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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