Business Policy and Strategic Management

Strategic Management

• Strategic management is system used by managers of firms to direct and administer a firm. Strategic management combines elements of scientific research and the art of management in order to make decisions for the firm. Strategic management is used to address issues such as which markets to enter, how to build competencies and how to structure the firm. Strategic management is, generally, directed from the top down with strategic decisions being made by the top management team.

Business Policies

• Business policies are the internal rules that a company has to decide actions. Policies serve to place boundaries on the decisions and actions made by employees. For example, a firm could have a policy that all clients must have an excellent credit record or pay up front. Employees would then be required to follow these policies. Policies may be decided by the top management team, but more specific policies may be determined by line managers.

Features of Business Policy

An effective business policy must have following features-

Specific- Policy should be specific/definite. If it is uncertain, then the implementation will become difficult.

Clear- Policy must be unambiguous. It should avoid use of jargons and connotations. There should be no misunderstandings in following the policy.

Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed by the subordinates.

Appropriate- Policy should be appropriate to the present organizational goal.

Simple- A policy should be simple and easily understood by all in the organization.

Inclusive/Comprehensive- In order to have a wide scope, a policy must be comprehensive.

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.

Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in minds of those who look into it for guidance.

Difference between Policy and Strategy

The term “policy” should not be considered as synonymous to the term “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.

Policy formulation is responsibility of top level management. While strategy