BUSINESS POLICY AND STRATEGIC MGMT

1. BUSINESS POLICY AND STRATEGIC MGMT By- Rutvi Umrigar

2. Chapter-1 Introduction to Business Policy and Strategy

3. Concept of Strategy • Thinking Strategically:The Big Strategic Questions Where are we now? 2. Where do we want to go? • Business(es) to be in and market positions to stake out • Buyer needs and groups to serve • Outcomes to achieve 3. How will we get there? • A company’s answer to “how will we get there?” is its strategy

4. Consists of the combination of competitive moves and business approaches used by managers to run the company • Management’s “game plan” to • Attract and please customers • Stake out a market position • Compete successfully • Grow the business • Achieve targeted objectives

5. A strategy is a unified, comprehensive, and integrated plan that relates the strategic advantages of the firm to the challenges of the envt. • It is designed to ensure that the basic objective of the enterprise are achieved through proper execution by the org. • A strategy begins with a concept of how to use the resources of the firm most effectively in a changing envt.

6. Strategy as a game plan • It is similar to the concept in sports of a game plan. • Before a team goes onto the field, effective coaches examine a competitor’s past plans and strengths and weaknesses. • Then they look at their own team’s strengths and weaknesses. • The objective is to win the game with minimum of injuries.

7. The Hows ThatDefine a Firm's Strategy • How to please customers • How to respond to changing market conditions • How to out compete rivals • How to grow the business • How to manage each functional piece of the business and develop needed organizational capabilities • Howto achieve strategic and financial objectives

8. Striving forCompetitive Advantage • To achieve sustainable competitive advantage, a company’s strategy usually must be aimed at either • Providing a distinctive product or service or • Developing competitive capabilities rivals can not match • Achieving a sustainable competitive advantage greatly enhances a company’s prospects for • Winning in the marketplace and • Realizing above-average profits

9. What separates a powerful strategy from an ordinary strategy • is management’s ability to forge a series of moves, • both in the marketplace and internally, that • produces sustainable competitive advantage!

10. “Strategy is a course of action through which an organization relates itself with the environment so as to achieve the objectives.”

11. Scope • Mission and objectives • Identification of substantial competitive advantages • Organization • Resource development

12. Strategic Approaches to Building Competitive Advantage • Strive to be the industry’s low-cost provider • Out compete rivals on a key differentiating feature • Focus on a narrow market niche, doing a better job than rivals of serving the unique needs of niche buyers • Develop expertise, resource strengths, and capabilities not easily imitated by rivals

13. A Company’s Strategy Is Partly Proactive and Partly Reactive

14. Chapter-2 Conceptual Foundation in Strategic management

15.  Definition “Strategic Management” • It is a stream of decisions and actions which leads to the development of an effective strategy or strategies to help in achieving corporate objectives. • It is defined as the set of decisions and actions in formulation and implementation of designed strategy to achieve the goal of the organization – Pearce and Robbinson • It is primarily concerned with relating the organization to its environment, formulating strategies to adapt to that environment, and assuring that implementation of strategies takes place - Steiner

16. Benefits of Strategic Management • Financial Benefits • Offsetting uncertainty (in changing environment) • Clarity in direction & Objectives • Improve Efficiency and effectiveness of the Organization • Personnel satisfaction • Better delegation, co-ordination, monitoring , performance evaluation and control • Searching and improving upon competitive advantage

17. Limitation of Strategic Management • Complex and dynamic Environment • Rigidity of Strategist • Inadequate focus and appreciation to Strategic Management • Implementation limitation (Resources, Improper timing) • Vague and general objective, Lack of communication of objective

18. Strategist Mission & Objectives The General Environment Analysis Industry & International Environment Internal Environment Generic Strategy alternatives Strategic Variation Choice Strategy Choice Resources and Structure Implementation Policies, Plans and Administration Evaluation and Control Strategic Management Process

19. Vision • Vision reflects a desired future • “Where we are going?” • It gives idea about Border sense of the business Mission • Mission Shows existence of the business • “Who we are?” and “What we Do?” • It is a narrow sense of the business

20. Objectives • Objective deals with reasons of existence • “Why We are in Business?” • It is further narrow the business sense

21. Chapter- 5 Strategy Alternatives

22. Strategist Mission & Objectives The General Environment Analysis Industry & International Environment Internal Environment Generic Strategy alternatives Strategic Variation Choice Strategy Choice Resources and Structure Implementation Policies, Plans and Administration Evaluation and Control Strategic Management Process

23. You have reexamined ideal goals in light of the expected outcomes of pursuing the existing strategy. • As a result, u should be in a position to consider the underlying potential for a gap between expected and ideal performance outcomes. • From the diagram, u have completed the analysis and diagnosis phase of the SMP and are ready to begin the choice phase.

24. This phase consist of 2 activities: • 1. the generation of a reasonable no.of strategic alternatives that will help to fill the gaps matching the ETOP and SAP. • 2. The choice of a strategy to reduce the gaps. • We have to see how the strategic decision makers generate alternatives strategies to fill the gaps found when the results of the 2 profiles and the firm’s goals are compared.

25. Relative to the gap analysis, we start with the current strategy. • If the gap is small (on the basis of the analyses of goals, external factors, internal factors), then we assume that the current strategy is adequate and little or no change is required. • If the gap increases (threats, opportunities, strengths, weaknesses or goal changes weaknesses create gap) then strategy alternatives to close the gap need to be considered.

26. By comparing the ETOP and SAP, u will acquire clues about the nature of strategic alternatives to close any gaps. • The alternatives for change are being generated with the perspective of improving performance by taking action to close performance gaps expected in the future.

27. Who are the generator of strategic alternatives: • In a corporation the primary generator of strategic alternatives is the top manager, and in the multiple-SBU firm, the primary generators are the SBU top managers and the corporate top manager. • Lower level managers are also involved to the extent that they prepare proposals for consideration by top managers.

28. For instance, an R&D unit may propose that additional resources be allocated for the development of a new product. • Functional level managers are also involved to the extent that plans to implement strategies are considered as part of the strategy formulation process, and strengths and weaknesses coming from functional levels are evaluated by these managers as inputs to the total process.

29. Generic strategy Alternatives • Stability Strategy • Expansion Strategy • Retrenchment Strategy • Combination Strategy

30. Stability Strategy: • A Stability Strategy is a strategy that a firm pursue when: • 1. It continues to serve the public in the same product or service, market, and function sectors as defined in its business definition, or in very similar sectors. • 2. Its main strategic decisions focus on increment improvement of functional performance.

31. Stability strategy are implemented by “steady as it goes” approaches to decisions. • Few major functional changes are made in the product or service line, markets, or functions. • In an effective stability strategy, a company will concentrate its resources where it presently has or can rapidly develop meaningful competitive advantage in the narrowest possible product-market function scope consistent with its resources and market requirement.

32. A stability strategy may lead to defensive moves such as taking legal action or obtaining a patent to reduce competition. • Stability usually involves keeping track of new developments to make sure the strategy continues to make sense. • Note that Stability approach is not a “do nothing” approach; nor does it mean that goals such as profit growth are abandoned.

33. The stability strategy can be designed to increase profits through such approaches as improving efficiency in current operations. • This strategy is typical for firms in a mature stage of development, or mature product-market evolution.

34. Why Do Companies Pursue a Stability Strategy? • A no. of explanations can be offered to support stability: • The firm is doing well or perceives itself as successful. Mgmt does not always know what combination of decisions is responsible for this. So, “we continue the way we always have around here.”

35. 2. A Stability Strategy is less risky. 3. It is easier and more comfortable for all concerned to pursue a stability strategy. 4. Too much expansion can lead to inefficiencies. 5. The envt is perceived to be relatively stable, with few threats to cause problems or few opportunities the firm wishes to take advantage of it.

36. Expansion Strategy: • An expansion strategy is a strategy that a firm pursue when: • It serves the public in additional product or service sectors or adds markets or functions to its definition. • It focuses its strategic decisions on major increases in the pace of activity within its present business definition.

37. A firm implements this strategy by redefining the business- either adding to the scope of activity or substantially the efforts of the current business. • Expansion is usually thought of as “the way” to improve performance.

38. Why Do Companies Pursue Expansion Strategies? • Many executives equate expansion with effectiveness. • Some believe that society benefits from expansion. • Managerial motivation • External pressure from stakeholders or securities analysts.

39. Retrenchment Strategies: • A Retrenchment Strategy is pursued by a firm when: • It sees the desirability of or necessity for reducing its product or services lines, markets or functions. • It focuses its strategic decisions on functional improvement through the reduction of activities in units with negative cash flows.

40. A firm could also reduce its functions. • E.g.,a firm may choose to sell most or all of its output to a single customer. • Retrenchment is frequently used during the decline stage of a business when it is considered possible to restore profitability.

41. Why Do Companies Pursue Retrenchment Strategy? • This strategy is hardest to pursue.. it goes against the brains of most strategist. • And it implies failure. • A few reasons are as follows: • The firm is not doing well or perceives itself as doing poorly. • The firm has not met with its objectives by following one of the other generic strategies, and there is a pressure from stakeholders, customers, or others to improve performance.

42. 3. The envt is seen to be so threatening that internal strengths are insufficient to meet the problems. 4. Better opportunities in the envt are perceived elsewhere, where a firm’s strengths can be utilized. Any strategy, if chosen at the right time and implemented properly, will be effective.

43. The retrenchment strategy is the best strategy for the firm which has tried everything, has made some mistakes, and is now ready to do something about its problems. • The more serious the problems the more serious the retrenchment strategy needs to be. • It is the hardest strategy for the business to follow.

44. It implies that someone or something has failed, and no one wants to be labeled a failure. • But retrenchment can be used to reverse the negative trends and set the stage for more positive strategic alternatives.

45. Combination Strategy • A combination strategy is a strategy that a firm pursues when: • Its main strategic decisions focus on the conscious use of several grand strategies (S,E,R) at the same time (simultaneously) in several SBUs of the company. • It plans to use several grand strategies at different future times (sequentially).

46. With combination strategies, the decision makers consciously apply several grand strategies to different parts of the firm or to different future periods. • The logical possibilities for a simultaneous approach are stability in some areas, expansion in others; stability in some areas, retrenchment in others; retrenchment in some areas, expansion in others; and all 3 strategies in different areas of the company.

47. Why Do Companies pursue a Combination Strategy? • A combination strategy is not an easy strategy to use. • It is much easier to to keep a firm in one set of values or one strategy at a time. • But when a company faces many envt and these envt are changing at different rates, and the company’s products are in different stages of the life cycle, it is easy to visualize conditions under which a combination strategy makes sense.