dicision making

8/13/2019 Dicision Making

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Strategic Decision making


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Process

Objectives to be achieved

Alternative ways of achieving the

objectives are identified

Each alternative is evaluated in terms of

objective achieving ability

The best alternative chosen


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What makes a decision strategicUnlike many other decisions, strategic

decision deals with the long-run future of

the entire organization and have three

characteristics.

1. Rare: strategic decision are unusual

and typically have no precedent to

follow

2. Consequential: strategic decisioncommit substantial resources and

demand a great deal of commitment

from people at all level


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Example

One example of a strategic decision was thatmade by BPL limited to move away from

manufacturing hermetically sealed precision

panel meters to a major consumer electronics

company emphasizing utilization of the best andmost appropriate technologies, applying the finest

manufacturing disciplines and most efficiently

marketing high quality products and services to

consistently gives customers the best value fortheir money


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Issues in strategic decision

making

Being a complex process,

strategic decision making is

difficult to perform, it is aincomprehensible: it can not be

analyze and explain easily.

decision makers are unable todescribe the exact manner in

which strategic decision are


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For this reason, no theoretical

model , however, painstakingly

formulated can adequately

represent the different dimension of

the process of SDM. Despite this

limitation, we can still attempt to

understand SDM by considering

some important issues related to it.


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Criteria for Decision- Making

The process of decision making

requires objective setting. This

objectives serves as yardsticks to

measure the efficiency and

effectiveness of the decision

making process. In this way

objective serves as criteria for

decision making. There are three

major viewpoints regarding setting


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a. The first is the concept ofmaximization. It is based onthinking of economist whoconsider objectives as thoseattributes which are set at thehighest point. The behavior ofthe firm is oriented towardsachieving this objectives and , inthe process, maximizing its


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B. The second view is based on

the satisfying. This envisages

setting objectives in such amanner that the firm can

achieve them realistically

through a process ofoptimization.


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C.The third view point is that of theconcept of incrementalizm.

According to this, the behavior of

the firm is complex and the process

of decision making. Which includes

objective setting, is essentially a

continually evolving political, a

consensus building. Through such

an approach , the firm moves


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2. Rationality in Decision-making

Rationality, in the context of SDMmeans exercising the choice among

various alternative courses of action

in such a way that it leads to the

achievement of objectives in best

possible manner. The economist

who support the maximizing criteria

consider a decision to be rational if

it leads to profit maximization.


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Behaviorist, who are the proponent ofthe satisfying concept, believe the

rationality takes into account the

constraints under which a decisionmaker operates. incrementalist are of

the opinion that the achievement of

objectives depends on the bargainingprocess between different interested

coalition groups existing in an

organization and therefore, rational

decision making process should take all


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Creativity in decision making

To be creative, a decision must

be original and different. A

creative decision-makingprocess may considerably affect

the search for alternative where

novel and untried means maybe looked for and adopted to

achieve objectives in an


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Creativity, as a trait, normallyassociated with individual and is

sought to be developed through

techniques such as brain storming.

You may recall that one of the

attitudinal objectives of business

policy course is to develop the

ability to go beyond and think, in

other word, is using creativity in


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Variability in decision making

It is a common observation that,given an identical set of condition

two decision makers may reach

totally different conclusions. This

often happens during case

discussions also. A case may

analyzed differently by individuals

in a group of learner and,

depending on the differing


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. Such thing happen due tovariability in decision making. It also

suggests that every situation is

unique and there are no set

formulas that can be applied in

strategic decision making.


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Person related factors in decision

making

There are a host of person-relatedfactors that play a role in decision

making. Some of these are: age,

education, intelligence, personal

values, cognitive style, risk taking

ability and creativity are generally

supposed to play a positive role in

strategic decision making


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. A cognitive style which enables aperson to assimilate a lot of

information, interrelate complex

variable and develop an integrated

view of the situation is especially

helpful in SDM. Values as enduring

prescriptive beliefs are culture-

specific and important in matter of

social responsibility and business

-


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Individual versus group decision

making

Owing to person related factor,there are three individual

differences among decision makers.

These difference matter in SDM. An

organization possessing special

characteristics, operates in a

unique environment are in a

vantage position to undertake SDM


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Individual such as chief executivesor entrepreneurs play the most

important role as strategic decision

makers. But as organizations

become bigger and more complex

and face an increasingly turbulent

environment, individuals come

together in groups for the purpose

of SDM.


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, like the working of human mind strategicdecision making is fathomless. And rightly so , for

it is based on complex mental process which are

not exposed to view. Henery mintzberg ,

componeting on the nature of SD-making saysthat the key managerial process are enormously

complex and mysterious, drawing on the vaguest

of informationa and using the least articulated of

mental process. This process seams to be morerelational and holistic then odered and sequntionl

and more intuitive then intellectual ..


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Approaches towards strategic

decision making

Entrepreneurial modeAdaptive mode

Planning mode

logical incrementalism


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(1) Role of Board of Directors

1. To establish and update the

company mission.

2. To elect the companys top

officers, the formost of whom is

the CEO.3. To establish the

compensation level of the top

officers, including their salaries


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4. To determine the amount andtiming of the dividends paid to

stockholders.5. To set broad company policy

on such matters as labour

management relations, productor service lines of business and

employee benefit packages.


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6. To set company objectives and toauthorize managers to implement

the long-term strategies that the top

officers and the board have found

agreeable.

7. To mandate company compliance

with legal and ethical dictates.


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(2) Role of Chief Executives


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The role modeling approaches attempt todescribe the CE in terms of the different roles that

they play in organisations. For instance, a CE

may be considered as:

Chief architect of organizational purpose,strategist or planner;

Organisation leader, organizer or organisation

builder;

Chief administrator, implementer or coordinator;and

Communicator of organizational purpose,

motivator, personal leader or mentor.


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(3) Role of Senior ManagerThe senior (or top) management consists of managers

at the highest level of the managerial hierarchy.Starting from the chief executive to the level offunctional or profit centre heads, these managers are

involved in various aspects of strategic management.Some of the members of the senior management actas directors on the board usually on a rotational basis.

All of them serve on different top-level committees setup by the board to look after matters of strategicimportance and other policy issues. Executive,

committees, consisting of senior managers, areresponsible for implementing strategies and plans,and for a periodic evaluation of performance. Ad hoccommittee formed to deal with new projects hassenior managers as project

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(4) Role of SBU-level Executive.

The rationale for organizing structure according to thestrategic business units (SBUs) is to manage adiversified company as a portfolio of businesses; each

business having a clearly defined product-marketsegment and a unique strategy. The role that theSBU-level executives play is, therefore, important instrategic management. SBU-level executives, alsoknown as either profit-centre heads or divisionalheads, are considered as chief executives of adefined business unit for the purpose of strategicmanagement. In practice, however, the concept ofSBU is adapted to suit traditions, shared facilities anddistribution channels, and manpower constraints.


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(8) Role of Middle- level Managers

The major functions of middle-level managers

relate to operational matters and, therefore,

they rarely play an active role in strategicmanagement. They may, at best, be involved

as sounding boards for departmental plans,

as implementers of decisions taken above,

followers of policy guidelines and passive

receivers of communication regarding

strategic plans. Basically involved in the

implementation of functional strategies, themiddle-level managers are rarely employed

for other purposes in strategic management.

The importance of middle management

cadres lies in the fact that they form the


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(9) Role of Executive AssistantThe emergence of executive assistants in the

managerial hierarchy is relatively a recent

phenomenon. An executive assistant is a

person who assists the chief executive in the

performance of his duties in various ways.

These ways could be to assist the chief

executive in data collection and analysis,suggesting alternatives where decisions are

required, preparing briefs of various

proposals, projects and reports, help in public

relations and liaison functions, coordinating


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. The executive assistants assist thechief executive, they help to optimise ,

modernization, technology upgradation,

diversification and expansion, planimplementation, and new product

development. On the whole, senior

managers perform a variety of roles byassisting the board and the chief

executive in the formulation,

implementation and evaluation of

strateg

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