Decisions are constantly made in organizations, and they can broadly be considered to fall in one of two categories. One set of decisions involves the development of strategies for the total organization. These strategic-level decisions include defining the mission and overall corporate goals, determining what businesses to be in, and how to compete in those businesses. The second set of decisions helps to make strategic-level decisions work. They keep the business running efficiently by translating strategies into action in the areas of human resources, finance and accounting, marketing, research and development, and manufacturing. When managers of these business functions choose courses of action, they take their cues from the strategies developed for the total organization. Thus, because strategic decisions affect the firm as a whole and involve creating competi tive advantage, it is important to have a clear understanding of the distinction between strategic and operational decision making—however, it is a distinction that is not always easy to make. At the start of this strategic management course, the typical way that many view the issues will be from an operational perspective. This is a familiar perspective for business majors with courses of study specializing in one function of the business (e.g., marketing, accounting, computer information systems, etc.). Moreover, individuals with professional experience often make decisions dealing with their particular area of expertise at the operational level. This is not surprising, since up to this point in most curricula, courses are designed around the business functions and provide theory and training at the operational level. In addition, those individuals with professional experience have tended to be members of a single department focused on a business function. Although more and more organizations encourage employees at all levels to view their areas from a broader and strategic perspective, many have not had the opportunity or training to practice strategic thinking. Even when the conceptual distinction between strategicand operational-level decision making becomes clear, in reality the line separating the two types of decisions is not always obvious. For example, on the face of it, buying a small machine should be considered operational, should it not? But if new equipment is purchased in support of a new strategic direction for the firm, is the decision to purchase suddenly strategic in scope? What about an aggregated series of operational decisions, such as purchasing several machines in the production area? If equipment purchases can, in fact, give an organization additional competencies and thereby alter the strategy of the firm, then the answer, perhaps, is yes.
To help clarify what should be viewed as strategic decision making, the following points provide a basis for thinking about issues and decisions from a strategic perspective:
1. Is the decision about changing the firm’s position within the industry?
2. Will the decision involve a new business area?
3. Does the decision have a significant financial impact on the firm?
4. Would it evoke a significant response in the environment—that is, from competitors or other stakeholders?