Business Policy – determination of the long term goals of an enterprise, the
adoption of courses of action, and the allocation of resources, in order to achieve
these goals.
The process of strategic planning:
1. What the organization might do – determined from the market environment
2. What the organization can do – in terms of its resources and competence
3. What the organization wants to do – in terms of executive values and
aspirations
4. What the organization should do – in terms of its obligation to society
5. Matching the opportunities, capabilities, values, and obligations to society in
the pursuit of organizational goals.
The limitation of strategy principally involves the inherent difficulties of conceiving
a viable pattern of goals and policies in order to implement them efficiently.
Organizational objectives, strategies, and policies are not mutually exclusive
components of the managerial process, but are highly interdependent and
inseparable.
The Strategic Management Process – this process describes two major
responsibilities:
 Strategy formulation – involves assessing existing strategies, organization,
and environment in order to develop new strategies and strategic plans
capable of delivering a future competitive advantage.

Strategy implementation – once strategies are created, they must be acted
upon successfully to achieve the desired goals.
In order to identify, analyze, set, revise, formulate, implement, and evaluate
strategic goals and processes, businesses must be aware of their environment:
economic, political, geographic, competitive, technological, social, environmental,
etc.
Peter Drucker associates this process with a set of five strategic questions:
1. What is our business mission?
2. Who are our customers?
3. What do our customers consider value?
4. What have been our results?
5. What is our plan?
Peter Drucker – Benefits of Strategy
 Profitability
 Market share – gaining and holding a specific share of a product market
 Human talent – recruiting and maintaining a high-quality workforce
 Financial health – acquiring financial capital and earning positive returns
 Cost efficiency – using resources efficiently and effectively to lower costs
 Product quality
 Innovation
 Social responsibility
The book HARDBALL (Stalk & Lackenbauer) predicts that over the next 10 years,
competition will become so fierce that marginal victories and short-term
advantages will not be enough to keep companies thriving. Wining will require
relentless strategic execution focused on turning competitive advantages into
decisive advantages.
Hardball strategies:
1. Unleash massive and overwhelming force
2. Exploit anomalies
3. Threaten competitors profits
4. Take it and make it your own
5. Entice competitors into retreat
6. Break industry compromises
7. Hardball mergers and acquisition
The GAP Analysis is an approach to provisional planning; whereby managers
measure where the company is today (in terms of strategic planning), where the
company is going, where does the company want to go, and how the company will
get there.
From the image bellow we observe that the “gap” is the area between the
momentum line (where the firm is going if everything remains constant) and the
potential line (where the firm wants to go or could be going).
In order to “fill” the planning gap, and go from momentum to potential, mangers
must engage in a few (or all) of the following strategies…
 Improve current operations
 Develop new products and services


Develop new markets
Diversify through various investments
The Product Market Matrix of business consists of two axis – products and
markets – which are divided into two categories – current and new.
A SWOT Analysis is an approach to provisional planning by getting at planning
issues for the business by (1) interviewing executives, (2) gathering information, (3)
using the provisional planning issue form (4) organizing the data by creating the
SWOT matrix, and (5) providing feedback to those who were interviewed.
This approach takes inventory of executive judgment in an organization by
gathering planning issues through selective interviewing of executives. It is based on
the assumption that the goals and objectives of an enterprise are best found in the
minds of its key executives. Therefore, it’s able to get at the nature of the business in
terms of its strengths, weaknesses, opportunities, and threats.
An efficient way of recording executive judgments is by using a provisional
planning issue form to record each issue raised during the interview. This will
provide the interviewee with an organizational tool for sorting out those aspects of
a strategic planning program that are specific to the organization.
Once the data has been gathered, the next step is to rearrange the data into logical
planning units. The premise for assembling planning issues can be visualized by
looking at the SWOT matrix.
Internal (organization)
External (environment)
Positive
Strengths
Opportunities
Negative
Weaknesses
Threats
Other points gathered during the interview may fall into logical planning families of
marketing, finance, administration, human resources, legal, and so on. These
planning issues (which have been grouped into logical planning families) are best
visualized along the links of what is known as strategy chain. The links in the chain
will usually be determined by the nature of the business and the number of planning
families.
Porter’s 5 Strategic Forces Model
Porter calls this the “industry structure”. The strategic management challenge is to
position an organization strategically within its industry, taking into account the
implications of forces that make it more or less attractive.
 An “unattractive” industry is one in which rivalry among competitors is
intense, substantial threats exist in the form of possible new entrants and
substitute products, and suppliers and buyers are very powerful in
bargaining over such things as quality and price.
 The opposite is true of an “attractive” industry.
Porter’s Generic Strategies Framework
According to Porter, business-level strategic decisions are driven by two basic
factors:
1. Market scope – how broad or narrow the target market is
2. Source of competitive advantage – how will you gain a competitive advantage




Cost leadership – where the organization’s resources and attention are
directed toward minimizing costs to operate more efficiently than the
completion.
Differentiation – where the organization’s resources and attention are
directed towards distinguishing its products from those of their competitors.
Focused cost leadership – where the organization concentrates on one special
market segment and tries in that segment to be the provider with lowest
costs.
Focused differentiation – where the organization concentrates on one special
market segment and tries to offer customers in that segment a unique
product.
Another way to consider the dynamic nature of business strategy formulation is in
terms of the product life cycle. This is a series of stages a product or services goes
through in the “life” of its marketability in terms of “sales” and “time”:
 Introduction
 Growth
 Maturity
 Decline
The BCG Matrix




Stars – high market-share/high-growth – provide large profits through
penetration of expanding markets
Cash Cows – high market-share/low growth – provide large profits and a
strong cash flow
Question Marks – low market-share/high-growth – don’t produce much profit
but are highly competitive
Dogs – low market-share/low-growth – don’t produce much profit and show
little potential for future improvements
Maslow’s Hierarchy of Needs
Maslow divides the pyramid into two areas
 Motivation and Satisfaction – which includes the top 2 areas
 Hygiene – which includes the bottom 2 areas
McKinsey 7’s for Evaluating Managerial Effectiveness
McKinsey’s 7-S framework can be used for examining the “fits” with managerial
strategy.
 Shared values – these can be attitudes and business philosophies such as
“excellence” or “great customer service”.
 Strategy – strategic planning process
 Structure – structure follows strategy
 Staff – must share the values that fit the structure and strategy
 Systems – administrative practices, and procedures used to run the firm
 Skills – organizational capabilities and core competencies
 Style – particularly of management and how they allocate their time and
attention, symbolic actions, leadership skills, etc.
The MBO process is an example of a strategic planning process, and represents a
practical way of implementing strategy through operational objectives.
The marketing concept is a philosophical approach that places your current and
prospective customers at center stage with your product and service portfolio as
well as your future offerings.
 It’s about how an organization can “get” and “keep customers”.
 It’s about how an organization can solve its customer’s problems.
The marketing concept was officially developed as a result of the industrial
revolution. The concept’s basic premise of determining the needs and wants of
target markets and delivering on those needs and wants with products and services.
 This concept also includes the effective communication of a products:
o Features,
o Benefits, and
o Value to current customers
The Birthday Party Phenomenon – the evolution of a product moving to an
experience consists of 4 stages:
1. Commodity stage – parents go to store and purchase ingredients for cake and
make the cake.
2. Good stage – use pre-made ingredients to make cake
3. Service stage – buy a pre-made cake
4. Experience stage – outsource the party completely to venues
Starbucks is a prime example of an “experience stage” service industry, where cups
of coffee are over twice as expensive as a home brewed coffee, however, Starbucks
offers an “experience” to buying their coffee: the lounge, free wifi, etc.
Other examples are Harley, Curves, MLB Games, Under Armour, etc.