Understanding Strategy in Business as a Strategic Decision-Making Process

Introduction 
The term strategy, generally, refers to decision-making and choices about the ways and means by which a stated objective will be achieved. Strategy, in a business context is about how the organization seeks to survive and prosper within its environment over the long-term. Strategy in business exists at various levels in the organization, board level, executive level, senior management level, etc. The term "strategy", as used in everyday business conversations, is an overloaded word. ​Every company ( "for-profit" or "non-profit") has a strategy, but most people including professional practitioners do not bother to explicitly establish their perspectives (points of view). This creates confusion, since strategy in the business context, is essentially, a layered concept.

Strategy in Business Organizations
Most executives in business organizations realize that to proper in the future, they need to turn to the fundamental issue of strategy. ​Strategy, in the business context, answers two (2) basic questions:

1. "Where do we want to go?"
2. "How do we want to get there?"

Strategy combines the "where?" and "how?" to create a continuing flow of temporary and shifting competitive advantage. Creating a series of shifting advantages is challenging. This involves selecting an attractive market, choosing a defensible strategic position, or building core competencies. It requires effective strategic decision-making at several levels in the organization; at the unit level, to improve business competitive strategy; at the multi-business level, to create collective strategy and cross-business synergies; and at the corporate, to articulate major inflection points in strategic direction. Strategy provides an organization with an offensive device to compete against competitors and guides their decisions and actions when faced with a range of choices. 

Strategy - A Layered Model
The various levels at which strategy exists in an organization can be defined as: corporate level, business unit level, operations level, and business functions level. The strategies at these various levels can be organized into a layered hierarchy, such as: corporate strategy, business competitive strategy, and operations strategy, with a crosscutting layer - functional strategy.

1. Corporate strategy - This is concerned with decisions about the vision, mission, and values of the organization and establishing its direction and scope (product, vertical and geographic integration) of the firm. The focus is on decisions about growth, business portfolio, and comparative advantages.
2. Business Competitive Strategy - This is concerned with how the firm competes within a particular industry or market. It is concerned with decisions about how to compete and win with competitive advantage through cost leadership or differentiation, or focus. 
3. Operations strategy - This is concerned with structural strategic decisions related to production or supply chain's configuration and infrastructures, the strategies to allocate resources, and the technologies to perform processes at each stage in the organization's value chain.
4. Functional Strategy - This is concerned with reinforcing each of the layers of the strategy hierarchy above. ​The three (3) levels of strategy hierarchy are interrelated through a specific dual integration, built through a vertical orientation - top-down and bottom- up to create sustainable competitive advantage. The success of  a strategy hierarchy is reinforced by functional strategy such as: marketing, finance, IT, HR, sales, etc., that appear simultaneously at all three levels of the strategy hierarchy. ​

[TBD]
​
The actual/realized strategy of an organization is the combination of the executed parts of deliberate strategy and emergent strategy.

• Deliberate strategy - This in the intended and planned strategy.
• Emergent strategy - This is realized pattern (behavior) that was not expressly intended or planned that emerged from execution. It is a set of actions, or behavior, consistent over time, “a realized pattern that was not expressly intended” in the original planning of strategy. An emergent strategy develops when an organization takes a series of actions that with time turn into a consistent pattern of behavior, regardless of specific intentions. It consists of the moves made and approaches taken by management to produce successful performance of the organization in successfully competing against rivals. For example, the day-to-day decisions and actions in areas such as enter new business to diversify, extending geographically to grow, efforts to integrate forwards or backwards, efforts to broaden or narrow product/services, actions to capitalize on new opportunities, and actions to respond to changing industry conditions i.e., shifting demand patterns, new airport regulations, entry of new competitors.

[TBD]
​

Strategy as Strategic Decision-Making Process
Strategic decision-making in concerned with how strategic decisions are made - formulated and implemented (Elbanna 2006). At various levels in a business organization, management's (strategic) decision-making is the process of making choices by recognizing the problem, gathering information about feasible solutions, and finally choosing the best alternative. Strategic decision-making is the means by which management intentions are realized (formulated and implemented).​ Strategic decision-making is inextricably linked to strategic planning because it concerns the distribution of resources and the company's long-term direction. 

Strategic decision-making involves issue comprehension, concepts structuring, and concepts formulation into cause-effect relations model. While the cause-effect relations are based on logical and deductive reasoning, the issues comprehension that triggers it, involves choice of assumptions which is to some extent arbitrary and inductive in nature. It is important that managers understand that their choice of assumptions is arbitrary and influenced by their beliefs and mind-set (mental model), and might not accord with reality. So strategic decisions logically flowing from these assumptions, if they turn out to be bad/erroneous assumptions, can lead to failure. 

Strategic decision-making is a critical skill for effective leadership in business organizations and other organizations, i.e., military, sports, political, etc. The outcomes of a leader's choices significantly impacts employees, customers, the market and success of the organization. 

Strategic decision-making is typically more complex, novel (new) and open-ended (Mintzberg, Raisinghani and Theoret, 1976), and is characterized by independent elements that by definition cannot be formulated, let alone solved independently of one another.' (Mitroff and Emshoff, 1979:1).

Strategy Viewpoints
The concept of strategy is usually used in different ways, even though traditionally, it has been defined in only one way. Explicit recognition of the multiple definitions corresponding to the different viewpoints can help people when developing strategies. The various viewpoints can be defined in terms of Mintzburg's 5Ps of strategy:

1. Perspective - This defines an orientation  - patterns of thinking - that shapes an organization's perspective on vision and direction - a view of what the company or organization is to become - and the things the organization is able to do well. Mintzburg points out that strategy as a perspective is the same as "Strategy as a Plan" but without the formal planning. In this view, many people in the organization have the same orientation or perspective when they make strategic decisions.
2. Plan - This is a device to help brainstorming options and planning how to deliver them. This may be general or detailed, formal or informal (in the mind). As a plan, strategy is conceived in advance, has a purpose and is thoughtful to some degree. This is deliberate and planned strategy which is a result of the rational planning approach of strategy development. The rational planning approach (e.g., Ansoff, 1979) defines an objective in advance, describes "where we are now," and uses a prescriptive approach in which "the three (3) core areas - strategic analysis, strategy development, and strategy implementation - are linked together sequentially" (Lynch, 2000; 24).
3. Pattern - A "realized pattern" of organizational behavior emerging as strategy. This comprises the decisions and actions over time that may be consistent or inconsistent but represents an emergent strategy. A consistent pattern of decisions may be the result of an explicit and written strategy or it may be result from organizational culture, or it may result from the influence of one or more leaders. An inconsistent pattern of decisions also represents a sort of strategy - a non-strategy, perhaps, but a strategy that governs decisions. So, in a sense, every organization has a strategy; they all make strategic decisions or non-decisions that are also decisions. 
4. Position - We may view a position taken by the organization that reflects decisions to offer particular products and services in particular markets as a strategy relative to the environment. 
5. Ploy - This is a deliberate exercise and device that can help the organization explore the possible future scenarios in which competition will occur. 

Decision makers or managers start with a given perspective, conclude that it calls for a certain position, and sets about achieving it by way of a carefully crafted plan. Over time things change; a pattern of decisions and actions marks movement from starting point to destination end-point (goal).


Strategic Decisions
A strategic decision is a specific commitment to action (usually, a commitment of resources). Strategic decisions are long-term decisions; they are taken in accordance with the organization's mission, vision, and values. Strategic decisions are characterized by a number of features including:

• Strategic decisions are concerned with possessing new resources, organizing others, or reallocating others, or enhancing existing resources.
• Strategic decisions deal with harmonizing organization's resource capabilities with the threats and opportunities.
• Strategic decisions affect and change the direction of the whole organization, and are long-term in their impact. 
•  Strategic decisions involve change in behavior of people, organizations and institutions. It is all about what management wants the organization to be like and to be about. 
• Substantially and irrevocably altering, in the short run, the relationships between the decision-makers' organization and its environment - customers, competitors, suppliers, etc., thus making it difficult or expensive to reverse the effects of the decisions. 
• ​Strategic decisions are surrounded by uncertainty; they always represent risk because they deal with the future and changes in behavior of organizations and institutions, the outcomes of which cannot be predicted with any degree of certainty. 

Strategic decisions concern the organization's external environment(s), the organization's resources, the people who form the organization, and the interface between the organization and its environment. 

Strategic decisions are those decisions, taken by top management, that have influence over years or decades, and even beyond the lifetime of the projects that implemented/realized those decisions. Some examples of strategic decisions include:

• In business, managers made decisions to

1. Enter a new market;
2. Release a new product - new product introduction.
3. Acquire another company;
4. Create new strategic asset or enhance an existing asset - e.g., design of supply chain network, selection of location of production facility, technology.

• In sports, a coach shapes the performance of athletes, melding them into effective team that can outperform the opponent.
• In politics, a candidate inspires donors, builds an organization, attracts and motivates campaign workers, and ultimately persuades voters (shape outcomes).  A winning political campaign depends on smart assessment of rivals, as well as the ability to mobilize supporters, often in the face of long odds. 

The success of strategic decisions depends on the ability of decision makers to influence the desired outcomes through the people that are members of the organization, and the expectation to outperform the competition/rivals.

Strategic decisions are novel (new) - there are no well understood or agreed upon procedures for making them, important (i.e., consequential) and non-routine. Success depends on the ability of managers to influence the desired outcomes through its people, and the need/expectation to outperform rivals. 

​​Strategic decisions are different from administrative, tactical and operational decisions. For these decisions, decision makers can actively influence outcomes of strategic choices, using their abilities to make things happen, and success means doing better than rivals. Strategic decisions require the decision maker to provide judgment based on insights into the problem situation and choices from alternatives.

​Strategic decision makers such as business executives, coaches in sports, or political candidates are not like shoppers or administrators making routine choices that lead to one outcome, or another. They can influence the outcomes by the way they lead and communicate, and through their ability to inspire and encourage others. Moreover, executives are in charge of organizations that compete vigorously with others; success means doing better than rivals. 

Roles of strategy in Business
Strategy plays a number/variety of roles in organization's success, including:

1. Preparing an organization for the future - This does not necessarily imply long-term planning or planning in general; it does imply forward-looking, which helps organizations anticipate future needs. Strategy shapes the future so the organization can position itself to win in both the short- and long-term.
2. Distinguishing an organization from others - This implies focus on the organization's unique assets (capabilities/competencies) and features, and exploiting them in a meaningful way to gain advantage.
3. Providing an organization with some stability - This implies the organization transformation or change is guided by strategy so it is not caught in constant flux or reorientation which would cause it to drift.
4. Serving as a common frame of reference - This implies strategy offers an organization a common point of reference even in rapidly changing circumstances. This makes it possible for people in the organization to have a shared understanding and know what assumptions, ideas or plans they are going to deviate from.
5. Support for internal and external alignment - This implies strategy provides an overarching and integrative framework for the most important internal and external factors to be taken into account by management, thus helping to align the organization both internally as well as with its external environment.
6. Guides organizational action - The reason for having a strategy is to give direction and meaning to the things that an organization does. 

Strategy is a significant determinant on a company's success or failure, in addition to the significance of competence of its managerial leadership.