SMBP Session 2

Strategic
Management and
Business Policy
BITS Pilani Dr. Shaili Singh
Pilani Campus Department of Management
BITS Pilani
Pilani Campus
MBA ZG611, Strategic Management

and Business Policy
Session No. 2
Content
• Strategic management and its purpose

• Model of SM
• Challenges of SM
• Crafting strategy (Mintzberg)
• Strategic statements
• Levels of strategy
• Strategic decision making
BITS Pilani, Pilani Campus

What is Strategic
Management?
• How to make strategic choices based on one's
capabilities and understanding the external forces
• Making choices in multiple horizons
• Strategy scholars Donald Hambrick and James

Fredrickson propose that a good strategy has five
elements, providing answers to five questions:
– Arenas: Where will we be active?
– Vehicles: How will we get there?
– Differentiators: How will we win in the marketplace?
– Staging: What will be our speed and sequence of moves?
– Economic logic: How will we obtain our returns?

Strategic Positioning
1. Strategy is the creation of unique and valuable position,

involving a different set of activities
2. Strategy requires you to make tradeoffs in competing-to
choose what not to do
3. Strategy involves creating fit among a company’s
activities

Activity system map- Ikea
Source: What is strategy? Porter, HBR

Activity system map- SW
Airlines
Source: What is strategy? Porter, HBR

Challenges of SM
• Fallacy of prediction
• Fallacy of detachment
• Fallacy of formalization
• Cognitive Biases

Strategic Management
Model

SM

Strategy Formulation
• Strategy formulation is the process of investigation,

analysis, and decision making that provides the
company with the criteria for attaining a competitive
advantage.
• It includes defining the competitive advantages of the
business, identifying weaknesses that are impacting the
company’s ability to grow, crafting the corporate mission,
specifying achievable objectives, and setting policy
guidelines.

Strategic Statements
OBJECTIVE = Ends
SCOPE = Domain
ADVANTAGE = Means
Walmart’s value proposition
Source: Can you say what your strategy is? Collis and Rukstad, HBR
Vision
A vision is a goal that is “massively inspiring, overarching,

and long term.
Examples:
“To be the happiest place on earth.”
“Restoring patients to full life.”
“To organize the world’s information and make it
universally accessible and useful.”

Mission
A set of organizational goals that include both the purpose

of the organization, its scope of operations, and the
basis of its competitive advantage.

Mission

Example-South West
Airlines

Levels of Strategy
Corporate Strategy Business Strategy

It deals with overall direction and scope How a business unit or a specific
of entire organization product/service can gain a competitive
advantage in its market or industry
It involves decisions about what It involves decisions related to positioning
businesses to be in and allocation of within the market
resources across them
Initiatives include-Portfolio management, Initiatives include-differentiation or cost
diversification, M&A, Partnerships etc. leadership and specific actions to
outperform rivals
Stability, Growth, Retrenchment Competitive and Cooperative
In functional level strategy purpose is to maximize resource productivity

Levels of Strategy

Policy
• A policy is a broad guideline for decision making that links the

formulation of a strategy with its implementation.
• Companies use policies to make sure that employees
throughout the firm make decisions and take actions that
support the corporation’s mission, objectives, and strategies.
• For example, when Cisco decided on a strategy of growth
through acquisitions, it established a policy to consider only
companies with no more than 75 employees, 75% of whom
were engineers.
• 3M says researchers should spend 15% of their time working
on something other than their primary project. (This supports
3M’s strong product development strategy.)

Strategy Implementation
• Strategy implementation is a process by which

strategies and policies are put into action through the
development of programs, budgets, and procedures.
• This process might involve changes within the overall
culture, structure, and/or management system of the
entire organization
• Strategy implementation often involves day-to-day
decisions in resource allocation

Program or tactic
• A program or a tactic is a statement of the activities or

steps needed to support a strategy.
• BMW inorder to achieve its objective of increasing
production efficiency by 5% each year:
(a)shorten new model development time from 60 to 30
month
(b)reduce preproduction time from a year to no more than
five months
(c)build at least two vehicles in each plant so that
production can shift among models depending upon
demand.

Budget and Procedures
• A budget is a statement of a corporation’s programs in

terms of dollars
• Procedures, sometimes termed Standard Operating
Procedures (SOP), are a system of sequential steps or
techniques that describe in detail how a particular task or
job is to be done.

Evaluation and Control
• Evaluation and control is a process in which corporate

activities and performance results are monitored so that
actual performance can be compared with desired
performance.

Strategic Decision Making


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Strategic

MBA ZG611, Strategic Management

• Strategic management and its purpose

BITS Pilani, Pilani Campus

• Making choices in multiple horizons

• Strategy scholars Donald Hambrick and James

BITS Pilani, Pilani Campus

1. Strategy is the creation of unique and valuable position,

BITS Pilani, Pilani Campus

Source: What is strategy? Porter, HBR

Source: What is strategy? Porter, HBR

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

• Strategy formulation is the process of investigation,

BITS Pilani, Pilani Campus

A vision is a goal that is “massively inspiring, overarching,

BITS Pilani, Pilani Campus

A set of organizational goals that include both the purpose

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

Corporate Strategy Business Strategy

Stability, Growth, Retrenchment Competitive and Cooperative

In functional level strategy purpose is to maximize resource productivity

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

• A policy is a broad guideline for decision making that links the

BITS Pilani, Pilani Campus

• Strategy implementation is a process by which

BITS Pilani, Pilani Campus

• A program or a tactic is a statement of the activities or

BITS Pilani, Pilani Campus

• A budget is a statement of a corporation’s programs in

BITS Pilani, Pilani Campus

• Evaluation and control is a process in which corporate

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

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