I.

BUSINESS POLICY
AND STRATEGY

LESSON 1: WHAT IS BUSINESS POLICY?

Enable for an organization to succeed it needs to have a shared sense of

direction. This will serve as a guide in management’s decision and policy-making,
and influencing employees’ attitude towards work.

In doing so, with the constant changes in the corporate world, an

organization has to adopt strategic management concepts and principles that are
considered vital in fostering competence, effectiveness and efficiency among all
its members with the end goal of long-term survival.

It is therefore important to learn the fundamentals of business policy and

strategy not just to enrich one’s knowledge in this context but also to strengthen
one’s foundation in strategic management.

Business Policy

The word policy is derived from the word “politeia” which means policy or
government. In the context of business, policy refers to the statements of the
organization that are framed in light of its objectives with respect to its operations.
Business policy, on the other hand, deals with the responsibilities and functions
of senior management, the factors that affect its success and the decisions that
shape an organization’s future. The very nature of business policy depends on
the needs of the organization. It has the following characteristics:

1. Simple: A policy should be simple , clear and easily understandable to

ensure that it would be interpreted the right way.
2. Clear: The policy should be clear and not confusing.
3. Flexible: A policy isn’t a permanent one. It should be modified as the
need arises.
4. Certain: The policy should give confidence to the line managers by
making it concrete and definite.

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 5. Consistent: A policy should result to smooth actions by the
subordinates even when handling recurring problems.
6. Relevant: The policy should be in-line with the goals of the organization;
7. Comprehensive: A policy should be comprehensive so as to avoid line
managers from frequently approaching the top management;
8. Stable: A policy, though not intended to be permanent, should also be
relatiively stable so as to avoid uncertainties in actions .

Business policy also emphasizes the analytical context of strategic

management. It provides a framework for getting to know strategic decision-
making. The four most important processes in business policy are: (1)
environmental scanning, (2) policy formulation, (3) policy implementation and (4)
evaluation and control.

Policy, Procedure and Process

Policy, according to Ralph Devis, is “a statement of a principle or set of

principles, along with their accompanying norms of conduct, that conditions and
governs the fulfillment of particular business objectives.” Policy is an internal law
that governs the organization's administrative actions. The management's
objective is expressed in policy. It establishes the parameters within which
decision-makers must function. Policy is a type of planning that serves as a guide
for making administrative decisions and outlines how things should be done.

Procedures, on the other hand, refers to the processes required to

complete a task. A procedural statement is more explicit and concrete than a
policy declaration. It emphasizes the order in which a specific action is carried out.
Procedures are a set of instructions that must be followed in a specific order. For
example, each company has its own protocol for processing orders, collecting
payments, and providing after-sales assistance. Procedures are used to show
how ordinary tasks can be completed. They are the vehicles through which
choices are carried out. Procedures should be examined and changed on a
regular basis. This results in work simplification, rationalization, efficiency gains,
and cost savings.

The big picture is defined by a process. It emphasizes one of the most

important aspects of business: diversity. These elements are captured in a

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procedure, which also includes additional information regarding functional roles,
objectives, and methods–depth.

Types of Business Policies

The types of business policies could be classified according to the

following categories:

Top management or managers are in charge of

developing policies for subordinates. This policy's
objective is to provide guidelines for subordinates and
Originated
their job. For example, a marketing director may
Policy
develop policies and then delegate implementation to
lower-level executives. The policy devised by the
marketing director is known as the Originated Policy.
The Ministry of Labour develops labor policies that are
According to
Imposed binding on businesses. External powers, such as the
Nature of
Policy state or the federal government, impose policy. The
Origin
organization is bound by the policies.
When an unusual circumstance emerges, the manager
may make a request to his supervisor for assistance in
resolving the issue. The policies are designed to deal
Appealed
with the current unforeseeable scenario. The regular
Policy
formulation of appealed policies may obstruct work
performance. This appealed policy should be replaced
with the original policies to avoid this.
Management creates internal regulations that serve as
guidance for subordinates. It defines the rules and
Internal parameters that subordinates must follow. It creates
Policy realm for subordinates working. The examples of
According to internal policies are recruitment and selection policy,
Structure budgetary policy etc.
External External challenges are addressed with such policies.
Policy In response to environmental variables or influences,
organizations reform or frame new policy.

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 Basic Policy This refers to the company's overall ideology.The top
management sets the basic policies.
Major Policy These policies deal with the most important issues of
According to
the organization's. For example, a promotion policy or
Importance
a distribution policy.
Minor Policy Minor policies are established to deal with routine
issues and are decided by managers on the front lines
Top Long-term planning is usually covered by these
Management policies. The highest management level makes the
Policies decision. Budgeting and product launch, for example.
According to Upper Middle The departmental head decides on these policies.
Levels of Management Managers should, however, link minor rules to the
Management Policies organization's major policies when drafting them.
Middle These policies are created by the superintendent or
Management junior management. The policies could be about sales,
Policies financing,etc.
Normal Such policies are developed to guide employees in
Policy their day-to-day job. Because the future is unclear and
unpredictable, these policies serve as a guide for
employees.
According to Composite It is a policy that is created by merging all of the
Situation Policy policies that have been submitted by each department.
Each department sends its policy to the budget officer
who coordinates the preparation of the unified
statement. The term "Composite Policy" refers to a
policy statement that has been approved by the Board.

Table 1: Categories of Policy

Policy Statement

A policy statement, according to Business Dictionary, is "a formal

document explaining how a business plans to conduct its affairs and act in
specific circumstances." As to Collins Dictionary, it is a proclamation of an
organization's or government's aims and intentions. The expectations of the
organization for employee behavior are outlined in a policy statement. Workplace

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behavior can be divided into two categories: work behavior and personal
behavior. By creating a policy, the authoring and implementation of a policy
statement establishes expectations of employee behavior.

The following is an example of an organization’s policy:

Source : https://www.raymondcorp.com/about-us/quality accessed on 2.1.2018

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LESSON 2: WHAT IS STRATEGY?

The word strategy was noted to have entered in the field of management
due to the military services where they apply forces against an enemy in order to
win a war. The word “strategy” was first used in 400 BC, is of Greek origin, and
derived from the word “strategos” which means Generalship.

In management, strategy, as a concept, is taken in broader terms. Ignor

Ansoff, known as the Father of Strategic Management, stated that it is essential
to systematically foresee the future challenges that may confront an organization
and come up with appropriate plans that would respond to these identified
challenges. To Michael Porter, strategy is the creation of a valued and unique
position that involves a different activity from competitors.

To contrast with a view of strategy, McGill University's Henry Mintzberg

defined strategy as a pattern in a stream of decisions, while Henrik von Scheel
defines the essence of strategy as the activities to deliver a unique mix of value –
choosing to perform activities differently or to perform different activities than
competitors. According to Max McKeown (2011), "strategy is about creating the
future" and is the human endeavour to achieve "preferred aims with available
methods." Dr. Vladimir Kvint describes strategy as "a technique of locating,
establishing, and developing a philosophy that, if rigorously followed, will ensure
long-term success."

The following are the approaches to forming a strategy:

1. Internally-Driven Organizations: Some organizations are internally-

driven which means that the strategies they are applying at present are
driven by what they have been doing in the past. However, this
approach has its downside as organization members fail to anticipate the
changes that are transpiring in the marketplace.
2. Customer-Driven Organizations: From the word itself, customer-driven
organizations are those that really listen to their customers. However,
just like internally-driven organizations, this approach has its own
downside, too, since organizations end up becoming “all things to all
people” when applying this type of approach.

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 3. Market-Driven Organizations: These organizations analyze which
markets will be served and the necessary ways on how to add value.

The Features and Characteristics of Strategy

The following are the features/characteristics of strategy:

1. Strategy is future-oriented. Strategizing entails foreseeing the future

enable to be ready for uncertain events that may happen in the business
environment.
2. Strategy focuses on long-term survival and developments rather than
routine operations;
3. Strategy prepares an organization for behaviors that may be observed
among customers and competitors;
4. Strategy oversees the internal and external factors that may affect an
organization;
5. Strategy gives a framework for an organization’s actions and thinking.

The Levels of Strategy

It is said that making strategic decisions is a primary responsibility of top

management. However, it is also considered useful to determine the levels of
operation of a strategy. Basically, there are three broad levels of strategy:

CORPORATE
LEVEL

BUSINESS
LEVEL

FUNCTIONAL
LEVEL

Figure 2: Levels of Strategy

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 As presented in the figure 2, the functional level of strategy falls on the
lowest part of the pyramid followed by business level strategy and corporate level
at the topmost part.

The functional level strategy is primarily concerned with how the

business-level strategy could be supported to improve the company’s
effectiveness in its operations within departments.

Business level strategy tends to be the most familiar strategy which

answers the following questions:

1. How do we compete?
2. How do we gain competitive advantage and how do we sustain it?

Corporate level strategy is concerned with decisions about the

organization’s scope and direction as a whole. This level of strategy is usually
seen on multinational enterprises.

LESSON 3: MINTZBERG’S 5 P’S OF STRATEGY

In 1987, Henry Mintzberg published his first article on the 5 Ps of strategy.

Various sorts of strategic thinking and approaches are required, according to him,
depending on the scenario and conditions. These could be linked and compatible.

Strategy is more than just a plan for dealing with an adversary, a group of
competitors, or a market. It also touches on some of the most fundamental
challenges surrounding organizations as tools for collective perception and action.

Mintzberg claimed that formulating a strategy that ignores competitor

reactions or fails to consider the organization's culture and capabilities is
pointless.

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 The 5 P’s of strategy as suggested by Mintzberg are:

1. Plan: We have a natural ability to plan things out. As a result, this is the
default, automatic method used. This entails generating ideas and
devising a strategy for capitalizing on the opportunity. Strategy has two
key elements, according to this definition: a) They are developed
deliberately and purposefully in advance of the activities to which they
apply. b) They are developed in advance of the actions to which they
apply.
2. Ploy: A Ploy is a specific ‘maneuver' designed to outwit a competition or
opponent. As part of a strategy, it entails plotting to disrupt, dissuade,
discourage, or otherwise affect opponents.
3. Pattern: Both strategic plans and ploys are planned actions. However,
strategy can sometimes be derived from historical organizational
behavior. A consistent and successful style of doing business might turn
into a strategy rather than being a conscious choice. As a result, simply
defining strategy as a plan is insufficient. We also require a definition
that considers the resulting behavior. As a result, the concept of strategy
as a "pattern" emerges. By this view, strategy is the intentional or
unintentional consistency of behavior.
4. Position: Another term for strategy is "position," which refers to how you
chose to position yourself in the marketplace. In this approach, strategy
aids in the exploration of the fit between your organization and its
surroundings, as well as the development of a long-term competitive
advantage.
5. Perspective: This strategy is centered on how a company views its
surroundings, including customers, competitors, and the environment.
As a result, they conduct their business and deal with circumstances in
this manner.

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ASSESSMENT:

Activity 1: Application

1. Assume that you are a CEO of a company. Craft a policy statement

relevant to the company that you are managing. Make sure to indicate
the name and nature of the business before you present your company
policies.

Activity 2: Answer the following through an essay

1. What are the drawbacks for customer-driven organizations when It

comes to forming strategies?
2. Comment on the following authors’ definition of strategy and highlight
some points of comparison: Mintzberg Henrik von Scheel, Max
McKeown, Dr. Vladimir Kvint

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