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CS Professional · Strategic Management and Corporate Finance · Business Policy and Formulation of Functional Strategy

In the context of business policy, which statement best describes the relationship between a policy and a strategy?

A policy is a broad guideline that directs decision-making within an organisation, whereas a strategy is a plan of action designed to achieve objectives and deal with the competitive environment. Policies set the boundaries within which strategic choices are made, so the two are related but not identical.

  1. AA policy is a broad guide for decision-making within which strategies are chosen, while a strategy is a plan to achieve objectives in a competitive environmentCorrect
  2. BA policy is a short-term action plan for competitors, while a strategy is a standing rule for routine matters
  3. CA policy and a strategy are identical and differ only in the level of management using them
  4. DA policy is formulated only by operational managers, while a strategy is formulated only by shareholders

Explanation

Business policy provides general guidelines that channel thinking and action in decision-making. Strategy is the specific plan of action to achieve objectives and respond to the environment. The other options reverse the roles or wrongly claim they are identical or tied to specific persons.

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