Strategies and policies are closely related. Both give direction, both are in the framework for plans, both are the basis of operational plans, and both affect all areas of managing. The term strategy has been used in different ways. Authors differ in at least one major aspect about strategies. Some writers focus on both the end points (purpose, mission, goals, and objectives) and the means of achieving them (policies and plans). Others emphasize the means to the ends in the strategic process rather than the ends per se.
Strategy refers to the determination of the purpose (or mission) and the basic long term objectives of an enterprise, and the adoption of courses of action and allocation of resources necessary to achieve these aims. Therefore, objectives are a part of the strategy formulation.
Policies are general statements or understandings that guide managers’ thinking in decision making. They ensure that decisions fall within certain boundaries. They usually do not require action but are intended to guide managers in their commitment to the decision they ultimately make. The essence of policy is discretion. Strategy on the other hand concerns the direction in which human and material resources will be applied in order to increase the chances of achieving selected objectives.
To be effective strategies and policies must be put into practice by means of plans, increasing in detail until they get down to the nuts and bolts of operations. Tactics, then, are the action plans through which strategies are executed. Strategies must be supported by effective tactics.
Although specific steps in the formulation of a strategy may vary, the process can be built, at least conceptually around the key elements.
The various organizational inputs including the goal inputs of the claimants were discussed.
The formulation of a strategy requires the evaluation of the attractiveness of an industry by analysing the external environment. The focus should be on the kind of competition within an industry, the possibility of new firms entering the market the availability of substitute products or services the bargaining positions of the suppliers and buyers/customers
The enterprise profile is usually the starting point for determining where the company is an where it should go. Thus, top managers determine the basic purpose of the enterprise and clarify the firm’s geographic orientation, such as whether it should operate in selected regions in all states in the United States, or even in different countries. In addition managers assess the competitive situation of their firm.
One can also often infer from the advertisements what is important for company in terms of geographic orientation, product emphasis and strategies in cooperating with partner and even competitors. Here are some examples:
- For Komatsu it is going global in a big, big way
- For Ricoh it is Embracing the potential of a digital future.
- For Konica it is giving the customer a voice in product design.
- For AMWAY it is made in America sold around the world.
- For Cannon it is working both with partners and competitors.
The enterprise profile is shaped by people, especially executives, and their orientation and values are important for formulating the strategy. They set the organizational climate, and they determine the direction of the firm through their vision. Consequently their values their preferences and their attitudes towards risks have to be carefully examined because they have an impact on the strategy.
The mission, also sometimes called as purpose is the answer to the question; What is our business? The major objectives are the end points towards which the activities of the enterprises are directed. Strategic intent is the commitment to win in the competitive environment. Firms achieving global leadership had an obsession with winning not only at the top level but also throughout the organization. This obsession is called strategic intent and is illustrated by Komatsu’s intent to encircle caterpillar its main rival, or Canon’s idea to Beat Xerox or Honda’s intent to become an automotive pioneer such as a second Ford. The authors pointed out that the strategic intent requires a personal effort and commitment. The intent statement is stable over time and focuses on the essence of winning.
The present and future external environment must be assessed in terms of threats and opportunities. The evaluation focuses on the competitive situation as well as on economic, social, political, legal, demographic and geographic factors. In addition the environment is scanned for technological developments for products and services on the market and for other factors necessary for determining the competitive situation of the enterprise.