Strategy Formulation and Implementation

Strategic Planning helps you manage the future. If you don't manage the future, the future will manage you.

Before starting the process of strategy formulation, managers should first learn to think Strategically.

Thinking Strategically helps managers know where the organization is now, where the organization wants to be, what changes are among competitors and what courses of action will help us achieve our goals so that we can define an overall direction for the organization's Grand Strategy.

What is an Organization’s Grand Strategy? It is a general plan of action to achieve long-term objectives: Growth, which can be promoted internally by investing in expansion or externally by acquiring additional business divisions.
Stability, through deciding whether to remain the same size or grow steadily and in a controlled fashion. Finally Retrenchment, which is a forced decline, by either shrinking current business units or selling off or liquidating entire businesses.

What is the purpose of Strategy? 
1. Identifying core competence: something the organization does especially 
    well in comparison to its competitors.
* Superior research and development.
* Mastery of a technology.
* Superior customer service.
2. Creating Synergy: when organizational parts interact to produce a joint 
    effect that is greater than the sum of its parts acting alone.
3. Value Creation: use core competence and synergy to provide increased 
    benefits received with lower costs paid.

What are the Levels of Strategy?
1. Corporate-Level Strategy "What business are we in?" 
2. Business-Level Strategy "How do we compete?"
3. Function-Level Strategy "How do we support business-level strategy?"

The strategy of an organization has a life cycle: a dormant phase and a development phase. Because strategic issues are not considered through periodic review, many organizations spend most of their time in the dormant phase. When your company has a product in demand that is worth developing, then there is justification for investment in the company's future. However there is likely to be a need for a fundamental appraisal of where the business is going to go, if the company is to set a course towards sustainable and improved profitability.


Environmental Scanning includes:
1. Internal analysis of the organization.
2. Analysis of the organization’s industry (task environment).
3. External macro-environment (PEST analysis).

Internal analysis is conducted in order to identify the organization’s strengths and weaknesses, while the external analysis is aimed at revealing opportunities and threats.  A profile of the strengths, weaknesses, opportunities and threats is generated by means of a SWOT analysis.

Strategy Formulation:

Step1: Development of the firm's goals and a specific strategic plan.
Step2: Assessing the external environment and the internal problems.
Step3: Integrating the results into goals and strategy.

Given the information from the environmental scan, the organization should match its strengths to the opportunities that it has identified, while addressing its weaknesses and external threats.

To achieve high profitability margins, the organization seeks to develop a competitive advantage over its rivals. A competitive advantage can be based on cost or differentiation. 

Strategy Implementation:

The selected strategy is implemented by means of programs, budgets and procedures. Implementation involves organization of the organization’s resources and motivation of the staff to achieve objectives.

The way in which the strategy is implemented can have a significant impact on whether it will be successful. In a large company, those who implement the strategy likely will be different people from those who formulated it. For this reason, care must be taken to communicate the strategy and the reasoning behind it. Otherwise, the implementation might not succeed if the strategy is misunderstood or if lower-level managers resist its implementation because they do not understand why the particular strategy was selected.

Evaluation & Control:
 
The implementation of the strategy should be monitored; the evaluation and control goes according to the following steps:
1. Define parameters to be measured.
2. Define target values for those parameters.
3. Perform measurements.
4. Compare measured results to the pre-defined standards.
5. Make necessary changes.

Source: Mission Newsletter – Issue 9