Strategy, Decision Making, and Cognition: An Integrative Perspective

Introduction

Over the last century, reflecting the dis-equilibrium provoking, ongoing process nature of competition, the role of management in firms has evolved from “…determining quantity and implementing production function to recognizing, understanding, creating, selecting, implementing, and modifying strategies…” (Hunt, 2000; Hunt & Madhavaram, 2006). Accordingly, scholars have paid considerable attention to, among other things, what strategy entails (e.g., Porter, 1996; Zeleny, 2010), what strategic management is (e.g., Chandler, 1969; Schendel & Hofer, 1979), and different forms of strategy such as industry-based strategy (e.g., Porter, 1980), resource-based strategy (e.g., Penrose, 1959; Barney, 1991), competence-based strategy (e.g., Chandler, 1990), and knowledge-based strategy (Huber, 1991). However, why do firms need to engage in strategy? The fundamental thesis of all strategy is to achieve competitive advantage, and thereby, superior financial performance (Madhavaram & Hunt, 2008). This quest for competitive advantages compels firms to continuously engage in strategy and related activities. However, what do strategy and related activities entail? Decision making and cognition are two, somewhat implicit and highly intertwined, concepts central to strategy.

Despite the multitude of definitions and perspectives on strategy, there is consensus that decision making undergirds all strategy related activities. For Mintzberg (1978), strategy can be seen as a pattern in a stream of decisions. For Schwenk (1984), decision making is critical to strategy formulation, generation of strategic activities, and evaluation and selection of strategic alternatives. For Hart (1992), decision making across organizations varies based on strategy mode, the manner in which strategy is formulated and implemented in different organizations. For Porter (1996), the essence of strategy involves decisions to perform different activities and/or specific activities differently, compared to rivals. For Hendry (2000, p. 956), “decisions are the most visible elements of the strategy process and a major focus of top management effort and attention.” In fact, strategy scholars in marketing explicitly made decisions a part of the marketing strategy definitions. For Slater and Olson (2001, p. 1056, italics added), “Marketing strategy is the set of integrated decisions and actions by which a business expects to achieve its marketing objectives and meet the value requirements of its customers.” For Day, Weitz, and Wensley (1990), marketing strategy refers to marketing activities and decisions related to building and maintaining a sustainable competitive advantage. Synthesizing and building on the conceptualizations of marketing strategy, Varadarajan (2010, p. 130, italics added) defines marketing strategy as “an organization’s integrated pattern of decisions that specify its crucial choices concerning marketing activities to perform and the manner of performance of these activities, and the allocation of marketing resources among markets, market segments and marketing activities toward the creation, communication and/or delivery of a product that offers value to customers in exchanges with the organization and thereby enables the organization to achieve specific objectives.”