Strategy and policy are two distinct words with different meaning but often used in conjunction to spell out business operations of any corporate organization. Strategy can be defined as long term action plan or course of action that is concisely designed to enable the achievement of particular goals and objectives set out by a corporate organization. It is a game plan that reinforces the performance of a venture (Weske 2004, pp 23-26).
Strategy is a core management function of every organization. A policy is defined as a guiding system, course of action or even a philosophy used by a corporate organization for commercial purpose. In a business context, a policy can also be defined as a general practice that a company establishes for its daily operations. The policies can either be written or unwritten. Strategy and policy are often used together to determine courses of actions that a company or corporate organization takes to achieve defined goals and objectives. Both are used to define the framework within which goals and objectives are to be achieved.
Strategy and policy are used by almost all corporate organizations. Strategy and policy can be defined as the composition of essential elements by which the resources of a corporate organization are being controlled. They are the main target for which the resources are put to use in order enable an organization to progress (Grant, 2005, p. 18).
Model of Analysis: The Value Chain
It is important to get an understanding of the activities through which a company or any other corporate organization establishes a competitive advantage over others and improves shareholder value. It is worthy to disintegrate a business system into sequences of activities that generate value. The sequence of doing this is what is referred to as Value Chain. The most known proponent of this model is Michael Porter who actually introduced the standard value chain model; the model includes a series of activities that are common to a broad variety of firms. The constituents of the generic value chain proposed by Michael Porter are ordered as Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales and finally Services.
- Inbound Logistics: this involves the process of obtaining raw materials and storing them safely. At a point when need arises, distribution of these materials to the manufacturers is carried out.
- b. Operations: In this, the entire process in which the products that are finished as well as services are obtained from the transformation of the appropriate input.
- Outbound Logistics: these activities that can be considered to be converse to Inbound Logistics. In this case finished products are warehoused and later distributed according to the needs of the market.
- Marketing and Sales: these activities involve the introduction of finished products into the market. As these activities go on, there is identifying of the needs of the clients and in turn these needs are satisfied through generating sales
- Services: this involves offering support and assistance to customers after the sale of products.
These five activities of the Value Chain are supported by certain feature of a firm:
- The infrastructure of a corporate organization: this may include but not limited to the structure of an organization, the culture of the company and control system.
- Human Resource Management: manpower management may include the process of enlisting new workers, hiring and training, payments and development.
- Technological development: the development of technology includes technological advancement that renders support to activities that create value and lastly,
- Procurement: this entails the purchase of input such as equipment, supplies and other necessary materials.
In view of the value chain, there is reliance of the profit margin of the business organization on the level of the efficacy and effectiveness of these activities performed by the business enterprise. For an organization to experience marginal profit, it is important that the company ensure that the cost of the activities in the Value Chain is less than the amount in price paid by customers (Malthus et al 2004, p. 136).
The model of value chain is very appropriate in determining the competence of a corporate organization. According to Porter the model can entails the activities in which a corporation can pursue a competitive advantage through two means. One is cost advantage; the corporation should have a better understanding of costs and be able to squeeze the costs out of the activities that add value. For instance, a corporation can manage to get excellent employees who have worked for its competitors but left because of less remuneration; in this case the corporation can offer a better pay and get the most out of the employees.
Differentiation is also another means; this can be achieved through focusing on certain tasks that are linked with the core capabilities and competencies of the corporation so as to embark on them in a mode that is better than its chief competitors (Hitt 2008, pp. 84-87).
Analysis of Asian Development Bank’s Strategy and Policy
Porter’s five forces model of value chain will be used in the analysis of strategies and policies of Asian Development Bank. The Asian Development Bank is an international financial institution and its mission is to assist its developing countries of operations to alleviate poverty and enhance quality of life for citizens of those countries, the vision of the bank is to ensure an Asia and Pacific that is free from poverty by initiating poverty reduction within the region and also abroad. The Asian Development Bank has well formulated strategy and policy that are embodied in a policy and strategy document that will enable it to achieve its long term goals and objectives. The bank has a strategy that covers its operations up to the year 2020 inclusive.
The bank’s strategic agenda is comprised of inclusive growth, regional integration and growth based on sustainable environment. Inclusive is under the bank’s poverty reduction strategy. It aims at reducing poverty and enhancing quality of life, support coherent social integration and assist people on how to manage the risks of life.
- Inbound logistics: the Asian Development Bank’s inbound logistics is efficient and effective. The Inbound Logistics of the bank includes the supervising the operations of the warehouse and distribution. This also includes conducting frequent visual assessment of different warehouses of the bank which may include sorting hard copy records and rooms for paper shredding to guarantee proper categorization of the corporation’s assets and crumb materials for dumping, space allocation and consistence with ISO 14001/OHSAS procedures. The bank also conducts inspection on its supply Request Facility of the system of Oracle and determining the available stock in its different warehouse. The inventory control of the bank adds to planning, development and execution of the bank’s policies, procedures and designed systems, operations and space allocations at the warehouses, disposal and the replacement of bank’s assets. This also provides assistance in the supervision of customary physical inventory of the bank’s assets. Other activities performed are analyzing the outcomes of physical inventory calculation, monitoring of inventory levels, recording of stock entries and any other activity that may be appropriate in the due process. Inbound Logistics activities also include Project Development and Implementation in which efficiency is ensured in the management process of data system of the unit. Development and Implementation process includes monitoring of the performance of computer system.
- Operations: the Asian Development Bank has operational policies known as Bank Policies (BPs) embodied in a manual called Operations Manual (OM). The bank’s Operation Manual. The Asian Development Bank’s policies are precise statements that arise from the accord that is responsible for the charter that allowed the formation of Asian Development Bank. The Operation Manual of the Bank also details the procedures that guide the operation of the bank. It also details the practical requirements and direction on the bank’s policy implementation. Operation strategy and policy of the bank covers the areas of poverty reduction, country partnership strategy, and gender development, lending policies disaster and emergency assistances and use of surplus proceeds from loans. The Asian Development Bank’s policies also spell out its operations in the areas of agriculture and health. However, the bank’s core operational areas are the urban infrastructure, supply of water and sanitation, energy and transport and communication.
- Outbound Logistics: the Asian Development bank has several products to offer to its customers. Some of these products include loans, grants to support different projects and facilities that are needed in the health sector and disaster and emergency circumstances
- Marketing and Sales: the Asian Development uses a marketing and promotion mix that ensures its products are well positioned in the financial industry market. The bank engages the strategy of advertising through various available advertising media to position itself in the financial market and attract more customers for its products. It also makes use of partnership with other corporate organizations in order to deliver its services to its customers. It has established fair financial incentives that attract customers; it has also invested in supporting various activities like poverty reduction initiatives, sustainable environmental activities. This can be described as an interactive form of marketing since it helps the bank to establish its reputation amongst the existing and potential customers. The bank also does direct marketing, brand loyalty marketing campaigns and best sustained success approach.
- Services: services are the last of Porter’s component of value chain model. In this case the bank participates in offering other services to the community of its customers. Asian Development Bank participates in offering health services, disaster and emergency assistance. It offers developmental assistances to respective governments of its regions of operations.
The information in the above section is according to Taylor & Francis Group (2004, p. 151)
Strategy and Policy Recommendation for Future Development
Even though the Asian Development Bank has proper working strategies and Policies it can still make some adjustments for its future development. The main changes that the bank can make on its strategy and policy include:
- The bank needs to come up with an action plan based on different countries of different economic statuses. This implies that the bank should design different action plans for low income and middle income nations. This will ensure that the bank is effective in its policy and strategy implementation
- The Asian Development Bank should also come up with policies and strategies that spell out clearly how it can collaborate with other development banks operating within its region of operations. Such policies and strategies should also give a guideline on how the bank can have more partners with better terms of engagements. This will enhance its operations in various fields and also help it use less resource in its overall operation.
- The bank should come up with strategy and policy to enable it partner with non-profit organizations that exist both at domestic and international level. This will ensure that its services effectively and efficiently reach the local poor people. The policy and strategy of partnering with organizations established at the local levels like community and faith based organizations will ensure that its partnership facilitates the reduction of poverty; poverty reduction is one of the main concerns of the bank.
- The Asian Development Bank should also ensure that it has policy and strategy that helps it monitor how its donated funds are being used and how to handle cases of misappropriations. Due its scale of operations, it may not be easy to determine the use of its donated funds just by scrutinizing financial report. It should have some mechanisms through which tangible evidences of the projects funded through its donations can be obtained. This will include designing monitoring and evaluation policies and strategies. These policies may include the bank stopping its funding to countries and organizations that misuse its funds and also taking legal actions against individuals and other corporate organizations misusing its donated resources. To ensure effectiveness of its projects the policies should also ensure that the bank sets timeline within which its funded projects must be finished. This will help it to account for its use of such resources as it may release from time to time for various purposes.
A policy is defined as a guiding system, course of action or even a philosophy used by a corporate organization for commercial purpose. In a business context, a policy can also be defined as a general practice that a company establishes for its daily operations. The policies can either be written or unwritten. Strategy and policy are often used together to determine courses of actions that a company or corporate organization takes to achieve defined goals and objectives. Both are used to define the framework within which goals and objectives are to be achieved. Strategy and policy are used by almost all corporate organizations.
Grant, R. 2005. Contemporary strategy analysis. Blackwell business, Wiley-Blackwell, p. 18.
Hitt, M. 2008. Strategic management: competitiveness and globalization: concepts & cases. London, Cengage Learning, PP 84-87.
Malthus, R. et al 2004, ‘T.R. Malthus: the unpublished papers in the collection of Kanto Gakuen University’, Volume 2 of T. R. Malthus, United Kingdom, Cambridge University Press, p. 136.
Taylor & Francis Group 2004. Europa World Year, Book 1. London, Taylor & Francis, P. 151.
Weske, M. et al 2004. Object-oriented and internet-based technologies: 5th Annual International Conference on Object-Oriented and Internet-Based Technologies, Concepts, and Applications for a Networked World, Net.ObjectDays 2004, Erfurt, Germany: proceedings, U.S.A, Springer, p. 23-26.