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Business Policy

Business Policy

A Policy is a Statement, verbal, written or Implied, of

those principles and rules that are set by Managerial
Leadership as guidelines & constraints for the
organizations Thoughts and actions
The purpose of the policy is to enable the management
to relate properly the organizations work to its
The existence of practical and comprehensive policies
tends to increase efficiency
Decisions made within a policy framework have a
higher probability of being synchronized with other
decisions within the company

Business Policy
Nature of Business policy:
Determines future course of action.
Setting Long-Term objectives of an enterprise
Study of functions & responsibilities of senior
management concerning crucial problems
Provides direction to the organization and
shape of future
Guiding Framework for repetitive decisions
Top Management to Lower Management

Business Policy

the character and identity of an

Concerned with mobilization of resources to help an
organization achieve its goals.
Continuous process in nature
Identification of opportunities & choosing the right
Adaptation to the Changing Environment


are set at different levels of

Management concerning different
Dividend Policy: Board of Directors
Capital Allocation for Expansion: Top
Revenue Matters/ Sales Administration
Middle Management
Routine Actions: Lower Management

Business Policy as a Field of Study :

1. It integrates knowledge & experience gained in various

functional areas of management.

It deals with constraints and complexities of real-life
It helps to bring long-term view of the environment.
It helps to understand the linkage within sub-systems of
the organization.
It is the study of Top Mgmt. & Responsibilities &
decision making process
It is the conceptualization of Key Business processes
A preparation for performance as a General manager and
broadening of perspective of specialist
Understanding & Implementation of Strategic
Management Process

Business Policy as a Field of Study

9.Objectives in Attitudes:
Generalist rather Specialist

View of Practitioner
Orientation of Professional Businessman
More Value to Creativity & Innovation than to maintenance of

Status quo

10.Objectives in Knowledge:
Knowledge of concepts
Knowledge of situations

11.Objectives in Skills:
Analytical Ability

Strategic Analysis Ability

Business Policy:
Importance of Business policy:
1. For learning purpose: It integrates the knowledge &

experience. It cuts the narrow financial boundaries. It

makes the study of management more meaningful.
2. For understanding business environment: To understand
how policies are formulated. It makes the task of policy
implementation simpler.
3. For Understanding the organization: It presents a basic
framework for understanding strategic decision-making.
4. For personal development: To understand the impact of
policies on position. To understand the senior managers
viewpoint. To identify growth areas for development..


Effective Business Policy

Specific- Policy should be specific/definite. If it is

uncertain, then the implementation will become difficult.

Clear- Policy must be unambiguous. It should avoid use

of jargons and connotations. There should be no
misunderstandings in following the policy.

Reliable/Uniform- Policy must be uniform enough so

that it can be efficiently followed by the subordinates.

Appropriate- Policy should be appropriate to the

present organizational goal.

Simple- A policy should be simple and easily understood

by all in the organization.

Inclusive/Comprehensive- In order to have a wide

scope, a policy must be comprehensive.


Stable- Policy should be stable else it will lead to

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.
indecisiveness and uncertainty in minds of those who look
into it for guidance.


Strategy is defining & achieving an organization's

objectives & implementing its missions
Large scale, future oriented plans for interacting with
competitive environment to optimize achievement of an
organizations objectives
Pattern of an organization's responses to its environment
over time
Long Term objectives or Purposes of an organization
Different from Operating decisions I.e day to day related

Strategy (Strategos= direction of military force).
What is strategy?
1. Determination of basic long-term goals & objectives of an
enterprise and adoption of course of action and allocation of
resources to carry out these goals.
Alfred Chandler (1962)

2.Pattern of objectives, purpose, goals and major policies &

plans to achieve these goals to define the current and desired
policies of the organization.
Andrews (1965)
3.It is the common thread among the organizations activities
and product-markets that defines the nature of business.
Igor Ansoff (1965)..


What is Strategy?
4. It is a unified, comprehensive and integrated plan designed to
assure that the basic objectives of enterprise are achieved.
William Glueck (1972)

5. It is a pattern in a stream of decision and actions.

Henry Mintzberg (1987)

6. Developing and communicating the companys unique

position, making trade-offs and creating a fit among
Michael E. Porter (1996)..


Levels of Strategy:
Corporate level


Strategic Business Unit









SBU is a business unit within the overall corporate identity which is

distinguishable from other business.
When companies become large, they are composed of a number of
businesses (or SBUs). Eg

Difference between
Policy and Strategy

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.
Policy formulation is responsibility of top level management. While
strategy formulation is basically done by middle level management.
Policy deals with routine/daily activities essential for effective and
efficient running of an organization. While strategy deals with strategic
Policy is concerned with both thought and actions. While strategy is
concerned mostly with action.
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.

Strategic Management

Set of decisions & actions resulting in

formulation & implementation of strategies
designed to achieve the objectives
Requirement due to complexity &
sophistication of Business decision Making
Effective dealing with environmental
challenges with given orgn. Resources

What is strategic management?
1. It is a stream of decisions and actions which leads to strategy
development to achieve corporate objectives.
William Glueck

2.It is the formulation and implementation of plans and carrying

out of activities relating to important matters of the
3. It is a process through which organizations analyze and learn
from their internal & external environment, establish strategic
direction, create strategies to help achieve goals and execute
Harrison & St. John..


Dimensions of Strategic

Top Management Decisions

Allocation of Large Amount of Companys
Significant Impact on the Long Term Prosperity
of the Firm
Future Oriented
Major Multifunctional or Multi business
Consideration of factors corresponding to
Firms external environment

Process of Strategic management:

Phases of Strategic Management:






Strategic Strategic
SWOT Strategic
Analysis implementevaluation
analysis alternatives
& choice
JANGLANI Management:
Working model of


Model of Strategic Management Process:

Establish strategic intent:
Vision, Mission, objectives,
Business definition



Formulate strategies:
Environmental appraisal,
organizational appraisal, SWOT analysis,
Corporate & business level strategies,
Strategic choice, strategic plan.
Implement strategies:
Project, procedure, resource allocation,
Structural, behavioral, functional
and operational implementation.
Strategic evaluation

Vision, Mission and Purpose,

A vision is more dreamt of than it is. Vision Statement is permanent

statement of a company. Vision is future aspirations that lead to an
inspiration. It defines the very purpose of existence of a company.

The vision of a company is a direction for action for employees. The

essence of a vision is forward looking view of what an organisation wishes
to become.

Kotter(1990) defines Vision as a description of an enterprise. (an

organisation, corporate culture, a business, a technology, an activity) in

El-namaki(1992) defines vision as a mental perception of the kind of

environment an individual, or an organisation, aspires to create within a
broad time horizon and underlying conditions for the actualisation of this

Miller and Dess(1996) defines vision as category of intentions that are

broad, all inclusive, and forward thinking
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Strategic Vision

Strategic Vision is a road map showing the route a company intends to take
in developing and strengthening the business. It defines Companys
destination and provides rational for going there. It culminates in to a Mission
Statement. Strategic Vision points an Organisation in a particular direction,
charts a strategic path to follow for future and moulds the organisations

Strategic Vision is different from Mission Statement: Strategic Vision

deals with where we are going, where as Mission Statement deals with
Companys present business scope and purpose.

A company Mission is guided by the buyers needs it seeks to satisfy, the

customer groups and market segments it is endeavouring to serve, and the
resources and technologies that it is deploying in trying to please customers
and achieve a Market and Industry position.

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Example of Strategic Vision

The San Antonio Express News developed this Strategic
"EXPAND our customer base and enhance the franchise by
pursuing multimedia opportunities.
DELIVER an award-winning level of journalistic
excellence, building public interest, trust and pride.
PROVIDE vigorous community leadership and support.
INSTILL an environment of internal and external excellence
in customer service.
EMPOWER and recognize each employee's unique
ACHIEVE the highest standards of quality.
IMPROVE financial strength and profitability."

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Characteristics of a Vision Statement

Inspiring and exhilarating.

It represents, a discontinuity, a step, a jump ahead to dream what it is to
Creation of common identity and share sense of purpose.
Competitive, original and unique and practical.
Foster risk taking and experimentation.
Foster long term thinking.
A vision is a statement about what your organization wants to become.
It should resonate with all members of the organization and help them
feel proud, excited, and part of something much bigger than themselves.
A vision should stretch the organizations capabilities and image of
itself. It gives shape and direction to the organizations future.
Visions range in length from a couple of words to several pages.
Shorter vision statements is recommended because people will tend to
remember their shorter organizational vision.

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Vision Statement

Vision Statement Samples:

"Year after year, Westin and its people will be regarded as the best and
most sought after hotel and resort management group in North America."
(Westin Hotels)
"To be recognized and respected as one of the premier associations of HR
Professionals." (HR Association of Greater Detroit)

Vision Statement of TATA STEEL

TATA Steel enters the new millennium with the confidence of learning,
knowledge based and happy organisation. We will establish ourselves as a
supplier of choice by delighting our customers with our service and
products. In the coming decade, we will become the most cost competitive
steel plant and so serve the community and the nation.

Vision Statement of Farm Fresh Produce

We help the families of Main Town live happier and healthier lives by
providing the freshest, tastiest and most nutritious local produce: From
local farms to your table in under 24 hours.

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Developing a Vision Statement

The vision statement includes vivid description of the organization as it

effectively carries out its operations.
Developing a vision statement can be quick culture-specific, i.e.,
participants may use methods ranging from highly analytical and rational
to highly creative and divergent, e.g., focused discussions, divergent
experiences around daydreams, sharing stories, etc. Therefore, visit with
the participants how they might like to arrive at description of their
organizational vision.
Developing the vision can be the most enjoyable part of planning, but
the part where time easily gets away from you
Note that originally, the vision was a compelling description of the state
and function of the organization once it had implemented the strategic
plan, i.e., a very attractive image toward which the organization was
attracted and guided by the strategic plan. Recently, the vision has
become more of a motivational tool, too often including highly idealistic
phrasing and activities which the organization cannot realistically aspire.
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Thompson(1997) defines Mission as the essential purpose of the
organisation, concerning particularly, why it is in existence, the
nature of businesses it is in, and the customers it seeks to serve
and satisfy

Hunger and Wheelen(1999) say that mission is the purpose and

reason for the organisations existence

Mission statements could be formulated on the basis of vision

that an entrepreneur decides on in the initial stages.

A business mission helps to evolve an executive action.

Mission of organisation is what it is and why it exists. It represents

common purpose which the entire organisation shares and
pursues. It is a guiding principle.
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Mission Statement

Mission of a company is expressed it terms of products and

geographical scope. It includes a methodology of attaining the
desired goal in vision. It defines the competitive strength of a

company and it emanates from corporate vision and strategic

posture of a company.

Thus the mission of a business is a statement, a build-up philosophy

of its current and future expected position with regards to its
products, market leadership.

Mission is statement which defines the role of organisation plays in

a society.

The corporate mission is growth ambition of the firm.

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Characteristics of a Mission Statement

It should be feasible, achievable & It should be precise.


It should be clear & It should be distinctive.


It should be motivating.


It should be indicative of major component of strategy & Objectives.


It should be indicative of how objectives are to be accomplished.


It should be indicative of how Policies will be achieved.


It should focus Market Rather than Product.

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Mission Statement Creation

To create your mission statement, first identify your organizations

winning idea.
This is the idea or approach that will make your organization stand
out from its competitors, and is the reason that customers will come
to you and not your competitors.

Next identify the key measures of your success. Make sure you
choose the most important measures (and not too many of them!)

Combine your winning idea and success measures into a tangible

and measurable goal.

Refine the words until you have a concise and precise statement of
your mission, which expresses your ideas, measures and desired
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Developing a Mission Statement




At is most basic; the mission statement describes the overall

purpose of the organization.
If the organization elects to develop a vision statement before
developing the mission statement, ask Why does the image, the
vision exist -- what is its purpose? This purpose is often the
same as the mission.
Developing a mission statement can be quick culture-specific,
i.e., participants may use methods ranging from highly analytical
and rational to highly creative and divergent, e.g., focused
discussions, divergent experiences around daydreams, sharing
stories, etc. Therefore, visit with the participants how they might
like to arrive at description of their organizational mission.
When wording the mission statement, consider the organization's
products, services, markets, values, and concern for public
image, and maybe priorities of activities for survival.

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Mission Statements




Consider any changes that may be needed in wording of the

mission statement because of any new suggested strategies
during a recent strategic planning process.
Ensure that wording of the mission is to the extent that
management and employees can infer some order of priorities
in how products and services are delivered.
When refining the mission, a useful exercise is to add or
delete a word from the mission to realize the change in scope
of the mission statement and assess how concise is its
Does the mission statement include sufficient description that
the statement clearly separates the mission of the organization
from other organizations?
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Mission Statement of Ranabaxy

To become a $ 1 Billion research based global (International)
pharmaceutical company
Mission Statement of Graphite India Limited
To be within top three companies in the world by achieving
1,00,000 MT Production of Graphite Electrodes before 2012
The mission statement of Farm Fresh Produce is:
To become the number one produce store in Main Street by
selling the highest quality, freshest farm produce, from farm to
customer in under 24 hours on 75% of our range and with 98%
customer satisfaction.
"Our goal is simply stated. We want to be the best service
organization in the world." (IBM)
"To give ordinary folk the chance to buy the same thing as rich
people." (Wal-Mart)
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Mission Statements
"FedEx is committed to our People-Service-Profit Philosophy. We
will produce outstanding financial returns by providing totally
reliable, competitively superior, global, air-ground transportation of
high-priority goods and documents that require rapid, time-certain
delivery." (Federal Express)
"Our mission is to earn the loyalty of Saturn owners and grow our
family by developing and marketing U.S.-manufactured vehicles
that are world leaders in quality, cost, and customer enthusiasm
through the integration of people, technology, and business
systems." (Saturn)
"In order to realize our Vision, our Mission must be to exceed the
expectations of our customers, whom we define as guests, partners,
and fellow employees. (mission) We will accomplish this by
committing to our shared values and by achieving the highest levels
of customer satisfaction, with extraordinary emphasis on the
creation of value. (strategy) In this way we will ensure that our
profit, quality and growth goals are met." (Westin Hotels and
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Values are traits or qualities that are considered worthwhile;

they represent an individuals highest priorities and deeply held
driving forces. (Values are also known as core values and as
governing values; they all refer to the same sentiment.)

Value statements are grounded in values and define how people

want to behave with each other in the organization. They are
statements about how the organization will value customers,
suppliers, and the internal community. Value statements
describe actions which are the living enactment of the
fundamental values held by most individuals within the
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The values of each of the individuals in your workplace, along

with their experience, upbringing, and so on, held together to
form your corporate culture. The values of your senior leaders
are especially important in the development of your culture.
These leaders have a lot of power in your organization to set the
course and environment and they have selected the staff for your
If you think about your own life, your values form the
cornerstones for all you do and accomplish. They define where
you spend your time, if you are truly living your values. Each of
you makes choices in life according to your most important top
ten values. It is necessary to take the time to identify what is
most important to you and to your organization.

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Developing a Values Statement

Values represent the core priorities in the organizations culture,
including what drives members priorities and how they truly act
in the organization, etc. Values are increasingly important in
strategic planning. They often drive the intent and direction for
organic planners.

Developing a values statement can be quick culture-specific, i.e.,

participants may use methods ranging from highly analytical and
rational to highly creative and divergent, e.g., focused discussions,
divergent experiences around daydreams, sharing stories, etc.
Therefore, visit with the participants how they might like to arrive
at description of their organizational values.

Establish four to six core values from which the organization

would like to operate. Consider values of customers, shareholders,
employees and the community.

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Developing a Values Statement

Notice any differences between the organizations preferred

values and its true values (the values actually reflected by
members behaviours in the organization). Record each preferred
value on a flash card, then have each member rank the values
with 1, 2, or 3 in terms of the priority needed by the organization
with 3 indicating the value is very important to the organization
and 1 is least important.
Then go through the cards again to rank how people think the
values are actually being enacted in the organization with 3
indicating the values are fully enacted and 1 indicating the value
is hardly reflected at all. Then address discrepancies where a
value is highly preferred (ranked with a 3), but hardly enacted
(ranked with a 1).

Incorporate into the strategic plan, actions to align actual

behaviours with preferred behaviours.
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Samples of Values and Value Statements

"To preserve and improve human life." (Merck)

At Merck, "corporate conduct is inseparable from the conduct of individual
employees in the performance of their work. Every Merck employee is
responsible for adhering to business practices that are in accordance with
the letter and spirit of the applicable laws and with ethical principles that
reflect the highest standards of corporate and individual behaviour...
"At Merck, we are committed to the highest standards of ethics and
integrity. We are responsible to our customers, to Merck employees and
their families, to the environments we inhibit, and to the societies we serve
worldwide. In discharging our responsibilities, we do not take professional
or ethical shortcuts. Our interactions with all segments of society must
reflect the high standards we profess."
Patriot Ledger (SouthofBoston.com): "We have a total commitment to
these values, shaping the way we do business for our employees, our
customers and our company.
Our employees are the most valued assets of our company, essential
participants with a shared responsibility in fulfilling our mission.
We recognize that the quality, motivation and performance of our
employees are the key factors in achieving our success.
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Goals & Objectives:

Goals & Objectives represent a future state or an outcome of
efforts put at present. Objectives are the ends that state how goals
will be achieved.
Goals are generalized & qualitative. Objectives are concrete,
measurable and specific.
Objectives make the goals operational.
Roles of Objectives:
1. Objectives
define the organizations relation
2. It helps an organization to achieve its vision & mission.
3. It provides the basis for strategic decision-making.
4. It provides the standards of performance appraisal



Goals & Objectives:

Characteristics of objectives:
1. It should be understandable.
2. It should be concrete and specific.
3. It should be related to a time-frame.
4. It should be measurable.
5. It should be challenging.
6. It should be set within limits..


Areas of Objectives

Objectives represent managerial commitment to achieve specific

results in specific period of time. Objectives could be

: Profitability

: Markets

: Productivity

: Innovation

: Product

: Financial Resources

: Physical facilities

: Organisation Structure & Activities

: Manager Performance & Development

: Employee performance & Activities.

: Customer Service
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: Social Responsibility.