Strategic Choices

By Anoop Menon

Our focus is on how a firm’s strategy may change over time in anticipation of and in response to competitors’ strategy.

We designate a firm’s configuration of resources and activities as its “activity system” and we reserve the use of the term “grand strategy” to designate overall plans that allow for major changes in activity systems consistent with the idea of strategic change.

“Repositioning costs” refers to the costs associated with changes to the existing activity system or changes from one activity system to another. These definitions reflect our focus on strategy-level questions and are consistent with the use of the term “strategy” in game theory wherein a strategy is a plan of action for the entire game. The repositioning cost approach is also applicable to tactical actions.

Our starting point is Pankaj Ghemawat’s theory of commitment as the essential element in identifying strategic choices.

Ghemawat identifies commitment as the distinguishing feature of strategic choices. He argues that committed choice creates the persistent pattern of action typically characterised as strategy.

Top-level strategists are advised to focus their attention on irreversible choices since the decisions will guide and constrain a firm’s future path. While more easily reversed choices — e.g., pricing in most cases —may be important, they are not, in this view, strategic.

From “Elevating Repositioning Costs: Strategy Dynamics and Competitive Interactions in Grand Strategy”