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2. BUSINESS POLICY: NATURE
AND OBJECTIVES
Unit I – Business Policy and Strategy

3. BUSINESS POLICY
When you play a game, you need to follow a set of rules; there are certain
do’s and don’ts to keep things fair and fun. Business policies work
similarly for companies. So, if you ask what business policies are exactly,
they are guidelines that a company uses to ensure smooth operation.
They help keep things organized and ensure everyone is on the same
page. These guidelines are like a roadmap for the company, helping to
make smart decisions.
"The study of the function and responsibilities of senior management, the
crucial problems that affect success in the total enterprise, and the decisions
that determine the direction of the organization and shape its future."
Christensen, Steiner and others
"Policy refers to goal-directed decisions and actions in which capabilities and
resources are matched with the opportunities and threats in the environment.
Policy and Strategy are consistent stream of decisions and actions to deal with
the environment." Henry Mintzberb.

4. INTRODUCTION TO BUSINESS POLICY
• Business Policy is a framework of rules and guidelines that help
managers make effective decisions.
Kazmi, 2006), defined business policy is the study of the function and
―
responsibilities of senior management, the crucial problems that affect
success in the total enterprise, and the decisions that determine the
direction of the organization and shape its future.
• It defines the scope, direction, and limitations of organizational
activities.
• Provides consistency in decision-making and integrates
organizational efforts.
Example: A bank's lending policy defines criteria for approving loans,
ensuring consistent practices.

5. The term "Business Policy" comprises of two words, Business
and Policy. Business as we know means exchange of goods
and services for increasing utilities.
Policy may be defined as "the mode of thought and the
principles underlying the activities of an organization or an
institution." Policies are general statements of principles which
guide the thinking, decision- making and actions in an
organization.

6. BUSINESS POLICY AS A FIELD OF STUDY
• Concerned with long-term strategy formulation and execution.
• Connects theoretical knowledge of management with practical
decision-making.
• Deals with issues like diversification, expansion, mergers,
acquisitions, and competition.
Example: Amazon entering cloud computing (AWS) is guided by
strategic business policies.

7. NATURE OF BUSINESS POLICY – PART I
1. Directive in Nature: Provides guidelines, not step-by-step
procedures.
2. Goal-Oriented: Aims at achieving organizational objectives.
3. Integrative: Connects all departments and functions together.
4. Top Management Function: Designed and monitored at
senior executive level.

8. NATURE OF BUSINESS POLICY – PART II
5. Flexible: Adjusts with changes in business environment.
6. Dynamic: Evolves over time with industry and market
changes.
7. Long-Term Focus: Ensures survival and growth of the
organization.
Example: Infosys adapting HR policies to hybrid work culture.

9. FEATURES OF EFFECTIVE
BUSINESS POLICY:
a) Specific- Policy should be specific/definite. If it is uncertain, then the implementation
will become difficult.
b) Clear- Policy must be unambiguous. It should avoid use of jargons and connotations.
There should be no misunderstandings in following the policy.
c) Reliable/Uniform- Policy must be uniform enough so that it can be efficiently
followed by the subordinates.
d) Appropriate- Policy should be appropriate to the present organizational goal.
e) Simple- A policy should be simple and easily understood by all in the organization.
f) Inclusive/Comprehensive- In order to have a wide scope, a policy must be
comprehensive.
g) 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.
h) Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in
minds of those who look into it for guidance.

10. DIFFERENCE BETWEEN
POLICY AND 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.
1.Policy formulation is responsibility of top level management.
While strategy formulation is basically done by middle level
management.
2.Policy deals with routine/daily activities essential for effective
and efficient running of an organization. While strategy deals with
strategic decisions.
3.Policy is concerned with both thought and actions. While
strategy is concerned mostly with action.
4.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.

12. OBJECTIVES OF BUSINESS POLICY – PART
I
Consistency in Operations: Policies provide a standardized
approach to decision-making, eliminating confusion and
ensuring uniformity across departments. They help
streamline processes and improve overall efficiency in day-
to-day activities.
Strategic Alignment: Policies align daily operations with the
company’s strategic goals, ensuring all employees work
towards a common objective. This connection between tasks
and goals helps the organization achieve long-term success.
Risk Management: Policies help identify and reduce risks
by setting clear guidelines, and protecting the organization
from legal and operational challenges. They also provide a
safety net for handling unexpected issues effectively.

13. OBJECTIVES OF BUSINESS POLICY – PART
II
Enhanced Communication: Policies act as a reference point for
employees and stakeholders, reducing misunderstandings and
promoting transparency. They ensure everyone has access to the
same information, fostering better collaboration.
Employee Empowerment: Policies enable employees to make
decisions within predefined boundaries, encouraging accountability
and boosting morale. Clear guidelines give employees the
confidence to act independently while staying aligned with company
expectations.
Provide a Framework for Decision-Making: Business policies
establish clear guidelines and principles for decision-making across
all levels and departments within an organization.This helps ensure
consistency, reduces errors, and prevents arbitrary or biased choices.

14. OBJECTIVES OF BUSINESS POLICY – PART
III
Integrate Functional Areas: Business policy helps
demonstrate the interdependencies between various functional
areas of a business (e.g., marketing, finance, human resources),
promoting a holistic understanding of the organization's
operations.
Foster Organizational Culture: Policies can help reinforce
the company's values, mission, and vision, fostering a positive
work environment and strengthening teamwork and employee
relationships

15. IMPORTANCE OF BUSINESS POLICY
 Decision-Making Framework: Provides a reference for making
consistent and informed decisions, reducing the chances of errors and
conflicts in operations. It ensures decisions are made fairly and align with
organizational goals.
 Facilitates Strategic Planning: Aligns organizational activities with long-
term goals, ensuring resources are utilized effectively. It helps the
company stay focused and adapt to changing market conditions.
 Ensures Compliance: Helps organizations adhere to legal, ethical, and
industry standards, protecting the company from risks and liabilities. It
builds trust with stakeholders and ensures smooth regulatory checks.
 Promotes Efficiency: Streamlines workflows by eliminating ambiguities
and increasing productivity with clear expectations and roles. It reduces
delays and helps teams work together seamlessly.
 Builds Organizational Culture: Reinforces the company’s values,
mission, and vision while encouraging collaboration and mutual respect
among employees. It fosters a positive work environment and strengthens
team relationships

16. ACTIVITY

17. TYPES OF POLICIES

20. CONCEPT
The concept of strategy is undoubtedly the most significant
concept in business policy and strategic management. The concept
of strategy is derived from military principles. In military context, the
strategy is a plan of action to win a war. Here military identify the
quality and quantity of resources to be mobilized and used at the
most appropriate time in suitable and convenient manner to win a
war.

21. FEATURES
Following are the features of strategic management.
1. Objective.
2. Future oriented.
3. Availability and allocation of resources.
4. Influences of Environment.
5. Universal applicability.
6. Levels of strategy.
7. Review.

22. 1. Objective Oriented:
The business strategies are objectives oriented and are directed towards
organizational goal. To formulate strategies the business should know the
objectives that are to be pursued.
For example if any business want to achieve growth then it has to set
following objectives.
a) To increase market share.
b) To increase customers satisfaction.
c) To enhance the goodwill of the firm.

23. 2. Future Oriented:
Strategy is future oriented plan and formulated to attain future position of
the organization. Therefore strategy enables management to study the
present position of organization and decides to attain the future position
of the organization. This is possible because strategy answer question
relating to the following aspects.
a) Prosperity of the business in future.
b) The profitability of the business in future.
c) The scope to develop and grow in future in different business.

24. 3. Availability and Allocation of Resources:
To implement strategy properly there is need of adequate resources and
proper allocation of resources. If it is done then business can attain its
objectives. There are three types of resources required by business namely
physical resources, i.e plant and machinery, financial resources i.e capital,
and human resources i.e manpower. If these resources are properly
audited/evaluated and find out its strength and weaknesses and co-
ordinate well then management can do better strategy implementation.

25. 4. Influence of Environment:
The environmental factors affect the formulation and implementation of
strategy. The business unit by analyzing internal and external environment
can find out its strength and weaknesses as well as opportunities and
threats and can formulate its strategy properly.
5. Universally Applicable:
Strategies are universally applicable and accepted irrespective of business
nature and size. Every business unit designs strategy for its survival and
growth. The presence of strategy keeps business moving in right direction.

26. 6. Levels of strategy:
There are companies that are working in different business lines
with regards to products /services, markets or technologies and
are managed by same top management. In this case such
companies need to frame different strategies. The strategies are
executed at three different levels such as –
a) Corporate level
b) Business level
c) Functional/operational level

29.  Business Level Strategy- Business Level Strategies are
concerned with grooming organizational competitive capacity.
These strategies are concerned with the plans and action
pertaining to successful performance in one specific business
or single line of business. These are primarily concerned with
the managing SBUs that aim to combat competition by
developing strong capabilities for strengthening market
position and market share thereby gaining competitive
advantage.
 The basic objective of these strategies is to provide the market
with right goods of right quality at right time and at right place.
Business levels strategies takes decisions about the Strategic
Business Units under different Strategic Business Areas.

30.  Strategic Business Unit is a part of a business that is considered
as separate for strategic purpose. n SBUs, activities of corporate
are divided on some logical basis like
 nature of product, terrestrial basis, profit basis etc.
 They are termed to the units which are producing identifiable,
differentiated products which compete with similar product
elsewhere. They are also defined as independent profit centre.
They are internal oriented and generally focuses on cost
leadership, product differentiation and segmental focus.

31. Functional Level Strategies are strategies which are related to specific function.
These are applicable to production, operations, marketing, finance, human
resource, IT, research and development, knowledge management etc. These are
crafted by functional heads for specific functions, business processes or key
activities. These aim at strengthening business unit competencies and capabilities
in performing specific functions, allocating resources within functional units and
establishing coordination for achieving corporate level objectives.
Operational Level Strategy- Operational level strategy is concern with action
and plan for key operating units like plants, geographic units, districts etc. and
deals with operating activities like developing plant’s policy, developing sales
plan, demarcating Break Even Volume, recruitment and selection policy of
employees and the like.