CHARTER 1 EVOLUTION OF BUSINESS POLICY AND STRATEGY (1).pptx

Strategy and strategic plans: How they are different and why it matters
Strategy creates a common understanding of what an organization wants to achieve and what it needs to do to meet its goals. Strategic plans bridge the gap from overall direction to specific projects and day-to-day actions that ultimately execute the strategy. Job No. 1 is to know the difference between strategy and strategic plans — and why it matters.

Strategy defines the long-term direction of the enterprise. It articulates what the enterprise will do to compete and succeed in its chosen markets or, for the public sector, what the agency will do to achieve its mission.

Strategic planning defines how the enterprise will realize its strategic ambitions in the midterm. Too often, strategic plans are created and then forgotten until the next planning cycle begins. A well-done strategic plan turns an enterprise strategy into a clear roadmap of initiatives, actions and investments required to execute the strategy and meet business goals.

Functional strategic plans document the choices and actions needed for the function to move from the current state to the desired end state, and contribute effectively to the enterprise business model and goals.

1. CHARTER 1 EVOLUTION OF BUSINESS POLICY AND STRATEGY

2. Background For any organization to operate and effectively focus its efforts on certain tasks and avoid going astray or deviate away from targets, a sense or direction needs to be set and some sort of rules or guidelines have to established and observed. More often, these rules are guides are in the minds of founders, leaders and managers though some are put in writing. The set of rules that guides the decisions and action of the members of the organization is generally called business policies. These policies may be informal or in writing coming in the form of operational manual, personnel handbook, and memoranda composed or issued from time to time and as the need arises.

3. CONCEPT OF BUSINESS POLICY The basic theory of the term management which evolves around the idea of planning, organizing, staffing, coordinating, controlling and evaluating holds true. 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.

4. BUSINESS POLICY - Generally refers to set of rules the guides the conduct of the business in pursuit of profit and other objectives of the business organization. These policies are developed in coherence with duties and responsibility of various functional units. (e.g. human resource, sale/marketing, production, and the like). 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 or follow for as long as one is a part or employee of the organization.

5. CONCEPT OF STRATEGY Wright, Kroll and Parnell (1996) defined strategy as essentially referring to top management’s plan to attain the outcomes consistent with the organization’s mission and goals.

6. STRATEGY IN THREE VANTAGE POINTS Strategy formulation or developing the strategy. Strategy implementation ( putting the strategy into action) Strategic control ( modifying either the strategy or its implementation to ensure that the desired outcomes are attained)

7. These same authors categorized strategy into either intended or realized strategy. Intended strategy refers to the original strategy that management plans and intends to implement, whereas realized strategy refers to the actual and eventual strategy that management actually implements. Realized strategy often differs from the intended strategy because unforeseen environmental or organizational events occur that necessities modification in the intended strategy.

8. 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.

9. Strategy is management’s is “ game Plan” Attract and please the customers Stake out a market positions Conduct operations Compete seccessfully

10. CHARACTERISTICS OF STRATEGY 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. Strategy derives its relevance given from the existence completion in business. It is done on the presumption of the existence of a negative scenario. It also connotes general program of action and deployment of emphasis and resources attain comprehensive objectives.

11. 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 of the basic long term goals and objectives of an enterprise, and adoption of courses of action and 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 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, exits without a policy.

12. STRATEGY vs. POLICY In the course of running the business in a real setting, business policies and strategies often collide thereby inviting dilemma and creating confusion. When conflict exists between or amongst policies and strategies, organizational problems or dilemmas begin.

13. The following are situation where the strategy and policy oftentimes come in collision course making it difficult to operationalize a strategy within the bonds of standing policy. Business policies exist amidst absence of business strategy and strategies may exist without establishment business policies. Business policies are generally directional in nature and strategy is more operational in context. Business policies are often formal or written and strategies may be informal and not necessarily written and often confidential.

14. ORIGIN and NATURE OF STRATEGY The historical development of the concept of strategic management was elaborated by Jeffrey Bracker of Georgia state University who cited the term of strategy was mention in the Old Testament and largely treated as semantic issue. Bracker cited the numerous authors have focused their attention o the concept of strategy but have failed to comprehensively investigate the historical evolution.

15. Bracker cited Strategy originated from the Greek word “ stratego ” referring to a “general ” which in turn traces its roots from the words “army” and “lead”. As it is, the term strategy has its roots and gained its popularity in the field of military science. The word stratego means “to plan the destruction of one’s enemies through effective use of resources” .

16. EVOLUTION OF STRATEGIC MANAGEMENT The concept of strategy as related to business become greater after World War II, as business moved from relatively stable environment into more rapidly changing and competitive environment. The changes in context of strategy was attributed to two significant factors. The mark acceleration of the rate of change within the firms The accelerated application of science and technology to the process of management.

17. 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. By historical account of some authors in management science. Strategic management is essentially perceived as business policy going out of the shell realizing that operationalization of business organizational is not only a concern of how the organizational should operate, and hence the need of internal policies , but also how the business organization itself should conduct its business in light of prevailing external and environmental realities.

18. In recent years, and given the above premise, business policy has metamorphosed from being inward-looking into outward – looking evolving into what is now known as strategic management. As a tool for managing the business organizations, business policy has expanded its role to include external factors as influencing factors in developing business policies eventually transforming into strategic management.

19. THE NATURE OF STRATEGIC MANAGEMENT More importantly, integrating the concept of strategy into the mainstream of the management system is what matters most in terms of giving direction that promises delivering profit expectations. Much more than simply applying planning principles. Strategic management takes into consideration various external as well as competitiveness and sustainability over the long term period in industry or sector it belongs.

20. Nature of strategic management Stahl and Grigsby (1992) defined strategic management as referring to the entire process of strategic decision – making that relates to its environment, guides internal activities, and determines the long-term performance of the organization. Wheelen and Hunger (2004) described the strategic management as a set of managerial decisions and actions that determine the long-run performance of a corporation. It includes environmental scanning (both external and internal), strategy formulation ( strategic and long run planning) strategy implementation , evaluation and control. Williamson, Jenkins, et al. (2004) as a framework that evolves around the idea of shaping and destiny of an organization.

21. It is about: Putting an organization into a competitive position. Sustaining and improving that position by developing an acquisition of appropriate resources and by monitoring and responding to environmental changes Monitoring and responding to the demands of key stakeholders.

22. Organizational strategies must be able to answer the ff. questions Where is the organization going? What options are open to the organization? What is the best way forward for the organization? How can this be done?

23. Wright, Kroll and Parnell ( 1996) strategic management in a broader term that encompasses managing not only the stages or vantage points they have identified but also the earlier stages determining the mission and goals of an organization within the context of external and internal environment.

24. SM involves a series of steps in which management should accomplish the ff. task Analyze the opportunities and threats of constraints that exist in the external environment; Analyze the organization’s strengths and weaknesses in its internal environment. Establish the organization’s mission and develop goals; Formulate strategies ( at the corporate level, business unit level, and functional level) that will match the organization’s strength and weakness with the environment’s opportunities and threats. Implement strategies Engage in strategic control activities to ensure that the organization’s goals are attained.

25. Wright, Koll and Parnell emphasized the strategic management is a continuous process. Indeed it is considered a continuous and dynamic process in the sense that being externally –oriented and driven by macro and micro environmental conditions, managers have to be always conscious that business being an ongoing wealth creation endeavor, appropriate efforts have to be made to ensure profitable operations and survive in times of trouble.

26. Strategic Management involves a series of steps which top management should accomplish the following task: Analyze the opportunities and threats or constraints that exits in the external environment. Analyze the organization’s strengths and weaknesses in its internal environment Establish the organization’s mission and develop goals; Formulate strategies(at the corporation level, business unit level, and functional level) that will match the organization's strengths and weaknesses with the environment’s opportunities and threats; Implement the strategies Engage in strategic control activities to ensure that the organization’s goals are attained.

27. Wright, Kroll and Parnell emphasized that strategic management is a continuous process. Indeed it is considered a continuous and dynamic process in the sense that being externally- oriented and driven by macro and micro environmental conditions, managers have to be always conscious that business being an ongoing wealth creation endeavor, appropriate efforts have to be made to ensure profitable operations and survive in times of trouble.

28. BENEFITS OF STRATEGIC MANAGEMENT There no doubt that substantial benefits can be expected from the practice of strategic management. As it promises and articulates a series of activities or tasks meant to ensure achievement or desired outcomes both on the producers and consumers’ side, embracing the ideals of strategic management and doing it well does not only stand to benefits business owners but the industry and the society.

29. The three most highly rated benefits of strategic management: Clearer sense of strategic vision for the firm Shaper focus on what is strategically important Improved understanding of a rapidly changing environment

30. STRATEGIC TYPES Is the category of firms based on common strategic orientation and combination of structure, culture, and process consistent with strategy.

31. General Strategic Orientation into four types as follows: Defenders Prospectors Analyzers Reactors

32. DEFENDERS This type includes companies with a limited product line that focus on improving the efficiency of their existing operations. This cost orientation makes them unlikely to innovate in a new area.

33. PROSPECTORS This type of companies includes firms with fairly broad product lines that focus on product innovation and market opportunities. The sales orientation makes them somewhat inefficient. They tend to emphasize creativity over efficiency.

34. ANALYZERS This types includes business organizations that operate in at least two different product-market areas, one stable and one variable. In the stable areas, efficiency is emphasized. In the variable areas innovation is emphasized.

35. REACTORS This type includes companies that lack a consistent strategy-structure-culture relationship. Their (often ineffective) responses to environmental pressures tend to be piecemeal strategic changes.

36. STRATEGIC vs. TACTICS STRATEGY – as common terminologies often mentioned in the world of strategic management TACTICS – its role in concretizing the intents and purposes of business policy and strategic management is equally important. Tactics are more operational and done in context with or as support activity or operation to achieve a strategy.

37. Strategy and tactics are differentiated in many ways as follows: As to level of conduct, strategy is developed at the highest levels of management whereas tactics are employed at related to lower levels of management. As to regularity, formulation of strategy is both continuous and irregular whereas tactics are determined on a periodic cycle with fixed time schedule( e.g. budget) As to subjective values, strategic decision- making is more heavily weighed with subjective values of managers than is tactical decision-making

38. Strategic vs. tactics ( Cont’s ) As to range of alternative, the total possible range of alternatives form which management must choose is far greater in strategic than in tactical decision-making. 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. In terms of nature of problems, strategic problems are generally unstructured and tent to be one of a kind. Tactical problems are more structured and often repetitive in nature.

39. Strategic vs. tactics ( Cont.'s ) As to information needs, formulating strategy requires large amount of information. Tactical information needs a contrast rely more heavily on internally generated data ( e.g. Accounting system,) In terms of horizon, strategies are intended to, and do last for long periods of time whereas tactics cover a short duration and are more uniform for all parts of operating program( e.g. annual budget). By reference is primal in the sense that it is the source of origin for development of tactics. Tactics are formulated within and in pursuit of strategies.

40. Strategic vs. tactics ( Cont.'s ) As to details, strategies are usually broad and may have fewer details than tactics. In terms of the type of personnel involved, strategies are for the most part formulated by top management, and the staff, fewer in he number as contrasted with the formulation of the tactics where large number of managers and employees usually participate in process. As to ease of evaluation, it is usually considerably easier to measure the effectiveness and efficiency of tactics than strategies.

41. Strategic vs. tactics ( Cont.'s ) From the contest point of view, strategies are formulated from corporate viewpoint, whereas tactics are developed principally from a functional point of view. As to importance, strategies are of the highest importance to an organization, while tactics are considerably less significant.

42. 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 the a well planed manner on the basis of certain presumptions or sets of biases.

43. The following are the bases from which policies and strategies are drawn upon: Legal mandate Vision and mission statement Specific objectives Programs and policies

44. Legal mandate This refers to formulating policies on the basis of the provisions of the charter or legal basis for certain or existence of the business organization including the applicable provisions of laws and policies or pronouncement of the government and its statutory or regulation bodies.

45. Vision and Mission Statement This refers to the leadership bias as well as sense of direction and mission for which the organization was conceived or established.

46. Specific objectives These are the corporate objectives purposely developed for the organization and for its members or employees at large to pursue.

47. Programs and policies These are specific programs and policies set forth by the organization’s policymakers( i.e. Board of directors and Top management) in pursuit of short and long term goals given certain considerations at hand.

48. Approaches to identifying Policies and Strategies Policy/ Strategy Profile – This approach involves a systematic examination of present company policy/strategy – implicit and explicit. Gap analysis – The stimulus is an examination of whether an end that has been established is likely to achieved. Competitive strategy analysis – This involves a thorough analysis of the competitive forces operating in a firm’s environment and searching for an alternative option.

49. Richard Whittington ( 2001) theorized that strategy comes in four generic approaches that differ fundamentally along two dimensions: the outcomes of the strategy and the process by which it is made.

50. Figure 1. Generic Perspective of Strategy

51. Four approaches are briefly described as follows: Classical approach Evolutionary Processual Systematic

52. Classical Approach The oldest of the four approaches and still the most influential, it relies on the rational planning methods dominant in the textbooks. As such, this approach follows a pattern of analyzing, planning and commanding or directing.

53. EVOLUTIONARY It draws on the fatalistic metaphor of biological evolution but substitutes the discipline of the market for the law of the jungle. This approach is conscious on keeping cost or expenses low with open options.

54. PROCESSUAL It emphasizes the sticky imperfect nature of all human life, pragmatically accommodating strategy to the fallible processes of both organizations and markets.

55. SYSTEMATIC This approach is relativistic, regarding the ends and means of strategy and inescapably linked to the cultures and powers of the local social system in which it takes place.

56. Developing Policy strategy 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 . Bottom 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. Top bottom approach - Policy and strategy and initiatives are taken by the top management then filtered down to lower – ranked personnel for consultations then returned back to the top management for refinements.

57. STRATEGIC DECESION The strategic management, it is not just simply making decision but it is important to exercise strategic decision or something like hard and unusual decision that need to be done for certain strategic considerations. Unlike the usual or many other decisions business managers do on a daily or routine basis, strategic decisions usually take into account a lot of external factors and deal with the long-run future of the entire organization.

58. What it takes for a decision to be considered strategic is described by Wheelen and Hunger Rare- Strategic decisions are unusual and typically have no precedent to follow. Consequential – strategic decisions should commit substantial resources and demand a great deal or commitment from people at all levels Directive – strategic decisions set precedents for lesser decisions and future actions throughout the organization.

59. MODALITIES IN STRATEGIC DECISION Decision-making function is a daily or routine aspect of a managerial function. Doing strategic decision, however is not a simple and considered ordinary or routine task compared to strategic decision.