What is Strategic Decision Making? - Definition & Management

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  • 0:04 Strategic Decision Making
  • 1:11 The Mission
  • 2:17 Managerial Input
  • 3:27 Other Decisions
  • 3:45 Lesson Summary
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Lesson Transcript
Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

After completing this lesson, you'll understand how important it is for managers to think of the big picture during strategic decision making. Learn how this helps a business to achieve and maintain its mission.

Strategic Decision Making

Managers of successful businesses do more than simply find a way to make money and sell stuff. Not only do they handle the day-to-day tasks of selling, they also think of the big picture and make decisions that will get the company to where it wants to go. This is called strategic decision making, where decisions are made according to a company's goals or mission. This type of decision making guides the choices that are made, aligning them with the company objective. It requires out-of-the-box thinking as managers need to consider future scenarios that may or may not happen. It's these scenarios that will determine in which direction a company will go.

For example, the manager of a dog food company notices that dog owners want more quality and fresh foods rather than kibble that lasts 10 years on the shelf, even if those kibbles provide a similar nutritional value. The company's mission statement is to be the best company that sells the healthiest dog food. To align the company with the changing needs and wants of its customers, the manager decides to shift the company's products to focus more on freshness. Yes, this means a reduced shelf life, but it does mean a higher profit margin because dog owners are more than willing to pay more for fresh quality foods.

The Mission

The biggest part of strategic decision making is the company's mission. It's the mission that guides the types of goals the managers will set for the company.

For example, if the dog food company's mission was to be the number one supplier of cheap dog food, then using fresh ingredients wouldn't be top of its priority list. Instead, finding cheaper ingredients, with a longer shelf life, would be more in line with that mission. See how the decisions can vary so drastically based on the company's mission?

Having a company mission actually helps you in your strategic decision making. Without it, you have no guidance. But with it, you know what direction you should take your thoughts and actions.

To reach this mission, managers also need to reassess their actions from time to time. Going back to the dog food company example, managers will look at sales data perhaps after a month of selling the new healthy and fresh dog food products. If sales are increasing and look promising, then this direction is a good one. But if sales are lacking, then it means that a new way of reaching the company's mission needs to be made. Perhaps, instead of focusing on fresh foods, the company can focus on higher quality ingredients that more closely imitate a dog's natural diet.

Managerial Input

As you can see, managers have a pretty big responsibility when it comes to making decisions for the company. Looking at the dog food company example, if it wasn't for the manager choosing to shift the company's focus to quality and freshness instead of shelf life, the company might have failed in meeting their mission statement.

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