7 Steps to Effective Decision-Making: A Business Strategy Guide
In business, making good decisions is critical. However, you need to understand how and when to use the different business strategies available to make a good decision. This blog post will discuss seven business strategy steps to help you make more effective business decisions for your company!
Steps to Effective Decision-Making:
Step One: Business Strategy Definition
A business strategy is a plan for achieving business objectives. This guide will cover two business strategies that you can use to make more effective business decisions for your company: SWOT analysis and PESTEL (political, economic, social, technological, environmental) analysis. Businesses must first define their mission statement to create an overall picture of their company and understand its strengths and weaknesses to be measured against competitors.
Next, a SWOT Analysis helps measure external factors which could affect your business, such as competitive threats or opportunities outside of your control like technology advances or regulatory changes within a given industry.
PESTEL analyses look at internal factors by asking business owners to look at the political, economic, social, and technological environments that could affect your business, such as competitors or industry changes. Every business will be different, so it is essential to identify critical factors for their company.
Step Two: SWOT Analysis
A business strategy that can help businesses make effective decisions by looking outside of themselves and understanding external competitive threats or opportunities they may face in the marketplace
A SWOT analysis looks at four primary areas to quantify how strong each category might be: Strengths/Opportunities (S), Weaknesses/Threats (W), Opportunities/Risks(O), and Threats/Limitations(T). The combination of these letters forms a word that business owners should easily remember: SWOT.
Strengths and Weaknesses are just what they sound like - a business's strengths or weaknesses in the marketplace
Opportunities and Threats are outside of your control that could affect your business, such as changes in technology, regulatory shifts within industries, competitive threats from new competitors entering the market, or economic downturns/upswings.
Opportunities can also include current industry trends that fit with where you want to take your company (e.g., consumer demand for healthy food options). Threats may not seem so obvious but could arise out of changing customer preferences if customers start buying less because there is too much competition for their dollars or it is a business-to-business business, so the product or service is not in direct contact with the consumer
Step Three: PESTEL Analysis
An assessment of internal business factors that can help make more effective business decisions
PESTEL looks at five primary areas to quantify how strong each category might be for your company: Political, Economic, Social, Technological, and Environmental. The combination of these letters forms another word that business owners should easily remember: PETE.
The political analysis includes looking at legislation such as new taxes being proposed by the federal government, which could change what you are currently selling within your industry, and if there are any regulations about operating permits coming down from the state/federal regulators
The economic analysis considers how business owners can evaluate the economic environment of their company and how this might impact business decisions. This includes looking at things like changes in interest rates, national unemployment levels, or government subsidies
Social analysis is about what societal factors are present that could affect your business, such as a changing public sentiment towards products/services you offer (e.g., animal rights) or demographic shifts which may affect the customer base for products to be purchased.
The technological analysis looks at technology evolution - not just new technologies but also advancements in existing technologies that make it more efficient than before to operate business functions, like natural language processing software upgrades.
Environmental analyses evaluate environmental issues outside of your control, which would need to be considered when making business decisions such as global climate change, which may affect business operations.
Step Four: Systems Thinking
A business strategy to help make more effective decisions by considering the big picture and how your business interacts with other entities, like suppliers or customers. This can be used in decision-making when trying to solve problems within the company (e.g., brainstorming new product ideas) or deciding what business moves should be made externally for marketing purposes, such as changing up advertising strategies
Systems thinking is about looking at different parts of a system that interact together, but it's not just limited to business interactions since systems also include any organization, including communities, ecosystems, and networks
For organizations/systems to function correctly without breaking or causing any disruptions, it is essential to look at the whole system and not just business-to-business interactions. This includes looking for feedback loops or what's known as "cascading effects," which can have a domino effect on business decisions
Step Five: Decision Making
How you decide to make an effective decision within your business.
There are many different ways of making business decisions, such as strategic thinking (a process that requires creative thought) to be able to come up with new ideas about opportunities/options open to business owners
The most common type of decision making is goal setting, where there are specific goals set for short-, mid-, long-term plans, and these goals then lead into action steps that help business owners achieve their business goals
Identifying your business objectives is the first step in goal setting, which includes what you want to accomplish for short-, mid-, long-term plans, as well as those action steps that help business owners attain those goals. It's essential to have a plan of attack or game plan because it will be more challenging to make decisions within your company and lead towards success without one.
Step Six: Achieving Business Goals
How business goals are attained through strategies.
The most common method used by companies for achieving business goals is strategic thinking (a process where creative thought helps generate new ideas about opportunities/options open to business)
Strategy can also include tactics such as marketing campaigns or social media marketing campaigns
A business owner must understand their business and its goals to be able to achieve those goals. This includes looking at your business strengths or the things that you do best relative to other companies, as well as weaknesses that may need work/improvement. A business strategy guide is a tool for business owners who want help with understanding how they can maximize their opportunities and avoid pitfalls of common mistakes made by entrepreneurs.
Step Seven: Final Thoughts
Important takeaways from this business strategy blog post
Effective decision making takes into account all aspects related to an organization, such as social, technological, environmental factors, but also the company culture and organizational structure when considering different areas of analysis (e.g., techno)
You want to have business objectives set for both short-, mid-, long-term goals, as well as those action steps that help business owners achieve those goals.
Goal setting includes what you want to accomplish and your business strengths/weaknesses, which should be considered when deciding to attain business success. It's important to plan or create a game plan of how you will make decisions regarding all aspects of analysis rather than just one single factor because decision making is not an easy task on its own, let alone without a strategy guide.