Opportunity or Necessity? What Drives a Strategic Business Decision?

What is Strategic Decision Making?

Strategic decision making aligns your company’s short-term goals with its long-term vision to give your organization a clear sense of direction. An immense amount of planning goes into developing a strategic decision making process. Every company will have a slightly different approach to decision making based on its industry and target demographics. For example, a shoe company targeting younger athletes will have a much different approach to decision making compared to a luxury car brand.

How to Identify the Problem

Strategic decision making can be used to tackle two different kinds of problems: those that make it a necessity to change, and those that offer an opportunity to change. Though these two kinds of challenges are completely different at their core, they can both benefit the company if navigated strategically. Let’s take a look at the definition of these two different types of challenges and an example of each.


●  Necessity

The first kind of problem that strategic decision making can help a business navigate stems from necessity. These are challenges that make it a necessity for the business to change in some way. A business’s success could be threatened if it doesn’t respond quickly and effectively to these sorts of challenges. These are the types of issues that pose the most immediate threat to your business.


For an example of an issue that is a necessity, let’s look at a hypothetical local bike shop that targets casual audiences like families. One challenge that this company might face is the competition they face from large commercial chains like Walmart. The local bike shop likely can’t outprice Walmart without losing money, so it needs to change or its future is in danger. This issue is a necessity because, without a solution, the bike shop may have to go out of business.


Strategic decision making can be used to create a plan to navigate these situations that is backed by data. To continue with our example of the local bike shop, they could find that their products are more appealing to their target audience in some way. For instance, if the bike shop has data to prove to families that their bikes are statistically safer than Walmart’s, then parents will be more likely to buy their bikes.


●    Opportunity

Strategic decision making can also help businesses more effectively respond to opportunities in the market. Issues that offer an opportunity aren’t necessarily threats to the business but can cause the business to fall behind the competition if it doesn’t respond properly. This is the broader category of challenges facing businesses and it isn’t necessary to respond to every one of them. Sometimes, the best decision is to save your resources until a better opportunity presents itself.


Amazon’s absolute domination of the eCommerce industry is an excellent real-world example of a business taking advantage of an opportunity. In the early days of Amazon’s online presence, they were only an online book store. But Amazon saw very early on that online shopping was going to be the next big thing. Instead of fighting their way into the brick-and-mortar book store market, they transitioned into an eCommerce catchall that sold just about anything under the sun. They then incentivized consumers to use their platform with perks like free shipping and competitive prices. This turned out to be the right decision as just a few years later Amazon is one of the most successful and recognized brands in the world.


Stages For Making a Strategic Decision

●    Analysis

The first step to making a strategic decision is to perform a situational analysis. During this step of the process, your team will identify all of the current opportunities and challenges facing your company. Do not think of any solutions to the issues you identify in this step. The most you should be doing is gathering data relevant to the challenges you identify.


Here are some questions you make ask yourself during this phase of the process:

○  What is my competition doing differently?

○  Have we been meeting our previously set goals?

○  What opportunities can we identify?

○  What challenges can we identify?


●   Decision

The decision phase of the process is when you settle on a final strategy and create the framework to monitor its success. Decide on a list of key performance indicators, or KPIs, to measure how effective your strategy has been. You should also have a rough timeline for when you expect to roll out each step of the plan.


Here are some questions you may ask yourself during this phase of the process:

○  How long will this strategy take to implement?

○  How long will it be until we can see its effects?

○  How will we measure the effectiveness of the strategy?

○  What are the desired effects of this strategy?


●  Implementation

The final step of the process is to implement the finalized strategy. At this point, you should have a decision you can be confident in. All that is left is to follow through with the plan and measure its success. Remember to analyze the results of the decision you made to inform your strategy in the future.


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