Strategies decisions depends highly on perceptions, people’s attitudes and assumptions, therefore they are rarely straightforward or simple. Strategic decisions determine the direction as well as success of an organization, which is why it is essential for decision-makers to understand the decision-making process in order to make the right decisions. Chapter 2, 3, and 4 focus on introducing forces which will form a decision, including ideas, developments and potential pitfalls. In chapter 4, a practical and useful framework is also created to guide step by step in a decision-making process.
Chapter 8 outlines insights and techniques for implementing and improving decisions in order to have a competitive strategy. Chapter 12 introduces forces which will have affection in sales, marketing and brand management decisions. It is necessary to understand the decision-making process and other involved factors to be able to create a practical and competitive strategy. Right decisions will make a huge impact on company’s directions as well as success in the future. Chapter 2: Ideas at Work Setting a strategy has always been complex due to the changes that company has to face over time.
There are several factors that will affect the decision making process. Decision-making approaches The classical administrator The classical administrator, which was founded by Henri Fayol, has become the most traditional model of the decision-makers or strategists. A set of common activities and principles of managements was developed and divided into five sections: planning, organizing, commanding, coordinating and controlling. Planning involves setting the goals of the organization and developing an action plan for future success.
Organizing involves structuring the organization and using necessary resources to achieve these aims. Commanding makes sure the optimum return from people, which is usually considered the most expensive component of a business. Coordinating involves focusing on people’s effort to achieve the goals. Control makes sure that everything is going according to plan, making adjustment when necessary to ensure success. The design planner When the strategy is planned, the techniques of the classical administrator would be used to implement the strategy.
Design planning will help the implementation process and it requires expertise in two areas: Analyzing and anticipating the future environment, techniques and models. Be aware of the external opportunities and threats; internal strengths and weaknesses. The role player The role player involves in the strategic decision-maker’s job as a reflective and analyzing planner and controller, to make sure the plan is realistic and practical. The competitive positioner It is crucial for competitive positioner to understand the power of the external environment in order to achieve competitive advantage.
Customers and suppliers, substitute products, present and potential competitors are considered competitive forces. The competitive positioned should be able to eliminate barriers to enter its market, set a competitive prices, reduce operating costs and be aware of its rivals. The visionary transformer Vision is one of the fundamental tools to make a strategic decision, and it should focus on answering the following questions: Where in the market should the organization position itself? Brand positioning? How should the organization achieve its goal?
However, visions should be achievable and visionary transformers should be able to ensure that they are achieved. The self-organizer The self-organizer needs the ability to network, innovate and collaborate with people to achieve the organization’s goal. The turnaround strategist The turnaround strategist focuses on turning around the performance of an organization once a visionary leader has failed. It is important to adapt new control systems quickly, find out the reasons for failing and be able to reverse them. Financial issues
There are three financial issues that influence strategic decisions, they are: cash management, risk management and budgeting. It is important for company to be able to manage its cash flow and have an effective financial control while implementing strategic decisions. Controlling costs Controlling costs, by saving money, making cost-cutting is one way to boost profits and reduce losses. Managing for value: implementing the balanced scorecard The balances scorecard takes into account four important perspective of activity, they are: financial perspective, customers, internal processes, innovation and learning perspective.
The main stages of implementing the balanced scorecard include: Preparing and defining the strategy, deciding what to measure, finalizing and implementing the plan, publicizing a d using the results, reviewing and revising the system. The rise of technology and the impact on technology on decision-making The rise of technology has opened up a multiple ways to add value, increase sales, reduce costs and manage more efficiently, therefore technology has made a huge and diverse impact on business decisions.
Factors that affect a business and decision-making such as: adding value, understanding customer needs, competitive advantage and assessing costs can be done much faster and more efficient with the help of technology. That is why it is definitely important to use and manage information systems properly to take the best out of it. Chapter 3: Pitfalls In this chapter, several types of failure may be encountered in decision-making process, such as: thinking flaws, leadership flaws and cultural flaws.
Behavioral flaws In order to avoid traps made by human brain while making decisions, common traps should be recognized and understood which ones are likely to influence decision-maker’s thinking. Some common traps which were mentioned in this chapter were: the anchoring trap, the status quo trap, the sunk-cost trap, the confirming-evidence trap, the overconfidence trap, the framing trap, the recent event trap, and the prudence trap. Leadership flaws Leadership flaws can also affect strategic decisions.
One of them is failure of understanding, when the leader does not properly understand a problem. Another common flaw is rationalistic planning, when everybody assumes that there is only one effective choice, therefore, leads to only one conclusion. Decision-making pitfalls Cultural flaws The culture of an organization can make a negative effect on strategic decision, and fragmentation occurs when people are in disagreement. In the other hand, groupthink is when an idea is given because it is supposed to harmony with the majority.
Such behaviors are common and therefore, decisions may be affected by the cultural of an organization. Failure to respond to change It is important to sense when to change before the business goes down and gets bankrupt. Responding to the need to change may be not easy, due to other external factors, but changing in the right way and at the right time is crucial to remain the business in the market. Overcoming decision-making problems It is usually much more difficult to over problems than just pointing them out.
When looking for a solution, two main factors should be considered seriously: the ability of the decision maker and the importance of testing and perfecting decisions. Some other ways to overcome problems and aim to effective decision-making are: being aware (and raising awareness among others), avoiding subjective or irrational analysis, being sensitive, establishing clear priorities and objectives, fostering creativity and innovation, understanding substantive issues and last but not least, focusing on the relevance and potency of the business idea.
Organizational learning and scenarios Two popular approaches that can be used to avoid the pitfalls of strategic thinking are adaptive organizational learning and scenario thinking. Adaptive organizational learning means continuing the process by adapting new changes to suit the organizational environment and to improve performance. Scenario thinking is a process which is divided into two parts: a formal element designed by managers, and an informal part, characterized by casual conversations.
Chapter 4: Rational or intuitive? Frameworks for decision-making The rational approach Assessing the situation Assessing the situation is the first step of rational decision-making process. It starts by asking whether the decision relates to a permanent issue or it is the result of an isolated event, therefore the decision-maker may have some idea of what to do in the next step. Defining the critical issues
When considering a decision, all aspects should be taken into account, and funneling is a useful and rational technique to be used. The method involves collecting information, then prioritizes and eliminates issues that aroused based on the data that were collected and analyzed. Specifying the decision This step defines what the decision must achieve. By defining the minimum set of goals, this helps to ensure focus and smooth implementation. Making the decision Compromise is usually involved in the decision-making process.
In this stage of the process, embracing with creativity and innovation may ensure the strategic decision will be implemented successfully. Implementing the decision After defining the decision, executing it is usually the most critical and time-consuming phase. These following factors are involved: planning how it will be implemented, assigning the tasks clearly and specifically, communicating, motivating and rewarding, managing resources to ensure that people carrying out the decision have the necessary equipment to complete their task.
Monitoring and making adjustments It is very important to monitor the implementation so that everything is going according to plan and adjustments can be made in time. Decision-making is a cycle, from the last step comes back to the first step again, therefore the assessment of the next decisions should start will the monitoring of current ones. The intuitive approach