Policy & Strategy

Recently updated on April 13th, 2023 at 06:10 pm

In business parlance, the terms strategy refers to is a unique plan designed with the aim of achieving a competitive position in the market and also to reach the organizational goals and objectives. In short, it is an interpretative plan, that guides the enterprise in realizing its goal. On the other hand, policy refers to a set of rules made by the organization for rational decision making.

Policy lays down the course of action, which is opted to guide the organization’s current and future decisions. Many people have confusion regarding the two terms, but they are not alike. Here, one should know that policies are subordinate to strategy.

Strategy

The strategy is a game plan, chosen to achieve the organizational objectives, gain customer’s trust, attain competitive advantage and to acquire a market position. It is a combination of well-thought intent and actions which lead to the organization towards its desired position or destination. It is a unified and integrated plan made to achieve the basic objectives of the enterprise like:

  • Effectiveness
  • Handling events and problems
  • Taking advantage of opportunities
  • Full resource utilization
  • Coping with threats

The strategy is a combination of flexibly designed corporate moves, through which an organization can compete with its rivals successfully. The following are the features of the Strategy:

  • It should be formulated from top-level management. However, sub-strategies can be made by middle-level management.
  • It should have a long-range perspective.
  • It should be dynamic in nature.
  • The main purpose is to overcome from uncertain situations.
  • It should be made in such a way, to make the best possible use of scarce resources.

Policy

The policy is also regarded as a mini-mission statement, is a set of principles and rules which direct the decisions of the organization. Policies are framed by the top-level management of the organization to serve as a guideline for operational decision making. It is helpful in highlighting the rules, value and beliefs of the organization. In addition to this, it acts as a basis for guiding the actions.

Policies are designed, by taking the opinion and general view of a number of people in the organization regarding any situation. They are made from experience and basic understanding. In this way, the people who come under the range of such policy will completely agree upon its implementation.

Policies help the management of an organization to determine what is to be done, in a particular situation. These have to be consistently applied over a long period to avoid discrepancies and overlapping.

STRATEGY

POLICY

Meaning Strategy is a comprehensive plan, made to accomplish the organizational goals. Policy is the guiding principle, that helps the organization to take logical decisions.
What is it? Action plan Action principle
Nature Flexible Fixed, but they allow exceptional situations
Related to    Organizational moves and decisions for the situations which have not been encountered previously. Organizational rules for the activities which are repetitive in nature.
Orientation  Action Thought and Decision
Formulation Top Level Management and Middle Level Management Top Level Management
Approach     Extroverted Introverted
Describes      Methodology used to achieve the target.           What should be done and what should not be done.

The following are the major differences between strategy and policy

  1. The strategy is the best plan opted from a number of plans, in order to achieve the organizational goals and objectives. The policy is a set of common rules and regulations, which forms as a base to take the day to day decisions.
  2. The strategy is a plan of action while the policy is a principle of action.

Strategies can be modified as per the situation, so they are dynamic in nature. Conversely, Policies are uniform in nature. However, relaxations can be made for unexpected situations.

  1. Strategies are associated with the organizational moves and decisions for the situations and conditions which are not encountered or experienced earlier. On the contrary. Policies define the rules for routine activities, which are repetitive in nature.
  2. Strategies are concentrated toward actions, whereas Policies are decision-oriented.
  3. The top management always frames strategies, but sub-strategies are formulated at the middle level. In contrast to Policy, they are, in general, made by the top management.
  4. Strategies deal with external environmental factors. On the other hand, Policies are made for the internal environment of business.
  5. Strategies often contain methodologies used to achieve the set target. In contrast, Policies determine what is to be done and what should not be done in specific circumstances.

The difference between Strategy and Policy is, a little complicated because Policies come under the Strategies. Apart from that, the policies are made to support strategies in several ways like accomplishing organizational goals and securing an advantageous position in the market. Both of them are made by the top management as well as made after a deep analysis.

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