Q#1: How does business policy helps in addressing and resolving crucial problems of

organizations?
Ans: Business policy is a general management orientation and involves in management of
organizations’ activities. Business policy helps in following ways to overcome the crucial problems
of organizations:

 Helps to formulate a strategic mission.

 Helps to identify potential strategic factors (SWOT) that may impact the organizations.
 Helps to improve understanding of a rapidly changing environment, making firm more
aware about potential threats.
Q#3: Briefly describe two responsibilities of top management.
Ans: Following are the two main responsibilities of top management;
1. Provide executive leadership and strategic vision – top management has to direct
activities and formulate strategic vision. Top management have three key characteristics
in carrying out this task.
a. The CEO articulates a strategic vision for the firm.
b. He presents a role for others to identify with and to follow.
c. He communicates high performance standards and also shows confidence in the
follower’s abilities to meet these standards.
2. Mange the strategic planning process – top management manage the strategic planning
process through strategic planning staff, whose responsibilities are to:
a. Identify and analyze companywide strategic issues and suggest corporate
strategic alternatives to top management.
b. Work as facilitators with business units to guide them through the strategic
planning process.
Q#4: The study of economic environment is a general force that exists in external environment.
Briefly describe any three variables that we study in economic environment.
Ans: Following are the three out of many variables that we study in economic environment;
1. Interest Rate – when interest rate increases it has major impact on consumer buying
habits e.g. sales of some items decline.
2. Money Supply – when money supply increases there will be inflation and prices will rise
up posing great challenge for organization.
3. Inflation Rates –
Q#5: Briefly describe Porter’s five force model, which drives industry competition.
Ans: Porter identifies 5 forces that drives industry competition. Following is the Porter’s five force
model.
1. Threats of new entrants:
New entrants are threats to established corporation, this threat of entry depends on entry
barriers. Some of the possible entry barriers are:
 Economies of scale
 Product differentiation
 Capital requirement
 Switching cost
 Government policy, etc.
2. Rivalry among existing firms:
Intense competition between existing firms is also a threat, which is related to the
presence of several factors, including:
 Number of competitors
 Rate of industry growth
 Product or service characteristics
 Amount of fixed cost
 Capacity, etc.
3. Threats of substitutes products or services:
Substitutes are those products that can be used interchangeably, satisfying the same
need as another product. Substitutes place a limit on price and on profitability, hence are
major threat.
4. Bargaining power of buyers:
Powerful buyers can force down prices or bargain for high quality service. Buyers have
more power if they;
 Purchase large proportion of seller’s product
 If changing supplier cost is very little.
 If purchased products by buyer are very high priced items
 If buyer earns very low profit on purchased product, etc.
5. Bargaining power of suppliers:
Powerful suppliers can raise prices or reduce the quality of purchased product or service.
A supplier is powerful if;
 Supplier are few but there demanding customers are more.
 Its product or service is unique
 If there are less substitutes available, etc.
6. Relative power of other stakeholders:
It include variety of stakeholder groups from the task environment, including,
governments, suppliers, customers, creditors, trade associations, labor unions, etc.
These stakeholders also exert pressure on the industry.
Q#6: Why does SWOT analysis necessary to be conducted before formulation, implementation
and evaluation of strategies?
Ans: The simplest way to conduct environmental scanning is through SWOT analysis. SWOT
analysis points out potential strengths and weaknesses of the firm as well as external
opportunities and threats that it might confront.
Strategy formulation can only be done when we conduct environmental scanning through SWOT
analysis, only then we can proceed further and implement formulated strategies and evaluate
and control them. So SWOT analysis is necessary to be conducted before formulation,
implementation and evaluation of strategies

Q#7: Why does business policy take long-range planning?

Ans: Long-range planning involves planning for longer term usually for 5-10 years. Business policy
is an integrative concern of strategic management that’s why it takes strategic (long-range)
planning.