Characteristics of Business Policy

and why some businesses fail and

some become successful
 A sound business policyshould possess
the following characteristics which are also
known as its principles:
Flexibility
A policy must be flexible and the usual words
which are added in the policy to make it flexible
are “whenever possible”, “as the case may be”,
“under usual conditions” etc., It should provide for
discretion so that subordinate manager can
intelligently apply the
policy in a given situation. A rigid policy serves no 2
purpose.
Easily understandable:
A policy should be such that
everyone in the organisation
understands it. It should
therefore, be stated in
definite, positive and clear
terms. There will be no
problem in the
implementation of policy 3
 Precise And Written
A policy should be precise and
written so that all people understand
it in the same sense. It is not an easy
thing to write a policy. Policies can
also be oral but written policies are
of great help to the subordinate staff.
4
 Consistent
There must be a consistency of sectional
policies with the main policy. If policies
are inconsistent or contradictory, it will
lead to confusion at the subordinate
level. Thus different policies of the
company should be in harmony with
each other. It should also be consistent
with the public policy. 5
 Fair And Equitable:
A policy should conform to economic
principles, business laws, equity and
justice. It must be fair to those who are
effected by it, and should be in
accordance with the accepted business
standards. It should be formulated with
due regard to the interests of all the
concerned parties. i.e., the employer, the 6
 Practicable:
A policy should be such that it is
actually possible to implement it in
real business situations. Thus a
policy should be founded upon facts,
and
sound judgement.
7
 Stable:
Although some amount of
flexibility in a policy is desirable
yet, it is one of the basic
characteristics of a policy that it
should be stable. If the concept of
flexibility is taken to mean as
frequent changes in a policy, the 8
 Business Policy & Strategy

Business Failure – Business Success

Murdick, Moor, Babson & Tomlinson,

Sixth Edition, 2000
 What Managers Need

• The skill that management needs most

is the ability to formulate complex
decision-problems in understandable
action terms.
• Management should decide on the best
action (after examining all alternatives)
and take that action.
 Causes of Business Failures
• Neglect causes 3.6%
• Economic Factors 63.5%
• Lack of experience 1.0%
• Finances 24.1%
• Fraud 2.2%
• Disasters 4.6%
• Strategic reasons 1.0%
 Finance Failures

• High levels of debt are burdensome

• Heavy operating expenses
• Insufficient capital
 Economic Factor Causes

• Inadequate sales 2.6%

• Industry weakness22.5%
• Insufficient profits 37.3%
• Not competitive .6%
• Poor location .2%
• Poor growth prospects .2%
• Inventory difficulties .1%