Lecture in Business Policy

July, 2019

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 the long-run.

Business policies are the guidelines developed by an organization to govern its

actions.

 enable the management to relate properly the organization's work to its

environment.

 defines the scope or spheres within which decisions can be taken by the
subordinates in an organization

 permits the lower level management to deal with the problems and
issues without consulting every time for decision

 includes guidelines, rules and procedures established to support efforts

to achieve stated objectives.

 guides to decision making and address repetitive or recurring situations.

 defines the area in which decisions are to be made, but it does not give the

 verbal, written, or implied overall guide, setting up boundaries that supply the
general limits and direction in which managerial action will take place.

Different business policies:

1. HR Policy

1.1 Hiring and Firing

1.2 Employee Profiling
1.3 Training
1.4 Transfer
1.5 Promotion
1.6 Wages
1.7 Incentives and bonus

2. Materials Policy
2.1 Quality
2.2 Quantity
2.3 Payment Terms
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 2.4 Stores
2.5 Handling
2.6 Documentation

3. Marketing Policy
3.1 What to sell
3.2 Where,to sell
3.3 To whom
3.4 Through whom

4. Quality Policy
4.1 Standards
4.2 Checks and control
4.3 Feedbacks
4.4 Corrective Measure
Strategy - refers to the art and science of planning and marshalling resources for their
most efficient and effective use.
 refers to the integration of all organizational activities and utilizing and
allocating the scarce resources within the organizational environment so
as to meet organizational goals.
 refers to a broad palette of actions that are typically used as a means of
competing effectively versus hostile environment
Michael Porter – Guru in designing effective business strategies.
Criteria for effective strategies:
1. It should not be about operational effectiveness
2. It should be about unique activities.
3. Strategic positions require trade-offs
4. It should fit the strategist in order to be sustainable
5. It needs to be constantly revised.
Competitive Advantage - is an advantage over competitors gained by offering consumers
greater value, either by means of lower prices or by providing greater benefits and service
that justifies higher prices.

Determinants of competitive advantage:

1. Cost structure
2. Branding
3. Quality of product offerings
4. Distribution and logistics
5. Intellectual property
6. Customer service

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Major factors that influence competitive advantage:
1. Internal factors
2. External factors
Internal factors – financial capability, human resources, research collaboration,
marketing strategies
External factors - political, economic, social, technical and culture
Strategic Management – is the process of formulating, implementing and evaluating
cross-functional decisions that enable the organization to define and achieve its
mission and ultimately to create value
 is the managerial process that focusses on identifying and building
competitive advantage by Generating good ideas and implementing them
effectively.

 pertains to a process that a firm’s management can undertake to

formulate and eventually implement such strategies.

Questions to strategic management process :

1. What is our business?
2. What do we want to become?
3. Who are our customers?
4. How to create customer value
Process of Strategic Management :
1. External analysis
2. Internal Analysis
3. Strategy Formulation
4. Strategy Execution
5. Strategic Control
Strategic Plan – a document which lays out strategies that can provide the firm with
competitive advantage for years to come.
Elements of Strategic Plan:
1. Mission – purpose of the business.
2. Objectives – are the expected outcome that will help the firm in its fulfillment of its
mission.
Characteristics of an objectives that will help the organization in the pursuit it its
vision and mission:
2.1 Provide the basis for strategic decision-making 2.2\
2.2 Should define an organization's relationship with its environment. 2.3

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 2.3 Should provide the standards for performance appraisal.
2.4 Should be concrete and specific.
2.5 Should be measurable, controllable and challenging.
2.6 Should be set within constraints.

3. Strategies
4. Policies – are the constraints that the firm chooses to live with. It serve as a
documentation of the firm’s core values, beliefs and ideals. It includes
5. Programs – first implementation components
6. Budgets
7. Procedures
8. Performance Measures – metrics to be used to evaluate the performance of the
people who are responsible of the entire program.

Levels of Strategies:
1. Corporate Level
2. Business Level
3. Functional Level
4. Operational Level
Corporate Level - highest level where CEO is primarily concerned both managing
portfolio business.
 create a distinctive way ahead for an organization, using whatever skills and
resources it has, against the background of the environment and its
constraints

Business Level - the head is the president - responsible in ensuring the profitability of
the business through continuous pursuit of marketable competitive advantage.
The president’s performance shall be valuated by the CEO.
Functional Level – pertains to strategies that are pursued by functional specialists
within a business unit.
Operational Level – pertains to the actual operations that are undertaken in an
organization by the people down the lines
Major areas in strategic management areas:
1. Formulation – deciding what to do
1.1 Identification of Opportunity and risk
1.2 Determining the company’s material, technical, financial and managerial
resources
1.3 Personal values and aspirations of senior management
1.4 Acknowledgement of non-economic responsibility to society

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 2. Implementation – achieving results
2.1 Organization structure and relationships
2.1.1 Division of Labor
2.1.2 Coordination of divided responsibility
2.1.3 Information system
2.2 Organizational processes and behavior
2.2.1 Standards and measurement
2.2.2 Motivation and Incentive system
2.2.3 Control systems
2.2.4 Recruitment and development of managers

2.3 Top leadership

2.3.1 Strategic
2.3.2 Organizational
2.3.3 Personal
Basic Elements of the Strategic Management Process:
1. Environmental Planning
2. Strategy Formulation
3. Strategy Implementation
4. Evaluation and Control

MINTZBERG’s Types of Implemented Strategy:

1. Intended strategy - premeditated and planned.
2. Deliberate strategy - these are the parts of the intended strategy that play
according to plan
3. Unrealized strategy – the plan was relying on inaccurate information or wrong
assumptions.
4. Emergent strategy – new things and new discoveries
5. Realized strategy – the synthesis on the remains of the deliberate strategy and
new emergent strategies.
Five P’s of Strategy according to Mintzberg:
1. Plan – planning comes out naturally
2. Pattern – base on the behavior organizational behavior)
3. Position – deciding where to position your company in the marketplace, helps
exploring the fit between the organization and environment, and it helps you
develop a sustainable competitive advantage.

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 4. Perspective - how organization views the sorroundings – the customers,
competitors and the environment. It becomes the basis for all its actions and the
way it reacts to situations.

5. Ploy - is a specific technique intended to outwit an opponent or competitor. It .

involves to disrupt, dissuade, discourage or otherwise influence competitors as a
part of a strategy

Organizational Structures:

1. One-Person Operations – one decision makers

2. Manager-Assistant Organizations – is a step up from the one-person operation.
The decision maker is supported by a network of assistants who can help
manage an even greater number of people.
3. Functional organizations – is the organization that serves as the ideal in
business development and envisioned to be an organization that is run by a well
trained professionals
4. Multi-business enterprise – it is an exposition on the concept of the functional.
Multiple functional businesses can be put together under a head office or
corporate headquarters.
5.
Theories in Managing Business:
Shareholder Theory Stakeholder Theory
Key Proponent Milton Friedman R. Edward Freeman
Principle Companies should focus Companies need to
on the needs of their balance the needs of their
shareholders alone different stakeholders.
Checks and balances Government is responsible Management is
for making sure that the responsible for seeing to it
company behaves properly that all stakeholders are
duly accounted for.
Result Companies that avoid Companies that engage in
paying taxes cut down on social responsibility
employee pay and are programs provide
indifferent to polluting the opportunities for its
environment(unless employees and suppliers
penalized by the and seek mutually
government), all to beneficial arrangements
minimize expenses and with competitors, but at the
maximize shareholder expense of profitability.
wealth

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The Chief Executive Officer (CEO) – refers to the person on top of a group of
companies.
Management roles/CEO roles:
1. Interpersonal role
2. Informational role
3. Decisional role
Interpersonal roles:
1. Figurehead – CEO serves as the symbolic personification of the company
2. Leader – leader of all the leaders
3. Liaison – primary representative
Informational roles:
1. Monitor – should know the in and out of the company/ identify trends ---
strengths and opportunities.
2. Disseminator – filter for what information need to be known by the organization or
by the outside world.
3. Spokesperson – the CEO generally the most credible spokesperson for the
organization.
Decision roles:
1. Entrepreneur - CEO is the most important entrepreneur in the organization.
2. Disturbance handler - the person who is the most authoritative to attend and
resolve the conflict.
3. Resource allocator
4. Negotiator – CEO is the most influential person in the organization and holds the
power as a principal negotiator.
Crucial roles of CEO:
1. Vision formulation - what do we want to be
2. Long-term Planning – how do we get there
3. Capacity building – how do we get the resources
Categories of environment in terms of strategic management process:
1. Macro-environment
2. Micro-environment
Macro-environment – refers to the external environment at large featuring the
elements that are beyond the power and influence of a firm and which reflect the
realities of the outside world.
Micro-environment – refers to the environment that the firm may have control.

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Elements of macro environment (in strategic management process)
1. Political
2. Economic
3. Socio-cultural
4. Technological
5. Legal Environment

Political – pertains to government policies, directions and initiatives that may have an
effect on operations and well being.

Socio-cultural – refers to the cultural facts, norms and behaviours of the groups and
sub-groups that need to be considered by the firm.

Environmental – refers to environmental initiatives that can affect enterprises.

Elements of Micro-environment:

1. Customers
2. Suppliers
3. Marketing intermediaries
4. Shareholders
5. Stakeholders
6. Competitors
Michael Porter’s Five Forces Model – is a famous and popular framework that seeks to
explain competitive pressures within an industry.
Five forces according to Michael Porter
1. Industry rivalry
2. Bargaining power of suppliers
3. Bargaining power of buyers
4. Threat of potential entrants
5. Threat of potential substitutes
Industry rivalry – pertain to the actual and direct competition that occurs between
competing firms in the industry.
Internal environment – refers to the totality of a firm’s tangible and intangible resources,
capabilities and potential.
Elements of internal environment:
1. Core values
2. Mission and vision
3. Management structure

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 4. Human resources
5. Tangible resources
6. Intangible resources

– is a management tool in identifying firm’s distinctive competencies and unique

portfolios of resources can be used to take advantage of environmental trends to
achieve company goals.