improving STRATEGIC MANAGEMENT Decisions and Strategic Decision-Making

Strategic Management Decisions and Decision-Making
Strategic management is an ongoing process of decision-making and actions through which management intentions and ideas (i.e., strategies) are formulated and realized - implemented and executed. An aspect of strategic management is concerned with managing the strategy-producing value chain of an organization. It involves the development and execution of strategies that define the corporate direction, how the company is going to grow and be profitable, etc. ​Strategic management process enables managers to plan and execute strategies that change the organization's behavior and capacity to, adapt to or respond to, changes in the external environment in which the company operates.

Strategic management decisions are strategic decisions; they are based on a company's mission, vision or its objectives. An example. A manager of a cat food company notices that his customers prefer higher quality and fresh food instead of cat food sold in very large quantities for a low price. Strategic management decisions link rhetoric (what people say), choices (what people decide and are willing to pay for), and actions (what people do) in shaping the nature and direction of an organization. 

Strategic management decisions involve strategic thinking - the ability of the organization to plan - and strategic choice/decision-making. ​​Strategic thinking is more about making decisions directed towards achieving defined outcomes. Strategic thinking is the ability of the organization to plan, leadership - the ability to influence the desired outcomes through its people, and the ability to motive the people in the organization to outperform rivals. Strategic thinking is active and ongoing, and is a way of understanding the fundamental drivers of a business organization. Strategic thinking requires envisioning what you want to accomplish and formulating solutions to problems.  Strategic thinking represents the "why" and the "what" of the work you want to accomplish in a particular context and the whole configuration of interconnected and continuous interacting components and systems. Strategic thinking connects the organization's current state and the "to be" future state in order to bridge the differences and close the gap to gain/maintain competitive advantage. 

Strategic Decisions
Strategic decisions are those decisions taken by top management that have an influence over years, decades and even beyond the lifetime of the project. Strategic decisions are decisions concerned with the whole environment in which the firm operates, the entire resources and the people who form the company, and the interface between the two. ​Strategic decisions require the decision maker to provide judgment based on insights into the problem situation and choices from alternatives. The effects of strategic decisions are difficult or expensive to reverse, because they substantially alter, and irrevocably so in the short run, the relationships between the decision-makers' organization and its environment - customers, competitors, suppliers, etc. Some examples of strategic decisions include:

• In business, managers made decisions to

1. Enter a new market;
2. Release a new product;
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. 

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. Success depends on the ability of managers to influence the desired outcomes through its people, and the need/expectation to outperform rivals.

Characteristics of Strategic Decisions
​​Strategic decisions are different from administrative, tactical and operational decisions. Strategic decisions are novel (new) - there are no well understood or agreed upon procedures for making them, important (i.e., consequential) and non-routine. Administrative decisions are routine decisions which help or rather facilitate strategic decisions or operational decisions. Operational decisions are technical decisions which help execution of strategic decisions. Tactical decisions are decisions and plans that concern the more detailed implementation of the organization's business strategy. 

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. 
• ​Strategic decisions are surrounded by uncertainty; they always represent risk because they deal with the future and changes in behavior of organizations and institutions which cannot be predicted with any degree of certainty. 

Strategic decision 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). 

​Strategic Decision-Making
​​Strategic decision-making in concerned with how strategic decisions are made - formulated and implemented (Elbanna 2006). 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 involves more than just simply making a choice that leads to one outcome or another. Strategic decision-making is a critical skill for effective leadership in business and other organizations. The outcomes of a leader's choices significantly impacts employees, customers, the market and success of the organization. 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. 


The strategic decision-making involves the following:
​

1. Define the problem - It is crucially important to determine whether this is the real root of the problem, or simply a symptom of another issue. Assess the urgency of the concern and determine your end goal. What do you want to achieve through the decision you eventually make?
2. Gather information, look for data that explains the origin of the problem.
3. Develop and evaluate options - Generate a wide range of options.
4. Choose the best option and take action - Select the option that best meets the decision objective.
5. Implement and monitor decision - Develop a plan to implement and monitor progress on the decision.

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 activities take place at different times, and may be organized into phases, such as::

1. Intelligence - This phase encompasses gathering relevant information to inform identifying the problems occurring in the organization. The information indicates why, where, and with what effects a situation occurs.
2. Design - This phase deals with developing appropriate and possible solution alternatives to the problems identified in the intelligence phase.
3. Strategic Choice - Strategic choice is the mental process of selecting the "best" or optimal - most appropriate solution (i.e., strategy) from the stock of alternatives that serves the enterprise's objectives. Behavioral models of decision making imply decision makers tend to settle for a "good enough" solution (March & Simon., 1981). This choice takes place in the organizational context and influenced by the decision makers beliefs, assumptions and judgments. The nature of strategic decisions make it possible for decision makers e.g., managers within an organization, to have widely varying and incorrect beliefs about environmental factors which can influence decision quality. Changing beliefs is a marketing effort, and requires time, and coordinated process of communication, conversation, education, and presentation of new evidence. ​The viability of strategic choice depends in large part on managers' knowledge about the current situation, and probable reactions of their company, competitors, customers, and broader public. 
4. Implementation - This phase involves actions needed to make changes in the organizational capacity to enable it to resolve the problem.

A major problem in strategic decision making is predicting the future of the organization in achieving its mission and its environment, and matching the characteristics of the organization to the environment. The decision-maker has to perceive and understand problems underlying identified issues; once perceived, solution ideas must be formulated then choices have to be made about a particular solution which is then implemented. 

​For example, customers’ utility for a product (goods or service), and managers’ opinions of the customers’ perceptions of quality for that product (goods or service), can be inversely related. These beliefs influence the choice of assumptions underlying the manager’s strategic decisions and determine how good/bad the decision is. Erroneous assumptions can lead to bad/poor strategic choice which in turn, can lead ultimately to strategic decision failing at implementation.

Factors Influencing Strategic Decisions and Choices
A number of factors can exert decisive influence on the success of strategic decisions-making and strategic choices. These may include the following:

1. Decision-Making Complexity -This derives from the recursive logic of thought and actions embedded in the strategic decision-making process, and is common at the different management levels in the organization. Each of which deals with different problems and relies on different sources of knowledge. Decision makers need to engage in a cognitive process, in the form of heuristics - rules of thumb, common sense, intuition or educated guesses - to create new solutions based on old experiences. To choose a good option, past data, current data, forecast data and various other factors must be examined carefully. make a good selection  
2. Uncertainty - Uncertainty is the state of having limited availability to critical information. Managers choose a strategic option on the basis of relevant data and information such as current conditions or future outcomes - possible outcomes that are unknown. The effects of uncertainty create obstacles and challenges to strategic decision-making due to limited knowledge of current conditions and gaps in knowledge of future outcomes. In these situations, managers face the extremely difficult problem in making decisions that demand a long-term perspective, committing the firm in the long run within a competitive landscape that is unlikely to stand still.
3. Decision Complexity - Decision complexity derives from: the inter-relationship among choices. For example, the strategic decision to enter a new market will require a major allocation of resources across different parts of the organization such as marketing, finance, operations, etc. This in turn will lead to the consideration of other strategic choices associated with the primary strategic decision, resulting in cascading decisions which is a source of complexity. 
4. Social Complexity - Social complexity derives from Managers and decision makers having differing individual mental models (or mindsets) of the world which then influences how people approach resolving the issues and problem; how these issues relate and impact perceived implications in relation to the strategic choices open to them. Differences in mind-sets (mental models) may also lead to cognitive conflict among decision makers due to possible differences in the individual manager's comprehension and interpretation of issues can lead to disagreements among decision makers and/or individual managers about the strategic choices to pursue. This manifests itself in managers doubts about how organizational values should guide the decision or choice of action.
5. Beliefs, Assumptions and Judgments - Strategic choice takes place in the organizational context and influenced by the decision makers beliefs, assumptions and judgments. The nature of strategic decisions make it possible for decision makers e.g., managers within an organization, to have widely varying and incorrect beliefs about environmental factors which can influence decision quality. A belief is a conclusion about how the world works, held by an individual. Once formed, our beliefs drive our actions. While beliefs are applied by individuals, they are also formed and applied by groups. And it is in this regard that beliefs play an important role in organizational life and shaping culture. Shared organizational beliefs can impact performance in a number of ways. Most managers don’t understand that their choice of assumptions is arbitrary influenced by their beliefs and that those assumptions might not accord with reality so strategic decisions logically flowing from bad/erroneous assumptions can lead to bad/poor decisions which can, in turn, ultimately to strategy failing at implementation and execution.

​Strategic thinking is essentially the process of determining the direction an entity (business, team, or individual) will take to achieve its long-term goals and vision. Strategic thinking involves the intentional and rational thought process that focuses on the analysis of critical factors and variables that will influence the long-term success of a business, team, or individual plan to achieve some specified objectives and goals.