INTRODUCTION TO

BUSINESS POLICY
By
Vaibhav Arwade
Asst. Professor
Prestige Institute of
Management
Gwalior.
Meaning and Definition
Business Policy defines the scope 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.
Meaning and Definition
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.
Nature of Business Policy
The study of the function and responsibilities of senior
management , the crucial problems that effect success in the total
enterprise and the decisions that determine the directions of
organization and shape its future.
Policy is the study of functions and responsibilities of senior
management related to those organizational problems which
effect the success of total organization
It deals with the future course of action that an organization has
to adopt.
It is concerned with mobilization of resources so the organization
can achieve its goals
Choosing between different alternatives available.
Features of Business
Policy
An effective business policy must have following
features-
1.Specific-Policy should be specific/definite. If it
is uncertain, then the implementation will
become difficult.
2.Clear-Policy must be unambiguous. It should
avoid use of jargons and connotations. There
should be no misunderstandings in following the
policy.
3.Reliable/Uniform-Policy must be uniform
enough so that it can be efficiently followed by
the subordinates.
 Features of Business
Policy
4.Appropriate-Policy should be appropriate
to the present organizational goal.
5.Simple-A policy should be simple and easily
understood by all in the organization.
6.Inclusive/Comprehensive-In order to have
a wide scope, a policy must be comprehensive.
7.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.
EVOLUTION OF BUSINESS POLICY

GENESIS OF BUSINESS POLICY:

Informally, the origins of business policy can be
tracked back to 1911,when Harvard Business
School introduced an integrative course in
management aimed at the creation of general
management capability.
 Formally, it has been introduced with the
publication of two reports in 1959.
1)Gordon & Howell report ,sponsored by
Ford Foundation recommended a capstone
course of business policy to train the
student for analyzing the complex biz
problem.
2)Sly, Pierson report
TYPE OF POLICIES:
Basically there are three main types of policies
1. Basic Policies:- These are framed by the top management
and spell out the basic approach of a company to its
activities and its environment.
2.General Policies:- These are framed by the middle level
management and are more specific. They apply to large
segments of the organization.
3.Specific Policies:- These are framed by the foremen and
supervisors and are very specific in nature. They are
applicable to routine activities.
 Difference between policy and
strategy
POLICY
1. Policy is a blueprint of the
organizational activities which
are repetitive/routine in
nature.
2. Policy formulation is
responsibility of top level
management
3. Policy deals with
routine/daily activities
essential for effective and
efficient running of an
organization
4. Policy is concerned with
both thought and actions.
STRATEGY
1. While strategy is concerned
with those organizational
decisions which have not been
dealt/faced before in same
form.
2. While strategy formulation is
basically done by middle level
management.
3. While strategy deals with
strategic decisions.
4. While strategy is concerned
mostly with action.
Importance of Business
Policy
Helps the participant to understand why
functional boundaries are created and
appreciate why the various sub units have to
move Inc lose coordination while realizing the
overall objective(s).
Helps to resolve to different between
individual and organizational goals. Every
attempt is made to pull all the functions and
activities together
Helps participants to work in an orderly
manner appreciating the work put in by
others.
Importance
They understand and adjust with each other by
developing mutual trust, cooperation and
understanding . Example: Production knows its target
maintenance keeps equipment and tools in good
order finance arranges funds and security takes care
of goods and services.
Creates an understanding of how overall objectives
and policies are formulated why everyone has to
focus attention on pre-set targets and goals, why one
should appreciate the viewpoint of the other while
translating rhetoric (language) into action; why one
needs to anticipate changes and adjust accordingly.
Biz. Policy covers 4 aspects of
Business
1.Its the responsibility of senior management which
affect the success of total enterprise.
2.It determines the future course of action that the
organisation has to adopt.
3.It defines what to be done to mould the identity of the
organisation.
4.It also tells about the mobilization of resources by
the help of which organization can achieve the
goal.
OBJECTIVES OF BUSINESS POLICY
1. Objectives in Terms of knowledge:
To understand the various concepts involved.
Knowledge about the environment and how it
affect the functioning of organization is vital in
understanding business policy.
2.Objective in terms of Skill
It helps to develop analytical ability and to link
theory with practice.
Objectives (contd.)
3.Objective in terms of Attitude:
To develop a generalist attitude to judge a
problem from all angle.
To act like a practitioner rather than a
perfectionist means ready for the experience with
lesser information.
Become receptive to new ideas .
To develop a creative and innovative attitude.
Various Terms In Biz.
Policy
1. MISSION:
Organization define their role that they wish
to perform in society in terms of Mission
Statement.
i.e. By Mission Statement an organization link
its activities to the need of society.
It exhibits an external orientation.
2.PURPOSE
Purpose is anything that a company strives for.
*Purpose too has external orientation but
depends on what org. wants to achieve
internally.
*Values are beliefs and conviction for the
achievement of purpose.
3.Objectives
*Open-ended attributes denoting a future
outcome that an organization strives for.
Eg.-To increase the market share.

*Qualitative projection
4.GOAL
A goal is a close ended attribute which is
precise and expressed in specific terms.
Eg.-To increase market share from 25% to
35%.
* Quantitative projection
5.Policies,Procedures and
Rules
Policy are guideline for action.
Policies are subdivided into Procedures (a
series of related steps) and Rules (courses of
action to be done under a given
circumstances)
6.Plans & Programmes
A programme is a broad term which includes
goal, policies, procedures and steps to put a
plan into action.
A plan may be implemented by a series of
programmes.
7.Tactics
Tactics are specific actions.
Eg.- A Co. plans for market expansion and for
that set up a regional marketing office, in
implementing this ,it may add or, devise
tactics of creating product awareness.
Forecasts
Estimates of future based on past and present
trends.
Quantification is done to map the trend.
9.Budgets
A plan statement for a given period of time in
future ,expressed in physical units.
It performs the essential task of resource
allocation.Eg.-Railway budget
Stratregy
The term strategy is derived from a Greek
word Strategos, which means generalship.
Thefore Strategy means the art of the general.
In business paralance, there is no definite
meaning assingned to strategy. Therefore
strategy could be
A plan or course of action or set of decision
rules making a pattern or creating a common
thread related to organisation's activity.
Contd
Related to pursuing those activities which
move an organisation from its current position
to a decided future state.
Concerened with the resources necessary for
implementing a plan or following a course of
action.
The planned or actual coordination of the
firms major goals and actions, in time and
space that continuously co-align the firm with
its environment.
Levels of Strategy
For many companies, a single strategy is not only
inadequate but also inappropriate. The need is for
multiple strategies at different levels. In order to
segregate different units or segments, each
performing set of activities, many companies
organise on the basis of operating divisions or
simply, divisions. These divisions may also be known
as
Profit centers or Strategic Business Units (SBUs).
as defined by Sharplin: SBU is any part of a business
organisation which is treated separately for strategic
management purpose
 LEVELS OF LEVELS OF
MANAGEMENT STRATEGY

CORPORATE
CORPORATE OFFICE

SBU SBU SBU SBU

A B C
FUNCTIONAL

FINANC MARKETIN OPERETION

HRM INFORMATION
E G S
 EXAMPLE-Multi Level
Planning
Bajaj Electricals Ltd (BEL)
It is the part of Bajaj Group, which is in the business of
steel, sugar, two wheeler, three wheeler, beside that of
consumer electrical products.
The company commissioned Accenture, which
recommended a comprehensive strategy for business
growth along with organisational restructuring.
BEL has five major strategic business units comprising
of home appliance, fans, lighting, luminaries, and
engineering projects.
The SBU structure aims to lend greater empowerment to
the employees and also bring about a significant
accountability for the performance of each SBU with
SBU head and his senior team.
SBAs
Strategic Business Area
A distinctive segment of the environment in
which firm does business.
Thus, a number of SBUs for different SBAs
form a cluster of units under a corporate
umbrella.
Functional Strategy deals with a relatively
restricted plan providing objectives for specific
function such as marketing department, then
allocation of resources among different
operations within functional area for optimal
contribution to achievement of SBU and
Corporate level objectives.
Thus, different SBU level strategies are
put into action under corporate level
strategy which in turn derived from
collective level strategy.
PURPOSE OF BUSINESS
POLICY:
1.To integrate knowledge of various functional
areas of management.
2.To adopt a generalist approach to problem
solving.
3.To understand the complex interlinks of sub-
systems within an organization by relating
them with the external environment.
STRATEGIC PLANNING PROCESS:
The firms engagement in Strategic Planning clearly
defines the objectives and assess both internal and
external situation to formulate Strategy.
Basic Model of Strategic
Management

Four Basic Elements

1.MISSION & OBJECTIVES
The mission statement describes the
companys vision, including unchanging
values and purpose of the firm and forward
looking visionary goals.
2.Environmental Scan
It includes the following component:
Internal analysis of firm-SWOT
Industrial Analysis of Task environment-
Porters 5 forces.
External environment-Pest Analysis
SWOT ANALYSIS
Porters five forces
PEST ANALYSIS