Organisational strategy is formulated through a deliberate process of defining a business's intended direction and outlining the actionable steps required to achieve its goals. This process leverages available knowledge and seeks to align resources and efforts across the entire organization.
The Strategy Formulation Process
Strategy formulation isn't a one-time event, but rather an ongoing cycle of analysis, planning, and execution. It's about making informed choices to guide the organization toward success. The reference defines strategy formulation as "using available knowledge to document the intended direction of a business and the actionable steps to reach its goals. This process is used for resource allocation, prioritization, organization-wide alignment, and validation of business goals. 14-Oct-2020"
Here's a breakdown of key aspects:
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Analysis: This involves examining both the internal and external environments.
- Internal Analysis: Assessing the organization's strengths, weaknesses, resources, and capabilities.
- External Analysis: Evaluating market trends, competitive landscape, opportunities, and threats.
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Goal Setting: Defining clear, measurable, achievable, relevant, and time-bound (SMART) goals. These goals should reflect the desired future state of the organization.
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Strategy Development: Crafting strategies that will enable the organization to achieve its goals. This involves identifying and evaluating different strategic options.
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Resource Allocation: Deciding how to allocate resources (financial, human, technological) to support the chosen strategies. This includes prioritization of projects and initiatives.
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Alignment: Ensuring that all parts of the organization are working together toward the same goals. This requires clear communication and coordination.
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Validation: Regularly reviewing and validating the strategy to ensure it remains relevant and effective.
Key Considerations
Several factors influence how organizational strategy is formulated:
- Organizational Culture: The values and beliefs of the organization can shape the strategic direction.
- Leadership Style: The leadership team's vision and approach play a crucial role in strategy development.
- Stakeholder Interests: The needs and expectations of stakeholders (e.g., shareholders, employees, customers) must be considered.
Example: A Tech Startup
Consider a tech startup aiming to disrupt the online education market.
- Analysis: They analyze their strengths (innovative technology), weaknesses (limited funding), opportunities (growing demand for online learning), and threats (established competitors).
- Goal Setting: Set a goal to acquire 10,000 users within the first year.
- Strategy Development: Decide to focus on a niche market (e.g., coding bootcamps) and offer a unique learning experience.
- Resource Allocation: Allocate funding to product development, marketing, and customer support.
- Alignment: Ensure that the development, marketing, and sales teams are all working towards the same user acquisition goal.
- Validation: Track user acquisition rates and adjust the strategy as needed.
By using available knowledge and following a structured process, organizations can formulate effective strategies that drive success.
