AISHWARYA.

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R18MB008
M.B.A 4TH SEM ‘E’ SEC

Assignment – 4
Strategic Management

Explain the difference between Policy and Strategy

Policies are the formal rules of an organization that inform employees

about decision-making. In politics, policy can also refer to an
agency’s written goals that have not yet been made law. Policies are
designed by upper-level managers to help standardize the internal
decisions of their organization, and are therefore relatively inflexible
and universal.

Strategies can take many forms within a single organization. Formal

strategies like strategic plans are institutionalized at the highest level
of the organization, and assist all employees in reacting to uncertain
situations and changing markets. Individuals and teams may also use
their own informal strategies for work like sales. Strategies need to be
adaptable, and not everybody within an organization will follow the
same strategies.
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Differences between Policy and Strategy

When It’s Formulated

Policy is usually formulated as early on in an organization or process
as possible, because it is needed to inform employees or the public
how to act. Policies regarding hiring and employee behaviour are
nearly always created as one of the first steps of a new organization.

Strategy is most effective when an organization is able to develop it

before beginning a new project. However, strategies are a broad and
flexible category, and many forms of strategy are modified on the fly
as markets or environments change

Formality

Policies are formal and typically institutionalized within an

organization. In a government, policy is considered a step before law.
It’s a formal indication of what the government wants to do but hasn’t
yet passed a law regulating, or doesn’t need to pass a law to start
doing. Strategies can range widely in formality.

Level of Flexibility

Because policy is similar or identical to written law, it can often seem

inflexible. It is designed in response to set circumstances and
therefore only needs a certain level of flexibility; managers or
employees need to be able to depend upon stable policy to inform
their decisions. However, effective policy systems leave room for
feedback, amendment, and repeal of unfair or inefficient policies.
Uncertainty

Policy is not optimal for dealing with highly uncertain situations.

While managers writing policy should attempt to predict potential
problems and externalities, policy is generally a reaction to known
issues. Although policy can be highly technical, like a privacy policy
or terms-of-service document, it is often instead a broad framework
that sets a precedent for how employees should make decisions. It
therefore does not predict or acknowledge new situations, and simply
tries to leave room in its language for uncertainty.
Who Creates It

Policy is typically created by upper-level management in the private

sector, or by agency heads and policymakers in the political sector.
Strategy can theoretically be created by anyone at an organization,
and individuals and teams may have their own strategies and plans