Business Policy defines the scope or spheres within which decisions can be taken by the subordinates in an organization. It permits lower level management to deal with problems and issues without consulting top level management every time for decisions.
Business policies are the guidelines developed by an organization to govern its actions. They define the limits within which decisions must be made. Business policy also deals with acquisition of resources with which organizational goals can be achieved. Business policy is the study of the roles and responsibilities of top-level management, the significant issues affecting organizational success and the decisions affecting organization in long-run.
In determining its policy, an organization will normally be seeking to secure some competitive advantages. In other words, an organization will be aiming to put itself in a position in which it will be able to serve its customers more effectively than its competitors. Frequently this will involve an organization in identifying its distinctive competencies, in order to deploy them, whilst also avoiding its weaknesses. In all cases ‘what the customer wants’ must be an important factor.
In some cases, the competitive advantage(s) may be obvious. Proximity to customers may offer advantages in terms of timing, i.e. how quick items or services might be made available to customers. Possession of a particular technology or technique (e.g. protected by patent rights) may ensure that something can be made available to customers which is not available from any other source. Economic factors may ensure that costs are low, e.g. compared to those of competitors in another country, so an organization may have a price advantage.
Generally, there is no single, obvious source of sufficient competitive advantage, so businesses must consider the policy options available to them in order to construct a policy which when taken as a whole gives some competitive strength.
An organization may choose to seek competitive advantage by means of any of the following:
- Flexibility. The ability to supply customers with different types of goods or service, to offer different variants on a basic portfolio, to customize, adapt and tailor, can be a major strategic advantage. This capability may help build long-term, more secure relationships with customers; whose needs may change over time. Such flexibility may enable organizations to command a higher price, to secure more profitable sectors of a business, etc.
- Technology. Organizations with strong research and development will often be in a position to market products/services which are more advanced, more sophisticated or more capable than others. They may be able to get such items to the market earlier than their customers, create new markets and win large market shares. In some sectors technological superiority may be a critical success factor (e.g. aerospace, health care). The ability to compete by innovating provides advantages which might be secured through patent protection. For some it is a major strength, and an advantage beyond that available to organizations that seek to exploit, or are able only to exploit, existing, established technologies.
- Quality. For most organizations’ product/service quality is important. Few customers will willingly acquire low-quality items or services. However, the ability to provide products or services at outstanding quality, when compared to competitors, can afford a major strategic advantage. Quality is a variable. It is often related to price. Having the organizational capabilities to deliver high quality can be a major source, or one source, of competitive advantage.
- Speed. Doing things quickly can mean quicker delivery to customers, shorter queuing or waiting time for customers, and quicker processing of customers than can be achieved by competitors. ‘Speed is of the essence’ for many customers. The ability to satisfy a customer now, rather than tomorrow, can be a major strength in manufacturing, transport, supply and service businesses.
- Cost. Some organizations choose to compete on cost, i.e. the price to the customer. High-volume operations providing a limited range of goods or services may have a cost and price advantage.
- Reliability. The fact that something, whether product or service, is always available, serviceable and satisfactory – doing what it was intended to do and in the intended manner – can be a major attraction to certain customers in certain circumstances. The ability to provide outputs having such high reliability gives considerable competitive advantage to organizations in industries such as aerospace, motor vehicles, health care, emergency services, etc. The factor relates in some ways to quality, the two often being interdependent, and technology.
- Responsiveness is to do with speed. Advantage may be secured by an organization which is able to respond quickly to changes in customer requirements, e.g. the need for new types of product or service, and which can most quickly satisfy those needs. Getting new ‘offerings’ to the market-place can put an organization in an advantageous position. Responsiveness is also associated with an ability to detect and/or understand a customer’s need, even to anticipate it, and a willingness to seek ways to satisfy it.
- Dependability. To have a record and a reputation as a dependable supplier can count for a great deal. The ability to provide, time after time, what is required when it is required and at the expected price is not something everyone can achieve. Such dependability alone, even for the supply of goods or services which are available from others, and at the same price, can be a considerable strength. It is not the same as speed. It is to do with consistency and repeatability on three of the other dimensions – quality, speed and cost.
The determination of the competitive stance of the organization, which of the above options to concentrate on, or which combination, will give a focus to the organization’s efforts and character to the organization. An organization which has chosen to compete on flexibility, quality and responsiveness will neither behave nor feel like one that is competing on speed and cost. Each will have positioned itself in the market. Each will have sought to differentiate itself from others in the eyes of the customer.
The management roles in each, not least the roles of operations managers, will be different, for among other things the operations objects will be different. Certainly, the weight attached to the three customer service objectives for operations will be different.
Thank you for reading this article and I hope to will cause a great change in your policy formulation in your institution.
Dr. Asare Bediako Adams, FCILG
The author is the Director of Africa Operations for Chartered Institute of Leadership and Governance. He is also the Executive Director of PMRIG Group of Companies and Bedoak Global Ltd and its affiliates. He also serves as a board member of several companies.