Business policy and strategic management are key concepts in business studies and entrepreneurship. They refer to the processes, frameworks, and methodologies that an organization uses to ensure they meet its goals and objectives, and they can help the business to become more efficient and competitive in its marketplace. Here’s a bit more about each:
- Business Policy: This refers to the set of rules and guidelines that an organization follows to make consistent and efficient decisions. The business policy helps to create a framework within which all employees can understand their roles and responsibilities. These policies can cover everything from human resources and finance to operations and marketing. Business policies can help improve the decision-making process, increase transparency, and ensure that all actions align with the organization’s goals. Business Policy: Meaning, Types, and Examples
- Strategic Management: This broader concept encompasses an organization’s overall strategy. Strategic management involves setting objectives, analyzing the competitive environment, analyzing the internal organization, evaluating strategies, and ensuring that the strategies are rolled out across the organization. Strategic management is typically divided into five stages: goal-setting, analysis, strategy formation, implementation, and monitoring. Everything you need to know about “strategic management”
Both business policy and strategic management play critical roles in the success of an organization. Policies ensure consistency and fairness, while strategic management ensures that the organization is moving in the right direction and that all actions and policies support the organization’s overarching goals.
Relationship between business policy and strategic management
Business policy and strategic management are inherently intertwined concepts, each serving to guide and inform the other. The relationship between these two aspects of business can be thought of as both sequential and cyclical.
- Sequential Relationship: At the highest level, strategic management usually comes first. Management begins by setting strategic goals and plans for the organization, often in response to external market conditions and internal capabilities. Once the strategic goals have been established, business policies are developed to help implement these strategies. Policies provide guidelines and rules that govern the behavior of individuals and units within the organization, helping to align daily operations and decisions with the strategic objectives.
- Cyclical Relationship: Over time, business policies and strategic management feed into each other, creating a continuous cycle of improvement and adaptation. As business policies are implemented, their effectiveness in achieving strategic goals is monitored and evaluated. This feedback can then inform strategic management, leading to adjustments in strategic goals and new or revised policies.
In essence, strategic management gives the organization its direction and purpose, while business policies provide the concrete steps needed to get there. Strategic management defines ‘what’ the organization aims to achieve, and business policy determines ‘how’ it will do so.
However, this is not a one-way relationship. Business policies, once in place, can also influence strategic management. The lessons learned from implementing policies, their successes and failures, can influence the future strategic direction of an organization.
For instance, if a certain policy led to significant efficiency gains in a particular department, strategic management might choose to focus more resources on this area and adjust their strategy accordingly. Conversely, if a policy doesn’t produce the desired results or leads to unforeseen issues, strategic management might need to reassess its goals or strategies to reach them. This constant feedback loop ensures the organization remains adaptable and responsive to both internal and external changes.
Example of business policy in strategic management
Suppose a technology company, TechCo, has set a strategic goal to become the market leader in its sector within five years. As part of their strategic management process, they identify that innovation and customer satisfaction are key areas they need to excel in to achieve this goal.
Now comes the part where business policies come into play:
- Innovation: To foster innovation, TechCo implements a policy allowing employees to spend 20% of their work time on personal projects related to the company’s interests. Similar policies at companies like Google inspire this. The idea behind this policy is that giving employees the freedom to explore new ideas will foster creativity and potentially lead to the development of new products or services.
- Customer Satisfaction: To increase customer satisfaction, TechCo implements a policy to address customer complaints within 24 hours. Additionally, they introduce a policy to conduct regular customer satisfaction surveys and incorporate customer feedback into product development.
These business policies are not standalone decisions but are aligned with the strategic goal of becoming a market leader. They provide a structured way for the company to work towards its strategic objectives.
Over time, TechCo will evaluate the effectiveness of these policies. If the innovation policy results in new product ideas and the customer satisfaction policy leads to higher customer retention rates, the company will know it’s on the right track. If not, it might be time to rethink the strategies or the policies designed to implement them.
This example illustrates how strategic management defines what a company wants to achieve, and business policy outlines how it plans to achieve it. The policies provide a roadmap for employees and teams, guiding their actions and decisions toward the strategic goals.
Case study of successful business policy in strategic management
A well-known example of a successful business policy in strategic management is the “Think Different” policy initiated by Apple Inc. under Steve Jobs.
In the late 1990s, Apple was struggling. They had a slew of products but lacked direction and focus, and they were losing market share to competitors. When Steve Jobs returned to Apple as CEO in 1997, he implemented a business policy that would forever change the company’s trajectory.
Strategic Goal: Jobs’ strategy was to reestablish Apple as an innovative company capable of disrupting markets and offering consumers intuitive, design-led technology products.
Business Policy: Jobs implemented a business policy of simplification and focus. He drastically reduced the number of Apple’s products from about 350 to just 10. This policy was a departure from the then-common practice of offering a wide range of products to cater to every possible customer segment.
Jobs believed that by focusing on a select few products, Apple could dedicate more resources to ensuring that those products were innovative, well-designed, and user-friendly. This policy is applied across the entire organization, from product design to marketing.
Result: The policy was tremendously successful. The iMac, released in 1998, was the first product of this new policy. Its unique design and user-friendly interface were a hit with consumers, and it marked the beginning of a series of successful products, including the iPod, iPhone, and iPad. These successes turned Apple into one of the most valuable companies in the world and a leader in multiple technology markets.
This case study shows how business policy can drive strategic goals. Steve Jobs’ decision to simplify and focus Apple’s product line was a bold policy decision that directly supported his strategic goal of reestablishing Apple as an innovative, design-led company. Through a clear and decisive policy, Apple could align all aspects of the organization behind this strategy and execute it successfully.
