Strategy formulation is the process of offering proper direction to a firm. It seeks to set the long-term goals that help a firm exploit its strengths fully and encash the opportunities that are present in the environment.
Strategy Formulation is usually preceded by strategic analysis. The information from PESTEL and SWOT analysis is then used to set clear and realistic goals and objectives. The firm should be able to identify if it needs additional resources and sources to procure them. The firm should formulate targeted plans and prioritize activities to achieve the goals.
Strategy formulation is the process by which an organization chooses the most appropriate course of action in order to achieve its pre determined goals. It helps an organization to consider the changing environment and be prepared for the possible changes that may occur. It further enables to evaluate the resources, allocate budgets, and determine the most effective plan for maximizing the return on investment.
Strategy Formulation:
- developing a vision and mission
- identifying an organization’s external opportunities and threats
- determining internal strengths and weaknesses
- establishing long-term objectives
- generating alternative strategies
- choosing particular strategies to pursue
Strategy Formulation Decisions:
- What new businesses to enter
- What businesses to abandon
- Whether to expand operations or diversify
- Whether to enter international markets
- Whether to merge or form a joint venture
- How to avoid a hostile takeover
Strategic plans should be communicated to everyone in the organization so that they are aware of the objectives, mission, and purpose.
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