DISHA COLLEGE

Department of Management

BBA VI Semester

NOTES
Pt. Ravishankar Shukla University Raipur (CG)

BBA VI

Subject: Business policy and Strategy

S.Code Subject Name Internal marks Sem Exam Marks Total Marks
127 Business policy and Strategy 10 90 100

Course Objectives: To help students formulate and strengthen the effective strategies of day
to day business
COURSE CONTENTS

Unit – I Nature and objectives of Business Policy, defining business purpose, mission and
objectives, strategic Intent.

Unit – II Analysis of external and internal environment, SWOT Analysis.

Unit – III Strategy formulation; major types of strategies, determination of strategic plan.

Unit – IV Strategy Implementation; The Process of strategy implementation, resource

allocation social responsibility of business and business ethics.

Unit – V Evaluation of Strategy and Content.

References:

1. Azhar Kazmi, Business Policy & Strategic Management TMH, New Delhi. P.K.
Ghosh, Business Policy n- Strategic Planning and Management, Sultan Chand and
Sons, New Delhi.
2. VSP Rao, V Hari Krishna,Strategic Management Text and cases

3. Marios I.Katsioloudes,Strategic Management Global Cultural Perspectives for Profit

and Non Profit Organizations
COMMONLY ASKED QUESTIONS

Que 1 Define Strategy? Discuss the key role to be played by all levels of Management in
strategy formulations?

Que 2 Explain the Process of Strategic Management?

Que 3 What is Strategy? How it is different from business Policy? Explain Historical
Evolution?

Que 4 What is Strategic Intent? Who is the founder of this concept? Explain the Role of
Mission in Strategic Management?

Que 5 Differentiate between Mission and vision What are the possible pitfalls of not having a
mission of an organization?

Que 6 What are the different aspects of nature of business policy? discuss each type with
suitable example?

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 UNIT ONE

TOPICS

1 Strategy Introduction

 Meaning and Definition

 Nature of business strategy
 Corporate level strategy
 Business level strategy
 Functional level strategy
 Strategic Management process
 Strategic Intent
 Components Of Strategic intent
 Vision and Mission
 Objectives and Goals
 Historical Evolution of Strategic Management Process

2 Business Policy

 Meaning and definition of Business policy

 Business Policy vs. Business Strategy
 INTRODUCTION

THE CONCEPT OF STRATEGY

The concept of strategy is ancient. Originally, the word ‘strategy’ is derived from the Greek
word ‘Strategeia’ which means ‘the art of the general’. It has been associated with first
determining the position of a military, business or political organization in relation to its
environment and then using the organization’s resources to reach its goals. The Greeks knew
that strategy was more than fighting battles. Effective generals have to determine the right
lines of supply, decide when to fight and when not to fight and manage the army’s
relationship with citizens, politicians and diplomats. Effective general not only had to plan
but had to act as well. These early military roots of strategy have, of course, expanded into
political and business arena a increased competition and environmental change have forced
organizations to plan more carefully for the future. A key aim of both business and military
strategy is to gain competitive advantage. In both, the organizations they try to use their own
strengths to exploit competitors’ weaknesses. The element of surprise provides great
competitive advantages in both military and business strategy.

According to David, a fundamental difference between military and business strategy is that
business strategy is formulated, implemented and evaluated with an assumption of
competition whereas military strategy is based on an assumption of ‘conflict.

BUSINESS STRATEGY

Definition

Business strategy can be understood as the course of action or set of decisions which assist
the entrepreneurs in achieving specific business objectives.It is nothing but a master plan that
the management of a company implements to secure a competitive position in the market,
carry on its operations, please customers and achieve the desired ends of the business.

“Strategy Is the determination of the basic long term Goal and objectives of an
organization and the adoption of the courses of action and the allocation of resources
necessary for carrying out the goals”

Alfred D-Chandler

“A plan or a course of action which is of vital pervasive or continuing importance to the

organization as a whole”

Arthur Sharplin
In business, it is the long-range sketch of the desired image, direction and destination of the
organization. It is a scheme of corporate intent and action, which is carefully planned and
flexibly designed with the purpose of:

 Achieving effectiveness,
 Perceiving and utilizing opportunities,
 Mobilizing resources,
 Securing an advantageous position,
 Meeting challenges and threats,
 Directing efforts and behavior and
 Gaining command over the situation.

A business strategy is a set of competitive moves and actions that a business uses to attract
customers, compete successfully, strengthening performance, and achieve organizational
goals. It outlines how business should be carried out to reach the desired ends.

NATURE OF BUSINESS STRATEGY

A business strategy is a combination of proactive actions on the part of management, for

the purpose of enhancing the company’s market position and overall performance and
reactions to unexpected developments and new market conditions.

The maximum part of the company’s present strategy is a result of formerly initiated actions
and business approaches, but when market conditions take an unanticipated turn, the
company requires a strategic reaction to cope with contingencies. Hence, for unforeseen
development, a part of the business strategy is formulated as a reasoned response.
LEVELS OF BUSINESS STRATEGY

Levels of Strategy Management of every organization follow some kind of process and can
be viewed in the context of strategic management concept. Different business organizations,
having some similar features, may have some differences according to size that relate to their
strategic behavior. There are also different levels or units within a business entity, and some
of those units can have strategic different from other. In brief, strategies are operated at
different levels in a organization.

 Corporate level strategy

 Business level strategy
 Functional level strategy and Operating strategy

1. Corporate level Strategy

Corporate level strategy is formulated by top management to oversee the interest and
operations of organization made up of more than one line of business. It occupies the highest
level of strategic decision-making and cover actions dealing with the objectives of firm,
Acquisition and allocation of resources, and coordination of strategies of various units. The
Major questions at this level are as follows –

 What kinds of businesses should the company is engaged in?

 What are the goals and expectations for each business?
 How should resources be allocated to reach these goals?

EXAMPLES of Corporate Strategies

 -Growth Strategies
  -Retrenchment Strategies

2. Business level strategy

Business level strategy is concerned with managing the interests and operations of a
particular line of business. It refers to the managerial game plan for a single business. It
is mirrored in the pattern of approaches and moves crafted by management to produce
successful performance in one specific line of business. It deals with such questions as

 How will the business compete does its markets?

 What products or services should it offer?
 Which customer does it seek to serve?
 How will resources be distributes within the business?

Basically, business level strategy attempts to determine what approach to its market and
business should take and how it should conduct itself, given its resources and the
conditions of the market.

Some Business Strategies are

 Cost Leadership Strategies-Followed By Ratan Tata In NANO car

 Differentiation Strategy-Hindustan Unilever Limited
 Focus Strategy-Rolls Royace(Target Upper Income group)

3. Functional level strategy

It involves decision-making at the operational level with respect to specific functional

areas – production, marketing, personnel, finance etc. In fact, strategy creates a
framework for managers in each function to carry out business unit strategies and
corporate strategies. Decisions at this level are often describes as ‘tactical divisions.These
strategis aaaaaaaare also called as lower level strategis and works upon the operations of
dayto day business.

EXAMPLES of Functional Strategies

 Marketing strategies
 Finance strategies
 Human resource strategy

STRATEGIC MANAGEMENT PROCESS

The Strategic Management Process is a process of relating the organization with its
environment by suitable course of action involving strategy formulation and ensuring that
the strategy has been implemented effectively. The strategic management process begins
with

1. Strategic Intent

An organization’s strategic intent is the purpose that it exists and why it will continue
to exist, providing it maintains a competitive advantage. Strategic intent gives a
picture about what an organization must get into immediately in order to achieve the
company’s vision. It motivates the people. It clarifies the vision of the vision of the
company.

 Strategic intent helps management to emphasize and concentrate on the priorities.

Strategic intent is, nothing but, the influencing of an organization’s resource potential
and core competencies to achieve what at first may seem to be unachievable goals in
the competitive environment
 A well expressed strategic intent should guide/steer the development of strategic
intent or the setting of goals and objectives that require that all of organization’s
competencies be controlled to maximum value. Strategic intent includes directing
organization’s attention on the need of winning; inspiring people by telling them that
the targets are valuable; encouraging individual and team participation as well as
contribution; and utilizing intent to direct allocation of resources.

Strategic intent differs from strategic fit in a way that while strategic fit deals with
harmonizing available resources and potentials to the external environment, strategic
intent emphasizes on building new resources and potentials so as to create and exploit
future opportunities.

COMPONENTS OF STRATEGIC INTENT –VMOSA *Tip to learn

 V-VISION

M-MISSION

O-OBJECTIVES

S-STRATEGY

A-ACTION PLANS

MISSION VISION

Objectives WHERE?
WHY? Strategies
Action Plans

VISION

A vision statement identifies where the organization wants or intends to be in future or

where it should be to best meet the needs of the stakeholders. It describes dreams and
aspirations for future.

For instance

Microsoft’s vision is To empower people through great

software, any time, any place, or any
device

Wal-Mart’s vision is “To become worldwide leader in

retailing”

BSNL vision is “To Become largest telecom service

provider in Asia”

Strokes Eye Clinic “Our Vision is to take care of your

Vision”

Voda Phone To be the world’s mobile communication

leader
 A vision is the potential to view things ahead of themselves. It answers the question

Where we want to be?

It gives us a reminder about what we attempt to develop. A vision statement is for the
organization and its members, unlike the mission statement which is for the
customers/clients. It contributes in effective decision making as well as effective
business planning. It incorporates a shared understanding about the nature and aim of
the organization and utilizes this understanding to direct and guide the organization
towards a better purpose. It describes that on achieving the mission, how the
organizational future would appear to be.

An effective vision statement must have following features-

 It must be unambiguous.
 It must be clear.
 It must harmonize with organization’s culture and values.
 The dreams and aspirations must be rational/realistic.
 Vision statements should be shorter so that they are easier to memorize

In order to realize the vision, it must be deeply instilled in the organization, being
owned and shared by everyone involved in the organization.

BENEFITS

 Help organization to prepare for future

 It reduces the risk taking and experimentation
 It represent integrity
 Provides pathway to the direction of organization

MISSION STATEMENT
 Mission statement is the statement of the role by which an organization intends to
serve its stakeholders. It describes

Why an organization is operating and thus provides a framework within which

strategies are formulated.

 It describes what the organization does (i.e., Present capabilities)

 Who all it serves (i.e., stakeholders) and
 What makes an organization unique (i.e., reason for existence)

A mission statement differentiates an organization from others by explaining its broad

scope of activities, its products, and technologies it uses to achieve its goals and
objectives. It talks about an organization’s present (i.e., “about where we are”). For
instance,

Microsoft’s mission To help people and businesses

throughout the world to realize their
full potential.

Wal-Mart’s mission “To give ordinary folk the chance to buy

the same thing as rich people.”

Skype “Skype’s mission is to be the fabric of real

time communication on the web”

Ford motors company “The instigator of the manufacturing

revolution of mass production assembly
lines”

Mission statements always exist at top level of an organization, but may also be made
for various organizational levels. Chief executive plays a significant role in formulation
of mission statement. Once the mission statement is formulated, it serves the
organization in long run, but it may become ambiguous with organizational growth and
innovations.

In today’s dynamic and competitive environment, mission may need to be redefined.

However, care must be taken that the redefined mission statement should have original
fundamentals/components. Mission statement has three main components-a statement
of mission or vision of the company, a statement of the core values that shape the acts
and behavior of the employees, and a statement of the goals and objectives.

Features of a Mission

 Mission must be feasible and attainable. It should be possible to achieve it.

 Mission should be clear enough so that any action can be taken.
 It should be inspiring for the management, staff and society at large.
 It should be precise enough, i.e., it should be neither too broad nor too narrow.
 It should be unique and distinctive to leave an impact in everyone’s mind.
 It should be analytical, i.e., it should analyze the key components of the strategy.
 It should be credible, i.e., all stakeholders should be able to believe it.
 DIFFERENCE BETWEEN VISSION AND MISSION

Basis of Difference VISION MISSION

About A vision Statement outlines The term Mission statement

 where an organization is the fundamental and
wants to be. enduring purpose of an
It communicates both the organization that sets it
purpose and values of our apart from other
business organization.

Answer It answers the question It answers the question

Where do we aim to be? “What do we do? What
make us different?

Time A vision statement Talks A mission statement Talks

about the future. about the present leading to
its future

Function It list us where we see It list the broad goals for

ourself some years from which the organization is
now.It Inspires us to give formed.its prime function is
our best it shapes our internal to define the key
understanding of why we measure of the
are working here. organizations success

Change It Rarely changes A mission statement may

change,but it shouls still tie
back to our core values,
customer needs and vision

Creation Developed First Developed only when

vision is available

Includes Objectives and values Includes customer products,

markets technology,
concern for survival,
concern for public image
etc

STRATEGIC GOALS

Strategic goals are goals created to identify the intended accomplishment of a business
strategy. When companies create strategic goals, they directly identify what they see as the
outcome of their business efforts. Strategic goals are most commonly created when a
company is mounting a new strategy. For example, if a company adopts a new advertising
campaign in an attempt to draw buyers to their products, they may also create a strategic
goal, or desired endpoint, of their new advertising efforts.

Goal setting is a process of directing what an organization wants to accomplish and devising
a plan to achieve the result we desire. For entrepreneurs, goal setting is an important part of
business planning, business goal should be a part of an overall business plan or objectives,
when we create a business plan it is important to decide what we want our business to be and
how to define our product and target market

Features-

 These are precise and measurable.

 These look after critical and significant issues.
 These are realistic and challenging.
 These must be achieved within a specific time frame.
 These include both financial as well as non-financial components

Example-

 Increasing market share

 Lowering production cost
 Developing new product line
 Increasing the effectiveness of marketing
 Increasing the efficiency of manufacturing

Business Objectives

“Objectives are the end results of planned activity”

A specific result that a person or a system aims to achieve within a time frame and with
available resources. A company objective is an outcome an organization would like to
achieve company objectives are measurable they effectively describe the actions required to
accomplish the task.
Objectives define the techniques an organization will use to achieve sales success, customer
service, financial objective or any other measurable of the company

TYPES OF BUSINESS OBJECTIVES

Financial objectives
 Profit Maximization
 Wealth maximization

Marketing aobjectives

 Increase sales
 Improve product awareness
 Establish yourself in industry
 Brand management

Social objectives
 Supply of quality goods at fair prices
 Fair deal to worker
 Fair deal ti suppliers and investors

Objectives represent managerial commitment to achieve specified results in a specified

period of time. They clearly spell out the quantity and quality of performance to be
achieved.Objectives are defined as goals that organization wants to achieve over a period
of time. These are the foundation of planning. Policies are developed in an organization
so as to achieve these objectives. Formulation of objectives is the task of top level
management.

Effective objectives have following features-

 These are not single for an organization, but multiple.

 Objectives should be both short-term as well as long-term.
 Objectives must respond and react to changes in environment, i.e., they must
be flexible.
 These must be feasible, realistic and operational

Example
- To achieve 10% growth in EPS
- To achieve 20.25% return on Equity
- To achieve 27% return on capital employed
DIFFERENCE BETWEEN GOALS AND OBJECTIVES

BASIS OF DIFFERENCE GOALS OBJECTIVES

Meaning A goal is a general direction Objectives are targets an
 where a company or an organization wants to achieve
individual wants to go quantitatively and
qualitatively
specificity Goals are general intentions Objectives are specific
towards the attainment of precise actions for
something accomplishment of specific
task
Tangibility Goals are intangible, Goals Objectives may be targeted at
may be directed towards getting measurable things or
achievement of non tasks
measurable things
Time Frame Goals usually have longer Objectives are usually
time frame depanding upon precise targets set for a short
the nature term
Measurement Goals may or may not me Objectives may be
measured measurable
Example  I want to be abetter  A Company want to
ball player increase sales by 10%
 I want to maximize this month.
my professional  To achieve 10%
performance growth in EPS
 Increasing  To achieve 20.25%
effectiveness of return on Equity
marketing  To achieve 27%
 Increasing the return on capital
effectiveness of employed
manufacturing

VISION Picture of ideal futue(What we want to

be?)

MISSION Core Purpose(Why we exist?)

OBJECTIVES Specific Targets(What task we have to

 accomplish?)

STRATEGIES Game Plan for success(How we want to get

there?)

SUMMARY

NATURE AND SCOPE OF BUSINESS POLICY

BUSINESS POLICY

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.

The policy is also regarded as a mini-mission statement, is a set of principles and rules which
direct the decisions of the organization. Policies are framed by the top-level management of
the organization to serve as a guideline for operational decision making. It is helpful in
highlighting the rules, value and beliefs of the organization. In addition to this, it acts as a
basis for guiding the actions.

Policies are designed, by taking the opinion and general view of a number of people in the
organization regarding any situation. They are made from experience and basic
understanding. In this way, the people who come under the range of such policy will
completely agree upon its implementation.

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.

Nature of Business Policy

Business policy basically deals with decisions regarding the future of an ongoing
enterprise. Such policy decisions are taken at the top level after carefully evaluating the
organizational strengths and weaknesses in terms of product price, quality, leadership
position, resources etc., in relation to its environment. Once established the policy
decisions shape the future of a company channel the available resources along desired
lines and direct the energies of people working at various levels towards predetermined
goals. In a way, business policy implies the choice of purposes, the shaping of
organizational identity and character the continuous definition of what is to be achieved
and the deployment of resources for achieving corporate goals.

Types of policies

There are many types of policies

  Marketing policies,

 financial policies,

 production policies

 personnel policies

Within each of these areas more specific policies are developed. For example, personnel
policies may cover recruitment, training, promotion and retirement policies. Viewed from a
systems angle, policies form a hierarchy of guides to managerial thinking. At the top of level
policy statements are broad. The management is responsible for developing and approving
major comprehensive company policies. Middle managers usually establish less critical
policies relating to the operation of their sub units. Policies tend to be more specific at lower
levels. The manager’s job is to ensure the consonance of these policies, each must contribute
to the objectives of the firms and there should be no conflict between sub system policies.

Importance of Business Policy Plans

 Business policies are important and affect everything from legal liabilities to
employee satisfaction and a positive public image.
 Policies make sure everyone is on the same page when it comes to expectations of
certain things.
 A business might have policies pertinent to different aspects of the company.
 There may be safety policies, human resources hiring policies and anti-discrimination
policies.
 There may also be policies that pertain to employees' dress code, lunch schedules,
time off and holidays.
 Other policies are relevant to the customer experience including greeting customers,
phone call management and product delivery specifics.
 All of these policies create a positive work environment. Employees who feel safe at
work from injury or discrimination are happier and more productive.
 This is an important aspect of productivity that every business owner must consider.
 When employees have specific directives on dress code, scheduling and requesting
time off, it levels the field and shields employees from favoritism.

BUSINESS POLICY VS BUSINESS STRATEGY

Basis of difference Business Policy Business Strategy

Meaning Strategy is a Policy is the guiding
 comprehensive plan, principle, that helps
made to accomplish the organization to
the organizational take logical
goals. decisions.
What is it? Action plan Action principle
Nature Flexible Fixed, but they
allow exceptional
situations
Related to Organizational Organizational rules
moves and decisions for the activities
for the situations which are repetitive
which have not been in nature.
encountered
previously.
Orientation Action Thought and
Decision
Formulation Top Level Top Level
Management and Management
Middle Level
Management
Approach Extroverted Introverted
Describes Methodology used What should be
to achieve the done and what
target. should not be done.

HISTORICAL EVOLUTION OF STRATEGIC MANAGEMENT PROCESS

STRATEGIC MANAGEMENT-History and Development

Until the 1940s, strategy was seen as primarily a matter for the military. Military
history is filled with stories about strategy. Almost from the beginning of
recorded time, leaders contemplating battle have devised offensive and counter-
offensive moves for the purpose of defeating an enemy. The word strategy
derives from the Greek for generalship, strategia, and entered the English
vocabulary in 1688 as strategie. According to James’ 1810 Military Dictionary, it
differs from tactics, which are immediate measures in face of an enemy.
Strategy concerns something “done out of sight of an enemy.” Its origins can be
traced back to Sun Tzu’s The Art of War from 500 BC.

Over the years, the practice of strategy has evolved through five phases
(each phase generally involved the perceived failure of the previous
phase):

1. Basic Financial Planning (Budgeting)

2. Long-range Planning (Extrapolation)
3. Strategic (Externally Oriented) Planning
4. Strategic Management
5. Complex Systems Strategy:
a. Complex Static Systems or Emergence
b. Complex Dynamic Systems or Strategic Balance
Basic Financial Planning (Budgeting)

James McKinsey (1889-1937), founder of the global management consultancy

that bears his name, was a professor of cost accounting at the school of business
at the University of Chicago. His most important publication, Budgetary
Control (1922), is quoted as the start of the era of modern budgetary accounting.

Early efforts in corporate strategy were generally limited to the development of a

budget, with managers realizing that there was a need to plan the allocation of
funds. Later, in the first half of the 1900s, business managers expanded the
budgeting process into the future. Budgeting and strategic changes (such as
entering a new market) were synthesized into the extended budgeting process,
so that the budget supported the strategic objectives of the firm. With the
exception of the Great Depression, the competitive environment at this time was
fairly stable and predictable.

Basic Financial Planning (Budgeting)

James McKinsey (1889-1937), founder of the global management consultancy

that bears his name, was a professor of cost accounting at the school of business
at the University of Chicago. His most important publication, Budgetary
Control (1922), is quoted as the start of the era of modern budgetary accounting.

Early efforts in corporate strategy were generally limited to the development of a

budget, with managers realizing that there was a need to plan the allocation of
funds. Later, in the first half of the 1900s, business managers expanded the
budgeting process into the future. Budgeting and strategic changes (such as
entering a new market) were synthesized into the extended budgeting process,
so that the budget supported the strategic objectives of the firm. With the
exception of the Great Depression, the competitive environment at this time was
fairly stable and predictable.

Long-range Planning (Extrapolation)

Long-range Planning was simply an extension of one year financial planning

into five-year budgets and detailed operating plans. It involved little or no
consideration of social or political factors, assuming that markets would be
relatively stable. Gradually, it developed to encompass issues of growth and
diversification.

In the 1960s, George Steiner did much to focus business manager’s attention
on strategic planning, bringing the issue of long-range planning to the
forefront. Managerial Long-Range Planning, edited by Steiner focused upon the
issue of corporate long-range planning. He gathered information about how
different companies were using long-range plans in order to allocate resources
and to plan for growth and diversification.

A number of other linear approaches also developed in the same time period,
including “game theory”. Another development was “operations research”, an
approach that focused upon the manipulation of models containing multiple
variables. Both have made a contribution to the field of strategy.

Strategic (Externally Oriented) Planning

Strategic (Externally Oriented) Planning aimed to ensure that managers

engaged in debate about strategic options before the budget was drawn up.
Here the focus of strategy was in the business units (business strategy) rather
than in the organization centre. The concept of business strategy started out as
‘business policy’, a term still in widespread use at business schools today. The
word policy implies a ‘hands-off’, administrative, even intellectual approach
rather than the implementation-focused approach that characterizes much of
modern thinking on strategy. In the mid-1900s, business managers realized that
external events were playing an increasingly important role in determining
corporate performance. As a result, they began to look externally for significant
drivers, such as economic forces, so that they could try to plan for
discontinuities. This approach c

The Problem with Strategic Planning (Analysis): The fuel for the modern
growth in interest in all things strategic has been analysis. While analysis has
been the watchword, data has been the password. Managers have assumed that
anything which could not be analyzed could not be managed. The belief in
analysis is part of a search for a logical commercial regime, a system of
management which will, under any circumstances, produce a successful result.
Indeed, all the analysis in the world can lead to decisions which are plainly
wrong. IBM had all the data about its markets, yet reached the wrong
conclusions.
 There are two basic problems with the reliance on analysis. First, it is all
technique. The second problem is more fundamental. Analysis produces a self-
increasing loop. The belief is that more and more analysis will bring safer and
safer decisions. The traditional view is that strategy is concerned with making
predictions based on analysis. Predictions, and the analysis which forms them,
lead to security. The bottom line is not expansion, future growth or increased
profitability-it is survival. The assumption is that growth and increased profits will
naturally follow. If, by using strategy, we can increase our chances of predicting
successful methods, then our successful methods will lead us to survival and
perhaps even improvement. So, strategy is to do with getting it right or, as the
more competitive would say, winning. Of course it is possible to win battles and
lose wars and so strategy has also grown up in the context of linking together a
series of actions with some longer-term goals or aims.

This was all very well in the 1960s and for much of the 1970s. Predictions and
strategies were formed with confidence and optimism (though they were not
necessarily implemented with such sureness). Security could be found. The
business environment appeared to be reassuringly stable. Objectives could be
set and strategies developed to meet them in the knowledge that the overriding
objective would not change.

Such an approach, identifying a target and developing strategies to achieve it,

became known as Management by Objectives (MBO).

Under MBO, strategy formulation was seen as a conscious, rational process. MBO
ensured that the plan was carried out. The overall process was heavily logical
and, indeed, any other approach (such as an emotional one) was regarded as
distinctly inappropriate. The thought process was backed with hard data. There
was a belief that effective analysis produced a single, right answer; a clear plan
was possible and, once it was made explicit, would need to be followed through
exactly and precisely.

In practice, the MBO approach demanded too much data. It became overly
complex and also relied too heavily on the past to predict the future. The entire
system was ineffective at handling, encouraging, or adapting to change. MBO
simplified management to a question of reaching A from B using as direct a route
as possible. Under MBO, the ends justified the means. The managerial equivalent
of highways were developed in order to reach objectives quickly with the
minimum hindrance from outside forces.
Henry Mintzberg’s book The Rise and Fall of Strategic Planning was first
published in 1994. “The confusion of means and ends characterizes our age,”
Henry Mintzberg observes and, today, the highways are likely to be gridlocked.
When the highways are blocked managers are left to negotiate minor country
roads to reach their objectives. And then comes the final confusion: the
destination is likely to have changed during the journey. Equally, while MBO
sought to narrow object
ives and ignore all other forces, success (the objective) is now less easy to
 identify. Today’s measurements of success can include everything from
environmental performance to meeting equal opportunities targets. Success has
expanded beyond the bottomline.