richmond capital · pdf file · 2015-06-06printing & prepress pira...

PIRA INTERNATIONAL – Profit Through Innovation

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Every real-life strategicproblem is complex. Moststrategic issues resulting from

an internal and external environmentanalysis (SWOT) will create manystrategic problems – making theprospect of a simple solution an illusion.

There is no single commonly heldsolution to strategic problems. Indeed,theorists cannot agree on how to solvestrategic problems through better deci-sion-making.

Decision-making can be defined as‘making choices between future, uncer-tain alternatives’.

It should be noted that all decision-making relates to the future and that adecision is a choice between alterna-tives.

The global printing industry is in astate of perpetual change and it could beargued that never has it been moreimportant to make better decisions thanin this uncertain world.

But what can be done to improve thisintegral aspect of management at thestrategic level?

Levels of decision-makingDecision-making takes place at everylevel of management. At the strategiclevel, decision-making is much moredependant upon human factors andjudgement. Such decision-making isoften based on guided trial and error andbecause of uncertainty and ambiguities,all possibilities cannot be explored.

This type of decision-making isknown as heuristic and is based on rulesof thumb rather than explicit decisionrules and formulae.

The chart below illustrates the levelsof decision-making together with examples.

Strategic decisions are likely to beconcerned with:

• The scope of an organisation’s activities;

• The achievement of some advantageover competitors;

• Long-term direction;• Geographical scope.

Accordingly strategy can be seen asthe matching of the activities of anorganisation to the environment in whichit operates. This is sometimes known asthe search for ‘strategic fit.’

Phases of decision-makingH A Simon, a leading authority on man-agement decision-making, considers that

decision-making comprises four princi-pal phases (see Figure 2 overleaf).

This is a useful way of considering theissue but it should be remembered thatdecision-making is an iterative processand few decisions are taken in this neat,logical sequence. There is feedback,inter-relationships between decisions,flair, judgement and creativity – allaffecting the decision to be made.

Elements of decision-makingEvery strategic decision involves:• Context (the environment in which

the organisation operates);

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Richmond Capital PartnersThe nature of strategy and strategic decision-making

profile

“Men like the opinions to whichthey have become accustomedfrom youth; this prevents themfrom finding the truth, for theycling to the opinions of habit”– Moses Maimonides, Egyptian physician and

philosopher (1135-1204)

Paul Holohan, Chief Executive,Richmond Capital Partners.

Management Level Decision Characteristics InformationCharacteristics

Decision Examples Information Requirements

STRATEGIC Long time horizons, large-scaleresources, much creativity andjudgment, usually unstructured,problems difficult to define, infre-quent, much uncertainty

Largely external, informal sourcesimportant, forward-looking, qual-itative information, precisionunimportant, instant access notvital, wide ranging, incomplete

Mergers and acquisitions, newproduct planning, capital invest-ments, financial structuring

Market and economic forecasts,political and social trends, legisla-tive, environmental and technolog-ical constraints and opportunities

TACTICAL Pricing, capacity planning,budget preparation, purchasingcontracts

Cost and sales analyses, perform-ance measures, summaries ofoperations/production,budget/actual comparisons etc.

OPERATIONAL Repetitive, short timescale, small-scale resources, usually struc-tured, clear objectives and deci-sion rules, little or no discretion

Largely internal, mainly historical,detailed, often quantitive, highprecision, instant availabilityoften critical, narrow in scope,comprehensive

Production scheduling, mainte-nance, re-ordering, creditapproval

Sales orders, production require-ments, performance measures,customer credit status, deliveries,despatches etc.

Figure 1. Levels of decision-making and examples.

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