Strategic Management & Decision Making: A Comprehensive Guide
Strategic Management and Decision Making
Operational Planning
Define precise time frames for completing each operational goal required for the organization’s tactical and strategic goals. Operational planning must be coordinated with the budget to allocate resources effectively.
Types of Plans
Single-use plans are developed for goals unlikely to be repeated. Standing plans provide guidance for recurring tasks or situations.
Contingency Planning and Scenario Building
In uncertain environments or with long time horizons, inflexible plans can hinder performance. Managers can develop multiple future alternatives for more adaptive plans. An extension of contingency planning is scenario building.
Strategic Management
Strategic management involves decisions and actions to formulate and execute strategies for a superior fit between the organization and its environment, achieving organizational goals.
Defining Strategy and Competitive Advantage
The first step is defining a strategy: the plan of action for resource allocation and activities to deal with the environment, achieve a competitive advantage, and attain goals. Competitive advantage sets the organization apart and provides a distinctive edge for meeting customer needs. Choosing how the organization will be different is key.
Key Strategic Considerations
- Target customers: An effective strategy defines the target customers and their needs.
- Core competence: Something the organization does exceptionally well compared to competitors, providing a competitive advantage through unique expertise.
- Synergy: When organizational parts interact to produce a joint effect greater than the sum of their individual parts.
Strategy Formulation vs. Strategy Execution
Strategy formulation involves planning and decision-making to establish goals and develop a strategic plan, including assessing the external and internal environments. Strategy execution uses managerial and organizational tools to direct resources toward achieving strategic results.
SWOT Analysis
Strengths are positive internal characteristics to exploit for achieving goals. Weaknesses are internal characteristics that might hinder performance.
The BCG Matrix
This matrix categorizes businesses based on market share and industry growth:
- Star: Large market share in a rapidly growing industry, with high growth potential.
- Cash Cow: Dominant business in a mature, slow-growth industry, generating positive cash flow.
- Question Mark: Small market share in a rapidly growing industry, with potential but also risk.
- Dog: Poor performer with a small share of a slow-growth market.
Decision Making
Decision making is identifying and resolving problems and opportunities. It involves effort before and after the actual choice.
Types of Decisions
Programmed decisions address frequently occurring situations with established decision rules. Nonprogrammed decisions address unique, poorly defined, unstructured situations with significant consequences.