Unit 5: Policies in Functional Areas

A] Policy

  • Policies are predetermined guidelines, laid down by the senior management of an organisation to guide the thinking, decision-making & actions of managers and their subordinates in implementing on organisation’s strategy.

  • Purpose of Policies:

  1. Framework to facilitate strategic decision-making.

  2. Control & reinforce the implementation of functional strategies.

  3. Uniform handling of similar situations occurring in different functional areas.

  • Different policies are:

1. Personnel Policies-

  • These relate to the personnel system, organisational & employee characteristics & industrial relations

  • The major decisions & issues involved in this are:

  1. Manpower planning, selections, development, compensation, etc.

  2. Working condition, availability of developmental opportunities for employees.

2. Marketing Policies-

  • These policies are based on 4P’s of marketing mix (Product, Price, Place & Promotion)

  • It includes:

  1. Product Policy which relates to its quality, features, packaging, branding etc.

  2. Pricing Policy which relates to Price setting, credit terms, payment period & so on.

  3. Place or Distribution Policy which relates to distribution channels, logistics, coverage of markets.

  4. Promotion Policy or Promotional Mix

3. Financial Policies-

  • The significant plans & policies that need to be formulated in Financial aspects are:

  1. Sources of funds which relates to procurement of capital, reserves, relationship with lenders & banks.

  2. Usage of funds which relates to capital investment, fixed assets acquisition, dividend decisions

  3. Management of funds which relates to financial accounting, cost control & reduction, tax planning, etc



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