Introduction to Business Policy

Nature of Business Policy

• The study of the function and responsibilities of senior management , the crucial problems that effect success in the total enterprise and the decisions that determine the directions of organization and shape its future.

• Policy is the study of functions and responsibilities of senior management related to those organizational problems which effect the success of total organization

• It deals with the future course of action that an organization has to adopt.

• It is concerned with mobilization of resources so the organization can achieve its goals

• Choosing between different alternatives available.

Who Comes Under Senior Management ?

Importance of Business Policy

For Learning

• Integrate the knowledge and experience gained in various functional areas of management

• Deals with constraints and complexities of real life business.

• Can be applied to various fields of management

Understanding Business Environment

• Internal Environment

• External Environment

• Adapting internally to external environment

For understanding the organization

• Provides the basic framework for understanding strategic decision making

• Understanding of business policy leads to improvement of job performance

For Personal Development

• It is beneficial for an executive to understand the impact of policy shifts on the status of one department and on the position one occupies

• Offers unique perspective to executives for understanding the macro factors and their impact on micro level

• Offers unique perspective to executives for understand the senior management view.

Different levels of Strategy

• Today the environment in which companies operate is full of complexities. one strategy may not work this situation .

• The need is for multiple strategy at different levels .

• In order to segregate different segments, each performing a common set of activities.

• Many companies are organized on the basis of operating divisions or simply devisions

Corporate Level Strategy

• The overall corporate level strategy is concerned with the broad scope of an organization’s strategic activities and the matching of these to the organization’s environment, its resources capabilities and the values and expectations of its various stakeholders.

• It looks at the whole strategic scope of the enterprise. • This is the “large picture” view of the organization and

includes deciding in which service or products markets to compete and in which geographic regions to operate.

Business Level Strategy

• It is the comprehensive plan providing objectives for SBU, allocation of resources among functional areas and coordination between them for optimal contribution to the achievement of the corporate level objectives.

What is SBU

• Operating Divisions are also known as profit centers or strategic business units (SBU)

• It may also be termed as any part of business organization which is treated separately for strategic Management Process

• Generally SBU are involved in a single line of business

Functional Strategies

• These strategies deal with relatively restricted plan providing objectives for a specific function, allocation of resources among different operation and coordination between them for optimal contribution to SBU and corporate level objectives

Other Strategies

• There are strategies which are at higher level than corporate strategies. These are known as societal strategies.

• Based on a mission vision statement a societal strategy is the generalized view of how the corporation relates itself to society in terms of particular need or a set of needs that it strive to fulfill

• Eg. Suppose a corporation decides to provide alternative source of energy for society at an optimum prices and based on the latest technology. On the basis of its societal strategy it has no of alternatives it can be a manufacturer or nuclear power reactor, a maker of equipments used for tapping solar energy etc

• One step down the functional level strategies are operational level strategies

• Each functional area could have a number of operational activities

• They deal with the highly narrow or specific area

Centralization Vs Decentralization

Strategic Decision Making

• One of the most important function of manager.

• It is the prominent task of senior management also.

• The difference lies in the level at which they operate

Conventional Decision making

• Objectives to be achieved are determined

• Alternatives ways of achieving the objectives are identified

• Each alternative is evaluated in terms of its objective-achieving capability

• The best alternative is chosen

• The case of Pantaloon white shirts

Issues in Decision Making

• Strategic decision-making is a complex process .

• Decision makers are unable to describe the exact manner in which the decision is made.

Criteria for decision making

• It requires objective setting.• Why we set objectives• The first is the concept of maximization.

The behavior of organization is oriented towards achieving these objectives and maximizing returns

• Second view is based on the concept of satisfying. This can be achieved by optimization.

• Rationality in decision making

• Creativity in decision making

• Variability in decision-making

• Individual Vs group decision making