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Strategic Thinking and Decision-Making: A Literature Review
BUSI 770 Strategic Thinking and Decision-Making
Respectfully submitted to: Professor Fassil Fanta
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Abstract
In this study, the author conducts a literature review on strategic thinking and decision-making.
This paper is made of three major sections related to the three research questions listed in the
BUSI 770 Literature Review Instructions. The first research question is concerning decision
processes in business decision making. The author first introduces the importance of business
decision-making and presents the literature review on the topics of business decision-making at
the individual level, business decision making at the individual level at the group level, and
organizational decision-making. The first research question is about the newest directions in the
process of strategy development and execution. The author syntheses the reviewed the literature
and presents the latest research in strategy development and alignment, strategy execution, and
two special focus on the topics of strategic management in the family business and strategic
management in the digital age. In the third part of this paper, the author reviews the literature
related to the alignment of supply chain management and business strategy. In the end, the
author makes a conclusion of the research on three research questions.
Keywords: business decision making, strategy development and execution, supply chain
management
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Strategic Thinking and Decision-Making: A Literature Review
The general theme of this literature review is strategic thinking and decision-making.
However, this paper is written corresponding to three very different topics under this general
theme. Therefore, instead of one introduction at the very beginning of this paper, the author
writes three individual introductions in explaining the significance of each topic at the beginning
of each section.
The author reviewed studies on business decision making, strategy development, and
execution, supply chain management. The primary sources for data collection are peer-reviewed
journal articles from Google Scholar and University online library. A few articles from related
scholarly journals are also included due to its importance. Overall, seventy-one articles are
selected and reviewed in this paper. In the first section, the major keywords of “individual”,
“group”, “organizational” and decision making are used individually and collectively in
searching for articles published between 2000 to 2020. One article (Langley et al.,1995)
published in 1995 is included due to its importance. Altogether, twenty-three articles are
selected due to their relevance to the topic. In the second section, the major keywords of
“strategy development”, “alignment”, “strategy execution”, and “strategic management” are
used individually and collectively in searching articles. The time frame is set from 2016 to 2020
in order to understand the latest research contents. Altogether, twenty-seven articles are selected
due to their relevance to the topic. In the third section, the major keywords of “strategy”,
“alignment”, “supply chain management”, “business strategy”, and “ sustainability” are used
individually and collectively in searching articles published between 2010 to 2020. Altogether,
twenty-one articles are selected due to their relevance to the topic.
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Business Decision Making
Decision-making is to select the courses of action based on the assessment of the current
situation and the prediction of an uncertain future. Business operation consists of plenty of
decisions that exert short-term or long-term effects on its performance. Business decisions could
be made by individuals or groups depending on the characteristic of the problem, the
organization’s management structure, and other situational factors. Strategic decisions are
typically important decisions that are related to the market position of competitive products or
services, location of facilities, selection of suppliers, or other actions that require a large
commitment of organizational resources and unlikely to be changed in the short term after being
made. These decisions are complex and risky in nature and have a critical impact on the long-
term development of the organization (Al-Tarawneh, 2012). Strategic decisions are seldom
made in the organization individually by the leader. Organizations adopt various mechanisms to
guide the business decision-making process in order to improve performance.
Individual level
Personal differences affect individual decision-making processes. According to Bruine
de Bruin (2007), the individual decision process depends on the decision maker’s cognitive
competence, decision-making skills and styles, demographic characteristics, and the value of
real-world consequences of the decision. Individual leaders who are decision-makers in the
organization play a key role in the organization’s business decisions. Langley et al. (1995)
described the individual decision-maker in an organization as a creator who makes
organizational decisions intuitively and provides creative insights into business operation, an
actor who stages live performances in response to the changes in an organizational context, a
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carrier who bear with them the experiences and the influences of the surrounding world.
Transformational leaders motivate people to commit to new visions and make changes to the
organization based on their authority and power (Tucker & Russell, 2004). Strategic leadership
literature implies that the general thoughts that the decisions made by the CEO or charisma
leader have a primary influence on the success or failure of an organization (Yukl, 2008). It is
usually the major responsibility of a leader to make decisions on the organizational strategy. The
strategic direction is set by top management in the company and cascades down to managers and
employees at different authority hierarchies in the organization (Brady & Walsh, 2008).
The research on the individual decision-makers’ influences on business can be found
mainly in small and medium-sized private organizations. The reason could be interpreted as that
in small or medium-size organizations the decision-makers are normally the private owners and
the operation is usually simple in terms of the administrative structure. Spencer et al.’s (2012)
empirical research examined the leader’s decision making in technology adoption indicated that
individual leader is the top driver in adoption of new technology. The authors also emphasized
that the owner as of the leader in the small or medium-size organization has a direct interest in
the outcome of strategic decisions and is more likely to have a personalized decision-making
process. In more detailed research, Francioni et al. (2015) explored the decision-making process
in small and medium-sized enterprises in their internationalization strategies with data collected
from a sample of 165 individual decision-makers. The research results showed that decision-
makers’ personal characteristics such as the need for achievement, risk attitude, affect the
rationality in the strategic decision-making process. Another key finding is the age of the
decision-maker affects the involvement in political activity and risk attitude. The older age is
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associated with increased self-awareness and abilities. However, a leader’s individual influences
in large public companies can not be overlooked. Wowak et al. (2016) examined the leader’s
control of the organization’s proximal strategic initiatives based on the data collected from 150
CEOs of S&P 500 firms. The study showed that charismatic CEOs alter the organizational
strategy on a year on year base and the changes are manifested in terms of strategic dynamism
and nonconformity, as well as corporate social responsibility.
Individual decision-making processes generate a quick response in autocratic decision-
making and are clear in accountability (Hafezalkotob & Hafezalkotob, 2017). However,
autocratic decisions are made based on a leader’s personal perception and knowledge
(Hafezalkotob & Hafezalkotob, 2017), which are subject to the negative influences of various
limits and biases (Bonabeau, 2009). Also, the changes initiated by the leader’s individual
decision may lose the support from lower levels staff and even bring about resistance in
implementation (Hafezalkotob & Hafezalkotob, 2017). Even a powerful or charismatic CEO,
long-standing conflict and dissent about the CEO’s decision in strategy or vision can create
polarization in the organization, which pose more obstacles in business decision implementation
(Yukl, 2008).
In a hyper-competitive business environment that is inundated with unprecedented
changes, complexity, uncertainty, and disruptions, the organization has to respond accurately and
promptly to risks and opportunities. Formulating a right corporate vision or strategy requires a
comprehensive understanding of different perceptions, collective intelligence, and commitment
from all levels (Bonabeau, 2009). Moreover, individual top leaders do not have exclusive
control over relevant business information, the innovative changes and creative ideas in
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organizations often stem from lower levels (Marion & Uhl-Bien, 2001). The limitations of
decision making at the individual level have left the organization poorly equipped to cope with
today’s demanding challenges in the business world (Bonabeau, 2009). According to Brady and
Walsh (2008), for larger organizations that compete in a more complex business environment, it
is less likely for senior management to stay on top of the dynamic market situations, make
decisions in response to changes, and ensure the success of the strategy implementation.
Group level
The pressure of competition, innovation, and consolidation requires the organization to be
more flexible, adaptive, and respond rapidly to a constantly changing global market (Kozlowski
& Bell, 2013). More and more organizations recruit a diverse workforce, organize various types
