Bba 400 Module Revised 2019 November To Dsvol

KENYATTA UNIVERSITY
DIGITAL SCHOOL OF VIRTUAL AND OPEN LEARNING IN
COLLABORATION WITH SCHOOL OF BUSINESS

BUSINESS ADMINISTRATION DEPARTMENT
UNIT CODE: BBA 400
UNIT TITLE: BUSINESS POLICIES AND DECISIONS
WRITTEN BY:
MRS ESTHER W. GITONGA

INTRODUCTION
This is the highest level of management course to undertaken in the B.com degree in
KU. Its contents are structured in such a way that all the students from the various
departments in the School of Business can identify with irrespective of their areas of
specialization.
 Business policies may have two perspectives. First as the guidelines used in
decision making processes 2nd as long term plans of action.
 Their contents of this unit are based on the perspective adopted in the University
Calendar – i.e. the 2nd perspective of Business Policies may have two
perspectives.
 This perspective adopted helps to view Business Policies as the long term
decisions that govern the operations of the business. The students will therefore
relate with the long term planning of the business irrespective of their
specializations.
 This module is divided into seven sessions as per the table of contents. Each
session has objectives to help guide you through the different lessons to be
learnt.
OBJECTIVES
This course is intended to help you to identify and related to all operational areas of the
business such that when you have a managerial position you can make well informed
decisions.
This overall objective is divided into three sections:

1. That you should be able to design business policies for an organization of your
choice
2. That you should be able to subjectively and objectively critic business policies
from different organizations
3. That you should understand the general framework for policy development
TABLE OF CONTENTS
1. Nature and scope of Business Policies

1.1: Introduction
1.2: Lesson Objectives
1.3: Lesson One: Nature and Scope
1.3.1: Definitions
1.3.2: Characteristics of business policies
1.3.3: Trends influencing policies
1.3.4: Importance of policies
1.4: Summary
1.5: Activities
1.6: Further readings
1.7: Self-Test questions
2. Social responsibility, Ethics and Policy decision
2.1: Introduction
2.3: Sub Lesson One: Scope of Social Responsibility
2.3.1: Definitions
2.3.2: Dimensions and Nature of Stakeholders
2.3.3: Areas for Social Responsibility
2.4: Sub Lesson Two: Tools in decision making
2.4.1: Importance of social responsibility & Ethics
2.4.1: Challenges of social Responsibility & Ethics
2.5: Summary
2.6: Activities
2.7: Further Readings
2.8: Self-Test Questions
3. Environment and Environment scanning techniques
3.1: Introduction
3.3: Sub Lesson One: Environment Analysis
3.3.1: Definitions
3.3.2: Sources of Information
3.3.3: Reasons for Analysis
3.4: Sub Lesson Two: Techniques of scanning
3.4.1: techniques
3.4.2: Current Trends
3.5: Summary
3.6: Activities
4. Business Policy formulation process
4.1: Introduction
4.3: Sub Lesson One: Definition and Phases of formulation
4.3.1: definitions
4.3.2: Time Based Approaches
4.3.3: Thrust Based Approaches
4.4: Sub Lesson Two: Policy Orientations
4.4.1: Stability Orientation
4.4.2: Growth Orientation
4.4.3: Retrenchment Orientation
4.4.4: Combination Orientation
4.5: Summary
4.6: Activities
4.7: Further Reading
4.8: Self-Test questions
5. The process and tools used in choice of policies

5.1: Introduction
5.3: Sub-Lesson One: Definitions and constraints
5.3.1: Definitions
5.3.2: Constraints of choice
5.4: Sub-Lesson Two: Analytic Models.
5.4.1: Boston Consulting Group Matrix
5.4.2: Business Planning Matrix
5.4.3: Strategic Budgetary Process
5.4.4: Ansoff’s Product Market matrix
5.4.5: Limitations of the tools
5.5: Summary
5.6: Activities
6. Business Policy implementation and challenges

6.1: Introduction
6.3: Sub-Lesson One: Implementation
6.3.1: Definition
6.3.2: Implementation process
6.3.3: effective implementation
6.3.4: Elements of implementation
6.3.5: Factors considered
6.4: Sub-Lesson Two: Tools for Resource allocation
6.4.1: Boston Consulting Group matrix
6.4.2: Business Planning Matrix
6.4.4: Product life Cycle
6.4.5: Policy in relation to management
6.4.6: Policy in relation to Organization Structure
6.4.7: Policy implementation Controls
6.4.8: Problems during implementation
6.5: Summary
6.6: Activities
7. Evaluation: review and monitoring of policies

7.1: Introduction
7.3: Lesson Seven: Review
7.3.1: Definitions
7.3.2: Criteria for Evaluation
7.3.3: Frequency of Evaluation
7.3.4: Challenges encountered
7.4: Summary
7.5: Activities
7.7: Glossary
References
EVALUATION:
1. SIT – IN – CAT………………………………………………………...15%
2. TAKE AWAY ASSIGNMENT………………………………………...15%
3. FINAL EXAMINATION………………………………………………...70%
TOTAL………………………………………………………………….100%
Lecture ONE: THE NATURE AND SCOPE OF BUSINESS POLICIES
1.1: INTRODUCTION
Welcome to this lesson that deals with application of principles that are learnt in the
lower level management courses. This lesson deals with the scope and overview of
business policies. It gives a summary of the content of the whole unit. It also deals with
the definitions that are used in this unit.
1.2: LESSON OBJECTIVES

At the end of this Lesson, you will be able to:
i) To define the terms: business policies, business policy framework, policy levels
and policies characteristics
ii) To describe the policy development process.
iii) Explain the importance of this unit as an area of study.
iv) Explain the trends that are likely to influence the performance of policies in
future.
Outcomes
1. Apply proper business policies
2. Understand how a policy framework can affect the performance of a business.
3. Be able to design a policy frame wok geared towards the attainment of specific
goals.
1.3: LESSON ONE : NATURE AND SCOPE OF BUSINESS POLICIES
1.3.1: Definitions
Policy:
There are two major definitions of the term policy hence the following two perspectives.
1. Policies are defined as guidelines that help to guide the decision

making activities of the organization so as to ensure
• Consistency in decision making
• Equity in organization's activities
• Consistency in the relationships with stakeholders.
• Stakeholders’ awareness of what outcomes to expect.

2. Policies can also be defined as long term plan (s) of action that
help(s) to ensure survival and growth of the organization in the long
term future. In this context, policies help to guide the following:
 The size of the organization
 The destiny of the organization
 Identity of the organization
 Allocation of resources to meet organization’s objectives
Business policy framework (BPF)
Business Policy framework defines the parameters within which policy

decisions are made. BPF comprises of five variables:
 Environment – all the positive and negative dynamics or forces that

are likely to influence the performance of policies. The dynamics can
be within the business thus referred to as internal environment or
controllable environment; or outside the business referred to as
external or non-controllable environment.(refer to Lesson 2)
 Overall purpose – this is the broad objective of the business. The

reason for business existence.
 Identity – this is defined as the unique characteristic that differentiates

the business from any other business. It might be related to a unique
customer, product, service etc.
 Resources – this includes all the factors of production at the disposal

of the business.
 Activities – refers to what the business does with the available

resources to undertake and fulfill its overall purpose and maintain its
identity.
Policy development process

This is a step by step process that comprises of
 Environment scanning
 Developing vision, mission and objectives
 Formulation of policies
 Choice of organization’s portfolio plan
 Implementation of chosen portfolio
 Evaluation of the implementation process
 Social responsibility and ethics
Policy levels
1. Functional level –policies at the department or sectional level dealing

with specific products or services or area of operation.
2. Organization level – policies developed for the whole organization.

They deal with the strategic actions of the whole organization’s future.
3. National level – policies developed to deal with the affairs of a

specific state.
4. Zonal or regional level –policies developed for operations of a given

region such as EAC, COMESA region etc.
5. International level
6. Global level
1.3.2: Characteristics of Business policies
• Entrepreneurial in nature. This is where policy makers or managers

are expected to act like enterpreneurs who are able to identify the
opportunities, gather the necessary resources and exploit the
opportunities for some gain in the implementation of the portfolio.
• Incorporate both internal and external environmental dynamics.
This emphasizes that the policy development process must carefully
consider the controllable and non-controllable environmental factors.
The internal dynamics can be changed to accommodate the new
policies. Whereas the policies can be adaptive in nature to
accommodate non-controllable dynamics.
• Intellectual in nature. When policy developers are making the

policies, they should use the highest level of skills, that is, conceptual
skills so as to be able to conceptualize the extent of the impact of the
new portfolio chosen even before it is implemented.
• Policies should be relatively fixed for a given period of time but

flexible to accommodate environmental dynamics. It should not be so
fixed because the environment keeps changing.
• Comprehensive assessment of all the competitive dynamics.

The managers must ensure there is effective and an all-inclusive
environment analysis so that all the required information for effective
policy development can be gathered.
• Customer focused, demand driven, market oriented. The policies

developed must have an outward orientation. Adhere to market
dynamics for example the 4 Ps of marketing. The market dynamics
must be used to direct the policies being developed. The tastes,
preferences and needs must also be incorporated in the policies.
• Incorporate all stakeholders. All the business stakeholders’ needs

must be identified, prioritized and trade-offs considered to ensure that
the policies are all inclusive. The objectives of different stakeholders
must also be considered.
• Match between policy requirements and available resources.

There are various resources that are required in the whole policy
development process especially in the implementation. These
resources must be identified, mobilized, allocated, utilized and
controlled so that there will not be white elephant projects in the
organization.
• Long term perspective. The portfolio adopted must have long term
orientation. This helps to achieve one of the two major objectives of
any portfolio that there must be growth and longevity in the portfolio
adopted.
• Best mix between environment and the resources. The policy

makers should assess the environment to access the resources that
are available and those that can be available.
• Industry driven. The industry goes through cycles and seasons and
policy makers should align policies to the industry dynamics.
• Trends oriented. Policies should be aligned to the past, current and

future dynamics. Different methods of assessing the trends should be
incorporated before policies are developed.
• Must incorporate managerial or leadership values. The policies

must reflect values that will be incorporated in the portfolio. The
values however must be balanced to ensure they do not create
biases of the policy makers only but of the other stakeholders as well.
1.3.3: Trends influencing policies
• Technological trends such as cashless society, e-commerce, e-

learning, plastic money, smaller banking halls, etc.
• Demographic developments. The variables that are used to define a

group of people keep changing from time to time.
• Social cultural changes. Social-cultural characteristics about the

societal dynamics keep changing and they affect business policies.
• Global dynamics eg global boundaries, international zoning,

regionalization are also influencing the business policies dynamics.
• Political developments and liberalization. All over the world, there are
political dynamics that keep changing and influencing business
activities.
• Increased levels of awareness amongst the stakeholders. Right now

the dynamics and unrest in Middle East and other areas in the world
are affecting the way businesses are done. The level of technology is
bringing the awareness of what is happening at real time.
• There are increased levels of literacy and illiteracy in the societies.

Due to the gap between the rich and the poor in the world, literacy
and illiteracy levels are increasing. This forces the different policy
makers to re-evaluate the different effects of the above on policies.
• Need and emphasis on social responsibility. The society has so many

needs that have been ignored in the past, and now there is a need for
businesses to give back to the society through being responsive to
society’s needs.
• Increased levels of unethical practices in the business, amongst

individuals and in the society. This forces policy makers to be aware
of the unethical practices as they develop policies.
• Need and emphasis on entrepreneurial culture
• Increasing informal sector
• Growth of information society. Information technology has made the

current society sensitive and aware of the different kinds of things
and businesses happening in the world.
• Physical/ ecological changes. In so many places all over the world

there are drastic changes in the weather patterns, this has brought
about changes in the way businesses operate. It has also brought
about new needs and tastes amongst the stakeholders and the
businesses have to respond.
• Changes in legal structures

1.3.4: Importance of this Unit as an area of study
• Helps managers when making choices amongst competing

alternatives
• Helps mangers to guide the future of the organization
• Helps in identification, mobilization, allocation, utilization and control

of resources
• Help in implementation activities
• Assists managers to identify where the organization is at, Where the

organization should go, what actions to take,
• Helps managers to identify Determinants of success or failure
• Helps in setting operational boundaries
• Helps to identify all the stakeholder and their respective needs
• Helps to be socially responsible and ethical in decision making
• Helps in evaluation of policy performance
• Gives legitimacy for business existence
• Settling disputes or conflict amongst stakeholders
• Helps in creating relationships within and outside the business
• Helps to develop and maintain organization's identity
• Helps organizations to curve a niche for their marketing activities
• Helps managers to be proactive and progressive Vs being reactive

and parochial
• Helps to identify the SWOT of the business Vs of competitors
• Acts as a frame of reference for all business activities both now and
in the future.
• Helps in identifying trends that are likely to influence business
formulation and choices of portfolio
1.4: SUMMARY
This lesson deals with the scope of business policies. Policies give
guidelines that act as guide to all the activities of the business, all
relationships of the business and the future of a business. Policies help
managers to plan, choose, implement and evaluate the activities of the
business. Policies sensitizes the business about the relationships with
stakeholders.
1.5: ACTIVITIES
You should identify some large businesses in your neighborhood or an

organization recognized nationally. Explain the activities that the chosen
business undertakes.
1.6: FURTHER READINGS
Review further definitions such as management, administration, and

leadership. Review the activities of planning, organizing and controlling, in
relation to policies.
1.7: SELF TEST QUESTIONS
a) Define the term policy.
b) Outline the step by step process of policy development process.
c) List the five elements of business policy framework.
d) List and briefly explain the reasons as to why this unit is important.
e) List and briefly explain the different levels of policy developmen

Lesson TWO: SOCIAL RESPONSIBILITY, ETHICS & POLICY DECISIONS
2.1: INTRODUCTION
Welcome to this lesson that deals with issues related to social and ethical objectives of
the business. As organizations grow, it becomes important for them to consider the
needs of all stakeholders who contribute directly or indirectly to the organization’s
welfare.
This lesson is divided into 3 sections –
1. Scope of social responsibility and ethics.
a) Decisions
b) Dimensions
c) Stakeholders
2. Tools used in decision making
3. Importance and challenges of social responsibility and ethics.

:
Objectives:
The following objectives will be covered under this lesson. By the end of this lesson, you
should be able to:
a. Define the terms Social Responsibility, Ethics, Corruption and corporate
governance
b. Explain the dimensions of social responsibility
c. Identify the different stakeholders and their respective needs
d. List the areas where social responsibility should be observed
e. Briefly explain how the stated tools can be used in policy decision making
f. Explain limitations of the tools
g. Identify the various reasons as to why social responsibility is important in a
business
h. Explain the challenges that organizations go through when undertaking social
responsibility activities.
Outcomes
i. Draw insights into social responsibility as a business driver
ii. How good governance affects a business output
iii. The relationship between good governance and social responsibility
iv. How environment affects governance in business
v. The effect of lack of CSR and good governance in a business environment
2.3: SUBLESSON 1: SCOPE OF SOCIAL RESPONSIBILITY
2.3.1: Definitions of terms

Social Responsibility – we will first define the term social responsibility. It is defined as
all activities that a business undertakes to promote positive relationship with all the
stakeholders within and outside the business, with or without necessarily generating
profit. It can also be defined as the responsibility of the business to protect and improve
the welfare of both business and all the surrounding stakeholders. A business is
considered as a social asset – hence a business cannot exist without the consent of the
stakeholders specifically the surrounding communities. According to Ghosh (et al) social
responsibility is an interaction of both the business forces and social forces.
Social responsibility may incorporate the organizations’ obligations, social reactions,

social responsiveness and legal behavior towards the surrounding community.
Business Ethics
Business Ethics can be defined as the principles that help to guide managers in
business decisions as to what fair or unfair good or bad; right or wrong; acceptable or
not acceptable and as to the yes or no. A reporter once said that there are no clear cut
distinctions between white and black, good or bad, Yes or No. Between white and black
there are grey areas, between good and bad, there are confusing questions, and
between Yes and No, there is a strong “may be”. There are a lot of rationalizations,
considerations and dilemmas. Yet managers are expected to make policy decisions
according to some moral principles, norms or standards that are generally acceptable to
the stakeholders. This forces us to answer the following questions that arise –
a) Who sets the standards?
b) What standards are acceptable to all stakeholders?
c) What can the manager do to handle any ethical dilemmas that arise in the course
of his/her decision making?
There are many varying Schools of thought on the same namely: Ethics are Universal;
ethics are relative and Ethics are an integrated social contract (you should be able to
define these three terms).
Corruption
We will use the definition as per Anti-Corruption and Economic crimes Act – 2007
There is no universal definition of the term corruption and hence the amorphous nature
of the term. However according to the Act, the following terms have been used;
1. Abuse of socially accepted Norms.
2. Evil immoral or wicked behavior
3. Unlawful acquisition of property at the expense of the public
4. Misuse of office/authority for individual/group benefit through coercion, undue
influence, misrepresentation, dishonesty or breaking the laws/rues/regulation in
force.
2.3.2: Dimensions of Social Responsibility & Ethics

There are 2 broad categories
1. Classical Vs modern. Classical category is where there are only two major
stakeholders involved namely the consumer and the producer. Modern category
is where there are so many stakeholders as explained below.
2. Reactive Vs proactive. Reactive is where the policy maker waits until there is a
crisis to come up with a solution. The proactive is where the policy makers
considers and incorporates all the stakeholders even before they demand the
rights. This is an anticipatory approach.
Nature of stakeholders
Stakeholders are defined as all those who relate or interact with the business in the
course of its operations. Policy makers must identify the different stakeholders, their
classifications, their respective needs and consequent satisfaction .Previously,
stakeholders used to be limited to a monolitic relationship between the producer and
consumer. They had direct contact with each other; they related openly and met
each other’s needs without the need for a broker. Producer ↔consumer. Nowadays,
stakeholders have pluralistic relationship. A relationship that is so amorphous and
the stakeholders have no direct contact with each other. Most businesses may not
know all the stakeholders of the business because of pluralistic relationship.
Stakeholders may be classified and not limited to the following categories.

1. Known Vs unknown stakeholders
2. Direct Vs Indirect stakeholders
3. Friendly Vs Hostile stakeholders
4. Traditional Vs Modern stakeholders
5. Monolistic Vs Pluralistic stakeholders
6. Local/National Vs International stakeholders
7. Internal Vs External stakeholders
8. Financial Vs Non financial stakeholders
9. Owners/Investors Vs Non Investors stakeholders
Why consider stakeholders?
Whereas it is not possible to satisfy all the stakeholders, the business must endeavor to
do the following;
1. Identify who the stakeholders are?
2. Identify where the stakeholders are?
3. Identify their respective needs, tastes and preferences.
4. Prioritize the stakeholders and their needs – (who is more important than the
other)
5. Create tradeoffs amongst the different stakeholders’ needs.
6. Identify what kinds of conflict can be there if the needs are not met.
Areas where social responsibility should be observed
The following areas should be observed when making policy decisions to ensure that
there is little or no conflict between the business and the stakeholders. The areas can
broadly be categorized into Human relations, customer relations and public relations.
They may specifically incorporate;
1. Equity for all without unfair discrimination

2. Consumer rights and protection
3. Disclosure and confidentiality of information
4. Acceptable marketing practices
5. Employees’ education, training and development
6. Employees’ commitment and motivation
7. Safety and health of all stakeholders
8. International and local relationships
9. Legal and Ethical relationships
10. Community development
11. Environmental protection and welfare
12. Fair and all inclusive code of ethics
13. Government relations
2.4: SUBLESSON II: TOOLS USED IN ETHICAL DECISION MAKING
There are various tools that can be used for making socially responsible decisions.The
tools depend on the following factors;
1. Nature of Business activities
2. Nature of stake holders concerned
3. Nature of management and leadership
4. The interest of the business
5. Environmental factors
The tools used include
 Social responsibility curve

 Ethical / legal matrix
 Pyramid of corporate social responsibility
 Ethical leadership matrix (to be covered at a higher level)
Social Responsibility curve
Egoism y y1
(Maximum
Personal benefits)
X1
X
Altruism
Maximum social benefits
Social responsibility curve compares two variables in decision making i.e. Egoism Vs
Altruism. It compares the point making business objectives Vs the social objectives.
Egoism represents the interest of the owners of the business which in a number of
businesses may be the needs of the managers.
This principle states that a policy decision is good if it contributes to maximum
generation of profits at the expense (or exploitation of all the other stakeholders.
Altruism on the other hand represents the needs/interests of all other stakeholders who
may not contribute directly to the activities of the business. This principle states that a
policy decision is good/ acceptable if it contributes maximumly to the benefit of all the
other stakeholders at the expense of the profit objective (or owners’ expense).
When making policy decisions, ensure they are not made at the extremes (i.e. points x
or y) because those points will create a lot of conflict amongst the stakeholders. This
conflict can easily bring down the business. Therefore this curve dictates that policy
decisions must be made at the extremes x or y.
Along the curve, preferable between x1 or y1 are areas where majority of the
stakeholders will be satisfied.
Ethical/legal matrix
This is a tool that compares 2 variables the ethical status of the decision and the legal
status of the decisions.
It emphasis that policy decisions must be both legal and ethical

Legal status reflects the compliance to the local authority laws that govern business
operations.
The ethical status reflects the compliance to the generally accepted norms/standards for
the different stakeholders in a given environment.
Ethical Ethical but Ethical The best place to make a policy decision
Illegal Legal is quadrant A- decision is both legal and
D A Ethical. The worst place to make a policy
decision is quadrant B- decision is both
Unethical Legal but
Unethical and Illegal. In quadrant C-
Illegal Unethical
policy decision is legal but unethical. In
B C
quadrant D- policy decision is ethical but
Unethical Illegal Legal
illegal. For both policy decisions to be
made they must consider both the laws
(legal status) and the Ethical status.
III PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY
 This is a tool that was developed by Pride and Terrel in their attempt to
categorize the areas that must be considered when dealing with social
responsibility. They categorized all organizations’ objectives into four major areas
as shown below.
Philanthropic objectives
Ethical objectives
Legal objectives
Economic objectives
 The very basic objective for any organization is economic objective. The need to
make profit, some gain or benefit for the owners of the business. This provides
the basis for justification of the existence for any business.
 The second level is to ensure that the business’s activities are legal objectives
according to national laws, county laws and local authorities by- laws.
 The next level is Ethical objectives ensure that the policy decisions are made
according to the generally accepted principles and norms of the stakeholders.
These are the principles that guide the decision make as to what is wrong/right,
just or unjust good or bad, fair or unfair in a given decision, so as to avoid harm
to the stakeholders.
 The next level is Philanthropic objectives that help to ensure that the business
gives back to the society by contributing its resources and improving on the
welfare or quality of life of the stakeholders.
All the above objectives help to ensure that the business maximizes its positive
impact and minimizes its negative impact on the society.
In conclusion
Ethical decision making, irrespective of the tool used has the following
components:
 Characteristics of the decision maker
 The decision – maker’s ethical standards,
 Moral awareness (recognizing the existence of moral dilemmas when
making policy decision)
 Ethical actions (taking step (s) to do what is right).
Research has shown that from four months old to adulthood, a human being is “wired”
with an ethical dimension and self-interest consciousness. Neuroscience has identified
a “moral sense” in humans through imaging technologies whereby, human beings are
said to have a unique neuron in the brain that lights up when a person perceives
unfairness and deception. The same neuron is found in African Apes, Chimpanzees and
humans.
How do you Balance Ethics, Egoism and Altruism?
In order to ensure all the variables in the above tools provide maximum welfare to all the
stakeholders the policy – maker can try the following:
1. Be involved in continuous scanning of the environment to keep up with new
developments
2. Identify stakeholders and their respective needs.
3. Establish consequences of satisfaction and dissatisfaction of different
stakeholders
4. Prioritize the stakeholders – who is more important than the other
5. Prioritize stakeholders’ needs
6. Establish policies on the treatment of different stakeholders
7. Establish clear feedback systems
8. Be accountable and responsive in the mobilization allocation, utilization and
control of the organization resources.
9. Development and encourage positive organization culture from top-down in the
whole organization
10. Provide effective feedback systems in case of any conflict.
2.5: SUBLESSON III: IMPORTANCE OF SOCIAL RESPONSIBILITY
Importance of social responsibility and ethics
1. Helps to create loyalty amongst the stakeholders e.g. customer, investors,

workers etc
2. Ensures long term survival of the business
3. Reduces conflict between the business and its stakeholders and amongst the
stakeholders themselves
4. In the long term, it translates into profit
5. Ensures support of the business by the surrounding society where the
stakeholders regard the business as a social assets
6. Promotes positive interaction between the business forces and the social forces
7. Helps to promote positive customer human and public relations
8. It’s a cheaper way of creating awareness about the organization and its
products/services (promotion)
9. Helps to attract unique stakeholders
10. Reduces cooperation costs of the business e.g. workers stay longer in the
business reducing costs of hiring and firing
11. The management earns respect amongst the stakeholders
12. It may help to motivate the stakeholders when they realize there is equity and
fairness in their treatment
13. The stakeholders may be willing to participate in socially responsible activities
and contribute their resources
14. If there is positive culture in the organization, the stakeholders will be willing to
speak out against ethical practices irrespective of the outcomes
15. Creates positive public image and creates a competitive edge
16. Social Responsibility is directly related to increasing number of customers.
Challenges of social responsibility in policy decision
1. It is expensive to participate in social responsibility (SR)

2. There’s an argument against Social Responsibility emphasizing that a business
is not a social asset it should strictly undertake profitable activities (economic
objectives)
3. It requires continuous scanning of the environment so as to prioritize the needs
and activities of the stakeholders and this can be expensive
4. There can be conflict of interest if the stakeholders perceive that their needs may
not be met
5. Selfish interest of the management where they may direct the Social
Responsibility resources using the egoism principles
6. It’s sometimes difficult to prioritize who is more important than the other amongst
the stakeholders
7. Moral/ethical dilemmas may arise in policy decision making
8. There’s increased need for socially responsible activities in the society
9. There’s increased need awareness and education levels amongst the
stakeholders where stakeholders are aware of their rights and they can lobby for
those rights
10. There a general dealing individual, business and societal ethics hence there may
be conflict in decision making
11. There are changes in the social cultural factors in the business environment and
this creates challenges for managers e.g. self service culture, single family
cultures, homosexuals, transgender, intra-gender, instant culture address
12. Changes in demographic factors may create conflict e.g. gaps, religious
differences, educational differences etc.
13. Changes in technology may affect the activities needs and decisions in the
business e.g. e-marketing, e-banking, e-tearing etc
14. There is increased pressure to satisfy different value systems since ethics differ
from one society to the other
15. Unfair demands by the stakeholders e.g. very high salaries, corrupt practices in
transactions
16. Spending organization resources on stakeholders that may not necessarily
contribute directly to the welfare of the business
2.6: SUMMARY
In a society that is so heterogeneous comprising of different tribes, races, ethnicity,

religious differences amongst other differences, it is important for the decision maker to
consider who all the stakeholders are, their respective needs, their rights, their abilities
and respective expectations towards the organizations’ activities. Managers must create
relationships between the business and the different stakeholders. This helps the
business to be given consent by the society to exist as a social asset. This usually
implies less conflict between the business and the society.
2.7: ACTIVITIES
You should list the different unethical, immoral and illegal things or activities being done
by the individuals, businesses and the general society.
2.8: FURTHER READING
You should read more on the different tools described above and the different
approaches to social responsibility and ethics.
2.9: SELF-TEST QUESTIONS
Using any of the tools mentioned in this lesson
(1) Explain how you can make decisions on the following areas;
 Matatu drivers tampering with speed governors
 Employing underage employees in transport industry
 Trafficking human for sex businesses
 Attracting customers through vulgar language and pictures (phonography)
 Buying cheap fuel from illegal fuel depots.
 Constructing apartments on top of a petrol station
(2) Suppose your manager insists on giving a bribe to secure a tender for the business,
as an individual how can you react?
(3) Explain how you can eliminate corruption in an organization as a new manager ?
LESSON THREE: ENVIRONMENT ANALYSIS AND TECHNIQUES
3.1: INTRODUCTION
Welcome to this lesson that deals with the process of assessing the environment or the
context within which policy decisions are made for effectiveness and efficiency. This
helps you to identify all the forces for or against the policy decisions made. Environment
usually specifies the dynamics that must be considered as policies are made. The
dynamics can be positive or negative depending on the impact they have in the
business.

At the end of this lesson, you should be able to:
1. Define the terms use in environment analysis
2. Explain the different kinds of environments and the causes of environmental
dynamics.
3. Explain the importance and challenges of environment analysis
4. Explain and give examples of different analysis techniques
3.3: LESSON I : THE ENVIRONMENTAL ANALYSIS AND DEFINITIONS

3.3.1: Definitions
Environment is any internal/eternal factor which influences activities of a business
and must be considered in designing business policies.
Environment is also defined as all the dynamics that are likely to have a positive or
negative impact on the performance of policies.
These factors could be categorized into the following categories:
 According to the scope: MACRO vs MICRO vs MESSO vs META
 According to how the manager can handle the factors: CONTROLLABLE VS
NON-CONTROLLABLE
 According to their relationship with the organization: INTERNAL VS EXTERNAL
Examples of environmental factors
Technology, Social Cultural factors, political factors, International factors,

Demographic factors, Competitive factors, Ecological factors, legal and
regulatory factors, Personnel capabilities, business policies, organization
structure, organization climate, organization culture, organization ambience and
factors of production among others.
Environmental dynamics
These include:
 Known and unknown factors
 Friendly or hostile factors
 Predictable and unpredictable factors
 Local or international factors
 Intended or unintended, that are likely to have a positive or negative impact on
the performance of policies.
Environmental analysis
Also called environment appraisal/assessment/ evaluation/ scanning / monitoring. It is a
systematic and comprehensive process through which the strategic manager monitors
the environmental factors which may determine the success or failure of the business.
It is also defined as a process of identifying business trends both within and outside the
business and subjecting them to the projected business performance. It involves the
following:
1. Identifying each of the critical factors
2. Identifying the scope of these factors
3. Identifying and determining the effects each of these factors will have on the
business i.e. the current effects and future effects
4. Assessing the positive and negative consequences of the various effects
5. Determine the inter-relationship amongst different environmental factors (both
obvious and remote relationships)
6. Identify the most beneficial/ influential for the success of the business
7. Subject the factors to the future of the business.
3.3.2: Sources of Information
Information can gathered from internal or external sources.

 Consumers
He is the most critical source of information. The consumer usually gives the
most relevant information with regard to the characteristics of the goods and
services as produced. Apart from the physical characteristics of the goods the
consumer is a rich source of competitors’ information.
 Visual Media – such as from television set,
 Audio media such as Radio
 Print media such as newspapers, magazines etc.
 Internet facilities
 Workers. The workers usually have informal information networks with
competitors’ workers; they give a lot of information as pertains to production
processes, distribution channels, Compensation programs, promotions
 Management information systems
 Through research and development activities
 Informal or formal forums outside the organization
 Suppliers of raw materials, finances, factors of production
 Consultancy firms
 Industrial espionage
3.3.3: Reasons for environmental analysis
1. Identify the external factors that may create opportunities for the business. Will
also be able to identify external threats which will lead to downfall of the business
2. To identify the strengths, weaknesses, opportunities and Threats existing in the
of the business
3. To identify strengths, weaknesses, opportunities and threats of the competitors
4. To identify market niche / market segment to be addressed thro business
performance.
5. To be proactive/progressive and not reactive and parochial with regard to
business policies.
6. To incorporate the most up-to-date developments in the environment
7. To identify Industry drivers.
8. To adopt best practices in the industry, locally or internationally.
9. To help in bench marking
10. To help Resolve the conflicts amongst the stakeholders
11. To justify Business policy framework
12. The manager is able to anticipate the changes that are likely to occur in the
environment and plan accordingly
13. To assist in the day to day running of the business
14. Information helps the managers to plan for mobilization, acquisition, utilization and
allocation of factors of production.
15. To be able to formulate the best policies for the business.
16. To be able to set the boundaries of operations, limits or parameters of operations.
3.4; SUB LESSON II: TECHNIQUES OF ASSESSING THE ENVIRONMENT
3.4.1: Techniques used for scanning
1. SWOT (Strength, Weakness, Opportunities Threats). Analysis

 This is the most comprehensive method of scanning the environment. It
combines both external/Internal dynamics. It is easy to use and the most
commonly used.
 The manager must always identify the strengths that the business has as
compared to competitors e.g. highly qualified personnel, strategic location
of the business, up to date technology, research and development.
 The manager must identify the weaknesses that exist within the business
and make the necessary changes either adopt to change the weaknesses
e.g. weakness of obsolete (out of date) technology, poor accounting
systems, less qualified personnel, limited physical infrastructure, Limited
sources of information/sources of factors of production, inability to respond
to changes, dictatorial leadership
 Opportunities are any activities that a business can undertake profitably.
These activities may include development of new products to satisfy new
customers, establishment of new branches to satisfy new customers,
establishing new unrelated businesses. This helps to ensure survival of
the business.
 Threat refers to any factor that may contribute to the failure of the
business. Anything that may hinder or impede the performance of the
business.
2. ETOP (Environmental Threats and Opportunities Profile)
When using this method the management uses critical SUCCESS factors
Environmental Threats Opportunities

factors
Competition Unfair competition Producers improved goods in
quality
Limited suppliers or competition Can create different lines of
among the suppliers products for different customers
Productivity levels are low Diversifying the location
Synergistic effects
Export
Import
Economic factors Decrease in consumption Diversify to different customers/
Decrease in purchasing power markets
Increase in cost of inputs
Taxation variations
Political factors Closure of the business Diversity for the business
Political biases Can Create different lines of
Political zoning products
Change of business locations
N/B: After identifying all the critical environmental factors the manager must choose
the opportunities to take advantage of. The investment portfolio will be based on
cost benefit analysis (CBA). If benefits ˃ cost – exploit the opportunity and vice
versa. With reference to the above analysis; for the competitive forces, the
opportunities are more than the threats; with reference to Economic factors, threats
are more than the opportunities, do not base investment on this. With reference to
political factors, threats and opportunities are equal, feasibility studies are required
to identify either more threats or more opportunities.
3. QUEST (Quick, Environmental, Scanning Technique)

 It is a systematic and intensive research process which helps the executives
to identify and share their views concerning future business trends and
environmental events which are critical to the formulation, choice, and
implementation and monitoring of strategies.
 This method can be used within the organization where different managers
meet and discuss their views either formally of informally.
 Can also be used externally where managers from different businesses may
come together either formally and discuss business and environmental trend.
 It involves the following:
 Identifying past trends
 Identifying current trends
 Identifying Future trends
 Identifying the Major events in the environment.
 Subjecting the trends to the business.
4. PESTLE ANALYSIS
This method analyses the external dynamics. It is an acronym that stands for:
political, economic, social-cultural, technological, legal and regulatory and
ecological factors. These factors are mainly external hence non-controllable. The
manager must develop policies aimed at helping the business to adapt to these
dynamics.
5. CRAP METHOD
This is an industry specific method. It analyses the competitive dynamics
affecting a specific industry. It involves identification of the critical success and
competitive factors and provides a rating against the competitors in the industry.
How well or bad are the competitors doing verses the business. It helps
organizations to identify their strengths and weaknesses and undertake the
actions necessary. It involves the following:
 Identification of the competitors
 Choosing a rating scale eg a scale of 1 up to 10
 Identifying the critical success factors
 Profiling the success factors based on how important they are.
 Scoring the factors based on the chosen scale for each of the competitors
 Getting the totals of each competitor
 Comparing competitors scores with the organization’s scores.
 Identifying areas of strengths and weaknesses for the business
 Developing strategies to develop strengths in the weak areas and
compete on the strengths.
6. GEMBA METHOD
This is a Japanese style of assessing the operational areas, “going out where the
action is”. If the implementation process is going on, the managers will be
involved in assessing how the process is progressing. If there are any deviations
from the planned implementation, they can be identified and the relevant
corrective measures can be undertaken immediately. It helps managers to
identify the real issues affecting the implementation and not window dressed
situations. The managers are able to avoid the symptoms to any negative
developments and address the situations immediately. Decisions are made
without delays because decisions can be made on the spot.
7. FORCE FIELD ANALYSIS (FFA)

The policy maker identifies the forces for or against the organization’s
performance. If there are more forces for the policy performance, investment
decisions are made because the environment id conducive. If there are forces
against the organizations policy performance, it implies that the environment is
not conducive and investment decisions can be delayed until the dynamics
change.
3.4.2: Current trends with regard to environmental dynamics
1. There are so many interest groups with a lot of lobbying powers and each of
these group have to be considered when designing policies. These groups may
include political parties, human rights organizations, local and international NGOs
etc
2. The society is more informed and more educated hence the stakeholders are
more aware of their rights. In case of any infringement of their rights, they can
claim their rights in court.
3. The trend of liberalization of the economies. It implies a lot of freedom in regard
to business operations very few controls in regard to business policies hence the
organizations cannot predict what a competitor will do considering the freedom of
trade.
4. There are a lot of international influences that have brought about drastic
changes in the environment. These can be political influence, economic
influence, technology influences.
5. Privatization of public sector i.e. a lot of parastatals have been sold to the general
public. This means that the managers are not only concerned with the interests
of the government but also concerned with the interest of the new owners. This
makes the environment within the business to become very dynamic.
6. Development of entrepreneurship culture worldwide. This has been inculcated in
all levels of the society and world over. It has also been developed among the
workers and other stakeholders.
7. Regionalization and globalization in the world. The world has become a global
village. Under this area a lot of free trade zones have been established with very
little or no restrictions eg AU, COMESA EAC, EU, etc.
8. A lot of women participation in the labor force. This implies a lot of changes in life
style, welfare of workers, working conditions and also changes with respect to
the attention given to the most critical issues of the business i.e. women use
more intuition in decision making than men, women’s needs are different from
men’s in the workplace.
9. Consideration of ethical and moral behavior of the stakeholders. This is the way
people behave towards the job, each other and inter relationships within and
outside the business. The managers are challenged to be more alert in regard to
changes in behavior.
10. Trends of negative attitudes towards work e.g. people disinterested with the
performance of the organization, workers not interested in giving their best,
workers spending working hours undertaking private activities (receiving private
calls, browsing on the internet, etc)
11. A lot of changes in demographics of the stakeholders. These changes can be in
terms of age groups, urbanization, movement of people, educational levels,
changes in social classes and other variables that help to define a given
population.
12. Single parent culture has a major influence in the way some businesses are
done. This could be families with single parents headed by men or women. It
could also be community families or even children headed families. The
implication is that each of these groups has brought a different dimension in their
relationship with the organization. For example, since a single parent is very
busy, he or she wants to do one stop shopping, a variety of/ or lot of choices in
purchasing decisions.
13. Self-service culture. This has developed because people are more informed,
more educated and more involved in working environment. They prefer to have
freedom for various activities and if they don’t have freedom they will spend a
little more money to acquire that freedom. They will prefer shopping in Malls,
multipurpose stores, exhibitions as opposed to across-the-counter shopping.
14. Selfishness and greed amongst the stakeholders. This has become a cultural
development eg where the MPs and Governors are demanding higher pay
regardless of the performance of the economy. More than 50% of the GDP going
to 1.6% of the population and the remaining (less than 50% of GDP being shared
by 98.4% of the population (2014). The culture has become, “what is there for
me?”.
3.4: SUMMARY
Environmental dynamics are critical for the performance of businesses. The forces for
and against the performance of the business determine whether even the best policies
will succeed or not. All the relationships of the business determine how the business
performs in a given environment or not. The different methods of scanning the
environment include SWOT, PESTLE, CRAP, GEMBA, ETOP among others.
3.5: ACTIVITIES
i) As a manager, list (a) the SWOT and PESTLE of KU (b) your SWOT and PESTLE
ii) Identify the environmental trends that are likely to influence business practices in
Kenya and in the World in the next 10 years.

Read further on the following areas:
i) The different ways that business environments can be categorized.
ii) The practical challenges that environmental dynamics can cause to the
business.

i) List various political dynamics in Kenya today.
ii) Explain any social cultural treads that are likely to influence your decisions as a
manager.
LESSON FOUR: FORMULATION OF POLICIES
4.1: INTRODUCTION
This lesson deals with the process of developing different alternatives that the
management can adopt. It outlines the definitions of formulation, different approaches
used in formulation, the different orientations and their respective advantages or
disadvantages.
1. Define the terms: formulation, growth orientation, stability orientation,,
retrenchment orientation and combination orientation.
2. Outline the advantages and disadvantages of the different orientations.
3. Explain the different approaches used in formulation
4.3: SUB LESSON I: DEFINATIONS AND APPROACHES
4.3.1: Definition and Phases
Formulation is a process of getting a set of decisions that will lead to effectiveness in an

organization. It is also defined as a comprehensive process of defining what the
business will be involved in the long term. It involves making decisions on:
 Vision and mission of the business
 Setting the objectives
 Setting the overall plans/ strategies which will help 1 and 2 above.
Specifically, formulation entails the following steps:
• Identifying information from environmental analysis
• Match between information and Vision, Mission and objectives
• Positives and negatives of alternatives
• Assessment of available / can be available resources (what, how, how much,
where, when, etc)
• Identifying viewpoint to use
• The Perspectives Adopted may include (Reactive, Proactive, Analytic, Adaptive,
Defensive, Offensive, Muddling through)
Formulation process encompasses the following three phases. Namely:

1. Intelligent phase
2. Design phase
3. Choice
Intelligent phase
It involves scanning the environment both internal and external. During this phase the
managers are able to identify the SWOT of the business. If the manager identifies any
opportunity he looks for different way of exploiting that opportunity. If he identifies any
problem that may threaten the business he looks for possible solution even before the
problem occurs. If he identifies weakness he looks for ways of strengthening his
business capabilities and he cannot strengthen the business, he withdraws or
retrenches from the business. The intelligent phase requires the conceptual skills of the
manager i.e. he is able to identify all the activities of a business in form of a system/
series of activities and he understands the consequences of a failure in those activities
The design phase

It involves identification of alternative courses of actions. It is usually based on the
results of environmental analysis in the intelligent phase. It involves identification of
what the business intends to do and what are the results, what the business can do and
what would be the results.
The choice phase

It involves selecting the most appropriate course of action based on cost benefit
analysis that is, if
C=B – Conduct more research, go back to intelligent phase
C>B – Withdraw or retrench
C<B – Grow the business
The order in which the management undertakes the three phases vary from one
organization to another. Some businesses will choose an activity to undertake, then
they scan the environment and they design the alternatives after the environmental
scanning. The approaches used when formulating policies include:
4.3.2: Approaches based on time

These approaches depend on time when they were developed e.g.
 Traditional approach
 Modern approach
Traditional approach
It is where the management identifies a problem, diagnoses it, and comes out with the
objectives of solving such a problem and designing a plan of action. The management
then exercises strict control on their plan of action until another problem arises which
requires the above process to be repeated. This approach is used mainly by parochial
goal setters and will only survive in a stable environment. This approach can be used
when short-term decisions are required but it is a very risky approach in a dynamic
environment.
The modern approach

Also referred to as competitive approach developed in 1950s
The approach identifies the policy orientations, assesses them and reviews them on a
continuous basis based on the results on environmental scanning. The assessment is
usually done whether or not a problem exists. This approach is usually used by
progressive goal setters who have to look for new ways of doing things. The approach
helps them to deal with long term plans to exploit opportunities which may arise in
future. The managers will make a decision based on current environmental situation as
well as in future. The following are the steps taken:
 Assessing the situation (existing policy orientation)
 Identifying the threats and opportunities (current and future)
 Identification of the changes required
 Design of policies which will help in adopting the changes
 Changing the vision, mission and objective of the business in order to survive in
a changing environment
4.3.3: Approaches based on thrusts/ forces underlying the approach
The following approaches are classified as based on the underlying forces pushing the
formulation process:
 Entrepreneurial approach
 Intuition approach
 Muddling through approaches
 Key factor approach
 Integrated approach
Entrepreneurial approach
This is where the manager is expected to act like an entrepreneur when making
decisions. An entrepreneur is supposed to identify the opportunities, gather resources
necessary to exploit the opportunity profitably. This approach is based on opportunities
that exist within and outside the organization.Using this approach the managers’
decision is always opportunity- based and not problem-based. Any change in
environment is viewed as an opportunity and not threat. The policies are aimed at
generating profit, value adding or benefit creation for the stakeholders.
Intuition approach
It is where the manager has no formal way of developing policy orientations. Most of the
policies are developed and kept in the mind of the manager. If a problem arises or any
opportunity, there is no set plan of activities that must be followed. It will all depend on
situation and manager’s capability. The manager uses a lot of personal value judgment
and he utilizes his conceptual skills when making decisions. The danger with this
approach is that there is no standard way of formulating policies. It all depends with
manager, his creativity and his integrity. When a manager uses this approach, he has to
combine it with other approaches.
Muddling through approach

This is an approach used by parochial managers when dealing with factors beyond their
control. The managers will always identify alternatives that are convenient for the
business which require very few or no changes in the environment. If changes in the
environment occur the management makes a remedial decision but not long-term
policy. Managers using this approach will always identify easy policies which can be
easily implemented. Any activity that requires complex decision-making is always
avoided. It is mainly used by parochial managers who will always prefer a status quo.
Also used by managers with insufficient information, time and other resources which are
required for corporate decision-making. Managers usually set objectives which are not
challenging to the workers because they don’t want to the involved in solving new
problems.
The key factor approach

This is where the management identifies the most critical factors, which contribute to the
success of the business, and they base all their decisions on that factor. They include
customer relations, public relations, quality product, strategic location of the business,
highly qualified staff, availability of unique resources and opportunities. The
environment analysis involves identification of these key factors as they continuously
change. Key factor approach may also involve use of the marketing mix – 4Ps
marketing (product, place, promotion and price).
Integrated approach
It is where the management identifies very comprehensive procedure, which can be
used continuously whether the business has problem, or not. Management has to scan
environment on continuous basis and identify the SWOT of the business. If there are
any threats in the environment, there is a consistent procedure to be used either to
overcome the threats or to adapt to the threats for business survival. It follows the
following steps:
 Analyzing the environment. This helps the business to identify the environmental
factors that may influence it success.
 Evaluate current business policies to identify whether the business is coping with
the current environment.
 Identify the strengths and weaknesses of the current policies as compared to the
environment
 Identify the changes that are required
 Identify the different alternative action that can be used to implement the required
changes
 Choose the most appropriate alternative either to solve an existing problem or
take advantage of an existing opportunity
 Implement the alternative taken
 Evaluate the alternative implemented
N/B: Managers using the above approach must always scan the environment and
review the business policies accordingly.
4.4: SUB LESSON II: DIFFERENT ORIENTATIONS
There are four broad ways of categorizing portfolio orientations. They include the
following:
 Stability orientation
 Growth orientation
 Retrenchment orientation
 Combination orientation
For each of the above orientations, it is important to know what the orientation entails,
why the orientation is adopted and the challenges therein.
4.4.1: Stability orientation

Managers using this orientation will continue with the same business activities that
were being performed in the immediate past. Retains the same level of objectives
and maintains the immediate past level of achievements. They will also maintain the
immediate past level of resources so as to retain a status quo in business
performance.
The orientation is adopted for the following reasons;
 When the management is satisfied with its past performance
 When there are no new opportunities in the environment to be exploited.
 When the resources are limited and there are no new sources of resources
 When the management is resistant to change e.g. parochial managers are
always resistant to change
 Where there is no foreseeable change in the environment in the new future
 When managers do not want to make risky decisions
 When the environment does not provide any external conditions favorable for the
other orientations.
 When the resources (unique) are about to be depleted and the management
fears change.
N/B: Stability orientation is risky where the environment is turbulent and there are so
many opportunities to be taken advantage of. It is also risky where there is a lot of
competition especially from outside the country and within the industry.
Challenges of stability orientation

• Competitors take advantage if used for long term purposes
• Promotes Reactive / mechanistic / parochial strategic viewpoint
• Promotes lack of creativity, innovativeness, motivation amongst the stakeholders
• Creates negative Public image
• Repels unique resources and investors
• May create dilemmas for some stakeholders
• Eventually, it may cause the fall of the business if used for a long period of time.
4.4.2: Growth orientation
It’s where the business increases in different dimensions as follows:
• Incorporates change of objectives to achieve more than previously achieved.

• Promotes Effectiveness or efficiency in the utilization of the resources
• Increasing products, lines of products and services
• Increasing number of stakeholders
• Rebranding of organization for better performance and perception.
• Increases branches of the organisation
• Increases quality and quantity of Resources
• Increases returns on investment
• Increases market share
 Increases the level of objectives
 Increases the level of past performance
 Increases the level of resources
The increase helps the business to take advantage of new opportunities and to
promote acquisition of new businesses, undertake promotional activities, and
encourage workers to be creative. The business can also encourage activities
which will enlarge the market share and consequently ensure future growth and
survival of the business.
When/ why growth is preferred

 It is preferred when there are many opportunities in the environment.
 When the business has control over some unique resources
 It can be chosen when the business is involved in research and development.
New products and services are developed
 Growth is culturally preferred i.e. when a business grows it attracts more
resources because investors have confidence in that business
 Helps to generate wealth for all interest groups
 It ensures future survival of all the interest groups
 When the business want to take advantage of specific expertise and other
strengths in an organization
 Growth encourages mass production thus reducing cost of production
N/B: Growth orientation is favorable in turbulent environment where managers are
progressive in nature and workers are in need of self-actualization.
Challenges of growth orientation
• Attracts conflict (this is the reason Kenya is facing allot of opposition because as
per the recent world bank reports, Kenya’s economy is amongst the fastest
growing in Africa and world at large, 20114/15).
• Requires Continuous appraisal of environment
• Extra resources/ extra costs are required to support growth.
• Diseconomies of large scale operations
• Occurrence of bureaucracies, delays in decision making, increased levels of
authority
• Occurrence of unethical practices due to pluralistic relationships
• Counter reactions from competitors eg collusive behaviour
4.4.3: Retrenchment orientation
This is where the management does two or all of the following things
 Withdraws the resources from production
 Reduces the number of products or services offered by the business
 Reduces the number of objectives, narrows its vision.
 Changes or lowers the nature, number and the level of personnel
 Withdraws from some market segments.
 Changes the number of stakeholders especially those directly related to the
organization.
N/B: This orientation is usually adopted by parochial managers who would rather
withdraw their resources than engage in competition. If the progressive managers adopt
this orientation, it is usually for a short period and it is done after a lot of environmental
analysis. The progressive managers will withdraw when the products or services they
are offering have negative cash flow, negative public image and unfair competition and
if they have to withdraw, it is based on the premise that there are better opportunities to
exploit..
Reasons why it is preferred

 If the resources are idle
 If there is negative cash flow
 If there is unfair competition
 If the opportunities are satisfactory exploited
 If there are threats which do not encourage any further production and if
production is pursued it will lead to greater loss for the business
 If the size of the market reduces
 If Political dynamics demand.
 Unethical practices that are likely to influence the stakeholders
 When there is no market niche.
 When there is a shift in customers / market.
 If there are Market changes i.e. changes in taste and preferences, changes in
demographics, fashion etc
 If tastes of various interest groups change e.g. owners of business may prefer to
invest in other areas.
 As a survival tactic especially where the economic situation changes.
Challenges of retrenchment
• Competitors activities may interfere with the planned orientation
• Lack of confidence of stakeholders especially workers and investors.
• Creates Negative Public image
• There is always concern as to What and when to retrench
• Resources may be left idle and this may create unnecessary expenses.
• Creates conflict /resistance amongst the stakeholders
• Social evils may arise especially if the personnel are retrenched.
4.4.4: Combination orientation
This is where management adopts two or more orientations at the same time
(concurrently) in the same environment. The management can adopt growth orientation
in one area and retrenchment in another area. Other combinations may include
retrenchment and stability, stability and growth; stability, retrenchment and growth.
However, when adopting combination, the manager must always ensure that there is
growth orientation to take care of the long term survival of the business.
Reasons of adopting combination orientation

 Where there are so many changes in the environment which provides both
opportunities and threats
 Synergistic effects are experienced when two or more activities are performed
jointly and they lead to a greater impact than when the two activities are
performed separately e.g. sales synergy, accounting synergy. If you have sales
synergy the management can develop new products and utilize the same sales
staff and distribution channels to distribute all the products without acquiring new
facilities
 Helps to reduce the number of alternatives that the management has to
implement
 Helps the management to become more efficient in resource allocation and
utilization and hence ensures the survival of the business irrespective of the
nature of the environment. For example, resources retrenched in one area can
be used for growth in another area of the organization.
Challenges of adopting combination

• Complex decision making
• Choice of combination. Which combination is the most appropriate?
• Relationships amongst stakeholders may create conflict
• Political basis of allocating resources
• Bureaucracies and bottlenecks may exist hence affecting the investment decision
making.
• Internal dynamics may overwhelm the implementers
• The larger organizations tend to be more political than SWOT oriented.
4.5: ACTIVITIES
In small groups, discuss the different areas where the learners can contribute to the
different areas where they have seen or experienced the different orientations.

Read more on the challenges of combination orientations.

1. What is formulation?
2. Discuss the different categories of policies
3. What do the different policy orientations entail?
LESSON FIVE: CHOICE OF POLICIES (ORGANIZATION PORTFOLIO)

5.1: INTRODUCTION
This lesson deals with what happens after the formulation of policies. A choice has to be
made for the organization portfolio to be selected. However, there are various
challenges that can constrain the process of choice. Various tools are explained below
that can help to deal with the choice.

1. Define the terms used.
2. List and briefly explain the different constraints encountered during choice.
3. Explain the tools used to choose the portfolio.
OUTCOMES
1. Establish the connection between leadership and business
2. Identify the effects of the environment in the running of a business
3. Establish various systems used in running a business
4. Choice of timing in business establishment
5.3: SUB LESSON: DEFINITIONS AND CONSTRAINTS OF CHOICE.
5.3.1: Definition:
 Choice is the process of selecting or getting the best and most appropriate
course of action so as to direct the resources towards the right objectives. This is
the process of comparing the impact of all possible strategies on the product
market/ business and getting a trade off amongst different courses of action.
Process of selecting the most appropriate/ applicable and sustainable policy
orientation
 Developing a match between the internal and external dynamics of the business
and the envisioned destiny
 Getting the best mix between the policy, the context and the resources so as to
achieve the overall purpose of the business.
. There are three major forces which influence the choice of orientation. These include:
Environment
This comprises of all the factors that influence the success or failure of business. These
factors are important because they dictate which of orientations will succeed and which
will fail. They either impede or enhance portfolio’s performance.
Leadership
The leaders will determine which orientations to be adopted. A leader is a person who
will direct group effort towards group objectives through effective and efficient use of the
resources. If the leaders are parochial, they will choose stability or retrenchment. If they
are adoptive they will choose what has been given to them (combination). If they are
progressive, they will choose growth that is usually based on the environmental analysis
and their value judgment. If they are good risk takers they will opt for growth orientation.
If they cannot handle uncertainty and risks, they opt for stability or retrenchment. The
orientation chosen will depend on the leaders. If they prefer acceptance from the
surrounding society they will opt for orientation that creates harmony in the society. If
not interested with social responsibility they will choose with their biases.
Organization systems
The organizations’ systems include the operating systems and patterns of decision
making within business. If a system is so bureaucratic, the leaders will rarely have time
to take advantage of the opportunities hence in most cases they opt for stability. If the
decision-making is through teamwork, they opt for growth orientation because the group
will quickly identify opportunities and make decision. During implementation, it is good
to avoid complex systems that may hinder implementation of good investment portfolio.
5.3.2: Constraints experienced in choice
1. Information constraints
This refers to the amount of data required which is relevant for a decision to be made.
The more the information available, the less the risk taken when making a decision and
the less the information, the higher the risk. In decision making, information should be
available when it is needed and in the form required. You should also have what is
required i.e. the relevant data should be simple and brief for the purpose of the decision
required. You should have information when it is required. Care should be taken to
avoid information going to the wrong stakeholders and especially competitors
N/B: Information is usually gathered from scanning the environment and if the
management does not scan the environment, most of the decisions taken will not relate
to the environment.
2. External constraints
When making the choice of the portfolio, the management must include all the
stakeholders outside the organization e.g. owners, suppliers of factors of production,
competitors, general society, government, consumer etc. When an orientation is
adopted, the managers have to prioritize the needs of different interest groups and
make a trade off amongst different interest groups. The trade off depends on how
important a certain interest group is as far as the success of the business is concerned.
It also depends on how much the business relies on a particular group e.g. if a business
has a monopoly supplier of raw materials, choice will be biased towards the needs of
that supplier. If you have a monopoly consumer of the product, choice will be biased
towards the needs of that consumer. If you have majority shareholder in the company,
the choice will be biased towards the needs of that shareholder. In a number of cases
the management may have to meet the needs of those interest groups in order to
survive. Otherwise the interest groups may sabotage the activities of the business.
3. Intra organization factors

This includes all the political forces within any organization which influences the
decision-making process amongst workers, supervisors, managers, and leadership. All
these are people within. A manager should always identify the leaders amongst the
different groups and the followers. Before the manager makes a policy decision, he
should identify the formal and informal relationships amongst the workers and the role
played by those relationships. Intra-organizational dynamics should be used for the
benefit of the organization.
4. Impact of past choices

When managers choose a portfolio to implement, they have to consider the history of
past choices and identify any associated successes or failures. Research has been
done and the following conclusions made. Most successful and older choices are
difficult to change. Once a choice is implemented it becomes difficult to change it
especially if original decision makers still exist in the decision making system. Past
unsuccessful choices are unlikely to be repeated unless there are parochial managers
who prefer status quo. When older choices start failing, management may prefer to
design sub-strategies which may act as a remedial solutions (short term solutions)
awaiting the overall formulation of policies. If the environment changes, management
may prefer to adopt a choice which was previously ignored because it may be
applicable to present environment. If management has to introduce effective choices,
they either have to act as a team or re-organize the whole organization structure so that
managers who have been involved in past decisions will have little or no impact on
current choices.
5. Time constraint
Time is a very important resource, supplied freely by God and yet the most
misused in organizations. When making choices, managers must consider the
time resource. There are four considerations when dealing with time.
 Time horizon
 Time frame
 Time pressure
 Timing
Time horizon
This is the longest time variable that policy makers have to make a decision. It usually
sounds like an unimaginable time, of a long term future. However, even that long term
future eventually becomes short term. Consequently, decisions with reference to time
horizon can be made now. It is when management considers whether the orientation is
short term/ long term. Any orientation that requires to be implemented in one year is
considered as short term. Orientations to be implemented five years onwards are
considered long term. Any orientation between one and five years is considered as
medium term.
Time frame
Usually defined as the time around which a decision can be made. The time frame
usually determines the period within which the rewards and punishments for different
activities will be experienced. If rewards are attached to long term success, managers
may tend to relax because they can’t identify with current success. If rewards are
attached to short-term success, it is difficult for managers to anticipate the future of the
business. There has to be a specified future. For example, in two months’ time, or at the
end of two months, we should have made the choices for the portfolio.
Time pressure
This deals with deadlines that are set for managers to make a choice. If the deadline is
too short you tend to make an irrational decision because you can’t account for all
factors that may influence the choice. Also managers are not able to analyze and
compare different alternatives; eventually the choices taken may be unsuccessful
If the deadline is too long managers may have access to sufficient information and will
tend to make a favorable choice because they are able to analyze and compared
different alternatives. Deadlines should be set and communicated to all.
Timing
Refers to when exactly the choice and implementation will take place e.g. if a marketer
intends to use pricing strategy against his competitors, he has to be careful of that exact
time that he increases or decreases the price in order to counter competitors strategies.
Also called the law of delay which states, “The longer a decision is delayed the lower
the probability that the consequences of that decision will ever be accepted, relevant or
applicable”. When choices are made, they usually apply to a specific environment in a
given time and if there is a change in that environment that choice will no longer be
applicable. The major question to ask is, “what else must be in place for this choice to
be acceptable and successful”. This defines time in relation to the environmental
dynamics.
6. Managerial values and systems
The management, leadership and the administration are critical for choice. Each
plays a different role in the choice of policies.
7. Resources (uses and sources)
The resources deal with and include all the factors of production. The manager
must ensure there is quality and quantity of the resources needed. Also consider
whether the resources are available and if not available, can they be available.
He should answer what, when, where, by whom, who, etc
8. Nature of competitive dynamics
This deals with the dynamics in the industry. This is determined by the SWOT of
the competitors’.
9. Risks, Returns and sustainability.
The risks and returns most of the times are related. The higher the returns: the
higher the risks. The question we need to ask is whether the returns and the risks
are sustainable and justifiable.
10. Business Policy Framework.
This includes the five variables of the framework ie environment, identity,
purpose, resources and activities. (Refer to lesson one of this module).
5.4: SUBLESSON II : ANALYTICAL MODELS USED WHEN CHOOSING POLICIES
There are various models of choice that include the following:
5.4.1: Boston consulting group matrix (BCG Matrix)
Market Growth rate

High
Question (?) Star
(Combination) (Growth)
Cash trap Cash cow
(Retrenchment) (Stability)
Market share
Low High
If a product has a very high market share and high growth rate it is called a star. If it has
a high market share and very low growth rate it is called Cash cow. If a product has a
very high market growth rate and very low market share, it is called Question mark. If a
product has low market growth rate and low market share it is called Cash trap/ dog.
Stars
These are the products that have high market share and high market growth rate. The
stars require a lot of new, high quality resources. They are unique products, attracts
unique resources, unique investors and are the long term future of the business. The
best choice of policy is growth orientation.
Cash cow
It is called so because one gets high returns after investing very little resources. Initial
investment is required but after the product matures, minimal resources are required for
maintenance. The customers are loyal and so committed to these products that the
sales are predictable and the market is fully saturated. The best choice of policy is
stability orientation.
Dog / cash trap

A lot of investment is done but it is trapped. You can only invest for prestige, public
image or as support for other products. The obvious choice of policy is retrenchment
orientation.
Question Marks
Any investment you put here has 50-50% chance of returns. Sometimes the products
give good returns and other times there is loss. In this quadrant, adopt combination of
policies.
5.4.2: Stop – light model/ Business planning matrix

It compares two variables:-
(a) Business strengths – They will be determined by the size of the business, size
of the market, the growth in the market, market share of the business and the
profitability. Represented on the vertical axis, ranging from low to high.
(b) Industry attractiveness – it is determined by the environmental conditions, the
opportunities and the threats. This is represented on the horizontal axis, ranging
from low to high.
Business strengths
High
Orange/ Yellow – (D) Green – (A)
Red – (B) Orange/ Yellow –(C)
(Retrenchment) (combination)
Low Industry attractiveness High
The model uses traffic lights analysis hence the term STOP-LIGHT MATRIX. If the
industry is very attractive and the business has a lot of strengths it falls in quadrant (A).
It means that business is doing very well and the management should continue with the
business and adopt growth orientation. If the industry is not attractive and the business
strengths are very low, the choice falls in (B) Quadrant. The management should
withdraw resources from such investment and thus adopt retrenchment options. If the
industry is very attractive and the business has very little strengths, it falls under (C) and
you should adopt stability because the business can maximize the use of the little
strength in the business and maximize the opportunities you get because the business
is very attractive. If the industry is not attractive but the business has a lot strengths, this
falls in quadrant (D) and you should adopt combination orientation i.e. you keep trying
the areas you think there exists opportunities especially through NICHE creation..
When using this tool the management should be very careful to identify the variables
that may contribute to success or failure e.g. the level of technology may create
opportunities for one business but it may be threatening to other businesses.
5.4.3: Strategic Budgetary process

When management wants to use this tool to make a choice, a lot of cost / benefit
analysis must be done. If
C= B adopt stability and or combination orientation
C> B adopt retrenchment orientation
C< B adopt growth orientation
The budgetary process is a tool that should be used on short term basis but should
never be used to make choices when long term choices are required. When using the
tool, management should critically analyze the environment so as not to under estimate
the most critical factors. It can also be used in combination with other tools.
5.4.4: Ansoff’s Product _Market matrix
Present Products New Products
PRESENT Market Product

MARKETS
penetration development
Market Product
NEW MARKETS development diversification
REVIEW QUESTION:
How can you use this tool for choosing the organization portfolio?
5.4.5: Limitations of the above tools

 Most managers will experience difficulties in specifying the variables to use
 The identification of the variables depend on the value judgment of the managers
 The managers usually experience difficulties in determining the impact of each of
the environmental factors hence the accuracy of the tool varies
 The manager’s qualification and interests may determine the tool chosen e.g.
parochial managers will prefer budgetary process, progressive management
prefers either of the tools and adoptive managers’ choice depends on who they
are co-operating with.
 In a number of situations the managers lack sufficient time to conduct in depth
analysis of all the variables.
 Most managers may not have qualified staff to collect enough data on a
continuous basis; they may base their decisions on outdated information.
 Most of the tools are marketing oriented and may not favor some stakeholders.
5.5: SUMMARY
Choice of the policy orientation because it helps to develop the portfolio to be adopted.
Choice also helps to differentiate stakeholders and their respective needs. The tools
used are equally critical and their respective advantages and disadvantages.
5.6: ACTIVITIES
Pick any one organization you are familiar with and identify areas of growth,
retrenchment, stability and combination orientation.
5.7: FURTHER READINGS

Read more on the challenges encountered when using different tools to make a choice.
5.8: SELF TEST QUESTIONS

1. What is choice of orientation?
2. Discuss the different categories of policies
3. What are the challenges encountered in choice?
4. Explain Ansoff’s matrix theory
5. Analyse the different types of policies
LESSON SIX: IMPLEMENTATION OF POLICIES
6.1: INTRODUCTION
Welcome to this lesson that deals with the process of ensuring that the portfolio adopted
is put into action successfully. It involves choice and allocation of resources so as to
ensure what was planned is implemented as required.
At the end of this lesson the learner should be able to:

1. Define the terms differentiation and integration.
2. Explain the tools used for allocation of resources.
3. Explain the challenges encountered during implementation.
Outcomes
 Be able to practically design a business policy
 Be able to advice on the implementation of a policy
 Be able to draw relationships between good and bad business polices
 Be able to know policies that are good for an enabling business environment
6.3: SUB LESSON I : IMPLEMENTATION OF POLICIES
6.3.1: Definitions:
 Process of putting into action the chosen policy to ensure achievement of all
benchmarks of the orientation chosen
 Execution of the portfolio options by getting things done thro:
 Right decisions
 Commitment
 Efficiency
 Effectiveness in the utilization of the factors of production
 Process of creating systems and patterns of operation to ensure that the chosen
policies are actualized for the future survival and growth of the business.
 Putting the policies into action.
During implementation, the following questions are answered:
 How to get policies into action?
 What and how to change or improve to accommodate the new portfolio?
 How to make sure portfolio is adopted as was intended?
 How to ensure all the control measures are executed as planned?
 How to make sure the resources are directed towards desired outcomes?
 How to differentiate and integrate the different components of the options
adopted?
6.3.2: Implementation process includes the following:

The implementation process may entail the following steps though not necessarily in
this order:
• Identifying the orientation adopted
• Creation of the necessary support structures
• Mobilization of resources to where and when they are required.
• Developing control systems and patterns of operations
• Differentiating the options adopted
• Integrating the differentiated components
• Directing the systems to have efficiency and effectiveness
• Motivating the HR to ensure commitment to the policy goals
• Creating relationships with all the stakeholders so as to reduce conflict.
• Providing the right leadership, management and administration during the
implementation
NB/
Differentiation
This involves the dividing up of the policy into very specific components that can be
achieved by the different section/ units of the business. This can be done in terms of
tasks, responsibilities, roles, authority, departments, sections etc.
Integration
It involves making sure that the above units work in harmony i.e. they work as a system
for the strategy to be effective. Integration must identify the inter-relationship amongst
different units and try as much as possible to match the different units.
6.3.3: To ensure effective implementation

• Develop strong and positive organization culture
• Develop leadership teams, forward looking and results oriented
• Match rewards& punishment systems with +ve or –ve implementation results
• Build capabilities (amongst the factors of production)
• Engage resources effectively and efficiently
• Develop/maintain competitiveness to accommodate new portfolio
• Simplify operating systems by avoiding punitive programs
• Develop Procedures / policies, rules and regulations that encourage positive
organization behavior,
• Adopt the best practices in the industry thro continuous improvement (kaizen
principles)
• Set and ensure benchmarks are observed to reduce deviations.
• Ensure there are sub-policies in all operational areas intended to support the
portfolio adopted.
Elements of Implementation
We consider 3 major things. Namely:-
 Policy versus the Leadership, Management and administration
 Policy versus Resource allocation
 Policy versus Organizational structure
6.3.5: Resource allocation
Resources are defined as anything that the management requires to be used in the
course of implementation of the portfolio. The factors to be considered include:
1. The financial resources

2. Facilities/ infrastructure, machines and equipment.
3. The materials / supplies and services
4. The personnel to be used when putting the plans into action
5. The management must identify the amount required of the above resources
should be able to state when the resources are required e.g. for short term or
long term purposes, deadline of the materials.
6. Should be able to determine how much of the resources can be generate within
the business and how much can be borrowed from outside sources
7. Should be able to identify the cost associated with different resource e.g. salary
for the personnel, renting/ leasing cost for the facilities, credit facilities for the
supply.
8. Management must always match the resources available with the need. If the
business has very little resources and is not capable of acquiring some more, the
manager should choose stability and retrenchment until resources are available.
If the business has a lot of resources the management must implement growth
orientation in order to take advantage of the opportunities in the environment.
If a business is new it should not borrow a lot of resources at the beginning instead is
should undertake what is called Multi-stage investment i.e. borrow and invest as and
when need arises.
6.4: SUB LESSON II:TOOLS USED FOR ALLOCATION OF RESOURCES

There are various tools that are used in the allocation of resources during
implementation. They include:
6.4.1: Boston consulting group matrix (BCG Matrix)
Market Growth rate

High
? Stars
Cash traps Cash cows

(Retrenchment) (Stability)
Low Market share
Low high
The growth orientation requires a lot of resources to develop new products, new
designs and take advantage of the opportunities in the environment. The orientation is
adopted for STARS. Stability orientation requires very little if any resources just to
maintain the current level of businesses. This orientation is adopted for CASH COWS.
Cash cow is used as resource generator because there is very little investment required
and yet it generates a lot of resources. In combination orientation, the amount of
resources depends on the combination adopted. This is usually adopted for QUESTION
MARKS that are unpredictable. Sometimes they perform well, other times they perform
poorly. With THE CASH TRAPS, the amount of resources required in retrenchment
depends on what factor of production is being retrenched. If personnel or labor has
been retrenched, it requires a lot of resources because workers have to be given
terminal benefits. If land or other physical facilities have to be retrenched there will be
no resources required, instead resources will be generated e.g. land can be sold,
leased, physical facilities can also be leased or rented. The disposal value may be
higher than the book value, hence generating profit.
6.4.2: Stop-light matrix (Business Planning Matrix)
This matrix compares two variables; Business Strengths or capabilities and industry
attractiveness (opportunities).
High
Yellow Green
Red Yellow
Low Industry attractiveness/opportunities

Low high
Green – a lot of resources are required for the product to maintain its position.
Red – stop allocation of the resources because there are no opportunities for the
business to exploit.
Yellow – the resources should be allocated cautiously, depending on the step by step
progress (multi-investment).
This is the normal annual finance budget that organizations have every financial year.
The budgetary process in most cases depends on interest groups and the priorities that
the interest groups have. This is a resource based tool and so the allocation of
resources depends on whether the resources are available or can be available
depending on the sources.
6.4.4: Product life cycle
time variable
Combination Growth Stability Retrenchment
Introduction Growth Maturity Decline
When using this tool, the resource allocation depends on the nature of activities being
undertaken. Introduction- stage is when the business starts operations or introduces a
product in the market. If the product survives birth stage they reach growth stage.
Growth- stage. This is where repeat purchases are occurring; people are looking for the
product, and they are developing loyalty for the product.
Maturity – this is where the market becomes saturated with the organization’s products.
The marketing mix is relatively stable, and the environment is also stable. The
customers have developed complete loyalty for the products.
Death/Decline – the products demand declines until the product dies or is withdrawn
from the market.
Introduction stage
Resources are needed for promotion activities, designing the products, test marketing;
also a lot of resources to purchase, lease or rent of whatever factors of production are
required.
Growth stage
Resources are needed for:- product development, promotion, research, redesigning the
products, expansion in terms of distribution of the products, mass production in order to
satisfy the new market and counter competition.
Maturity stage
Requires very little resources to maintain the product in the market, these products are
resource generators for the other products. There is mass production so as to satisfy
the large market available.
Decline stage
If you are not able to jump-start or re-engineer the product, you may have to withdraw
the product hence you require resources to withdraw / retrench. Also concurrent with
the withdrawal, you can introduce a competing product. This may require promotional
expenses amongst other resources to introduce the product in the market..
6.4.5: Policy versus Management

When implementing policies, the following are elements are required: Leadership,
management, organization climate and administration.
Leadership
The choice of leaders will determine whether the portfolio will fail or not, even
when all the other constraints have been overcome. A leader is expected to be a
guide and is supposed to give directions as to how objectives will be achieved.
This requires him to have a clear vision and mission of the business so as to
enable the organization to undertake the implementation towards desired
objectives.
Functions of a leader during implementation
1. Promoting and defending the interests of the business
2. Developing conductive working environment
3. Ensuring teamwork amongst the members of different groups
4. Ensuring that the organization needs are met
5. Anticipating the resources needed at different times
6. Ensuring that all the systems work together to achieve common objectives
Policy leadership vs Organization climate

This refers to the working conditions within the business which are conductive to the
achievement of objectives. Organization climate is defined as the quality of internal
environment which encourages co-operation, individual initiative, commitment to the
organizational policy and efficiency in the utilization of resources
The organization climate can be very conducive but the implementation may fail if the
implementers do not possess the following characteristics:
a) Should be self-motivated
b) They should be good in decision making and they should be incorporated in
decision making systems.
c) They should have communication capabilities and they should be provided
with facilities and freedom of communication
d) The implementers must have confidence in their leaders
e) They should be alert to the changes in the environment
f) They should be aware of the expected standards
Administration
It is the day-to-day running of the business which helps to ensure that business policies
are adhered to.
Functions of an administrator during implementation
1. He ensures that the resources are available at the right time, amount, quality,
quantity etc.
2. He ensures that the resources are efficiently utilized
3. Ensures that the plans/ decisions/ policies are designed at the right time and
communicated to the various interest groups.
4. Supposed to ensure the plans of actions are adhered to and any deviation from
the plan is identified and rectified.
5. He is expected to identify any changes in the environment that may affect the day-
to-day implementation
6.4.6: Policy verses Organization structure

This is the skeleton of the organizations’ levels of authority, communication,
delegation and activities. There are two options as to how the implementation
changes will be adopted in the organization. First the organization can design the
structure before choosing the portfolio, then the implementation will be based on an
already existing structure. Second, the management can develop the portfolio first
and create a structure that accommodates the changes. Both have disadvantages
and advantages. For example, the new constitution that was implemented in Kenya
had a lot of conflict because; it was developed before the framework for its
implementation was developed. Therefore the structures are being developed
concurrent to the implementation, whereby so many stakeholders have established
their comfort zones.
6.4.7: Policy Implementation Controls
As a policy decision maker, ensure that there are effective control systems. The
management must ensure the organization has both inbuilt and independent
control structures. The questions to answer include but are not limited to:
• What or who should be controlled, when, where , by whom, why, what control
system, how, for how long etc
• What PRELIMINARY, CONCURRENT AND FEEDBACK CONTROLS systems
should be established? (define each of these controls and explain when they can
be used) these controls are briefly defined as follows:
• Preliminary controls are put at the INPUTTING LEVEL. This is before the
implementation begins eg on the quality and quantity of the factors of production,
the nature of the policy orientation being adopted, nature of environmental
dynamics, etc..
• Concurrent controls are put at the processing level and they run concurrent with
the implementation activities. This involves making sure that the processing
activities are undertaken as per the stipulated time variables.
• Feedback controls are exercised at the end of the implementation process. To
assess the level of success of the implementation process. It is usually done on
the outputs to check if the objectives have been achieved.
Problems encountered during implementation
1. Unexpected changes in the environment might derail the implementation process.

2. Misappropriation of resources during the implementation process.
3. Time constraints may be uncertain with regard to the timing i.e. it may be difficult
to assess the impact that an orientation has created especially when the time
constraints were not properly evaluated.
4. Conflict of interest amongst different interest group especially if they perceive their
objectives are not being achieved during implementation.
5. Lack of sufficient resources for all the implementation activities.
6. Sabotage of the implementation process especially when the implementers have
not been involved in decision making
7. Lack of motivation amongst implementers especially if the communication
channels are not used effectively.
8. Mismatch between the variables identified during the formulation and choice of
portfolio and the actual variables affecting the implementation activities
9. Difficulties in ensuring the criteria used for implementation and especially in
handling resources is related to both external and internal environment
10. Lack of sufficient information for quick decision making
11. Lack of financial resources for implementation activities
12. Lack of qualified personnel to undertake specialized implementation activities.
13. Changes in management, leadership and administration during implementation.
6.5: SUMMARY
Implementation is a very important step in policy development process. It involves

breaking down the policy orientation adopted and creating relationships amongst the
differentiated components so as to achieve maximum results from implementing a given
portfolio. One critical element in the implementation process is to allocate resources
effectively and efficiently. Tools such as BCG matrix, product life cycle, Business
product matrix and strategic budgetary process are used to allocate resources.
6.6: ACTIVITIES
List and explain different implementation activities in any organizations that you have
related with.

Read further on the steps involved in the implementation process.
i) What is implementation?
ii) List the factors to be considered in allocation of resources.
iii) Scan the current environment in Kenya and identify factors that can affect
implementation.
LESSON SEVEN: REVIEW AND MONITORING OF POLICIES
7.1: INTRODUCTION
This lesson deals with the “Why” of all business activities and decisions. After the policy
implementation process, assessment must be done to ensure that policy objectives are
met. The planned objectives and the outcomes are either very close or they tarry. If
there are any deviations, they should be explained, justified and rectified. The
evaluation process helps to give the results of the implementation activities.

 Define the terms used in this lesson such as evaluation, monitoring, review,
window dressing.
 Compare and contrast different criteria used in the evaluation process.
 Explain the importance of evaluation process.
 Explain the challenges experienced during the evaluation process.
7.3: LESSON: REVIEW AND MONITORING OF POLICIES (EVALUATION)
7.3.1: Definitions
Monitoring involves a step by step process of assessing periodically, the performance of

different implementation activities. This is done concurrent to the implementation
process and specifically done on the benchmarks. Review involves continuous
assessment of the portfolio implemented so as to ensure that they have been
implemented effectively. Evaluation is the summative assessment of the whole
implementation process after the process is completed. It also involves assessing the
internal and external environment in order to identify the variables that have affected or
influenced the implementation activities. It also involves assessment of the impact of the
policies on business activities, on the stakeholders, on the long term future of the
business, on the competitors and the respective changes that have occurred in the
implementation process.
During evaluation the management must establish the following;
1. The basic assumptions to be made in the course of evaluation. For example
which variables are controlled, which are changing and the expected impact of
each of the variables
2. The existing conditions in the environment and identify any deviation from the
basic assumptions
3. Re-assess the policies that have been implemented in order to identify any
deviation from the orientation chosen
4. Review or revise policy formulation process so as to make any changes that are
necessary
7.3.2: Criteria for evaluation
1. Internal consistency – it is where the management identifies how the portfolio

relates to the objectives of the business
2. Assessing the external consistency. It is where the management identifies the

external environmental factors, their effects on the portfolio and any deviations
from the planned results
3. Workability of the policy. It is where the management identifies how
useful/applicable a given policy is also identifies the benefits to be derived from
the orientation adopted.
4. Acceptability of the policy chosen. It where the management identifies the degree
of risk and uncertainty involved in the implementation of the portfolio. The risk is
calculated in terms of returns on investment, resource utilization, resource
availability, changes in environment etc.
5. Appropriateness of the time span of the policy. It is where the management
identifies the time constraints involved in a given investment portfolio e.g. timing,
time pressure, time frame and time horizon
6. Appropriateness of the policy implemented as compared to effectiveness in
resource utilization. It is where the management ensures that all the resources
required are available and they are effectively utilized to generate benefits for the
different stakeholders.
7. Longevity criterion. This helps to identify the long term effects of the implemented
portfolio. Does the new portfolio have a positive impact on the survival and
growth of the business?
8. Resource criterion. This criteria assesses if the resources allocated were
effectively and efficiently utilized and controlled.
9. Competitive Advantage criterion. Evaluation is based on the different competitive
advantages developed as the portfolio was implemented. Comparison of the
SWOT of the business with the SWOT of the competitors.
7.3.3: The frequency of evaluation
Evaluation process and frequency depends on the nature of business involved. Some
businesses have fixed intervals and others have variable intervals. If a business varies
its frequency of evaluation, it means that the management will conduct evaluation only
when there is a major change either in the internal environment or external environment
which may affect the success of a given option of the portfolio e.g. changes in
leadership, performance of various factors of production, changes in technology, social
factors, political factors etc.
Evaluation should not be conducted so frequently because of the following reasons:
1. Financial constraints involved
2. The time required to conduct the evaluation may affect the performance of the
stakeholders and consequently affect the performance of the portfolio
3. Stereo – typing may occur especially where the evaluators do not have enough
resources. They assume the outcomes of the policies are all the same hence the
evaluators end up copying what was previously reported.
4. To reduce any unnecessary cost which may be incurred in formulating sub
strategies which may be required during evaluation activities
5. The implementers may question the validity of the policy implemented, creating
fear of failure amongst the stakeholders.
6. If evaluation is conducted frequently it interferes with the activities of all the stake
holders and may contribute to the failure of the portfolio implemented.
7. In most cases the evaluators tend to be the same people as the formulators
hence they may not want to reflect any negative consequences which may
influence the performance.
7.3.4: Challenges experienced when evaluating organization portfolio.
1. The uniqueness of each policy orientation. Each policy has different variables to
be considered. This requires a lot of resources if all the variables have to be
evaluated
2. The criteria to be used in evaluating the portfolio even when the objectives of the
portfolios are different.
3. Conflict of interest amongst the stakeholders. Different stakeholders have their
own objectives and any one orientation may have positive consequences for one
stakeholder at the same time negative consequences for another stakeholder.
4. Window dressing. In most organizations, credit goes to the management when a

the implementation succeeds and punishment goes to the subordinate when it
fails. The subordinate will always try to cover up any failure in implementation so
that they are not punished. In the end when the implementation fails the
subordinates will tend to blame the failure on uncontrollable factors like external
environment.
5. Motivation during evaluation. The management must always identify the factors
that will help to motivate different stakeholders towards the success of the
portfolio. Motivation depends on the objectives of different stakeholders. If one
stakeholder perceives that his objectives will be met if the implementation
succeeds, he will always be motivated towards the success. If another
stakeholder perceives that his objectives will not be met, he will tend to sabotage
the success of the implementation. In order to ensure that the stakeholders are
motivated, the manager should:
 Involve them in decision making
 Communicate any progress that has been achieved in implementation
activities especially where there are positive consequences
 Ensure that the implementation is accompanied by rewards e.g. increase
in salary, recognition, promotion, praise, sharing of the profits.
 Avoid giving punishment when a portfolio fails especially when the
implementers did their best.
 Identify and specify the specific roles played by every person in
implementation activity so as to avoid blaming everybody in case of a
particular person’s failure.
 They must communicate the vision, mission and objectives of the
business so that the implementers may have a clear view of what is
expected of them.
6. Information required. Competitive information, related to competitions includes the

competitors’ marketing strategies such as the strategies used in 4ps of marketing.
This helps the business to identify competitive advantages that it has against
competitors. Also identifies strengths and weaknesses of competitors. Helps
management to choose strengths against competitors weaknesses and to
strengthen its weaknesses so as to be able to face competition. There are two broad
categories of information: external and internal.
 External information
Information dealing with factors beyond control of managers.
Managers must identify external factors which may influence
implementation activity because external environment can make
attractive strategies fail
 Internal environment information; includes strengths of businesses,
resource at its disposal, capabilities of acquiring new resources, risks
and uncertainty involved in decision making activities, considerations
of stakeholders and priorities of each of the stakeholders.
The above three categories of information will help managers to allocate new resources
 Acquire new resources
 Quick decision making
 Planning for current and future objectives
 In control activities i.e. Comparing achievement against plans.
 To identify necessary changes for success of the business
 Also provide basis for continuous environmental analysis
N/B: In most cases, for evaluation to be genuine, external consultants are needed to
evaluate the portfolio implementation in relation to the following areas:
Environmental dynamics and their respective impact
Skills of the evaluators
Negative attitudes towards evaluation variables and processes.
Time constraints ie Time horizon, time frame, time pressure and timing.
Financial resources required
Interpretations by different stakeholders.
Ethical/ moral dilemmas encountered by different stakeholders.
7.4: SUMMARY
This lesson deals with the aspects of evaluation so as to ensure the planned
objectives were achieved just as was intended. It involves comparing planned
results vs actual results and identifying any deviations. If any deviations occur,
corrective measures are undertaken. The output of the evaluation process is used
for decision making in the environment scanning and consequently to review the
vision, mission and objectives.
7.5: ACTIVITIES
1. The learners should indentify the reasons for or against the evaluation process.
2. Identify the different variables that are relevant in the evaluation process.
3. Discuss the challenges of evaluation in organizations.

Additional readings include:
1. Ethical issues that may arise during evaluation of implemented portfolio;
2. New techniques of evaluation coming up and being developed to cope with new
technologies.
i. Define the terms review, monitoring and evaluation.

ii. List any problems that you may encounter during evaluation.
iii. List any possible areas of window dressing in organizations during evaluation.
GLOSSARY
Concurrent control. All control activities undertaken at the same time with the
implementation process
.
Corporate Social Responsibility. This is a concept that businesses have obligations to
the society over and above their profit making (economic) objectives. This may include
organic objectives, legal objectives among others
.
Deviation. This occurs in the control systems where there is a discrepancy between
performance standards and the actual results
.
Ethics. The principles that guide individual to make a decision as to what is right or
wrong, good or bad, equitable or inequitable especially in relation to other people.
Feedback control. Incorporates all activities that aim at evaluating an activity after it is
completed. Evaluating the outputs.
Leadership. The ability to direct group efforts towards group goals by motivating them
towards set objectives.
Organization structure. The way the people and tasks in an organization are arranged to
reflect
Policies. General guidelines to follow in making decisions and taking action so as to

have consistency in the relationships with the stakeholders.
Preventative control. Incorporates all activities aimed at monitoring the inputs into the
implementation process
REFERENCES MATERIALS FOR ALL LESSONS
Dubrin,A. j., (2009). Essentials of Management. South Western Cengange,
Canada.
Gamble, E.J., & Strickland, A. J. (2007). Crafting and Executing Strategy: Concepts and
Cases. McGraw Hill Irwin.
Hunger, D. J. & Wheelen, L. T. (2008). Strategic Management and Business Policy.

Pearson Prentice Hall ( 11th Ed)
Ghosh , P.K. & Kapoor, G. K., (1985). Business Policies. Sultan Chand & sons, New
Delhi.
Ghosh , P.K. & Kapoor, G. K., (1985). Business and society: A study of Business-
Environment Interface.. Sultan Chand & sons, New Delhi.
Ghosan, S., Quinn, J. B., et al. (2002). The Strategy Process. McGraw Hill Irwin. (5th Edition)
Kamieniecki , S. & Kraft, E. M. (2007). Business and Environmental Policy. MIT Press,
Cambridge.
Management Dynamics and practices: Kenyan Perspective by Sagimo.

Fred & Stoner (1998). Strategic Planning for emerging business.
Drummond , H., (2000). Introduction to Organizational Behavior. Oxford University

Press.
Hugh Maillah and Tampoe M., (2000). Strategic Management. Oxford University Press.
Stearns, T. M. & Aldag R.I., (1981). Management. Harold Hoffman Inc.
Plunkett W. R. & Attner R. F. (1997). Management: meeting and Exceeding Customer

Expectations. South-western College Publishing.

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KENYATTA UNIVERSITY

DIGITAL SCHOOL OF VIRTUAL AND OPEN LEARNING IN

COLLABORATION WITH SCHOOL OF BUSINESS

UNIT CODE: BBA 400

UNIT TITLE: BUSINESS POLICIES AND DECISIONS

MRS ESTHER W. GITONGA

This overall objective is divided into three sections:

1. Nature and scope of Business Policies

2. Social responsibility, Ethics and Policy decision

5. The process and tools used in choice of policies

6. Business Policy implementation and challenges

7. Evaluation: review and monitoring of policies

Lecture ONE: THE NATURE AND SCOPE OF BUSINESS POLICIES

1.2: LESSON OBJECTIVES

1.3: LESSON ONE : NATURE AND SCOPE OF BUSINESS POLICIES

1. Policies are defined as guidelines that help to guide the decision

• Consistency in decision making

• Equity in organization's activities

• Consistency in the relationships with stakeholders.

• Stakeholders’ awareness of what outcomes to expect.

 The size of the organization

 The destiny of the organization

 Identity of the organization

 Allocation of resources to meet organization’s objectives

Business policy framework (BPF)

Business Policy framework defines the parameters within which policy

 Environment – all the positive and negative dynamics or forces that

 Overall purpose – this is the broad objective of the business. The

 Identity – this is defined as the unique characteristic that differentiates

 Resources – this includes all the factors of production at the disposal

 Activities – refers to what the business does with the available

Policy development process

 Developing vision, mission and objectives

 Choice of organization’s portfolio plan

 Implementation of chosen portfolio

 Evaluation of the implementation process

 Social responsibility and ethics

1. Functional level –policies at the department or sectional level dealing

2. Organization level – policies developed for the whole organization.

3. National level – policies developed to deal with the affairs of a

4. Zonal or regional level –policies developed for operations of a given

1.3.2: Characteristics of Business policies

• Entrepreneurial in nature. This is where policy makers or managers

• Intellectual in nature. When policy developers are making the

• Policies should be relatively fixed for a given period of time but

• Comprehensive assessment of all the competitive dynamics.

• Customer focused, demand driven, market oriented. The policies

• Incorporate all stakeholders. All the business stakeholders’ needs

• Match between policy requirements and available resources.

• Best mix between environment and the resources. The policy

• Trends oriented. Policies should be aligned to the past, current and

• Must incorporate managerial or leadership values. The policies

1.3.3: Trends influencing policies

• Technological trends such as cashless society, e-commerce, e-

• Demographic developments. The variables that are used to define a

• Social cultural changes. Social-cultural characteristics about the

• Global dynamics eg global boundaries, international zoning,

• Increased levels of awareness amongst the stakeholders. Right now

• There are increased levels of literacy and illiteracy in the societies.

• Need and emphasis on social responsibility. The society has so many

• Increased levels of unethical practices in the business, amongst

• Need and emphasis on entrepreneurial culture

• Increasing informal sector