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UN IT - 4STRATEGIES & POLICIES

Prof Sapana Singh

STRATEGY DEFINED:

The term strategy or iginated from military.

It is the set of comprehensive action plans toensure achievement of organizational objectives.

Strategy refers to the determination of the

mission & the basic long-term objectivesof anenterprise & the adoption of courses of action &allocation of resourcesto achieve thoseobjectives.

- Harold KoontzProf Sapana Singh

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Strategies help in providing direction to theprior ities of an enterprise.

It helps in determining various moves to copeup with external environment.

It also helps an organization to identify the

areas and points on which it mustconcentrate to gain command.

Eg: Wal-Marts low cost strategyProf Sapana Singh

Characteristics of Strategy

Formulated by top mgmt

Generally long range in nature

Flexible & dynamic

Action oriented

Concerned with scanningexternal environment

& finding ways to cope with itMore specific than objectives

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Types of Strategies

CORPORATE Level

BUSINESS Level

FUNCTIONALLevel

Prof Sapana Singh

Prof Sapana Singh

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Strategic Planning Process

MISSION & OBJECTIVES

ENVIRON MENTAL SCANNING

STRATEGY FORMULATION

STRATEGY IMPLEMENTATION

EVALUATIO N & CONT ROL

Prof Sapana Singh

SW OT AN ALYSIS

STRENGTH Goodwill Brand name Quality product Advanced technology Trained & skilled

employees

W EAKNESSo Weak distribution

networko Lack of efficiencyo Lack of expertise in

some areaso Weak brand name

OPPORTUNITY New technology Joint venture or merger Accessing unfulfilled

customer needs New market

THREAT Substitute products Increasing competit ion Trade barrier Changing technology New regulations Changing tastes &

preferencesProf Sapana Singh

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TOW S MATRIX

Prof Sapana Singh

TOW S MATRIX

InternalFactors

ExternalFactors

STRENGT H W EAKNESSES

OPPORTUNITIESS-O Strategies W-O Strategies

THREATSS-T Strategies W-T Strategies

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PORTFOLIO MATRIX

1) BCG Growth-Share Matrix:

It is a portfolio planning model developed byBruce Hendersonof Boston ConsultingGroup.

It is mainly for large corporations with variousdivisions.

It helps organizations to manage their businesspor tfolio & develop business level strategies.

It also helps them in evaluating the relative

performance of various businesses(SBUs-Strategic Business Units.

It is a tool for allocating resources.Prof Sapana Singh

BCG approach helps focusing on three

aspects of a business unit:-

Volume ofSales

Cost centeror

Profitcenter

Growth ofMarket Size

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Prof Sapana Singh

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2) GE Portfolio Matrix or Mckinsey

Matrix General Electric portfolio matrix was an

improvement over BCG portfolio matrix.

This matrix has 9 cells in which business units(SBUs) are plotted.

This matrix has two dimensions:

1. Industry Attractiveness(replaced marketgrowth)

2. Business Strength (replaced marketshare)

Prof Sapana Singh

Prof Sapana Singh

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INDUSTRYATTRACTIVENESS

(Product-marketattractiveness)

BUSINESS STRENGTH

Market size Market Growth rate Intensity of competition Demand variability Global opportunities Industry profitability

Macro-environmentalfactors (PEST)

o Market shareo Production capacityo Profit margins relative

to competitorso Customer loyaltyo Relative brand strength

o Distribution channelaccess

Prof Sapana Singh

Segment 1(GREEN): This is the best segment.

The business is strong and the market isattractive. The company should allocate resourcesin this business and focus on growing the businessand increase market share.

Segment 2 (YELLOW ): The business is eitherstrong but the market is not attractive or themarket is strong and the business is not strongenough to pursue potential opportunities.Decision makers should make judgment on howto fur ther deal with these SBUs. Some of themmay consume to much resources and are notpromising while others may need additionalresources and better strategy for growth.

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Segment 3:(RED) This is the worst segment.Businesses in this segment are weak and theirmarket is not attractive. Decision makers shouldconsider either repositioning these SBUs into adifferent market segment, develop better cost-effective offering, or get rid of these SBUs andinvest the resources into more promising andattractive SBUs.

Prof Sapana Singh

Generic Competitive Strategies by Porter

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Prof Sapana SinghPorters 5 Competitive Forces

Effective Implementation of Strategies

Proper and clear communication of formulatedstrategies to all.

Before planning, the planning premises must bedeveloped by scanning the environment, and thispremises must be communicated to all.

Such action plans must be developed thatcontribute to the accomplishment of objectives.

The organizational structure should fit theplans.

Organization should be proactive to deal withenvironmental changes.

Time to t ime evaluation & control.Prof Sapana Singh

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POLICIES

Policies are the guidelinesor the general limitswithin which the members of an organization act.

Each and every policy has a specific purpose behindit.

They exist at all the levels of an organization.

They are the guidelines that help in decisionmaking.

Prof Sapana Singh

Types of Policies

ORIGINATED POLICY

IMPLIED orTRADITIONAL

POLICY BY FAIT

APPEALED POLICY

EXTERNALLY IMPOSEDPOLICIES

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Principles of Formulation of Policies

A policy should contribute to the achievementof organizational objectives.

It should be definite and in writing.

It should be durable(stable) and flexible.

Policies for all the departments should becomplementary (lower level policies should bederived from higher level policy).

It should bejust, fair & equitable.

Time to time review & modification.

Prof Sapana Singh

DECISION MAKING

Decision making can be regarded as themental processes (cognitive process) resultingin the selection of a course of action amongseveral alternatives. Every decision makingprocess produces a final choice.

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Types of Decisions

1. BASIC & ROUTINE DECISIONS

2. PERSONAL vs. ORGANISATIONALDECISIONS

3. PROGRAMMED & NON-PROGRAMMEDDESICIONS

Prof Sapana Singh

1) BASIC & ROUTINE DECISION

Basic Decisions:They are unique, one-time

decisions demanding large investments,

creativeness & good judgment on the part of

managers.

Routine Decisions: They are repetitive in

nature, require lit tle discussion & are generally

concerned with short term.Prof Sapana Singh

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2) PERSONAL vs. ORGANIZATIONAL

DECISIONS

Personal Decisions: E.g.- decisions like watchingT.V, studying, playing etc. Such decisions are

taken by managers in their individual

dimensions. These cannot be delegated.

Organizational Decision:These decisions are

made by managers in their official or formal

dimensions. They are aimed at promoting the

interests of the organization.Prof Sapana Singh

3)

Prof Sapana Singh

PROGRAMMED NON-PROGRAMMED

Routinized & repetit ive Fresh, Unique & impor tant

Least risk & uncertainty High level of risk & uncertainty

Made within framework of policies,rules & specific procedures.

No existing policies or proceduresto guide

Require little discussion & thinking Requires creative problem solving

Known outcomes Unknown outcomes

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Characteristics of Decision Making

It is a human process.

There is always a purpose behind everydecision making.

Involves selecting a particular course ofaction from various alternatives.

Dependent on circumstances.

Involves problem identification & analysis.

Ends up with final choice.

Prof Sapana Singh

Decision Making Process

Prof Sapana Singh

Identifying the Problem

Analyzing the Problem

Developing Alternative Solutions

Weighing Alternative Solutions

Choosing the Best Solution

Implementing & Verifying the Decisions

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Individual Decision Making Models

Prof Sapana Singh

RATIONAL ECONOMIC MODEL According to this model, the decision-maker is

assumed to make decisions that wouldmaximize his/her advantage economically bysearching & evaluating all possible alternatives.

Assumptions:

Decision making is a goal-oriented process.

All choices are known.Order of preference.

Maximum advantage.Prof Sapana Singh

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Problematic Factors:

1. Impossible to state problems accurately.

2. Not fully aware of problems.

3. Imperfect knowledge.

4. Limited time & resources.

5. Cognitive limits.

6. politics

Prof Sapana Singh

Descriptive Decision Theory (Behavioral

Theory)/ The Administrative Model Proposed by Herbert A Simonand developed by

Richard Cyert& James March.

Objective: To explain the decision-makingbehavior of individuals & organizations.

Acco. To Simon, people carry only a limited viewof problems confronting them because of

following reasons-

Lack of full informationabout problem.

Lack of knowledge of all possiblealternativesolutionsto the problem & theirconsequences.

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Lack of ability to processcompetitive environment& technical information.

Lack of time& resources.Bounded Rationality: a concept that suggeststhat the ability of managers to be perfectlyrational in decision-making is limited by suchfactors as cognitive capacity & time constraints.

Satisficing Model: a model stating that

managers seek alternatives until they find onethat looks satisfactory, rather then seeking theoptional decision.

Prof Sapana Singh

THE POLITICAL MODEL This model is useful for making non-

programmed decisions, when-

a) Conditions are uncertain.

b) Information is limited.

c) There is disagreement among managers aboutwhat goals to seek & what course of action topursue.

Such complex decisions are resolved throughforming alliances among managers, known asCoalition Building. It gives managers anopportunity to contribute to decision making.

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Prof Sapana Singh