Business Policy and Strategy

29 October 2023 12:21

Unit - 1
Business policy is a set of principles and rules that guide an organization's decision-making and
actions. It is a framework that helps businesses achieve their goals and objectives in a consistent
and ethical manner.

Business policies are typically developed by senior management and communicated to employees
through a company handbook or other documentation. They may be reviewed and updated
regularly to reflect changes in the business environment, technology, laws, or organizational goals.

• Effective business policies help to:

1. Ensure that decisions and actions are aligned with the organization's overall mission, values,
and strategic objectives.
2. Provide a consistent and predictable framework for employees to work within.
3. Reduce the risk of costly mistakes and liabilities.
4. Promote a culture of compliance and ethical behavior.
5. Enhance the organization's reputation and credibility.

• Nature of business policy-

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 the
long-run. It is also concerned with the formulation and implementation of strategies to achieve
organizational goals.
Business policy is a complex and dynamic field, as it is constantly evolving to reflect changes in
the business environment. However, there are some key features that are common to all business
policies:
1. They are general statements of guidance, rather than specific instructions.
2. They are based on an understanding of the organization's external environment and internal
capabilities.
3. They are developed and implemented by top management.

• Scope of business policy

The scope of business policy is broad and encompasses all aspects of organizational decision-
making.
Some of the key areas that are typically covered by business policy include:
1. Corporate strategy:- This includes the organization's overall mission, vision, and values, as
well as its long-term strategic goals.
2. Business model:- This describes how the organization creates and delivers value to its
customers.
3. Resource allocation:- This involves deciding how to allocate the organization's resources to
achieve its goals.
4. Risk management:-This includes identifying and managing the risks that the organization
faces.
5. Corporate governance:- This refers to the system of rules and procedures that govern the
organization's decision-making and operations.

• Business policy is important for a number of reasons. It can help organizations to:

1. Achieve their goals and objectives.-

Business policy provides a framework for decision-making and action that is aligned with the
organization's overall mission, values, and strategic objectives.
2. Make better decisions-
Business policy helps to ensure that decisions are made in a rational and informed manner,
taking into account all relevant factors.
3. Reduce risk-
Business policy can help to identify and mitigate risks, both internal and external.
4. Promote consistency and fairness.-
Business policy helps to ensure that all employees are treated equitably and that decisions are
made in a fair and consistent manner.
5. Improve communication and coordination.-

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 5. Improve communication and coordination.-
Business policy helps to communicate the organization's goals and objectives to all employees
and to coordinate their efforts towards achieving those goals.
6. Enhance the organization's reputation.-
A well-designed and implemented business policy can help to enhance the organization's
reputation for ethical behavior and good corporate citizenship.

• Business Forecasting-

Business forecasting is the process of predicting future developments in business based on

analysis of trends in past and present data. It is a valuable tool for businesses of all sizes, as it
allows them to make informed decisions about resource allocation, production planning, and
marketing strategy.

• Different forecasting methods :

1.Time series analysis:

This involves analyzing historical data to identify trends and patterns. These patterns can then be
used to predict future values.
2.Causal forecasting:
This method identifies the factors that influence demand for a product or service. Once these
factors have been identified, they can be used to predict future demand.
3. Judgmental forecasting:
This method relies on the expertise and experience of managers to make predictions about the
future.

• Steps for Forecasting:

1. Develop the basis of forecasting:-

The first step in the process is investigating the company’s condition and identifying where the
business is currently positioned in the market.
2. Estimate the future operations of the business:-
Based on the investigation conducted during the first step, the second part of forecasting involves
estimating the future conditions of the industry where the business operates and projecting and
analyzing how the company will fare in the future.
3. Regulate the forecast:-
This involves looking at different forecasts in the past and comparing them with what actually
happened with the business. The differences in previous results and current forecasts are
analyzed, and the reasons for the deviations are considered.
4. Review the process
Every step is checked, and refinements and modifications are made.

▪ Long-range planning (LRP) of a business is the process of setting goals and developing
strategies for the future of the business, typically over a period of five to ten years. It is a
proactive approach to planning that helps businesses to anticipate change and to position
themselves to take advantage of opportunities and to mitigate risks. ( LATER)
▪ Strategic planning is a process in which an organization's leaders define their vision for the
future and identify their organization's goals and Okiobjectives. The process includes
establishing the sequence in which those goals should be realized so that the organization can
reach its stated vision.
▪ Strategic management is the process of setting goals, procedures, and objectives in order to
make a company or organization more competitive.The strategic management process is the
way in which the strategies determine objectives and make Strategic decision.

▪ Features and Characteristics of Strategic management -

1. Top Management Responsibilities- Strategic management relates to several areas of a firm’s

operations. So, it requires top management’s involvement.
Generally, only the top management has the perspective needed to understand the broad
implications of its decisions and the power to authorise the necessary resource allocations.

2. Allocation of large amount of resources- Strategic Management requires the commitment of the
firm to actions over an extended period of time. So, they require substantial resources, such as

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firm to actions over an extended period of time. So, they require substantial resources, such as
physical assets, 20 manpower etc.

3. Impact on Long Term prosperity of the firm- Once a firm has committed itself to a particular
strategy, its image and competitive advantage are tied to that strategy, its prosperity is
dependent upon such a strategy for a long time.

4. Future Oriented- Strategic management is about making decisions that will help the
organization achieve its desired future state.

5. Multi- functional or multi-business consequences- Strategic management has complex

implications for most areas of the firm. They impact various strategic business units especially
in areas relating to customer- mix, competitive focus, organisational structure etc.
All these areas will be affected by allocations or reallocations of responsibilites and resources
that result from these decisions.

6. Consideration of factors in the external environment-

▪ Strategic Management Process- It is define as the way an organisation define it's strategy .
It is a continuous process in which the organisation decides to implement a selected few
strategies, detail implementation of plan and progressing work and success of implementation
through regular assessment.
▪ Objective -
The objective of the strategic management process is to help an organization achieve its goals
and objectives in a sustainable and efficient manner. It is a systematic approach to developing
and implementing strategies that take into account the organization's internal and external
environment, as well as its strengths, weaknesses, opportunities, and threats.

▪ Steps And Stages of Strategic Management-

1. Environmental analysis:
The environmental analysis involves assessing the organization's internal and external
environment. The internal environment includes the organization's strengths and weaknesses,
such as its resources, capabilities, and culture. The external environment includes the
organization's opportunities and threats, such as industry trends, customer needs, and
competitor actions.
2. Strategy formulation:
Once the organization has a good understanding of its internal and external environment, it can
begin to formulate strategies to achieve its goals and objectives. This involves developing a
vision for the future, setting specific goals and objectives, and identifying the strategies that will
be used to achieve those goals and objectives.
3. Strategy implementation:
Once the organization has formulated its strategies, it needs to put them into action. This
involves developing and implementing plans, allocating resources, and making decisions. It is
important to communicate the strategies to all stakeholders and to monitor and evaluate their
implementation.
4. Strategy evaluation:
The final step in the strategic management process is to evaluate the performance of the
strategies and make adjustments as needed. This involves collecting data on the performance
of the strategies, comparing the actual results to the desired results, and identifying any gaps.
The organization can then make adjustments to the strategies or to the implementation of the
strategies in order to achieve the desired results.

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