Strategic Management

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STRATEGIC MANAGEMENT

LESSON 5:
CHARACTERISTICS OF STRATEGIC DECISIONS
Strategic Decision-Making
Strategic management is characterized by its emphasis on
strategic decision-making. As an organization grows bigger and becomes complex with higher degree of uncertainty, decisionmaking also becomes increasingly complicated and difficult. Strategic decisions have to deal essentially with the long-term future of the organization and have three important characteristics. 1. Rare

Strategic decisions are not common and have no precedents.
2. Consequential
Strategic decisions involve committing substantial resources of the company and hence a high degree of commitment from
persons at all levels.
3. Directive
Strategic decisions can serve as precedents from less important decisions and future actions of the organisations10.

Mintzberg Model
According to Mintzberg, the modes of strategic decisions
making are:
1. Entrepreneurial Mode
Formulation of strategy is done by a single person in this
mode. The focus is on opportunities. Strategy is guided by the founder’s vision and is characterized by bold decisions. In the Indian set-up, we can cite the case of Wipro Infotech as an
example of this mode of strategy formulation.
2. Adaptive Mode
This mode of decisions making is referred to as “muddling
through”. It is characterized by reactive solutions rather than a proactive search for new opportunities. We can again cite the example of Wipro Infotech
introducing the sale of customWhat
ized Personal Computers in
response to Dell Computers
entering the Indian market.
How
3. Planning Mode
This mode of decision-making
involves systematic information
gathering for situational
analysis, generating alternate
strategies and selection of the
appropriate strategy. As could
be inferred, this mode includes
both the proactive mode and
the reactive solutions to current
problems. For example, entry
of MNCs into the automotive
markets in India has made the

11.601

lead player Maruti Suzuki to come out with new models and
discard/slow down production of non-moving and old
models.
Sometimes organizations may adopt a fourth mode, called the
logical incrementalisation mode. This is a synthesis of all the three modes of strategic decision-making listed above.
Quninn12 describes logical incrementalisation as: “An interactive process in which the organization probes the future, experiments and learns from a series of partial (incremental) commitments rather than through global formulation of total

strategies.”
As already explained, strategic decisions involve an interface between an organization and its external environment. This is in contrast to operating decisions, which are more frequent. The effects of strategic decisions permeate throughout the organization at all levels for a considerable length of time since it involves committing substantial amount of resources of the

organization. Sometimes this is referred to as a non-selfgenerating decision, implying that though strategic decisions may be few in number, the organization should always be aware of the need to make such decisions.

Hence, it is essential to put a mechanism in place to take
strategic decisions. This is more so in the case of Indian
organizations with the onset of liberalization. Table 1.1
provides a comparison of the operating and strategic decisions. As may be seen from the table, the organizations’ short-term survival is affected by its operating and administrative efficiency. Its success or failure in the long term depends on right strategic decision-making, i.e. it depends on doing the right things rather than on doing the things right.

Strategic decisions

Clear

Unclear

Operating Decisions

I

II

Effective

Clear strategy and effective operations

Unclear strategy but effective

have contributed to success in the past

success in the past but success in the

future
Ineffective

operations have...
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