BUSINESS PLANNING

AND
STRATEGIC
Management

Prof. DEBASISH DUTTA

Planning

Planning is the most basic of all managerial

functions. It involves selecting mission and
objectives and the actions to achieve them.
Plans provide a rational approach to achieving
preselected objectives.

Prof. DEBASISH DUTTA

Corporate Planning
Corporate Planning gives the high-level, longhorizon
plan
that
identifies
financial
opportunities and links them directly and
tactically
to
key
value-driven
business
strategies.

It links those financial KPIs with pragmatic

operational cause and effect indicators and
help tie those opportunities to plan and
optimize at a high level over the long term.

Prof. DEBASISH DUTTA

Prof. DEBASISH DUTTA

BUSINESS POLICY

Prof. DEBASISH DUTTA

BUSINESS POLICY
Definition
Business policy is the study of the functions and
responsibilities of senior management, the crucial
problem that affect the success in the total
enterprise, and the decision that determine the
direction of the organisation 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 orgaisational identity
and character, the continuous definition of what
needs to be done, and the mobilisation of
resources for the attainment of goals in the face
of competition or adverse circumstances.
Christensen and others
Prof. DEBASISH DUTTA

The definition covers

1. It is considered as the study and of the functions

and responsibilities of the senior management.
2. It relates to those organisational problem that
affect the success of the total enterprises.
3. It determines the future course of action that an
organisation has to adopt.
4. It involves choosing the purpose.
5. It defines what needs to be done in order to
mould the character and identity of organisation.
6. It is concerned with mobilisation of resources,
which help the organisation to achieve its goals.
Prof. DEBASISH DUTTA

Characteristics of Business Policy

Definite and clear policies help to prevent
deviations from accepted course and helps in
achieving desired goal and therefore the
characteristics are:

Simplicity
Clarity
Flexibility
Certainty

Consistency
Comprehensive
Relevant
Stability

Prof. DEBASISH DUTTA

Traditional Planning
Vs.
Strategic Planning
Prof. DEBASISH DUTTA

Traditional Planning Vs. Strategic Planning

Traditional Planning
1.

2.

3.

4.

5.

Strategic Planning

It is concerned with goal

1.
It is concerned with new
derived from established
objectives and strategies.
objectives
2.
It combines activities that
It is concerned with
form an unique value chain
individual objectives
3.
It is performed by top
May be carried out lower
management
management
4.
It is integrated and have
It is more functional or
corporate level and business
unit wise or departmental
level approach
wise approach.
5.
It has less procedures and
It deals with goals that is
may trade in unchartered
validated through past
path
experiences
Prof. DEBASISH DUTTA

Strategic Management

Prof. DEBASISH DUTTA

STRATEGY
The word strategy, deriving from the Greek
noun strategus, meaning commander in chief,
was first used in the English language in 1656.
The development and usage of the word
suggests that it is composed of stratos (army)
and agein (to lead).

In a management context, the word strategy

has now replaced the more traditional term
long-term planning to denote a specific
pattern of decisions and actions
Prof. DEBASISH DUTTA

Strategic Management
In
the
descriptive
and
prescriptive
management texts, strategic management
appears as a cycle in which several activities
follow and feed upon one another.
The strategic management process is typically
broken down into five steps

Prof. DEBASISH DUTTA

Model of Strategic Management

Step 1

VISION AND
MISSION
STATEMENT

Step 2

SCANNING
ENVIRONMENT

Step 3

DEVELOPING
STRATEGIC
CHOICES

Step 4

IMPLEMENTATION

Step 5

EVALUATION
Prof. DEBASISH DUTTA

Vision and Mission Statement

The first step in the strategic management model
begins with senior managers evaluating their
position in relation to the organizations current
mission and goals.
The mission describes the organizations values
and aspirations; it indicates the direction in which
senior management is going.
Goals are the desired ends sought through the
actual operating procedures of the organization
and typically describe short-term measurable
outcomes.
Prof. DEBASISH DUTTA

Scanning Environment
Environmental analysis looks at the internal
organizational strengths and weak-nesses and
the external environment for opportunities and
threats.
The factors that are most important to the
organizations future are referred to as
strategic factors and can be summarized by
the acronym SWOT Strengths, Weaknesses,
Opportunities and Threats.
Prof. DEBASISH DUTTA

Developing Strategic Choices

Strategic formulation or developing strategic
choices involves senior managers evaluating
the interaction between strategic factors and
making strategic choices that guide managers
to meet the organizations goals.
Some strategies are formulated at the
corporate, business and specific functional
levels. The term strategic choice raises the
question of who makes decisions and why they
are made.
Prof. DEBASISH DUTTA

Implementation
Strategy implementation is an area of activity
that focuses on the techniques used by
managers to implement their strategies.
In particular, it refers to activities that deal
with leadership style, the structure of the
organization, the information and control
systems, and the management of human
resources.
Leadership is the most important and difficult
part of the strategic implementation process.
Prof. DEBASISH DUTTA

Evaluation
Strategy evaluation is an activity that
determines to what extent the actual change
and performance match the desired change
and performance.

Prof. DEBASISH DUTTA

Conclusion
The strategic management model depicts the
five major activities as forming a rational
and linear process. It is, however, important
to note that it is a normative model, that is,
it shows how strategic management should
be done rather than describing what is
actually done by senior managers.
The strategic decision-making implies a
potential gap between the theoretical model
and reality.
Prof. DEBASISH DUTTA

Levels of Strategy

1. Corporate Level Strategies

2. Business Level Strategies
3. Functional Level Strategies

Prof. DEBASISH DUTTA

Corporate Level Strategies

Corporate level strategies are basically about
decisions related to allocating resources
among the different businesses of a firm,
transferring resources from one set of
business to others and managing and
nurturing a portfolio of business in such a way
that the overall corporate objectives are
achieved. An analysis based on business
definition provides a set of strategic
alternatives that an organisation can consider.

Prof. DEBASISH DUTTA

Business Level Strategies

Business Level Strategies are the courses of
action adopted by a firm for each of its
businesses separately to serve identified
customer groups and provide value to
customer by satisfaction of their needs
In the process the firm uses its competencies
to gain, sustain, and enhance its strategic or
competitive advantage.

Prof. DEBASISH DUTTA

Functional Level Strategies

Functional Level Strategies deals with a
relatively restricted plan which provides the
objectives for a specific function, for the
allocation of resources among different
operations within that functional area and for
enabling a coordination between them for an
optimal contribution to the achievement of the
business and corporate level objectives.
Functional strategies are implemented through
functional and operational implementation.
Prof. DEBASISH DUTTA

STRATEGIC ANALYSIS
AND
CHOICE

Prof. DEBASISH DUTTA

Strategic Choice

Process of strategic choice consists of following

four steps:
1. Focusing on alternatives
2. Considering the selection factors
3. Evaluation of strategic alternatives
4. Making the strategic choice

Prof. DEBASISH DUTTA

Focusing on alternatives

The aim of focusing on alternative is to narrow

down the choice to a manageable number of
feasible strategies.
A decision maker would, in practice, limit the
choice to a few alternatives, rather focuses on
reasonable number of alternatives.

Prof. DEBASISH DUTTA

Considering the selection factors

It determines the criteria on which the

evaluation of strategic alternatives can be
based.
It can be divided into two groups:
1. Objective Factors: Based on analytical
techniques.
2. Subjective Factors: Based on personal
judgment.

Prof. DEBASISH DUTTA

Evaluation of strategic alternatives

It basically involves bringing together the

results of the analysis carried out on the basis
of the objective and subjective factors.
There is no set procedure and strategists may
use
any
approach
which
suits
the
circumstances. Both objective and subjective
factors have to be considered together.

Prof. DEBASISH DUTTA

Making the strategic choice

This leads to a clear assessment of which
alternative is the most suitable under the
existing conditions. One or more strategies has
to be chosen for implementation.
A blueprint that will describe the strategies and
the conditions under which they would operate
has to be made.

Prof. DEBASISH DUTTA

Strategic Analysis
Nature of Strategy Analysis

-----

Establishing long-term objectives

Generating alternative strategies
Selecting strategies to pursue
Best alternative - achieve mission & objectives

Prof. DEBASISH DUTTA

Strategic Analysis

Corporate Level
The analysis focuses on the question of what
should a corporate entity do regarding the
several business that are there in its portfolio.
It can be done through corporate portfolio
analysis and various techniques like BCG
matrix etc.

Prof. DEBASISH DUTTA

Strategic Analysis

Business Level
It refers to industry and competition analysis.
The industry and competition are vital for
consideration in making strategic choice.
Porters five forces model, experience curve
analysis, SWOT analysis etc. help in business
level analysis.

Prof. DEBASISH DUTTA

SWOT ANALYSIS

Prof. DEBASISH DUTTA

SWOT Matrix

Four Types of Strategies

Strengths-Opportunities (SO)
Weaknesses-Opportunities (WO)
Strengths-Threats (ST)
Weaknesses-Threats (WT)

Prof. DEBASISH DUTTA

SO Strategies

Strengths
Weaknesses
Opportunities
Threats
SWOT

SO
Strategies

Prof. DEBASISH DUTTA

Use a firms
internal strengths
to take advantage
of external
opportunities

WO Strategies

Strengths
Weaknesses
Opportunities
Threats
SWOT

WO
Strategies

Prof. DEBASISH DUTTA

Improving internal
weaknesses by
taking advantage
of external
opportunities

ST Strategies

Strengths
Weaknesses
Opportunities
Threats
SWOT

ST
Strategies

Prof. DEBASISH DUTTA

Use a firms
strengths
to avoid or
reduce the impact
of external
threats

WT Strategies

Strengths
Weaknesses
Opportunities
Threats
SWOT

WT
Strategies

Prof. DEBASISH DUTTA

Defensive tactics
aimed at reducing
internal
weaknesses &
avoiding
environmental
threats

SWOT Matrix
Strengths S

Weaknesses W

List Strengths

List Weaknesses

Opportunities O

SO Strategies

WO Strategies

List Opportunities

Use strengths to take

advantage of
opportunities

Overcoming weaknesses
by taking advantage of
opportunities

Threats T

ST Strategies

WT Strategies

List Threats

Use strengths to avoid

threats

Minimize weaknesses and

avoid threats

Leave Blank

Prof. DEBASISH DUTTA

GE Nine-Cell Matrix

Prof. DEBASISH DUTTA

GE Nine-Cell Matrix

This is based on the pioneering efforts of the

General Electric (GE) company of the US and
supported by the consulting firm McKinsey &
Company of the US.
It is a typical 9 cell Matrix.

Prof. DEBASISH DUTTA

GE Nine-Cell Matrix
The vertical axis represents industry
attractiveness,
which
is
a
weighted
composite rating based on eight different
factors.
These factors are:
1. Market size and growth rate
2. Industry profit margin
3. Competitive intensity
4. Seasonality
5. Cyclicality
6. Economics of scale
7. Technology and social environment
8. Legal and human aspects
Prof. DEBASISH DUTTA

GE Nine-Cell Matrix
The horizontal axis represents business
strength competitive position which a
weighted composite rating based on seven
factors.
These seven factors are:

1. Relative market share

2. Profit margins
3. Ability to compete on price & quality
4. Knowledge of customer and market
5. Competitive strength and weaknesses
6. Technological capability
7. Calibre management
Prof. DEBASISH DUTTA

GE Nine-Cell Matrix

The two composite values for industry

attractiveness
and
business
strength/competitive position are plotted for
each business in a companys portfolio. The
pie chart circles denote the proportional size
of the industry and the dark segment
represent the companys market share.

Prof. DEBASISH DUTTA

GE Nine-Cell Matrix
The 9 cell matrix are grouped on the basis of
low to high industry attractiveness, and
weak to strong business strength. The zones
of three cells each are made, denoting
different combinations represented by green,
yellow, and red colours.
The
green
zone
indicates
expansion
strategies, yellow zone suggests stability and
consolidation
and
red
zone
suggests
retrenchment, liquidation, or turnaround.

Prof. DEBASISH DUTTA

Industry Attractiveness

GE Nine-Cell Matrix
10.0

Strong

6.7

Average

3.3

Weak

1.0

High
6.7

Medium
3.3

Low
1.0

Business Strength and competitive Position

Rating Scale: 1 = Weak ; 10 = Strong
Prof. DEBASISH DUTTA

GE Nine-Cell Matrix
Advantages over BCG Matrix:
It offers an intermediate classification of medium and
average ratings.

It incorporates a larger variety of strategic variables like

the market share and industry size.
It is a powerful analytical tool to channel corporate
resources to business that combine medium to high
industry attractiveness with an average to strong
business strength/competitive position.

Prof. DEBASISH DUTTA

GE Nine-Cell Matrix

Drawback of the 9 cell matrix:

It only provides a broad strategic prescription
rather than specifics of business strategy.

Prof. DEBASISH DUTTA