Explain the importance of strategy and policies in organizational functioning.

Explain the importance of strategy and policies in organizational functioning. Describe how strategy and policies are formulated in the organization you are familiar with. Highlight the strategies and policies which were successful supporting with examples. Briefly describe the organization you are referring to.


Organizational policies and strategy provide guidelines for action. Unfavorable and ambiguous policies or strategy may affect the functioning of the individuals adversely and they may experience stress. Thus, unfair and arbitrary performance evaluation, unrealistic job description, frequent reallocation of activities, rotating work shifts, ambiguous procedures, inflexible rules, inequality of incentives, etc., work as stressors. Organization wide policies designed to achieve major organizational objectives. Specifying all factors that compose the environment is a complex and perhaps unmanageable task.
• Focused Purpose
• Clearly defining short-term purpose
• Ensuring mission is realistic
• Serving the best interests of all stakeholders
• Defining a point of differentiation
• Future Perspective
• Clearly defining long-term outlook
• Appealing to the long-term interests of the company's stakeholders
• Providing a foundation for decision-making
Strategic Advantage
Competitive advantage is a key driver to forming an organizational strategy. Competitive advantage is clearly understood by all stakeholders. Employees clearly understand how their role supports the company's organizational strategy second key strategy element is External Assessment, which reflects an organization's approach to gathering and analyzing essential market data. Included in this data are developing competitive profiles, studying macro and micro economic information, identifying industry opportunities and threats, and understanding what it takes to be successful in a given market.
Strategy formulation
Strategy consists of a set of long-range decisions which establish actions to exploit opportunities or combat threats in response to environmental forces and developments. These decisions are the result of a complex decision-making process designed to establish organizational goals and long-range plans for resource allocation. Process involved in strategy formulation is the same as discussed in policy formulation; however, a major difficulty in the strategic decision process is the identifying and analysis the factors bearing on the problem.
Evaluation of a Strategy
There are, of course, many factors determining organization's success or failure. But a valid strategy can gain extraordinary results for the organization whose general level of competence is only average.
1. Internal Consistency: Internal consistency refers to the cumulative impact of individual policies on corporate goals, and in a well-worked out strategy, each policy fits into an integrated pattern. A strategy must be judged on the basis of its relationships to other policies and goals of the organization.
2. Consistency with the Environment: The strategy should be consistent with the environment, that is, this should make sense with respect to what is going on outside. Consistency with the environment has both static and dynamic aspects. In a static sense, it implies judging the strategy; with its suitability to the existing environment.
3. Appropriateness in the Light of Available Resources: The strategy should be appropriate in the light of available resources. Resources are those things that help an organization achieve its objectives. There are two basic issues which management must decide in relating strategy and resources. These are what the critical resources are? The three resources most frequently identified as critical are money, competence, and physical facilities.
4. Satisfactory Degree of Risk: Strategy and resources, taken together, determine the degree of risk which the organization is under taking. Thus, each organization must decide the degree of risk it can take. This, in turn, depends upon several factors.
5. Appropriate Time Horizon: A good strategy not only provides what objectives would be achieved, it also indicates when objective would be achieved. This is due to the fact that a significant part of every strategy is the time horizon on which it is based. In choosing an appropriate time horizon, the organization must pay careful attention to the goals being pursued. Goals have time-based utility and must be established far enough in advance to allow the organization to adjust to them.
6. Wort ability: The strategy must have enough degree of workability. The workability of a strategy can be measured in terms of results which are obtained. However, the results measure two factors: the strategy selected and the skill with which it is being executed. If the results are not up to standards, both these factors can be examined.
As an example, let us review the strategy of a medium-sized company “Apporva Electronics” involved in manufacturing and marketing electronic entertainment products. In terms of product/market scope the company has restricted itself to marketing of television sets in the Northern and Eastern regions of the country. In terms of future areas of growth, the compnay’s R&D division is involved in designing video cassette players and personal computers to be marketed in either Northern or East region markets. The company has evolved a competitive advantage in terms of an excellent after sales service not easily matched by any of its close competitors. Most of the key personnel in marketing and sales have been deployed in such a way that they contribute their maximum in various regions with high degree of autonomy and constitute the company’s distinctive competence. By seeking entry in the video cassette players and personal computers in the future the company would be using its existing distribution network thus creating marketing synergy.