Business Strategy PDF

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Business Policy and StrategyUnit-IBusiness Policy – Meaning – Features – Classiication –Process of Policy – Making objectives of business Policy.Unit –IIBusiness strategy – Meaning – features importance –Strategic Management Process -SWOT analysis - ETOP analysis TOWS matrix- BCG matrix. Unit – IIIM...

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Business Policy and Strategy

Business Policy and Strategy Unit-I Business Policy – Meaning – Features – Classification – Process of Policy – Making objectives of business Policy. Unit –II Business strategy – Meaning – features importance – Strategic Management Process -SWOT analysis - ETOP analysis – TOWS matrix- BCG matrix. Unit – III Major business policies – Personnel policy - Production policy – Marketing policy - Financial policy. Unit – IV Major business strategies – Stability growth – retrenchment – disinvestment – mixed strategies. Unit – V Society and business business – Social audit.

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– ethics

– Social responsibilities of

Business Policy and Strategy

UNIT 1 Business Business is the mainspring of the modern human life. It is the major economic activity in any society. Each one of us, making some dealing in our day-to-day life with a number of business concerns. It includes activities concerned with production, trade, banking, insurance, finance, agency, advertising, packaging, and other related activities. What is important and what needs emphasis in the term ‘business’ is that the above activities area being organized and carried on to satisfy the consumers needs. Business Policy The origin of business policy can be traced back to 1911, when the Harvard Business School introduced an integrative course in management aimed at providing general management capability. Policy making is one of the most important components of business planning. It provides guidelines as to how objectives of business are to be achieved. The necessity of guiding the future direction of business arises at some stage in the course of existence of every company. Definition According to Terry, “A business policy is an implied overall guide setting up boundaries that supply the general limits and direction in which managerial action will take place”. According to Knoontz,“ Policies define how the company will deal with stock holders, employees, customers, suppliers, distributors and other important groups. Policies narrow the range of individual discretion, so that employees act consistently on important issues”.

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Business Policy and Strategy

As defined by Christensen and Others, 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.” Scope of Business Policy No business organization can either survive or grow without definite objectives which can only be accomplished by applying different policies from time to time, depending upon the working conditions. Business policies are actually the guidelines for organizational thinking, behavior and action. Policies as such are formulated pertaining to different aspects of business organizations and therefore they enjoy a very wide scope in day-to-day life of any business unit. Policies in general, have a wide scope as they are concerned with     

Aim and objectives of a business unit Organizational structure Financial resources available Regional traditions and social values Fiscal and commercial policy of the government

Need for Business Policies It goes without saying that “business policy and administration” is part and parcel of management. No business enterprise can be managed, controlled and administered effectively if no definite policies are determined. In fact, it is the policy that guides the course of action Policies are so framed as to attain the goal of the enterprise and the pre-determined goal can be achieved only when actions are put into practice. When the policies are to be implemented, every care should be taken by executives to see that implementation of policies will have no adverse effects on workers as well as on the management.

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Business Policy and Strategy

Hence, to see that policies are effective as well as fruitful, implementation has been considered as an important aspect of management. The executives concerned with policy implementation should execute them in such a manner as would lead to maximum return on total investment with minimum amount of discontentment among people in the organization.

Features of Policy From the above definitions, following features of a policy can be identified  A policy provides guidelines to the members of the organization for deciding a course of action. Policy provides and explains what a member should do rather that what he is doing.  Policy limits an area within a decision is to be made and assures that the decision will be consistent with and contributive to objectives.  Policies are generally expressed in qualitative or general way. The words most often used in stating policies are to maintain, to continue, to follow, to provide, to assist, to assure, to employ, to make, to produce or to be etc.  Policy formulation is a function of all managers in the organization because some form of guidelines for future course of action is required at every level.  Policies serve an extremely useful purpose. They avoid confusion and provide clear-cut guidelines at all levels to subordinates; and therefore, they enable the business to carried on smoothly and often without break.  They also lead to better and maximum utilization of resources, human, financial and physical, by adhering to actions for conservation.

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Business Policy and Strategy

 Decision-making, planning and coordination of any business organization are exclusively governed and controlled by “Business Policies”.  Consistency in the work performance by different members of firm is maintained because of clear-cut policies chalked out at executive level.  Policies normally cover the study of the nature and process of choice about the future of a business enterprise and are to be handled by responsible executives.

Classifications

On the basis of levels of Management 5 | Page

Business Policy and Strategy

Business policies are framed at different levels of the management, and accordingly they may be classified as: Top management policies : These policies are derived from the top management planning. The top management comprise of the Board of directors, Chairman, Vice-Chairman, Managing Director, General Manager, etc. The top management policies are concerned with the long-range such as product selection, diversification, acquisitions and mergers, extent and liability-sales forecasting, etc. Middle level management policies: These policies are the out come of the deliberations of the middle management consist of the deputy heads to the various sections and functional departments. They frame policies on employment and training, industrial relations, labour welfare and social security etc. and these policies are known as middle management policies. Lower level management policies: The lower level management people are men who have direct supervision over the working force. They chalk out policies for the assignment of the jobs to the best suited persons, the provision of adequate tools, raw materials, training the workers, issuing of orders, improving working conditions, etc. On the basis of Functional Areas Policies relating to various functional areas of the management are called functional policies. Production and Purchase policies : The policies for operational are related to the production system, operational planning and control, and research and development. The strategy adopted and affects the nature of product also the markets to be served and the manner in which the markets are to be served. Marketing Policies : Policies related to marketing have to be formulated and implemented on the basis of the marketing mix i.e product, price, place and promotion. The major issues and decisions related to these marketing mix factors.

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Business Policy and Strategy

The following are considered as major marketing policies.  Product Policies  Pricing Policies  Promotion Policies  Physical distribution Policies

Financial Policies : This policies may be regarded as the most important business policies, as the entire success or failure of a business unit depends upon these. Properly framed financial policies result in prosperity and long survival, while faulty policies result in the unit’s run. The financial policies of an organization are related to the availability, usage and management of funds. Financial policies have therefore to be determined is the areas of  Sources of Capital Policies  Working Capital Policies  Profit distribution Policies  Depreciation allowances Policies Personnel Policies: Personnel policies are the tools for the personnel department to achieve the objectives of the organization. Personnel policy provides guidelines for a wide variety of employment relationship in the organization. The personal policy of the organization should have two types namely  General Objective : The statement of general objective should express the top management’s basic philosophy of human resources and reflect its deep underlying convictions as to the importance of people in the organization. 7 | Page

Business Policy and Strategy

 Specific objectives: The statement of specific objectives should refer to the various activities of personnel administration connected with staffing, training, developing, wage and salary benefits, employee records and personnel research. The major areas of the personnel policies are  Recruitment and Selection Policy  Training and Promotion Policy  Remuneration and Benefit Policy  Industrial relation Policy On the basis of Expression Business policies may be either express or implied, which in turn may be oral or written. Oral Policies : Oral policies are those, which are issued or stated by the word of mouth. Such policies are generally adopted when an organization is small and face-to-face communication is desired. They are often not remembered for long and easily forgotten. Therefore, usually oral policies are not in popular use. Written Policies : Written policies are those, which are normally put in black and white and stated in clear terms so that personal whom they are addressed to easily understand them. For putting the policies in writing, much care to be taken. Implied policies : These are the policies, which are implied from the code of conduct or from the behavior of business employees; but they are expressed. They generally flow from the philosophy of the business, its social values and even traditions. For example, smoking and drinking may be prohibited not in writing but it is implied by the conduct of the executives who refrain theses habits while on duty. 8 | Page

Business Policy and Strategy

On the basis of nature of Origin On the basis of nature of origin business policies can be classified in to three types. They are as follows Formulated Policy : A formulated policy is one, which is specified by the organization for providing guidelines to its members. Most of the policies in private sector organizations fall in this category as every organization formulate various policies on different aspects. This policy may be broad giving general guidance for the action. Appealed Policies : Sometimes, policies may not be clearly stated and the actions of managers particularly at the higher levels provide guidelines for actions at lower levels. In such a case, the action of a decision maker, consciously or unconsciously, depends on his own guidelines. Moreover, in the absence of any specific guidelines, decision is based on individual interpretation of the situation and consequent actions. Imposed Policies : imposed policies arise from the influence of some outside agencies. Such agencies may be government which provides policies for all public-sector organizations, parent organizations overseas in the case of multinational companies operating in a country. On the basis of scope of Organization Business policies may also be categorized as basic policies, general policies and specific policies. Basic Policies : These policies are basis of the organization and are framed by the top management. They spell out the approach of a company to its activities. For example, marketing policy of a firm may be “consumer-oriented” as against “product-oriented”, with the main purpose of competing with the products of competitors. General policies : Such policies are generally more specific and apply to large segments of organization. The middle level management, e.g., mainly frames them purchasing policy to give first preference to local suppliers. 9 | Page

Business Policy and Strategy

Specific or Departmental Policies : A departmental policy is specific in nature. The foremen and supervisors formulate it. It applies to routine activities in the department. On the basis of Management Functions The management undertakes functions, viz., planning, organizing, actuating, and controlling. Accordingly the policies may be planning policies, organizing policies, actuating or directional policies and controlling policies. Planning Policies : These policies are concerned with the path of action, which lead to company activities and attainment of its objectives. Planning policies decide the objectives to be achieved; the policies paths that should be followed to achieve the objectives and how the objectives set are to be achieved through programs and process. Organizing Policies : Organization is another management function, which is concerned with the division or allocation of necessary competent activities to members of the group so that through collective efforts, the objectives may be achieved. Actuating Policies : The actuating policies, therefore include: providing effective leadership; integrating people and task and convincing them to assist in the achievement of the overall objectives; effective communication with the members; and providing climate for the subordinates development and their motivation to work. Controlling policies: Controlling is the process of measuring actual result, comparing with standard of performance, finding out deviations and taking corrective action when necessary. Controlling policies involve a series of activities; continuous observation and study of periodic result of performance in order to identify potential problems; selection of the best mode of control. Importance of Business Policy Business policy is important as a course in the management curriculum and as a component of executive development programmes for 10 | P a g e

Business Policy and Strategy

middle-level managers who are preparing to move up to the senior management level. To highlight the importance of business policy, we shall consider four areas where this course proves to be beneficial.    

For For For For

learning the course Understanding the business environment understanding the business organization personal development

For Learning the course Business policy seeks to integrate the knowledge and experience gained in various functional areas of management. It enables the learner to understand and make sense of the complex interaction that takes place between different functional areas. Business policy deals with the constrains and complexities of real-life business. In contrast, the functional area courses are based on a structured, specialized and well developed body of knowledge, resulting from a simplification of the complex overall tasks and responsibilities of the management. For Understanding the Business Environment Regardless of the level of management of person belongs to, business policy helps to create an understanding of how policies are formulated. This helps in creating an appreciation of the complexities of the environment that the senior management faces in policy formulation. By gaining an understanding of the business environment, managers become more respective to the ideas and suggestions of the management. Such an attitude on the part of the management makes the task of policy implementation simpler. For Understanding the Organization Business policy presents a basic framework for understanding strategic decision making while a person is at the middle level of management. Such a framework, Combined with the experience gained while working in a specialized functional area, enables a person to make preparations for handling general management responsibilities. This benefits the organization in a variety of ways. For Personal Development 11 | P a g e

Business Policy and Strategy

A study of business policy offers considerable scope for personal development. It is a fact of organizational life that the different subunits within an organization have a varying value and importance at different times. It often happens that a company which has followed a production orientation as a matter of policy gradually shifts emphasis to marketing, maybe due to increasing competition. The Purpose of Business policy To integrate the knowledge gained in various functional areas of management To adopt a generalist approach to problem-solving To understand the complex inter-linkages operating within an organization through the use of a system approach to decision-making and relating these to the change taking place in the external environment.

Business Policy Process  Ascertaining the problem  Policy formulation  Dissemination of the policy  Acceptance of the policy  Explanation of the Policy 12 | P a g e

Business Policy and Strategy

 Policy Implementation  Policy Control Ascertaining the Problem The main object of generating the policy is to have smooth working in the business organization. Hence, the task of formulating policies should be assigned only to those in the management who are well versed and quite conversant with varied situations or problems of the business concerned. Policy Formulation This is the next step to be taken by persons concerned with policy implementation. Any policy that is to be framed should be quite suitable both to the management and to its employees. No policy can be successfully put into practice unless it is properly approved by the company personnel. Dissemination of the Policy Dissemination indicates announcement or making the subject-matter known to others. One of the basic elements of the policy is that whatever policy is framed it should be made known to all within the organization so as to avoid any conflict between the company management and its personnel.

Acceptance of the Policy When the policies are formulated, it is advisable to get the draft of the policy statement approved by those who are supposed to apply it in the interest of the organization as a whole management and personnel.

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Business Policy and Strategy

Once the basic principles on which the policies are designed and the rules and regulations included in the proposed draft policy are thoroughly understood and accepted. Explanation of the Policy If the policy is to be accepted at all levels of management, every attempt should be made by policy-makers that the exact meaning, significance and purpose of policy are explained in clear terms to the persons concerned. The policy will have no opposition and an early approved if explained thoroughly, will hold relevance to the business environment in which the business enterprise is expected to operate. Policy Implementation This is last but one stage in the process of policy-making decisions. Implementation of policy indicates putting it into practice as and when any problem or critical situation arises. Even otherwise, corporate operations are undertaken and are also the outcome of the policy implementation. Policy Control This is a very important element of business policy which is likely to be implemented at different levels on different occasion. The management in this regard should be careful to see that the policy imple...