BUSINESS POLICY

MEANING OF BUSINESS POLICY

Business Policy is the study of the functions
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. The problems of policy in
business, like those of policy in public affairs,
have to do with the choice of purposes, the
moldings 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 circumstance.

It covers many aspects of business policy.

Firstly, it is considered as the study of
functions and responsibilities of the senior
management related to those organizational
problems which affect the success of the total
enterprise. Secondly, it deals with the
determination of the future course of action
that the organisation has to adopt. Thirdly, it
involves a choice of purposes and defining
what needs to be done in order to mould the
character and identity of the organisation.
Lastly, it is also concerned with the
mobilization of resources by the help of which
the organisation can achieve its goals.

Business policy, with its concern for

determination of the future course of action,
lays down a long-term plan which the
organisation then follows. The senior
management, while determining the future
course of action, have a mental picture of the
type of organisation they want their company
to become.

In deciding about the future course of action,

the senior management are confronted with a
wide array of decisions and actions that could
possibly be taken. The senior management
exercise a choice, depending on the given
circumstances, and which, in their opinion,
would lead the organisation towards a specific
direction. Moving in a predetermined direction,
the organisation attains the planned identity
and character.

Organisational decisions are not made in

isolation and managerial actions cannot be
taken without providing the resources
necessary for them. The senior management,
while deciding about the future course of
action, concern themselves with the
resources- financial, material and human
that would be required for the implementation
of the long-term plans.

EVOLUTION OF BUSINESS POLICY

The senior management consists of those
managers who are primarily responsible for
long-term decisions and carry designations
such as Chief Executive, President, General
Manager, or Executive Director. These are the
persons who are not concerned with the dayto-day problems but are expected to devote
their time and energy for thinking and deciding
about the future course of action.

The Genesis of Business Policy

The origins of business policy can be traced
back to 1911, when Harvard Business School
introduced an integrative course in
management aimed at the creation of general
management capability. This course was
based on case studies which had been in use
at the school for instructional purposes since
1908.

However, the real impetus for introducing

business policy in the curriculum of business
schools (as management institutes or
departments are known in the US) came with
the publication of two reports in 1959. The
Gordon and Howell report, sponsored by the
Ford Foundation, recommended a capstone
course of business policy which will give
students 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. The
Pierson report, sponsored by the Carnegie
Foundation and published simultaneously,
made a similar recommendation.

In 1969, the Americal Assembly of Collegiate

Schools of Business, a regulatory body for
business schools, made the course of
business policy a mandatory requirement for
the purpose of recognition. During the last four
decades, business policy has become an
integral part of management curriculum. From
the US, the practice of including business
policy in the management curriculum spread
to other parts of the world.

Evolution Based on Managerial Practices

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 tried to anticipate
the future through preparation of budgets and
using control systems like capital budgeting
and management by objectives. With the
inability of these techniques to adequately
emphasise the role of future, long-range
planning came to be used. Soon, long-range
planning was replaced by strategic planning,
and later by strategic management: a term is
currently used to describe the process of
strategic decision making. Strategic

management is the theoretical framework for

business policy courses today.
Policy-making became the prime responsibility
of erstwhile entrepreneurs who later assumed
the role of senior management.

The Indian Scenario

Formal management education started in
India in the late fifties and gained an impetus
with the setting up of the Indian Institutes of
Management (IIMs) and the Administrative
Staff College of India in the early sixties. In the
formative years of the IIMs, the curriculum and
philosophy of management education were
borrowed substantially from the Americal
business schools. The IIM, Ahmedabad
based its teaching methodology on the
Harvard model of developing and using case
studies as the major tool. With the setting up
of three more IIMs at Bangalore, Calcutta and
Lucknow and the creation of university
departments, management education has
experienced an unparalleled growth in the last
three decades.
The All India Management Association, New
Delhi, which is a national body for the
promotion of scientific management in India,
and offers a popular correspondence course
in management, has also recently induced a
course on business policy in the curriculum.
The contents of the curriculum, teaching
methodology, etc. for business policy course
varies among institutions. Different
nomenclature used for the course title include,
besides business policy; corporate planning,
corporate strategy and planning, management
policy and, lately, strategic planning or
strategic management.
The course contents of Indian system of
management are drawn heavily from foreign,
mostly Americal literature, the Indian system
of management can be developed, based an

Indigenous research but the dependence on

Americal sources will have to be accepted.

The Nature of Business Policy

The Business Policy nature has the following
features:(i) It is the process of upgrading its product
mix.
(ii) It promote joint ventures with other
concerns.
(iii) It promote divested from one business to
another due to price hikes due to heavy
Taxes/Duties on its present product remeting
in losses to business.
(iv) It promote major expansion programe.
(v) From the happenings reported above, we
see that when a company either upgrades its
product mix, promotes a joint venture, divests
in another company, undertakes an expansion
programme or takes such similar action
having a long-term impact on its future
operations and status, it is the result of senior
management decision-making. The senior
management, in any organization, is primarily
responsible for guiding the future course of
action and providing a sense of direction.
Toward these ends, business policy attempts
to inculcate in one the capability for senior
management.

Importance of Business Policy

Business policy is important as a course in
management curriculum and as a component
of executive development programmes for
middle-level managers preparing to move up
to the senior management level. A study of
business policy fulfils the needs of
management students as well as those of
middle-level managers.

To highlight the importance of business policy,

we consider four areas where this course
proves to be beneficial.

From the viewpoint of the Course itself

Business policy seeks to integrate knowledge
and experience gained in various functional
areas of management. It enables the learner
to understand and make sense of the complex
interaction that takes place between different
functional area.
Business policy deals with the constraints and
complexities of the real-life business. In
contrast, the functional area courses are
based on a structured, specialized and welldeveloped body of knowledge resulting from
the simplification of the complexity of the
overall taks and responsibilities of
management.

For the development of a theoretical structure

of its own, business policy cuts across the
narrow functional boundaries and draws upon
a variety of sources; other courses in
management curriculum and from a wide
variety of disciplines like economics,
sociology, psychology, demography, political
science, etc. In doing so, business policy
offers a very broad perspective to its learners.
Business policy makes the study and practice
of management more meaningful as one can
view business decision-making in its proper
perspective. For instance, in the context of
business policy, a short-term gain for a
department or a sub-unit is willingly sacrificed
in the interest of the long-term benefit that
may accrue to the organization as a whole.

For the Understanding of Business

Environment
Regardless of the level of management where
a person is, business policy creates an
understanding of how policies are formulated.
This helps in creating an appreciation of the
complexities of the environment that the
senior management faces in policy
formulation.
By gaining an understanding of the business
environment, managers become more
receptive to the ideas and suggestions of the
senior management. Such an attitude on the
part of managers makes the task of policy
implementation simpler.
By being able to relate the environmental
changes to policy changes within the
organisation, managers feel themselves to be
a part of a greater design. This helps in
reducing their feelings of isolation.

For Understanding the Organization

Business policy presents a basic framework
for understanding strategic dicision-making
while a person is at the middle level of
management. Such a framework, combined
with the experience gained in working in a
specialized functional area, enable a person
to make preparations for handling general
management responsibilities. This benefits the
organisation in a variety of ways.
Business policy, like most other areas of
management, brings to the organisation and
also to its managers, the benefit of years of
distilled experience in strategic decisionmaking. Case study, which is the most
common pedagogical tool in business policy,
provides illustrations of real-life business
strategy formulation and implementation.

For personal Development

A study of business policy offers considerable
scope for personal development. It is a fact of
organizational life that the different sub-units
within an organisation have varying value and
importance at different times. It often happens
that a company which adopts a productionorientation as a matter of policy gradually
shifts emphasis to marketing, may be due to
increased competition. Executives within the
production departments have lesser
opportunities for career advancement as
compared to their colleagues in marketing
in the changed situation. In this case, it is
beneficial for an executive to understand the
impact of policy shifts on the status of ones
department and on the position he or she
occupies. In extreme cases, many positions
become redundant due to policy shifts and
retrenchment is inevitable.
Business India cautions executives, especially
those who work for multinationals. It says that
persons who have devoted their lives
working for one company suddenly find
bewildering changes at head offices in the UK
and US and adds that reorganizations and
changes at the top level can have a dramatic
impact on individuals. It is only too common
for divisions of a company to be shut down
worldwide, or to be sold off to another
company. An understanding of business
policy enables the executives to avail an
opportunity or avoid a risk with regard to
career planning and development.

For a career choice, a study of policy provides

adequate grounding for understanding the
macro factors and their impact at the micro
level. By gaining an understanding of such an
impact, an executive is better placed to
identify growth areas. For instance, in the
current business situation in India, a career in

computer industry, especially in software,

would offer better personal growth
opportunities than, say, in the steel industry.

Business policy, offers a unique perspective to

executives to understand the senior
managements viewpoint. With such an
understanding, the chances of a proposal
made or an action taken by an executive
being appreciated by senior managers is
decidedly better.

An interesting by-product of business policy

course is the theoretical framework provided
in the form of the strategic management
model. The applicability of this model is not
limited to business alone. It can be applied to
organizations like services, educational
institutions, family, government, public
administration and to many other areas. In
fact, the model provides powerful insights in
dealing with policy-making at the macro level
as well as at an individual level through selfanalysis.

The importance of business policy stems from

the fact that it offers advantages to an
executive from multiple sources. Apart from
the intangible benefits, an executive gains an
understanding of the business environment
and the organisation he or she works in. Such
an understanding can help considerably in
career planning and development.

Purpose of Business Policy

The purpose of business policy is three-fold:
(1) To integrate the knowledge gained in
various functional areas of management;
(2) To adopt a generalist approach to
problem-solving; and
(3) To understand the complex interlinkages

operating within an organization through the

use of systems approach to decision-making
and relating them to changes taking place in
the external environment.
In order to make the study of business policy
purposeful, the specific objectives need to be
defined.

Objectives of Business Policy

The objectives of business Policy can be
derived from the purpose of business policy
and can be explained in following terms:A) Objectives in terms of knowledge
(1) The learners in business policy have to
understand the various concepts involved.
Many of these concepts like strategy, policies,
plans and programmes are encountered in
functional area courses too. It is imperative to
understand these concepts in the context of
business policy.
(2) Knowledge about the environment
external and internal and how it affects the
functioning of an organisation is vital in
understanding business policy. Through the
tools of analysis and diagnosis, a learner can
understand the environment in which a firm
operates.
(3) Information about the environment helps in
the determination of the mission, objectives
and strategies of a firm. The learner can
understand the environment in which a firm
operates.
(4) Implementation of strategy is a complex
issue and is invariably the most difficult part of
strategic management. Through the
knowledge gained in business policy, the
learner is able to visualize how the
implementation of strategies can take place.
(5) To learn that problems in real-life business
are unique and so are their solutions is an
enlightening experience for the learners. The

knowledge component of such an experience

stresses the generalization of approach to be
adopted in problem-solving and decisionmaking. With a generalized approach, it is
possible to deal with a wide variety of
situations. The development of this approach
is an important objective to be achieved in
terms of knowledge.
(6) To survey the literature and learn about
the researches taking place in the field of
business policy is also an important
knowledge objective.

B) Objectives in Terms of Skills

(1) The attainment of knowledge should lead
to the development of skills so as to apply
what is learnt. Such application takes place by
an analysis of case
studies and their interpretation and by an
analysis of the business events taking place
around us.
(2) The study of business policy should enable
a student to develop analytical ability and use
it to understand the situation in a given case
or incident.
(3) Further, business policy study should lead
to the skills of identifying factors relevant in
decision-making. The analysis of strengths
and weaknesses of an organisation, the
threats and opportunities present in the
environment, and the suggestion of
appropriate strategies and policies form the
core content of general management
decision-making.
(4) The above objectives, in terms of skill,
increase the mental ability of learners and
enables them to link theory with practice.
Such an ability is important in managerial
decision-making where a large number of
factors have to be considered at once to
suggest appropriate action.

(5) Case analysis, as a part of business policy

study, leads to the development of oral as well
as written communication skills.

C) Objecttives in Terms of Attitude

1. The attainment of knowledge and skill
objectives should lead to the inculcation of
appropriate attitude among the learners. The
most important attitude, developed through
the course, is that of a generalist. The
generalist attitude enables the learner to
approach and assess a situation from all
possible angles.
2. Dealing in a comprehensive manner, a
generalist is able to function under conditions
of partial ignorance by using his or her
judgment and intuition. Typically, case studies
provide only a glimpse of the overall situation
and a
case analyst frequently faces a frustrating
situation of working with less than the required
information. Experience has shown that
managers, especially in the area of long-range
planning, have to work with incomplete
information. A specialist would tend to
postpone or avoid a decision under such
conditions but a generalist could go ahead
with whatever information is available. In this
way, he or she acts like a practitioner rather
than a perfectionist.
3. To possess a liberal attitude and be
receptive to new ideas, information and
suggestions is important for a general
manager. Dogmatism with regard to
techniques is to be replaced with a practical
approach to decision-making for problemsolving. In this way, a general manager acts
like a professional manager.
4. An important attitude is to go beyond and
think when faced with a problematic situation.
Developing a creative and innovative attitude
is the hallmark of a general manager who

refuses to be bound by precedents and

stereotyped decisions.

The objectives of business policy, in terms of

knowledge, skills and attitude could be further
extended to the area of behaviour and
performance. Having attained the objectives in
the classroom, or in an executive
development programme, the learner is
expected to exhibit appropriate behaviour and
good performance on the job. The structure of
business policy, built through theoretical study
and exposure to case studies, needs to be
strengthened further through accumulation of
experience as one moves up the managerial
ladder. The richness and variety of
experiences encountered in real-life business
offer opportunities of testing, validating, and
replicating the mental images and models
developed in business policy course.

Such an approach imparts an added impetus

to the development of general management
capability which is the sine qua non for a
manager who wishes to succeed in his or her
job and make a meaningful contribution to the
organisation he or she works for.

From the above we have seen that objectives

of business policy can be set in terms of the
knowledge gained, skills acquired, and
attifude in calculated through study, which
offers a basis for building up a mental
structure which can help in a systematic
aggregation of experiences when an
executive is working at middle level. Such a
stracture help in the creation of general
management capability.
(JAIMANGAL SINGH)