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Q3. Strategic choice is made in the context of decision situation as well as decision making.

Explain this and show various objective and subjective factors that affect Strategic choice. Strategy: Many great thinkers have defined Strategy in different perspective considering one or the other aspects. A definition that included all the aspects would have to be very long. Lets have a look at some of these definitions: Xenophon, a Greek writer says, Strategy is knowing the business you propose to carry out. This definition stresses that strategy requires knowledge of the business, an intention for the future, and an orientation towards action. Kenneth Andrews defined strategy as The pattern of major objectives, purposes or goals and essential policies or plans for achieving those goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be. Kenichi Ohmae defines strategy as The way in which corporation endeavors to differentiate itself positively from its competitors, using its relative strengths to better satisfy customer needs. This definition addresses both the competitive aspect of strategy and the need to build capabilities. It also explicitly mentions customers and the satisfaction of their needs as a driver of strategy. Thus from the above definitions it is apparent that definition for strategy varies & reason for this variation is the origin of the ideas e.g. Military thinkers, political thinkers, academics & practitioners have all considered the issue of strategy. Strategic Choice Strategic choice is the third logical element of the strategy formulation process. Choice is at the centre of strategy formulation. Strategic choice involves identifying alternative courses of action and selecting the best ones that will meet the firms strategic objectives. The Strategic Choice Approach is used in face to face workshops of a decision making group. Strategic choice is viewed as an ongoing process in which the planned management of uncertainty plays a crucial role. The Strategic Choice Approach: Focuses on decisions to be made in a particular planning situation, whatever their timescale and whatever their substance. Highlights the subtle judgments involved in agreeing how to handle the uncertainties which surround the decision to be addressed whether these be technical, political or procedural. The approach is an incremental one, rather than one which looks towards an end product of a comprehensive strategy at some future point in time. This principle is expressed through a framework known as a `commitment package'. In this, an explicit balance is

agreed between decisions to be made now and those to be left open until specified time horizons in the future. The approach is interactive, in the sense that it is designed not for use by experts in a backroom setting, but as a framework for communication and collaboration between people with different backgrounds and skills.

Decision Making
Decision making is the study of identifying and choosing alternatives based on the values and preferences of the decision maker. Making a decision implies that there are alternative choices to be considered, and in such a case we want not only to identify as many of these alternatives as possible but to choose the one that (1) has the highest probability of success or effectiveness and (2) best fits with our goals, desires, lifestyle, values, and so on. If you want to lead effectively, you need to be able to make good decisions. If you can learn to do this in a timely and well-considered way, then you can lead your team to spectacular and well-deserved success. However, if you dither or make poor decisions, your team risks failure and your time as a leader will probably be brutally short. Decision-making involves more than processing information. It is also an interpersonal process. We must decide how to involve others in making the decision or whether to include them at all. Our decision-making strategy should be influenced by these four variables: Availability of information Clear superiority of one choice Need to have others accept the decision Amount of time available for decision-making. Five possible approaches to decision-making are listed below, with indicators for choosing each one Make the decisions by ourselves We have all the information we need. We already know which decision is likely to be best. Acceptance by others is not important. A decision must be made quickly. Get information from others, and then decide by ourselves. We lack critical information that others have. With this information, we will be able to tell which decision is best. Acceptance by others is not important. A decision must be made quickly. Before deciding, consult with others, one-on-one to get their views. The best decision is not clear. Others may have conflicting views or different priorities. Hearing different perspectives will help us make a better decision. Including others in the process will increase acceptance of the decision. A group discussion would not be helpful. You have time for consultation.

Before deciding, have a group discussion to explore options. The best decision is not clear. Others may have conflicting views or different priorities. We need to hear other perspectives to make a good decision. Having a group discussion will allow more possibilities to be explored. Hearing the views of others will help group members understand and accept the decision. Group discussion is logistically possible. We have time for group participation. Ask the group to reach a consensus independently. The best decision is not clear. You have no strong preferences. Group members share your priorities and can agree on common goals. Group members have all relevant information. The group has a big stake in the outcome. Acceptance by the group is important. The group has a history of working well together. Group discussion is logistically possible. We have time for consensus-building. Making good decisions depends not only on locating all necessary information, but also on involving the right people in the right way. If you tend to overuse one or two of the above strategies, look for appropriate occasions to try a different approach.

Process in Decision making


Decision making typically follows a six-step process: Identify the problem or opportunity Gather relevant information Develop as many alternatives as possible Evaluate alternatives to decide which is best Decide on and implement the best alternative Follow-up on the decision

Kinds of Decisions
There are several basic kinds of decisions. Decisions whether: This is the yes/no, either/or decision that must be made before we proceed with the selection of an alternative. Should I buy a new TV? Should I travel this summer? Decisions whether are made by weighing reasons pro and con. The PMI technique discussed in the next chapter is ideal for this kind of decision. It is important to be aware of having made a decision whether, since too often we assume that decision making begins with the identification of alternatives, assuming that the decision to choose one has already been made. Decisions which: These decisions involve a choice of one or more alternatives from among a set of possibilities, the choice being based on how well each alternative measures up to a set of predefined criteria. Contingent decisions:

These are decisions that have been made but put on hold until some condition is met..

Decision-Making Strategies
Decision rules or principles of choice are criteria or policies that are utilized when choosing between the available alternatives. The following are common principles of choice and lend themselves to particular decision strategies. Decision strategies can be considered from two aspects: First aspect A strategy is a plan of action or policy which is designed to achieve an overall aim. So on a large-scale, there are four main decision making strategies: Rational Intuitive Recognition primed The Ultimate Decision Making strategy.

Rational: Rational strategies have to do with identifying options, evaluating and comparing them and eventually deciding on the highest ranking or best option. Intuitive: Intuitive decision strategies indicate that there may be no rationale or logic behind the choices made. Gary Klein's recognition primed: Gary Klein's recognition primed decision model is a combination of the first two. Intuition is used to generate a workable course of action and then we consider it logically to confirm it as appropriate. Ultimate Decision Making: The Ultimate Decision Making model put forward on this site goes beyond Klein's model in that it teaches us our own personal decision making signals that are built into our own biology. Second aspect - smaller chunks There have been many decision making strategies described and used in order to choose between many alternatives. David Welch in his book 'Decisions, Decisions' lays out five decision strategies: Optimization Constrained optimization Preselect ion Satisfying and Randomization.

Optimization: Optimization decision strategies are those where every option, criteria, consequence and risk is considered. He says this is the ideal although they obviously take a lot of time for information gathering and assessment and can often be costly in terms of stress. This option is not so good when they are a huge number of options. Constrained optimization: Constrained optimization means that the number of options considered are constrained or limited in some way. They may be time, geographical, cultural, ethnic constraints and so on. For example, 'my clients have to live in this particular city, or within a half an hour's journey from my office'. Setting the constraints will obviously impact the final result. There are many ways to set constraints which makes this one of the commonest decision strategies. Preselection: Preselect ion of options can also be done on the basis of many different considerations. You can preselect restaurants, for example, based on recommendations of friends or recommendations from a particular magazine. A preselect ion process of candidates for elections narrows the options available to the voters. Satisfying: The satisfying decision strategy is where, as soon as you find an option that fits the bill, you go with it. This can be useful when there are a lot of alternatives and its in an area where you have little expertise. Randomizing: Randomizing decision strategies are those where you toss a coin or throw dice. They are useful when there are few options and no one is significantly better than any of the others. These decision strategies are for rational models, ie., where you are comparing and contrasting alternatives.

Factors that affect strategic choice


After evaluation of strategic alternatives is choice of the most suitable alternative. For a business group, it may be possible to choose all strategic alternatives but for a single company it is quite difficult. The strategic alternative has to be the matched with the problem. While making a choice, two types of factors have to be considered Objective factors Subjective factors Objective factors are the ones which can be quantified which subjective factors are the ones which cannot be quantified and are based on experience and opinion of people. Strategic choice is like a decision making process.

There are four objective ways to make a choice: Corporate Portfolio Analysis SWOT Analysis Industry Analysis Competitive Analysis Corporate Portfolio Analysis When the company is in more than one business, it can select more than one strategic alternative depending upon demand of the situation prevailing in the different portfolios. It is necessary to analysis the position of different business of the business house which is done by corporate portfolio analysis. This analysis can be done by using any of the seven technologies given below: Experience curve PLC concept BCG Matrix GE nine cell Matrix Space Diagram Hofers product market evaluation matrix Directional Policy Matrix Experience curve: In the experience curve technique, technology the experience of the strategist enables him to decide which businesses to enter or quit. PLC concept: Depending upon the stage of the Product Life Cycle (PLC)of the business, one can make a strategic choice for different portfolio. BCG Matrix: Boston consultancy developed a matrix called BCG Matrix which is helpful to make strategic choice. In this, the products are positioned based on various external and internal factors to know the continuity, growth and discontinuing product. The factors given are specific in nature and attempt has been made to quantify them. GE nine cell Matrix: The GE Nine Cell Matrix is a matrix in which nine positions are defined in terms of business strength factors and industry attractiveness factors. The business strength factors include market share, profit margin, ability to compete; market knowledge, competitive position, technology, and management caliber and the industry attractiveness factor include market size, growth rate, profit, competition, and economics of scales, technology and other environmental factors. Nine cells are divided into three zones and depicted by different colors i.e. green, yellow and red. Each zone of matrix presents a specific type of strategy or set of strategies.

Space Diagram: The strategic position and action evaluation (SPACE) is an extension of two dimensional portfolio analyses which helps an organization to hammer out an appropriate strategic posture. It involves consideration of dimensions like organizations competitive advantage, organizations financial strength, environmental stability etc. Various SPACE factors are measured in terms of degrees, often quantified from 0 to 5 with 0 in indication most unfavorable and 5 indicating most favorable. On basis of four dimensions organization can choose its strategy. Hofers product market evaluation matrix: Hofer and Schendel suggested the product market evaluation matrix. They constructed a 15 cell matrix taking competitive position and stages of product / market evolution dimensions. Directional Policy Matrix: The directional policy matrix was developed by shell chemicals, U.K. It used two dimensions business sector prospects and companys competitive capabilities to choose strategies. Each dimension is further divided into unattractive, average and attractive (for business sector prospects) and weak, average and strong (for companys competitive capabilities. Each quadrant shows a different strategy which the organization may adopt. Competitor Analysis In this analysis, we try to assess what the competitor has and what he does not have. We explore everything with respect to the competitor. In competitor analysis, focus is on external environment as one of the components of external environment is the competitor. The difference between SWOT analysis and competitor analysis is that in competitor analysis we are concerned with only one component of the environment i.e. competitor while in SWOT analysis we take about all the factors of the environment. Industry Analysis In industry analysis, all the competitors belonging to the particular industry with which the organization is associated are looked at. All the members of the industry are considered as a whole. Competitive analysis In competitive analysis, only the major competitors are assessed while in industry analysis all the competitors belonging to the industry are looked at. The strategic choice is a decision making process which looks into the following steps: - Focusing on strategic alternatives - Evaluating strategic alternatives - Considering decision factors objective factors and subjective factors.

- Finally, making the strategic choice. Conclusion Formulation of strategy in emerging industries must cope with the uncertainty & risk of this period of an industrys development. The rules of competitive game are largely undefined, the structure of the industry unsettled & probably changing & competitors hard to diagnose. Yet all these factors have another side- the emerging phase of industrys development is probably the period when the strategic degrees of freedom are the greatest and when the leverage from good strategic choices is the highest in determining performance. The strategy menu offers us a considerable number of options at the business, and functional levels of the enterprise. Not all of these options, however, represent practical choices for any given enterprise. An organization in a dying industry with meager financial assets and out dated technologies is clearly more limited in its options than a well-financed firm in a growth industry. External reality, mitigated by internal feasibility, dictates the absolute limits of the enterprises realm of practical strategic choices. - -----------------------------------------------------------------------------------