Factors Affecting Strategic Choice

 Strategic choice is the mental process of selecting the best or most appropriate strategy from the stock of alternatives that serves the enterprise objectives.

This choice takes place in not thin air but a frame work of reference made up of variety of elements and the choice made is the product of the basic elements that work in the frame work.

Strategic choice therefore is selection of the best strategic option that helps achieve organization's objectives.Relevant strategic options are evaluated their suitability,acceptability and feasibility.The evaluated strategic options are ranked in order of their potential to achieve objective.Such options should allow businesses to maintain or create sustainable strategic advantage.The strategic choice is made from among the ranked alternative.

'Strategic choice’ involves selecting from among several alternatives the most appropriate strategy which will best serve the enterprise objectives. To choose a good strategic option, past data, current data, forecasted data, and various other factors should be examined carefully. The selection process becomes a complex job because it is influenced by various factors.

The more important factors influencing the strategic choice are discussed here:

Factor # 1. Environmental Constraints:

The dynamic elements of environment affect the way in which choice of strategy is made. The survival and prosperity of a firm depend largely on the interaction of the elements of environment—such as shareholders, customers, suppliers, competitors, the government and the community. These elements constitute the external constraints. The flexibility in the choice of strategy is often governed by the extent and degree of the firm’s dependence on the environment.

Factor # 2. Dynamism of Market Sector:

Glueck has said, “The strategic choice is affected by the relatively volatility of market sector the firm chooses to operate in.” Market forces vehemently influence the choice of strategy. 

For example, a firm which obtains bulk supply of its raw materials or components in a competitive market will have greater flexibility in its strategic choice than another firm which has to depend for its supplies on an oligopolistic market.

Factor # 3. Intra-Organisational Factors:

Organisational factors also affect the strategic choice. These include organisational mission, strategic intent, goals, organisation’s business definition, resources, policies, etc. Besides these factors, organisational strengths, weaknesses, and capability to implement strategic alternatives also affect the strategic choice.

Factor # 4. Corporate Culture:

In choosing a strategic alternative, strategy makers must consider pressures from the corporate culture. They must assess a strategy’s compatibility with that culture. Every organisation has its own corporate culture. It is made of a set of shared values, beliefs, attitudes, customs, norms, etc. The successful functioning of an organisation depends on ‘strategy-culture fit’. The strategy choice has to be compatible with firm’s culture. The strategic choice should not be out of tune with the cultural framework of the firm. The culture has substantial influence on the strategic choice. In case of mismatch between strategic choice and the cultural framework of a company, either one is to be redefined.

Factor # 5. Industry and Cultural Backgrounds:

Industry and cultural backgrounds affect strategic choice.

For example, executives with strong ties within an industry tend to choose strategies commonly used in that industry. Other executives who have come to the firm from another industry and have strong ties outside the industry tend to choose different strategies from what is being currently used in their industry.

Factor # 6. Pressures from Stakeholders:

The attractiveness of a strategic alternative is affected by its perceived compatibility with the key stakeholders in a corporation’s task environment. Creditors want to be paid on time. Unions exert pressure for comparable wage and employment security. Governments and interest groups demand social responsibility. Shareholders want dividends. All these pressures must be given some consideration in the selection of the best alternative.

Factor # 7. Impact of Past Strategies:

It has been noticed that the choice of current strategy may be influenced by what type of strategies have been used or followed in the past. Pearce and Robinson have said, “A review of past strategy is the point at which the process of strategic choice begins. As such past strategy exerts considerable influence on the final strategic choice.”

Hence, it is said that ‘past strategies are often the principal architects of current strategies.’ Pearce and Robinson explain the reason in this way – “Because they have invested substantial time, resources and interest in these strategies, the strategists would logically be more comfortable with a choice that closely parallels past strategy or represents only incremental alternations.”

Factor # 8. Personal Characteristics:

Personal factors like own perception, views, interests, preferences, needs, aspirations, personal disposition, ambitions, etc., are important and play a vital role in affecting strategic choice. Even the most attractive alternative might not be selected if it is contrary to the attitude, mindset, needs, desires and personality of the selector/strategist himself.

Thus, personal characteristics and experience affect a person’s assessment and choice of strategic alternatives.

For example, one study found that narcissistic (self-absorbed and arrogant) type of managers favour bold actions that attract attention.

Factor # 9. Value System:

The role of value system in choosing a strategic alternative is well recognized. While evaluating the strategic alternatives, different executives may take different positions because of differences in their personal values. Guth and Tagiuri found that personal values were important determinants of the choice of corporate strategy. Similarly, value system to top management affects the types of strategy that an executive chooses.

Factor # 10. Managerial Attitude towards Risk:

Managerial attitude towards risk is an important factor that influences the choice of strategy. Individuals differ considerably in their attitude towards risk taking. Some are risk prone, others are risk averse.

Conceptually, one may distinguish between the following attitudes reflecting the order of risk preferences:

i. Risk is necessary for success;

ii. Risk is a fact of life and some risk is desirable; and

iii. High risk destroys enterprises and needs to be minimized.

Factor # 11. Managerial Power Relations:

Choice of strategy is also influenced by the power play among different interest groups. William Guth in his study found that strategic choice is significantly affected by interpersonal relations and power relationship among members of the top management team. Power politics is a crucial factor determining the choice of strategy.

A few research findings conclude:

i. If the chief executive is in favour of a strategic option, it may be endorsed by senior managers close to him, but one or the other managerial clique may oppose it.

ii. Lower level managers can greatly influence the choice eventually made by the chief executive.

iii. Where a participative decision-making process is in vogue, the strategic choice eventually made by top management is quite often the outcome of a lot of filtering that takes place of die alternatives at lower levels of management. For instance, strategic choices made by lower level managers may limit the strategic options considered by top management.

Factor # 12. Coalition Phenomenon:

Cyert and March have observed another power factor that influence strategic choice. They explained that “in large organisations, subunits and individuals have reason to support some alternatives opposed by others. Mutual interest often draws certain groups together in a coalition to enhance their position on major strategic issues. These coalitions, particularly the more powerful ones, exert considerable influence in the strategic choice process.”

Factor # 13. Time Dimension:

The time dimension also influences strategic choice in the following ways:

i. Time pressure – The ‘deadlines’ for making the decisions or choosing an option create time pressures under which managers may be forced to make a choice. In the absence of time pressure, the choice might be different. Peter Wright observes, “Under time constraint, managers put greater weight on highly negative information and considers fewer aspects of the problem”.

ii. Time frame – Here, a manager considers the short-term and the long – term implications of a choice. If the incentive compensation of managers is related to short-run earning performance, there is very likelihood that long-term strategic considerations would be ignored.

iii. Time horizon – It refers to the period of commitment that goes with it. A long-range strategy implying commitment of resources for an uncertain future is often less acceptable than one having immediate relevance.

iv. Timing of a decision – It is yet another aspect of time dimension that may determine the quality of the strategic choice. A prompt decision may be required to make the best use of an opportunity and before the competitors have time enough to capitalize it.

Pearce and Robinson suggest that “strategic choice will be strongly influenced by the match between management’s current time horizon and the lead time associated with different choices.”