Selecting between two or more options is known as a decision. A strategic decision is an alternative that influences the major factors that decide whether an organization’s strategy is successful. In the next section, you will know the nature of strategic decision making. In contrast, a tactical decision influences the daily execution of steps to attain organizational strategic goals. Strategic decisions are defined as decisions related to the entire working environment where the firm operates its resources, the people who form the firm, and the relationship between them.
The process of choosing the best alternative from the prevailing conditions for making the decisions that provide a long-term impact on organizational performance is called “strategic decision-making.” For example, developing a new product or replacing old machines with new ones to improve the product or service.
Definitions of Strategic Decision Making
According to George R. Terry, “Decision-making is the selection based on some criteria from two or more possible alternatives.”
According to Eisenhardt and Zbaracki, “Strategic decisions are infrequent decisions made by the top leaders of an organization that critically affect organizational health and survival.”
Nature of Strategic Decision Making
The nature of strategic decision making is as follows:
1) Impacts the Long-term Direction
The long-term direction of an organization is largely affected by strategic decisions. Such decisions are usually taken to help the organization attain some advantage.
2) Concerned with the Scope of an Organisation’s Activities
Strategic decisions are always related to the scope of activities of an organization.
3) Issue of Scope of Activity is Fundamental to Strategic Decisions
For strategic decisions, the issue of the scope of activity is very important. It shows the nature of strategic decision making. Since the scope defines the organization’s boundaries for managing it effectively, it is directly concerned with the manager’s vision and mission for the organization.
4) Matching Organizational Activities
Strategic decisions are also concerned with matching organizational activities with the environment where it functions.
5) Influences Operational Decisions
Operational decisions can be influenced by strategic decisions to set off waves of lesser decisions.
6) Complex in Nature
Generally, strategic decisions are complex. It can be said that the level of complexity differentiates strategic management from other aspects of organizational management. It is the nature of strategic decision making. There should be at least three reasons for this complexity.
7) High Level of Uncertainty
The level of uncertainty is high in strategic decisions. The decisions might be taken based on views regarding the future, the exact prediction of which is impossible for the managers.
8) An Integrated Approach is Needed
An integrated approach is needed in strategic decisions to manage the organization effectively. It is the nature of strategic decision making. These are not similar to functional problems where a single area of expertise or perspective can explain or solve the problems.
9) Involve Key Organizational Change
Strategic decisions bring in major organizational appraisal changes. These changes are not only difficult to decide and plan, but they are even more challenging to implement. Thus, the level of complexity involved in strategic management is much more than other operational tasks.
10) Implication
Strategic management makes sure that strategy is put into action and implemented through an action plan.
1. What is Strategic Decision Making?
Strategic decision making is a scientific procedure in which people, teams, or companies determine the direction of action for reaching long-term targets. It involves choosing the most beneficial movement plan from alternatives, considering the context, resources, and future implications.
2. Why is Strategic Decision Making Essential?
Strategic decision making is essential to the fulfillment and survival of any agency. It offers a clear route, aids aid allocation, and manages risks. While specializing in long-term goals, strategic selections also account for the risky enterprise surroundings, making a business enterprise adaptive and resilient.
3. How does Strategic Decision Making relate to Chance and Uncertainty?
Strategic decision making inherently includes managing hazards and uncertainty as decisions are made based on future projections and assumptions. Effective strategic decisions recollect the possible dangers and devise strategies to mitigate them. Furthermore, they include contingency plans to manipulate unexpected situations or uncertainties.
4. What function does leadership play in Strategic Decision Making?
Leadership performs an important role in strategic decision making. Leaders are chargeable for putting the imaginative and prescient, ensuring the alignment of choices with organizational goals, and fostering a way of life that helps knowledgeable risk-taking. Moreover, leaders facilitate verbal exchange, inspire participation, and ensure transparency in a choice-making manner, accordingly using the company toward its goals.