STRATEGY-FORMULATION FRAMEWORK
Learning Objectives
After understanding
this topic you able to understand the basic phenomena of strategy formulation frame
work and also under stand the stages of strategy formulation frame work.
Objectives
Objective placing an important role in strategic management Strategic analysis and choice largely involves
making subjective decisions based on
objective information. This topic includes important concepts that
can help strategists generate feasible alternatives, evaluate those alternatives, and choose a specific course of
action.
Behavioral aspects of strategy formulation are described, including politics,
culture, ethics, and social
responsibility considerations. Modern tools for formulating strategies are described, and the
appropriate role
of a board
of directors is discussed
A Comprehensive Strategy-Formulation Framework
Important strategy-formulation techniques can be
integrated into a three-stage decision-making framework,
as shown below. The tools presented in
this framework are applicable to all sizes and types of organizations
and can help strategists identify, evaluate, and select strategies.
Stage-1 (Formulation Framework)
1. External factor evaluation
2. Competitive matrix profile
3. Internal factor evaluation
Stage-2 (Matching stage)
1. TWOS Matrix (Threats-Opportunities-Weaknesses-Strengths)
2. SPACE Matrix (Strategic Position and Action Evaluation)
3. BCG Matrix (Boston
Consulting Group)
4. IE Matrix (Internal and external)
5. GS Matrix (Grand Strategy)
Stage-3 (Decision stage)
1. QSPM (Quantitative Strategic Planning Matrix)
Stage 1 of
the formulation framework consists of
the EFE Matrix, the IFE Matrix, and the Competitive
Profile Matrix. Called the Input Stage, Stage 1 summarizes the basic input information needed to formulate
strategies.
Stage 2, called the Matching Stage, focuses upon generating feasible alternative strategies by
aligning key external and internal factors. Stage 2 techniques include
the Threats-Opportunities-
Weaknesses-Strengths (TOWS) Matrix, the Strategic Position and Action Evaluation (SPACE) Matrix, the
Boston
Consulting Group (BCG) Matrix, the Internal-External (IE) Matrix, and the Grand Strategy Matrix.
Stage 3, called the Decision Stage, and involves a single technique, the Quantitative Strategic Planning Matrix
(QSPM).
A QSPM uses input information from Stage 1
to objectively evaluate feasible alternative strategies
identified in Stage 2.
A QSPM reveals the relative attractiveness of
alternative strategies and, thus, provides
an objective basis for selecting specific strategies.
All nine techniques included
in the strategy-formulation framework require integration of intuition and analysis.
Autonomous divisions in an
organization
commonly use strategy-formulation techniques to develop
strategies and objectives. Divisional analyses provide a basis for identifying, evaluating, and selecting among
alternative
corporate-level strategies.
Strategists themselves, not analytic tools, are always responsible and accountable for strategic decisions.
Lenz emphasized that the shift from a
words-oriented to a
numbers-oriented planning process can give rise
to a false sense of
certainty;
it can reduce dialogue, discussion, and argument as
a means to explore
understandings, test assumptions and foster
organizational
learning. Strategists, therefore, must be wary of
this possibility and use analytical tools
to facilitate, rather than diminish,
communication. Without objective
information and analysis, personal biases, politics, emotions, personalities, and halo error (the tendency to put
too much weight on
a single factor) unfortunately may play
a dominant role in the strategy-formulation
process.
