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Assignment # 01
BUSINESS POLICY
What is Strategic Planning?
(The Strategic Planning Process, n.d.) Strategic planning is the process that clearly defines business
objectives and assesses both the internal and external situation to formulate and implement the
strategy, evaluate the progress, and make adjustments as necessary to stay on track.
The Strategic Planning Process can be shown with the help of following process:
Mission &
Objectives
Environmental
Scanning
Strategy
Formulation
Strategy
Implementation
Evaluation
& Control
What is a vision?
Visualization or mental picture is the literal meaning of vision. A vision describes how an
organization views itself and where it will be in next 3 or 5 or 10 years and so on. A vision
statement indirectly describes the futuristic view of an organization e.g. vision of Mobilink as
described in (Mobilink GSM, n.d.) is “To be the leading telecommunication services provider in
Pakistan by offering innovative communication solutions for the customers while exceeding
shareholder value and employee expectations.” It is a broad view of a company’s futuristic views.
The mission of a company usually tells what the company is providing i.e. either it is some good or service.
The mission of Mobilink as described in (Mobilink GSM, n.d.) is “To be the unmatchable mobile
system of communications in Pakistan. It provides the best value to its customers, employees,
business partners and shareholders.”
A well defined mission statement speaks a lot about the company and bestows it with honor by
separating it from other companies of its own type. It also identifies the scope of company’s
operations by defining the products and targeted market.
What is a budget?
As the name indicates, a budget is a financial or monetary plan. It lists down the resources available
and cost of each program. Wheelen and Hunger (2002, p.15) says that “a budget lists the detailed
cost of each program”. The budget thus helps the management in planning for its expenses and
setting cost limits using the available resources.
What is program?
A program means agenda, plan, curriculum or syllabus. It defines and describes the work flow of an
action or a task. Wheelen and Hunger (2002, p.15) defines a program in the following words “A
program is a statement of activities or steps needed to accomplish a single use plan. It may involve
restructuring of organization, changing the company’s internal culture or beginning a new research
effort.” Hence we may conclude that it is a component of a project which describes the workflow
throughout.
What is a policy?
Policy means guiding principle or course of action. Wheelen and Hunger (2002, p.14) defines a
policy in the following words “A policy is a broad guideline for decision making that links the
formulation of strategy with its implementation. Companies use policies to make sure that
employees throughout the company make decisions and take actions that support the company’s
mission, objectives and strategies. ”
Hence a policy in collaboration with company’s objectives and mission is a guiding principle for
employees which define them their limits of action. It has lesser scope than a strategy.
Wheelen and Hunger (2002, p.12) defines goals in the following words “a goal is an open ended
statement of what one wants to accomplish with no quantification of what is to be achieved and no
time period for completion.”
Hence a goal has
• No quantification
• No time period
What is a strategy?
Literally, strategy means a plan or policy but in terms of strategic management it has slightly
different meanings. It means a comprehensive and long term plan. Wheelen and Hunger (2002,
p.13) defines a strategy in the following words “a strategy of a corporation forms a comprehensive
master plan stating how the corporation will achieve its mission and objectives”
There are three types of strategies i.e.
• Corporate Strategy
• Business Strategy
• Functional Strategy
What is a procedure?
Procedure means mode of operation or course of action. Wheelen and Hunger (2002, p.15) defines a
procedure in the following words “system of sequential steps or techniques that describe in detail
how a particular task or job is to be done. They typically detail the various activities that must be
carried out in order to complete the corporation’s programs”
Often the companies name their standard procedures as “Standard Operating Procedure or SOP”.
These procedures are combined, compiled and published within the company for taking guideline
through this manual. An example is the SOP of Mobilink offices.
“Karger and Malikstudied studied 273 firms in the chemicals and drugs, electronics, and
machinery industries. All were $ 50 to 500 million corporations. Those practicing strategic
management were contrasted with those who didn’t (planners with no planners). Very significantly
differences were found in the machinery and chemical industries and some positive findings in the
drug and electronics group” Glueck (1980, p.17).
“Hegarty studied 46 firms in Fortune’s second 500 companies from 1970 to 1973. he found
that the more directly the firm linked its objectives to its strategies and thus formalized its strategic
management process, the more the firm prospered.” Glueck (1980, p.19).
Hence there is a difference between the firms that apply strategic management and those who do
not. As described by Glueck (1980, pp.16-17) there are the following advantages of strategic
management:
• Strategic management helps analyze and scan the environment therefore future problems
and opportunities could be well anticipated
• It allows a firm’s top management to anticipate changes and provide track and control for
the enterprise
• It provides clear cut mission, vision and objectives of enterprise to all the employees
• It allows a firm to take decisions on the basis of long range forecast
• It is widely practiced in industry
• Businesses where strategic management is applied are better performers and their employees
According to Wheelen and Hunger (2002, p.4) strategic management has the following advantages:
• The followers of strategic management are the outperformers
• It provides clearer sense of company’s strategic vision
• It helps understanding the rapidly changing environment
• GDP trends.
• Interest rates.
• Money supply in the economy.
• Inflation rate.
• Unemployment level.
• Wage/price control.
• Devaluation /revaluation.
• Energy availability and cost.
• Disposable income.
Technological forces
Technological forces include the following;
• New product development.
• Availability and cost of raw material.
• Availability and cost of money.
• Availability and cost of labor.
• Technological changes.
Market Forces
Market forces include the following;
• Changes in population.
• Age shifts.
• Income distributions.
• Product/service life cycle.
• Entry and exit of competitors.
• Availability of substitutes.
• Strategic changes by competitors.
Corporate policy
Corporate policy describes a companies overall direction in terms of its general attitude towards
growth and the management of its various businesses and product lines. It typical fit within the three
main categories of stability, growth and retrenchment.
Business policy
Business policy usually occurs at the business unit or product level and it emphasizes improvement
of the competitive position of a corporation products or services in the specific industry or market
segment served by that business unit. Business strategies may fit within the two overall categories
of competitive or cooperative strategies.
Functional policy
Functional policy is the approach taken by a functional area to achieve corporate and business unit
objectives and strategies by maximizing resources productivity. It is concerned with developing and
nurturing a distinctive competence to provide a company or business unit with a competitive
advantage.
Environmental Scanning
In the Environmental scanning we monitor, evaluate and disseminate information from the external
and internal environment to the corporation. The external environment consists of forces such as
economic forces, technological forces, political forces, socio cultural forces and demographical
forces. The internal environment consists of variables that are within the organization. They include
the corporation culture, people and resources.
The simplest way of scanning the environment is through SWOT analysis in which the strengths,
weakness, opportunities and threats or an organization are analyzed because they are the strategic
factors of a company.
Strategy Formulation
Strategy formulation is the development of long range plans of a company in order to gain effective
and efficient business procedure. Strategies are formulated by keeping in view the long term
prospective of a firm. It includes the following steps:
Mission
Objectives
Strategies
Policies
Strategy Implementation
Strategy implementation is that step in which the plans and policies are actually implemented
through the help of programs budgets and procedures.
Programs
A program is a subset of a big project. It determines the set of activities that are undertaken while
accomplishing a plan.
Budget
A budget is a financial plan of an organization which is formed on the basis of funds available.
Procedures
A procedure is a set of instructions which are required to do a job. Mostly, the companies make their
“standard operating procedures” for the sake of convenience of their employees.
The image of the five forces model (Five Forces Analysis, n.d.)
(Marketing Teacher, n.d.) The five forces model is also known as Porter’s model. It was developed
by Michael E. Porter of Harvard Business. It is a model for the industry analysis and business
strategy development. Wheelen and Hunger (2002, pp. 60-63) It highlights five key forces namely:
1. Threats of Entry
2. The power of buyers
3. The power of suppliers
4. The threat of substitutes
5. Competitive rivalry
Threats of Entry
New industry entrants usually bring new threats to the existing companies because they may have
such a competitive advantage that they may capture the market share of existing companies
therefore they are a big threat. The entry barriers or obstructions may provide a safe side to the
existing companies.
The possible barriers may be:
• Economies of scale
• The cost of entry
• Distribution channels
• Cost advantages not related to the size of the company
• Government action
• Product differentiation
• This is high where there a few, large players in a market e.g. the large grocery chains.
• If there are a large number of undifferentiated, small suppliers e.g. small farming businesses
supplying the large grocery chains.
• Changing suppliers cost is little
The power of suppliers tends to be a reversal of the power of buyers. Suppliers are the providers of
goods. They also have the ability to change the prices i.e. through increasing the supply or vice-
versa. Either of the situations can bring down the prices and may also raise it to the higher levels.
The power of suppliers is high when:
• Where the switching costs are high e.g. Switching from one construction company to another
• Supplier is a renowned and strong brand e.g. Dell
• There is a possibility of the supplier integrating forward
• Customers are fragmented so that they have little bargaining power e.g. Gas/Petrol stations in
remote places.
• Substitutes are few or not at all available e.g. Microsoft windows
Competitive Rivalry
Wheelen and Hunger (2002, p.62) state that according to Porter rivalry is related to presence of
several factors such as
• Number of competitors
• Role of industry growth
• Product or service characteristics
• Amount of fixed costs
• Capacity
• Exit barriers
• Diversity of rivals
There is the threat of substitute where entry is easy. This is why it is always seen in the center of
the diagram.
References
Five Forces Analysis [Image] (n.d.). Retrieved September 13, 2008, from
http://www.marketingteacher.com/Lessons/lessonfivefoces.htm
Glueck, F., William. (1980). Environmental Analysis and Diagnosis. In Business Policy and Strategic
Management(3rd Ed.). (pp. 88-102). USA: McGraw Hill.
Glueck, F., William. (1980). Why Strategic Management. In Business Policy and Strategic Management(3rd
Ed.). (pp. 16-19). USA: McGraw Hill.
Mobilink GSM (n.d.) Mobilink Mission. Retrieved September 13, 2008, from
http://www.mobilinkgsm.com/mission
Mobilink GSM (n.d.) Mobilink Vision. Retrieved September 13, 2008, from
http://www.mobilinkgsm.com/vision
Quick MBA Knowledge to Power Your Business (n.d.). The Strategic Planning Process. Retrieved
September 13, 2008, from http://www.quickmba.com/strategy/strategic planning
The Strategic Planning Process [Image] (n.d.). Retrieved September 13, 2008, from
http://www.quickmba.com/strategy/strategic planning
Wheelen, L., Thomas & Hunger, David, J. (2002). Basic Concepts of Strategic Management (8th Ed.). In
Strategic Management and Business Policy (pp.9-16). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Benefits of Strategic Management. In Strategic
Management and Business Policy (8th Ed.). (p. 4). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Competitive Tactics. In Strategic Management and
Business Policy (8th Ed.). (p. 123). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Environmental Scanning and Industry Analysis. In
Strategic Management and Business Policy (8th Ed.). (pp.52-53). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Environmental Scanning and Industry Analysis In
Strategic Management and Business Policy (8th Ed.). (pp.60-63). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Environmental Scanning and Industry Analysis In
Strategic Management and Business Policy (8th Ed.). (pp.62). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Strategy Formulation. In Strategic Management and
Business Policy (8th Ed.). (p. 10). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Strategy Formulation. In Strategic Management and
Business Policy (8th Ed.). (p. 12). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Strategy Formulation. In Strategic Management and
Business Policy (8th Ed.). (p. 13). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Strategy Formulation. In Strategic Management and
Business Policy (8th Ed.). (p. 12). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Strategy Formulation. In Strategic Management and
Business Policy (8th Ed.). (p.13). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Strategy Implementation. In Strategic Management and
Business Policy (8th Ed.). (p. 15). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Strategy Implementation. In Strategic Management and
Business Policy (8th Ed.). (p. 14). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Strategy Implementation. In Strategic Management and
Business Policy (8th Ed.). (p. 14). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). Strategy Implementation. In Strategic Management and
Business Policy (8th Ed.). (p. 15). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). The Study of Strategic Management. In Strategic
Management and Business Policy (8th Ed.). (p. 02). NewJersy: Prentice Hall.
Wheelen, L., Thomas & Hunger, David, J. (2002). The Study of Strategic Management. In Strategic
Management and Business Policy (8th Ed.). (p. 02). NewJersy: Prentice Hall.