STRATEGIC DECISION STRATEGIC DECISION MAKINGMAKING

PRESENTED BY :PRESENTED BY : NEHA JAIN(89)NEHA JAIN(89)SUGANDHA GUPTA(107)SUGANDHA GUPTA(107)

What makes today’s business What makes today’s business world different?world different?

– Access to informationAccess to information– Electronic commerceElectronic commerce– Global base/focusGlobal base/focus– Electronic processingElectronic processing– The work forceThe work force– The economyThe economy

Decision making processDecision making process Objectives to be achieved are determinedObjectives to be achieved are determinedAlternative ways of achieving the Alternative ways of achieving the objectives are identified, includes: objectives are identified, includes: Gather reliable information (explicit and tacit form)Gather reliable information (explicit and tacit form) Be objective about yourself and your businessBe objective about yourself and your business Evaluation of each alternative in terms of Evaluation of each alternative in terms of it’s objective achieving abilityit’s objective achieving abilityBest alternative is chosenBest alternative is chosenDecision is implemented Decision is implemented

Environment of decision Environment of decision problemproblem

The decision-makerThe decision-maker The analystThe analyst who models the problem in order who models the problem in order

to help the decision maker to help the decision maker Controllable factorsControllable factors (including your personal (including your personal

abilities and physical resources)abilities and physical resources) Uncontrollable factorsUncontrollable factors The The possible outcomespossible outcomes of the decision of the decision The The environment/structural constraintsenvironment/structural constraints Dynamic interactionsDynamic interactions among these among these

components. components.

Components of decision making process

Performance measure (or indicators):Performance measure (or indicators): Measuring business performance is at the Measuring business performance is at the top of the management decision making. It top of the management decision making. It provides the desirable level of outcome provides the desirable level of outcome (objective of your decision)(objective of your decision)

LevelLevel Performance MeasurePerformance Measure

strategicstrategic   Financial, Growth, and Financial, Growth, and InnovationsInnovations

TacticalTactical   Cost, Quantity, and Customer's Cost, Quantity, and Customer's satisfactionsatisfaction

OperationalOperational   Target setting, and Conformance Target setting, and Conformance with standardwith standard

Cont’dCont’dUncontrollable inputsUncontrollable inputs: often create the : often create the problem and constrain the actions. problem and constrain the actions. ParametersParameters: Parameters are the constant : Parameters are the constant elements that do not change during the time elements that do not change during the time horizon of the decision review horizon of the decision review Controllable InputsControllable Inputs: The collection of all : The collection of all possible courses of action possible courses of action Interactions Among These ComponentsInteractions Among These Components: : These are logical, mathematical functions These are logical, mathematical functions representing the cause-and-effect relationships representing the cause-and-effect relationships among inputs, parameters, and outcome. among inputs, parameters, and outcome. ActionAction: The ultimate decision and is the best : The ultimate decision and is the best course of strategy to achieve the desirable goal. course of strategy to achieve the desirable goal.

Strategic decision makingStrategic decision making Strategic decision making is the process of Strategic decision making is the process of

selecting alternatives among the existing selecting alternatives among the existing situation to make decision that have long situation to make decision that have long term implication for the organization term implication for the organization performance (Long term=MORE THAN 3 performance (Long term=MORE THAN 3 YEARS). For example, NEW PRODUCT YEARS). For example, NEW PRODUCT DEVELOPMENT, Replacement of old DEVELOPMENT, Replacement of old machines with new one for the intension of machines with new one for the intension of service/product improvement service/product improvement

Modeling strategic decision makingModeling strategic decision makingTHE IDENTIFICATION PHASE:THE IDENTIFICATION PHASE:1)1) The Decision Recognition Routine The Decision Recognition Routine 2)2) The Diagnosis RoutineThe Diagnosis RoutineTHE DEVELOPMENT PHASETHE DEVELOPMENT PHASE1)1) The Search Routine The Search Routine 2)2) The Design Routine The Design Routine THE SELECTION PHASETHE SELECTION PHASE1)1) The Screen Routine The Screen Routine 2)2) The Evaluation-Choice Routine The Evaluation-Choice Routine 3)3) The Authorization Routine The Authorization Routine

Difference between decision making and Difference between decision making and Strategic decision makingStrategic decision making

Problems encountered Problems encountered are experienced by all are experienced by all managersmanagersRequired in day to day Required in day to day activitiesactivitiesNot much threats Not much threats existsexistsUsually do not involve Usually do not involve large sums of moneylarge sums of moneyRoutine decisions are Routine decisions are often made quickly often made quickly

Primary the task of Primary the task of senior managementsenior managementStrategic tasks are Strategic tasks are complex and variedcomplex and variedEnvironmental threats Environmental threats and opportunities are and opportunities are abundantabundantCan involve large Can involve large sums of money being sums of money being gained or lost gained or lost It is necessary to take It is necessary to take time to decide time to decide systematically using a systematically using a structured approach structured approach

Strategic ThinkingStrategic Thinking Determines and reveals the organization's Determines and reveals the organization's

purpose purpose Selects the businesses the organization is in Selects the businesses the organization is in Attempts by responding properly to both the Attempts by responding properly to both the

environmental opportunities and threats and the environmental opportunities and threats and the strengths and weaknesses of the organization strengths and weaknesses of the organization

Engages all the hierarchical levels of the firm - Engages all the hierarchical levels of the firm - corporate, business, and functional. corporate, business, and functional.

Defines the nature of the economic and non-Defines the nature of the economic and non-economic contributions the firm intends to make economic contributions the firm intends to make to its stakeholders to its stakeholders

Provides a coherent, unifying, and integrative Provides a coherent, unifying, and integrative pattern of decisions a firm is making pattern of decisions a firm is making

Decision-Making Process in Organizations:Dynamic Strategic PlanDecisions are at the heart of success of any organization. At time there are critical moments when these decisions can be difficult, perplexing and nerve-wracking. Making decisions can be hard for a variety of structural, emotional, and organizational reasons. Adding to these, doubling the difficulties are factors such as uncertainties, having multiple objectives, interactive complexity, and the anxiety. The organizational decisions at different levels are depicted in the following chart:

The critical component in the above chart is organization's values and the ranks among values. The final product will necessarily shape the mission, the purpose, and the vision of the organization. The organization's values and the ranks among values can be achieved by the following major sequence of activities: Identification, Evaluation, Option Development, Options Evaluation, Selection, Communications, and Implementation.

Strategic decisions are purposeful actions and have longer a time horizon than both the tactical and the operational decisions. This can be done by asking questions such as: What is the performance measure (or indicators)?, Why should we measure it?, How do we measure it?

Executives are paid to make decisions. These decisions can be framed as questions such as the following:How can we assure that our new market entry gains us profitable market share? How can we motivate our organization to create value for our constituents? How can we distinguish between competitor strategies worth following from the dead ends? How can we make robust decisions that will maximize our gains even if things don’t turn out as we planned? How can we keep success from going to our heads? How can we adapt to changing customer needs, upstart competitors, and new technologies? How can we assure that our acquisitions are profitable?

Seven principles of strategic decision making

Issues in Strategic Decision making

Being a complex process , strategic decision making is difficult to perform. It is Incomprehensible , it cannot be analysed and explained easily. The key managerial processes are enormously complex and mysterious , drawing on the vaguest of information and using the least articulated of mental processes.

1) The criteria for decision making a) First is the concept of maximisation b) Second view is based on the concept of satisficing c) The third view point is that of the concept of incrementalism.

2) Rationality in decision making Excercising a choice from among various alternative courses of

action in such a way that it leads to the achievement of objectives in the

best possible manner

3) Creativity in decision making To be creative a decision must be original and different . A craetive

strategic decision making process may considerably affect the search alternatives where novel and untried means may be looked for and adopted to achieve objectives in an exceptional manner

4) Variability in decision making It is a common observation that given an identical set of condition , two decision makers may reach totally different conclusion.

5) Persons related factors in decision making Attributes like age, knowledge, intelligence, risk taking ability and creativity are generally supposed to play a positive role in strategic decision making

6) Individual versus group decision making Owing to person related factors , there are individual differences among the decision makers . These differences matter in strategic decision making.

REFERNCEREFERNCE

Strategic Management and Strategic Management and business policy by Azhar Kazmibusiness policy by Azhar Kazmi

www.google.comwww.google.com

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