Before we proceed to undertake strategic management process, particularly strategy formulation, it is desirable to identify the various approaches which are applied. In strategic decision making, this is essential because different approaches put varying emphasis on various elements of strategic management. There are different approaches to strategic decision making because an organization may differ from other organizations in terms of:
- Degree of formalization in decision making process from highly formalized and structured to informal and unstructured process
- Managerial power relationship from the dominant role of the strategist to compromise of different interest groups; and
- Nature of environment from highly complex to simple and stable.
These differences determine the kind of approach individual organizations would adopt in their decision-making process, including strategic decision making. However, various approaches that are available for adoption in strategic decision-making have been described by authors differently. For example, Mint berg has classified various approaches into three forms (he has referred to these as modes). These are entrepreneurial, planning, and adaptive. As against this classification, Steiner et al have a fivefold classification: formal structured, intuitive anticipatory, entrepreneurial opportunistic, incremental, and adaptive. The difference between these two sets of classification can be resolved to some extent. Formal structured approach resembles planning approach; incremental and adaptive approaches have common factors than differences and, therefore can be grouped together; entrepreneurial approach is basically based on intuition and anticipation as these elements require high level of vision in strategists to anticipate opportunities and threats posed by the relevant environment. Therefore, for further analysis, three types of approaches will be taken. These are:
- Entrepreneurial opportunistic approach
- Formal structured approach, and
- Adaptive approach.
Entrepreneurial Opportunistic Approach
Entrepreneurial opportunistic (or simply entrepreneurial) approach is adopted, generally, by heads of family managed organizations and is characterized by pushing an organization ahead in the face of environmental odds. The basic features of strategy making under this approach are as follows:
- The focus in this approach is on capitalizing the opportunities rather than problem solving. There is constant search of opportunities in the environment either formally or otherwise.
- Decision power is centralized in the entrepreneur who is capable of, making bold and unusual decisions.
- The bold and unusual decisions made in the face of environmental uncertainty, lead the organization to move forward by unusual leaps and thrive with corresponding gains.
- The most important objective in this approach is growth and expansion In assets, turnover, and market share.
Thus, decision making becomes emergent process as against formal process.
