Making strategic decisions: Amazon case study

Making business decisions always have consequences; from the routinely day to day operations to the most crucial issues, managers and directors have to become experts in the decision-making process, since stakeholders rely on the management’s best judgment. According to Rosenzweig (2013), decision-makers must develop two core talents: First, they must be able to determine the nature of the decision. Secondly, they must take the right approach. Making decisions require acting as a psychologist, a strategist, and a gambler. In the most complicated decisions that drive the fortunes of organizations, managers need more than the ability to prevent common mistakes; they need a contradictory mix: a talent to do a detailed debrief analysis and the ability to act audaciously.

This paper aims to analyze the management decision-making process as a vital skill for managers and how this activity could be enhanced by the use of techniques developed by academics like Carter L. Franklin since those decisions could affect the organization for the good or the worst. Amazon’s case is included as a successful example of strategic business decisions.     

Strategic Decisions

Not all decisions affect organizations in the same manner, as stated by Wheleelen, Hunger, Hoffman, and Bamford (2018), strategic decisions refer to a long-term action that is rare, with substantial consequences for the entire organization and directed to set precedents for future business’ behavior. Strategic decisions address the choices made and bring it into line them with the company’s objectives. Strategic decisions needs creative thinking as managers must consider future situations that could or may not occur; these scenarios will determine the direction in which an organization will be involved, and consequently, beneficed or damaged. For these reasons, managers have the duty of improving their abilities and expertise to make the best decisions for the organization; like any other human activity, the experience and knowledge will grant mastering to the decision-making process. Developing expertise must be a manager’s principal objective since the adequate methodology will help executives to become specialists in making better decisions.   

As stated by Franklin (2013), the rational decision process has seven interrelated elements: Understanding the opportunity for the decision, Formulating the correct decision targets,  identification and involvement of the right members in the resolution, Properly frame the decision (including awareness of relevant alternative framing), Creation of alternatives, choice: alternative collection and learning to enhance future decision – making. These principles are related to each other as elements in the “decision star,” a five points star-shaped figure, having as center the choice and the angles of Opportunity, Goals, Frame, Alternatives, Participants, and the Learning as a choice consequence. 

Although the expert decision-maker process has the same theoretical seven principles, experts learn that participants are essential just in the initial analysis. However, as soon the frame is established, it may be a distractive element; therefore, it must be limited. Another difference between standard and expert decision-making process is the alternatives’ number, since the more advanced the understanding is, the less probable it will be that multiple choices for a single decision will be considered. Finally, the proficiency allows to vanish choices, because the expert decision-maker will detect the relationship between opportunity and goals and will decide the only decision available to meet the expectations. As referred by Messick (1988), experts improve mental models indicating new and well-used patterns of perception, thinking, and behavior, which guide, organize and control new knowledge acquisition and information processing in the sense of problem resolution.

Making Strategic Decisions: Amazon

Strategic decisions commonly refer to long – term decisions that are difficult to change or modify in the short term; In general, strategic decisions include the utilization and allocation of resources, the design of the supply chain and the selection of technologies. For example, Amazon started as an online bookstore; however, Jeffrey Bezos as founder and CEO, took the most critical strategic decision when he decided to change the business model and implemented the online retail sales with express delivery.

Today, Amazon has control over 40 percent of all electronic commerce in the U.S.; Amazons carry out more product searches than Google, which helps Bezos to create an advertising company so successful as IBM as a whole. Amazon Web Services is responsible for almost half the Cloud industry; institutions as varied as General Electric, Unilever, and even the CIA rely on their servers. The company has 42 percent of paper book sales and a portion of the video streaming market; Twitch, a gaming service, has 15 million people every day, and Bezos owns The Washington Post since 2013, granting him with enormous power inside political circles. (Foer, 2019). One crucial decision changed the lives of millions of people, and it is foreseeable that the Coronavirus crisis will lead to a new boost in e-sales.

Conclusion

The art and science of making strategic decisions are one of the essential skills in the global economy. Amazon is the perfect example of how significant the taking-decision process expertise is for the organization’s future. Franklin’s model must be considered as compulsory for all organizations’ leaders before making critical strategic decisions.     

References

Franklin, C. (2013). Developing expertise in management decision-making. Academy of Strategic Management Journal, 12(1), 21-37

Foer, F. (2019, November). Jeff Bezos’s Master Plan. The Atlantic. Retrieved from https://www.theatlantic.com/magazine/archive/2019/11/what-jeff-bezos-wants/598363/

Messick, S. (1988). Testing for Success: Implications of New Developments in Measurement and Cognitive Science. The Magazine of the Graduate Admissions Council. Vol. V, No 2.

Rosenzweig, P. (2013, November). What makes strategic decisions different. Harvard Business Review. Retrieved from https://hbr.org/2013/11/what-makes-strategic-decisions-different

Wheleelen, T., Hunger, J., Hoffman, A., and Bamford, C. (2018). Strategic Management and Business Policy. Globalization, Innovation, and Sustainability. Fifteenth Edition. Pearson: New York.

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