CHAPTER 1 – POLICY AND STRATEGY FEATURES OF BUSINESS POLICY STRATEGY - A distinctive plan created to deal with the allocation and deployment of physical and human resources so as to reach a market position and accomplish the organizational goals and objectives in the face of environmental pressures. 1. SPECIIFIC - should be explicit POLICY - A set of guide to thinking and action formulated by the organization for balanced decision making. 3. RELIABLE/UNIFORM - must be standardized enough so that it can be efficiently pursued by the subordinates THE NATURE OF BUSINESS POLICY In order for an organization to accomplish its annual objectives it needs to have policies. Guidelines, rules and procedures that support efforts intended to accomplish declared objectives are incorporated in policies. Policies make certain that each unit of the organization function under the same standard rules. Coordination and communication among different units of the organization are made possible through polices. Without consultation from top level management when making decisions, lower level management is permitted to deal with problems and issues BUSINESS POLICY - Defines the scope or boundaries and serves as an overall guide within which decisions can be taken by the subordinates in an organization. - Develops the general management standpoint that will direct and administer the actions of the organization. - Handles the acquiring of resources which the organization would make use of in the attainment of its objectives - Commonly have extended life The policy statements are wide-ranging at the top level. Top management’s responsibility - the formulating and approving of major comprehensive organizational policies Middle management - less important policies concerning the operations of the various sub-units of the organization Lower level management - creates more specific policies 2. CLEAR - must be definite - must prevent the use of jargons and connotations - no misinterpretation in pursuing the policy 4. APPROPRIATE - should be suitable to the current organizational goal 5. SIMPLE - must be straightforward and without doubt can be understood by the entire organization 6. INCLUSIVE/COMPREHENSIVE - in order to have an extensive scope, a policy must be wide-ranging 7. FLEXIBLE - should be bendable in procedure/application - it must be extensive in scope as to make certain that the line managers make use of them in repetitive/routine situations 8. STABLE - should be steady or else it will lead to uncertainty and hesitation in minds of those who regarded it as guide IMPORTANCE OF BUSINESS POLICY - shows the satisfactory performance restrictions while at the same time attending to the needs of the employees a. BALANCE - Promotes individual productivity - Employers must be clear in dealing with employee goals and inform the latter on the manner of accomplishing these goals - A business policy has to be properly communicated, realistically implemented, directed and updated. b. JOB DESCRIPTIONS - Each position in the organization needs to be properly described and be included in the business policy. - A well-thought of and soundly written business policy makes it easier for business to operate even with no regular involvement by management. c. LIABILITY - The employer may be held legally responsible for misbehavior done by employees on the job particularly if such naughtiness affected stakeholders. d. CONSEQUENCES FOR VIOLATIONS - There should be a concrete rules that deal with any disobedience of the business policy. DIFFERENCE BETWEEN POLICY AND STRATEGY POLICY Focused largely with organizational management Can be delegated for implementation Outline of the organizational activities Task of top level management Governing an organization Thoughts and actions What should be done and should not be done STRATEGY Takes care of environmental limitations and opportunities Last minute executive decision cannot be delegated Organizational decisions which have not been dealt with or encountered Task of middle level management Strategic decisions Actions Methods applied EXAMPLES OF COMPANY POLICIES 1. SUBSTANCE ABUSE - An employee’s attendance and productivity is affected when he is taking in abusive substances like drugs and alcohol. 2. DRESS CODE - Dressing in a particular manner is often required by various organizations from their employees. 3. COMPUTER USE - In an attempt to restrict the use of Internet surfing and to increase productivity, some organizations may execute a policy about the use of computers inside the place of work. 4. ELECTRONIC COMMUNICATIONS - Most companies execute an electronic communications policy to administer the use of Internet, e-mail, mobile phones, telephones, fax machines and personal media devices. 5. WORKING FOR OTHERS - In order to protect the employer, a policy restricting an employer’s ability to work for others may possibly exist. 6. SEXUAL HARASSMENT - It consists of making unwanted sexual advances, making sexually open comments, sung sexually overt language or requesting sexual favor in exchange for a salary raise or promotion. 7. SMOKING STRATEGY DEFINITION - It came from the ancient Greek word “strategos” – “the general’s art” HENRY MINTZBERG’S FIVE P’S: 1. STRATEGY AS PLAN PLAN – is a kind of deliberately crafted course of action that serves as a guide in handling a situation to become successful 2 Fundamental Characteristics of Strategy Plan: a. Strategy is prepared in advance of the actions to which it applies b. It is formulated intentionally and on purpose. BUSINESS MODEL - Vital element of an organization’s strategic plan - Explains the course of action that the company would follow to earn profits 2. STRATEGY AS A PATTERN - Centers on the extent to which an organization’s stream of actions over time are consistent. PATTERN STRATEGY = looks at what has worked in the past ---- & seek ways to continue, even enhance this pattern Market patterns are often unintentional --- Key is to be able to identify such patterns --- & where they’re beneficial incorporate them into your strategy. 3. STRATEGY AS A POSITION - Refers to an organization’s position in the industry relative to its competitors. 4. STRATEGY AS A PLOY - is an explicit move intended to outsmart or deceive competitors PLOYS – may consist of plotting disrupt, dissuade, discourage, or otherwise influence them as part of a strategy 5. STRATEGY AS A PERSPECTIVE - refers to how managers construe the competitive situation around them - a strategy could be considered as perspective when majority of the people inside the organization have the same viewpoint during the crafting of strategic decision - it must be shared by organizational members through their actions and targets - culture plays an important role in the choices of organization about its strategy Quality & execution of classic products + Innovation & creativity for new products = Perspective Strategy needs to match your culture. TYPES OF STRATEGY 1. INTENDED STRATEGY - is nothing but a deliberate course of action reflected to be most appropriate for accomplishing preset corporate goals - it is the approach that an organization looks forward to implement - conceived by top management - is the outcome of a process of negotiation, bargaining and comprising - what the organization designed to do Business plan - when a strategic plan is formed for a new enterprise - is an intended strategy since it is the draft of the strategy that the organization proposes so that it will be on the right track Positioning - refers to the approach the company would relate with the external environment and its reaction in the change of government 2. DELIBERATE STRATEGY - entails the management detailing the actions that the company must be doing to realize definite goals - is analytical and structured with vision statement, mission statement, strengths and weaknesses (SWOT), objectives and so on - the parts of the intended strategy that the organization continues to practice over time 3. EMERGENT STRATEGY - is an unplanned strategy that arises in response to the various unexpected threats, opportunities and challenges - - - takes place in the absence of a plan to execute by management describes the constant development of corporate strategy of an organization to keep pace with and to overtake the external environment to accomplish pre-set targets a learning process where the whole corporate body understands the facts and figures coming from external environment and assesses the changes in external and internal environment what the organization did in response to unanticipated opportunities and challenges 4. REALIZED STRATEGY - is the strategy that an organization actually follows - a product of an organization’s intended strategy, the organization’s deliberate strategy and its emergent strategy THE NATURE OF STRATEGIC MANAGEMENT STRATEGIC MANAGEMENT - is the management process and decisions that decide the long-term structure and activities of the company - it is a process which determines whether an organization excels, survives, or dies - is equally an art and science that concerns on formulating, implementing, and evaluating, cross-functional decisions that make easy for an organization to achieve its objectives 5 IMPORTANT THEMES OF STRATEGIC MANAGEMENT: 1. Management process - relay to how strategies are created and changed 2. Management decisions - the decisions must relate clearly to a solution of perceived problems 3. Time scales - the strategic time option is long however, for a company in real trouble this can be very short 4. Structure of the organization - an organization is managed by people in a structure 5. Activities of the organization - a potentially limitless area of study and normally centers upon all activities which involve the organization STRATEGIC MANAGEMENT PROCESS Strategic management offers the following: 1. a planned direction approved by the team and stakeholders 2. an understandable business strategy and vision for the upcoming years 3. a technique for accountability 4. a framework for governance at various levels 5. a reasonable structure to manage risk for business stability 6. the potential to make the most of opportunities and respond to external change through taking current strategic decisions PHASES OF STRATEGIC MANAGEMENT: 1. ENVIRONMENTAL SCANNING - is the beginning of the strategic planning process and includes doing situational study of the organization in the environmental perspective - the organization needs to find out its market position relative to competitors, its image as a business, its strengths and weaknesses as well as its opportunities and threats 2. STRATEGIC FORMULATION - consists of crafting a vision and mission, determining the external opportunities and threats of an organization, identifying internal strengths and weaknesses, setting up long-term objectives, developing alternative strategies, and selecting specific strategies to pursue - emotional and intellectual in pursuing the future (theorists Hamel and Parahald) the idea of strategic intent came from the Japanese in Post-Worldwar II STRATEGIC MANAGEMENT BENEFITS identification prioritization discovery of opportunities FINANCIAL BENEFITS 1. RELEVANCE - Strategic management facilitates the creation of an occupational environment where department supervisors may obtain a new way of operating their processes and to be courageous in making the needed changes. 2. PROFITABILITY MANAGEMENT - Honest and differing viewpoints of various department heads aids a company discover a lot concerning its customers and stimulate sales later. - In order to measure profitability, strategy managers make use of the company income statement known also as the statement of profit and loss. 3. STRATEGIC IMPLEMENTATION - to establish annual objectives, prepare policies, motivate employees, and allocate resources so that prepared strategies can be put into practice 3. LIQUIDITY MONITORING - Liquidity loss is a serious warning that there is an upcoming short term problem from the management viewpoint. - Strategic management assists organizations check cash balances and make certain that accessible cash is aligned with long-term goals. - Statement of cash flows 4. STRATEGIC EVALUATION AND CONTROL - the final phase - the core process for acquiring the information such as what time appropriates strategies that are not working as they should 4. SOLVENCY ADMINISTRATION - The best asset-debt combination is managed by the organization with use of strategic management to help maintain solvency. - Statement of financial position STRATEGIC MANAGEMENT MODEL - fundamental steps of the strategic management - identifies concepts of strategy and the elements necessary for development of a strategy enabling the organization to satisfy its mission NON-FINANCIAL BENEFITS STRATEGIC INTENT - is the high level statement of the way through which an organization is able to accomplish its vision - is a management idea that refers to a grand and persuasive dream that offers vitality both 1. IMPROVES STABILITY - Strategies like setting up a new business, selling into new market segments or adding a novel product line facilitate stability improvement. 2. DECREASES RISKS - The execution of corporate governance, internal controls and policies and procedures using strategic management helps minimizes legal experiences. 3. STRONG LABOR SUPPLY - Proactive staffing practices that improve workforce performances are included in strategic management. 2. TARGET CONSUMERS - A well-organized mission statement identifies extensively the target market. 4. STRENGTHEN BRAND MANAGEMENT - Generating a particular brand as a component of strategic management makes easier the identification of opportunities that will make stronger the organization as a business. 3. TARGET REGION - The organization should choose what region it could serve best and convey that information using the mission statement. 5. IDENTIFIES (SWOT) - Strategic management consists of exploring the strengths, weaknesses, opportunities and threats confronting the overall company and individual elements of it. CHAPTER 2 – ORGANIZATIONAL MISSION, VISION, OBJECTIVES AND VALUES REMEMBER: Mission and Vision are standard and critical elements of a company’s organizational strategy. ORGANIZATIONAL MISSION AND ITS IMPORTANCE MISSION STATEMENT - The statement of the organization’s purpose - It guides the company in its decision-making - Provides insight into what organization’s leaders’ view as the chief purpose for being in business. Generally speaking, the target of the mission are: 1. Shareholders 2. Leaders 3. Employees Components of Strategic Planning: 1. Formulating company objectives 2. Strategies 3. Tactics – actionable steps Some Examples of Objectives: 1. Market-share targets 2. Revenue or profit goals 3. Achievement of customers satisfaction 4. Enhanced awareness of the brand To gain superior customer satisfaction: a. Better training b. Checking of feedbacks CHARACTERISITICS OF A MISSION STATEMENT 1. FUNCTION - The inclusion some description of the function of the business is a requirement for a mission statement. 4. VALUES - Company values should express principles the company explicitly tries to affirm in day-to-day operations. 5. TECHNOLOGY - For businesses that depend greatly on technology, the mission statement should contain a description of the important technology the company does or plans to employ. 6. EMPLOYEES - A mission statement offers a chance to express that policy in a concise way so employees distinguish the rudiments of where they are situated. 7. STRATEGIC POSITIONING - Effective mission statements also incorporate a concise description of the company’s strategic position in the market. 8. FINANCIAL OBJECTIVES - Profit-oriented businesses need understandable financial objectives. 9. IMAGE - Companies always aspire to create good public image. WRITING A MISSION STATEMENT Mission statement: a. Describe the goals, ethics, culture, and norms for making decisions of an organization b. Describe the goals of the company and focuses on its customers, its employees, and its owners and what the organization can do for them c. A vital tool to know, create and communicate basic business ethics which must be concisely articulated in a paragraph or two d. A great tool for understanding, developing and communicating fundamental business objectives A mission statement must respond to issues concerning one’s business, such as: 1. The nature of the company 2. What the company is doing, what it stands for and the reason for doing it such business 3. The desire to make profit or is it enough to just making a living 4. Markets being served and the benefits being offered to them 5. Solve a problem for the customers 6. The type of internal work environment employees desires a. Start with a Market-defining Story A truly good story defines the market and gives details on the needs or wants or the so-called “why to buy.” It also describes the customer being targeted or “buyer persona.” Along with it identifies how the business is distinct from most others, or even exceptional. It makes simpler thoughts concerning what a business is not, what it cannot do. b. Define How the Customer’s Life is Better Because the Business Exists Begin the mission statement with what the company can do well. Use the market-defining story to discover the reason for the business being special for its target market. c. Consider What the Business Does for Employees These modern days, responsible organizations want to be excellent in the eyes of their employees. If the company places importance in keeping its employees, it tries to excel in turnover for its bottom line. Equality, diversity, value for ideas and originality, empowerment, training, tools, and the like are factors that essentially matter. d. Add What the Business Does for its Owners Business schools trained their students that the mission of management is to increase the worth of stock. Shares of stock are in reality the evidence of ownership. Traditionally, a business exists to enhance the financial position of its owners, and possibly it does. e. Discuss, Digest, Cut, Polish, Review, Revise A good mission statement provides numerous purposes, name objectives, and survive for a long period of time. Thus, it is worthy to edit or make necessary corrections. EVALUATING MISSION STATEMENT Here are some things to consider when making assessment of a mission statement: 1. Is the center of the mission statement concerns customer satisfaction or the product itself? 2. Does the mission statement inform who the company’s customers are? 3. Does the mission statement give details on what specific customer needs the company is trying to please? 4. Does the mission statement make clear how the company will provide its customers? 5. Does the mission statement match the present market environment? 6. Is the mission statement formulated in reference to the company’s core competencies? 7. Is the mission statement motivating and does it inspire employee commitment? 8. Is the mission statement practical? 9. Is the mission statement definite, brief, sharply focused, and impressive? 10. Is the mission statement plain and effortlessly understood? 11. Does the mission statement tell how the company desires to be remembered? ORGANIZATIONAL VISION: ITS IMPORTANCE AND BENEFITS VISION STATEMENT a. Include a viewpoint of corporate values b. May offer a direction for the company c. Adds an ingredient of human values, motivate employees and provide stakeholders with a sense of reason d. To differentiate an organization apart from other players in the industry where it belongs e. Also provides an organization its unique identity, company emphasis, and pathway for progress f. Offers portrait of what the organization shall look like say five to ten years from now g. Similar to a mission statement, it helps the company to describe its purpose IMPORTANCE OF A VISION STATEMENT: 1. It is useful in connecting the present and the future of a company. 2. It offers hope for the future of a company, thus becoming a supply of inspiration. 3. It helps management of a company in the formulation of the standards for decision making. 4. In addition, it enlightens the importance of the company and helps improve whatever market place in which the company is a part of. Further, it develops organization interest and commitment. 5. A vision statement of an organization assists in identifying the actions and goals that will help in accomplishing the vision. BENEFITS OF A VISION STATEMENT: 1. It gives direction and assists the organization to get ready for the future. 2. It offers assistance for decision-making. 3. It forms the organization’s strategy. 4. It directs the types of people the company hires and promotes. 5. It describes what the company will do and what it will not do. 6. It aids in prioritization and in planning. 7. It makes parallel people and activities across the business organization.’ 8. It offers purpose and a basis of inspiration. 9. It mirrors an organization’s foundation values and beliefs. 10. It gives power to people and helps center their efforts. 11. It brings transformation and hope for the upcoming years. QUALITIES OF AN EFFECTIVE VISION STATEMENT 1. FUTURE FOCUSED - A good vision statement provides clear direction and offers a visible picture of what the business likely to be in five to ten years times. 2. DIRECTIONAL - An effective vision offers path and makes obvious where the organization is heading. 3. CLEAR - A vision that is clear allows individuals within the organization to have a collective sense of what is significant and what is not, to make sure that they are open to perform in those constraints. 4. RELEVANT - A vision to be effective must have a link on what has occurred during the past to the preferred future which shows the credibility of the vision. 5. PURPOSE-DRIVEN - An effective vision offers a bigger sense of purpose for the organization as well as its people. 6. VALUES BASED - Vision entails a set of values and beliefs that are necessary to support who organizations have to become to accomplish the vision. - Values are ideals or morals that the organization shares on what is good or bad. 7. CHALLENGING - A vision is a challenging goal that should set a high standard for the entire organization. 8. UNIQUE - A vision is said to be unique when it pronounces the characteristics that makes the organization stands out and why it is significant. 9. VIVID - Well created visions illustrate the future in a manner that is simple to visualize and to depict in the mind’s eye. 10. INSPIRING - An effective vision connects and encourages people to make commitment to a cause. - Vision is inspiring when it stops on in his tracks, grabs one’s heart and causes him to pay good attention. WRITING A GOOD VISION STATEMENT a. Define the Output Begin with making clear what the organization actually does. Make certain to stay focused on the output not the input. b. Define the Unique Twist to Bring Out the Above Outcome At some point in the organization’s lifespan, there is this belief of management that the company will surely become successful while others would fail because of something impressive. This something must be defined and become part of the vision statement. c. Apply Some High-level Quantification Ironically speaking, most of the times vision statements are too visionary. Without possible realistic end in sight, the initial encouragement anchored in great vision statement can swiftly become disappointment, or even worst cynicism amongst employees and customers of the organization. Thus, the vision statement must not be too specific. d. Add relatable, human, “real world” aspects As an ultimate trick to make the vision more unforgettable, there must be an addition of a real-life aspect so that consumer could have a concrete picture to relate with the vision statement. ORGANIZATIONAL OBJECTIVES OBJECTIVES - - - - Are definite outcome that an organization obtains in order to achieve its fundamental mission Affirm direction, help in evaluation, produce synergy, disclose priorities, center on harmonization, and offer a starting point for effective planning, organizing, leading and controlling activities Must have the characteristics of being challenging, measurable, consistent, realistic, and visible. Give the source for strategic decision making Supply the standards for both the organizational and individual evaluation of performance FORMULATING STRATEGIC OBJECTIVES CHARACTERISTICS THAT ARE RELATED WITH SETTING OBJECTIVES: 1. SPECIFICITY - The concern if specificity is decided by conveying objectives at various levels and prefixing terms. 2. MULTIPLICITY - Refers to the quantity and kind of objectives to be created. - In order to cover all functional areas, management needs to form sufficient and fitting objectives. 3. PERIODICITY - Objectives are formulated for different timeframes. Long term objectives – less definite Short-term objectives – definite, specific, complete 4. VERIFIABILITY - In strategic management, it is meaningful to make use of just verifiable objectives. - It is also related to objectives being measurable. 6. QUALITY - ORGANIZATIONAL VALUES 1. GUIDE The principles and ethics can guide the behavior of organization members. They assist organizations in determining what is right and wrong. 2. COMMUNITY Value statements serve as a reference point for community members outside the organization. 3. ACTING OUTSIDE THE VALUES When an organization writes down its values, it lays out its expectations of behaviors for organization members. 4. MISSION AND GOALS The ultimate purpose of value statements is to encourage behaviors from organization members that promote the achievement of organizational goals and its mission. 5. LIVING OUT VALUE STATEMENTS Communication of values is vital both internally and externally. Organizational values ought to be updated regularly by members as well as outsiders. This will promote the feeling of being part of the organization. NOTE: o o 5. REALITY o 2 Set Objectives of Organizations: a. Official Objectives - are what the organization would aspire to realize; qualitative b. Operational Objectives - are what the organization desires to attain to become successful; quantitative The measurement of quality objectives comes from its capability to furnish precise direction and concrete basis for appraising the performance. The strength of the organizational values determines how the company functions whether well or poorly. Values serve as an operating system that shows the way to meet the organizational needs and prioritize these needs. The purpose of every organization is inspired by values.