The Role of Top Management and the Importance

of Company Policy
Every part of the organization should be an expression of the purpose and policies of the
firm, or it is meaningless and therefore redundant.

Why study business policy?

Many people although at the lower ranks of a company, must understand the
policies and goals the central purpose of the organization. Whether they be
the departmental manager, or specialist far down the ladder of hierarchy,
they must have a sense of the mission, character and importance of the
company as a whole. After all, if the individual does not know the larger
purpose for which he serves, he cannot serve it well.
Responsibilities of the Chief Executive
He, working closely with the BoD, must have elaborate the major
policies of the firm
Must define the objectives of the firm
Must develop strategies and the long-range plan for achieving these
objectives
Must develop an organization which most efficiently carries out the
companys strategic plan
Must develop the operating policies which ease the burden of decisionmaking to carry out the plan
Involve in controlling the operations of the firm and in problem-solving

Major Policies (Company Policies)

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Deal with the firms fundamental nature, its identity, and the direction
in which it is expected to move. They provide a framework within
which the objectives can be established.

Objectives
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The firms objectives or goals (these are two terms used

interchangeably) specify, usually in quantitative terms (e.g., dollars,
percentages, or time periods), where the firm is expected to be at
some time in the future.

Strategy
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Business strategy is the approach developed to achieve the objectives

which have been defines. The development of the strategy is a critical
part of long-range planning. A firms strategy (its strategic plan)
defines in detail how the firm is to get from where it is now o where the
objectives state it should be at some tie in the future.

Operating Policies
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Are guides for decision-making. The operating policies of a firm flow

out of its objectives, its strategy, and its organization. The objectives,
plus the policies, define the character or personality of the firm. They

provide a framework within which management can make decisions

that are consistent in themselves and are in accordance wih the
strategic plan and its objectives.

Major Policies of an Enterprise

They deal with the firms fundamental nature, its identity and the
direction in which it is expected to move, providing a framework within which
goals or objectives can be properly established.

The policies of essentially every enterprise is to maximize profits or

minimize losses consistent with other major policies and
objectives.
Another major policy of a company may be stated in terms of the
products and/or services the company will produce and sell.
The policy might be to produce into the foreseeable future only
those goods and services which the company is currently
producing, or
The policy may be to expand into complimentary products which
use the same marketing channels or which utilize the same raw
materials and manufacturing resources, or
The policy maybe to expand through vertical integration
The usual type of policy is stated in terms of anticipated position within
the firms industry.
A policy of no growth is a viable policy unless it also means no
planning or strategy. A policy of no growth may even be consistent
with long life and increasing profits if it is accompanied by an active
strategy of the correct amount of marketing effort, innovation, and
perhaps diversification to maintain present sales volume.
Concerning geographic market, the firm may now sell only given
region of the country. The policy may either be to continue as a
regional firm or to expand and become a national firm or to branch out
into international markets.
Product quality for which the company will be known.
Policy involves ownership. Such policy sets definite restrictions on
other policies and objectives because investment in plant, equipment,
and working capital will be limited by the familys financial resources.
The sum of the major policies essentially defines the character of the firm,
as the owners see it, and, in general terms, as they project it into the future.