Business Policy

“The study of the functions and responsibilities of senior management, the crucial
problems that affect success in the total enterprise, and the decisions that determine the
direction of the organization and shape its future. The problems of policy in business ,
like those of policy in public affairs, have to do with the choice of purposes, the moulding
of organizational identity and character, the continuous definition of what needs to be
done, and the mobilization of resources for the attainment of goals in the face of
competition or adverse circumstance.” – Christensen and others

Nature and Scope of Business Policy

 The study of the functions and responsibilities of senior management related to
those organizational problems that affect success of the total enterprise
 It deals with the determination of the future course of action that an organization
has to adopt.
 It involves choosing the purpose and defining what needs to be done in order to
mould the character and identity of an organization
 It is also concerned with the mobilization of resources, which will help the
organization to achieve its goals.
The senior management consists of those managers who are primarily responsible for
long-term decisions and include Chief executive, Executive director, President, etc.
These persons are not concerned with the day-to-day problems but are expected to devote
their time and energy to thinking and deciding about the future course of action.
Business policy, with its concern for determination of the future course of action, lays
down a long-term plan which the organization then follows. The senior management,
while determining the future course of action, have a mental picture of the type of
organization they want their company to become.
In deciding about the future course of action, the senior management are confronted
with a wide array of decisions and actions that could be possibly taken. The senior
management exercise a choice, depending on the given circumstances, and, which, in
their opinion, would lead the organization towards a specific direction. Moving in a pre-
determined direction, the organization attains the planned identity and character.
 Organizational decisions are not made in isolation and managerial actions cannot be
taken without providing the resources necessary for them. The senior management, while
deciding about the future course of action, concern themselves with the resources –
financial, material and human that would be required for the implementation of the long-
term plans.
Purpose of Business Policy
 To integrate the knowledge gained in various functional areas of management
 To adopt a generalist approach to problem-solving
 To understand the complex inter-linkages operating within an organization
through the use of a systems approach to decision-making and relating these to
the changes taking place in the external environment
Business policy seeks to integrate the knowledge gained in various functional areas so
as to develop a generalist approach. Such an approach is helpful in viewing
organizational problems in their totality. It also creates an awareness about the
repercussions that an action in one area of management has on other areas, individually,
and, on the organization as a whole.
The view point adopted in business policy is different from that adopted in the
functional areas. For instance, a marketing problem is not viewed purely as a problem of
marketing but as an organizational problem. Business policy helps in understanding
business as a system consisting of a number of sub-systems. Any action in one sub-
system has an impact on other sub-systems and on the system as a whole. It is of vital
importance for the top management, in any organization, to adopt such systems approach
to decision-making. Business policy helps a manager to become a generalist- avoid the
narrow perspective generally adopted by specialists- and deal with business problems
from the view point of senior management.
A problem of declining sales volume is apparently a marketing problem. However an
analysis of the causes of the problem will show that its roots may probably lie any where
in the organization. Declining sales volume may be due to rising level of competition,
inefficient distribution, faulty sales promotion, inappropriate recruitment policies,
misdirected training, falling quality standards, outdated design, de-motivating credit
policies, etc. A problem, which apparently seems to be a marketing problem, may be due
to factors not necessarily with in the control of the marketing department. A solution to
the problem would necessitate looking into different functional areas.

Definition of Strategy
“The determination of the basic long-term goals and objectives of an enterprise and the
adoption of the courses of action and the allocation of resources necessary for carrying
out these goals.”
– Alfred D Chandler
“A unified, comprehensive and integrated plan designed to assure that the basic
objectives of the enterprise are achieved.”
- William F Glueck

Strategic Planning
Strategic planning is an organization's process of defining its strategy, or direction, and
making decisions on allocating its resources to pursue this strategy, including its capital
and people. Various business analysis techniques can be used in strategic planning,
including SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats ) and
PEST analysis (Political, Economic, Social, and Technological analysis).
Strategic management
The set of managerial decisions and actions that determines the long-run performance of
an organisation
“ The formulation and implementation of plans and carrying out of activities relating to
the matters which are of vital, pervasive or continuing importance to the total
organization.” - Sharplin

Importance of Strategic Management:

 It results in higher organizational performance.

 It requires that managers examine and adapt to business environment changes.
  It coordinates diverse organizational units, helping them focus on organizational
goals.
 It is very much involved in the managerial decision-making process.

NATURE AND SCOPE OF STRATEGIC MANAGEMENT

“Strategic management is defined as “the set of decisions and actions that result in the
formulation and implementation of action plans designed to achieve company’s
objectives.”

Characteristics of Strategic Management:

1. Strategic management integrates various functions
2. It considers a broad range of stakeholders
3. Strategic management has long-term perspective
4. It is concerned with both efficiency and effectiveness
Scope of Strategic Management: It comprises nine critical tasks-
1. Formulating the company’s vision and mission
2. Developing a company profile
3. Assessing the company’s external environment
4. Analyzing the company’s options by matching its resources with the external
environment
5. Identifying the most desirable option
6. Selecting a set of long-term objectives and grand strategies
7. Developing annual objectives and short-term objectives
8. Implementing the strategic choices
9. Evaluating the success of the strategic process
Strategic Management Process:

Establishment
Formulation Implementation Strategic
of strategic of strategies
of strategies evaluation
intent

Strategic
control

Establishment of Strategic intent:

This includes setting Organizational Vision, Mission, Goals and Objectives. A Vision
statement identifies what the company intends to be in the future. A clear vision provides
the foundation for developing a comprehensive mission statement. Mission is the
fundamental unique purpose of an organization that sets it apart from other organizations
and Goals and objectives are the end result, which an organization strives to achieve.
These together provide the direction for other aspects of the process.
Formulation of Strategy
Formulation of strategies is a creative and analytical process. It is a process because
particular functions are performed in a sequence over the period of time. The process
involves a number of activities and their analysis to arrive at a decision. The formulation
of strategy requires environmental analysis and Organization analysis.
Environmental Analysis: Since the basic objective of strategies is to integrate the
organization with its environment, it must know the kind of environment in which it has
to work. This can be known by environmental analysis. The process of environmental
analysis includes collection of relevant information from the environment, interpreting its
impact on the future organizational working, and determining what opportunities and
threats-positive and negative aspects-are offered by the environment. The process of
environmental analysis works better if it is undertaken on continuous basis and is made
an intrinsic part of the strategy formulation.
Organizational Analysis: While environmental analysis is the analysis of external
factors, corporate analysis takes into account the internal factors. These together are
known as SWOT (strengths, weaknesses, opportunities and threats) analysis. It is not
merely enough to locate what opportunities and threats are offered by the environment
but equally important is the analysis of how the organization can take the advantages of
these opportunities and overcome threats. Corporate analysis discloses strengths and
weaknesses of the organization and points out the areas in which business can be
undertaken. Corporate analysis is performed by identifying the factors, which are critical
for the success of the present or future business of the organization, and then evaluating
these factors whether they are contributing in positive way or in negative way. A positive
contribution is strength and a negative contribution is a weakness.
Environmental analysis and corporate analysis taken together will specify the various
alternatives for strategy. Usually this process will bring large number of alternatives. For
example, if an organization is strong in financial resources, these can be used in many
ways, taking several projects. How-ever, all the ways or projects cannot be selected.
Therefore, some criteria should be set up to evaluate each alternative. Normally the
criteria are set in the light of organizational mission and objectives. The identification and
evaluation of various alternatives will narrow down the range of strategies that can
seriously be considered for choice. Choice is deciding the acceptable alternative among
the several which fits with the organizational objectives
Implementation of Strategies: After the strategy has been chosen, it is put to
implementation, that is, it is put into action. Choice of strategy is mostly analytical and
conceptual while implementation is operational or putting into action. Various factors
which are necessary for implementation are design of suitable organization structure,
developing and motivating people to take up work, designing effective control and
information system, allocation of resources, etc. When these are undertaken, these may
produce results, which
can be compared in the light of objectives set, and control process comes into operation.
Evaluation and Control of Strategies: If the results and objectives differ, a further
analysis is required to find out the reasons for the gap and taking suitable actions to
overcome the problems because of which the gap exists. This may also require a change
in strategy if there is a problem because of the formulation inadequacy. This puts back
the managers at the starting point of the strategy formulation.
Types of Decisions
 Strategic Decisions
 Administrative Decisions
 Operating decisions.

Strategic Decisions
Strategic decision is a major choice of action concerning committing resources with a
view to achieve organizational objectives. It is a major decision which affects the entire
organization or a significant part of it. A decision to diversify is a strategic decision.
.Strategic decisions are primarily concerned with external, rather than internal problems
of the firm and specifically with selection of the product-mix, which the firm will
produce, and the markets to which it will sell.

DIMENSIONS OF STRATEGIC DECISIONS:

1. Strategic decisions require top-management involvement

2. They involve substantial resource deployment
3. Strategic decisions have a significant impact on the long-term prosperity of
the firm
4. They are future oriented
5. They set precedent for lower level decisions and future actions
6. They have major multi-functional or multi-business consequences and they
have implications for the entire organization
Strategic decisions necessitate considering factors in the firm’s external environment
Administrative decisions
Administrative decisions are concerned with structuring the firm’s resources in a way,
which creates a maximum performance potential. One part of the administrative problem
is concerned with organization flows, distribution channels, and location of facilities.
The other part is concerned with acquisition and development of resources ,development
of raw-material sources, personnel training and development, financing, and acquisition
of facilities and equipment
Operating Decisions
Operational decision is concerned with how a major chosen action is put into operation. It
is of short-term nature and affects a narrow part of the organization. The authority for
making operational decision is delegated to lower level managers. The object is to
maximize the efficiency of the firm’s resources-conversion process, or, in other words, to
maximize profitability of current operations. The major decision areas are resource
allocation (budgeting) among functional areas and product lines, scheduling of
operations, supervision of performance, and applying control actions.
VISION: “An enduring picture of what the firm wants to be and, in broad terms, what it
wants to ultimately achieve.”

Vision statement identifies what the company intends to be in the future. A clear vision
provides the foundation for developing a comprehensive mission statement.

Benefits of having a Vision:

 Good visions are inspiring and exhilarating

 Good visions help in the creation of a common identity and a shared sense of
purpose
 Good visions are original and unique
 God visions foster risk-taking and experimentation
 Good visions foster long-term thinking

While the essence of vision is a forward-looking view of what an organization whishes

to become, mission is what an organization is and why it exists.
IOC’s Vision:
“Indian Oil aims to achieve international standards of excellence in all aspects of energy
and diversified business with focus on customer delight thorough quality products and
services”

MISSION: “The company mission is defined as the fundamental, unique purpose that
sets a business apart from other firms of its type and identifies the scope of its operations
in product and market terms.”

Characteristics of a good mission statement:

1. It should be feasible
2. It should be precise
 3. It should be clear
4. It should be motivating
5. It should be distinctive
6. It should indicate major components of strategy
7. It should clarify the purpose of the organization
8. It should be relevant to all the stakeholders in the firm
Characteristics of a Mission Statement
Organizations legitimize themselves by performing some function that is valued by
society. A mission statement defines the basic reason for the existence of that
organization. Such a statement reflects the corporate philosophy, identity, character, and
image of an organization. It may be defined explicitly or could be deduced from the
management’s actions, decisions, or the chief executive’s press statements. When
explicitly defined it provides enlightenment to the insiders and outsiders on what the
organization stand for. In order to be effective, a mission statement should possess the
following seven characteristics.
1. It should be feasible. A mission should always aim high but it should not be an
impossible statement. It should be realistic and achievable its followers must find it to be
credible. But feasibility depends on the resources available to work towards a mission. In
the sixties, the US National Aeronautics and Space Administration (NASA) had a
missionto land on the moon. It was a feasible mission that was ultimately realized.
2. It should be precise. A mission statement should not be so narrow as to restrict the
organization’s activities nor should it be too broad to make itself meaningless. For
instance, ‘Manufacturing bicycles’ is a narrow mission statement since it severely limits
the organization’s activities, while mobility business’ is too broad a term, as it does not
define the reasonable contour within which the organization could operate.
3. It should be clear. A mission should be clear enough to lead to action. It should not be
a high-sounding set of platitudes meant for publicity purposes. Many organizations do
adopt such statements but probably they do so for emphasizing their identity and
character. For example, Asian Paints stresses ‘leadership through excellence’, while India
Today see itself as ‘the complete news magazine’. The Administrative Staff College of
India considers itself as ‘the college for practicing managers’ and Bajaj Auto believes in
‘Providing, value for money, for years’. To be useful, a mission statement should be clear
enough to lead to action. The ITC’s stated corporate philosophy of aligning its
organizational activities with national priorities helps it in choosing areas for
diversification like the hotel, paper and agroindustry.
4. It should be motivating. A mission statement should be motivating for members of
the organization and of society, and they should feel it worthwhile working for such an
organization or being its customers. A bank, which lays great emphasis on customer
service, is likely to motivate its employees to serve its customers well and to attract
clients. Customer service, therefore is an important purpose for a banking institution.
5. It should be distinctive. A mission statement, which is indiscriminate, is likely to
have little impact. If all scooter manufacturers defined their mission in a similar fashion,
there would not be much of a difference among them. But if one defines it as providing
scooters that would provide ‘value for money, for years’ it will create an important
distinction in the public mind.
6. It should indicate major components of strategy. A mission statement along with
the organizational purpose should indicate the major components of the strategy to be
adopted. The chief executive of Indal expressed his intentions by saying that his company
“begins its fifth decade of committed entrepreneurship with the promise of a highly
diversified company retaining aluminum as its mainline business, but with an active
presence in the chemical, electronics and industrial equipment business”. This statement
indicates that the company is likely to follow a combination of stability, growth and
diversification strategies in the future.
7. It should clarify the purpose of the organization: A Mission statement should
indicate the purpose of the organization – the reason for its existence. The purpose that
sets a business apart from other firms of its type and identifies the scope of its operations
in product and market terms.
8. It should be relevant to all the stakeholders in the firm: The mission statement has
to be relevant to all the stakeholders in the firm including employees, customers, society,
etc and not just shareholders and managers.
Fundamental Assumptions in Formulating a Mission Statement:
1. The product or service can provide benefits at least equal to its price
2. The technology to be used in production will provide a product/ service that is
competitive in cost and quality
3. The product or service can satisfy a customer need currently felt by specific
market segments
4. The management philosophy of the business will result in a favourable public
image
5. The business will provide financial rewards for those willing to invest their labour
and money in the firm
6. With hard work and the support of others, the business can grow and be profitable
in the long run
7. The entrepreneur’s concept of the business can be communicated to and adopted
by employees and stockholders
Components of a Mission statement:
1. Customers – The mission statement should describe the customers that the
organization intends to serve
2. Product/ Service – This information identifies the goods and/or services
produced by the organization – what the company offers to its customers
3. Technology – It includes topics such as the techniques and processes by
which the company produces goods and/ or renders services
4. Geographic domain – This information describes markets the organization
intends to serve. Geographically, where does the firm compete?
5. Concerns for Survival, Growth and Profitability –This includes the firm’s
concern for survival, growth and profitability
6. Philosophy – A statement of organizational philosophy commonly appears as
part of the mission statement. An organizational philosophy statement reflects
the basic belief and values that should guide the organization members in
conducting the organization business.
 7. Self-concept – The mission statement, necessarily contain the information on
the self-concept of the organization. Organization self-concept is the
company’s own view or impression of itself. The company arrives at this self-
concept by assessing its strengths and weaknesses, competition and the ability
to survive in the market place.
8. Concern for public image – Mission statements normally contain some
reference, to the type of impression that the organization wants to leave with
its public. However the public forms the opinion of the company based on its
activities and it s performance.

A Few Illustrations of Mission Statements

HCL: “To be a world class competitor”
Ranbaxy Laboratories: “To become a research based international pharmaceutical
company.”
Unit Trust of India: “To keep the common man in sharper focus; to encourage and
investment habits among them . .
IOC’s Mission:
“Maintaining national leadership in oil refining, marketing and pipeline
transportation”

Mission Statement of Ranbaxy Laboratories:

“To become a research-based international pharmaceuticals company”

Mission Statement of BHEL:

“Maintain a leadership position as suppliers of quality equipment, systems and
services in the field of conversion, transmission, utilization and conservation of
energy, for applications in the area of electric power, transportation, oil and gas
exploration and industries.
Utilize company’s capabilities and resources to expand business into allied areas and
other priority sectors of the economy like defence, communications and electronics”
Sony's vision statement
:

"We invite new thinking, so even more fantastic ideas can evolve. We take chances. We

exceed expectations. We help dreamers dream."

Sony's core ideology has been stated many different ways over the company's history. At

its founding, Masaru Ibuka described two key elements of Sony's ideology: "We shall

welcome technical difficulties and focus on highly sophisticated technical products that

have great usefulness for society regardless of the quantity involved; we shall place our

main emphasis on ability, performance, and personal character so that each individual can

show the best in ability and skill."2 Four decades later, this same concept appeared in a

statement of core ideology called Sony Pioneer Spirit: "Sony is a pioneer and never

intends to follow others. Through progress, Sony wants to serve the whole world. It shall

be always a seeker of the unknown.

Sony ‘s Mission Statement:

“To experience the joy of advancing and applying technology for the benefit of the

public”

Johnson & Johnson’s credo (Mission Statement)

We believe our first responsibility is to the doctors, nurses and patients,
to mothers and fathers and all others who use our products and services.
In meeting their needs everything we do must be of high quality.
We must constantly strive to reduce our costs
in order to maintain reasonable prices.
Customers' orders must be serviced promptly and accurately.
Our suppliers and distributors must have an opportunity to make a fair profit.
 We are responsible to our employees,
the men and women who work with us throughout the world.
Everyone must be considered as an individual.
We must respect their dignity and recognize their merit.
They must have a sense of security in their jobs.
Compensation must be fair and adequate,
and working conditions clean, orderly and safe.
We must be mindful of ways to help our employees fulfill
their family responsibilities.
Employees must feel free to make suggestions and complaints.
There must be equal opportunity for employment, development
and advancement for those qualified.
We must provide competent management,
and their actions must be just and ethical.
We are responsible to the communities in which we live and work
and to the world community as well.
We must be good citizens – support good works and charities
and bear our fair share of taxes.
We must encourage civic improvements and better health and education.
We must maintain in good order
the property we are privileged to use,
protecting the environment and natural resources.
Our final responsibility is to our stockholders.
Business must make a sound profit.
We must experiment with new ideas.
Research must be carried on, innovative programs developed
and mistakes paid for.
New equipment must be purchased, new facilities provided
and new products launched.
Reserves must be created to provide for adverse times.
 When we operate according to these principles,
the stockholders should realize a fair return.

HEWLETT PACKARD’s MISSION STATEMENT

Customer loyalty

To provide products, services and solutions of the highest quality and deliver more
value to our customers that earns their respect and loyalty.
Underlying beliefs supporting this objective:
Our continued success is dependent on increasing the loyalty of our customers.
Listening attentively to customers to truly understands their needs, then delivering
solutions that translate into customer success is essential to earn customer loyalty.
Competitive total cost of ownership, quality, inventiveness, and the way we do
business drives customer loyalty.

Profit

To achieve sufficient profit to finance our company growth, create value for our
shareholders and provide the resources we need to achieve our other corporate
objectives.
Underlying beliefs supporting this objective:
Profit is the responsibility of all.
Balance of long-term and short-term objectives is key to profitability.
Profit allows us to reinvest in new and emerging business opportunities.
Profit is highly correlated to generating cash, which brings more flexibility to the
business at a lower cost.
Profit enables the achievement of our corporate objectives.

Market leadership

To grow by continually providing useful and significant products, services and

solutions to markets we already serve—and to expand into new areas that build on
our technologies, competencies and customer interests.
Underlying beliefs supporting this objective:
There are more places we can contribute than we will be capable of contributing:
We must focus.
To be average in the marketplace is not good enough, we play to win.
We must be No. 1 or No. 2 in our chosen fields.

Growth

To view change in the market as an opportunity to grow; to use our profits and our
ability to develop and produce innovative products, services and solutions that
satisfy emerging customer needs.
Underlying beliefs supporting this objective:
Growth comes from taking smart risks, based on the state of the industry—that
requires both a conviction in studying the trends, but also in inducing change in
our industry.
Our size (and diversity of businesses) gives us an ability to weather economic
cycles and turn them to our favor.

Employee commitment

To help HP employees share in the company's success that they make possible; to
provide people with employment opportunities based on performance; to create
with them a safe, exciting and inclusive work environment that values their
diversity and recognizes individual contributions; and to help them gain a sense of
satisfaction and accomplishment from their work.
Underlying beliefs supporting this objective:
HP's performance starts with motivated employees; their loyalty is key.
We trust our employees to do the right thing and to make a difference.
Everyone has something to contribute: It's not about title, level or tenure.
An exciting, stimulating work environment is critical to invention.
A diverse workforce gives us a competitive advantage.
Employees are responsible for lifelong learning.

Leadership capability

To develop leaders at every level who are accountable for achieving business
results and exemplifying our values.
Underlying beliefs supporting this objective:
Leaders inspire, foster collaboration and turn vision and strategies into action—
with focused, clear goals.
Effective leaders coach, relay good news and bad, and give feedback that works.
Leaders demonstrate self-awareness and a willingness to accept feedback and
continuously develop.
Leaders speak with one voice and act to eliminate busy work.
It is important to measure people on the results they achieve against goals they
helped to create.

Global citizenship

Good citizenship is good business. We live up to our responsibility to society by

being an economic, intellectual and social asset to each country and community in
which we do business.
Underlying beliefs supporting this objective:
The highest standards of honesty and integrity are critical to developing customer
and stakeholder loyalty.
The betterment of our society is not a job to be left to a few; it is the
responsibility to be shared by all.
This objective is essential to delivering on the brand promise.

Goals and Objectives:

Goals denote what an organization hopes to accomplish in a future period of time.

.Objectives are the ends that state specifically how the goals shall be achieved. They are
concrete and specific in contrast to goals that are generalized. In this manner, objectives
make the goals operational.
Role of Objectives:
 Objectives provide the foundation for management functions
 Objectives define the organization’s relationship with its environment
 Objectives help an organization to pursue its vision and mission
 Objectives provide the basis for strategic decision-making
 Objectives serve as a guide for improving organizational efficiency
 Objectives provide the standards for performance appraisal

Characteristics of Effective Objectives:

 Objectives should be understandable

 Objectives should be concrete and specific
 Objectives should be related to a time frame
 Objectives should be measurable and controllable
 Objectives should be challenging
 Different objectives should correlate with each other
 Objectives should be set within constraints
 Objectives should be realistic

Issues in Objective-Setting:

 Specificity
 Multiplicity
 Periodicity
 Verifiability
 Reality
 Quality
Areas of Objective Setting:
 Profitability
 Market standing
 Productivity and product quality
 Innovation
 Physical and Financial resources
 Manager performance and development
 Employee performance and attitude
 Public responsibility
 Customer satisfaction

Definition of Strategy
“The determination of the basic long-term goals and objectives of an enterprise and the
adoption of the courses of action and the allocation of resources necessary for carrying
out these goals.”
– Alfred D Chandler
“A unified, comprehensive and integrated plan designed to assure that the basic
objectives of the enterprise are achieved.”
- William F Glueck

Features of Strategy:
♦ Strategy is all about winning
♦ Strategy offers broad guidelines
♦ Strategy is forward looking
♦ Strategy’s life span is limited.
♦ Strategy is generally a product of top management thinking
♦ Strategy is a dynamic and flexible programme of action
♦ Strategy is an inherently creative process

Elements of a Strategy:
♦ Goals : A strategy invariably indicates the long term goals toward which all
efforts are directed
♦ Scope: A strategy defines the scope of the firm that is, the kind of products the
firm will offer, the markets it will pursue and the broad areas of activity it will
undetake.
♦ Competitive advantage: A strategy also contains a clear statement of what
competitive advantages the firm will pursue and sustain
♦ Logic: It is the most important element of a strategy. Ex: A firm’s strategy is to
dominate the market for inexpensive detergents by being the low-cost, mass-
market producer. The goal is to dominate the detergent market. The scope is to
produce low-cost detergent powder for the Indian mass market. The competitive
advantage is the firm’s low cost. Yet this example does not explain why this
strategy will work. The ‘why’ is the logic of the strategy.
Low price will generate high volumes. This will lead to economies of
scale and low costs. This will further improve the bottom line with a low price.
 LEVELS OF STRATEGY
Corporate
level
strategy

Business
level
strategy
Corporate level

Functional SBU 1 SBU 2 SBU3

level
strategy

Finance HR Production Marketing

Levels of Strategy
Strategy may operate at different levels of an organization - corporate level, business
level, and functional level.
Corporate Level Strategy
It sets long-term direction for the total enterprise. It deals with deciding the businesses
the company will enter & leave and how resources will be distributed among these
businesses. Strategy at this level is typically developed by top management (Board of
Directors). The decisions are broad based, carry greater risk and affect most parts of the
organization. Eg. The type of business that the organization should enter, changes
required in growth strategy, acquisition, diversification, etc. Corporate level strategy
ccupies the highest level of strategic decision-making and covers actions dealing with the
objective of the firm, acquisition and allocation of resources and coordination of
strategies of various SBUs for optimal performance.

Business-Level Strategy.
It identifies how a strategic business unit or division will compete in its product or
service domain. Business-level strategy is - applicable in those organizations, which have
different businesses-and each business is treated as strategic business unit (SBU). The
fundamental concept in SBU is to identify the discrete independent product/market
segments served by an organization. Since each product/market segment has a distinct
environment, a SBU is created for each such segment. For example, Reliance Industries
Limited operates in textile fabrics, yarns, fibers, and a variety of petrochemical products.
For each product group, the nature of market in terms of customers, competition, and
marketing channel differs. There-fore, it requires different strategies for its different
product groups. Thus, where SBU concept is applied, each SBU sets its own strategies to
make the best use of its resources (its strategic advantages) given the environment it
faces. At such a level, strategy is a comprehensive plan providing objectives for SBUs,
allocation of re-sources among functional areas and coordination between them for
making optimal contribution to the achievement of corporate-level objectives. Such
strategies operate within the overall strategies of the organization.

Functional-Level Strategy.
 It guides activities within one specific area of operations. Functional strategy, as is
suggested by the title, relates to a single functional operation and the activities involved
therein. Decisions at this level within the organization are often described as tactical.
Functional strategies are developed by functional managers and are typically reviewed by
business unit heads. Eg. Pricing the products, R& D strategy, training personnel, etc
TYPES OF STRATEGIES

Deliberate versus Emergent Strategies

In
t
St end
ra ed
te
gy
Del
iber
at e
Stra
tegy

Sustained
Realized Superior
Unrealized Strategy Performance
Strategy

Emergent Strategy

Adapted from: Mintzberg, H. “The Strategy Concept I: Five Ps for Strategy” California Management Review. Volume 30
Number1, Fall 1987.

According to Mintzberg and Waters, there are five kinds of strategies in their model:
emergent strategy, intended strategy, deliberate strategy, realized strategy, and unrealized
strategy.
Intended strategy is the strategy as conceived by the top management team. Realized
strategy is the actual strategy that is implemented. The intended strategy that is realized
is a deliberate strategy. Realized strategy is a blend of intentions and emergence which
can be interpreted by reference to the strength of pressure from the external environment.
Emergent strategies can be seen as responses to unexpected opportunities and problems.
Mintzberg and Waters mentioned that realized strategy – the actual strategy that is
implemented – is only partly related to that which was intended. The primary determinant
of realized strategy is what Mintzberg terms emergent strategy – the decisions that merge
from the complex processes in which individual managers interpret the intended strategy
and adapt to changing external circumstances.
TACTICS:
A tactic is a sub strategy. It is a specific operating plan detailing how a strategy is to be
implemented in terms of when and where it is to be put into action.
Strategies are forward-looking. They provide the guidelines for growth. With strategies,
you are in reality, talking of future performance gaps and how you are going to overcome
them. Tactical is more or less present or now orientated. So when speaking of tactical
plans, you are basically speaking of present performance gaps and how you are going to
overcome them.
Distinction between Strategy and Tactics
1. Level of Conduct: Strategy is developed at the highest level of management either at
the headquarter or at major divisional. Tactics is employed at and relates to lower levels
of management.
2. Periodicity. The formulation of strategy is both continuous and irregular. The process
is continuous but the timing of decision is irregular as it depends on the appearance of
opportunities, new ideas, crisis, management initiative, and other non-routine stimuli.
Tactics is determined on a periodic basis by various organizations. A fixed timetable may
be followed for this purpose, for example, preparation of budgets at regular intervals.
3. Time Horizon. Strategy has a long-term perspective; especially the successful
strategies are followed for quite long periods. In occasional cases, it may have short-term
duration. Thus, depending on the nature and requirement, its time horizon is flexible;
however, emphasis is put on long-term.
On the other hand, time horizon of tactics is short-run and definite. The duration is
uniform, for example budget preparation.
4. Uncertainty. Element of uncertainty is higher in the case of strategy formulation and
its implementation. In fact, strategic decisions are taken under the conditions of partial
ignorance. Tactical decisions are more certain as these are taken within the framework set
by the strategy. Thus, evaluation of tactics is easier as compared to evaluation of a
strategy.
5. Information Needs. The total possible range of alternatives from which a manager can
choose his strategic action is greater than tactics. A manager requires more information
for arriving at strategic decision. Since an attempt is made to relate the organization to its
environment, this requires information about the various aspects of environment.
Naturally the collection of such information will be different. Tactical information is
generated within the organization particularly from accounting procedures and statistical
sources.
6. Importance. Strategies are most important factors of organization because they
decide the future course of action for the organization as a whole. On the other hand,
tactics are of less importance because they are concerned with specific part of the
organization. This difference, though seems to be simple, becomes important from
managerial

POLICIES:
Policies are guidelines to decision-making. They tell people what they may or may not
do. Policy is a guide to action in areas of repetitive activity. Once policy decisions are
formulated, these can be delegated and implemented by others independently.