Competive Advantage

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Factors affecting strategic choice

Management Principles: A contemporary Edition for Africa

P.J. Smit, T Brevis, G.J. De J. Cronje. M.J. Vrba,Juta and Company Ltd, Jan 1 2007

The choice of a grand strategy requires a clear decision that allows an organization to attain itsgoals. If an examination of the different strategies identifies a clearly superior strategy, the decisionis relatively simple. However such clarity is the exception, which makes most decisions in thisregard judgemental. Several factors influence the decision to implement a specific strategy.

Corporate Governance plays a major role in strategic planning and therefore in the choice of astrategy or combination of strategies. The King 2002 Report on Corporate Governance in SouthAfrica acknowledges that there is a move away from the single bottom line (that is, profit forshareholders) to a triple bottom line, which embraces the economic, environmental and socialaspects of a company s activities. The board is responsible for ensuring that the company hasimplemented an effective ongoing process to identify risk, measure its potential impact against aset of assumptions, and then activate what it believes is necessary to manage these risksproactively. The board should therefore decide on what risk that company is prepared to take andthe risks it will not take in pursuance of its mission and long-term goals.

Top management s attitude to risk-and more specifically the chief executive officer s attitude strongly choices influences strategy selection. Where attitude favour risk, the range of strategicchoices expands; where managemnet is risk-averse, strategic choices are limited, as riskyalternatives are eliminated before strategic choices are made. Risk-averse managers will probablynot be considered by a team of risk-averse managers.

The personality of a manager also affects the choice of a strategy. Kets de Vries argues that theinner the tre of m n ger-in other words, the manager s personality has a direct influence onthe choice of a strategy, the corporate culture, and even the structure of the organization.Pressures from an organization s mission, long-term goals, and culture heavily influence strategic


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choice. The mission statement and all goals have to be analyzed to determine whether a specificstrategy fits in with the direction and entire set of goals that management chooses. Furthermore, ifa strategy is compatible with the norms and values (culture) shared by management and employees,the likehood of success is greater.

The success of an organization s strategies is also dependent on proper timing. A seemingly goodstrategy may be disastrous if undertaken at the wrong time. A construction company that decidesto concentrate on the first-time home owner for the following two years may be detrimentallyaffected by a sharp increase in interest rates. The same strategy may be very successful if theorganization decides to hold off entering this market until interest rates have settled down.


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Competive Advantage

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