Strategy Formulation Essay Example for Free

Strategy Formulation EssayBasic strategic be after is comprised of some(prenominal) comp adeptnts that build upon the previous piece of the proposal, and operates much like a flow chart. However, preceding to embarking on this touch, it is important to consider the players involved. T here(predicate) moldiness(prenominal) be a commitment from the highest office in the organisational hierarchy. Without buy-in from the head of a company, it is unlikely that other members will be supportive in the planning and eventual implementation butt, thereby dooming the plan before it ever takes shape. Commitment and support of the strategic-planning initiative must spread from the president and/or CEO totally the way down through the ranks to the credit line worker on the factory floor.Just as importantly, the strategic-planning team should be composed of top-level managers who atomic number 18 capable of representing the interests, concerns, and opinions of all members of the org anization. As well, organizational theory dictates that there should be no more than twelve members of the team. This allows group kinetics to function at their optimal level. The components of the strategic-planning process read much like a laundry list, with one exception each piece of the process must be kept in its sequential ordinance since each part builds upon the previous one. This is where the similarity to a flow chart is most evident, as bottomland be seen in the following illustration.The only exceptions to this are environmental s canfulning and straight implementation, which are continuous processes throughout. This article will now focus on the discussion of each component of the formulation process environmental scanning, continuous implementation, values assessment, reverie and military mission formulation, strategy design, death penalty audit analysis, gap analysis, action-plan development, contingency planning, and final implementation. After that, this ar ticle will discuss a Japanese variation to Strategy Formulation, Hoshin readying, which has move in truth popular.ENVIRONMENTAL SCANNINGThis element of strategy formulation is one of the two continuous processes. consistently scanning its surroundings serves the distinct purpose of allowing a company to survey a variety of constituents that alter its cognitive process, and which are inevitable in order to conduct subsequent pieces of the planning process. There are several particular(prenominal) areas that should be considered, including the overall environment, the specific industry itself, competition, and the internal environment of the firm. The resulting consequence of regular review article of the environment is that an organization readily notes changes and is able to adapt its strategy accordingly. This leads to the development of a real favour in the form of accurate responses to internalFigure 1 strategical Planning Process and away stimuli so as to keep pace with the competition.CONTINUOUS IMPLEMENTATIONThe idea behind this continual process is that each step of the planning process requires some degree of implementation before the adjoining symbolise can begin. This naturally dictates that all implementation cannot be postponed until completion of the plan, but must be initiated along the way. Implementation procedures specific to each phase of planning must be completed during that phase in order for the next confront to be started.VALUES ASSESSMENTAll backup organisation decisions are basically based on some set of values, whether they are personal or organizational values. The implication here is that since the strategic plan is to be used as a guide for daily decision making, the plan itself should be aligned with those personal and organizational values. To delve even further, a values assessment should overwhelm an in-depth analysis of several elements personal values, organizational values, operating philosophy, organization culture, and stakeholders.This allows the planning team to take a macro look at the organization and how it functions as a whole. Strategic planning that does not mix in a values assessment into the process is sure to encounter severe implementation and functionality problems if not unqualified failure. Briefly put, form follows function the form of the strategic plan must follow the functionality of the organization, which is a lineal result of organizational values and culture. If any party feels that his or her values have been neglected, he or she will not adopt the plan into daily work procedures and the benefits will not be obtained. imaginativeness AND MISSION FORMULATIONThis step of the planning process is critical in that is serves as the foundation upon which the oddity of the plan is built. A vision is a statement that identifies where an organization wants to be at some smudge in the incoming. It functions to provide a company with directionality, stress management , justification and quantification of resources, enhancement of professional growth, motivation, standards, and succession planning. Porrus and collins (1996) point out that a well-conceived vision consists of two major components a ticker ideology and the visualised future. A union ideology is the enduring character of an organization it provides the glue that holds an organization together. It itself is composed of core values and a core purpose. The core purpose is the organizations entire reason for being. The envisioned future involves a conception of the organization at a specified future date inclusive of its aspirations and ambitions.It includes the BHAG (big, hairy, audacious goal), which a company typically reaches only 50 to 70 percent of the time. This envisioned future gives vividly describes specific goals for the organization to reach. The strategic results of a well formulated vision include the survival of the organization, the focus on productive effort, vitalit y through the alignment of the individual employees and the organization as a whole, and, finally, success. Once an agreed-upon vision is implemented, it is time to move on to the creation of a mission statement. An explicit mission statement ensures the unity of purpose, provides the basis for resource allocation, guides organizational climate and culture, establishes organizational boundaries, facilitates accountability, and facilitates control of cost, time, and murder.When formulating a mission statement, it is vital that it specifies six-spot specific elements, including the basic product or service, employee orientation, primary market(s), guest orientation, principle technologies, and standards of quality. With all of these elements in integratedd, a mission statement should still remain short and memorable. For example, the mission statement of the American Red Cross, reads The mission of the American Red Cross is to improve the quality of human life to enhance self-reli ance and concern for others and to serve well people avoid, prepare for, and cope with emergencies. Other functions of a mission statement include setting the leaping for development of company philosophy, values, aspirations, and priorities (policy) establishing a positive public image justifying business operations and providing a corporate identity for internal and external stakeholders.STRATEGY DESIGNThis section of strategy formulation involves the preliminary layout of the fine paths by which the company plans to fulfill its mission and vision. This step involves four major elements identification of the major lines of business (LOBs), establishment of critical success indicators (CSIs), identification of strategic thrusts to pursue, and the determination of the necessary culture. A line of business is an activity that produces either dramatically different products or services or that are geared towards very different markets. When considering the addition of a new line of business, it should be based on existing core competencies of the organization, its potential contribution to the bottom line, and its fit with the firms value system. The establishment of critical success factors must be completed for the organization as a whole as well as for each line of business. A critical success indicator is a gauge by which to measure the progress toward achieving the companys mission. In order to serve as a motivational tool, critical success indicators must be accompanied by a target year (i.e. 1999, 19992002, etc.).This also allows for easy tracking of the indicated targets. These indicators are typically a mixture of financial figures and ratios (i.e. return on investment, return on equity, profit margins, etc.) and softer indicators such as customer loyalty, employee retention/turnover, and so on. Strategic thrusts are the most well-known methods for accomplishing the mission of an organization. Generally speaking, there are a handful of commonly used strategic thrusts, which have been so aptly named grand strategies. They include the concentration on existing products or services market/product development concentration on innovation/technology vertical/horizontal integration the development of joint ventures diversification retrenchment/ volte-face (usually through cost reduction) and divestment/liquidation (known as the final solution). Finally, in designing strategy, it is necessary to determine the necessary culture with which to support the achievement of the lines of business, critical success indicators, and strategic thrusts.Harrison and Stokes (1992) defined four major types of organizational cultures power orientation, role orientation, achievement orientation, and support orientation. Power orientation is based on the inequality of admittance to resources, and leadership is based on strength from those individuals who control the organization from the top. Role orientation carefully defines the roles and duties of e ach member of the organization it is a bureaucracy. The achievement orientation aligns people with a common vision or purpose.It uses the mission to attract and release the personal energy of organizational members in the pursuit of common goals. With a support orientation, the organizational climate is based on mutual trust between the individual and the organization. to a greater extent emphasis is placed on people being valued more as human beings preferably than employees. Typically an organization will choose some mixture of these or other predefined culture roles that it feels is suited in helping it to achieve is mission and the other components of strategy design.PERFORMANCE AUDIT ANALYSISConducting a performance audit allows the organization to take inventory of what its current state is. The main idea of this stage of planning is to take an in-depth look at the companys internal strengths and weaknesses and its external opportunities and threats. This is commonly called a SWOT analysis. ontogeny a clear understanding of resource strengths and weaknesses, an organizations best opportunities, and its external threats allows the planning team to draw conclusions almost how to best allocate resources in light of the firms internal and external situation.This also produces strategic thinking roughly how to best strengthen the organizations resource base for the future. Looking internally, there are several key areas that must be analyzed and addressed. This includes identifying the place of each existing line of business and unused resources for prospective additions identifying the status of current tracking systems defining the organizations strategic profile listing the available resources for implementing the strategic thrusts that have been selected for achieving the newly defined mission and an examining the current organizational culture.The external investigation should look closely at competitors, suppliers, markets and customers, stinting trends, labor-market conditions, and governmental regulations. In conducting this query, the information gained and used must reflect a current state of personal business as well as directions for the future. The result of a performance audit should be the establishment of a performance gap, that is, the resultant gap between the current performance of the organization in relation to its performance targets. To close this gap, the planning team must conduct what is known as a gap analysis, the next step in the strategic planning process.GAP ANALYSISA gap analysis is a simple tool by which the planning team can identify methods with which to close the identified performance gap(s). All too often, however, planning teams make the mistake of making this step much more rocky than need be. Simply, the planning team must look at the current state of affairs and the desire future state.The first question that must be addressed is whether or not the gap can feasibly be closed. If so, th ere are two simple questions to answer What are we doing now that we need to get around doing? and What do we need to do that we are not doing? In answering these questions and reallocating resources from activities to be ceased to activities to be started, the performance gap is closed. If there is doubt that the initial gap cannot be closed, then the feasibility of the desired future state must be reassessed.Collins, James C., and Jerry I. Porras. Building Your Companys Vision. Harvard Business Review, September-October 1996, 6590. Goldstein, Leonard D., Timothy M. Nolan, and J. William Pfeiffer. Applied Strategic Planning How to Develop a Plan that Really Works. New York McGraw-Hill, Inc., 1993. Harrison, Roger, and Herb Stokes. Diagnosing Organizational Culture. San Francisco Pfeiffer, 1992. King, Bob. Hoshin Planning the Developmental Approach. Methuen, MA GOAL/QPC, 1989. Mellum, Mara Minerva, and Casey Collett. Breakthrough Leadership Achieving Organizational Alignment throug hHoshin Planning. lolly American Hospital Publishers, Inc., 1995.