Process of strategic

choice

Submitted by- Krishan Pal

Roll no- CM15216
Class- B.E int MBA,5th year
An old story at General Motors:-

 CEO Alfred Sloan proposed a controversial strategic decision.

 Each executive responded with supportive comments and praise.
 After all in apparent agreement, Sloan stated that they were not going
to proceed with the decision as:-
1. Either executives didn’t know enough to point potential downsides
of decision
2. Or they were agreeing to avoid upsetting the boss and disrupting
the cohesion of group.
 The decision was delayed until a debate could occur over pros and
cons.
DEFINITION

 Strategic choice is the evaluation of alternative strategies and

selection of best alternative. It is therefore, the decision to select
from among the grand strategies considered , the strategy which will
best meet the enterprise objectives.
 It involves the following four steps:-
1. Focusing on few alternatives
2. Considering the selection factors.
3. Evaluating the alternatives against these criteria
4. Making the actual choice.
Process of Strategic choice
1) Focusing on alternatives- The aim of this step is to narrow down the choice
of a manageable number of feasible strategies. It can done by visualizing a future
state and working backwards from it. Managers generally use GAP ANALYSIS for
this purpose. By reverting to business definition it helps the mangers to think in a
structured manner along any one or more dimesions of business.
 At corporate level strategic alternatives are – Expansion, Stability,
Retrenchment, Combination.
 At business level strategic alternatives are- Cost Leadership, Differentiation or
Focused business strategy.
2) Analyzing the strategic alternatives – The alternatives have to be
subjected to a thorough analysis which rely on certain factors known as selection
factors. These selection factors determine the criteria on the basis of which
evaluation takes place. They are:
 Objective factors- These are based on analytical techniques and are hard facts
used to facilitate the strategic chice
 Subjective factors- These are based on one’s personal judgement , collective or
descriptive factors.
CONTD….

3) Evaluation of strategies- Each factor is evaluated for its capability

to help the organization to achieve its objectives. This steps involves
bringing together analysis carried out on the basis of subjective and
objective factors. Successive iterative steps of analyzing different
alternatives lie at the heart of such evaluation.

4) Making a strategic choice- A strategic choice must lead to a clear

assessment of alternative which is the most suitable alternative under
the existing conditions. A blueprint has to be made that will describe the
strategies and conditions under which it operates. Contingency
strategies must be also devised.
BLUNDERS IN EVALUATION
 It is found that failure almost always stems from the actions of decision
maker , not from bad luck or situational limitations as:-
1. They desire for speedy actions leads to a rush to judgement.
2. They apply failure prone decision making practices such as
adopting the claim of an influential stakeholder.
3. They make poor use of resources by investigating only one or
two more options.
 These 3 blunders cause executives to limit their search for feasible
alternatives and look for quick consensus.
Two Techniques to Avoid
consensus Trap:-
 Devil’s Advocate:- The idea of the devil’s advocate originated in the
medieval roman catholic church as a way of ensuring that the impostors were
not canonized as saints. One trusted person was selected to find and present
all the reasons why a person should not be canonized. When this process is
applied to strategic decision making, a devil’s advocate (may be an individual
or group) is assigned to identify the potential pitfalls and problems with a
proposed alternative strategy in formal presentation
 Dialectical inquiry:- It involves combining two conflicting views- the
thesis and antithesis- into a synthesis. When applied to strategic decision
making, it requires that two proposals using different assumption regenerated
for each alternative strategy under consideration. After advocates of each
position present and debate the merits of their arguments before key
decision makers. Either one of the alternatives or a new compromise
alternative is selected as the strategy to be implemented .
Four Criteria
 Regardless of the process used to generate strategic alternatives , each
resulting alternative must be rigorously evaluated in terms of its ability
to meet four criteria.
1) Mutual Exclusivity:- Doing any one alternative would preclude doing any
other
2) Success:- It must be feasible and have a good probability of success.
3) Completeness:- It must take into account all the key strategic issues.
4) Internal consistency:- It must make sense on its own as a strategic
decision for the entire firm and contradict key goals, policies. And strategies
currently being pursued by the firm or its units.