit between the organization and its environment.
 It assists firms to identify resource allocation and reallocation needs.

Fiction versus Fact

Myths and misconceptions often reign in the realm of strategic planning. These
misconceptions may cause confusion about the purpose and goals of planning and
result in a lack of buy-in from employees. To better grasp what strategic planning is, it is
important to examine what it is not.
Fiction — Strategic planning is a linear, smooth process.
Fact — “Strategic planning is not a linear pr ocess that flows seamlessly from
step to step, as many books would suggest. Rather, it proceeds in fits and starts,
revisiting earlier steps in some situa- tions and skipping ahead in others” Strategic
planning should be considered as having a feedback loop at every stage, whereby new
information requires previous assumptions to be reviewed for relevancy.
Fiction — Strategic planning should only be developed by
upper management and selectively shared.
Fact — “Little of the actual development of the plan can be delegated, but it must
be a product of extensive listening and the gathering of input from all levels of the
company …. The final plan must be shared with all levels, in varying detail depending
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on their responsibilities”1 if it is to be implemented.

MANAGERIAL STRATEGIC DECISION MAKING
Every day, thousands of new businesses are conceived by entrepreneurs, and
thousands of new ventures and expansion projects are conceived by existing firms. The
question always arises as to why some entrepreneurs and firms succeed whereas many
others fail.
WHY BUSINESSES FAIL
Although managers cannot control all the events that affect their busi- nesses, most
businesses fail because managers fail. The history of American business shows that
many businesses, large and small, have a relatively short successful life span.
Obviously, few (if any) executives want their businesses to fail. They want to perpetuate
the lives of the firms that they manage and increase the profits. Why then is the track
record poor? There is only one answer — managers either do not know how to
determine the specific actions necessary to maintain the ongoing health of their
organizations or they lack the required execution skills.
ENVIRONMENT OF THE BUSINESS SYSTEM
Any firm may be just one decision away from prosperity or oblivion. It has often been
said that it isn’t how many good decisions a CEO makes that determines the success of
a firm; instead, it is how few bad ones and, in fact, avoiding that one particular bad
strategic decision that may cripple an organization. Still others have indicated that, in
business, the mediocrity of a CEO is rewarded for these very same reasons, and most
succeed with the “don’t rock the boat” syndrome.
LEGITIMACY: THE ROLE AND RESPONSIBILITIES OF BUSINESS IN SOCIETY
Calvin Coolidge, president of the United States, 1923–1929, while in office, stated that
“the business of business was business.” Businesses are created not for societal
benefits, but to make money. The fact that they provide benefits to the society in which
they exist is a peripheral and ancillary result of their financial success and not their
primary reason for existence. However, all too often, business managers have a
restricted perspective of their business.
Businesses gain legitimacy by satisfying their stakeholders to a sufficient
degree, and by acting in a morally responsible manner toward
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them. The following are considered common stakeholder groups:

1. Shareholders

2. Customers

3. Employees

4. The general public and communities

5. Special-interest groups
6. Suppliers

7. Governments

8. Competitors

9. Lenders

10. Unions
The process of evaluating a firm on its ability to meet its key stake- holders’ goals is
generally referred to as the balanced scorecard approach. The balanced scorecard employs
various metrics to determine a firm’s performance with regard to each stakeholder group
considered critical to the firm’s success. This approach also has been somewhat
institutionalized in the Malcolm Baldrige National Quality Award, which requires that the
quality award applicant address specifically how information is gained from its key
stakeholders, and how its performance and improvement efforts are measured.

For further discussion please refer to the link provided: STRATEGIC PLANNING

https://www.youtube.com/watch?v=iXzmAou_UUA
For further discussion please refer to the link provided THE IMPORTANCE OF STRATEGIC PLANNING

https://www.youtube.com/watch?v=Ydt6Nm_F-RI

Reference:
Business Policy And Strategy 7th Edition