BUSINESS POLICY AND STRATEGIC MANAGEMENT
Learning Objectives • • • • • Learn what business policy and strategy is all about. Know the framework and importance of strategic management. Know the strategic management process. Have an understanding of corporate vision and mission. Learn how strategy operates at different levels of the organization.
Without a strategy the organization is like a ship without a rudder. Joel Ross and Michael Kami Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking and commitment of resources to action. Peter Drucker
This chapter introduces the concept of business policy and strategic management. With the increased competition, the management of business has acquired strategic dimension. All professionals, including the Chartered Accountants, working towards growth of their businesses must possess sound knowledge of strategic management. Business policy and strategic management are highly intertwined.
Business Policy as a Discipline
The origins of business policy can be traced back to 1911, when Harvard Business School introduced an integrative course in management aimed at the creation of general management capability. This course was based on interactive case studies which had been in use at the school for instructional purposes since 1908. The course was intended to enhance general managerial capability of students. However, the introduction of business policy in the
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Business Policy and Strategic Management curriculum of business schools / management institutes came much later. In 1969, the American Assembly of Collegiate Schools of Business, a regulatory body for business schools, made the course of business policy, a mandatory requirement for the purpose of recognition. During the next few decades, business policy as a course spread to different management institutes across different nations and become an integral part of management curriculum. Basically, business policy is considered as a capstone, integrative course offered to students who have previously been through a set of core functional area courses. The term 'Business Policy' has been traditionally used though new titles for the course have begun to be introduced in recent years. According to William F Glueck, development in business policy arose from the developments in the use of planning techniques by managers. Starting from day-to-day planning in earlier times, managers tried to anticipate the future through preparation of budgets and using control systems like capital budgeting and management by objectives. With the inability of these techniques to adequately emphasize the role of future, long-range planning came to be used. Soon, long-range planning was replaced by strategic planning, and later by strategic management, a term that is currently used to describe the process of strategic decision making. Business policy, as defined by Christensen and others, is "the study of the functions and responsibilities of senior management, the crucial problems that affect success in the total enterprise, and the decisions that determine the direction of the organization and shape its future. The problems of policy in business, like those of policy in public affairs, have to do with the choice of purposes, the moulding of organizational identity and character, the continuous definition of what needs to be done, and the mobilization of resources for the attainment of goals in the face of competition or adverse circumstance. Business Policy tends to emphasise on the rational-analytical aspect of strategic management. It presents a framework for understanding strategic decision making. Such a framework enables a person to make preparations for handling general management responsibilities.
Meaning and the Nature of Management
To understand strategic management to be studied later, we need to...