Strategies, policies, and planning premises - MANAGEMENT PROCESS
5 STRATEGIES, POLICIES, AND PLANNING PREMISES
2Strategies, policies, and planning premises - MANGEMENT PROCESS
THE STRATEGIC PLANNING PROCESS.
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Goals of Stake
Goals of Stake
Levels of strategy
Three levels for Strategic decisions: The success of the strategic management depends on the
speedy and timely taking of decisions. For this the process of strategic decisions is followed as under.
Corporate level strategy
• This has the largest domain.
• By definition, corporate level strategy concerns itself with the whole corporation as a unit and c
• Corporate level strategy makers analyse the commonalities of various business units and work to
add value to the whole system besides individual growth of participating business units.
• Consequently, aims to answer the purpose or the mission of the organization.
• In other words, corporate level strategy takes a view at the overall scope of an organization and how
to enhance stakeholder value.
• Issues concerning the introduction of new products or expansion into new markets or segments are
all a part of this strategic level.
• It is of prime importance that corporate level strategy is fully aligned with the overall vision of the
organization and the values and expectations of stakeholders.
• Any deviation can result in serious repercussions for the management as also the stakeholders.
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Levels of strategy
Business unit level practical decisions
• When the business activities of the company are divided on the regional market, product standards
by keeping the profit in the centre, then each of this department is known as Business Unit.
• e.g. Videocon Company’s Television Division, Washing Machine Division etc. Similarly B PL.
Company’s Television Division, Telephone Division, Stereo Division etc.
• For all these decisions one person with all the powers is appointed who is known as General
• The strategic decisions taken at the corporate level are to be considered for the effective
implementation of it for which the managers have to take the necessary practical decisions.
• The authority for this is decided by the corporate level and it is given to all the divisional managers.
• This type of unit is known as Strategic Business Unit.
• The managers of all these SBUs organize the activities of their unit by considering the time period of
5 to 8 years so that they can get maximum return on their capital investment.
Single Business Unit Level:
• When the company is dealing in a single type of single product or dealing in only one area, then it is
known as a ³Single Business Unit´.
• In these circumstances, the manager of one business unit of middle level collectively takes the
practical decisions along with the corporate strategy of high level.
• This is possible only because there is one unit.
• In these circumstances, there is no possibility of any disharmony between the practical decisions
taken at corporate strategy and business unit level.
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Levels of strategy
Multiple Business Units Level:
• When the company is arranging on its business activities in context to more than one region or
product, then the business activities are divided according to the geographical area, or product.
• In these circumstances the various divided units are known as Different Business Units and a
separate general manager is appointed for each one.
• Even though all the units are working separately, the main corporate strategy decided at the top
level is being followed.
Functional level operating decisions:
• Top managers prepare the strategic plans.
• At the middle level the resources are supplied and facilities are arranged for the success of the
strategies in context to the divisional units and
• finally the lower level, which is known as the functional level, is implementing those strategic plans.
• For this functional decisions are taken for various activities. Functional activities include various
activities such as production, marketing, personnel management, financial management, office
management, research and development etc.
• To make all these activities effective the functional managers and their assistants are being
• For the effective implementation of the strategies at the operational level, the activities must be
• For this the supervisors are being appointed to keep the control over all the functional activities.
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Levels of strategy
BCG Matrix: Boston Consulting Group Matrix is developed by Bruce Henderson of BCG in early 1970s.
• Business or products are classified as low or high performers depending upon their market growth
rate and relative market share.
• It is a portfolio planning method which is based on the observation that a company’s business units
can be classified in to four categories.
– Question marks
– Cash cows
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Star (high growth, high market share)
>Stars use large amounts of cash.
>Stars are leaders in the business.
>Stars usually generate cash for the company
Cash Cows (low growth, high market share)
>Profits and cash generation should be high.
>Low market growth does not attract new competitors
>Low market growth, call for less investments
Levels of strategy
Limitations of BCG Matrix
• It neglects the effects of synergy between business units.
• High market share is not the only success factor.
• Market growth is not the only indicator for attractiveness of a market.
• Sometimes Dogs can earn even more cash as Cash Cows.
• There is no clear definition of what constitutes a 'market'.
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Levels of strategy
• A high market share does not necessarily lead to profitability all the time.
• The model uses only two dimensions – market share and growth rate. So companies may be
tempted to divest prematurely.
• A business with a low market share can be profitable too.
• The model neglects small competitors that have fast growing market shares.
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Strategic planning is an organization's process of
• defining its strategy, or direction, and
• making decisions on allocating its resources to pursue this strategy.
• In order to determine the direction of the organization, it is necessary to understand its current
position and the possible avenues through which it can pursue a particular course of action.
• Generally, strategic planning deals with at least one of three key questions:
– "What do we do?"
– "For whom do we do it?"
– "How do we excel?"
• The key components of 'strategic planning' include an understanding of the firm's vision, mission,
values and strategies. (Often a "Vision Statement" and a "Mission Statement" may encapsulate the
vision and mission).
– Outlines what the organization wants to be, or how it wants the world in which it operates to be
(an "idealised" view of the world).
– It is a long-term view and concentrates on the future. It can be emotive and is a source of
– For example, a charity working with the poor might have a vision statement which reads "A
World without Poverty.“
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– Defines the fundamental purpose of an organization or an enterprise, succinctly describing why
it exists and what it does to achieve its vision.
– For example, the charity above might have a mission statement as "providing jobs for the
homeless and unemployed".
– Beliefs that are shared among the stakeholders of an organization.
– Values drive an organisation's culture and priorities and provide a framework in which decisions
– For example, "Knowledge and skills are the keys to success" or "give a man bread and feed
him for a day, but teach him to farm and feed him for life". These example maxims may set the
priorities of self-sufficiency over shelter.
– Strategy, narrowly defined, means "the art of the general".- a combination of the ends (goals)
for which the firm is striving and the means (policies) by which it is seeking to get there.
– A strategy is sometimes called a roadmap - which is the path chosen to plow towards the end
vision. The most important part of implementing the strategy is ensuring the company is going
in the right direction which is towards the end vision.
• Organizations sometimes summarize goals and objectives into a mission statement and/or a
vision statement. Others begin with a vision and mission and use them to formulate goals and
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There are many approaches to strategic planning but typically one of the following approaches is used:
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Situation - evaluate the current situation
and how it came about.
Draw - what is the ideal image or the desired
Target - define goals and/or objectives
(sometimes called ideal state)
See - what is today's situation? What is the gap
from ideal and why?
Path / Proposal - map a possible route to
Think - what specific actions must be taken to
close the gap between today's situation and the
Plan - what resources are required to execute
1. Define mission;
3. Assessment of resources, risks, and opportunities;
4. Strategy formulation;
5. Strategy implementation;
6. Monitoring and adapting plans; strategic vs. Operational planning
Competitive analysis in strategy formulation:
Porter’s five forces model;
Organizational assessment competitive advantages,
SWOT analysis and the issues involved
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Mintzerbg’s 5Ps of strategy
• Henry Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning, points out that people
use "Strategy" in several different ways, the most common being these five:
1. Strategy is a Plan, a "how," a means of getting from here to there.
2. A strategy can be a Ploy too; really just a specific manoeuvre intended to outwit an opponent or
3. Strategy is a Pattern in actions over time; for example, a company that regularly markets very
expensive products is using a "high end" strategy.
4. Strategy is Position; that is, it reflects decisions to offer particular products or services in particular
5. Strategy is Perspective, that is, vision and direction.
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MAJOR KINDS OF STRATEGIES AND POLICIES
• Public relations
• Products or services
Porter’s competitive strategies:
– Overall cost leadership;
– Common requirements
• for successfully pursuing Porter’s competitive strategies.
• In a 1996 Harvard Business Review article and in an earlier book, Porter argues that competitive
strategy is "about being different."
• He adds, "It means deliberately choosing a different set of activities to deliver a unique mix of value“.
• In short, Porter argues that strategy is about competitive position, about differentiating yourself in
the eyes of the customer, about adding value through a mix of activities different from those used by
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Carrying out plan:
– reward system,
– decision processes, and
– structure needs;
Maintaining strategic control:
– Environment factors.
– effect of strategic action on organization,
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Political, Economical, Socio-Cultural,
Technological, Environmental, Legal,
Transport of goods
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– Developing and communicating planning premises;
– Appropriate fit between organizational structure and planning needs;
– Action plan must contribute to and reflect major objectives and strategies;
– contingency strategies and programs;
– Emphasize planning and implementation;
– Proper organizational climate.
– Planning premises vs. future expectations;
– Effective premising:
– Selection of premises that are essential,
– development premises for contingency planning
– verification of contingency of premise,
– communication of premises
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“Planning premises are the anticipated environments in which plans are expected to operates. They
include assumptions or forecasts of the future and known conditions that will affect the operations of
• Systematic and logical estimate for the future factors affecting planning.
• Planning premises are the assumptions providing a background against which the estimated events,
affecting the planning, will take place.
• A key part of planning is the establishment of clear planning premises.
• To assure co-ordination among all managers who make plans in organisation, these premises should
be used by all concern persons premises guides planning.
• Well organised planning can be done.
• Risk of uncertainty reduces.
• Risk of flexibility reduces.
• Co-ordination becomes effective.
• Increase in profitability
The process is as follows:
• A panel of experts on a particualr problem area is selected, usually from both inside and outside the
• The experts are asked to make a forecast (anonymously) in terms of discoveries and developments
• The answers are compiled and fed back to the audience
• Further estimates of future are made collectively
• Repetitions take place if required for further additions
• When a convergence of opinion begins to evolve, the results are then used as an acceptable forecast
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22Strategies, policies, and planning premises - MANGEMENT PROCESS
Types of Planning Premises
External planning premises are the important elements in plan formulation. These exist
in an organization’s external environment. Various external factors are grouped into five
broad categories: economic, political, legal, technological, socio-cultural and
competitive. These factors either present opportunities or threat to an organization.
Besides external factors, internal factors of the organization are also taken into
consideration for plan formulation. Various internal premises are related to the occurring
within the organization like organization structure, management systems, etc. factors
may be lie in various functions of the organization such as production, marketing,
finance and personnel and management.
Various planning may be classified as tangible and intangible. Tangible premises are
those, which can be expressed, in quantitative terms like monetary unit, unit of product,
labor hour, machine hour, and so on. for example, sales forecast which provides
premises for operative plans can be expressed in terms of rupees . Intangible premises
are of qualitative nature and cannot be translated into quantity. For example, image of
the company in its environment can be expressed in qualitative terms and interpretation
has to be drawn from these.
Planning premises can be classified on the basis of their controllability. Thus, premises
may be either controllable or uncontrollable. Controllable premises are those that can
be controlled by organization’s actions. Such premises are mostly internal for example,
organizational policies, structure, systems, procedures etc. Uncontrollable premises are
mostly external and cannot be controlled by an organization’s actions, for example, rate
of economic growth, population growth, taxation policy of government etc.