Behavioral Considerations Affecting Strategic Choice

Role of current strategy

Attitudes toward risk

Degree of firm’s

external dependenc

eManagerial priorities different

from stockholder

s

Internal political

considerations

Competitive reaction

Behavioral Considerations Affecting Strategic Choice

• Role of current strategy

– What is the amount of time and resources invested in previous strategies?

– How close are new strategies to the old?

– How successful were previous strategies?

• Degree of firm’s external dependence

– How powerful are firm’s owners, customers, competitors, unions, and its government?

– How flexible is firm with its environment?

Behavioral Considerations Affecting Strategic Choice

• Attitudes toward risk– Industry volatility and industry evolution affect managerial

attitudes

– Risk-oriented managers prefer offensive, opportunistic strategies

– Risk-averse managers prefer defensive, conservative strategies

• Managerial priorities different from stockholder interests– Agency theory suggests managers frequently place their

own interests above those of their shareholders

Behavioral Considerations Affecting Strategic Choice

• Internal political considerations– Major sources of company power are CEO, key subunits,

and key departments

– Power can affect corporate decisions over analytical considerations

– See Fig. 9-6

• Competitive reaction– Probable impact of competitor response must be

considered during strategy design process

– Competitor response can alter strategy success

The Contingency Approach

• Contingency Approach Defined

– Also sometimes called the situational approach.

– There is no one universally applicable set of management principles (rules) by which to manage organizations.

– Organizations are individually different, face different situations (contingency variables), and require different ways of managing.