Strategy Formulation

7 July 2016

As defined by Andrew M. Pettigrew of United Kingdom, the formation of strategy in organizations is a continuous process. Specific dilemmas within the firm, or in the firm’s environment, may raise the organization members’ consciousness of strategy and allow us, as analysts, to think of strategy formulation as an intentional process built around certain discrete decisions; but strategy is being formed implicitly all time.

Choices are made and acted upon in processes involving individuals and subgroupings, at various organizational levels, that develop into the pattern of thinking about the world, evaluating that world, and acting upon that world that we call strategy. Study of the process strategy formulation therefore involves analyses of both discrete and identifiable decision events, together with the connections between successive decisions over time. Strategic planning is a sequential process, with each part building upon the previous one.

Strategy Formulation Essay Example

The initial step in strategy formulation is typically the compilation and dissemination of the vision and mission statement. It specifies the organization’s scope of activities and the market a firm wishes to serve. Follow-on strategy formation is a combination of three main processes which are as follows: Performing a situation analysis, self-evaluation and competitor analysis: both internal and external; both micro-environmental and macro-environmental. Concurrent with this assessment, short- and long-term objectives are set. These objectives should include completion dates.

Implementation plans then detail how the objectives are to be achieved. The strategy hierarchy Most corporations have multiple levels of management. Strategic management can occur at corporate, business, functional and operational levels. Corporate strategy answers the questions, “which businesses should we be in? ” and “how does being in these businesses create synergy and/or add to the competitive advantage of the corporation as a whole? ” Business strategy is the corporate strategy of single firm or a strategic business unit (SBU) in a diversified corporation.

Functional strategies are specific to a functional area, such as marketing, product development, human resources, finance, legal, supply-chain and information technology. The emphasis is on short and medium term plans. Functional strategies are derived from and must comply with broader corporate strategies. Defining an operational strategy was encouraged by Peter Drucker. It deals with operational activities such as scheduling criteria. Define the word strategy and formula and its history Strategy has been defined by Robert M. Grant as the match an organization makes between its internal resources and skills..

and the opportunities and risks created by its external environment. Understand the SWOT analysis and its relation to strategy formulation “Strategy formulation and implementation. ” by Richard Daft. Prepared by Gregar Donaven E. Valdehueza, MBA (Lourdes College Intructor) S ? Strenghts Positive internal Characteristics that the organization can exploit to achieve its strategic performance goals. W ? Weaknesses Internal characteristics that might inhibit or restrict the organization’s performance. O ? Opportunities Characteristics of external environment that have potential to help the organization achieve or exceed its strategic goals.

T ? Threats Characteristics of external environment that may prevent the organization from achieving its strategic goals. Learn the step by step strategy formulation 1 Understand strategy and its importance: You need a strategy that beats the market realities. There are certain common denominators for all the companies that operate like customers, suppliers, competitors, and potential entrants (competitive products). Now each of these try to demand and command attention in furtherance of their own cause. All these also can work towards reducing the gap between the capital investment and returns (profit/loss).

It is prudent to manage these denominators in a way that reverses the trend and makes returns, a healthy multiple of capital investment. 2 Identify the source of advantage and exploit it: There are many sources of advantage for an entrepreneur — two of the most important being, location and special capability. Now these are scarce commodities and any strategy plan conceived around attributes puts the organization ahead of the rest of the competition and positions you along with the best of the competition, and makes success that much less complicated.

3 Position the organization appropriately: Focus on the markets and the marketing factors that synch with the nature, culture, size and technological advantages and constraints. Determine and discriminate between the markets while allocating funds. The strategy should reflect a clear understanding of markets and should result in intelligent defining of the segments that could result in refined resource allocation. This should of course be preceded by microscopic market research at granular level to see direction of trends in those markets.

4 Do not follow the trends, but set one: Far too often it has been observed, that the strategies are woven around the existing market trends. This is considered a way of playing safe, but how safe it is, is the question. The word “trend” itself denotes a temporary existence and ease of replaceability (imminence of change). The strategy should be to peep into the future and identify what could be tomorrow’s trend. Identify and formulate the strategy accordingly, or better still plan a strategy that could make you a trend setter. 5

Base your team strategy on privileged insights into futures, not on past history: It is a common practice, to collect heaps of information on the history, do some arbitrary interpolation or extrapolation and then base team strategy on this data. This will no doubt allow your team to sustain past commitments without losses — but if growth is your objective and market leadership the ultimate aim, you’ll need to have an insight into the future. A glance into people’s pulse regarding what they have versus new things they would like to have — gives a fairly accurate insight into the future.

It pays to organize frequent market research (controlled advancements are not moved forward randomly). With the availability of so many social media platforms, it is now easier to gauge people’s aspirations by seeing and assessing interests and frustrations in your network. 6 Plan to enable success, but respect the glorious uncertainties of the market. An all weather strategy often keeps you always afloat compared to one planned for normal (current) market behavior. Planning for the event of a failure (such as maintaining liquidity by renting or leasing versus owning capital assets) is always better than failing to plan.

Uncertainties of the future can be classified into four levels. Level one gives a fairly clear view of the future, and an inkling of what to expect. Level two is a little more hypothetical about the action and outcomes, but rather concrete expectations. Level three works on the law of probability for likelihood of returns. Level four represents total ambiguity (on a hunch for example) about the outcome and delivers shockers. A formulated strategy can reasonably be expected to provide for the first two levels.

Strategy for the third and fourth levels depends upon various factors, and should be best left to the ingenuity of the entrepreneur and enterprise. 7 Stage your strategy to have a correct balance of commitment and flexibility: Commitment (of resources) and flexibility (variations) are inversely proportionate and more often than not, they are malefic to each other (jumping in contravenes edging in, one toe at a time). It is all about trade-off between the two, and success depends on the timing and intuition.

If it is a leap in the dark, how you land your market for your new product depends on your expertise and experience in creating a new markets — or vice-versa. 8 Make your strategy to be understood and “bought into” by your team: Your planning should be done in such a way that it is backed by a strong conviction in the team who must deliver on the plans. This is possible, if you take into confidence the department heads during the planning stage, take their views, and where ever feasible implement them.

Ownership at the planning stage naturally ensures ownership and informed support at the implementation stage. 9 Align plan and action Translate your strategy into an implementable action plan. First, define clearly what you are moving from and where you are moving to with respect to your company’s business model, organization, and capabilities. Develop a detailed view of the shifts required to make the move, and ensure that processes and mechanisms, for which individual executives must be accountable, are in place to effect the changes.

Quite simply, this is an action plan. 10 Be sure that everyone knows the timetable for what to do and being proactive, not reactive. Be sure that each major “from–to shift” is matched with the energy and assets to make it happen. Since the totality of a major change often represents a corresponding organizational transformation, make sure you and your senior team: Draw on research and experience offering solid advice on successful change management revealed by the large body of information of actual, successful change.

planning process 11 Align your strategy to the required resource allocation: That is the final — but most important point — don’t forget to make sure your ongoing resource allocation processes are aligned with your strategy so that when you do implement changes, you have the resources to fully take advantage of matching resources to the opportunities in your new niche, product and market. Appreciate the importance of strategy formulation

A limited
time offer!
Save Time On Research and Writing. Hire a Professional to Get Your 100% Plagiarism Free Paper