Business Policy and Strategies Notes

Business Policy and
Strategy
.
• 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.
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.
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-
• Policy is a blueprint of the organizational activities which are repetitive in
nature. While strategy is concerned with those organizational decisions which
have not been dealt/faced before in same form.
• Policy formulation is responsibility of top level management. While strategy
formulation is basically done by middle level management.
• Policy deals with routine/daily activities essential for effective and efficient
running of an organization. While strategy deals with strategic decisions.
• Policy is concerned with both thought and actions. While strategy is
concerned mostly with action.
Policy & Strategy
• Policy refers to a set of rules made by the organization for rational decision
making. Principle used as guide in setting direction of the organization.
Guideline to be kept in mind all the time.
• A Strategy is a special plan made by the management to achieve the
organizational goals and objectives and objectives. It is a plan of action.
• Example: A goal to reach volume of sales at specified time maybe obtained
using different marketing strategies. It could a cut in the price or an ads.
• Vision Mission
• Vision and mission statements spell out the context in which the
organization operates and provides the employees with a tone that is to be
followed in the organizational climate. Since they define the reason for
existence of the organization, they are indicators of the direction in which
the organization must move to actualize the goals in the vision and mission
statements.
• The vision and mission statements serve as focal points for individuals to
identify themselves with the organizational processes and to give them a
sense of direction while at the same time deterring those who do not wish to
follow them from participating in the organization’s activities.
• The vision and mission statements help to translate the objectives of the
organization into work structures and to assign tasks to the elements in the
organization that are responsible for actualizing them in practice.
• To specify the core structure on which the organizational edifice stands and
to help in the translation of objectives into actionable cost, performance, and
time related measures.
• Finally, vision and mission statements provide a philosophy of existence to
the employees, which is very crucial because as humans, we need meaning
from the work to do and the vision and mission statements provide the
necessary meaning for working in a particular organization.
• Vision: An inspirational statement of what the organization hopes to achieve
at some point in the future. It is the image of what the organizations desire
to achieve. It serves as a challenge for the company. It carries an extra
ordinary force that compels and inspires and motivates the employees to
work and focus towards its desired future state. The vision statement does
not tell of the strategies but ist sets direction. (what the company to become)
• Mission: Defines the current purpose of the organization and the reason for
its existence. It tells what the company is now and what it is doing at the
present. It also tells about its product or services and the types of
consumers to be serves. (reason for existence)
Basic Concepts in Business Policy & Strategy
• The Strategic Management Process:
• Situation Analysis - Internal analysis of the environment is the first step of
environment scanning. Organizations should observe the internal organizational
environment. This includes employee interaction with other employees, employee
interaction with management, manager interaction with other managers, and
management interaction with shareholders, access to natural resources, brand
awareness, organizational structure, main staff, operational potential, etc. Also,
discussions, interviews, and surveys can be used to assess the internal environment.
Analysis of internal environment helps in identifying strengths and weaknesses of
an organization and culture as well.
• As business becomes more competitive, and there are rapid changes in the
external environment, information from external environment adds crucial
elements to the effectiveness of long-term plans. As environment is dynamic,
it becomes essential to identify competitors’ moves and actions.
Organizations have also to update the core competencies and internal
environment as per external environment. Environmental factors are infinite,
hence, organization should be agile and vigile to accept and adjust to the
environmental changes.
• . For instance - Monitoring might indicate that an original forecast of the
prices of the raw materials that are involved in the product are no more
credible, which could imply the requirement for more focused scanning,
forecasting and analysis to create a more trustworthy prediction about the
input costs. In a similar manner, there can be changes in factors such as
competitor’s activities, technology, market tastes and preferences.
• While in external analysis, three correlated environment should be studied
and analyzed —
• immediate / industry environment
• national environment
• broader socio-economic environment / macro-environment
a
• Strategy Formulation – Involves development of company strategies
composed of three organizational levels: operational, competitive, and
corporate.
• .
• Operational strategies are short term and are associated with the various
operational departments of the company such as human resource, finance,
marketing and production.
• Competitive strategies – are those related to the technique in competing in a
certain industry. The company must identify the strengths and weaknesses
of its competitors, thus formulate strategies to gain competitive advantage
• Corporate Strategy – Is to be able to improve both operational and competitive
strategies. There should be a synergy between the operating units and
competitive strategies should support overall corporate strategies.
Corporate strategies are long – term, consolidate and direct the organization
resulting to overall organization’s performance.
• Competitive Advantage - A competitive advantage is what makes an entity's
goods or services superior to all of a customer's other choices. The term is
commonly used for businesses.
• If strategy formulation is uniquely designed and effectively communicated,
organizations have greater possibilities of obtaining organizational
competitiveness. Optimum use of resources and maximum performance at
its best productivity
• Strategy Implementation - Strategic implementation is a process that puts
plans and strategies into action to reach desired goals. The strategic plan
itself is a written document that details the steps and processes needed to
reach plan goals, and includes feedback and progress reports to ensure that
the plan is on track.
• programs
• Procedures
• activities
• If strategy implementation is effectively employed, organization can have the
comparative advantage. Lower marginal and opportunity costs than its
competitors.
• Strategy Evaluation - strategy Evaluation is as significant as strategy
formulation because it throws light on the efficiency and effectiveness of the
comprehensive plans in achieving the desired results. The managers can also
assess the appropriateness of the current strategy in todays dynamic world
with socio-economic, political and technological innovations. Strategic
Evaluation is the final phase of strategic management.
• If strategic control is properly in placed, the organization can realize strategic
performance. Accomplishment of high level of productivity. There will be
efficiency and quantifiable management
.

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Business Policy and

• An effective business policy must have following features;

• The term “policy” should not be considered as synonymous to the term

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