Q.1 Explain with respect to policies – steps in framing business policy and stages of policy cycle. Will these help in decision making? (10 marks)

Steps Involved in Framing Business Policies

Policy formulation is the process of designing the policy. The major function of designing the policy relies upon the managers. Policy framing is one of the phases of strategic planning in the organisation. It is based on the underlying objectives of the organisation. Framing and monitoring the policy is one of the critical tasks in the organisation.

The process of framing policies consists of the following steps:

— Definition of purpose – The first step towards framing policies includes the process of identifying the objectives and the philosophy of the organisation. The purpose is to select the guidelines for measuring the performance based on the organisation’s strengths and weaknesses, its available resources and the personnel. The basic concept of the business activities is defined in this phase.

Example – The perception of the garment company is to develop the finest cloth at less cost. Adding to such a conceptual view, the company must define the purpose in terms of guidelines needed for measuring the performance and obtaining the desired targets.

— Preparation of strategic intelligence – This step involves analysing the internal environment of the organisation. The strategic intelligence is the process of detailed description of what the company is and assessing its sphere of operations. The prediction of the future happenings including the opportunities and risks must be known because it lays heavy impact on the company’s position in the market.

— Policy alternatives – Alternating policies must be identified and analysed once the objectives of the organisation are defined. The managers recognise the problems faced by the organisation and discover the alternative policies. This step is the central phase of framing a policy. A list of policy alternatives is generated by considering the probabilities of the problems faced by the organisation.

Example – Inventory systems in Das n Das Company

The Das n Das Company invested on control systems to avoid taking decisions on the routine matter regarding the orders, timings of production, etc. In such a situation, many factors are considered by the top level management to increase the production rate and the size of orders. Hence meetings are held to discuss the implementation of the policy that suits the best.

The top level management introduced an alternative to the inventory control policy that consisted of determination and evaluation of various conflicting factors. The policy is adopted to represent a balance between the internal factors like employees, resources and the production.

— Policy analysis – This step involves analysing the alternative policies and examining its contribution towards the objectives of the organisation. An alternative policy is based on the consequences to be faced by the organisation. The elements of policy analysis process include evaluating the consequences of various alternatives and their effects on the objectives of the organisation.