Comprehensive Report: Strategy Formulation Process and Analysis

This report provides a detailed analysis of the strategy formulation process, a critical element for organizational success. It outlines a six-step process, beginning with defining the organization, including end benefits and target market, and progressing through defining the strategic mission, objectives, and competitive strategy. The report emphasizes the importance of understanding strengths, weaknesses, opportunities, and threats (SWOT analysis) in formulating competitive strategies. It then discusses strategy implementation and the crucial step of evaluating progress. Each step is examined in terms of its advantages, potential pitfalls, and limitations. The report highlights the need for organizations to adapt to changing environments and communicate strategic plans effectively. The conclusion recommends efficient strategic planning for business organizations.

Strategy Formulation Process

Table of Contents
Executive Summary......................................................................................................... 1
Introduction...................................................................................................................... 2
Step 1. Define the Organization.......................................................................................2
End Benefit................................................................................................................... 3
Target Market............................................................................................................... 3
Advantages of Define the organization.........................................................................3
Pitfalls........................................................................................................................... 3
Limitations.....................................................................................................................3
Step 2. Define the Strategic Mission................................................................................3
Advantages of Formulating Strategic Mission...............................................................4
Pitfalls........................................................................................................................... 4
Limitations.....................................................................................................................4
Step 3. Define the Strategic Objective.............................................................................4
Advantages...................................................................................................................4
Pitfall............................................................................................................................. 5
Limitations.....................................................................................................................5
Step 4. Define the Competitive Strategy..........................................................................5
Strengths and Weaknesses..........................................................................................5
Advantages...................................................................................................................5
Pitfall............................................................................................................................. 6
Limitations.....................................................................................................................6
Step 5. Implement Strategies...........................................................................................6
Advantages...................................................................................................................6
Pitfalls........................................................................................................................... 6
Limitations.....................................................................................................................6
Step 6. Evaluate Progress............................................................................................... 7
Advantages...................................................................................................................7
Pitfalls........................................................................................................................... 7
Limitations.....................................................................................................................7
Conclusion....................................................................................................................... 7
1

Executive Summary
Strategy formulation is considered as the way to improve the future situation of the
organization. It is the action plan which helps the organization in determining its
strategic objectives and goals. In this paper, we motive to identify the process of
strategy formulation which helps the organization in formulating effective strategy plan
for achieving their business objectives. In this firstly we discuss the different steps of
strategy formulation which define the organization, strategic mission, strategic
objectives, and competitive strategies, implement strategies and evaluate progress.
After this, we identify the advantages, pitfalls, and limitations of these steps which help
the management in determining the importance of every step. Last we will provide a
conclusion in which some suggestion and benefits of the strategic plan are
recommended to organizations. All this helps the business organizations to build its
business strategies efficiently.
2

Introduction
Strategy formulation is known as the process through which organizations select the
best alternative courses of action to fulfill their predetermined objectives. Strategy
formulation is considered as an important process for the success of organizations
because it provides a framework for the activities that lead to the predetermined results.
It is necessary for organizations to communicate their strategic plans with their
employees so that they are aware of the organization's mission, purpose, and
objectives. Strategy formulation requires the high attention of management towards
changing the environment and should prepare itself for the potential changes that may
occur in future (Bamberger, 2014). The strategic plan enables an organization to
evaluate its allocate budgets, resources and also determine the efficient plan for
enhancing Return on Investment (ROI).
An organization which spent not enough time on formulating strategic plan will not be
able to focus more on its employees. Organizations should be reactive in nature
because it helps them in addressing unanticipated pressures. Strategy formulation
needs a defined set of six steps for efficient implementation. These steps are following:
3

In this report, we will discuss steps which are followed in the strategic formulation. This
will help an organization in determining all its business strategies in advance which can
efficiently utilize in dealing with unknown situations.
Step 1. Define the Organization
Defining the organization means to measure the potential customers. In the absence of
a strong customer base, whose demands are being satisfied, an organization will not
able to survive in the market for a long time. It is necessary for an organization to
recognize the factors that are valued by its potential customers. Is the value depend on
a high-quality product or service relative to the competition? Are its potential customers
purchasing products because of low prices? Do the produced products fulfill the
4
1. Define the
Organization
3. Define the
strategic
objectives
5. Implement
Strategies
2. Define the
Strategic Mission
4. Define the
Competitive
Strategy
6. Evaluate
Progress

requirements of the potential customers? There are following ways in which the
organizations can define themselves.
End Benefit
The organization should remind that customers are purchasing benefits not features. As
an example, if an airline defined itself as dealing in the business of flying people from
one place to another than the organization views its competition only with the other
existing airline (Andrews, 2012). Furthermore, if the airline defined itself as in
transportation business then it will able to recognize its competition involves not only
other airlines but also buses, trains, and car rental organizations.
Target Market
The organization can become profitable by measuring themselves with a significant
target group. The organizations should not focus only on demographic segmentation but
also by psychographic indicators such as by understanding the attitudes, values,
lifestyles of customers, and opinions. As an example, Nike has successfully targeted
itself not only with permanent athletes but also with those who want to be part of athlete
world.
Advantages of Define the organization
There are following advantages of define organization:
 Efficiently utilization of resources
 Information flows in an efficient way
 Identification of target market
5

Pitfalls
 Failure to formulate key competencies and behaviors
 Poor feedback and communication among the management and employees
 Lack of awareness regarding policies and rules of the organization.
 Lack of clear direction
Limitations
 Highly dependency on the organization capabilities and its market position.
 Largely affected by competitive environment and societal expectation of
organization.
Step 2. Define the Strategic Mission
Strategic mission of organizations offers a long-range viewpoint of what the organization
struggles for going forward. It is necessary for organizations to determine its strategic
mission which helps the organizations in providing a guide for performing its
predetermined plans (Stanway, 2013). A strong strategic mission should consist all the
elements such as the values that the organization holds, special abilities, nature of
business, organization vision, and the position of the organization in existing market.
The mission helps an organization in creating its identity in the existing market as well
as eyes of the target customer.
Advantages of Formulating Strategic Mission
Determining strategic mission by organizations proves very beneficial. Some
advantages of formulating strategic mission are following:
6

 Enforcing mission statement provides a consensus of purpose to organization
and efficiently helpful in deliver the employees a sense of identity and belonging.
Mission statement is considered as the part of organization identity.
 A mission statement helps someone in identifying the ways in which an
organization operates and also helps the employees in providing a tone that is
followed in the organization climate (Adan, 2014).
 Mission also define the reason for the existence of the organization which helps
the employees in performing functions as per requirement of the organization.
Pitfalls
Formulation of strategic mission also have some pitfalls which are following:
 Can be Worthless and Ambiguous: The major pitfall of mission formulation is that
the chances of its implementation and design being wrong are very high. Mission
statement of an organization can easily be confusing, empty and vague.
 Focuses more on Short Term Issues and internal in nature: Mostly mission
statement of an organization is generally considered internal in nature which will
arise various unknown problems in front of the organization.
Limitations
 Generally, mission statements are considered no more than a public relation
stunt.
 Most of the business organizations are established for earning a profit.
 The creating mission statement is generally considered a time-consuming
process by the management of organizations.
 Mission statement generally not support all stakeholders of an organization.
7

Step 3. Define the Strategic Objective
The third step of organizations is to measure the performance targets required to
achieve determined objectives. These objectives involve production of goods and
services, market position of the organization relative to competition, sales increases,
improved customer services, desired market share, advances in technology, and
corporation expansion. It is required by the organization to share its objectives with all
its stakeholders and employees. All organization member should be aware of their roles
in the strategic process and how their significant efforts contribute to fulfilling's the
objectives of the organization (Bisbe, 2012). In addition to it, all organization members
should have their own performance targets and goals for their individual roles.
Advantages
 Provide Directions: Objective of an organization provide direction to its
employees through which they can put efforts towards accomplishing the
predetermined goal.
 Helpful in resolving conflicts: The main advantage of the strategic objective is
that board members can easily hold an immediate reference to an objective
statement in time for any argument and conflict.
 Removes ambiguity regarding the existence of an organization: The objective
statement of the organization helps the manager and employees in removing any
ambiguity regarding the aim of the organization.
Pitfall
 Create Pressure: Formulating objective create pressure on the employees of an
organization (Redding, 2013). If an employee tasked with improving his work
8

performance up to 30 percent over the previous year, then the employee might
feel the pressure of meeting some requirements.
 The sense of Failure: Fulfillment of organization objectives creates a sense of
success for employees. If any employee fails in achieving the objectives of an
organization, he may feel a sense of failure which would reduce his motivation
level.
Limitations
 Creates Rigidity: Quality of flexibility is considered in planning but when any
changes occurred in an environment that only small changes can be enforced in
objective statement of organization. So, it is not possible for an organization to
introduce desired changes in the objective statement.
 Formulation of objective considered as time consuming process.
Step 4. Define the Competitive Strategy
Strategy formulation requires the organization to identify where it stands into the
marketplace. It not only applies to organizations but also on individual department and
unit throughout the enterprise. This step requires the management to formulate a
competitive strategy to formulate proactive responses to possible changes in the
marketplace. The formulating competitive strategy involves identification of
organizations resources and how identified resources will be utilized.
Strengths and Weaknesses
It is considered the well know tool of marketing. SWOT stands for strengths,
weaknesses, opportunities and threats. In which strengths and weaknesses are
9

considered internal factors and opportunities or threats are considered external factors.
During formulation of competitive strategy, the organization should measure internal
strengths and weaknesses which can be efficiently utilized by management to grip
available opportunities. It is also important for the organization to take an honest look
towards its weakness. Through this, the organization can perform efforts to reduce its
weaknesses.
Advantages
 A better understanding of industry helps in the efficient utilization of competitive
strategies (Reitzig, 2013). This will also facilitate the management to take more
informed business related decisions which enhance the success of the
organization in future.
 Stronger Action Plan: In the absence of competitive strategies business
organizations fails in achieving their objectives. Formulating competitive
strategies provides a strong action plan to management.
Pitfall
Formulating competitive strategies is not considered beneficial always. It can create
various unhealthy business rivalries that result in reducing the performance of the
organization. It also creates a gap between the management and its employees which
can arise various conflicts at the workplace.
Limitations
There are certain limitations regarding the competitive strategies of an organization:
 Insufficient development and research facilities
10

 Poor products due to poor quality control
 Absence of efficient and skilled labor
 Poor relation with other industries
Step 5. Implement Strategies
Developing effective strategies remains ineffective still, it implemented in an efficient
manner. It is necessary for an organization to take all required steps towards
understanding the marketplace and identify available competition (Lindström, 2014). In
the absence of implementing the strategy, the whole work of organizations will be of
little to no value. All the techniques and methods utilized for implementing strategies are
known as tactics. These individual actions enforce an organization to develop a
framework for strategy implementation.
Advantages
 Rapidly identify and respond to business trends
 Empowered staff by utilizing Timely, Trend Reports and Meaningful information.
 Helpful in creating in-depth analysis regarding financial, customer, operations
and vendor report.
Pitfalls
 High involvement of unrealistic costs and time factors: Implementation plan of
strategies is covered with various unnecessary expenses which the management
should bear before implementing the strategies.
11