TOPIC 3: STRATEGIC DECISION MAKING

A STRATEGIC DECISION

A strategic decision is one that deals with the long-run future of an entire

organization.

Strategic decision making, or strategic planning, describes the process of creating

a company's mission and objectives and deciding upon the courses of action a

company should pursue to achieve those goals.

WHAT MAKES A DECISION STRATEGIC?

A strategic decision is;

1. RARE-Strategic decisions are unusual and typically have no precedent to

follow

2. CONSEQUENTIAL-Commit substantial resources and demand a great deal

of commitment from people at all levels

3. DIRECTIVE-Set precedents for lesser decisions and future actions

throughout an organization

Characteristics of Strategic Decisions

Source: Johnson, G. and Scholes, K. (1997). Exploring Corporate Strategy, Fourth Edition, Prentice Hall, New
York.
1. Strategic decisions are likely to affect the long-term direction of an organisation.

2. Strategic decisions are normally about trying to achieve some advantage for the organisation.

3. Strategic decisions are likely to be concerned with the scope of an organisation’s activities: Does (and
should) the organisation concentrate on one area of activity, or does it have many? The issue of scope of
activity is fundamental to strategic decisions because it concerns the way in which those responsible for
managing the organisation conceive its boundaries. It is to do with what theY want the organisation to be
like and to be about.

4. Strategy is to do with the matching of the activities of an organisation to the environment in which it
operates.

5. Strategy can also be seen as 'stretching' an organisation's resources and competences to create
opportunities or capitalise on them. It is not just about countering environmental threats and taking
advantage of environmental opportunities; it is also about matching organisational resources to these threats
and opportunities. There would be little point in trying to take advantage of some new opportunity if the
resources needed were not available or could not be made available, or if the strategy was rooted in an
inadequate resource-base.

6. Strategic decisions therefore often have major resource implications for an organisation. In the 1980s a
number of UK retail firms had attempted to develop overseas with little success and one of the major reasons
was that they had underestimated the extent to which their resource commitments would rise and how the
need to control them would take on quite different proportions. Strategies, then, need to be considered not
only in terms of the extent to which the existing resource-base of the organisation is suited to the
environmental opportunities but also in terms of the extent to which resources can be obtained and controlled
to develop a strategy for the future.

7. Strategic decisions are therefore likely to affect operational decisions, to ‘set off waves of lesser
decisions’.

8. The strategy of an organisation will be affected not only by environmental forces and resource availability,
but also by the values and expectations of those who have power in and around the organisation. In some
respects, strategy can be thought of as a reflection of the attitudes and beliefs of those who have the most
influence on the organisation. Whether a company is expansionist or more concerned with consolidation,
and where the boundaries are drawn for a company’s activities, may say much about the values and attitudes
of those who influence strategy -- the stakeholders of the organisation. The beliefs and values of these
stakeholders will have a more or less direct influence on the organisation.
Overall, if a definition of strategy is required, these characteristics can provide a basis for one. Strategy is
the direction and scope of an organisation over the long term, which achieves advantage for the
organisation through its configuration of resources within a changing environment, to meet the needs
of markets and fulfil stakeholder expectations.

Strategic decisions are, then, often complex in nature: it can be argued that what distinguishes strategic
management from other aspects of management in an organisation is just this complexity. The complexity
arises for at least three reasons. First, strategic decisions usually involve a high degree of uncertainty: they
may involve taking decisions on the basis of views about the future which it is impossible for managers to
be sure about. Second, strategic decisions are likely to demand an integratedapproach to managing the
organisation. Unlike functional problems, there is no one area of expertise, or one perspective that can define
or resolve the problems. Managers, therefore, have to cross functional and operational boundaries to deal
with strategic problems and come to agreements with other managers who, inevitably, have different
interests and perhaps different priorities. This problem of integration exists in all management tasks but is
particularly problematic for strategic decisions. Third, as has been noted above, strategic decisions are likely
to involve major change in organisations. Not only is it problematic to decide upon and plan those changes,
it is even more problematic actually to implement them. Strategic management is therefore distinguished by
a higher order of complexity than operational tasks.

Management

Characteristics of Strategic Decisions

Strategic decisions take care of the long-run future of the entire
organization. Strategic decision making is the central function of a top-
level executive. Implementation of strategy involves a number of interrelated
decisions, choices, and a broad range of activities. It requires the commitment
and co-operation of all units, levels and members.

What are the Characteristics of Strategic

Decisions in an Organization?
 Long-term direction of the business is a crucial part of strategic
decisions. Strategic decisions usually emerge from the perspective views
about the organization and society, including regulatory environment,
prospects of different business, industry structure, competitive
environment, etc.

Strategic decisions have major resource propositions for a business.

These decisions could be focused on possessing new resources,
organizing others or reallocating others.

The decisions are influenced by the value system, which includes

business ethics and philosophy.

The long run direction and value orientation influence the definition of
the scope of the activities of the business. The business/businesses this
company should be in is key decision in strategic management. The issue
of scope of activity is prime to strategic decisions as it concerns the way
in which those responsible for managing the organisation conceive its
boundaries.

Strategy is the means to achieve the end, i.e., the mission and goals.

They are long term in general and related to the scope of the business
of the organization may mean major resource commitments, including
reallocation of present resources.

They involve a change of major type because a company operates in

ever-changing environment.

Strategic decisions attempt to develop a sustainable organization

environment fit. The quintessence of strategic management is the efficient
use of organizational resources or strengths to take advantage of the
environmental opportunities and to combat the environmental threats.
 Strategic decisions focus on achieving a sustainable competitive edge
of the firm.

Strategic decisions are likely to affect operational and administrative

decision.

Strategic decisions are complex in nature because they encompasses

mission, long-term direction, scope of the organization, and establishment
of organization environment fit.

Due to the long-term future perspective of the strategic decisions, they

might involve significant uncertainty as future can hardly be forecasted
exactly.

A strategy is usually comprehensive and highly integrated.

Strategic decisions aren’t the same as administrative and operational

decisions. Administrative decisions are routine decisions that assist or
rather facilitate strategic decisions or operational decisions. Operational
decisions are technical decisions which help execution of strategic
decisions. To cut back cost is a strategic decision which can be attained
through operational decision of decreasing the number of employees and
how we carry out these reductions is going to be administrative decision.

In the above text we have discussed the key characteristics of strategic

decisions in management.
Strategic decisions are the decisions which are focused on whole environment
in which the company functions, the entire resources and the individuals who
form the business and the interface between the two. Strategic decisions are
complex in nature.
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Tweet Strategic decision making (SDM) is of great and growing importance because
of five characteristics of strategic decisions (SDs): (a) they are usually big,
risky, and hard-to-reverse, with significant long-term effects, (b) they are the
bridge between deliberate and emergent strategy, (c) they can be a major
source of organizational learning, (d) they play an important role in the
development of individual managers, and (e) they cut across functions and
academic disciplines.

Strategic Decisions - Definition and Characteristics

Strategic decisions are the decisions that are concerned with whole environment in which the firm operates, the entire
resources and the people who form the company and the interface between the two.

Characteristics/Features of Strategic Decisions

1. Strategic decisions have major resource propositions for an organization. These decisions may be concerned
with possessing new resources, organizing others or reallocating others.

2. Strategic decisions deal with harmonizing organizational resource capabilities with the threats and
opportunities.

3. Strategic decisions deal with the range of organizational activities. It is all about what they want the
organization to be like and to be about.

4. Strategic decisions involve a change of major kind since an organization operates in ever-changing
environment.

5. Strategic decisions are complex in nature.

6. Strategic decisions are at the top most level, are uncertain as they deal with the future, and involve a lot of
risk.

7. Strategic decisions are different from administrative and operational decisions. Administrative decisions are
routine decisions which help or rather facilitate strategic decisions or operational decisions. Operational
decisions are technical decisions which help execution of strategic decisions. To reduce cost is a strategic
decision which is achieved through operational decision of reducing the number of employees and how we
carry out these reductions will be administrative decision.