Evolution of Business Policy and Strategy
Key Differences Between Strategy and
Evolution of Business Policy and Strategy
Business Policies – the rules that guide the
decisions and actions of the members of the organizations.
o Writing
o Informal
Coming in the form of an operational manual, personnel
handbook, and memoranda. They may also come in the form
of minutes of the meetings and documentation including
workshops and year-end activities.
o The written documents generally comprise
the rules and procedures in the conduct of
the business and how officers and
employees of the organization should act
from day to day.
o Business policy is a set of rules that guides
the conduct of the business in pursuit of
profit and other objectives of the business
organization.
o Strategy-referring to top management’s plan
to attain outcomes consistent with the
organization’s mission and goals. – Wright,
Kroll, and Parnell, 1996)
Two Kinds of Strategies
1. Intended Strategy – refers to the original strategy
that management plans and intends to implement.
2. Realized Strategy – refers to the actual and
eventual strategy that management actually
implements.
Thompson and Strickland (1999)
- Characterized strategy at the operational level
referring to it as a set of competitive moves and
business approaches that management is employing
to run the company. Among others, strategy is
management’s “game plan” to achieve the following:
 Attract and please customers;
 Stake out a market position;
 Conduct operations;
 Compete successfully
Definition of Policy
Policy – is also regarded as a mini – mission
statement is a set of principles and rules which directs the
decisions of the organization. Policies are framed by the top-
level management of the organization to serve as a guideline
for operational decision-making. It is helpful in highlighting
the rules, values, and beliefs of the organization. In addition to
this, it acts as a basis for guiding the actions.
Policy
1. Strategy is
the best
plan opted from a number of plans in order to achieve
the organizational goals and objectives. While the
policy is a set of rules and regulations, which forms a
base to take day-to-day decisions.
2. Strategies can be modified as per the situation, so
they are dynamic in nature. Conversely, policies are
uniform in nature, however, relaxations can be made
for unexpected situations.
3. Strategies are always framed by the top management
but sub-strategies are formulated at the middle level.
In contrast to Policy, they are, in general, made by
the top management.
4. Strategies deal with external environmental factors.
On the other hand, policies are made for the internal
environment of business.
Strategic Management
Strategic management is the ongoing planning,
monitoring, analysis, and assessment of all that is
necessary for an organization to meet its goals and
objectives. Changes in the business environment require
organizations to constantly assess their strategies for
success.
The strategic management process helps
organizations take stock of their present situation, chalk
out strategies, deploy them and analyze the effectiveness
of the implemented management strategies.
Five Stages of Strategic Management
Process
 Assessing the organization’s current strategic
directions;
 Identifying and analyzing internal and external
strengths and weaknesses;
 Formulating action plans;
 Executing action plans;
 Evaluating to what degree action plans have been
successful and making changes when desired are
not being produced.
Benefits of Strategic Management
 Clearer sense of strategic vision for the firm
 Sharper focus on what is strategically important
 Improved understanding of a rapidly changing
environment (globally competitive)
Strategic Types:
1. Defenders – this type includes companies with a
limited product line that focuses on improving the
efficiency of their existing operations
2. Prospectors – this type of company includes firms
with fairly broad product lines that focus on product
 innovation and market opportunities. The sales
orientation makes them somewhat inefficient. They
tend to emphasize creativity.
3. Analyzers – this type includes business
organizations that operate in at least two different
product-market areas, one stable and one variable. In
the stable areas, efficiency is emphasized. In the
variable areas, innovation is emphasized.
4. Reactors – this type includes companies that lack a
consistent strategy-structure culture relationship.
(they have no consistent strategy)
Strategy, Plan, and Tactics
o STRATEGY – the plan and framework to help
you achieve long-term goals. It includes the
approach and supports your WHY.
o Plan – details of what you are going to do within
the plan.
o Tactics – how you are going to execute the plan
that supports the strategy. Include the specific
actions to help you achieve the desired goals.
(task assignment must be carried)
Bases of Policies and Strategies
a. Legal Mandate
b. Vision and mission statement
c. Specific objectives
- Corporate objectives develop
d. Programs and Policies
- Specific or program
- Top management, board of directors
Approaches to Identifying Policies and
Strategies
a. Policy and strategy profile – this approach
involves a systematic examination of the present
company policy strategy. This is a more internal
approach whereby existing policies and operational
strategies are examined by the officers and
employees of the firm aided by an external
consultant.
b. Gap Analysis – asking what is missing in the
existing policy that may have been missed resulting
in non-attainment of objectives. This kind of
assessment should lead to having a long list of “what
to do now” to give substance and meaning to the
company’s vision and mission.
c. Competitive Strategy Analysis – this approach
calls for looking around how the policies and
strategies of the firm compare to its competition in
the market. (Is it effective for your other competitors?
So, we need to access)
Richard Whittington (2001)
Richard Whittington (2001) theorized that strategy
comes in four generic approaches.
a. Classical Approach – the oldest and still the
most influential. It relies on rational planning
methods. This approach follows a pattern of
analyzing, planning, and commanding or
directing. Profitability is the supreme goal and
rational planning is the means to achieve it.
b. Evolutionary – Whittington believed that
evolutionary theorists do not necessarily
prescribe rational planning methods. Rather, they
argue that whatever methods managers adapt, it
will only be the best performers that survive. (it
depends on the performance they achieved)
c. Processual – it argues that it is to the very
imperfections of organizational and market
processes that managers owe their strategies and
competitive advantage.
d. Systematic – this approach is more cautious
staying close to the ground and going with the
flow where the direction is going. Retain faith in
the capacity of the organization to plan forward
and to act effectively within their environments.
Developing Policy and Strategy
a. Top-bottom Approach – in this approach,
initiatives in developing policies and strategies come
from the top management with rank and file tasked to
implementing or following the policies and strategies.
(where the strategy start?)
b. Bottom-top Approach - in this approach, policy
and strategy initiatives emanate from the bottom of
rank-and-file from which top management develops
concrete policies and strategies for the lover-ranked
employees to observe or follow.
c. Top-bottom Approach - In this approach, policy
and strategy initiatives are taken by the top
management then filtered down to lower-ranked
personnel for consultations then returned back to the
top management for refinements.

“The Dynamic Nature of the Market and the
Business”
Business managers need to live and accept that to be
competitive, one has to live with a constantly changing
environment and get the best out of it.
The dynamic nature of the market and the business
itself is in part due to the following circumstances and
realities:
a. The ever-changing market condition
- Driven by supply and demand situation
- Shortage, inflation
b. The changing taste of the market
- Consumer behavior changes over time
c. Sociopolitical changes
- Sociopolitical-combining social and political factors
- Lifestyle, buying habits, and religion
- Tax and economic policies: Increasing or decreasing
rate of the taxes is a good example of a political
component. Government regulations may raise the
tax rate for some businesses and can lower the same
for others due to specific reasons. This decision will
directly impact businesses. This is why maintaining a
strategy that can do that with such situations is very
important.
- Political stability: Lack of political stability within a
country can significantly impact the operations of a
business. This can especially be true for businesses
that are operating on a global scale. For instance, a
hostile takeover can take over a government.
Eventually, such a situation will lead to looting, riots,
and general, disorder within the environment. Such
situations can disrupt business operations and
activities which can have a major impact on its
bottom line.
- Foreign Trade Regulations: Every business has a
need to expand business operate ion to other
countries. However, political back the round of a
country can influence the desire for a business to
expand its operations. Tax policies that are
particularly controlled by the government can induce
a particular business to expand operations in different
regions whereas; other tax policies can hinder the
process of business expansion for some industries.
Government initiatives, which have been designed to
support local businesses, might work against
international companies when the question is of their
competitiveness in a foreign region.
- Employment Laws: Employment laws are made to
protect the rights of employees and include every
aspect of the employer/employee relationship.
Employment law is an aspect that is very complex
and involves several pitfalls as well. When businesses
are in touch with the latest developments in this law,
they can manage to take their business in the right
direction however, those who get it wrong need to be
completely prepared for the expensive results it will
generate. In modern corporations, employees are
almost 98% of the company for the accomplishments
or lack thereof and any changes within employment
law will, of course, have a great impact on the
business operations.
d. The impact of global developments in
relation to the local markets
- The need for enterprises in their struggle for survival,
to change their strategies and go out from the borders
of their own country. 
e. The changes in the conduct of business
The Triggering Events
- Situations or scenarios that may have caused or
resulted in the actions or initiatives of the top
management of the firm to consider certain strategic
options to make the firm competitive or to achieve
certain strategic objectives. (It is something that acts
as stimulus for a change in strategy.)
Two forms of Triggering Events
a. Internal triggering events
- New CEO/President (they desire investors)
- Performance Gap - exists when performance does not
meet expectations
Example: Sales
- Change in ownership - either by way of acquisition,
sellout, merger, or changes in the majority of
ownership of stockholdings among publicly listed
firms can trigger or may result in a new set of
strategies whether changes were made in the top
management team or not.
- Management Team Shake Up
- Corporate Reorganization/Restructuring - Requires
new schemes or strategies to achieve new vision-
mission statement or desired goals
- New Products or Services - Need new kinds of
strategies or enhanced strategies.
b. External triggering events
- The overall economic environment - refers to all the
external economic factors that influence buying
habits of consumers and businesses and therefore
affect the performance of a company
- Government – its leadership, policies, and regulatory
functions
- The sociopolitical environment - is something that
involves the both social and political factor
Example: is the issue of environmental
conservation, which is influenced by both social
attitudes toward "going green" and political policies.
- The Legal Environment - Legal system of a country
is framed by the government. The laws which are
passed by the government for business operation is
called legal environment. In every country, the
government regulates business activities.
- The Technological Environment - refers to the state
of science and technology in the country and related
aspects such as rate of technological progress,
institutional arrangements for development and
application of new technology
 - The Global Regional Environment - which consists
of the international interactions out of a company's
control that influence how a business operates.
Example: The global environment includes
trade laws
- Market Factors (demand and supply situations) - As the
price of a good goes up, consumers demand less of it
and more supply enters the market. If the price is too
high, the supply will be greater than the demand, and
producers will be stuck with the excess. Conversely,
as the price of a good goes down, consumers demand
more of it and less supply enters the market.
- The religious environment
- Occurrence of calamities and other natural
phenomena
Strategic Inflection Point
It represents what happens to a business when a
major change takes place due to the introduction of new
technologies, a different regulatory environment, a change in
customers’ values, or a change in what customers prefer.
Theory of the Firm
 Monopoly – characterized by the existence of a single
seller of a product that dominated the market.
Example: Meralco
 Oligopoly – has more than one producer or seller of a
product, which may be either homogenous or
differentiated.
Example: cellphone seller
 Monopolistic competition – -
- Many sellers
- Slightly differentiated products
- Each seller may set a price for its own product
Each firm differentiates its product from the consumer through
various methods including advertising, promotion, location,
service, and quality
Characteristics
- Monopolistically competitive markets exhibit the
following characteristics:
- Each firm makes independent decisions about price
and output, based on its product, its market, and its
costs of production.
- Knowledge is widely spread between participants,
but it is unlikely to be perfect. For example, diners
can review all the menus available from restaurants in
a town, before they make their choice. Once inside
the restaurant, they can view the menu again, before
ordering. However, they cannot fully appreciate the
restaurant or the meal until after they have dined.
 Perfect competition - product are the same
- Numerous buyers and sellers so that each has no
influence over price
- Buyers and Sellers are price takers
Technology Development and Innovation
 Technology is an agent of change
 EFFICIENCY OF OPERATIONS
 Technology also helps a business understand its cash
flow needs and preserve precious resources such as
time and physical space. Warehouse inventory
technologies let business owners understand how best
to manage the storage costs of holding a product.
With proper technology in place, executives can save
time and money by holding meetings over the
Internet instead of at corporate headquarters.
Theories Influencing Strategic
Management
 Evolution and Revolution Theories
 Industrial Organization Theory
 Chamberlin’s Economic Theories
 Contingency Theory - Firms can become proactive
by choosing to operate in an environment in which
the opportunities and threats match the firm’s
strengths 
And weaknesses. This theory finds its application in a
variety of integration and diversification options or
corporate-level strategies. Add, change, modify
 Resource-based Theory - Firms unique resources to
comprise the key variables that allow it to develop
and sustain a competitive strategic advantage
 Institution Theory - This theory holds that an
organization can adapt to changing conditions by
imitating other successful organization
 Organizational Learning Theory – the organization
adjusts defensively to a changing environment and
uses knowledge offensively to improve the fit
between the organization and its environment
 Transaction Cost Economics - It proposes that
vertical integration is more efficient than contracting
goods and services in the marketplace when the
transaction cost of buying goods in the open market
becomes too great. When highly vertically integrated
firms become excessively large and bureaucratic,
however, the costs of managing internal transactions
may become greater than simply purchasing the
needed goods externally, thus justifying outsourcing
over vertical integration.
Vertical Integration - an arrangement in
which the supply chain of a company is
owned by that company. Usually, each
member of the supply chain produces a
different product or service, and the products
combine to satisfy a common need.