Business Policy and Strategic

Management

A theoretical and Practical

Perspective

By – Prof. Nikhil Rao

Sessions Main Topic
1 Introduction to BP/SM
Core concepts
Comprehensive Model of SM
2 Strategic Intent
Formulation Of Strategies
a) Environment Appraisal
b) Organisational Appraisal
c) SWOT Analysis

3 d) Corporate Level Strategies

4 e) Portfolio Analysis
5 f) Business Level Strategies
6 Strategy Implementation
7 Functional Strategies
Marketing Strategies
8/9 Functional Strategies
Financial Strategies
HR Strategies
Operational Strategies
10 Turnaround Management
Strategic Evaluation and Control
Business Policy

Defn :
The study of the function and responsibility of senior
management , the crucial problems that affect
success in the total enterprise and the decisions that
determine the direction of the organization and
shape its future.
Context :
The problems of policy in business have to
do with the choice of purposes , the moulding of
organizational identity and character, the continuous
definition of what needs to be done and the
mobilization of resources for the attainment of goals
in the face of competition or adverse circumstances
MANAGEMENT
IS THE PROCESS OF DESIGNING AND MAINTAINING
AN ENVIRONMENT IN WHICH INDIVIDUALS ,
WORKING TOGETHER IN GROUPS , EFFICIENTLY
ACCOMPLISH SELECTED AIMS

FUNCTIONS OF MANAGEMENT :
 )PLANNING
 )ORGANIZING
 )STAFFING
 )LEADING
 )CONTROLLING
Definitions Of Management
 )Mary Follett :-- “The art of getting things done
through people.”
 )Peter Drucker :--- Managers give direction to their
organizations, provide leadership and decide how to use
organizational resources to accomplish goals
 )Richard daft :;;-- Management is the attainment of
organizational goals in an effective and efficient manner
through planning, organizing , leading and controlling
organizational resources.
 )Griffin : Management is a set of functions directed at
the efficient and effective utilization of resources in the
pursuit of organizational goals.
Key Points in Management
Efficient : using resources wisely and in a cost effective manner.
Effective : making the right decisions and successfully
implementing them.
Planning:The management function concerned with defining goals
for future organizational performance and deciding on the tasks
and use of resources needed to attain them.
Organizing : The management function concerned with assigning
tasks , grouping tasks into departments and allocating resources to
departments.
Leading : The management function that involves the use of
influence to motivate employees to achieve organizational goals.
Controlling : the management function concerned with monitoring
employees’ activities , keeping the organization on track toward its
goals and making corrections if needed.
 Old Paradigm New Paradigm

Vertical Organization Learning

Organization

Forces on Organization

Markets Local, Domestic Global

Workforce Homogeneous Diverse
Technology Mechanical Electronic (Digital)
Values Stability, Efficiency Change, Chaos
 

Old Paradigm New Paradigm

Management Competencies

Focus Profits Customers,

Employees
Leadership Autocratic Dispersed,
empowering
Doing work By individuals By Teams
Relationships
Conflict, Competition
Collaboration
Strategies
 comes from the Greek word “ Strategos” – meaning “ Art
of the general”
 Military used the word “ strategy” to mean grand plans
made in the light of what it is believed an adversary
might or might not do.
 Defn of strategy :
 1) General program of action and deployment of
resources to attain comprehensive objectives
 Alfred Chandler :
“ Determination of the basic long –term
objectives of an enterprise and the adoption of course of
action and allocation of resources necessary to achieve
these goals”.
Glueck :
“ A unified , comprehensive and integrated plan
designed to assure that the basic objectives of the
enterprise are achieved”

Michael Porter : : “ Developing and communicating

the company’s unique position, making trade-offs
and forging fit among activities.”
Corporate level
Division level
Business level
Functional level
 LG
C o r p o r a te te a m

C o n s u m e r e le c tr o n ic s H o m e A p p lia n c e s FM CG
D iv is io n D iv is io n D iv is io n

C o lo u r T V V C D /D V D W a s h in g M a c h in e R e fr ig e r a to r A /C
B u s in e s s b u s in e s s
 Different levels of strategy

L e v e ls S tra te g y

C o rp o ra te C o r p o r a t e o ffic e
C O R PO R ATE LEVEL
/ h e a d o ffic e

SBU SBU SBU SBU

B u s in e s s L e v e l

fu n c t io n a l O p e r a t io n s M a r k e t in g P e rs o n n e l F in a n c e F u n c t io n a l
le v e l
Strategic Management
Glueck : “ A stream of decisions and actions which
leads to the development of an effective strategy or
strategies o help achieve corporate objectives”.

Hofer :” The process which deals with the

fundamental organizational renewal and growth with
the development of strategies , structures and
systems necessary to achieve such renewal and
growth and with the organizational systems needed
to effectively manage the strategy formulation and
implementation processes.”
Strategic Management

Ansoff :
“ A systematic approach to a major and
increasingly important responsibility of general
management to position and relate the firm to its
environment in a way that will assure its continued
success and make it secure from surprises.”
Sharplin :
“ The formulation and implementation of plans
and carrying out of activities relating to the matters
which are of vital , pervasive or continuing
importance to the total organization”
Strategic Management

Harrison :
“The process through which organizations
analyze and learn from their internal and external
environments, establish strategic direction , create
strategies that are intended to help achieve
established goals and execute these strategies , all in
an effort to satisfy key organizational stakeholders.”
Phases In SM

Establishing Strategic Intent

Formulation of strategies
Implementation of strategies
Strategic Evaluation and control.
Comprehensive Model of Strategic Management Process

Establishing Strategic Intent

Vision , Mission, Business Definition and objectives
S
C
T
O
R
N Formulation of strategies
A Environment Appraisal, Organizational Appraisal
T SWOT Analysis , Corporate Level Strategies
T
R Business level Strategies , Strategic Choice
E
G O

I L Strategy Implementation
Project, Procedural, Resource Allocation
C Structural, Behavioral, Functional and operational

Strategic Evaluation
Part A : Establishing Strategic Intent

Vision , Mission, Business

Definition and objectives
Establishing the hierarchy of strategic
intent

1) Creating and communicating a vision : It serves

the purpose of stating what an organization wishes
to achieve in the long run.

2) Designing a mission statement : The mission relates

an organization to society.
“ The essential purpose of the organization ,
concerning particularly why it is in existence , the
nature of of the business it is in and the customers it
seeks to serve and satisfy.
Vision and Mission
Anheuser-Busch

vision:

Through all of our products, services and relationships, we will add to

life's enjoyment.

mission:

 Be the world's beer company

 Enrich and entertain a global audience
 Deliver superior returns to our shareholders
Vision and Mission
Boeing

Mission Statement

To provide innovative, world-class, integrated technical data and

training systems that enable our customers to operate at optimal
performance.
Vision

To ensure that the integrated Instructional Systems and Training

Support organizations become our domestic and international
customers' preferred supplier of training systems, systems support and
equipment by providing innovative, world-class integrated products and
services that enable our customers to operate at optimal performance.
Vision and Mission
ONGC
Vision and mission:
To be a world-class Oil and Gas Company integrated in energy
business with dominant Indian leadership and global presence.

HPCL
Vision:
"To be a leading world class company in hydrocarbons and energy related
sectors with a global presence."
 Mission:
"HPCL, along with its joint ventures, will be a fully integrated company
in the hydrocarbons sector of exploration and production, refining and
marketing;
focusing on enhancement of productivity, quality and profitability;
caring for customers and employees; caring for environment
protection and cultural heritage.
It will also attain scale dimensions by diversifying into other energy
related fields and by taking up transnational operations
Vision and Mission

Infosys' Vision:

"To be a globally respected corporation that provides

best-of-breed business solutions, leveraging
technology, delivered by best-in-class people"

Infosys' Mission Statement :

"To achieve our objectives in an environment of

fairness, honesty, and courtesy towards our clients,
employees, vendors and society at large"
 Vision and Mission
Titan

Vision

To be the most desirable jewellery brand for Indian

women

Mission
We will continuously create wealth for all our stakeholders,
by transforming the jewellery business and by being the
gold standard in design, shopping experience and ethical
practices.
 
Vision and Mission
Birla Sunlife Mutual fund
Vision 
 To be the most trusted name in investment and wealth
management, to be the preferred employer in the industry
and to be a catalyst for growth and excellence of the asset
management business in India.  

Mission 
 To consistently pursue investor's wealth optimization by :
 Achieving superior and consistent investment results
 Creating a conducive environment to hone and retain talent
 Providing customer delight
 Institutionalizing system-approach in all aspects of
functioning
 Upholding highest standards of ethical values at all times
3) Defining the business : explains the businesses of
an organization in terms of customer needs ,
customer groups and alternate technologies

4) Setting objectives : what is to be achieved in a

given time period
Business definitions
Customer groups relate to “who is being satisfied.
Customer needs describe “what” is being satisfied
Alternative technologies means “how” the need is
being satisfied.
e.g
Whirlpool Refrigerators
Customer needs – quick refrigeration
Customer groups--- individuals, institutions and exports
Technologies: high quality and latest from Whirlpool ,
USA--- (6th sense )
Business definitions
e.g Maruti Suzuki
Customer function/needs– transportation with
economy and style (Maruti 800, Zen)
Customer Groups --- individuals (middle class and
lower upper class), institutions(companies) and
export market.
Technology --- latest from Suzuki (MPFI, and
technology to meet Euro 2 /3 norms)
Setting Objectives
Objectives denote what an organization hopes to
accomplish in a future period of time.

Characteristics of objectives
1) Should be understandable
2) should be quantifiable
3) should be time bound
4) should be measurable
5) should be challenging
eg To increase market share from 10% to 25%in 2
years
Part B :Formulation of strategies

Environment Appraisal, Organizational Appraisal

(SWOT Analysis) , Corporate
Level Strategies
Business level Strategies , Strategic
Choice
Environment Appraisal
(Opportunities and Threat analysis)
Market Environment :
1) Customer factors like needs , preferences,
perceptions, buying behavior etc.
2) product factors : demand , utility, features,
lifecycle, price, place, promotion, differentiation of
products/services
3) Marketing intermediary factors : levels and quality
of customer service, middlemen, logistics, costs and
financial intermediaries. 4)
Competitor related factors : different types of
competitors , entry level barriers , nature of
competition
Environment Appraisal

Technological Environment :

1) Sources of Technology : internal , external,

cost of acquiring technology, collaboration etc.
2) technological development, stages of
development , change and rate of change of
technology.
3) Communication and infrastructural technology
Environment Appraisal
Economic Environment : consists of macro-level
factors related to the means of production and
distribution of wealth which have an impact on the
business of an organization. Some of the important
factors operating in the economic environment are: 1)
The economic stage at which a country exists at a given
point of time . 2)The economic structure adopted
such as capitalistic, socialistic or mixed economy. 3)
Economic policies such as industrial, monetary and
fiscal policies
Environment Appraisal

Economic planning such as 5 year plans

, annual budgets etc.
Economic indices like GNP, GDP, rate of
savings, exports , imports,BOP,
disposable income etc.
Liberalisation, Privatisation,
Globalisation
Environment Appraisal

Regulatory Environment:
Policies related to licensing , foreign
investment,foreign stakes
Policies related to import and export
Policies related to PSU , small scale industries , sick
industries , development of backward areas ,
environment pollution , consumer protection
Environment Appraisal

Socio-cultural Environment :
Demographic characteristics
changing lifestyle patterns ,
materialism, socio-cultural attitudes , beliefs ,
values education levels , awareness of
rights , work ethics The role of men,
women, children and the aged in family and society
Environment Appraisal

Supplier Environment : consists of factors related to

the cost , reliability and availability of the factors of
production or service that have an impact on the business of
an organization. 1) cost, availability and continuity of supply
of raw materials , parts and components 2) cost and
availability of finance for implementing projects 3) cost,
availability of energy used in production 4) infrastructure
support and bargaining power of suppliers and existence of
substitutes 5) cost , availability and dependability of human
resources
Environment Appraisal

Political Environment :
Political philosophy , govt’s role in
business and its policies, intervention in economic
and business development.
Environment Appraisal

International Environment :
Globalization , its process , content and direction.
Global economic forces , organizations , blocs
etc. Global trade and commerce , its process
and trends Global financial system , sources of
finance and accounting standards ---(US GAP)
Geopolitical situation ,
equations , alliances and strategic interest of nations
Global
demographic patterns and shifts
Environment Appraisal

Global human resource- nature and quality of skills

and expertise, mobility of personnel.
Global information systems ,
communication networks and media
Global technological and quality
systems and standards .
Global markets and
competitiveness Global legal
system, adjudication and arbitration mechanism
Organizational Appraisal
(Strength and weakness analysis)

The appraisal of the external environment of a firm

helps it to think of what it might choose to do. The
appraisal of the internal environment enables a firm
to decide about what it can do.
Organizational capability could be understood in
terms of the strengths and weaknesses existing in
the different functional areas of the organization.
Financial Capability Factors
relate to the availability, usage and management of funds.
Some of the important factors, which influence the
financial capability of any organization, are as follows:

)Factors related to source of funds: Capital structure,

working capital availability, reserves and surplus, and
relationship with lenders, bank and financial institutions.

)Factors related to usage of funds: Capital investment,

fixed asset acquisition, current assets, loans and advances,
dividend distribution and relationship with shareholders.
Financial Capability Factors
)Factors related to management of funds: Financial
accounting and budgeting systems, return and risk
management, tax planning, cost reduction and control.
Typical strengths that support financial capability
 Access to financial resources
 Excellent relationship with financial institutions
 High level of credit worthiness
 Low cost of capital
 Shareholders’ confidence
 Tax benefits due to govt. policies.
Marketing Capability factors

relate to the 4Ps

 )Product related factors: variety, differentiation

etc.
 )Price related factors: Pricing objectives and
policies
 )Place related: distribution, logistics, marketing
intermediaries’ etc.
 )Promotion related : Advertising, sales
promotion, PR
Marketing Capability factors

Some of the typical strengths leading to marketing

capability are as follows:
 Wide range of quality products
 Brand name
 Effective distribution and sales promotion
 High decibel advertising
 Effective MR and MIS
 Low prices
Operations Capability factors

relate to the production of products, use of raw materials

etc.

1) Factors related to the production system: Capacity,

location, layout, product design, degree of automation
extent of vertical and backward integration etc.
2) Factors related to the operations and control system:
Production planning, material supplies (Purchase dept.),
Inventory, quality control, maintenance and procedures
 )Factors related to R & D system: Personnel, product
development, patent rights, technical collaboration
and support etc.
Operations Capability factors
 Typical strengths that support operations
capability

 High level of capacity utilization

 Favorable plant location
 Reliable source of supply
 Existence of good inventory control system
 Availability of high calibre R&D personnel
 Technical collaboration with reputed firms’
abroad.
Personnel Capability

Personnel capability factors relate to the existence

and use of human resources and skills. Some of the
important factors, which influence the personnel
capability of an organization, are as follows:
 )Factors related to the personnel system:
System of manpower planning, selection,
development, compensation, communication,
appraisal, and procedures.
Personnel Capability

 )Factors related to industrial relations: Union-

management relationship, safety, welfare,
security, employee satisfaction etc.
 )Factors related to organizational and
employees’ characteristics: Quality of
manpower, availability of growth opportunities
for employees, working conditions etc.
Methods and techniques used for
Organizational Appraisal

 )Internal analysis :
 )Value chain analysis
 )Quantitative analysis : 1) Financial
Analysis 2) Non-Financial analysis
 )Comparative analysis :
1)Historical Analysis
2) Industry norms
3)Benchmarking
Michael Porter’s Value chain

Porter: divided the value chain of a manufacturing company into

 )Primary activities :
 Inbound Logistics : Warehousing, Materials Handling
Inventory control,Scheduling
 Operations : Manufacturing, Q.A, packaging,
Assembly,maintenance
 Outbound Logistics : transportation, storage, order
processing
 Marketing and sales: 4P’s
 Service: after sales service, training, installation
Michael Porter’s Value chain

 )Support activities :
 Procurement : Purchasing, physical resources
 Human Resource Development: Recruiting, developing,
Retrenchment, training.
 Technology Development
 Infrastructure: Staff functions, organizational designs,
finance, accounting.

The profit margin and the inbuilt quality of the organization is a

direct correlation of how effectively it manages its value chain.
Quantitative Analysis
Financial Analysis:
Traditional methods for evaluating financial
performance includes ratio analysis --- Financial
ratio analysis (current ratio, debt-equity ratio, ROI
etc.) assesses the liquidity , profitability , leverage
aspects of the organization.
Modern techniques include
EVA and ABC
Quantitative Analysis
EVA: Economic value added analysis: is the wealth
an organization creates for its owners and is
expressed as the difference of the after –tax
operating profits and the total cost of capital.

Activity based cost accounting: ABC identifies the

major activities in the value chain within the
company and keeps a tab on the costs within each
activity. This helps in identifying the factors that
determine cost (cost drivers) and the areas where
costs are actually incurred.
Quantitative Analysis
Non –Financial Quantitative analysis--
This includes
1) Employee turnover ratio
2) Absenteeism
3) number of patents registered per quarter
4) number of units produced per day
5) service calls per day
6) service complaints per day etc.
Comparative Analysis
Historical Analysis :
The company compares its present performance with
its own past performance to see whether its
improving or not.
Industry norms : The industry to which a business
belongs is used for comparison . The company
compares parameters like cost structure, sales ,profit
margins etc. with that of the industry to see how its
faring .
Comparative Analysis
BENCHMARKING
“The practice of being humble enough to admit that
someone else is better at something and being wise
enough to learn how to match and even surpass
them at it”
Competitive Benchmarking: direct comparison of
one’s own performance against the best competitors.
Generic Benchmarking: comparison of one’s own
processes against the best practices anywhere in any
type of organization.
Organizational Capability Profile

Weakness normal strength

-5 0
5
 )Financial capability
 a)
 b)
 c)

 )Marketing Capability
 a)
 b)
 c)
Organizational Capability Profile
Weakness normal strength
-5 0
5
 )Personnel capability
 a)
 b)
 c)
 )Operational Capability
 a)
 b)
 c)
 )General Management capability
From this the company arrives at the Strategic Advantages
Profile