Strategic decision

From CEOpedia | Management online

Strategic decision are associated with strategic management at highest level in organizations. Companies adjust to the changing situation by developing and implementing more or less complex projects. It is very important that those initiatives are reasonable and based on the overall strategy of the company. Therefore, one of the most important steps in strategic decision is the correct diagnosis of the situation in broad strategic dimension.

Strategic decisions are the key component for competitiveness of company - both present and in future - as well as its development[1] Through such decisions long-term strategic objectives are implemented, which are directly intended for increasing stakeholders value. Depending on the sector in which company operates, strategic decisions my involve: creation of subsidiaries abroad, sale of license for companies operating on international market, implementation of the new IT system. When deciding, company's board should be guided by an earlier experience and analysis of the changing environment, because such decisions have long-term effects, involve a large amount of resources, and what is very important - are associated with a lot of risk.[2] The decision requires therefore multiple relevant information. There are two types of such information:

  • prospective - used at the strategic level, containing mostly data regarding future
  • retrospective - relating to the past and applicable mostly to the operational activities.

Areas of strategic decisions

The areas covered by the strategic decisions include:[3]

  • competitiveness - need to acquire, maintain and strengthen and entrench all types of competitive behavior, which should be adopted,
  • development - the structure of production and the market diversification, product innovation, conquering new geographic markets,
  • organizational and management structure change,
  • creation of essential ingredients of environment.

Barriers

Manager may encounter difficulties in decision-making at every level. Barriers can be:

See also:

Examples of Strategic decision

  • Mergers and Acquisitions: Mergers and Acquisitions are large-scale strategic decisions that involve combining two or more companies into one entity. The aim is to increase market share and/or reduce costs, while at the same time offering a greater range of products and services.
  • Investment Decisions: Investment decisions are strategic decisions taken to acquire and develop assets or resources in order to achieve the company’s long-term goals. This can include decisions to invest in research and development, new technology, or expansion into new markets.
  • Market Expansion: Companies may choose to expand their markets in order to increase their customer base and revenue. This can involve investing in new products or services, opening new branches or stores, or investing in international markets.
  • Corporate Restructuring: Corporate restructuring is typically used to improve a company’s financial performance. It involves changing the organizational structure, processes, and procedures in order to reduce costs, increase efficiency, and improve customer service.
  • Leadership Changes: Leadership changes are strategic decisions to replace the company’s leaders. This is often done when the current leadership is not meeting the company’s goals, or when the company needs fresh perspectives and ideas.

Advantages of Strategic decision

One advantage of strategic decision is that it can lead to greater efficiency and productivity within an organization. Some of the other advantages of strategic decision include:

  • Increased clarity of objectives: Strategic decision allows companies to clearly define their goals and objectives and ensure that all employees are aware of them.
  • Improved resource utilization: Strategic decision can help organizations to better utilize their resources and allocate them to tasks that are most likely to bring the desired outcomes.
  • Improved performance: With the right strategy in place, organizations can improve their performance by focusing on the most important tasks and activities.
  • Increased competitive advantage: Strategic decision can give companies a competitive advantage by helping them to identify and capitalize on opportunities in the marketplace.
  • Enhanced customer satisfaction: Strategic decision can help organizations to better understand the needs of their customers and create products and services that meet their needs.

Limitations of Strategic decision

Strategic decision making is an essential part of organizational success, however, it is important to acknowledge several limitations associated with strategic decisions. These include:

  • Poor data quality: Strategic decisions are often based on data that is either incomplete or of low quality, which can lead to poor outcomes.
  • Subjectivity: Strategic decisions often involve subjective judgements, which can lead to biases and conflicts of interests that can potentially lead to suboptimal decisions.
  • Time constraints: Strategic decisions often need to be made quickly in order to remain competitive, which can lead to decisions made without enough analysis or research into their impacts.
  • Overconfidence: Strategic decisions are often made with an overconfidence in their efficacy and can lead to decisions made without enough consideration of the potential risks.
  • Complexity: Strategic decisions involve multiple stakeholders, variables, and potential outcomes, making them difficult to analyze and evaluate.
  • Unforeseen consequences: Strategic decisions often have unforeseen and unintended consequences that can lead to negative outcomes.

Other approaches related to Strategic decision

Other approaches related to strategic decision include:

  • Stakeholder Analysis: This approach involves identifying, mapping and analyzing the interests, needs, and goals of the different stakeholders in a company in order to understand their influence and priorities.
  • SWOT Analysis: This approach is a popular tool for identifying and analyzing the Strengths, Weaknesses, Opportunities and Threats of an organization.
  • Strategic Planning: This approach involves creating a detailed plan for achieving a company's long-term goals and objectives.
  • Scenario Planning: This approach is used to analyze the potential outcomes of different scenarios and develop strategies to address them.
  • Risk Management: This approach is used to identify, assess, and manage risks that may impact the organization's ability to achieve its strategic goals.

In summary, other approaches related to strategic decision include stakeholder analysis, SWOT analysis, strategic planning, scenario planning, and risk management. These approaches help to analyze the current situation, identify opportunities and threats, and develop strategies to achieve long-term goals.


Strategic decision — recommended articles
Importance of strategic management — Strategic option — Benefits of strategic management — Significance of strategy — Strategic planning functions — ASTRA analysis — Strategy — Strategy of the organization — Strategic management

References

  1. ↑ Pierścionek Z., Zarządzanie strategiczne w przedsiębiorstwie, Wydawnictwo Naukowe PWN, Warszawa 2011, p. 9
  2. ↑ Schroeder J., Badania marketingowe rynków zagranicznych, AE w Poznaniu, Poznań 1997, p. 24
  3. ↑ Pierścionek Z., Zarządzanie strategiczne w przedsiębiorstwie, Wydawnictwo Naukowe PWN, Warszawa 2011, p. 9
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