Chapter 1 EVOLUTION OF BUSINESS POLICY AND STRATEGY.pptx

lesson

1. EVOLUTION OF BUSINESS POLICY AND STRATEGY

2. •In the world of business, the set of rules that guides the decisions and actions of the members of the organization is generally called business policies. These policies may be informal or in writing coming in the form of an operational manual, personnel handbook, and memoranda composed or issued from time to time and as the need arises. •Overtime, it is realized that it is not enough to have a set of business policies, written or unwritten, but it is more important to address operational strategies knowing that business is not a short-term but a long-term journey to seeking profit. •With globalization trends along with the challenges and opportunities posed by information and communication technology particularly the use of computers and the popularization of the so-called e-Commerce/e-Business, the notion of being more concerned with internal operational policies and procedures has alarmed business executives that they are more concerned nowadays with being externally-oriented and specifically concerned with strategic management concepts.

3. CONCEPT OF BUSINESS POLICY Within the context of a plan or the process of planning are a variety of plans taking the form of budget, policy, strategy, rules, guides, procedures, etc. Common to this kind of variant of plans is that all of them are done ahead of time and that these terms serve as guideposts or perimeters upon which decisions have to be based. Business policies are meant to be observed or followed simply because as a matter of practice and tradition, rules and policies of the business are traditionally done by the top management, and doing otherwise would be risky or will do more harm than good to subordinates. Hence, business policies are considered marching orders for middle management to implement, and rank-and-file personnel have to take action. •Business policy is also looked upon as general management orientation traditionally viewed as largely inward-looking as well as more biased with guiding how personnel in the organization would act or what to follow for as long as one is a part or employee of the organization. It provides the fundamental framework for plans and also provides middle managers with a basis for decision-making. The more policies are clearly understood, the more harmonious a workplace becomes.

4. CONCEPT OF STRATEGY 1. Strategy formulation or developing strategy 2. Strategy implementation 3. Strategic control •Thompson and Strickland (1999) characterized strategy at the operational level referring to it as a set of competitive moves and business approaches that management is employing to run the company. Among others, strategy is management’s game plan to achieve the following: 1. Attract and please customers 2. Stake out a market position 3. Conduct operations 4. Compete successfully

5. CHARACTERISTICS OF STRATEGY 1. Strategy is traditionally meant to be a grand plan made in the light of what it was believed an adversary might or might not do. 2. Strategy derives its relevance given from the existence of a negative scenario. 3. It is done on the presumption of the existence of a negative scenario. 4. It also connotes general program of action and deployment of emphasis and resources to attain comprehensive objectives. 5. A process of deciding on objectives of the organization, on changes in these objectives, on the resources used to attain these objectives, use and disposition of these resources. 6. It involves determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary to carry out those goals. 7. A decision about how to use available resources to secure a major objective in the face of the obstruction. 8. Unlike policy, strategy implies actions and guides decision making, spelling out directions to be taken. 9. Strategy may, in some extreme or necessary cases, exist without a policy.

6. STRATEGY VS. POLICY The following are situations where strategy and policy oftentimes come in collision course making it difficult to operationalize a strategy within the bounds of standing policy:   1. In many instances, business policies exist amidst absence of business strategy and strategies may exist without established business policies. 2. If ever may exist, business policies are generally directional in nature and strategy is more operational in context. 3. Business policies are often formal or written and strategies may be informal and not necessarily written and often confidential.

7. ORIGIN AND NATURE OF STRATEGY •The historical development of the concept strategic management was elaborated by Jeffrey Bracker of Georgia State University who cited that the term strategy was mentioned in the old testament and largely treated as semantic issue. Bracker cited numerous authors have focused their attention on the concept of strategy but have failed to comprehensively investigate its historical evolution.   •One of the known applications of strategy to business occurred when Socrates consoled Nichomactides , a Greek militarist who lost an election to the position of general to Anosthenes , a Greek businessman. Socrates compared the duties of a general from a businessman and showed Nichomactides that in either case one plans the use of one’s resources to meet objectives.

8.   EVOLUTION OF STRATEGIC MANAGEMENT   1. The marked acceleration of the rate of change within the firms 2. The accelerated application of science and technology to the process of management.   •It was reported that the first modern writers to relate the concept of strategy to the business were Von Neuman and Morgenstern (1947) with their theory of games. Numerous other authors have developed concepts of business strategy in the past 30 years.

9.   NATURE OF STRATEGIC MANAGEMENT • Simply getting to know the concept of strategy and putting it to work or applying it is just one of the many aspects of what it takes to make the company competitive. More importantly, integrating the concept of strategy into mainstream of the management system is what matters most in terms of giving directions that promises delivering profit expectations. •Williamson, Jenkins, et al. (2004) approached Strategic Management as framework that evolves around the idea of shaping the destiny of an organization. It is about: 1. Putting an organization into a competitive position 2. Sustaining and improving that position by developing an acquisition of appropriate resources and by monitoring and responding to environmental changes 3. Monitoring and responding to the demands of key stakeholders

10. BENEFITS OF STRATEGIC MANAGEMENT • Wheelen and Hunger (2004) found the three most highly rated benefits of strategic management, these are: 1. Clearer sense of strategic vision for the firm 2. Sharper focus on what is strategically important 3. Improved understanding of a rapidly changing environment

11. STRATEGIC TYPES Wheelen and Hunger (2004) theorized that strategic type is a category of firms based on common strategic orientation and a combination of structure, culture, and process consistent with strategy. Competing firms within a single industry can be categorized on the basis of their general strategic orientation into four types: 1. Defenders. 2. Prospectors 3. Analyzers. 4 . Reactors.

12. STRATEGY VS. TACTICS Tactics are more operational and done in context with or as a support activity or operation to achieve a strategy. Strategy and tactics are differentiated in many different ways as follows:   1. As to level of conduct, strategy is developed at the highest levels of management whereas tactics are employed at and related to lower levels of management. 2. As to regularity, formulation of strategy is both continuous and irregular whereas tactics are determined on a periodic cycle with fixed time schedule. 3. As to subjective values, strategic decision making is more heavily weighed with subjective values of managers than is tactical decision making. 4. As to range of alternatives, the total possible range of alternatives from which management must choose is far greater in strategic than in tactical decision making. 5. As to uncertainty, uncertainty is usually much greater in both the formulation and implementation of strategy than in deciding upon and knowing the results of tactical decisions.

13. BASES OF POLICIES AND STRATEGIES Having a business policy in place is not a product simply copied from other business organizations but a set of document that needs to be developed in a well-planned manner on the basis of certain premises and presumptions or sets of biases. Broadly, the following are the bases from which policies and strategies are drawn upon: 1. Legal mandate. 2. Vision and mission statement. 3. Specific objectives. 4. Programs and policies.  

14. APPROACHES TO IDENTIFYING POLICIES AND STRATEGIES 1. Policy/strategy profile. This approach systematically examines present company policy/strategy-implicit and explicit. This is a sort of self-examination, audit, and introspection. 2. Gap analysis. In this approach, the stimulus is an examination of whether an end that has been established is likely to be achieved. 3. Competitive strategy analysis . This involves a thorough analysis of the competitive forces operating in a firm’s environment and searching for an alternative option. Richard Whittington (2001) theorized that strategy comes in four generic approaches: 1. Classical approach. The oldest of the four approaches and still the most influential, it relies on the rational planning methods dominant in the textbooks. 2. Evolutionary. It draws on the fatalistic metaphor of biological evolution but substitutes the discipline of the market for the law of the jungle. 3. Processual. It emphasizes the sticky imperfect nature of all human life, pragmatically accommodating strategy to the fallible processes of both organizations and markets. This approach is more adaptive to situation by playing by the local rules. 4. Systemic. This approach is relativistic, regarding the ends and means of strategy and inescapably linked to the cultures and powers of the local social systems in which it occurs.    

15. DEVELOPING POLICY AND STRATEGY 1. Top-bottom approach. In this approach, initiatives in developing policies and strategies come from the top management with rank and file tasked to implementing or following the policies and strategies. 2. Bottom-top approach. In this approach, policy and strategy initiatives emanate from the bottom or rank and file from which top management develops concrete policies and strategies for the lower ranked employees to observe or follow. 3. Top bottom top. In this approach, policy and strategy initiatives are taken by the top management then filtered down to lower ranked personnel for consultations then return back to the top management for refinements.

16. STRATEGIC DECISION For managers and for everyone in the business organization, decision making is a daily if not an all the time task or duty. Doing strategic decision, however, is somehow distinct in that every decision is related to a certain period and context as well as motivated by the firm’s vision statement. In the context of strategic management, it is not just simply making decision but it is important to exercise strategic decision or something like hard and unusual decisions that need to be done for certain strategic considerations.

17. Modalities in Strategic Decision •According to Mintzberg, there are four typical approaches or modes of strategic decision making as follows: 1. Entrepreneurial mode. In this mode, strategy is made by one powerful individual and the focus is on opportunities, problems are secondary. 2. Adaptive mode. Sometimes referred to as muddling through, this mode is characterized by reactive solutions to existing problems, rather than proactive search for opportunities. Much bargaining goes on concerning priorities of objectives. 3. Planning mode. This decision-making mode involves systematic gathering of appropriate information for situation analysis, the generation of feasible alternative strategies , and the rational selection of the most appropriate strategy, It includes both the proactive search for new opportunities and the reactive solution of existing problems. 4. Logical mode. It can be viewed as a synthesis of planning, adaptive, and, to a lesser extent, entrepreneurial modes. In this mode, top management has a reasonably clear idea of the corporation’s mission and objectives, but, in its development of strategies, it chooses to use “an interactive process in which the organization probes future, experiments, and learns from series of partial (incremental) commitments rather than through global formulation of total strategies.

18. Strategic Decision-making Process •By its nature, making strategic decision is not an instantaneous or spontaneous reaction to market situations or scenarios but a process that considered directly and indirectly relevant to strategic objectives.

19. ROLE OF THE BOARD OF DIRECTORS •The Specific Roles of the Board of Directors in any business organization come in the following ways:   1 . Monitor. 2. Evaluate and influence. 3. Initiate and determine.