You are on page 1of 3

Definition of 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.
Business policies are guidelines-statements (guide to plans & decision making) to
facilitate predetermined objective on the mode and manner in the structural & functional
aspects to achieve the objective formulated as plans at all levels of management in the
business organisation.
As per the definition given by Christensen et. al. and steiner and others
" the study of the function and responsibilities of senior management, the crucial
problems that affect success in the total enterprise, and the decisions that determine the
direction of the organisation and shape its future.
Read more:
Features of Business Policy

An effective business policy must have following features1. 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.
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

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.

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 follows1. 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.

Nature of Business Policy

by V S Rama Rao on November 3, 2010
Business policy basically deals with decisions regarding the future of an ongoing enterprise.
Such policy decisions are taken at the top level after carefully evaluating the organizational
strengths and weaknesses in terms of product price, quality, leadership position, resources etc., in
relation to its environment. Once established the policy decisions shape the future of a company
channel the available resources along desired lines and direct the energies of people working at
various levels towards predetermined goals. In a way, business policy implies the choice of
purposes, the shaping of organizational identity and character the continuous definition of what
is to be achieved and the deployment of resources for achieving corporate goals.
Some useful definitions of Business Policy
1) A business policy is an implied overall guide setting up boundaries that supply the general
limit and direction in which managerial action will take place.
2) A business policy is one, which focuses attention on the strategic allocation of scarce
resources. Conceptually speaking strategy is the direction of such resource allocation while
planning is the limit of allocation
3) A business policy represents the best thinking of the company management as to how the
objectives may be achieved in the prevailing economic and social conditions
4) A business policy is the study of the nature and process of choice about the future of
independent enterprises by those responsible for decisions and their implementation

5) The purpose of a business policy is to enable the management to relate properly the
organizations work to its environment. Business policies are guides to action or channels to
Business policies generally have a long life. They are established after a careful evaluation of
various internal and external factors having an impact on the firms market standing As and when
circumstances change in a major way the firm is naturally forced to shift gears, rethink and
reorient its policies. The World Oil crisis during the 70s has forced many manufacturers all over
the globe to reverse the existing practices and pursue a policy of manufacturing fuel efficient
cars. Therefore, policies should be changed in response to changing environmental and internal
system conditions.
Types of policies
There are many types of policies marketing policies, financial policies, production policies,
personnel policies to name a few in every organization. Within each of these areas more specific
policies are developed. For example, personnel policies may cover recruitment, training,
promotion and retirement policies. Viewed from a systems angle, policies form a hierarchy of
guides to managerial thinking. At the top of level policy statements are broad. The management
is responsible for developing and approving major comprehensive company policies. Middle
managers usually establish less critical policies relating to the operation of their sub units.
Policies tend to be more specific at lower levels. The managers job is to ensure the consonance
of these policies, each must contribute to the objectives of the firms and there should be no
conflict between sub system policies.
Although it is customary to think of policies as written statements it is not necessarily the case.
For example a firm may simply decline to consider handicapped employees in the selection of
new personnel. In effect, this becomes an effective policy even though the company has never
verbalized its position.