Lecture 5:

Strategic Decision-Making
Objectives
• Understand the nature of strategic decision-making.
• Realise that there are multiple ways of making decisions (different
views)…and…
• …there is no one best way (depends on context)

No! Yes! No! Yes!

 Managers do not know or understand everything! For example…
› “I have a plan: it’s in my head” (Sales Manager at an exporting firm in the
UK)
 Any decision, regardless of how it is made, will be made based on
information…
› that information can be full, or very little; good, or very bad!
 “Strategy is just as much about what you decide not to do as it is what
you do” (Finkelstein, 2003)

First things first…

 Decision Types: Longer term;
Competitive [strategic] positioning
Resource allocation, management and
Strategic long-term investments;
Sets and affects direction;
Basis for competing and gaining
advantage
Short term;
Day-to-day resource allocation;
Does not affect firm direction;
Operational Day-to-day decisions;
Focus on low-level mechanisms
Very important. Perceiving an issue as “strategic will emphasize long-term implications, as well
as stress the effect of the problem on the organization as a whole and its consequences for
competitive positioning…perceiving a problem as operational will tend to emphasize short-term
localized implications and focus attention on specific actions to be taken” (Berthon et al., 2001:
139)
What makes a ‘Strategic Manager’?

Making strategic decisions! …but this is obvious, right??

Plan or improvise?

It’s a question of balance!

 But Marketplace???????

Markets are volatile, uncertain, complex and ambiguous on

the whole…

Strategy in Turbulent Times 6

Then add the international dimension into the mix…
Then add Uncertainty into the mix!

Outcomes of
strategic
decisions are hard Crucial to debate and
to predict communicate

Risks are greater,

value is harder to
discern and create Innovation and new
business models
(e.g., open innovation) Unpredictable behaviour and patterns
Strategic Planning

STRATEGIC PLANNING
Rational Approach to Decision-Making

Rational actors access as complete information

• Rational approach as is possible pertaining to all the available
comes from alternatives
economics
• Central premise is
that decisions are All possible consequences of each of the
made in a three-step alternatives are mapped out
process:

Comparison of alternatives, normally by using a

cost-benefit analysis etc, also evaluate
Strategy in Turbulent Times 11
competitive advantage, value etc
Characteristics of Formal
Formal
Strategic Planning (Mintzberg)
Purposeful

TMT
decision- Information
making

Strategic
• Plan first by the top! Planning
Execute then by the bottom!
Tight
Analysis
• Ideal for Deliberate Control
Strategy
Carefully
Implement
Strategy in Turbulent Times 12
 Environmental
A clear strategy formulation Analysis
•Economic
process provides structure… •Socio-cultural
•Technological
•Political
Opportunities &
Threats
Evaluate
Industry Evaluation
Current
Analysis Strategy •Resource
Performance
•Mission •Structure Options Requirements
•Evolution •Business Unit •Risk/return
•Goals
•Competition •Corporate
•Objectives
•Strategies Competitive Implementation
Analysis &
Positioning
Company
Analysis
•Structure
•Resources
•Processes
How do we get there?
•Culture
Strengths &
Weaknesses
Strategy in Turbulent Times 13
Where should we go?
Where are we now?
One problem with planning is…
 CRITIQUE by Mintzberg…Errors in rationalist views
Formalization
The processes that will lead to strategy’s success can be clearly identified and anticipated; but
what about sudden events (i.e. Emerging events?)
Detachment
A divide is presupposed between strategic planning and emerging conditions!!
Quantification
The strategy-making process is driven by ‘hard facts’, by quantitative objective representations
(i.e. cost/profit)…again what about emerging events?
Predetermination
The context for strategy making is stable and relies on hard data and predictable states of
affairs…again where are the emerging events in all this???
“Imagination is more important than knowledge. A. Einstein

Emergence and Improvisation

EMERGENCE AND
IMPROVISATION
 Mintzberg and Emergence
Mintzberg’s theory is based on ‘emergence’:
• Emergent strategy originates in the interaction of the organization with
its environment
• As events unfold and ideas about them coalesce, emergent strategies
tend to converge as ideas and actions from multiple sources are
integrated into a pattern
• Strategy is what strategists do in practice
• Strategy is constantly being redefined, reconfigured and renegotiated in
practice
Emergence and Learning

By implication then…

• No need for a strategy unit or a strategically minded leader at the top;

managers should improvise decisions based on emergent events!!
• Rather than trying to predict the future, the mantra of the emergent
approach is being prepared for future challenges.
• Preparedness replaces predictability as the strategic imperative
• Implies an absence of process…no right/wrong way to do it.
Thinking Point……chaos????

Just how realistic is pure

emergence though…??
The Reality of Strategic Decision-Making

Strategy is not just about creating a detailed,

long-term plan

Strategy should focus on a long-term

strategic intent and flexible means for
realising that intent

Learning and continuous renewal are

essential parts of strategy
‘Improvisation’?
Thinking and doing
simultaneously (Weick, 1996)

“…an index of…creativity,

spontaneity, and action”
Improvisation (Nemkova, Souchon, & Hughes,
2012: 353)

“conception of action as it
unfolds…drawing on available
material, cognitive, affective &
social resources” (Kamoche &
Cunha, 2001: 96)
How to foster an ‘improvisation competence’ in
business?
• Fluid information systems

• Build flexible memory systems

• Experimental culture
 Agree, accept, and add; decentralise

• Risk tolerance and failure by design!

• Curiosity, learning, and teamwork

“The new economy’s most profound strategic implication is that companies must
capture unanticipated, fleeting opportunities in order to succeed”
(Eisenhardt and Sull, 2001: 108)

How to Make Decisions Effectively

HOW TO MAKE DECISIONS

EFFECTIVELY
 Group Work 1: Case study example of GM and Opel
(opportunity in East Germany post Berlin Wall, 1989)
Time: 20 minutes
Which of these two companies was improvising decisions? Why?
Which of the two adopted planning/rational?
Chaos; organisation Opel Chairman Lou
GM Corporate Board:
Hughes:
Need more information! out of control? Local responsiveness to
Planning.
Current strategy: large,
…or… competition (VW).
Agility? Local contacts; negotiate
modern, focused factories
right to build new factory
in Spain. Local in East Germany.
Over 1 year timeframe.
responsiveness? Obtained subsidies.
Resource
commitments
shaping strategy?
Both create a better world………better way for making decisions……!!!!!!
The Purpose of Improvising…to create agility

The Problems of Planning…

Rigidity, time, detailed process,
information requirements,
inability to deal with surprises!!

…are counterbalanced by the benefits of

improvising.
Speed, action-oriented, creativity,
information light, based on sensemaking
 Group Activity 2: 45 minutes
Retail has suffered immense turbulence in recent years.
Let’s reflect on the Blockbuster case.
1) How did they make important strategic decisions?
2) Group discussion: what would you have done strategically at
Blockbuster and how? Why?

The decisions taken were not necessarily wrong…maybe they

were just badly implemented or the wrong answers for the
circumstances/context at that time
 Conclusions

• Decision-making is difficult. No one can actually teach you the perfect way of making
decisions! The worst decision is a biased decision.
• Planning and improvising work better together.
• Trial-and-error?! Is that the best I can come up with?
• There are always examples of best practice, and bad practice
• But copying some other person or firm’s decision-process is at best sub-optimal as
internal and external conditions for your firm will likely be completely different
• Learn from the successes and mistakes of others, but, find what works best for
you!
Readings
• Bower, J.L. and Gilbert, C.G. (2007), “How managers’ everyday decisions
create or destroy your company’s strategy?”, Harvard Business Review,
85 (February): 72-79
• Menon, A., Bharadwaj, S.G., Adidam, P.T. and Edison, S.W. (1999),
“Antecedents and consequences of marketing strategy making: A model
and test”, Journal of Marketing, 63 (April): 18-40
• Nemkova, E. Souchon, A.L. and Hughes, P. (2012), “Export decision-
making orientation: An exploratory study”, International Marketing
Review, 29 (4): 349-378
Readings

• Pettigrew, A. (1987), “Context and action in the transformation of the

firm”, Journal of Management Studies, 24(6): 649-670.
• Nemkova, E., Souchon, A.L., Hughes, P. and Micevski, M. (2015), “Does
improvisation help or hinder planning in determining export success?
decision theory applied to exporting”, Journal of International
Marketing, 23(3): 41-65.
• White, J.C., Varadarajan, P.R., and Dacin, P.A. (2003), “Market situation
interpretation and response: The role of cognitive style organizational
culture, and information use”, Journal of Marketing, 67(3), 63-79.
Readings
• Kouropalatis, Y., Hughes, P. and Morgan R.E. (2012), “Pursuing ‘Flexible
Commitment’ as Strategic Ambidexterity: An Empirical Justification in
High Technology Firms”, European Journal of Marketing (Special Issue),
46 (10), 1389-1417. Winner of the Outstanding Paper Award 2013.
• Barr, P.S. and Glynn, M.A. (2004), “Cultural variations in strategic issue
interpretation: relating cultural uncertainty avoidance to controllability
in discriminating threat and opportunity”, Strategic Management
Journal, 25, 59-67.