EVOLUTION OF BUSINESS

POLICY AND STRATEGY

Business Policy
• The set of rules that guides the decisions and
actions of the members of the organization
• Provide fundamental framework for plans and
basis for decision making
• Usually set-forth by the top management
Strategy
• Referring to the top management’s plan to attain
the outcomes consistent with the organization’s
mission and goals. ( Wright, Kroll, and Parnell)

Three Vintage points

• Strategy Formulation
• Strategy Implementation
• Strategic Control
Two Categories of Strategy
• Intended- refers to original strategy that
management plans and intends to implement

• Realized- refers to the actual and eventual

strategy that the management actually
implements
Thompson and Strickland (1999)
• Strategy is a set of competitive moves and
business approaches that management employs
• It is the management’s game plan to achieve the
following:
a. Attract and please customer
b. Stake out a market position
c. Conduct operations
d. Compete successfully
Characteristics of Strategy
• Strategy derives its relevance given from the
existence competition in the business

• It is done on the presumption of the existence of

a negative scenario

• A decision about how to use available resources

to secure a major objective in the face of
obstruction

• Strategy is traditionally meant to be a grand plan

Strategy vs. Policy

Business policies and strategies often collide

which creates conflicts resulting to various
organizational problems. The following are
situations where strategy and policy often
collides:

a.) In many instances, business policies exist

amidst absence of business strategy and
strategies may exist without establishes business
policies.
b.) If ever they exist, business policies are
generally directional in nature and strategy is
more operational in context.

c.) Business policies are often formal or written

and strategies may be informal and not
necessarily written and often confidential.
ORIGIN AND NATURE OF STRATEGY

Jeffrey Bracker of Georgia State University who

cited the term “strategy” said that it was
mentioned in the old testament and largely
treated as a semantic issue. He also cited that
strategy came from the greek word “stratego”
referring to a “general” which in turn traces its
roots from the words “army” and “lead”. The
term strategy has gained its popularity in the
field of military science.
EVOLUTION OF
STRATEGIC MANAGEMENT
From a relatively stable environment, the
concept of strategy has now undergone into a
more rapidly changing and competitive
environment. The change in context of strategy
was attributed to two significant factors
namely:
a.) The marked acceleration of the rate of change
within the firms
b.) The accelerated application of science and
technology to the process of management
Von Neuman and Morgenstern (1947)
- First modern writers to relate the concept of
strategy to the business with their theory of
games
Concept of Strategy
- Set out a sense of direction to achieve an
objective as well as some sort of rules need to be
laid down for everyone to be guided upon,
strategy as applied to business has been largely
associated with business policy.
Business Policy as a precursor of strategic
management
The Nature of Strategic Management

Strategic management takes into

consideration various external as well as
internal factors and the environment in
general as well as competitiveness and
sustainability over the long-term period in
the industry or sector it belongs.
STRATEGIC MANAGEMENT DEFINED
• Strategic Management is defined 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. (Stahl
and Grigsby, 1992)
• Strategic Management is a set of
managerial decisions and actions that
determine the long-run performance of a
corporation. It includes environmental
scanning (external and internal), strategy
implementation, evaluation and control.
(Wheelen and Hunger, 2004)
 Strategic Management is a framework that
evolves around the idea of shaping the destiny of
an organization. (Williamson, Jenkins, et.al.,
2004)
It is about:
A. Putting an organization into a competitive
position;
B. Sustaining and improving that position by
developing an acquisition of appropriate
resources and by monitoring and responding to
environmental changes; and
C. Monitoring and responding to the demands of
key stakeholders.
 Strategic management encompasses managing
not only the stages or vantage points they have
identified but also the earlier stage determining
the mission and goals of an organization within
the context of external and internal
environment. (Wright, Kroll and Parnell, 1996)

They emphasized strategic management is a

continuous process.
Series of steps in which top management should
accomplish following tasks:

1. Analyse the opportunities and threats

2. Analyse the organization’s strengths and
weaknesses
3. Formulate strategies
4. Implement strategies
5. Engage in strategic control activities to ensure
that the organization’s goals are attained
 Benefits of Strategic Management
3 most highly rated benefits of strategic
management according to Wheelen and Hunger
(2004).

• Clearer sense of strategic vision for the firm

• Sharper focus on what is strategically important

• Improved understanding of a rapidly changing

environment
Strategic Types
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 4 types:

• Defenders – this type includes companies with

limited product line that focus in improving the
efficiency of their existing operations.
• Prospectors – this type of companies includes
firms with fairly broad product lines that focus
on product innovation and market opportunities.

• Analyzers– this type includes business

organizations that operate in at least two
different product-market areas, one stable and
one variable.

• Reactors – this type includes companies that

lack a consistent strategy-structure-culture
relationship.
Strategy vs. Tactics

a.) As to level of conduct

• Strategy- highest levels of management
• Tactics- lower level of management
b.) As to regularity
• Strategy- continuous and irregular
• Tactics- determined on a periodic cycle with
fixed time schedule
c.) As to subjective values
• Strategy is heavily weighed with subjective
values than tactics
d.) As to range of alternatives
• Strategy is far greater than tactics
e.) As to uncertainty
• Uncertainty is much greater in strategy than
tactics
f.) As to nature of problems
• Strategy- generally unstructured and one of a
kind
• Tactics- structured and repetitive in nature
g.) In terms of information needs
• Strategy- requires large amount of information
• Tactics- rely heavily on internally generated
data
h.) As to time horizon
• Strategy- last for a long period of time
• Tactics- covers short duration
i.) As to reference
• Strategy- Original
• Tactics- formulated within and pursuit of
strategies
j.) As to the details
• Strategy- broad and may have fewer details than
tactics
k.) As to the type of personnel involved
• Strategy- top management
• Tactics- managers and employees
l.) As to the ease of evaluation
• It is easier to measure the effectiveness in
tactics than in strategy
m.) As to the context point of view
• Strategy- formulated from corporate viewpoint
• Tactics- developed principally from a
functional point of view.
n.) As to its importance
• Strategy- highest importance
• Tactics- less significant
Approaches to Identifying Policies and Strategies
A. Policy/strategy profile
B. Gap Analysis
C. Competitive Strategy Analysis

Four Approaches according to Richard

Whittington (2001)
1. Classical Approach
2. Evolutionary
3. Processual
4. Systemic
DEVELOPING POLICY AND STRATEGIC
DECISIONS

a. Top-bottom 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
b. Bottom-top 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
c. Top-bottom-top – policy and strategy initiatives
are taken from the top management then filtered
down to lower-ranked personnel for
consultations then return back to the top
management for refinements
STRATEGIC DECISION
a. Rare – Strategic decisions are unusual and
typically have no precedent to follow.
b. Consequential – Strategic decisions should
commit substantial resources and demand a
great deal of commitment from people at all
levels.
c. Directive – Strategic decisions set
precedents for lesser decisions and future
actions throughout the organization.
MODALITIES IN STRATEGIC DECISION

a. Entrepreneurial mode – strategy is made

by one powerful individual and the focus is on
opportunities; problems are secondary
b. Adaptive mode – sometimes referred to as
“muddling through,” characterized by reactive
solutions to existing problems, rather than
proactive search for new opportunities
 c. Planning mode – involves the systematic
gathering of appropriate information for
situation analysis, the generation of feasible
alternative strategies, and the rational selection
of the most appropriate strategy
d. Logical mode – can be viewed as a
synthesis of planning, adaptive, and, to a lesser
extent, the entrepreneurial modes
Strategic Decision-Making Process
(Wheelen and Hunger, 2004)

Step 1: Evaluate current performance

Step 2: Review Corporate Governance
Step 3: Scan and assess external environment
Step 4: Scan and assess internal corporate
environment
Step 5: Analyze strategic factors to pinpoint
problem areas
Step 6: Generate, evaluate and select best
alternatives
Step 7: Implement selected strategies
Step 8: Evaluate and implement strategies via
feedback systems
Role of the Board of Directors
• The Board of Directors in so far are policy and
strategy concerned.

• Specific roles:
a. Monitor
b. Evaluate and influence
c. Initiate and determine