INTRODUCTION TO BSUINESS POLICY

Organisation is a group of people coming together to achieve common goals. It consists of many people.
There is separation of management and ownership. Hence it becomes essential to issue guidelines to manage
the business by the people. The top management lays down broad guidelines or general limits within which
managers have to decide their course of actions to deal with a particular situation. The guidelines lay down
by the top management act as guiding force for decision making by the functional managers. The general
statements or understanding which guide thinking and action of subordinates is called ‘policies’.

Every organisation has a purpose for which it was established – either for profit making or non- profit
making, and closely allied to the purpose of an organisation are the principles on which it is to be conducted.
These principles in business parlance are commonly called “Policy”. Policy, according to Kalejaye (1998),
denotes a future course of action of intent towards the activities of an organisation.

A business policy is: guidelines that facilitate to reach a predetermined objective both in mode and manner
formulated from the top to the lower level management while Objectives are the endpoints to a plan. The
nature and objective of business policy are both formulated as plans and determined by a business
organisation. 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 toward
predetermined goals. In a way, business policy implies the choice of purposes, the shaping of organisational
identity and character the continuous definition of what is to be achieved and the deployment of resources
for achieving corporate goals. Objective is the end to a plan while policy is the mode and manner to reach
the objective. 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 organisational strengths and
weaknesses in terms of product price, quality, leadership position, resources etc., in relation to its
environment.

The word ‘Policy’ is derived from the Greek word ‘Politeia’ meaning policy or government. In the
autocratic system the policies are framed by the leader whereas in the democratic system the policies are
framed by the people.
The Dictionary meaning of ‘policy’ is a ‘planned action’ and that plan is a policy. Hence policy and plan are
synonymous. According to Flippo, Policy “is a man-made rule of pre-determined course of action that is
established to guide the performance of work toward the organisation objective. It is a type of standing plan
that serves to guide subordinates in the execution of their task.”
According to George R. Terry, meaning of Policy is “A verbal, written or implied overall guide setting up
boundaries that supply the general limits and directions in which managerial actions will take place.”
Policies are statements of the organisation framed in light of its objectives in the various areas with which its
operation are concerned- personnel, finance, and production, marketing and so on.
Every time it is not possible to meet the top management and ask about the action to be taken in a particular
situation. Therefore, general guidelines are framed by the top management. These guidelines or policy are
the boundaries within which decisions can be made by the subordinates. The lower level management can
handle situation by referring to these guidelines without having the need to meet top management each time.

Policy can be developed for any type of business activity. It can be related with product, pricing, promotion,
finance and so on. Statement that codifies such guidelines is called policy statement. Policies highlight the
thinking of the top management.

Business policy is the study of the roles and responsibilities of top- level management, the significant issues
affecting organisational success and the decisions affecting organisation in the long-run. Business Policy
defines the scope or spheres within which decisions can be taken by the subordinates in an organisation. 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 organisation to
govern its actions. They define the limits (Do’s & Don’t’s) within which decisions must be made.

Business Policy defines the scope or spheres within which decisions can be taken by the subordinates in an
organisation. 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 organisation to govern its actions. They define the
limits within which decisions must be made. Business policy also deals with acquisition of resources with
which organisational goals can be achieved. Business policy is the study of the roles and responsibilities of
top level management, the significant issues affecting organisational success and the decisions affecting
organisation in long-run.

Business Policy defines the scope or spheres within which decisions can be taken by the subordinates in an
organisation (Wikipedia, 2012). 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 organisation to govern its actions. They define the limits within which decisions must be
made. Business policy also deals with acquisition of resources with which organisational goals can be
achieved.

Business policy is the study of the roles and responsibilities of top level management, the significant issues
affecting organisational success and the decisions affecting organisation in long-run.

Some useful definitions of Business Policy

1) It 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 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) It 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 organisation’s work to
its environment Business policies is guides to action or channels to thinking.
6) It is the aggregate of the policy guidelines of different functional areas viz. production, marketing, finance
etc. in a company.
7) It is the major policy guidelines drawn by the board of directors to regulate the overall direction in which
company should move.
8) It is the process of study, process of decision and process of action leading to development of effective
business strategy.

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 firm’s market standing as and when circumstances
change in a major way the firm is naturally forced to shift gears, rethink and reorient its policies. During the
World Oil crisis 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.

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 follows:
  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 formulation is basically
done by middle level management.
 Policy deals with routine/daily activities essential for effective and efficient running of an
organization. While strategy deals with strategic decisions.
 Policy is concerned with both thought and actions. While strategy is concerned mostly with action.
 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.

Features / Characteristics of Policy

Policy has a key role to play in business management and administration. It helps the management to
achieve the desired goals. It also ensures a business firm to have an effective and efficient operation in a
more economical manner. The policies are framed the top management and it is implemented at the bottom
level. The policy should be definite, positive and understandable to everyone in the organization. Definite
and clear policy helps to avoid involuntary deviations from accepted course of action. It ensures that the
actions of individual managers are consistent over the time. Nature of business policy depends upon the
nature of objectives and the needs of the Organisation. Following are the characteristics of policy:
1. Simple: A policy should be as simple as possible. It should be codified in a clear and easily
understandable terminology. Such policy formulation will enable the line managers to interpret in a right
way.
2. Clear: There should not be any ambiguity in the policy. It should be clear and not confusing one. Use of
technical jargons should be avoided. The words which carry dubious meaning should be avoided.
3. Flexible: Policy should be flexible. It should be reasonably stable. It should be altered or modified very
often. It should remain in force for a long time. In order to make it usable for long time it should be
flexible also. The intention of flexibility is to make the policy usable in repetitive situation by the lower
managers.
4. Certain: Policy must be definite and concrete. This gives confidence to the line mangers.
5. Consistent: Policy should be consistent. A consistency leads to smoothness of action by the subordinates
while handling recurring problems.
6. Relevant: Policy should be relevant to the goals of the organization. They should relate to the current
business situation and environment.
7. Comprehensive: Policy should cover broader area of business. A comprehensive statement of policy
ensures flexibility in decision making. It also avoids the line managers to approach the top management
frequently.
8. Stable: A policy should be reasonably permanent and stable. Constant change in the policy makes its
implementation difficult. Unstable policy creates uncertainty in the mind of those who refer to policy for
guidance. It is not intended that policy should be permanent forever; it should have provision of
flexibility depending on the situation. Policy should have capability of adjustment to meet future changes.
It should be based on sound judgment.

The Purpose of Business Policy

Business policy ‘is a term associated with the integrated management course, which is generally studied in
the latter part of the degree or diploma, and is preceded by the study of functional area courses in finance,
marketing, operations and personnel (Kazmi, 2006). A business policy course seeks to integrate the
knowledge gained in various functional areas so as to develop a generalist approach in management
students. Such an approach is helpful in viewing organizational problems in their totality. It can also create
awareness about the repercussions that an action taken in one area of management can have on other areas
individually, and on the organization as a whole.

The viewpoint adopted in business policy is different from that adopted in the functional area courses. For
instance, a marketing problem is not viewed purely as a problem of marketing ‘but as an organizational
problem. A course in business policy helps in understanding a business as a system consisting of a number
of sub-systems. Any action taken in one sub-system has an impact on other sub -systems, and on the system
as a whole. It is of vital importance for the top management in any organization to adopt such a systems
approach to decision-making. Business policy helps a manager to become a generalist by avoiding the
narrow perspective generally adopted by the specialists, and to deal with business problems from the
viewpoint of the senior management.

The problem of declining sales volume is apparently a marketing problem. However, an analysis of the
problem will show that its roots may probably lie anywhere in the organization. Declining sales volume may
be due to a rising level of competition, inefficient distribution, faulty sales promotion, inappropriate
recruitment policies, misdirected training, inadequate sales promotion, limited commission to sales
personnel, falling quality standards, a decrease in the variety of products offered, outdated design,
underutilization of capacity, demotivating credit policies and so on. a problem, which apparently seems to be
a marketing problem, may be due to factors not necessarily within the control of the marketing department.
A solution to the problem would necessitate transgressing the artificial boundaries between the functional
areas, each of which is looked after by a team of specialists. These specialists, due to their background,
training and, possibly, loyalty to their disciplines are unaware and ill-equipped to deal with all the problems
in entirety. They may come up with short-term solutions but these are only like first-aid to a victim when a
thorough diagnosis and treatment is required to mitigate the misery. A generalist, on the other hand, is better
qualified to deal with organizational problems and can come up with solutions that will have a lasting effect.
On the basis of the above discussion, we can say that the purpose of business policy is three-fold:
 to integrate the knowledge gained in various functional areas of management;
 to adopt a generalist approach to problem-solving,
 to understand the complex interlinkages operating within an organization through the use of a
systems approach to decision-making and relating these to the changes taking place in the external
environment.

Objectives of Business Policy

According to Azhar kazmi., he described the objectives of business policy in two terms which are in term of
knowledge and in term of skills. This description is found useful as its helps understands the business
environment and the determination of organisational mission, purpose, strategies and objectives. For further
justification we shall also discuss the objectives of business policy in term of attitudes

Knowledge Objectives
a. With the adequate knowledge of the environment, the assessment of the organisation’s vision,
mission, purpose, strategies, objectives, goals and policies are guaranteed.
b. It knowledge enables the strategists to execute the complex task of strategy implementation.
c. It helps to analysis the environmental (internal and external) which in turn create awareness of the
necessity of the organisation because it affords the organisation the opportunity to knowing its
relationship with the environment.
d. It helps to understand the various concepts such as strategy policies, plans and programmes involved
in business policy, which are also inherent in other functional areas
e. It assists the organisation with the approaches to problem solving and decision-making.
f. It enables learners to search for relevant literature that makes him know the researches in the field.

Skills Objectives
a. Knowledge expectedly leads to skills development, and its application in terms of case studies
analysis, their interpretation and also the business events analysis leads to skills development.
b. Knowledge of business policy provides students with the analytical ability skills required in
management cases and incidents analysis.
 c. the study of business policy leads to the skill of identifying the factors relevant in decision-making.
The analysis of the strengths and weaknesses of an organization, the threats and opportunities present
in the environment, and the suggestion of appropriate strategies and policies form the core content of
general management decision-making.
d. It increases the mental ability of the learners and enable them to link theory with practice. Such an
ability is important in managerial decision-making where a large number of factors have to be
considered at once to suggest appropriate action.
e. Business policy study, case analysis leads to the development of oral as well as written
communication skills.

Attitudinal Objectives
The attainment of the knowledge and skill objectives leads to the exhibition of an appropriate attitude among
the learners. The most important attitude developed through this course is that of a generalist. The generalist
attitude enables the learners to approach and assess a situation from all possible angles. By acting in a
comprehensive manner, a generalist is able to function under conditions of partial ignorance by using his or
her judgement and intuition. Typically, case studies provide only a glimpse of the overall situation and a
case analyst frequently faces the frustrating situation of working with less than the required information.
Experience has shown that managers, especially in the area of long-range planning, have to work with
incomplete information. A specialist would tend to postpone or avoid a decision under such conditions but a
generalist would go ahead with whatever information was available. In this way, he or she acts more like a
practitioner rather than a perfectionist.
For a general manager information and suggestions are important to possess a liberal attitude and be
receptive to new ideas. Dogmatism with regard to techniques should be replaced with a practical approach to
decision-making for problem-solving. In this way, a general manager can act like a professional manager.

It is important to have the attitude to go beyond and think when faced with a problematic situation.
Developing a creative and innovative attitude is the hallmark of a general manager who refuses to be bound
by precedents and stereotyped decisions.

The Nature of Business Policy

Before we proceed to understand the nature of business policy, let us witness these situations, as reported in
an issue of a reputed business magazine in India: ( Kazmi, 2006). Exide reaps the benefits of its strategies,
which include modernization, expansion, and acquisitions, to become the integrated leader in the battery
sector. Costly expansions and poor demand have forced JK Corp to rework its strategies. It is now banking
its future on its core paper business. This will come through the divestment of its cement division, Laxmi
Cements, and the acquisition of the Central Pulp Mills. Tisco is using divestments and mergers to restructure
its core businesses of steel, allied industries, refractory, and engineering. Exim Bank (the Export and Import
Bank of India), established in the early eighties with the objective of extending support to Indian exporters
and importers, still remains small given the Indian economy’s requirements. As it faces tough competition
from the scheduled commercial banks it needs a strategic vision to cope with the increasing competition in
the new millennium.
From the above reports, we can see that when a company either promotes a joint venture, divests a part of its
business, embarks upon an expansion programme, undertakes mergers and acquisitions or takes other
similar actions which have a long-term impact on its future operations and status, those are a result of senior
management decision-making. The senior management in any organization is primarily responsible for
guiding the future course of action and for providing a sense of direction. Business policy attempts to
inculcate the capability for senior management in one toward these ends.

(Kazmi, 2006), defined business policy is ―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 organization and shape its future. The problems of policy in business, like those of policy
in public affairs, have to do with the choice of purposes, the moulding of organizational identify 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 competition or adverse circumstances.

This comprehensive definition covers many aspects of business policy. Firstly, it is considered as the study
of the functions and responsibilities of the senior management related to those organizational problems
which affect the success of the total enterprise. Secondly, it deals with the determination of the future course
of action that an organization has to adopt. Thirdly, it involves a choosing the purpose and defining what
needs to be done in order to mould the character and identity of an organization. Lastly, it is also concerned
with the mobilization of resources, which will help the organization to achieve its goals.

The senior management consists of those managers who are primarily responsible for long-term decisions,
and who carry designations, such as, Chief Executive Officer, President, General Manager, or Executive
Director. These are persons who are not concerned with the day-to- day problems but are expected to devote
their time and energy to thinking and deciding about the future course of action. With its concern for the
determination of the future course of action, business policy lays down a long- term plan, which the
organization then follows. While deciding about a future course of action, the senior management are
confronted with a wide array of decisions and actions that could possibly be taken. The senior management
exercises a choice, on the basis of given circumstances, and which, in their opinion, would lead the
 organization in a specific direction. By moving in a predetermined direction, an organization can attain its
planned identity and character.

Importance / Role of Business Policies

Policies are the key for success of the business. Policies offer great advantages to the management if they
are stated with clarity. It raises the confidence of the line managers. They make the decisions within given
boundary. The managers act without the need for consulting the senior managers every time which
minimizes the need for close supervision. It also builds the confidence of the managers. The importance of
business policies is discussed as follows:
1. Control: Policy facilitates effective control on the working of the organisation. It indirectly controls the
managers at different level without directly interfering in their routine working.
2. Effective Communication: Generally, policies are written and well drafted statements. Hence there is
not a remote chance of confusion or miscommunication. By setting policies the management ensures
that decision made will be consistent and in the best interest of the organization. Clearly laid down
policies try to eliminate personal hunch and biasness.
3. Clarity: Policies clarifies the view point of the management for the purpose of running a particular
activity / activities.
4. Motivation: Policy enables the line mangers to be self-reliant. They take the decision on their own in
the confined border of the policy. This raises their confidence and motivates them. A well drafted
policy provides a pattern within which delegation of authority is possible.
5. Policy Review: Regular review of policy is must to see to it that the existing policies are relevant in the
given situation. If required policy may be modified or altered depending on the business environment.
Review of policy at regular intervals provides a method of anticipating future conditions and situations
and helps to resolving how to deal with them.
6. Economical and Efficient: Policy enables the management to carry out its operations effectively and
efficiently. It enhances the working of the organization.
7. Coordination of Efforts: Policies ensure coordination of efforts and activities at different levels in the
organization. Activities and duties are assigned in such a way that all activities in the organization are
integrated effectively. Policy coordinates with individual efforts.
8. High Morale: A well-crafted policy can raise overall morale of an enterprise. Policy enables the
mangers to understand the intention of the management.

Merits of Business Policy

1. They tend to serve as precedents and thus reduce the repetitive rethinking of all the factors in individual
decisions; they save time.
2. Clear policies help each manager to understand the range within which he can make decision and
thus feels less uncertain as to whether he can give answers to subordinates without ‘getting into trouble.’
3. Because they specify routes towards selected goals, policies help in evaluating performance.
4. Policies are ‘control guides of delegated decision-making’.
5. Good administration and implementation of policies naturally improves the working environment with
good labor-management relations.
6. Policies help the firm to clarify its objectives, guide planning for future operations, aid subordinates in
reaching operating decisions, facilitate overall coordination and control and act as yardsticks for
evaluating the quality of executive decision-making and action.
It is through policies that the organization’s objectives are achieved, better use of resources is ensured, social
responsibility is fulfilled in an increasing manner, personal satisfaction is obtained by the employees and the
management is enabled to take useful decisions.
Since policies emanate from good plans and since the actual performance of duties and activities depend
upon some means of directing future actions, planning and policies are closely related in the management of
an organization.

Demerits of Business Policy

 In order to create and implement a business policy, human resource is needed which is not cost
effective. 
 It restricts the business, as it cannot go beyond the set limits of the business policy.
 Financial Investment, the financial investment necessary to establish the rules at your business.
Whether you will choose to outsource or will assign this task in-house to development of your
workplace policies.
 Restrict Innovation, Business policies restrict innovation. there are many policies that do not allow
employees to make decisions or create something new.
 Creation of Frustration, When the business policies do not allow the employees to do something
new. Sometimes it creates frustration and depreciation into the employees.

Definitions: Policies, Procedure, Process, Programmes

Definitions of the term Policy, Procedures, Process and Programmes are stated below:
Policy and Procedure:
Ralph Devis defined “Policy is a statement of a principle or group of principles, with their supporting rules
of action that conditions and governs the achievement of certain objectives to which a business is directed.”
Policy is an internal law which guides the administrative actions in the organization. Policy indicates the
intention of the management. It serves as the guidelines within which decision makers are expected to
 operate. Policy is an aspect of planning, a guide for making administrative decisions and it indicates the way
of doing the things.
Procedures indicate certain steps to carry out a particular work. A statement of procedure is more specific
and concrete than policy. It highlights the chronological sequence of carrying out a particular activity.
Procedures involve planned sequence of operations. For example, every organization has its unique
procedure of processing order, payment collection or providing after sales service. Procedures are used to
indicate how a routine work can be performed. They are the means by which decisions are implemented.
Procedures needs to be reviewed and updated. This leads to work simplification, rationalization, increased
efficiency and reduced costs. The following table depicts the difference between the Policy and the
Procedure:

Difference between the Policy and the Procedure

S/N Policy Procedure
 Policy acts as a guide in decision making process. Procedure is guide to action.
 Policy is an aspect of planning. It is detailed plan indicating steps of carrying out a
particular activity or event.
 Policy to some extent has flexibility which Procedure is a rigid in nature. No permission to use
provides room for managers to use discretion in discretion.
certain cases.
 Policies need to be interpreted by its users while It lays down sequence in which a particular activity
using it. is to be carried out.
 Policy may be written, oral or implied. Procedures are always in writing.
 Policy is the creation of top management Procedures are developed by the line managers.

Policy and Process: Policy is a set of guiding principle used to set direction in an organization. A procedure
is a series of steps to be followed as a consistent and repetitive approach to accomplish an end result. The
difference between processes and procedures can be termed as breadth and depth. A process defines the big
picture. It highlights the main elements of business–breadth. A procedure captures those elements and adds
more information for functional responsibilities, objectives, and methods–depth.

Programmes: According to Oxford Dictionary Programmes means “A set of related measures or activities
with a particular long-term aim”. E.g. An extensive programme of reforms. Business Dictionary defines
programme as “a plan of action aimed at accomplishing a clear business objective, with details on what
work is to be done, by whom, when, and what means or resources will be used.”
Evolution of Business Policy as a Discipline
The origins of business policy can be traced back to 1911 when the Harvard Business School introduced an
integrative course in management aimed at providing general management capability. This course was based
on case studies which had been in use at the school for instruction purposes since 1908. However, the real
impetus for introducing business policy in the curriculum of business schools came with the publication of
two reports in 1959.
The Gordon and Howell Report sponsored by Ford Foundation had recommended a capstone course of
business policy which would give participants an opportunity to pull together what they have learned in the
separate business fields and utilize this knowledge in the analysis of complex business problems.

In today’s situation business policy is considered as a integrative course offered to those who have already
been through a set of core functional area courses.

Kazmi (2006) states that business policy is a mandatory course which is usually included in a typical
management study curriculum. According to him, almost all management education programmes offered by
the universities and management institutes in Nigeria include business policy course (by whatever
nomenclature it may be addressed) normally in the latter part of a degree or diploma programme.

The term “Business Policy” has been used traditionally though new titles such as “Strategic Management”,
“Corporate Strategy and policy” and so on are now used extensively for the course. The discussion has so
far been related to the academic status of the business policy course. In practice however, the development
has been along different lines.

The Genesis of Business Policy

Tracing the history of business policy, Kazmi (2006) stated that its can be traced back to 1911, when the
Harvard Business School introduced an integrative course in management aimed providing general
management capability. This course was based on case studies which had been in use at the School for
instructional purposes since 1908 (Christensen, et. al., 1982 cited in Kazmi, 2006). However, the real
impetus for introducing business policy in the curriculum of business schools (as management institutes or
departments are known in the United States) came with the publication of two reports in 1959. The Gordon
and Howell report, sponsored by the Ford Foundation, had recommended a capstone course of business
policy which would ―…give students an opportunity to pull together what they have learned in the separate
business fields and utilize this knowledge in analysis of complex business problems‖ (Kazmi, 2006). The
Pierson report, sponsored by the Carnegie Foundation, and published simultaneously, had made a similar
recommendation.
In 1969, the American Assembly of Collegiate Schools of Business), a regulatory body for business schools,
made the course of business policy a mandatory requirement for the purpose of recognition. In the last two
decades, business policy has become an integral part of management education curriculum. The practice of
including business policy in the management curriculum has spread from the United States to other parts of
the world. The contents of the course, teaching methodology and so on vary from institution to institution.
But basically, business policy is considered a capstone integrative course offered to students who have
already been through a set of core functional area courses. The term ―business policy‖ has been
used traditionally though new titles such as strategic management, corporate strategy and policy and so on
are now used extensively for the course. The discussion has so far been related to the academic status of the
business policy course. In practice, however, the development has been along different lines.

Evolution based on Managerial Practices

Guleck has viewed the development in business policy as arising from the use of planning techniques by
managers. Starting from day-to-day planning in earlier times managers till recently tried to anticipate the
future through the preparation of budgets and by using control systems like capital budgeting and
management by objectives.

However, as these techniques were unable to emphasis the role of the future adequately, long range planning
came into use. But soon, long range planning was replaced by strategic planning and later by strategic
management – A term that is currently being used to describe the process of strategic decision making.
Strategic Management forms the theoretical framework for business policy courses today.

Kazmi, (2006) have viewed the development in business policy as arising from the use of planning
techniques by managers. Starting from day -to-day planning in earlier times, managers, till recently, tried to
anticipate the future through the preparation of budgets and by using control systems like capital budgeting
and management by objectives. However, as these techniques were unable to emphasise the role of the
future adequately, long-range planning came into use. But, soon, long-range planning was replaced by
strategic planning, and later, by strategic planning – a term that is currently being used to describe ―the
process of strategic decision- making. Strategic management forms the theoretical framework for business
policy courses today.

Historical Perspective of the Evolution of Business Policy

Hofer et al., (1984) have viewed the evolution of business policy in terms of four paradigm shifts. For the
sake of convenience, these shifts may be considered as four overlapping phases in the development of the
subject, business policy. It is interesting to note that the development of business policy, as a field of study,
has closely followed the demands of real-life business. He further the first phase which can be traced to the
mid-1930s, rested on the paradigm of ad-hoc policy-making. The need for policy-making arose due to the
nature of the American business firms of that period. The first, which had originally commenced operations
in a single product line catering to a unique set of customers in a limited geographical area, expanded in one
or all of these three dimensions. Informal control and coordination became partially irrelevant as expansion
took place and the need to integrate functional areas arose. This integration was brought about by framing
policies to guide managerial action. Policy-making became the prime responsibility of erstwhile
entrepreneurs who later assumed the role of senior management. Due to the increasing environmental
changes in the 1930s and 40s in the United States, planned policy formulation replaced ad-hoc policy-
making. Based on this second paradigm, the emphasis shifted to the integration of functional areas in a
rapidly changing environment.

Increasing complexity and accelerating changes in the environment made the planned policy paradigm
irrelevant since the needs of a business could no longer be served by policy-making and functional area
integration only. By the 1960s, there was a demand for a critical look at the basic concept of business and its
relationship to the environment. The concept of strategy satisfied this requirement and the third phase, based
on a strategy paradigm, emerged in the early sixties. The current thinking – which emerged in the eighties –
is based on the fourth paradigm of strategic management. The initial focus of strategic management was on
the intersection of two broad fields of enquiry: the strategic process of business firms and the responsibilities
of general management.

The story is far from over. As Thompson and Strickland (1984) say, the approaches and methods of analysis
of strategic management ―have not yet coalesced into a theory ‘of how to manage an enterprise, but ―they
very definitely do represent a powerful way of thinking to resolve strategic issues‖.

Pointers to the Future

The resolution of strategic issues that affect the future of a business firm has been a continual endeavour in
the subject of business policy. The endeavour is based on the development of strategic thinking. As
Whitefield says ―really useful training (in strategic management should yield) …. a comprehension of a
few general principles with a thorough grounding in the way they apply to a variety of concrete details. Most
likely, the students will forget the details and principles but-remember (usually unconsciously) new, non-
obvious ways of thinking strategically (Kazmi, 2006). The general principles undergirding strategic thinking
have been the focus of the efforts of researchers and academicians in the field of business policy. What,
then, are these general principles? As a first step, the model of strategic management that has developed so
far, and is under constant review, incorporates these general principles.

The direction in which strategic management is moving can be anticipated from what (Ansoff, 1984) calls
an emerging comprehensive approach of ―management of discontinuous change, which takes account of
psychological, sociological, political, and systemic characteristics of complex organizations‖. With the
emergence of futuristic organizations, which, in the words of Toffler, are no longer responsible simply for
making a profit or producing goods but for simultaneously contributing to the solution of extremely complex
ecological, moral, political, racial, sexual, and social problems, (Toffler, 1980) the demands on business
policy are expected to rise tremendously. The general managers of tomorrow may be called upon to shoulder
a set of entirely new responsibilities necessitating a drastic review of the emerging concepts and techniques
in business policy. Responding to the need for evolving new approaches to the teaching of business policy,
the AACSB no longer insists on the provision of just one course in this area. Now there is an emerging trend
to have several courses, such as, the theory of strategic competitive strategy, industry dynamics, hyper-
competition, and global strategy in the curriculum (Kazmi, 2006).

Qualities of a Good Policy

Wikipedia (2012) states that company policies are most effective as official written documents. While
policies often differ in form depending on company size, industry, and length of time in business, policy
documents generally contain certain standard components including:
 Purpose Statement, outlining why the organization is issuing the policy, and what the desired effect
or outcome of the policy is.
 Specifications, including statements indicating the specific regulations, requirements, and
organizational behavior that the policy is creating.
 Implementation section, indicating which parties is responsible for carrying out individual policy
statements and how policy adherence will be ensured.
 Effective Date, which indicates when the policy is considered in force (an executive signature or
endorsement can be useful to legitimize the policy).
 Applicability and Scope Statement, describing whom the policy affects and which actions are
impacted by the policy.
 Background, indicating any reasons, history, and intent that led to the creation of the policy, which
may be listed as motivating factors.
 Definitions, providing clear definitions for terms and concepts found in the policy document.
Structure of policy
The structure of policy in formal organisation has hierarchical shape that is directly analogues to the
pyramid of management, which includes;
i. Major policy
ii. Secondary policy
iii. Functional policy
iv. Minor policy
v. Standard operating procedures
vi. Rules

Steiner‟s Pyramid of Business Policies

Major Policies: Major policies are formulated at the top of the organization and relate to the company‘s
main purpose. They provide guide line pertaining to such things as the line of business and ethical conduct
of organization.
Secondary or Corporate Policies: These policies are broad and general policies formulated at the upper
levels of management of the organization. These policies apply to the entire organization and deal with
business facets such as the selection of major products and services and the selection of marketing areas.
Much of the information generated in the proper formulation of major policies can be used in determining
secondary policies, which are more specific than major policies.
Functional Policies: These deal with specific functional areas of the organization. They involve policies
that specifically related to marketing production, finance, and other functional areas. For instance, the ABC
Transport Company will accept customer exchanges or returns made within one month after purchase is an
example of functional policy related to marketing.
Minor Policies: They are subordinate to functional policies and define in details such matters as
maintenance of equipments, schedules, plant layout, absenteeism etc.
Procedure: This is a series of related steps or related steps or tasks expressed in chronological order to
achieve a specified purpose. Procedure defines in step-by-step fashions the method by which policies are
achieved. They outline precisely the manner in which an activity must be accomplished. Procedure generally
permits little flexibility and deviation.
Rules: This is a statement of what may, must or must not be done in a particular situation or when playing a
game. It explains in a lucid manner what an employee should do or is advised to do in a particular situation.
You can also describe rules as the habits, the normal state of things, or what is true in most cases. Finally, a
rule is a statement of what is possible according to a particular system. Rules permit the use of discretion in
performing a particular task.

Sources of Policy
Kalejaye (1998) examined the major sources of policies and classified them as originated, appealed, implied
and externally-imposed. These are explained as follows:
Originated Source – The most acclaimed source of policies is the one from top management which
originates for the express purpose of guiding the company’s operations. Originated policies flow basically
from the objectives of the enterprise, as they are defined by top executive authority. These types of policies
may be broad in scope, allowing key subordinates to give them clearer definition or they might be
promulgated so completely and comprehensively as to leave little room for definition or interpretation.
Appealed Source – In practice, in most cases, policies stem from appeal through the hierarchical level of
management authority. If occasion for decision arises for executives who do not know whether they have
sufficient authority or how such matters should be handled, they appeal to their supervisors for the necessary
support and action. As appeals are taken upward and decisions are made on them, a kind of rules and
procedures are established. Precedent, therefore, develops and becomes guides for future managerial action
and serves as reference point.
Implied Source – Useful policies are developed from the actions which employees see about them and
believe to constitute them. Employees will readily understand what real policy is if they work for a company
that operate policies that produce high quality goals, or sound labour policy, for instance, though the real
policy is implied.
Externally-imposed Source – To a large extent, policies are externally-imposed by such agencies as the
government, trade unions, professional associations and others like trade association. This might come in
form of direct regulation or one of the many conditions of accepting government aid or contract; it could
also be to maintain industrial peace. Besides, local and state governments, professional associations, social
and charitable organisations do influence the policies of organisations.

Types of Policies
Policies are classified on several bases. They may be classified into several categories, which are discussed
as follows:
A) According to the Nature of Origin:
a. Originated Policy: These policies are formulated by the top management or managers. The purpose
of this policy is to serve as guidelines to the subordinates and their working. The policy act as guide
for the managers at the lower levels. The policies are formulated for the benefit of their own
subordinates. E.g. Marketing Head may formulate policies and handover to the junior executives for
implementation. The policy formulated by the marketing head is called as Originated Policy.
b. Imposed Policy: The policy imposed by some external forces like state or central government. The
policies are binding on the organization. Labour ministry formulates policy as regards to labour are
binding on the organization. It cannot be avoided.
c. Appealed Policy: When certain exceptional situation arises at that time the manager may make an
appeal to his superior for deciding on such problem. The policies are framed to handle such current
unpredicted situation. Formulation of appealed policy on regular basis may hinder the work
performance. To avoid this appealed policy should be replaced by the originated policies.
B) According to the Organizational Structure:
a. Internal Policy: Internal policies are designed by the management and act as guidelines to the
subordinates. It establishes rules and parameters within which subordinates have to operate. It creates
realm for subordinates working. The examples of internal policies are recruitment and selection policy,
budgetary policy etc.
b. External Policy: Such policies are framed to tackle the external problems. Organizations redesign or
frame new policy in reply to the environmental factors or forces. eg. Change in pollution norms by the
state government will compel the organization to reframe their environmental policy in accordance with
the changed norms. Hence a change in policy on account of external factors like enactments and
circulars of government is an example of external policy.
C) According to the Mode of Expression:
a. Written Policy: Policies expressed in the form of written statements are called as written policies. It
avoids confusion and misunderstanding. It is always advisable to have policy in written format. These
policies define boundaries within which decision needs to be taken by the subordinates.
b. Oral Policy: A policy issued mere by word of mouth is termed as oral policy. These policies are easy to
communicate as compared to written policy. Oral policies are simple and quick to exercise. If the
 policies are not defined clearly it may create confusion amongst the employees. With the passage of time
there are chances that the policy may be forgotten or misinterpreted.
c. Implied Policy: Implied policy is neither written nor oral policy. It is being followed conventionally.
Such policies can be inferred from the mere behaviour of subordinates or managers. They are not
explicit or expressed policies. E.g. Company produces goods in the price range which is comfortable to
middle class people. This indicates that the intention of the company is to serve the middle-income
groups.
C) According to the Importance:
a. Basic Policy: It implies the fundamental philosophy of the enterprise. Basic policies are framed by the
top management.
b. Major Policy: These policies are concerned with the major issues and concern of the organization. Eg.
Promotion Policy, Distribution Policy etc.
c. Minor Policy: To tackle routine matters, minor policies are decided by the line managers. It may relate
with the amount of discount, time of delivery of product etc.
D) According to the Scope:
a. General Policy: These policies are framed by the middle level management.
b. Specific Policy: Policies which are not general are specific policies. E.g. Departmental policy.
c. Directive Policy: A directive policy is essential when decentralized discretion is not possible or when it
may be contrary to the best interest of the company as a whole.
E) According to the Levels of Management:
a. Top Management Policies: These policies generally cover long range planning. They are decided by
the top management. E.g. Budgeting and Product Launching etc.
b. Upper Middle Management Policies: These policies are decided by the departmental head. But while
framing such policies, manager should link it with the major policies of the organization.
c. Middle Management Policies: The superintendant or junior manager frames these policies. The
policies may relate to sales, finance etc.
F) According to the Situation:
1. Normal Policy: To guide employees about day to day work such policies are framed. Future is uncertain
and unpredictable hence these policies act as guidelines to the employees.
2. Contingent Policy: These policies help the subordinates to handle uncertain and abnormal situation.
G) According to the Function:
1. Administrative Policy: These policies are concerned with the administration of the organization. It covers
broad area of administration. Such policy aims at controlling the staff.
2. Composite Policy: It is a policy that is made out by combining the policies submitted by every department.
Each department submits their policy to the budget officer who prepares consolidated statement in a
coordinated manner. Such policy statement when approved by the Board is called “Composite Policy”.
3. Supplementary Policy: The issues not covered by the composite policies are covered under supplementary
policy.
4. Departmental Policy: The policies prepared by individual department for their routine working are called as
departmental policies. E.g. Personal Department Policy.

Factors Considered Before Framing Business Policies

Policy implies broad form of guidelines. Policy comes first and strategy comes later. For example,
recruitment to top positions will be from outside of a policy in an organisation. For adherence to that policy,
organization needs strategies for recruitment from outside.
Over a period of time because of changing business environment and growing competition, business policies
of many companies evolved into specific strategic processes. Formulation of policy is the responsibility of
the top management, while formulating corporate policies, the board has to take into account several factors.
The philosophy, the approach of the organization needs to be considered while framing business policies.
For any business such policies should be properly elucidated and correctly understood by all concerned. For
effective formulation of policy one should take into account the following aspects:
1. Policies should be based on organisational objectives.
2. Policies should be capable of relating objectives to functional areas.
3. Policies should follow accepted standard of business.
4. Policies should be definite understandable and preferably in writing.
5. Policies should be stable and flexible.
6. Policies should facilitate effect and coordinated among functional areas.
For sound policy making following are the critical factors;
a. Relationship to organization objectives: The policies should be based on organizational objectives.
In other words, while framing policies one should take into account for what purposes and objectives
the business has been established and how this can be best achieved. The policy should reflect the
principles, practices and philosophies. If the policy fails to relate organisational objectives and
personal objectives of individuals and groups, then the firm will find it difficult to achieve its
objectives.
b. Simple understandable: The policy should be stated in definite, positive and clear understandable
terms. Understanding of policy is important on the part of those affected by it. Clarity is the essence
of good policy. If the policies are clear cut, then personal opinion will not affect in decision making.
 c. Written policies: Policy should be written so that they can be integrated within system and policy
manuals. According to Henry Carl a policy conceived as admin tool does not exist unless it is in
writing. When the policies are in writing, it ensures uniformity of freedom of action on the part of the
management.
d. Stable: The policy must be stable but should not be rigid. When the policies are stable, they inspire
confidence in the mind of the employees, customer and dealers. Policy should not be modified or
altered frequently but should be stable for fairly long time, may be two or three years. If the policies
are changed on regular basis it may create confusion in the mind of those who are going to follow
them. It is essential that policy should be reviewed, evaluated and revised as per the change in the
market condition or urgency of the company and changes in the environment. The policy should be
flexible; it means it should be able to adapt to short term changes.
e. Comprehensiveness: The policy should be comprehensive. It should cover all issues concerned with
the firm.
f. Complementary to one another: All policies in the functional areas must be complementary to one
another. E.g. Manufacturing policy and purchase policy should be complementary to each other.
g. Supplementary to overall corporate policies: Supplementary policies add to and extend overall
organisational policies. They are derived from policies that are directed towards the achievement of
economic objectives and can be broken down into supportive policies. If the policies are not
supplementary, there might be conflict between departmental policy and overall policy.
Precautions need to be taken in policy framing as the policy involved large sum of money and unsound
decision may in danger the companies bargaining power. Therefore, following needs to be considered before
framing policies:
 What purpose and objective will it serve?
 What principle, concept, practices and philosophies of organisation will it protect?
 How much would be the cost of implementation?
 Is it feasible to implement the policy?
 What areas will it cover?
 Will it be acceptable to all?
In short while framing policies the objectives of the business firm, its management structure, financial
resources available at its disposal, attitude, social values and norms of the top management, policies of sister
concern, government rules and regulations and public opinion need to be considered. A company you can
never evade responsibilities towards the society and therefore policies must incorporate the statement that
reflects organization’s interest in the welfare of the society. Ethical values should be given due
consideration.
Steps Involved in Framing Business Policies
Policy formulation is a process of determining and laying down general principles on the basis of which
business will be operated. Policy acts as guidelines to the manager. Policy provides and guide for decision
making and act as a framework for organisational activity. Policies involved standing decision which are to
be followed at different level in the organisation. The policies framed by top level management act as a
guide for formulation of lower level policies. For example, product policies are normally determined by top
level management. But this policy requires some supplementary policies like R&D, pricing, advertising etc.
Manager at low level may decide about the supplementary policies.
Policy formulation involves following steps:
1. Identification of the Situation: Policy framing is not a simple task. It is a complex process which
requires the help of the experts. The policies are required to reflect the good practices in society.
Policy making involves all levels in the working organization.
2. Problem Definition: This is an important step in policy formulation. It involves identification of
problem and determining the need for framing policy. Normally it is the function of line manager to
identify the problems in their respective department. Once the problems are identified the top
management will try to analyse pros and cons and will work out possible alternative preposition and
finally determine policy needs.
3. Policy Recommendation: The next step is policy recommendation which will suit the situation. This
depends on the level at which policies are formulated. A manager has to make choice among the
various proposals. He has liberty to accept or reject the proposal according to their suitability. If he
feels he may modify the proposal to suit the working condition.
4. Policy Proposal: The departmental managers have to develop policies related to their areas in
accordance with corporate policies. Policies framed should be based on the guidelines provided by
the overall corporate policies. The purpose of the policy is to guide the lower level management and
the operative in making decisions. Each departmental manager will submit the departmental policy
statement to the Managing Director.
5. Development of Policy: The draft policy should be given wide publicity among all who may be
expected to operate. The purpose is to receive constructive criticism and suggestions. This leads to
formulation of sound policies which are developed after detailed discussion. The middle management
gets involved from their relative areas of responsibility. When policies are framed and developed in
this manner, these policies will stand the test of time and will hold even under condition of stress.
6. Dissemination the Policy: Once the policies are formulated in clear, precise, simple statement in
accordance with principles and rules of action, it must be disseminated to those who are responsible
for its implementation. Sometime policy is promulgated by word of mouth or at meetings and
seminars. In certain cases, company may publish handbook of the policy.
 7. Explanation of the Policy: Once the policies are disseminated, it is necessary to explain and educate
the exact meaning of the policy. The person concerned with implementation of such policy should be
explained in clear terms all aspects of policies which includes purpose, components significance and
its relevance the role of the person who is going to implement. It is also necessary to educate the
person that how that policy relates with overall organisational goals of the company. Company may
use different methods and techniques like elucidation, explanation, illustration, demonstration,
simulation and case studies etc. for dissemination.
8. Acceptance of the Policy: Before accepting the policy the persons related with its implementations
of the policy, must understand the principles underlying it and rules of action. Once the policy is
operative, questions will arise and these questions require interpretation by the top management. The
interpretation gives an opportunity to the policy maker to modify and improve it as per the situation.
9. Policy Implementation: Policy once formulated and interpreted needs to be implemented. Policy
implementation is a process of putting policy into effect. Managing Director being the executive head
is ultimately responsible for policy implementation.
10. Policy Review: The most important task is to assess policy at regular interval. There should be
continuous review of policies. It helps us to know whether the policy has been effective in the areas
at which it was aimed. The opinions, complaints, reactions, comments or suggestions are received
from the persons entrusted with the implementation of the policy. The effectiveness of policy can be
judged on the basis of net profit, investment earnings per share or on the basis of qualitative
measurement like internal consistency of the implemented policy, consistency with the external
factors, appropriateness and workability.

Policy Cycle and Its Stages

The policy cycle is a tool used for analysing the development of policy framing.
Cycle divides the policy framing process into several stages. It starts right from notional starting point at
which policy maker think about a particular problem and to come out with policy and till its end that is its
implementation. Policy formulation is a continuous process and not mere single event.
i. Agenda Setting: Organisation faces many problems and issues which requires management to take
immediate attention. It is the responsibility of the policy maker to decide on which matter or issue is
important and which one to be tackled on urgent basis. The policy framing starts with defining and
identifying the problem. It is rightly said that problem known is 50% problem solved; hence it is the
core responsibility of the policy framer to correctly diagnose the problem. Once the problem is
identified policy framing becomes easier task.
ii. Policy Formulation: Once the problem is identified, efforts are made to resolve the problem by
framing right policies. Objectives are set so that it will become easier for the implementer to
understand the underlined purpose of policy framing. Once the policies are formulated, it is essential
to find out its commercial feasibility. For this purpose, it becomes essential to identify the cost and
estimating the effect of solution. It is the critical job to select the best policy amongst many.
iii. Legitimation: It is not enough to formulate the best policy but it is equally important to get it
accepted by those who are going to implement it. The policy framer had a challenging task of getting
support for the policy. It can involve one or more combination of legislative approvals, executive
approval, seeking consent through consultation with affected group / interest groups. It is one of the
important steps in policy cycle.
iv. Implementation: After educating policy and getting consent from the concern, the next step is to
implement the policy. Establishing and employing an organisation to take responsibility for
implementation is the critical factor. For implementation, all the resources like money, material,
 manpower, finance legal framework and so on should be made available. This will ensure effective
implementation of policy. If the resources are properly made available, it will enable smooth
execution of the policy. Here attention should be made on the fact that decisions needs to be carried
out as planned.
v. Evaluation: Once the policy is implemented it becomes essential to know whether the policy was
able to achieve the desired results. Assessment of the policy requires knowing the extent the policy
was successful or whether the policy decisions were correct ones. It will be called successful if it
gives the desired results. If there is any deviation necessary steps should be taken.
vi. Policy maintenance or termination: If the policy fails to give desired outcome then it should be
modified. If the policy is not suitable to the present situation, then it should be discontinued.
The policy cycle is useful in many ways. It can be applied to any kind of organization.

Implementation of Policy Change

Change is a major part of our lives, whether it is change in industries, technologies or various sectors such as
transportation, education, health care, social policies or organizational policies.
Change refers to any variation in the working of the organisation. Change is vital. It is essential for survival,
growth of any organisation. A company may like to change its machinery due to advancement of
technology. It may change its pattern of distribution. Those companies who are able to manage change will
get competitive edge in the market. Today change is seen in every functional area. There are changes in
ownership or control of a company, changes in the management, changes in the availability of fund in the
organisation. When there is change in the company, the level of anxiety arises. Individuals become anxious
during change and resist it even the changes could be for their betterment.

Level of Changes
1. Knowledge Change: A change in knowledge comes through education and learning process. Sometimes
it occurs due to experience of the people.
2. Attitudinal Change: The change is brought about in the attitude of the people. The attitude may be
positive or negative. The change in attitude can be brought in by several motivational approaches.
3. Behavioural Change: This change is brought because of change in the behaviour of a person. It is very
difficult to notice such change in short span of time.
4. Organisational Change: Organisations involving changes in the norms, customs and belief of the people
at large have to initiate it in a planned manner.
Thus change is a way of life. People may accept it, if that change is beneficial to them or may resist, if they
think the changes are going to affect them negatively.
Sources of Policy Change
Business policy is influenced by internal and external factors which are highly dynamic in nature.
Technology is by far the major source of change. New opportunities for the profitable exploitation of
technology are constantly affecting business strategy. In order to gain market, organisations are constantly
redefining their goals and policies, developing new products and services, changing the style of operation,
acquiring new resources. Due to rapid development in the market conditions, organisations have to be
dynamic and respond to changes in the environment. The stimulus for change in existing policies comes
from various sources.
1. The Changing Need of Customers and Clients: The demand for products never remain constant. There
is always change in customer expectations. The changing nature of demand can be best illustrated by
product life cycle. The life cycle of different product varies considerably. For example, the Tape
Recorders have a very short life, on the other hand some products like soap have been in the market since
Victorian Times. Different products have different product life cycles. It is to be noted that very few
products remain successful in definitely. Changing nature of demand thus is the permanent feature of
business activity.
2. Need to Solve Problems: There are political, economic and social problems. These problems require
application of technology which causes change in the working of the organisation. Sometime the solution
to the problem requires in depth research and development which leads to development of research areas
for example information and technology, satellites etc.
3. The Need of Efficiency: No organisation can survive without improving their productivity and
efficiency.
4. Problems of Change: Change is not easy; several problems are associated in the process of change in
the business organisation. It is always not possible to get the expected results from the change. There is
always discrepancy between expectations and achievement. The reason for this is gap between expected
and actual results. People feel uncomfortable when their established role is threatened by change.
a. The failure to define in a quantitative term the result that are expected from change creates problem.
b. The fear among the individual that his previous experience and skill will no longer apply. This is
called resistance to change and may be expressed indirectly rather than directly.
c. The changes which are being introduced demand new approach style as the result of different
method of working.

Strategies for Management of Change

Business organisations are always changing and constantly redefining their policies to suit the changes.
Adaptability is the Key. Considering this, organizations goes on developing new products and services,
acquire new resources, introduce new systems and techniques of management. They are constantly faced
with need to manage change and not merely react to change.
Changes in technology have created new dimensions and great uncertainty. We can see the changes in the
social institution, in the economic environment, industrial policy, government expenditure and logical
breakthrough providing labour time saving devices and giving new dimension to changes to adapt for better.
For effective management of change there is a need to develop appropriate strategies and structure. Modern
business is more complex due to technological, economical, political, social and legal environment. Today
the business is carried out within the given framework of rules and regulations. To manage change
effectively there is a need to change the attitude of the people. The people who are going to get affected
need to be convinced about why the change needs to be implemented and should be persuaded about the
required changes.
The process of change has its own typology, which indicates either an incremental or abrupt process of
change. The result of change is divided into continuity or discontinuity. For instance, with incremental
change and continuity, we would expect reproduction by adaptation. But when change is abrupt and there is
discontinuity, we would expect breakdown and replacement of the institutions. The table below presents all
the options.
Result of change
Continuity Discontinuity
Incremental Reproduction by adaptation Gradual transformation
Process of change Abrupt Survival and return Breakdown and Replacement
Source: Streeck and Thelen 2005: Pg. 9.

The changes would be successfully implemented when there is coherence, stability, peer support, proper
training and engagement. Successful implementation implies that ‘agencies comply with the directives of the
statues. Agencies are held accountable for reaching specific indicators of success, goals of the statute are
achieved, local goals are achieved or there is an improvement in the political climate around the programme.
The implementation process is characterised by a ‘multi-staged, developmental approach.
There are number of conditions need to be satisfied to enhance the change successfully. These conditions
vary across the organisations. This adds to the difficulty of the whole process of implementation of change.
There are basically two major approaches to change i.e. top-down and bottom-up approaches. These are
widely used concept in the policy implementation and change. The two approaches vary in a number of
areas like the role of decision makers and their relationships and the type of policies.
a. Top-down approach: Top-down theorists see policy designers as the central actors and concentrate
their attention on factors that can be manipulated at the central level. Sabatier and Mazmanian (1979),
who identified a number of legal and political variables and then synthesised them into six conditions
 needed for effective implementation. These variables ranges from clear objectives, causal theory, legal
structure of the implementation process, committed officials, supportive interests’ groups to no
undermining of changing socioeconomic conditions. ‘Top- downers’ usually prioritise clear policies.
Strengths and weaknesses: The major strength of the top-down approach is that it seeks to develop
generalisable policy and come up with consistent recognisable patterns in behaviour across different policy
areas. But top-down approaches are criticised for only taking statutory language as a starting point and
hence do not consider the significance of previous actions. This approach considers implementation as an
administrative process and ignores or eliminates political aspects.
b. Bottom-up approach: Bottom-up theorists emphasise target groups and service delivery personnel,
arguing that policy is made at the local level. Scholars of this approach thus criticise top- down theorists
for only taking into consideration the central decision-makers and neglecting other actors.
The bottom-up approach, developed by Hanf, Hjern and Porter (1978), identifies the networks of actors who
are involved in service delivery in one or more local areas and asks them about their goals, strategies,
activities and contacts. Then it uses the contacts in order to develop a networking technique. This approach
involves everyone in the policy change from lower level to upper level.
Strengths and weaknesses: Bottom-up approaches do not present prescriptive advice, but rather describe
what factors have caused difficulty in reaching stated goals. It is significant that strategies are flexible so that
they can be easily adaptable to suit the situation based on the views of the service delivery personnel.

Role of Policies in Strategic Management

Policy refers “to specific guidelines, methods, procedures, rules, forms, and administrative practices
established to support and encourage work towards stated goals”. Policies act as a empowerment tools. It
simplifies decision making process. The actions of the managers and their subordinates are guided for
effective strategic decision making. Policies provide standard operating procedure. Policies are important
tool in strategic decision making process. Policies promote uniform thinking and handling of similar
situation. Frictions of actions are either eliminated or reduced. Policies ensure quick decision as they are
written guidelines on routine problems face by the organization. It empowers employees. As the policies are
normally written, it reduces uncertainty in day today decision making. It provides pre-determined solution to
a particular problem of recurring nature.
It also establishes consistency in decision making process and pattern of managerial action. It has been
observed that policies reduce resistance to organizational strategies. Policies act as a tool which indirectly
controls independent action of the subordinate manager. It improves job performance of the individuals.
Policies help to understand business environment which in turn will enable the firm to plan its activities and
strategies to tackle the environmental challenges.
Policies are designed to guide the behaviour of managers in relation to the pursuit and achievement of
strategies and objectives. Policies are instrument for strategy implementation. Policies act as specific guides
to managerial action and decisions in the implementation of strategy. Policies and procedures help in
strategy implementation in several ways:
1. Policy institutionalizes practices which are strategy-supportive.
2. They also facilitate development of operating procedures throughout the organization which enable
implementation of strategies.
3. Policy reduces uncertainty in repetitive and day-to-day activities of the organization. It helps in the
direction of efficient execution of strategy / strategies.
4. It curtails discretionary decision and behaviour of the individuals. On the other hand, procedures imply
steps how things are to be handled.
5. Policy helps to establish a fit between corporate culture and strategy which enable proper
implementation of the policies.
6. Policy helps to shape the character of the working environment. It translates the corporate philosophy
into how things are to be done, how people are treated.
7. It reflects out what corporate beliefs and attitudes mean in terms of everyday activities.
8. Alignment of actions and behaviour with strategy is possible due to policy. This avoid conflicting
practices.
9. Because of policy, there will be consistent patterns of action in terms of how the organization is trying
to make the strategy work.
The existence of a policy can only be justified if it leads to the achievement of the organization’s objectives.
Policies should be consistent. Policies which conflict with each other should be avoided. Policies should be
flexible.

Business Policy and Decision Making

Policies flow from planning. Policies act as a useful connection between goals and actions. Business policies
are statement of directions, guidance for corporate thinking, corporate behaviour and action. Therefore,
policies cover very broad area; it takes into account approach of business and challenges and problems
arising out of the external environment in particular. Therefore, the policies cover wide variety of subjects
and broad base. Every possible matter that affects the interest of anyone in the organisation, the community
and the government is included. It covers functional areas of the business. As a guide for making decisions
policies provide the following advantages.
1. Save Time: Policy tends to serve as precedents and reduce repetitive rethinking of all the factors
while making decisions by the individuals.
2. Coordination: As policies are in writing and communicate same message to all, it aids in
coordination. As number of individuals guided by the same policies, it is possible that can predict
accuracy in decisions of others.
3. Stability: Policies bring in portability in the organisation. There is certainty of action. Even though
top management frames the policies, the action remains same. Normally policies are framed for
long time hence it promotes stability in the organisation. Due to this it diminishes frustration among
the members.
4. Definite Decision: When the policies are clearly defined it encourages definite individual decision.
This is because each manager has clear understanding of the range within which he can make
decisions. He is more confident as he makes decision in accordance with policy framework.
5. Evaluation of Performance: Policies specify route towards selected goals. Policies act as a
standard or measuring yard for evaluating performance. The results can be easily compared with the
policies to determine whether the decisions are well within the boundaries of the policies. It also
helps to determine how well the members of an organisation have lived up to their professed
intention.
6. Loyalty: When the policies are sound in nature it creates enthusiasm among the employees. They
remain more loyal towards organization. This is possible when the policy reflects established
principle of fair play and justice.
7. Initiative: When the policies are properly administered and implemented it encourages initiative
among the employees. This creates feeling of ownership and they work hard with full responsibility
to work.
8. Image Building: Corporate policies act as an image builder in the eyes of the general public. Good
image will bring more reputation and goodwill which will enhance sales and profitability. With the
increased profitability, organisation may undertake social responsibility on a larger scale.
9. Optimum Use of Resources: Clarity in policies, its relevance and reasonableness enable optimal
utilization of resources. The wastages can be avoided which will improve efficiency and
productivity of the organisation.
 10. Control Guide: Policies act as control guides for delegated decision. Because of the policy there
will be consistency and uniformity in the decision making process on a particular problem which
occur frequently and under similar but not identical situation.
11. Confidence: Policies set the pattern of behaviour. It permits participants to plan with greater degree
of freedom and confidence. It leads to coordination amongst the departments.
Thus policies clarify organisational objectives, guide planning and help subordinate in decision making. It
also facilitates coordination and Control. Policy acts as a yardstick for measuring performance of the
individuals and the quality of their decision making ability. Organisational objectives can be easily achieved
if the policies are clearly defined and understood by those who are going to implement it. The scarce
resources can be optimally used and organisation can fulfil their social obligations in an effective manner.
References
https://www.managementstudyguide.com/business-policy.htm