The various strategies have to be carefully evaluated before the choice is made. Strategic choices must be considered in light of the risks involved in a particular decision. Some profitable opportunities may not be pursued because a failure in a risky venture could result in the bankruptcy of the firm. Another critical element in choosing a strategy is timing. Even the best product may fail if it is introduced to the market at an inappropriate time. Moreover, the reaction of competitors must be taken into consideration. When IBM reduced its price of the PC computer in reaction to the sales success of Apple’s Macintosh computer, firms producing IBM-compatible computers had little choice but to reduce their prices as well. This illustrates the interconnection of the strategies of several firms in the same industry.
Medium- and Short-Range Planning, Implementation and Control
Although not a part of the strategic planning process (and therefore shown by broken lines in Figure), medium- and short-range planning, as well as the implementation of the plans, must be considered during all phases of the process. Control must also be provided for monitoring performance against plan.The importance of feedback is shown by the loops in the model.
Top managers get paid for making tough decisions, and many of their decisions are strategic for the future of the company. Let us look at some examples of decisions that altered the course of the company. General Motors. Roger Smith of general Motors saw the opportunities in the high-tech field and their importance for GM. Consequently, he decided to acquire Electronic Data Systems Corp., a large data procession company. But the resistance to the merger of these two companies (with very different organizational cultures) by GM’s staff was substantial.
Long-established organisations do not change easily, and Roger Smith learned a great deal about the difficulty of making dramatic changes.
Gould Inc. William Ylvisaker, the former CEO of Gould Inc., changed the firm from a manufacturer of car batteries and electrical equipment to a high-tech electronic firm. This new direction required a change in personnel; half of Gould’s management committee left the company. Making such drastic decisions requires a strong-willed person; Ylvisaker was named one of the ten toughest corporate managers by Fortune magazine. Warner-Lambert. When Ward Hagan wanted to restructure Warner-Lambert, he had to streamline the drug company. This required selling the eyeglass manufacturer American Optical (a loser) as well as Entenmann, a profitable bakery firm. To give a new direction to the firm, Hagan employed the consulting services of McKinsey & Co. to teach its managers strategic planning. To be sure, nobody can predict the long-term future with great accuracy, but strategic planning forces managers to think critically and analytically about the future. The company sent 500 of its managers to a program that trained them in critical thinking. To demonstrate the importance of strategic thinking, the company rewarded managers who utilized the technique with promotions. Rolm Corporation. Rolm Corporation was concerned about its dependence on military customers, which led to a search for related product lines. Despite a thorough search, the results were at first disappointing. Persistence and a continuing search led to the development of digital switching equipment that was more advanced than that of Rolen’s competitors. Some risk-taking decisions turned out to be right and made the company a giant in its field before the firm was acquired by IBM.