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Theoretical Aspects of the Strategic Management Decision-Making of Companies

Abstract:

This chapter analyses theoretical aspects of decision making within the strategic management process in companies. To make decisions it is necessary to analyse the problem from the knowledge and understanding of it; problems do not always have similar conditions and there are risks involved in a mechanical response or an intuitive approach. In the business context, the consequences of a bad or good choice can have repercussions on the success or failure of the organization. Good decisions are not easily achieved, they are the result of an arduous and orderly methodological process. Robbins and Coulter (2018) propose, for example, four perspectives on the way managers make decisions: rationality, limited rationality, intuition, and evidence-based management. The study of decision-making has long been of interest by numerous researchers. There are countless variables on which decision-making depends, among which we have the external context, the internal context, risk, mental models, behaviour, risk forecasting and the time of decision-making. According to Hillier and Lieberman (2015) decision making is done based on the choice between some options, an alternative is chosen to solve certain situations that may arise. Every company, be it micro, small, medium or large, is affected by two types of environment: internal and external. Robbins and Coulter (2018) explain that the internal environment are those forces or factors that directly affect a company (customers, consumers, suppliers, value chain), while the external environment is made up of factors that they operate outside the organization and affect its performance. These factors are associated with economic, political, social, cultural, technological and globalization aspects. In the internal context, the strengths and weaknesses that companies have and on which the manager makes certain decisions are evaluated. Rodríguez and Pedraja (2009) state that in the external context the threats and opportunities that exist in the environment are analyzed, they also emphasize that the agents who make the decisions do not have all the necessary information to choose between the various options presented, which causes uncertainty when making decisions. De León (2007) states that risk analysis in decision-making is associated with the continuous improvement that companies seek, by estimating the probability of unwanted events occurring in the process, where to measure the magnitude of the situations that may generate negative impacts that may occur. On the other hand, risk analysis is associated not only with systematically observing the situations that arise in order to make a decision, but also with making methodological proposals that allow determining the causes and consequences of making a decision. The objective of this work, therefore, is to theoretically describe the variables external context, internal context and risk as elements that influence decision-making, applied mainly to those that are strategic in nature, understanding as a strategy the way in which the resources of a company, prior to the development of a production or administrative process, are deployed.