B301B: MAKING SENSE OF STRATEGY
Block 3: UNITS
Unit 6: Pages (256-271) and (276-278)
Note: These slides will cover most of the main
ideas discussed in the above mentioned sections,
but it is the student’s responsibility to do the
following activities (6.1, 6.2, 6.3, 6.4 & 6.7).
Introduction
• Decision making is a common feature of
organizational life.
• Level of importance : trivial and significant
• Trivial : Programmed or operating or generic
• Significant : Strategic
• Vary from company to company
• Strategic Decision making : Those decisions
that concern ‘the goals of an organization as
well as the means to reach these goals
(Noorderhaven,1995,p.15)
6.1: Models of strategic decision making
Before we approach the issue of strategic
decision making, it is necessary to consider the
status of the theories we shall discuss here.
A distinction is often made between two types
of theory:
‘Prescriptive’ or ‘normative’ theories concern how to
make strategic decisions, offering a model or
recommendation for how strategic decisions ought to
be made. The implication is that if we follow the
theory we make better, more successful, strategic
decisions.
‘Descriptive’ theories offer accounts of how strategic
decision making occurs in practice, asking questions such
as:
How do strategic decisions get made in a particular
management team?
What psychological factors influence particular strategic
decisions?
How does information affect strategic decisions?
A simple way to think about the distinction is that
prescriptive/normative theory tells us about what ‘ought’
to be, while descriptive theory is about what ‘is’.
In reading 16 of Block 3 “Decision processes” you were
introduced to the rational model and its shortcomings,
because of such shortcomings theorists have added a series
of more realistic assumptions which might be considered a
more realistic approximation of how humans do behave.
The two most important concepts involved in this model,
both attributed to Simon’s pioneering work, are the two
concepts of ‘bounded rationality’ and ‘satisficing’.
Bounded rationality refers to the idea that agents are
only partly rational. In essence, people make decisions on
information which is incomplete or even erroneous;
consequences cannot be anticipated, assessed and valued
with absolute accuracy. (Block 3 ,Page 262)
Satisficing refers to the decision-making process. Rather
than finding all alternatives, weighing them up against
each other and making a decision which would give the
best outcome, individuals seek out the best alternative
from those that are available to them and evaluate each
alternative in turn according to their aspirations, until
reaching one which satisfies these aspirations. (Block 3
,Page 262)
Armed with these somewhat more realistic assumptions of human
behaviour, Simon has developed a model of decision making which has
three stages
Case study 6.1 is a good application to Simon’s model.
Problem recognition. Google wanted a significant market share of the
videosharing business; its product, GoogleVideo, failed to deliver this.
Develop alternatives. Possible alternatives open to Google were to:
market Google Video aggressively to increase market share, close down
Google Video ,accept its current position and simply maintain its current
market share, acquire another internet video company.
Choice. Google decided to
acquire YouTube, at a cost
of $1.65 billion.
.
In refining the rational approach, a variety of theorists have
added and subtracted various stages and sub-stages to this
framework.
For example, a number of theorists have suggested that the
impulse towards a decision does not necessarily come from
problems but may be derived from setting objectives.
Gore et al. (1992) provide a composite diagram (Figure 6.2).
It should be remembered that no theory of strategic decision
making includes all of these phases; Figure 6.2 is designed to
illustrate core features of the rational approach to strategic
decision making. In this respect there are two key points worth
emphasising:
The rational decision-making process is sequential, with
each stage following on from its predecessor.
 Although this model recognises the existence of
bounded rationality and satisficing, it proposes that we
should seek to reduce their impacts on the process. For
example, we should try to generate as many alternatives
as possible.
What are the practical implications of the rational
approach? And its advantages and disadvantages?
The rational approach provides a structure and a
sequence for strategic decision making, it provides explicit
guidance for the decision-making process and, if followed,
it is claimed, lead to better decisions.
Second, the framework enables us to integrate the
analytic tools you have studied into a broader decisionmaking process, i.e., analysis, choice and implementation
become a structured whole.
However, we might wonder whether other features of
organisational and human life fit in; e.g., where is the
explicit role of creativity, instinct, power, intuition,
chance?
 There is the additional question of whether these
models are realistic: is it true that organisations,
some of which are highly successful, always follow
these paths?
 Although the development of the rational model
has resolved some of the problems associated with
the somewhat unrealistic model of economic
rationality – e.g., it does not assume the existence
of perfect information or the ability to calculate
perfectly the outcomes of every alternative
 we cannot seem to make the claim that the rational
approach automatically leads to success.
Sense-making:
Recently the more sociologically inclined or
‘strategy-as-practice’ perspective has cast its gaze
over strategic decision making.
From the strategy-as-practice perspective, an
adequate account of strategic decision making needs
to include the variety of social processes ongoing
within an organisation:
the way in which meaning is produced and reproduced;
the manner in which social identities are performed,
constructed and altered;
the manner in which decisions and alternatives operate
within broader power relations and the like
This sociologically orientated approach counters the idea that
information is somehow neutral, apart from social relations.
The authors suggest that information is constructed and
transmitted within a social setting.
It is within this process that the meaning of information is
generated and transformed through social interactions, e.g.,
conversations, presentations, reports.
This process of sense-giving is contested as various
individuals attempt to apply or re-fashion information
according to their beliefs and preferences.
The lessons for practice seem to be that not only are effective
information gathering and processing insufficient, but we need
to be skilled practitioners in the arts of meaning-making.
The process also displays unintended
consequences; it is not simply the domination of
one sense over another; there is both sensewriting and sense-reading.
Conflict is not simply about choices, but over
the very sense applied to the alternatives and
their accompanying evidence.
Evidently skilled practitioners in these arts can
use this opportunity (in certain cases) to lend
information a specific meaning, framing this
information in the minds of participants and
perhaps leading them to a particular conclusion