Strategic decisions are ... Essence and features, decision-making methods

One of the most crucial moments of leadership is strategic decisions. They determine the direction of development of the enterprise for the long term. How are decisions made and what are the pitfalls along the way?

Description of strategic decisions

Strategic decisions are managerial decisions that are characterized by such key features:

• They are oriented to the long term and lay the foundation for operational decisions and tactical activities.
• They are associated with uncertainty associated with the unpredictability of changes in the external and internal environment.
• They require the involvement of a large amount of resources (financial, intellectual and labor).
• Reflect the views of senior management about the future of the enterprise.
• Help organizations interact with the environment.
• Contribute to the alignment of the activities of the organization with available resources.
• They give an idea of ​​the planned changes in the enterprise.
• They are characterized by a high degree of uncertainty and the content of a large number of assumptions.
• They require an integrated comprehensive approach to the organization of organization management.
• They have an impact on the formation of the resource base and the organization of operational activities.

Types of strategic decisions

Allocate such types of strategic decisions of the enterprise:

• Financial - determination of methods for attracting, accumulating and spending material resources.
• Technological - determining the method of production of products or the provision of services.
• Commodity-market - the definition of a strategy for market behavior, production and sales of products (services).
• Social - the determination of the quantitative and qualitative composition of the staff, especially the interaction and material rewards.
• Management - methods and means of enterprise management.
• Corporate - the formation of a system of values, as well as ways to move toward the global goal of the organization.
• Restructuring - bringing the production and resource base in line with the changing strategy and market situation.

Key Decision Making Goals

We can distinguish the following main goals of strategic decisions:

• Achieving maximum profitability of work with a constant set of activities. The indicators in this case are sales volumes, profit margins, growth rates of these indicators, securities income, market coverage, the amount of payments to employees, improving the quality of products or services provided.
• Ensuring the sustainability of the global policy in the field of R&D expenses, the development of new products and services, competitiveness, investment, human resources, social responsibility.
• Search for new directions of development, new types of products and provided services. This involves the development of new policies regarding structural change in the organization.

Principles

Making strategic decisions at the enterprise is carried out in accordance with the following principles:

• Science and creativity. In the decision-making process, the manager should be guided by the results of scientific research and modern achievements in the industry. Nevertheless, there should be a place for improvisation and creativity, which determine an individual approach to solving a problem.
• Purposefulness. The strategic decision should be aimed at achieving the global goal of the enterprise.
• Flexibility. There should be the possibility of making adjustments related to changes in the internal and external environment.
• Unity of plans and programs. Decisions made at different levels of management should be consistent and have a single direction.
• Creation of conditions for implementation. Decision making should be accompanied by the creation of conditions conducive to the implementation of plans.

Strategic Decision Requirements

The strategic decisions of the company must meet the following requirements:

• Validity. Decisions should be made on the basis of well-studied reliable data both about the enterprise itself and about the external environment. This reduces the risk of erroneous beliefs.
• Authority. A strategic decision can only be made by the person who has the right to do so. Moreover, the manager should in the future oversee the implementation of the plan and be responsible for this issue.
• Directivity. The decision made is binding.
• The absence of contradictions. Strategic and tactical decisions, as well as previously identified goals of the enterprise should be fully agreed upon, because they will not work in isolation from each other.
• Timeliness. From the moment the situation changes until the decision is made, the shortest possible period of time must pass. Otherwise, in view of new events, the idea may turn out to be irrelevant and unnecessary.
• Clarity and conciseness. The wording should be such that a double interpretation is completely excluded.
• Optimality. The strategy should completely solve the existing problem and contribute to the achievement of goals. Moreover, its implementation should be accompanied by minimal time and material costs.
• Complexity The decision should be made taking into account all factors and conditions characteristic of the internal and external environment.

Different decision making process

Making strategic decisions implies going through the following main steps:

• Studying the problem. The manager must collect information about the state of the organization and the situation in the external environment. You should also identify problems and recognize the causes of their occurrence.
• Goal setting. The manager should have a clear idea of ​​what position the organization should achieve in a given period. Criteria should also be determined by which the success of the strategy will be evaluated.
• The formulation of ideas. It is necessary to formulate several options for the strategy, which subsequently will need to be compared and the most competitive one selected.
• Making strategic management decisions. Based on a comparison of previously formulated ideas.
• The implementation of the strategy. Detailed planning and implementation of the intended program.
• Evaluation of the results. After some time has passed since the adoption of the strategy, the compliance of the current indicators with the planned ones is analyzed.

Difficulties in making strategic decisions

Entrepreneurship involves a lot of difficulties, obstacles and risks. This is especially true when it comes to the long term. In particular, the adoption of strategic management decisions is accompanied by such difficulties:

• A dynamically changing external environment can nullify corporate plans. Especially if they are not formulated in general terms, but are described in detail.
• It is almost impossible to obtain information about the external environment in the quantity and quality that is needed for a complete comprehensive analysis.
• When making decisions, managers tend to simplify the problem, which may cause some difficulties in translating ideas into reality.
• The habit of using formalized procedures significantly reduces the range of possibilities.
• Operational employees do not take part in the formation of strategic decisions by top managers. Thus, employees are not always satisfied with the course of the enterprise, which may affect the quality of work.
• When making a decision, managers pay little attention to the methods of its implementation.

Strategic objectives

The strategic objective is the future situation within the organization or beyond, which may affect the implementation of goals. It may represent some kind of external threat or a weakness of the enterprise itself. The solution of strategic tasks is an advantageous use of the opportunity to stabilize the situation.

The concept was formulated as strategic planning developed. Initially, it was understood that the strategy would be reviewed and adjusted annually. But experience has shown that this is accompanied by large time and material costs, and therefore impractical. In addition, this leads to a lack of decisiveness among senior management and an insufficiently responsible approach to planning issues. Thus, a review of strategies began to be carried out every few years in order to identify strategic objectives. And over time, this issue was separated from planning.

Analysis methods

Analysis of strategic decisions can be carried out through such methods:

• Comparison - comparing the value of key indicators in order to identify deviations from the planned parameters.
• Factor analysis - establishing the degree of influence of various factors on the resulting sign. The ranking of factors allows you to draw up a plan of measures to improve the situation.
• Index method - the calculation of index indicators in order to study the state of phenomena or their elements in dynamics. Suitable for the study of complex processes that are not always measurable.
• The balance method is a comparison of performance indicators in order to study their dynamics, as well as identify mutual influence. The relationship between the objects is manifested in the equality of indicators.
• The method of chain substitutions is to obtain adjusted values ​​by replacing the base (planned) indicators with actual ones.
• The elimination method is the allocation of the action of a specific factor on performance indicators. Moreover, the influence of all other factors is excluded.
• The graphical method is a comparison of planned or basic and reporting indicators through charts and graphs. Allows you to visualize the degree of implementation of the strategy.
• Functional-cost analysis - a systematic study that is used to increase returns per unit of cost for each object. The expediency of the functions performed by the object is established.

Tasks

Strategic decisions are an integral part of enterprise management. They determine the direction of activity for several periods ahead, therefore they need careful analysis. The objectives of the analysis are as follows:

• evaluation of the production plan;

• optimization of the business program for each workshop;

• resource allocation optimization;

• optimization of technical equipment;

• determination of the optimal size of the enterprise as a whole and its structural units;

• determination of the optimal range of products or the list of services provided;

• determination of optimal logistics routes;

• determination of the feasibility of repair, reconstruction and modernization;

• comparison of the efficiency of use of each unit of the resource;

• determination of economic losses to which the decisions made may result.

Levels

Strategic decision planning is carried out at three levels. Their contents are described in the table below.

Typical Models

The strategic decisions of the organization can be made in accordance with the following typical models:

• Entrepreneurial. Development and decision-making is carried out by one authorized person. At the same time, the main emphasis is on potential opportunities, and problems are relegated to the background. It is important that the manager makes a strategic decision in accordance with how he personally or the founder of the enterprise sees the direction of development.
• Adaptive. The model is characterized by reactive actions to emerging problems, rather than the search for new managerial opportunities. The main problem with this approach is that stakeholders are promoting their own vision of a way out of the situation. As a result, the strategy is fragmented, and its implementation is significantly complicated.
• Planning. This model involves the collection of information that is necessary for an in-depth analysis of the situation in order to generate alternative ideas and choose the optimal strategy. A search is also being made for solutions to emerging problems.
• Logical. Despite the fact that managers are aware of the mission of the corporation, when developing strategic solutions, they prefer interactive processes during which experiments are conducted.

Types of financial strategies

The development of strategic decisions in many respects affects financial issues. The success of an activity largely depends on material support. In this regard, it is worth highlighting the following main types of financial strategies:

• Financial support for accelerated growth. The strategy is aimed at ensuring the accelerated pace of operational work. First of all, we are talking about the production and marketing of finished products. As a rule, the use of such a strategy is associated with a high demand for financial resources, as well as the need for growth in current assets.
• Financial support for sustainable organization growth. The main goal is to achieve a balance between limited growth in operating activities and the level of financial security. It is the support of the stability of these parameters that makes it possible to efficiently distribute and use material resources.
• Anti-crisis financial strategy - ensures the stability of the enterprise at the time of overcoming the crisis of operational activity. The main task is to create such a level of financial security so that there is no need to reduce production volumes.

Strategic Decision Assessment System

Strategic decisions are a complex factor that needs to be carefully evaluated to confirm feasibility and effectiveness. There are four main elements in this system:

1. Motivation. First of all, the head of the organization (or the responsible manager) should be interested in conducting the assessment. The desire, as a rule, is due to the fact that a clear relationship should be traced between the proposed strategy and organization philosophy. Another motivating factor is the financial results that will follow the successful implementation of a competent strategy.
2. Informational resources. For the assessment to be objective and reliable, it is necessary to have up-to-date information on hand, presented in a convenient form for perception. It is important that the company has an effective system for collecting and processing management data. It is also important to have a system for forecasting possible results from the implementation and implementation of a strategic decision.
3. Criteria. Assessment of strategic decisions is carried out in accordance with a system of criteria. This is a sequence of implementation and implementation, coordination of strategies with the requirements of the internal and external environment. It is also worth objectively evaluating the feasibility of strategic plans and the main advantages compared to competing organizations.
4. Making decisions on the results of the assessment. Based on the data obtained and the results of the studies, the head or authorized manager must conclude that it is advisable to implement or continue the implementation of the strategic decision under consideration.

We examined the importance and goals of strategic decisions in the enterprise.