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APPROACHES TO STRATEGIC DECISION
MAKING ,
PHASES IN STRATEGIC DECISION
MAKING &
STRATEGIC BUSINESS UNITS
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APPROACHES TO STRATEGIC
DECISION MAKING
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In practice, there are two basic approaches todecision making
1. PRESCRIPTIVE APPROACH
2. DESCRIPTIVE APPROACH
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Based on the degree of formalization in
decision making ,managerial control and
nature of environment, 3 types ofapproaches to strategic decision making are :
1. Formal Structured Approach
2. Entrepreneurial Approach3. Incremental Approach
4. Intuitive Approach
5. Adaptive Approach
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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.
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ENTREPRENEURIAL APPROACH
Strategy is made by one powerful individual whohas entrepreneurial competencies like innovation
and risk taking. The focus is on opportunities.
Problems are secondary. Generally the founder isthe entrepreneur and the strategy is guided by his
or her own vision of direction and is exemplified
by bold decisions.
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INCREMENTAL APPROACH
Used only in unavoidable situations.
Decisions are taken by considering few
alternatives.
Usually adopted by public companies .
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INTUITIVE APPROACH
Based on the intuition or anticipation of thepromoters of the business unit.
The CEO or the promoter makes decisions based
upon forecasting the future.
Success depends on promoters intuition,
experience, judgement,etc.
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ADAPTIVE APPROACH
Decisions are taken on the basis of how thechanges 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.
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PHASES IN STRATEGIC
DECISION MAKING
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PHASES
1. Identifying the problem
2.Diagnosis of the problem
3. Development of solution4. Evaluation
5. Implementation of decision
6. Control
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IDENTIFYING THE PROBLEM
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DIAGNOSIS OF THE PROBLEM
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DEVELOPMENT OF THE SOLUTION
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EVALUATION
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IMPLEMENTATION OF DECISION
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CONTROL
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STRATEGIC BUSINESS UNIT
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SBU
A strategic business unit is a separate and self-sufficient business unit operating in the market.
Each SBU should be an individual business entity
with an individual planning process.
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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.
l h li f d i
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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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THANK YOU