a.

Vision

b. Mission

1. Establishment of Intent c. Business Definition

d. Business Model

e. Goals and Objectives

External environment

a. Environmental Analysis
Internal environment or
Org appraisal
b. Corporate level strategy
Strategic Management

2. Formulating a Strategy c. Business level strategy

d. Strategic analysis and

choice

e. Preparing strategic plan

a. Activating strategies

b. Structural
implementation
3. Implementing the
strategy
c. Behavioral
implementation

d. Functional and
operational
implementation

a. Strategic evaluation

4. Evaluating the strategy b. Strategic control

c. Reformulating strategies
 UNIT I

What is a Business Policy?

A business policy is a set of guidelines that an organization has for governing the actions of its
management and employees. It enables the organization to make choices and decisions based on
their environment.
It is the study of
 function and responsibilities of senior management
 crucial problems that an enterprise should overcome to be successful
 decisions that determine the direction of the organization
Nature of Business Policy
Business policy basically deals with decisions regarding the future of an ongoing enterprise.
Such policy decisions are taken at the top level after carefully evaluating the organizational
strengths and weaknesses in terms of product price, quality, leadership position, resources etc., in
relation to its environment. Once established, the policy decisions shape the future of a company,
channel the available resources along desired lines and direct the energies of people working at
various levels towards predetermined goals.
There are many types of policies – marketing policies, financial policies, production policies,
personnel policies to name a few in every organization. Within each of these areas more specific
policies are developed. For example, personnel policies may cover recruitment, training,
promotion and retirement policies. Viewed from a systems angle, policies form a hierarchy of
guides to managerial thinking. At the top of level policy statements are broad. The management
is responsible for developing and approving major comprehensive company policies. Middle
managers usually establish less critical policies relating to the operation of their sub units.
Policies tend to be more specific at lower levels. The manager’s job is to ensure the consonance
of these policies, each must contribute to the objectives of the firms and there should be no
conflict between sub system policies.
Scope and characteristics of Business Policy
Every business has a way in which it operates and does things. Businesses and company leaders
without clear business policies often have subordinates making decisions that don't mesh with
what leadership really wants to see. Clear, concise and written business policy plans help any
business maintain consistency in operations and relieve leadership from the need to
micromanage. When business policies are created and used, there is a standardization of how the
company delivers products or services to consumers.
Some important features or parameters of a good business policy are:

 Specific: If a policy is not specific, implementation becomes inconsistent and unreliable.

For example, "Employees may not park in the guest parking lot."
  Clear: A business policy has no ambiguity. It is written in easy-to-understand language.
For example, "Immediate release of employment is the result of company drivers having
two points on their driving record."
 Uniform: The policy should be a standard that everyone can follow from the top
management to the plant workers. For example, "Anyone entering the construction site
must have a protective hat, shoes and glasses on at all times."
 Appropriate: Business policies should be relevant to organizational goals and needs. For
example, "Discrimination and sexual harassment accusations are investigated with
disciplinary action applicable based on investigation findings."
 Simple: Policy must be understood by all that it applies to within the business. For
example, "No smoking within 100 feet of welding operations designated by the painted
yellow floor lines."
 Inclusive: A business policy isn't something relevant to a small group in the business, it
must cover the wide scope and include everyone. For example, "Business attire is required
at all times in the office or meeting with clients."
 Stable: This refers to implementation. If an incident arises, the policy should be stable such
that there is no indecisiveness about following it. For example, "Cell phones are not
permitted in the conference room."

Important functions of business policies

1. Objectives of the company are defined and classified: They provide workers with knowledge
about what is expected of them, e.g. behaviour and performance standards

2. The planning function is done systematically: They provide rules and guidelines for decision-
making in routine situations

3. A clear framework for the delegation of decision-making is provided: Business policy clearly
states the amount of authority that the subordinates have. It also specifies the limits of the
authority of the subordinates. Thus it tightens the authority on one hand and provides initiatives
to the subordinates.

4. Subordinates can use the policy directives intelligently and carefully: It also helps the
managerial personnel to perform the functions of control and coordination successfully by
providing a consistent and clear response across the company in dealing with situations.

5. Policy acts as the main foundation for evaluation and determining the quality of action and
decisions taken by executives. They provide an accepted method of dealing with complaints and
misunderstandings to help avoid claims of bias and favouritism.

Evolution of Business Policy

Business policy as a distinct field of study was introduced at Harvard Business School in 1911.
The course aimed at improving the general management capabilities of management students. It
was intended to tie together and give proper focus to the functions of business both internally and
 between businesses, and show how they were closely interrelated in practice to enable a chief
executive to recognize and deal with those relationships.
The paradigm shifts that occurred in evolution of Business Policies are:

First Phase: Paradigm of Adhoc Policy (till mid 1930s): Adhoc policy making necessitated by
the expansion of American firms in terms of product markets and customers and the consequent
need to replace informal controls and coordination by farming functional policies to guide
managers.

Second Phase: Paradigm of planned Policy (1930s – 1940s): Replacement of adhoc policy
making by planned policy formulation and shifting attention towards integration of functional
areas, in line with environmental requirements.

Third Phase: Strategy Paradigm ( 1960s): Rapid force of environmental changes and increasing
complexity of managerial functions demanding a critical look at the concept of business in
relation to its environment hence the need for strategic decisions.

Fourth Phase: Paradigm of Strategic Management (1980s): shifting of focus to the strategic
management process and the responsibility of general management in resolving strategic issues.

What is Strategy?
It is a method or plan of action chosen to bring about a desired future; designed to achieve a
certain goal or to determine the solution to a problem.
Strategy is an action that managers take to attain one or more of the organization's goals.
Why do we need strategy?
It is useful in long term decision making for organizations. It brings focus towards the goal and
enables the organization as a whole to move towards the same direction, to achieve a common
objective. It ensures that all efforts are made in the same direction.
Advantages/Benefits of having a Business Strategy
 It allows organizations to be proactive rather than reactive
 It sets up a sense of direction
 It increases operational efficiency
 It helps to increase market share and profitability
 It can make a business more durable

What is Strategic Management?

The branch of management that deals with the process of making strategies, implementing and
monitoring them and enabling the organization’s management to make long term plans and
decisions for the organization. It helps the organization to move towards its common objectives.
Strategic management process is a method by which managers conceive of and implement a
strategy that can lead to a sustainable competitive advantage.
Difference between Policy and Strategy

STRATEGY POLICY

Strategy is a comprehensive plan, made to Policy is the guiding principle that helps the
accomplish the organizational goals. organization to take logical decisions.

Plans on what needs to be done Principles on how work must be done

Flexible – may change based on evaluation Fixed, but they allow exceptional situations

Represents Action Represents Decision

Top Level Management and Middle Level Top Level Management

Management

Long Range Planning

A long-range plan is a set of goals (usually five to ten) that outlines the path for the company's
future. When the long-range plan is in place, a strategic plan should be developed to define the
objectives and actions necessary to achieve the goals spelled out in the long-range plan.
Long-range business planning helps business leaders to think differently about the company's
direction. It also provides motivation and insight into the type of performance necessary to meet
business goals. The strategies devised under Long Range Planning are always in sync with the
long term vision of the organization, and focus on goals and objectives for the next 5 years to a
decade.

A long-range plan should provide guidance for all areas of activity in the company:

 Approaches to Market — They are specific statements that summarize how the company
plans to accomplish its mission. In other words, what is your company's unique way of
reaching the market?
 Marketing Message and Direction — Is the proper market being reached with the proper
message in an appropriate frequency? What is the new message? What direction are you
heading with your marketing?
  Measurable Sales Goals — They should be based on the assessment of existing markets.
How much are we selling now, how much do we want to sell in the future? Examples of
what can be measured: increased unit volume, increased profits or increased sales leads.
 Measurable Operational Goals — Set specific goals such as zero invoice errors, zero
delivery errors or more production per shift.
 Measurable Feedback Improvements — Identify ways to improve customer satisfaction
and then measure progress. Tracking increases in customer-service ratings obtained via
surveys is one possibility.

Strategic management activities enable companies to sustain their operations over the long term.
Companies can maintain a competitive edge by taking innovative approaches that solve complex
business problems. Once the strategy gets set by a company’s executive leadership, each lower-
level manager conducts long-term planning activities to set priorities, align resources, focus
attention on common goals, and ensure that the company delivers on promises to sponsors and
stakeholders.

Levels of Strategy
There are three levels at which strategies are devised:
1. Corporate – It is a plan of action covering various common functions performed by
different SBUs. It deals with objectives that are applicable to the entire organization as a
whole, including co-ordination of different SBUs within the organization. It is generally
carried out at the top level management.

2. Strategic Business Unit (SBU) – It is a plan of action covering various common

functions pertaining only to that SBU. The strategies at this level deal with objectives of
that SBU and co-ordination of all functions within it. It does not have a direct impact on
other SBUs. It is generally made and carried out by that SBU’s senior management.

3. Functional – It is relatively restricted to specific functions within an SBU like

Production or Quality or HR. It enables optimal operations at functional level so that
SBU and Corporate level strategies are successful. This is generally made by middle level
management taking care of that function within an SBU.

Strategic Management Process – Its components or steps:

1. Establishment of Intent (also called initial assessment)
2. Formulation of strategy
3. Implemention of strategy
4. Strategy monitoring - Evaluation and control
 I. Establishment of Intent
It involves the identification of the following:
1. Vision
2. Mission
3. Business Definition
4. Business Model
5. Goals and Objectives

The vision statement and mission statement define the business and its customer base. They
serve as the foundation for the company's approach to the market and keep it on track with
adjustments as changes occur. The process of creating these statements begins with self-analysis
by the owner to define his or her vision for the company.
VISION
What is a Vision?
It is a statement that articulates the position that an organization would like to achieve in the
distant future, encapsulating the strategic intent of the organization. It is a forward looking view
of what the organization wants to become.
The vision statement should be an audacious dream of a future reality based on the work done by
the organization. It should be bursting at the seams with possibility. It’s where “begin with the
end in mind” becomes real. It’s the heart and DNA of the organization. A vision should be so big
that it feels nearly impossible. It should require people to dream.
The vision statement gives the company direction. It is the future of the business, which then
provides the purpose. The vision statement is about what you want to become. It is aspirational
and inspirational.

Vision statement questions look like:

 What are our hopes and dreams?
 What problem are we solving for the greater good?
 Who and what are we inspiring to change?

The vision statement promotes growth, both internally and externally. A strong vision helps
teams focus on what matters the most for their company. It also invites innovation. A purpose-
driven company envisions success as a whole, because they know what success means for their
company.

Characteristics of a vision
i. It may be vague
ii. It represents the distant future of the organization
iii. It is derived from the core value system of the visionary
iv. It is driven by passion and aspirations, thus works as a motivating factor

Benefits of having a vision

i. Enable long term thinking
ii. Inspire to move forward
iii. Represent the future state of the organization, thus giving clarity on where it needs to be
iv. Provides a shared sense of purpose to employees
v. They foster risk taking and experimentation
 MISSION
What is a Mission?
It is a concept that represents the purpose of existence of an organization. It is a generic
representation of how the organization is satisfying the needs of a part of the society.
A well-crafted mission statement answers what you do, who benefits from this and how you do
it. Depending on the particular organizational structure, the mission statement of a company can
be broken down into its different divisions. All in all, the purpose is to help the people in the
organization to stay focused on the activities of today that realize the dreams of tomorrow.

A mission statement defines a company’s goals in three important ways:

 It defines what the company does for its customers
 It defines what the company does for its employees
 It defines what the company does for its owners
Some of the best mission statements also extend themselves to include fourth and fifth
dimensions: what the company does for its community, and for the world.

Characteristics of a mission statement

i. It should be feasible, realistic and achievable
ii. It should be precise, neither too broad nor too narrow
iii. It should not be vague, and provide clarity on the actions required to be taken
iv. It should motivate the employees to work for the organization
v. It should be distinctive - set the organization apart from the crowd
vi. It should provide a high-level view of the major components of the strategy to be adopted

Benefits of having a mission statement

i. Direction: It provides direction to the organization providing specific next steps.
ii. Unification: It allows for unification of purpose, allowing all members of the
organization at various levels and in multiple departments to move together for one
common objective or direction. With an explicit mission statement, all workers
understand how their roles fit into the larger picture.
iii. Staying True to Roots: a strong mission statement helps guide the company through
major growth without losing focus and keeping in line with its goals and developing,
rather than harming, its brand.
iv. Accountability: Creating and referring to the mission statement helps business owners
hold themselves and their employees accountable vis-à-vis what they set out to
accomplish.
Difference between vision and mission
Vision Mission
The tomorrow of company The today of company
Distant future picture Current purpose of existence
May be vague Clear and concise
Remains same in the long run May change over a period of time as the organization
evolves

Vision = Someday
Mission = Every Day

Few examples:
Company: Tesla
Mission: To accelerate the world’s transition to sustainable energy.
Vision: To create the most compelling car company of the 21st century by driving the world’s
transition to electric vehicles.
Why it works: What better word than “accelerate” in a mission to serve as the driving force
behind what Tesla does. While boldly stating “best in the century” reflects loftier dreams in the
vision.

Company: AirBnB
Mission: Belong anywhere.
Vision: Tapping into the universal human yearning to belong—the desire to feel welcomed,
respected, and appreciated for who you are, no matter where you might be.
Why it works: In just two words, the Airbnb mission says “we help you feel at home.” They
explore a deeper sense of belonging in the vision, tapping into the universal human desire their
company aims for.

Company: Toyota USA

Mission: To attract and attain customers with high-valued products and services and the most
satisfying ownership experience in America.
Vision: To be the most successful and respected car company in America.
Why it works: Toyota’s mission demonstrates what they are known for: products and service.
Even in a highly competitive industry, their vision states that they will become the best car
company in the country.

Company: Amazon
Mission: We strive to offer our customers the lowest possible prices, the best available selection,
and the utmost convenience.
Vision: To be Earth’s most customer-centric company, where customers can find and discover
anything they might want to buy online.
Why it works: Amazon’s mission is cut-and-dry about what they offer to customers. The vision
takes the offerings farther, saying their company will offer “anything” customers want.

Company: TED
Mission: Spread ideas.
Vision: We believe passionately in the power of ideas to change attitudes, lives and, ultimately,
the world.
Why it works: The TED mission to “spread ideas” is a simple demonstration of how they serve.
The vision is all about impact, how spreading ideas invokes change in the world.

Company: LinkedIn
Mission: To connect the world’s professionals to make them more productive and successful.
Vision: To create economic opportunity for every member of the global workforce.
Why it works: LinkedIn succinctly captures what they do (connect) and who they serve (the
world’s professionals) in their mission. While the vision encompasses every working person in
the world.

Company: Google
Mission: To organize the world’s information and make it universally accessible and useful.
Vision: To provide access to the world’s information in one click.
Why it works: Google may seem complex, but its mission clarifies that organization and
accessibility are what they offer. Their vision statement is about improving accessibility in the
future “in one click.”

BUSINESS DEFINITION
Business definition is that part of strategic planning where the organizations describe
 What we serve (Customer function identification – what needs of the customer do we
satisfy)
 Who we serve (Customer group identification – which type of customers do we target)
 How we serve (Alternative Technologies – manner in which a function is performed for a
customer, how the need is being satisfied)
What we serve deals with needs of the customer. A business earns its revenue from providing
customer satisfaction (and aiming for customer delight) through its product and service offerings.
Who we serve refers to the target customer groups. These groups could be based on demographic
characteristics like age, gender, income, occupation etc or geographic segmentation like rural
and urban or lifestyle (traditional vs. modern).
The how of business definition refers to alternative technologies used to provide the product or
service which satiates a perceived need of the customer. It includes not just the technical
knowledge but also the skill set and business competencies which act as the enablers for
organization to provide value to its customers.
These three dimensions together define the business that an organization is into. A business
definition may be done at a high level, as Corporate Business definition, as well as a more
detailed and precise business definition at SBU level. Business definition at corporate and SBU
level may vary depending upon the diversity of business lines that the organization operates in.
(If the organization is into different types of businesses, corporate business definition would be
generic while SBU level definitions will each be based on their particular line of business.)

BUSINESS MODEL
In simple terms, a Business model defines how the organization is doing its business to create
value for its customers.
A business model captures the fundamental assumptions and any key learnings about a new
venture. For example, it might enumerate the company’s core value proposition, targeting
customers, key resources, and assumed revenue streams.
It answers the HOW part of the planning process. It is a specification describing how an
organization fulfils its purpose.
This step is closely linked to strategic planning process since it encompasses various strategic
decisions on how the organization decides to operate.
Why is a business model important?
A business model is important because it captures where the business is headed and how it will
get there. It is the DNA of the company’s strategy and it sets the direction for success.
The process of planning and articulating a business model gives company leaders a clearer
picture of how they will realize their vision. At the same time, sharing it with others in the
organization encourages alignment, consensus building, and buy-in. A solid business model
keeps product and company builders accountable for what they are working on and the time and
resources they consume.
Building a business model also encourage leaders to think from the outside in. This means
gaining insight into what matters to customers and how to best deliver real value to them.
A detailed list of components that are found in most business models:
 Problem: the target customers’ pain points
 Solution: how the company intends to meet the customers’ needs (aka the product)
 Key Resources: physical, intellectual, human, and financial assets at the company
 Customer Segments: who are the target customers
 Unique Value Proposition: why the customer is willing to buy the solution
 Competitive Landscape: what alternatives can customers use
 Competitive Advantage: characteristics not easily copied or bought elsewhere
 Sales Channels: how the company will reach customers
 Revenue Streams: how the company generates income
 Revenue Model: framework for how the company will be profitable
 Key Partners: partners and suppliers essential to the business
 Cost Structure: what are the company’s costs and how should that affect pricing
 Key Metrics: how the company measures success
 GOALS AND OBJECTIVES
Goals denote what an organization hopes to accomplish in the near future. Objectives are the
means that state how the goals shall be achieved. The terms both reflect short term goals that
allow the company to move one step at a time towards their long term strategies.

Both terms imply the target that one's efforts is desired to accomplish. Goals are generically
for an achievement or accomplishment for which certain efforts are put. Objectives are
specific targets within the general goal. Objectives are time-related to achieve a certain task.
A goal is defined as

1. The purpose toward which an endeavour is directed.

2. The result or achievement toward which effort is directed or aimed.

An objective has a similar definition but is supposed to be a clear and measurable target.
Objectives define strategies or implementation steps to attain the identified goals.
Unlike goals, objectives are specific, measurable, and have a defined completion date. They are
more specific and outline the “who, what, when, where, and how” of reaching the goals.
Goals can be qualitative in nature, but objectives are quantifiable.
Characteristics of Objectives
Objectives should be S.M.A.R.T.

SMART goals/objectives are:

 Specific: Well defined, clear, and unambiguous
 Measurable: With specific criteria that measure your progress towards the
accomplishment of the goal
 Achievable: Attainable and not impossible to achieve
 Relevant: Relevant and relatable to your long term mission and vision
  Timely: With a clearly defined timeline, including a starting date and a target date. The
purpose is to create urgency.

Example: Broad Goal: I Want to Grow My Business

Making the above goal SMART:-

 Specific: I will acquire new clients for my consulting business.

 Measurable: I will measure my progress by how many new clients I bring on while
maintaining my current client base – current target is to get three new clients.
 Attainable: I will ask current clients for referrals, launch a social media marketing
campaign and network with local businesses.
 Relevant: Adding additional clients to my business will allow me to grow my business
and increase my revenue.
 Time-Based: I will have three new clients within two months.

HOW TO MAKE ACCURATE GOALS AND OBJECTIVES

There are many tools available in the business world that allow and enable organizations to build
their business definition, business model and goals and objectives in a structured manner.
One such tool is the Balanced Scorecard.

BALANCED SCORECARD

The Balanced Scorecard is a management system. It’s a way of looking at your organization that
focuses on your big-picture strategic goals. It also helps you choose the right things to measure
so that you can reach those goals.

Balanced Scorecard approach is often used in identifying the objectives in an organization. This
is because it provides a comprehensive view of the organization so that the objectives are
relevant to all aspects of the organization (Financial, Customer, Learning and development,
internal processes) and not just focus on one or two dimensions. This allows for the goals and
objectives of the organization to be holistic in nature, covering the entire spectrum of the
company’s operations.

Traditionally, companies have judged their health by how much money they make. Financial
measures are definitely important, but they only give you part of the picture. They focus on the
short-term, and you’re trying to build an organization to stand the test of time. The name
“balanced scorecard” comes from the idea of looking at strategic measures in addition to
traditional financial measures to get a more “balanced” view of performance.
Perspective 1: Learning and Growth
The learning and growth perspective looks at the overall corporate culture of the organization.
Are people aware of the latest industry trends? Is it easy for employees to collaborate and share
knowledge, or is the company a mess of tangled bureaucracy? Does everyone have access to
training and continuing education opportunities?
Technology plays a major role in learning and growth. Are people able to use the latest devices
and software? What is the top management doing to make sure that the organization is staying
ahead of your competition?

Perspective 2: Customer
The customer perspective focuses on the people who actually buy products and services from
this organization. Is new business coming for the company and existing customers happy? Where
does the organization stand in the market compared to its competitors?
Customer satisfaction is a great forward-looking indicator of success. The way its customers are
treated today directly impacts how much money the firm will make tomorrow.

Perspective 3: Financial
Taking a balanced look at the organization doesn’t mean that traditional financial measures can
be ignored. The financial perspective is a major focus of the balanced scorecard.
How much money is the company making? Are the shareholders happy? The financial health of
an organization may be a lagging indicator showing the result of past decisions, but it’s still
critically important. Money keeps companies alive, and the financial perspective focuses solely
on that.

Perspective 4: Internal Business Processes

The internal business processes perspective looks at how smoothly a firm’s business is running.
Efficiency is important here. It’s all about reducing waste, speeding things up, and doing more
with less. Are there unneeded obstacles standing between new ideas and execution? How quickly
can one adapt to changing business conditions?

Examples of important goals and objectives for an organization as per the balanced scorecard: