Business Policy

Characteristics of Strategic Decisions
Source: Johnson, G. and Scholes, K. (1997). Exploring Corporate Strategy, Fourth Edition, Prentice Hall, New York.

1. Strategic decisions are likely to affect the long-term direction of an organisation.

2. Strategic decisions are normally about trying to achieve some advantage for the organisation.

3. Strategic decisions are likely to be concerned with the scope of an organisation’s activities: Does (and should) the organisation concentrate on one area of activity, or does it have many? The issue of scope of activity is fundamental to strategic decisions because it concerns the way in which those responsible for managing the organisation conceive its boundaries. It is to do with what they want the organisation to be like and to be about.

4. Strategy is to do with the matching of the activities of an organisation to the environment in which it operates.

5. Strategy can also be seen as 'stretching' an organisation's resources and competences to create opportunities or capitalise on them. It is not just about countering environmental threats and taking advantage of environmental opportunities; it is also about matching organisational resources to these threats and opportunities. There would be little point in trying to take advantage of some new opportunity if the resources needed were not available or could not be made available, or if the strategy was rooted in an inadequate resource-base.

6. Strategic decisions therefore often have major resource implications for an organisation. In the 1980s a number of UK retail firms had attempted to develop overseas with little success and one of the major reasons was that they had underestimated the extent to which their resource commitments would rise and how the need to control them would take on quite different proportions. Strategies, then, need to be considered not only in terms of the extent to which the existing resource-base of the organisation is suited to the environmental opportunities but also in terms of the extent to which resources can be obtained and controlled to develop a strategy for the future.

7. Strategic decisions are therefore likely to affect operational decisions, to ‘set off waves of lesser decisions’.

8. The strategy of an organisation will be affected not only by environmental forces and resource availability, but also by the values and expectations of those who have power in and around the organisation. In some respects, strategy can be thought of as a reflection of the attitudes and beliefs of those who have the most influence on the organisation. Whether a company is expansionist or more concerned with consolidation, and where the boundaries are drawn for a company’s activities, may say much about the values and attitudes of those who influence strategy -- the stakeholders of the organisation. The beliefs and values of these stakeholders will have a more or less direct influence on the organisation.

Overall, if a definition of strategy is required, these characteristics can provide a basis for one. Strategy is the direction and scope of an organisation over the long term, which achieves advantage for the organisation through its configuration of resources within a changing environment, to meet the needs of markets and fulfil stakeholder expectations.

Strategic decisions are, then, often complex in nature: it can be argued that what distinguishes strategic management from other aspects of management in an organisation is just this complexity. The complexity arises for at least three reasons. First, strategic decisions usually involve a high degree of uncertainty: they may involve taking decisions on the basis of views about the future which it is impossible for managers to be sure about. Second, strategic decisions are likely to demand an integrated approach to managing the organisation. Unlike functional problems, there is no one area of expertise, or one perspective that can define or resolve the problems. Managers, therefore, have to cross functional and operational boundaries to deal with strategic problems and come to agreements with other managers who, inevitably, have different interests and perhaps different priorities. This problem of integration exists in all management tasks but is particularly problematic for strategic decisions. Third, as has been noted above, strategic decisions are likely to involve major change in organisations. Not only is it problematic to decide upon and plan those changes, it is even more problematic actually to implement them. Strategic management is therefore distinguished by a higher order of complexity than operational tasks.