DMBA401 Unit-07

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)
MASTER OF BUSINESS ADMINISTRATION

SEMESTER 4
DMBA401
STRATEGIC MANAGEMENT &
BUSINESS POLICY
Unit 7: Business Policy and Decision Making 1

Unit 7
Business Policy and Decision Making
Table of Contents
SL Topic Fig No / Table SAQ / Page No

No / Graph Activity
1 Introduction - -
3
1.1 Learning Objectives - -
2 Concept of Business Policy - 1
4-6
2.1 Features of Business Policy - -
3 Factors Considered before Framing Business - 2 6-7
Policy
4 Steps Involved in Framing Business Policy - 3 7-8
5 Policy Cycle and its Stages 1 4 9-10
6 Implementation of Policy Change - 5
6.1 Levels of Change - - 11-12
6.2 Sources of Policy Change - -

7 Role of Policies in Strategic Management - 6 13-14
8 Business Policy and Decision Making - 7 14-15
9 Summary - - 16
10 Glossary - - 17
11 Case Study - - 18-19
12 Terminal Questions - -
20-22
12.1 Answers - -
13 Suggested Books and E-References - - 23

1. INTRODUCTION
This unit will cover the different concepts and aspects of business policy and it’s uses in
decision making. As a business grows, the business environment also changes. Thus, the need
for framing business policy also arises. A clear business policy brings clarity in conducting
daily business activities. Managers need not refer to the senior management for important
decisions and can refer to established business policies to address queries and concerns
raised by employees.
You will also learn about the factors to be considered before framing business policies, the
process of framing business policies and the steps involved. The key steps include
identification of the situation problem definition and policy recommendation. Thereafter a
policy proposal is made, developed and disseminated. After that, a policy has to be explained,
approved, implemented, and finally, reviewed.
Business policies, when framed precisely, allow lower and middle-level managers – in direct
contact with customers -- to deal with issues efficiently. Business policies also define the
premises within which decisions should be made. It involves assessing and outlining roles
and responsibilities of all employees. It takes into account decisions framed by top
management that will directly impact the organization, and take it forward. At the end of
this unit, you will also learn about the role of policy in strategic management and decision
making.
1.1 Learning Objectives

After studying this chapter, you will be able to:
❖ Discuss the factors which should be considered before framing policies

❖ Explain how policies are framed
❖ Describe the Policy Cycle and its stages
❖ Explain the role of policy in strategic management and decision making

2. CONCEPT OF BUSINESS POLICY

Before learning about business policy, let’s look at these terms closely.
Business:
Business is the foundation of modern life. It is the most important economic activity in any
society. Business is defined as an organization or firm, which is engaged in commercial,
professional, industrial, and economic activities with the intention to earn profit.
Policy:
A policy is a statement of purpose and a defined scope within which a company can function.
Policies are generally approved by the Board of Directors or the top management. Subjective
and objective decision-making can be conducted within the boundaries set by a policy.
Business Policy:
Business policy is a guide that helps to achieve the predetermined goals of an organization.
The nature and purpose of a business policy are both drafted and determined by a business’s
stakeholders. Once established, the policy decisions shape the future of a company, using the
available resources and directing them to perform to achieve organizational goals. A
business policy means the selection of objectives, positioning a business and outlining its
character, and helping to acquire the required resources to achieve business objectives. For
a company, the goal is the end, while a policy is the means and ways of achieving those goals.
Working within a business policy, decisions are made by the senior management after a
careful analysis of the organization's strengths and weaknesses. This analysis is in terms of
product value, quality, leadership position, resources, etc.
The purpose of a business policy is to enable managers to align an organization's work with
its environment. By setting the scope, business policies are meant to channelize the decision
making and thought process in an organization. It also facilitates the middle and lower-level
of the management to deal with problems and issues without consulting senior management
on a regular basis for every issue.
Business policies are guidelines established by an organization to manage its operations.

They lay down the limits within which decisions should be made. Business policy explores

the roles and responsibilities of top management, key issues affecting an organization, and
guides decision making.
Example
3M
Once known as the Minnesota Mining and Manufacturing Company, 3M works with clients
in healthcare, consumer products, automotive, manufacturing, electronics, and safety
industries.
Remote work plans: The Work Your Way plan lets employees create a work schedule that
helps them do their best work from wherever they want, whenever they want.
2.1 Features of Business Policy

A clear and well-designed business policy should have the following features:
It should be specific and precise. This is critical because if a policy is vague, it will not serve
its purpose of guiding managers in making decisions. Any ambiguity in a policy should be
taken care of by the top management.
• It should be reliable. It will be the basis of several decisions made in the future by
hundreds of employees.
• It should be appropriate and stay relevant with the business environment.
• It should be flexible and open for change. There should be scope for change in a policy,
as and when required, so that the managers can continue to refer to it.
A policy should be future-oriented, as it is meant to guide an organisation forward.

SELF-ASSESSMENT QUESTIONS – 1
1. A policy is same as a strategy. (True/false)

2. _____________ is the medium through which a management can expect to achieve its
goals over a period of time.
3. Business policy is a ____________ that helps an organisation achieve a predetermined
goal.
3. FACTORS CONSIDERED BEFORE FRAMING BUSINESS POLICY

For the successful formulation of a policy, the following factors should be considered:
A. Relationships with Organizational Goals: There should be a clear correlation
between organizational goals and business policies. In other words, before framing
policies, the reason, that is the core organizational objectives, for which the
organization has been established, should be focused upon.
B. Easy to Understand: A policy needs to be clearly stated, and should be understood by
all. Clarity is the essence of a good policy. If the policies are clearly stated, then personal
biases and opinions will not affect decision-making.
C. Written and Documented: A policy should be written in order to be integrated into
the business system as policy manuals. According to Henry Carl, a policy will not be
functional until it is in written form.
D. Stable and Flexible: A policy needs to be stable but not rigid. Stable policies promote
self-confidence amongst employees, customers, vendors, and others. However, policies
need to be changed or altered in keeping with the changing business environment.
E. Compatibility with in Company: All policies in the workplace should go hand in hand
with different functional policies. For example, production policy and purchase policy
must be compatible.

4. _________ management is responsible for policy formulation.

5. A policy comes first, strategy follows. (True/false)
6. It is mandatory in an organisation for policies to be in a written form.
(True/False)
7. The following factor need not be considered before framing a business policy:
a) A policy can be either in written or oral form
b) It should be stable
c) All policies need to be compatible with each other
d) A policy should be easy to understand
4. STEPS INVOLVED IN FRAMING BUSINESS POLICIES

Top management of a company lays down the business policy for an organization to follow.
Policy development includes the following steps:
1. Identification of Situation: Policy planning is a complex process that requires expert
guidance. Policies are needed to reflect a company’s image. The first step in the framing
of business policies is to understand the business environment.
2. Problem Definition: This important step in policy-making involves identifying
problems for a business and determining the need for framing a policy. Line managers
identify problems in their departments. and convey to the top management. After
further consultation, different alternatives are analyzed to finally determine the needs
of the policy.
3. Policy Recommendation: The next step is to issue recommendations that can address
the needs of an organization. This depends on the level at which the policies are
formulated. The management has to choose from the suggestions and alternatives
given. The most suitable proposals are selected and recommended.
4. Policy Proposal: After the recommendation is made, it is presented to the department
heads. They, in turn, can make changes, if required to meet the company objectives.
Framed policies are based on guidelines provided by overall business policies.

5. Policy Development: The draft of the policy is discussed with all concerned managers
and employees who would be expected to work with that. The aim here is to have
constructive criticism and suggestions so that a constructive policy can be framed. This
process helps create sound policies developed after detailed discussions.
6. Dissemination of the Policy: Once policies are formulated, these need to be conveyed
to those who would be implementing them. For this purpose, publicity material may be
required. Sometimes, a policy is issued orally, or at meetings and seminars.
7. Explanation of the Policy: Once policies are disseminated, the next most important
thing is to explain the details of the policy. Especially, its impact on people and business
and its overall objective.
8. Policy Approval: Before the adoption of a policy, employees involved in its
implementation need to understand the basic principles and operating rules about the
policy. Once a policy is rolled out, questions will arise. These questions need to be
addressed by the top management. After all the deliberations, a policy is approved.
9. Policy Implementation: The next step is to implement the policy. The Managing
Director or the CEO of an organization is ultimately responsible for the implementation
of the policy.
10. Policy Review: The most important task is to review a policy at regular intervals. There
should be an ongoing review of policies. This helps in assessing if the policy worked
well in the areas where it was intended to be. Continuous feedback, comments,
complaints, responses, and suggestions should be received from people entrusted with
the policy implementation.
8. The first step in the development of a policy is _________________.

9. Policies of functional departments should be in sync with the _____________ policies.
10. Continuous feedback is required from the stakeholders of a policy after its
implementation. (True/False)

5. POLICY CYCLE AND ITS STAGES

We saw how a policy is the definite course of action selected by an organization from all the
available alternatives to guide its decisions. A Policy Cycle is a method used to analyze the
entire development of a policy, right from its formulation to implementation and
maintenance. We saw that policy framing includes 10 detailed steps where in policy cycle it
is about the life of the policy.
Agenda
Setting
Policy
Policy
Maintenance
Formulation
Evaluation
Legitimation
Implementation
Fig 1: A Policy Cycle
The cycle divides the policy making process into several stages. It starts right at the
beginning stage where policymakers and strategists think about a particular problem or
issue. It ends with its implementation and review. Policy formulation is a regular and
continuous process and not a single event.

A. Agenda Setting: An organization faces many issues which require management to

address these immediately. Policymakers should consider these concerns on an urgent
basis. Framing of a policy begins by explaining and identifying these problems.
B. Policy Formulation: Once a problem is identified, efforts are made to address the
problem by formulating appropriate policies. As objectives are set and identified, it
makes it easier for those who will implement the policy to understand the reason and
purpose of a policy’s formation. It is important to determine the commercial feasibility.
C. Legitimation: It is not enough to make the best policy. It is equally important to get it
approved by those who will use it. This is a challenge for policymakers, that of getting
organizational support.
D. Implementation: After informing all stakeholders about the newly-framed policy and
obtaining approvals, the next step is to implement the policy. This is a critical issue. For
implementation, all resources, such as money, equipment, operational capacity,
financial legal framework, etc. should be made available.
E. Evaluation: Once a policy is operational, it becomes important to know if the policy has
achieved the desired results. A review is required to know how well the policy has
performed.
F. Policy Maintenance: If a policy fails to provide the desired result, then appropriate
modifications need to be made. However, sometimes, if a policy does not meet the
requirements of an organization, the policy may need to be discontinued.
11. Policy Cycle is a method used to analyse the development of policy

_________________.
12. Which of the following is not a stage in the policy cycle?
a) Policy formulation
b) Evaluation
c) Policy maintenance
d) Approval from top management
13. After informing about and explaining a policy, and obtaining approvals from
stakeholders, the next step is to apply the policy. (True/False)

6. IMPLEMENTATION OF POLICY CHANGE

Just as change is a big part of our lives, and constant in nature, so it is with company. This
change could be in the internal or external environment of an organization. Examples being:
change in machinery, technology, political and social factors, or organizational policies.
Change refers to any variation in organizational performance. It is essential for the survival
and growth of any organization. A company would like to change its equipment or machinery
due to the development of new technology. Today, change is evident in every functional area
of an organization. There are changes to ownership or company control, in management,
flow of funds, to name a few. Any change creates anxiety. Invariably, employees resist change
during any transition -- even if it benefits all subsequently.
6.1 Types of Change

A change in an organization can be of various types.
A. Knowledge Change: A change in knowledge is gained through education and a

learning process. It could also be because of experience gained in their lives. In an
organisation, employees’ behaviour or way of doing things change with the
enhancement in experience, knowledge shared, and training.
B. Opinion Change: Changes can come about in the attitude of employees. This attitudinal
change could be positive or negative. In an organisation, a change of attitude can
happen due to several reasons related to organisational environment, culture, and
objectives.
C. Behavioural Change: This change is brought about by a change in human behaviour.
It is difficult to notice such a change in the short term. But as employees work,
behavioural change is depicted in their performance.
D. Organisational Transformation: With changes in company policies, organisations
also get transformed. This change is reflected in the style of working and in the overall
work culture.

6.2 Sources of Policy Change

Business policies are influenced by internal and external factors in an organization which
are very powerful in nature. Today, technology is the major source of change. It is opening
up new opportunities for a business and deeply impacting business strategies.
However, the incentive for change in existing policies can come from various sources. These
are:
A. Changing Customer Needs: The demand for products is not static. Customer
expectations keep changing. This changing nature of customer demand can be best
understood by studying a product's lifecycle. Lifecycles of different products vary
greatly. For example, a Tape Recorder had a short life cycle, on the other hand, other
products such as soaps have been around since Victorian times.
B. Resolving Issues: Problems affecting organizations can be political, economic,
technological, and social. Management needs to introduce changes in functioning in
order to address these concerns. Sometimes the solution to a problem requires
extensive research and redevelopment of a product.
C. For Improving Efficiency: No organization can survive without improving its
productivity and efficiency. This may be required to increase falling profits and may
require some change in policy. In the face of continuous improvement organizations
need to change their policy to better utilize all the opportunities.
14. Change in knowledge is gained thorough ____________ and training.

15. Which one of the following is not a level of change?
a) Knowledge
b) Opinion
c) Behavioural
d) Strategic
16. Business policy does not get influenced by internal and external factors which are
very powerful in nature. (True/False)

7. ROLE OF POLICIES IN STRATEGIC MANAGEMENT

A policy refers to specific guidelines, procedures, rules, forms, and management systems
established to support and promote organizational goals. Policies empower and ease the
decision-making process by providing clear guidelines.
Policies are an important tool in strategic decision-making. By encouraging uniform thinking

and handling of similar situations, policies also help avoid conflicts of action. Being in a
written form, policies reduce ambiguity in tackling business issues.
Policies are designed to guide managers to create strategies to meet business objectives.
Policies serve as guidelines for managers in implementing business strategies.A policy lays
down practices that support strategies. It helps to guide strategic planning and execution.
• Policies contribute to the development of processes across organisations, even an
industry.
• A policy reduces uncertainty in the recurring activities of an organisation. It reflects a
company's beliefs and ideas in relation to daily activities.
• It reduces individual decisions and choices and ensures uniformity in decision making
• A policy helps create a balance between corporate culture and strategy; this allows
effective implementation of policies.
• Policies help create a working environment. It interprets a company’s philosophy of
how things should be done, and how people should be treated.
• It helps avoid conflict by aligning actions and activities.
17. Policy refers to specific guidelines, _______________, rules, forms, and management
systems established to support and promote work for the stated purpose”.
18. Policies contribute to the development of processes across an organisation or
industry that makes __________________________.
19. A policy helps to create a ___________________. It interprets a company’s philosophy of
how things should be done, and how people should be treated.

8. BUSINESS POLICY AND DECISION MAKING

Policies help put goals into actions. Business policies direct corporate thinking, and
performance. Thus, policies cover the whole business spectrum – from internal capabilities
to the market environment – and serve as a guide for making decisions in the following ways:
A. Saves Time: Policies are a precedent to decision making by managers and employees
at all levels. Since these guidelines help lower-level management to deal with issues
without consulting their senior, policies help save precious time.
B. Clarity and Coordination: As policies are written and communicated to all, these bring
clarity and integrity within the entire organisation. This in turn also leads to
departmental collaboration and coordination.
C. Stability and Confidence: Policies bring stability in an organisation and instil
confidence among employees. Policies are framed for the long run and help focus on
organisational goals.
D. Concrete Decisions: When policies are clearly defined, it encourages managers to
make concrete decisions as they have a clear understanding of the scope of their
decisions.
E. Performance Evaluation: Policies guide in following company goals and objectives.
Policies serve as standards to compare and evaluate organisational performance.
F. Loyalty and Justice: When policies are based on strong fundamentals, they instil
confidence among employees. They remain more loyal to a company. Especially, when
a policy advocates the principle of equality and justice.
G. Excelling Employees: When policies are managed and implemented efficiently,
employees feel a sense of ownership and are willing to give their best.
H. Image Building: Business policies build the image of a company. A good image and
reputation ensure a large and loyal customer base and improves sales and profitability.
I. Improving Efficiency: Clarity of policies, their relevance, and understanding enables
the efficient use of company resources. This improves efficiency and productivity of an
organisation.

J. Regulatory Guidelines: Policies serve as regulatory guidelines for decision making.

This ensures consistency and uniformity in the process of making decisions across all
levels in an organisation, especially for recurring issues.
20. _______________ is one of the core benefits of decision making policies.

a) Vision creation
b) Time Saving
c) Interdependency
d) Manipulative decisions
21. Policies serve as a standard for performance. Results can be easily compared to
policies for determining whether decisions are within the scope of policy limits.
This is as ______________________________.
22. Policies serve as regulatory guidelines for decision making. (True/False)

9. SUMMARY
• Every organization has its unique way in which it operates and performs activities. If
business policies are not framed clearly, it may create several issues within
organisations and for customers. This can hamper the performance of the organisation.
• A business policy is a set of rules and regulations framed by the top management of a
company. A business policy should be clear, specific, uniform, simple, appropriate, and
stable.
• The steps involved in the framing of business policies are: Situation analysis, Problem
identification, and Policy recommendation. Followed by Policy proposal, Development,
Dissemination, Explanation, Approval, Implementation and Review.
• A policy cycle is a method used to analyse the development of policy framing. It consists
of: Agenda-setting, Policy formulation, Legitimation, Implementation, Evaluation and
Maintenance.
• A business policy is influenced by internal and external factors which are very powerful
in nature. Technology is the most advanced source of change. New opportunities for
profitable exploitation of technology affect business strategies. To benefit in the
marketplace, organisations often redefine their goals and policies, creating new
products and services, changing working styles, and find new resources.
• Policies are required in the implementation of business strategies. As a policy is a
guideline for decision making which links the formulation of the strategy to its
implementation.

10. GLOSSARY
Business Environment: The term business environment refers to the combined value of all
individuals, organizations and other forces outside the power of the organization but which
may affect its productivity. The environment comprises individual customers and other
factors such as technological, financial, cultural, economic, and competitors which can affect
the business directly or indirectly.
Competitive Advantage: Competitive advantage refers to those factors which give an

organization an edge over its competitors. Advantages that allow a company to produce
goods or services better or cheaper than its competitors. These factors allow a
manufacturing business to make more sales compared to its market competitors.
Dissemination: Dissemination is the act of spreading or circulating any information, news

etc.
Ethics: It is the belief about what is morally correct or acceptable.
Operations: Operations are the business activities which a company performs to convert
raw materials into finished products or services, selling them to customers, and making a
profit.

11. CASE STUDY

Matching Plans and Policies at Rane Group
The Deming Application Prize is considered as the most prestigious award for excellence in
quality management. There are many Indian companies that have won the prize, Sundaram
Clayton being the first. However,three companies in the same business group winning the
prize is a remarkable achievement. The Chennai-based Rane group is the proud recipient of
the Deming Prize, thrice. Two years after Rane Brake Linings won the prize in 2003, two
other group companies -- Rane Engine Valves and Rane Steering Systems -- achieved the
honourin 2005.
The Beginning: Sometime in 1999, S. Sundar Ram, president of Rane Brake Linings, realised
the critical importance of quality as a competitive tool in a changing world where global
competition was going to prevail. Probably, spurred by rival Sundaram Clayton's success,
Ram decided to focus on the approach of Total Quality Management (TQM), as the means to
achieve strategic success.
The Rane group, consisting of eight companies founded in 1929, manufactures of auto
components like steering and suspension systems, seat belts, valves, valve guide and tappets.
Rane Brake Linings, a member of the Rane Group of Companies set up in 1964, is an ISO 9001
and 14001 company. It has factories in Chennai, Hyderabad. and Pondicherry,
manufacturing asbestos and asbestos-free brake lining, clutch facings, disc pads, and railway
brake blocks.
Typical for a family business group, Rane Brake was a top-driven company. The CEO would
formulate the strategic plan and the managers would implement it. However, the
implementation of TQM required decentralisation of management, as well as, an open
leadership style.
Changing through Policies: The implementation of TQM focused on a certain element such
as customer focus, standardisation of processes, fact-based decision making, policy
deployment to align corporate goals with employee responsibilities, and total employee
involvement. The implementation plan also called for organisational support and
behavioural interventions, such as quality circles and discussion groups.

An apex team was set up, comprising all the company presidents and total quality (TQ)
coordinators, besides group-wise TQ coordinators. This team would go to a company
location every month and spend the day auditing the work done and charting out future
progress. Quality circles and discussion groups proved invaluable in employee
empowerment and employee ownership. Suggestions emanating from these groups helped
make continual improvements in various aspects of the production system.
A Modern Company: Today, research and development is a thrust area at this consummate
manufacturing company. There is a dedicated facility for new product development for
critical applications, including aerospace. The design centre has computer-aided design and
sophisticated test equipment. Products go through comprehensive testing and validation in
modern test facilities. The company attempts to continually update in line with evolving
customer demand.
The Rane group companies plan to improve their lean manufacturing systems using the
Toyota production system, which focuses on eliminating all kinds of wastage and push
export sales. The group has technology collaborations with TRW Automotive of the US and
NSK and Nisshinbo of Japan.
The outcome of changes in production plans and policies have been in terms of improved
teamwork, energetic and motivated employees, and improved organisational alignment.
Source: http://www.domain-b.com/companies/companies_r/rane_brake-
linings/20031223_deming.html
Two examples of external variables, which influence business policy are ___ and ___.
Ans: Political or governmental policies, International environment, Economic forces (Any
two)

12. TERMINAL QUESTIONS

SHORT ANSWER QUESTIONS
Q1. State the basic features of a business policy.
Q2. Illustrate the steps involved in framing a business policy.
LONG ANSWER QUESTIONS

Q1. Discuss the different factors which should be considered before framing a business
policy.
Q2. Explain the policy cycle and its stages.
12.1 ANSWERS
SELF ASSESSMENT QUESTIONS
1. False
2. Business Policy
3. Guide
4. Top
5. True
6. True
7. A. Policy can be either in writing or oral form
8. Situation Identification
9. Corporate
10. True
11. Framing
12. D. Approval from top management
13. True
14. Education
15. d) Strategic change
16. False
17. Procedures
18. Strategy implementation
19. Work environment

20. B. time saving

21. performance evaluation
22. True
TERMINAL QUESTIONS
SHORT ANSWER QUESTIONS
Answer 1: Policies are framed in alignment with the organizational goals and objectives.
Policies act as guidelines to managers and lower-level employees in deciding the course of
action and day-to-day issues. Policies are formulated by the top management and are
implemented by the lower and middle-level management.
Answer 2: Formulation of policies involves the following steps: Identification of the

situation and Problem definition. Followed by Policy Recommendation Proposal,
Development, Dissemination, Explanation, Approval, Implementation, and Review.
LONG ANSWER QUESTIONS

Answer 1: Factors to be considered before framing business policies are:
a. Relationship to organization objectives: The policies should be based on
organizational objectives. In other words, while framing policies one should consider
for what purposes and objectives the business has been established and how this can
be best achieved. The policy should reflect the principles, practices and philosophies.
b. Simple understandable: The policy should be stated in definite, positive and clear
understandable terms. Understanding of policy is important on the part of those
affected by it. Clarity is the essence of good policy.
c. Written policies: Policy should be written so that they can be integrated within the
system and policy manuals. A Policy is determined as an admin tool is considered when
it is in writing. . As the written policies ensures the uniformity of freedom of action on
the part of the management.
d. Stable: The policy must be stable but should not be rigid. When the policies are stable,
they inspire confidence in the mind of the employees, customers and dealers.
e. Comprehensiveness: The policy should be comprehensive. It should cover all issues
concerned with the firm.

f. Complementary to one another: All policies in the functional areas must be

complementary to one another. e.g., Manufacturing policy and purchase policy should
be complementary to each other.
g. Supplementary to overall corporate policies: Supplementary policies add to and
extend overall organizational policies. These policies are derived from those policies
which are directed towards the achievement of the organizational objective and then
broken down into supportive policies.
Answer 2: The policy cycle starts when policy makers consider framing a policy to address
a particular business problem. A policy is then framed and implemented.
i. Agenda Setting: An organization faces many problems and issues which require
management to take immediate attention. It is the responsibility of the policy-maker
to decide on which matter or issue is important and which one to be tackled on an
urgent basis.
ii. Policy Formulation: Once the problem is identified, efforts are made to resolve the
problem by framing the right policies. Objectives are set so that it will become easier
for the implementer to understand the cost.
iii. Legitimation: It is not enough to formulate the best policy but it is equally important
to get it accepted by those who are going to implement it. The policy-framer had the
challenging task of getting support for the policy.
iv. Implementation: After the approval of the policy and getting consent from the
concern, the next step is to implement the policy. Implementation of the policy by an
organization is a critical task to do, as it includes the establishment of responsibilities
by the employees as well.
v. Evaluation: Once the policy is implemented it becomes essential to know whether the
policy was able to achieve the desired results. Assessment of the policy requires
knowing the extent to which the policy was successful or whether the policy decisions
were correct ones.
vi. Policy maintenance or termination: If the policy fails to give the desired outcome, then
it should be modified. If the policy is not suitable for the present situation, then it
should be discontinued.

vii.
14. SUGGESTED BOOKS AND E-REFERENCES
BOOKS:
• Cherunilam Francis (2015), Business Policy and Strategic Management: Himalaya
Publication House, New Delhi.
• C Appa Rao, B Parvathiswara Rao, K Sivaramakrishna (2008); Strategic Management
and Business Policy: Excel Books, New Delhi.
REFERENCES:
• Factors affecting business polciyviewed on 03May 2021,
<http://www.managementguru.net/factors-influencing-policy-formulation-and-
decision/>
• Policy Cycle, viewed on 05 May 2021,
<https://www.slideshare.net/naseemarfa/policy-cycleabout:blank>

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DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

MASTER OF BUSINESS ADMINISTRATION

Unit 7: Business Policy and Decision Making 1

SL Topic Fig No / Table SAQ / Page No

6.1 Levels of Change - - 11-12

6.2 Sources of Policy Change - -

Unit 7: Business Policy and Decision Making 2

1.1 Learning Objectives

❖ Discuss the factors which should be considered before framing policies

Unit 7: Business Policy and Decision Making 3

2. CONCEPT OF BUSINESS POLICY

Business policies are guidelines established by an organization to manage its operations.

Unit 7: Business Policy and Decision Making 4

2.1 Features of Business Policy

A policy should be future-oriented, as it is meant to guide an organisation forward.

Unit 7: Business Policy and Decision Making 5

1. A policy is same as a strategy. (True/false)

3. FACTORS CONSIDERED BEFORE FRAMING BUSINESS POLICY

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4. _________ management is responsible for policy formulation.

4. STEPS INVOLVED IN FRAMING BUSINESS POLICIES

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8. The first step in the development of a policy is _________________.

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5. POLICY CYCLE AND ITS STAGES

Fig 1: A Policy Cycle

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A. Agenda Setting: An organization faces many issues which require management to

11. Policy Cycle is a method used to analyse the development of policy

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6. IMPLEMENTATION OF POLICY CHANGE

6.1 Types of Change

A. Knowledge Change: A change in knowledge is gained through education and a

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6.2 Sources of Policy Change

14. Change in knowledge is gained thorough ____________ and training.

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7. ROLE OF POLICIES IN STRATEGIC MANAGEMENT

Policies are an important tool in strategic decision-making. By encouraging uniform thinking

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8. BUSINESS POLICY AND DECISION MAKING

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J. Regulatory Guidelines: Policies serve as regulatory guidelines for decision making.

20. _______________ is one of the core benefits of decision making policies.

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Competitive Advantage: Competitive advantage refers to those factors which give an

Dissemination: Dissemination is the act of spreading or circulating any information, news

Ethics: It is the belief about what is morally correct or acceptable.

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11. CASE STUDY

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12. TERMINAL QUESTIONS

Q2. Illustrate the steps involved in framing a business policy.

LONG ANSWER QUESTIONS

Q2. Explain the policy cycle and its stages.

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20. B. time saving

Answer 2: Formulation of policies involves the following steps: Identification of the

LONG ANSWER QUESTIONS

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f. Complementary to one another: All policies in the functional areas must be

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