Business Policy and Strategy bba study notes

Business Policy and Strategy

Business Policy and Strategy Unit-I Busine Busi ness ss Polic olicy y – Mean Meanin ing g – Featu eaturres – Clas Classi sifc fcat atio ion n – Process o Policy – Making objectives o business Policy.

Unit –II Busine Busi ness ss stra strate tegy gy – Mean Meanin ing g – eat eatur ures es impo import rtan ance ce – Strategic Management Process -S!" analysis - #"!P analysis – "!S matri$- BC% matri$.

Unit – III Major business policies – Personnel policy - Pro&uction Pro&uction policy – Marketing policy - Financial policy.

Unit – IV Major business strategies – Stability gro't( – retrenc(ment – &isinvestment – mi$e& strategies.

Unit – V Society Society an& business business business – Social au&it.

) | P a g e

– et(ic et(ics s

– Socia Sociall respon responsibil sibilities ities o


UNIT 1 Business Business Business is t(e mainspr mainspring ing o t(e mo&ern mo&ern (uman (uman lie. lie. *t is t(e major major economic activity activity in any society. society. #ac( one o us+ making some &ealing in our &ay-to-&ay lie 'it( a number o business concerns. *t incl inclu& u&es es acti activi viti ties es conc concer erne ne& & 'it( 'it( pro& pro&uc ucti tion on++ tra& tra&e+ e+ bank bankin ing+ g+ insurance+ fnance+ agency+ a&vertising+ packaging+ an& ot(er relate& activities. (at is important an& '(at nee&s emp(asis in t(e term ,business is t(at t(e above activities area being organie& an& carrie& on to satisy t(e consumers nee&s.

Business Policy "(e origin o business policy can be trace& back to )/))+ '(en t(e 0ar 0arvar& ar& Bu Busi sin ness ess Sc( Sc(ool ool intr ntro&u o&uce& ce& an integ ntegra rati tive ve cours ourse e in management aime& at provi&ing general management capability. Policy making is one o t(e most important components o business planning. *t provi&es gui&elines gui&elines as to (o' objectives o business business are to be ac(ieve&. "(e necessity o gui&ing t(e uture &irection &irection o business arises at some stage in t(e course o e$istence o every company.

Defnition 1ccor&ing to "erry+ 21 business policy is an implie& overall gui&e setting up boun&aries t(at supply t(e general limits an& &irection in '(ic( managerial action 'ill take place3. 1ccor&ing to 4noont+2 Policies &efne (o' t(e company 'ill &eal 'it( stock (ol&ers+ employees+ customers+ suppliers+ &istributors an& ot(er important groups. groups. Policies Policies narro' narro' t(e range o in&ivi&ual &iscretion+ &iscretion+ so t(at employees act consistently on important issues3.

5 | P a g e


UNIT 1 Business Business Business is t(e mainspr mainspring ing o t(e mo&ern mo&ern (uman (uman lie. lie. *t is t(e major major economic activity activity in any society. society. #ac( one o us+ making some &ealing in our &ay-to-&ay lie 'it( a number o business concerns. *t incl inclu& u&es es acti activi viti ties es conc concer erne ne& & 'it( 'it( pro& pro&uc ucti tion on++ tra& tra&e+ e+ bank bankin ing+ g+ insurance+ fnance+ agency+ a&vertising+ packaging+ an& ot(er relate& activities. (at is important an& '(at nee&s emp(asis in t(e term ,business is t(at t(e above activities area being organie& an& carrie& on to satisy t(e consumers nee&s.

Business Policy "(e origin o business policy can be trace& back to )/))+ '(en t(e 0ar 0arvar& ar& Bu Busi sin ness ess Sc( Sc(ool ool intr ntro&u o&uce& ce& an integ ntegra rati tive ve cours ourse e in management aime& at provi&ing general management capability. Policy making is one o t(e most important components o business planning. *t provi&es gui&elines gui&elines as to (o' objectives o business business are to be ac(ieve&. "(e necessity o gui&ing t(e uture &irection &irection o business arises at some stage in t(e course o e$istence o every company.

Defnition 1ccor&ing to "erry+ 21 business policy is an implie& overall gui&e setting up boun&aries t(at supply t(e general limits an& &irection in '(ic( managerial action 'ill take place3. 1ccor&ing to 4noont+2 Policies &efne (o' t(e company 'ill &eal 'it( stock (ol&ers+ employees+ customers+ suppliers+ &istributors an& ot(er important groups. groups. Policies Policies narro' narro' t(e range o in&ivi&ual &iscretion+ &iscretion+ so t(at employees act consistently on important issues3.

5 | P a g e


1s &efne& by C(ristensen an& !t(ers+ business policy is 2t(e stu&y o t(e uncti unction on an& respo responsi nsibil biliti ities es o senior senior manag managem ement ent++ t(e cruci crucial al problems t(at a6ect success in t(e total enterprise+ an& t(e &ecisions t(at &etermine t(e &irection o t(e organiation an& s(ape its uture.3

Scope o Business Policy 7o business organiation can eit(er survive or gro' 'it(out &efnite obje object ctiv ives es '(ic '(ic( ( can can only only be acco accomp mpli lis( s(e& e& by appl applyi ying ng &i6e &i6errent ent policies rom time to time+ &epen&ing upon t(e 'orking con&itions. Business policies are actually t(e gui&elines or organiational t(inking+ be(avior an& action. Polic olicie ies s as su suc( c( are are or ormula mulate te& & pert pertai aini ning ng to &i6e &i6errent ent aspe aspect cts s o business organiations an& t(ereore t(ey enjoy a very 'i&e scope in &ay-to-&ay lie o any business unit. Policies Policies in general+ (ave a 'i&e scope as t(ey are concerne& 'it(     

1im an& objectives o a business unit !rganiational structure Financial resources available 8egional 8egional tra&itions an& social values Fiscal an& commercial policy o t(e government

Need or Business Policies *t goes 'it(out saying t(at 2business policy an& a&ministration3 is part an& parcel o management. 7o business enterprise can be manage&+ controlle& an& a&ministere& e6ectively i no &efnite policies are &etermine&. *n act+ it is t(e policy t(at gui&es t(e course o action Policies are so rame& as to attain t(e goal o t(e enterprise an& t(e pre-&etermine& goal can be ac(ieve& only '(en actions are put into practice. (en t(e policies are to be implemente&+ every care s(oul& be taken by e$ec e$ecut utiv ives es to see see t(at t(at impl implem emen enta tati tion on o poli polici cies es 'ill 'ill (ave (ave no a&verse e6ects on 'orkers as 'ell as on t(e management.

9 | P a g e


0ence+ to see t(at policies are e6ective as 'ell as ruitul+ implementation (as been consi&ere& as an important aspect o management. "(e e$ecutives concerne& 'it( policy implementation s(oul& e$ecute t(em in suc( a manner as 'oul& lea& to ma$imum return on total investment 'it( minimum amount o &iscontentment among people in t(e organiation.

Features o Policy From t(e above &efnitions+ ollo'ing eatures o a policy can be i&entife& 

1 policy provi&es gui&elines to t(e members o t(e organiation or &eci&ing a course o action. Policy provi&es an& e$plains '(at a member s(oul& &o rat(er t(at '(at (e is &oing.



Policy limits an area 'it(in a &ecision is to be ma&e an& assures t(at t(e &ecision 'ill be consistent 'it( an& contributive to objectives.



Policies are generally e$presse& in :ualitative or general 'ay. "(e 'or&s most oten use& in stating policies are to maintain+ to continue+ to ollo'+ to provi&e+ to assist+ to assure+ to employ+ to make+ to pro&uce or to be etc.



Policy ormulation is a unction o all managers in t(e organiation because some orm o gui&elines or uture course o action is re:uire& at every level.



Policies serve an e$tremely useul purpose. "(ey avoi& conusion an& provi&e clear-cut gui&elines at all levels to subor&inates; an& t(ereore+ t(ey enable t(e business to carrie& on smoot(ly an& oten 'it(out break.



"(ey also lea& to better an& ma$imum utiliation o resources+ (uman+ fnancial an& p(ysical+ by a&(ering to actions or conservation.

< | P a g e




=ecision-making+ planning an& coor&ination o any business organiation are e$clusively governe& an& controlle& by 2Business Policies3.



Consistency in t(e 'ork perormance by &i6erent members o frm is maintaine& because o clear-cut policies c(alke& out at e$ecutive level.



Policies normally cover t(e stu&y o t(e nature an& process o c(oice about t(e uture o a business enterprise an& are to be (an&le& by responsible e$ecutives.

lassifcations

!n t"e #asis o le$els o %ana&e'ent > | P a g e


Business policies are rame& at &i6erent levels o t(e management+ an& accor&ingly t(ey may be classife& as?

Top 'ana&e'ent policies ( "(ese policies are &erive& rom t(e top management planning. "(e top management comprise o t(e Boar& o &irectors+ C(airman+ @ice-C(airman+ Managing =irector+ %eneral Manager+ etc. "(e top management policies are concerne& 'it( t(e long-range suc( as pro&uct selection+ &iversifcation+ ac:uisitions an& mergers+ e$tent an& liability-sales orecasting+ etc.

%iddle le$el 'ana&e'ent policies( T"ese policies are t(e out come o t(e &eliberations o t(e mi&&le management consist o t(e &eputy (ea&s to t(e various sections an& unctional &epartments. "(ey rame policies on employment an& training+ in&ustrial relations+ labour 'elare an& social security etc. an& t(ese policies are kno'n as mi&&le management policies.

)o*er le$el 'ana&e'ent policies( "(e lo'er level management people are men '(o (ave &irect supervision over t(e 'orking orce. "(ey c(alk out policies or t(e assignment o t(e jobs to t(e best suite& persons+ t(e provision o a&e:uate tools+ ra' materials+ training t(e 'orkers+ issuing o or&ers+ improving 'orking con&itions+ etc.

!n t"e #asis o Functional +reas Policies relating to various unctional areas o t(e management are calle& unctional policies.

Production and Purc"ase policies ( "(e policies or operational are relate& to t(e pro&uction system+ operational planning an& control+ an& researc( an& &evelopment. "(e strategy a&opte& an& a6ects t(e nature o pro&uct also t(e markets to be serve& an& t(e manner in '(ic( t(e markets are to be serve&.

%ar,etin& Policies ( Policies relate& to marketing (ave to be ormulate& an& implemente& on t(e basis o t(e marketing mi$ i.e pro&uct+ price+ place an& promotion. "(e major issues an& &ecisions relate& to t(ese marketing mi$ actors.

A | P a g e


"(e ollo'ing are consi&ere& as major marketing policies. 

Pro&uct Policies



Pricing Policies



Promotion Policies



P(ysical &istribution Policies

Financial Policies ( "(is policies may be regar&e& as t(e most important business policies+ as t(e entire success or ailure o a business unit &epen&s upon t(ese. Properly rame& fnancial policies result in prosperity an& long survival+ '(ile aulty policies result in t(e units run. "(e fnancial policies o an organiation are relate& to t(e availability+ usage an& management o un&s. Financial policies (ave t(ereore to be &etermine& is t(e areas o 

Sources o Capital Policies



orking Capital Policies



Proft &istribution Policies



=epreciation allo'ances Policies

Personnel Policies( Personnel policies are t(e tools or t(e personnel &epartment to ac(ieve t(e objectives o t(e organiation. Personnel policy provi&es gui&elines or a 'i&e variety o employment relations(ip in t(e organiation. "(e personal policy o t(e organiation s(oul& (ave t'o types namely 

eneral !#.ecti$e ( "(e statement o general objective s(oul& e$press t(e top managements basic p(ilosop(y o (uman resources an& reect its &eep un&erlying convictions as to t(e importance o people in t(e organiation.

 | P a g e




Specifc o#.ecti$es( "(e statement o specifc objectives s(oul& reer to t(e various activities o personnel a&ministration connecte& 'it( staDng+ training+ &eveloping+ 'age an& salary benefts+ employee recor&s an& personnel researc(.

"(e major areas o t(e personnel policies are  

8ecruitment an& Selection Policy "raining an& Promotion Policy



8emuneration an& Beneft Policy



*n&ustrial relation Policy

!n t"e #asis o /0pression Business policies may be eit(er e$press or implie&+ '(ic( in turn may be oral or 'ritten.

!ral Policies ( !ral policies are t(ose+ '(ic( are issue& or state& by t(e 'or& o mout(. Suc( policies are generally a&opte& '(en an organiation is small an& ace-to-ace communication is &esire&. "(ey are oten not remembere& or long an& easily orgotten. "(ereore+ usually oral policies are not in popular use.

ritten Policies ? ritten policies are t(ose+ '(ic( are normally put in black an& '(ite an& state& in clear terms so t(at personal '(om t(ey are a&&resse& to easily un&erstan& t(em. For putting t(e policies in 'riting+ muc( care to be taken. I'plied policies ( "(ese are t(e policies+ '(ic( are implie& rom t(e co&e o con&uct or rom t(e be(avior o business employees; but t(ey are e$presse&. "(ey generally o' rom t(e p(ilosop(y o t(e business+ its social values an& even tra&itions. For e$ample+ smoking an& &rinking may be pro(ibite& not in 'riting but it is implie& by t(e con&uct o t(e e$ecutives '(o rerain t(eses (abits '(ile on &uty. E | P a g e


!n t"e #asis o nature o !ri&in !n t(e basis o nature o origin business policies can be classife& in to t(ree types. "(ey are as ollo's

For'ulated Policy ( 1 ormulate& policy is one+ '(ic( is specife& by t(e organiation or provi&ing gui&elines to its members. Most o t(e policies in private sector organiations all in t(is category as every organiation ormulate various policies on &i6erent aspects. "(is policy may be broa& giving general gui&ance or t(e action. +ppealed Policies ( Sometimes+ policies may not be clearly state& an& t(e actions o managers particularly at t(e (ig(er levels provi&e gui&elines or actions at lo'er levels. *n suc( a case+ t(e action o a &ecision maker+ consciously or unconsciously+ &epen&s on (is o'n gui&elines. Moreover+ in t(e absence o any specifc gui&elines+ &ecision is base& on in&ivi&ual interpretation o t(e situation an& conse:uent actions.

I'posed Policies ( impose& policies arise rom t(e inuence o some outsi&e agencies. Suc( agencies may be government '(ic( provi&es policies or all public-sector organiations+ parent organiations overseas in t(e case o multinational companies operating in a country. !n t"e #asis o scope o !r&ani2ation Business policies may also be categorie& as basic policies+ general policies an& specifc policies.

Basic Policies ( "(ese policies are basis o t(e organiation an& are rame& by t(e top management. "(ey spell out t(e approac( o a company to its activities. For e$ample+ marketing policy o a frm may be 2consumer-oriente&3 as against 2pro&uct-oriente&3+ 'it( t(e main purpose o competing 'it( t(e pro&ucts o competitors. eneral policies ( Suc( policies are generally more specifc an& apply to large segments o organiation. "(e mi&&le level management+ e.g.+ mainly rames t(em purc(asing policy to give frst preerence to local suppliers. / | P a g e


Specifc or Depart'ental Policies ( 1 &epartmental policy is specifc in nature. "(e oremen an& supervisors ormulate it. *t applies to routine activities in t(e &epartment. !n t"e #asis o %ana&e'ent Functions "(e management un&ertakes unctions+ vi.+ planning+ organiing+ actuating+ an& controlling. 1ccor&ingly t(e policies may be planning policies+ organiing policies+ actuating or &irectional policies an& controlling policies.

Plannin& Policies ( "(ese policies are concerne& 'it( t(e pat( o action+ '(ic( lea& to company activities an& attainment o its objectives. Planning policies &eci&e t(e objectives to be ac(ieve&; t(e policies pat(s t(at s(oul& be ollo'e& to ac(ieve t(e objectives an& (o' t(e objectives set are to be ac(ieve& t(roug( programs an& process. !r&ani2in& Policies ( !rganiation is anot(er management unction+ '(ic( is concerne& 'it( t(e &ivision or allocation o necessary competent activities to members o t(e group so t(at t(roug( collective e6orts+ t(e objectives may be ac(ieve&. +ctuatin& Policies ( "(e actuating policies+ t(ereore inclu&e? provi&ing e6ective lea&ers(ip; integrating people an& task an& convincing t(em to assist in t(e ac(ievement o t(e overall objectives; e6ective communication 'it( t(e members; an& provi&ing climate or t(e subor&inates &evelopment an& t(eir motivation to 'ork. ontrollin& policies( ontrolling is t(e process o measuring actual result+ comparing 'it( stan&ar& o perormance+ fn&ing out &eviations an& taking corrective action '(en necessary. Controlling policies involve a series o activities; continuous observation an& stu&y o perio&ic result o perormance in or&er to i&entiy potential problems; selection o t(e best mo&e o control.

I'portance o Business Policy Business policy is important as a course in t(e management curriculum an& as a component o e$ecutive &evelopment programmes or ) | P a g e


mi&&le-level managers '(o are preparing to move up to t(e senior management level. "o (ig(lig(t t(e importance o business policy+ 'e s(all consi&er our areas '(ere t(is course proves to be benefcial.    

For learning t(e course For Gn&erstan&ing t(e business environment For un&erstan&ing t(e business organiation For personal &evelopment

For )earnin& t"e course Business policy seeks to integrate t(e kno'le&ge an& e$perience gaine& in various unctional areas o management. *t enables t(e learner to un&erstan& an& make sense o t(e comple$ interaction t(at takes place bet'een &i6erent unctional areas. Business policy &eals 'it( t(e constrains an& comple$ities o real-lie business. *n contrast+ t(e unctional area courses are base& on a structure&+ specialie& an& 'ell &evelope& bo&y o kno'le&ge+ resulting rom a simplifcation o t(e comple$ overall tasks an& responsibilities o t(e management.

For Understandin& t"e Business /n$iron'ent 8egar&less o t(e level o management o person belongs to+ business policy (elps to create an un&erstan&ing o (o' policies are ormulate&. "(is (elps in creating an appreciation o t(e comple$ities o t(e environment t(at t(e senior management aces in policy ormulation. By gaining an un&erstan&ing o t(e business environment+ managers become more respective to t(e i&eas an& suggestions o t(e management. Suc( an attitu&e on t(e part o t(e management makes t(e task o policy implementation simpler.

For Understandin& t"e !r&ani2ation Business policy presents a basic rame'ork or un&erstan&ing strategic &ecision making '(ile a person is at t(e mi&&le level o management. Suc( a rame'ork+ Combine& 'it( t(e e$perience gaine& '(ile 'orking in a specialie& unctional area+ enables a person to make preparations or (an&ling general management responsibilities. "(is benefts t(e organiation in a variety o 'ays.

For Personal De$elop'ent )) | P a g e


1 stu&y o business policy o6ers consi&erable scope or personal &evelopment. *t is a act o organiational lie t(at t(e &i6erent subunits 'it(in an organiation (ave a varying value an& importance at &i6erent times. *t oten (appens t(at a company '(ic( (as ollo'e& a pro&uction orientation as a matter o policy gra&ually s(its emp(asis to marketing+ maybe &ue to increasing competition.

T"e Purpose o Business policy "o integrate t(e kno'le&ge gaine& in various unctional areas o management "o a&opt a generalist approac( to problem-solving "o un&erstan& t(e comple$ inter-linkages operating 'it(in an organiation t(roug( t(e use o a system approac( to &ecision-making an& relating t(ese to t(e c(ange taking place in t(e e$ternal environment.

Business Policy Process 

1scertaining t(e problem



Policy ormulation



=issemination o t(e policy



1cceptance o t(e policy



#$planation o t(e Policy

)5 | P a g e




Policy *mplementation



Policy Control

+scertainin& t"e Pro#le' "(e main object o generating t(e policy is to (ave smoot( 'orking in t(e business organiation. 0ence+ t(e task o ormulating policies s(oul& be assigne& only to t(ose in t(e management '(o are 'ell verse& an& :uite conversant 'it( varie& situations or problems o t(e business concerne&.

Policy For'ulation "(is is t(e ne$t step to be taken by persons concerne& 'it( policy implementation. 1ny policy t(at is to be rame& s(oul& be :uite suitable bot( to t(e management an& to its employees. 7o policy can be successully put into practice unless it is properly approve& by t(e company personnel.

Disse'ination o t"e Policy =issemination in&icates announcement or making t(e subject-matter kno'n to ot(ers. !ne o t(e basic elements o t(e policy is t(at '(atever policy is rame& it s(oul& be ma&e kno'n to all 'it(in t(e organiation so as to avoi& any conict bet'een t(e company management an& its personnel.

+cceptance o t"e Policy (en t(e policies are ormulate&+ it is a&visable to get t(e &rat o t(e policy statement approve& by t(ose '(o are suppose& to apply it in t(e interest o t(e organiation as a '(ole management an& personnel.

)9 | P a g e


!nce t(e basic principles on '(ic( t(e policies are &esigne& an& t(e rules an& regulations inclu&e& in t(e propose& &rat policy are t(oroug(ly un&erstoo& an& accepte&.

/0planation o t"e Policy * t(e policy is to be accepte& at all levels o management+ every attempt s(oul& be ma&e by policy-makers t(at t(e e$act meaning+ signifcance an& purpose o policy are e$plaine& in clear terms to t(e persons concerne&. "(e policy 'ill (ave no opposition an& an early approve& i e$plaine& t(oroug(ly+ 'ill (ol& relevance to t(e business environment in '(ic( t(e business enterprise is e$pecte& to operate.

Policy I'ple'entation "(is is last but one stage in t(e process o policy-making &ecisions. *mplementation o policy in&icates putting it into practice as an& '(en any problem or critical situation arises. #ven ot(er'ise+ corporate operations are un&ertaken an& are also t(e outcome o t(e policy implementation.

Policy ontrol "(is is a very important element o business policy '(ic( is likely to be implemente& at &i6erent levels on &i6erent occasion. "(e management in t(is regar& s(oul& be careul to see t(at t(e policy implementation takes place in conormity 'it( t(e basic principles+ rules an& regulations set by t(e policy makers.

3o* Policies Di4er ro' 5ules 

Policies are in t(e orm o gui&ance an& not t(e or&er. 8ules are positive instructions or or&ers to &o or not to &o somet(ing

)< | P a g e




 

*nringement o rules lea&s to specifc penalties '(ereas no stipulate& penalties are impose& in case t(e policies are not strictly a&(ere& to. *n t(e case o policies+ t(ere is room or variation or t(eir use; it is not so regar&ing rules. Policies give birt( to rules an& rules support an& augment t(e policies.

"aracteristics o Business Policies 

!bjectivity



8elations(ip to ot(er objectives



Complementariness



Stability an& Fle$ibility



Fairness an& 0onesty



Being kno'n+ un&erstoo& an& accepte&



Policy in 'riting



Simple an& ree rom ambiguity



Supplementary to ot(er policies



#t(ical stan&ar&s

!#.ecti$es o t"e Business Policy *t is t(us essential t(at 'e s(oul& frst state t(e objectives o business policy an& only t(en procee& urt(er. "(e objectives o business policy (ave been state& by aut(ors suc( as C(ristensen et.al. an& Steiner an& ot(ers in terms o kno'le&ge+ skills an& attitu&es. "(ese objectives coul& be &erive& rom t(e purpose o business policy.

In Ter's o 6no*led&e 

"(e learners o business policy (ave to un&erstan& t(e various concepts involve&. Many o t(ese concepts like strategy+ policies+

)> | P a g e


plans an& programmes are encountere& in t(e unctional area courses too. *t is imperative to un&erstan& t(eses concepts specifcally in t(e conte$t o business policy. 

1 kno'le&ge o t(e e$ternal an& internal environment an& (o' it a6ects t(e unctioning o an organiation is vital to an un&erstan&ing o business policy. "(roug( t(e tools o analysis an& &iagnosis a learner can un&erstan& t(e environment in '(ic( a frm operates.



*normation about t(e environment (elps in t(e &etermination o t(e mission+ objectives+ an& strategies o a frm. "(e learner appreciates t(e manner in '(ic( strategy is ormulate&.

In Ter's o S,ills 

"(e attainment o kno'le&ge s(oul& lea& to t(e &evelopment o skills so as to be able to apply t(at '(ic( (as been learnt. Suc( an application can take place by an analysis o case stu&ies an& t(eir interpretation+ an& by an analysis o t(e business events taking place aroun& us.



"(e stu&y o business policy s(oul& enable a stu&ent to &evelop analytical ability an& use it to un&erstan& t(e situation in a given case o inci&ent.



Furt(er+ t(e stu&y o business policy s(oul& lea& to t(e skill o i&entiying t(e actors relevant in &ecision-making. "(e analysis o t(e strengt(s an& 'eaknesses o an organiation+ t(e t(rea&s an& opportunities present in t(e environment+ an& t(e suggestion o appropriate strategies an& policies rom t(e core content o general management &ecision-making.

)A | P a g e


In Ter's o +ttitude  "(e

attainment o t(e kno'le&ge an& skill objectives s(oul& lea& to t(e inculcation o an appropriate attitu&e among t(e learners. "(e most important attitu&e &evelope& t(roug( t(is course is t(at o a generalist. "(e generalist attitu&e enables enables t(e learners learners to approac( an& asses a situation rom all possible angles.



By acin acing g in a comp comprre(en e(ensi sive ve mann manner er++ a gene genera rali list st is able able o unction un&er con&itions o partial ignorance by using (is or (er ju&gment an& intuition. "ypically+ case stu&ies provi&e only a glimps glimpse e o t(e overal overalll situat situation ion an& an& a case case analys analystt re:u re:uent ently ly ace aces s t(e t(e rus rustr trat atin ing g situ situat atio ion n o 'ork 'orkin ing g 'it( 'it( less less t(an t(an t(e t(e re:uire& inormation.

UNIT 7 Business Strate&y "(e term ,Strategy is &erive& rom military+ '(ere it is taken to mean t(e process o planning t(e movements o troops so as to outplay t(e enemy in t(e battlefel battlefel&. &. !riginal !riginally+ ly+ t(e term term (as been &erive& rom rom %reek 'or& ,strategos. "(e 'or& strategy+ t(ereore t(ereore means t(e art o general. *n corporate planning+ strategy is t(e ,gran& &esign+ '(ic( an organiation c(ooses in or&e or&err to move move to react eact to'a to'arr&s t(e t(e set set obje object ctiv ives es by us usin ing g its its resources.

%eanin& 8 Defnitions +ccordin& to ,noot2 ! Donnel 2 Strategies are general programme o action to'ar&s t(e attainment o compre(ensive compre(ensive objectives3. Strate tegy gy is t(e t(e patt patter ern n o obje object ctiv ives es++ +cco +ccord rdin in& & to +ndr +ndre* e*s9 s9 :Stra purpose o goals an& major policies an& plans or ac(ieving t(ese goals state& in suc( a 'ay+ so as to &efne '(at business t(e company is in or is to be an& t(e kin& o company it is or is to be3.

) | P a g e


+cco +ccord rdin in& & to ;a'es a'es Brai Brain n
+nalysis o Defnitions o Strate&y "(e analysis o various &efnitions o strategy presents t(e ollo'ing points?     

Strategy is a central un&erstan&ing o t(e strategic management process. Stra Strate tegy gy is t(e t(e &ete &eterrmina minati tion on o basi basic c long long-t -ter erm m goal goals s an& an& objectives o an organiation. organiation. =eter =etermin mining ing t(e course course o action action to attai attain n t(e pre&e pre&eter termin mine& e& goals an& objectives. 1llocating t(e necessary resources or implementing t(e course o action. Set o &ecision-making &ecision-making rules making a common t(rea&.

)e$els o Strate&y

)E | P a g e


orporate )e$el Strate&y is an overarc(ing plan o action covering t(e various unctions unctions perorme& perorme& by &i6erent SBGs. SBGs. t(e plan &eals 'it( t(e objectives o t(e company+ allocation o resources resources an& coor&ination coor&ination o t(e SBGs or optimal perormance. SBU )e$el Strategy is a compre(ensive plan provi&ing objectives or SBGs Gs+ allocation o resources among unctional areas+ an& coor&ination bet'een t(em or making an optimal contribution to t(e ac(ievement o corporate level objectives.

Functional Strate&y &eals 'it( a relatively restricte& plan provi&ing obje object ctiv ives es or or a sp spec ecif ifc c unc uncti tion on++ allo alloca cati tion on o resou esourrces ces amon among g &i6er &i6erent ent operat operatio ions ns 'it(in 'it(in t(at t(at uncti unctiona onall area+ area+ an& coor coor&in &inati ation on bet'een t(em or optimal contribution to t(e ac(ievement o SBG an& corporate level objectives. Features Features o Strate&y "(e &efnition o strategy provi&es provi&es its ollo'ing ollo'ing eatures? eatures? Strategy relates t(e frm to its environment+ particularly t(e e$ternal environment in all actions '(et(er objective setting+ or actions an& resources re:uire& or its ac(ievement. 

Strategy is t(e rig(t combination o actors bot( e$ternal an& inter internal nal.. *n relatin relating g an organi organiat ation ion to its envir environm onment ent++ t(e mana manage geme ment nt must must also also cons consi& i&er er t(e t(e inte interrnal nal act actor ors s too+ too+ particularly its strengt(s an& 'eakness to taken various courses o action.



Strategy is relative relative combination combination o actions. actions. "(e combination is to meet a particular con&ition+ to solve certain problems+ or to attain a &esirable objective. objective. *t may taken taken any orm; orm; or every situation situation varies an& t(ereore re:uires a some'(at &i6erent approac(.



Strategy may may even involve contra&ictory contra&ictory action. Since strategic strategic action &epen&s on environmental variables+ a manager may take

)/ | P a g e


an action to&ay an& revise or reverse (is steps tomorro' &epen&ing on t(e situation. 

Strategy is or'ar& looking. *t (as orientation to'ar&s t(e uture. Strategic action is re:uire& in a ne' situation. 7ot(ing ne' re:uiring solutions can e$ist in t(e past+ an& so strategy is relevant only to t(e eature.

I'portance o Strate&ic %ana&e'ent To Pro$ide uidelines ( Strategic management provi&es gui&elines to t(e employer about t(e organiations e$pectations rom t(em. "(is 'oul& minimie conict bet'een job perormance an& job &eman&s. "(us it provi&es incentive or employer an& (elps t(e organiation in ac(ieving its objectives. De$eloped feld Study #y 5esearc" ( Strategic management 'as just base& on case stu&ies+ 9 years ago. But recently+ t(ere are met(o&ological problems in researc( in t(is fel& o stu&y. More systematic kno'le&ge in t(is area is available at present. "(ereore+ it is 'ort('(ile to stu&y strategic management at present compare& to t(e past. Pro#a#ility or Better Peror'ance ( "(ere is no clear researc( evi&ence t(at strategic management lea&s to (ig(er perormance. But t(e majority o stu&ies suggest t(at t(ere is a relations(ip bet'een better perormance an& ormal planning. I'pro$es o''unication ( Strategic management provi&es e6ective communication o inormation rom lo'er level managers to mi&&le level managers an& to top level managers. I'pro$es oordination ( Strategic management improves coor&ination not only among t(e unctional areas o management+ but also among in&ivi&ual projects. I'pro$e +llocation o 5esources( Strategic planning (elps in &eci&ing upon most easible an& viable projects an& t(ereby improves t(e allocation o resources to t(e viable projects. Benefts o Strate&ic %ana&e'ent 5 | P a g e




*t (elps organiations not only to respon& to its relevant environment+ but also to initiate an& inuence its environment an& t(ereby e$ert control over its &estiny.



*t (elps t(e organiations to ac(ieve un&erstan&ing commitment rom all managers an& employees.



*t (elps or increase& employee pro&uctivity+ re&uce& resistance to c(ange+ clear un&erstan&ing o perormance-re'ar& relations(ip.



*t oten brings or&er an& &iscipline to a frm.



*t allo's or i&entifcation+ prioritiation an& e$ploitation o opportunities.



*t provi&es an objective vie' o management problems.



*t represents a rame'ork or improve& control o activities.



*t minimies t(e e6ects o a&verse con&itions an& c(ange.

an&

Strate&ic %ana&e'ent Process Strategic &ecision making is carrie& out t(roug( t(e process o strategic management. "(e 'ay strategic management is &efne& t(e &i6erent p(ases in t(e process o strategic management+ t(e elements t(at t(is process contains; an& lastly+ t(e mo&el o strategic management t(at 'e (ave a&opte&.

P"ases in strate&ic %ana&e'ent "(e strategic management as a process consists o &i6erent p(ases '(ic( are se:uential in nature. "(ese our p(ases coul& be encapsulate& as ollo's 

#stablis(ing t(e (ierarc(y o strategic intent+



Formulation o strategies

5) | P a g e




*mplementation o strategies an&



Perorming strategic evaluation an& control

"(e above our p(ases are consi&ere& as se:uentially linke& to eac( ot(er an& eac( successive p(ase provi&es a ee&back to t(e previous p(ases. "(e p(ases in strategies management are &epicte& as ollo'ing

#ac( p(ase o t(e strategic management process consist o a number o elements '(ic( are &iscrete an& i&entifable activities perorme& in logical an& se:uential steps.

/sta#lis"in& t"e "ierarc"y o strate&ic intent( 

Creating an& communicating a vision



=esigning a mission statement



=efning t(e business



Setting objectives

For'ulation o strate&ies( 

Perorming environmental appraisal

55 | P a g e




=oing organiational appraisal



Consi&ering corporate-level strategies



Consi&ering business-level strategies



Gn&ertaking strategic analysis



#$ercising strategic c(oice



Formulating strategies



Preparing a strategic plan

I'ple'entation o Strate&ies 

1ctivating strategies



=esigning structures an& system



Managing be(avioral implementation



Managerial unctional implementation



!perational sing strategies

Peror'in& strate&ies e$aluation and control( 

Perorming strategic evaluation



#$ercising strategic control



8eormulating strategies

S!T +nalysis S!T is a s(ort orm or t(e internal strengt(s an& 'eaknesses o a business an& environmental opportunities an& t(reats acing t(at business. S!" analysis is a systematic i&entifcation o t(ese actors 59 | P a g e


an& t(e strategy t(at reects t(e best matc( bet'een t(em. *t is base& on t(e logic t(at an e6ective strategy ma$imies a businesss strengt(s an& opportunities but at t(e same time minimies its 'eaknesses an& t(reats.

Stren&t"s( Strengt( is resource+ skill+ ot(er a&vantage relative to competitors an& t(e nee&s o markets a frm serves or anticipates serving. *t is a &istinctive competence t(at gives t(e frm a comparative a&vantage in t(e marketplace. Financial resources+ image+ market lea&ers(ip+ an& buyerHsupplier relations are e$amples. ea,nesses( 1 'eaknesses is a limitation o &efciency in resources+ skills an& capabilities t(at seriously impe&es e6ective perormance. Facilities+ fnancial resources+ management capabilities+ marketing skills an& bran& image coul& be source o 'eaknesses. !pportunities( 1n opportunity is a major avorable situation in t(e frms environment. 4ey tren&s represent one source o opportunity. 5< | P a g e


*&entifcation o a previously overlooke& market segment+ c(anges in competitive or regulatory circumstances+ tec(nological c(anges+ an& improve& buyer or supplier relations(ip coul& represent opportunities or t(e frm.

T"reats( 1 t(reat is a major unavorable situation in t(e frms environment. *t is a key impe&iment to t(e frms current an& or &esire& uture position. "(e entrance o a ne' competitor+ slo' market gro't(+ increase& bargaining po'er o key buyers or suppliers+ major tec(nological c(ange+ an& c(anging regulations coul& represent major t(reats to a frms uture success. /T!P +nalysis "(ere are many tec(ni:ues available to structure t(e environmental appraisal. !ne suc( tec(ni:ue+ suggeste& by %lueck is t(at o preparing an #nvironmental "(rea& an& !pportunity Profle I#"!PJ or an organiation. "(e preparation o #"!P involves &ivi&ing t(e environment into &i6erent sectors an& t(en analying t(e impact o eac( sector on t(e organiation. 1 compre(ensive #"!P re:uires sub&ivi&ing eac( environmental sector into sub-actors an& t(en t(e impact o eac( sub-actor on t(e organiation &escribe& in t(e orm o a statement.

"(e ollo'ing summary s(o's t(e major actors o #"!P. "(e summary provi&es an e$ample o an #"!P prepare& or an establis(e& company in t(e bicycle in&ustry. "(e main business o t(e company is in sports cycle manuacturing or t(e &omestic an& e$port market. "(is e$ample relates to a (ypot(etical company but t(e illustration is realistically base& on t(e current *n&ian business environment.

5> | P a g e


#nvironmental Sectors

Social

7ature o *mpact K

*mpact o eac( sector

Customer preerence or sport cycles '(ic( are as(ionable+ easy to ri&e an& &urable L 7o signifcance actor Political /cono'ic K %ro'ing auence among urban consumers; e$perts potential (ig( K Bicycle in&ustry a t(rust area or 5e&ulatory #$port %ar,et K *n&ustry gro't( rate is  to E percent per year; or sport cycle gro't( rate is 9 percent; largely unsaturate& &eman& K Mostly ancillaries an& associate& Supplier companies supply parts an& components; import o 81 material easily available. "ec(nological up gra&ation o in&ustry Tec"nolo&ical K in progress; import o mac(inery simple. International N #merging t(reat rom c(eap imports rom c(ina Gp arro's in&icate avorable impact; &o'n arro's in&icate unavorable impact an& (oriontal arro's in&icate natural impact. 1s observe& rom t(e above summary+ sport cycle manuacturing is an attractive proposition &ue to t(e many opportunities operating in t(e environment. "(e company can capitalie on t(e gro'ing &eman& by taking a&vantage o t(e various government policies an& concession. *t can also take a&vantage o (ig( e$port potential t(at alrea&y e$ist. Since t(e company is an establis(e& manuacturer o bicycle+ it (as a avorable supplier+ as 'ell as tec(nological environment.

But contrast t(e implications o t(is #"!P or a ne' manuacturer '(o is planning to enter t(is in&ustry. 5A | P a g e


"(oug( t(e market environment 'oul& still be avorable+ muc( 'oul& &epen&s on t(e e$tent to '(ic( t(e company is able to ensure t(e supply o ra' materials an& components+ an& (ave access to t(e latest tec(nology an& possess t(e acilities to use it. "(e preparation o an #"!P provi&es a clear picture to t(e strategists. By means o an #"!P+ t(e organiation kno's '(ere it stan&s 'it( respect to its environment. !bviously+ suc( an un&erstan&ing can be o a great (elp to an organiation in ormulating appropriate strategies to take a&vantage o t(e opportunities an& counter t(e t(reats in its environment.

orporate le$el strate&ic analysis Corporate-level strategic analysis treats a corporate entity as constituting a portolio o business un&er a corporate umbrella. "(e analysis ocuses on t(e :uestion o '(at s(oul& a corporate entity &o regar&ing t(e several business t(at are t(ere in its portolio.

orporate Portolio +nalysis Corporate portolio analysis coul& be a set o tec(ni:ues t(at (elps strategists in taking strategic &ecisions 'it( regar& to in&ivi&ual pro&ucts or business in a frms portolio. *t is primarily use& or competitive analysis an& corporate strategic planning in multipro&uct an& multi-business frms.

B %atri0 ( "(e Boston Consulting %roup IBC%J matri$+ suc( as t(e one s(o'n in t(e ollo'ing is provi&es a grap(ic representation or an organiation to e$amine t(e &i6erent business in its portolio on t(e basis o t(eir relative market s(ares an& in&ustry gro't( rates. 1s s(o'n in t(e table+ business coul& be classife& on t(e BC% matri$ as 'it(er lo' or (ig( accor&ing to t(eir in&ustry gro't( rate an& relative market s(are. "(e vertical a$is &enotes t(e rate o gro't( in sales in percentage or a particular in&ustry.

5 | P a g e


"(e (oriontal a$is represents t(e relative market s(are+ '(ic( is t(e ratio o a companys sales to t(e sales o in&ustrys largest competitor or market lea&er. "(e lo' an& (ig( market s(ares are separate& by a vertical lines set at ).. "(e means t(at a company 'oul& (ave a relative market s(are o less t(an ). i it &oes not (ave t(e largest s(are. 1 relative market s(are o more t(an ). 'oul& occur or companies t(at are t(e largest sellers in t(eir various in&ustries. Still+ in or&er to get t(e ma$imum beneft out o t(e e$perience curve+ t(e BC% matri$ in&icates t(at it is necessary to be t(e market lea&er. "(e result o combining t(e in&ustry gro't( rate an& relative market s(are+ eac( along a (ig( an& lo' &imension+ is a our-cell matri$. #ac( cell o t(is matri$ (as been given an interesting an& appropriate name by t(e Boston Consulting %roup.

"(e our cells o t(e BC% matri$ (ave been terme& as stars+ cas( co's+ :uestion marks an& &ogs. #ac( o t(ese cells represents a particular type o business. "(ese &i6erent types o businesses 'it( some contemporary e$amples rom t(e *n&ian corporate 'orl&+ are &escribe& belo'

+ Typical B %atri0

5E | P a g e


Stars ( Stars are (ig(-gro't(-(ig(-market s(are businesses '(ic( may or may not be sel-suDcient in terms o cas( o'. "(is cell correspon&s closely to t(e gro't( p(ase o t(e pro&uct lie cycleIPOCJ. 1 company generally pursues an e$pansion strategy to establis( a strong competitive position 'it( regar& to a star business. as" o*s ( 1s t(e term in&icates+ cas( co's are businesses '(ic( generate large amounts o cas( but t(eir rate o gro't( is slo'. *n terms o POC+ t(ese are generally mature business '(ic( is reaping t(e benefts o t(e e$perience curve. "(e cas( generation e$cee&s t(e reinvestment t(at coul& proftable be ma&e into ,cas( co's. "(ese businesses can a&opt mainly stability strategies. (ere long-term prospects are e$ceptionally brig(t+ limite& e$pansion coul& be a&opte&. 1s ,cas( co' in&ustries lose t(eir attractiveness an& ten& to'ar&s &ecline+ a p(ase& retrenc(ment strategy may be easible.

5/ | P a g e


Do&s( "(e business '(ic( are relate& to slo'-gro't( in&ustries an& '(ere a company (as a lo' relative market s(are are terme& as ,&ogs. "(ey neit(er generate nor re:uire large amount o cas(. *n terms o POC+ t(e ,&ogs are usually pro&ucts in late maturity or a &eclining stage. "(e e$perience curve or t(e company s(o's t(at it aces cost &isa&vantages o'ing to a lo' market s(are. "(e only possibility or t(e company coul& be to gain market s(are at t(e e$pense o rival frms+ a possibility t(at is remote o'ing to t(e (ig( cost involve&. So retrenc(ment strategies are normally suggeste&.

TOWS analysis helps you get a better understanding of the strategic choices that you face. (Remember that "strategy" is the art of determining how you'll "win" in business and life.) t helps you as! and answer the following #uestions$ %ow do you$

•

&a!e the most of your strengths ircument your wea!nesses

•

apitali*e on your opportunities and

•

9 | P a g e


•

&anage your threats

+ ne,t step of analysis usually associated with the e,ternally-focused TOWS &atri, helps you thin! about the options that you could pursue. To do this you match e,ternal opportunities and threats with your internal strengths and wea!nesses as illustrated in the matri, below$ TOWS Strategic Alternatives Matrix External Opportunities (O) . /. 0. 1.

External Threats (T) . /. 0. 1.

Internal Strengths SO ST "Maxi-Maxi" Strategy "Maxi-Mini" Strategy (S) . /. Strategies that use Strategies that use strengths to maximize strengths to 0. 1. opportunities. minimize threats. Internal Weaknesses (W) . /. 0. 1.

WO WT "Mini-Maxi" Strategy "Mini-Mini" Strategy Strategies that Strategies that minimize eaknesses by taking a!vantage minimize eaknesses o" opportunities. and avoi! threats.

This helps you identify strategic alternaties that address the following additional #uestions$ •

•

•

•

Strengths and Opportunities (SO) - %ow can you use your strengths to ta!e adantage of the opportunities Strengths and Threats (ST) - %ow can you ta!e adantage of your strengths to aoid real and potential threats Wea!nesses and Opportunities (WO) - %ow can you use your opportunities to oercome the wea!nesses you are e,periencing Wea!nesses and Threats (WT) - %ow can you minimi*e your wea!nesses and aoid threats

9) | P a g e


UNIT > %a.or Business policies Personnel Policy Personnel policies are t(e tools or t(e personnel &epartment to ac(ieve t(e objectives o t(e organiation. Personnel policy provi&es gui&elines or a 'i&e variety o employment relations(ip in t(e organiation. "(e personal policy o t(e organiation s(oul& (ave t'o types namely 

eneral !#.ecti$e ( "(e statement o general objective s(oul& e$press t(e top managements basic p(ilosop(y o (uman resources an& reect its &eep un&erlying convictions as to t(e importance o people in t(e organiation.



Specifc o#.ecti$es( "(e statement o specifc objectives s(oul& reer to t(e various activities o personnel a&ministration connecte& 'it( staDng+ training+ &eveloping+ 'age an& salary benefts+ employee recor&s an& personnel researc(.

6ey issues in personnel policy ( "(e close interrelation bet'een t(e :uality o personnel an& strategic management re:uires t(e top e$ecutives to be concerne& 'it( t(e ollo'ing major policy issues bearing on personnel. 

8ecruitment+ promotion an& transer.



Compensation an& supplementary benefts.



8elation 'it( employee unions



Collective bargaining.

Finally+ policy &ecisions (ave to be taken in connection 'it( personnel a&ministration+ an& t(ese relate to personnel selection+ training an& promotion+ remuneration an& benefts an& in&ustrial relations.

95 | P a g e


5ecruit'ent and Selection Policy ( Policy &ecisions (ave to be taken as to (o' personnel is to be selecte& in terms o t(e proce&ure to be use&. i.e+ t(e e$tent o intervie's re:uires+ psyc(ological resting to be intro&uce& an& t(e source o recruitment. Policy &ecisions may also be taken 'it( regar& to t(e minimum e&ucational or e$perience re:uirements.

Trainin& and Pro'otion Policy ( "(e :uestion o manpo'er &evelopment or training is also an important aspect an& policy &ecisions (ave to be taken 'it( regar& to manpo'er planning an& flling up (ig(er vacancies by promotion rom 'it(in. 1 policy o promotion rom 'it(in presupposes t(e e$istence o a&e:uate training policies to &evelop persons or suc( (ig(er position.

5e'uneration and Beneft Policy ( Policy &ecisions (ave also to be taken in terms o t(e remuneration structure. For e$ample+ in case o t(e sales orce+ certain organiations preer to rely merely on salaries '(ereas ot(er '(ic( to buil& in a commission component to provi&e t(e necessary incentive. "(e :uestion o t(e e$tent o bonus+ apart rom legal re:uirements in *n&ia (as also to be &eci&e&. Policy &ecisions 'ill also be taken regar&ing ot(er benefts suc( as sick leave+ vacations+ canteen acilities an& 'orking con&itions.

Industrial 5elations Policy ( Finally+ in t(e lig(t o increasing strikes in *n&ia+ proper policy &ecisions must be taken in connection 'it( &ealing 'it( labour &isputes an& avoi&ing t(em in t(e uture.

Production and Purc"ase Policy

99 | P a g e


"(e policies or operational are relate& to t(e pro&uction system+ operational planning an& control+ an& researc( an& &evelopment. "(e strategy a&opte& an& a6ects t(e nature o pro&uct also t(e markets to be serve& an& t(e manner in '(ic( t(e markets are to be serve&. 1ll t(ese collectively inuence t(e operations system structure an& objective+ '(ic( are use& to &etermine t(e operations an& policies. Purc(ase an& pro&uction policies like ot(er business policies generate a number o intricate problems.

1 satisactory (an&ling o t(ese problems is essential i t(e business is to keep on its toes. Major pro&uction an& purc(ase policies involve t(e ollo'ing issues;      

Selection o t(e pro&uction process =etermining t(e total pro&uction capacity =eci&ing about t(e e$tent o vertical interpretation #stablis(ing plans or maintenance an& replacement Solving manuacturing or buying problems o supply an& services; Consi&ering (o' t(e purc(asing unctions s(oul& be organie& an& perorme&

6ey issues in production policy ( "(e major issues in pro&uction policy may be sai& to inclu&e t(e ollo'ing  

*nvolvement o t(e frm in pro&uction processes. C(oice o t(e pro&uction processes in inclu&es tec(nology to be use&+ &ivision o labour+ mec(aniation o operations an& sie an&

 

location o plants #stimate o t(e pro&uction capacity Maintenance o replacement o t(e e$isting pro&uction acilities

Pro&uction policy &ecisions 'ill (ave to be taken in connection 'it( t(e sie o t(e run+ automation+ pro&uction stabiliation+ e$tent o marketing or buying components an& inventory levels.

9< | P a g e


T"e Si2e o t"e 5un Policy ( "(is 'ill &epen& on t(e backing an& or&ers as 'ell as t(e nature o automation intro&uce&. *t 'ill also &epen& on t(e type o t(e market. "(e temptation is to increase t(e sie o t(e run to take a&vantage o avoi&ing t(e set up costs. 0o'ever+ t(ese (ave to be 'eig(te& against t(e cost o (eavier inventories.

+uto'ation Policy ( Policy &ecision at t(e top level may (ave to be taken on t(e :uestion o automation. "(e mo&ern tren& is to'ar&s greater automation but t(is (as to be tempere& by social objectives o avoi&ing increasing unemployment in *n&ia.

1gain automation involves consi&eration o tec(nical problems apart rom economic aspects. "(e policy o increasing automation or mec(aniation may be merely 'it( a vie' to avoi& repetitive an& uninteresting 'ork or it may be to re&uce costs. Policy &ecisions (o'ever+ (ave to be taken in t(is be(al at t(e top-level.

Production Sta#ili2ation Policy ( "(e :uestion o pro&uction stabiliation is relate& to t(e sie o t(e run an& t(e e$tent o automation pro&uction (as to be stabilie& t(roug( proper timing+ as market &eman&s cannot be overlooke&. *n vie' o seasonality o &eman&s+ '(ere t(ey e$ist pro&uction stabiliation is soug(t to be ac(ieve& by manuacturing ot(er pro&ucts instea& o leaving pro&uction acilities i&le. *n service in&ustries+ like our rail'ays t(is is a problem '(ere trains (ave to be run o6-season '(en t(ey are partially empty. Policy &ecisions t(ereore (ave to be taken in t(is be(al.

%a,e or Buy Policy ( Make or buy &ecision is relate& to bot( t(e :uestion o marketing policy as 'ell as pro&uction policy. Policy &ecisions (ave to be taken as to t(e e$tent o t(e pro&uct t(at (as to be manuacture& 'it(in t(e organiation itsel an& t(e e$tent+ i any o purc(ases rom outsi&e.

9> | P a g e


For e$ample in t(e automobile in&ustry t(ere are many small-scale in&ustries provi&ing component parts or t(e motorcar. Suc( a policy &ecisions mig(t be arrive& at in t(e lig(t o fnancial consi&erations or because o government control or &irections+ or in terms o social obligations o large business.

In$entory )e$el Policy ( Finally+ t(e :uestions o t(e levels o inventories or stocks t(at can be maintaine& (ave to be &eci&e&. "(e sie o t(e run+ pro&uct stabiliation an& t(e ot(er policies &iscusse& above are relate& to t(e :uestion o inventory level o policies in connection 'it( stocks. "(is is also relate& to t(e aspect o marketing as being out o stock may result in losing customers. 1s against t(is+ (ig(er inventories increase t(e costs an& re&uce t(e ultimate profts. =isposing o6 (eavy stocks may re:uire price slas(ing or re&uctions resulting in 'astage o fnancial resources.

%ar,etin& Policy ( Policies relate& to marketing (ave to be ormulate& an& implemente& on t(e basis o t(e marketing mi$ i.e pro&uct+ price+ place an& promotion. "(e major issues an& &ecisions relate& to t(ese marketing mi$ actors. *n t(e marketing policy &ecisions+ eac( frm is naturally e$pecte& to use t(e set o &ecision+ variables best suite& to its o'n strategy. But t(ere are certain basic issues+ '(ic( are common concern to most o frms. "(e more important issues in marketing 'it( respect to '(ic( gui&elines nee& to be provi&e& are; pro&uct line an& pro&uct mi$+ customers to be serve& an& c(annels o &istribution+ pricing o pro&ucts an& services+ sales+ promotion an& marketing mi$. Basically marketing policies relate to eac( o t(e ,our Ps in marketing namely pro&uct+ pricing+ promotion an& p(ysical &istribution.

Product Polices( *n connection 'it( pro&uct policies+ or e$ample a policy &ecision mig(t (ave to taken as to '(et(er to make or buy t(e pro&uct. Policy &ecisions mig(t (ave to be lai& &o'n 'it( regar& to t(e nature an& e$tent o &iversifcation.

9A | P a g e


For e$ample '(et(er &iversifcation in t(e uture 'ill al'ays be in terms o relate& pro&ucts or '(et(er ne' pro&uct i&eas can be consi&ere& in connection 'it( unrelate& pro&ucts. "(e make or buy &ecision can also be a part o t(e pro&uction policy but can be part o t(e marketing strategy '(ic( is concerne& 'it( t(e overall strategy o t(e business.

Pricin& Policies( Similarly in t(e area o pricing policy &ecisions (ave to be taken. "(e market segment or segments aime& at 'ill &etermine t(e price range. "(e policy &ecisions on pricing are also a6ecte& by t(e type o tra&e c(annels an& t(e &iscounts t(at mig(t (ave to be o6ere&. Pricing policies also &epen& on t(e objectives involve& '(ic( may be to skim t(e cream. i.e+ beneft :uickly in case o novelty pro&uct by c(arging a (ig( price+ or t(e policy may be rapi& market penetration by keeping t(e price as lo' as possible.

Pro'otion Policies( "(e promotional policy is also tie& in 'it( t(e pricing policies. "(e policy to concentrate on certain a&vertising me&ia 'oul& be &ictate& in terms o pro&uct policies an& t(e customer segment involve&. Policy &ecisions 'oul& also (elp in arriving at t(e amount to be spen& on promotional activities. Certain organiations f$ a policy o bu&geting a certain percentage+ say > percent+ o t(e sales or a&vertising e$pen&iture.

P"ysical Distri#ution Policies ( Finally+ policy &ecisions (ave to be taken in t(e area o p(ysical &istribution o t(e pro&uct '(ic( involve& consi&erations o c(annels o &istribution an& logistics i.e+ :uestions o 'are(ousing points an& inventory levels.

9 | P a g e


=iDcult policy &ecisions are involve& in arriving at t(e selection o an appropriate set o &istribution c(annels or t(e pro&ucts o t(e company. !nce establis(e& suc( &ecisions are &iDcult to c(ange. Certain organiations preer to give sole &istributors(ips.

Financial Policy ( "(is policies may be regar&e& as t(e most important business policies+ as t(e entire success or ailure o a business unit &epen&s upon t(ese. Properly rame& fnancial policies result in prosperity an& long survival+ '(ile aulty policies result in t(e units run. "(e fnancial policies o an organiation are relate& to t(e availability+ usage an& management o un&s. Financial policies (ave t(ereore to be &etermine& is t(e areas o 

Sources o Capital Policies



orking Capital Policies



Proft &istribution Policies



=epreciation allo'ances Policies

Source o apital Policy( Policy &imensions are taken at t(e top level regar&ing t(e sources o capital. For e$ample+ in t(e case o t(e sole tra&er+ t(e in&ivi&ual proprietor generally provi&es t(e capital+ '(ic( is supplemente& by loans+ '(ic( (e may be able to obtain rom banks an& ot(er fnancial institutions.

*n t(e case o partners(ip+ t(e partners provi&e t(e basic capital. *n case o joint stock companies+ large capital is possible rom a large number o s(are(ol&ers. *n a&&ition+ loans are generate& t(roug( t(e issue& o &ebentures. "(e :uestion o t(e &ebtHe:uity ratio is a policy &ecision+ '(ic( must be taken.

or,in& apital Policy( "(e &i6erence bet'een t(e current assts an& t(e current liabilities or t(e 'orking capital &etermines (o' ar t(e business unit can imme&iately meet its obligations. *t constitutes t(e ability o t(e organiation to meet its bills '(en t(ey all &ue.

9E | P a g e


Policy &ecisions 'ill (ave to be taken 'it( regar& to (o' or suc( current assets s(oul& be (el& in cas( or in ot(er rea&ily marketable securities or place& in f$e& &eposit to earn interest. "(ese policies are also concerne& 'it( t(e e$tent o bank borro'ings permissible an& allo'ances cre&it acilities t(at s(oul& be e$ten&e& to t(e customers.

Proft Distri#ution Policy ( Policy &ecisions (ave to be taken 'it( regar& to (o' muc( profts s(oul& be &istribute& by 'ay o &ivi&en&s to t(e s(are (ol&ers an& (o' muc( s(oul& be ploug(e& back or uture capital re:uirements. * a&e:uate &ivi&en&s are not &istribute&+ '(en capital is re:uire& in t(e uture it 'ill be &iDcult to attract investors as ne' s(are(ol&ers or to in&uce e$isting s(are(ol&ers to take up more s(ares in t(e company. Some companies ollo' a policy o &ivi&en& e:ualiation by setting asi&e profts in goo& years to be use& or payment o &ivi&en& in lean years.

Depreciation +llo*ance Policy( Policy &ecisions (ave to be taken on t(e :uestion o e$tent o &epreciation to be 'ritten o6 '(ile keeping in min& t(e ta$ provi&ing as 'ell as its possible use as source o un&s or t(e enterprise. UNIT ? %a.or Business Strate&ies Strategy reers to t(e manner o using resources to provi&e superior results. *n operational terms+ strategy is a compre(ensive+ integrate& plan &esigne& to assure t(at t(e basic objectives o t(e enterprise are accomplis(e&.

Strategic planning or strategy ormulation consists o a set o &ecisions+ '(ic( lea&s to t(e &evelopment o an e6ective strategy. Strategy ormulation presupposes environmental analysis an& evaluation o internal capabilities.

9/ | P a g e


"(ereore+ strategic planning is or'ar&-looking e$ercise+ '(ic( &etermines t(e uture posture o t(e enterprise 'it( special reerence to its pro&uct+ market posture+ proftability+ sie+ an& rate o innovation an& e$ternal institutions.

Di'ension o Strate&ic Decisions (at &ecisions acing a business are strategic an& t(ereore &eserve strategic management attention "ypically+ strategic issues (ave fve i&entifable &imensions?

Strate&ic issues re@uire Top-'ana&e'ent Decisions ( Strategic &ecisions overarc( several areas o a frms operations. "opmanagement involvement in &ecision making is imperative. "(e perspective or un&erstan&ing+ anticipating broa& implications+ ramifcations+ an& t(e po'er to aut(orie t(e resources allocations are necessary or implementation.

Strate&ic issues in$ol$e allocation o o'panyAs 5esources ( Strategic &ecisions c(aracteristically involve substantial resource &eployment. "(e people+ p(ysical assets+ or money nee&e& must be eit(er re&irecte& rom internal sources or secure& rom outsi&e. Strate&ic issues are uture !riented ( Strategic &ecisions are base& on '(at managers anticipate or orecast rat(er t(an t(ey kno'. *n t(e turbulent an& competitive ree enterprise environment+ a successul frm must take anticipatory stance to'ar&s c(ange. Strate&ic issue usually "a$e 'ulti-#usiness conse@uences( 1 strategic &ecisions are coor&inative. =ecisions about suc( actors as customer mi$+ competitive emp(asis+ or organiational structure necessarily involve a number o a frms strategic business units ISBGsJ+ unctions+ &ivisions+ or program units.

< | P a g e


#ac( o t(ese areas 'ill be a6ecte& by t(e allocation or reallocation o responsibilities an& resources relate& to t(e &ecision.

Strate&ic issue necessitate considerin& e0ternal en$iron'ent( 1ll business frms e$ist in an open system an& are inuence& by e$ternal con&itions largely beyon& t(eir control. "(ey must consi&er competitors+ consumers+ suppliers+ cre&itors+ government an& labor.

Sta#ility Strate&y 1 stability strategy arise out o a basic recognition by management t(at t(e frm s(oul& concentrate on utiliing its present resources to &evelop its competitive strengt( 'it(in a restricte& pro&uct-market confguration. *n ot(er 'or&s+ stability strategy implies t(at t(e company 'ill continue in t(e sale or a similar business as it no' pursues+ an& 'it( t(e same o similar objectives. "(e stable strategy is &esirable or a frm+ '(ic( (as a smoot( sailing an& '(ere environment is not e$cessively (ostile. "(is type o strategy is ollo'e& by a frm '(en? t(ere is no &eviation rom t(e e$isting strategy; it goes on serving customers in similar pro&uct or service sectors as mentione& in t(e business c(arter an&; t(e environment is relatively stable or not muc( c(ange is e$pecte& in it. "(e various sub-strategies o t(e stable strategy inclu&e t(e ollo'ing

Incre'ental ro*t" Strate&y ( "o start 'it( a strategic move+ many frms preer to a&opt incremental gro't( as a strategy+ concentrating on one pro&uct line at a time+ an& gro'ing slo'ly but surely 'it( a strong base to move on. "(e objective may be+ or instance+ to enter ne' market segments gra&ually. 7ot(ing is attempte& by 'ay o a big leap or'ar&.

<) | P a g e


7e' moves are careully teste& in all respects. Suc( an incremental gro't( strategy may succee& t(roug( e6ective market segmentation+ re&ucing costs o

Proft Strate&y( "(e proft strategy is also &esignate& as ,en&-game strategy. (en t(e objectives o a frm are to generate cas( imme&iately or itsel proft strategies are ollo'e&. * necessary+ t(e frm orgoes its market s(are to generate t(e cas(. Sta#ility as a Pause Strate&y ( 0aving ac(ieve& a (ig( gro't( level+ some frms may fn& it &iDcult to maintain it an& t(us attempt to set a lo'er level o gro't( or t(e time being until con&itions are c(anging are more propitious. *t may be calle& some sort o a ,breat(ing spell strategy. Sustaina#le &ro*t" strate&y( "(is strategy is &esirable '(en e$ternal con&itions are not avorable or pursuing a gro't( strategy &ue to resource constrains. 1lso t(ere may be ot(er kin&s o c(anges in e$ternal con&itions '(en t(e e$ecutives may fn& gro't( strategy no longer 'ort('(ile. ro*t" or /0pansion Strate&y #$pansion strategy is ollo'e& '(en an organiation substantially broa&ens t(e scope o its customer groups+ customer unctions+ an& alternative tec(nologies in or&er to improve its perormance. (en a frm increases t(e level o objectives in terms o market s(are+ sales revenue+ etc+ ne' pro&ucts are a&&e& to t(e e$isting line+ or &issimilar pro&ucts are taken up or pro&uction an& sale+ or business activities are e$pan&e& t(roug( ac:uisition+ merger+ or amalgamation o frms. *n t(is sense+ gro't( strategy &i6ers rom stability strategy in t(at t(e ormer implies e$ponential gro't( '(ile t(e latter implies an e$trapolation o gro't( base& on past perormance. "(e gro't( strategy can be classife& into t'o sub-category namely+ internal gro't( strategy an& e$ternal gro't( strategy. <5 | P a g e


Internal ro*t" Strate&y( *n t(is strategy+ t(e company 'ill take all necessary e6ort to gro' its business 'it( (elp o its o'n resources an& e6ort. "(ere are t'o types o internal gro't( strategies namely+ internal gro't( by increasing sales o t(e single pro&uct or service line an& internal gro't( by &iversifcation. *n internal gro't( by increasing sales o t(e single pro&uct or service line+ t(e frm increases its level o objective ac(ievement by increasing t(e sales an& proft o its present pro&uct or service line. "(is may be ac(ieve& in t(e ollo'ing 'ays; 

  

By e$pan&ing sales t(roug( increasing primary &eman& an& encouraging ne' uses #$pan&ing sales o pro&uct by a&opting a &i6erent income groups #$pan&ing sales by a&opting a &i6erent pricing strategy #$pan&ing sales to &i6erent market segments by pro&ucing goo&sHservices+

'(ic(+

cater

to

&i6erent

purposes

an&

personalities

/0ternal &ro*t" #y %er&er and ;oint Ventures( 1n e$ternal gro't( strategy is one by '(ic( a frm increases its level o objective ac(ievement t(roug( mergers+ joint ventures an& vertical integration. %er&er? 1 merger is t(at process by '(ic( t'o o more frms ac:uire t(e assets an& liabilities o t(e ot(er in e$c(ange o stock+ or cas(+ or bot(. *t can be t'o types namely+ concentric an& conglomerate. 1 concentric merger is one in '(ic( t'o or more frms+ '(ic( are relate& by t(e pro&uction process+ tec(nology an& markets combine. 1 conglomerate merger involves t(e combination o t'o or more frms not closely relate& by tec(nology+ pro&uction process or markets.

;oint Venture( *t can take place bet'een t'o or more frms o t(e same country or bet'een t(e frms operating in &i6erent countries. 1s

<9 | P a g e


t(ey are orme& 'it( a &i6erent purpose an& (ave a &i6erent rate o success.

Vertical Inte&ration( @ertical integration is a gro't( strategy c(aracterie& by entering or leaving one or more stages in t(e process o t(e manuacture an& &istribution o goo&s an& services. *t may be back'ar& integration or or'ar& integration. Back'ar& integration also kno'n as upstream &evelopment+ it involves a&&ition to activities to ensure t(e supply o a frms present inputs. *t is aime& at moving lo'er on t(e pro&uction process scale so t(at t(e frm is able to supply its o'n ra' materials or basic components.

5etrenc"'ent Strate&y 8etrenc(ment strategy is ollo'e& '(en an organiation substantially re&uces t(e scope o its customer groups+ customer unctions+ or alternative tec(nologies in or&er to improve its perormance. 8etrenc(ment involves total or partial 'it(&ra'al rom a customer group+ customer unction+ or use o an alternative tec(nology. 8etrenc(ment strategies may be use& on t(e ollo'ing circumstances; 

Poor perormance  "(reat to survival  8e&eployment resources  *nsuDciency o resources  "o secure better management an& improve& eDciency "(ere are &i6erent 'ays in '(ic( a company may &een& its e$istence an& survive+ or best serve t(e interest o o'ners in t(e ace o internal or e$ternal crises. "(e variants or sub strategies o retrenc(ment strategy are turnaroun& strategy+ &ivestment strategy+ an& li:ui&ation strategy.

Turnaround Strate&y( (en an enterprise (as been su6ering rom business losses or a long perio& because o continue& &ecline in sales+

<< | P a g e


it takes recourse to turnaroun& strategy to arrest an& reverse t(e &ecline perormance o t(e business.

"(is strategy aims at improving t(e eDciency o t(e frm by turning aroun& its resources. 8e&ucing assets ac(ieving cost re&uction an& increasing revenues can bring t(is about. "(ere are certain con&itions+ '(ic( point out t(at a turnaroun& is nee&e&. "(ese &anger signs are; persistent negative cas( o'; negative profts; &eclining market s(are; &eterioration in p(ysical acilities; over-manning+ (ig( turnover o employees + an& lo' morale; uncompetitive pro&ucts or services an& mismanagement.

Di$est'ent Strate&y( *n t(is approac( t(e frm &eci&es to close &o'n a particular area o business. Suc( an e$treme step is taken '(en it is oun& t(at t(e particular unit or &ivision or area o business (as been su6ering loss or a long time an& t(ere is no possibility o any improvement in t(e near uture. =ivestment &ecision s(oul& be ma&e careully. Beore taking a fnal &ivestment &ecision it 'ill be appropriate to prepare a profle o environmental opportunities+ t(reats an& strategic a&vantages or eac( &ivision. 1 &ivestment strategy may be a&opte& &ue to various reasons;  

1 project or business t(at proves to be unviable in t(e long-term Persistent negative cas( o's rom a business create fnancial problems

or

t(e

'(ole

company+

creating

t(e

nee&

or

&ivestment.  "ec(nological up-gra&ation is re:uire& i t(e business is to survive 

but '(ere it is not possible or t(e frm to invest in it. =ivestment may be &one because by selling o6 a part o business t(e company may be in a position to survive

<> | P a g e


)i@uidation strate&y( "(e li:ui&ation strategy may be regar&e& as a strategy o last resort. *t involves selling o6 or closing &o'n a frm to avoi& bankruptcy an& securing a better &eal or s(are(ol&ers t(an running at a loss. Suc( a &ecision is taken un&er t(e ollo'ing circumstances? 

(en t(e business con&ition o a frm is perilous an& t(ere is no

(ope o recovering rom t(e present crises.  "(e managers may eel t(e business is at its peak but t(e uture is uncertain an& t(e frm is unable to see any &irection in '(ic( it can enter an& operate. *n suc( a situation+ t(ey &eci&e to get out 

o t(e present line o business. 1 frm may be su6ering rom a business crises an& it may not



(ave a&e:uate resources to get out o t(e present rut. (en a frm (as been aring very ba&ly in t(e past e' years an& (as conse:uently su6ere& consi&erable losses an& some ot(er



frm o6ers to buy it or ta$ consi&eration or any ot(er reason. Sometimes a frm may be o6ere& a price (ig(er t(an it real 'ort( an& t(e management may be tempte& to sell o6 t(e business.

/$aluation o +lternati$es( 1ter t(e above steps (ave been ollo'e&+ t(e strategy maker s(oul& consi&er t(e best one. Quite oten only t'o alternatives are present i.e to ollo' are not to ollo'. *n or&er to e$amine t(e best strategy t(e relative strengt( an& 'eaknesses s(oul& be evaluate& 'it( respect to tec(nical easibility. 1ter analysis o all t(ese actors only t(e best strategy may be selecte&.

Selection o Strate&y( "(e i&entifcation an& evaluation o various alternatives 'ill narro' &o'n t(e range o policies+ '(ic( can seriously be consi&ere& or c(oice. C(oice is &eci&ing t(e acceptable alternative among t(e several '(ic( fts 'it( t(e organiational objective.


7ormally at t(is stage+ personal values an& e$pectations o &ecisionmaker play an important role in strategy because (e 'ill &eci&e t(e course o action &epen&ing on (is o'n likings an& &isliking. "(is (appens because in one 'ay+ t(e organiational objectives reect t(e personal p(ilosop(y o in&ivi&uals particularly at t(e top management level.

I'ple'entation( 1ter t(e Strategy (as been c(osen+ it is put to implementation+ '(ic( is it is put into action. C(oice o Strategy is mostly analytical an& conceptual '(ile implementation is operational or putting into action. @arious actors '(ic( are necessary or implementation are &esign o suitable organiation structure+ &eveloping an& motivating people to take up 'ork+ &esigning e6ective control an& inormation system+ allocation o resources etc.+ (en t(ese may pro&uce results+ '(ic( can be compare& in t(e lig(t o objectives set+ an& control process comes into operation. * t(e results an& objectives &i6er+ a urt(er analysis is re:uire& to fn& out t(e reasons or t(e gap an& taking suitable actions to overcome t(e problems because o '(ic( t(e gap e$ists. "(is may also re:uire a c(ange in strategy i t(ere is a problem because o t(e ormulation ina&e:uacy.

< | P a g e


The 7-S-Model 2y 3agmar Rec!lies The 7-S-Model is better known as McKinsey 7-S. This is because the two persons who developed this model, Tom Peters and Robert aterman, have been consultants at McKinsey ! "o at that time. Thy published their 7-S-Model in their article #Structure $s %ot &r'ani(ation) *+/ and in their books #The 0rt o1 2apanese Mana'ement) *++/ and #$n Search o1 34cellence) *+5/. The model starts on the premise that an or'ani(ation is not 6ust Structure, but consists o1 seven elements

Structure Strategy

Systems S(are& @alues

Skills

Style

Sta6 www.themanager.org

Those seven elements are distin'uished in so called hard S8s and so1t S8s. The hard elements *'reen circles/ are 1easible and easy to identi1y. They can be 1ound in strate'y statements, corporate plans, or'ani(ational charts and other documentations. The 1our so1t S8s however, are hardly 1easible. They are di11icult to describe since capabilities, values and elements o1 corporate culture are continuously developin' and chan'in'. They are hi'hly determined by the people at work in the or'ani(ation. There1ore it is much more di11icult to plan or to in1luence the characteristics o1 the so1t elements. 0lthou'h the so1t 1actors are below the sur1ace, they can have a 'reat impact o1 the hard Structures, Strate'ies and Systems o1 the or'ani(ation.

Description


The Hard S’s Strategy

0ctions a company plans in response to or anticipation o1

Structure

chan'es in its e4ternal environment. 9asis 1or speciali(ation and co-ordination in1luenced primarily by

Systems

strate'y and by or'ani(ation si(e and diversity. :ormal and in1ormal procedures that support the strate'y and structure. *Systems are more power1ul than they are 'iven credit/

The Soft S’s Style / Culture

The culture o1 the or'ani(ation, consistin' o1 two components •

&r'ani(ational "ulture the dominant values and belie1s, and

norms, which develop over time and become relatively endurin' 1eatures o1 or'ani(ational li1e. •

Mana'ement Style more a matter o1 what mana'ers do than

what they say; the creation and maintenance *or sometimes deconstruction/ o1 meanin' is a Staff

1undamental responsibility o1 mana'ers. The people?human resource mana'ement > processes used to develop mana'ers, sociali(ation processes, ways o1 shapin' basic values o1 mana'ement cadre, ways o1 introducin' youn' recruits to the company, ways o1 helpin' to mana'e the careers o1

Sills

employees The distinctive competences > what the company does best,

Shared !alues /

ways o1 e4pandin' or shi1tin' competences @uidin' concepts, 1undamental ideas around which a business is

Superordinate "oals

built > must be simple, usually stated at abstract level, have 'reat meanin' inside the or'ani(ation even thou'h outsiders may not see or understand them.

311ective or'ani(ations achieve a 1it between these seven elements. This criterion is the ori'in o1 the other name o1 the model Aia'nostic Model 1or &r'ani(ational 311ectiveness. $1 one element chan'es then this will a11ect all the others. :or e4ample, a chan'e in


success1ul chan'e process, since new structures and strate'ies are di11icult to build upon inappropriate cultures and values. These problems o1ten come up in the dissatis1yin' results o1 spectacular me'a-mer'ers. The lack o1 success and syner'ies in such mer'ers is o1ten based in a clash o1 completely di11erent cultures, values, and styles, which make it di11icult to establish e11ective common systems and structures. The 7-S Model is a valuable tool to initiate chan'e processes and to 'ive them direction. 0 help1ul application is to determine the current state o1 each element and to compare this with the ideal state. 9ased in this it is possible to develop action plans to achieve the intended state.

UNIT  Society and Business Business is an integral part o t(e social system; an& it inuences ot(er elements o society+ '(ic( in turn a6ect business. "(e type o pro&ucts to be manuacture& an& markete&+ t(e marketing strategies to be employe&+ t(e 'ay t(e business s(oul& be organie&+ are inuence& by society. "(e social system also on t(e ot(er (an&+ is inuence& by t(e 'ay t(e business unctions+ innovations+ transmission on &i6usion o inormation an& ne' i&eas may a6ect society. "(us business activities (ave greatly inuence& by social attitu&es+ values+ outlooks+ customs+ traits+ etc. 8esponsibility o business to'ar&s society inclu&es concern or ecology; consumerism; rural &evelopment an& ne' projects. Business may or may not (ave &irect or &ay-to-&ay interaction 'it( t(ese interest groups. "(e 'ell being o society is t(e 'ell being o business.

Business /t"ics Business et(ics is concerne& 'it( t(e relations(ip o business goals an& tec(ni:ues to specifc (uman nee&s. *t stu&ies t(e impact o acts on t(e goo& o t(e in&ivi&ual+ t(e frm+ t(e business community an& t(e society as a '(ole.

> | P a g e


*n t(ese 'or&s o %arrett+ ,business et(ics is a stu&y o moral rig(tness an& 'rongness o t(e acts involve& in t(e pro&uction+ &istribution an& e$c(ange o economic goo&s an& services.

Need or Business /t"ics "(e nee& or business et(ics+ i.e+ or a set o generally stan&ar&s o personal con&uct+ is evi&ent t(roug(out t(e 'orl&. "(e legislative representatives establis( status an& a&ministrative la's in critical areas o inter-personal con&uct '(ere t(e saety an& personal 'elare on t(e people can be vitally a6ecte& by unet(ical practices+ or urt(ering et(ical practices in business community an& proessional people+ t(e concept o Proessional Co&es or Co&es o con&uct (ave also assume& great importance. "(ese (ave been an& &evelope& by t(e tra&e associations concerne& 'it( t(e ollo'ing objectives. 

Publication o a Co&e o #t(ics is likely to improve t(e conf&ence o customers+ clients+ employees+ etc.+ in t(e :uality o service



t(ey may e$pect; Business co&es govern t(e inter-relations(ips o t(e members. Business cannot be carrie& on 'it(out trust in t(e et(ical stan&ar&s o ven&ors an& suppliers+ fnanciers an& government

agencies.  "(e interest o all t(ose '(o &eal 'it( business t(e stock (ol&ers+ employees+ customers+ competitors+ &ealers an& suppliers an& t(e local community-nee& to be protecte& rom t(e unet(ical practices.  "(e consumers rig(t can be save& an& serve& 'ell only '(en 

t(ere is some type o moral bin&ing on t(e business community Business to&ay is conronte& 'it( various social issues+ suc( as ? people

oriente&

management

ecology

an&

environmental

protection consumerism an& t(e energy being inter-relate&+ nee& t(at business s(oul& eel some obligation or meeting t(ese issues.

>) | P a g e


Factors a4ectin& #usiness /t"ics "(e business e$ecutive (as to &eci&e '(at is et(ical or unet(ical. Many actors inuence t(is &ecision. "(ere are as ollo's

Personal code o #e"a$ior o Indi$idual ? "(e personal Co&e o Be(avior o t(e in&ivi&ual is t(e result o t(e comple$ environment t(at inuences ones lie. T"e /t"ical standards i'posed( "(e et(ical co&e impose& by t(e superior on t(e subor&inates also inuences t(e morality o be(avior. * t(e superior con&ones unet(ical activities suc( as pa&&ing e$pense accounts+ t(e subor&inate is encourage& to look upon t(is activity as on acceptable practice. Policies o t"e co'pany( Stan&ar&s o be(avior in an in&ustry are oten inuence& greatly by t(e &ominant frms in t(at in&ustry. %arrett puts t(is i&ea '(en (e says3 t(e best protection is t(e e$ample presente& by t(e con&uct o top management an& t(e atmosp(ere it creates+ '(en lea&ers are scrupulous+ t(e employees kno' '(at is consi&ere& rig(t. (en e$ample is supporte& by e$plicit policy+ t(e ollo'ers (ave a clear i&ea o (o' to translate t(e e$ample o lea&ers into action.

5ole o Trade +ssociations in Business /t"ics "ra&e associations+ '(ic( are voluntary organiations o businessmen orme& to promote t(eir common interest+ can play an important role to promote business et(ics. "ra&e associations can promote business et(ics in t(e ollo'ing 'ays   

#&ucation an& persuasion Co&e o #t(ics Moral sanctions

>5 | P a g e


Principles o Business /t"ics "(ere are certain principles o business et(ics+ '(ic( are may be state& as belo' 0uman value gro's 'it( t(e increase in sie o business to '(ic( it applies. "(ereore+ t(e importance an& &ignity o (uman labor (as not only to be accepte& but also practically applie& to. "(e purpose o all economic activity is to meet consumer nee&s an& to contribute to t(e 'ell being o t(e community; or business is not an en& in itsel but is only a mean to ac(ieve an en&. "(ereore+ business (as to contribute to mans material (appiness an& to (is mental+ moral an& spiritual gro't(. 2Business must be (el& in trust legally an& morally or t(e beneft o t(e people '(om t(e business 'ants to serve3. Business must be just+ eDcient an& &ynamic. Mo&ern business (as maniol& responsibilities; an& t(e task o management is to ,reconcile an& (armonie t(ese separate an& sometimes conicting responsibilities. "(e social role o business can best be assume& in an atmosp(ere o ree&om into t(e least possible restraint on (ealt(y an& open competition an& absence o un&esirable restriction or intererence rom t(e government. 1s suc( ,concentration an& monopoly (ave to 'atc(e& an& guar&e& an& '(erever necessary &isperse&.

Social 5esponsi#ility o Business Business &epen&s on society or e$istence+ sustenance an& encouragement. =epen&ence on society is so complete t(at as long as t(e latter 'ants t(e ormer+ business (as reason to e$ist. Being so muc( &epen&ent+ business (as &efnite responsibility to'ar&s society.

>9 | P a g e


"(is is popularly kno'n as social responsibility. #very &ecision t(e businessman takes an& every action (e contemplates (ave social implications. 1ccor&ing to 8aymon& Bauer+ 2Social responsibility is seriously consi&ering t(e impact o t(e companys actions on society3.

Social 5esponsi#ility %odels "(ere are t'o basic approac(es to t(e concept o social responsibility. "(e frst concept on t(e micro level analysis+ try to s(o' in&ivi&ual companies (o' t(ey can be more socially responsive. !n t(e ot(er (an&+ t(e macro level o analysis+ assuming t(at t(e government+ not in&ivi&ual companies s(oul& establis( a countrys social goals.

+6/5%+NAS %!D/)( 1ckerman &escribe& t(ree p(ase t(roug( '(ic( companies commonly ten& to pass in &eveloping a response to social issues. In P"ase – 1( 1t t(is state+ no one asks t(e company to &eal 'it( it. "(e c(ie e$ecutive oDcer merely ackno'le&ges t(e problems by making a 'ritten or oral statement o t(e companys policy to'ar&s it. In P"ase – 7( t(e company (ires sta6 specialists to stu&y t(e problem an& to suggest 'ays o &ealing 'it( it. Company (as limite& itsel to &eclaring its intentions an& ormulating its plans. P"ase – > ( "(e company integrates t(e policy into its ongoing operations. Gnortunately+ implementation oten comes slo'ly an& oten not until t(e government or public opinion orces t(e company to act. 1ckerman t(us a&vices t(at+ t(e management s(oul& act early in t(e lie cycle o any social issue in or&er to enjoy t(e largest amount o managerial &iscretion over t(e outcome.

>< | P a g e


!5+NIC+TI! N+) )/V/) C(ie #$ecutive

Sta6 Specialists

=ivision Management

>> | P a g e

P3+S/S !F !5+NIC+TI!N+) INV!)V/%/NT P3+S/ -1 P3+S/ -7 P3+S/ -> !btain Issue( Corporate kno'le&ge. 1&& obligation sta6 specialists rite +ction( an& communicate policy !utco'e( #nric(e& purpose+ increase& a'areness Issue( "ec(nical problems. +ction( =esign &ata system an& interpret environment. !utco'e( "ec(nical an& inrastructural groun&'ork.

!btain organiational commitment. C(ange perormance e$pectations.

Provi&e response rom operating units. 1pply &ata system to perormance measurement.

Issue( Management problem. +ction( Commit resources an& mo&iy


!utco'e( *ncrease& responsiveness. +55!))AS F!U5-P+5T %!D/) 1rc(ie B. Carrol (as promulgate& t(e our-part mo&el. "(e mo&el suggests t(at business frms are basically an economic activity; its primary responsibility is economic. *t mist pro&uce t(e goo&s t(at society 'ants an& must sell t(em at a proft. Oegal responsibilities are also basic. Firms s(oul& operate 'it(in t(e la'. *n t(is mo&el+ et(ical responsibilities reer to be(avior by t(e frm t(at is e$pecte& by society. "(e category o &iscretionary responsibilities encompasses voluntary activities un&ertaken or t(e public goo&.

Specifc &iscretionary activities are not man&ate& by la' nor &eman&e& by public opinion. 0o'ever+ more an& more re:uently business are e$pecte& to get involve& in t(ese o activities.

/cono'ic )e&al /t"ical Discretionary 5esponsi#ilitie 5esponsi#ilitie 5esponsi#ilitie 5esponsi#ilitie s s s s T!T+) S!I+) 5/SP!NSIBI)ITI/S Di'ensions o Social 5esponsi#ilities

>A | P a g e


> | P a g e


Social +udit Business unit (as obligations to its employees+ o'ners+ buyers+ government an& environment. "(e :uestion no' is (o' to assess t(e perormance o a particular business unit. "(e ans'er is ,social au&it. "(e social au&it is an approac( or monitoring+ appraising an& measuring t(e social perormance o business. 4reps may regar&e& as t(e oun&ing at(er o t(e i&ea. 0e inclu&e& among t(ese measurements; employment+ pro&uction+ consumer e6ort comman&e&+ consumer un&s absorbe&+ pay rolls an& &ivi&en& an& interest. "(e basic purpose o a business is to ma$imie t(e fnancial return earne& on its fnancial investment plus t(e amount o social return on its social investment. "o make rational investment &ecisions in t(e social area it is necessary to kno' '(at t(e social returns are+ an& i 'e are to assess t(em by t(e same measures as or fnancial investment+ t(ese must be e$presse& in monetary terms. 1 social au&it is a systematic stu&y an& evaluation o an organiations social perormance+ as &istinguis(e& rom its economic perormance. *t is concerne& 'it( t(e possible inuence on t(e social :uality o lie instea& o t(e economic :uality o lie. Social au&it lea&s to a report on t(e social perormance o a business unit. *t is t(e evaluation or assessment o a companys perormance against planne& goals in t(e area o social responsibility. "(e internal an& e$ternal bo&ies may carry out t(e assessment+ &i6erent people (ave interprete& t(e term social au&it &i6erently. "o some it means t(e public &isclosure o a companys social responsibility an& to some ot(ers social au&it is a compre(ensive evaluation o t(e 'ay a company &isc(arge all its responsibilities to s(are(ol&ers+ customers+ an& employees an& to t(e 'i&er community.

>E | P a g e


Features o Social +udit "(e nature o social au&it can be ma&e clearer i 'e bring out its salient eatures.

Social audit include any acti$ity ( Social au&it inclu&e any activity '(ic( (as a signifcant social impact+ suc( as activities a6ecting environmental :uality+ consumerism+ opportunities or 'omen an& ot(er &isa&vantages people in society an& similar ot(ers. Dicult to audit ( Social perormance is &iDcult to au&it because most o t(e results o social activities occur beyon& t(e companys gate an& t(e company (as no means o securing &ata on t(e result. #ven i &ata are available it is &iDcult to establis( (o' o t(em (ave occurre& &ue to companys actions.

Social audit use #ot" @ualitati$e and @uantitati$e data( social au&its use bot( :ualitative an& :uantitative &ata. "(e pressure to use :uantitative approac( is strong because o objectivity. Quantitative &ata are precise an& convincing+ but in t(e area o social p(ilosop(y an& (uman values it is mislea&ing to report only in :uantitative terms.

+ssessin& or&ani2ational co''it'ents to society ( Social au&it &etermine only '(at an organiation is &oing in social areas+ not t(e amount o social goo& t(at results rom t(ese activities. *t is process au&it rat(er t(an an au&it or results. !#.ecti$es o Social +udit Because o t(e &i6ering vie' about social au&its+ t(ey (ave multiplie& motives+ '(ic( inclu&e+ increasing t(e 'is&om o social programmes+ improving public relations+ an& en(ancing t(e cre&ibility o t(e business. "(e particular issues are minority employment+ pollutionHenvironment+ 'orking con&itions+ community relations an& consumerism issues.

>/ | P a g e

Business Policy and Strategy bba study notes

Recommend Documents