Definition: Strategy Formulation

Strategy formulation is the process of choosing the best corporate as well as business course of
action for an organization so that it achieves the goals and objectives set by it. A good strategy
maximizes competitive advantage and minimizes competitive disadvantage by making best use
of the corporate strengths and managing weaknesses.
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Strategy formulation essentially involves six basic steps:

 Setting the vision and mission of the company, along with its goals and objectives to be
achieved both in long and short term.
 Performing SWOT and other environmental checks to evaluate macro and micro
environment and the state of the competition.
 Setting very specific quantitative goals, for example a 20% increase in revenue.
 Setting up the whole organization and all departments so that they work in coherence
towards the set target.
 Review of the current status of the organization, its set target and the status of the
competition and the methods by which the target could be achieved
 Evaluating the available alternatives and choosing the best among them to be the strategy
of the organization.

Hence, this concludes the definition of Strategy Formulation along with its overview.

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. The process of strategy
formulation basically involves six main steps. Though these steps do not follow a rigid chronological order,
however they are very rational and can be easily followed in this order.

1. Setting Organizations’ objectives - The key component of any strategy statement is to set the long-term
objectives of the organization. It is known that strategy is generally a medium for realization of
organizational objectives. Objectives stress the state of being there whereas Strategy stresses upon the
process of reaching there. Strategy includes both the fixation of objectives as well the medium to be used to
realize those objectives. Thus, strategy is a wider term which believes in the manner of deployment of
resources so as to achieve the objectives.

While fixing the organizational objectives, it is essential that the factors which influence the selection of
objectives must be analyzed before the selection of objectives. Once the objectives and the factors
influencing strategic decisions have been determined, it is easy to take strategic decisions.
 2. Evaluating the Organizational Environment - The next step is to evaluate the general economic and
industrial environment in which the organization operates. This includes a review of the organizations
competitive position. 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 can be discovered so that the management can identify their own
strengths and weaknesses as well as their competitors’ strengths and weaknesses.

After identifying its strengths and weaknesses, an organization must keep a track of competitors’ moves
and actions so as to discover probable opportunities of threats to its market or supply sources.

3. Setting Quantitative Targets - In this step, an organization must practically 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 that might be made by various product zones or operating
departments.
4. 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. This requires a careful analysis of macroeconomic trends.
5. Performance Analysis - Performance analysis includes discovering and analyzing the gap between the
planned or desired performance. A critical evaluation of the organizations past performance, present
condition and the desired future conditions must be done by the organization. This critical evaluation
identifies the degree of gap that persists between the actual reality and the long-term aspirations of the
organization. An attempt is made by the organization to estimate its probable future condition if the current
trends persist.
6. 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 - Meaning

and Steps in Implementing a Strategy
Strategy implementation is the translation of chosen strategy into organizational action so as to achieve
strategic goals and objectives. Strategy implementation 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. But, organizational structure is
not sufficient in itself to motivate the employees.

An organizational control system is also required. This control system equips managers with motivational incentives
for employees as well as feedback on employees and organizational performance. Organizational culture refers to
the specialized collection of values, attitudes, norms and beliefs shared by organizational members and groups.

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.

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.

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. With the change in power and status roles, the managers and
employees may employ confrontation behaviour.

Difference Between Strategy Formulation and Strategy Implementation

June 20, 2015 By Surbhi S 1 Comment

Strategy Formulation and Strategy Implementation are the two most important
phases of strategic management process. Strategy Formulation means
crafting a combination of strategies and picking out the best one to achieve the
organizational goals and objectives and thereby reaching the vision of the
organization. It involves a number of steps which are performed in chronological
order.

On the other hand, Strategy Implementation refers to the execution of the

opted strategy, i.e. it converts the chosen strategy into action, for the realization
of organizational goals and objectives. There are many management students,
who often juxtapose the two terms. But there exist a fine line of differences
between strategy formulation and strategy implementation, which has been
explained in the article below.
Content: Strategy Formulation Vs Strategy Implementation
1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion

Comparison Chart
BASIS FOR COMPARISON STRATEGY FORMULATION

Meaning Strategy Formulation refers to the preparation of a well thought strategy, that helps in the ac

Concept Placement of forces before action takes place.

Process type Logical

Emphasis on Effectiveness

Responsibility Top Management

Orientation Planning

Activity type Entrepreneurial

Requirement of Analytical skills

Definition of Strategy Formulation

Strategy Formulation is concerned with the crafting and designing of strategies,

and picking the best strategy for execution, to achieve the desired organizational
goals and objectives. It is the second stage of the Strategic Management Process.
The following are the three major aspects of Strategy Formulation:

 Corporate Level Strategy

 Business Level or Competitive Level Strategy
 Functional Level Strategy
Strategy Formulation involves evaluating the current business strategy and
determining measures to improve them. Ascertaining the major areas
where business needs any help from the external environment of business. In this
phase, the present issues and problems of the organization are resolved first.
Alternative courses of action are prepared, taking all the items into account. After
that, the strategy is formulated accordingly for implementation, after all,
considerations.

Definition of Strategy Implementation

This is the third and final phase of Stage of Strategic Management Process, where
the formulated strategy is put into action to meet out the organizational goals and
objectives. Strategy Implementation is a process of converting planned decisions
into action.

Strategy Implementation Model

It includes directing the ongoing strategy so that it can work in an efficient

manner and taking corrective measures to improve its performance time to time,
to reach the targeted results. The following activities are involved in it:

 Allocation of resources like the man, material, money, machinery, etc.

 Designing the organizational structure for handling new strategy.
 Training manpower.
 Ascertaining functional process.
 A devising system in the organization.
Key Differences Between Strategy Formulation and
Strategy Implementation
The following are the major differences between strategy formulation and
strategy implementation:

1. Strategy Formulation refers to designing the strategy. Strategy

Implementation means, execution of the opted strategy.
2. Strategy Formulation putting all forces into its place before an action takes
place while Strategy Implementation focuses on managing those forces
during execution.
3. Strategy Formulation is a logical process, whereas Strategy
Implementation is an operational process.
4. Strategy Formulation puts emphasis on effectiveness, but Strategy
Implementation gives stress on efficiency.
5. Strategy Formulation is the responsibility of top management. Conversely,
middle management is responsible for Strategy Implementation.
6. Strategy Formulation requires intuitive skills. In contrast to, Strategy
Implementation, which needs motivational skills.
7. Strategy Formulation is an entrepreneurial activity. On the other hand,
Strategy Implementation is an administrative activity.
8. Strategy Formulation is related to planning, but Strategy Implementation
is concerned with action.
Conclusion

Strategic Management Process is a combination of three processes, i.e. Strategy

Analysis, Strategy Formulation, Strategy Implementation. First of all, in depth
diagnosis (analysis) on the business environment, organizational goals,
resources, and competencies is performed, which is followed by strategy choice
(formulation) where alternative strategies are prepared and after taking into
consideration various matters the best action plan is chosen to reach the desired
goals. Then finally comes the strategy execution (implementation), where the
decision is brought into action. Without implementation, the strategy would be of
no use to the organization.
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