Business Policy and Competitive Strategy

 Sozialwissenschaften

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Business Policy and Competitive Strategy
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  Business Policy and Competitive Strategy (Sec-B) 1.   Define business policy and competitive strategy and illustrate the major elements of both, taking practical examples from Indian business. 1. Business Policy defines the scope or spheres within which decisions can  be taken by the subordinates in an organization. It permits the lower level management to deal with the problems and issues without consulting top level management every time for decisions. Business policies are the guidelines developed by an organization to govern its actions. They define the limits within which decisions must be made. Business policy also deals with acquisition of resources with which organizational goals can be achieved. Business policy is the study of the roles and responsibilities of top level management, the significant issues affecting organizational success and the decisions affecting organization in long-run.   2.   Features of Business Policy An effective business policy must have following features- Specific-  Policy should be specific/definite. If it is uncertain, then the implementation will become difficult. Clear-  Policy must be unambiguous. It should avoid use of jargons and connotations. There should be no misunderstandings in following the  policy. Reliable/Uniform-  Policy must be uniform enough so that it can be efficiently followed by the subordinates. Appropriate-  Policy should be appropriate to the present organizational goal. Simple-  A policy should be simple and easily understood by all in the organization. Inclusive/Comprehensive-  In order to have a wide scope, a policy must  be comprehensive. Flexible-  Policy should be flexible in operation/application. This does not imply that a policy should be altered always, but it should be wide in scope so as to ensure that the line managers use them in repetitive/routine scenarios.  Stable-  Policy should be stable else it will lead to indecisiveness and uncertainty in minds of those who look into it for guidance. The definition of business strategy is a long term plan of action designed to achieve a particular goal or set of goals or objectives. Strategy is management's game plan for strengthening the performance of the enterprise. It states how business should be conduct to achieve the desired goals. Without a strategy management has no roadmap to guide them. Creating a business strategy is a core management function. It must be said that having a good strategy and executing the strategy well, does not guarantee success. Organisations can face unforeseen circumstances and adverse conditions through no fault of their own. Difference between Policy and Strategy The term “policy” should not be considered as synonymous to the term “strategy”. The   difference between policy and strategy  can be summarized as follows- 1.   Policy is a blueprint of the organizational activities which are repetitive/routine in nature. While strategy is concerned with those organizational decisions which have not been dealt/faced before in same form. 2.   Policy formulation is responsibility of top level management. While strategy formulation is basically done by middle level management. 3.   Policy deals with routine/daily activities essential for effective and efficient running of an organization. While strategy deals with strategic decisions. 4.   Policy is concerned with both thought and actions. While strategy is concerned mostly with action. 5.   A policy is what is, or what is not done. While a strategy is the methoidology used to achieve a target as prescribed by a policy. 2.   What is Envioronmental scanning? Environmental scanning is the process of continually acquiring information on events occurring outside the organization to identify and interpret potential trends. Environmental scanning can be defined as ‘the study and interpretation of the political, economic, social and technological events and trends which influence a business, an industry or even a total market’. [2]   The factors which need to be considered for environmental scanning are events, trends, issues and expectations of the different interest groups. Issues are often forerunners of trend  breaks. A trend break could be a value shift in society, a technological innovation that might be permanent or a paradigm change. Issues are less deep-seated and can be 'a temporary short-lived reaction to a social phenomenon'. [3]    A trend can b e defined as an ‘environmental phenomenon that has adopted a structural character’. There are a number of common approaches how the external factors, which are mentioned in the definition of Kroon and which describe the macro environment, can be identified and examined. These factors indirectly affect the organization but cannot be controlled by it. One approach could be the PEST analysis. PEST stands for political, economic, social and technological. Two more factors, the environmental and legal factor, are defined within the PESTEL analysis  (or   PESTLE analysis ).   The segmentation of the macro environment according to the six presented factors of the PESTEL analysis is the starting point of the global environmental analysis. PESTEL analysis   The six environmental factors of the PESTEL analysis are the following: Political factors   Taxation Policy   Trade regulations   Governmental stability   Unemployment Policy, etc. Economical factors   Inflation rate   Growth in spending power   Rate of people in a pensionable age   Recession or Boom   Customer liquidations Socio-cultural   Values, beliefs   language   religion   education   literacy   time orientation Technological factors   Internet   E-commerce   Social Media   Electronic Media   Research and Development   Rate of technological change Environmental factors   Competitive advantage    Waste disposal   Energy consumption   Pollution monitoring, etc. Legal factors   Unemployment law   Health and safety   Product safety   Advertising regulations   Product labeling   labor laws etc. [5]   Mesoenvironment The meso-level is settled between the macro- and the micro-level. This field deals with the design of the specific environment of the enterprises. It is of decisive importance that the layout of the physical infrastructure (transport, communication and power distribution systems) and of the sector policies, especially of the education, research and technology policy, are oriented towards competitiveness. In addition the design of the trade policy and systems of rules (for example environmental norms and technical safety standards), which contributes to the development of national advantages of competition, is relevant. Like on the micro-level, on the meso-level new patterns of organisation and steering must be developed. The state shall give impulses and mediate between enterprises, associations, science and intermediate institutions. "The design of locations becomes like that a continuous process on the basis of the efforts of enterprises, science and state as well as of the determined cooperation of private and public agents." Explain the meaning of Competitive strategy. What do you understand by the rules of engagement? Explain in detail. A plan for how a firm will compete, formulated after evaluating how its strengths and weaknesses compare to those of its competitors. For example, a small meatpacking firm may decide to concentrate on a special niche product offered in limited areas after determining it cannot compete on price with major competitors. Michael Porter has described a category scheme consisting of three general types of strategies that are commonly used by businesses to achieve and maintain competitive advantage. These three generic strategies are defined along two dimensions: strategic scope and strategic strength. Strategic scope is a demand-side dimension (Michael E. Porter was srcinally an engineer, then an economist before he specialized in strategy) and looks at the size and composition of the market you intend to target. Strategic strength is a supply-side dimension and looks at the strength or core competency of the firm. In particular he identified two competencies that he felt were most important: product differentiation and product cost (efficiency). Porter’s explanation of this is that firms with high market share were successful because they pursued a cost leadership strategy and firms with low market share were successful because they used market segmentation  to focus on a small but profitable market niche. Firms in the middle were less profitable because they did not have a viable generic strategy. Porter suggested combining multiple strategies is successful in only one case. Combining a market segmentation strategy with a product differentiation strategy was seen as an effective way of matching a firm’s  product strategy (supply side) to the characteristics of your target market segments (demand side). But combinations like cost leadership with  product differentiation were seen as hard (but not impossible) to implement due to the potential for conflict between cost minimization and the additional cost of value-added differentiation. Porter stressed the idea that only one strategy should be adopted by a firm and failure to do so will result in “stuck in the middle” scenario.[3] He discussed the idea that  practising more than one strategy will lose the entire focus of the organization. The competitive strategy is alternatively called as Five-forces model, Competitive forces, Porter's five forces, Porter's framework for competitive analysis. The main facors are: • The bargaining power of customers • The bargaining power of suppliers • The threat of new entrants • The threat of substitute products • The intensity of competitive rivalry . Section C 1.   what do you understand by the term corporate level strategies? Explain the following grand strategies: stability, expansion and retrenchment. Businesses have to respond to a dynamic and often hostile environment for pursuit of their mission. Strategies provide an integral framework for management and negotiate their way through a complex and turbulent external environment. Strategy seeks to relate the goals of the organisation to the means of achieving them. A company’s strategy is the game plan management is using to stake out market position and conduct its operations. A company’s strategy consists of the combination of competitive moves and  business approaches that managers employ to please customers, compete successfully and achieve organisational objectives. Strategy may be defined as a long range blueprint of an organisation's desired image, direction and destination what it wants to be, what it wants to do and where it wants to go.
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