Strategic Choice Theory

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Strategic Choice Theory
Article Review and Essay
Zhaoling Zhu

AD655 International Business, Economics and Cultures Instructor: Dr. Jung Wan Lee
02/29/2012
Introduction
Strategies are specific rules or actions for choosing actions in a contradictory situation; for some strategies are the long-term or high-level planning. The essential of a firm or a government’s strategy is to make the right choice.  They cannot afford to try all the strategies with their limited resources and abilities. The Strategic Choice Theory was first proposed by Kochan (Kochan, et.al, 1984) and his colleagues in the mid 1980s attempting to explain the transformation of the U.S. industrial relations when all other contemporary theories failed to. For example, in 1960s and 1970s the Dunlop’s systems theory (Dunlop, 1958) was widely accepted whereas some anomalies happened in it. First, the theory could not predict the union membership fell into a decline while traditional theories including Dunlop's theory presumed that labor unions would never change their employment relationships in that time. Second, based on the traditional theories, we could not know whether or not managerial values, behaviors in industrial relations could change. Third, the conventional industrial relations theories treated managements as reacting initiatives and changes that affected the transformation in U.S. industrial relations. One of the major reasons why Kochan and his colleagues were successful was because the theory they established was successful in understanding the anomalies when traditional industrial relations theories could not provide a good explanation. Meanwhile, this theory paid great attention to the dynamic process while other theories were too much static. For example, when the major theories at that time primarily considered the environmental conditions, the Strategic Choice Theory posed the concept of decision-making level factor. This made it different from other theories substantially. Overall, this theory was a big break through at that time trying to explain the transformation by employing more new factors for the satisfaction of a more complicated situation. Kochan’s approach to strategic choice in industrial relations was further defined by two conditions. First, strategic decisions can only occur where the parties have discretion over the decisions; that is, where environmental constraints do not severely curtail the parties’ choice of alternatives. Second, within the set of decisions over which the parties have discretion, strategic decisions are those that alter the party’s role or its relationship with other actors in the industrial relations system. This emphasized the importance of the decision-maker level and the relationship between the decision-maker level and the outcomes.

Occurrence of Strategic Choices
Kochan and his colleagues used a figure shown as below to illustrate the locations where strategic decision-making occurs. The columns of the matrix represent the three key actors who make strategic decisions and the rows represent the levels at which these decisions are made. Kochan also mentioned that the effects of the decisions may appear at multiple levels.

Industrial Relations Strategy Matrix|
Decision Level| Employers| Nature of decisions Unions| Government| I. Macro or global level for the key institutions| The strategic role of human resources; policies on unions; investments; plant location, new technology; and outsourcing| Political roles (e.g., relations with political parties and other interest groups); union organizing (e.g., neutrality and corporate campaigns); public policies (e.g., full employment)| Macro economic and social policies; industrial policy (protection vs. free trade)| II. Employment relationship and industrial relations system| Personal policies and negotiations and strategies| Collective bargaining policies and negotiations strategies...
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