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CBM 322 STRATEGIC MANAGEMENT ___________________________________________________________________________ 1 Chapter 1 Introduction: Evolution of Business Policy and Strategy Business policies - The set of rules that guides the decisions and actions of the members of the organization. - These policies may be informal or in written coming in the form of operational manual, personnel handbook, and memoranda composed or issued from time to time and as the need arises. - They may also come in the form of minutes of the meetings and documentation of other forms of formal discussions including workshops and year-end activities. Concepts of Business Policy 1. The basic theory of management which evolves around the idea of planning, organizing, staffing. Coordinating, controlling and evaluating still holds true. 2. Business policies are really meant to be observed or followed simply because as a matter of practice and tradition, rules and policies of the business are traditionally done by the top management, and doing otherwise would be risky or will do more harm than god for subordinates. 3. Business policies are usually expressed in broad direction and sometimes made specific to serve as guidelines or rules for decision-making and execution of organizational activities. Concepts of Strategy 1. Strategy defined as essentially referring to top management’s plan to attain the outcomes consistent with the organization’s mission and goals. 2. Three vantage points of strategy namely:  Strategy formulation  Strategy implementation  Strategic control 3. Categorized strategy  Intended strategy – refers to the original strategy that management plans and intends to implement.  Realized strategy – refers to the actual and eventual strategy that management actually implements. 4. Strategy at the operational level referring to it as a set of competitive moves and business approaches that management is employing to run the company. (Thompson and Strickland)  Attract and please customers  Stake out a market position  Conduct operations  Compete successfully Characteristics of Strategy __________________________________________________________________________________________________ M.B.M-G.

References: Fundamentals of Strategic Management by N. A. Orcullo, Jr., Ph.D Strategic Management Book by Neil Titson Google.com

CBM 322 STRATEGIC MANAGEMENT ___________________________________________________________________________ 2 1. Strategy is traditionally meant to be a grand plan made in the light of what it was believed an adversary might or might not do. 2. Strategy derives its relevance given from the existence competition in the business. 3. It is done of the presumption of the existence of a negative scenario. 4. It also connotes general program of action and deployment of emphasis and resources to attain comprehensive objectives. 5. A process of deciding on objectives of the organization, on change in these objectives, on the resources used to attain these objectives, use and disposition of these resources. 6. It involves determination of the basic long-term goals and objectives of an enterprise, and adoption of courses of action and the allocation of resources necessary to carry out those goals. 7. A decision about how to use available resources to secure a major objective in the face of obstruction. 8. Strategy implies actions and guides decision-making, spelling out direction to be taken. Origin and Nature of Strategy  Strategy mentioned in the Old Testament and largely treated as semantic issue.  First known application of strategy to business occurred when Socrate consoled Nichomactides, a Greek militarist who lost election to the position of general to Anosthenes, a Greek businessman.  Socrates compared the duties of a general from a businessman and showed Nichomactides that in either case one plans the use of one’s resources to meet objectives.  The word strategy originated from the Greek word “STRATEGO” referring to a “GENERAL” which is turn traces its roots from the word “ARMY” and “LEAD”.  The term strategy has its own roots and gained its popularity in the field of military science. The word “STRATEGO” means “TO PLAN THE DESTRUCTION OF ONE’S ENEMIES THROUGH EFFECTIVE USE OF RESOURCES.”  Integrating the concept of strategy into the mainstream of the management system is what matters most in tem of giving directions that promises delivering profit expectations  Strategic management takes in consideration various external as well as internal factors and the environment in general as well as competitiveness and sustainability over the long term period in the industry or sector it belongs.  Strategic management as referring to the entire process of strategic decision-making that relates to its environment, guides internal activities, and determines the long-term performance of the organization. (Stahl and Grigsby)  Strategic management is a set of managerial decisions and actions that determine the long-run performance of a corporation. It includes:  Environmental scanning  Strategy formulation  Strategy implementation, evaluation and control. Strategic Types 1. Defenders – this type includes companies with a limited product that focus on improving the efficiency of their existing operations. __________________________________________________________________________________________________ M.B.M-G.

References: Fundamentals of Strategic Management by N. A. Orcullo, Jr., Ph.D Strategic Management Book by Neil Titson Google.com

CBM 322 STRATEGIC MANAGEMENT ___________________________________________________________________________ 3 2. Prospectors – this type of companies includes firms with fairly broad product lines that focus on product innovation and market opportunities. 3. Analyzers – this type includes business organizations that operate in at least two different productmarket areas, one stable and one variable. 4. Reactors – this type includes companies that lack a consistent strategy-structure-culture relationship. Bases of Policies and Strategies 1. Legal Mandate. This refers to formulating policies on the basis of the provisions of the charter or legal basis for creation or existence of the business organization including the applicable provisions of law and policies or pronouncement of the government and its statutory or regulatory bodies. 2. Vision and mission statement. This essentially refers to the leadership bias as well as sense of direction and mission for which the organization was conceived or established. 3. Specific objectives. These are the corporate objectives purposely developed for the organization and for its members or employees at large to pursue. 4. Programs and policies. These are specific programs and policies set forth by the organization’s policymakers I pursuit of short and long-term goals given certain considerations at hand. Developing Policy and Strategy 1. Top-bottom approach. Initiatives in developing policies and strategies come from the top management with rank and file tasked to implementing or following the policies and strategies. 2. Bottom-top approach. Policy and strategy initiatives emanate from the bottom and rank and file from which the top management develops concrete policies and strategies for the lower rank employees to observe or follow. 3. Top-bottom-top. Policy and strategy initiatives are taken by the top management then filtered down to the lower-ranked personnel for consultations then returned back to the top management for refinement. Modalities in Strategic Decision In the context of strategic management, it is not just simple making decision but it is important to exercise strategic decision or something like hard and unusually decisions that need to be done for certain strategic considerations. 1. Entrepreneurial Mode. Strategy is made by one powerful individual and the focus is on opportunities; problems are secondary. 2. Adaptive mode. Characterized by reactive solutions to existing problems, rather than proactive search for new opportunities. 3. Planning mode. The systematic gathering of appropriate information for situation analysis, the generation of feasible alternative strategies, and the rational selection of the most appropriate strategy. 4. Logical mode. It can be viewed as a synthesis of planning, adaptive, and to a lesser extent, the entrepreneurial modes.

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References: Fundamentals of Strategic Management by N. A. Orcullo, Jr., Ph.D Strategic Management Book by Neil Titson Google.com

CBM 322 STRATEGIC MANAGEMENT ___________________________________________________________________________ 4 Strategic Decision-Making Process Step 1. Evaluate current performance result in term of:  Return of Investment, and profitability  The current mission, objectives, strategies and policies Step 2. Review corporate governance, the performance Board of Directors and Top Management Step 3. Scan and assess external environment to determine the strategic factors that pose Opportunities and Threats Step 4. Scan and assess the internal corporate environment to determine the strategic factors that are Strengths and Weaknesses. Step 5. Analyze strategic (SWOT) factors to:  Pinpoint problem areas,  Review and revise the corporate mission and objectives as necessary Step 6. Generate, evaluate, and select the best alternative strategy in the light of the analysis conducted in Step 5. Step 7. Implement selected strategies via programs, budgets, and procedures. Step 8. Evaluate and implement strategies via feedback systems and the control of activities to ensure their minimum deviation from plans. Role of Board of Directors The Board of Directors is not directly or should not be directly involved in the conduct of the business; they have to be directly and indirectly involved in the policy and strategy development process nevertheless. Specific roles of Board of Directors in any business: 1. Monitor. By acting its committees or being a part of the management team, the board can keep abreast of developments inside and outside the corporation, bringing to management’s attention development it might have overlooked. 2. Evaluate and influence. A board can examine management’s proposals, decisions, and actions; agree or disagree with them; give advice and offer suggestions; and outline alternatives. 3. Initiate and determine. A board can delineate a corporation’s mission and specify strategic options to its management.

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References: Fundamentals of Strategic Management by N. A. Orcullo, Jr., Ph.D Strategic Management Book by Neil Titson Google.com...