B301 Block 3 - Strategic Choice
Bound Rationality (Simon, 1997)
Describes making decisions within the constraints of limited information and alternatives.
Psychological decision making (Keeney and Raiffa) reading 12
From this reading it is clear that decision making is fraught with traps, as follows: anchoring traps, in which past events or trends are given undue influence on decision making status quo trap, in which decisions are overly orientated towards maintaining the present situation sunk-cost traps, where past decisions are validated even if they are substantially incorrect, invalid, or even demonstrably poor confirming evidence traps, where we look for evidence that confirms our preferred choice rather than seeking out the variety of evidence, both positive and negative, that is relevant and appropriate for our choices and alternatives Framing traps, where the manner in which choices are presented affects our decisions.
Grant's Seven Drivers of cost advantage
Grant (2013, P. 181) suggests that there are seven drivers of cost advantage, and these are: * economies of scale · economies of lear ning · production t echnique S product design · input costs · capacity u tilisation residual efficiency.
Stuck in the Middle - Porter's Competitive Strategy (Hiya st al., 2003)
Integrated cost leadership / differentiation. Porter argues that this approach will see business stuck in the middle making know progress. However, this works well for many business such as H&M and Zara
Political Model (1970)
Restriction of flow of information, hiding of aims of the influencer of decisions. Takes into consideration that many decisions require debate, discussion, and coalition building
Domain Navigation - Lionel Bourgeois (1986) Competitive Strategy
Senior managers take the corporate level decisions of domain selection and define how this is achieved.
SAFe - suitability, acceptability and feasibility. Framework (Johnston et al.)
Suitability * First, the proposed strategy should be consistent with and fulfil the industry KSFs for the market in which the organisation operates. Second, the proposed strategy should address the strategic problem or opportunity identified in the strategic analysis. * Third, the strategy should capitalise on the organisation's identified resources and capabilities and the way they relate to external oppormnities. Finally, the strategy should fit the organisation's objectives, such as required rates of remm on capital, profitability measures and other, non- financial, performance indicators. Increasingly, these objectives may also involve considerations of the organisation's role in a wider context, including an acknowledgement of corporate social responsibility. Acceptability Test questions include the following: What will be the financial or cost-benefit permrmance? Is there an unacceptable risk of endangering overall liquidity or affec· g capital stmctur e? · Is there a risk that the organisation's relationships with 1ts stakeholders could be unacceptably affected? Is the proposal likely to upset employees, institutional shareholders, existing customers or clieJats, or governmental organisations? * What is the effect of the proposed strategy on the internal systems and procedures? Even if feasible, will there be an unacceptable level of additional pressure upon staff? Feasabilty The questions to be asked include the following: Can the strategy be resou]ced? Even the most brilliant strategy cannothe implemented if, for example, the organisation's financial position is too weak to raise the capital needed to begin implementation. Can the organisation actually achieve the required level of operational perf ormance, say, in quality and service levels? Would a strategy aimed at reducing costs in manufacturing run into problems associated with inadequate managerial resources, insufficient numbers of trained staff, insufficient plant, or inadequate process and product technologies? How will the competition react and how will the organisation cope witll that reaction? For example, a strategy to increase market share by reducing prices may lead to a fierce competitive reaction.
Ansoff's Growth Matrix
Tool to help decide how and where to compete in the market through New products, evelopment existing products or some completely different
Domain Selection - Lionel Bourgeois (1986) Corporate Strategy
Where senior leaders such as headoffice (corporate level) decide which new market or industry to enter with an existing expertise. Senior leaders are also known as a corporate parent steer the direction of the business at a high level.
decision making process
a logical series of steps used to make a decision
Rational Approach Decision Process Model (Gore, 1992)
analytical tool for strategic decision making
satisficing decision (Simon, 1997)
chooses the first satisfactory alternative that presents itself
Traditional Roles of Parent Company - Lynch (2008)
providing corporate functions and services, such as international treasur) management and central human resource management undertaking corporate development initiatives, such as pursuing a central' R&D role or negotiating new acquisitions providing additional finance for growth or problem areas developing formal links between businesses, and facilitating SUCH developments as the transfer of technology or core competencies between SBUs.
