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Lesson#23
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STRATEGY-FORMULATION FRAMEWORK
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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.
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