Strategic Decision Making

Decision Making is Important function of any manager Strategic decision making is a primary task of the senior management Strategic decision making largely relates to the responsibility of the top management Decision making is the process of selecting a course of action from among many alternatives. The process works somewhat like this: Objectives to be achieved are determined Alternatives ways of achieving the objectives are identified Each alternative is evaluated in terms of its objective achieving ability ; and The best alternative is chosen

Issues in Strategic Decision - Making

1. Criteria for Decision-making
Maximization Satisficing Incrementalism

2. Rationality in Decision- Making:Means exercising a choice from among various alternatives courses of action in such a way that leads to the achievement of objectives in the possible manner.

3.Creativity in Decision-Making:The decision must be original and different. It should be lead to profit maximization. Creativity as a trait, is normally associated with individual and sought to be developed through techniques such as brain storming.

4.Variability in Decision-Making:In given an identical set of conditions, two decisions makers may reach totally different conclusions. This also happens in decision making also.

5. Person related factors in Decision- Making :There are lost of person related factors in DecisionMaking. Some of these age, education, personal values, cognitive style risk taking ability, creativity.

6. Individual Versus Group Decision- Making :Owing to person related factors, there are individuals differences among decision makers. These differences matters in strategic decision making.

Strategic Intent
The foundation for the strategic management is laid by the hierarchy of strategic intent. The concept of strategic intent makes clear what an organization stands for. Hamed and Prahalad coined the term strategic intent. Characteristics of strategic intent
It is an obsession with an organization This obsession may even be out of proportion to their resources and capabilities Involves the following Creating and communicating a vision Designing a mission statement Defining the business Setting objectives

Vision
Definition by Kotler description of something (an organization, corporate culture, a business, a technology, an activity) in the future

Defination by Miller and Dess category of intentions that are broad, all inclusive and forward thinking

Advantages of having a vision

They foster experimentation Vision promotes long term thinking Visions foster risk taking They can be used for the benefit of people They make organizations competitive, original and unique Good vision represent integrity They are inspiring and motivating to people working in an organization

Mission
Defination by Hynger and Wheelen purpose or reason for the organizations existence Defination by David F.Harvey A mission provides the basis of awareness of a sense of purpose, the competitive environment , degree to which the firms mission fits its capabalities and the opportunities which the government offers

Defination by Thompson essential purpose of the organization, concerning particularly why it is in existence, the nature of the business it is in, and the customers it seeks to serve and satisfy

A few major points of distinction Mission is the societal reasoning while the purpose is the overall reason Mission is external reasoning and relates to external environment. Purpose is internal reasoning and relates to internal environment Mission is for outsiders while purpose is for its own employees

Objectives and Goals

Objectives refer to the ultimate end results which are to be accomplished by the overall plan over a specified period of time. Meaning Objective are open ended attributes denoting a future state or outcome and are stated in general terms When the objectives are stated in specific terms, they become goals to be attained Goals denote a broad category of financial and non-financial issues that a firm sets for itself Objectives are the ends that state specifically how the goals shall be achieved It is to be noted that objectives are the manifestation of goals whether specifically stated or not

Importance of establishing objectives

1. Objectives provide yardstick to measure performance of a department or SBU or organization 2. Objectives serve as a motivating force. All people work to achieve the objectives 3. Objectives help the organization to pursue its vision and mission 4. Objectives define the relationship of organization with internal and external environment 5. Objectives provide a basis for decision-making.

Areas for setting objectives

Profit objective or performance objectives Market objective - increase in market share Productivity objective cost per unit of production Product objective product development, product diversification, branding, etc 5. Social objective tree plantation, provision for drinking water, setting up of community center, etc 6. Financial objective relates to cash flow, debt equity ratio, working capital, new issues, debt instruments, etc 7. Human resource objective described in terms of absenteeism, turnover, number of grievances, strikes and lockouts, etc 1. 2. 3. 4.

Examples
INFOSYS INDIA Vision- We will be a globally respected corporation. Mission- Strategic Partnership for Building Tomorrow's Enterprise. ITC Vision- Sustain ITCs position as one of Indias most valuable corporation through world class performance, creating ,growing values for the Indian economy and the Companys stakeholder. Mission- To enhance the wealth generation capability of the enterprise in a globalizing ,environment, delivering superior and sustainable stakeholder value.