5.
Simple- A policy should be simple and easily understood by all in the
Definition of Business Policy
Business Policy defines the scope or spheres within which decisions can
be taken by the subordinates in an organization. It permits the lower level
management to deal with the problems and issues without consulting top
level management every time for decisions. Business policies are the
guidelines developed by an organization to govern its actions. They define
the limits within which decisions must be made. Business policy also deals
with acquisition of resources with which organizational goals can be
achieved. Business policy is the study of the roles and responsibilities of
top level management, the significant issues affecting organizational
success and the decisions affecting organization in long-run.
Definition:
Business policies are guidelines-statements (guide to plans & decision
making) to facilitate predetermined objective on the mode and manner in
the structural & functional aspects to achieve the objective formulated as
plans at all levels of management in the business organisation.
As per the definition given by Christensen et. al. and steiner and others
" the study of the function and responsibilities of senior management, the
crucial problems that affect success in the total enterprise, and the
decisions that determine the direction of the organisation and shape its
future.
Features of Business Policy
An effective business policy must have following features-
1. Specific- Policy should be specific/definite. If it is uncertain, then the
implementation will become difficult.
2. Clear- Policy must be unambiguous. It should avoid use of jargons
and connotations. There should be no misunderstandings in
following the policy.
3. Reliable/Uniform- Policy must be uniform enough so that it can be
efficiently followed by the subordinates.
4. Appropriate- Policy should be appropriate to the present
organizational goal.
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organization.
6. Inclusive/Comp
7. rehensive- In order to have a wide scope, a policy must be
comprehensive.
8. Flexible- Policy should be flexible in 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.
9. Stable- Policy should be stable else it will lead to indecisiveness and
uncertainty in minds of those who look into it for guidance.
Difference between Policy and Strategy
The term “policy” should not be considered as synonymous to the term
“strategy”. The difference between policy and strategy can be
summarized as follows-
1. 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.
2. Policy formulation is responsibility of top level management. While
strategy formulation is basically done by middle level management.
3. Policy deals with routine/daily activities essential for effective and
efficient running of an organization. While strategy deals with
strategic decisions.
4. Policy is concerned with both thought and actions. While strategy is
concerned mostly with action.
5. 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.
Nature of Business Policy
Business policy basically deals with decisions regarding the future of an
ongoing enterprise. Such policy decisions are taken at the top level after
carefully evaluating the organizational strengths and weaknesses in terms of
product price, quality, leadership position, resources etc., in relation to its
environment. Once established the policy decisions shape the future of a Types of policies
company channel the available resources along desired lines and direct the
energies of people working at various levels towards predetermined goals. In
There are many types of policies –
a way, business policy implies the choice of purposes, the shaping of
organizational identity and character the continuous definition of what is to be
achieved and the deployment of resources for achieving corporate goals. 1. marketing policies,
2. financial policies,
3. production policies,
4. personnel policies

Some useful definitions of Business Policy

1) A business policy is an implied overall guide setting up boundaries
that supply the general limit and direction in which managerial action
will take place.
2) A business policy is one, which focuses attention on the strategic
allocation of scarce resources. Conceptually speaking strategy is the
direction of such resource allocation while planning is the limit of
allocation
3) A business policy represents the best thinking of the company
management as to how the objectives may be achieved in the
prevailing economic and social conditions
4) A business policy is the study of the nature and process of choice
about the future of independent enterprises by those responsible for
decisions and their implementation
5) The purpose of a business policy is to enable the management to
relate properly the organization’s work to its environment. Business
policies are guides to action or channels to thinking.
Within each of these areas more specific policies are developed. For
example, personnel policies may cover recruitment, training, promotion and
retirement policies. Viewed from a systems angle, policies form a hierarchy
of guides to managerial thinking. At the top of level policy statements are
broad. The management is responsible for developing and approving major
comprehensive company policies. Middle managers usually establish less
critical policies relating to the operation of their sub units. Policies tend to be
more specific at lower levels. The manager’s job is to ensure the consonance
of these policies, each must contribute to the objectives of the firms and
there should be no conflict between sub system policies.
Although it is customary to think of policies as written statements it is not
necessarily the case. For example a firm may simply decline to consider
handicapped employees in the selection of new personnel. In effect, this
becomes an effective policy even though the company has never verbalized
its position.

Business policies generally have a long life. They are established after a
careful evaluation of various internal and external factors having an impact
on the firm’s market standing as and when circumstances change in a major
way the firm is naturally forced to shift gears, rethink and reorient its policies.
The World Oil crisis during the 70s has forced many manufacturers all over
the globe to reverse the existing practices and pursue a policy of
manufacturing fuel efficient cars. Therefore, policies should be changed in
response to changing environmental and internal system conditions.

2|Page(Prepared by Prof.Emilio N. Timoteo Jr for Business Policy)