Approaches to Strategic Decision Making
As the caption suggests this approach is followed in strategic decision-making by the organisations headed by family heads where by the organisation is moulded to face the environmental changes. In the Indian context the business groups such as Reliance, Jyoti Udyog, Nirma, Kothari Products, Mofatlal Group, Dabur Products, T.T.K. Group, Infosys Technologies are examples.
Features of Entrepreneurial Approach
(1) Capitalising on the Opportunities – Entrepreneurial approach warrants constant search for opportunities that changing environment makes available. This searching may be formal or informal. Seeking the possible and viable opportunities and encashing them. That is, it is not a problem solving process.
(2) Centralized Decision-Making Power – The family head is the person who has the exclusive power of making bold and unusual decision. It is founded on rich experience of past and sound judgement that play vital role in making the head as competent authority to make decisions.
(3) Growth and Expansion Orientation – This approach is growth and expansion-oriented. That is, there is an all out attempt increase the wealth, assets, turnover and market share, Growth and expansion oriented approach keeps the family of entrepreneurs on the toes always alert and agile and keen observațion of business situations is the key to their success.
(4) Efforts and Rewards are Well Balanced – The entrepreneurial approach believes in making unusual and very bold decision in the environment of uncertainty. They keep the organisation adaptive to the changing needs of business world. Naturally,
unusual and bold decisions based on rich and unique experience and sound judgement are bound to yield rich dividends commensurate with the boldness and environmental interfacing. This means that these bold and unusual decisions are based on hard facts of changing environment.
This adaptive approach is reactive rather than proactive and tries to collect and mix the variant factors influencing the strategic decisions. It touches the very root of changing context of decision-making. This approach is very common in case of public sector enterprises where decision-making power is divided amongst different constituents. It is a matter of governing and managing these enterprises where the objectives are social service orientation hinged by profit making. That is, though the aim is to meet the social needs the government enterprises not barred from making profit.
Features of Adaptive Approach
(1) It is an Exercise of Problem-Solving – Such an approach is to solve the problem encountered which are more of survival and maintenance or continuation of existing situation rather hunting new opportunities and encashing on them.
(2) Dominance of Decision Making Process by Constituents – These constituents we mean here the ‘publics’ that have stake in business. The decísion-making process is shared by the owners, managers, government agencies, trade unions, financers and the like. The decision reflects the interests of these stake-holders.
(3) Priority Based Decisions – This approach believes in solving one problem at a time. The most urgent problem gets the priority over others. The idea behind this is to attain and maintain highest degree of flexibility to adapt the decision to more pressing needs. Logic behind this is to use all the vigor and strength in solving effectively the most pressing problem so that they need not look back again.
This approach calls for making decisions in anticipation of the future state of affairs where the organisation is prepared to face it boldly. That is, strategic decisions are based on socio-economic purposes of the organisation, value of top management, external opportunities and problems on one hand and organisations strength and weaknesses on the other. It is widely used by multi-nationals which have formalised and structured strategic decision-making process.
Features of Planning Approach
(1) Analysis of Factors Influencing a Strategy – The process of strategy making is founded on analysis of various factors that influence the strategy. These factors are both external and internal. External factors are economic, technological, socio-cultural, political, ecological and the internal related with firm’s strengths and weaknesses.
(2) Systematic and Structured Approach – Płanning approach to strategic decision making involves systematic and structured approach to the solution of problems. It is more a task of assessisng the cost benefit pay-offs of the possible alternatives. It is a systems approach in that the structure of organisation and its parts are geared to make possible the pay off’s in terms of costs and benefits.
(3) It is a Comprehensive Process – It is comprehensive process in that it is capable of producing a set of integrated decisions and strategies. That is, all the decisions and strategies that are inter-departmental and inter level of the organisation are supporting one another rather than supplanting. Thus, the goal of profit maximisation or wealth maximisation is having the organisational level support and the interdepartantal and inter sections support where each is limited, balanced and integrated. It is a coordinative approach.
It is evident that above three approaches are having contrasting ways for strategic decision making. It is not mandatory to follow a particular approach. In practice, to its advantage, it may select one of these or combine them to get the best results provided the combination works within the internal constraints on resources and compatibilities and external uncontrollable factors that provide threats and opportunities.