Behavioral Considerations

Affecting Strategic Choice

Role of current
strategy

Degree of
Attitudes
firm’s external
toward risk
dependence

Managerial Internal Competitive

priorities political reaction
different from considerations
stockholders
 Behavioral Considerations
Affecting Strategic Choice
• Role of current strategy
– What is the amount of time and resources invested in
previous strategies?
– How close are new strategies to the old?
– How successful were previous strategies?
• Degree of firm’s external dependence
– How powerful are firm’s owners, customers,
competitors, unions, and its government?
– How flexible is firm with its environment?
 Behavioral Considerations
•
Affecting Strategic
Attitudes toward risk
Choice
– Industry volatility and industry evolution affect managerial
attitudes
– Risk-oriented managers prefer offensive, opportunistic
strategies
– Risk-averse managers prefer defensive, conservative
strategies
• Managerial priorities different from stockholder
interests
– Agency theory suggests managers frequently place their
own interests above those of their shareholders
 Behavioral Considerations
Affecting Strategic Choice
• Internal political considerations
– Major sources of company power are CEO, key subunits,
and key departments
– Power can affect corporate decisions over analytical
considerations
– See Fig. 9-6
• Competitive reaction
– Probable impact of competitor response must be
considered during strategy design process
– Competitor response can alter strategy success
 The Contingency Approach
• Contingency Approach Defined
– Also sometimes called the situational approach.
– There is no one universally applicable set of
management principles (rules) by which to
manage organizations.
– Organizations are individually different, face
different situations (contingency variables), and
require different ways of managing.