Business Policy: Meaning, Features, Importance, Objectives & Policy vs Strategy

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.

Features of Business Policy 

An effective business policy must have following features -

1. Specific - Policy should be specific and definite. If it is uncertain, then the implementation will become difficult.
2. Clear - Policy must be unambiguous. It should avoid use of jargons and connotations. There should be no misunderstandings in following the policy.
3. Reliable/Uniform - Policy must be uniform enough so that it can be efficiently followed by the subordinates.
4. Appropriate - Policy should be appropriate to the present organizational goal.
5. Simple - A policy should be simple and easily understood by all in the organization.
6. Inclusive/Comprehensive - In order to have a wide scope, a policy must be comprehensive.
7. 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 or routine scenarios.
8. Stable - Policy should be stable else it will lead to indecisiveness and uncertainty in minds of those who look into it for guidance.

Importance of business Policy

1. Learning – business policy to integrate the knowledge and experience gained in various functional areas of management. It enabled the learner to understand and make sense of the complex interaction between different functional areas.
2. Business Environment - business policy helps to make the study and practice of management more meaningful as one can view business decision making in its proper perspective. Short terms gains for department may be sacrificed in the interest of the long-term benefits that may accrue to organization as a whole.
3. Understanding the Organization – business policy helps to create an understanding of how policies are formulated. Its helps to creating an appreciation of the complexities of the environment that are faced by senior management.
4. Personal Development – beneficial for an executive to understand the impact of policy shifts on the status of one’s department and the position one occupies. Understanding of business policy enables executive opportunity or avoids a risk with regard to career planning and development.

Purpose of Business Policy

1. To integrate the knowledge gained in various functional areas of management
2. Adopt a generalist approach to solving problems
3. Understand the complex interlink ages operating within the organization. Through the use of system approach to decision making and relating these chances taking places in the external environment.

Objectives of Business Policy

1. In Terms of Knowledge – The Various concepts like Strategy, Policy, Plans and Programmes are encountered in the functional area course too. It is imperative to understand these concepts specifically in the business policy. Through all these tools Learner can understand the environment in which firms operate. The development of such approach helps in problem solving and decision making for Business.
2. Skills – Attainment of knowledge should lead to skills in order to apply hat has been learnt. This can be taken place by an analysis and interpretation of case studies as well as business events to develop skill of identifying the factors relevant in decision making. Analysis of Swot and suggestion of appropriate strategies and policies of core content of general management decision making.
3. Attitude - Inculcation of appropriate attitude amongst Learner. Function under partial ignorance conditions. In long-range planning especially the manager has to make do with incomplete information.

Difference between Policy and Strategy 

The term “policy” should not be considered as synonymous to the term “strategy”. The difference between policy and strategy can be summarized as follows-

1. 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.
2. Policy formulation is responsibility of top-level management. While strategy formulation is basically done by middle level management.
3. Policy deals with routine/daily activities essential for effective and efficient running of an organization. While strategy deals with strategic decisions.
4. Policy is concerned with both thought and actions. While strategy is concerned mostly with action.
5. 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.

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Sandeep Ghatuary

Finance & Accounting blogger simplifying complex topics.

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