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Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of organizational goals and objectives and thereby achieving the organizational vision. The process of strategy formulation basically involves six main steps. Though these steps do not follow a rigid chronological order, however they are very rational and can be easily followed in this order.
- Setting Organizations objectives - The key component of any strategy statement is to set the long-term objectives of the organization. It is known that strategy is generally a medium for realization of organizational objectives.
Objectives stress the state of being there whereas Strategy stresses upon the process of reaching there.
Strategy includes both the fixation of objectives as well the medium to be used to realize those objectives. Thus, strategy is a wider term which believes in the manner of deployment of resources so as to achieve the objectives.
While fixing the organizational objectives, it is essential that the factors which influence the selection of objectives must be analyzed before the selection of objectives. Once the objectives and the factors influencing strategic decisions have been determined, it is easy to take strategic decisions.
- Evaluating the Organizational Environment - The next step is to evaluate the general economic and industrial environment in which the organization operates. This includes a review of the organizations competitive position.
It is essential to conduct a qualitative and quantitative review of an organizations existing product line. The purpose of such a review is to make sure that the factors important for competitive success in the market can be discovered so that the management can identify their own strengths and weaknesses as well as their competitors strengths and weaknesses.
See AlsoWhy Is Strategy Implementation Often Considered the Most Difficult Stage in Strategic Management?The 5 Most Common Strategy Execution Challenges | CU ManagementStrategy Formulation: Meaning, Aspects, Process, Approaches and ChallengesStrategy Formulation - benefitsAfter identifying its strengths and weaknesses, an organization must keep a track of competitors moves and actions so as to discover probable opportunities of threats to its market or supply sources.
- Setting Quantitative Targets - In this step, an organization must practically fix the quantitative target values for some of the organizational objectives. The idea behind this is to compare with long term customers, so as to evaluate the contribution that might be made by various product zones or operating departments.
- Aiming in context with the divisional plans - In this step, the contributions made by each department or division or product category within the organization is identified and accordingly strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic trends.
- Performance Analysis - Performance analysis includes discovering and analyzing the gap between the planned or desired performance.
A critical evaluation of the organizations past performance, present condition and the desired future conditions must be done by the organization.
This critical evaluation identifies the degree of gap that persists between the actual reality and the long-term aspirations of the organization. An attempt is made by the organization to estimate its probable future condition if the current trends persist.
- Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action is actually chosen after considering organizational goals, organizational strengths, potential and limitations as well as the external opportunities.
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The article is Written By Prachi Juneja and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.
Strategic Management
- Strategic Management - Introduction
- Strategy - Definition and Features
- Components of a Strategy Statement
- Vision & Mission Statements
- Strategic Management Process
- Environmental Scanning
- Strategy Formulation
- Strategy Implementation
- Strategy Formulation vs Implementation
- Strategy Evaluation
- Strategic Decisions
- Benefits of Strategic Management
- Business Policy
- BCG Matrix
- SWOT Analysis
- SWOT Analysis of Google
- SWOT Analysis of Starbucks
- SWOT Analysis of Blackberry
- Personal SWOT Analysis
- SWOT Analysis of Amazon
- SWOT Analysis of IKEA
- SWOT Analysis of Nike
- SWOT Analysis of Microsoft
- SWOT Analysis of China Mobile
- Competitor Analysis
- What is Competitive Advantage ?
- Human, Social, and Intellectual Capital as a Means of Competitive Advantage
- Porters Five Forces Model
- Blue Ocean Strategy and its Implications for Businesses
- Overfished Ocean Strategy: How to Drive Growth and Attain Profitability
- Porters Five Forces Analysis of the Airlines Industry in the United States
- Porters Five Forces Analysis of Samsung
- Porters Five Forces Analysis of Virgin Atlantic
- Porters Five Forces Analysis of China Mobile
- Strategic Leadership
- Some Pitfalls to be Avoided
- Corporate Governance
- Business Ethics
- Social Responsibilities of Managers
- Core Competencies
- Core Competency Theory of Strategy
- Ansoff Matrix
- Routes to Strategic Growth
- Diversification as a Viable Corporate Strategy
- 5 Configurations of Strategic Management
- Role of Planning, Plans and Planners
- Reasons for Avoiding Strategic Planning
- Strategic Management for the Millennials
- Strategizing for the Future
- PESTLE Analysis of the Global Aviation Industry
- PESTLE Analysis of Starbucks
- PESTLE Analysis of Samsung
- SWOT Analysis of Unilever
- Business Strategies to Beat the Downturn
- Analysis of Amazons Corporate Strategy
- How Amazon Can Improve its Corporate Strategy
- Cutting Costs Strategically
- Actualizing Business as Usual Strategies for Mission Critical Organizations and Functions
- Why Indian Firms Must Strive for Strategic Autonomy in Their Geoeconomic Strategies
Sure, the concepts embedded within this article on strategy formulation are quite comprehensive. Let's break down each concept:
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HomeLibraryMarketing: This seems to be the site or platform where this article is hosted, not directly related to the content of the article on strategy formulation.
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Strategic Management: The overarching field concerned with planning, executing, and evaluating strategies to achieve organizational objectives effectively.
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Steps in Strategy Formulation Process: The specific stages involved in developing strategies for an organization: Setting Objectives, Evaluating the Organizational Environment, Setting Quantitative Targets, Aiming in Context with Divisional Plans, Performance Analysis, and Choice of Strategy.
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Vision & Mission Statements: Statements defining the long-term aspirations (vision) and fundamental purpose (mission) of an organization.
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Environmental Scanning: The process of monitoring, evaluating, and interpreting information from the external environment to identify potential opportunities or threats to an organization.
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Strategy Implementation: The translation of formulated strategies into actions and initiatives to achieve organizational goals.
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Strategy Formulation vs Implementation: Distinguishing between the process of devising strategies and putting those strategies into practice.
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Strategy Evaluation: The assessment and review of implemented strategies to determine their effectiveness in achieving desired objectives.
This article provides a rich array of strategic concepts, including models like SWOT Analysis, Porter's Five Forces, and Ansoff Matrix, which aid in analyzing competitive landscapes, market positioning, growth strategies, and potential risks or opportunities.
Moreover, it touches upon broader organizational aspects such as strategic leadership, corporate governance, ethics, social responsibilities, core competencies, diversification strategies, and the impact of macroeconomic factors through tools like PESTLE Analysis.
The content also delves into specific business cases, examining strategies employed by companies like Google, Starbucks, Blackberry, Amazon, IKEA, Nike, Microsoft, and China Mobile, providing insightful SWOT and competitive analyses.
Overall, it covers the breadth of strategic management, offering both theoretical frameworks and practical applications through real-world case studies and industry-specific analyses.