Business Policy & Strategy

Unit 1
 Business Policy
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.
 Nature of Business Policy:
• Specific: If a policy is not specific, implementation becomes inconsistent and
unreliable. For example, "Employees may not park in the guest parking lot."
• Clear: A business policy has no ambiguity. It is written in easy-to-understand
language. For example, "Immediate release of employment is the result of
company drivers having two points on their driving record."
• Uniform: The policy should be a standard that everyone can follow from the top
management to the plant workers. For example, "Anyone entering the
construction site must have a protective hat, shoes and glasses on at all times."
• Appropriate: Business policies should be relevant to organizational goals and
needs. For example, "Discrimination and sexual harassment accusations are
investigated with disciplinary action applicable based on investigation findings."
• Simple: Policy must be understood by all that it applies to within the business. For
example, "No smoking within 100 feet of welding operations designated by the
painted yellow floor lines."
• Inclusive: A business policy isn't something relevant to a small group in the
business, it must cover the wide scope and include everyone. For example,
"Business attire is required at all times in the office or meeting with clients."
• Stable: This refers to implementation. If an incident arises, the policy should be
stable such that there is no indecisiveness about following it. For example, "Cell
phones are not permitted in the conference room."
 Policy Vs. Strategy
• Policy is a blueprint of the organizational activities which
are repetitive/routine 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.
• A policy is what is, or what is not done. While a strategy is
the methodology used to achieve a target as prescribed by
a policy.
 Forecasting
• Forecasting is about predicting the future as
accurately as possible, given all of the
information available, including historical data
and knowledge of any future events that might
impact the forecasts.
• Forecasting is a common statistical task in
business, where it helps to inform decisions
about the scheduling of production,
transportation and personnel, and provides a
guide to long-term strategic planning.
 Types of Forecast
• Short-term forecasts
are needed for the scheduling of personnel,
production and transportation. As part of the
scheduling process, forecasts of demand are often
also required.
• Medium-term forecasts
are needed to determine future resource
requirements, in order to purchase raw materials,
hire personnel, or buy machinery and equipment.
• Long-term forecasts
are used in strategic planning. Such decisions must
take account of market opportunities,
environmental factors and internal resources.