Chapter 01 - Introduction to Business policy and Strategy PDF

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Chapter-“Introduction to Business Policy and Strategy”StrategyIn simple word, strategy is a series of actions by a firm that are decided according to the particular situation. The Oxford Dictionary defines strategy as: “A plan of action designed to achieve a long-term or overall aim” “The art of pla...

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Chapter-01 “Introduction to Business Policy and Strategy” Strategy In simple word, strategy is a series of actions by a firm that are decided according to the particular situation. The Oxford Dictionary defines strategy as: “A plan of action designed to achieve a long-term or overall aim” “The art of planning and directing overall military operations and movements in a war or battle” Strategy is the forgoing of company missions, setting objectives for the organizations in light of external and internal forces, formulating specific policies to achieve objectives & ensuring their proper implementation so that the basic purposes and objectives of the organization will be achieved.

Levels of Strategy Strategy can be formulated at three levels, namely, the corporate level, the business level, and the functional level. At the corporate level, strategy is formulated for your organization as a whole. Corporate strategy deals with decisions related to various business areas in which the firm operates and competes. At the business unit level, strategy is formulated to convert the corporate vision into reality. At the functional level, strategy is formulated to realize the business unit level goals and objectives using the strengths and capabilities of your organization. There is a clear hierarchy in levels of strategy, with corporate level strategy at the top, business level strategy being derived from the corporate level, and the functional level strategy being formulated out of the business level strategy. In a single business scenario, the corporate and business level responsibilities are clubbed together and undertaken by a single group, that is, the top management, whereas in a multi business scenario, there are three fully operative levels.

Figure: Levels of Strategy Corporate Level: Corporate level strategy defines the business areas in which your firm will operate. It deals with aligning the resource deployments across a diverse set of business areas, related or unrelated. Strategy formulation at this level involves integrating and managing the

diverse businesses and realizing synergy at the corporate level. The top management team is responsible for formulating the corporate strategy. The corporate strategy reflects the path toward attaining the vision of your organization. For example, your firm may have four distinct lines of business operations, namely, automobiles, steel, tea, and telecom. The corporate level strategy will outline whether the organization should compete in or withdraw from each of these lines of businesses, and in which business unit, investments should be increased, in line with the vision of your firm. Business Level: Business level strategies are formulated for specific strategic business units and relate to a distinct product-market area. It involves defining the competitive position of a strategic business unit. The business level strategy formulation is based upon the generic strategies of overall cost leadership, differentiation, and focus. For example, your firm may choose overall cost leadership as a strategy to be pursued in its steel business, differentiation in its tea business, and focus in its automobile business. The business level strategies are decided upon by the heads of strategic business units and their teams in light of the specific nature of the industry in which they operate. Functional Level: Functional level strategies relate to the different functional areas which a strategic business unit has, such as marketing, production and operations, finance, and human resources. These strategies are formulated by the functional heads along with their teams and are aligned with the business level strategies. The strategies at the functional level involve setting up short-term functional objectives, the attainment of which will lead to the realization of the business level strategy. For example, the marketing strategy for a tea business which is following the differentiation strategy may translate into launching and selling a wide variety of tea variants through company-owned retail outlets. This may result in the distribution objective of opening 25 retail outlets in a city; and producing 15 varieties of tea may be the objective for the production department. The realization of the functional strategies in the form of quantifiable and measurable objectives will result in the achievement of business level strategies as well.

Strategic Vision A strategic vision portrays a company’s future business scope “Where we are going”. The strategic vision provides an overview of where you want to be at in a specific time in the future. It helps provide an overarching principle(s) for all the detail contained in later sections. The vision should also support the strategies and agenda of the target audience. The strategic vision can be short or long term, depending on the type and duration of the project being proposed. The strategic vision should present the ideal, but achievable, outcome. In broader sense, a strategic vision is a roadmap of a company’s future-providing specifics about technology and customer focus, the geographic and product markets to be pursued, the capabilities it plans to develop and the kind of company that management is trying to create.

Strategic Mission A company’s mission statement describes its present business scope ‘Where we are and what we do.”

In broader sense, a company’s mission statement is typically focused on its present business scope- who we are and what we do’. It describes an organization’s present capabilities, customer focus, activities and business makeup.

Goal A goal is an idea of the future or desired result that a person or a group of people envision, plan and commit to achieve. People endeavor to reach goals within a finite time by setting deadlines. The purpose of goals is to specify with precision what must be done if the company is to attain its mission or vision.

Characteristics of a Well-Structure Goals A business owner's simplest goal is to be successful and make money. However, this isn't enough to make your business successful. You need to set well-defined goals that measure short-term, midterm and long-term success. You may also want to break goals into sales, marketing, development and company employee growth. Most businesses use the SMART model for goal setting: Specific, Measurable, Achievable, Relevant and Timed. These are specific characteristics used in successful goal setting. Specific and Well-Defined: Being specific and well-defined is the foundation for any goal because if you don't know where the end zone is, you don't know how to score. For a business owner, a specific and well-defined goal is focused on a task that moves the company forward. Examples of specific goals are hiring an assistant, selling 20 units, making 100 cold calls, or launching a new product. Each of these examples is defined by a specific action, but many other actions are necessary to achieve these goals. These actions become an action plan and let you know how you are doing along the way. For example, launching a new product might have an action plan that includes research, development of a prototype, testing the prototype and getting user feedback. Measurable in Nature: Measurable in nature refers to the fact that a goal has to have a ruler or scoreboard attached to it. If the goal is to sell more widgets, and you sell one more than last time, that isn't a goal that defines what is needed. Making 100 cold calls is a measurable goal and action. A tally sheet easily tracks whether you achieved the goal or not. Keep in mind that every goal is not results oriented; making outbound calls says nothing about how many sales were made or how much revenue was generated. It is considered a leading indicator of success that gives you insight into how many calls are needed to convert a specific number of sales. When you wait for the results, called lagging indicators, it may be too late to make adjustments. Achievable or Realistic: You hear it all the time, "I want to make a million dollars." This may or may not be an achievable goal depending on the situation. Look at goals and determine if they are too lofty. While you want to challenge yourself and your team, setting goals too high may fail and demoralize your staff. For example, if making 10 sales in one month is the best any of your sales staff has ever done, setting a goal of 20 is probably too high. Work your way up so people can see feel success and build on that. Perhaps start with 12 for the goal.

Relevant to Job: Arbitrary goals don't help anyone. Whether you are setting personal goals, company goals or employee goals, make sure they are relevant to the job description and the company mission and vision. For example, a sales representative will have a higher sales goal than a customer service representative who may occasionally get an ancillary sale by pivoting in a service call. At the same time, the customer service representative might have a goal that requires helping a customer within 90 seconds. This goal is relevant to the customer service representative's specific job. Timed for Success: Know when you will evaluate whether the goal was achieved. If you don't set a date for review or a deadline for achievement, the goal may never be achieved as everyone continues to work toward it. For example, if the goal for the company is to generate $1 million in revenues, it could theoretically be achieved over five years if you don't say "annually," which sets a 12-month time limit on the goal. After the 12 months, you can look at whether you achieved the goal. It is also wise to review the goals in smaller segments – perhaps quarterly for an annual goal or weekly for a monthly goal – to check progress and make adjustments if needed.

Qualities of a Strategic Leader The following 10 traits are common strategic leadership characteristics and help these individuals motivate and inspire their teams to produce better business results. These components of strategic leadership make up the key traits of strategic leaders and how they contribute to their success. These are 10 characteristics of a good leader and by following the example of these strategic leadership style qualities you can improve your efficiency as a leader. Open-Minded: Being a strategic leader means you have to be curious and hungry for new ideas. Brilliant insights will come from others around you. You have to be willing to hear uncomfortable things from customers and stakeholders. Being strategic means you can reflect on ideas that conflict with your current beliefs and understanding. It doesn’t mean you accept every piece of information, but it does mean you consider and explore new and even nonconforming ideas objectively and investigate interesting possibilities. Courageous: Strategic leaders understand at a deep level that current success and current practices won’t last forever. A major role of a strategic leader is to be courageous and take the steps necessary when needed. Anything and everything has the potential to become calcified and irrelevant to customers and stakeholders. Strategic leaders face the challenge of changing what feels comfortable. They know that current success can lead to complacency so they inspire innovation and challenge people to experiment and take risks; they see failure as part of this process. They manage the criticism and second guessing of others who live in the comfort zone. Disciplined: Strategic leaders must understand that discipline is essential for structure and order. Discipline is the ability to focus on longer-term priorities and forces that will affect future results. It is the ability to make strategic thinking and actions a regular part of your daily routine. Depending on the nature of the position or industry, disciplined leaders invest 10% to 30% of their time and energy on strategic activities.

Endurance: Leading a bold new strategic transformation can be hard work and even arduous at times. Strategic leaders have the drive and stamina needed when change becomes elusive, difficult, and even painful. If strategy were easy, everyone would be adaptable, innovative, and prepared for the future. Strategic leaders have developed the mental and physical muscle to produce results when others might give up prematurely on a plan. Inspiring: Strategic leaders enroll others in the journey. The famous strategic leaders that we look up to are known for their inspirational leadership quality. They get others to sign up voluntarily and unlock that extra discretionary energy needed to move a strategic agenda forward. If you don’t inspire others and create a critical mass, people will resist and push back on ideas and plans that are intended to improve their lives. Strategic leaders are able to sell new ideas, help others see the value and influence the team’s direction. They celebrate progress, ease the tension and inject fun into the process. Accountable: Strategic leaders are willing to hold themselves and others accountable for commitments. They are not harsh, but they make expectations explicit. They know that people drop the ball on occasion, make mistakes, and have letdowns. This is normal, but strategic leaders are persistent: they troubleshoot, offer support and accommodate weaknesses, but in the end, they require performance. If you want to be a member of a strategic leader’s team you have to step up, have positive intentions, and ultimately deliver your fair share of the effort to achieve the target. Strategic Coaches: Strategic leaders understand that strategy is driven by critical competencies and capabilities. In order to gain traction and momentum, people have to be knowledgeable and experienced. Strategic leaders are teachers and developers. They create opportunities for learning and growth. Strategic coaching is different than normal operational coaching. Strategic coaching focuses on building skill sets and behaviors that are needed to propel future growth and to create the next generation of practices. Collaborative: We always like to say that strategy is a team sport. Great leaders who are proactive and forward thinking understand that in order to formulate a direction and to gain momentum they will need an army. Strategic leaders need a team of people who are forward looking and willing to shape the future within their sphere of control. Great strategic leaders create a mosaic of strategic plans that fit together and that are led by many members of the team. Perspective: Great leaders know how to adapt by maintaining clarity of purpose. They have a vision for the future and passion to drive them there. They remain calm when storms brew and they know that disruptions and adversity will be part of the journey. These leaders know they can’t be all things to all people. They make difficult choices and know when to say “no” to even good ideas that just don’t make sense right now or won’t add enough value to the strategy. The ability to make trade-offs and choosing what not to do is just as important as knowing what to do.

Financial Objectives For our company, a growing company it is vital to set goals, for this is necessary to impose a series of objectives that will support the success of these goals, among them are the financial objectives that provide the basis for a solid plan to move forward on the path of success for our organization these financial goals are:

Growth Income: It is essential for us to present solid annual revenues with a margin of 20% increase from the first 5 years, so from the second year cover initial expenses and generate the expected profits. Profit margins: Obtain profit margins to meet the needs of the organization and include it to also invest in the business for expansion and distribution among employees in a profitsharing agreement. Sustainability: We refer to the characteristics of development that will have the business in order to hold and at the same time provide more jobs and a steady improvement gradual growth. Return of investment: This term return on investment refers to money recovered for capital spending, our company expects to get 100% return on investment within 2 years of profit, generating a profit margin of 20% the first 5 years and longer 40% from the sixth

Strategic Objectives Strategic objectives are goals on non-financial factors that the company aims to achieve with a specific indicator that will allow it to be measured in a specific period of time.         

Increase number of employees Positioning the brand Diversifying supply Promote a work environment thus to increase efficiency in the processes of the organization Consolidate the business as a solid and orderly organization Use the appropriate human resources Agile processes focused on innovation Give customer benefits for choosing our brand Consolidate good relations to retain customers

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