FACTORS AFFECTING STRATEGIC CHOICE

4.8 FACTORS AFFECTING STRATEGIC CHOICE

The choice of a grand strategy or strategies requires a clear decision that allows an organisation to attain its goals. If an examination of the different strategies identifies a clearly superior strategy, the decision is relatively simple. However, such clarity is the exception, which makes most decisions in this regard judgemental. Several factors influence the decision to implement a specific strategy. We shall discuss some of the more important factors below.

Firstly, corporate governance plays a major role in strategic planning and therefore in the choice of strategy or combination of strategic planning and therefore in the choice of strategy or combination of strategies. The King Report on Corporate Governance in South Africa acknowledges that there is a move away from the single bottom line (that is, profit for shareholders) to a triple bottom line, which embraces the economic, environmental and social aspects of a major company’s activities. The board responsible for ensuring that the organisation has implemented an effective ongoing process to identify risk, measure its potential impact on the environment and society against a set of assumptions, and then activate what it believes is necessary to manage these risks proactively. The board should therefore decide on what risk that a company is prepared to take and the risks it will take in pursuance of its mission and long-term goals. The fact that a strategy, once initiated, is very difficult to change because organisational momentum keeps it going, is confirmed by Mintzburg’s research, which suggest that past strategy strongly influences current strategic choice. The older and more successful a strategy is, the hard it is replace. Mintzburg also found that, even when a strategy begins to fail because of changes in the business environment, strategists often increase their commitment to that strategy. It seems that, in order to change unsuccessful past strategies, an organisation may have to replace key strategists to lessen the influence of the past strategies on the future strategic choices.

Factors that influencing the choice of a strategy are:  Corporate governance guidelines pertaining to risk management;

 Previous strategies chosen;  Dependence on external factors;  Attitude towards risks;  Personalities of strategists;  Alignment with the organisation’s mission and long-term goals;  Proper timing

Some organisations are extremely dependent on one or more external factors, such as suppliers, customers, or competition. These organisations may have to choose a strategy that they would normally not choose in order to maintain their relationship with specific external factors. A gymnasium offering aerobics and weight-lifting facilities, for example,

may have to expand to offer Internet facilities to members’ children so that the children can

be kept busy while their parents are training. The success of an organisation’s strategies also depends on proper timing. A seemingly good

strategy may be disastrous if undertaken at the wrong time. A construction company that decides to concentrate on the first-time home owner for the following two years may be detrimentally affected by a sharp increase in interest rates. The same strategy may be very successful if the organisation decides to hold off entering this market until interest rates have settled down.