Strategic decision making is the central function of a top-level executive. Present businesses that have already created a strategic management plan will revert to these steps as per the situations requirement, so as to make essential changes. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. The University of Minnesota course on strategic management teaches students to consider corporate culture when constructing an organization's strategic framework. Administrative decisions are routine decisions that assist or rather facilitate strategic decisions or operational decisions.
In resource-based or process-oriented industries, strategies for shared resource units often determine or constrain business-unit strategy. As treasurers struggle to estimate capital needs and trade off alternative financing plans, they and their staffs extrapolate past trends and try to foresee the future impact of political, economic, and social forces. A planning process that stimulates entrepreneurial thinking. Following elements are developed in the strategy formulation stage. Determining the strategic direction for an organization is a major undertaking, and executive leadership is primarily responsible for this task. Experience suggests, however, that it is important to recognize such issues where they exist and to assign explicit planning responsibility to an appropriate individual or group in the organization. By its nature, it is multidisciplinary: Strategy involves marketing, finance, human resource and operations to formulate and implement strategy.
Business owners can review these forces to ensure their strategies create a differentiated approach to meeting consumer needs or wants in the economic marketplace. Strategy takes a holistic view. Operational decisions are technical decisions which help execution of strategic decisions. Where future is unknown such an analysis is impossible. Manu Melwin Joy Assistant Professor Ilahia School of Management Studies Kerala, India. It requires the commitment and co-operation of all units, levels and members.
It provides a framework or structure for decision-making by company leaders. Customization Strategic information management systems are typically customized to meet the unique needs of each individual company. User-specific controls can also be set, in case employees need access to certain information but management wants to limit their access to sensitive data. These decisions may be concerned with possessing new resources, organizing others or reallocating others. The shoe usually pinches first in financial planning.
Strategy implementation further includes the following. Integration can be of following types: Horizontal Integration: It means when a firm takes over the other firm operating at the same level of production or marketing. One of the differences between strategic and day-to-day business operations is time — strategy occurs over time and has a long-term impact while day-to-day business operations produce immediate or instant measures that may have a short-term effect. Goals and objectives represent specific targets business-level strategies should achieve. One way to generate this kind of thinking is to ask each business manager to describe the specific business advantage he or she intends to achieve. It involves a systematic analysis of the internal strengths and weaknesses financial, managerial, marketing, or technological and of external opportunities and threats like change in demand, law, or technologies.
Operational decisions are not frequently taken. If the vision is to be industry leader, increases sales is part of this strategy, but to sell in bulk to achieve the vision, the discount given to a bulk buyer is tactic. To cut back cost is a strategic decision which can be attained through operational decision of decreasing the number of employees and how we carry out these reductions is going to be administrative decision. Always define your business on the basis of core need being fulfilled. The issues that forecast-based plans address—e.
Strategic decisions are the decisions that are concerned with whole environment in which the firm operates, the entire resources and the people who form the company and the interface between the two. Describe a comprehensive model of strategic decision making 6. Deals with many things Narrow focus Time horizon Longer period Shorter period Timing of action Prelude to action During the action Type of guidance General guidance to whole organisation Specific and situational guidance to specific section of organisation From the above- table it should not be concluded that they are exclusive from each other. Based on their knowledge of their own cost structure, can they estimate what the impact of a product or marketing change will be on their plants, their distribution system, or their sales force? Cooperation: It means cooperation among competitors. Many managers come and many managers go away from the task of formulation.
The quality of financial analysis is generally very poor. Integration not only widens the scope of business but also a subset of diversification strategies. It is not necessary for top managers to divulge everything, but as a minimum, junior managers should know the strategic purposes their actions serve. Sometimes the chosen decision may be a compromising decision, lacking clarity or direction. This task of the management is better accomplished through strategy evaluation which provides needful information to the managers in this regard.
These are related to production and factory growth. Thus begins a second phase, forecast-based planning. Describe how strategic decisions differ from other decisions that managers make 3. Business Unit strategies are decided by heads of business units and functional plans by functional heads. Is it the result of their substantial investments in strategic planning, which appear to have produced something like a quantum jump in the sophistication of their strategic planning processes? Cost leadership allows business owners to produce consumer goods or services at the lowest cost in an industry. In retrospect, one chairman confided that he had overestimated the value of confidentiality. Rather, the emphasis in strategy is on the quality and texture of the business.
It forces management to confront the long-term implications of decisions and to give thought to the potential business impact of discernible current trends, well before the effects are visible in current income statements. It is multidisciplinary as a new strategy influences all the functional areas, i. The task may include analysis and bifurcation of a variety of businesses. . Organizational decisions can be arrayed on a continuum, with strategic decisions at one end and tactical decisions at the other. This is largely accomplished by three mechanisms: 1. Strategic decisions are normally about trying to achieve some advantage for the organization.