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5th Sem Strategic Management Notes

Factor Influence Strategic Choice

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Last updated: 18 July 2023

Strategic Choice – Factors Affecting & Process Of Strategic Choice

Strategic choice refers to the decision which determines the future strategy of a firm. It addresses the question “Where shall we go”.

A SWOT analysis is conducted to examine the strengths and weaknesses of the firm and opportunities that can be exploited are also determined.
Based on the analysis the firm selects a path among various other alternatives that will successfully achieve the firm`s objectives. Strategic choice is, therefore, the decision to select from among the grand strategies considered, the strategy which will best meet the enterprise objectives. The decision involves the following four steps – focusing on a few alternatives, considering the selection factors, evaluating the alternatives
against these criteria and making the actual choice.

Factors Affecting Strategic Choice 

  • Environmental constraints
  • Internal organizations and management power relationships
  • Values and preferences
  • Management`s attitude towards risk
  • Impact of past strategy
  • Time constraints- time pressure, frame horizon, the timing of the decision
  • Information constraints
  • Competitors reaction

Process of Strategic choice

1. Focusing on alternatives – The aim of this step is to narrow down the choice to a manageable number of feasible strategies. It can be done by
visualizing a future state and working backward from it. Managers generally use GAP analysis for this purpose. By reverting to a business definition it helps the managers to think in a structured manner along any one or more dimensions of the business.

  • At the Corporate level, strategic alternatives are -Expansion, Stability, Retrenchment, Combination
  • At the Business level, strategic alternatives are – Cost leadership, Differentiation or Focused business strategy.

2. Analyzing the strategic alternatives- The alternatives have to be subjected to a thorough analysis that relies on certain factors known as
selection factors. These selection factors determine the criteria on the basis of which the evaluation will take place. They are:

Objective factors – These are based on analytical techniques and are hard facts used to facilitate strategic choice.
Subjective factors – These are based on one`s personal judgment, collective or descriptive factors.

3. Evaluation of strategies – Each factor is evaluated for its capability to help the organization to achieve its objectives. This step involves bringing together analysis carried out on the basis of subjective and objective factors. Successive iterative steps of analyzing different alternatives lie at the heart of such evaluation.

4. Making a strategic choice– A strategic choice must lead to a clear assessment of alternatives which is the most suitable alternative under the
existing conditions. A blueprint has to be made that will describe the strategies and conditions under which it operates. Contingency strategies
must be also devised

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Syllabus BHM308

01 Organizational Strategy

  1. Mission
    1. Mission Statement Elements and its importance
  2. Objectives
    1. The necessity of formal objectives
    2. Objective Vs Goal
  3. Strategy
    1. Developing Strategies
      1. Adaptive Search
      2. Intuition search
      3. Strategic factors
      4. Picking Niches
      5. Entrepreneurial Approach

02 Environmental and Internal Resource Analysis

  1. Need For Environmental Analysis
  2. Key Environmental Variable Factors<
  3. Opportunities and Threats
    1. Internal resource analysis
  4. Functional Areas Resource Development Matrix
  5. Strengths and Weaknesses
    1. Marketing
    2. Finance
    3. Production
    4. Personnel
    5. Organization

03 Strategy Formulation

  1. Strategy (general) Alternatives
    1. Stability Strategies
    2. Expansion Strategies
    3. Retrench Strategies
    4. Combination Strategies
  2. Combination Strategies
    1. Forward integration
    2. Backward integration
    3. Horizontal integration
    4. Market penetration
    5. Market development
    6. Product development
    7. Concentric diversification
    8. Conglomerate diversification
    9. Horizontal diversification
    10. Joint Venture
    11. Retrenchment
    12. Divestiture
    13. Liquidation
    14. Combination

04 Strategic Analysis and Choice (allocation of Resources)

  1. Factors Influencing Choice
    1. Strategy formulation
  2. Input Stage
    1. Internal factor evaluation matrix
    2. External factor evaluation matrix
    3. Competitive profile matrix
  3. Matching Stage
    1. Threats opportunities – weaknesses – strengths matrix (TOWS)
    2. Strategic position and action evaluation matrix (SPACE)
    3. Boston consulting group matrix (BCGM)
    4. Internal – External matrix
    5. Grand Strategy matrix
  4. Decision Stage
    1. Quantitative Strategic Planning Matrix (QSPM)

05 Policies in Functional Areas

  1. Policy
  2. Product Policies
  3. Personnel Policies
  4. Financial Policies
  5. Marketing Policies
  6. Public Relation Policies

06 Strategic Implementation Review and Evaluation

  1. McKinsey 7S Framework
  2. Leadership And Management Style
  3. Strategy Review And Evaluation
    1. Review the underlying bases of Strategy
    2. Measure Organisational Performance
    3. Take corrective actions