How to Understand Formulation and Strategies of Business Policy

The corporate world is in the process of a global transformation. Mergers, acquisitions, outsourcing and downsizing are becoming common word everywhere. Privatization is allowing free enterprise to take on functions that previously were the domain of government. International boundaries are fading in importance as businesses take on a more global perspective and the technology of information age is telescoping the time it takes to communicate and make decision.

Goals indicate what a business unit wants to achieve. Strategy is a game plan for getting there. Every business must design a strategy for achieving its goals, consisting of a marketing strategy, and a compatible technology strategy and sourcing strategy.

According to Johnson and Scholes “Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations”. Indeed, strategy is a road map or guide by whom an organization moves from a current state of affairs to a future desired state. In other words, strategy is about:

• Where is the business trying to get to in the long-term (direction)
• Which markets should a business compete in and what kind of activities is involved in such markets? (markets; scope)
• How can the business perform better than the competition in those markets? (Advantage)
• What resources (skills, assets, finance, relationships, technical competence, and facilities) are required in order to be able to compete? (Resources)
• What external, environmental factors affect the businesses’ ability to compete? (environment)
• What are the values and expectations of those who have power in and around the business? (stakeholders)

 It is not only a template by which daily decisions are made, but also a tool with which long-range future plans and courses of action are constructed. Strategy allows a company to position itself effectively within its environment to reach its maximum potential, while constantly monitoring that environment for changes that can affect it so as to make changes in its strategic plan accordingly. In short, strategy defines where you are, where you are going, and how you are going to get there.

Strategic management takes a panoramic view of this changing corporate terrain and attempts to show how large and small firms can be more effective and efficient not only in today’s world but tomorrow as well.

Business policies define all functional areas in the company from marketing, finance, operations, to personnel or management. The formulation of policies is established to avoid problems and/or address unfavorable repercussions that may arise from any entity of the organization.

Business policies enable institutions, organizations, or enterprises to function efficiently and systematically. Essential to business management is a business policy that defines processes and practices within the organization. It functions as a set of rules or principles enforced to guide every department, component, and position in the company, the absence of which connotes a huge possibility of disorder, discrimination, and favoritism. Compliance to this set of rules however, promotes discipline, precision, and motivation to reach company goals.