STRATEGIC MANAGEMENT

GENESIS

The origin of Business Policy (BP) can be traced back in 1911.

1911  Harvard Business School introduced an integrative course aiming

creation of general management capability.

Real impetus for introducing BP in Business Schools with the publication of

two reports in 1959:

1959  (i) Gordon & Howell Report – Sponsored by Ford Foundation

(ii) The Pierson Report -- Sponsored by Carnegie Foundation

1969  The American Assembly of Collegiate Schools of Business, A

regulatory body of Business Schools made this course compulsory for the
purpose of recognition.

From US it spread to other part of the World. The term BP is traditionally

used though new titles have begun to introduce recently.

EVOLUTION
W.F.Glueck views the development in BP as arising from the use of
planning techniques by managers. In earlier times it started with

Day to Day Panning

↓
Tried to anticipate the future by
Preparation of Budget,
Capital Budgeting, MBO
↓
Found unable to emphasise the role of future, so started
Long – range planning
↓
Strategic Panning
↓
Strategic Management
It describes the process of strategic decision making
HISTORICAL PERSPECTIVE OF EVOLUTION OF BP

Study of BP closely followed the demands of real – life business. Its

evolution is viewed in terms of four paradigm shifts. These are obviously
overlapping phases.

I- Mid – 1930s, paradigm of ad-hoc policy making. This was due to

the nature of American business Farms in that period. Single
Product, catering to a unique set of customers, in limited
geographical area.

II- Planned Policy Formulation -- Emphasis shifted to integration of

functional areas. It is due to rapidly environmental changes in
1930s and ‘40s.

III- Strategy Paradigm – By 1960, there was a demand for critical look
at the basic concept of business and its relationship to the
environment. The concept of ‘Strategy’ satisfied this requirement.

IV- Strategic Management – Emerged in 1980s. This focuses on the

intersection of two broad fields of enquiry: the strategic processes
of business firms and the responsibilities of general management.

GENESIS IN INDIA

Late ‘50s and early ‘60s – Management education started. IIM’s and
Administrative Staff College started in early sixties. We borrowed
curriculum and philosophy from American Business Schools. --- There was
unparallel growth of Business Schools in the last 3 decades. This subject is
taught usually in later part of the Degree with different nomenclature
‘Corporate Planning’, ‘Corporate Strategy & Planning’, ‘Mgt. Policy’,
‘Strategic Planning’ or ‘Strategic Mgt’. --- The course contents draw heavily
from America. Our dependence on American sources has been firmly
established. --- But in recent time, availability of literature in BP is
increasing. Moreover, organisations are willing put BP concepts and
techniques in practice.
THE NATURE OF BUSINESS POLICY

1. It is considered as the study of functions and responsibilities of the senior

mgt. related to those organizational problems which affect the success of the
total enterprise.

2. It deals with the determination of the future course of action that the
organisation has to adopt.

3. It involves a choice of purposes and defining what needs to be done in

order to mould the character and identity of the organisation.

IMPORTANCE OF BP

A study of BP fulfils the need of mgt. students as well as those of middle –

level managers. – Importance of BP is considered in the following four
areas:

(i) From the viewpoint of the Course itself

BP deals with the constraints and complexities of the real-life business. It
cuts across the narrow functional boundaries and draws upon a variety of
sources. BP seeks to integrate knowledge and experience gained in
various functional areas of mgt. It enables the learner to understand and
make sense of the complex interaction that takes place between different
functional areas. BP makes the study and practice of mgt. more
meaningful.

(ii) For the understanding of Business Environment

BP creates an understanding of how policies are formulated in relate to
the environmental changes. Managers become more receptive to the ideas
and suggestions of the senior management.

(iii) For Understanding the Organisation

BP creates an understanding of decision making from the angle of the
organisation. It brings the benefit of years of distilled experience in
strategic decision-making.
(iv) For Personal Development
It is beneficial for an executive to understand the impact of policy shifts
on the status of one’s department and on the position he occupies. Because it
provides adequate grounding for understanding the macro factors and their
impact at the micro level. It therefore helps to avail an opportunity or avoid a
risk with regard to career planning and development.

PURPOSE OF BUSINESS POLICY

In BP organizational problem is viewed in their totality. It also creates an

awareness about the repercussions that an action in one area of mgt. has on
other areas, individually and on the organisation as a whole. We can mainly
look it in three folds:

i) to integrate the knowledge gained in various functional areas of mgt,

ii) to adopt a generalist approach to problem-solving: and
iii) to understand the complex interlink ages operating within an
organisation through the use of systems approach to decision-making
and relating them to changes taking place in the external environment.

OBJECTIVES OF BUSINESS POLICY

The objectives of BP can be set in terms of the knowledge gained,

skills acquired, and attitude inculcated through the study of this course. The
study offers basis for building up a mental structure which can help in a
systematic aggregation of experiences when an executive is working at the
middle-level. Such a structure helps in the creation of general management
capability.
DEFINITION OF TERMS USED IN BUSINESS POLICY

Many terms are used in BP to denote different concepts. Some are defined as
under:

MISSION: Many organisations define the role that they wish to play in
society in terms of a mission statement. Thus a mission statement can help
an organisation to link its activities to the needs of society and legitimize its
existence.

PURPOSE: The senior management in an organisation determine a certain

purpose or several purposes which their company should be able to achieve
in the long-run. The purpose can include anything that an organisation
strives for.

OBJECTIVES: Objectives are the open-ended attributes denoting a future

state of outcome that an organisation strives for. When the objectives are
stated in specific terms, they become goals to be attained.

GOALS: A goal is a closed-ended attribute which is precise and expressed

in specific terms.

POLICIES, PROCEDURES, AND RULES: A policy is considered to be a

guideline for action. It channelises organizational efforts in a predetermined
direction and leads to the achievement of goals, objectives, purpose and
mission of the company.
Policies are subdivided and stated in terms of procedures ( a series of
related steps or tasks expressed in a chronological order) and rules
(prescribed courses of action that explicitly state what is to be done under
given set of circumstances).

PLANS AND PRORAMMES: A programme is a broad term which

includes goals, policies, procedures, rules and steps to be taken in putting a
plan into action. So a plan may be implemented through a series of
programmes.

TACTICS: Strategy gives rise to tactics and, thus, tactics may be thought of
as a sub-strategy. It is often confused with strategy. The difference lies only
in the degree of importance associated with the tactics.
FORECASTS: Forecasts are estimates future based on an extrapolation of
the past and present trends.

BUDGETS: A budget is plan statement for a given period of time in future,

expressed in financial or physical units.

SEMANTICS IN TERMIMOLOGY:
(i) Mission -- Purpose: Mission statements help an organisation to
link its activities to the needs of society. When purpose is based on
what the organisation desires to achieve internally.
(ii) Objectives – Goals: Objectives are open-ended attributes denoting
a future state or outcome and are stated in general terms. Goals are
closed ended attributes expressed in specific terms.
(iii) Strategy – Policy: Strategies are means to an end. Policy is a
guideline to action. When strategies necessarily lead to action,
policies are contingent decisions.
(iv) Strategy – Tactics: Through tactics are considered as action plans
through which strategies are implemented.

UNDERSTANDING STRATEGY: The term ‘strategy’ is derived from a

Greek word strategos, which means generalship – the actual direction of
military force, distinct from the policy governing its deployment. Literally,
therefore, the work ‘strategy’ means the art of the general. In business
parlance, there is no definite meaning assigned to strategy. Business policy
has evolved to the stage of strategic management through the strategy
making phase.

DEFINING STRATEGY: Management is an art as well as science. Arthur

Sharplin (1985) defines strategy as: “A plan or course of action which is of
vital, pervasive, or continuing importance to the organisation as a whole.