How Strategic Management Differs From Business Policies

Strategic management and business policies are both very valuable tools for businesses, but they are also very different tools. Managers should understand the differences between strategic management and policies so that they can understand how to use both for the benefit of the firm.

Strategic Management

Strategic management is system used by managers of firms to direct and administer a firm. Strategic management combines elements of scientific research and the art of management in order to make decisions for the firm. Strategic management is used to address issues such as which markets to enter, how to build competencies and how to structure the firm. Strategic management is, generally, directed from the top down with strategic decisions being made by the top management team.

Business Policies

Business policies are the internal rules that a company has to decide actions. Policies serve to place boundaries on the decisions and actions made by employees. For example, a firm could have a policy that all clients must have an excellent credit record or pay up front. Employees would then be required to follow these policies. Policies may be decided by the top management team, but more specific policies may be determined by line managers.

Differences

The central difference between strategic management and business policies is that strategic management is a system that helps guide and direct a firm, while policies, on the other hand, are merely rules to be followed. Business policies alone are not enough to provide guidance for a firm, they merely tell members of the organization what to do. Policies are static and unchanging so they cannot help a firm in a changing environment, while strategic management is able to adapt to changes.

Relationship

Business policies do not influence the firm's strategic management, but strategic management can influence the firm's policies. If a firm makes a strategic decision to increase profits, for example, the company's policies might change to reflect this; for instance by requiring managers to reduce spending or limiting contracts to ones above a certain value.