Assignment 3 concerns decision making

Topic Assignment 3 concerns decision making. This one is unique because it is shared among all students taking this course (regardless of the professor). In short, you are given a very brief description of an issue within a company (Plastic Packaging). Based on this, you will identify the main issues, recommend alternative courses of action, and propose how these actions could be implemented. Use journal articles and other forms of research.

The scenario is vague on purpose – you will need to make assumptions and speculate on some of the underlying issues. Just be sure to base these on the information that is provided within the scenario. In other words, don’t add to the scenario.

Attached is a journal article on decision making, and I believe it may guide you through this article assignment. Regardless of the issue(s) you identify, understanding the logic and processes that should influence managerial decisions is beneficial. Sometimes these steps are done formally (for example, in a meeting of decision makers), but they can also be performed individually, or even without realizing or being aware of our actions (this is what many psychologists refer to as “non-conscious decision making”).

You do not need to formally review this article in your next Topic Assignment. However, I HIGHLY SUGGEST you review and use it to frame your analysis.

Finally, the rubric in the Topic Assignment instructions has two main categories: ‘depth and quality’ and ‘reference support’. Below, I give you a bit more detail on what is meant in terms of this.

Student understands the issues/problems.
Student discusses data/facts from relevant stakeholders.
Student evaluates the impact of issues/problems identified.
Student analyzes the data/information using qualitative and/or quantitative tools/research.
Student analyzes the internal business environment.
Student analyzes the external business environment.
Student generates alternatives.
Student recommends a corrective action plan.
Student implements solution(s).
Student understands the implications of their solution(s).

Let me know if you have any questions. I’ll spend the weekend grading Case 1 and should have them back to you no later than Sunday!

Decision Making Assignment

Instructions

John, President of Plastic Packaging (a small bottle manufacturing company located in western Massachusetts), has decided that downsizing is the solution to the recent financial struggles that the company is experiencing as a result of a decrease in customer demand. Last Friday afternoon, John sent a mass e-mail to all of the employees at the facility to explain some of the disappointing financials and his decision to use a downsizing strategy to deal with the situation. The 75 employees of Plastic Packaging start to panic. During the afternoon break, the rumor mill is on overdrive in the breakroom. People are anxious, confused, surprised, and upset with this executive decision. Many of them wonder if there are better alternatives to the financial problems the company has recently experienced and they know that their president could have handled the situation at hand in a much more effective manner. Please respond to the following questions in four distinct and labeled sections:

(1) Identification: What are some of the main problems and related issues that you see within this scenario/case?

(2) Analysis: What are the root causes and relevant factors contributing to the main problems that you identified?

(3) Alternatives and Recommendations: What could John have done differently?

(4) Action Plan: How should John carry out these alternatives that you recommended?

Use references from books and journal articles to support all of the sections of your discussion. Cite your references within your discussion and include the full citations for your references on your Reference page at the end of your document, following the APA Guidelines that I provided you in Doc Sharing. Submit your completed assignment to the appropriate dropbox. The following rubric will be used to grade your assignment.

	Exceeds Standards	Meets Standards	Fails to Meet Standards
Depth and Quality of Discussion I will consider how detailed your discussion is and how far into depth you go.	Thoroughly discusses and evaluates the issues related to the decision at hand, providing convincing and supported arguments.	Discusses and evaluates the issues related to the decision at hand, providing supported arguments, but could have gone into much more depth.	Fails to discuss and evaluate valid issues related to the decision at hand, does not provide convincing or supported arguments, and lacks a significant degree of depth.
Score:	(40-36)	(35-28)	(27 or below)
Reference Support The more reference support you use, the better. The quality of the journals is also important.	Research from multiple journal articles provided strong support for the discussion. Several of the journal articles used came from top-tier journals.	Research from journal articles provided support for most of the discussion. More references could have been used.	Several parts of the discussion lacked strong support from the research presented in journal articles.
Score:	(40-36)	(35-28)	(27 or below)
Overall Quality of Written Communication Paper Formatting Turnitin Similarity Rating Grammar	Student presented a well-written, coherent analysis that was free from any grammar and/or spelling errors.	Student presented a well-written, coherent analysis that contained a few minor errors.	Student presented an incoherent analysis that contained several errors.
Score:	(20-18)	(17-14)	(13 or below)
Total Score (Grade):

Management Decision
A process perspective on strategic decision making
E. Frank Harrison
Article information:
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E. Frank Harrison, (1996),”A process perspective on strategic decision making”, Management Decision, Vol. 34 Iss 1 pp. 46 –
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E. Frank Harrison Professor of Management, San Francisco State University,
San Francisco, USA
A process perspective on strategic decision making
[ 46 ]
Posits that a process
perspective on strategic
decision making is more
likely to yield a successful
outcome. Conceives the
strategic decision-making
process as a composite of the
concept of strategic gap and
the managerial decisionmaking
process. Presents six
examples of real-world strategic
decision in support of a
process approach to the
making and implementing of
such decisions. The evidence
in support of a process perspective
on strategic decision
making suggests a need for
further research and exposition
of this critically important
subject.
Management Decision
34/1 [1996] 46–53
© MCB University Press
[ISSN 0025-1747]
In discussing decision making, it is customary
to focus on a decision-making process or
the decision itself. Focusing for a moment on
the decision itself, it is useful to note the
variety of definitions for the term decision.
One definition, for example, avers that “to
make a decision means to make a judgment
regarding what one ought to do in a certain
situation after having deliberated on some
alternative course of action”[1]. In a classic
work on the science of management decision
making, Herbert A. Simon treats it as a
process synonymous with the whole process
of management. In his words: “Decision making
comprises three principal phases: finding
occasions for making a decision; finding
possible courses of action; and choosing
among courses of action”[2].
Another definition views a decision as only
one step in an intellectual process of differentiating
among relevant alternatives. The
decision itself is the point of selection and
commitment when the decision maker
chooses the preferred purpose, the most reasonable
task statement, or the best course of
action[3]. Still another definition notes that in
making a decision the decision maker has
several alternatives and the choice involves a
comparison between these alternatives and
an evaluation of their respective outcomes[4].
For purposes of this article, “a decision is
defined as a moment, in an ongoing process of
evaluating alternatives for meeting an objective,
at which expectations about a particular
course of action impel a decision maker to
select that course of action most likely to
result in attaining the objective”[5]. This
definition is generally accepted in the literature
of managerial decision making[6]. It also
tends to confirm the basic thesis of this article:
that managerial decision making takes
place within a process composed of identifi-
able decision-making functions.
Decision making is the most significant
activity engaged in by managers in all types
of organizations and at any level. It is the one
activity that most nearly epitomizes the
behaviour of managers, and the one that
clearly distinguishes managers from other
occupations in the society. Drucker notes, for
example, that “to make the important decision
is the specific executive task. Only an
executive makes such decisions”[7]. “Of all
the managerial functions that executives
perform … the act of making a decision is
without equal in importance”[8]. To be sure,
managers and executives do many things
besides make decisions. Nonetheless, the
current and lasting impact of managerial
performance is centred in the efficacy of
executive choices. The primary focus in this
article is on strategic decisions made by managers
at the top of the organization. These
decisions trigger dozens or even hundreds of
other decisions of lesser magnitude at
descending levels of management. Strategic
decisions, therefore, set the tone and tempo of
managerial decision making for every individual
and unit throughout the entire organization.
If the decision making at the top of the
organization is ineffective, then the choices
made at lower levels of management will be
the same. Similarly, if top management’s
strategic choices tend to be successful, it
reflects favourably on choices made in other
parts of the organization.
Strategic decisions are highly complex
and involve a host of dynamic variables.
Their pre-eminent characteristic is signifi-
cance; “Strategic decisions deal with the
long-term health of the enterprise”[9].
“Strategic decisions are those which normally
fall within the purview of top management”[10].
Strategic decisions constitute the
critical variable in strategic management[11].
They are the means by which perennially
scarce resources are rationally committed to
fulfil managerial expectations for success.
Following are five criteria for use in identifying
and making a strategic decision:
1 The decision must be directed towards
defining the organization’s relationship to
its environment.
2 The decision must take the organization as
a whole as the unit of analysis.
3 The decision must encompass all of the
major functions performed in the organization.
4 The decision must provide constrained
guidance for all of the administrative and
operational activities of the organization.
5 The decision must be critically important
to the long-term success of the total organization[12].
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E. Frank Harrison
A process perspective on
strategic decision making
Management Decision
34/1 [1996] 46–53
[ 47 ]
The concept of strategic gap
As noted earlier, strategic decisions are oriented
towards the relationship between a
given organization and its external environment.
This relationship is epitomized by the
concept of strategic gap, which focuses on the
fit between the capabilities of the organization
and its most significant external entities.
The strategic gap is conceptualized in
Figure 1. Stated most simply, the strategic gap
reflects the imbalance between the current
strategic position of the organization and its
desired strategic position[13]. The strategic
gap is determined by comparing the organization’s
inherent capabilities with the opportunities
and threats in its external environment[14].
In one sense, the strategic gap is a
measure of the perennially imperfect fit
between the organization and its external
environment. If the capabilities of the organization
were fully committed to exploiting all
perceived opportunities and warding off all
discerned threats, there would be no
strategic gap. For reasons to be discussed
subsequently, this eventuality is most
unlikely[15].
The profile of strategic gap
For the simple reason that strategic decisions
based on a balance of internal weakness seem
certain to fail, a gap analysis begins properly
with an assessment of the major capabilities
of the total organization in the principal categories
of management, technology, policies
and resources. This approach involves the
development of a capability profile to ascertain
principal areas of strength and weakness.
Organizational assessment
There are at least three reasons why a capability
profile of strengths and weaknesses is
important in measuring the strategic gap of
a given organization:
1 Capitalizing on external opportunities
usually signifies effective use of internal
strengths.
2 Protecting the organization from environmental
threats requires a knowledge of
internal weaknesses.
3 Few organizations excel in all areas[16].
“Thus [strategic decisions] ultimately are a
compromise between offence and defence
with the optimum balance dependent on
awareness of external conditions and skillful
utilization of internal resources”[16].
The principal categories of organizational
capability to be assessed for areas of strength
and weakness in developing a capability
profile are as follows:
• Management. The primary focus here is on
the decision-making track record of top
management. Have the recent successes
outnumbered the failures in sufficient
quantity to constitute a measurable organizational
strength?
• Technology. If the organization uses an
advanced technology, does it keep up with
the state of the art in its field, and is this
new knowledge regularly transposed into
new products or services? If the organization
uses a routine technology, does it regularly
avail itself of applicable external technological
developments to enhance its efficiency
and productivity?
• Policies. Are there written statements to
provide governance and guidance at all
levels and in all major activities of the
organization?
• Resources. Are the human, fiscal, physical
and institutional resources of the organization
available in proper kind and sufficient
quantity and are they utilized effectively in
maintaining a competitive advantage in the
external environment?
If the aforesaid questions can be answered
affirmatively, the organization’s strengths
exceed its weaknesses and it is ready to pursue
the opportunities in its external environment.
Conversely, if there are areas of weakness
in the basic capabilities of the organization,
corrective action should be taken to
transform such weaknesses into strengths, at
which point opportunities may be developed
and exploited through the distinctive competence
reflected in the capability profile.
Environmental assessment
Like the organization itself, the external
environment is composed of several principal
aggregates:
• Opportunities. Opportunities represent
situations with a potential to enhance the
long-term competitive advantage of the
organization. Opportunities presume that
the organization has the capability for
capitalizing on them. The litmus test of
management is to recognize an opportunity
This relationship is
epitomized by the concept of
strategic gap, which focuses
on the fit between the
capabilities of the
organization and its most
significant external entities.
Assessment
• Opportunities
• Threats
• Requirements
• Responsibilities
E
N
V
I
R
O
N
M
E
N
T
Positive gap
(O > E)
O
R
G
A
N
I
Z
A
T
I
O
N
Strategic
gap
Negative gap
(E > O)
Assessment
• Management
• Technology
• Policies
• Resources
Figure 1
The concept of strategic gap
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E. Frank Harrison
A process perspective on
strategic decision making
Management Decision
34/1 [1996] 46–53
and to exploit it for the benefit and gain of
the total organization.
• Threats. Threats include all external forces
with a potential for intruding on the organization
in ways that work to its disadvantage.
The most common threats are competition
and technological obsolescence.
• Requirements. Requirements include statutory
requirements, legal codes and other
governance mechanisms that act to limit
the strategic choices of management.
• Responsibilities. Responsibilities constitute
expectations on the part of some
stakeholder group or external entities that
the strategic decisions of management will
not work to its disadvantage. Included here
is the pervasive concept of social responsibilities.
Strategic gap analysis
There are three conceivable variations of
strategic gap: positive strategic gap; negative
strategic gap; and zero strategic gap. The first
two variations reflect the actual condition of
a given organization at different points in
time. The third variation exists only in
theory.
Positive strategic gap
If a concurrent assessment of the organization
and its external environment reveals
that the sum of internal capabilities is clearly
greater than its principal environmental
aggregates, a positive strategic gap exists.
In other words, as shown in Figure 1,
if O > E, the strategic gap is balanced in
favour of the organization. In this state, the
management, technology, policies and
resources of the organization are more than
adequate to exploit any opportunity, cope
with any threat, or meet any requirement or
responsibility emanating from the external
environment.
Negative strategic gap
As shown in Figure 1, the second variation of
strategic gap occurs when its principal environmental
aggregates are greater than the
internal capabilities of the organization.
This variation, symbolized by E > O, means
that the organization is unable to exploit
available opportunities, deal with perceived
threats, meet its legal requirements, or fulfil
its expected responsibilities. It is called a
negative strategic gap; and it means that the
organization is at a significant disadvantage
vis-à-vis its external environment. In general,
a negative strategic gap must be transformed
into a positive strategic gap before management
can avail itself of the opportunities in
the external environment.
Zero strategic gap
There will always be a strategic gap between
the organization and its external environment.
Factors such as imperfect information,
time delays in responding to externallyinduced
change, technological breakthroughs
and managerial incompetence all contribute
to the unavoidability of a strategic gap. There
is, in other words, a level of strategic gap,
hopefully on the positive side, that is irreducible
for any organization. When, in the
judgement of management, the organization
has reached this irreducible minimum, it has
achieved a good strategic fit. This is an optimal
state for an effectively managed organization
to make strategic decisions.
The managerial decisionmaking
process
There is an increasingly abundant literature
that places the moment of choice within an
integrated process of managerial decision
making[17-21]. According to this view, managerial
decisions result from a set of decisionmaking
functions logically connected to constitute
a managerial decision-making
process. This process is depicted in Figure 2.
Decision-making functions
The components of the decision-making
process are the functions of decision making.
These functions are:
• Setting managerial objectives. Decision
making starts with the setting of objectives,
and a given cycle within the process culminates
on attaining the objectives that gave
rise to it.
• Searching for alternatives. Search involves
scanning the internal and external environment
of the organization for relevant information
from which to fashion a set of alternatives
likely to fulfil the objectives.
• Comparing and evaluating alternatives.
By formal and informal means, alternatives
are compared based on the perceived relative
uncertainty of cause-and-effect
Setting
managerial
objectives
Revise
objectives Searching
for
alternatives
Comparing
and
evaluating
alternatives
Follow-up
and control
Take
corrective
action as
necessary
Implementing
decisions
The act of
choice
Revise or
update
objectives
Renew
search
Figure 2
The managerial decision-making process
[ 48 ]
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[ 49 ]
E. Frank Harrison
A process perspective on
strategic decision making
Management Decision
34/1 [1996] 46–53
relationships and the preferences of the
decision maker for various probabilistic
outcomes.
• The act of choice. Choice is a moment when,
in the ongoing process of decision making,
the decision maker chooses a given course
of action from among a set of alternatives.
• Implementing the decision. Implementation
is that point in the total decision-making
process when the decision is transformed
from an abstraction into an operational
reality.
• Follow-up and control. This function is
intended to ensure that the implemented
decision has an outcome coincident with
the objectives that gave rise to its occurrence.
The interrelatedness of decision making
As shown in Figure 2, the functions of decision
making are highly interrelated within
the decision-making process. The process
begins with the setting of objectives, the
attainment of which invariably requires a
search for information from which to develop
a set of alternatives. These alternatives are
compared and evaluated using applicable
criteria; and the alternative which gives
greatest promise of attaining the objectives is
normally chosen. The selected alternative is
then implemented through existing structures,
systems and processes, after which it is
subjected to existing follow-up and control
procedures to ensure an outcome compatible
with the initiating objectives. The functions
of decision making proceed sequentially
through the process. The process provides an
organizational framework within which the
functions are accomplished to produce a
successful result. The literal interrelatedness
of the process can be demonstrated easily by
considering the adverse consequences attendant
on disregarding a function or altering
the straightforward sequencing of all the
functions. In the event that a given alternative
once selected and implemented does not
appear to produce the desired result, the
decision maker may consider any one of the
subprocesses shown in Figure 2: corrective
action, renewed search, or revised objectives.
The dynamics of decision making
The dynamics of the managerial decisionmaking
process result from the effects of the
decision-making functions on one another
and in combination:
Decision making is a dynamic process:
complex, redolent with feedback and sideways,
full of search, detours, information
gathering, and information ignoring, fueled
by fluctuating uncertainty, fuzziness, and
conflict; it is an organic unity of both predecision
and postdecision stages[22].
The principal manifestation of the dynamic
nature of the managerial decision-making
process is the synergy that is produced by the
interrelated functioning of the total process.
The presence of synergy means that the
decision-making functions have more value
as components of the process than as functions
in their own right. In this context, synergy is
analogous to decisions more likely to result
in the attainment of the objectives. The synergistic
results of the process mean for the most
part that decisions made within the process
have a greater potential for success. This is
the essence of the dynamics of decision making
within the process conceptualized in
Figure 2.
The strategic decision-making
process
The strategic decision-making process is a
composite of the concept of strategic gap
(Figure 1) and the managerial decisionmaking
process (Figure 2). It is depicted in
Figure 3.
Varieties of process flows
There are three types of process flows in
Figure 3, each of which contributes to the
final outcome of the total process.
Primary flow
The primary flow encompasses the main
functions of the strategic decision-making
process. These functions cannot be circumvented
without seriously compromising the
integrity of the total process. Information
received from the external environment is
used to assess the strengths and weaknesses
of the organization along with the opportunities
and threats in the external environment.
A gap analysis is performed to ascertain the
size and positive or negative nature of the
resultant strategic gap. The results of the gap
analysis are used by management to set or
reset the managerial objectives that trigger
the managerial decision-making process. The
managerial objectives constitute the ends for
which a strategic choice is made and implemented.
The outputs of the implemented
strategic decision elicit feedback from the
external environment permitting management
to assess the outcome of its choice and
to take corrective action as necessary, thereby
ensuring attainment of the managerial objectives.
A continuous evaluation of the implemented
strategic decision is supplemented by
periodic comprehensive reviews with annual
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[ 50 ]
E. Frank Harrison
A process perspective on
strategic decision making
Management Decision
34/1 [1996] 46–53
updatings of the gap analysis and the managerial
objectives.
Corollary flow
The corollary flow constitutes the ancillary
functions of the process conceptualized in
Figure 3. These functions can be abridged or
bypassed but not without some impairment
of the total process. For example, a search
may be circumscribed but possibly at the cost
of an inadequate set of alternatives; or the
assessment of an implemented strategic decision
may be accomplished less frequently at
the price of a less successful outcome. In
combination with the primary flow, the corollary
flow enhances the prospects for a successful
strategic decision.
Information flow. Information flow constitutes
the exploration of possibilities in the
search for alternatives or the feedback of
information from the external environment
signifying the acceptance or non-acceptance
of the implemented strategic decision.
As such, information flow makes its own
specialized contribution to strategic
decision success.
Dynamics of the total process
The dynamics of the total process set forth in
Figure 3 are centred on three principal relationships:
1 The pervasive influence of the external
environment on the total process of strategic
decision making.
2 The pivotal coupling of strategic gap with
managerial decision making ensuring that
managerial objectives reflect the current
gap analysis.
3 The continuous flow of information
throughout the process commencing with
the initiation of gap analysis, continuing
with the search for information from
which to develop a set of alternatives, and
following with an evaluative flow from the
external environment as corrective action
is taken and current cycles are replaced by
future cycles.
Strategic decision applications
For purposes of this article, a successful
strategic decision is one that results in the
attainment of the objective that gave rise to
the decision within the constraints that had
to be observed to bring about each attainment.
Because objectives constitute the foundation
of the strategic decision-making
process, and because such objectives are set
based on the results of a comprehensive
strategic gap analysis, it seems reasonable to
posit that a formal decision-making process
is conducive to strategic decision success.
The real-world applications of the strategic
decision-making process set forth in this
section are intended to validate this
hypothesis.
A profile of successful strategic choice
Successful strategic choices tend to manifest
a common set of characteristics:
• The managerial objectives are compatible
with and reflective of the current strategic
gap of the organization.
• There is an open search for alternative
courses of action that encompass the principal
stakeholders of the organization and
A continuous evaluation
of the implemented strategic
decision is supplemented by
periodic comprehensive
reviews with annual
updatings of the gap
analysis and the managerial
objectives.
Make choice Set/reset
objectives Strategic gap Gap analysis
E
N
V
I
R
O
N
M
E
N
T
Environment
assessments
Organizational
assessments
Evaluate
alternatives
Implement
choice
Search for
alternatives
Assess
choice
Outputs
Feedbacks
• Positive gap
• Negative gap
Possibilities
• Opportunities
• Threats
Information
• Strengths
• Weaknesses
Corrective
action
Key
Primary flow Corollary flow Information flow
Figure 3
The strategic decision-making process
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[ 51 ]
E. Frank Harrison
A process perspective on
strategic decision making
Management Decision
34/1 [1996] 46–53
which consider applicable time and cost
constraints along with the cognitive limitations
of the decision maker.
• There is an objective comparison and evaluation
of a set of alternative courses of action
with a principal emphasis on probabilistic
consequences attendant on the selection of
a given alternative.
• There is a tendency to select that alternative
most likely to result in the attainment
of the objectives within the boundaries of
rational choice.
• The implementation of a chosen alternative
proceeds within the established way of
doing business and is reflective of propitious
timing and balanced risk and reward
factors in relation to the expected outcome.
• There is no presumption of success following
implementation and continuous measurement
and evaluation of emerging
results is accompanied by timely corrective
action to ensure an outcome that attains the
objectives.
These characteristics will be used to evaluate
the success or failure inherent in the following
real-world applications of strategic decision
making.
Successful strategic decisions
The first successful strategic decision considered
here is the decision made in 1980 by the
Carter administration and the US Congress
to save the Chrysler Corporation from bankruptcy.
The first and foremost objective was to
save Chrysler. The company’s capability
profile reflected huge weaknesses in management,
technology and resources. The search
for alternative courses of action considered
all possibilities; and it was conducted within
pervasive time and cost constraints. The
resulting decision was manifested in the
Chrysler Corporation Loan Guarantee Act of
1979 which provided the company with $2
billion in matching loan guarantees. The
successful implementation of this financial
bailout made it possible for Chrysler to
become profitable again in 1983. The vital
state of Chrysler’s finances and market position
in 1995 attest to the success of this strategic
choice made within the framework of the
strategic decision-making process.
The second example of a successful strategic
decision was made by Philip Morris Companies
in 1984 to reduce its dependency on
profit from tobacco products. The means to
accomplish this objective was diversification;
and Philip Morris considered several alternatives
before settling on the food processing
industry. Philip Morris had a very positive
strategic gap to finance its strategic objective
which was to be accomplished within ten
years. In 1985, Philip Morris purchased General
Foods for $5.5 billion, followed by the
acquisition of Kraft Foods in 1988 for $12.9
billion, and the subsequent acquisition of
Swiss-based coffee and confectionery company
Jacobs Suchard AG in 1990 for $4.1 billion.
In 1984, income from tobacco products
accounted for 92 per cent of Philip Morris’
income from operations. By 1992, this proportion
had declined to 68 per cent with further
reductions in prospect. Clearly, Philip Morris
has achieved its long-term strategic objective;
and its strategic decision affords another
positive example of the benefits inherent in
the process set forth in Figure 3.
The last example of a successful strategic
decision involves the acquisition by the Wells
Fargo Bank of Crocker National Bank in 1986
for $1.08 billion. This acquisition created the
nation’s tenth largest holding company with
about $42.5 billion in assets. Wells’ objective
was to establish a major presence in the
rapidly growing banking market in southern
California. Wells had a positive strategic gap
and conducted a comprehensive search for
alternatives before the opportunity to purchase
Crocker materialized. The acquisition
of Crocker promised the immediate realization
of Wells’ objective. Implementation of the
decision was facilitated by compatible banking
technologies, complementary policies and
procedures, and continuous follow-up by the
management of Wells Fargo. Implementation
was essentially completed within one year.
Unsuccessful strategic decisions
Nearly everyone has a list of unsuccessful
strategic decisions. The three failures presented
here are simply illustrative of management’s
partial or complete disregard of the
strategic decision-making process conceptualized
in Figure 3.
In 1978, General Motors set a strategic
objective to reinvent itself through the expenditure
of $40 billion. At that time, GM had 49
per cent of the US automobile market. By
1993, GM had spent over $60 billion in pursuit
of its objective and its market share had
declined to 32 per cent. Even today, in 1995,
GM is in a kind of organizational free fall. For
example, the company is still trying to earn
an operating profit from its North American
operations. What went wrong?
GM’s capability profile in 1978 revealed
strength in all areas except management.
GM’s management was characterized by a
bloated, bureaucratic structure that resisted
any attempt to improve the corporation.
Objectives were poorly defined, lines of
authority were obscure; accountability for
results was non-existent, and the personal
interests of GM’s managers took precedence
There is no presumption
of success following
implementation and
continuous measurement
and evaluation of emerging
results is accompanied by
timely corrective action to
ensure an outcome that
attains the objectives.
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[ 52 ]
E. Frank Harrison
A process perspective on
strategic decision making
Management Decision
34/1 [1996] 46–53
over the long-term best interests of the corporation.
Essentially, GM had a serious negative
strategic gap that was not apparent to its
decision makers. Consequently, its strategic
objective was unattainable from the outset.
In the context of Figure 3, GM took several
alternative actions in pursuit of its objective.
In 1983, GM entered a joint venture with
Toyota; in 1984, GM purchased Electronic
Data Systems from Ross Perot; also in 1984,
GM underwent a vast internal reorganization;
and finally, in 1986, GM commenced
production of the Saturn automobile. None of
these alternatives was successful; nor was
GM’s exorbitant expenditures on plant modernization
and advanced technology. In fact,
GM’s objective was flawed by the very management
that set it; and no amount of strategic
decision making will reinvent GM until
its management is completely changed.
The second example of unsuccessful strategic
decision making concerns the Northrop
Corporation. In 1980, the Carter administration
asked the Northrop Corporation to
design, develop and produce a low-cost fighter
aircraft for sale overseas. Northrup’s strategic
objective in accepting this offer without
the usual formal contract was to protect its
industry position as a producer of hightechnology
military aircraft. Basically,
Northrop erred in not demanding a written
contract and in assuming that a change of
administration would not jeopardize its verbal
agreement with the Carter administration.
Alternatives were not considered and
negative consequences were not envisioned.
There were no safeguards to protect Northrop
once the decision was implemented and costs
were incurred. Essentially, it was a high-risk
strategic decision with rewards contingent
on continued government advocacy of exclusive
sales of Northrop’s aircraft to foreign
governments. After five years and over $1
billion in development costs, the F-20 fighter
programme at Northrop was cancelled in
1986. Implementation of this strategic decision
during the Reagan administration did
not result in the sale of a single aircraft to the
export market or any of the US armed forces.
On 23 April 1985, after 99 years, the CocaCola
Company decided to abandon its original
formula in favour of a sweeter variation
designated “New Coke”. The strategic decision
to substitute new Coke for old Coke
failed and less than three months later the
company brought back old Coke under the
name “Coca Cola Classic”. It was then
decided to compete with Pepsi using both
Cokes. The explanation of Coca-Cola’s failure
is simple and straightforward. The company
completely disregarded its principal stakeholders
in deciding to precipitously jettison
old Coke in favour of new Coke. Alternatives
such as a gradual implementation of new
Coke or a tandem marketing of both Cokes
were not considered. It was either old Coke or
new Coke with no middle ground. Essentially,
proceeding on the basis of some very limited
and tenuous taste tests, Coca-Cola’s management
decided to summarily dump the crown
jewel of its product line. Once the premier
product was withdrawn, there was an incredibly
negative aftermath such that the company
had to reverse itself with considerable
embarrassment. Clearly, the strategic decision-making
process was circumvented by a
total disregard of the external environment
and a lack of consideration for alternative
ways of introducing a new product. The primary
criteria were quantitative measures of
sales, profits and market share. These criteria
caused the company to disregard the image of
a product that had been part of the US’s folklore
for nearly a century. As such, this application
affords a prime example of how not to
make a strategic decision.
Summary
This article has set forth a process perspective
on strategic decision making. The
process begins with the concept of strategic
gap (Figure 1) which focuses on the fit
between the capabilities of the organization
and its most significant external entities.
Gap analysis begins with a capability profile
depicting the principal strengths and weaknesses
of the organization. If the organization’s
strengths exceed its weaknesses, it has
a positive strategic gap and it is ready to
exploit the opportunities and protect itself
from the threat in its external environment.
If the weaknesses outweigh the strengths, the
organization has a negative strategic gap and
corrective action is required to remedy the
negative imbalance before pursuing external
opportunities. The external environment of
the organization is composed of opportunities,
threats, requirements and responsibilities
which must be dealt with from a position
of organizational strength.
The managerial decision-making process
(Figure 2) constitutes the second major part
of the strategic decision-making process. The
former process is composed of six major decision-making
functions which are both interrelated
and dynamic in their cycling through
the process. The strategic decision-making
process (Figure 3) is composed of three types
of process flows each of which contributes to
the benefits inherent in the overall process.
The strategic decision-making process is
In fact, GM’s objective
was flawed by the very
management that set it; and
no amount of strategic
decision making will reinvent
GM until its management is
completely changed.
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[ 53 ]
E. Frank Harrison
A process perspective on
strategic decision making
Management Decision
34/1 [1996] 46–53
highly dynamic in its own right. This
dynamism is centred on the external environment;
the continuous flow of information
throughout the process; and the pivotal coupling
of the concept of strategic gap with the
managerial decision-making process.
This article posited that a successful strategic
decision is one that results in the attainment
of the objective that gave rise to the
decision within the constraints that had to
be observed to bring about such attainment.
It was also posited that a formal decisionmaking
process is conducive to strategic
decision success. A profile of strategic decision
success with six principal characteristics
was advanced as a basis for evaluating
real-world strategic choices. Three examples
of successful strategic decisions revealed that
the decision makers had followed the three
varieties of process flows conceptualized in
Figure 3. Three other examples of unsuccessful
strategic choices showed that the decision
makers had disregarded all or some part of
the process flows set forth in Figure 3. Based
on an evaluation of six strategic decisions in
a cross-section of major US corporations, it
may tentatively be concluded that a process
approach to strategic decision making is
more likely to culminate in strategic decision
success. Hopefully, the significance of this
subject along with the content of this article
will elicit additional research in this critical
area of management.
References
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Application questions
1 Are your strategic decisions successful for
the most part?
2 Are your strategic decisions made after
an objective gap analysis of your entire
organization?
3 Do your strategic choices regularly
embody the common set of characteristics
advanced for the profile of a successful
strategic choice set forth in this article?
4 Do you regularly employ a process
approach to your strategic decisions?
Downloaded by Doctor Alex Williams At 08:17 20 March 2017 (PT)
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