business policy and strategic management

Business PolicyBusiness Policy(Strategic Management)

Chapter 1

Business PolicyIf we know where we are and something about how we If we know where we are and something about how we got there, we might see where we are trending – and if got there, we might see where we are trending – and if the outcomes which lie naturally in our coure are the outcomes which lie naturally in our coure are unacceptable, to make time change. unacceptable, to make time change.

-Abraham Lincoln--Abraham Lincoln-

If a man takes no thought about what is distant, he will If a man takes no thought about what is distant, he will find sorrow near at hand. He who will not worry about find sorrow near at hand. He who will not worry about what is afar off will soon find something worse than what is afar off will soon find something worse than worry.worry.

-Confucius--Confucius-

Without strategy, an organization is like a ship without a Without strategy, an organization is like a ship without a rudder, going around in circles. It’s like a tramp; it has rudder, going around in circles. It’s like a tramp; it has no place to go.no place to go.

-Joel Ross & Michael Kami--Joel Ross & Michael Kami-rowena ginafe p. vargas,mba, business policyrowena ginafe p. vargas,mba, business policy

Business Policy

• Strategic Planning originated in the 1950’s and was very popularized between mid-1960’s and the mid-1970’s.

• A strategic plan is, in essence, a company’s game plan.

• A strategic plan results from tough managerial choices among numerous good alternatives, and it signals commitment to specific markets, policies, procedures and operations in lieu of other “less desirable” courses of action.

rowena ginafe p. vargas,mba, business policyrowena ginafe p. vargas,mba, business policy

Business PolicyThree Stages of Strategic Management:• Strategy Formulatioin• Strategy Implementation• Strategy Evaluation

Strategy Formulation: includes developing a vision and mission, identifying an organization’s external opportunities and threats, determining internal strength and weaknesses, establishing long-term objectives, generating alternative strategies and choosing particular strategy to pursue.


Business Policy• Strategy Implementation: requires a firm to establish annual

objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed. • Includes developing a strategy –supportive culture, creating an

effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance.

• Strategy Evaluation: is the final stage in strategic management. Fulfilling the need to know of managers when particular strategies are not working well; strategy evaluation is the primary means for obtaining this information


Case PresentationI. IntroductionII. Mission/VisionIII. Internal Assessment

I. StrengthsII. Weaknesses

IV. External AssessmentI. OpportunitiesII. Threats

V. Strategy FormulationVI. Strategy ImplementationVII. Strategy EvaluationVIII. Conclusion/Recommendation

Page: 354363 of Strat. Mgt. FRD

rowena ginafe p. vargas,mba, business policy

Business Policy• Strategists: are the individuals who are most responsible for the success

and failure of an organization.

o Responsibilities of the CEO:– He, working closely with the board of directors, must elaborate the

major policies of a firm– He, working closely with the board of directors, and his top managers,

must define the objectives of the firm.– He, working closely with his top manager, and develop strategies and

the long-range plan for achieving these objectives.– He must develop an organization which most efficiently carries out the

copany’s strategic plan.– He, working together with his top managers, must develop te operating

policies which ease the burden of decision-making to carry out the plan. – He, depending upon his philosophy of management (degree of

decentralizaztion of authority and responsibilties) will, also be involved in controlling the operations of the firm and in problem solving.


Business Policy• Major Policies – deal with the firm’s fundamental nature, its

identity, and the direction in which it is expected to move. They provide a framework within which the objectives can be established.

• Objectives – the firm’s objectives or goals (these are two terms used interchangeably) specify, usually in quantitative terms (e.g. Dollars, percentages, or time periods), whre the firm is expected to be at some time in the future.

• Strategy – is the approach developed to achieve the objectives which have been defined. The development of strategy is a critical part of long-range planning. A firm’s strategy (it’s strategic plan) defines in detail how the firm is to get from where it is now to where the objectives state it should be at some time in the future. rowena ginafe p. vargas,mba, business policyrowena ginafe p. vargas,mba, business policy

Business Policy• Operating Policies• Operating policies are guides for decision-making. The

operating policies of a firm flow out of its objectives, its strategy, and its organization. The objectives, plus, the policies, define the character or personality of the firm. • They proivde a framework within which management can

make decisions that are consistent in themselves and are in accordance with the strategic plan and its objectives.


Business Policy

• Major Policies of an Enterprise:• Are usually stated in the “Statements of Purpose” of the

company.– “This company will be one of the leading firm in the manufacturing of

all types of textiles, and eventually of ready-made clothing. Full ownership shall remain in th hands of members of the family”.

• It can also be stated that the Major Policy for a company is to “maximize profits or minimize losses consistent with other major policies and objectives.”• Another Policy could be expressed in terms of products

and/or services the company will produce and sell. • A usual Policy is stated in terms of anticipated position within

the firm’s industry. rowena ginafe p. vargas,mba, business policyrowena ginafe p. vargas,mba, business policy

Business Policy

• Major Policies of an Enterprise:• Some executives feel that a firm must either grow or die. • They feel if a firm does not have growth as its goal, it will not be

an innovator; it will merely replace machinery as they wear out and replace men as they retire. – A policy of “NO GROWTH” may even be consistent with long life and

increasing profits if it is accompanied by an active strategy of the correct amount of marketing effort, innovation, and perhaps diversification to maintain present sales values.

• Another type of policy will concern the geographic market for the product or service. The firm may now sell only in a given region/area.


Business Policy

• Major Policies of an Enterprise:• Another policy may also indicate the product quality.

– If the company makes furniture; the management may wish to establish a reputation as a manufacturer of modern mass-produced furniture, or it may wish to concentrate on cheap reproduction or just stylish furniture.

• Another policy involves ownership. – A family may wish to retain 100% ownership, or may it wish to

maintain only management control over the enterprise.

• Finally, a Policy could also include the degree of the company’s social responsibility to which the company will devote itself.


Why some firms Do No Strategic Planning???

• Poor reward structures- but quick to punish • Firefighting – reactive management• Waste of time-does not believe in planning as an investment.• Too expensive• Laziness • Content with success• Fear of failure• Overconfidence


Business Policy• Reasons for not doing Strategic Planning– Prior bad experience– Self-interest– Fear of the unknown– Honest difference of opinion– Suspicion

• Business Ethics – Principles of conduct within organizations that guide decision

making and behavior. – Good Business Ethics is a pre-requisite for good strategic

management. Good Business ethics is Good Business. – Good ethics also mean environmentally sensitive.


Business and Military Strategy• Strategy– Defined by the Webster’s New Dictionary as the

“Science of planning and directing large-scale military operations, of maneuvering forces into the most advantageous position prior to actual engagement with the enemy”.

– came from the Greek term Strategos• Statos means the Army• Ago means to Lead

– Based on history strategic management in business and military means “Gaining competitive advantage”

• Sun tzu’s Art of War– All warfare is based on deception


business policy and strategic management

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