What is the alternative way to apply and implement password policies to different groups and users?

Windows Server2008 and later DCs let you to create multiple policies (Fine grained Password policies). It requires manually creating additional Password Setting Object (PSO) in Active Directory, using tools like ADSIEdit or LDIFE (or any3rd party tool). Before creating PSO you have to keep in mind that,

1> Domain's functional level must be2008 or later.

2> For creating PSO you to login as member of Domain Admin group.

The detailed steps for creating Fine Grained Password Policy can be found at, http://blogs.technet.com/b/seanearp/archive/2007/10/06/windows-server-2008-fine-grained-password-policy-walkthrough.aspx

Correct ;)