Strategic Management Assignment

Strategic Management
Topic: Strategy Formulation
Submitted To
Sir Arif Ali shaikh
BY
Tabinda yousaf
REG # 2183172
Contents
Introduction.................................................................................................................................................3
Definition.....................................................................................................................................................3
Need of strategy formulation......................................................................................................................3
Steps of strategy formulation......................................................................................................................3
Evaluating the Organizational Environment:-..........................................................................................4
Setting Quantitative Targets:-..................................................................................................................4
Aiming in context with the divisional plans:-...........................................................................................4
Performance Analysis :-...........................................................................................................................4
Choice of Strategy:-.................................................................................................................................5
Diagram.......................................................................................................................................................5
Problems of strategy formulation................................................................................................................5
THREE ASPECT OF STRATEGY FORMULATION.............................................................................................6
Corporate level strategy..........................................................................................................................6
Business level strategy.............................................................................................................................7
Functional level strategy..........................................................................................................................7
Types of functional strategies:-...................................................................................................................7
Marketing Strategy..................................................................................................................................7
Research and Development Strategy......................................................................................................8
HRM Strategy..........................................................................................................................................8
Financial Strategy....................................................................................................................................8
Information Management Strategy.........................................................................................................8
Conclusion...................................................................................................................................................8
2
Strategy Formulation
Introduction
It is useful to consider strategy formulation as part of a strategic management process
that comprises three phases: diagnosis, formulation, and implementation. Strategic management
is an ongoing process to develop and revise future-oriented strategies that allow an
organization to achieve its objectives, considering its capabilities, constraints, and the
environment in which it operates
Definition
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
Need of strategy formulation

 To achieve the organizational goals effectively and efficiently.
 To become more competitive.
 To maximizing the profit.
 To make a large market share.
 And so on....
Steps of strategy formulation

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 :-

3
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.
After 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.
4
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
Diagram
Problems of strategy formulation

a. Lack of awareness (no proper information)
b. Kidding themselves syndrome (no flow of any new information)

5
c. Vested interests of the managers (personal interest affects professional interest)
d. Excessive involvement in everyday operational problem(no time for studying

information)
e. Resistance to change
f. Inability on the part of the top management
THREE ASPECT OF STRATEGY FORMULATION
Corporate level strategy
 This strategy formulated at corporate level by top management.

 To oversee the interests and operation of organizations.
 Dealing with the objectives of firm, acquisition and allocation of resources, and
coordination of strategy of various units.
6
 It applies to the enterprise as a whole.
 It explains the business in which a firm will compete and how it should utilize its
resources.
 It occupies the highest level of strategic decision making.
Business level strategy

 This strategy formulated at business level by managers.
 It concerned with managing the interests and operations of a particular line of
business.
 A managerial game plan for a single business.
 Here strategy is about which product or services should be developed and
offered to which market and to which customers.
Functional level strategy

 A functional strategy is a short term game plan for a key functional area within a
company.
 Functional strategies help in implementing grand strategy.
 Its focus on external environment.
Types of functional strategies:-

i. Marketing strategy.
ii. R & D (Research & Development Strategy)
iii. HR strategy (Human Resource)
iv. Financial Strategy
v. Information system strategy
Marketing Strategy
Marketing strategy deals with Pricing, selling and distributing a Product.
Here the companies use 2 types of strategies:
(1) Market Development

(2) Product Development
7
In Market Development a Company or a Business Unit: Capture larger market share of
an existing market-Market saturation and Market Penetration. Develop new markets for
current product.
Research and Development Strategy

R & D strategy deals with 2 very important things
(1) Product Innovation (2) Process Improvement It also deals with the questions like, -
how new technology should be assessed? –Internal development -external acquisition
etc.
HRM Strategy
HRM strategies are an organization’s plans for managing people, culture, structure and
training and development and for determining how people fit into an organization’s
future growth.• Some companies divide the strategies into 4 major areas; culture,
people, organization and human resource systems.
Financial Strategy
It focuses on the alignment of financial management within an organization with its
business and corporate strategies to gain strategic advantage.
Information Management Strategy

It focuses on the alignment of information management within an organization with its
business and corporate strategies to gain strategic advantage.
Conclusion
A strategic plan is a living document that changes and grows as the conditions
around it change. If an organization recognizes that it must constantly be aware of
the business world around it and must be flexible to the changes that will inevitably
occur, then it will be in a position to adapt and modify its plans to achieve maximum
success.
References
[1] Acur, N., Englyst, L., (2006). Assessment of strategy formulation: how to ensure
quality in process and outcome, International Journal of Operations and Production
Management, 26(1), 69-91
[2] Alkhafaji, A.F., (2003). Strategic management. Formulation, evaluation and control
in a dynamic environment, USA: The Haworth Press.
8
[3] Bogner, W.C., Thomas, H., (1993). The role of competitive groups in strategy
formulation: a dynamic integration of two competing models, Journal of Management
Studies, 30(1), 51-67.
[4] Bower, Joseph L., and Yves Doz, "Strategy Formulation: A Social and Political
Process," in C. W. Hofer and Dan Schendel (eds.), Strategic Management: A New View
of Business Policy and Planning, Little Brown and Co., Boston,MA, 1979.
[5] Hofer, C.W. & Schendel D. 1978. Strategy Formulation: Analytical Concepts.St.
Paul: West Publishing Company.

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Strategic Management

Topic: Strategy Formulation

Need of strategy formulation

 To become more competitive.

 To maximizing the profit.

 To make a large market share.

Steps of strategy formulation

Setting Organizations’ objectives :-

Evaluating the Organizational Environment:-

Setting Quantitative Targets:-

Aiming in context with the divisional plans:-

Problems of strategy formulation

b. Kidding themselves syndrome (no flow of any new information)

d. Excessive involvement in everyday operational problem(no time for studying

f. Inability on the part of the top management

THREE ASPECT OF STRATEGY FORMULATION

Corporate level strategy

 This strategy formulated at corporate level by top management.

Business level strategy

Functional level strategy

Types of functional strategies:-

ii. R & D (Research & Development Strategy)

iii. HR strategy (Human Resource)

iv. Financial Strategy

v. Information system strategy

Here the companies use 2 types of strategies:

(1) Market Development

Research and Development Strategy

Information Management Strategy

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