Business policy as a distinct field of study was introduced at Harvard Business School way back in 1911. The course aimed at improving the general management capabilities of students. It was intended to tie together and give proper focus to the first year courses by showing how the functions of business both internally and as between businesses, were closely interrelated in practice and how a chief executive had to recognize and deal with those relationships. The course, however received widespread acceptance only after the publication of two reports in 1959. The Gordon and Howell report, sponsored by the Ford Foundation predicted that a course on business policy would give students an opportunity to put together what they have learned in the separate business fields and utilize this knowledge in the analysis of complex business problems! The Pierson report, sponsored by the Carnegie Foundation also recommended the introduction of the course strongly. Following these reports the business policy course was made mandatory in all business schools in the US for the purpose of recognition. In the course of time the course gained popularity in business schools in other parts of the world as well. It is being increasingly viewed as an integrative course offered to students after completing as set of functional area courses in Finance, Marketing, and Accounting etc.
Development of course contents:
In the days gone by academicians viewed future as a moving target, difficult to capture analyze and interpret with a certain degree of confidence. So they pinned their hopes primarily on short term planning tools. Around 1930s systematic attempts were made to go deep into future and prepare the organizations for likely changes in future. Budget control systems management by objectives and capital budgeting techniques were pressed into service with a view to predict future impacts based on current trends. These techniques unfortunately failed to capture the essence of future conditions in an appropriate way. Long range planning was used to remedy the situation. Corporate plans, prepared by people at various levels based on current practices and likely changes in future, were often pushed upwards for approval by top management. Top management’s participation in such lopsided exercises was minimal and there was always the danger of the recommendations not being followed. This process is called as first generation planning. First generation planning puts lot of emphasis on picking up an appropriate course of action (generally a single plan) based on environmental challenges and organizational strengths and weaknesses. Then came the second generation planning in the form of strategic management which came to occupy the center stage in the business world ,emphasizing interaction by managers at all levels of the organizational hierarchy in planning and implementation . Hofer et al called this evolution a paradigm shift. They have summarized the developments in this regard thus:
First Phase: Paradigm of Adhoc Policy (till mid 1930s): Adhoc policy making necessitated by the expansion of American firms in terms of product markets and customers and the consequent need to replace informal controls and coordination by farming functional policies to guide managers.
Second Phase: Paradigm of planned Policy (1930s – 1940s): Replacement of adhoc policy making by planned policy formulation and shifting attention towards integration of functional areas, in line with environmental requirements.
Third Phase Strategy Paradigm ( 1960s): Rapid force of environmental changes and increasing complexity of managerial functions demanding a critical look at the concept of business in relation to its environment hence the need for strategic decisions.
Fourth Phase: Paradigm of Strategic Management (1980s): shifting of focus to the strategic management process and the responsibility of general management in resolving strategic issues.