Strategy Formulation
Strategy formulation refers to the process of determining the most suitable
course of action for the attainment of organizational goals and objectives and thereby
achieving the organizational vision. Basically, the strategy formulation process includes
six main steps. Whereas these measures do not adhere to a strict chronological order,
they are rather rational and can be followed in this order easily.
Setting Organizations’ objectives - Setting the organization's long-term goals
is the core component of every strategy statement. It is recognized that strategy is
typically a medium for attaining organizational objectives. Objectives emphasize the
state of being there, while strategy stresses the process of getting 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.
It is imperative that the variables that influence the selection of goals must be
evaluated prior to the selection of objectives when setting organizational goals. It is
easy to take strategic decisions once the priorities and factors affecting strategic
decisions have been determined.
Evaluating the Organizational Environment - The next step is to determine the
general economic and industrial climate in which the business works. This
requires a study of the competitive standing of organizations. A qualitative and
quantitative analysis of an established product line for a company is important.
The intent of such a review is to ensure that the factors essential to the market's
competitive success can be discovered in order for management to recognise
their own strengths and weaknesses as well as the strengths and weaknesses of
their competitors.
After acknowledging its strengths and weaknesses, an organization must
keep track of the movements and actions of rivals to discover likely openings for
threats to its business or sources of supply.
Setting Quantitative Targets - In this step, the quantitative target values for
some of the organizational goals must be essentially set by an organization. The
concept behind this is to compare with long-term clients in order to assess the
impact that different product zones or operating departments might make.
Aiming in context with the divisional plans - In this step, the contributions
made within the organization by each department or division or product category
are defined and strategic planning for each sub-unit is carried out accordingly. A
careful study of macroeconomic trends is needed for this.
Performance Analysis - Performance analysis involves identifying and
evaluating the discrepancy between the performance anticipated or desired. The
company must carry out a critical assessment of the organizations' past success,
current position and the desired future conditions. The extent of distance that
exists between the current reality and the organization's long-term goals is
defined by this crucial assessment. An attempt is made by the organization to
estimate its probable future condition if the current trends persist.
Choice of Strategy - In Strategy Formulation, this is the final step. After
assessing organizational objectives, organizational strengths, ability and
weaknesses, as well as external opportunities, the best course of action is
actually chosen.
