UNIT 2

BUSINESS POLICY
AND
STRATEGY
 Approaches
to
Environmental
Scanning
 As suggested by Kubr, three approaches can be used to
organize the information for the process of environmental
scanning
1. Systematic Approach – Gathering information for environmental scanning which have a
direct impact on organizations activities, Govt. policy statements relating to the business and
industry, keeping a track of alterations and taking the same into account. The information so
collected necessarily needs to be updated to the strategic management team for strategic
decision-making and also for making changes in the operational activities.

2. Ad Hoc Approach – In this approach, organizations periodically conduct special projects and
evaluate existing strategies and also to formulate new strategies. Sometimes special surveys
and studies are also undertaken in order to address the environmental issues.

3. Processed – form Approach – Some organizations may use secondary data which is
processed by Govt. or private agencies; this is often referred to as processed form approach.
Since environmental scanning is absolutely necessary for strategy formulation of any
organization, whatever approaches is adapted, DATA Collection and Processing systematically
is ultimate for Strategic Management Process
ETOP
ETOP- A Diagnosis Tool
Porter 5 Forces Model
 Analysis
of
Internal Resources
STRATEGIC ADVANTAGE PROFILE (SAP)
Every firm has strategic advantages and disadvantages.

For example, large firms have financial strength but they tend to move slowly,
compared to smaller firms, and often cannot react to changes quickly. No firm
is equally strong in all its functions. In other words, every firm has strengths as
well as weaknesses. Strategists must be aware of the strategic advantages or
strengths of the firm to be able to choose the best opportunity for the firm. On
the other hand they must regularly analyze their strategic disadvantages or
weaknesses in order to face environmental threats effectively

Examples: The Strategist should look to see if the firm is stronger in these factors than
its competitors. When a firm is strong in the market, it has a strategic
advantage in launching new products or services and increasing market share
of present products and services.
STRATEGIC ADVANTAGE PROFILE (SAP)
Strategic Advantage Profile for a bicycle company

• Up Arrow indicates Strength

• Down Arrow indicates Weaknesses
• Horizontal Arrow indicates Neutral
STRATEGIC ADVANTAGE PROFILE (SAP)
Strategic Advantage Profile for a bicycle company

• Up Arrow indicates Strength

• Down Arrow indicates Weaknesses
• Horizontal Arrow indicates Neutral
Value Chain Analysis
Value Chain Analysis
 Value Chain Analysis
         M.Porter introduced the generic value
chain model in 1985. Value chain represents
all the internal activities a firm engages in to
produce goods and services. VC is formed of
primary activities that add value to the final
product directly and support activities that
add value indirectly.
 Value Chain Analysis
   Definition

Value chain analysis (VCA) is a process where a firm identifies its

primary and support activities that add value to its final product
and then analyze these activities to reduce costs or increase
differentiation.

Value chain represents the internal activities a firm engages in

when transforming inputs into outputs.
 Value Chain Analysis
• Value chain analysis is a strategy tool used to analyze internal firm
activities. 
• Its goal is to recognize, which activities are the most valuable (i.e., are
the source of cost or differentiation advantage) to the firm and which
ones could be improved to provide competitive advantage. 
• In other words, by looking into internal activities, the analysis reveals
where a firm’s competitive advantages or disadvantages are.
• The firm that competes through differentiation advantage will try to
perform its activities better than competitors would do. If it competes
through cost advantage, it will try to perform internal activities at
lower costs than competitors would do. When a company is capable
of producing goods at lower costs than the market price or to provide
superior products, it earns profits.
 MCKINSEY’S 7S FRAMEWORK
What is the McKinsey 7S Model?
The McKinsey 7S Model refers to a tool that analyzes a company’s “organizational
design.” The goal of the model is to depict how effectiveness can be achieved in an
organization through the interactions of seven key elements – Structure, Strategy, Skill,
System, Shared Values, Style, and Staff.

The focus of the McKinsey 7s Model lies in the interconnectedness of the elements
that are categorized by “Soft Ss” and “Hard Ss” – implying that a domino effect exists
when changing one element in order to maintain an effective balance. Placing “Shared
Values” as the “center” reflects the crucial nature of the impact of changes in founder
values on all other elements.
 MCKINSEY’S 7S FRAMEWORK

          
The Seven Elements of the McKinsey 7-S Framework
The Seven Elements of the McKinsey 7-S Framework

The three "hard" elements include: 

• Strategy. 
• Structures (such as organization charts and reporting lines).
• Systems (such as formal processes and IT systems.)
These elements are relatively easy to identify, and management
can influence them directly.
The four "soft" elements, on the other hand, can be harder to
describe, and are less tangible, and more influenced by your
company culture. But they're just as important as the hard
elements if the organization is going to be successful.
 The 7 S-
1. Strategy: this is your organization's plan for building and
maintaining a competitive advantage over its competitors.
2. Structure: this is how your company is organized (how departments
and teams are structured, including who reports to whom).
3. Systems: the daily activities and procedures that staff use to get the
job done.
4. Shared Values: these are the core values of the organization and
reflect its general work ethic. They were called "superordinate
goals" when the model was first developed.
5. Style: the style of leadership adopted.
6. Staff: the employees and their general capabilities.
7. Skills: the actual skills and competencies of the organization's
employees.
SWOT ANALYSIS