Week 1

Chapter 1: EVOLUTION OF BUSINESS POLICY AND STRATEGY

In the world of business, there is so-called Business Policies. These are set of rules that guide the decisions and
actions of the members of the organization. This may be informal or in writing coming in the form of operational
manual, personnel handbook, and memoranda. Business Policies also are set of rules that guide the conduct of the
business in pursuit of profit and other objectives of the business organization.

❖ Concept of Strategy
Strategy- referring to top management’s plan to attain outcomes consistent with the organization’s mission and
goals. (Wright, Kroll, and Parnel)
- Characterized as operational level referring to it as a set of competitive moves and business
approaches that management is employing to run the company. (Thompson and Strickland)
- Largely treated as semantic issue. (Jeffrey Bracker)
- Greek word “stratego” referring to a “general”
“to plan the destruction of one’s enemies through effective use of resources” 2
Categories:
1. Intended Strategy- refers to original staregy that management plans and intends to implement
2. Realized Strategy- refers to actual and eventual strategy that management actually implements. Characteristics of
Strategy:
a. Traditionally meant to be a grand plan made in the light of what is believed an adversary might or might not do.
b. Derives its relevance given from the existence competition in business.
c. Done on the presumption of the existence of a negative scenario.
d. Connotes general program of action and deployment of emphasis and resources to attain comprehensive
objectives.
e. Involves determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses
of action and the allocation of resources necessary to carry out those goals.
f. A decision about how to use available resources to secure a major objective in the face of obstruction.
g. Implies action and guides decision-making, spelling out directions to be taken.
h. Strategy may, in some extreme or necessary cases, exist without a policy.

Strategy VS. Policy

STRATEGY POLICY
Exist without the established business policy Exist amidst the absence of business strategy

Operational in nature Directional in nature

Maybe informal and not necessarily written Formal or written
and often confidential
✓ Policy- viewed as internal matters that guide the operationalization of the business organization. (Please
click and see the
link)https://youtu.be/F2_EsTP_WuU

What is the nature of Strategic Management?

✓ Integrating the concept of strategy into the mainstream of the management system is what matters most in
the terms of giving directions that promises delivering profit expectations. (Please click and see the
link)https://youtu.be/_BajRnOCSKk

What is Strategic Management?

According to:
a. Stahl and Grigsby: Referring to the entire process of strategic decision-making that relates to its
environment, guide internal activities, and determines the long-term performance of the organization.
b. Wheelen and Hunger: A set of managerial decisions and actions that determine the long-run
performance of the organization.
c. Williamson, Jenkins, et al: Framework that evolves around the idea of shaping the destiny of an
organization.
d. Wright, Kroll, and Parnell: Consists of managerial decisions and actions that help to ensure that the
organization of formulates and maintains a beneficial fit with its environment.

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Steps that Top Management Should Accomplish:
1. Analyze the opportunities and threats or constraints that exist in the external envi.
2. Analyze the organization’s strengths and weaknesses in its envi.
3. Establish the org.’s mission and develop the goals.
4. Formulate the strategies that will match the org.’s strengths and weaknesses with the
environment’s opportunities and threats.
5. Implement strategies.
6. Engage in the strategic control activities to ensure that the org.’s goals are attained. General
Strategic Orientation of Competing firm:
a. Defender. This type includes companies with limited product line that focus on improving the efficiency of their
existing operation.
b. Prospectors. Type of companies includes firms with fairly broad product lines that focus on product innovation
c. Analyzers. Includes business organizations that operate in at least two different product-market areas, one
stable and one variable.
d. Reactors. Includes companies that lack a consistent strategy-structure-culture relationship. Their responses to
environmental pressures tend to be piecemeal strategic changes.

Strategy VS. Tactics

Tactics- are more operational and done in context with or as a support activity or operation to achieve a strategy.
As to: Strategy Tactics
Level of Conduct Developed at the highest levels Employed at related to lower
of management levels of
management
Regularity Continuous and Irregular Determined on a
periodic cycle with fixed
time schedule
Subjective Values Strategic decision-making is Tactical decision-making is
heavily weighed not heavily weighed
Range of Alternatives greater Lesser
Uncertainty Much greater in both Knowing the result first
formulation and
implementation
Nature of Problems Strategic problems are Structured and often
generally unstructured and repetitive
tend to be one of a kind
Information Needs Requires large amount of Rely more heavily on
information internally generated data
Time Horizon Intended to, and do last for Covers a short duration
long periods of time
Reference Original in the sense that it is Formulated within and in
the source of origin for the pursuit of strategies
development of tactics
Details Broad Fewer
Type of personnel Most part formulated by Large number of managers
involved management and staff and
employees
Ease of Evaluation Easier to measure the Not Easy
effectiveness and
efficiency
Context of Point of View Formulated from corporate Developed principally
viewpoint from a functional point of
view
Importance Highest importance in the org Considerably less
significant
(Please click and see the link for further comprehension)
https://youtu.be/ASjjmU_7nGk

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 Week 1
https://youtu.be/-5Qv30004CM

Bases of Policies and Strategies

a. Legal Mandate-refers to formulating policies on the basis of the provisions of the charter or legal basis for
creation or existence of the business organization including the applicable provisions of laws and policies or
pronouncement of the government and its statutory or regulatory bodies.
b. Vision and Mission statement-essentially refers to the leadership bias as well as sense of direction and mission
for which the organization emanates from its founders and the previous or incumbent leaders or managers of the
organization.
c. Specific Objectives- are corporate objectives purposely developed for the organization and for its members or
employees at large to pursue
d. Programs and Policies- are specific programs set forth by the organization’s policy makers in pursuit of short
and long-term goals given certain considerations at hand.

Approaches to Identifying Policies and Strategies

1. Policy/Strategy Profile
2. Gap Analysis
3. Competitive Strategy Analysis

Outcome
Profit maximizing

Classical Evolutionary

Processes Emergent
Deliberate

Systematic Processual

Plural

Figure 1. Generic Perspective of Strategy

*Search about it (Source: Whittington 2001)

Developing Policy and Strategy

a. Top-Bottom 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.
b. Bottom-Top Approach. Policy and strategy initiatives emanate from the bottom or rank-and-file from which top
management develops concrete policies and strategies for the lower-ranked employees to observe or follow.
c. Top-Bottom-Top. 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 refinement
(Please click and see the link: https://youtu.be/7xXzEhnjJD4)
: https://youtu.be/lO9u5pA6Rns

How to make strategic decision-making?

a. Rare. Strategic decisions are unusual and typically have no precedent to follow.
b. Consequential. Strategic decisions should commit substantial resources and demand a great deal of commitment
from people at all levels.
c. Directive. Strategic decisions set precedents for lesser decisions and future actions throughout the organization.
Process:
1. Evaluate current performance results in terms of (a) ROI, Profitability, and so forth, (b) current mission,
objectives, strategies, and policies.
2. Review corporate governance, that is, the performance of the firm’s BOD and Top Management.
3. Scan and assess external environment to determine the strategic factors that pose Opportunities and Threats.
4. Scan and Assess the internal corporate environment to determine the strategic factors that are Strengths and
Weaknesses.
5. Analyze strategic SWOT factors to pinpoint problem areas, and review and revise the corporate mission and
objectives as necessary.
6. Generate, evaluate, and select the best alternative strategy in the light of the analysis conducted in Step 5.
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7. Implement selected strategies via programs, budgets, and procedures.
8. Evaluate and implement strategies via feedback systems and control of activities to ensure their minimum
deviation from plans.

Modalities in Strategic Decision by Mintzberg

a. Entrepreneurial Mode
b. Adaptive Mode
c. Planning Mode
d. Logical Mode

Role of Board of Directors

a. Monitor. BODs can keep abreast of the developments inside and outside the corporation, bringing to
management’s attention development it might have overlooked.
b. Evaluate and Influence. Examine management’s proposals, decisions, and actions, agree or disagree with them,
give advice and offer suggestions, and outline alternatives.
c. Initiate and Determine. BOD can delineate a corporation’s mission and specify strategic options to its
management.

References:
Orcullo Jr., N, (2007), Fundamentals of Strategic Management, Rex Book Store
Pereda, R., et. Al, (2015), Strategic Management, Unlimited Books Library Services & Publishing Inc.

*Note: Prepare for an assessment next meeting. God bless and stay safe!

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