Strategic Choice Under Uncertainty

tradition strategy A core assumption of the methodology is that the company executives can make an accurate and accurate prediction of the future development of any business with a series of powerful analysis tools, and then determine the direction of the company's strategic development. In a relatively stable business environment, this method is effective. However, once uncertainty increases, the effect of this method is very small. If it is not good, it will lead the company astray. In the face of today's increasing market uncertainty, we need to make a systematic and thorough strategy. Policy decision Enterprise managers must adopt a new method, that is, first determine the level of uncertainty, and then formulate corresponding strategies accordingly.

Some uncertainties may still exist after thorough analysis. The author calls it "residual uncertainty" and can be divided into four levels. Level 1: bright enough prospects. Managers can make predictions for the future and make strategies based on this prediction. Level second: multiple possible prospects. There may be multiple results or different scenarios in the future. Although analytical research may help to determine the probability of occurrence of various results, it is not possible to determine the final result. Level third: prospects within a certain range. The future outcome may fall within a certain range. This range is determined by a few key variables, and actual results may occur anywhere in the scope, and these results are not natural independent situations. Level fourth: completely blurred prospects. The interaction of all aspects of uncertainty has created a fundamentally unpredictable environment.

When faced with uncertainty, the company can take three strategic gestures: shaping, adapting and waiting. The purpose of the "shaper" is to promote the evolution of the new structure designed by the industry to them. "Adapters" tend to accept the current industry structure, adapt to their future development and evolution, and react positively to the opportunities in the market. Wait-and-see waiting is a special form of adaptation, which only applies to second to fourth levels of uncertainty. Under such strategic stance, the company will make some incremental investments at present and establish reliable ones. information Channel, good cost structure, and the relationship between customers and suppliers make themselves in a favorable position, so that strategies can be formulated after the environmental uncertainty is reduced.

Only strategic posture is not a complete strategy. It clarifies the strategic intentions of the company, but does not point out the actions needed to achieve that intention. When implementing strategy in uncertain environment, the company can take three related actions: risky gambling, option hedging and no regrets. Risky gambling means massive investment, which may bring huge rewards to the company, or it may cause huge losses to the company. The purpose of option hedging is to ensure that the rewards are most favorable and minimize losses in the worst cases. No regrets are actions that can be rewarded no matter what happens.

In the first level predictable business environment, most companies are adapters, who often take a series of regrets. Of course, enterprises can also become shapers, but this is too risky and rare.

In a second level environment, the purpose of shaping strategy is to improve the probability of occurrence of favorable industry situations. Of course, even the best shapers have to adapt to the situation and quickly change their course when the situation is not good. In a second level environment, triggering variables are usually easy to monitor, so it is easy for enterprises to decide whether to adopt adaptive strategies or wait and see strategies.

In the third stage, the mould tries to push the market forward in a general direction. The strategic posture of the adaptor is mainly realized through investment and training of organizational capability. In the third level, wait-and-see waiting is also a common strategic gesture.

In the fourth level of uncertainty, no company knows what is the best strategy. Therefore, the task of the shaper is to set up a vision for the future industry structure and standard, so as to coordinate the strategy of the market enterprise and promote the market to develop in a more stable and favorable situation. In the fourth level, wait-and-see waiting is a common but potentially dangerous strategic gesture. At the same time, because the option hedging is difficult to manage, the company often adopts the strategic posture of the adaptor.