There are plenty of definitions in management literature that define business policy and strategy. A business policy should be simple, easy to understand and implement. Business policy is a guideline to the organization that everyone to the last mile understands and follows.
Let me try and explain the differences using real-life examples.
I worked in this group’s leading technology services company for ten years and quickly learned that ethics was a cornerstone policy. As a global business head of consulting, my targets for securing business and bringing in revenues were governed by a business plan I prepared at the beginning of the year. The unwritten rule was a red line you cannot cross regarding ethics.
Customer centricity was another business policy that permeated the organization. You were required to do everything to achieve customer satisfaction. Most of the projects that we executed in India were loss-making. We kept delivering them, investing more resources and technology to satisfy the customer. We compensated our losses from profitable projects from the US, UK, and other parts of the world.
Let me now move to business strategy –
Business strategy can be defined as a distinct array of interdependent choices that address business questions. These could be interdependent pathways to meet a business objective. At the heart of a great business strategy lies the ability to secure a competitive advantage over your competitors and undertake such steps that will increase the customers’ willingness to pay for your products and services. It is connected by identifying the right product mix, improving business processes, increasing efficiency, acquiring talent suitable for the task at hand, determining the appropriate business model, etc.
Business strategies should be tested thoroughly before implementation. The tests should demonstrate that the firm can achieve its business objective within the desired time frame by making the identified strategic choices. For instance, an IT outsourcing company wants to penetrate an identified market and decides on a certain pathway to achieve this objective. The path could mean undertaking all projects largely at the cheapest location. It could also be that all work will be done at the client’s site. In the latter case, the business objective of getting the desired margins may not be achieved. Here the strategic goal is not met, and the strategy has to be replaced by another delivery model based on the principle of nearshore and a cost-competitive delivery center.