Every company aims to be successful and satisfy the desires of all stakeholders and employees. But they can only do this with a clear policy about running the company. All firms must clearly define their objectives and how they can achieve them. There must be clear guidelines about how to operate the business and what regulations they need to follow. Similarly, the company must be steered properly to reach its goals. Every organisation needs to have a clear business policy and strategic management.
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Understanding Business Policy
Companies need to sustain and grow. Towards this, people at all levels must make crucial decisions. A business policy is a set of guidelines that define the limits within which people at a subordinate level can make decisions and solve issues. It allows lower-level managers to find solutions for various problems without always approaching top management. A clear policy also ensures that the decisions are consistent and contribute to the company’s growth. The combination of business policy and strategic management makes companies function successfully and achieve their objectives.
A good business policy and strategic management give equal opportunities to all employees to move forward professionally. The other advantage of having a clear policy is that it keeps the company compliant with all the statutory regulations that govern the functioning of an organisation. It will also keep the employees working within the company’s rules and regulations. Although different companies have different business policies, there are certain basic features in every business policy.
Specific – Policies must be specific to make it easy for the managers to implement with consistency and reliability.
Clear – Guidelines must be clear without any ambiguity. It enables everyone to understand what they say and follow it correctly.
Uniform – All policies must be uniform for employees at all levels, from the top management down to the workers at the lowest levels.
Appropriate – The business policies of a company must be relevant to its objectives.
Simple – The policy’s language must be simple enough for everyone to understand and follow without difficulty.
Inclusive – Everything a company’s policy mentions must apply to all employees.
Stable – There must be stability in implementing the policies. There must be no indecisiveness in following the policies.
Importance Of Business Policies
When discussing business policy and strategic management, it is necessary to understand why a business policy is important to the company. Firstly, it is crucial as it impacts everything like legal liabilities, employee satisfaction and the company’s public image. Strong business policies ensure a common expectation about everything in the company. All the employees know the outcome of every action. As there are policies on all the organisation’s activities, everyone can expect to get the same treatment at all times. Let us see the benefits of a clear business policy.
Better Coordination
Policies control everything in an organisation. It means that similar actions will have the same outcome. Employees can anticipate every course of action in the company. It leads to better coordination between the various departments. As all the workers know how processes should be performed, there is no discord between departments. When there is uniform action, all the activities will lead to the achievement of company objectives. It also results in stimulating initiatives by employees. A clear business policy and strategic management result in everyone working towards a common goal.
Quick Decision Making
Managers at all levels need to make decisions about department activities. Having a clear business policy helps these people decide on matters without any doubt because the policy lays everything down. They need not go to their superior every time they must make a decision. As part of the business policy and strategic management, companies also lay down the limits of the decisions employees at each level can make. Lower-level managers also gain confidence and become ready to take up more responsibilities.
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Effective Control
A well-defined business policy gives the top management control over all activities in the firm. When there are clear directions about how things must happen in an organisation, it makes it easy for the top management to assess the performance of every employee. Moreover, it also gives the managers more control over how things work in the firm. There are no deviations from the methods that are laid down. When there is firm business policy and strategic management, it is easy to find deviations and correct them immediately.
Decentralisation
A business policy mentions the roles and responsibilities of every employee in the firm. It means that there is no need for constant supervision from the managers. Decision-making is also left to the managers of each department, leaving the top management with enough time to plan the firm’s development and other creative activities. Managers get control over employees, and this delegation of authority helps in improved efficiency as there is supervision at every level.
Good Office Atmosphere
Business policies have precise guidelines about how each employee must behave in the office and what roles they must play. It helps to develop a warm and harmonious office environment. As their duties are laid down, there is no confusion about the workers’ role, which avoids unnecessary disputes. Business policy and strategic management ensure that every staff member fulfils their responsibilities and works towards achieving company objectives.
Cost Reduction
Cost reduction is necessary for every company as the market becomes more competitive. It can be achieved only if systems are in place to purchase raw materials and services. A clear business policy lays down guidelines about selecting vendors and purchasing goods by the firm. Such policies help the company get the best prices for the items it purchases. Having clear purchase policies also helps to ensure there is no fraud or misuse of funds. Proper procedures must be followed, and this results in transparency in purchases.
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What Is Strategic Management?
While policies dictate how the company and its employees must function, strategic management lays down the path for the organisation to operate to achieve its objectives. Strategic management is also formulated by the company’s top management, often in discussion with heads of various departments. Both business policy and strategic management apply to every department and employee of the firm. Strategic management includes many activities like setting objectives, analysing the firm’s strengths, studying the competition, evaluating strategies and ensuring that the strategies are followed across the firm.
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There are four steps to strategic management.
- Environmental Scanning – The company collects information about both internal and external factors and analyses them to formulate strategies.
- Strategy Formulation – After scanning the environment, the company formulates the strategy for achieving the goals of the organisation. There are corporate, business and functional strategies in every firm.
- Strategy Implementation – The company must implement the strategy it has formulated. This includes designing the firm’s structure, distributing resourcing, developing decision-making processes and managing human resources.
- Strategy Evaluation – In this last step of the strategic management process, the top management assesses how the strategies have been implemented and what results in the firm has achieved. This exercise ensures that the implementation meets organisational objectives.
Levels Of Strategic Management
In companies with multiple products and business units, there are mostly different levels of strategic management. When the business policy and strategic management are formulated, these levels are defined.
Corporate Strategy
This is the strategy for the whole organisation. It addresses various questions like what is the purpose of establishing the company, what products it wants to sell and how to get into new businesses or expand the current one. The corporate strategy is usually formulated by the top management, including the CEO, the board of directors and the chiefs of functional areas.
SBU Strategy
This pertains to the strategies for a particular business unit in the organisation or a specific mix of products. It will answer questions about the improvement of business in that particular product or customer segment. The SBU strategy is also in line with the corporate strategy. It will help the business unit compete in the market and contribute to the overall success of the firm.
Functional Strategies
As the name suggests this pertains to different functional areas like finance, marketing, production or human resources. It helps in ensuring that every area of the company functions efficiently and contributes to the achievement of company objectives. Functional strategies are formulated by the heads of those functional areas.
Features Of Strategy Management
While on the subject of business policy and strategic management, it is essential to understand the key features of strategic management.
Efficient Top Management – Strategic management necessitates the presence of highly efficient professionals in senior management roles as they must make critical decisions.
Sufficient Resource Availability – There must be sufficient availability of resources like workforce and logistics if the company must implement strategic management properly. The top management allocates and re-allocates resources across departments during the implementation of strategic management.
Dynamic Business Environment – Strategic management happens in a dynamic company. It must be able to accept and adapt to financial, technological or legal changes.
Future-Oriented – This type of management needs the company to find solutions for complex and uncertain problems. It must be done by selecting the best option, keeping in mind future predictions and projections.
Long-Term Benefits – Strategic management affects various functions in an organisation and the long-term success of the company. Companies see great success in the long term when implementing strategic management.
Benefits Of Strategic Management
Creates A Proactive Organisation
Adopting the business policy and strategic management system helps a company become proactive. It allows the organisation to foresee future events and become prepared for them. They can anticipate unfavourable events and prepare to face them with very little financial loss. A proactive firm is always faster to be back on track after any disaster.
Gives A Sense Of Direction
Companies must strive to achieve their business goals and strategic management helps in providing the right direction towards that. It helps in setting up realistic goals that align with the vision and mission of the establishment.
Improves Operational Efficiency
Operational efficiency increases when companies adopt strategic management. All discussions and decisions travel in the direction of achieving objectives with the best use of available resources. Strategic management aligns all functional areas of the company resulting in better efficiency.
Better Market Share And Profitability
Adopting a strategic management system helps companies get better insights into market trends, consumer behaviour and competitor activities. Knowing this enables the company to turn all sales and marketing efforts to ensure better market share and increased profitability.
Makes Businesses More Durable
An organisation can run into various troubles in its journey. A company that is performing very well presently can run into losses shortly. It has been proved that companies that adopted the strategic management method are better prepared to face difficult times and come out of them unscathed.
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Summing Up
Managing a business is not easy in the present times when there are various unpredictable factors. The recent pandemic showed us that companies need to be highly prepared for any situation if they want to remain successful in the long term. Having a clear-cut policy and implementing strategic planning are the ways to ensure that the company is insulated against any unfortunate circumstances. It takes the will and skills of a good manager to put in place effective policies and ensure that they are implemented without deviation.
More Information:
What Is Decision-Making In A Business? Why Is It Important?
What are the Types of Business Environment?
What is the Scope of Macroeconomics in Management?
What is Managerial Economics? Meaning, Fundamentals & Frameworks
