Business Policy

Course Description
• This course deals with the overall
direction and Operation of the Business
enterprise.
• Emphasis is focus on :
a) The roles, tasks and skills of the
general manager in leading a
business.
b). The study of the collection of
cases highlight the functions and
responsibilities of line managers.
 What is Business Policy
• defines the scope or spheres within which decisions
can be taken by the subordinates in an
organization.
• permits the lower level management to deal with
the problems and issues without consulting top level
management every time for decisions.
• define the limits within which decisions must be
made.
• deals with acquisition of resources with which
organizational goals can be achieved.
• the study of the roles and
responsibilities of top level management.
 Defining Business Policy

• It is the aggregate of the

policy guidelines of different
functional areas such as
production, marketing,
finance etc. in a company.
Defining Business Policy

• It is the major policy

guidelines drawn by the
board of directors to
regulate the overall
direction in which
company should move.
 Defining Business Policy

• It is the process of study,

process of decision and
process of action leading to
development of effective
business strategy.
 Business Policy
• This comprehensive definition covers many aspects
of Business Policy –
– Firstly it is considered as the study of the functions and
responsibilities of the senior management related to those
organizational problems which affects the success of the
total enterprise.
– Secondly, it deals with the determination of the future
course of action that an organization has to adopt.
– Thirdly, it involves choosing the purpose and defining what
needs to be done in order to mold the character and
identify of an organization.
– Lastly, it is also concerned with the mobilization of
resources, which will help the organization to achieve its
goals.
Features of Business Policy
• Specific
• Clear
• Reliable/Uniform
• Appropriate
• Simple
• Inclusive/Comprehensive
• Flexible
• Stable
Business Policies Cover
Four Things

• Property
• Liability
• People
• Income
Historical Evolution Of Business Policy

1930’s 1940’s
1960’s 1980’s
Ad Hoc Planned
Strategic
Policy Policy
Strategy management
making formulation
 EVOLUTION OF
BUSINESS POLICY AS A DISCIPLINE
• The origins of business policy can be traced
back to 1911 when the Harvard Business
School introduced an integrative course in
management aimed at providing general
management capability. This course was
based on case studies which had been in use
at the school for instruction purposes since
1908. However, the real motive for
introducing business policy in the curriculum
of business schools came with the publication
of two reports in 1959.
 EVOLUTION OF
BUSINESS POLICY AS A DISCIPLINE
• The term “Business Policy” has been
used traditionally though new titles such
as “Strategic Management”, “Corporate
Strategy and policy”.
• The discussion has so far been related
to the academic status of the business
policy course.
• In practice however, the development
has been along different lines.
 EVOLUTION BASED ON
MANAGERIAL PRACTICES
- Guleck has viewed the development in
business policy as arising from the use
of planning techniques by managers.
Starting from day-to-day planning in
earlier times managers till recently tried
to anticipate the future through the
preparation of budgets and by using
control systems like capital budgeting
and management by objectives.
 EVOLUTION BASED ON
MANAGERIAL PRACTICES
• However as these techniques were unable to
emphasize the role of the future adequately,
long range planning came into use. But soon,
long range planning was replaced by strategic
planning and later by strategic management –
A term that is currently being used to
describe the process of strategic decision
making. Strategic Management forms the
theoretical framework for business policy
courses today.
HISTORICAL PERSPECTIVE OF
BUSINESS POLICY –
• Hofer has viewed the evolution of business policy
in terms of four paradigm.
• For the sake of convenience, these shifts may be
considered as four overlapping phases in the
development of the subject of Business Policy. It
is interesting to note that the development of
business policy as a field of study has closely
followed the demands of real – life business.
• Ad hoc Policy – According to Hofer the first phase
which can be traced back to the mid 1930’s rested
on the paradigm of Ad Hoc Policy making. The
need for policy making arose due to the nature of
the American business firms of that period.
HISTORICAL PERSPECTIVE OF
BUSINESS POLICY –
• The firms which has originally commenced
operations in a single product line catering to a
unique set of customers in a limited
geographical area expanded in one or all of
these three dimensions. Informal control and
co-ordination became partially irrelevant as
expansion took place and the need to integrate
functional areas arose. This integration was
brought about by framing policies to guide
managerial action. Policy making became the
prime responsibility of earlier entrepreneurs
who later assumed the role of senior
management.
 Planned Policy
formulation
• Due to the increasing environmental
changes in the 1930’s and 40’s in
the U.S. Planned Policy Formulation
replaced Ad Hoc policy making.
Based on this second paradigm the
emphasis shifted to the integration
of functional areas in a rapidly
changing environment.
 Strategy Paradigm
• Increasing complexity and accelerating changes
in the environment made the Planned Policy
Paradigm irrelevant since the needs of a
business could no longer be served by policy
making and functional area integration only. By
the 1960’s there was a demand for a critical
look at the basic concept of business and its
relationship to the environment. The concept of
strategy satisfied this requirement and the
third phase based on a strategy paradigm
emerged in the early sixties.
 Strategic Management
• The current thinking which emerged in the eighties
is based on the fourth paradigm of strategic
management. The initial focus of strategic
management was on the intersection of two broad
fields enquiry : The strategic processes of business
firms and the responsibilities of general
management.
• Thompson and Strickland say “The approaches and
methods of analysis of strategic management have
not yet merged into theory of how to manage an
enterprise. But they definitely do represent a
powerful way of thinking to resolve strategic
issues.”
 Process of Strategic management:

Phases of Strategic Management:

Establish
strategic Formulate Implement Strategic
Intent strategies strategies evaluation

Strategic
control

Working model of Strategic Management:

Establish Strategic Strategic
strategic SWOT Strategic Strategic
Analysis implement- evaluation
Intent analysis alternatives
& choice ation

Strategic control
 VISION:
1st level of Strategic Intent

VISION: It is a position that a company would

like to achieve in the distant future (10-15
years). It is a powerful motivator to action.

Why vision is needed?

a. Good visions are inspiring.
b. Good visions help in creation of a common
identity and a shared sense of purpose.
c. Good visions are competitive, original and unique.
d. It promotes risk-taking and experimentation.
e. It promotes long-term thinking…
 MISSION:
2nd level of Strategic Intent

Vision is a foreward-thinking view of what an

organization wants to be. Mission is what an
organization is and why it exists.

Mission is a statement that defines the role an

organization plays in a society.
Eg: A newspaper & TV news editor: mission- information.

It is the purpose or reason for the organization’s

existence..
 MISSION:
2nd level of Strategic Intent

Characteristics of Mission:
1. It should be feasible.
2. It should be precise; not too narrow & broad.
3. It should be clear.
4. It should be motivating.
5. It should be distinctive; unique from
competitors.
6. It should indicate how objectives are to be
achieved...
 Goals & Objectives:
Goals & Objectives represent a future state or an outcome
of efforts put at present. Objectives are the ends that
state how goals will be achieved.
Goals are generalized & qualitative. Objectives are
concrete, measurable and specific.
Objectives make the goals operational.

Roles of Objectives:
1. Objectives define the organization’s relation with
environment.
2. It helps an organization to achieve its vision & mission.
3. It provides the basis for strategic decision-making.
4. It provides the standards of performance appraisal…
 Goals & Objectives:

Characteristics of objectives:

1. It should be understandable.
2. It should be concrete and specific.
3. It should be related to a time-frame.
4. It should be measurable.
5. It should be challenging.
6. It should be set within limits..
 How to Write A
Business Policy
Title: What is the policy going to be called?
Policy: What is the text of the policy?
Purpose: Why do we need a policy for this?
Scope: Who does this policy apply to?
Responsibilities : Who is responsible for the
policy?
Definitions: Are all terms in the policy clear?
References: Does this policy refer to
other documents?
 Steps In Policy
Formulation
1. Environmental Analysis

2. Identification of Policy Alternatives

3. Evaluation of Policy Alternatives

4. Choice of Policy