As defined by Christensen: “Business Policy is the study of the function and responsibilities of Senior Management, the crucial problems that affect success in the total enterprise, and the decisions that determine the directions of the organisation and shape of its future.
The problems of policy in the business, like those of policy in public affairs, have to do with choice of purposes, the moulding of organisational identity and character, the continuous definition of what needs to be done, and the mobilisation of resources for the attainment of organisational Goals in the face of competition or adverse circumstance
1940- 1960: Planned policy became irrelevant due to increasingly complex and accelerating changes. Firms had to anticipate environmental changes. A strategy needed to be formed with critical look at basic concept of Business and its relationship to the existing environment then.
1980 & onwards: The focus of Strategic Management is on the strategic process of business firms and responsibilities of general management. Everything outside the four walls is changing rapidly.
This phenomenon is called as “Discontinuity” by Mr. Peter Drucker. Past experiences are no guarantee as science and technology is moving faster. The future is no more extension of the past or the present. The world is substantially compressed and managing the environment becomes crucial function.
What to produce, where to market, which new business to enter, which one to quit and how to get internally stronger and resourceful are the new stakes.
Strategic Planning is required to be done to endow the enterprise with certain fundamental competencies / distinctive strengths which could take care of eventualities resulting from unexpected environmental changes.
However, the evolution of this phase is still continuing and is yet not formed into a theory of how to manage an enterprise. But Strategic Management is a very important tool for and way of thinking to resolve strategic issues.
Defining Strategy and Concept of Strategic Management
Alfred D Chandler(1962) : “The determination of basic long-term goals and the adoption of courses of the courses of action and the allocation of resources necessary for carrying out these goals”
Alfred D Chandler(1984) : “Basically, a strategy is a set of decisions-making rules for the guidance of organisational behaviour”
Kenneth Andrews(1965) : “The pattern of objectives, purpose, goals, and the major policies and plans for achieving these goals stated in such a way so as to define what business the company is in or is to be and the kind of company it is or to be
” Kenneth Andrews (1965) : “Business Strategy is a method of describing the future position of the company, its objectives, purposes, goals, policies, and plans that may be required for guiding the company from its existing position to where it desires to be”.
Igor Ansoff(1965) : “The common thread among the organisation’s activities and product-markets…that defines the essential nature of business that the organisation was or planned to be in future”
William F Gleueck(1972) : “A unified , comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved”
Henry Mintzberg(1987) : “A pattern in a stream of decisions and actions”
Michael E Porter(1996) : “…developing and communicating the company’s unique position, making trade-offs, and forging fit among activities”
In most (large) corporations there are several levels of strategy. Strategic management is the highest in the sense that it is the broadest, applying to all parts of the firm. It gives direction to corporate values, corporate culture, corporate goals, and corporate missions. Under this broad corporate strategy there are often functional or business unit strategies
Different Levels of Strategy Levels Structure Strategy Corporate Corporate Level SBU - A SBU - B SBU - C SBU Business level Functional Finance Marketing Operations Personnel Information Functional Level Corporate Office
Functional strategies include marketing strategies , new product development strategies, human resource strategies, financial strategies, legal strategies, supply-chain strategies, and information technology management strategies. The emphasis is on short and medium term plans and is limited to the domain of each department’s functional responsibility. Each functional department attempts to do its part in meeting overall corporate objectives, and hence to some extent their strategies are derived from broader corporate strategies.
Many companies feel that a functional organizational structure is not an efficient way to organize activities so they have reengineered according to processes or strategic business units (called SBUs). A strategic business unit is a semi-autonomous unit within an organization. It is usually responsible for its own budgeting, new product decisions, hiring decisions, and price setting. An SBU is treated as an internal profit centre by corporate headquarters. Each SBU is responsible for developing its business strategies, strategies that must be in tune with broader corporate strategies
The “lowest” level of strategy is operational strategy . It is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria. It must operate within a budget but is not at liberty to adjust or create that budget. Operational level strategy was encouraged by Peter Drucker in his theory of management by objectives (MBO). Operational level strategies are informed by business level strategies which, intional turn, are informed by corporate level strategies.
Business strategy , which refers to the aggregated operational strategies of single business firm or that of an SBU in a diversified corporation refers to the way in which a firm competes in its chosen arenas.
Corporate strategy , then, refers to the overarching strategy of the diversified firm. Such corporate strategy answers the questions of "in which businesses should we compete?" and "how does being in one business add to the competitive advantage of another portfolio firm, as well as the competitive advantage of the corporation as a whole
Since the turn of the millennium, there has been a tendency in some firms to revert to a simpler strategic structure. This is being driven by information technology. It is felt that knowledge management systems should be used to share information and create common goals. Strategic divisions are thought to hamper this process. Most recently, this notion of strategy has been captured under the rubric of dynamic strategy , popularized by the strategic management textbook authored by Carpenter and Sanders. This work builds on that of Brown and Eisenhart as well as Christensen and portrays firm strategy, both business and corporate, as necessarily embracing ongoing strategic change, and the seamless integration of strategy formulation and implementation. Such change and implementation are usually built into the strategy through the staging and pacing facets.
Strategists are individuals or groups who are primarily involved in the formulation, implementation, and evaluation of Strategy.
In a limited sense, all managers are Strategists. But we may have outside agencies involved in various aspects of Strategic Management, who are also Strategists.
Board of Directors :- Board is an ultimate legal authority of an organisation. Board is responsible to owners, share holders, government, controlling agencies, financial institutes. They get elected and appointed by holding or parent company. Board is requires to direct and is involved in reviewing and screening executive decisions in light of their environmental, business and organisational implications.
Role of Board of Directors is to guide the senior management in setting and accomplishing objectives, reviewing and evaluating organisational performance, and appointing senior executives. Board is involved in setting strategic direction, establishing objectives & strategy, monitoring and reviewing achievement.
Chief Executive Officer :- is responsible for all aspects of strategic management from the formulation to evaluation of strategy. CEO plays a pivotal role in setting mission, objectives and goals. He formulates and implements strategy and ensures that organisation does not deviate from a predetermined path. CEO is primarily responsible for strategic management of the organisation.
Entrepreneur :- is the person who starts a new business, is a venture capitalist. He has to play a proactive role to provide sense of direction, set objectives and formulate strategies. He is different from formal system and plays all strategic roles simultaneously.
Senior management :- consists of higher management level starting from CEO to functional managers and profit centre or SBU heads. They are responsible for implementing the strategies and plans and for a periodic evaluation of their performance. Organisationally they come together in the form of committees, task forces, work groups, think tanks and play a very important role in Strategic management.
SBU level Executives :- SBUs are formed with each business having a clearly defined product – market segment and a unique strategy. They are CEOs for their SBUs and hence SBU level strategy formulation and implementation is their main role.
Corporate Planning :- It assists management in all aspects of strategy formulation, implementation and evaluation. They are responsible for preparation and communication of strategic plans, provides administrative support and plays a measurement and controlling role. They do not from strategy and do not initiate a process on their own.
Consultants :- in absence of a Corporate planning many organisation take an outside help in the form of a consultants or consulting companies. Besides providing corporate strategy and strategic planning, they are specialist, knowledgeable, outsider, unbiased and provide objective evaluation. E.g. AF Ferguson, PWC, KPMG, Billimoria, Mckinsey etc.
Middle Level Managers :- They relate to operational matters and are seldom play active role in Strategic Management. They form departmental / functional plan in light of broad objectives and goals of organisation provided in vision, mission, goals and objective statements of the organisation. They are implementers, followers of guide lines, receivers of communication about strategic plans. They are basically involved in in the implementation of functional strategies.
9. Executive Assistant :- An executive assistant is a person who assists the chief executive in the performance of his duties like data collection and analysis, suggesting alternatives. He prepares brief for various plans, proposals, projects. He helps in public relations and liaison functions. He coordinates activities with the internal staff and outsiders. He is a corporate planner for CEO. Generally, he orients from finance background ensuring and opining on ROI and strategic positioning of the organisation.
Definition – “Strategic management is the process of systematically analysing various opportunities and threats ‘vis-a vis’ organisational strengths and weaknesses, formulating, and arriving at strategic choices through critical evaluation of alternatives and implementing them to meet the set objectives of the organisation”.
Definition – “Strategic Management is concerned with making decisions about an organisation’s future direction and implementing those decisions”.- By Lloyd L Byras.
Strategic management is the art, science and craft of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives. It is the process of specifying the organization 's mission , vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs. Strategic management seeks to coordinate and integrate the activities of the various functional areas of a business in order to achieve organizational objectives. A balanced scorecard is often used to evaluate the overall performance of the business and its progress towards objectives.
Mission Statement indicating methodology for achieving the objectives, purposes and Philosophy of organisation as reflected in vision statement.
Company Profile, its internal culture, strengths and capabilities.
Critical study of external environmental factors, threats and opportunities.
Finding out way and deciding the desirable course of actions for accomplishing the Mission statement.
Selecting long term objectives and deciding corresponding strategies.
Evolving short term objectives, defining corresponding strategies in tune with Mission and Vision Statements.
Implementing chosen strategies in planned way, based on budgets, allocating resources, outlining action plan and tasks.
Installation of a continuous review system, creating a control mechanism and Data generation for selecting future course of action.
Characteristics & Benefits of Strategic Management -1
Strategic Planning provides the route map for the enterprise. It lends a framework which can ensure that decisions concerning future are taken in a systematic and purposeful way.
Strategic Planning provides a hedge against uncertainty, against totally unexpected developments.
Strategic Planning helps in understanding trends in a better way and generates a reference frame for investment decisions.
Strategic Planning provides the frame work for all major business decisions, decisions on business, products, markets, manufacturing facilities, investments, and organisational structure. It is a path finder for business opportunities and it is also a defence mechanism to avoid costly mistakes in choice of product market or investments.
Characteristics & Benefits of Strategic Management - 2
The more intense the environmental uncertainty, more critical is the need for strategic planning. The success of the efforts and activities of the enterprise depends heavily on the quality of strategic planning. Considerable thought and effort must go in vision, insight, experience, quality of judgement and the perfection of methods and measures.
Strategic Planning is a management task concerned with growth and future of the business enterprise.
As a management tool, Strategic Planning utilises both intuition and logic. Logic is through Planning and information process and intuition is through experience, knowledge and vision of top people in Management.
Characteristics & Benefits of Strategic Management - 3
All vital aspects of corporate governance are perfected through strategic planning, starting from corporate mission, philosophy and core values, down to choice of businesses and strategies.
Through analytical process aspect, involved in Strategic Planning, corporation understands where its core competencies are, identifies the competitive advantages, pinpoints the gaps, formulate steps to bridge them.
Main aspects of Strategic Planning are Future, Growth, Environment, basket of businesses of the firm for additions and deletions, Strategy and not day to day routine matters, creation of core competency and competitiveness and finally integration. It views the organisation / business in its totality and not a particular function. Thus Strategic Planning is Corporate Strategy.
Characteristics & Benefits of Strategic Management - 4
Strategic Planning differs from other operative and administrative functions of management.