Strategy formulation
It is useful to consider strategy formulation as part of a strategic management process that comprises three phases: diagnosis, formulation, and implementation.
- Diagnosis -
- Performing a situation analysis, including identification and evaluation of current mission, strategic objectives, strategies, and results, plus major strengths and weaknesses
- Analyzing the organization's external environment, including major opportunities and threats
- Formulation, the second phase in the strategic management process, produces a clear set of recommendations, with supporting justification to make the organization more successful. This includes trying to create "sustainable" competitive advantages. A good recommendation should be effective in solving the stated problem, practical, feasible within a reasonable time frame, cost-effective, not overly disruptive, and acceptable to key "stakeholders" in the organization. It is important to consider "fits" between resources plus competencies with opportunities, and also fits between risks and expectations.
- In organizations, strategies must be implemented to achieve the intended results. The most wonderful strategy in the history of the world is useless if not implemented successfully. This third and final stage in the strategic management process involves developing an implementation plan and then doing whatever it takes to make the new strategy operational and effective in achieving the organization's objectives.
The process of strategy formulation
- Setting Organizations’ objectives – Any strategy statement is to set the long-term objectives of the org. Objectives stress the state of being there whereas Strategy stresses upon the process of reaching there. Once the objectives and the factors influencing strategic decisions have been determined, it is easy to take strategic decisions.
- Evaluating the Organizational Environment - To evaluate the general economic and industrial environment in which the organization operates. 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.
- Setting Quantitative Targets - An organization must 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 made by various operating departments.
- Aiming in context with the divisional plans – The contributions made by each department or division within the organization is identified accordingly strategic planning is done for each unit. This requires a careful analysis of macroeconomic trends.
- Performance Analysis - A critical evaluation of the organizations past performance, present condition and the desired future conditions must be done by the organization. It includes discovering and analyzing the gap between the planned or desired performance.
- 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.
Strategy implementation
It is the translation of chosen strategy into organizational action so as to achieve strategic goals and objectives. It is also defined as the manner in which an organization should develop, utilize, and amalgamate organizational structure, control systems, and culture to follow strategies that lead to competitive advantage and a better performance. Organizational structure allocates special value developing tasks and roles to the employees and states how these tasks and roles can be correlated so as maximize efficiency, quality, and customer satisfaction-the pillars of competitive advantage.
Following are the main steps in implementing a strategy-
- Developing an organization having potential of carrying out strategy successfully.
- Disbursement of abundant resources to strategy-essential activities.
- Creating strategy-encouraging policies.
- Employing best policies and programs for constant improvement.
- Linking reward structure to accomplishment of results.
- Making use of strategic leadership.
Strategy implementation poses a threat to many managers and employees in an organization. New power relationships are predicted and achieved. New groups (formal as well as informal) are formed whose values, attitudes, beliefs and concerns may not be known. Excellently formulated strategies will fail if they are not properly implemented. Also, it is essential to note that strategy implementation is not possible unless there is stability between strategy and each organizational dimension such as organizational structure, reward structure, resource-allocation process, etc
Difference Between Strategy Formulation & Implementation
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Strategy
Formulation |
Strategy
Implementation |
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Strategy Formulation includes planning and decision making involved in developing organization’s strategic goals and plans. |
Strategy Implementation involves all those means related to executing
the strategic plans. |
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Strategy Formulation is placing the Forces before the action. |
Strategy Implementation is managing forces during the action. |
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Strategy Formulation is an Entrepreneurial Activity based on strategic decision-making. |
Strategic Implementation is mainly an Administrative Task based on strategic and operational decisions |
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Strategy Formulation emphasizes on effectiveness. |
Strategy Implementation emphasizes on efficiency. |
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Strategy Formulation is a rational process. |
Strategy Implementation is basically an operational process. |
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Strategy Formulation requires co-ordination among few individuals. |
Strategy Implementation requires co-ordination among many individuals. |
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Strategy Formulation requires a great deal of initiative and logical skills. |
Strategy Implementation requires specific motivational and leadership traits. |
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Strategic Formulation precedes Strategy Implementation |
Strategy Implementation follows Strategy Formulation. |
Organizational values
It defines the acceptable standards which govern the behavior of individuals within the organization. Employees have certain value in a life. They view life from different angle which are reflected in their work performance. Values are a combination of different attitude and attributes of individuals. they help employee to decide what is right, good, desirable, favorable and so on. Without such values, individuals will pursue behaviours that are in line with their own individual value systems, which may lead to behaviours that the organization doesn't wish to encourage.
Honesty, self-respect, equality, sincerity, obedience, truthfulness are various examples of values. In a smaller, co-located organization, the behavior of individuals is much more visible than in larger, disparate ones. In these smaller groups, the need for articulated values is reduced, since unacceptable behaviours can be challenged openly. However, for the larger organization, where desired behavior is being encouraged by different individuals in different places with different sub-groups, an articulated statement of values can draw an organization together.
Why Identify and Establish on impacts Organizational Values?
Effective organizations identify and develop a clear, concise and shared meaning of values/beliefs, priorities, and direction so that everyone understands and can contribute. Once defined, values impact every aspect of your organization. You must support and nurture this impact or identifying values will have been a wasted exercise. People will feel fooled and misled unless they see the impact of the exercise within your organization.
If you want the values you identify to have an impact, the following must occur.
- Organizational values help each person establish priorities in their daily work life.
- Organizational goals are grounded in the identified values.
- Adoption of the values and the behaviours that result is recognized in regular performance feedback.
- People hire and promote individuals whose outlook and actions are congruent with the values.
- Only the active participation of all members of the organization will ensure a truly organization-wide, value-based, shared culture.
- Values guide every decision that is made once the organization has cooperatively created the values and the value statements.
- Rewards and recognition within the organization are structured to recognize those people whose work embodies the values the organization embraced
- People demonstrate and model the values in action in their personal work behaviours, decision making, contribution, and interpersonal interaction.
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