Business Policy and Strategic Management

• Rules and guidelines steer organizations towards targets
• Written rules avoid problems and financial losses
• Business policies guide organizational decisions and actions, formalized in manuals, handbooks, and meeting minutes

Strategic Management

• Addressing operational strategies is vital, as business aims for long-term profit
• Strategic management involves external awareness for competitive operation
• Internal business policies guide personnel
• Globalization with information technology emphasized external orientation and strategic management
• Technological improvements make the world virtually smaller
• External orientation and strategic management principles are embraced for survival and competition

Business Policy

• Management revolves around planning, organizing, staffing, controlling, and evaluating
• Business policy comprises of rules guiding business conduct towards profit, developed in coherence for various functional units
• Business policy is inward-looking, guiding personnel within the organization, providing a framework for plans and decision-making

Strategy

• Strategy is top management's plan to achieve mission-aligned outcomes
• Strategy involves:
  • Strategy formulation
  • Strategy implementation
  • Strategic control

Intended vs Realized strategy

• Intended strategy: The original strategy management plans to implement
• Realized strategy: The actual strategy implemented, which may differ due to unforeseen events

Strategy Defined

• Strategy is a set of competitive moves and business approaches
• Strategy include the following:
  • Attracting customers
  • Securing a market position
  • Conducting operations
  • Competing successfully
• Other traits of strategy:
  • A grand plan anticipating potential adversaries
  • Deriving relevance from business competition
  • Presuming a negative scenario
  • Emphasizing action and resource allocation for objectives
  • Involving decisions on objectives and resource management
  • Determining long-term goals and resource allocation

Strategy vs Policy

• Strategy means using resources against obstruction
• Strategy implies actions and guides decision-making
• Strategy can exist without policy
• Business policies and strategies may clash, causing dilemmas
• Effective management determines the business direction when policies and strategies conflict
• Business policies can exist without strategy, and vice versa
• Business policies are directional, while strategy is operational
• Business policies are formal; strategies may be informal and confidential
• Policy guides internal operations, while strategy maintains external competitiveness

Origin of Strategy

• Business policy is the precurser of strategic management
• Strategic management acknowledges the importance of how a business should operate in response to external and environmental factors
• Arose out of the need for managers to realise the need to be more outward looking
• Business policy evolved to strategic management, incorporating external factors
• Strategic management overshadows business policy by considering both internal and external factors
• Strategic management is more appropriate than business policy in current environment

Evolution of strategic management

• Concept of strategy emerged post-World War II, due to a shift to a more rapidly changing and competitive environment:
  • Accelerated rate of change within firms
  • Accelerated application of science and technology to management
• Integrating strategy into management systems is essential for profit
• Strategic management incorporates internal and external factors for sustainability

Strategic Management Defined

• Strategic management is the entire process of strategic decision-making related to the environment with long term performance implications
• Strategic management involves:
  • Environmental scanning (internal and external)
  • Strategy formulation (long-range planning)
  • Strategy implementation
  • Evaluation and control
• The study of strategic management emphasizes:
  • Monitoring and evaluating opportunities/threats
  • Identifying organizational strengths/weaknesses
• Strategic management shapes an organization's destiny
• Addresses key questions:
  • Where is the organization going?
  • What options are open?
  • What's the best way forward?
  • How can this be done?
• Strategic management maintains a beneficial fit with its environment, which is necessary for competitive viability
• Involves analysing external factors, interal factors and strategy implementation

Strategic management is a continuous and dynamic process

• Managers must be aware that business is an ongoing, wealth-creating endeavor
• Appropriateness is key to profitable operations and survival
• Strategic managers must adapt to constant change

Benefits of Strategic Management

• Clearer sense of strategic vision for the firm
• Sharper focus on strategically important aspects
• Improved understanding of a rapidly changing environment

Strategic Types

• Strategic type categorizes firms by strategic orientation, structure, culture, and process
• Strategies including
  • Defenders: Focus on limited product lines and efficient operations
  • Prospectors: Focus on broad product lines and innovation
  • Analyzers: Operate in both stable and variable markets
  • Reactors: Lack consistent strategy

Strategy vs Tactics

• Tactics are more operational by concretizing business operations
• Strategy determines the highest levels of conduct
• Strategy is continuous and irregular
• Tactics are determined periodically
• Strategic decision-making relies on subjective values
• Tactical decision-making has less so
• The consideration for alternatives is greater in strategic decision making
• Uncertainty is greater in forming strategies
• Strategic problems are unstructured
• Tactical problems are structured
• Formulating strategy needs more information and relies on internal data
• Strategies last longer than tactics
• Strategy is the origin of tactics

Developing Strategies

• Strategy is formulated by top management with staff participation
• Effectiveness is easier to measure in tactics
• Strategies are formulated from a corporate viewpoint and tactics from a functional ones
• Strategies are more significant

Bases of Policies and Strategies

• Policies and strategies should be based on premises and presumptions, and not simply copied
• Legal mandates (laws, policies)
• Vision and mission statements (leadership bias)
• Specific objectives (corporate goals)
• Programs and policies (organization's specific actions)

Identifying Policies and strategies

• Policies and strategies stem from:
  • Wisdom in considering various approaches
  • A brainstorming session
  • Serious research

Methods to approach

• Policy/strategy profile which involves systematic examination of current policies and strategies
• Gap analysis finds what parts are missing
• Competitive strategy analysis find alternative, niche markets
• Classical Approach based on textual method
• Evolutionary Approach that substitutes the market for the law of the jungle
• Processual Approach that takes into consideration that the market is often messy
• Systematic Approach is relativisitic

The development of policies and Strategies

• Should be a concern for everyone in the buisness oragnization
• This may take the form of one of the following options:
  • Top-bottom
    • Top to bottom management strategy
  • Bottom-top
    • Bottom to top managment strategy
  • Top-bottom-top
    • Top down with refinement

Strategic Decision-making

• In context with stratgic management, decision making should include the consideration of multiple external conditions
• Strategic Decisions should be:
  • Rare
  • Consequential
  • Directive

There are 4 main modalities of decision making according to Mintzberg:

• Entrepreneurial Model
• Adaptive model
• Planning Model
• Logical Model

Strategic decision making process

The process is composed the the following tasks:

• Evaluate current performace
• Examine and evaluate company's current standing
• Reassess company's standing in light of external and internal factors
• Generate options for strategy making
• Choose a course of action
• Implement strategy
• Monitor and adjust to new conditions

Role of the Board of Directors

• In the process of creation and implementation of strategy, boards should be indirectly and directly involved
• Responsibilities are:
  • Monitor. acting through coomittes to keep abreast of internal and external conditions
  • Evaluate and influence. To assess management's actions, offer advice and suggestions
  • Aiding in strategy implemntation