APPROACHES TO STRATEGIC DECISION MAKING , PHASES IN STRATEGIC DECISION MAKING & STRATEGIC BUSINESS UNITS

APPROACHES TO STRATEGIC DECISION MAKING

In practice, there are two basic approaches to decision making

1. PRESCRIPTIVE APPROACH 2. DESCRIPTIVE APPROACH

Based on the degree of formalization in decision making ,managerial control and nature of environment, 3 types of approaches to strategic decision making are :
1. Formal Structured Approach 2. Entrepreneurial Approach 3. Incremental Approach 4. Intuitive Approach 5. Adaptive Approach

FORMAL STRUCTURED APPROACH

Systematic procedures and planning programmes are set . Strategic decisions are on the right path since the job is assigned only to experienced planners. Makes best use of different planning systems.

ENTREPRENEURIAL APPROACH
Strategy is made by one powerful individual who has entrepreneurial competencies like innovation and risk taking. The focus is on opportunities. Problems are secondary. Generally the founder is the entrepreneur and the strategy is guided by his or her own vision of direction and is exemplified by bold decisions.

INCREMENTAL APPROACH
Used only in unavoidable situations. Decisions are taken by considering few alternatives. Usually adopted by public companies .

INTUITIVE APPROACH
Based on the intuition or anticipation of the promoters of the business unit. The CEO or the promoter makes decisions based upon forecasting the future. Success depends on promoters intuition, experience, judgement,etc.

ADAPTIVE APPROACH
Decisions are taken on the basis of how the changes in the environment is going to have its impact at a given time. That is adapting to the environment. This mode is typical of most universities, many large hospitals and a large number of governmental agencies.

PHASES IN STRATEGIC DECISION MAKING

PHASES
1. Identifying the problem 2.Diagnosis of the problem 3. Development of solution 4. Evaluation 5. Implementation of decision 6. Control

IDENTIFYING THE PROBLEM

DIAGNOSIS OF THE PROBLEM

DEVELOPMENT OF THE SOLUTION

EVALUATION

IMPLEMENTATION OF DECISION

CONTROL

STRATEGIC BUSINESS UNIT

SBU
A strategic business unit is a separate and selfsufficient business unit operating in the market. Each SBU should be an individual business entity with an individual planning process.

The best example of strategic business unit would be to take organizations like HUL, P&G or LG in focus. These organizations are characterized by multiple categories and multiple product lines.

For example, HUL may have a line of products in the shampoo category, Similarly LG might have a line of products in the television category. Thus to track the investments against return, they may classify the category as a different SBU itself.

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