BUSINESS POLICIES AND

DECISIONS
BBA 400
 COURSE OBJECTIVE

• Design business policies for any organization of their

choice,
• Critique business policies from different organizations.
• Understand the general framework for policy development
 DEFINITION

• This is the study of activities and decisions made by

strategic level managers with reference to long term future
of the business and the respective allocation of the factors
of pattern so as to ensure that the organization achieves its
mission, vision and objectives efficiently and effectively.
 BUSINESS POLICIES AND DECISIONS
• They are guidelines that help decision makers in all their
decision making activities.
• Parameters of business operations .
• The limits set by the organization which help to ensure
that stakeholders in the business makes decisions
consistently .
• Policies are defined as long term plans of action which the
organization uses to guide its operations with reference to
efficiency, effectiveness and long term survival of the
business .
 Policy Development Process

• Environment scanning
• V.M.D development
• Formulating business policies
• Choice of policies
• Implementation
• Evaluation
• feedback
 Environment scanning

• is the process of accessing all the forces or dynamics

surrounding the business that is likely to enhance or
impede the growth of the business. This forces may be
classified into two broad categories, internal forces and
external forces
 Vision, Mission & objectives

• Vision is where business wants to go

• Mission how business will get there i.e. how business will
achieve vision.
• Objective outcome within specified period of time
 STRATEGY

• DEFINITION

• LEVELS OF STRATEGY
 STRATEGY DEFINITION

• First, the word was used in terms of Military Science

• , the word strategy has been derived from Greek
‘Strategos’, which means generalship.
• Strategy ends, or yields to tactics when actual contact with
enemy is made’.
• In management, the concept of strategy is taken in
slightly different form as compared to its usage in military
form; it is taken more broadly
 Def. cont.

• "Strategy is the direction and scope of an organisation

over the long-term: which achieves advantage for the
organisation through its configuration of resources within
a challenging environment, to meet the needs of markets
and to fulfil stakeholder expectations".
 Porter’s Generic Strategies

• Focus/segmentation

• Differentiation

• Cost leadership
Porter’s generic Strategies
 STRATEGY is concerned with:

• Where is the business trying to get to in the long-term

(direction)
• Which markets should a business compete in and what
kind of activities are involved in such markets? (markets;
scope)
• How can the business perform better than the competition
in those markets? (advantage)?
 Strategy concern;

• What resources (skills, assets, finance, relationships,

technical competence, facilities) are required in order to
be able to compete? (resources)?
• What external, environmental factors affect the businesses'
ability to compete? (environment)?
• What are the values and expectations of those who have
power in and around the business? (stakeholders)
 Levels of Strategy

• Strategies exist at several levels in any organisation -

ranging from the overall business (or group of businesses)
through to individuals working in it.
• Formulation and implementation is done at all levels
 Corporate Strategy

• is concerned with the overall purpose and scope of the

business to meet stakeholder expectations.
• This is a crucial level since it is heavily influenced by
investors in the business and acts to guide strategic
decision-making throughout the business.
• Corporate strategy is often stated explicitly in a "mission
statement".
 Business Unit Strategy

● is concerned more with how a business competes

successfully in a particular market.
● It concerns strategic decisions about choice of -products,
-meeting needs of customers,
- gaining advantage over competitors,
- exploiting or creating new opportunities etc.
 Operational Strategy

• is concerned with how each part of the business is

organised to deliver the corporate and business-unit level
strategic direction. Operational strategy therefore focuses
on issues of
-resources,
-processes,
- people
 COMPONENTS OF STRATEGY

The Understanding of Strategy is further enhanced by looking at the

basic detail and elements that constitute strategy
• Some components of strategy
 Other Components of strategy

• Vision – Gives overall direction : Corporate vision is a

short, succinct, and inspiring statement of what the
organization intends to become and to achieve at some
point in the future, often stated in competitive terms.
Vision refers to the category of intentions that are broad,
all-inclusive and forward-thinking.
 Other components-cont

• Mission- Gives the scope of operation

• A company's mission statement is a constant reminder to
its employees of why the company exists and what the
founders envisioned when they put their fame and fortune
at risk to breathe life into their dreams.
 Other components-cont

• Scope.
The scope of an organization refers to the breadth of its
strategic domain—the number and types of industries,
product lines, and market segments it competes in or plans
to enter. Decisions about an organization's strategic scope
should reflect management's view of the firm's purpose or
mission. This common thread among its various activities
and product-markets defines the essential nature of what
its business is and what it should be.
 Other Components of Strategy

• Goals and objectives. Strategies should also detail desired

levels of accomplishment on one or more dimensions of
performance—such as volume growth, profit contribution,
or return on investment—over specified time periods for
each of those businesses and product-markets and for the
organization as a whole.
 Other Components-cont.

• Resource deployments. Every organization has limited

financial and human resources. Formulating a strategy
also involves deciding how those resources are to be
obtained and allocated, across businesses, product-
markets, functional departments, and activities within
each business or product-market.
 Other Components-cont.

• Identification of a sustainable competitive advantage.

One important part of any strategy is a specification of
how the organization will compete in each.business and
product-market within its domain. How can it position
itself to develop and sustain a differential advantage over
current and potential competitors? To answer such
questions, managers must examine the market
opportunities in each business and product-market and the
company's distinctive competencies or strengths relative
to its
 Competitiveness- Core Competencies

• Examples of core competencies -Airline:

• The lowest operating costs per plane
• An economical point-to-point airport network
• A fanatical culture focused on customer service and cost
savings
• An ability to keep planes in the air more of the time than
its competitors.
 Formulation of Business Policies

• This is the process of developing all alternative of action

that the business is likely to undertake or what the
business can undertake choice of policies. Managers
select that most appropriate cause to causes of action. It’s
referred to as organization portfolio pattern and is when us
select what that business will do.
 Implementation & Evaluation

• Implementation process of putting into action that chosen

causes of action.
• Evaluation is a process of accessing the extent of success
or failure of the chosen causes of action
• Also defined as process of comparing planned outcomes
against any outcomes
 Feedback

• Social responsibility. Defined as the obligations that

business have over and above the economic objectives.
These are the obligations that help business to exist as a
social asset or in the consent of the society.
 BUSINESS POLICY FRAMEWORK

• Defined as the number of variables or limitations that help

to explain the scope within which policy decisions are
made.
• This framework defines how far the organization can go in
terms of growth in a given environment.
• It includes;
 overall purpose of business

• This is the main reason as to why the business exists i.e.

• what does business do?
• What does it plan two achieve?
• What customers does it serve?
• What stakeholders does it relate to?
• How does it perform in a given ministry?
• Number of products and services, branches or
organization programs undertaken ?
 Identity of the business

• This is the unique characteristics that the business is

known for.
• This help the business to curve a niche in the industry.
• Also help business to ensure survival in the midst of
competition.
 The activities

• This refers to what the business does to achieve its

overall objectives.
• This may involve, designing and marketing of products
and services, providing social services to that
surrounding communities motivating and encouraging
the stakeholders to be better off, acquisition of the
factors of pattern etc.
 The resources

• Includes all factors of production that are used as the

activities are undertaken when developing policies the
management must identify, mobilize, allocate, utilize
and control all the factors of production.
• The management must ensure that the costs are in line
with the identity of the business. Also that the quality
and quantity of the factors of production are maintained.
 The Environment
• Environment as a variable of business policy framework
sets the limits of business survival depending on
whether the environment is controllable or non-
controllable.
• Controllable environment includes all the factors within
the business that the policy maker can change e.g. the
organization climate, organization culture, organization
structure, channels of communication and devolution,
the quality and quantity of resources, the relationships
within the business, the control systems within the
business etc.

• Non-controllable factors are defined as the forces

 Characteristics of business policies

• Business policies must be long-term perspective

• Policies must have the overall view of the whole
organization.
• Policies must be intellectual in nature
• Policies must be entrepreneurial in nature

• Policy decisions must have the best mix between the

resources, environment and the opportunities to be
exploited.
• Business polices must ensure continuous scanning of both
internal and external environment.
• Business policies must be relatively fixed for a period of
 Why study business Policy

• To be able to identify the activities of strategic level

managers in the organization.
• To be able to define the operational boundaries or the
scope of operations for different organizations.
• To justify the existence of the business i.e. legitimize.
• The manager is able to develop policies that are customer
focused hence long term in nature.
• Helps managers make choices amongst competing
alternatives focuses within and outside organization.
• Helps management to have a policy document that can be
used for reference in case there is a conflict amongst the
stakeholders.
• Helps managers in the evaluation of business performance
• Helps to identify the SWOT of the business.
• Help to identify the SWOT of the competitors.
• Helps the management to identify the environmental
trends that may enhance or hinder the performance of
policies.
• Helps managers to be progressive and proactive in their
decisions as opposed to be reactive and parodal in
decision making.
 Level of Policies

•
• Product or unit policies
• Organization policies
• Industrial policies
• National policies
• International policies
• Global policies
•
Trends / issues Relating to Business Policies
Changes in technology .
• Declining books ethics, individual and societal ethics
• Political changes
• Globalization and liberalization of business.
• Social cultural changes
• Drastic changes in the physical and ecological
environment
• Increasing levels of literacy
• Discrepancies in the ownership of resources .
• Information dominated society.
• Increased need for social responsibility.
• Changes in the legal structures
 ENVIRONMENTAL SCANNING

• Process of appraising the environment / identifying all

forces surrounding and within business that are likely to
have an impact on policy performance.
• Usually a comprehensive process that helps people
understand what can enhance policy performance.
 CONT’

• Identification of all dynamics within and outside the

business. The dynamics are the key factors.
• Identification of effects of these factors on policy
performance
• Identification of trends in relation two those factors past
current and future.
• Identification of relationships amongst factors. Direct or
indirect relationship.
• Identification of any opportunities and threats arising from
relationships.
• Assessment of all available options that can be successful
for business to understand in a given environment.
 ENVIRONMENTAL DYNAMICS

• All the known or unknown predictable or unpredictable,

related or unrelated, intended or unintended, hostile or
friendly changes in environment at a given period of time.
 Causes of Environmental Dynamics

• Increased level of competition .

• Fair or unfair competition.
• Increased research and development activities, in
conciliation and inventions.
• Reduced government intermediaries.
• International / global interventions.
• Declining individual, business and societal ethics.
• Drastic changes in task and preferences of different
stakeholder.
• Need and emphasis on development of informal sector.
• Changes in social trends
• Increased levels of education and awareness.
 Importance of environmental Dynamics
• Help policy makers design the most up to date and
relevant policies
• Help management set operational boundaries.
• Help mangers make strategic decisions that give
organization a competitive edge.
• Help policy makers identify SWOT of the business
• Help identify SWOT of the competitors.
• Identify positive and negative in relation two each
environmental dynamics
• Identify trends that may enhance performance of business
policies.
• Predict and anticipate unique new environmental
dynamics
 Challenges encountered when scanning environment

• Lack of qualified researchers who can scan the

environment and gather both objectives an subjective
date.
• Cost associated with environment scanning, time
constraints technologies used.
• Lack of qualified sources of information
• Practice of unethical research activities.
• Determination of the most appropriate technique for
scanning the environment.
• Unexpected changes especially in external environment.
• Challenges of identifying the stakeholders to be
incorporated in environment scanning.
 Classification of Environment

Based on the ability of the policy maker to control

• Internal
• external
according to the scope of environment
• Institutional or business environment
• Local environment
According to other nature of variables
• General environment
• Industrial environment
• Business environment
 The general environmental factors

• Demographic changes
• Physical changes
• International factors
• Economical factors
 challenges in formulating policies
• Global dynamics where nobody takes responsibility and
nobody.
• Cost associates with scanning activities.
• Diversity and the nature of the stakeholders, variables
considered.
• Problems associated with its impact on the business.
• Difficulties in developing equilibrium between business
policies and general environment dynamics.
 Industry environment

•Dynamics within a particular industry which usually affect

making for all business producing similar / substitute
policies in particular area.
• Usually shapes the nature of the stakeholder consumer
behavior, characteristics of the products and consumers
 Business environment

Includes all the factors that are within the ability of the
policy maker exchange for an individual policy maker can
adjust business environment irrespective of the industry
and general environment dynamics.
Factors:
• Organization culture
• Organization structure
• Modes and channels of communication
• Levels of centralization, decentralization specialization
etc.
• Level of delegation
 SWOT ANALYSIS

• Deals with both external and internal environment. Also

deals with both positive and negatives of the environment.
•
• Internal (positive);Strength – Business capabilities
• Internal (negative) ;weaknesses - Underdeveloped
capabilities
• External (positive);Opportunities - unmet needs
• External (negative);Threats - Undeveloped capabilities
CRAP (COMPETITION, RIVALRY, ANALYSIS,
PROFILE)

• Identification of the key competitors in the industry.

• Identification of the key success factors
• Rating of the different factors against each other
• Calculating the totals of the different ratings
• Identifying areas of most threats versus opportunities
• Identifying areas where the business needs are developed
capabilities through policy development.
 ETOP (ENVIRONMENTAL, THREATS,
OPPORTUNITIES AND PROFILE)
• Mostly used in general environment
Involves:
• Identification of the key environmental factors
• Profiling the factors in order to priority
• Identify any opportunities amongst these factors
• Identifying any threats in external environment
• Comparing the opportunities against the threats
• Developing polices that help the business to exploit the
opportunities and to avoid threats.
 PESTLE

• Political
• Economical
• Social
• Technological
• Legal
• Ecological
 QUEST (QUICK, ENVIRONMENT,
SCANNING, TECHNIQUE)
Involves the following:-
• Identification of past industry trends
• Identification of current trends
• Identification of any major events in the industry or
environment
• Projecting of current trends and the future
• Subjecting data collected to the individual business in the
industry.
 GEMBA
• Japanese style of scanning the environment.
• Style that help to identify environmental dynamics in
operation areas.
• Used to refer to “out where the action is”
• Emphasizes that mangers must move of their operation
areas or their offices or box style of management and
move to floors of the organization where activities are
undertaken.
• This helps managers and policy makers to identify the
real activities and avoid window dressed scenarios.
• Window dressing usually occurs when the rewards are
given to the management for any business success and
the punishment is given to the subordinates.
 SAP (STRATEGIC ADVANTAGE PROFILE

GROWTH ORIENTATION
• Where policies are designed to help the organization
increase its performance based on its immediate past.
• Entail increasing the market share.
• Increasing the market per share, number of branches,
number of products and services quality and quantity.
• Increasing the unique characteristics of product, level of
production, effectiveness and efficiency.
• Growth can be adopted through mergers, acquisition,
joint ventures, backward and forward integration,
downstream and upstream development.
 RETRENCHMENT

• Policies are developed which help reduce level of business

performance from its immediate past.
• It is usually adopted in areas where the business have
positive cash flow, negative public image or is
experiencing unfair competition or very high risks may be
done through closure of branches, termination of
personnel, disposal of fixed assets, stoppage of production
lines, withdrawal from certain market segments,
withdrawal from risky ventures etc
 STABILITY

• Policies are designed to help the management two retain

the status quo in terms of all its operational areas.
•
• This is a short term orientation and is only used as a
transitional policy or used in a stable environment.
 COMBINATION ORIENTATION

• Where policies are developed combining two or more of

the above orientations.Adopted by progressive managers
who utilize offensive and defensive view points.
 constraints in choice making

• Time horizon
• Time frame
• Timing
• Time pressure
 TOOLS FOR MAKING A CHOICE

• Strategic Budgetary Process

• Normal financial budget in the organization
• It is a resource based tool hence if resources are availed
growth orientation is adopted. If no new resources stable
orientation is adopted
• Product Lifecycle
• Product or service based tool
• BCG (Boston Consulting Group) Matrix
• Retrenchment stability
• Orientation orientation
• Business Planning Matrix
• Uses two variables:-
• Market Attractiveness
• Business strengths or capabilities
 SOCIAL RESPONSIBILITY AND ETHICS

• Social responsibility includes all the activities that a

business undertakes to promote positive relationship with
all the stakeholders within and outside the organization
with or without necessarily for profit generation.
Ethics are the principles that help individuals to
choose what is right or wrong in their decision making and
actions.
• Social responsibility as a social obligation.
• Social responsibility as a social reaction.
• Social responsibility as social responsiveness.
• Social responsibility as ethical and legal behaviour
 Areas where the policy makers need to consider in
policy development process
• Product line
• Marketing practices.
• Employee education and training.
• Environmental control.
• Community development.
• Government relations.
• Disclosure of information.
• International relations.
• Employee relations, motivation and satisfaction.
• Safety and health of stakeholders.
• Equity for all without unfair discrimination.
 FORMULATION OF POLICIES

• Process of developing all possible courses of action that

the business can undertake.
• Process of identifying all the alternative directions the
business can undertake in order to achieve its destiny.
• The process helps the policy makers to make decisions on
the guidelines to be used to arrive at the said destination.
 The process involves :

• Identification of the necessary information gathered from

environment scanning.
• Creating a match between the information gathered with
the vision, mission and objectives of the business.
• Identifying the positives and the negatives all the
alternatives.
• Identifying whether the relevant resources are available (
what, when how. where, how much etc)
• Identifying the viewpoint to be adopted in the use of
different alternatives, reactive vs. proactive; defensive vs.
offensive, analyst vs. adaptive.
•
 Characteristics of Business Policies

• Must have best mix between the environment and the resources.
• Must create a match between the internal and external environment.
• Must be intellectual in nature.
• Must be entrepreneurial- (opportunity based)
• Must incorporate all or majority of the stakeholders.
• Must have long term perspective.
• Must incorporate continuous environmental evaluation.
• Must be flexible.
 CHALLENGES DURING FORMULATION

• Lack of quality data.

• Difficulties in identifying all the stakeholders and their respective
needs.
• Time and resource constraints
• Difficulties in categorizing the orientations.
• Unethical practices and biases based on the interests of the
dominating stakeholders.
• Lack of brainstorming skills.
 CHOICE OF POLICIES

• Process of adopting/ selecting the most appropriate and

relevant policies that will help the business to achieve its
objectives and meet the needs of the stakeholders.
• Process of identifying what the business will do in relation
to policy implementation
• Process of matching policies orientation adopted and
business policy framework - relevant environment, overall
business purpose, business identity, activities and
resources.
 Choice of policies involves the following:

• Identifying the different categories of policies developed.

• Identifying stakeholders needs in relation to the chosen
policies
• Establishing priorities amongst the stakeholders.
• Creating relationships between stakeholders’ objectives,
environmental dynamics and the business objectives.
• Identification of the constraints within and outside the
business. Identification of the most appropriate tool to be
used in the choice.
 Constraints during choice

• External environmental dynamics.

• Information constraints.
• Internal environmental dynamics.
• Need for social responsibility.
• Resource constraints.
• Nature and needs of stakeholders.
• Business policy framework.
• Time constraints.
 Tools that can be used

• Strategic Budgetary Process - Resource Based.

• Product Life Cycle - Product Service Based (growth).
• BCG Matrix - Market Based.
• Business Planning Matrix - opportunity based.
• Product Market Matrix - Product Development Based
 IMPLEMENTATION OF POLICIES

• Process of designing and identifying business systems and

patterns that help to get the best mix between the policy
chosen, environment, resources and policy objectives.
• Process of putting the policies chosen into action by
directing all organizational systems to fit into policy
objectives. (strategic fit- context vs policy chosen)
• Process of directing and organizing the policy activities so
as to ensure policies address the needs of stakeholders.
 Policy implementation involves:

• Identifying areas in the organization where change is

required (incremental or radical)
• Differentiation
• Integration
• Directing and controlling organizational systems
 Factors to consider during implementation

• Resource allocation
• Organization structure
• Management
• Leadership
• Environmental dynamics
 Implementation Challenges

• Resistance from stakeholders

• Sabotage
• Resources
• Nature of leadership
• Drastic environmental changes
• Competitors may derail implementation
• Effective differentiation and integration
• Political dynamics
•
 EVALUATION

• Compare planned policy outcomes with the actual policy

outcomes
• Assess policy performance so as to identify any deviations
from the plans
• Continuous assessment and monitoring of the
implemented policies so as to ensure policies chosen are
effectively and efficiently implemented inrelation to the
environmental dynamics.
• Assessing the internal and external dynamics and
subjecting the performance of policies to those dynamics.
 During evaluation establish the following:

• Basic assumptions
• Critical variables
• Existing conditions
• Expected impact
• Deviations from basic assumptions
• Standards and procedures
•
 Reasons for evaluation

• Compare plans vs. outcomes

• Gather data for feedback
• Compare current vs. past policy performance
• Identify and correct deviations
• Assess environmental changes and their impact
• Match policy requirements with size of organization
• To revise vision, mission and objectives
• Identify Organization’s vs. competitors SWOT
 Criteria for evaluation

• External consistency
• Internal consistency
• Time consistency
• Resource consistency
• Relevance/workability criterion
• Acceptability criterion among others
 Challenges during evaluation

• Uniqueness of each policy

• Uniqueness of environment in relation to organizational
dynamics
• Conflict of interest amongst the stakeholders
• Choice of the right criteria vs. policy objectives
• Misappropriation /misallocation of resources
• Challenges in relation to the social responsibility
requirements
• Challenge of the frequency of evaluation and respective
impact
• Negative attitudes
• Personnel required