BUSINESS POLICY

BBA 503
Unit 1
 BUSINESS POLICY: MEANING
• Business policy is the study of the roles and responsibilities of top level management,
the significant issues affecting organizational success and the decisions affecting
organizational success and the decisions affecting organization in the long run and
short run
• Business policy defines the scope or spheres within which decisions can be taken by
subordinates.
• It permits the lower level management to take decisions without consulting top level
management.
• Business policies are the guidelines developed by the organization to governs its
action. It defines the limits within which decisions must be made.
• Guidelines : set of principles and rules to direct the decisions in order to face
challenges, opportunities, threats of day to day business operational activities.
 NATURE/ FEATURES/
CHARACTERISTICS
• Specific : avoid uncertainty otherwise implementation is difficult. It should be
definite.
• Clear : must be unambiguous, avoid jargons and connotations. No
misunderstandings.
• Uniform : followed by all the subordinates
• Appropriate : present organizational goal
• Simple : easily understood
• Inclusive/ comprehensive : for wide scope should include every aspect
• Flexible : in operation (unexpected situation) but should not always altered
• Stable : it should not be unstable otherwise it will create indecisiveness in the
minds of people who are following
 SCOPE
• Based on the coverage or scope , these business policies can be classified
into broader namely by major or minor. These are called as organizational
and functional.
• Organizational policies related to organizational level objectives,
procedures, control covering entire organization. Example pricing structure,
capital structure etc.
• Functional policies related to raw material, services of workers, shift working
etc. these are day to day policies decided by departmental heads.
 CONTINUE…
• It also covers many aspects of business:
• It deals with the determination of the future courses of the action that the
organization has adopt it.
• It includes the functions and responsibilities of top level management related
to organizational problems which affect the success of total enterprises.
• It also identifies the resources by the help of which the organization can
achieve its goals.
• It defines the scopes and spheres within which decisions can be taken by
the subordinates in an organization.
 STRATEGY- INTRODUCTION
• The word strategy is derived from Greek word “strategos”
• Means generalship or art of generals : art of general in wars
• The art of planning and direction of military operation to win a war
• The word strategy has entered into management from military services
• It includes determination and evaluation of alternative plans to already existing plans
and principles
• This is a immediate plan of action to achieve ultimate goals of action.
• For e.g. Pricing strategy(penetration, skimming, cost plus) , distribution strategy (intensive,
selective) marketing strategy etc.
• Igor Ansoff : Russian American mathematician and business manager is known as father
of strategic management.
• Strategic management is the study of why some firms outperform others. How to create
a competitive advantage in the marketplace that is unique, valuable and difficult to
copy
 FEATURES OF STRATEGY

• 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.
• 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.
• 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”.
 STRATEGIC MANAGEMENT- AN
INTRODUCTION
• Strategic Management is all about identification and description of the strategies that managers can carry so as
to achieve better performance and a competitive advantage for their organization.
• An organization is said to have competitive advantage if its profitability is higher than the average profitability
for all companies in its industry.
• Strategic management can also be defined as a bundle of decisions and acts which a manager undertakes
and which decides the result of the firm’s performance.
• The manager must have a thorough knowledge and analysis of the general and competitive organizational
environment so as to take right decisions.
• The managers should conduct a SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats) in order to -
make the best possible utilization of strengths, minimize the organizational weaknesses, make use of arising
opportunities from the business environment and shouldn’t ignore the threats.
• It is applicable to both small as well as large organizations as even the smallest organization face competition
and, by formulating and implementing appropriate strategies, they can attain sustainable competitive
advantage.
• It deals with making and implementing decisions about future direction of an organization. It helps us to identify
the direction in which an organization is moving.
 PROCESS OF STRATEGIC
PLANNING
Strategic management is a continuous process that:

1. Evaluates and controls the business and the industries in which an organization is involved;
2. Evaluates its competitors and sets goals and strategies to meet all existing and potential
competitors; and then
3. Re-evaluates strategies on a regular basis to determine how it has been implemented and
whether it was successful or does it needs replacement
 STRATEGY VS. POLICY

Strategy Policy
1. Framed by top level management but sub 1. Framed by only top level mgt.
strategies are made by middle level
management 2. It deals with internal environment of
2. It deals with external environment factors business
3. This is a plan of action 3. This is principle of action
4. Are concentrated towards action
4. Are decision oriented
5. Can be modified as per the situation ,they
are dynamic in nature 5. Rigid in nature but relaxation can be
6. This is the best plan opted from no. of plans made for some unexpected situation.
7. These are made to achieve organizational 6. Common set of rules and regulations
goals and objectives
7. It is form for day to day activities
 ORGANIZATIONAL CULTURE
• Organizational culture is generally understood as all of a company's beliefs,
values and attitudes, and how these influence the behavior of its employees.
• Culture is a set of understandings that members of the community shares
with each other.
• It is a set of values, ideas, morality, code of conduct, day to day rituals which
makes each human different.
• Basically culture is passed from generation to generation
• Culture is learned through the interaction with the environment during our
development or growth years
 CHARACTERISTICS
1. Individual autonomy : organization with good culture provides individual
autonomy. Autonomy means self direction and freedom to take initiative
2. Innovation and risk taking
3. Outcome orientation : management focuses on the results rather then the
procedure followed for that outcome
4. People orientation: when organization takes any decisions they take into
consideration how it will affect their people
5. Risk tolerance: the people are always encouraged to be innovative and
risk taking
6. Management support: degree to which management provides clear
communication, warmth and support to the subordinates.
 CONTINUE…
7. Performance reward system: reward system like increase in salary or
promotion should be dependent on performance rather than favoritism
and on seniority basis
8. Identity: organization with strong and cultural focus ensures that there is no
difference between identity of employee and organization
10. Structure: rules regulation is fixed, everything is well defined who will report
under whom, a particular line of authority responsibility is well defined.
CULTURAL
TYPOLOGY
• Goffee and Jones have identified four distinct
cultural types.
• These four cultural types are based on two
dimensions which they call sociability and
solidarity.
• Sociability refers to friendliness in relationships
between people in an organization. It means
that actions are taken that favor others with
no expectation of something in return. It
refers to high concern for people i.e. they are
people oriented and focusses on process
rather than outcome.
• Solidarity is task oriented. High solidarit y
means that people can work well together
toward common goals, even when they
have personal disputes or conflicts
 TYPES OF CULTURAL TYPOLOGY
1. Networked Culture:
• It is high on sociability and low on solidarity.
• Organization treats it members in a quite friendly manner and there is open
sharing of information
• It lead to poor performance because focus is on people rather than task
2. Mercenary Culture:
• It is low on sociability and high on solidarity
• The organization are task oriented and believe in competition
• People are highly focused and goal oriented but at times it leads to
frustration and stress among poor performers
 CONTINUE….
3. Fragmented Culture:
• It is low on both sociability and solidarity
• Employees are disconnected from each other
• The sense of belonging to and identification with the organization is usually
very weak.
• This type of culture suffers from lack of collegiality
• Communal Culture
• It is high in both sociability and solidarity
• Organization value both people and tasks
• There is work accomplishment along with relationship of trust and respect
 FUNCTIONS AND DYSFUNCTIONS
OF ORGANIZATIONAL CULTURE
• Functions of Organizational Culture
1. Culture helps to create sense of identity for the workers
2. Culture encourages the member to give priority to the organizational goals
to personal goals
3. Sound culture helps in shaping the attitudes and behavior of employees
4. It is very helpful for studying organizational behavior
5. Culture helps to distinguish between one organization and the other
 DYSFUNCTIONS OF
ORGANIZATIONAL CULTURE
1. Barrier to change: when environment is stable employee behavior is also stable
which acts like an asset of an organization. But when the environment is dynamic
in nature, it acts like a liability of an organization because employees start resisting
the change and to get adjust in new culture
2. Barrier to mergers and Acquisitions: nowadays financial matters and product
compatibility is not only the reason considered for merger and acquisition cultural
compatibility has become a primary concern while deciding about mergers and
acquisitions.
3. Barrier to Diversity: strong cultures do not acknowledge the fact that people from
different cultures can bring strength to the organization. New employees who
belong to different race, religion, culture etc. are forced to fit in the core
organizational culture, otherwise they are deemed to be unfit for the organization
 ORGANIZATIONAL STRUCTURE
• Definition: “Organizational structure (OS) is the systematic arrangement of human
resources in an organization so as to achieve common business objectives. It outlines
the roles and responsibilities of every member of the organization so that work and
information flow seamlessly, ensuring the smooth functioning of an organization”.
• All organizations, whether government or private sector need to have a formal
structure. The main purpose behind such structure is to prescribe duties and
responsibilities.
• It is represented in the form of an organizational chart depicting interrelationship
between different positions.
• All the individuals connected through lines to show the flow of authority. The person
having most general level of responsibility are placed at the top and persons of
lesser responsibility are placed below.
• Persons are differentiated in terms of their functions. One type of differentiation of
function is horizontal, in which different individuals perform different functions but on
the same level and other one is vertical where one individual guide or direct the
activities of others (superior – subordinate relationship)
 TYPES OF ORGANIZATIONAL
STRUCTURE
Line structure: this has a very specific line of command. The approvals and
orders in this kind of structure come from top to bottom in a line. Hence the
name line structure. This kind of structure is suitable for smaller organizations.
This is the sort of structure allows for easy decision making and is very informal
in nature. They have fewer departments, which makes the entire organization
a very decentralized one.
• Merits: simplicity, effective coordination, economical, quick decision making,
effective control and supervision
• Demerits: time consuming, favoritism, excess work load
LINE ORGANIZATION
 LINE AND STAFF STRUCTURE
• Line and staff structure combines the line structure where information and
approvals come from top to bottom, with staff departments for support and
specialization. Line and staff organizational structures are more centralized.
Managers of line have authority over their subordinates, but staff managers
have no authority over line managers and their subordinates. The decision
making process becomes slower in this type of organizational structure.
• Merits: less burden on line officers, quick actions, balanced and prompt
decisions, better discipline
• Demerits: conflict between line and staff organization, lack of coordination,
more dependence on staff
LINE AND STAFF ORGANIZATION
 MATRIX STRUCTURE
• Matrix organizational structure is a combination of two or more different
kinds of organizational structures, such as project management and
functional management. Matrix structure is composed of both a traditional
hierarchy of management where employees are managed by functional
manager as well as additional project managers who can manage
employees across different departments. These two or more managerial
systems intersect on a grid or matrix.
• Merits: collaboration between different departments, allows
interdepartmental communication, combines project and functional
management
• Demerits: decision making process may be slowed down, too much work
can cause overload, measuring employee performance might become
difficult
MATRIX STRUCTURE
ORGANIZATIONAL PURPOSES,
VISION , MISSION
 STRATEGIC INTENT/ORGANIZATIONAL
PURPOSE
• Purpose for what organization strive for.
• Intent means purpose
• In simple terms, it is identified as company’s vision of what it wants to
achieve in long term
• An organization’s strategic intent is the purpose that it exists and why it will
continue to exist (mission)
• It inspire, motivate and provide clear direction to stakeholders, employees,
investors and customers.
• Elements of strategic intent:
• Vision, Mission, Goals, objectives, Plans
 ORGANIZATIONAL PURPOSE,
MISSION, VISION
• Organizational Purpose is the main objective(s) that is (are) being pursued by
an organization, as typically listed in its articles of incorporation or
memorandum of association. It is the reason for having incorporated.
• Vision: defines the desired or intended future state of an organization or
enterprise in terms of its fundamental objective. Vision is a long term view
sometimes describing how the organization would like the world to be in
which it operates. For example a charity working with the poor might have a
vision statement which reads “ a world without Poverty”
• Mission: defines the fundamental purpose of an organization or an
enterprise, describing why it exists and what it does to achieve its vision.
• For example, the charity might provide job training for the homeless and
unemployed.
 VISION
• A vision statement describes the desired future position of the company. Where the organization
wish to land in future.
• A vision statement focuses on tomorrow and what an organization wants to ultimately become. It
depicts the company’s aspirations for the business.
• Vision statement questions look like:
➢ What are our hopes and dreams?
➢ What problem are we solving for the greater good?
➢ Who and what are we inspiring to change?
• For example:
• Amazon Vision: to be earths most customer centric company, where customers can find and
discover anything they might want to buy online
• LinkedIn Vision: to create economic opportunity for every member of the global workforce
• Google vision: to provide access to the worlds information in one click
 FEATURES OF VISION
• Vision foster risk taking and experimentation
• Vision are competitive, original and unique
• Vision foster long term thinking
• Vision helps you to decide a purpose
• Vision are inspiring
 MISSION
• It explains the reason for the existence of the business
• A mission statement helps to identify what business the company undertakes. It defines the present capabilities,
activities, customer focus as well
• It is designed to help potential shareholders and investors to understand the purpose of the company
• A mission statement focuses on today and what an organization does to achieve vision
• Mission statement questions look like:
➢ What do we do?
➢ Whom do we serve?
➢ How do we serve them?
• For example:
• Amazon’s mission: we striv e to offer our customers the lowest possible prices, the best available selection, and
the utmost convenience
• LinkedIn mission: to connect the worlds professionals to make them more productive and successful
• Google mission: to organize the world’s information and make it universally accessible and useful
 FEATURES OF MISSION
• It should be feasible: Aim high but it should not be impossible statement
• It should be precise: neither narrower nor broader
• It should be clear
• It should be motivating
• It should be distinctive
• It should indicate major components of strategy
• It should indicate how objectives are to be accomplished
 GOALS
• A goal is a short statement of a desired outcome to be accomplished over a
long time frame, usually three to five years or may be 10 years
• It is a broad statement that focuses on the desired results and does not
describe the methods used to get the intended outcome
• Some common examples of business goals include the following:
• Maximizing profits, Growing revenues, Increasing efficiency, Providing
excellent customer service, Becoming an industry leader, Creating a brand
• Goals are general guidelines that explain what you want to achieve
 OBJECTIVES
• Objectives are specific, actionable targets that need to be achieved within
a smaller time frame, such as a year or less, to reach a certain goal
• Objectives describe the actions or activities involved in achieving a goal
• Goals are the outcome you intend to achieve, whereas objectives are the
actions that help you achieve a goal.
• For example: to achieve the goal of increasing revenues, a company can
have an objective like “Add three new products by the end of October this
year”
 CONTINUE…
Objectives must be SMART
• Specific: it should be to the point
• Measurable: can be measured in terms of targets
• Attainable: it should be attainable within the provided environment and
resources
• Relevant: it should be properly aligned with goals, mission and vision
• Time bounded: it should be attainable within a proper time period
 PLANS
• A plan is typically any diagram or list of steps with details of timing and
resources used to achieve an objective to do something
• It is commonly understood as a temporal set of intended actions through
which one expects to achieve a goal and objectives of the organization