Mod 1

Amity School of Business
Business Policy and

Strategic Management
Vivek Ahuja
BBA Batch 2008-11
Semester VI
Module 1
Introduction
• Introduction to Strategy and Planning

• Evolution of Strategic Management
• Concepts of Corporate Strategy
• Patterns of Strategy Development
• Phases in Strategic Management Process.
Strategy…
 The word ‘strategy’ has entered in the field of
management from military where it refers to apply
the forces against an enemy to win a war. Originally,
the word strategy has been derived from Greek word
‘strategos’ which means generalship. The word
was used first time around 400 BC.
 The word strategy means the art of the general to

fight in war.
…S tra te g y
 The dictionary meaning of strategy is,
 “the art of so moving or
disposing the instrument of warfare as
to impose upon enemy, the place time
and conditions for fighting by one self.”


Strategy in Management…
 In management, the concept of strategy is taken in more
broader terms.
 “Strategy is the unified, comprehensive and
integrated plan that relates the strategic advantage
of the firm to the challenges of the environment and
is designed to ensure that basic objectives of the
enterprise are achieved through proper

…Strategy in Management
It lays stress on the following:

 Unified, comprehensive and integrated plan.
 Strategic advantage is related to challenges of
environment.
 Proper implementation ensures achievement of
basic objectives.
Importance of Strategy
A n o rg a n iza tio n is co n sid e re d e fficie n t a n d o p e ra tio n a lly
e ffe ctive if it is ch a ra cte rize d b y co o rd in a tio n b e tw e e n
o b je ctive s a n d stra te g ie s.
S tra te g y h e lp s th e o rg a n iza tio n to m e e t its u n ce rta in

situ a tio n s w ith d u e d ilig e n ce .
W ith o u t a stra te g y, th e o rg a n iza tio n is like a sh ip w ith o u t

a ru d d e r. It is like a tra m p , w h ich h a s n o p a rticu la r
d e stin a tio n to go to . Without an appropriate strategy
e ffe ctive ly im p le m e n te d , th e fu tu re is a lw a ys d a rk a n d
Planning
W h a t is P la n n in g ?
Planning as a process involves the determination of

future course of action, that is why an action, what action,
how to take action, and when to take action. These “why,
what, how, and when” are related with different aspects of
planning process.
‘ Why ’ of action reveals that action has some objectives

or the end
result which an organization wants to achieve
‘What ’ of action specifies the activities to be
undertaken
‘How ’ and ‘When ’ generate various policies , programs ,

procedures, and other related elements.
“ Planning is the selection and relating of


facts and making and using of

assumptions regarding the future in the
visualization and formalization of proposed
activities believed necessary to achieve
desired result.”
AOL/Time Warner- the world’s first

Internet Powered media and
communications company
• In Jan 2001, the Federal Communications

Commission in the USA approved a $105 billion
merger of AOL, the world’s largest ISP, with Time
Warner – the media and entertainment empire.
• The merger clearly changed the direction of the
business, its intended long-term position in the
industry and had far-ranging implications on most
parts of the business in terms of priorities and
• As business analysts said, the merger was a

significant proof of the rate at which the sectors
of computing, telecommunications, media and
entertainment were converging and would impact
greatly the competitors in these sectors and their
customers and potential consumers.

Time Warner'sGerald Levin, left, and AOL's Steve Case

Nature of Strategy
• Long- term direction
– The AOL / Time Warner merger set the new company
on the path as a multimedia giant.
• Competitive advantage
– The AOL / Time Warner merger was justified in terms
of providing ‘content’ to an Internet Service
Provider and giving a new ‘distribution route’ to
the content provider.
• Scope of an organization’s activities
– In the AOL / Time Warner case, broadening the scope
of activities was a major reason behind merger.
• Strategic fit
– It is developing strategy by identifying opportunities
in the business environment and adapting
resources and competences so as to take
advantage of these.
– In the fast moving media and IT world, customers
sought for value providers who can provide a
range of services through complementary
channels and this opportunity was clearly
Nature of Strategy
• Strategy development by ‘stretch’
– Stretch is the leverage of the resources and
competences of an organization to provide
competitive advantage and / or yield new
opportunities.
• Require major resource changes
– AOL/ Time Warner had to redraft their resource
allocation to enter markets with no tradition of
subscription and where ‘piracy’ is prevalent.
• Affect operational decisions
– The merger required a whole set of decisions at the
operational level, setting up of new structures and
management controls, human resource policies
and practices.
• Strategy gets affected by stakeholders
– The strategy also gets affected by values and
expectations of those who have power in and
around the organization.
– In the merger though AOL could control everything,
it was constrained by regulatory authorities and
lobby groups (including performers)-both in US
The leading edge of strategy: fit or

A SP EC T O F stretch
E N V IR O N M EN T- R E S O U R C E -L E D
STR A TEG Y L E D ‘ F IT ’ ‘ STRETCH ’
U n d e rlyin g b a sis o f S tra te g ic fit b e tw e e n Le ve ra g e o f
stra te g y m a rke t o p p o rtu n itie s re so u rce s to im p ro ve
a n d o rg a n iza tio n ’ s va lu e fo r m o n e y
re so u rce s
C o m p e titive ‘ C o rre ct’ p o sitio n in g D iffe re n tia tio n b a se d
a d va n ta g e th ro u g h … D iffe re n tia tio n o n co m p e te n ce s
d ire cte d b y m a rke t su ite d to o r cre a tin g
H o w sm a llp la ye rs n
Fienedd a n d d e fe n d a mC haarke
n g te nthe ee d‘ ru le s o f
su rvive … n ich e th e g a m e ’
R isk -re d u ctio n P o rtfo lio o f P o rtfo lio o f
th ro u g h … p ro d u cts/ b u sin e sse s co m p e te n ce s
C o rp o ra te ce n tre S tra te g ie s o f C o re co m p e te n ce s
in ve sts in … b u sin e ss u n its o r
su b sid ia rie s 14
Pictu re o f th e D A Y
Strategic Advantage
STRATEGIC MANAGEMENT
 The top management of an organization is concerned with selection of a
course of action from among different alternatives to meet the
organizational objectives. The process by which objectives are
formulated and achieved is known as Strategic Management and
Strategy acts as the means to achieve the objective. Strategy is the
grand design or an overall ‘plan’ which an organization chooses
in order to move or react towards the set objectives by using its
resources.
Evolution of Strategic Amity School of Business
Management
 Four Paradigm shifts (Hofer)

 First phase – mid 1930’s
 Second phase – 1930’s and 1940’s
 Third phase – 1960’s
 Fourth phase – 1980’s – present


First Phase
1
 The first phase that can be traced back to the mid 1930’s, rested on
the paradigm of ad-hoc policy making. The need for policy making arose
due to the nature of American business firms in that period. The firms, which
commenced operations with a single product line catering to a unique set of
customers in a limited geographical area expanded in one or all of these
three dimensions. Policy making became the prime responsibility of
erstwhile entrepreneurs, who later assumed the role of senior management.

Second Phase
2
 Due to the increasing environmental changes in the 1930’s and 1940’s
in the U.S., planned policy formulation replaced ad-hoc policy making.
Based on this second paradigm, the emphasis shifted to the integration of
functional areas in a rapidly changing environment.

Third Phase
3
 Increasingly complexity and accelerating changes in the environment
made the planned policy paradigm irrelevant since the needs of the
businesses could no longer be served by policy-making and functional area
integration alone. By the 1960’s, there was a demand for a critical look at
the basic concept of business and its relationship with the environment. The
concept of Strategy satisfied this requirement and the third phase, based on
strategy paradigm, emerged in the early sixties.

Fourth Paradigm
4
 The current thinking – that emerged in the eighties – is based on the
fourth paradigm of strategic management. The initial focus of Strategic
Management was on the intersection of two broad fields of enquiry: the
strategic process of business firms and the responsibilities of the general
management.

T h e R isk o f S tra te g ic D rift
Environmental change
Strategic change
5 3
Amount of Change
1 4
Time
Phase 1 Phase Phase 3 / 4
Incremental 2 Flux Transformation
Change al Change or
Demise
Patters of Strategy Development

• Incremental
• Flux
• Transformational
• Demise
Strategy Development in
Environmental Contexts
Environmental
conditions
Simple Complex
Static
•Historical
Analysis
•Forecasting
Decentralized Planning
Experience & Learning
Scenario
Planning
Dynamic
Strategic Planning in Practice
 For strategic planning to work, managers

need to take note of current & future
competitive environment
•
 To forecast how the future may look like
Scenario Planning can be used

 Operating managers can be involved

(Decentralized Planning)
Scenario Planning
• Involves formulating plans for “what if” scenarios about the future
•
• Some scenarios are Optimistic & some are Pessimistic

•
• Managers are asked to prepare strategies to cope up with each scenario

•
• A set of indicators is chosen, and the indicators are used as “signposts” to track trends and identify the probability that
any particular scenario will come to pass
•
• As a result of scenario planning, organizations might pursue one dominant strategy, but make investments that will
payoff of other scenarios come to fore
• Helps managers understand the environment, thinking strategically & generating strategic options
•
• Pushes managers to think “outside the box”
•
Scenario Planning
Formulate Plans to Invest in one

Identify Different Deal with those Plan, but…
Possible Futures Futures
Switch strategy if
Tracking of Hedge your bets by
signposts Preparing for
Shows alternative Other scenarios
Scenarios becoming And..
More likely
Scenario Planning
 Example: Royal Dutch Shell
– Using scenario planning since the 1980s
– Today it uses two main scenarios to refine
its strategic planning
 “Dynamics as usual” – gradual shift from carbon
fuels to renewable energy
 “The spirit of the coming age” – looks at the
possibility that a technological revolution
will lead to a rapid shift to new energy
sources
– Shell is making investments that will ensure
profitability of whichever scenario comes
to pass, and it is carefully tracking
technological and market trends for signs
of which scenario is becoming more likely
over time
Decentralized Planning
 Strategic planning process is

generally top management’s
responsibility in companies
•
 They may not have understanding of
the operating realities

Levels of Strategy
A Company’s Amity School of Business
Strategy Making Hierarchy
 Overall strategy
 A collection of strategic initiatives
and actions devised by the managers and
key employees up and down the whole
organizational hierarchy
 Crafting a strategy involves answers to the
following how’s:
– How to out compete rivals
– How to respond to changing market
conditions
– How to develop needed competencies
– How to achieve strategic and financial
objectives
 In a diversified multi-business companies
strategy making involves levels of strategy
involving different facets of company’s
overall strategy
•

 Corporate Strategy consisting of

– Initiatives company use to establish in

different businesses
–
– Approaches that are pursued to boost the
combined performance

– Usually reviewed and approved by Board of

Directors
 Business Strategy

– Actions and approaches crafted to produce

success in a specific line of business

– Crafting response to changing environment


– Responsibility of Business Head

 Seeing that lower level strategies are well
matched with overall business strategy
 Getting major business level strategic moves
approved by Corporate level officers
 Functional – area Strategy & Operating Strategies
–
– Actions, approaches and practices employed to manage

key activities within a business
– Strategic initiatives for key operating units (plants,
distribution centers, geographic units)
– Specific operating activities with strategic
significance (advertising campaigns, supply chain
related activities)
– Add detail and completeness to functional and overall
business strategies
Example of Jet Airways

 Entry of low cost carriers changed the face of industry
 Jet Airways started facing stiff competition from Air

Deccan, Spice Jet & Kingfisher
 Market share went down from 57% to 32%
 Set up a new Corporate strategy:
 “Regaining and expanding its market share by entering

and operating in the LOW COST and a VALUE BASED CARRIER
arena as well”

 In order to give a definite shape to the corporate strategy,
a business level strategy was implemented:
 “the TAKEOVER of Air Sahara by Jet Airways and renaming

it to form JETLITE”

 Jet’s management made various changes in the operation
strategies of the airline
– No tickets at throw away prices
– Jetlite was to take on Tier II and Tier III cities
– New schedule for other tier II cities
– Cost cutting – by slashing employee numbers and better

negotiation with suppliers
– Single cabin carriers
– Improvement in aircraft utilization hours

–
Example of Vodafone
 Corporate Level Strategy :
 Focus:
– Deliver High performance in controlled
businesses
– Maximize shareholder returns in affiliates
– Leverage measurable synergy benefits from
scale and scope
– Outperform acquisition business cases
 Vodafone wanted to enter the Indian market
in 2006-2007
– Gartner had figured that customer base in
India would double by 2010
Example of Vodafone
 Business Unit Strategy
– Acquired Hutchison Essar Limited
and divested in Bharti Airtel
•

Example of Vodafone
 Operational & Functional Strategies :
– Investing in Rural India by network sharing
with other providers
– Cutting costs through:
 Infrastructure sharing deal with Idea and
Bharti
 Creation of “Indus Towers”
– Redefining the logo
– High level of cost and time discipline
– Customer value enhancement
– Target areas: Mobile data, Enterprise and
Broadband
– Technology upgradation
– CSR
Intended &
Emergent Strategies
Strategy As An Emergent Process
• Criticism of Formal Planning:
– Unpredictability of Real World
– Autonomous Action: Strategy making
by lower level managers
– Serendipity and Strategy
–
Mintzberg’s Model of Strategy Development
Emergent and Deliberate Strategies
Deliberate Strategy
Planned Strategy Realized Strategy
Unpredicted
Change Unplanned
Shift by Top
Unrealized Emergent Level
Strategy Strategy Managers
Autonomous
Serendipity Action by Lower
Level by
Managers
Intended & Amity School of Business
Emergent Strategies
• A company’s realized strategy is the product
– Planned strategies that are actually put into action
and
– Any unplanned strategies
–
• Many Planned strategies not implemented

because of unpredicted changes in the
environment
•
• Emergent strategies are unplanned responses to

unforeseen circumstances
– Arise from:
• Autonomous action by individual managers,
• fateful discoveries,
• unplanned strategic shift by top level managers
when environment changes

• Sometimes emergent strategies are more

successful than the planned ones
Strategy Making in an Unpredictable
World
• Environment is uncertain, complex &
ambiguous
• Small changes may have large &
unpredictable impact rendering
strategic planning useless
• Premium on being able to respond
quickly & alter strategies
•
•
Strategy Making in an
Unpredictable World
• Example:
– Dramatic rise of Google (pay per click
model) disrupted the online
advertising industry
– Microsoft’s MSN network & Yahoo had
to change their strategies rapidly
– Both came out with their search
engines
Autonomous Action:
Strategy making by lower level

managers
• Too much importance to Top level
management
– Many important strategic decisions are
initiated by lower level managers
– Out of their own initiatives lower level
managers come up with newer strategies
and then lobby top managers for
resources
• Helpful for established companies in
responding to paradigm shifts in industry
• Top-level management sometimes have
inertia
Autonomous Action:
Strategy making by lower level

• Example #1 managers
– Original prototype of Microsoft’s Xbox was prepared
by four lower level engineering employees on their
own initiative
– They convinced top level managers for the
commercialization of the Xbox

• Example #2
– Starbucks also sells music CDs at many of its outlets
– Sales of those outlets with CDs are generally higher
• Idea came into being when Tim Jones, a stores
manager started bring his own music
compilations
• He started getting requests from customers for
copies of those CDs
• Jones suggested the CEO, Howard Schultz that
Starbucks should sell its own music
– Since then, Starbucks has also moved into music
downloading, where customers can burn their CDs
while in the store
Serendipity & Strategy Amity School of Business
• Examples of accidental events

abound that help push companies
in new & profitable directions
•
• Some companies miss these
opportunities because
serendipitous discoveries do not fall
in line with their prior strategies
•
•
Serendipity & Strategy Amity School of Business
• Example #1
– Richard G. Drew invented one of the most
practical items to be found in any home or
office: transparent adhesive tape in 3M
– Initially it had adhesives only along the
edges
– Was used in painting cars with two tones
– During the Great Depression, people
became creative with it and found
hundreds of its use
–
• Example #2
– A century ago, the telegraph company
turned down an opportunity to purchase
rights to the invention on Alexander
Emergent Strategies
• Example:
– Entry of Honda into US motorcycle market in
1959
– Honda executives (from Japan) focused on
selling 250-cc & 350-cc machines
– Sales were sluggish
– Honda executives themselves were using
50-cc bikes & were attracting attention
– They got a call from Sears & other stores
– Honda launched those bikes
– By 1964 one out of two motorcycles sold in
US was a Honda

–
Emergent Strategies
• Example (Contd.)
– Credit should be given to Honda for
recognizing the strength of the emergent
strategy & for pursuing it
• Management need to recognize:
– Strategies can take root wherever people
have the capacity to learn
– Process of emergence; ability to judge the
worth
– Whether emergent strategies fits companies
needs & capabilities
– Emergent strategies are a function of
corporate culture & controls put in place
Phases in
Strategic
Management
Process
To determine MISSION & OBJECTIVES
mission, goals
and values of GENERAL ENVIRONMENT
firm and key INDUSTRY & INTERNATIONAL Analysis &
decision makers ENVIRONMENT Diagnosis
INTERNAL FACTORS
O&T GENERIC STRATEGY ALTERNATIVES

STRATEGY VARIATIONS Choice
S&W
STRATEGY CHOICE
RESOURCE STRUCTURE
POLICY, PLANS & ADMINISTRATION
Implementation
EVALUATION & CONTROL
FEEDBACK
55
Model of Strategic Management Process
Company Mission and Social Responsibility
External Environment Possible? Internal Analysis

Remote / Industry / Operating Desired?
Strategic Analysis and Choice

Feedback
Feedback
Long Term Objectives Generic and grand strategies
Short-term objectives;
reward system Functional tactics Policies that empower
action
Restructuring, reengineering, and refocusing the organization
Strategic control and continuous improvement

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Amity School of Business

Business Policy and

• Introduction to Strategy and Planning

‘strategos’ which means generalship. The word

was used first time around 400 BC.

 The word strategy means the art of the general to

 “the art of so moving or

disposing the instrument of warfare as

to impose upon enemy, the place time

and conditions for fighting by one self.”

 “Strategy is the unified, comprehensive and

integrated plan that relates the strategic advantage

of the firm to the challenges of the environment and

is designed to ensure that basic objectives of the

enterprise are achieved through proper

 Unified, comprehensive and integrated plan.

 Strategic advantage is related to challenges of

 Proper implementation ensures achievement of

S tra te g y h e lp s th e o rg a n iza tio n to m e e t its u n ce rta in

W ith o u t a stra te g y, th e o rg a n iza tio n is like a sh ip w ith o u t

Planning as a process involves the determination of

‘ Why ’ of action reveals that action has some objectives

‘How ’ and ‘When ’ generate various policies , programs ,

“ Planning is the selection and relating of

facts and making and using of

AOL/Time Warner- the world’s first

• In Jan 2001, the Federal Communications

• As business analysts said, the merger was a

Time Warner'sGerald Levin, left, and AOL's Steve Case

The leading edge of strategy: fit or

course of action from among different alternatives to meet the

organizational objectives. The process by which objectives are

formulated and achieved is known as Strategic Management and

Strategy acts as the means to achieve the objective. Strategy is the

grand design or an overall ‘plan’ which an organization chooses

in order to move or react towards the set objectives by using its

 Four Paradigm shifts (Hofer)

 Second phase – 1930’s and 1940’s

 Third phase – 1960’s

 Fourth phase – 1980’s – present

commenced operations with a single product line catering to a unique set of

customers in a limited geographical area expanded in one or all of these

three dimensions. Policy making became the prime responsibility of

erstwhile entrepreneurs, who later assumed the role of senior management.

in the U.S., planned policy formulation replaced ad-hoc policy making.

Based on this second paradigm, the emphasis shifted to the integration of

functional areas in a rapidly changing environment.

businesses could no longer be served by policy-making and functional area

strategy paradigm, emerged in the early sixties.

fourth paradigm of strategic management. The initial focus of Strategic

Management was on the intersection of two broad fields of enquiry: the

strategic process of business firms and the responsibilities of the general

Patters of Strategy Development

Experience & Learning

Strategic Planning in Practice

 For strategic planning to work, managers

 Operating managers can be involved

• Some scenarios are Optimistic & some are Pessimistic

• Managers are asked to prepare strategies to cope up with each scenario

• Pushes managers to think “outside the box”

Formulate Plans to Invest in one

 Strategic planning process is

Strategy Making Hierarchy