Characteristics of strategic management decisions

The characteristics of strategic management decisions vary with the level of strategic activity being considered. As  corporate level decisions tend to be more value oriented, conceptually based, and less concrete than are those pertaining to business or functional level strategy formulation and implementation. Corporate level decisions are also characterized by greater magnitudes in risk, cost, and profit potential, as well as by longer time horizons and greater needs for flexibility and for external infusions of resources. These characteristics are logical consequences of the more far- reaching, futuristic, innovative, and pervasive nature of corporate level strategic activity. Examples of corporate level decisions include the choice of business in which to engage, dividend policies, sources of long-term financing, and priorities for the growth.

At the other end of the continuum, functional level decisions principally address action-oriented or operational issues. Made periodically, they lead directly to the implementation of some part of the overall general strategy for the firm formulated at corporate and business levels. Therefore functional level decisions are relatively short range in their time horizon, involving low risk and modest costs because of substantial reliance on available resources. They usually determine actions requiring minimal company-wide cooperation which are supplemental to the functional area’s present activities and which are highly adaptable to ongoing activities so that minimal cooperation is needed for their successful implementation. Because of their relatively concrete and quantifiable nature, functional level decisions receive critical attention and analysis despite their independently low comparative profit potential.

Some commonly encountered functional level decisions might include generic versus brand name labeling, basic versus applied R&D, high versus low inventory levels, general versus specific purpose production equipment, and close versus loose supervision. Bridging corporate and functional level decisions are those made at the business level. It indicates, business level strategic decisions exhibit characteristics whose descriptors fall between the other two levels. For example, business level decisions are less costly, risky, and potentially profitable than corporate level decisions but more costly, risky, and potentially profitable than functional level decisions. Some frequently required business level decisions involve plant location, marketing segmentation and geographic coverage, and distribution channels.

 

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