Planning and Strategic Decision Making
The planning hierarchy
Planning is deciding in advance what to do, how, when and by whom. The hierarchy runs: mission (purpose), vision (future state), objectives (SMART and time-bound), strategies (long-term means), policies, procedures, rules, programmes and budgets. Exam-favourite distinctions: a policy guides thinking, a procedure guides action chronologically, a rule removes discretion altogether.
Strategy tools
PESTLE scans the macro-environment; SWOT matches internal strengths and weaknesses to opportunities and threats; Porter's generic strategies (cost leadership, differentiation, focus) define competitive positioning; the Ansoff matrix classifies growth by product and market novelty - market penetration, product development, market development, diversification - with risk rising along that sequence.
Decision making
The rational model: define the problem, gather information, generate alternatives, evaluate against criteria, choose, implement, review. Simon's bounded rationality counters it - managers satisfice because information, time and cognition are limited. Group techniques: brainstorming (uncritical generation, quantity first), Delphi (anonymous multi-round expert questionnaires, never a meeting), nominal group technique (silent written generation, round-robin, then ranked vote).
Worked example
A flour miller has spare capacity, sells only to bakery customers in one state, and wants growth. Same product into new states = market development. A new packaged consumer flour sold to its existing bakery customers = product development. A new product for a new retail market = diversification. Reasoning: risk rises as both axes move, so the choice turns on the firm's appetite and capability, not on projected returns alone.
Traps
- Writing objectives without a time frame or measure, so performance cannot be controlled.
- Confusing strategy (means to long-run ends) with tactics (short-term adjustment).
- Describing Delphi as a face-to-face meeting - anonymity between rounds is its defining feature.
- Presenting SWOT as four lists with no S–O or W–T matching.