Topic 4.3 · Strategy and Decision Making
Strategy and Decision Making
Strategy vs. tactics, a deliberative (PACED) decision process, choosing criteria including ROI, and deciding with imperfect data.
Learning objectives
- 4.3.AExplain how and why businesses develop and use strategy to achieve goals.
- 4.3.BApply a deliberative process to make a business decision.
Objective statements © College Board, quoted from the Course and Exam Description.
Strategy and tactics
A strategy describes how a business will reach a goal: competitive advantage, its mission, higher revenue, lower costs or higher profit. Different businesses pick different strategies based on their capabilities, competitive landscape and industry.
Tactics are the specific actions that carry a strategy out. A clear strategy mobilizes and aligns resources and increases the chance of success. Businesses track data on finances, customers, competitors and market trends to define, evaluate and modify their strategy.
Strategy vs. tactic
Strategy: become the most convenient coffee option for commuters. Tactics: open drive-throughs near highway exits, launch mobile ordering, and guarantee 3-minute service.
A deliberative decision process: PACED
- Problem: define the problem or decision.
- Alternatives: develop the options.
- Criteria: establish what matters for judging them.
Key terms
- Strategy
- A plan for achieving one or more goals, such as competitive advantage, mission, revenue, cost reduction or profit.
- Tactic
- A specific action intended to advance a strategy.
- Deliberative process (PACED)
- Define the Problem, list Alternatives, set Criteria, Evaluate alternatives, Decide.
- Decision criteria
- The costs and benefits used to compare options. They can be quantifiable (costs, sales, profit) or intangible (reputation, mission, values).
- Return on investment (ROI)
- Additional profit generated by an investment divided by the investment's cost.
- Strategic framework
- A structured tool (e.g., SWOT, Porter's Five Forces) for systematically evaluating options against goals.
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