Business Policy
Defining Business Policy
• It is the aggregate of the policy guidelines of
different functional areas viz. production,
marketing, finance etc. in a company.
• It is the major policy guidelines drawn by the
board of directors to regulate the overall
direction in which company should move.
• It is the process of study, process of decision and
process of action leading to development of
effective business strategy.
BUSINESS POLICY AS A
DISCIPLINE
• The genesis of business policy –
• The origins of business policy can be traced back
to 1911 when the Harvard Business School
introduced an integrative course in management
aimed at providing general management capability.
This course was based on case studies which had
been in use at the school for instruction purposes
since 1908. However, the real impetus for
introducing business policy in the curriculum of
business schools came with the publication of two
reports in 1959.
BUSINESS POLICY AS A
DISCIPLINE
• The Gordon and Howell Report sponsored by Ford
Foundation had recommended a capstone course
of business policy which would give participants an
opportunity to pull together what they have
learned in the separate business fields and utilize
this knowledge in the analysis of complex business
problems.
• In today’s situation business policy is considered
as a integrative course offered to those who have
already been through a set of core functional
area courses.
BUSINESS POLICY AS A
DISCIPLINE
• The term “Business Policy” has been used
traditionally though new titles such as “Strategic
Management”, “Corporate Strategy and policy”
and so on are now used extensively for the course.
• The discussion has so far been related to the
academic status of the business policy course.
• In practice however, the development has been
along different lines.
EVOLUTION BASED ON
MANAGERIAL PRACTICES
- Guleck has viewed the development in
business policy as arising from the use of
planning techniques by managers. Starting
from day-to-day planning in earlier times
managers till recently tried to anticipate
the future through the preparation of
budgets and by using control systems like
capital budgeting and management by
objectives.
EVOLUTION BASED ON
MANAGERIAL PRACTICES
• However as these techniques were unable to
emphasis the role of the future adequately, long
range planning came into use. But soon, long range
planning was replaced by strategic planning and
later by strategic management – A term that is
currently being used to describe the process of
strategic decision making. Strategic Management
forms the theoretical framework for business
policy courses today.
HISTORICAL PERSPECTIVE OF
BUSINESS POLICY –
• Hofer has viewed the evolution of business policy in
terms of four paradigm.
• For the sake of convenience, these shifts may be
considered as four overlapping phases in the
development of the subject of Business Policy. It is
interesting to note that the development of business
policy as a field of study has closely followed the
demands of real – life business.
• Ad hoc Policy – According to Hofer and others the
first phase which can be traced back to the mid
1930’s rested on the paradigm of Ad Hoc Policy
making. The need for policy making arose due to the
nature of the American business firms of that period.
• The firms which has originally commenced
operations in a single product line catering to a
unique set of customers in a limited geographical
area expanded in one or all of these three
dimensions. Informal control and co-ordination
became partially irrelevant as expansion took
place and the need to integrate functional areas
arose. This integration was brought about by
framing policies to guide managerial action. Policy
making became the prime responsibility of
erstwhile entrepreneurs who later assumed the
role of senior management.
Planned Policy
formulation
• Due to the increasing environmental
changes in the 1930’s and 40’s in the
U.S. planned policy formulation
replaced Ad Hoc policy making.
Based on this second paradigm the
emphasis shifted to the integration
of functional areas in a rapidly
changing environment.
Strategy Paradigm
• Increasing complexity and accelerating changes in
the environment made the planned policy paradigm
irrelevant since the needs of a business could no
longer be served by policy making and functional
area integration only. By the 1960’s there was a
demand for a critical look at the basic concept of
business and its relationship to the environment.
The concept of strategy satisfied this
requirement and the third phase based on a
strategy paradigm emerged in the early sixties.
Strategic Management
• The current thinking which emerged in the eighties is
based on the fourth paradigm of strategic
management. The initial focus of strategic
management was on the intersection of two board
fields enquiry : The strategic processes of business
firms and the responsibilities of general management.
Thompson and Strickland say “ The approaches and
methods of analysis of strategic management have not
yet coalesced into theory of how to manage an
enterprise. But they very definitely do represent a
powerful way of thinking to resolve strategic issues.
• The resolution of strategic issues that affect the
future of a business firm has been a continual
endeavor in the subject of business policy. The
endeavor is based on the development of strategic
thinking. As Whitefield says “Really useful training (in
strategic management should yield)… A comprehension
of a few general principles with a through grounding in
the way they apply to a variety of concrete details.
Most likely, the students will forget the details and
principles but remember (usually unconsciously) new,
non – obvious ways of thinking strategically.” The
general principles underlying strategic thinking have
been the focus of the efforts of researchers and
academicians in the field of Business Policy.
Business Policy
• As defined by Christensen and others, Business Policy
is “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 organization and shape
its future”.
• The problems of policy in business like those of policy
in public affairs have to do with –
– The choice of purposes.
– The molding of organizational identity and
character.
– The continuous definition of what needs to be done
– And the mobilization of resources for the
attainment of goals in the face of competition or
adverse circumstances.
Business Policy
• This comprehensive definition covers many aspects of
Business Policy –
– Firstly it is considered as the study of the functions and
responsibilities of the senior management related to those
organizational problems which affects the success of the total
enterprise.
– Secondly, it deals with the determination of the future course
of action that an organization has to adopt.
– Thirdly, it involves a choosing the purpose and defining what
needs to be done in order to mould the character and identify
of an organization.
– Lastly, it is also concerned with the mobilization of resources,
which will help the organization to achieve its goals.
THE IMPORTANCE OF
BUSINESS POLICY
• Business Policy is important as a course in the
Management curriculum and as a component of
executive development programs for middlelevel managers who are preparing to move up
to the senior management level. A study of
Business Policy fulfills the needs of
management students as well as those middlelevel managers. We shall consider four areas
where this course proves to be beneficial –
• For learning the course.
• For understanding the business environment.
• For understanding the organization.
• For personal development.
• The purpose of Business Policy is three – fold –
• To integrate the knowledge gained in various
functional areas of management.
• To adopt a generalist approach to problem solving.
• To understand the complex inter-linkages
operating within an organization through the use
of a systems approach to decision-making and
relating these to the changes taking place in the
external environment.