Policy And Strategy

Policy Meaning A policy is a general statement which is formulated by an organisation for the guidance of its personnel. The objectives are first formulated and then policies are planned to achieve them. “Policies were identified as guides to thinking in decision- making. They assume that when decision are made, these will fall within certain boundaries.

Features A policy is a standing plan which provides answers to recurring problems of a similar nature. A Policy limits an area within which a decision is to be taken for the achievement of organisational goals. Policies are models of thought and principles underlying the activities of an organisation. Policies are framed by all managers in the organisation.

Considerations in Policy Formulation Organisational Goals Proper Participation Reflect Business Environment Consistency Proper Communication In writing

Process of Policy Formulation Defining Policy Area Identifying Policy Alternatives Evaluating Alternatives Selection of a Policy Trial Run of a Policy Implementing Policy

Factors Influencing Policies Objectives and Strategies of the Organisation Organisational Structure Available Resources Managerial Values Social Factors Political Factors

Types of Policies Major Policies Supportive Policies Minor Policies Composite Policies

Limitation of Policies No Universal Solutions No Instant Solutions Dampen Human Initiation No Substitute for Human Judgment

STRATEGY Strategy is an action plan which sets the direction that a company will be taking. It is a decision making choice and would involve consideration for internal strengths and weaknesses and external environment affecting the company.

Features of Strategies Strategies consist of general programme of action to be pursued for achieving goals Strategies involve choices that determine the nature and direction of organisation’s activities towards achivement of goals. Strategies include tactics used by the opponents Strategy is formulated taking into account both internal and external factors Strategies need to be modified they can never be static. Strategy is forward looking These are formulated at top level.

Approaches for Strategy Formulation Intuition-Strategy evolves in the mind of chief executive Entrepreneurial Approach-Entrepreneur focuses on opportunities. Inside-Out Planning-Resources review Disjointed Incrementalism-Continue in the present situation and changes so far as possible. Key-Factor Approach-Strategies to be formed around it. Integrated Approach-All factors to be taken into account.

Types of Strategies Stability Strategy Growth Strategy Retrenchment Strategy Combination Strategy-Mixture of above three.

Steps in Strategy Making Clarifying Business Objectives and values Appraisal of External Environment Appraisal of Internal Environment Examining Alternative Strategies Choice of Strategy

Evaluation of Strategies Consistency in Organisation Suitable in Environment Suitable for Resources Degree of Risk Workability

Functional Strategies A functional Strategy is the short term game plan for a key functional area within a company. This strategy deals with a relatively restricted plan which provides the objectives for a specific function for the allocation of resources among different operations within that functional area.

Difference B/W Business and Functional Strategies Time Horizon- Functional are of short period Business are of Longer Period. Specificity-Functional for specific area while business are for achieving overall goals. Participation in the development- Functional are participative while business are made at top level.

Areas of Functional Strategies Marketing Area Finance/Accounting Area Production/Operations Area Research & Development Area Personnel Area Information Management Area

Corporate Strategy A corporate Strategy is decided at the top level mgt. and influences all aspects of business. The Board of Directors, Chief Executive Officer and Administrative officers are involved in formulating corporate strategy. The goals are determined and corporate strategy is formulated to achieve those goals.

Levels of Strategy Corporate Level Business Level Functional Level

Strategic Business Units In order to develop and promote certain product, large units set up small separate units. The companies may use this device for a major product line also. An SBU must have its own mission, have definable group of competitors, prepare its own plans, manage its own resources and have a proper size. The main of SBU is to provide assurance that a new product will not get lost among other products in a large company.