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P K Agarwal 1

Evolution of strategic managementand business policy

The genesis of strategic managementand business policy

Evolution based on managementpractices

Historical perspective

Pointers to the future

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P K Agarwal 2

Business policy defined Business policy, as defined by Christensen and

others, is "the study of the function andresponsibilities of senior management, thecrucial problems that affect success in the totalenterprise, and the decisions that determine

the direction of the organisation and shape itsfuture. The problems of policy in business, likethose of policy in public affairs, have to do withthe choice of purposes, the moulding oforganisational identity and character, the

continuous definition of what needs to be done,and the mobilisation of resources for theattainment of goals in the face of competitionor adverse circumstance.

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Policy

A policy is a broad guideline fordecision making that links theformulation of a strategy with itsimplementation. Companies usepolicies to make sure that employeesthroughout the firm make decisions

and take actions that support thecorporations mission, objectives, andstrategies

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Policies

1. Policies include guidelines, rules, andprocedures established to support efforts toachieve stated objectives.

2. Policies are most often stated in terms ofmanagement, marketing, finance/accounting,production/operations, research anddevelopment, and computer information

systems activities. Examples: smoking policy, recruitment policy

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How does Strategy fit in?

Strategy is the process by whichindividuals and organisations makechoices about scarce resources so asto satisfy wants over time in anenvironment of uncertainty. They areaided in this process by market and

non-market forces.

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P K Agarwal 6

The concept of strategy

A strategy could be:

plan or course of action or a set of decisionrules making a pattern or creating acommon thread;

the pattern or common thread related tothe organisation's activities which arederived from the policies, objectives andgoals;

related to pursuing those activities whichmove an organisation from its currentposition to a desired future state;

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Contd.

concerned with the resources necessaryfor implementing a plan or following acourse of action; and

connected to the strategic positioning ofa firm, making trade-offs between itsdifferent activities, and creating a fitamong these activities.

the planned or actual coordination of the

firm's major goals and actions, in timeand space that continuously co-align thefirm with its environment.

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Strategic Management Defined

Strategic management is the process by

which managers set an organizations (or

several organizations) long-term course,

develop plans in the light of internal and

external circumstances, and undertakeappropriate action to reach those goals.

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P K Agarwal 9

Strategic management defined

Strategic management is defined as

the dynamic process offormulation,

implementation, evaluation and

controlof strategies to realise the

organizations strategic intent.

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Planning & Strategic Management.

"[Strategic management] is a means of

understanding the strategic position of the

organisation: formulating courses of action,evaluating them and choosing between

them; as well as planning how the choice of

strategy can be put into effect and

managing the resultant changes."

Johnson and Scholes (1994)

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Planning and StrategicManagement.

Planning is a sequence of analytical and

evaluative procedures to formulate an

intended strategy and the means of

implementing it. (Johnson and Scholes, 1999)

is Planning unconcerned with emergent

strategy?

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Basic Concepts of StrategicManagement

1. Basic financial planning: initiate someplanning when they requested to set up theirbudgets; considers activities for one year.

2. Forecast-based planning: consider projectsfor more than a year. The time horizon isusually 3-5 years.

3. Externally-orientedplanning: conductstrategic planning by top management and

they leave implementation to low level.4. Strategic management: planning by

forming a team from all levels in thecompany.

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P K Agarwal 13

Strategic decision-making

Objectives to be achieved aredetermined;

Alternative ways of achieving theobjectives are identified;

Each alternative is evaluated in termsof its objective-achieving ability; and

The best alternative is chosen.

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P K Agarwal 14

Issues in strategic decision-making

Criteria for decision-making

Rationality in decision-making

Creativity in decision-making Variability in decision-making

Person-related factors in decision-

making Individual versus group decision-

making.

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Not Always a Formal Process

Where is the organization now? (not where

do we hope it is)

If no changes are made, where will the

organization be in 1,2,5 or 10 years?

What specific actions should management

undertake?

What are the risks and payoffs?

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4 Phases of Strategic Management

Firms evolve through the following

phases of strategic management.

1. Basic financial planning

2. Forecast-based planning

3. Externally-oriented planning

4. Strategic management

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P K Agarwal 17

Four phases in strategicmanagement

Formulation

ofstrategies

Implementationof

strategies

Strategic

evaluation

Strategic control

Establishmentof

strategicintent

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Strategic Management

Environmental Scanning

Evaluation &Control

StrategyImplementation

StrategyFormulationMission

Vision

Disciplined, iterativeprocessof driving towards vision, by finding or making and

maintaining a defensible space or trajectory in a given businessenvironment.

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P K Agarwal 19

Comprehensive model of strategicmanagement

Strategy FormulationEnvironmental Organisational

Appraisal Appraisal

SWOT Analysis

Corporate-level Strategies

Business-level Strategies

Strategic analysis and choice

Strategic plan

Strategic Intent

Vision

Mission

Businessdefinition

Business model

Objectives

Strategy

ImplementationProject

Procedural

Resource allocationStructural

Behavioural

Functional &

Operational

Strategic control

Strategic

Evaluation

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P K Agarwal 20

Levels at which strategy operates

Corporate

Office

SBU

ASBU

B

Finance Marketing Operations HRM Information

LEVELS OF MANAGEMENT LEVELS OF

STRATEGY

CORPORATECORPORATE LEVEL

SBU BUSINESS-LEVEL

FUNCTIONAL

SBU

C

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Strategic Intent

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Vision

Mission

Businessdefinition

Business model

Objectives

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Strategy Formulation

Environmental Appraisal OrganisationalAppraisal

SWOT Analysis

Corporate-levelStrategies

Business-levelStrategies

Strategic analysisand choice

Strategic plan

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Strategy Implementation

Project

Procedural

Resource allocation

Structural

Behavioural

Functional &Operational

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Strategic Evaluation

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Functional Strategy

Technological leadership

Technological followership

P K Agarwal