Business Policy

1. Business Policy Strategy Formulation Topic 1: The Concept of Strategy and the Strategic Management Process

2. Lecture Plan • What is a strategy? • The strategic management process • Why strategic management is an ongoing process • Who performs the tasks of SM? • Benefits of a strategic approach

3. What is a strategy? • ‘determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals’’ • Chandler • ‘a commitment to undertake one set of actions rather than another’ • Oster

4. What is a Strategy? (2) • ‘...the “game plan” management has for positioning the company... entails choice among alternatives and signals organisational commitment to specific markets, competitive approaches, and ways of operating.’ • Thomson and Strickland

5. The strategy pyramid Corporate Influence Business Function Operating • Uniting the strategy-making effort through vertical and horizontal linkages. • Co-ordination through mutually reinforcing vision, objectives & strategies.

6. Different Levels of Strategy Corporate - what business? Business - how to compete in each business Functional - in support of business level

7. The Strategic Management Process Analyze Environment Identify opps / threats Identify current mission, objectives & strategies Formulate Strategies SWOT ANALYSIS Implement Strategies Identify strengths & weaknesses Analyze Resources Evaluate Results ‘Management’, Robbins, S. & Coultar, M. 1996p. 259

8. Strategy Making - Process or Event? • Strategy making is an ongoing process • Boundaries between tasks:conceptual not real • Managers have many other responsibilities • Crafting/ implementing happens erratically

9. Intended and Adaptive Strategy ‘strategy is a combination of planned actions and on-the-spot adaptive reactions to freshly developing industry and competitive events.’ Respond to external/internal environment Emergent Strategy

10. Who Performs the five tasks? • CEO and other managers • Strategic planners • Board of directors

11. The Three Strategy Making Tasks • Develop a strategic vision/ business mission • Set objectives • Craft a strategy

12. ‘Chesire Puss’ she (Alice) began ... ‘Would you please tell me which way I ought to go from here’ ‘That depends on where you want to get to,’ said the cat. Lewis Carroll ‘If you don’t know where you’re going, any old road will take you there’. Anonymous

13. Mission Defines the current boundaries Defines the business position -’Who are we?’ - ‘What do we do?’ Present

14. What Business are you in: Coca Cola • soft drinks? Competition is Pepsi, Finches • beverages? Competition is tea, coffee, softdrinks • thirst -quenching? Competition is water & all liquids!

15. Broad / Narrow Business Definition Broad Narrow Beverages Fizzy drinks Children’s entertainment Toys for toddlers Furniture Waterbeds Travel River cruises in Egypt

16. Objectives • Strategic vs. Financial? • Long range vs. short range? • Challenging but achievable • Measurable

17. Strategic vs. financial objectives? Strategic focus is on competitors eg. becoming the top company in the industry Financial focus is on financial performance eg. acceptable profit margin/ ROI Both are neccessary company must survive in both short and long term

18. Long vs. Short term? Long term forces early action long term implications considered Short term encourages speedy progress

19. Challenging but Achievable objectives must be realistic but should stretch funds/ resources must be available to execute the strategy

20. Measurable Objectives must be measureable eg. growth in market share of 5% Deadlines must be set eg. by December next ‘You cannot manage what you cannot measure’

21. Objectives needed at all levels Parts supporting the whole Top-down objective-setting - cohesion - leadership

22. Approaches to performing the strategy making tasks Master strategist: manager is chief architect Delegate to others Collaborative approach Champion approach

23. External Factors that shape strategy Society political regulatory Industry Attractive- ness Opportunity threat Craft a Strategy Evaluation Choice Company’s strategic situation Strengths weakness Manager values / ambitions Culture Internal

24. Societal, Political, Regulatory Conditions Limit the strategic actions that a company can or should take May cause company to change strategy anti-smoking lobby (direct mkg/advertising) lead-free petrol (eg Pura) recycling

25. Industry Attractiveness Strategy must be matched to industry and competitive conditions eg. technology shift change in cost structure of industry

26. Market Opportunities and Threats Be open to opportunities Aim at capturing best growth opportunities Defend against threats to well-being and future performance

27. Organisational Strengths and Weaknesses Strategy must be well-matched to the company’s strengths strategy should be grounded in what company is good at doing perilous to depend on what it’s not good at

28. Manager’s Values, Beliefs and Ambitions Management play a pivotal role Strong leadership builds commitment Management communication - ‘buy-in’

29. Strategy formulation: deciding what to do what you might do: opportunity what you can do: resources what you’d like to do: values/ ambitions what you ought to do: ethics

30. Tests for a good strategy • Goodness of fit test • matches well the company’s situation • internal • external • Competitive advantage test • leads to sustainable competitive advantage • Performance test • leads to superior performance • profitability • long term business/ market position strength

31. Benefits of a Strategic Approach Direction Adaptable / in-tune with environment Basis for budget/resource allocation Unifies decisions across organisation Encourages pro-active management Requires strategic thinking rather than gut-feel/drift