Definition and Characteristics
Strategic decisions are the decisions that are concerned with the whole environment in which the firm operates, the entire resources and the people who form the company, and the interface between the two.
Characteristics/Features of Strategic Decisions
- Strategic decisions have major resource propositions for an organization. These decisions may be concerned with possessing new resources, organizing others, or reallocating others.
- Strategic decisions deal with harmonizing organizational resource capabilities with threats and opportunities.
- Strategic decisions deal with the range of organizational activities. It is all about what they want the organization to be like and to be about.
- Strategic decisions involve a change of major kind since an organization operates in an ever-changing environment.
- Strategic decisions are complex in nature.
- Strategic decisions are at the topmost level, are uncertain as they deal with the future, and involve a lot of risks.
- Strategic decisions are different from administrative and operational decisions. Administrative decisions are routine decisions that help or rather facilitate strategic decisions or operational decisions. Operational decisions are technical decisions that help the execution of strategic decisions. To reduce cost is a strategic decision which is achieved through the operational decision of reducing the number of employees and how we carry out these reductions will be an administrative decision.
The differences between Strategic, Administrative and Operational decisions can be summarized as follows-
| Strategic Decisions | Administrative Decisions | Operational Decisions |
| Strategic decisions are long-term decisions. | Administrative decisions are taken daily. | Operational decisions are not frequently taken. |
| These are considered where future planning is concerned. | These are short-term-based Decisions. | These are medium-period-based decisions. |
| Strategic decisions are taken in Accordance with organizational mission and vision. | These are taken according to strategic and operational decisions. | These are taken in accordance with strategic and administrative decisions. |
| These are related to the overall Counter planning of all organizations. | These are related to the working of employees in an organization. | These are related to production. |
| These deal with organizational Growth. | These are in the welfare of employees working in an organization. | These are related to production and factory growth. |
Benefits of Strategic Management
There are many benefits of strategic marketing and they include identification, prioritization, and exploration of opportunities. For instance, newer products, newer markets, and newer forays into business lines are only possible if firms indulge in strategic planning. Next, strategic management allows firms to take an objective view of the activities being done by it and do a cost-benefit analysis as to whether the firm is profitable.
Just to differentiate, by this, we do not mean the financial benefits alone (which would be discussed below) but also the assessment of profitability that has to do with evaluating whether the business is strategically aligned to its goals and priorities.
The key point to be noted here is that strategic management allows a firm to orient itself to its market and consumers and ensure that it is actualizing the right strategy.
Financial Benefits
It has been shown in many studies that firms that engage in strategic management are more profitable and successful than those that do not have the benefit of strategic planning and strategic management.
When firms engage in forward-looking planning and careful evaluation of their priorities, they have control over the future, which is necessary for the fast-changing business landscape of the 21st century.
It has been estimated that more than 100,000 businesses fail in the US every year and most of these failures are to do with a lack of strategic focus and strategic direction. Further, high-performing firms tend to make more informed decisions because they have considered both the short-term and long-term consequences and hence, have oriented their strategies accordingly. In contrast, firms that do not engage themselves in meaningful strategic planning are often bogged down by internal problems and a lack of focus that leads to failure.
Non-Financial Benefits
The section above discussed some of the tangible benefits of strategic management.
Apart from these benefits,
- firms that engage in strategic marketing are more aware of the external threats,
- an improved understanding of competitor strengths and weaknesses and
- increased employee productivity.
- They also have lesser resistance to change and
- a clear understanding of the link between performance and rewards.
The key aspect of strategic management is that the problem-solving and problem-preventing capabilities of the firms are enhanced through strategic management. Strategic management is essential as it helps firms to rationalize change and actualize change and communicate the need to change better to their employees. Finally, strategic management helps in bringing order and discipline to the activities of the firm in its both internal processes and external activities.