Business Policy and Strategic

Management- An Introduction
By
Prithwi Tilak Banerjee
Faculty Member

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Learning comes from ‘anybody’!

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 Let us start with the whole truth

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 Bad planning waste the talents

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 The summation of everything

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 Planting the tree for a long term

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 The 5 Ps of Business Policy
• Strategy is a Plan- It is a direction, guide, and a course
of action- more of an intention rather than the actuality
• Strategy is a Ploy- It is a maneuver intended to outwit
the competitor; in any market, for any product/services
• Strategy is a Pattern- It is a consistent pattern of past
behaviour- realized with experience than it’s intended
• Strategy is a Position- It is locating the image, brands,
products, & firms within the conceptual framework of
consumers or other stakeholders determined outside
• Strategy is a Perspective- It is the power to dream by
visionary architects with Ability, Skill, and Knowledge to
perform tasks in a consistent basis and lead the way

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Is this a battle of Myopic vision?

What do
you see?

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 It all starts from our core values

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 Ingredients to cook up Policies

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The style of cooking good Policy

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 The actual need for a Strategy

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 The main purpose behind these

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 Policy and Strategy should gel

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And that is achieved by sheer…

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 To make every Vision a reality

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 And to put a Mission to Vision
Planning Implementation Control
Corporate Measuring
planning Organizing results
Division
planning Diagnosing
results
Business Implementing
planning
Taking
Product corrective
planning action

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Hence
before
Policy
comes
this….

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Then only the building stands….

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 The Five Force model in details

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 The Generic Strategy in details
Cost Leadership:
Low-cost competitive strategy
Aimed at broad mass market
Aggressive construction of efficient-scale facility
Cost reductions and minimization
Differentiation:
Broad mass market
Unique product or service
Charge premiums
Lower customer sensitivity to price
Differentiation focus:
Focus on particular group or geographic market
Seek differentiation in targeted market segment
Serve special needs of narrow target market
Cost Focus (Stuck in the middle):
No competitive advantage
Below-average performance
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The Grand Strategy formulation!

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 The problems in the ‘long’ run…
Risks of Cost Leadership
Cost leadership is not
sustained:
• Competitors imitate.
• Technology changes.
• Other bases for cost
leadership erode.
Proximity in differentiation is
lost.
Cost focusers achieve even
lower cost in segments.
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Risks of Differentiation
Differentiation is not
sustained:
• Competitors imitate.
• Bases for differentiation
become less important to
buyers.
Cost proximity is lost.
Differentiation focusers
achieve even greater
differentiation in segments.
Indraprastha College of Management & Technology
Risks of Focus
The focus strategy is
imitated:
The target segment
becomes structurally
unattractive:
• Structure erodes.
• Demand disappears.
Broadly targeted competitors
overwhelm the segment:
• The segment’s
differences from other
segments narrow.
• The advantages of a
broad line increase.
New focusers sub-segment
the industry.
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The real purpose behind SWOT

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The wide implication/importance

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 A sample example for “Project”

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 Your Project in any local shop
SWOT Strength Weakness Opportunity Threat

Revenue/Impact

Customer/Client

Internal Process

Intangibles

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 What exactly to do in Project
Intangible Assets
Key Question: How do they align
their intangible assets – people,
systems and culture – to
improve critical processes?
Internal Operations
Key Question: What processes
must they excel at to satisfy the
suppliers/buyers/intermediates?
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Customer/Client
Key Question: How do they reach
their financial objectives, how do
they create value for their
customers and clients?
Revenue/Impact
Key Question: What are their
market and client expectations
for financial performance and
impact with their services?
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 The Evolution of Strategy/Policy
1950s 1960s-early 70s Mid-70s-mid-80s Late 80s –1990s 2000s
DOMINANT Budgetary Corporate Positioning Competitive Strategic
THEME planning & planning advantage innovation
control

MAIN Financial Planning Selecting Focusing on Reconciling

ISSUES control growth &- sectors/markets. sources of size with
diversification Positioning for competitive flexibility &
leadership advantage agility

KEY Capital Forecasting. Industry analysis Resources & Cooperative

CONCEPTS budgeting. Corporate Segmentation capabilities. strategy.
& Financial planning. Experience curve Shareholder Complexity.
TOOLS planning Synergy Portfolio analysis value. Owning
E-commerce. standards.
— Knowledge Management—

MANAGE-
Coordination Corporate Diversification. Restructuring. Alliances &
MENT & control by planning depts. Global strategies. Reengineering. networks
IMPLIC- Budgeting created. Rise of Matrix structures Refocusing. Self-organiza-
ATIONS systems corporate Outsourcing. ation
& virtual
planning organization
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 Anshoff's- Product/Market Grid
Current New
products products

Market- Product-
Current penetration development
markets strategy strategy

New Market- Diversification

markets development
strategy strategy

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 The Matrix of all matrices- BCG
20%- Stars Question marks
Market growth rate

4
?2 ?
18%-
16%- 3 1
14%-
12%- 5 ?

?
10%-
8%- Cash cow Dogs
6%- 8
4%-
2%- 6 7
0
10x 4x 2x 1.5x 1x .5x .4x .3x .2x .1x
Relative market share
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The whole world of our business

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The PEST Analysis (The Macro)
• Political: Local, national and international
political developments- how will they affect the
organisation and in what way/s?
• Economic: What are the main economic issues-
both nationally and internationally- that might
affect the organisation?
• Social: What are the developing social trends
that may impact on how the organisation
operates and what will they mean for future
planning?
• Technological: Changing technology can
impact on competitive advantage very quickly!
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 Next Project- Do it with SME s

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Narrowing down to focused strategy with quantitative
and qualitative screening criteria

Customers
Needs and other
Segmenting
Dimensions
Targeting &
Segmentation
S.
Company W.
Mission, Objectives, O.
& Resources T. Positioning &
Differentiation
Competitors
Current &
Prospective

External Market Environment

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 Value Chain Analysis by Porter

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Vertical & Horizontal Integration
Textile producer Textile producer

Shirt manufacturer Shirt manufacturer

Clothing store Clothing store

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• Horizontal Integration
– The process of acquiring or merging with industry
competitors
• Vertical Integration
– Expanding operations backward into an industry that
produces inputs for the company or forward into an
industry that distributes the company’s products
• Strategic Outsourcing
– Letting some value creation activities within a business be
performed by an independent entity

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 Horizontal Integration Benefits
1. Lowers the cost structure
– Creates increasing economies of scale
– Reduces the duplication of resources between two companies
1. Increases product differentiation
– Product bundling – broader range at single combined price
– Total solution – saving customers time and money
– Cross-selling – leveraging established customer relationships
1. Replicates the business model
– In new market segments within same industry
1. Reduces industry rivalry
– Eliminate excess capacity in an industry
– Easier to implement tacit price coordination among rivals
1. Increases bargaining power
– Increased market power over suppliers and buyers
– Gain greater control

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 Horizontal Integration Problems
• Implementing a horizontal integration is not an easy task.
– Problems associated with merging very different company
cultures
– High management turnover in the acquired company when the
acquisition is a hostile one
– Tendency of managers to overestimate the benefits to be had in
the merger
– Tendency of managers to underestimate the problems involved
in merging their operations
• The merger may be blocked if merger is perceived to:
– Create a dominant competitor
– Create too much industry consolidation
– Have the potential for future abuse of market power

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 Vertical Integration Advantages
1. Facilitates investments in efficiency-enhancing
specialized assets
– Allows company to lower the cost structure or
– Better differentiate its products
1. Enhances or protects product quality
– To strengthen its differentiation advantage through either
forward or backward integration
1. Results in improved scheduling
– Makes it easier and more cost-effective to plan, coordinate,
and schedule the transfer of product within the value-added
chain
– Enables a company to respond better to changes in demand

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 Vertical Integration Negetives
• Cost structure is increasing.
– Company-owned suppliers develop a higher cost structure
than those of the independent suppliers
– Bureaucratic costs of solving transaction difficulties
• The technology is changing fast.
– Vertical integration may lock into old or inefficient technology
– Prevent company from changing to a new technology that
could strengthen the business model
• Demand is unpredictable.
• Creates risk in vertical integration investments.
Vertical integration can weaken business model when:
1. Company-owned suppliers lack incentive to reduce costs
2. Changing demand or technology reduces ability to be
competitive
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 Write an essay on these firms

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 Thank you all so very much

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