Unit 1 Strategic Management - Introduction

When making a decision, we form opinions and choose actions via mental processes which are influenced by biases, reason, emotions, and memories. The simple act of deciding supports the notion that we have free will. We weigh the benefits and costs of our choice, and then we cope with the consequences. Factors that limit the ability to make good decisions include missing or incomplete information, urgent deadlines, and limited physical or emotional resources.

Decisions vary along two dimensions: Control and Performance. 

Control considers how much we can influence the terms of the decision and the outcome.
Performance addresses the way we measure success.  Combining them creates four categories of decisions:

1] Making routine choices and judgments. 

2] Influencing outcomes. 

3] Placing competitive bets.

4] Making strategic decisions.

Another classification of decision making is from the communication systems point of view which is depicted below

Take the example of sailing and try to list out elements of strategic decision making for this activity

Classification of decisions in management can be of different types based on the point of view of the categorisation process

1. Strategic & Routine Decisions

2. Programmed & Non-Programmed Decisions

3. Policy Decisions & Operating decisions

4. Organisational Decisions & Personal Decisions

5. Individual Decisions & Group Decisions

Strategic Management Decision: Definition, Meaning,  Characteristics, Formulation, Types

The words trace their roots to the Greek, Stratos ‘army’ + agein ‘to lead.’ The commander — ‘strategos’ — is looking at every possible scenario, planning an attack, surveying the enemy forces, reviewing his own army’s strength and so on. Henderson then goes on to define Business Strategy in the article is called “The Origin of Strategy” that appeared in the November–December 1989 issue of Harvard Business Review as, “ …a deliberate search for a plan of action that will develop a business’s competitive advantage and compound it.”  In the military, most often strategy refers to ‘deployment’ of troops – that means maneuvering of troops into position before the enemy is engaged. In. business, we can substitute ‘resources’ for troops. Business people deploy resources of various types to achieve objectives. According to Michael Porter, the undisputed guru of competitive strategy, “strategy is about the competitive position, about differentiating yourself in the eyes of the customer, about adding value through a mix of activities different from those used by competitors.” In his book, he defines competitive strategy as “a combination of the ends for which the firm is striving and how it is seeking to get there.”

In their book of 1980, Thompson and Strickland defined strategy as “the pattern of organizational moves and managerial approaches used to achieve organizational objectives and to pursue the organization’s mission.

 Chandler (1960) defined strategy as: ―The determination of the basic long-term goals and objectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out these goals.

The levels of strategy is depicted in the figure below

Significance of Strategic Management

Its complexity may be attributed mainly to 3 reasons:

1.      Strategic management involves making decisions about the future. The future is uncertain. A manager can’t be sure about the future. Therefore, strategic management involves a high degree of uncertainty.

2.      Managers in different departments in an organization have different priorities. They must reach an agreement to ensure an. integrated approach. Strategic management needs an integrated approach, which is difficult to achieve.

3.      Strategic management involves major multifarious changes in the organization. It heeds changes in organizational culture, leadership, organization structure, reward system, etc. All this makes strategic management complex.

 

The complexity in the external domain of business has increased and forecast-based planning may no longer be feasible or reliable.

Disruptive technologies, changing geopolitical situations, the emergence of Japan as a manufacturing powerhouse followed by China as a factory to the world, depletion of natural resources/fossil fuels/contamination of aquifers/land as result of businesses’ activity and consumption, disenchantment with bad governance, and emergence of the global village assisted by the ICT technologies and with shifts in economic power structure (BRIC countries Brazil, Russia, India, and China emerging as a dominant economic force) compel managers to develop such systems for decision making that enable them to capture the uncertainties to the extent possible in their decision process.

Importance of Strategic Management:

·         Shows the right direction to the organization

·         Helps companies or organizations to turn proactive rather than reactive

·         Guides the companies to prepare and face the challenges which may occur in future

·         Plays an important factor in decision making

·         Make sure to fight the competitions and have long term survival assurance

·         Have a competitive edge over the market

·         Last but not least, helps in business development and success

The Advantages & Disadvantages of strategic management

a. The Advantages of Strategic Management

·         Discharges Board Responsibility.

·         Forces An Objective Assessment.

·         Provides a Framework For Decision-Making.

·         Supports Understanding & Buy-In.

·         Enables Measurement of Progress.

·         Provides an Organizational Perspective.

·         The Future Doesn't Unfold As Anticipated.

·         It Can Be Expensive.

b. The Disadvantages of Strategic Management

·        The Future Doesn’t Unfold As Anticipated

·        It Can Be Expensive

·        Long Term Benefit vs. Immediate Results

·        Impedes Flexibility