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Strategic Formulation

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Strategic Formulation

Uploaded by

naveenraj2k1
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Strategic Formulation in Strategic

Management
1. Introduction to Strategic Formulation
Strategic formulation refers to the process of deciding the best course of action for
achieving organizational objectives and goals. It involves determining the right strategies to
be followed by analyzing the internal and external environment.

Strategic formulation is essential for the long-term success and competitiveness of any
organization, guiding decision-making and resource allocation.

2. Stages of Strategic Formulation


a. Environmental Scanning:

Internal Analysis: Evaluation of the organization's strengths, weaknesses, resources, and


capabilities through tools like SWOT analysis.
External Analysis: Analysis of external factors that impact the organization using models
like PESTEL (Political, Economic, Social, Technological, Environmental, Legal) and Porter’s
Five Forces. This helps identify opportunities and threats.

b. Setting Organizational Objectives:

Mission & Vision Statements: These articulate the organization’s purpose and future
aspirations.
SMART Goals: Strategic objectives should be Specific, Measurable, Achievable, Relevant, and
Time-bound.

c. Strategy Generation:

Corporate-Level Strategy: Focuses on the overall direction of the organization, like growth
strategies (expansion, diversification) or stability strategies.
Business-Level Strategy: Focuses on how to compete in specific markets, such as cost
leadership, differentiation, or focus strategies (Porter’s Generic Strategies).
Functional-Level Strategy: Involves optimizing various departments like marketing, finance,
and operations to support business-level strategies.

d. Strategy Evaluation and Selection:

Suitability: Whether the strategy aligns with the organization’s goals and environment.
Feasibility: Whether the organization has the necessary resources (financial, human,
technological) to implement the strategy.
Acceptability: Whether the strategy meets the expectations of stakeholders, considering risk
and returns.

3. Tools and Models for Strategic Formulation


SWOT Analysis: Helps in identifying Strengths, Weaknesses, Opportunities, and Threats.
PESTEL Analysis: A tool for scanning the macro-environmental factors that affect the
business environment.
Porter's Five Forces: Analyzes competitive forces within the industry that impact
profitability.
BCG Matrix: Helps in portfolio analysis by categorizing products into stars, cash cows,
question marks, and dogs.
GE Matrix: Another portfolio analysis tool that assesses the attractiveness of the industry
and the competitive strength of the business.

4. Implementation and Feedback


Strategic Implementation: Translating formulated strategies into actionable steps, involving
resource allocation, setting up systems, and establishing timelines. The role of leadership
and organizational structure is crucial here.

Monitoring and Control: Continuous evaluation through performance metrics to ensure that
strategies are delivering desired outcomes. Adjustments are made based on feedback and
changing environments.

5. Conclusion
In conclusion, strategic formulation is an integral part of strategic management. It plays a
vital role in guiding an organization toward sustainable competitive advantage and long-
term success. However, it is not a static process; it requires constant adaptation in response
to both internal capabilities and the external business environment.

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