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Definition of Business Policy

Business Policy defines the scope or spheres within which decisions can be taken by the subordinates in an organization. It permits the lower level management to deal with the problems and issues without consulting top level management every time for decisions. Business policies are the guidelines developed by an organization to govern its actions. They define the limits within which decisions must be made. Business policy also deals with acquisition of resources with which organizational goals can be achieved. Business policy is the study of the roles and responsibilities of top level management, the significant issues affecting organizational success and the decisions affecting organization in long-run.

Features of Business Policy An effective business policy must have following features1. Specific- Policy should be specific/definite. If it is uncertain, then the implementation will become difficult. 2. Clear- Policy must be unambiguous. It should avoid use of jargons and connotations. There should be no misunderstandings in following the policy. 3. Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed by the subordinates. 4. Appropriate- Policy should be appropriate to the present organizational goal. 5. Simple- A policy should be simple and easily understood by all in the organization. 6. Inclusive/Comprehensive- In order to have a wide scope, a policy must be comprehensive.

7. Flexible- Policy should be flexible in operation/application. This does not imply that a policy should be altered always, but it should be wide in scope so as to ensure that the line managers use them in repetitive/routine scenarios. 8. Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in minds of those who look into it for guidance. Difference between Policy and Strategy The term policy should not be considered as synonymous to the term strategy. The difference between policy and strategy can be summarized as follows1. Policy is a blueprint of the organizational activities which are repetitive/routine in nature. While strategy is concerned with those organizational decisions which have not been dealt/faced before in same form. 2. Policy formulation is responsibility of top level management. While strategy formulation is basically done by middle level management. 3. Policy deals with routine/daily activities essential for effective and efficient running of an organization. While strategy deals with strategic decisions. 4. Policy is concerned with both thought and actions. While strategy is concerned mostly with action. 5. A policy is what is, or what is not done. While a strategy is the methodology used to achieve a target as prescribed by a policy. Business policies Business policies are sets of rules followed by a store or group of stores that define business processes, industry practices, and the scope and characteristics of a store's or group of stores' offerings. They are the central source and reference template for all allowed and supported practices within a store or group of stores. In Web Sphere Commerce, business policies are enforced with a combination of one or more business policy commands that implement the rules of the business policy. Each business policy command is a Java class. A business policy command can be shared by multiple business policies. The behavior of the business policy command is determined by the parameters passed to the command.

Parameters affecting the function of a business policy command can be introduced in three places:

the contract term and condition referencing the business policy the business policy definition the business policy command itself

The business policy definition may specify a set of parameters that are automatically fed into each invocation of any of commands associated with the policy. A business policy command may specify additional parameters when it is invoked. Finally, a contract term and condition may proved extra parameters for a business command unique to the term and condition. Business policy commands for the same type of business policy must have the same interface. The following categories of business policies are provided in WebSphere Commerce: Catalog business policies Catalog business policies define the scope and characteristics of the catalog of products for sale in a store including prices and the categorization of products in a store's catalog. Payment business policies Invoicing, payment, and refund business policies define how a store accepts payments, pays refunds, and the format of a store's invoices. Returns business policies Returns business policies define if refunds are accepted, the time period they are accepted for, and any re-stocking fees applied to returns. Shipping business policies Shipping business policies define the shipping providers a store can use and the charges associated with each type. Referral interface business policies Referral interface business policies define the relationship between a proxy store and a remote store. Many contract terms and conditions reference business policies. This provides a measure of control over the nature of contracts a store enters into while still providing flexibility in creating the contract terms and conditions.

Business policies are guidelines-statements (guide to plans & decision making) to facilitate predetermined objective on the mode and manner in the structural & functional aspects to achieve the objective formulated as plans at all levels of management in the business organisation. As per the definition given by Christensen et. al. and steiner and others " the study of the function and responsibilities of senior management, the crucial problems that affect success in the total enterprise, and the decisions that determine the direction of the organisation and shape its future. Business policy provides a basic framework defining fundamental issues of a company, its purpose, mission and broad business objectives and a set of guideline governing the company's conduct of business within its total perspective. purpose of business policy Reduce uncertainty Adopt a generalist approach to uniform handling of problem solving Establish indirect control over independent action Make quicker decision

Nature of Business Policy by V S RAMA RAO on NOVEMBER 3, 2010 Business policy basically deals with decisions regarding the future of an ongoing enterprise. Such policy decisions are taken at the top level after carefully evaluating the organizational strengths and weaknesses in terms of product price, quality, leadership position, resources etc., in relation to its environment. Once established the policy decisions shape the future of a company channel the available resources along desired lines and direct the energies of people working at various levels towards predetermined goals. In a way, business policy implies the choice of purposes, the shaping of organizational identity and character the continuous definition of what is to be achieved and the deployment of resources for achieving corporate goals. Some useful definitions of Business Policy

1) A business policy is an implied overall guide setting up boundaries that supply the general limit and direction in which managerial action will take place. 2) A business policy is one, which focuses attention on the strategic allocation of scarce resources. Conceptually speaking strategy is the direction of such resource allocation while planning is the limit of allocation 3) A business policy represents the best thinking of the company management as to how the objectives may be achieved in the prevailing economic and social conditions 4) A business policy is the study of the nature and process of choice about the future of independent enterprises by those responsible for decisions and their implementation 5) The purpose of a business policy is to enable the management to relate properly the organizations work to its environment. Business policies are guides to action or channels to thinking. Business policies generally have a long life. They are established after a careful evaluation of various internal and external factors having an impact on the firms market standing As and when circumstances change in a major way the firm is naturally forced to shift gears, rethink and reorient its policies. The World Oil crisis during the 70s has forced many manufacturers all over the globe to reverse the existing practices and pursue a policy of manufacturing fuel efficient cars. Therefore, policies should be changed in response to changing environmental and internal system conditions. Types of policies There are many types of policies marketing policies, financial policies, production policies, personnel policies to name a few in every organization. Within each of these areas more specific policies are developed. For example, personnel policies may cover recruitment, training, promotion and retirement policies. Viewed from a systems angle, policies form a hierarchy of guides to managerial thinking. At the top of level policy statements are broad. The management is responsible for developing and approving major comprehensive company policies. Middle managers usually establish less critical policies relating to the operation of their sub units. Policies tend to be more specific at lower levels. The managers job is to ensure the consonance of these policies, each must contribute to the objectives of the firms and there should be no conflict between sub system policies.

Although it is customary to think of policies as written statements it is not necessarily the case. For example a firm may simply decline to consider handicapped employees in the selection of new personnel. In effect, this becomes an effective policy even though the company has never verbalized its position.

Nature and objective of business policy The nature and objective of business policy are both formulated as plans and determined by a business organisation.Objective is the end to a plan while policy is the mode and manner to reach the objective. A business policy is: guidelines that facilitate to reach a predetermined objective both in mode and manner formulated from the top to the lower level management while Objectives are the endpoints to a plan. Current Trends in Business Policy by V S RAMA RAO on NOVEMBER 2, 2010 The four paradigms of business policy throw light on how the discipline has developed over the years. The story does not seem to end here. The approaches and methods of analyzing business processes have not yet coalesced into a theory of how to manage the show. But certain visible trends revealing how strategic issues get resolved can be outlined thus (Christensen et al). Top management Prerogative: Business policy puts lot of emphasis on top management functions and responsibilities such as defining objectives, specifying action plans, providing direction to enterprise activities, ensuring control, balancing the concerns of internal and external groups and ensuring the success of a firm in a changing environment. General Management Bias: Business policy tries to look at the jungle rather than the trees. Instead of examining issues from a functional angle, policy makers tend to view all key issues from a broader perspective i.e. assessing the overall impact of a decision on the entire business. This, of course involves choosing a right path, keeping organizational capabilities and environmental pressures in the background.

Resource Focus: Business policy is chiefly concerned with the mobilization of various resources in order to achieve the goals of an enterprise in an effective way in the face of severe competition or adverse circumstances. Externally tuned: Business policy tries to underscore the importance of environmental impacts on organizations and the need for top management to come out with appropriate responses. As things stand now, the most important factor in assessing organizational effectiveness is not efficiency but adaptability to environmental challenges. Covers a Large Territory: Business policy and Strategic management cover lot of ground now a days. Barring some differences in applications especially in non profit ventures these courses find ready acceptance in small businesses , public sector enterprises and other types of non business organizations. The Indian Scenario Management education received a big boost in the early 60s after the setting of Indian Institutes of Management (IIMs) and the Administrative Staff College of India. IIMs structured their curriculum along the lines followed in reputed American Business schools. The case method of study (as followed in Harvard business school) was an important pedagogical tool employed in IIM, Ahmedabad all these years. Several university departments, meanwhile have started the Masters in Business Administrative (MBA) programs at various locations throughout the country. After the opening up to the Indian economy in early 90s, the All India Council for Management Education (AICTE) was set up to provide proper direction to the growth of management education, The Business Policy and Strategic Management course has gained wider acceptance as an integrative discipline in over 1500 management institutes that have come up in the recent pass (1990 2003). A number of doctoral and post doctoral studies have also been undertaken with a view to enrich the knowledge in this area especially with a clear focus on Indian companies. A professional association called Strategic Management Form of Indian has also been formed in 1996 which is exclusively devoted to the development of issues relating to strategic management. A number of publications covering the concepts, techniques and case studies relating to business policy and strategic management have also gone up impressively

especially after the 90s, such as Strategic Marketing, Business Standards Strategist etc. Objectives of Business Policy Course The business policy course is offered in various management institutes to serve three important purposes: 1) Integrate the knowledge and methods learned in previous courses having a functional flavor such as production, finance, marketing, accounting etc. 2) Develop analytical skills and decision making capabilities of participants through the extensive use of ease, research reports industry specific studies micro and macro economic data. 3) Promote positive attitudes genuine ethical values and healthy ways of thinking, taking a holistic view of the concerns of internal as well as external stakeholders of the organizations. Importance of Business Policy Course by V S RAMA RAO on NOVEMBER 3, 2010 The Business policy course is integrative in nature. It enables the learner to understand the importance of looking at the organization as a unified whole. The functional flavor and emphasis is needed to motivate people to peak performance. But in the race to get ahead of other departments, especially where resources have to be put to effective use, one should not lose sight of the broad, overall interests of an organization. A course in business policy seeks to integrate the knowledge and experience gained in various functional areas of management. Individual departments may suffer from certain unique problems. Marketing may complain against poor quality, Production may look at poor sales support. Finance may find it difficult to come out with appropriate budgetary allocations and Personnel Department may criticize the poor compensation plans coming in the way of improved performances. Sectional interests no doubt have to be taken care of. Every attempt must be made to put out the internal fires by emphasizing the overall goals for which the organization is known. Business policy course is multidisciplinary in nature. It draws rich inputs from other disciplines such as Psychology, Economics, and Sociology etc. The students are made to examine the important issues from various angles. Sectional interests, sectoral demands, tunnel

visions and departmental loyalties and a host of other disintegrating factors are examined and cross examined bit by bit, piece by piece while arriving at mutually satisfying decisions the course helps participants to cross fertilize ideas, synchronize thoughts and deal with issues dispassionately. They can come out of the shell cross functional boundaries and take effective decisions keeping the best interests of the organizations in mind. They are willing to look at the other side of the coin more closely. They are willing to listen and toss around ideas freely, interact openly and take everything good or bad in their stride. A course in Business policy also helps participants to improve their decision making capabilities in a significant way. Participants are encouraged to gather information from diverse sources, investigate facts thoroughly examine the opinions of affected parties initially and resolve issues through joint, interactive sessions. Strategic decision making is not a one man show. Both the manager and the subordinates must be willing to dissolve their differences examine facts objectively and arrive at decisions to mutual satisfaction. One can develop skills of this nature of course only through experience and observation. A Course in Business policy helps participants to understand the linkages between various functional specialties decide things objectively and rationally. Benefits of the Course: A Capsule. 1) Helps the participant to understand why functional boundaries are created and appreciate why the various sub units have to move In close coordination while realizing the overall objective(s). 2) Helps to resolve difference between individual and organizational goals. Every attempt is made to pull all the functions and activities together. 3) Helps participants to work in an orderly manner appreciating the work put in by others. They understand and adjust with each other by developing mutual trust, cooperation and understanding. Production knows its target maintenance keeps equipment and tools in good order, finance arranges funds and security takes care of goods and services. 4) Creates an understanding of how overall objectives and policies are formulated why everyone has to focus attention on pre-set targets and goals, why one should appreciate the viewpoint of the other while translating rhetoric into action; why one needs to anticipate changes and adjust accordingly. The course will certainly

improve the capabilities of participants in monitoring events, forecasting problems and solving them proactively rather than reactively. Business Policies by V S RAMA RAO on NOVEMBER 4, 2011

The role of polices is very crucial for the success of any program. The policies are a guideline statement that helps organizations and business in achieving its objectives and goals. Business policy defines the scope that set the path of decision making. A business that lacks policy will surely come to an end sooner or later due to mismanagement and chaos. Business policies are guidelines-statements guide to plans & decision making to facilitate predetermined objective on the mode and manner in the structural & functional aspects to achieve the objective formulated as plans at all levels of management in the business organization. Business policies mainly consist of companys rule, its process and relationship. One can call business policies as mission statements as well. It is business policy that defines strategic management and helps in improving performance. Features of Business Policy An effective business policy must have the following features1. Specific- Set specific policies pertaining to organizations goals and objectives. Implement these policies smartly and achieve the goal 2. Clear- Policy must be unambiguous. It should avoid use of misleading phrases and connotations. There should be no misunderstandings in following the policy. 3. Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed by the subordinates.

4. Appropriate- Policy should meet the organizations goal, in short it has to be appropriate. 5. Simple- A policy should be simple and easily understood by all in the organization. 6. Inclusive/Comprehensive- Plan comprehensive policy for the better and secure future of the organization. 7. Flexible- Policy should be flexible in operation/application. There should always be a scope of alteration in time of emergency. Though over flexibility could harm the organization but little flexibility in policy is required for healthy growth. 8. Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in the minds of those who look into it for guidance. To beat the increasing level of competition organizations are planning their policies following the concept of SWOT. SWOT analysis (alternately SLOT analysis) is a strategic planning method used to evaluate the Strengths, Weaknesses / Limitations, Opportunities, and Threats involved in a business venture. It involves specifying the objective of the business venture and identifying the internal and external factors that could cause hindrance in achieving business goals and marking the factor that could facilitate the growth of the business. The technique is designed to Albert Humphrey, who led a convention at Stanford University in the 1960s and 1970s using data from Fortune 500 companies. A SWOT analysis starts with setting objective for the organization. A SWOT analysis is incorporated into the strategic planning model. For the proper management of any business it is essential to identify the SWOT and work according to it. Identification of SWOT is important from the planning purpose. First, the policy makers have to decide whether the objective is achievable if the objective is tough or unachievable then new objective has to be considered. The SWOT analysis is often used in many business areas including academics to highlight and identify strengths, weaknesses, opportunities and threats. It is particularly helpful in identifying areas for development. Difference between Policy and Strategy

The term policy is totally different from strategy and two should not be used synonymously. The difference between policy and strategy can be summarized as follows1. Policy is a blueprint of the organizational activities. While strategy deals with strategic decisions. 2. Policy is mostly formulated by the top level management whereas strategy is set by middle level management. 3. Policy involves with routine/daily activities essential for running of an organization, policy is relate to both thought and action whereas strategy is mostly concerned with action alone. There are various factors that affect business polices. The condition of market, global economic condition, competitors and most importantly customers area of interest plays crucial role in the business policies. To remain in the race and to be ahead businesses are spending time in reading current trend of market and buyers and introducing desired change in their business policy for the betterment. Follow the strategic planning and set realist business policies for further growth of the business. Evolution of Business Policy Course by V S RAMA RAO on NOVEMBER 2, 2010 Business policy as a distinct field of study was introduced at Harvard Business School way back in 1911. The course aimed at improving the general management capabilities of students. It was intended to tie together and give proper focus to the first year courses by showing how the functions of business both internally and as between businesses, were closely interrelated in practice and how a chief executive had to recognize and deal with those relationships. The course, however received widespread acceptance only after the publication of two reports in 1959. The Gordon and Howell report, sponsored by the Ford Foundation predicted that a course on business policy would give students an opportunity to put together what they have learned in the separate business fields and utilize this knowledge in the analysis of complex business problems! The Pierson report, sponsored by the Carnegie Foundation also recommended the introduction of the course strongly. Following these reports the business policy course was made mandatory in all business schools in the US for the purpose of recognition. In the course of time the

course gained popularity in business schools in other parts of the world as well. It is being increasingly viewed as an integrative course offered to students after completing as set of functional area courses in Finance, Marketing, and Accounting etc. Development of course contents: In the days gone by academicians viewed future as a moving target, difficult to capture analyze and interpret with a certain degree of confidence. So they pinned their hopes primarily on short term planning tools. Around 1930s systematic attempts were made to go deep into future and prepare the organizations for likely changes in future. Budget control systems management by objectives and capital budgeting techniques were pressed into service with a view to predict future impacts based on current trends. These techniques unfortunately failed to capture the essence of future conditions in an appropriate way. Long range planning was used to remedy the situation. Corporate plans, prepared by people at various levels based on current practices and likely changes in future, were often pushed upwards for approval by top management. Top managements participation in such lopsided exercises was minimal and there was always the danger of the recommendations not being followed. This process is called as first generation planning. First generation planning puts lot of emphasis on picking up an appropriate course of action (generally a single plan) based on environmental challenges and organizational strengths and weaknesses. Then came the second generation planning in the form of strategic management which came to occupy the center stage in the business world ,emphasizing interaction by managers at all levels of the organizational hierarchy in planning and implementation . Hofer et al called this evolution a paradigm shift. They have summarized the developments in this regard thus: First Phase: Paradigm of Adhoc Policy (till mid 1930s): Adhoc policy making necessitated by the expansion of American firms in terms of product markets and customers and the consequent need to replace informal controls and coordination by farming functional policies to guide managers.

Second Phase: Paradigm of planned Policy (1930s 1940s): Replacement of adhoc policy making by planned policy formulation and shifting attention towards integration of functional areas, in line with environmental requirements. Third Phase Strategy Paradigm ( 1960s): Rapid force of environmental changes and increasing complexity of managerial functions demanding a critical look at the concept of business in relation to its environment hence the need for strategic decisions. Fourth Phase: Paradigm of Strategic Management (1980s): shifting of focus to the strategic management process and the responsibility of general management in resolving strategic issues.

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