BBA - II SEMESTER

BBA202: BUSINESS STRATEGY

Q.1. Define business policy. Explain the importance of
business policy. Differentiate between business policy and
Strategy.

(Definition

of

business

policy,

Importance

of

business policy, Difference between business policy and

strategy)
Answer:
Definition of a Business Policy
"Business Policy is the study of functions and responsibilities of general
management and the problems which affect the character and success of
the total enterprise" Learned Andrews Christensen and Gath
"The study of issues and problems encountered by managers whose
principal responsibility is the long-term development of the total
enterprise" Thomas Denis
"A business policy is nothing more than a well-developed statement of
directions and goals. Goals involve definitions of precisely what the
business is or should be and the particular kind of company it should be.
Directions guide the actions of the firm to accomplish these goals."
Edmond & Gray.
Importance of Business Policy
The Business Policy is expected to play a very significant role in any
business enterprise. Business Policy is the medium through which the
Management can expect to achieve its goals over a period of time. In the
absence of sound and clear cut policy decisions, it will be impossible to
handle various issues like the form of the organization, the method of

production to be followed, raising funds for nurturing the growth of the

business and the marketing of goods etc. There are a host of day-to-day
problems which can be solved by the managers at the operating level with
the help of policies to guide them. In short, the policies help managers at
different levels of the Managerial Pyramid in discharging their duties
efficiently and thereby help them in achieving the corporate goals by
integrating the various business operations. Business Policy, as a distinct
field of study, was introduced at Harvard University as early as in 1911. If
you have just started out in business or have been in business for years,
it's imperative to thoroughly develop company policies. A company policy
is a rule or guideline, a company follows when faced with a particular
problem or issue. The more situations or policies you develop, the
smoother your business will operate. Without a policy the organization will
function arbitrarily in an anarchic way and may not reach its objectives.
Difference between business policy and strategy
After going through a host of factors having influence on Business Policy,
now try to list out the basic differences between business policy and
strategy. This is very much important because many times these words
are used interchangeably even though they basically convey different
meanings.

Q.2. What are the objectives of Strategic Management?

What are the causes for failure of Strategic Management?
(Objectives of Strategic Management, Causes for failure of
Strategic Management)
Answer:
Objectives of Strategic Management
The different objectives are given below:
a) To keep pace with the changing business environment: The
present day world is often called as a flat world because of revolution in
transport, communication and technological advancement. The present
day environment in which the business enterprises operate is so dynamic
and fast-changing that the business enterprises are finding it extremely
difficult to operate. There are high level of uncertainties, threats and
constraints from different quarters and due to this business corporations
are finding it extremely difficult to survive. Strategic Management
principles and practices, if used, can help those business firms in
exploring the possible opportunities and also achieve an optimum level of
efficiency by minimizing the effect of expected threats.
b) To motivate Employees: We are aware of the fact that managing
men and women, is the most challenging task for any business unit.
Human resources can turn out to be highly productive and useful to a firm
provided necessary motivation and guidance are provided to them which,
in turn, increase their confidence level. Adopting Strategic management
techniques helps as a morale booster and ultimately rewards the
organization in terms of efficiency and loyalty to the organization.
c)

To

strengthen

the

decision

making

process:

Strategic

management aims at effective decision making process by taking into

consideration the objectives of the business concern as a whole in a
transparent manner. Hence, any decision taken should find wide

acceptance among the rank and the file as there will be no resistance to
change within the business enterprise.

Causes for failure of Strategic Management

No doubt, Strategic management yields highly favourable results for any
organization which has implemented it. There are, however, certain cases
where despite adopting the techniques of Strategic management, firms
have not met with the desired success. Let us always remember that
Strategic Management is not like a magic wand which can always ensure
success to everyone. So, let us try to list out the different causes
responsible for such a failure:
a) Strategic management is always based on certain fundamental
premises. If these premises do not hold good, the strategy or the plans
based on them would be unrealistic or ineffective.
b) Strategic management is only a means to achieve the corporate goals.
So, if there is lack of realism it will be reflected in the strategy. In other
words, we should always remember to be realistic while framing our
mission statement or declaring our objectives and not highly optimistic.
c) Many a time, the young Managers try to be over-ambitious and start
dreaming of success overnight by adopting Strategic management
techniques. This results in failure to reach the goals set and causes
frustration.
d) Sometimes, the management may be always chanting the mantra of
strategic

management

and

opportunities and thereby fail.

overlook

or

ignore

several

lucrative

e) Failure in implementing the strategy effectively will end up in producing

poor result. Let us remember the plight of a patient who has not taken the
best medicine prescribed for his illness grumbling about the sickness.
f) Strategic planning requires high level of calibre, experience and
knowledge with the best vision. If people do not have adequate
experience, expertise and commitment, the business organization may
not succeed.
g) Often people complain about the cost associated with planning and
implementation, ignoring the benefits derived in the medium and long
term.

Q.3. Write a brief note on the following:

a) Core competencies and their importance
b) Strategic leadership.
Answer:
a) Core

Competencies

and

their

Importance

in

Strategy

Formulation
The term Core Competency has its origin in an article titled The
Core Competence of the Corporation, written by C. K. Prahalad
and Gary Hamel for the Harvard Business Review in 1990. In this
article, core competency has been defined as The collective
learning and coordination skills behind the firm's product
lines. The authors illustrated that the core competencies of an
organization led to the development of core products, which in turn,
can be used for personalization of products for end users. An
organizations core competency is developed through 7continuous
evolution over a period of time. Core competencies are also
essential to succeed in global market. The authors claimed that In
the 1990s managers will be judged on their ability to identify,
cultivate, and exploit the core competencies that make growth
possible - indeed, they'll have to rethink the concept of the
corporation itself. (C K Prahalad and G Hamel, 1990.) When the
core competencies are matched with the market opportunities, new
businesses

are

created.

By

combining

and

matching

core

competencies to market opportunities, multiple businesses can also

be created. The core competencies help to bind the business units
together so as to form a comprehensive portfolio. Let us look at the
factors which help to

identify the core competency of the

organization
a) It should provide the company with a wide variety of markets

b) It should contribute significantly to product benefits

c) It should be difficult for competitors to imitate or duplicate
Some examples of core competencies of organizations are Philips
dominance in optical media, Sonys core competency in miniature
electronics and Microsofts core competency in proprietary software. All
these products or services can be sourced in a wide variety of markets,
have significant benefits to the customer and are difficult to copy or
imitate, thereby making the company a powerhouse in that area. In
order to measure core competencies, the company has to ascertain the
core product share, instead of market share. A company having low
brand value may have high core product share in the market. Core
competencies are capabilities which are essential for the establishment
of competitive advantage for the business. In order to analyse the core
competencies, the business must recognise that competition involves
the core competence mastery as well as market position and power.
Core competencies also help in value creation and value addition for
the product. Leadership of an organization can also be considered a
core competency, as the leader can be effective for the success of the
organization.
b) Strategic Leadership
Strategic leadership refers to those leaders who are responsible for the
creation as well as the implementation of the strategic vision of the
organization. The strategic leader of an organization needs to provide
the necessary direction in the following ways
a) Vision An effective leader has a vision for the growth of the
organization. Normally, he is able to predict future trends and is ahead
of times in providing value to customers. Due to the vision, the
strategic leader is able to guide the course of business for the
organization.

b) Organizational structure A strategic leader is able to analyse

the internal conditions of the organization and the demands of the
market place in order to arrive at a suitable organizational structure.
Such a structure helps in deciding on the action plans and allocation of
work, thereby making the implementation of the vision easier.
c) Pragmatic approach Such an approach is practical, goal-oriented
and is positive in nature. A strategic leader has the ability to adopt a
pragmatic approach in times of crisis and can turn the business around.
d)

Communication

An

effective

leader

possesses

good

communication skills and is able to clearly provide instructions for

action. He also has the ability to establish proper communication
networks for his organization, which aid in the free flow of crucial
information and provides the framework for better action. Such a
leader also makes informed decisions as he has formal and informal
channels of communication.
e) Culture Due to the establishment of an efficient organizational
structure and open communication network as well as his personal
qualities of reliability and consistency, a strategic leader is able to
forge a healthy work culture. He is also sympathetic to the problems
faced by the employees and provides solutions to ease their troubles,
thereby establishing a good environment for employees.
f) Change Management The strategic leader is capable of effective
management of change as he is able to anticipate and prepare for such
change. He is always aware of the market conditions, technological
developments as well as the internal conditions of his organization and
has the ability to adapt to change quickly. Most efficient leaders also
plan in advance to minimise damages due to changes in environment.
Hence, such leaders are better equipped to lead the organization
during times of crisis or change.

g) Corporate Governance An effective leader practises the

principles of good corporate governance, as he recognises that the
individual cannot be greater than the organization. He implements
strategies to ensure that there is transparent functioning within the
organization. This serves to boost the morale of employees. Such a
leader also ensures that there is an effective succession planning so
that

the organizations

takeovers.

existence

is

not

threatened by

hostile