Amity School of Business

Business Policy and

Strategic Management
 What is Strategy? Amity School of Business

• Two fundamental questions in any business:

– Where should we compete?
– How should we compete?
• Good and effective answers
– Successful strategies
– Outperforming competition over long run
• Bad answers
• Deploying inconsistent or ill-conceived strategies
• Destroying value

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 Purpose of Strategy
Amity School of Business

• To create a competitive advantage that

generates superior, sustainable financial
returns.
• Requires:
– Understanding of the business landscape,
– forces that shape competition,
– dynamics among players and the drivers of industry
evolution --- deciding where the firm chooses to engage
with competition.
– Choice of a position on this landscape --- shapes the
business model and the underlying set of activities that
sustain it.
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 What do we mean by Strategy?
Amity School of Business

• Strategy consists of choices.

– It is an integrated set of choices that positions the
business in its industry so as to generate superior
financial returns over the long run.
• The right set of choices is not easy or obvious
– Made amid uncertainty.
– Must be executed using finite resources.

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 What do we mean by Strategy?
Amity School of Business

• Strategy can fail-

– If firm chooses difficult place on landscape and is
not able to adapt to, change its environment.
– If choices are not fully integrated and so intended
business model and positioning do not fully align.
• Successful strategy requires consistency.
– With the realities of the external environment
– With internal activities
– With long term dynamics in the industry and the
organization
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 What do we mean by Strategy?
Amity School of Business

• A company’s strategy consists of the

competitive moves and business approaches
that managers are employing to grow the
business, attract and please customers,
compete successfully, conduct operations, and
achieve the targeted levels of organizational
performance.

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 How Strategy evolved?
Amity School of Business

• Derived from the Greek word, ‘strategos’,

referring to military command.
• In late 18th and early 19th century military
theorist Carl von Clausewitz distinguished
between tactics such as campaigns on the
battlefield and the discipline of strategy.
• Strategy demanded a broad perspective; tactics
were merely means to an end.

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 How Strategy evolved?
Amity School of Business

• Strategy had to focus on the object of the war

and give an aim to the whole military action.
• Strategy was the overarching plan-the “aim”,
to which specific campaigns and actions were
subordinated, and which had to accommodate
the uncertainties of external circumstances and
enemy actions.

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 The leading edge of strategy: fit or stretch
Amity School of Business

ASPECT OF ENVIRONMENT-LED RESOURCE-LED

STRATEGY ‘FIT’ ‘STRETCH’
Underlying basis of Strategic fit between Leverage of resources
strategy market opportunities to improve value for
and organization’s money
resources
Competitive ‘Correct’ positioning Differentiation based
advantage through… Differentiation directed on competences
by market need suited to or creating
market need
How small players Find and defend a Change the ‘rules of
survive… niche the game’
Risk-reduction Portfolio of Portfolio of
through… products/businesses competences
Corporate centre Strategies of business Core competences
invests in… units or subsidiaries 9
 Strategy and Competitive Advantage
Amity School of Business

• A company achieves sustainable competitive advantage when an attractive

number of buyers prefer its offerings over those of competitors and when
the basis of this preference is durable.
• Four of the most frequently used and dependable strategic approaches are:
– Striving to be industry’s low cost provider thereby aiming for a cost-
based competitive advantage over rivals.
– Outcompeting rivals based on differentiation.
– Focusing on a narrow market niche and wining a competitive edge by
being better than rivals.
– Developing expertise and resource strengths that give company the
capabilities that rivals cannot easily imitate.

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 Strategic Management
Amity School of Business

• Strategic Management is defined as the set of

decisions and actions that result in the
formulation and implementation of plan,
designed to achieve a company’s objectives.
• It includes-
– Environmental Scanning (both external and
internal)
– Strategy Formulation
– Strategy Implementation, and
– Evaluation and Control.
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 Dimensions of Strategic Decisions
Amity School of Business

• Strategic issues
– Require Top-Management decisions
– Require large amounts of Firm’s resources
– Affect the firms’ long – term prosperity
– Are future – oriented
– Have multi-functional or multi-business
consequences
– Require considering the firm’s external
environment

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 Benefits of Strategic Management
Amity School of Business

• Clearer sense of strategic vision for the firm

• Sharper focus on what is strategically important
• Improved understanding of rapidly changing
environment
• Behavioral effects –
– Enhances firm’s ability to prevent problems
– Group-based strategic decisions are drawn from best available
alternatives
– Involvement of employees improves their understanding of
productivity-reward relationship leading to better motivation
– Gaps and overlaps in activities are reduced
– Resistance to change is reduced

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 Challenges to Strategic Management
Amity School of Business

• Impact of Globalization
– The World is Flat
• Impact of Environmental Sustainability
– Regulatory risk
– Supply-chain risk
– Product and technology risk
– Litigation risk
– Reputational risk
– Physical risk
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 Linking Strategy and Strategic
Amity School of Business
Management
• Strategy is the direction and scope of an
organization over the long term, which
achieves advantage for the organization
through its configuration of resources within a
changing environment and to fulfill
stakeholder expectations.
• Strategic Management includes understanding
the strategic position of an organization,
strategic choices for the future and turning
strategy into action. 15
 Basic Model of Strategic Management
Amity School of Business

Environmental Strategy Strategy Evaluation and

Scanning Formulation Implementation Control

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 Amity School of Business

Model of Strategic Management Process

Company Mission and Social Responsibility

External Environment Possible? Internal Analysis

Remote / Industry / Operating Desired?
Feedback

Strategic Analysis and Choice

Feedback
Long Term Objectives Generic and grand strategies
Short-term objectives;
Functional tactics Policies that empower
reward system
action

Restructuring, reengineering, and refocusing the organization

Strategic control and continuous improvement

 Mintzberg’s Model of Strategy Development
Amity School of Business
Emergent and Deliberate Strategies

Deliberate Strategy

Planned Strategy Realized Strategy

Unpredicted
Change Unplanned
Shift by Top
Unrealized Emergent
Level
Strategy Strategy
Managers

Autonomous
Serendipity Action by Lower
Level by Managers
 Intended & Emergent Strategies
Amity School of Business

• A company’s realized strategy is the product

– Planned strategies that are actually put into action and
– Any unplanned strategies
• Many Planned strategies not implemented because of
unpredicted changes in the environment
• Emergent strategies are unplanned responses to unforeseen
circumstances
– Arise from:
• Autonomous action by individual managers,
• fateful discoveries,
• unplanned strategic shift by top level managers when environment changes

• Sometimes emergent strategies are more successful than the

planned ones
 A Company’s Strategy Making
Amity School of Business
Hierarchy
• Overall strategy
A collection of strategic initiatives and actions devised by the managers and
key employees up and down the whole organizational hierarchy
– Crafting a strategy involves answers to the following how’s:
• How to out compete rivals
• How to respond to changing market conditions
• How to develop needed competencies
• How to achieve strategic and financial objectives
– In a diversified multi-business companies strategy making involves
levels of strategy involving different facets of company’s overall
strategy
 Corporate Level Strategies
Amity School of Business

What business or businesses the firm should be in?

– Initiatives company use to establish in different businesses

 What business sectors to invest/enter?
 How should the resources be allocated?
– Approaches that are pursued to boost the combined performance
– Usually reviewed and approved by CEO &Board of Directors
– Long term Horizon

Example: GE is active in a wide range of businesses including lighting

equipment, major appliances, motor and transportation equipment,
turbine generators, construction and engineering services, industrial
electronics, medical systems, aerospace, aircraft engines and
financial services.
 Business Strategy
Amity School of Business

• What we sell to whom

• Competitive advantage
– Actions and approaches crafted to produce success in a specific line of
business
– Crafting response to changing environment
– Responsibility of Business Head
• Seeing that lower level strategies are well matched with overall business
strategy
• Getting major business level strategic moves approved by Corporate level
officers.
Bajaj electrical Ltd. – includes business of sugar, steel, two-wheelers, three
wheelers. Thus, SBU’s home appliances, fans lights, luminaries & eng. &
products
Functional – area Strategy & Operating
Strategies Amity School of Business

– Actions, approaches and practices employed to manage key activities

within a business
– Strategic initiatives for key operating units (plants, distribution centers,
geographic units)
– Specific operating activities with strategic significance (advertising
campaigns, supply chain related activities)
– Add detail and completeness to functional and overall business
strategies
 Concept of Strategic Intent
Amity School of Business

• Effective Strategic management begins with the organization clearly

articulating its vision for the future. The concept of Strategic intent,
popularized by Gary Hamel and C.K. Prahlad (1989), refers to the purpose
of the organization and the ends it wishes to pursue.
• The Strategic Intent of the firm represents the organization’s belief about
its state in the future. The purpose or ends the organization wishes to
pursue vary from being really broad and long-term (mission and vision), to
being narrow, with a focus on the short or near-term (objectives or goals).
• It is important to realize that achieving the narrow intentions is a necessary
condition towards achieving the broader intentions, and therefore, there
needs to be a careful alignment between these various levels of
intentions.

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 Amity School of Business

Hierarchy of Strategic Intent

Most Integrative Fewest in number

Vision

Mission

Goals

Objectives

Plans
Fig. – Hierarchy of Strategic Intent (Miller, 1998).
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Most Specific Greatest in number
 Vision Amity School of Business

• Refers to the broad category of long-term intentions

that the organization wishes to pursue.
• It is all inclusive, and futuristic.
• It is in most cases a dream; the aspirations the
organization holds for its future; a mental image of
the future state.
• It communicates management’s aspirations to
stakeholders and helps steer the energies of company
personnel in a common direction.
– Henry Ford’s vision of a car in every garage.
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 Developing a Strategic Vision
Amity School of Business

• Involves thinking strategically about

– Future direction of company
– Changes in company’s product/market/customer
technology to improve
• Current market position
• Future prospects

• A strategic vision describes the route a company

intends to take in developing and strengthening its
business. It lays out the company’s strategic course
in preparing for the future.
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 Characteristics of Effective Vision
Amity School of Business
Statements
• Graphic
– Paints a picture of what management is trying to
create
• Directional
– Is forward-looking, describes the strategic course
that management has charted
• Focused
– Specific enough to provide guidance for decision
making and resource allocation
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 Characteristics of Effective Vision
Amity School of Business
Statements
• Flexible
– Is not a once-and-for-all-time statement
• Feasible
– Within the realm of what the company can
reasonably expect to achieve in due time
• Desirable
– Indicates why the chosen path makes good
business sense.
• Easy to Communicate
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 Role of Strategic Vision Amity School of Business

• A well-conceived and well-communicated vision

functions as a valuable managerial tool to
– Give the organization a sense of direction, mold
organizational identity, and create a committed enterprise
– Inform company personnel and other stakeholders what
management wants its business to look like and “where we
are going”
– Spur company personnel to action
– Provide managers with a reference point to
• Make strategic decisions
• Translate the vision into hard-edged objectives
and strategies
• Prepare the company for the futuret

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 Defining Mission
Amity School of Business

• A broadly framed, but enduring statement of a firm’s intent.

• Embodies the business philosophy of the firm’s strategic
decision makers, implies the image the firm seeks to project,
reflects the firm’s self-concept, and indicates the firm’s
principal product or service areas and the primary customer
needs the firm will attempt to satisfy.
• A mission does not represent a specific target; at the same
time, it is not all euphoria either.
• A mission, on one hand, legitimizes the corporation’s
existence and role in society, and on other, gives internal
direction for the future of the corporation.

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 Characteristics of a Mission Statement
Amity School of Business

• Feasible
– Should aim high but should not be impossible.
• Precise
– Should not be too narrow or too broad.
• Clear
– Should be clear enough to lead to action.
• Motivating
– Should motivate members of the organizations to work for
it.
• Distinctive
• Indicate the major components of strategy
• Indicate how objectives are to be accomplished

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 Constituents of Corporate Mission
Amity School of Business

• Company Goals:
– Survival: often taken for granted to the extent that it is neglected.
– Profitability: profit in the long term indicates a firm’s ability to satisfy
principal claims and desires of employees and stockholders.
– Growth: growth is invariably related to survival and profitability, but
care should be taken to define it broadly. A company can set up growth
priorities.
• Company Philosophy: reflects or specifies the basic beliefs, values,
aspirations, and philosophical priorities to which strategic decision
makers are committed in managing the company.
• Public image: present and potential customers attribute certain
qualities to particular businesses, these public's expectations are
reflected in the mission statements.
• Company Self-Concept: the firm must realistically evaluate its
competitive strengths and weaknesses.
• Sensitivity to customer wants
• Concern for quality

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 Goals Amity School of Business

• As mission statements make vision statements

more tangible. Similarly, goals provide the
basis for action towards the achievement of the
organization’s mission, in the form of specific
milestones.
• Goals are both financials and non-financials,
and specify the route the organization takes to
achieve its vision and mission.

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 Objectives Amity School of Business

• Objectives are operational definitions of the

organizational goals. They provide the measurable
parameters for monitoring/evaluating the
performance of the organization.
• Objectives also include a time dimension that
delineates the specific goals the organization intends
to achieve in defined periods.
• By providing a series of time-bound objectives, the
organization demonstrates how it can move towards
achievement of its goals, through consistently and
periodically achieving objectives.
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 Plans Amity School of Business

• Plans indicate the specific actions that will be

taken by the organization in order to achieve
the objectives.
• Plans specify the roles members of the
organization will perform, the resource
allocation across different organizational sub-
units and departments, and prioritize and
schedule the various activities.

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 Defining the Business Amity School of Business

• A business can be defined in terms of three dimensions (according

to Derek Abell):
– Customer groups
– Customer needs
– Technology
e.g. “Designing incandescent lighting system for studios.”
Customer
needs
Alternative Technologies

Customer Groups
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