Business policy and strategy are undeniably the major factors to a successful business. Every firm must make business policy and strategy for standing in the overall competitive market.
Firstly, business policy was originated in 1911, when Harvard Business School introduced Integrated Course in Management .
Secondly, business Strategy was developed in 1960s by Alfred Chandler.
In this blog, we will learn in detail about business policy and strategy:
Table of Content
|1. Definition of Business Policy |
2. Definition of Business Strategy
3. Difference between
Policy and Strategy
Definition of Business Policy
Business policy are the set of rules and guidelines. Basically, it is developed by the top level of an organization to direct the decisions of the subordinates.
Policy states the limits as well as scope under which the lower management can make decisions.
Moreover, policy gives power to the lower level management to deal with several issues as problems. And it also give them right to take decisions without consulting with the top level of the management.
Features of Business Strategy
Following are the features of business policy:
- Clear: The business policy should especially written clearly. It must be easily so that it can be understandable to everyone without any misunderstanding.
- Simple: Business policy must be written in simple language, so that people can easily understand it.
- Specific: The business policy must be specific so that the subordinates can easily implement it.
- Stable: Business policy must be stable so that it can be implemented for a longer period of time.
- Comprehensive: The policy must specify the detailed information of all the important rules as well as guidelines. As a result it will help the people in decision-making process.
- Flexible: Basically, business policy must be flexible in all the operation of an organization. So that whenever needed we can make some changes in it.
- Uniform: The business policy must be uniform particularly between all the people at all the level in the organization.
- Reliable: The business policy must made reliable so that the subordinates can trust n follow it without any doubt.
Process of Business Policy
Following are the process of making business policy:
Steps for making business policy
- Environmental Scanning
Firstly, we have to do environment scanning.
Environmental scanning is the process of collection of information by the analysis of internal as well as of external environment of the firm.
These can be done by SWOT analysis, PESTLE, and furthermore.
Basically, Internal environment includes the strength and weakness in the organization. And external environment includes the opportunity as well as threats of outside the organization.
- Policy Formulation
Secondly, we have to do policy formulation.
In policy formulation, the organization develops its long-range of plans to manage opportunity as well as threats of the environment.
The organization also formulates policy in simple language. So that it can be easily understandable by each and every member of an organization.
- Policy Implementation
Thirdly, we have to do policy implementation.
In this step, the organization further implements the policy which it has been formulated in the previous step.
The implementation of new policy may changes the entire structure, culture as well as management system of the organization. Moreover, the organization takes routine feedback from the lower management to know if there is any trouble occurring in adopting new policy.
- Evaluation and Control
Lastly, here comes evaluation and control.
In this process, the organization particularly evaluates the results of the new policy.
The organization monitors and records the result of new policy and then compare the recorded results with the desired results.
If the actual results didn’t match the desired results then the organization try to find the reason for it and takes the corrective action to solve the problem.
Importance of Business Policy
Following are the importance of business policy:
- Business policy act as a reference material to the employees of an organization as employees can take action if something happens.
- It maintains balance between the need of an organization and the needs of an employees.
- Helps employees to meet organizations expectations with their performance.
- It gives detail explanation of all the duties which are assigned to every employee of an organization.
- It helps employees to know much better about their roles, functions and their contribution in the organization.
Definition of Business Strategy
Business strategy is the long-term plan made by higher management of an organization to achieve organizational goals.
Business strategy is also called the backbone of business.
It involves combination of various decisions and actions which are required to be performed by the organization to achieve its goals in order to stand in the competitive market.
Features of Business Strategy
Following are the features of business strategy:
Business policy is basically dynamic in nature. Because it changes with the situation of business environment of an organization.
Business policy is also a never ending process. Whenever the implemented strategy gets completed a new strategy comes into existence.
Basically, the purpose of every organization is only to earn profit. No one wants to bear loss and business strategy is also based on profit maximization.
Business policy is also a forward looking process. Because it makes plans and strategies which are future oriented.
Business strategy is obviously result-oriented. Business strategy is moreover directly or indirectly based on the result of the business of an organization.
Levels of Business Strategy
Following are the levels of business strategy:
- Firstly, Corporate level strategies
- Secondly, Business level strategies
- Lastly, Functional level strategies
Corporate level strategy is also known as Grand strategy.
C.L.S. is developed by the top management of the firm for maximizing profitability, achieving overall growth and success in future.
Business level strategies are those strategies which are concerned particularly with the business.
Basically, it is concerned with the competition that a firm faces in the market.
For competing in the market a firm has to basically follow three generic strategies: cost-leadership; differentiation and focus.
Functional level strategy is basically concerned with the tactical decisions (operational level decisions) for functional areas of the firm.
It supports the overall strategy of the business and helps functional managers to achieve their goals and objectives.
Importance of Business Strategy
Following are the importance of business strategy:
- Firstly, business strategy gives direction to the firm to work in a systematic manner to achieve goals.
- Secondly, business strategy measures the success of business. It also identifies the areas which need improvement in the future.
- Thirdly, effective business strategy helps organization to adopt the changing demand of the market.
- Fourthly, business strategy helps organization in identifying their strengths and weaknesses. Additionally, it also guide them to utilize their efforts and resources in best manner.
- Lastly, it increases the growth of the business. Moreover it also helps to run business for a long period of time.
Difference Between: Policy and Strategy
Policy and Strategy
|1.||Policy is the principle that guide the organization for taking logical decisions.||Strategy is the plan made by the organization for achieving its goals and objectives.|
|2.||Policy is related with rules and regulations for the repetitive activities.||Strategy is related with those decisions and actions which haven’t happen before.|
|3.||Policy is decision oriented.||Strategy is action oriented.|
|4.||Policy is formulated by the top level of management.||Strategy is formulated by top and middle level of the management.|
|5.||Policy is an introverted approach.||Strategy is an extroverted approach.|
|6.||Policy helps to know what is to be done and what is not to be done.||Strategy helps to achieve the target of the firm.|
|7.||Policy is static in nature.||Strategy is dynamic in nature.|
In short, business policy and strategy both are necessary for running a successful business.
An effective business policy and strategy directs the employees of the firm to take essential decisions and is also beneficial for the long-term health of an organization.
In order to secure a respectable position in the competitive market every firm should make an effective business policy and strategy.
(Ans.) Business policy and strategy development is the document describing the policy as well as strategy that a firm will use for the accomplishment of its goals.
(Ans.) Business policy and strategy are very important for an organisations. The business policy and strategy are described as below:
Business policy refers to the set of rules and guidelines developed by the top level of an organization to direct the decisions of the subordinates.
Business strategy is the long-term plan made by higher management of an organization to achieve overall organizational goals.
(Ans.) The essentials of business policy are:
The business policy must be uniform, simple, clear, appropriate, specific, stable and inclusive.