Course Code: 19MBA509A

Course Title: Strategic Management

Module Leaders :
Mr. Rajeev Prasad
rajeev.ms.mc@msruas.ac.in

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 Session Content

• Strategy Formulation
• Concept of Strategy Formulation
• Approaches to Strategic Formulation
• Developing Alternative Strategies

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 Strategy Formulation

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Faculty of Management and Commerce © Ramaiah University of Applied Sciences
 Strategy Formulation

Definition
“Strategy formulation is the process of determining
appropriate courses of action for achieving organizational
objectives and thereby accomplishing organizational
purpose.”

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Faculty of Management and Commerce © Ramaiah University of Applied Sciences
 Strategy Formulation

• Strategy formulation is the process by which an

organization chooses the most appropriate
courses of action to achieve its defined goals
• This process is essential to an organization's
success, because it provides a framework for the
actions that will lead to the anticipated results

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 What Are The Three Roles Of
Strategic
Management?
• Strategic management is the process of employing
that kind of large-scale, objective-oriented
approach through the use of three
major components:
1. Environmental Scanning
2. Strategy Formulation and
3. Implementation and Strategy Evaluation

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 Concept of Strategy Formulation

• Concept of Strategy is an action that managers take

to attain one or more of the organization's goals
• Concept of Strategy can also be defined as a general
direction set for the company and its various
components to achieve a desired state in the future
• Strategy includes detailed strategic planning process

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 What Are The Steps In Strategy Formulation?

Strategy Formulation in Management: Top 8 Steps

• Step # 1. Setting Basic Objectives
• Step # 2. Identify Opportunities and Risks
• Step # 3. Evaluating Alternative Resource
• Step # 4. Formulating Alternative Strategies
• Step # 5. Evaluating these Alternatives
• Step # 6. Establishing Basic Strategy
• Step # 7. Implementing Strategy
• Step # 8. Evaluating Strategy

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 What Is Strategy Analysis?

• Strategic analysis refers to the process of

conducting research on a company and its
operating environment to formulate a strategy
• Defining the internal and external environments to
be analyzed
• Using several analytic methods such as Porter's
five forces analysis, SWOT analysis

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 Approaches to Strategic Formulation

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 Approaches to Strategic Formulation

The Strategic Approaches includes:

• Collaboration and partnership (Through team work)

• Technology (Using skill /knowledge / expertise)
• Policy change and development (For development)
• Capacity building (To develop capability)
• Systemic change and integration

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 What Are The Three Primary Strategies Of A Strategy
Formulation?

There are three levels of strategy formulation used in

an organization:
1. Corporate level strategy: This level outlines what you want
to achieve: growth, stability, acquisition or retrenchment /
Cost cutting (Top level)
2. Business level strategy: This level answers the question of
how you are going to compete (Middle level)
3. Functional level strategy: This is inside organizations
( Production , Marketing , Finance etc.)

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 Types of Business Strategies
• Strategic planning takes place on three different and
distinct levels:

1. Corporate

2. Business

3. Functional

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 1. Corporate Strategy
• Corporate strategy is an organizational strategy that determines what
businesses a company is in, should be in, or wants to be in, and what
it wants to do with those businesses.
• There are three main types of corporate strategies:

 A growth strategy

 A stability strategy

 A renewal strategy

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 1. Corporate Strategy Contd..

 A Growth Strategy:
• Is a corporate strategy that is used when an organization wants to
grow
• It does so by expanding the number of products offered or markets
served
• Either through its current business(es) or through new business(es)

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 1. Corporate Strategy Contd..

 A Stability Strategy:
• Implies continuing the current activities of the firm without
any significant change in direction

 A Renewal Strategy:
• Strategy designed to address organizational weaknesses that are
leading to performance declines

Retrenchment Strategy Turnaround Strategy

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 2. Business Strategy

 A Business Strategy (also known as a competitive strategy)

 It is focused on how the organization will compete in each of its
businesses

Role of Quality as a Sustaining

Competitive Competitive
Advantage Competitive Advantage
Advantage

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 Why Is Strategy Formulation Important?

• The strategic formulation process forces an

organization to establish objectives and enables
the organization to measure success

• The formulation process enables the organization

to determine what is important and critical to the
success of the organization.

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 What Information Is Needed For Proper
Formulation Of Strategy?

In order to properly formulate a strategy, the

corporation must need to know their:

1. Mission statement – the purpose or reason for the

organization's existence

2.Objectives – the end results of corporation's activities and

what they want to achieve

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 What Is Strategy Formulation Tools?

• Special tools they can use to assist them in formulating

strategies include the following:

1. Critical Question Analysis

2. SWOT Analysis

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 What Is Marketing Strategy Formulation?

• Definition: Marketing strategy formulation is the

process of defining an organization's marketing goals
and objectives
• They examine which marketing approaches will be
best at reaching clients and attractive them to seek
out the business' services

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 Developing Alternative Strategies

The four strategic alternatives are:

1. Market Penetration
2. Market Development
3. Product Development and
4. Diversification

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 Market Penetration
• A market penetration strategy whereby an
organization seeks to gain greater dominance in
a market in which it already has an offering
• This strategy often focuses on capturing a larger
share of an existing market
• This focus on current markets in order to
increase market share
• Market penetration requires strong execution in
pricing, promotion, and distribution in order to
grow market share
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 Market Development Strategy

• Market development is a growth strategy that

identifies and develops new market segments for
current products
• A market development strategy targets non-
buying customers in currently targeted segments
• A market development strategy entails expanding
the potential market through new users

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 Product Development Strategy

• Product development strategy is the process of

bringing a new innovation to consumers from
concept to testing through distribution
• New product development strategies look at
improving existing products to strengthen an
existing market or create new products that
the market seeks

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 Diversification Strategy

• A diversification strategy is the strategy that an

organization adopts for the development of its
business
• This strategy involves widening the scope of the
organization across different products and market
sectors
• Diversification strategy is a form of
growth strategy which helps the organizational
business to grow
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 Three Types Of Diversification

Diversification is a method of risk management that

involves the change and implementation
of different investments stated in a specific portfolio
Three Diversification Strategies include
1. The concentric diversification
2. Horizontal diversification and
3. Conglomerate diversification

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 The Concentric Diversification

• In which company acquires or develops new

products or services closely related to its core
business or technology to entre one or new
markets
• Example: A auto company diversify by adding new
car model by expanding into related market like
trucks

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 Conglomerate Diversification

• Is a growth strategy involves new products or

services that are significantly differently from the
organizations present products and services
• This occurs when organizations moves into totally
unrelated to the current business
• Example: A computer company decide to
produce pens, the company is pursuing
conglomerate diversification

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 Horizontal Diversification

• Horizontal diversification involves providing new

and unrelated products or services to existing
customers

• Example: A Note book manufacture that enters

the pen market is pursuing a horizontally
diversification strategy

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 Thanks

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