Three primary areas that influence business policy

 Nothing survives in isolation. Framing business policy is not exception to this rule. There are three primary areas that impact and influence in formulating business policy. These are: politics, economics and military shortened as PEM. Read more on this mythical PEM:

Politics

Finally the buck ends on politics. Wait a minute! It was politics that started the process anyway! Business policy, therefore begins with politics and ends with it. Multinational companies know this theory very well. They enter into global arena at the behest of homestretch where politics drive them to explore elsewhere as they are reaching either the pinnacle or saturation point. Mercedes is a good example.

Economics 

Turnover for a firm is merely a statistical figure. It is the profit that is stupid. Thereby hangs the tale of expansion and/or diversification. Over the period net profit starts to decline in relation to the turnover growth. Hence firms wish to tweak business policy by cost reduction exercise in case expansion is sought after. If limits to expansion arises then there is a junction point: introduce new technology or diversify.

Underpinning of technology is clear when firms analyse the economic impact affecting their product line with new techno or without it. This needs some explaining. If the firm is in overly saturated market then there is no purpose of adding new technology as incremental growth in both turnover and profit is much less. If the firm is perched on a pinnacle then it behoves bringing in new techno to sustain the current status first and stimulate market next.

Military 

Unlike in the case of armed forces, firms are not in the war front to kill or be killed. Yet in business warfare being the case out there, firms need to be well prepared to handle competitive strategy that seeks to be on the top of the fellow participants. Every company swims in shark infested water where opponents gang up to smother and swallow a firm that has weak defence lines. Putting it on right perspective firms must be geared to employ a suite of   offensive and defensive business strategy to beat the opponents. 

 

Cheers! 

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist