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Strategic Choice Chapter 11
Strategic Choice
11.1
Importance of choice in the strategy
formulation process
S
trategic
choice is the third logical element of the strategy formulation process.
Choice is at the centre of strategy formulation. If there are no choices to be made,
there can be little value in thinking about strategy at all. On the other hand, there will
always, in practice, be limits on the range of possible choices. In general, small enter-
prises tend to be limited by their resources, whereas large enterprises nd it difcult
to change quickly and so tend to be constrained by their past. In large corporations,
managers may nd their range of choice limited because some choices are made at a
higher level or in another country. In the public sector, the genuine strategic choices
may be made by politicians so that the role of the manager is limited to devising how
best to implement strategies rather than to ponder fundamental choices of future
direction for themselves.
Even when managers are apparently free to make strategic choices, results may
eventually depend as much on chance and opportunity as on the deliberate choices
of those managers. When considering future strategies, it may seem that there are
clear choices to be made. When reecting on outcomes in retrospect, it is often
clear that events, and particularly unexpected events, played a major role in
determining results. When considering choice, it is necessary to take a prescriptive
view. Descriptive ways of thinking may help to explain the outcomes after the
event.
In a tidy logical world, any process of choice could be rationally divided into four
stepsidentify options, evaluate the options against preference criteria, select the
best option, and then take action. This suggests that identifying and choosing options
can be done purely analytically. In practice, it may be difcult to identify all possible
options with equal clarity or at the same time. Unexpected events can create new
opportunities, destroy foreseen opportunities, or alter the balance of advantage
between opportunities. Identifying and evaluating options is a useful approach but it strategic choice
133
has limitations. It is necessary to remember that the future may evolve differently
from any of the options.
Good strategic choices have to be challenging enough to keep ahead of competitors
but also have to be achievable. Analysis has an important role in making strategic
choice but judgement and skill are also critical. For instance, sometimes it may be
better to delay making a decision whereas at other times a wrong decision may be
better than no decision. Strategic choices that keep options open may be preferable
in an uncertain future to dened strategies that depend for their success on uncertain
events happening. Such judgements require wisdom as much as analytical skill.
These words of caution lay the ground for this chapter that might otherwise seem
to make the process of strategic choice sound too mechanistic.
Since strategic choice tends to be so fuzzy, it is useful to dene the words being
used. We shall adopt the following denitions.
s
Choice and strategic choice refer to the process of selecting one option for implemen-
tation.
s
An option is a course of action that it appears possible to take. The simplest form of
choice is therefore between taking an option and not taking itdoing it or not
doing it. Most choices have more shades of possibility than this.
s
A strategic option is a set of related options (typically combining options for product/
markets and resources) that form a potential strategy. For instance, it might be an
option to enter a new market in a new country. The entry to that market with a
chosen method of distribution and known way of acquiring necessary distribution
resourcesin fact, a complete business plan of how to enter the new market
successfullywould become a strategic option.
s
Chosen Strategy is the strategic option that has been chosen. The nature of this forms
the content of strategy and is addressed in Part IV.
11.2
Structure of strategic choice
F
igure
11.1 reproduces the right-hand half of Figure 6.3 introduced in Chapter 6.
It shows how the three logical elements of the strategy formulation process
interlock. The shaded background is a reminder of the importance of context as
determining the issues to be resolved by strategic choice.
Figure 11.2 expands the detail to illustrate the signicance of the overlaps. The
common ground between any two circles is of some interest but it is only where all
three circles overlap that logically viable options exist. The chosen strategy emerges
as the chosen viable option. It is where the differing requirements of intent and
assessment are most fully metthat is, where the three logical elements overlap.
The areas where any two circles overlap are also of interest. The criteria for choice
derive from intent and assessment. Feasible options may exist which are not aligned
to strategic intent. This, of course, may raise the question of whether the strategic 134
the strategy formulation process
intent should be changed. Infeasible options may seem highly attractive and may
have powerful supporters, so the reasons why they are infeasible may need to be
carefully argued with clear evidence in support. Choices of what not to do may some-
times be as important as choosing what to do.
In practice, the process for choosing a strategy may be structured something like
Figure 11.3, although the reality is likely to be much messier. The structure of this
chapter is also based on this gure.
The process of choice starts by identifying available options. The chosen strategy strategic choice
135
will have to answer the questions what, how, why, who, and when, so each
option will provide provisional answers to each of these questions.
There are likely to be different kinds of options. Figure 11.3 shows three types
products/services/markets, resources/capabilities, and method of progressthat are
typical but not necessarily exhaustive.
11.3
Options for markets and
products/services
T
he
most obvious type of option relates to which products or services to offer in
which markets. Igor Ansoff was the rst to suggest the diagram shown in Figure
11
.4 for structuring this decision.
The axes of the diagram are product (including services and any form of offering),
market need (which can be any group of potential customers whether dened by
their needs, inclinations, or income bracket), and market geography (geographical 136
the strategy formulation process
location). The model denes four cells for the present market geography. The top-left
of these cells represents the present status of the business. The possible future
choices about products and markets can be represented as movements within or
away from this cell.
One set of choices is possible within the existing product/market set.
s
Do nothingthat is, continue present strategies. This strategy is important as it is
usual to compare any proposed change with the do nothing option as a baseline.
The do nothing option is rarely viable for the long term as it is likely that competi-
tors will gradually take the market by improving their products, their processes, or
their relationships.
s
Withdrawleave the market by closing down or selling out. This appears to
be a negative option but may be necessary to focus available resources into areas
of greater strength. It is common in declining markets to see some of the com-
petitors selling out to others who can operate the combined operation more
cheaply.
s
Consolidateattempt to hold market share in existing markets. This is a defen-
Box 11.1 Example of options and a strategic choice
In April 1999, Ford announced the agreed acquisition of Kwik Fit. Ford had therefore
made a strategic choice. Ford has a strategic intent to move into automotive services. A
strategic assessment of Ford should show that its existing resources of large plants and
skills in design, marketing, finance, and assembly of new cars are inadequate to
support a service business. The decision to acquire Kwikfit would then be made from
options about:
s
what types of services to offer and in which markets;
s
what resources and capabilities are needed to support these services;
s
how to acquire or build these resources.
Clearly there are multiple options in response to each question and there are links
between the question. A strategic option for Ford would be a set of options that seem to
make sense together.
Without any detailed knowledge of the deliberations within Ford, it would seem that
Figure 11.3 could be used to illustrate the structure of the decision.
It is important to notice that in practice the decision will also have been influenced by
irrational elements not illustrated in Figure 11.3. For instance, it happens that Alex
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