The Impact Of Business Policy On Organisational Performance

Project and Seminar Material for Business Administration and Management BAM

The Impact Of Business Policy On Organisational Performance


The aim of this study is to determine the impact of business policy on organizational performance. Data were collected from primary and secondary sources.

Data are presented in tables as frequency distribution and in the analysis, the techniques of frequency and percentage are used.

The findings of the study are;

  1. Effective financial policy leads to effective financial management.
  2. Effective pricing policy enhances sales and profitability.
  3. Effective production policy ensures improved product quality.
  4. Effective marketing policy ensures profitability and growth.

In conclusion, effective business policy enhances growth, survival and profitability of a potential business.

Chapter One


1.1 Background of the Study

Every business has a set of objectives which it sets out to achieves. These objectives are stated or defined in their policy or mission statements. In order to achieve the set goals, management ensures that all operations, transactions and activities of the business conform with established guides. The established guide to action is called business guide to action is called business policy. (kindle Berger, 1996:52)

Thus, a policy is a guide for making decisions in the enter pries (Ewurum and Unanka, 1995: 72)

For efficient performance a standard operational procedure must be followed and this, apparently, defines the boundary within which decision can be made. If one decision provides help for decision in other situations, it is said to be a policy decision because it set a precedence and provides a guide to future decision making. Thus, an important characteristic of a policy is that it provides a guide and a reference point for decision-making by subordinates. Clear policies encourage the delegation of decision-making authority.

In corporate business a number of important issues require or calls for top management decisions. These decisions will define the fundamental business policies which arise from the objectives set to be achieved and are related to the functional areas. These areas are procurement, production, marking, finance, personnel, research and development (Hanson, 1994:92).

Top management (Board of Directors) have to provide guiding principles to actions of lower management in these functional areas. For instance there should be a guiding principle on how and where raw materials should be procured, what to produce and production technique to be adopted and what marking strategies to adopt (including pricing) in order to be include method of financing as well as research and development.

Management expects believe that organizational performance to a large extant depends on how effective decisions taken on these functional areas are and how judiciously these decisions are implemented as business policies. performance indications include market share, sales volume, product quality, customer satisfaction, level of profit, growth rate, etc (Aniebona, 1999:56).

Business policies affect these variables.

Apparently, many business organizations have gave under because they did not have action guiding principle. Decisions and activities of such enterprises were arbitrarily taken and carried out. Today, it has become obvious that business activities have to be conducted within the framework of guiding principles if the organization should perform efficiently and effectively. It is against this background that this study is set to examine the impact of business policies on organizational performance.

1.2 Statement of the Problem

Many business organizations do not have clearly defined business policies. In other words, they do not have clearly defined policies regarding procurement, marketing, etc. Apparently, such business may not achieve their objectives. Lack of clearly defined and effectively implemented business policies could hamper the performance of the organizations. This implies that profit maximization and growth will become elusive.

Nevertheless, many organizations do not have clearly defined business objectives and have continued to operate under the harsh business environment prevalent in our economy. This, therefore, calls for an investigation into how business policies affect organizational performance.

1.3 Purpose of the Study

The overall objective of this study is to determine the impact of business policies on organizational performance.

Thus, the specific objectives are:

  1. To determine how procurement policy affects costs and product prices.
  2. To find out how production policy affects supply, product quality and prices.
  3. To determine if marketing and pricing policies affect sales.
  4. To identify how financial policy affects business operations.
  5. To ascertain if research and development affect and business performance. I secured questions on the topic or near it.

1.4 Scope of the Study

The scope of this study covers only policies in respect of procurement, production, pricing, marketing, research and development in three business organisations in Enugu Metropolis.

1.5 Research Questions

The following questions will guide this study;

  1. In what ways can procurement policy affect production costs and product prices?
  2. How does production policy affect support, product quality and prices?
  3. How do marketing and pricing decisions affect sales volume?
  4. In what way does financial policy affect the operations of the business?
  5. In which ways can research and development affect the performance of the business?

1.6 Significance of the Study

This study is significant because of it’s usefulness in many respects. Firstly, many private and public sector enterprises have been performing poorly because they do not have clearly defined business policies. Others have been performing poorly in spite of existing business policies. It will therefore be expedient for their management to see the need for formulating and effectively implementing business policies as will be shown in this study. the research findings will show how effective business policy can be formulated while the recommendation will show how that can also be implemented for good results.

Secondly, management of business organizations will also see the need for reviewing their business policies in line with changing business conditions. Review of policies will ensure that critical decisions are taken to supplant existing ones if it is the way to achieve organizational goals.

Thirdly, there is the need for management to set those goals that can be achieved within the available resources of the organisation.

1.6 Limitations of the Study

Two major constraints were encountered in the course of this study. firstly, same of the staff approached for information declined to complete the questionnaires as well as to be interviewed. This uncooperative attitude limited the volume of primary information made available for the study.

Secondly, the financial constraint facing the researcher prevented from making the study more extensive by including more establishments into the study. could not afford the costs of travels and additional questionnaires that would be required.

Chapter Five

Discussions, Recommendation and Conclusion

5.1 Discussions of Results / Findings

The researcher found out that many Organizations have financial policy which is embedded in their financial management. Some raise finds through equity shares while others raise funds through short or long – term loan. To ensure effective financial policy they adopt efficient financial allocation. This results in efficient utilization of funds, elimination of wasteful expenditure, minimization of cost and enhanced profitability.

Another finding is that many also have marketing policy which cover pricing, discounts, promotion and distribution and that prices. Is based on co0st and competitors’ prices. Effective marketing policy enhances competitiveness sales and profitability. Many do have production policy, which hinges on product quality improvement, cost minimization, product standardization, customer satisfaction and efficient plant utilization. Efficient production policy increases output and turnover

5.2 Connclusion

Organizations that have effective business policy always perform very well because it can plan and forecast future business tuned. Effective business policy enhances funding production and profitability. Ultimately effective business policy enhances profitability and growth prospect. Thus, effective business policy is crucial.

5.3 Implications of the Research Findings

Effective financial policy makes an Organization to manage its financial resources very well and makes it liquid and solvent, in marketing, this enhances sales and profitability which effective production policy guarantees increasing out put and revenue for the organizations.

5.4 Recommendations

  1. Management should always formulate effective financial policy that will ensure effective financial management. Find should be adequately obtained but efficiently utilized.
  2. It should ensure effective production policy through adequate procurement of raw materials at minimal cost effective utilization of lab our and machine capital.
  3. It should also formulate effective marketing policy, which should include effective pricing of products and effective promotion of the products.
  4. Finally new product development should always be encouraged and this can always be achieved through effective research and development policy.

5.5 Suggestion for Further Studies

The following areas should also be studied by follow student:

  1. Impact of corporate planning on business performance.
  2. Resources management and organization performance.
  3. Economic reforms and organizational reforms.

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