A systematic attention to fashioning appropriate business policies and ensuring that these are adhered to in all aspects of business activities improves the ability of the company to identifying the policies that are most suited for long term business growth and performance., And improves the ability of the business to stick to these policies.
In absence of clearly laid down policies to which the company is sincerely committed, as determined to pursue these policies in face of short term problems and apparent losses, a company is likely face a situation of frequently changing top management directives in response to random variations in environment and organizational performance, that sap the energy of the company in moving from one extreme approach to another. When there is a complain about product quality from a major customer, the top management will stress quality to the exclusion of all other issues, but when subsequently quarterly results show low profits, the stress will shift to cost cutting, which may involve neglecting quality.
A well formulated business policy enable a business to keep sight of its priorities in face of the pressure of changing conditions and adopt a stable balanced approach.
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