Strategic Management

Strategy Formulation

Strategy Formulation
Corporate Planning, Concept of Planning, Planning
Process, Types of Planning, Strategic Planning, Strategic
Decision Making, Vision, mission and purpose, objectives
and goals of a business organization -Types of strategies -
Guidelines for crafting successful business strategies.
 Strategic Management
Strategy Formulation

WHAT IS STRATEGIC PLANNING (Formulation)?

• A strategic plan is an overall defined course of organizational action for a set period
of time that guides day-to-day decision-making and activity;
• The plan examines and reflects an organization's values, current status, and
environment—and it relates those factors to the organization's desired future
state, usually expressed in five- to ten-year time periods.
• The plan defines how resources will be used given timelines and handles (which are
means by which an organization can leverage resources or realities);
• The plan is both a reaction to, and a tool for adapting to, environmental changes and
creating an organization's future within its changing environments.
• The plan is aimed to achieve specific goals and objectives.
• The plan is evaluated by whether or not it achieves specific events or milestones.
• The plan is based on both the organization’s internal environment and the external
action field in which the organization operates; (Unit 3)
• The purpose of the plan is to help the organization capitalize on its strengths while
minimizing its weaknesses, and to take advantage of opportunities and defend
against threats. (Unit 3)
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Strategy Formulation

• Both strategic planning and long range planning cover several years. However,
strategic planning requires the organization to examine what it is and the
environment in which it is working. Strategic planning also helps the organization
to focus its attention on the crucial issues and challenges. It, therefore, helps the
organization's leaders decide what to do about those issues and challenges.

• In short, as a result of a strategic planning process, an organization will have a

clearer idea of what it is, what it does, and what challenges it faces. If it follows
the plan, it will also enjoy enhanced performance and responsiveness to its
environment.
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Strategy Formulation

IMPORTANCE OF STRATEGIC PLANNING

• In the simplest terms, a strategic plan can help improve everyone’s performance.
• A strategic plan cannot only refocus a sense of purpose, but can stimulate future-
oriented thinking based on a shared sense of mission.
• Collaboration between members of an organization is more effective when everyone
is working with the same set of assumptions and toward the same goals.
• Visioning, planning, and setting goals have consistently proven to be positive
influences on organizational performance.
• Strategic planning can help an organization think through the difficult choices
imposed by limited budgets.
• But if there is no genuine internal commitment to the plan, and no intention to
implement it, strategic planning is a waste of time and energy.
• So strategic planning is for those who are willing to be honest, who want to focus on
accurately assessing capabilities, and who are committed to influencing and
creating a successful future for themselves.
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Strategy Formulation
STRATEGIC PLANNING PROCESS
• As a process, strategic planning involves an orderly sequence of activities, each vital to the success of
the whole process.
• The activities include:
1. Assessing the external environment (Unit 3)
2. Assessing the internal environment (Unit 3)
3. Developing a vision or mission for the future
4. Developing goals and objectives to reach that future
5. Implementing the plan (Unit 5)
6. Measuring progress and revising the plan (Unit 5)
• The external and internal assessments provide a realistic base on which to build future plans.
• The vision or mission identifies the organization's purpose and its desired future state.
• Consensus building is an important part of these phases.
• Once there’s consensus, the practical steps necessary to reach the desired future state—the goals and
objectives of the organization—can be identified and implemented.
• Evaluation and revision occur at the end of the planning cycle, but may occur at any stage within the
planning process.
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Strategy Formulation
The “How” of Strategic Planning

• The recommended steps in the strategic planning process are as follows:

• Participant Selection
• Core Ideology [Core Values & Purpose development]
• Vision and Mission development
• Goals and Objectives
• Performance Audit - Review of Organizational Strengths, Weaknesses, Opportunities and Threats
[SWOT]
• Gap Analysis - Review information gathered from the SWOT and compare the results to your stated
goals and objectives.
• Contingency Planning – Worst and best case scenarios.
• Integrated Functional Plans – Action Steps/Detailed Plans
• Implementation Considerations
• Monitoring And Evaluation
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Strategy Formulation
Core Values Development

Core values are those vital few values that all members of the organization are
expected to use, live by and demonstrate on a daily basis while executing their
work responsibilities. “Core Values are the essential and enduring tenets of an
organization. A small set of timeless guiding principles that require no
external justification; they have intrinsic value and importance to those inside
the organization.”
Core values are so fundamental and deeply held that they will change seldom, if
ever, and must stand the test of time. Some examples of organizational core
values are as follows:
Disney – Imagination and wholesomeness, no cynicism, nurturing and
promulgation of “wholesome American values”, creativity, dreams,
imagination, fanatical attention to consistency and detail, and preservation
and control of the Disney magic.
Sony Corporation - Elevation of the Japanese culture and national status, being a
pioneer-not following others, doing the impossible, encouraging individual
ability and creativity.
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Organizational “Purpose” Development

3M: To solve unsolved problems innovatively

Cargill: To improve the standard of living around the world
Fannie Mae: To strengthen the social fabric by continually democratizing home
ownership
Walt Disney: To make people happy
Mary Kay Cosmetics: To give unlimited opportunity
Merck: To preserve and improve human life
Lost Arrow Corporation: To be a role model and a tool for social change:
Nike: To experience the emotion of competition, winning , and crushing competitors
Sony: To experience the joy of advancing and applying technology for the benefit of
the public
Wal-Mart: To give ordinary folk the chance to buy the same things as rich people
Telecare Corporation: To help people with mental impairments realize their full
potential
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• Analysis of values:
– Values are broad beliefs about what is or is not appropriate.
– Strong core values for an organization helps build institutional identity, gives
character to an organization, and it backs up the mission statement.
– Organizational culture reflects the dominant value system of the organization
as a whole.

• Organizational culture 
– Shapes the values of managers and other organization members.
– Points people in common directions.
– Helps build institutional identity.
– Gives character to the organization in the eyes of employees and external
stakeholders.
– Backs up the mission statement.
– Guides the behavior of organizational members in meaningful and consistent
ways.
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Hierarchy of goals
Organizational goals ranging from, at the top, those that are less specific yet
able to evoke powerful and compelling mental images, to, at the bottom,
those that are more specific and measurable.
Vision, mission statement, strategic objectives (Goals, Objectives, Strategy, etc.)
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Strategy Formulation
VISION
Organizational “Vision” Development
“Visioning is a deep voyage into the heart and soul of an organization.
Visioning is looking at the big picture and attempting to foresee the
future. Visioning was designed to appeal to both the mind and spirit, and
to involve employees in the exciting process of creating the future within a
successful organization. The essence of successful organizational visioning
is the commitment to rethinking and reviewing the organization. The
process empowers members and the organization to achieve and reach its
full potential.”

Peter Drucker, stated “The best way to predict the future is to create it.”
Unlike prior methods of organizational planning, visioning begins with the
future, not the present; it focuses on the end-state, not the means of
getting there. The description of that ideal end-state is called a vision.
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Strategy Formulation
VISION

Organizational vision
Goal that is “massively inspiring, overarching, and long term”
Represents a destination that is driven by and evokes passion

Why Do Visions Fail?

The walk doesn’t match the talk
Irrelevance
Too much focus leads to missed opportunities
Not the holy grail
An ideal future irreconciled with the present
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Example:
Microsoft Vision: Empower people through
great software anytime, anyplace, and on any
device
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Mission:
An organization’s mission is the purpose or the reason for the
organization existence. A well conceived mission statement defines
the fundamental, unique purpose that sets a company apart from
other firms of its type and identifies the scope of the company's
operation in terms of the products offered and markets served.
A mission statement may be defined narrowly or broadly in scope.
A broadly defined mission statement keeps the company from
restricting itself to one field or product line, but it fails to clearly
identify what it makes or which product/market it plans to
emphasize.
A narrow mission very clearly states the organizations primary
business, but it may limit the scope of the firm's activities in terms
of product or service offered, the technology used and the market
served.
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Mission statement
Set of goals that include both the purpose of the
organization, its scope of operations, and the basis
of its competitive advantage
Has the greatest impact when it reflects an
organization’s enduring, overarching strategic
priorities and competitive positioning
Good mission statements identify:
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Strategy Formulation
Good mission statements identify:
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Strategy Formulation

An important test of the mission is how well it serves the

organization’s stakeholders.
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Strategy Formulation

• Example :
Honda Mission Statement : Proceed always with
ambition and youthfulness.
Respect sound theory, develop fresh ideas, and
make the most effective use of time.
Enjoy your work and always brighten your
working atmosphere.
Strive constantly for a harmonious flow of work.
Be ever mindful of the value of research and
endeavor.
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Strategy Formulation
Organizational “Goals and Objectives” Development

Many people tell us that goals and objectives are confusing. They are not
sure of the difference between a goal, objective or an action step. This
difficulty is understandable when you read some of the poorly written
goals and objectives that can be found throughout resources such as the
internet. There are some basics concerning goals and objectives that can
be helpful to the writer. In this section we will attempt to provide the
reader with some of the basics regarding writing goals and objectives.

Why do we need to identify goals and objectives?

Plans and actions based on clear goals and objectives are more likely to
succeed in meeting the organization’s needs.
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Strategy Formulation
Goals, by definition, are outcome statements that define
what an organization is trying to accomplish. Try to think
of each goal as a large umbrella with several spokes
coming out from the center. The umbrella itself is a goal.
Now think of each spoke as an objective. Without the
specifics of the objectives the very general goal could not
be accomplished; just as an umbrella cannot be put up or
down without the spokes.

Goals are general guidelines that explain what you want

to achieve in your organization. They are usually long-
term and represent the large issues or problems you
want to address like “protect public health and safety”.
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Objectives define strategies or implementation steps to attain the
identified goals. Unlike goals, objectives are specific, measurable,
and have a defined completion date. They are more specific and
outline the “who, what, when, where, and how” of reaching the
goals.
Objectives are developed to help achieve goals by dividing them
into manageable components.
For example, “eliminate flood damage” would be a goal. A
supporting objective could be “adopt a zoning ordinance prohibiting
new development in the floodplain.”
This objective would need a date of completion, a person
responsible for implementation and specific actions steps outlining
what needs to be accomplished in order to adopt the zoning
ordinance.
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By definition objectives are described as being precise, time-based,
and have measurable actions that support the completion of a goal.
Objectives must:

Relate directly to the goal Be clear, concise, and understandable

Be stated in terms of results Begin with an action verb
Be measurable Specify a date for accomplishment

All objectives should be SMART.

S – Specific M – Measurable A – Attainable R – Realistic
T – Time-bound
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What are the differences between goals and objectives?
Goals are broad objectives are narrow.
Goals are general intentions; objectives are precise.
Goals are intangible; objectives are tangible.
Goals are abstract; objectives are concrete.
Goals can’t be validated as is; objectives can be validated.
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Corporate Goals and Objectives include:

Profitability (net profits)
Growth (increase in total assets, etc.)
Utilization of resources(ROE or ROI)
Market leadership (market share)
Shareholder’s Wealth