Strategy Formulation and Strategic Planning

• Strategy formulation is the analytical process of selecting the best course of action to meet organizational objectives and vision.
• It is a step in the strategic management process.
• A strategic plan allows an organization to examine its resources, provides a financial plan, and establishes an action plan for increasing profits.
• SWOT analysis, which examines strengths, weaknesses, opportunities, and threats, informs the strategic plan.
• The strategic plan should be communicated to employees so they are aware of the company's objectives, mission, and vision.
• It provides direction and focus to the employees.

Levels of Strategy Formulation

• Corporate level strategy outlines what an organization wants to achieve, such as growth, stability, acquisition, or retrenchment and focuses on what business to enter.
• Business level strategy answers how an organization will compete and is relevant for organizations with strategic business units (SBUs).
• Functional level strategy concentrates on how an organization will grow and defines daily actions, including resource allocation, to deliver corporate and business level strategies.
• A strategy enables a business to become more successful than its competitors.
• Corporate level strategies pertain to large corporations with multiple businesses, focusing on how to manage and allocate resources among them.
• It also balances resources with market opportunities in each business area.
• Top managers formulate corporate level strategy, looking ahead for five years or longer.
• Top managers make two types of decisions: developing a master plan consistent with the organization's overall direction and developing a portfolio strategy that determines the types of organizational activities and resource allocation.

Grand Strategy

• A grand strategy is a comprehensive general strategy that provides the basis for strategic direction to accomplish the organization’s long-term goals.
• Grand strategies include growth, stability, and retrenchment strategies.
• In a stability strategy, management maintains the status quo if the company is performing well and does not want to take any risks associated with more aggressive growth.
• Both the growth strategy and retrenchment strategy have a number of different ways to achieve the results.

Stability Strategy

• It implies "to leave well enough alone."
• If the environment is stable and the organization is doing well, then it may be better to make no changes.
• An organization would apply it if satisfied with its product line, consumer groups, and market share, and the management does not want to take expansion risks.
• For example, WD-40 Company, with its petroleum-based lubricant, has been around since the 1950s and has little or no interest in changing the status quo.

Retrenchment Strategies

• It means reduction in product, services, or personnel.
• This strategy is useful when facing tough competition, scarcity of resources, and a declining economy.
• It becomes highly necessary for the survival of the company, even though it may reflect poorly on the management.
• These Include harvest, turnaround, divestiture, bankruptcy, and liquidation.