How did ‘Business Policy’ evolve to its current form?
Business Policy as a subject was introduced in year 1911 in the Harvard School of Business with the objective to equip future managers with knowledge of business policy so that to enable them to govern organization.
Development in business policy arose from the planning techniques previously used by the managers.
In earlier times, the business environment was not as it is nowadays. Therefore the planning techniques differed greatly from the present scenario. Following techniques were used in the past to run and manage businesses-
• Day to day planning – Since businesses were not far sighted, the managers used to plan for each day. They were not customer oriented rather they were production oriented. But as things started changing, this technique started failing.
• Capital Budgeting & Management by Objectives – Here the managers started using capital budgeting to plan for their business. This proved successful for some time and gave good returns. However, as things changed rapidly, It too lost its importance and became futile.
• Long term planning – Now businesses became far sighted and thus started developing long term plans. But since business works in a dynamic environment, long term plans couldn’t sustain for long. Plans once implemented couldn’t work for long and thus made loss.
• Strategic Planning – Afterwards, this technique came into being. This is usually developed by the top management and is future oriented. This entails entire organization and provides guidelines which facilitates decision making.
After Strategic Planning, Business Policy was developed and is still widely accepted around the world. Following are the key points of business policy –
It defines rules and regulations of top management
It specifies limit within which the lower management can take decision without consulting the top management.
It provides guidelines to govern organization.
It deals with acquisition of resources for achievement of goals.
