What is Business Policy

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Business Policy is the statement of a well developed business philosophy of the general management or the top management to provide guidelines and directions to the decision making process in the organization. organization.  It visualizes the whole organization and its total business and provides directions to all tasks and targets accordingly. accordingly.

What is Business Policy  

Business policy is, therefore, considered as guidelines for accomplishment of objectives and goals of the organization. organization. Five basic elements of Business Policy projected by Melvin J. Stanford includes: includes: Objectives The environment The firm Strategy and Time

(1) (2) (3) (4) (5)

What is Business Policy   

Thus the top management policy guides, directs and facilitates the thinking and acting process of all managers and executives in an organization, since the policy is formulated in accordance with the mission and purpose of the organization. organization. While it enables the general management to gain perception of the organization as a whole, it guides and directs the thinking and acting process of all the functional areas and departments, strategic business units and profit centres. centres. Thus, it creates a sense of mission and purpose in the executive value judgment. judgment.

Nature and Scope of Strategic Management 
 

 

The complex and sophisticated business environment has created an urgent need for strategic management for an organization. organization. To deal effectively with the challenges of environment, including competitors, when profits are at stake; stake; Suppliers, when resources are becoming even more scarce; scarce; Government Agencies, when adhering to growing number of regulations has become essential and Customers who have more and more expectations from products in the form of quality, service, cost and delivery to their satisfaction. satisfaction.

competition. The Strategic management process also ensures preparedness of Companies for reacting to unexpected internal or external pressures and sustain them.Strategic Management Process  (1) (2)  The Strategic management process facilitates to optimally position a firm in a given competitive environment as it: it: permits more realistic and accurate assessment of the anticipated environmental changes and prepare the organization for being pro-active proto face the competition. them. .

them.C. strategic management is understood as a process of formulating objectives of an organization and developing methods to achieve them. .  In the present context.Definition of Strategic Management  The word Strategy is derived from the Greek word Strategia that was evolved during 400 B. forces. The word Strategia meant science of guiding and directing Military forces.

Definition of Strategic Management  Strategic Management can be defined as follows: follows: Strategic Management is the process of systematically analyzing various opportunities and threats vis-a visvis organizational strengths and weaknesses. formulating and arriving at strategic choices through critical evaluation of alternatives and implementing them to meet the set objectives of the organization. . organization.

S and defined strategy as follows: follows: the determination of basic long-term goals and longobjectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out these goals . interstrategy and organization structure in 70 manufacturing firms in U.Definition of Strategic Management  Alfred D. Chandler made a detailed analysis of various inter-relationships among environment.

Adoption of course of actions to achieve these goals Allocation of resources necessary for carrying out these goals. longgoals. goals. .Definition of Strategic Management  (1) (2) (3) It is important to note that Alfred D. Chandler has made reference to three basic aspects of strategic process: process: Determination of basic long-term goals.

produces the principle policies and plans for achieving these goals.Concept of Corporate Strategy  Strategy is the action plan. determines. the business the company intends to be in . business. purposes and goals. shapes and reveals its objectives. plan. .  It is the pattern of decisions made at the corporate level which .  Corporate strategy is applicable to the whole organization and its whole business. and defines goals.

Growth / Expansion A Intensification Market Penetration Market Development Product Development Innovation B Diversification Vertical Horizontal Retrenchment Divestment Turnaround Liquidation Bankruptcy Stability Incremental Growth Profits Sustainable Growth Pause Strategy Combination Joint Venture Strategic Alliance Consortia .

policy. The internal consistency of the company. threats. Corporate Strategy is an important tool in the tool kit of corporate management. . company. competitors. The satisfactory degree of risk. In articulating the corporate strategy.Concept of Corporate Strategy   (i) (ii) (iii) (iv) Therefore. risk. forming the very essence of both strategic planning and corporate policy. the corporate management is concerned with: with: Scanning of the external environment which provides opportunities and threats. The available and potential resources of the company and its competitors.

Steps in an effective Corporate Strategy (i) (ii) (iii) (iv) (v) (vi) (vii) Scanning and assessment of the environment with special reference to external environment Corporate self-appraisal selfAn organization structure enough to meet the challenges Adequate manpower to handle strategic planning and operation Ensure consistency in strategies Set clear-cut objectives and goals clearEnsure consistency with environmental needs .

Steps in an effective Corporate Strategy (viii) Incorporate contingency strategies to tackle contingency situations (ix) Fix up appropriate operational plan taking into account competitors (x) Allocation of adequate resources (xi) Formulation of strategy (xii) Implementation of strategy (xiii) Evaluation of strategic options. actions and performance .

making.  .  In the case of start-ups or family owned startbusinesses. the entrepreneur is both the General Manager and the Chief Strategist.Corporate Level Strategists The Board of Directors and the Chief Executive Officers (CEO. Strategist. Board.s) are the primary groups involved with corporate level strategy making.  The ultimate legal authority in businesses is that of Board.

(iii) Ensuring that managers take prudent action regarding corporate objectives.  .Corporate Level Strategists Boards are held responsible to the stockholders for the following duties: duties: (i) Ensuring the Continuity of Management ( Replacing or retiring ineffective managers (ii) Protecting the use of stockholder s resources. resources. objectives.

effectiveness. (vi) Maintaining.Corporate Level Strategists (iv) Approving major financial and operational decisions of the managers. managers. Society. (vii) The Board is legally mandated to control the organization and be centrally concerned with maintaining operations and effectiveness. . revising and enforcing the Corporate Charter and By-laws. By-laws. (v) Representing the company with other organizations and bodies in Society.

action. threats.Corporate Level Strategists  With more active outsiders. more and more boards are involved in linking strategy with subsequent corporate action.  They are beginning to support new strategies. and protect the organization from outside threats. attract resources. .

 The CEO must conceptualize the strategy and then initiate and maintain the strategic management process.The CEO as Strategist  The CEO is responsible for defining what business the firm is in and matching the best product opportunities with the best use of the enterprise s resources. process. . resources.

activities.  .  If a firm can find new activities which utilize the strengths and benefits of old activities.Concept of Synergy and its relevance to strategy Synergy refers to the idea that the whole is greater than sum of its parts (2+2=5). it is likely to create more value for all activities.

convenience etc  For instance. Sears began its move into providing financial services to complement its existing insurance business by using its broad base of retail outlets and a large number of customers as a point of departure. location. departure. .g.Concept of Synergy and its relevance to strategy  The Enterprise while performing its functions should give careful attention to the utilities provided to customers e. cost. time .

(Mergers). and advertising. distribution channels.Concept of Synergy and its relevance to strategy  Synergy can be developed through internal expansion but it is usually discussed through external expansion (Mergers). .  Synergy exists when the strengths of two companies more than offset their joint weaknesses. weaknesses. warehouses. advertising.  Sales synergy arising from many Products having same sales people.

machinery.Concept of Synergy and its relevance to strategy    Investment synergy arises from many products having the same plant. overheads. R&D and machinery. another. Operating synergy arises from many products making possible a higher utilization of facilities and personnel and the spreading of overheads. . Management Synergy arises from management experience in handling problems in one location or industry that helps to solve problems in another. inventories.

too. However. the combined resources of two companies. . but there has been little systematic proof that synergy actually exists. In theory.Concept of Synergy and its relevance to strategy     Synergy can be negative too. firms. exists. the concept of synergy is appealing. In most mergers. if properly integrated. can create a stronger operation that stand alone firms. at least or more than one factor can be negative. negative.

 .  The criteria can be maximization of profits or maximization of return on investment.  The aim is to achieve objectives at their maximum level with available resources.Strategic Decision Making (1) Decision Making Criteria: The criteria for making decisions is governed by the objectives that the decision maker attempts to lay down.

strategic alternatives are arrived at.  A number of alternatives may be created and by paired comparison or through elimination process. .Strategic Decision Making (2) Rationale:  Rationality in decision making implies presence of logical reasoning in arriving at acceptable decisions.

brain storming. .  The alternatives generated may lead to breakthrough ideas.  Companies taps the creativity of their people through various techniques i.Strategic Decision Making (3) Creativity:  Creativity and innovations bring in most unusual ideas.e. attribute listening to generate alternative strategic options.

the two managers may differ in their approach due to their experience.  No .  Additionally.  The two managers who are in the process of strategic decision making will usually arrive at different decisions.  The difference may arise due to different perceptions of a problem.Strategic Decision Making (4) Variability: two people can think alike in a given business situation. mindset etc.

. Values etc play a vital role in decision making and quality of a decision. Intelligence. (6) Group Dynamics and Individual Decision Making:  Group dynamics affects the decision making process and the decision making is generally through consensus. Training. Qualification.Strategic Decision Making (5) Personality or Individual Factors:  The Age. Experience.

individual decision making thrives. But as the group becomes large. .  The availability of information to the group and to the individual is different. which creates variability in decision making. the need for acceptance of ideas by the group becomes more difficult.  When groups are small.Strategic Decision Making  The personal factors may not be in tune with the entire group and differences are expected to arise in decision making.

A Case Study of PepsiCo. Inc about the Timing and Strategic Management  From within the ranks of the consumer product marketing giants. Inc has emerged as this generation s innovator and new product leader. Coca-Cola. leader. . Proctor & Gamble and Coca-Cola.  Pepsi has accumulated a wide variety of consumer product successes despite recent slips and tumbles experienced by other industry powerhouses such as Philips. PepsiCo.

Pepsi has helped Taco Bell and Pizza Hut became two of the fastest growing restaurant chains in the country. country. Inc about the Timing and Strategic Management  Besides having the nation s best selling soft drink.  The backbone of this confidence is a fastfastmoving. risk-oriented management with an riskexquisite sense of timing. timing. .A Case Study of PepsiCo.

Because of the rapidly changing demands of the regional. it also realizes the importance of instinct or intuition as decision making asset .A Case Study of PepsiCo. competition. a degree of intuition is essential to flexibility in keeping a step ahead of the competition. . Inc about the Timing and Strategic Management   While Pepsi employs analytical research and test marketing tools similar to those of its rivals. national and even international markets.

.A Case Study of PepsiCo. Cocaoff. Pepsi s top management allows its managers to operate with a great deal of autonomy and encourages quick actions in return for expected performance. performance. Inc about the Timing and Strategic Management   Executives of Pepsi value their instincts so much that they have risked millions by being the first out with a 100% NutraSweet formula. even 100% before a test market could be performed for fear that Coca-Cola would be tipped off.

usually the difference between success and failure is not that of failing to recognize the opportunity but instead that of not correctly and quickly acting upon the opportunity before the competition does. does. Inc about the Timing and Strategic Management  When opportunities arise. .A Case Study of PepsiCo.

level. . Inc about the Timing and Strategic Management (1) (2) Questions Does a point exist where even the best intuition or good hunch won t be enough to go on when determining investment allocations? Whether the risk and comfort level o each individual management team differs and the factors affecting the risk and comfortable level.A Case Study of PepsiCo.

.  The information generated can be fruitfully used by strategy managers in the process of evolving strategies keeping in view the vision of the company. company.Strategic Management Process  The forecasts ( Economic. process. Political and Technological ) made become a significant part of strategic management process.

 Companies may even change their vision and mission statements and may like to alter their strategies for growth and survival in view of research made. . development.  The gaps that emerge due to study of forecasts can be planned to be filled up through research of causes of these gaps. gaps. made.Strategic Management Process  The forecasts opens avenues for development.

successful.  The basic values for which it comes into existence are of great importance-some of importancewhich may emerge from the strengths and proprietary knowledge of entrepreneur. . entrepreneur. growth.  As the company grows. Purpose & Objectives  The corporate mission of companies develop in stages during its growth. it faces more complex and intricate business solutions and the company may alter its mission and defines new benchmarks for being successful.Corporate Mission.

Social Responsibilities of Business      Social Responsibility is the common denominator and the basis of claims of all the driving forces of business. addressed. Reports. The companies should be open to social audits wherein the social responsibility of a company must be evaluated and adhering of the company to social responsibility must be addressed. disposal of waste and conservation of natural resources etc are pertinent issues which must be addressed by strategy managers. business. dues. Discharge of pollutants. managers. Thebe claimed true profits should be claimed only after paying social dues. Many companies mention their social achievements in their Annual Reports. .

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