Question Explain in what sense the top management makes the company's decisionand in what sense it does not make the company;s strategic decision alone? Illustrate with suitable example.
Answer Organizations operate in an environment crafted by external forces- customers, suppliers, competitors, government/industry, and employees- but top management has the responsibility to make the best strategic decisions in the midst of this environment. The answer to the age old question- which is first, the chicken or the egg- is... the farmer. Top management must plan how it wants to move forward, no matter what the environment.
Top management has a fiduciary responsibility to ownership to act in their best interests. Typically, this means maximizing enterprise value, but in a closely held entity, ownership may have other interests than just maximizing return on capital.
So, ownership can have a significant effect on strategy to the extent its alternative goals- such as providing employment in a community, providing specific services, or minimizing risk- drive strategy.
An excellent example of conflict between ownership (as represented by a Board of Directors) and top management can be found in the case of Hewlett-Packard and Carly Fiorina's acquisition of Compaq Computer. A quick google search will provide a great deal of additional detail and analysis of this issue.
