Basic Concepts Bus Pol Start Mgmt Student Copy (1)

7/25/2019 Basic Concepts Bus Pol Start Mgmt Student Copy (1)

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CHAPTER 1Basic

Conceptsof BusinessPolicy &StrategicManagement


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BasicConcepts of Strategic Management

Globaliation!nternationaliation of mar"ets an#corporations

Global $%orl#%i#e mar"ets rat'er t'annational mar"ets

Electronic Commerce(se of t'e !nternet to con#uct businesstransactions

Basis for competition on a more strategicle)el rat'er t'an tra#itional focus on pro#uctfeatures an# costs


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Basic Concepts of Strategic Management

Electronic Commerce ** Tren#s

. Forcing company transformation. Market access & branding

changing disintermediation oftraditional distribution channels

. Balance of power shift toconsumer

. Competition changing


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Electronic Commerce ** Tren#s

. Pace of business increasing.

Internet purchasing beyondtraditional boundaries. Knowledge key asset source of

competitie adantage


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Business Policy as !iscipline

"eed to deelop multi#disciplinaryunderstanding of Business

$ capstone course that introducesaccountants to marketing% marketersto operations% production managers tohuman resources% often referred as

Business Policy at that time Business policy came from the use of

planning techniues from managers

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'hen came long range planning% laterreplaced by 1trategic Planning% thenreplaced by 1trategic Managementwhich described the process ofstrategic decision making

Business Policy basically deals withdecisions regarding the future of anorgani2ation% taken at top leel afterealuating the company3s strengthsand weaknesses in relation to its

enironment o1-7


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Integrates knowledge and methods learnedin functional courses% i*e* production% 4nance%marketing% 56% etc*

!eelops # analytical skills and decision#

making capabilities of students through casestudies% industry speci4c study & data

Promotes Positie $ttitudes ethical aluesand healthy ways of thinking taking holisticiew of the internal as well as e7ternalstakeholders of an organi2ation

Business Policy tends to emphasise rational#

analytical aspect of strategic management1-8


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Characteristics of Business $ctiities

Continuing economic decision#makingactiity (entrepreneurial mind set% risk%uncertainty of return0

Managerial% social and legal processes(moral alues% socially & legallyresponsible0

Production of goods and serices (alueadded0

1ale or e7change of goods and serices

1atisfaction of human needs 1-9


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Functions of Businesses

1tart#up Phase Marketing (product% price% promotion%

physical distribution0

Production (operations8 plant location andlayout% plant building% production planning%repair & maintenance% uality control0

97pansion Phase

Finance (management of funds relatie toliuidity% pro4tability% solency & e.ciencyof operations0

5uman resources 1-10


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Meaning & "ature ofManagement

6esponsible for integrating resources(manpower% machine% material &method0 and mobili2ing resources%

increasing productiity% facilitateorgani2ational change% adaption%resolution of con-icts* 1uccess of

organi2ation depends on competenceand character of management

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Meaning & "ature ofManagement

+rgani2ational processes% design ofstructure% determination of goals%acuisition and allocation of resources%

installation of control and communicationsystem depends on management

Management is in-uence process tomake things happen* It is backed bypower% competence% knowledge andresources* It is multilateral

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Management

Comprises planning% organi2ing*1ta.ng% leading or directing%facilitating and controlling or

manipulating an organi2ation ore:ort for the purpose ofaccomplishing a goal

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Management Models

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Tra#itional Mo#ernManaging assets Managing resources &

capabilities

Focus on managingnumbers

Focus on creating alue

5ierarchical "etwork!ependent parts Independent parts

6eactie 6esponsie

Command and control 9mpowered employees

Blame culture 9ncouraging radical

ideas

6isk aerse 6isk taking


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1ailing 6ace; 1trategy9lements

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Acti)ity ElementPlace to go skills

!ecisions% tasks 1tructure

"orms% culture Core alues


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?hat is 1trategy

Intended strategy plan for action

9mergent strategy process

6eali2ed strategy # outcome

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St t i M t D fi d


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Strategic Management Defined

Set of managerial decisions andactions that determines the long-run

performance of a rm.

B i C t f St t i M t


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+ P'ases of Strategic Management

@* Basic 4nancial planning (budgeting0A* Forecast#based planning (# years0

* 97ternally#oriented planning(Dresort3

retreat led by key members ofplanning sta: to deelop strategicplans for the company

E* 1trategic management# planning

interactie across leels& is nolonger top down8 internal ande7ternal consultants aailable toguide group strategy decisions



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Hig'ly Rate# Bene,ts

. Clearer sense of strategic ision(e7ecute current actiities to satisfye7isting market but must also adaptthese actiities to satisfy new &changing markets0

. 1harper focus on strategic importance(D4t3 between enironment & strategy%

structure & processes0. Improed understanding of changing

enironment



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-ot Al%ays a .ormal Process

. ?here is the organi2ation nowG(not where do we hope it is0

. If no changes are made% wherewill the organi2ation be in @%A% or@H yearsG

. ?hat speci4c actions shouldmanagement undertakeG

. ?hat are the risks and payo:sG


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A@

9+=J'I+" +F 1'6$'9


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Basic Elements of the Strategicanagement !rocess

Environmental Scanning Defined


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Environmental Scanning Defined

Monitoring, evaluation, and

disseminating information fromexternal and internal environments to key people in the rm


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'he Macro 9nironment

'here are a number of commonapproaches for how the e7ternalfactors% which describe the macro

enironment% can be identi4ed ande7amined* 'hese factors indirectlya:ect the organi2ation but cannot be

controlled by it* +ne approach is theP91' analysis*

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P91' (political% economic% social andtechnological0* +f the four categoriese7plored in the P91' analysis% the

company has the least control oereconomic factors*

'wo more factors% the enironmental

and legal factor% are de4ned withinthe P91'9= analysis (or P91'=9analysis0*

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'he segmentation of the macroenironment according to the si7presented factors of the P91'9=

analysis is the starting point of theglobal enironmental analysis*

'he si7 enironmental factors of the

P91'9= analysis are the following; Political factors

'a7ation policy81-26


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'raderegulations8


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Customer liuidations*

Socio-cultural

$ge distribution8

9ducation leels8

Income leel8

Consumerism* !iet and nutrition8

Population growth8

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=ife e7pectancies8

6eligion8

1ocial class8 97pectations of society about thebusiness*

echnological factors Internet8

9#commerce8

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1ocial media*

=eel of $utomation

Environmental factors

Competitie adantage8

?aste disposal8

9nergy consumption8 Pollution monitoring*

!egal factors

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https://www.boundless.com/marketing/definition/mediahttps://www.boundless.com/marketing/definition/automationhttps://www.boundless.com/marketing/definition/automationhttps://www.boundless.com/marketing/definition/media


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Jnemployment law8

5ealth and safety8

Productsafety8

$dertisingregulations8

Product labeling labor laws*

Ecology

$:ects customer,s buying habits8 $:ects the production processof the 4rm*

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Potential supplies =abor supply8

uantity of labor aailable8

ualityof labor aailable8

Material suppliers8

!eliery delay8

=eel of competition to suppliers8

1ericeproider8

1pecial reuirements* 1-32

https://www.boundless.com/marketing/definition/qualityhttps://www.boundless.com/marketing/definition/servicehttps://www.boundless.com/marketing/definition/servicehttps://www.boundless.com/marketing/definition/quality


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Environmental

Variables

Environmental Scanning


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Environmental Scanning

S40T Analysis

. 1trengths ?eaknesses

. +pportunities # 'hreats


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Planning

9lements 9nironmental 1canning

Monitoring

$ssessing

'ools 1?+' Identi4cation

'op#down planning Bottom#up Planning

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Planning

'ools ision Based Planning

Issue Based Planning

1cenario Planning

+rganic Planning

Fie Forces $nalysis

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'op !own> Bottom JpPlanning

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Planning

Basic Planning Identify 4rm3s purpose (mission

statement0

Create general goals to accomplishmission

Identify speci4c action plans to

implement each strategy 9aluate and update the plan oer time

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Planning

ision#Based Planning 9stablish ision#mission

9stablish goals in line with ision and

mission Craft strategies

!eelop action plans for each strategy

!eelop roadmap showing mission%ision% goals% strategies and action plans

Monitor and ealuate implementation

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Planning

Issue based (


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Planning

1cenario Planning

Identify possible future scenarios broughtabout by e7ternal forces which might

in-uence the organi2ation !eelop hedge plans to address each changein a force* 5edge plans coer di:erentfuture organi2ational scenarios (best% worst

and ok>reasonable case0 which might arise asa result of each change* ?orst scenario urgesstrong motiation to change

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Planning

1cenario Planning Choose and implement best course of

action

9mploy alternatie strategy if likelihoodof chosen strategy is futile based onsignposts or indicators

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Planning

+rganic (self organi2ed0 Planning !etermines best practices% processes and

methods8 practical application in the workplace

1teps

Clarify and articulate organi2ation3s culture andalues through dialogues & storyboard techniues

!iscuss ob)ecties of the group for the 4rm

!etermine on#going basis the weaknesses of currentprocesses and recommend improement

6e-ect on how organi2ation will portray plans tostakeholders

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Planning

Porter3s Fie Forces $nalysis tool for understanding where power lies

in a business situation

helps you understand both the strengthof your current competitie position andthe strength of a position you,reconsidering moing into*

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Porter3s Fie Forces $nalysis

Fie Forces Supplier Po%er5

$ssess how easy it is for suppliers to drie

up prices (drien by the number of suppliersof each key input% the uniueness of theirproduct or serice% their strength and controloer you% the cost of switching from one toanother% etc*0

'he fewer the supplier choices and the moreyou need suppliers, help% the more powerfulyour suppliers are*

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Fie Forces Buyer Po%er5

5ow easy it is for buyers to drie prices

down (drien by the number of buyers% theimportance of each indiidual buyer to yourbusiness% the cost to them of switching fromyour products and serices to those ofsomeone else% etc*0

If you deal with few% powerful buyers% thenthey are often able to dictate terms to you*

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Fie Forces Competiti)e Ri)alry5

"umber and capability of your competitors*

If you hae many competitors% and they o:ereually attractie products and serices% thenyou,ll most likely hae little power in the situation%because suppliers and buyers will go elsewhere ifthey don,t get a good deal from you*

If no#one else can do what you do% then youcan often hae tremendous strength*

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Fie Forces T'reat of Substitution5

$bility of your customers to 4nd a di:erent

way of doing what you do% i*e*% if you supplya uniue software product that automatesan important process% people may substituteby doing the process manually or byoutsourcing it*

If substitution is easy and substitution isiable% then this weakens your power*

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Fie Forces T'reat of -e% Entry5

Power is also a:ected by the ability of

people to enter your market* If it costs little in time or money to enter your

market and compete e:ectiely% if there are feweconomies of scale in place% or if you hae littleprotection for your key technologies% then new

competitors can uickly enter your market andweaken your position*

If you hae strong and durable barriers to entry%then you can presere a faorable position andtake fair adantage of it*

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Corporate


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6esponsibilities of the Board

1etting corporate strategy% oeralldirection% mission or ision

5iring and 4ring C9+ and top

management

Controlling% monitoring or superisingtop management

6eiewing and approing use ofresources

Caring for shareholders3 interests1-51

l f h d i i


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6ole of the Board in 1trategic

Management

Monitor

9aluate and in-uence 97amine management3s proposal%

decisions and action8 agree or disagreewith them% gie adice and o:ersuggestions

Initiate and determine Can delineate corporation3s mission and

specify strategic options tomanagement

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9aluating


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Bene4ts of


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'rends in Corporate


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'rends in Corporate


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'rends in Corporate


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9thics

Code of moral principles*

1et standards of goodN and badN as

opposed to rightN and wrong*N

9thical behaior

?hat is accepted as good and right in

the conte7t of the goerning moral code*

9thical Behaior


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=aw% alues% and ethical behaior; =egal behaior is not necessarily ethical

behaior*

Personal alues help determine indiidualethical behaior*

'erminal alues (goals that we work towards

and iew as most desirable% i*e* Familysecurity; taking care of loed ones0

Instrumental alues (preferred methods of

behaior% i*e* honest% polite% and ambitious0

9thical Behaior


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Four iews of ethical behaior*


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Cultural issues in ethical behaior;

Cultural relatiism

9thical behaior is always determined by

cultural conte7t*

Cultural uniersalism

Behaior that is unacceptable in one3s home

enironment should not be acceptableanywhere else*

9thical Behaior


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Management - Chapter 3

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'he e7tremes of cultural relatiism and ethicalimperialism in international business ethics*

Source: Developed from Thomas Donaldson, !al"es #n Tens#on: $th#%s &'a( from )ome,*

Harvard Business Review, vol+ ./eptemer-%toer 1996, pp+ 8-62+


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9thical Behaior

5ow international businesses can respect core or uniersalalues;

"espect for human dignity Create culture that alues employees% customers% and

suppliers*

Keep a safe workplace* Produce safe products and serices*

"espect for #asic rights Protect rights of employees% customers% and communities* $oid anything that threatening safety% health% education%

and liing standards*$e good citi%ens 1upport social institutions% including economic and

educational systems* ?ork with local goernment and institutions to protect

enironment*


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$n ethical dilemma occurs when choices%although haing potential for personaland>or organi2ational bene4t% may beconsidered unethical*

9thical dilemmas include; !iscrimination 1e7ual harassment Con-icts of interest Customer con4dence +rgani2ational resources

5ow do ethical dilemmas complicate the workplaceG


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5ow do ethical dilemmas complicate the workplaceG

9thical behaior can be rationali2ed by

conincing yourself that;

Behaior is not really illegal*

Behaior is really in eeryone3s best

interests*

"obody will eer 4nd out*

'he organi2ation will protectN you*


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6

Factors in-uencing ethical behaior

include;

'he person

Family in-uences% religious alues% personalstandards% and personal needs*

'he organi2ation

1uperisory behaior% peer group norms and

behaior% and policy statements and written rules*

'he enironment


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Factors in-uencing ethical managerial behaiorOthe person% organi2ation% and enironment*

5ow can high ethical standards be


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5ow can high ethical standards bemaintainedG

Checklist for dealing with ethical dilemmas1tep @* 6ecogni2e the ethical dilemma

1tep A;


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0

9thics training;1tructured programs that help

participants to understand ethical

aspects of decision making*5elps people incorporate high

ethical standards into daily life*

5elps people deal with ethicalissues under pressure*

5ow can high ethical standards be maintainedG


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1

?histleblowers

97pose misdeeds of others to;

Presere ethical standards

Protect against wasteful% harmful% or illegal acts

=aws protecting whistleblowers ary




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Barriers to whistleblowing include; 1trict chain of command

1trong work group identities

$mbiguous priorities+rgani2ational methods for

oercoming whistleblowing barriers; 9thics sta: units who sere as ethics

adocates Moral uality circles



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9thical role models;

'op managers sere as ethical role models*

$ll managers can in-uence the ethical

behaior of people who work for and with

them*

97cessie pressure can foster unethical

behaior*

Managers should be realistic in setting

performance goals for others*


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Codes of ethics; Formal statement of an organi2ation3s alues

and ethical principles regarding how to behaein situations susceptible to the creation of

ethical dilemmas*$reas often coered by codes ofethics; Bribes and kickbacks Political contributions 5onesty of books or records Customer>supplier relationships Con4dentiality of corporate information


1ocial 6esponsibility & 9thics in


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1ocial 6esponsibility & 9thics in1trategic Management

1ocial responsibility proposes that apriate corporation hasresponsibilities to society that e7tend

beyond making pro4t Friedman3s 'raditional iew of

6esponsibility

6esponsibility of business is to useresources and engage in actiitiesdesigned to increase pro4ts as long as itengages in open and free competition

without deception or fraud 1-75

Carroll3s Four 6esponsibilities of


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Carroll s Four 6esponsibilities of

Business

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!iscretionary

9thical

9conomic =egal

Social "es#onsi$ilities

Carroll3s Four 6esponsibilities of


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Carroll s Four 6esponsibilities of

Business

9conomic# produce goods and serices ofalue to society so that the 4rm may repay itscreditors and shareholders

=egal de4ned by goernments in lawsmanagement is e7pected to obey

9thical# follow generally held beliefs aboutbehaior in a society

!iscretionary# purely oluntary obligations acorporation assumes8 few people e7pect anorgani2ation to ful4ll discretionary

responsibilities 1-77

i l ibili


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1ocial 6esponsibility

1ustainability# can be broadened toinclude economic and social as wellas enironmental concerns

For a corporation to be sustainable(successful for longer period of time%it must satisfy all of its economic%

legal% ethical and discretionaryresponsibilities0

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Corporate 1ocial 6esponsibility

Beliefs that guide socially responsiblebusiness practices; People do their best with a balance of work

and family life* +rgani2ations perform best in healthy

communities* +rgani2ations gain by respecting the natural

enironment* +rgani2ations must be managed and led forlong#term success*

+rgani2ations must protect theirreputations*


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Corporate 1ocial 6esponsibility

$rguments againstsocialresponsibility; 6educed business

pro4ts 5igher business

costs

!ilution of business

purpose'oo much socialpower for business

=ack of publicaccountability

$rguments in faor

of socialresponsibility; $dds long#run

pro4ts

Improed publicimage

$oids moregoernment

regulation Businesses hae

resources andethical obligation


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Four strategies of corporate social responsibilityOfrom obstructionist to proactie behaior*


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5ow do organi2ations and goernments work together in societyG

5ow goernment in-uences

organi2ations;

Common areas of goernment

regulation of business a:airs; +ccupational safety and health

Fair labor practices

Consumer protection 9nironmental protection


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5ow do organi2ations and goernments work together in societyG

5ow organi2ations in-uence goernments;

Personal contacts and networks

Public relations campaigns

=obbying

Political action committees

1ometimes by illegal acts% such as bribery or

illegal 4nancial contributions to political

campaigns


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Centrality of ethics and social responsibility inleadership and the managerial role*

Strategy Formulation


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&evelopment of long-range plans fore'ective management ofopportunities and threats in lightof corporate strengths and(eaknesses

9lements of Formulation


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9lements of Formulation1tage

!eeloping strategic ision andmission

1etting measurable ob)ecties

!etermining strategic posture

9stablishing policies

Implementing rules and procedures

Matching resources and capabilities

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!eeloping 1trategic ision and Mission

ision# concretely describes how acompany sees itself in the future $d)usted t more medium term period (#

years0 1teps

isuali2e what the organi2ation wants to be(creates dreams0

Inspire people

Proide focus (paints future directions suchthat all resources can be utili2ed e.ciently

& e:ectiely0 1-88

!eeloping 1trategic ision and


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Mission

9:ectie isioning !ecision makers start by creatiely

stating desired outcome dictated bydistribution of resources supported bymanagerial capabilities

$rises out of the need for the business tooperate in more global and market

oriented enironment 9.cient isioning

Jtili2ing aailable resources and

capabilities o:ered by each function>1-89

l i 1 i i i d i i


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"ormally emanates from topmanagement based on oeriew of4rm3s situation

'asks that would help accomplishision In)ect sense of purpose into 4rm3s

actiities Proide long#term discretion


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1hould be speci4c% time#bound anddistinct to the organi2ation

Better stated in present tense#

connotes eery action performedtoday is a step towards reali2ation ofthe ision

Must contain simple but powerfulwords that should inspire andchallenge eery member of the

organi2ation1-91



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p g g

Mission

Considerations in reising ision'ime (depends on the business of the

organi2ation8 use term rather than

speci4c measure of time0 Cost

Company3s performance (growth of thecompany from formation to present0

?orkforce competencies (deelopmentof di:erent e7pertise8 going upcorporate ladder0

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Strategy Formulation


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Mission Statement 6e-ects management3s ision of what

the 4rm seeks to do and become Proides more details about the

organi2ational goals

$nswers; Dwhat is our business38 Dwhydo we e7ist3

reason for organi2ation

Mission 1tatement


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Mission 1tatement

Promotes shared e7pectations Communicates public image

1hould last at least @HH years while

goals and strategies can be changedmany times within @HH years

6e-ects management ision of what

the 4rm seeks to do and become

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Bene4ts of ?riting 1trategic


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g gIntent

Compel management and employeesto hae sense of direction andpurpose

!ries strategic decision making andresource allocations

+bligates seeking of signi4cant

performance improements to attainob)ecties

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1etting Measurable


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g+b)ecties

?hat one hopes to accomplish 1M$6' (speci4c% measurable%

attainable% realistic% time bound0 andC+? (communicated% owned% written0


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g+b)ecties

Business goals considered long term includenew product% growing annual reenue anddeeloping comprehensie marketing andpublic relations strategy

+b)ecties closer to company3s mission andision8 market position% new market%product> serice mi78 technology8 humanresources8 image8 growth> diersi4cation8pro4tability

Best is to compare with performance ofcompetitors

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!etermining 1trategic Posture(long#


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g g g

term ision0

?hat business are we in nowG

?hat business do we want to beG

?hat will our customers want in the

futureG

?hat are the e7pectations of ourstakeholdersG

?ho will be our future competitors>suppliersG PartnersG

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!etermining 1trategic Posture(long#


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g g g

term ision0

?hat should our competitie scopebeG

5ow will technology impact our

industryG ?hat enironmental scenarios are

possibleG

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9stablishing Policies


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9stablishing Policies ?ritten guide that proides clear%

concise and straight to the pointdirections for people within theorgani2ation


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9stablishing Policies

1anctions if deiated 1hould be clearly communicated

Basis of performance

1hould not be too constraining andconfusing that limit creatiity indecision#making

Changes e7pected & necessary Manifested in decreasing stakeholders3

wealth and income

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Implementing 6ules and Procedures


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Implementing 6ules and Procedures

6ules describe how a speci4c actionis to be performed to ensuremanagement and employees ful4ll

their roles toward meetingcompany3s e7pectations

Procedures de4nes series steps in

achieing speci4c task 6ules and procedures should not

contradict% in case of con-ict policy

will preail1-102

Matching 6esources &


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Capabilities

Match resources and capabilities withopportunities & risks that arise ine7ternal enironment

Process of matching that determinesattractieness of the industry(ownership of resources0 & 4rm3scompetitie adantage (deelopmentof resources aailable to the 4rm0

Benchmarking ob)ectiely assess

Documents

Basic Concepts Bus Pol Start Mgmt Student Copy (1)