Citation: Csaszar, F. A. (2013). Strategic decision making. E. H. Kessler, ed., Encyclopedia of Management Theory. SAGE Publications, Thousand Oaks, CA, 775–778. doi:10.4135/9781452276090.n263
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Paper highlights
Strategic decisions differ from the clean choices described in standard decision theory. The possible actions are rarely known in advance, probabilities are ambiguous, several people hold different information and preferences, and implementation is part of the problem. This encyclopedia entry explains why those features require a distinct field of strategic decision-making.
The useful shift is from asking only what decision should be made to asking how the decision process should be designed. How a firm frames the problem, searches for alternatives, combines judgments, and assigns decision rights changes which strategy it eventually chooses.
A framework for strategic decisions
The entry organizes strategic decision-making into three stages:
- identify and frame the problem;
- develop possible solutions through search; and
- evaluate and select among those solutions.
Each stage can fail in a different way. Individual biases can distort judgment. Valuable alternatives may never be generated. Information distributed across several people may be combined poorly. Organizational structure can then screen proposals too aggressively or too loosely.
What organization design changes
Centralized structures are useful when decisions are interdependent, disparate information must be combined, or a few choices carry large stakes. Decentralized structures are useful when local knowledge matters and many decisions must be made quickly. They also produce different errors: additional approval screens reject more bad projects, but they also reject more good ones. The appropriate structure therefore depends partly on whether a mistaken approval or a missed opportunity is more costly.
Why it matters
- Strategic failures often occur before alternatives are compared: the problem may be framed too narrowly, a strong option may never be generated, or knowledge may remain dispersed.
- Behavioral decision theory, search, information aggregation, and organization design explain different points of failure in one process.
- Improving the final vote cannot repair an option that never reached the table.
How to use this entry
Cite this for
- A concise overview of strategic decision-making as a process field rather than a list of strategy frameworks.
- The basic sequence of framing, search, evaluation, and selection in consequential organizational decisions.
- The link between decision structures and omission or commission errors.
Useful for teaching
- A first map of the strategic decision-making literature for MBA, PhD, or executive audiences.
- How individual bias, search failure, information aggregation, and organization design enter at different points in a decision process.
- Why improving the final selection rule cannot fix a poorly framed problem or a missing alternative.
Careful claim
This entry is an orientation to core concepts in strategic decision-making; use it to frame the field and point readers toward process mechanisms, not as a standalone empirical test.
Abstract
Strategy is about making decisions–decisions such as which industry to enter, how to position the firm and its products, which resources to develop or to buy, who to hire, and which organizational structure to use. It is no surprise, then, that much research within the strategy field has studied how strategic decisions are made and how they can be improved. The literature addressing these two questions falls under the rubric of strategic decision making (SDM). This literature focuses on the processes leading to a decision (e.g., how different opinions are taken into account) rather than on the content of the decision (e.g., which strategy framework to use to devise the firm’s positioning). This entry presents some of the fundamental concepts and tools studied in the field of SDM and ways in which they might be applied by managers.
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Last updated 2026-06-21