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BUSINESS POLICY

CHAPTER 1
BASIC CONCEPTS IN BUSINESS POLICY
AND STRATEGY
 Business Policy by Zarate
 Is a Strategic Management in context which
generally serves primarily on integrating various
functional activities.
In General,
Business policy is study of the function and responsibility
of Senior Management. The crucial problems that affect
the success of the whole organization and the decisions
that determine the direction of the organization and
shape its future.
A policy is typically described as a principle
or rule to guide decisions and achieve
rational outcome(s).Policies are generally
adopted by the Board of or senior
governance body within an organization
where as procedures or protocols would be
developed and adopted by senior executive
officers.
Few examples of business policies are-

• A company will not consider any cost reduction


options if it means
compromising quality.
• A company decides to grow only through retained
earnings.
• A company will not consider adding new products
with less than
10 percent return on investment.
• A company sells exclusively on cash terms.
• A rental company charges a deposit for rented
material.
• A rental car company charges extra money for
delivering the rented car in another location.
• A company hires personnel with experience only.
• A company prepares guidelines on how to collect
debts from its customers.
• A company will not question customers’ returns of
items purchased earlier.
• A company responds to 50 percent of customer
inquiries within three working days
STRATEGIC MANAGEMENT
PROCESS
1. Situation Analysis
2. Strategy Formulation
a. Mission/ Vision
b. Strategies/Policies
3. Strategy Implementation
a. Programs/Activities
b. Budgets/Procedures
4. Strategy Evaluation and Control
a. Performance
b. Actual Results
I) SITUATION ANALYSIS

A. Internal environment
1.organizational culture
2.employees interaction
B. External environment
1.customers
2. suppliers
3. competitors
4. stakeholders
2. STRATEGY FORMULATION
This involves the development of company
strategies. It composed of three organizational
levels;
1. Operational Strategies
are short term and are associated
with the various operational departments of
the company such as human resources,
finance, marketing, and production.
STRATEGY FORMULATION
2. Competitive Strategies
are those related to the techniques
in competing in a certain industry,
company must identify the SWOT of
competitors, formulate strategies to gain
competitive advantage.
STRATEGY FORMULATION
3. Corporate Strategies
are long-term and are involved in
providing direction for the organization
3.STRATEGY IMPLEMENTATION
This involves the development of procedures,
programs, and activities to put the strategies
into practice. It is also the time to determine
which strategies should be implemented first.
Communication is very important in Strategy
Implementation.
4. Strategy Evaluation
It includes appraising the company performance. All
employees are involved in strategy evaluation.
The evaluation helps in the selection of the best
possible policy. If any of the alternatives are not
acceptable and not consistent with company’s
objectives then the process reverts back to the
identification of alternatives where fresh alternatives
are looked for. The search begins again.
After the policy has been made, it becomes necessary
to review it from time to time so that it does not
become obsolete.
STRATEGIC MANAGEMENT:
PLANNING PHASES
Phase1 Planning Financial Aspects
this is usually the phase when Financial data budget is
planned.
Phase 2 Forecasting
for long term planning, 5-year plans are made,
managers propose projects and have tendency to outdo each
other in terms of getting larger share of funds.
Phase 3 External Planning
this is usually the task of top management, gathering
and formulating strategies for the company on a five-year
period
Phase 4 Strategic Management – this is the process of getting
the rudiments of strategies in details, called strategic plans, a
detailed version of Phase3
GLOBALIZATION
 Since the market is now a vast area where there
are various brands competing with each other,
companies now have to sell their brands in every
continent around the world.
 To maintain quality and competitive pricing,
companies have redesigned their organizational
structures and strategically placed regional or
country units instead of having one international
division to serve all international transactions.
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