BBA - II SEMESTERBBA202: BUSINESS STRATEGY

Q.1. Define business policy. Explain the importance of

business policy. Differentiate between business policy and

Strategy. (Definition of business policy, Importance of

business policy, Difference between business policy and

strategy)

Answer:

Definition of a Business Policy

"Business Policy is the study of functions and responsibilities of general

management and the problems which affect the character and success of

the total enterprise" – Learned Andrews Christensen and Gath

"The study of issues and problems encountered by managers whose

principal responsibility is the long-term development of the total

enterprise" – Thomas Denis

"A business policy is nothing more than a well-developed statement of

directions and goals. Goals involve definitions of precisely what the

business is or should be and the particular kind of company it should be.

Directions guide the actions of the firm to accomplish these goals."

Edmond & Gray.

Importance of Business Policy

The Business Policy is expected to play a very significant role in any

business enterprise. Business Policy is the medium through which the

Management can expect to achieve its goals over a period of time. In the

absence of sound and clear cut policy decisions, it will be impossible to

handle various issues like the form of the organization, the method of

production to be followed, raising funds for nurturing the growth of the

business and the marketing of goods etc. There are a host of day-to-day

problems which can be solved by the managers at the operating level with

the help of policies to guide them. In short, the policies help managers at

different levels of the Managerial Pyramid in discharging their duties

efficiently and thereby help them in achieving the corporate goals by

integrating the various business operations. Business Policy, as a distinct

field of study, was introduced at Harvard University as early as in 1911. If

you have just started out in business or have been in business for years,

it's imperative to thoroughly develop company policies. A company policy

is a rule or guideline, a company follows when faced with a particular

problem or issue. The more situations or policies you develop, the

smoother your business will operate. Without a policy the organization will

function arbitrarily in an anarchic way and may not reach its objectives.

Difference between business policy and strategy

After going through a host of factors having influence on Business Policy,

now try to list out the basic differences between business policy and

strategy. This is very much important because many times these words

are used interchangeably even though they basically convey different

meanings.

Q.2. What are the objectives of Strategic Management?

What are the causes for failure of Strategic Management?

(Objectives of Strategic Management, Causes for failure of

Strategic Management)

Answer:

Objectives of Strategic Management

The different objectives are given below:

a) To keep pace with the changing business environment: The

present day world is often called as a flat world because of revolution in

transport, communication and technological advancement. The present

day environment in which the business enterprises operate is so dynamic

and fast-changing that the business enterprises are finding it extremely

difficult to operate. There are high level of uncertainties, threats and

constraints from different quarters and due to this business corporations

are finding it extremely difficult to survive. Strategic Management

principles and practices, if used, can help those business firms in

exploring the possible opportunities and also achieve an optimum level of

efficiency by minimizing the effect of expected threats.

b) To motivate Employees: We are aware of the fact that managing

men and women, is the most challenging task for any business unit.

Human resources can turn out to be highly productive and useful to a firm

provided necessary motivation and guidance are provided to them which,

in turn, increase their confidence level. Adopting Strategic management

techniques helps as a morale booster and ultimately rewards the

organization in terms of efficiency and loyalty to the organization.

c) To strengthen the decision making process: Strategic

management aims at effective decision making process by taking into

consideration the objectives of the business concern as a whole in a

transparent manner. Hence, any decision taken should find wide

acceptance among the rank and the file as there will be no resistance to

change within the business enterprise.

Causes for failure of Strategic Management

No doubt, Strategic management yields highly favourable results for any

organization which has implemented it. There are, however, certain cases

where despite adopting the techniques of Strategic management, firms

have not met with the desired success. Let us always remember that

Strategic Management is not like a magic wand which can always ensure

success to everyone. So, let us try to list out the different causes

responsible for such a failure:

a) Strategic management is always based on certain fundamental

premises. If these premises do not hold good, the strategy or the plans

based on them would be unrealistic or ineffective.

b) Strategic management is only a means to achieve the corporate goals.

So, if there is lack of realism it will be reflected in the strategy. In other

words, we should always remember to be realistic while framing our

mission statement or declaring our objectives and not highly optimistic.

c) Many a time, the young Managers try to be over-ambitious and start

dreaming of success overnight by adopting Strategic management

techniques. This results in failure to reach the goals set and causes

frustration.

d) Sometimes, the management may be always chanting the ‘mantra’ of

strategic management and overlook or ignore several lucrative

opportunities and thereby fail.

e) Failure in implementing the strategy effectively will end up in

producing poor result. Let us remember the plight of a patient who has

not taken the best medicine prescribed for his illness grumbling about the

sickness.

f) Strategic planning requires high level of calibre, experience and

knowledge with the best vision. If people do not have adequate

experience, expertise and commitment, the business organization may

not succeed.

g) Often people complain about the cost associated with planning and

implementation, ignoring the benefits derived in the medium and long

term.

Q.3. Write a brief note on the following:

a) Core competencies and their importance

b) Strategic leadership.

Answer:

a) Core Competencies and their Importance in Strategy

Formulation

The term “Core Competency” has its origin in an article titled “The

Core Competence of the Corporation”, written by C. K. Prahalad

and Gary Hamel for the Harvard Business Review in 1990. In this

article, core competency has been defined as “The collective

learning and coordination skills behind the firm's product

lines”. The authors illustrated that the core competencies of an

organization led to the development of core products, which in turn,

can be used for personalization of products for end users. An

organization’s core competency is developed through 7continuous

evolution over a period of time. Core competencies are also

essential to succeed in global market. The authors claimed that –

“In the 1990s managers will be judged on their ability to identify,

cultivate, and exploit the core competencies that make growth

possible - indeed, they'll have to rethink the concept of the

corporation itself”. (C K Prahalad and G Hamel, 1990.) When the

core competencies are matched with the market opportunities, new

businesses are created. By combining and matching core

competencies to market opportunities, multiple businesses can also

be created. The core competencies help to bind the business units

together so as to form a comprehensive portfolio. Let us look at the

factors which help to identify the core competency of the

organization –

a) It should provide the company with a wide variety of markets

b) It should contribute significantly to product benefits

c) It should be difficult for competitors to imitate or duplicate

Some examples of core competencies of organizations are Philips’

dominance in optical media, Sony’s core competency in miniature

electronics and Microsoft’s core competency in proprietary software. All

these products or services can be sourced in a wide variety of markets,

have significant benefits to the customer and are difficult to copy or

imitate, thereby making the company a powerhouse in that area. In

order to measure core competencies, the company has to ascertain the

core product share, instead of market share. A company having low

brand value may have high core product share in the market. Core

competencies are capabilities which are essential for the establishment

of competitive advantage for the business. In order to analyse the core

competencies, the business must recognise that competition involves

the core competence mastery as well as market position and power.

Core competencies also help in value creation and value addition for

the product. Leadership of an organization can also be considered a

core competency, as the leader can be effective for the success of the

organization.

b) Strategic Leadership

Strategic leadership refers to those leaders who are responsible for the

creation as well as the implementation of the strategic vision of the

organization. The strategic leader of an organization needs to provide

the necessary direction in the following ways –

a) Vision – An effective leader has a vision for the growth of the

organization. Normally, he is able to predict future trends and is ahead

of times in providing value to customers. Due to the vision, the

strategic leader is able to guide the course of business for the

organization.

b) Organizational structure – A strategic leader is able to analyse

the internal conditions of the organization and the demands of the

market place in order to arrive at a suitable organizational structure.

Such a structure helps in deciding on the action plans and allocation of

work, thereby making the implementation of the vision easier.

c) Pragmatic approach – Such an approach is practical, goal-oriented

and is positive in nature. A strategic leader has the ability to adopt a

pragmatic approach in times of crisis and can turn the business

around.

d) Communication – An effective leader possesses good

communication skills and is able to clearly provide instructions for

action. He also has the ability to establish proper communication

networks for his organization, which aid in the free flow of crucial

information and provides the framework for better action. Such a

leader also makes informed decisions as he has formal and informal

channels of communication.

e) Culture – Due to the establishment of an efficient organizational

structure and open communication network as well as his personal

qualities of reliability and consistency, a strategic leader is able to

forge a healthy work culture. He is also sympathetic to the problems

faced by the employees and provides solutions to ease their troubles,

thereby establishing a good environment for employees.

f) Change Management – The strategic leader is capable of effective

management of change as he is able to anticipate and prepare for such

change. He is always aware of the market conditions, technological

developments as well as the internal conditions of his organization and

has the ability to adapt to change quickly. Most efficient leaders also

plan in advance to minimise damages due to changes in environment.

Hence, such leaders are better equipped to lead the organization

during times of crisis or change.

g) Corporate Governance – An effective leader practises the

principles of good corporate governance, as he recognises that the

individual cannot be greater than the organization. He implements

strategies to ensure that there is transparent functioning within the

organization. This serves to boost the morale of employees. Such a

leader also ensures that there is an effective succession planning so

that the organization’s existence is not threatened by hostile

takeovers.