Strategic Decision Making In Context Of A Firm Or Organization Business Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Strategy literally means the way an action is planned to achieve the desired results. Decision making is defined as the art of choosing the best option out of the wide array of options available (Triantaphyllou, 2000). To execute a plan in the best possible way one should be good at decision making .While making a good decision one has to weigh all the pros and cons of the various alternative options and for the decision to be effective,he must be able to forecast the outcomes of all the options and based on his personal rationale he has to choose the alternative which puts him as "better off" than the other options available (Naqvi, et al.).

Strategic Decision Making, in context of a firm or an organization, is the framing of long term plan of action that aims at resulting in success and profits for the products and services marketed by the company, for instance (Armstrong, 1982). Strategic decision making is important to outperform the various other competitors in the market.

The nature of decision making can be either programmed or non-programmed. The programmed nature is usually associated with Routine decision making, which is a repetitive and definite procedure for handling .The non-programmed nature is associated with Strategic Decision Making. The non-programmed decisions are consequential and unstructured. It gives scope to experience, judgment, insight and intuition. These ideas are abstract and vague and vary depending on personal attributes of the decision maker. Thus Strategic decision making should be framed by skilled executives who have had the proper past experience, thus ensuring the "proper hunch or intuitive feeling" that would lead to the most probable successful results (Burkhat and Reuss, 1993). It requires both subjective and quantitative analysis to be done. It is a holistic approach towards synthesizing isolated bits of data and experiences into an integrated picture. It is quick, subconscious and complex. It neither is emotional nor biased. Though it hasn't found great applicability in the mainstream, it still plays a major role in the framing of strategies . In the dynamic business conditions that are prevalent today, the strategic decisions are based on incomplete knowledge. Furthermore, identifying quantitative equations among variables or finding numerical values for parameters and initial states is impossible. Thus the head over formula state prevails. Strategic problems are ill-structured and cannot be programmed hence, fore effectiveness decision support systems should incorporate intuitive aspects of decision making (Mulcaster, 2009).

Intuitions do play a part in strategic decision making. Intuition does not necessarily mean the opposite of rationality. Intuition, according to Vaughan, is a synthetic psychological function in that it apprehends the totality of a given situation (Facione & Facione, 2007). The executives thus shoulder the responsibility of sensing the gravity of the problem and rely on the courage of their convictions to take the proper decisions.

A lot of research work needs to be done for decision making. A SWOT analysis is a "must-do". A SWOT analysis stands for Strengths, Weaknesses, Opportunities, and Threats involved in a project or business venture. Analysis involves specifying the objective of the business venture or project and identifying the internal and external factors that might prove favorable or unfavorable to achieve that objective (Hill & Westbrook, 1997). The characteristics of the firm or team that give it an advantage over others in the industry are its strengths. Weaknesses are the characteristics of the firm or the business that place it at a disadvantage relative to the other firms. External chances to make greater sales or profits in the environment are the opportunities of the firm. External elements in the environment that could cause trouble for the business are called threats.

Strategic planning makes use of planning, coordination and controlling of various factors that are involved .Formulation of a strategy involves, identifying the value that a product has for a consumer who buys it from the market (Allison & Kaye, 2005).Value is the satisfaction or the benefit, be it psychological, emotional or the utility of the product , that the buyer enjoys on its consumption .Its thus very important to trace the value chain of the product, because ultimately, it is the buyer who helps the producer gain from the services and products that he has supplied to the market. The strategy thus formulated should aim at developing and organizing goods and services and marketing them in such a way that it compels the buyer to avail its facilities .So when devising a strategy, benefits that are valued by a particular customer group for a particular product, are assessed.

The benefits customers desire and will pay for are traced and the value that they attach to them is totalled. Thus the planning has to be done keeping in mind the tastes and preferences of the buyer. Which sets the bottom line of providing the highest quality at the lowest possible price, that how a consumer will satisfy his wants and choose between the various alternatives available in the market.

A firm, in a market that allows competition among various producers who are continually in a pursuit of creating a demand for their goods in the market ,has to keep in mind the threats from the potential entrants that might join the competition and might divert the consumers towards their product . Strategic decisions define the long term purpose and positioning of the firm within the industry that its placed in. A business strategy should answer the basic questions like what amount of growth and level of profitability the organization plans to achieve (Isenberg, 1986). Should clearly define what products and services it plans to extend. The firm should clearly state what generic strategy it plans to follow and also state its goals, like what position it plans to hold in the near future.

Strategies are planned by first gathering all the present information of the present scenario of the market and what is expected to change in the future .Analyzing the information and planning on how to market the given product so as to draw maximum number of consumers . To have a strategy one must clearly define its vision statement that is the statement that defines the long term purpose of the organization and gives a mental picture of the organization in the future. Should be one that is short and memorable and clear-cut. The firm has to have a mission statement stating how the actions planned by it, if performed well, will lead to organizational success, which would further lead to the over all development of the individual and society, as a whole (Peterson & Martin, 2009).

The intent of the firm should clearly depict that it plans to win at all levels of organization. It should convince the market that their core purpose is not changeable but will in future inspire change, if required to ensure efficiency (Bradford & Ducan, 2000).

The market being spoken about is unpredictable, and thus much importance should be given to Innovation. Innovation can be seen as the process that renews or improves something that exists and not, as is commonly assumed, the introduction of something better. This ensures the long term stance of the firm .Innovation is all about acceptance in society, profitability and market performance expectation. The need for expansion or growth cannot be ignored. While planning strategies the executive who enjoys the power of framing long term policies and strategies of the business firm, needs to keep in mind that the strategies, should first and foremost be able to reach and convince the key stakeholders of the business firm. The stakeholders are the individuals or the groups that are interested in the business strategy of the firm. The key stakeholders are the people or groups that are capable of influencing the business strategy of an organization. The need to create value for the stakeholders is felt because it is through their support that a company will seek to expand and make its business profitable in the market. What the stakeholders or the shareholders have to say about the firm of key importance , thus they have to be impressed and they need to believe in the convictions of the firm. The various key stakeholders have varied expectations and the firm shoulders the responsibility of living up to their expectations. For instance, the CEO of the firm may expect short term profits, prestige, growth etc. A dominant shareholder may expect reliability and consistency. A key customer may expect favorable buying terms, personal incentives and early information about new products whereas Research and Development department may expect innovative and supportive environment and freedom to carry out own initiatives. Thus a decision maker has to keep in mind all these expectations and plan his course of action. The strategy is expected to keep in sync with the Environmental norms (Kim & Renne, 2005). The uncertainty of the environment reduces the value of long term planning, because what is planned in the best way today, keeping in mind all the best possible ways of optimum utilization of resources and maximization of profits, ,may not be the best defined way in the changed scenario of the future. New technology may result in some other efficient way of planning. Thus a self-correcting, flexible and adaptive approach is to be followed, so that the planning stands good even in the changed scenario of the business environment. Even sustainability plays a major role in the forming of a strategy. Sustainability is the efficient development that meets the needs if the stakeholders in the present without compromising the ability to meet their needs in future. It sets the social and ecological standards of the business firms. Most of the strategies are framed keeping in mind US and the developed economy that they have. But in the real picture, not all economies are similar to the US. The issues faced by the companies in a smaller country are very different from that faced in a very developed economy. In smaller countries with a developing of under-developed economy, small local markets, central role of government, significant role of the public sector and limited capital markets are responsible for strategy being different from that of a very developed economy, like that of the US. The factors like the national historical background of the nation are also likely to influence the cognitive process of Strategic Decision making. Individual or national values, political systems and research bases are few other factors that make each country unique and thus strategy making is a nation to nation varying concept (Mulcaster, 2005). The infrastructure varies from country to country. The performance analysis is done by determining how the business is performing relative to the demands of the environment, capabilities of the firm and the various expectations of the stakeholders. The gap between the actual and the expected points is analyzed. Gap analysis is the detailed explanation of the performance analysis which highlights the shortcomings between expectations and reality.

Strategic decision making is thus a very dicey issue as the decision-maker is under a lot of pressure to examine the various available options and choose from among them the best alternative. There is no scope of fickleness or nonchalance, because the repercussions of the decision taken are long term and the smallest or errors might cause the wreckage of the very rudiment of the business firm. Therefore, every care is taken to gather internal and external data and thinking is done to explore the various methods that can lead to the accomplishment of the goals and thus after analyzing from all view points the most appropriate action is undertaken by formulation of a strategy to go about it. And at the end it is tested for efficiency, that is, if it actually has been implemented properly and is being monitored properly. Once the strategies planned, are implemented in the expected way, there is no stopping of the firm. The firm reaches heights and conquers the market. Thus a genuine strategic planning department is indispensable for any business firm or an organization as it is this factor that gives a competitive edge to firm and places it at an advantageous position, relative to the other organizations in the market. Strategic Decision making is thus an indispensable tool in taking the company on a success drive that ensures maximum profits and long term positioning of the firm in the market. In the cut-throat competition of today, it is the strategic planning department and their unique, worth-giving-a-thought strategies provide a competitive-edge to the firms and help them prosper.


Triantaphyllou, E. (2000). Multi-Criteria Decision Making: A Comparative Study. Dordrecht, The Netherlands: Kluwer Academic Publishers (now Springer). pp. 320

Nasir Naqvi, et al. "The Role of Emotion in Decision Making: A Cognitive Neuroscience Perspective", Current Directions in Psychological Science

Hill, T. & R. Westbrook (1997). "SWOT Analysis: It's Time for a Product Recall". Long Range Planning 30 (1): 46-52

J. Scott Armstrong (1982). "The Value of Formal Planning for Strategic Decisions". Strategic Management Journal 3 (3)

Patrick L. Burkhart and Suzanne Reuss (1993). Successful Strategic Planning: A Guide for Nonprofit Agencies and Organizations. Newbury Park: Sage Publications.

Mulcaster, W.R. "Three Strategic Frameworks," Business Strategy Series, Vol 10, No 1, pp 68 - 75, 2009.

Facione, P. and Facione, N., Thinking and Reasoning in Human Decision Making, The California Academic Press / Insight Assessment, 2007

Michael Allison and Jude Kaye (2005). Strategic Planning for Nonprofit Organizations. Second Edition. John Wiley and Sons.

Isenberg, Daniel Strategic Opportunism: Managing under uncertainty, Harvard Graduate School of Business, Working paper 9-786-020, Boston, January 1986.

Peterson, Martin (2009). An Introduction to Decision Theory. Cambridge University Press

Robert W. Bradford and J. Peter Duncan, "Simplified Strategic Planning" (Chandler House Press, Worcester, MA: 2000)

W. Chan Kim and Renée Mauborgne, "Blue Ocean Strategy" (Harvard Business School Press, Boston, MA: 2005)