6EC513

GLOBAL
BUSINESS
AND
STRATEGY

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Week 12: Decision making and
strategy application derby.ac.uk
 Lecture objectives

 Introduce approaches to decision making in strategy application

 To differentiate between rational and irrational decision making choices

 To apply review and link SWOT analysis to the Threat, Opportunities,

Weaknesses and Strength matric (TOWS) in strategic decision making

 To review and apply the Suitability, Acceptability, and Feasibility matrix.

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 What is decision making and how do managers
make decisions in organisational strategy?

 Definition: “the process of making choices from a among a number

of alternatives” (H&B, 2013, p. 691)
 Decision-making is at the core of organisations
 The decisions made influence the members of an organisation as
well as wider society (credit crunch 2008)
 Mintzberg (1989): Decision-making as a central task of managers
 Exist at different levels: individual, group and organisational

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 Decision making approaches

 Rational Decision Making

 Bounded Rational Decision Making

 Political Decision Making

 Garbage Can Decision Making

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Vroom’s (2000) model of decision making
 Model of how decisions should be made by leaders
 Consists of three main elements:
 Decision participation styles (Decide, Consult Individually, Consult
group, Facilitate, Delegate)
 Diagnostic questions that help to analyse the situation
 Decision rules to determine the appropriate decision making style
(along decision making tree)
 Central concepts: Quality (achieving aim, time, and cost) and
acceptability (to those affected by decision)

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Limitations of rational decision making model

 Decision makers rarely have knowledge of all alternative

courses of action and consequences
 Not all consequences can be considered (time and effort)
 Information is rarely accurate
 Rarely widely agreed upon, common rules of decision making:
people have diverging –rather than common—goals
 Decision makers are not necessarily rational

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Bounded rationality of decision making (Herbert Simon)
 Attempts to be rational in organisations are limited (bounded) by
 Imperfect and incomplete information (uncertainty)
 The complexity of problems
 Human information-processing capacity
 The time available for decision making
 Conflicting preferences and different organisational goals (politics,
ambiguity about courses of actions)
 Decision makers can only satisfice, not optimise/maximise: Decisions that
are ‘good enough’ rather than ‘ideal’
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Decision making as a political process

 Organisations are political spaces

 Disagreement over goal(s) and use of resources among different actors with
different interests
 Organisational actors will use power in their relationships to influence desired
outcomes
They do so
 By controlling information flows (e.g. withholding information)
 By creating/using resource dependencies (e.g. withholding or negotiating access to
important resources)
 By creating coalitions/alliances (with other shareholders/stakeholders)

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How can decision making quality be improved?
Rational perspective:
• More information providing
better knowledge about
alternatives and consequences
Political perspective:
• Understand resource
dependencies
• Reduce power-imbalances:
equal access to resources,
information, formal procedures
Bounded-rational perspective:
• Be aware of limitations of
decision making
• Try to get better information
Emergent/continuous change
perspective:
• Build efficient semi-structures
• Probe into the future
• Plan for transitions
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Relating external/internal environment in decision
processes

 To formulate a strategy that leads to a competitive advantage,

 Resources and capabilities must combine to form core competencies.
 Firms should consciously work to identify these.
 Evaluation should occur in the context of PESTEL.
 Evaluation should occur in the context of Competition.
 Use Porter’s Five Forces
 SWOT
 SAF and TOW

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Suitability, Acceptability and Feasibility (SAF)

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Strategic Approach using a TOWS

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Strategic Approach using a TOWS

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 Suitability

Suitability is concerned with assessing which proposed strategies

address the key opportunities & constraints an organisation faces,
through an understanding of the strategic position of an organisation.
It is concerned with the overall rationale of the strategy:
Does it exploit the opportunities in the environment and avoid the
threats?
Does it capitalise on the organisation’s strengths and strategic
capabilities and avoid or remedy the weaknesses?
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Strategic Approach using a TOWS

There are several useful techniques:

 Ranking.
 Using scenarios.
 Screening for competitive advantage.
 Decision trees.
 Life cycle analysis.

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 Feasibility

Feasibility is concerned with whether a strategy

could work in practice i.e. whether an organisation
has the capabilities to deliver a strategy
Two key questions:
 Do the resources and competences currently
exist to implement the strategy effectively?
 If not, can they be obtained?

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 Feasibility: Example -

Need to consider: Internal Consider also: External

 The funding required.  Political

 Cash flow analysis and
 Legal context - laws
forecasting.
 Financial strategies needed  Market size
for the different ‘phases’ of  Competition
the life cycle of a business.  Supply chain
 Skills
 Timing etc

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Strategic capabilities: the key issues

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 Linking SAF, SWOT and TOWs
Organisation Strengths Weaknesses Opportunities Threats
Description Outcome outcome outcome outcome

Fix it Fix it Fix it Fix it

Tesla

Seminar excercice

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Example of TOWS application

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University of Derby, Kedleston Road, Derby, DE22 1GB
T +44 (0)1332 591044 E opendays@derby.ac.uk

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