=>DEVELOPMENT OF POLICIES =>BUSINESS POLICY -Policies are guides to action -They indicate, how the tasks assigned to the

organization might be accomplished and provide a basis for lower level managers, on which to make decisions, about the use of resources, which have been allocated. -Changes in strategic direction do not occur automatically. Operational plans are to be established to make the strategy work. -While middle managers in functional areas usually make such decisions, they need to be guided by the strategy, so that plans are geared to the accomplishment of desired objectives.

-The policies for the functional areas of the business are established to assist in this process. E.g. If firm adopts Cost leadership strategy

-All activities and resources should now be focused on developing low cost structure and reducing costs. -All functional areas, Marketing, finance, operations, personnel and information management should work towards meeting this objective. -Functional managers make plans to use the resources allocated to them in specific ways. Such plans are drawn up within the guidelines set at higher levels-policies

=>Need for policies ->Policies are developed to ensure that 1. The strategic decisions are implemented by all parts of an organization. 2. There is a basis available for controlling activities in the different functional areas of business. 3. The time spent by functional managers on decision making may be reduced as the plans lay down clearly what has to be done and the policies provide the discretionary framework within which decision need to be taken.

4. Similar situations occurring in different functional areas are handled by the functional managers in a consistent manner. 5. Coordination across the different functions takes place where necessary.

Development of policies Policies provide the means for carrying out the strategic decisions. The critical element is the ability to factor the grand strategy into policies that are compatible, workable and not just theoretically sound.

It is not enough for managers to decide to change the strategy. What comes next is How do we get there? When? How efficiently? A manager answers these questions by preparing policies to implement the grand strategy

->For example Strategic choice- Diversify -Executive to decide What to diversify into Where to diversify How much money will be needed Where the money will come from What changes are needed in marketing, production and other functions to make diversification work

=>Process involved in establishing policies -Similar to those in strategy formulation -Environmental factors can influence the choice

-Internal policies and power of sub units jockeying for position play a role -Since it involves resource allocation- resistance to change, conflict resolution techniques and coalition building will all be at play in development of policies -Without good policies -Managers would make the same decisions over and over again -Different managers might choose different direction and this could create problem -On the other hand Policies should never be so inflexible as to prevent exceptions for good reasons

=>Criteria for judging the adequacy of policies 1. Do they reflect present and desired company practices and behavior 2. Are they practical, given existing or expected situations 3. Do they exist in areas critical to firms success 4. Are they consistent with one another, and do they reflect timing needed to accomplish goals

=>As a result, policies will 1. Specify more precisely how the strategic choice will come to be- what is to be done, who is to do it, how it is to be done, and when it should be finished. 2. Establish follow up mechanism to make sure the strategic choice and policy decision will take place 3. Lead to new strengths, which can be used for strategy in the future.

Example ->Strategy- Expansion ->Marketing plansExtend and improve product lines, volume is more critical than margins as necessary

->Manufacturing plans- Expand plant capacity to support new products

->Human resource plans- Hire additional sales, R & D and production workers and managers

->Finance plan- Increase debt- equity ratio by one third Consider the dividend policy for cash flow needs ->Timing- Evaluate market share position and financial position after 2 years -For each of these plans, a set of policies will have to be established for the appropriate area of the business -Policies will ensure that plans are carried out as intended and the different areas are working towards the same ends