Strategy and business policy

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  1. Strategy and Business PolicyStrategy and Business Policy George AntoniadesGeorge Antoniades 2. Strategic ManagementStrategic Management ►Set of decisions and actions…
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  • 1. Strategy and Business PolicyStrategy and Business Policy George AntoniadesGeorge Antoniades
  • 2. Strategic ManagementStrategic Management ►Set of decisions and actions that result inSet of decisions and actions that result in the formulation and implementation of plansthe formulation and implementation of plans designed to achieve a company’s objectivesdesigned to achieve a company’s objectives
  • 3. Strategic ManagementStrategic Management ► It’s main tasksIt’s main tasks 1.1. Formulate a mission of the company (reasonFormulate a mission of the company (reason for it’s existence)for it’s existence) 2.2. Develop a company profileDevelop a company profile 3.3. Assess the external environmentAssess the external environment 4.4. Analyze the company’s optionsAnalyze the company’s options 5.5. Identify the most desirable options in light ofIdentify the most desirable options in light of it’s missionit’s mission
  • 4. 7.7. Select long term objectivesSelect long term objectives 8.8. Implement the strategic choicesImplement the strategic choices 9.9. Evaluate the success of the strategy forEvaluate the success of the strategy for future referencefuture reference
  • 5. The Dimensions of StrategicThe Dimensions of Strategic DecisionsDecisions ► Strategic Issues Require Top-ManagementStrategic Issues Require Top-Management DecisionsDecisions  Only top management can understand the implicationsOnly top management can understand the implications of these decisionsof these decisions  Only top Management can authorize the allocation ofOnly top Management can authorize the allocation of the sources requiredthe sources required ► Strategic Issues Require large Amounts ofStrategic Issues Require large Amounts of ResourcesResources  Require substantial allocation of people and assetsRequire substantial allocation of people and assets
  • 6. ► Strategic Issues often Affect the firms Long-Strategic Issues often Affect the firms Long- Term ProsperityTerm Prosperity  The decision will commit the organizationThe decision will commit the organization for a long time. (usually 5 years and more)for a long time. (usually 5 years and more) ► Strategic Issues are future OrientedStrategic Issues are future Oriented  Managers are based on forecast ratherManagers are based on forecast rather than what they knowthan what they know ► Strategic issues usually have MultifunctionalStrategic issues usually have Multifunctional or Multibusiness consequencesor Multibusiness consequences  Strategic decisions often affect the firm’sStrategic decisions often affect the firm’s SBUsSBUs ► Strategic Issues require Considering theStrategic Issues require Considering the Firm’s External EnvironmentFirm’s External Environment
  • 7. Levels Of StrategyLevels Of Strategy ►Corporate Level ManagementCorporate Level Management  Board of Directors, C.E.O, and AdministrativeBoard of Directors, C.E.O, and Administrative Officers.Officers. ►Responsible for financial performanceResponsible for financial performance ►Responsible for the non financial goals (e.g. ImageResponsible for the non financial goals (e.g. Image and social responsibilities of the firm)and social responsibilities of the firm) ►Business Level ManagementBusiness Level Management  Business and Corporate ManagersBusiness and Corporate Managers ►Translate statements of direction and intent comingTranslate statements of direction and intent coming from Corporate Level into objectives and strategiesfrom Corporate Level into objectives and strategies
  • 8. ►Functional Level ManagementFunctional Level Management  Product managers, area managers, functionalProduct managers, area managers, functional managersmanagers ►Annual objectivesAnnual objectives ►Short term strategiesShort term strategies ►Implement company’s strategic planImplement company’s strategic plan ►Focus on doing the “right thing”Focus on doing the “right thing”
  • 9. Benefits of strategic managementBenefits of strategic management ► Prevent problemsPrevent problems ► Group-based strategic decisions generate greater varietyGroup-based strategic decisions generate greater variety of strategies by experts specialized in different areasof strategies by experts specialized in different areas improve the screening of optionsimprove the screening of options ► The involvement of employees in strategy formulationThe involvement of employees in strategy formulation heightens their motivationheightens their motivation ► Gaps and overlaps in activities are reduced sinceGaps and overlaps in activities are reduced since participation of individuals and groups clarifies the differentparticipation of individuals and groups clarifies the different rolesroles ► Resistance to change is reducedResistance to change is reduced  Participants are more likely to accept changes which they haveParticipants are more likely to accept changes which they have taken part ontaken part on
  • 10. Risks of Strategic ManagementRisks of Strategic Management ►Strategic Planning takes timeStrategic Planning takes time  Negative impact on operational responsibilitiesNegative impact on operational responsibilities ►If the formulators are not involved in theIf the formulators are not involved in the implementation they may shrink theirimplementation they may shrink their responsibility for the decisions reachedresponsibility for the decisions reached  Managers should limit their promisesManagers should limit their promises ►Strategic managers must be trained toStrategic managers must be trained to anticipate and respond to disappointment ofanticipate and respond to disappointment of subordinates over unattained expectationssubordinates over unattained expectations
  • 11. Strategic Management ModelStrategic Management Model ► Company MissionCompany Mission  The mission describes the company’s product, market,The mission describes the company’s product, market, and technological areas.and technological areas. ► Company ProfileCompany Profile  Portray the company’s quantity and quality of financial,Portray the company’s quantity and quality of financial, human and physical resourceshuman and physical resources  Examine the company’s strengths and weaknesses ofExamine the company’s strengths and weaknesses of its management and structureits management and structure  Contrasts the company’s past successes traditionalContrasts the company’s past successes traditional concerns with current capabilities to identify itsconcerns with current capabilities to identify its capabilitiescapabilities
  • 12. ►External EnvironmentExternal Environment  Consist of all conditions and forces that effect aConsist of all conditions and forces that effect a firm’s strategic options and define itsfirm’s strategic options and define its competitive situationcompetitive situation ►Strategic Analysis and choiceStrategic Analysis and choice  Simultaneous assessment of externalSimultaneous assessment of external environment and the company profile to identifyenvironment and the company profile to identify possibly attractive interactive opportunities.possibly attractive interactive opportunities.
  • 13. ► Long –Term ObjectivesLong –Term Objectives  The results an organization seeks to achieve over longThe results an organization seeks to achieve over long period of timeperiod of time ► Profitability R.O.I (return on investment), productivity etc.Profitability R.O.I (return on investment), productivity etc. ► Generic and Grand StrategiesGeneric and Grand Strategies  Generic StrategiesGeneric Strategies ► Low cost, differentiation, and focus strategies.Low cost, differentiation, and focus strategies. ► Combined with a comprehensive, general plan of major actionsCombined with a comprehensive, general plan of major actions through which the firm will achieve its Long-Term objectivesthrough which the firm will achieve its Long-Term objectives
  • 14. ►Action Plans and Short-Term objectivesAction Plans and Short-Term objectives  Action Plans translate generic and grandAction Plans translate generic and grand strategies into action by incorporating:strategies into action by incorporating: ►SpecificSpecific and functionaland functional tactics and actionstactics and actions for a shortfor a short term period in an effort to build a competitiveterm period in an effort to build a competitive advantageadvantage ►ClearClear frame time for completionframe time for completion ►CreateCreate accountabilityaccountability to determine who isto determine who is responsible for each action in the planresponsible for each action in the plan ►OutcomesOutcomes that action should generatethat action should generate
  • 15. ►Functional TacticsFunctional Tactics  Identify and undertake activities unique to theIdentify and undertake activities unique to the function that help build a competitive advantagefunction that help build a competitive advantage ►Policies that Empower ActionPolicies that Empower Action ►Restructuring, Reengineering, refocusingRestructuring, Reengineering, refocusing the organizationthe organization ►Strategic control and continuousStrategic control and continuous improvementimprovement
  • 16. Chapter 2Chapter 2
  • 17. Defining the Company missionDefining the Company mission ►Company MissionCompany Mission  The mission describes the company’s product,The mission describes the company’s product, market, and technological areas.market, and technological areas.  ““It describes the reason for the company’sIt describes the reason for the company’s existence”existence” ► Strategic management (Strategic management (Board of directorsBoard of directors)) is responsible for overseeing the creationis responsible for overseeing the creation and accomplishment of the companyand accomplishment of the company missionmission
  • 18. Company missionCompany mission ► Designed to accomplish:Designed to accomplish: 1.1. To ensure unanimity of purposeTo ensure unanimity of purpose 2.2. To provide a basis for motivation forTo provide a basis for motivation for employeesemployees 3.3. To develop a basis for allocating theTo develop a basis for allocating the organizational resourcesorganizational resources 4.4. TO establish organizational climateTO establish organizational climate
  • 19. Company missionCompany mission 5. To serve as a focal point for those who can5. To serve as a focal point for those who can identify with the organization’s purpose andidentify with the organization’s purpose and direction, and deter those who can’tdirection, and deter those who can’t 6. To facilitate the translation of objectives and6. To facilitate the translation of objectives and goals into work structure involving thegoals into work structure involving the assignment of tasksassignment of tasks 7. Specify the purposes of the organization and7. Specify the purposes of the organization and translate it into goalstranslate it into goals
  • 20. Formulating a MissionFormulating a Mission ►Start by thinking our beliefs about theStart by thinking our beliefs about the organizationorganization  The product or service of the business canThe product or service of the business can provide at least equal benefits with its priceprovide at least equal benefits with its price  The product or service can satisfy a customerThe product or service can satisfy a customer need in specific market segments that is notneed in specific market segments that is not currently met adequatelycurrently met adequately  The business can survive grow and makeThe business can survive grow and make profitsprofits  The technology the business is involved in canThe technology the business is involved in can provide cost and quality product or serviceprovide cost and quality product or service
  • 21. Formulating a MissionFormulating a Mission ►The management philosophy will create aThe management philosophy will create a favourable public image. It will providefavourable public image. It will provide financial and psychological rewards forfinancial and psychological rewards for those who are willing to invest in thethose who are willing to invest in the organizationorganization ►The entrepreneur’s self-concept of theThe entrepreneur’s self-concept of the business can be communicated to, andbusiness can be communicated to, and adopted by employees and stockholdersadopted by employees and stockholders
  • 22. Mission statement componentsMission statement components ►Product or service, Primary market,Product or service, Primary market, Principal TechnologyPrincipal Technology  Specifications of the basic product or serviceSpecifications of the basic product or service  Specifications of the primary marketSpecifications of the primary market  Specifications of the principal technology ofSpecifications of the principal technology of production or deliveryproduction or delivery  Combined they describe the business activityCombined they describe the business activity
  • 23. Mission Statement ComponentsMission Statement Components ►Company Goals:Company Goals:  Secure SURVIVAL through GROWTH andSecure SURVIVAL through GROWTH and PROFITABILITYPROFITABILITY
  • 24. Mission Statement ComponentsMission Statement Components ►Company PhilosophyCompany Philosophy  Reflects or SpecifiesReflects or Specifies ►Basic beliefsBasic beliefs ►ValuesValues ►Aspirations (ambitions)Aspirations (ambitions) ►Philosophical prioritiesPhilosophical priorities  Decision makers are committed to these valuesDecision makers are committed to these values ►E.g. General motors on its statement clarifies itsE.g. General motors on its statement clarifies its environmental principlesenvironmental principles
  • 25. Mission Statement ComponentsMission Statement Components ►Public imagePublic image  Reflects public’s expectationsReflects public’s expectations ►E.g. Johnson & Johnson makes safe productsE.g. Johnson & Johnson makes safe products ►Corvette makes powerful machinesCorvette makes powerful machines ►Toyota makes reliable carsToyota makes reliable cars
  • 26. Mission Statement ComponentsMission Statement Components ► Company self conceptCompany self concept  Company knows itselfCompany knows itself Characteristics of the corporate self conceptCharacteristics of the corporate self concept 1.1. Based on management perception of how theBased on management perception of how the society will respond to the companysociety will respond to the company 2.2. Directs the behaviour of people employed by theDirects the behaviour of people employed by the companycompany 3.3. It is determined in part by the responses of othersIt is determined in part by the responses of others to the companyto the company 4.4. It is incorporated into mission statements that areIt is incorporated into mission statements that are communicated to individuals inside and outside thecommunicated to individuals inside and outside the companycompany
  • 27. Mission Statement ComponentsMission Statement Components Newest TrendsNewest Trends ►CustomerCustomer  Majority of companies state “The customer isMajority of companies state “The customer is our top Priority”our top Priority”  Focuses on customer satisfactionFocuses on customer satisfaction ►SafetySafety ►ServiceService ►ValueValue ►QualityQuality
  • 28. Mission Statement ComponentsMission Statement Components Newest TrendsNewest Trends ►Social ResponsibilitySocial Responsibility  PollutionPollution  Give back to societyGive back to society  Donate to non-profit organizationsDonate to non-profit organizations
  • 29. Inputs to the development of theInputs to the development of the company missioncompany mission ►StakeholdersStakeholders  A stakeholder is any person or OrganizationA stakeholder is any person or Organization who can be positively or negatively impactedwho can be positively or negatively impacted by, or cause an impact on the actions of aby, or cause an impact on the actions of a company.company.
  • 30. Inputs to the development of theInputs to the development of the company missioncompany mission InsideInside StakeholdersStakeholders -Executive officers-Executive officers -Board of directors-Board of directors -Stockholders-Stockholders EmployeesEmployees OutsideOutside stakeholdersstakeholders -Customers-Customers -Suppliers-Suppliers -Creditors-Creditors -Governments-Governments -Unions-Unions -Competitors-Competitors -General Public-General Public CompanyCompany missionmission
  • 31. ExamplesExamples ►Customer-Market: We believe our firstCustomer-Market: We believe our first responsibility is our doctors, nurses, andresponsibility is our doctors, nurses, and patients, to mothers and all others who usepatients, to mothers and all others who use our products and services (Johnson &our products and services (Johnson & Johnson)Johnson) ►Product-Service: AMAX’s principal productsProduct-Service: AMAX’s principal products are molybdenum, coal, iron, copper, lead,are molybdenum, coal, iron, copper, lead, zinc, gold and magneseum. (Amax)zinc, gold and magneseum. (Amax)
  • 32. ExamplesExamples ► Technology-The common technologies in theseTechnology-The common technologies in these areas relates to discrete particle coatingsareas relates to discrete particle coatings (NASHUA)(NASHUA) ► Concern for survival-The company will run it’sConcern for survival-The company will run it’s operations prudently, and will provide the profitsoperations prudently, and will provide the profits and growth which will assure Hoover’s ultimateand growth which will assure Hoover’s ultimate success (Hoover)success (Hoover) ► Philosophy-We are committed to improve healthPhilosophy-We are committed to improve health care throughout the world Bxtel Travenol)care throughout the world Bxtel Travenol)
  • 33. ExamplesExamples ►Self Concept-Hoover is a diversified, multiSelf Concept-Hoover is a diversified, multi industry corporation with strongindustry corporation with strong manufacturing capabilities entrepreneurshipmanufacturing capabilities entrepreneurship policies, and individual business unitpolicies, and individual business unit autonomiesautonomies ►Concern for public image-We areConcern for public image-We are responsible to the communities in which weresponsible to the communities in which we live and work and to the world communitylive and work and to the world community as well (J & J)as well (J & J)
  • 34. Strategy MakersStrategy Makers ► Board of directorsBoard of directors Elected by stockholdersElected by stockholders ► ResponsibilitiesResponsibilities  Establish and update company missionEstablish and update company mission  Elect top officers (CEO)Elect top officers (CEO)  Establish compensation levels of top officers (salaries,Establish compensation levels of top officers (salaries, bonuses)bonuses)  Determine the amount of timing and dividend paid toDetermine the amount of timing and dividend paid to stockholdersstockholders  Set company policy on matters like Labour-Set company policy on matters like Labour- Management relations, employee benefitsManagement relations, employee benefits  Set company objectives and authorise managers toSet company objectives and authorise managers to implement strategiesimplement strategies  Mandate company compliance with legal and ethicalMandate company compliance with legal and ethical dictatesdictates
  • 35. The External EnvironmentThe External Environment
  • 36. Remote EnvironmentRemote Environment ►EconomicEconomic ►SocialSocial ►PoliticalPolitical ►TechnologicalTechnological ►EcologicalEcological
  • 37. Remote EnvironmentRemote Environment ► Economic FactorsEconomic Factors Concern the direction of the economy in which
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