Policy and Business Strategy

Subject: Policy and Business Strategy

Career: Business Administration
Teacher: Lic. Ivan Marcelo Morales Alconini

INTRODUCTION TO THE CONCEPT OF STRATEGIC PLANNING

ORIGINAL TEXT
Ing. Luis Pimentel Villalaz, MBA
September 1999

ROOTS, VIEWS AND MODEL "STANDARD" STRATEGY

The word strategy has been used in many ways and in different contexts over the
years. Its most common use has been in the military, where the concept has been
used for centuries.

The term strategy comes from the Greek strategos meaning "general". In turn, this
word comes from roots meaning "army" and "acaudillar". The Greek verb, stratego
means "to plan the destruction of enemies because of the effective use of resources"i

In the case of modern competitive entrepreneurs tilt, the roots of the concept of
strategies are presented with obvious appeal. While strategists companies do not
project the destruction of its competitors on the market if they try to outsell their rivals
and get more and better than them.

Among the different views we have the first scholars who linked the concept of
business strategy were Von Neumann and Morgenstern, in his work in game theory.
There they defined the strategy as the series of events running a business, which
are selected according to a specific situation.

Peter Drucker, in his book The Practice of Management (1954), stated that the
strategy requires managers to analyze their current situation and change it if
necessary. Part of its definition was based on the idea that managers should know
what resources had your company and what you should have.

Alfred Chandler defined business strategy in his book Strategy and Structure (1962),
based on his analysis of four major US industry, in the early twentieth century,
DuPont, Standard Oil of New Jersey, General Motors and Sears Roebuck. Chandler
defined strategy as the element that determined the basic goals of a business, long
term and the adoption of courses of action and allocation of resources to achieve
these goals.

Kenneth Andrews, colleague Chandler at Harvard, offered a similar definition, which

caught the attention of a generation of students from the Business School of Harvard
and around the world: "The strategy represents a pattern of objectives, purposes or
 Policy and Business Strategy

goals, as well as policies and major plans to achieve these goals, presenting them
in such a way that let you define the activity to which the company is engaged, or
which will be dedicated, as well as the type of company that is or will be "

Based on the latter definition the strategy should design a series of goals and plans
to reveal the field of activity of the company and how this activity is focused.

Igor Ansoff in 1965, offered a more analytical definition, focused action. Ansoff felt
that the strategy was a "common thread" running between the activities of the
company and the products / markets. The strategy becomes the one rule for making
decisions; a thread with four components:
1. The scope of product / market
2. The vector of growth
3. Competitive Advantage
4. the synergism

All above definitions have four elements in common. First is the concept of an
environment, ie a series of outside the company, to which it must respond conditions.
Some of these conditions are negative (threats) and other positive (opportunities).
Second, the company must establish goals or basic objectives. The goal of the
highest level is often referred to as the mission; that is, a definition of the raison d'etre
company. Third, management should perform an analysis of the situation in order to
determine its position on the environment and the amount of resources. This analysis
is generally known as Forces, Weaknesses, Opportunities and Threats SWOT for its
acronym in Spanish, (SWOT English). Finally, the company plans how to apply its
resources,
The focus of the strategy is mainly based on two assumptions. The first is that the
analysis should always go before the action. Defining goals, analyzing the situation
and planning must go before any action taken by the company. This is often called
strategy formulation. The second assumption is that the action, often called
implementation of the strategy, is in charge of people who are not analysts,
managers and planners higher levels. These are people who practice their formulas,
with the least possible surprises.
 Policy and Business Strategy

DEFINITIONS

Henry Mintzberg, in his book The Strategic Process Concepts, Contexts and Cases,
defines strategy as follows: the pattern or plan that integrates the major goals and
policies of an organization and, in turn, sets the coherent sequence of actions to
perform .

well formulated strategy helps to sort and assign, taking into account their attributes
and internal deficiencies, the resources of an organization, in order to achieve a
viable and original situation and anticipate possible changes in the environment and
possible actions of opponents.

Along with the definition of strategy we must define a series of concepts integrated
throughout the strategic processii.

managerial capacity. It is the set of knowledge, experience, skills, attitudes and

aptitudes (intelligence), which allows people with no coercive means influence on
others to achieve goals with effectiveness, efficiency and effectiveness.

Planning is:
 a basic function of management
 determines the desired future
 It is filming a "movie" of what we want to happen in the organization
 is the process of building a bridge between the current situation and the desired
situation

In short we can say graphically that planning is the process that allows to build a
bridge between:

Current situation The desired future

Diagnosis of the current Strategic plan
situation
 Policy and Business Strategy

Within this plan we must have indicators, which define

 productivity

is the ratio of total products obtained and the total resources consumed

 effectiveness

is the relationship between the results achieved and we set previously and
realize the degree of compliance with the objectives planned

 efficiency

is the relationship between the amount of resources used and the amount of
resources than previously estimated 0 scheduled use

 effectiveness

Assesses the impact of what we do, we deliver product 0 service we provide.

Not enough to produce 100% effective, but products 0 services are adequate
to meet the needs of customers. effectiveness is a criterion related to quality
(fitness for use, customer satisfaction)
 Policy and Business Strategy

MAIN DIFFERENCES BETWEEN STRATEGIC PLANNING AND

Operational Planning

Strategic planning. Is:

 Long term
 To do and how to do in the long run
 Emphasis on finding permanence of the institution over time
 Large guidelines (general)
 Includes: mission, vision, corporate values, goals, strategies and policies

Operational planning. Is

 Short and medium term

 Who, how, when, who, where and how
 Emphasis on aspects of "everyday"
 Unbundling of the strategic plan specific programs or projects)
 It includes goals and objectives, activities, timelines and responsible

WHY DEVELOP A STRATEGIC PLAN?iii

The development of a strategic plan produced related to the ability to perform more
efficient management, freeing human and material resources, resulting in production
efficiency and better quality of life and work for members of the organization benefits.

Strategic Planning improves the performance of the institution

The mere fact proven by many studies, to establish a vision, define the mission, plan
and determine objectives, positively influences the performance of the institution.
Strategic planning can think ahead, visualize new opportunities and threats focus
the mission of the organization and effectively guide the direction of an organization,
facilitating innovative management and leadership action.

Can cope with the main problems of organizations

Strategic planning is a deliberate and coordinated way to address the most critical
problems, trying to solve a whole and provide a useful framework for addressing
decisions, anticipating and identifying new demands.

Introduces a modern way of managing public institutions

Good strategic planning requires the organization to learn more, improve

communication and coordination between different levels and programs and improve
management skills. Strategic planning generates forces of change that prevent
 Policy and Business Strategy

organizations get carried away by the changes, helps them take control over
themselves and not just react to external stimuli and rules.

Strategies versus tactics

In differing strategies tactics? The main difference lies in the scale of action or
perspective of the leader. What appears to be a tactic to the chief executive can be
a strategy for the chief marketing if it determines the overall success and viability of
the organization. In a narrower sense tactics can be at any level.

Relineamientos tactics are short, are adjustable and take action and interaction
opposing forces used to achieve specific goals after initial contact. The strategy
defines a continuous basis for these adjustments to focus more broadly conceived
purposes.

A genuine strategy is always needed when the potential actions or responses of an

intelligent adversary may substantially affect the desired result, regardless of the
global nature of the activities of the company. This condition concerns the important
actions that are undertaken at the highest level of competitive organizations.
 Policy and Business Strategy

STAGES OF A STRATEGIC PLANiv

Strategic planning focus on the critical factors that determine the success or failure
of an organization and design a realistic process, are key aspects to develop
strategic planning.

The strategic planning process should be tailored to the organization. There are two
key aspects to develop a strategic planning process:

Strategic planning emphasizes the analysis of the environmental conditions in which

the organization is and the analysis of their internal characteristics.

DIAGNOSIS OF THE CURRENT SITUATIONv

Step No. 1: Identification of external customers and determining their

demands

External customers are those individuals, organizations, groups or sectors of great

importance for the institution. Their views, expectations and demands should be
taken into consideration later decide whether they can be addressed.

The systematic determination of the demands of external customers will allow the
institution to provide valuable information to design and deliver quality products and
services that meet increasingly expectations.

Step No. 2: Identification of internal customers and determining their

demands

Persons, groups, areas or internal departments directly and permanently linked to

the management of the organization, they can be called internal customers.

The demands of internal customers must be considered carefully as they provide the
basis for formulating objectives and strategies. This does not mean that all
expectations are to be met.

To the extent that achieves meet the demands of internal customers their degree of
motivation and commitment will increase, which undoubtedly redound to the
effectiveness, efficiency and effectiveness of the organization.

"Internal customers satisfied succeed in satisfying external customers"

INTERNAL ANALYSIS ORGANIZATION

 Policy and Business Strategy

The internal analysis is the study of the key factors in turn have shaped past
performance, evaluating the performance and identifying strengths and weaknesses
of the organization in its operation and operation in relation to the mission.

This analysis includes aspects such as human resources, technology, formal

structure, formal and informal networks of communication, financial capacity, etc.

Strengths (positive internal factors) are driving forces that contribute positively to the
management of the institution, and weaknesses (negative internal factors) instead
are impeding forces or problems that prevent the proper performancevi.

Organizational analysis identifies strengths and weaknesses to drive them to

eliminate or correct them.

EXTERNAL ANALYSIS OF THE ORGANIZATION

It refers to the identification of exogenous factors beyond the organization that affect
its performance, both positive aspects (opportunities) and negative (threats).

This analysis can be recognized as areas of interest or relevant:

 the conditions of growth and development of the country, economic, trade

agreements,
 changes in the environment (cultural, demographic)
 resources (technological, scientific advances)
 changes in citizens' needs (in terms of transport, communications, information
and participation)
 public policy and sector priorities
 the risk of natural factors
 competition
 regulations
 various conditions

This analysis is aimed at identifying threats and opportunities generated by the

external environment for the functioning and operation of the organization.
 Policy and Business Strategy

STRUCTURE OF A STRATEGIC PLAN

MISSION

The organizational mission as "an enduring statement of purpose that distinguishes

a similar institution". It is a compendium of the raison d'etre of an organization,
essential to determine goals and formulate strategies.

A good institutional mission should reflect the expectations of its customers. It is the
client and only the client who decides what is an organization.

The mission should be essentially broad in scope to allow the study and the
generation of a wide range of goals and feasible strategies without stifling creativity
of people.

The mission describes the nature and the field to which the organization is engaged
in other words is the answer to the question: what does the organization exist ?.

The main components that should be considered in structuring the mission are as
follows:

 Customers - Who are the customers of the institution?

 Products 0 services - which products 0 most important services of the institution

and in what form must be delivered?

 Markets - competes the institution geographically?

 Concern for survival and improvement.

 Concern for public image - What is the public image that the institution aspires?
 Policy and Business Strategy

VIEW

Vision, according to Mintzberg, is the definition of the raison d'etre of the

organization. Walls define the vision as broad and sufficient statement of where you
want your organization is within 3 0 5 years. It is a set of general ideas that provide
the framework for what an organization is and wants to be in the future.

Farsightedness pointing direction, gives direction, is the chain or the link between
the organization's present and future. This describes the character and the concept
of future activities of the organization

The answer to the question, what do we want the organization in the coming years
?, is the vision, establishes what the organization intends to do, and who will, as well
as the central philosophical premises

For drafting the vision should consider the following elements:

 It must be made by leaders

 Time dimension
 Integradora: shared between the management team and employees
 Wide and detailed
 Positive and encouraging
 Must be realistic as far as possible
 communicates enthusiasm
 Projected hopes and dreams
 It incorporates values and common interests
 Use an ennobling, graphic and metaphorical language
 synergism achieved
 It should be disseminated internally and externally
 Policy and Business Strategy

CORPORATE VALUESvii

Values are a set of principles, beliefs, rules governing the management of the
organization. Constitute the institutional philosophy and organizational culture
support.

Any implied or explicitly institution has a set of corporate values, therefore these
must be analyzed, adjusted or redefined and then released.

In short, the basic objective of defining corporate values is to have a framework that
inspires and regulates the life of the organization.

Through effective leadership, values become contagious; habits of thought affect

people.

STRATEGIC GOALS, STRATEGIES AND POLICIES

The strategic goals set that is what will be achieved and will be achieved when the
results do not establish how they will be achieved. These affect the overall direction
and viability of the institution.

La strategy as already defined is the pattern or plan that integrates the major goals
and policies of an organization and builds a coherent sequence of actions to perform.
They establish how they will achieve the strategic objectives. Strategies can be
attempted (planned) or emerging (unplanned). The basic objective of the strategy is
to achieve a competitive advantage. This is nothing more than any feature of the
organization that the difference in direct competition within their sector. Any company
that makes profits from a sustained way has something its competitors can not
match, although in many cases imitate. (Pamphlet strategic planning Linda Kasuga-
Luis Humberto Franco quality and excellence).
Policies are rules or guidelines that express the limits within which action must occur.
Often they take the form of contingency actions to resolve conflicts that exist and
relate to specific objectives. Strategic policies are those that guide the overall
direction and position of the entity and also determine their viability.

Having established the above can define the step by step or work programs or
operational plans, which are those that specify the sequence of steps to achieve the
main objectives actions. They illustrate how programs within the limits established
by the policy objectives will be achieved, ensure that they allocate the necessary
resources to achieve the objectives and allow us to establish a dynamic basis for
measuring the progress of such achievements.

Strategic decisions are those that establish the overall direction of a company and
its maximum light viability for both predictable as the unpredictable changes that, in
time, may occur in areas that are of interest or competence.
Policy and Business Strategy
 Policy and Business Strategy

CASE STUDY

If practice is to choose a company under study and obtain sufficient information to

develop the following questions.
1. Please give a short history of the company and determine its strategic evolution,
ie if your product evolution is attempted, emerging strategies or a combination of
both.
2. Identify the mission or objective and main goals of the company.
3. Please give a preliminary analysis of its internal strengths and weaknesses, as
well as the opportunities and threats facing in their environment. Based on this
analysis, identify strategies should follow the signs.
4. Who is the Chief Executive Officer (CEO, Manager or Director General)?
Evalúense leadership skills of the CEO.
5. Investigate if this company has a formal mission statement. If you already have
an established mission, evaluate it and redefinala according to competitive levels
today.
6. If the company lacks a mission statement, what should it be?
7. Identify the major stakeholders. What are your requirements? As the company
tries to satisfy them?
8. Pick yourself an important strategic decision made by the company in recent years
and Analyze what implications of this decision. I act the company correctly?
9. Identify whether the company has a unique ability, competitive advantage or
disadvantage in their industry (where it records its biggest sales).
10. Design a strategic plan to leverage their strengths and opportunities and to
address their weaknesses and threats.
11. What human resource management policy recommend you to develop your staff
and motivate him even more than it is now? (Empowerment, dowsizing, motivation
and incentive systems).
12. Suggest quality circles for key areas of the company, detail its operation and how
to motivate employees.
13. Identifying a process that can be improved substantially. Perform this process
reengineering.
 Policy and Business Strategy

QUOTES BIBLIOGRAFICAS

i
Mintzberg, Henry; Q. Brian, James; Voyer, John, The Process
Strategic. Concepts, Contexts and Cases.Publisher Prentice Hall. First
Edition (Brief Edition) Mexico 1997
ii
Santos Alfredo Paredes, Strategic Planning Manual.
Workshop on Strategic Planning Seminar. Comptroller General of the
Republic.Project Financial Management Reform. Panama 1997.
iii
Ministry of Finance, Budget Directorate, Planning
Strategic Public Service. Interministerial Committee for the
Modernization of Public Management, Chile 1999.
iv
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v
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vi
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vii
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