What Is Strategic Decision-Making?

Business leaders use strategic decision-making when they plan the company's future. Strategic management involves defining long-term goals, responding to market forces and carrying out the firm's mission. A company's mission is equivalent to its purpose -- its primary reason for existing. When making strategic decisions, managers look at the big picture. They consider the impact potential actions will have on the company, its competition and its market. Many managers try to align strategic decisions with the company's overall vision -- where it would like to be and how it would like to get there.

Managers must address change and long-term growth with strategic planning. A small-business owner may want to consider the amount of potential growth he would like to achieve. Will expansion of locations occur if there are adequate sales and revenue support? Or will the company reinvest its profits and develop new products and services? Strategic planning occurs at a high level and involves non-routine decisions. Managers must decide what to do about abstract or theoretical scenarios. These scenarios are not happening yet but probably will.

Strategic decisions usually mean managers must plan for change and risk. Many factors are unknown, since managers are planning for future changes. The changes are typically large in scope, such as introducing a new manufacturing process. Another example of a major change is the decision to modify the company's culture. For instance, the firm may be having trouble with increased employee turnover. After doing some research, managers discover the problem is due to its seniority system and poor supervisor-employee relationships. Top managers might plan to start rewarding employee performance and encouraging middle managers to focus on relationship-building.

To be effective planners, managers need to analyze the company's internal and external environments. An analysis helps pinpoint characteristics about the company's industry, its products and its resources. Managers can begin to identify strengths and weaknesses. This helps them plan appropriate responses to what is happening in the market. If the company has a strong brand name, this is a strength managers can leverage. Perhaps market share is declining due to increased competition or loss of product appeal. Managers could recapture market share on the strength of the company's brand if they plan to introduce a revised product.

While managers are planning what they would like to accomplish, they also map out how. This means managers have to figure out which resources to use, including staff. Communication about the initiative's goals helps ensure the implementation is successful. Sometimes top managers have to find ways to motivate staff to carry out their vision. Middle and front-line managers need to understand what the initiative is, how it fits with the company's mission and what they need to do. Once implementation is underway, managers evaluate the results. Depending on the results, they may make adjustments or come up with new strategies.