Nature & Importance of Business Policy Development of Business Policy Classification of Business Policy Mechanism of Policy Making

Objectivity Stability & Flexibility Relationship to other objectives Being known accepted and understood Ethical standards Consistent with Public Policy Comprehensiveness

Ascertaining the problem Policy formulation Dissemination of the policy Acceptance of the policy Policy implementation Policy control

Relationship to Organization Objectives Simple and easy understandable Written policy Supplementary to Overall Corporate Policies Planned Development

Solving Business problems Policies provide stability Policies help manager to improve his managerial powers Optimum utilization of scarce resources Ensure consistency Policies determine specific routes

Inadequate coverage Limited area Policies are static Consistency in policies Policies provides set rules

Policies based on Nature of origin Policies based on expression Policies based on functions Policies based on scope of organization Policies based on levels of management Policies based on situation & contingency Major or Administrative Minor or Departmental

Policies based on Nature of origin Originated policy Appealed policy Imposed policy Policies based on functions Personnel policies Marketing Finance Production policies

Policies based on expression Oral policy Stated or Written policy Policies based on scope of organization Basic policies General policies Specific policies

Policies based on levels of management Top management Middle management Operating Management

Policies based on situation & contingency Normal Policies Contingencies Policies

Identification of the situation Development of Policy Dissemination of the Policy Explanation of the Policy Acceptance of the Policy Feed Back

Strategic Management

That set of managerial decisions and actions that determines the long-run performance of a corporation. It includes 1. Environmental Scanning 2. Strategy formulation 3. Strategy Implementation 4. Evaluation and Control

1. Basic Financial Planning 2. Forecast-Based Planning 3. Externally-Oriented Planning (Strategic Planning) 4. Strategic Management

Clearer sense of strategic vision Sharper focus on what is strategically important Improved understanding of rapidly changing environment

Impact of Globalization Impact of Electronic Commerce

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European Union (EU) North American Free Trade Agreement (NAFTA) Association of South East Asian Nations (ASEAN)

Internet forcing companies to transform themselves New channels are changing market access and branding The balance of power is shifting The pace of business is increasing Knowledge is becoming the key assets

Environmental Scanning

Strategy Formulation

Strategy Implementation

Evaluation and Control

Environmental Scanning External

Societal Environment General Forces Task Environment Industry Analysis

Strategy Formulation
Mission
Reason for existence

Strategy Implementation

Evaluation and Control and Control

Objectives
What results to accomplish by when

Strategies
Plan to achieve the mission & objectives

Policies
Broad guidelines for decision making

Internal
Structure Chain of Command Culture Beliefs, Expectations, Values Resources Assets, Skills Competencies, Knowledge

Programs
Activities needed to accomplish a plan

Budgets
Cost of the programs

Process to monitor performance and take corrective action

Procedures
Sequence of steps needed to do the job

Performance

Feedback/Learning

Societal Environment

Sociocultural Forces Shareholders Governments Special Interest Groups Customers

Environment

Task

Economic Forces

(Industry)
Suppliers

Internal Environment Structure Culture Resources

Employees/ Labor Unions

Competitors

Trade Associations Creditors Political-Legal Forces Communities Technological Forces

Composed of general forces in environment

Composed of

Groups in environment that directly affect or are affected by the organizations operations (Often called industry)

The way a corporation is organized in terms of communication, authority, and workflow

Collection of beliefs, expectations, and values learned and shared by members and transmitted from one generation of employees to another

An asset, competency, process, skill, or knowledge controlled by the corporation

Strategy

A comprehensive master plan stating HOW the corporation will achieve its mission and objectives

Corporations overall direction and the management of its businesses

Emphasizes improving the competitive position of a corporations products or units

Maximizes resource productivity

Corporate Strategy
Business
(Division Level)

Strategy
Functional Strategy

Strategy Formulation

The process of developing long-range plans to deal effectively with environmental opportunities and threats in light of corporate strengths and weaknesses
Composed of

Mission Objectives Strategies Policies

Mission

The purpose or reason for the corporations existence. It may be narrow or broad in scope.
Narrow Broad

Railroad Insurance

Transportation Financial Services

Objectives

The end results of planned activity. They state WHAT is to be accomplished by WHEN. They should be quantified, if possible.

Profitability Efficiency Growth Shareholder wealth Utilization of resources Reputation Contributions to employees Contributions to society Market leadership Technological leadership Survival Personal needs of management

Policies

Broad guidelines for making decisions

Strategy Implementation

The process of putting strategies and policies into action through the development of Programs Budgets Procedures

Program

A statement of activities or steps needed to accomplish a single-use plan

Budget

A statement of a corporations program in dollar terms

Procedures

A system of sequential steps or techniques that describe in detail how to perform a particular task or job

Evaluation and Control

The process of monitoring corporate activities and performance results so that actual performance can be compared with desired performance

New CEO External intervention Threat of a change in ownership Performance gap

3(a) Scan and Assess External Environment: S ocietal T ask

3(b) Analyze External Factors: Opportunities Threats

1(a)

1(b) Examine and Evaluate the Current: Mission O bjectives Strategies Policies

2 Review Corporate Governance: Board of Directors Top Management

5(a) Select Strategic Factors (SWOT) in Light of Current Situation

5(b) Review and Revise as Necessary: M ission Objectives

6(a) Generate and Evaluate Strategic Alternatives

6(b) Select and Recommend Best Alternative

7 Implement Strategies: Programs Budgets Procedures

Evaluate Current Performance Results

Evaluate and Control

4(a)
Scan and Assess Internal Environment: Structure C ulture R esources

4(b)
Analyze Internal Factors: Strengths Weaknesses

Strategy Formulation: Steps 1 6

Evaluation Strategy and Implementation Control: Step 7 Step 8

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Strategy Formulation

Mission

Broad: To serve the best interests of shareowners, customers, and employees Narrow: To become a full-line globally-oriented major home appliance manufacturer and marketer

Objectives

Increased profitability Number one in customer satisfaction Number three in North American unit sales

Strategies

To grow horizontally where the corporation is not yet well represented through external acquisition or joint ventures To grow horizontally internally by improving efficiency and quality of acquired companies and by using one business units expertise in one acquired are to introduce quality products from a business unit in another area

Policies

No cost reduction proposal will be approved if it reduces product quality in any way Every product, from the least expensive to the highest priced, should be superior to the competition in overall quality and performance The corporation must not emphasize market share at the expense of profitability Business units must be managed for synergies, while simultaneously the specialized expertise among those units must be allowed to flourish

Programs

Work with Bosch-Siemens to develop joint marketing and supplier agreements for Hoover appliances Analyze and develop Asian markets through current distributors and licensees and through joint ventures Develop new appliances for continental Europe Develop TV advertising for Jenn-Air and Magic Chef Consolidate production of washers and dryers in dedicated plants

Budgets

Prepare budgets for each planned program

Procedures
Develop procedures for joint purchasing and joint marketing of Bosch-Siemens with Hoover Coordinate marketing, manufacturing, and purchasing activities of business units through committees Research and development takes place in unit housing each product line Consolidate all advertising under one agency, but establish internal advertising for each brand category

Evaluation & Control

Require all business units to provide monthly status reports on sales and costs by product line plus any trends in expenses Require all business units to provide annual reports giving operating revenues, costs, and expenses as well as identifiable assets in dollars, plus property additions and deletions Require all business units to provide quarterly assessments of competitive activity and overall trends affecting each of their product lines Require all business units to inform corporate headquarters before proceeding on any financially risky plan

An organizations grow larger and more complex with more uncertain environments, decisions become increasingly complicated and difficult to make.

Questions arise what makes a decision strategic?

Strategic decisions deal with the long run future of the

entire organization and have three characteristics:

Rare Consequential Directive

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According to Henry Mintzberg, the three most typical approaches, or modes of strategic decision makings are:
Entrepreneurial modes Adoptive modes Planning modes

A forth mode that is logical incrementalism was added later by Quinn

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