Strategic Decisions

Have you ever been responsible for making complex, all-encompassing high risk decisions? Perhaps it was how to invest your first paycheck or should you buy or rent a place to live? If these types of decisions sound familiar, then you can relate to making strategic decisions. In the business world, these are types of decisions that deal with a large range of corporate activities. They tend to be complex, risky and are used by top-level executives to propose major changes in corporate directions. When managers have to make strategic decisions based on operations, they have to examine specific areas of influence on the company’s production.

In this lesson, we will focus exclusively on the five areas that influence strategic decisions in operations and supply chain management through the eyes of CEO Peter Tires who runs the Tread Car Company. Peter, along with his executive vice presidents, makes top-level strategic supply chain decisions that affect his entire organization. Let’s take a look at the five areas of business in which strategic decision making is used.

Product Development

Peter and his executives must provide the strategic direction for product development, or the creation of new or improved products and benefits, for the company’s car product line so that the vehicles are built for sale. An example of a product development strategic decision facing Tread Car company is whether to eliminate slow-selling vehicles, such as the NoGo, or whether to add new larger ten passenger SUVs. This type of strategic decision making will vastly alter the operations and supply chain production, inventory, buyer and supplier factors. In the past, Peter has even acquired new businesses in order to reach his operations goals.

Customers

Another key area of strategic decision making that affects operations and supply chain is based on the analysis of customers who are the final purchasers and users of the product. Tread Car Company spends time researching their customer segments and deciding on the most profitable target markets. Once the strategic decision is made to target certain groups of customers, then operations will focus on how best to make those cars efficiently in order to satisfy the customer and make a profit.

Manufacturing

Peter’s team also focuses on delivering the best strategic manufacturing decision regarding what products the operations team should produce and with what type of technology. Based on the team’s strategic decision to launch three new cars this year, the company has decided to use American workers and build new factories in North Carolina, Seattle and Texas.

Vendors

Tread Auto’s executive team routinely revisits their supplier or vendor list to determine if they are effectively providing the materials and parts of the goods or services production chain. Peter endorses switching suppliers to reduce costs as long as quality is maintained. For example, most suppliers will provide Tread Auto with large discounts due to the significant amount of business they would receive.

Logistics

The last strategic decision making area revolves around logistics, or planning, implementing and coordinating production and supply or products. Peter’s team has to make decisions on warehouses, distribution centers, transportation and delivery of the vehicles. In addition, they have to decide if any third party sources, such as logistic service providers, are needed to fulfill their objectives.

Lesson Summary

Strategic decisions are types of decisions that deal with a large range of corporate activities. They tend to be complex, risky and are used by top-level executives to propose major changes in corporate directions. There are five areas of business in which strategic decision making is used:

• Product development is the decisions regarding the creation of new or improved products and benefits.
• Customers who are the final purchasers and users of the product.
• Manufacturing decisions regarding what products the operations team should produce and with what types of technology.
• A supplier or vendor provides the materials and parts of the goods or services production chain.
• Logistics, or planning, implementing and coordinating production and supply or products.

Overall the strategic decisions that Peter’s team makes with regards to the supply chain should support the overall corporate strategy that the organization is following.

Key Terms

Learning Outcomes

When this lesson ends, you’ll be prepared to:

• Define strategic decisions in operations and supply chain management
• List and describe the five areas of strategic decisions