Page 23 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 2: Strategy Formulation and Defining Vision

A good recommendation should be: effective in solving the stated problem(s), practical (can be Notes
implemented in this situation, with the resources available), feasible within a reasonable time
frame, cost-effective, not overly disruptive, and acceptable to key "stakeholders" in the
organisation. It is important to consider "fits" between resources plus competencies with
opportunities, and also fits between risks and expectations.
There are four primary steps in this phase:
1. Reviewing the current key objectives and strategies of the organisation, which usually
would have been identified and evaluated as part of the diagnosis
2. Identifying a rich range of strategic alternatives to address the three levels of strategy
formulation outlined below, including but not limited to dealing with the critical issues
3. Doing a balanced evaluation of advantages and disadvantages of the alternatives relative
to their feasibility plus expected effects on the issues and contributions to the success of the
organisation

4. Deciding on the alternatives that should be implemented or recommended.
In organisations, and in the practice of strategic management, strategies must be implemented
to achieve the intended results. Here it has to be remembered that the most wonderful strategy
in the history of the world is useless if not implemented successfully.

2.1 Aspects of Strategy Formulation

The following three aspects or levels of strategy formulation, each with a different focus, need
to be dealt with in the formulation phase of strategic management. The three sets of
recommendations must be internally consistent and fit together in a mutually supportive manner
that forms an integrated hierarchy of strategy, in the order given.
1. Corporate Level Strategy
2. Competitive Strategy
3. Functional Strategy
Let us understand each of them one by one.

1. Corporate Level Strategy: In this aspect of strategy, we are concerned with broad decisions
about total organisation's scope and direction. Basically, we consider what changes should
be made in our growth objective and strategy for achieving it, the lines of business we are
in, and how these lines of business fit together. It is useful to think of three components of
corporate level strategy:
(a) Growth or directional strategy (what should be our growth objective, ranging from
retrenchment through stability to varying degrees of growth - and how do we
accomplish this)
(b) Portfolio strategy (what should be our portfolio of lines of business, which implicitly
requires reconsidering how much concentration or diversification we should have),
and

(c) Parenting strategy (how we allocate resources and manage capabilities and activities
across the portfolio – where do we put special emphasis, and how much do we
integrate our various lines of business).

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