Monday 24 October 2011

The Nature of Strategic Decisions


Although the process of creating strategy is often discussed as if it were an unconstrained design process, keep in mind that while strategists evaluate strategy, the firm is operating. 

Presumably this involves evaluating the extent to which present strategy is meeting expectations.  It may be the case that only a small part of, say, marketing strategy would have to be changed to correct a problem.  In effect, then, such a change would constitute an acceptance of societal-, corporate-, and business-level strategy, and also of most of the firm's functional strategy set.  Marketing strategy would be all that was rejected.  When a firm's performance is less than satisfactory, the reason often is a functional strategy shortcoming. 

One might say, then, that a "good" business-level strategy would have been poorly implemented by part of its functional strategy set.  For this simple example, a change in marketing strategy could improve performance while other levels of strategy would remain unchanged.

Alternatively, a problem with the nature of a firm's or SBU's business brought about by a major environmental opportunity or threat, a change in that level's goal set, or the development of some internal capability or weakness could necessitate a business-level strategy change.  The new strategy would probably include vestiges of the old along with some unfamiliar elements.  In most cases a whole new functional strategy set would likely have to be designed and put into effect to implement the new business-level strategy.

More generally, one could conceivably change parts of a firm's functional strategy set without changing business-level strategy.  However, rarely would one expect to encounter the case in which a change in business-level strategy did not trigger the necessity to change functional-level strategy in some way, at least not in a successfully managed business.

There is a risk of incorrectly identifying the strategy level at which a problem exists.  The tendency is to change functional level strategies or organisational structure in an attempt to remedy any problem.  Of course, if the problem existed within the firms corporate- or business-level strategy, for example, changing functional-level strategy would not correct it. In fact, this move would be likely to aggravate the situation.  The reason for this tendency is probably that functional strategy changes are potentially less disruptive than changes in the other levels.

Good fortune

Dr. Brian
CEO MAANZ International http://www.marketing.org.au
http://www.linkedin.com/in/drduck

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