BABA FARID INSTITUTE OF TECHNOLOGYDehradun

ASSIGNMENT ON BUSINESS POLICY AND STRAREGY MANAGEMENT

TOPIC : STRATEGIC PLANNING AND PROCESS

PROJECT GUIDE BY : SUBMITTED BY : SUMIT KUMAR DUTTA BBA Vth SEM

STRATEGIC PLANNING AND PROCESS

Strategic Management - is the process through which organizations analyze and learn from their internal and external environments, establish strategic directions, create strategies, all in an effort to satisfy key organizational constituencies, which are called STAKEHOLDERS.

A simple model of the strategic management process is illustrated below. The model simply represents a useful sequence in which to discuss the central topics of strategic management. For example, while the activities may occur in the order specified in the model, especially if a firm is engaging in a formal strategic planning program, they may also be carried out in some other order or simultaneously.

 EXTERNAL AND INTERNAL ANALYSIS

External environment analysis, involves evaluation of the broad and task environments to determine trends, threats, and opportunities and to provide a foundation for strategic direction. The broad environment consists of domestics and global environmental forces such as socio-cultural, technological, political, and economic trends. The task environment consists of external stakeholders. External stakeholders are groups or individual outside the organization that are significantly influenced by or have a major impact on the organization.

Internal stakeholders, which include managers, employees, and the owners and their representatives (e.g., board of directors), also have a stake in the outcomes of the organizations. A fully developed internal analysis also includes a broader evaluation of all the organization’s resources and capabilities to determine strengths, weaknesses, and opportunities for competitive advantage, and to identify organizational vulnerabilities that should be corrected.

External environment analysis, involves evaluation of the broad and task environments to determine trends, threats, and opportunities and to provide a foundation for strategic direction. The broad environment consists of domestics and global environmental forces such as socio-cultural, technological, political, and economic trends. Factors to be considered for each of the forces are as follows. Political:

Political stability Risk of military invasion

Trade regulations & tariffs

Anti-trust laws

Pricing regulations

Taxation - tax rates and incentives

Wage legislation - minimum wage and overtime

Work week

Mandatory employee benefits

Industrial safety regulations

Product labeling requirements

 Economic:

Type of economic system in countries of operation Exchange rates & stability of host country currency

Efficiency of financial markets

Skill level of workforce

Labor costs

Business cycle stage (e.g. prosperity, recession, recovery)

Economic growth rate

Unemployment rate

Inflation rate

Interest rates

Social:

Demographics Class structure

Education

Culture (gender roles, etc.)

Entrepreneurial spirit

Attitudes (health, environmental consciousness, etc.)

Leisure interests

Recent technological developments

Technological: Technology's impact on product offering Impact on cost structure

Rate of technological diffusion

 The task environment consists of external stakeholders. External stakeholders are groups or individual outside the organization that are significantly influenced by or have a major impact on the organization. Examples of external stakeholders are the following:

Suppliers Customers

Competitors

Government agencies and administrators

Local communities

Financial intermediaries

Unions

People who make up the internal part of the organization are called internal stakeholders which include managers, employees, and the owners and their representatives (e.g. board of directors)                                         The internal analysis is a comprehensive evaluation of the internal environment's potential strengths and weaknesses. Factors should be evaluated across the organization in areas such as:

Company image and culture Organizational structure

Access to natural resources

Operational efficiency and capacity

Brand awareness

Market share

Financial resources

Strategic Direction 

Pertains to the longer-term goals and objectives of the organization. At more fundamental level, strategic direction defines the purposes for which an organization exists and operates. This direction is often contained in a mission statement. Unlike short-term goals strategies, the mission is an enduring part of planning processes within the organization.

MissionA company's mission is its reason for being. The mission often is expressed in the form of a mission statement, which conveys a sense of purpose to employees and projects a company image to customers. In the strategy formulation process, the mission statement sets the mood of where the company should go.VisionDefines the desired or intended future state of an organization or enterprise in terms of its fundamental objective. Vision is a long term view, sometimes describing how the organization would like the world in which it operates to be.

GoalsGoals are desired states of affairs or preferred results that organizations attempt to realize and achieve.

ObjectivesObjectives are concrete goals that the organization seeks to reach, for example, an earnings growth target. The objectives should be challenging but achievable. They also should be measurable so that the company can monitor its progress and make corrections as neededA well established strategic direction provides guidance to the managers and employees who are largely responsible for carrying our as well as a greater understanding of the organization for the external stakeholders with whom the organization interacts Business and Corporate Strategy Formulation  A strategy is an organizational plan of action that is intended to move an organization toward the achievement of its shorter-term goals and ultimately, toward the achievement of its fundamental purposes. Strategy formulation is often divided into three types-corporate, businesses, and functional.

STRATEGY FORMULATION IN A MULTIBUSINESS ORGANIZATION Business strategy formulation pertains to domain direction and navigation, or

how business competes in the areas they have selected. Corporate strategy formulation refers primarily to domain definition, or selection

of business areas in which the organization will compete. Functional strategy formulation contains the details of how the functional areas

such as marketing, operations, finance, and research should work together to achieve the business-level strategy.

STRATEGY IMPLEMENTATION AND CONTROL

Strategy formulation results in a plan for the organization and its various levels. On the other hand, strategy implementation represents a pattern of decisions and actions that are intended to carry out plan.

Involves creating the functional strategies, systems, structures, and process needed by the organization in achieving strategic ends.

Strategic Control refers to the process that leads to adjustments in strategic direction, strategies, or the implementation plan when necessary.

They may determine that the organizational mission is no longer appropriate or that the organizational strategies are not leading to the desired outcome.

  THE IMPORTANCE OF STRATEGIC CONTROL

Henry Mintzberg, one of the foremost theorists in the area of strategic management, tells us that no matter how well the organization plans its strategy, a different strategy may emerge.

Starting with the intended or planned strategies, he related the three types of strategies in the following manner:

Intended strategies that get realized; these may be called deliberate strategies.

Intended strategies that do get realized; these may be called unrealized strategies.

Realized strategies that were never intended; these may be called emergent strategies.

Strategic Restructuring – in the life of every organization, growth will slow and some stakeholders will began to feel dissatisfied.

Restructuring – involves a renewed emphasis on the things an organization does well, combined with variety of tactics to revitalize the organization and strengthen its competitive position. ALTERNATIVE PERSPECTIVES ON STRATEGY DEVELOPMENT

Determinism versus Enactment – The traditional process for developing strategy consists of analyzing the internal and external environments of the organization to arrive at organizational strengths, weaknesses, opportunities, and threats (SWOT).Ideas and Theories Regarding the Strategic management Model

Situation Analysis - The traditional process for developing strategy, consisting of analyzing the internal and external environments of the organization to arrive of organizational strengths, weaknesses, opportunities,, and threats. The results form the basis for developing missions, goal, and strategies.

Environmental determinism – management’s task is to determine which strategy will best fit environmental, technical, and human forces of a particular point in time and then work to carry it out.

Principle of Enactment – Organizations do not have to submit to existing forces in the environment. They can, in part, create their environments through strategic alliances with stakeholders, advertising, political lobbying, and a variety of other activities.

Deliberate Strategy – Managers plan to pursue an intended strategic course. Strategy is deliberate.

Emergent Strategy – Strategy simply emerges from a stream of decisions. Managers learn as they go.

Stakeholder Management – The organization is viewed from the perspective of the internal and external constituencies that have a stake in the organization. Stakeholder analysis is used to guide the strategy process. Stakeholder management is central to the development of mutually beneficial relationships and alliances with external stakeholders.

Resource-based View – AN organization is a bundle of resources. The most important management function is to acquire and manage resources in such as way that the organization achieves sustainable competitive advantages leading to superior performance.

DELIBERATE VERSUS EMERGENT STRATEGY FORMULATION

Deliberate strategy implies that managers plan to pursue an intended strategies course. In some cases strategy simply emerges from a stream of decisions. Managers learn as they go.

Emergent strategy is one that was not planned or intended. According to this perspective, managers learn what will work through a process of trial and error.

STAKEHOLDER ANALYSIS AND MANAGEMENT The stakeholder view of strategic management considers the organization from

the perspective of the internal and external constituencies that have a strong interest in the organization.

Stakeholder analysis involves identifying and prioritizing key stakeholders, assessing their needs, collecting ideas from them, and integrating this knowledge into strategic management processes such as the establishment strategic direction and formulation and implementation plans.

Stakeholder management includes communicating, negotiating, contracting, and managing relationships with stakeholders, and motivating them to0 behave in ways that are beneficial to the organization and its other stakeholder.

 THE RESOURCE-BASED VIEW OF THE FIRM

is a business management tool used to determine the strategic resources available to a company.

sees companies as different collections of physical and intangible assets and capabilities, which determine how efficiently, how effectively a company performs its functional activities

Major concern in RBV is focused on the ability of the firm to maintain a combination of resources that cannot be possessed or built up in a similar manner by competitors. Further such writings provide us with the base to understand that the sustainability strength of competitive advantage depends on the ability of competitors to use identical or similar resources that make the same implications on a firm’s performance.

has its root in the work of the earliest strategic management theorists. According to this view, an organization is a bundle of resources, which fall into the general categories:

Financial resources, including all of the monetary resources from which a firm can draw

Physical resources, such as plant, equipment, location, and access to raw materials

Human resources, which pertains to the skills, background, and training of individuals within the firm

General organizational resources, which includes a variety of factors that are peculiar to specific organizations.

The key points of the theory are:1) Identify the firm’s potential key resources.

Resources include all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc; controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness.Resources are tradable and non-specific to the firm.Example: Patents and trademarks,Brand-name reputation,Installed base,Organizational culture,Workers With specific expertise or knowledge Capabilities are firm-specific and are used to engage the resources within the firm, such as implicit processes to transfer knowledge within the firm.

2) Evaluate whether these resources fulfill the following criteria (referred to asVRIN):

Valuable – A resource must enable a firm to employ a value-creating strategy, by either outperforming its competitors or reduce its own weaknesses.Rare- Resources and capabilities must be in short supply to create competitive advantage and go beyond competitive parity.In-imitable – If a valuable resource is controlled by only one firm it could be a source of a competitive advantage.Non-substitutable – Even if a resource is rare, potentially value-creating and imperfectly imitable, an equally important aspect is lack of substitutability. 

3) Care for and protect resources that possess these evaluations, because doing so can improve organizational performance. 

Resource-based perspective, Strengths are firm resources and capabilities that can lead to a competitive advantage. Weaknesses are resources and capabilities that the firm does not possess but are necessary, resulting in a competitive disadvantage. Opportunities are conditions and task environments that allow a firm to take advantage of organizational strengths, overcome organizational weaknesses, and/or neutralize environmental threats. Threats are conditions in the broad and task

environments that may stand in the way of organizational competitive or the achievement of stakeholder satisfaction.A competitive advantage can be attained if the current strategy is value-creating, and not currently being implemented by present or possible future competitors.Sustainable competitive advantage is an advantage that is difficult to initiate by competitors and thus leads to higher-that-average organizational performance over a long period of time.Threats to sustainability: Imitation or substitution Market entry

Powerful buyers and suppliers

Unpredictable changes in external environment

Factors beyond a firm's control (bad luck)

ETHICS AND SOCIAL RESPONSIBILITY

Ethics – are a personal value system that helps determine what is right or good. These values are typically associated with a system of beliefs that supports a particular moral code or view.Organizational ethics – are a value system that has been widely adopted by members of an organization.

Social responsibility contains four major components:1.      Economic responsibilities such as the obligation to be productive and profitable and meet the consumer needs of society2.      A legal responsibility to achieve economic goals within the confines of written law3.      Moral obligations to abide by unwritten codes, norms, and values implicitly derived from society4.      Discretionary responsibilities that are volitional or philanthropic in nature

 THE CASE FOR GOING GLOBAL

– Most successful organizations find that their domestic markets are becoming saturated or that foreign markets offer opportunities for growth and profitability that often are not available domestically.

FORCES FAVORING GLOBALIZATIONSaturated domestic marketProfitability of foreign marketsFalling trade barriers (i.e., EC 1992)

Newly industrialized countries (i.e., Korea, Taiwan, Spain) leading to increasing global competition and new market opportunitiesGrowing similarly of industrialized nationsShift toward market economies (i.e., East Germany)English becoming a universally spoken languageGlobalizations of capital marketsAvailability of lower-cost resources (i.e., labor) in some foreign countriesUniformity in technical standardsOpportunities to learn from foreign joint venture partners