Strategic decisions are mainly concerned with the selection of the product-mix that the firm intends to product and the markets in which it will sell its products. Such decisions affect the organization as a whole over long periods of time. Because strategic decisions have such a tremendous impact on a firm and because they require large commitments resources, they can only be made by top managers in the organizational hierarchy (Pears and Robinson, AITBS).
A chief executive officer (CEO) is the principal strategist (others include the Board of Directors, line managers, staff assistants to CEO, corporate planners, public relations advisors, legal officers) responsible for an organization’s overall direction, success or failure . The CEO is expected to ask and seek answers to the following questions while managing the show:
Strategic decisions are the essence of strategic management. Strategies can be put into practice only after choices (decisions) have been made. Strategic decisions by their very nature are characterized by considerable risk and uncertainty. Strategic decisions involve more than one area of an organization. They require sizeable allocation of resources. They are future oriented with long term ramifications. They can either take a company to commanding heights or make it a bottomless pit! To be safe therefore the CEO has to formulate strategic decisions after receiving vital inputs from internal and external groups carefully. In actual practice, strategic decisions rarely follow this route as the following examples illustrate.
The features of strategic decisions of course vary with the level of strategic activity considered. Corporate level decisions are characterized by greater risk, cost profit potential, greater need for flexibility and longer tem horizon. Functional level decisions involve action oriented operational issues and are relatively short range and low risk. Business level decisions help bridge decisions at the corporate and functional levels.
Dimensions of strategic decisions
Typically, strategic issues have the following dimensions (Pears and Robinson)
Top management Involvement: Strategic issues require the CEO to carefully assess the likely impact on various divisions, Allocate resources thereafter and oversee the implementation process closely. At every stage, strategic decisions require consistent support and continued blessings form top management.
Allocation of large doses of resources: As mentioned above, decisions require commitment of large doses of internal as well as external resources over an extended period.
Effect on long term Prosperity of the firm:
Strategic decisions have long term effects on forms – for better or worse. Once a firm embraces a particular strategy, its image and competitive advantages are invariably linked to that strategy. It gains recognition in certain markets, for certain products with certain. The firm would seriously jeopardize all its pervious gains if it shifts focus from these markets products or technologies by adopting a radically different strategy. For example, the Rs 1,000 crore NEPC Group once known for its dominance in wind energy business shifted focus from its core business and ventured into paper, airlines agro foods , tea , textiles etc. and got wiped out completely from the industrial map of India.
Strategic decisions are built around forecasts. The emphasis is on selecting a suitable course of action from the available alternatives and moving ahead with confidence. In turbulent environment a firm will succeed only if takes a proactive stance towards change. For example, visualizing the demand for television content in the late 1990s Ekta kapoor of Balaji Tele films moved ahead of others and came out with stunningly popular television serials. Balaji is now in red as the most popular television content provider has become the darling of the FIIs in the stock market a well.
Multi-functioned or Multi – business Consequences:
Strategic decisions have complex implications for most areas of the firms. Hey impact various strategic business units especially in areas relating to product-mix, customer mix, organization structures competitive focus etc.
Focus on External Groups:
In order to successfully position a firm in a competitive environment, strategies must look beyond its operations .They must keep in mind how the other stake holders (competitors, customers, suppliers, creditors, government and labor) are likely to react to its own strategic moves from time to time.