Approaches to strategy formulation

An additional level of strategy called operational strategy Approaches to strategy formulation encouraged by Peter Drucker in his theory of management by objectives MBO.

It gives direction to corporate values, corporate culture, corporate goals, and corporate missions. An example of a company that currently operates this way is Google Strategic management techniques can be viewed as bottom-up, top-down, or collaborative processes.

Objectives stress the state of being there whereas Strategy stresses upon the process of reaching there. In it, the CEO, possibly with the assistance of a strategic planning team, decides on the overall direction the company should take.

The top-down approach is the most common by far. Once the objectives and the factors influencing strategic decisions have been determined, it is easy to take strategic decisions. 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.

Cost underestimation and benefit overestimation are major sources of error.

The best course of action is actually chosen after considering organizational goals, organizational strengths, potential and limitations as well as the external opportunities. The proposals that are approved form the substance of a new strategy, all of which is done without a grand strategic design or a strategic architect.

Corporate strategy refers to the overarching strategy of the diversified firm. An attempt is made by the organization to estimate its probable future condition if the current trends persist.

Such change and implementation are usually built into the strategy through the staging and pacing facets. Thus, strategy is a wider term which believes in the manner of deployment of resources so as to achieve the objectives.

The process of strategy formulation basically involves six main steps.

Steps in Strategy Formulation Process

This critical evaluation identifies the degree of gap that persists between the actual reality and the long-term aspirations of the organization. According to Michael Porter, a firm must formulate a business strategy that incorporates either cost leadership, differentiation or focus in order to achieve a sustainable competitive advantage and long-term success in its chosen arenas or industries.

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.

Choice of Strategy - This is the ultimate step in Strategy Formulation. It is felt that knowledge management systems should be used to share information and create common goals.

This requires a careful analysis of macroeconomic trends. This includes a review of the organizations competitive position. Strategic management is the highest of these levels in the sense that it is the broadest - applying to all parts of the firm - while also incorporating the longest time horizon.

Performance Analysis - Performance analysis includes discovering and analyzing the gap between the planned or desired performance.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.

Steps in Strategy Formulation Process 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. 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.


Describe business-level strategies, including Porter’s competitive forces and strategies and partnership strategies. Explain the major considerations in formulating functional strategies. 6 CHAPTER 8 Strategy Formulation and Implementation Strategy Strategy Strategy.

Business Strategy/Approaches to Strategic Management

Different Approaches to Strategy Formulations GRATIENNE SIONCKE & ANN PARMENTIER Vlerick Leuven Ghent Management School, Belgium Introduction A clear and well-defined strategy formulation and strategy implementation, which are important corporate governance issues, are needed to help a manager take the right decisions to obtain superior performance.

The deliberate approaches to strategy formulation are typically undertaken through a normative approach to theory creation, while the emergent schools of thought are more typically formulated through a descriptive or empirical theory creation process.

Approaches to strategy formulation
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