Business Policy and Strategic Management

Business Policy &
Strategic Management
-Prof. Shashank Divekar
Pune, India
Business Policy & Strategic Management

What is Business Policy ?
Business policy is the study of the roles and responsibilities
of top- level management, the significant issues affecting
organizational success and the decisions affecting
organization in the long-run.
Business Policy defines the scope or spheres within which

decisions can be taken by the subordinates in an organization.
It permits the lower level management to deal with the
problems and issues without consulting top level management
every time for decisions.
Business policies are the guidelines developed by an

organization to govern its actions. They define the limits
(Dos & Donts) within which decisions must be made.

Business Policy includes guidelines, rules and procedures
established to support efforts to achieve stated objectives.
Policies are guides to decision making and address

repetitive or recurring situations.
Policy defines the area in which decisions are to be made,
but it does not give the decision.
A policy is a verbal, written, or implied overall guide,
setting up boundaries that supply the general limits and
direction in which managerial action will take place.
Examples of Business Policies :

HR Policy
Hiring-Firing
Employee profile
Training
Transfers
Promotions
Wages
Incentives & Bonus
Materials Policy
Quality-Quantity
Vendors
Payment terms
Stores & Handling
Documentation
Marketing Policy
Quality Policy
Standards
Checks & Controls
Feedbacks
Corrective Measures
What to sell
Where
To Whom
Through Whom
Communication
What is Corporate Strategy ?

Corporate Strategy is the direction and scope of an
organisation, which achieves advantage for the organisation
through its configuration of resources within a changing
environment and to fulfill stakeholder expectations.
What is Strategic Managemant ?

It is the managerial process that focusses on identifying and
building competitive advantage
By
Generating good ideas and implementing them effectively.
Corporate Strategy is the pattern of major objectives,

purposes or goals and essential policies or plans (for
achieving those goals), stated in such a way as to define
what business the company is in, or is to be in, and the kind
of company it is, or is to be.
- Kenneth Andrews
The task of corporate strategy is to create a distinctive way

ahead for an organisation, using whatever skills and
resources it has, against the background of the environment
and its constraints.
5 Tasks of Strategic Management

1. Forming a strategic vision Long term direction, a sense of
purposeful action.
2. Setting objectives Converting the strategic vision into specific

performance outcomes for the organisation to achieve.
3. Crafting a strategy to achieve desired results :
Macroeconomic analysis
Industry Analysis
Game theory
Capabilities-based strategy formulation
Dynamic capabilities & evolutionary thinking
4. Implementation & executing the strategy
5. Evaluating performances, reviews and corrective action
Business Model
A Business Model is a document describing the operations of a

business including the components of the business, the
functions, and design. It is the plan implemented by a company
to generate revenue and make a profit from operations.
Magretta defines Business Model as Stories that explain how
enterprises work.
A Business Model depicts the content, structure and

governance of transactions, designed so as to create value
through exploitation of business opportunities.
A Business Model is the logic of the firm, the way it operates
and how it creates value for its stakeholders.
Business Model
A business model is how a company operates and a strategy is

how a company competes. Strategies cannot be formulated
without first understanding the fundamental elements of a
business model.
When the basis of competition changes because a new model
changes the economics in the industry, business models need
to be adjusted and then the strategy realigned.
How corp. strategy links the organisations resources with its environment
Economy Growing
Environment
Competitors Attacking
Threat
Opportunity
RESOURCES
Strategy needed
to direct
activities of its
people, finance,
factories etc.
Environment
Threat
Opportunity
Customers excited
about new
products & services
Environment
Environment
Suppliers becoming
more aggressive

How corp. strategy links the organisations resources with its environment
Economy at large
Substitutes
Suppliers
Legislation &
Regulation
Technology
Firm
Rivals
Buyers
New Entrants
Societal Values & Lifestyle
Population
Demographics
Environmental Threat & Opportunities Profile (ETOP)

ETOP analysis is a management tool that analyses environmental
information and determines the relative impact of threats and
opportunities for the systematic evaluation of the environment.
Environment scanning is the process of gathering, analysing and
dispensing information for tactical or strategic purposes.
ETOP process involves dividing the environment into different

environmental sectors and then analysing the impact of each sector
on the organisation.
ETOP gives a clear picture to the strategies about each aspect of the
business environment, the various individual factors within each
sector which affect the business favourably or otherwise.

ENVIRONMENTAL
SECTOR
NATURE OF IMPACT
IMPACT OF THE SECTOR
ECONOMIC
Burgeoning middle class,

rising disposable incomes,
lifestyle changes.
MARKET
Several major players, lots of

small players and a large
unorganised sector, margin
pressures.
GLOBAL
Global slowdown, cheaper

imports, US$, crude prices.

ENVIRONMENTAL
SECTOR
NATURE OF IMPACT
POLITICAL
Coalition compulsions, lack

of direction, instability.
REGULATORY
Too many controls, inspector

raj, documentation and
licensing, reservations for SSI
etc.
SOCIAL
Changing attitudes,
acceptance of new social
values and norms, new ideas
and liberal outlook.

ENVIRONMENTAL
SECTOR
NATURE OF IMPACT
TECHNOLOGY
Cheaper technology
development, skilled and
trained indigenous talent.
SUPPLIERS
Too few vendors, new

suppliers reluctant to enter
the market. Pricing and
scheduling issues.
Characteristics of Corporate Strategy

Corporate strategies provide direction when the company
enters new economic markets. The strategy determines
markets of the firms, customers and competitors.
1. Generally long-range in nature but valid for short-range
situations also.
2. Action-oriented and more specific than objectives.

3. Multipronged and integrated.
4. Flexible and dynamic
Characteristics of Corporate Strategy ..Contd.

5. Formulated at top management level with inputs from
middle and lower level managers
6. Generally meant to deal with competitive and complex settings
7. Flows out of goals and objectives and is meant to turn

them into realities.
8. Is concerned with perceiving opportunities and threats
and seizing initiatives to cope with them.
9. Provides unified criteria for managers in function of
decision making.

Mintzbergs 5 Ps of Strategy
Henry Mintzberg first wrote about the 5 Ps of strategy in

1987. According to him different types of strategic thinking
and approaches are required as per situations and
conditions. These may be inter-related and compatible.
Strategy is not just a notion of how to deal with an enemy or
a set of competitors or a market. It also involves some of the
fundamental issues about organisations as instruments for
collective perception and action.
Mintzberg argued that there is no point in developing a
strategy that ignores the competitors reactions or does not
take into account the organisations culture and capabilities.

Mintzberg presented 5 different approaches or concepts of

strategy. These are known as 5 Ps of strategy.
1. Plan
2. Ploy
3. Pattern
4. Position
5. Perspective

Strategy as a Plan :
Planning is something that comes naturally to us. As such, this is
the default, automatic approach that is adopted. This involves
brainstorming options and planning how to exploit the
opportunity.
By this definition, strategy has two essential characteristics :
a) They are made in advance of the actions to which they apply.
b) They are developed consciously and purposefully.
As plans, strategies can be general or specific.

Strategy as a Ploy :
A Ploy is a specific maneouvre intended to outwit an
opponent or competitor. It involves plotting to disrupt,
dissuade, discourage or otherwise influence competitors as a
part of a strategy.
A major retail store threatening to expand its size and

capacity to discourage a competitor from opening a store in
the area, a corporation luring away some key employees or
distributors of a competitor in order to weaken the operating
capability of the competitor are some examples of ploys.

Strategy as a Pattern :
Strategic plans and ploys are both deliberate exercises.
Sometimes, however, strategy emerges from past
organizational behavior. Rather than being an intentional
choice, a consistent and successful way of doing business can
develop into a strategy.
Thus, defining strategy as a plan is not sufficient. We also need
a definition which takes into account the resulting behaviour.
Thus the definition of strategy as a pattern emerges.
By this definition strategy is consistency in behaviour, whether
or not intended.

Strategy as a Position :
"Position" is another way to define strategy - that is, how

you decide to position yourself in the marketplace.
In this way, strategy helps you explore the fit between your
organization and your environment, and it helps you
develop a sustainable competitive advantage.
By this definition, strategy becomes a mediating force
between the organisation and its environment both
internal and external.
A position can be deliberate, intended or may emerge as a
pattern of behaviour.

Strategy as a Perspective :
This approach is based on the way an organisation views the
world around itself the customers, competitors and the
environment. Accordingly the conduct their business and
deal with situations.
It is every organisations perspective that becomes the basis

for all its actions and the way it reacts to situations. Some
companies are aggressive marketers, some believe in
developing new technologies while there are some who
believe in productive efficiency.

The 5 Ps should be seen as a variety of viewpoints that one

should consider while developing a robust and successful
strategy.
While various relationships exist among the different

definitions, not any single definition takes precedence over the
others. In many ways the definitions compliment each other.
Each definition adds important elements to our understanding
of strategy, indeed encourages us to address fundamental
questions about organisations in general.

As such, there are three points in the strategic planning process

where it's particularly helpful to use the 5 Ps:
1. While gathering information and conducting the analysis
for strategy development, as a way of ensuring that
everything relevant is taken into account.
2. When you've come up with initial ideas, as a way of

testing that that they're realistic, practical and robust.
3. As a final check on the strategy that you've developed, to
flush out inconsistencies and things that may not have
been fully considered.
Using Mintzberg's 5 Ps at these points will highlight problems that
would otherwise undermine the implementation of the strategy.
LEVELS OF
STRATEGY
Corporate level strategy
It decides the business you should be in. Is concerned
with the overall purpose and scope of an organisation
and how value will be added to the different parts
(Business units) of an organisation.
Business Unit strategy
Also known as Competitive Strategy, it decides the tactics to
beat/ overcome the competition. Is about how to compete
successfully in particular markets. The concerns are about
competitors, opportunities and new products or services.
LEVELS OF
STRATEGY
Operational strategy
Also called the Go-to-Market Strategy or Functional Strategy,
it decides the operational methods to implement the tactics.
Are concerned with how the component parts of an
organisation deliver effectively the corporate and business-level
strategies in terms of resources, processes and people.
Corporate
Strategy
Overall purpose and scope of business,

investors expectations, long-term vision.
Business to be in
Business Strategy
Tactics to beat the competition
Challenges of competition,
choice of products, exploiting
and creating new opportunities.
Operational Strategy
Operational methods to implement the tactics
How each part of the biz

is organised to deliver
corporate and BU-level
direction
Core areas of Corporate Strategy :
1. Strategic Analysis : The organisation, its mission and

objectives have to be examined and analysed. The top
management examines the objectives, the environment
and the resources.
2. Strategy Development : The strategy options have to be
developed and selected. The strategy has to be built on the
particular strengths of the organisation, developing
advantages over competition that are sustainable over time.
3. Strategy Implementation : The selected options have to
be implemented.
The three core areas of

corporate strategy :
Sequential Approach
Strategic
Analysis
Strategic
Development
Simultaneous Approach
Strategic
Implementatio
n

A Comprehensive Strategic Management Model
External
Audit
Vision &
Mission
Statements
LongTerm
Objectives
Generate,
Evaluate &
Select
Strategies
Implement
Strategies
Mgnt.
Issues
Implement
Strategies Functional
Measure &
Evaluate
Performance
Internal
Audit
Strategy Formulation
Strategy Implementation
Strategy
Evaluation
Vision, Mission & Objectives

Vision Statements and Mission Statements are the inspiring
words chosen by successful leaders to clearly and concisely
convey the direction of the organization.
A Vision Statement describes the desired future position of
the company.
A Mission Statement defines the company's business, its
objectives and its approach to reach those objectives.
Elements of Mission and Vision Statements are often
combined to provide a statement of the company's purposes,
goals and values.

The Vision statement communicates both the purpose and
values of the organization.
Vision refers to the category of intentions that are broad, allinclusive and forward-thinking. It is the image that a business
must have of its goals before it sets out to reach them.
A vision statement is a broad declaration of overall intent
to eventually achieve a widely acknowledged state of
existence - an aspiration for the future.

A Mission statement is an organization's vision translated
into written form. It makes concrete the leader's view of the
direction and purpose of the organization. `
A Mission statement guides the actions of the organisation,
spells out its overall goals and provides the framework or
context within which the companys strategies are
formulated.
A mission statement defines in a paragraph or so any entity's
reason for existence. It embodies its philosophies, goals,
ambitions and mores. Any entity that attempts to operate
without a mission statement runs the risk of wandering
through the world without having the ability to verify that it
is on its intended course.

A Mission statement should be a short and concise statement of
goals and priorities. In turn, goals are specific objectives that
relate to specific time periods and are stated in terms of facts.
Mission and Vision Statements are commonly used to:
Internally :
Guide management's thinking on strategic issues, especially
during times of significant change;
Help define performance standards;
Inspire employees to work more productively by providing
focus and common goals;
Guide employee decision making;

Help establish a framework for ethical behavior.

Mission and Vision Statements are commonly used to:
Externally :
Enlist external support;
Create closer linkages and better communication with
customers, suppliers and alliance partners;
Serve as a public relations tool.
Vision defines where the organisation wants to be in the future.

It reflects the optimistic view of the organisations future. It
should make all members of the organisation feel proud,
excited and part of something bigger than themselves.
Mission defines where the organisation is going now, basically
describing its purpose, its primary objectives.
Sample Vision & Mission Statements

Walmart
Vision
To become the worldwide leader in retailing.
Walmart
Mission
To help people save money,

so they can live better.
Toyota
Vision
Toyota aims to achieve long-term, stable growth in

harmony with the environment, the global
economy, the local communities it serves, and its
stakeholders.
Toyota
Mission
Toyota seeks to create a more prosperous society

through automotive manufacturing.

Ford
Vision

To become the worlds leading consumer company
for automotive products and services
Ford
Mission
We are a global family with a proud heritage

passionately committed to providing personal
mobility for people around the world. We anticipate
consumer need and deliver outstanding products and
services that improve peoples lives.
IBM
Vision
IBM should be first-and-foremost on any new

enterprise data center migration short-list.
IBM
Mission
To lead in the invention, development and

manufacture of the industrys most advanced
information technologies, including computer
systems, software, storage systems and
microelectronics.

P&G
Vision
To be the best consumer products and services

company in the world.
P&G
Mission
To provide branded products and services of superior

quality and value that improve the lives of the worlds
consumers, now and for generations to come.
Vodafone
Vision
To be the communications leader in an increasingly

connected world.
Vodafone
Mission
To enrich our customers lives through the unique

power of mobile communication.

Samsung
Vision
Samsung
Corporate
Philosophy
Samsung
Mission
"Leading the Digital Convergence Revolution"

"We will devote our human resources and
technology to create superior products and
services, thereby contributing to a better global
society."
"Digital- Company"
There are two requirements for being "Digital-

Company", and the first is clearly about being
"Digital" producing not just digital products, but
products that inspire digital integration across our
entire company.
The second part of being a "" is to use Processes connecting R&D, production, and
marketing to customers, partners, and the marketdisciplined approach is the way we bring value to
every part of our supply chain, including products
data and customer relationship through Enterprise
Resource Planning (ERP).
Goals & Objectives

Objectives are open-ended attributes that denote the
future states or outcomes.
Objectives are organizations performance targets the
results and outcomes it wants to achieve. They function
as yardstick for tracking an organizations performance
and progress.
Goals are close-ended attributes which are precise and

expressed in specific terms.
Objectives may be qualitative while goals generally
tend to be quantitative.
Goals & Objectives
The pursuit of objectives is an unending process such that

organizations sustain themselves. They provide meaning
and sense of direction to organizational endeavour.
COMMON OBJECTIVES :
SURVIVAL
STABILITY
GROWTH
EFFICIENCY
PROFITABILITY
Characteristics of Objectives :
Objectives help an organization in pursuit of its vision

and mission.
Objectives provide the basis for strategic decision-making
Objectives should define an organization's relationship
with its environment.
Objectives should provide the standards for performance
appraisal.
Objectives should be concrete and specific.

Objectives should be measurable, controllable and challenging.
Objectives should be set within constraints.
ENVIRONMENTAL APPRAISAL
Environment is the sum of various external and some

internal forces that affect the functioning of business.
"The environment includes factors outside the firm which can lead
to opportunities for, or threats to the firm. Although there are
many factors, the most important of the sectors are socioeconomic, technological, supplier, competitors, and government.
- Glueck & Jauch
"Environment factors or constraint are largely if not totally, external
and beyond the control of individual industrial enterprises and their
managements. These are essentially the 'givers' within which firms
and their managements must operate in a specific country and they
vary, often greatly, from country to country.
- Barry M. Richman & Melvyn Copen
ENVIRONMENTAL APPRAISAL
Objectives of Environmental Appraisal :
1. To understand the current and potential changes taking place
2. To obtain necessary inputs for strategic decision making.
3. To facilitate and foster strategic thinking in organisations
Characteristics of Business Environment :
Environment is complex
Environment is Dynamic
Environment is multi-faceted
Far-reaching impact
Carries risks, uncertainties & opportunities
Micro Environment
Micro-environment is related to small area or immediate
periphery of the organisation. It influences the organisation
regularly and directly.
Decisions affected by Micro-Environment
Employees, their characteristics, attitudes and profiles.
The customer base
Methods and sources of finance
Vendors/ suppliers and the relationships
The local community
Direct competition

Macro Environment
Macro Environment consists of broad, indirect factors which
affect the overall business environment in a country or region,
across all industries.
DEMOGRAPHIC
ECONOMIC
LEGAL / REGULATORY
MACRO
ENVIRONMENT
GOVERNMENT
POLITICAL
CULTURAL
TECHNOLOGICAL
GLOBAL

Types of strategies
Integration
Forward Integration :
Gaining ownership/ increased control

over channel partners
Backward Integration : Ownership/ control over suppliers
Horizontal Integration : Ownership/ control over competitors
Intensive
Market Penetration :
Seeking increased market share in

existing markets through extra efforts.
Market Development : Introducing existing product (s) into new

geographic areas or consumer segments
Product Development : Improving existing products or developing
new products
Types of strategies
Diversification
Related Diversification : Adding new but related products
or services
Unrelated
Adding new, unrelated products
Diversification :
or services
Defensive
Retrenchment : Regrouping through cost and asset reduction
to reverse declining sales/ profits
Divestiture :
Selling/ hiving off a division or part of the

organisation
Liquidation :
Selling all the assets, in parts, for their

tangible worth

Competitive Analysis : Porters Five-Forces Model
1. Rivalry among competing firms

2. Potential entry of new competitors
3. Potential development of substitute products

4. Bargaining power of suppliers
5. Bargaining power of consumers

Competitive Analysis :
Porters 5-Forces Model
Potential
Entrants
(Threat of customer
mobility)
Suppliers
(Bargaining Power)
Industry Rivalry
Product
Substitutes
Buyers
(Bargaining Power)
Competitive Analysis : Porters Five-Forces Model

The Five-forces model is used in three steps to
determine what competition is like in a given industry :
1. Identify the specific competitive pressures/ key
elements associated with each of the five forces, that
impact the firm.
2. Evaluate how strong are the pressures comprising each

of the five forces (Fierce, strong, moderate to normal
or weak).
3. Determine whether the collective strength of the five
competitive forces is conducive to earning attractive profits.

Generic Strategies
Industry Force
Cost leadership
Differentiation
Entry Barriers
Ability to cut price - in

retaliation deters
potential entrants
Customer loyalty can

discourage potential
entrants
Develops core
competencies that
can act as entry
barriers
Ability to offer lower

prices to powerful
buyers
Large buyers have

lesser power to
negotiate due to few
close alternatives.
Large buyers have

lesser power to
negotiate due to few
alternatives.
Despite low volumes,
a differentiationfocused firm is better
able to pass on
increased supplier
costs to customers.
Buyer Power
Focus
Supplier Power
Better insulated from

powerful suppliers
Better able to pass on

increased supplier
costs to the
customers
Substitutes
Can use low prices as

defense against
substitutes.
Differentiating
attributes reduce the
threat of substitutes
Specialised products
and core-competency
protect against
substitutes.
Brand loyalty protects

against rivals
Rivals cannot meet

differentiationfocused customer
needs
Rivalry
Better able to
compete on price
Corporate Social Responsibility as Business Strategy

CSR is a form of corporate self-regulation integrated into a
business model.
CSR is about how companies manage the business processes to

produce an overall positive impact on society.
CSR involves operating a business in a manner that meets or
exceeds the ethical, legal, commercial and public expectations
that society has of business.
CSR is a concept whereby companies integrate social and
environmental concerns in their business operations and in
their interaction with the stakeholders on a voluntary basis.
Four Dimensions of CSR

Economic : Responsibility to earn profit for investors
Legal : Responsibility to comply with the law
Ethical : Driven not just by profits but also doing what is right,
just and fair.
Voluntary & Philanthropic : Promoting human welfare, being a
good corporate citizen contributing t the community and the
quality of life.
Business Policy & Strategic Managementc

STRATEGIC CHOICE
The decision of strategic choice involves :
Setting Objectives
Generating Alternatives
Choosing one or more alternative (s)
Implementing the chosen alternative(s)
There are four steps in the process of strategic choice :

1.
2.
3.
4.
Focusing on alternative strategies

Analysing the alternatives
Evaluating the alternatives
Choosing from among the alternatives
Business Portfolio Analysis :

A company's portfolio is the sum of its business, assets and
products. In portfolio analysis, top management views its
product lines and business units as a series of investments from
which it expects returns.
The best business portfolio is the one that best fits the
companys strengths and weaknesses to opportunities in the
environment.
A perfect portfolio analysis is shaped to meet and suit the
company's potency and also enable it to exploit the best
opportunities available.
Analysis of a portfolio involves deciding on the relative
importance of available business and investment opportunities.
Business Portfolio Analysis :

Portfolio analysis can be defined as a set of techniques that
help strategists in taking strategic decisions with regard to
individual products or business in a companys portfolio.
It is primarily used for competitive analysis and corporate
strategic planning in multi-product and multi-business firms.
The objective is to help divert resources from its cash-rich

businesses to more prospective ones that hold promise of a
faster growth so that the company achieves its corporate level
objectives in an optimal manner.
Boston Consulting Group (BCG) Growth-Share Matrix

BCG Matrix is considered to be the simplest way to portray a
companys portfolio of investments. It is popularly used for
resource allocation in a diversified company.
Using the BCG approach, a company classifies its different
businesses on a 2-dimensional growth-share matrix.
The vertical axis represents the market growth rate and

provides a measure of market attractiveness.
The horizontal axis represents relative market share of the
company or the product and serves as a measure of the
companys strength in the market.
The products are classified n four categories as Stars, Cash

Cows, Question Marks and Dogs.
GE Nine-Cell Strategic Model

The GE 9-Cell Matrix was developed with the intention to overcome
certain limitations of the BCG Matrix.
The Matrix was pioneered by General Electric Co., with the aid of
Boston Consulting Group and McKinsey & Co.
The matrix consists of 9 cells (3X3) and Two Key Variables :
Business Strength
Industry Attractiveness
Business Strengths :
Industry Attractiveness :
Product features/ Patents

Market Share
Profit Margins
Price/ Quality Competitiveness
Market Intelligence
Market Size & Growth

Economies of scale
Technology
Social/ environmental aspects
Competitive factors

If your enterprise falls in the green zone you are in a favorable
position with relatively attractive growth opportunities.
A position in the yellow zone is viewed as having medium attractiveness.

Leader
Growth
High
Industry
Attractiveness Medium
Low
Try Harder
Cash
Generation
High
Proceed
with care
Phased
Withdrawal
Medium
Enterprise Strength
Improve
or Quit
Phased
Withdrawal
Withdrawal
Low

A position in the red zone is not attractive. The suggested
strategy is that management should begin to make plans to
exit the industry.
Leader
Growth
High
Industry
Attractiveness Medium
Low
Try Harder
Cash
Generation
High
Proceed
with care
Phased
Withdrawal
Medium
Enterprise Strength
Improve
or Quit
Phased
Withdrawal
Withdrawal
Low
Strategy Alternatives
Stability
Expansion
Retrenchment
Intensification
Market
Penetration
Market
Development
Combination
Diversification
Product
Development
Forward
Vertically
Integrated
Concentric
Diversification
Backward
Conglomerate
Diversification
Strategic-management process does not end when the firm
decides what strategies to pursue. There must be a transition of
strategic thought into strategic action. Implementing strategy
affects an organisation from top to bottom; it affects all the
functional and divisional areas of a business.
A technically imperfect plan that is implemented well, will
achieve more than the perfect plan that never gets off the
paper on which it is typed. Change comes through
implementation and evaluation and not through the plan.
Strategy execution deals with the managerial exercise of

supervising the ongoing pursuit of strategy, making it work,
improving the competence with which it is executed and
showing measurable progress in achieving the targeted results.

Strategy formulation is fundamentally different from
strategy implementation :
Strategy Formulation
Positioning forces before the

action
Guiding forces during the action
Focuses on effectiveness
Focuses on efficiency
Primarily an intellectual process
Primarily an operational process
Requires good intuitive and

analytical skills
Requires special motivation and

leadership skills
Requires coordination among

few individuals
Requires coordination among

many individuals
Strategy formulation concepts and tools do not differ greatly for small, large,
for-profit or non-profit organisations. However, strategy implementation
varies substantially among different types.
Strategy & Corporate Culture

Corporate Culture is a system of shared values, assumptions, beliefs,
and norms that unite the members of an organisation.
Culture functions like an operating system of a computer, thereby
providing definite process environment for operability of strategy.
Culture eats Strategy for breakfast
- Peter Drucker

Teamwork
Hierarchy
Communication
Rituals &
Routines
Org.
Structure
CORPORATE
CULTURE
Social
Connecti
-vity
Values
Beliefs
Control
Systems
McKinseys 7 S Framework
Developed in the early 1980s by Tom Peters and Robert Waterman,
two consultants working at the McKinsey & Company.
The basic premise of the model is that there are seven internal
aspects of an organization that need to be aligned if it is to be
successful.
The 7S model can be used in a wide variety of situations where an
alignment perspective is useful, for example to help :
Improve the performance of a company.

Examine the likely effects of future changes within a company.
Align departments and processes during a merger or
acquisition.
Determine how best to implement a proposed strategy.
The McKinsey 7S model involves seven interdependent factors
which are categorized as either "hard" or "soft" elements:
HARD ELEMENTS
SOFT ELEMENTS
STRATEGY
SHARED VALUES
STRUCTURE
SKILLS
SYSTEMS
STYLE
STAFF
Strategy: the plan devised to maintain and build competitive

advantage over the competition.
Structure: the way the organization is structured and who

reports to whom.
Systems: the daily activities and procedures that staff
members engage in to get the job done.
Shared Values: these are the core values of the company that are
evidenced in the corporate culture and the general work ethic.
Style: the style of leadership adopted.
Staff: the employees and their general capabilities.
Skills: the actual skills and competencies of the employees
working for the company.
It is easier for managements to influence hard elements, since they
are easier to define or identify. They include reporting systems,
procedures and IT systems.
Soft elements, although equally important, are intangible and more
related to culture. They are difficult to control or influence.
Strategy & Organisation Structure

Changes in strategy often require changes in the way
an organization is structured :
Structure largely dictates how objectives and policies

will be established. The structural format for
developing objectives and policies can significantly
impact all other strategy-implementation activities.
Structure dictates how resources will be allocated. Eg.
Allocation of resources will be determined by whether
structure is based on customer groups or along
functional areas
When a firm changes its strategy, the existing organisational
structure may become ineffective.

Strategy & Organisation Structure
When a firm changes its strategy, the existing organisational
structure may become ineffective.
Chandler found a particular structure sequence to be often

repeated as organisations grow and change strategy over time.
New Strategy is
formulated
Improved
Organisational
Performance
New administrative
problems
Organisational
performance
declines
New
Organisational
Structure
Chandlers Strategy-Structure Relationship

Strategy Evaluation
It is essential for managers to systematically review, evaluate and

control the execution of strategies, because even the bestformulated and best-implemented strategies can become obsolete
as the internal and external environments change.
Strategy evaluation is essential to ensure that the stated
objectives are being achieved.
Strategy evaluation is important because organisations face
dynamic environments in which key external and internal factors
often change quickly and dramatically.
Strategy evaluation includes three basic activities :

1. Examining the underlying bases of the firms strategy
2. Comparing expected results with the actual results
3. Corrective action to ensure performance conforms to plans

Strategy Evaluation
Richard Rumelt lays down four criteria that can be used to
evaluate a strategy :
1. Consistency : Strategy must be consistent with goals and policies.
2. Consonance :
A strategy must represent an adaptive response to the
external environment and to the critical changes occurring
within.
3. Feasibility :
The strategy should be attempted within the physical, human
and financial resources of the enterprise.
4. Advantage :
The strategy must provide for creation and/ or maintenance of
a competitive advantage in a selected area of activity
(Resource, skill or position).

Strategy Evaluation Process
The process of strategy evaluation consists of the
following steps :
1. Fixing benchmarks of performance
qualitative & quantitative
2. Measurement of performance
3. Analysing variance
4. Corrective action
Difficulties in Strategy Evaluation : Strategy evaluation in modern

business environment has become a difficult and complicated
process because of certain factors :
Increase in environment complexity
Difficulty in predicting the future accurately
Increasing number of variables
High rate of obsolescence of even the best laid plans
Increase in domestic world events
Decreasing time span for planning certainty
Most common ways to evaluate strategic performance :
Change in assets
Change in profitability
Change in sales
Change in productivity
Change in profit margins
Balanced Sorecard is a strategy performance management tool

that can be used by managers to keep a track of the execution
of activities by the staff within their control, and to monitor the
consequences arising from these actions.
The concept involves creating a set of measurements for four
strategic perspectives. These include :
1. Financial
2. Customer
3. Internal Processes
4. Learning & Growth
As a model of performance, the Balanced Scorecard is effective

since "it articulates the links between leading inputs (human
and physical), processes, and lagging outcomes, and focuses on
the importance of managing these components to achieve the
organization's strategic priorities."
Balanced Scorecard lets executives see whether they have

improved in one area at the expense of another. Knowing that
will protect companies from posting sub-optimal performance.
A Balanced Scorecard defines what management means by
"performance" and measures whether management is
achieving desired results.
The characteristic of the balanced scorecard and its derivatives
is the presentation of a mixture of financial and non-financial
measures each compared to a 'target' value within a single
concise report.
What Balanced Scorecards Do :

Articulate the business's vision and strategy
Identify the performance categories that best link the
business's vision and strategy to its results (e.g., financial
performance, operations, innovation, employee performance)
Establish objectives that support the business's vision and
strategy
Develop effective measures and meaningful standards,
establishing both short-term milestones and long-term targets
Contd..
What Balanced Scorecards Do :

Contd..
Ensure companywide acceptance of the measures
Create appropriate budgeting, tracking, communication, and
reward systems
Collect and analyze performance data and compare actual

results with desired performance
Take action to close unfavorable gaps
Balanced Scorecard
The emphasis is on establishing a balance between four
types of measurements :
1. Short term & Long Term
2. External & Internal
(External factors include shareholders and
customers and Internal include critical business
processes, innovation, learning and growth)
3. Performance Drivers (Leading indicators) &
Outcome measures (Lagging indicators)
4. Objective measures and Subjective measures.
(Objective measures are mostly financial while
Subjective measures are mostly non-financial)
BALANCED
SCORECARD
FRAMEWORK
FINANCIAL
How do we appear to the
shareholders?
CUSTOMER
How should our customers
perceive us?
VISION &
STRATEGY
LEARNING & GROWTH

What should we learn to
grow & prosper?
INTERNAL
At which processes should
we excel?
Balanced Scorecard
PERSPECTIVE
GENERIC MEASUREMENTS
FINANCIAL
Return on capital employed, Economic value

added, Sales growth, Cash flow etc.
CUSTOMER
INTERNAL BUSINESS
PROCESS
LEARNING & GROWTH
Measurement of : Customer satisfaction,

Retention, Acquisition, Profitability, Market
share etc.
Measurement along internal value chains
for: Existing and future technology,
measures of quality, cycle time, cost
controls, after-sales service, measures of
warranty, repairs, customer returns etc.
Measurements for : People (Employee
retention, training, skills, morale) Systems
(Availability of critical real-time information
needed for front-line employees)
Strategy and Balanced Scorecard

MISSION
Why we
exist
VISION
What we
want to be
VALUES
What is
important to
us
STRATEGY
MAP :
Translate the
strategy
STRATEGY
Our game
plan
STRATEGIC
OUTCOMES
SATISFIED
SHAREHOLDERS
DELIGHTED
CUSTOMERS
BALANCED
SCORECARD :
Measure &
Focus
EXCELLENT
PROCESSES
MOTIVATED
WORKFORCE
Thank You !
Prof. Shashank Divekar

Business Policy and Strategic Management

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Business Policy &

Business Policy & Strategic Management

Business Policy defines the scope or spheres within which

Business policies are the guidelines developed by an

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Policies are guides to decision making and address

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Examples of Business Policies :

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What is Strategic Managemant ?

Generating good ideas and implementing them effectively.

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Corporate Strategy is the pattern of major objectives,

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5 Tasks of Strategic Management

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Societal Values & Lifestyle

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Environmental Threat & Opportunities Profile (ETOP)

ETOP process involves dividing the environment into different

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IMPACT OF THE SECTOR

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Environmental Threat & Opportunities Profile (ETOP)

IMPACT OF THE SECTOR

Coalition compulsions, lack

Too many controls, inspector

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IMPACT OF THE SECTOR

Too few vendors, new

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Characteristics of Corporate Strategy

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Characteristics of Corporate Strategy ..Contd.

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Mintzberg presented 5 different approaches or concepts of

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