Strategy formulation

• Strategy formulation refers to the process of

developing a strategic plan to guide an
organization's actions and decisions in order
to achieve its long-term goals and objectives.
• It involves analyzing the internal and external
environment, identifying strategic options,
and making choices that will provide the
organization with a competitive advantage.
 Key steps involved in strategy formulation
1. Mission and Vision: Define the organization's mission, which outlines its purpose and reason
for existence. The vision statement represents the desired future state or the organization's
aspirations. These statements provide the foundation for strategy development.
2. Environmental Analysis: Conduct a thorough analysis of the external environment to
understand industry dynamics, market trends, customer needs, technological
advancements, regulatory factors, and competitive forces. Tools such as PESTEL analysis
(Political, Economic, Social, Technological, Environmental, and Legal) and Porter's Five Forces
can help assess the external factors impacting the organization.
3. Internal Analysis: Evaluate the organization's internal resources, capabilities, strengths,
weaknesses, and core competencies. Assessing factors such as organizational structure,
culture, financial resources, human capital, and operational efficiency helps identify areas
where the organization has a competitive advantage and areas that need improvement.
SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) is commonly used for
internal analysis.
 Key steps involved in strategy formulation
4. Goal Setting: Establish specific, measurable, achievable, relevant, and
time-bound (SMART) goals that align with the organization's mission and
vision. These goals provide clarity and direction, serving as benchmarks for
evaluating strategy implementation.
5. Strategic Options Generation: Generate a range of strategic options
based on the insights gained from the environmental and internal analysis.
Consider opportunities for growth, market positioning, differentiation,
competitive advantage, and value creation. Brainstorming, scenario
planning, and market research can help generate strategic options.
6. Evaluation and Choice: Evaluate the strategic options against various
criteria, including feasibility, suitability, strategic fit, resource requirements,
risks, and expected outcomes. Select the most appropriate strategies that
align with the organization's goals and capabilities.
 Key steps involved in strategy formulation
7. Strategy Implementation: Develop an action plan that outlines the
initiatives, projects, and activities required to execute the chosen
strategies. Allocate resources, set milestones, and establish mechanisms
for monitoring and controlling the implementation process.
8. Performance Monitoring: Continuously monitor and evaluate the
progress of strategy implementation. Track key performance indicators
(KPIs) to assess the effectiveness of the strategies and make adjustments
as needed.

• It's important to note that strategy formulation is an iterative process,

and organizations need to regularly review and adapt their strategies to
respond to changes in the business environment and ensure continued
success.
 Levels of Strategy Formulation
• Strategy formulation occurs at different levels
within an organization to address different
scopes and responsibilities. The three primary
levels of strategy formulation are:
1. Corporate level
2. Business level
3. Functional level
 Levels of Strategy Formulation
• Corporate-Level Strategy: Corporate-level strategy
focuses on the overall direction and scope of the entire
organization. It involves making decisions at the highest
level of management regarding the allocation of
resources, portfolio management, and the identification
of businesses or markets in which the organization will
operate. Key considerations at this level include
diversification, mergers and acquisitions, strategic
partnerships, and entering new geographic markets.
Corporate-level strategy sets the foundation for the
organization's business units or divisions.
 Levels of Strategy Formulation
• Business-Level Strategy: Business-level strategy is
concerned with how a specific business unit or division
within the organization will compete within its industry or
market segment. It involves decisions related to
competitive positioning, differentiation, cost leadership,
target market selection, and value creation. Business-level
strategies aim to establish a sustainable competitive
advantage and maximize the performance of individual
business units. Examples of business-level strategies
include focused differentiation, cost leadership, or a
combination of both.
 Levels of Strategy Formulation
• Functional-Level Strategy: Functional-level strategy
focuses on the specific activities and operations within
functional areas of the organization, such as marketing,
operations, finance, human resources, and research and
development. It involves determining how each functional
area can contribute to the overall business and support
the achievement of business-level objectives. Functional-
level strategies align with and support the broader
corporate and business-level strategies. For instance, a
marketing department may develop strategies to enhance
brand awareness or target specific customer segments.
 Conclusion
• These three levels of strategy formulation are interconnected and
should be aligned to ensure coherence and consistency throughout
the organization. Corporate-level strategies set the direction and goals
for the entire organization, business-level strategies define how each
business unit will compete, and functional-level strategies outline the
specific actions and initiatives within each functional area to support
the higher-level strategies.
• It's important to note that the formulation of strategies at each level
requires analysis of the internal and external environment, assessment
of resources and capabilities, and consideration of organizational goals
and objectives. Strategy formulation at all levels should be an ongoing
process that adapts to changes in the business landscape and ensures
the organization remains competitive and relevant.