Business policy

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 is the study of the roles and responsibilities of top level management,

the significant issues affecting organization success and the decisions affecting

organization in the long run.

Business policy is “the study of the functions and responsibilities of senior management,

the crucial problems that affect success of the total enterprise, and the decisions that

determine the direction of the organisation and shape its future. The policy framing

required for the moulding of organisational identity and character, the continuous

definition of what needs to be done, and the mobilization of resources for the attainment

of goals in the face of the competition or adverse circumstances.

Definition of Business Policy

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.

Features of Business Policy

An effective business policy must have following features-

1. Specific- Policy should be specific / 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.

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/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.

Strategy

Strategy is popularly related to war, means methods to defeat enemy. Strategy is now

used for business, meaning methods or means adopted to achieve business objectives.

The term strategy began to be used in business with increase in competition and

complexity of business operations.

Strategy is the complex plan for bringing the organization from a given state to a desired

position in a future period of time.

The term strategy is derived from the Greek word ‘strategia’ which means “generalship.”

In the military concept, strategy refers to arranging troops into position before the

enemy is actually engaged in the war. Once the enemy has been engaged, attention
shifts to tactics how to win war. Here, the employment of troops is central point of

strategy formulation, implementation and controlling of war. And this concept transfers

to the business world today which begins to take form in terms of formulation,

implementation and controlling business policy to achieve strategic goals of the

business enterprise.

The definition of business strategy is a long term plan of action designed to achieve a

particular goal or set of goals or objectives. Strategy is management's game plan for

strengthening the performance of the enterprise. It states how business should be

conducted to achieve the desired goals.

The definition of business strategy is a long term plan of action designed to achieve a

particular goal or set of goals or objectives. Strategy is management's game plan for

strengthening the performance of the enterprise. It states how business should be

conducted to achieve the desired goals.

Features of Strategy

1. Strategy is Significant because it is not possible to foresee the future. Without a

perfect foresight, the firms must be ready to deal with the uncertain events which

constitute the business environment.

2. Strategy deals with long term developments rather than routine operations, i.e. it

deals with probability of innovations or new products, new methods of productions, or

new markets to be developed in future.

3. Strategy is created to take into account the probable behavior of customers and

competitors. Strategies dealing with employees will predict the employee behavior.
Strategy is a well defined roadmap of an organization. It defines the overall mission,

vision and direction of an organization. The objective of a strategy is to maximize an

organization’s strengths and to minimize the strengths of the competitors.

Strategy, in short, bridges the gap between “where we are” and “where we want to be”.

Difference between Policy and Strategy

1. Policy is long term whereas strategy is situation specific

2. Strategy is formulated on the basis of activities of the competitor, whereas policy

is not.

3. Policy is delegated downwards for implementation, whereas strategy is not.

4. Strategy can be modify as per the situation, but policies are uniform in nature.

5. Strategy deals with external environmental factor, policy are made for internal

environmental factor

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.

to achieve a target as prescribed by a policy.

Key Differences between Strategy and Policy

The following are the major differences between strategy and policy

1. The strategy is the best plan opted from a number of plans, in order to achieve

the organizational goals and objectives. The policy is a set of common rules and

regulations, which forms as a base to take the day to day decisions.

2. The strategy is a plan of action while the policy is a principle of action.

3. Strategies can be modified as per the situation, so they are dynamic in nature.

Conversely, Policies are uniform in nature. However, relaxations can be made for

unexpected situations.

4. Strategies are associated with the organizational moves and decisions for the

situations and conditions which are not encountered or experienced earlier. On the

contrary. Policies define the rules for routine activities, which are repetitive in nature.

5. Strategies are concentrated toward actions, whereas Policies are decision-

oriented.

6. The top management always frames strategies, but sub-strategies are

formulated at the middle level. In contrast to Policy, they are, in general, made by the

top management.

7. Strategies deal with external environmental factors. On the other hand, Policies

are made for the internal environment of business.

contrast, Policies determine what is to be done and what should not be done in specific

circumstances.

Comparison Chart

BASIS
STRATEGY POLICY
COMPARISON

Meaning Strategy is a comprehensive plan, Policy is the guiding principle

made to accomplish the that helps the organization to

organizational goals. take logical decisions.

What is it? Action plan Action principle

Nature Flexible Fixed, but they allow

exceptional situations

Related to Organizational moves and Organizational rules for the

decisions for the situations which activities which are repetitive

have not been encountered in nature.

previously.

Orientation Action Thought and Decision

Formulation Top Level Management and Top Level Management

Middle Level Management

Approach Extroverted Introverted

Describes Methodology used to achieve the What should be done and

target. what should not be done.

The Differences between Strategies and Policies

A Strategy is a special plan made to achieve a market position and to reach the

organizational goals and objectives, but Policy refers to a set of rules made by the

organization for rational decision making. Many people have confusion regarding the

two terms, but they are not alike. You should know that policies are subordinate to

strategy. Here, in this article we made an attempt to point out the important differences

between Strategy and Policy.

Definition of Strategy

Strategy is a game plan, chosen to achieve the organizational objectives, gain

customer’s trust, attain competitive advantage and to acquire a market position. It is a

combination of well thought intent and actions which lead to the organization towards its

desired position or destination. It is a unified and integrated plan made to achieve the

basic objectives of the enterprise like:

 Effectiveness

 Handling events and problems

 Taking advantage of opportunities

 Coping with threats

Strategy is a combination of flexibly designed corporate moves, through which an

organization can compete with its rivals successfully. The following are the features of

the Strategy:

 It should be formulated from the top level management, however, sub-strategies

can be made by middle level management.

 It should have a long range perspective.

 It should be dynamic in nature.

 The main purpose is to overcome from uncertain situations.

 It should be made in such a way, to make the best possible use of scarce

resources.

Definition of Policy

The policy is also regarded as a mini – mission statement, is a set of principles and

rules which directs the decisions of the organization. Policies are framed by the top level

management of the organization to serve as a guideline for operational decision

making. It is helpful in highlighting the rules, value and beliefs of the organization. In

addition to this, it acts as a basis for guiding the actions.

Policies are designed, by taking opinion and general view of a number of people in the

organization regarding any situation. They are made from the past experience and basic

understanding. In this way, the people who comes under the range of such policy will

completely agree upon its implementation.

particular situation. These have to be consistently applied over a long period of time to

avoid discrepancies and overlapping.

Key Differences between Strategy and Policy

The following are the major differences between strategy and policy

1. Strategy is the best plan opted from a number of plans, in order to achieve the

organizational goals and objectives. Policy is a set of common rules and regulations,

which forms as a base to take day to day decisions.

2. Strategy is a plan of action while the policy is a principle of action.

3. Strategies can be modified as per the situation, so they are dynamic in nature.

Conversely, Policies are uniform in nature, however relaxations can be made for

unexpected situations.

4. Strategies are concentrated toward actions, whereas Policies are decision

oriented.

5. Strategies are always framed by the top management but sub strategies are

formulated at the middle level. In contrast to Policy, they are, in general made by the top

management.

6. Strategies deal with external environmental factors. On the other hand, Policies

are made for internal environment of business.

Conclusion

The difference between Strategy and Policy is, a little complicated because Policies

come under the Strategies. Apart from that the policies are made to support strategies

in several ways like accomplishing organizational goals and securing an advantageous

after a deep analysis.