What is Strategic Decision Making

Strategic management is characterized by its emphasis on strategic decision-making. As an organization grows bigger and becomes complex with higher degree of uncertainty, decision- making also becomes increasingly complicated and difficult. Strategic decisions have to deal essentially with the long-term future of the organization and have three important characteristics.

  • Strategic decisions are not common and have no precedents.
  • Strategic decisions involve committing substantial resources of the company and hence a high degree of commitment from persons at all levels.
  • Strategic decisions can serve as precedents from less important decisions and future actions of the organizations

Strategic decision making is an ongoing process that involves creating strategies to achieve goals and altering strategies based on observed outcomes. For example, the managers of a pizza restaurant might have the objective of increasing sales and decide to implement a strategy of offering lower prices on certain products during off hours to attract more customers. After a month of pursuing the new strategy, managers can look at sales data for the month and evaluate whether the strategy resulted in increasing sales and then choose to keep the new price scheme or alter their strategy.

Strategic decision making, or strategic planning, involves in the process of creating an organization’s mission, values, goals and objectives. Deciding upon a particular action plan a company also involves in altering strategies based on observed outcomes. Strategic decision making can transform companies into large groups and industries.

Some entrepreneurs have the ability to make strategic decisions quickly, sometimes with limited information. While taking a calculated risk, you must set a threshold to qualify your decisions. Just for instance, a major client drops out when you are about to execute a big marketing plan, what do you do? You agree on the minimum feasible outcome you want. The impact, strategic management and leadership styles can have on strategic decision making can result in profitable consequences.

For instance, the manager of a restaurant wants to increase sales. He decides to implement a strategy of offering lower prices during off hours to attract more customers. After few weeks of pursuing the new strategy, the managers looks at data for monthly sales and evaluate whether the strategy resulted in increasing sales .He can then choose to keep the new price scheme or alter his strategy accordingly.

Usually it happens that entrepreneurs may have an idea for their chosen industry and can be also professional in it, but they are unable to manage the business. They often seek outside help to advise in the strategic decision making process. These mentors turn out to be a vital source of advice for them. Some business owners hire professional consultants to help them make strategic decisions.

Any person, corporation, or industry should know their current affairs, where they are and what they want. The process of strategic planning utilizes metrics that provide a realistic picture of the corporation, creating the necessary motivation for the development of a strategic plan. According to a survey taken as of now the process of strategic decision making can be executed in a few steps and the selected strategy must be sufficiently robust to enable the firm to perform activities differently from its rivals or to perform similar activities in a more efficient manner. Flaws in strategic decision making can affect individual economic decisions; it affects corporate strategic planning as well. Hence look for feedback and monitor the results.

It is always a good habit to see what practices other companies are using to execute successful strategic decisions. Strategic decision making and planning is ultimately about resource allocation and would not be relevant if resources were unlimited. Financial goals and financial performance can play a more central role in the strategic planning and decision-making process, particularly in the implementation stage.

Important Considerations

  • Long-Term Growth – Managers must address change and long-term growth with strategic planning. A small-business owner may want to consider the amount of potential growth he would like to achieve. Will expansion of locations occur if there are adequate sales and revenue support? Or will the company reinvest its profits and develop new products and services? Strategic planning occurs at a high level and involves non-routine decisions. Managers must decide what to do about abstract or theoretical scenarios. These scenarios are not happening yet but probably will.
  • Change and Risk – Strategic decisions usually mean managers must plan for change and risk. Many factors are unknown, since managers are planning for future changes. The changes are typically large in scope, such as introducing a new manufacturing process. Another example of a major change is the decision to modify the company’s culture. For instance, the firm may be having trouble with increased employee turnover. After doing some research, managers discover the problem is due to its seniority system and poor supervisor-employee relationships. Top managers might plan to start rewarding employee performance and encouraging middle managers to focus on relationship-building.
  • Analysis – To be effective planners, managers need to analyze the company’s internal and external environments. An analysis helps pinpoint characteristics about the company’s industry, its products and its resources. Managers can begin to identify strengths and weaknesses. This helps them plan appropriate responses to what is happening in the market. If the company has a strong brand name, this is a strength managers can leverage. Perhaps market share is declining due to increased competition or loss of product appeal. Managers could recapture market share on the strength of the company’s brand if they plan to introduce a revised product.

Implementation – While managers are planning what they would like to accomplish, they also map out how. This means managers have to figure out which resources to use, including staff. Communication about the initiative’s goals helps ensure the implementation is successful. Sometimes top managers have to find ways to motivate staff to carry out their vision. Middle and front-line managers need to understand what the initiative is, how it fits with the company’s mission and what they need to do. Once implementation is underway, managers evaluate the results. Depending on the results, they may make adjustments or come up with new strategies.

Decision Making Strategies
Strategic Decision Making Models

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