Business Policy Flashcards
What is a business policy?
The set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives
What are the 9 critical tasks of a business policy
- Formulate the company’s mission
- Conduct an internal analysis
- Assess the external environment – competitive and general contexts
- Analyze the company’s options by matching its resources with the external environment
- Identify the most desirable options in light of the mission
- Select a set of long-term objectives and grand policies that will achieve the most desirable options
- Develop annual objectives and short-term policies that are compatible with long-term objectives and grand policy
- Implement the policy choices
- Evaluate the success of the policy process for future decision making
What is a policy?
A large-scale future-oriented plan, used to interact within competitive environment to achieve company goals
What are the dimensions of business policy?
Policy issues require top-management team decisions
Policy issues require large amounts of the firm’s resources
Policy issues often affect the firm’s long-term prosperity
Policy issues are future oriented
Policy issues usually have multifunctional or multibusiness consequences
Policy issues require considering the firm’s external environment
What are the 3 levels of business policy?
- Corporate level: board of directors, CEO & administration [Highest]
- Business level: business and corporate managers [Middle]
- Functional level: Product, geographic, and functional area managers [Lowest]
What are the characteristics of business policy decisions at the corporate level?
- Often carry greater risk, cost, and profit potential
- Greater need for flexibility
- Longer time horizons
- Choice of businesses, dividend policies, sources of long-term financing, and priorities for growth
What are the characteristics of business policy decisions at the functional level?
- Implement the overall policy formulated at the corporate and business levels
- Involve action-oriented operational issues
- Relatively short range and low risk
- Modest costs: depend upon available resources
- Relatively concrete and quantifiable
What are the characteristics of business policy decisions at the business level?
- Help bridge decisions at the corporate and functional levels
- Less costly, risky, and potentially profitable than corporate-level decisions
- More costly, risky, and potentially profitable than functional-level decisions
- Include decisions on plant location, marketing segmentation, and distribution
What is formality?
It is the degree to which participation, responsibility, authority, and discretion in decision-making are specified in business policy
What forces are used to determine the formality?
- Organizational Size
- Predominant Management Styles
- Complexity of Environment
- Production Process
5.Problems in the Firm - Purpose of the Planning System
- Stage of Firm’s Development
What are the 3 modes of formality?
Entrepreneurial Mode – most small firms
Planning Mode – most large firms
Adaptive Mode – most medium size firms
What is the Entreprenurial mode?
The informal, intuitive, and limited approach to policy management associated with owner-managers of smaller firms
What is the planning mode?
The policy formality associated with large firms that operate under a comprehensive, formal planning system
What is the adaptive mode?
The policy formality associated with medium-sized firms that emphasize the incremental modification of existing competitive approaches.
What are the components of the business policy model?
- Company Mission
- External Analysis
- Long-Term Objectives
- Short-Term Objectives
- Policies Empowering Action
- Policy Control & Continuous Improvement
- Internal Analysis
- Policy Analysis & Choice
- Generic & Grand policy
- Action Plans & Functional Tactics
- Restructuring, Reengineering & Refocusing
