Strategy Formulation

Strategy Formulation. This involves the

development of company strategies. Strategy
formulation is composed of three organizational
levels: operational, competitive, and corporate.

Operational strategies are short-term and are

associated with the various operational department
of the company such as human resources, finance,
marketing, and production.
Competitive strategies are those related to the
techniques in competing in a certain industry. The
company must identify the strengths and
weaknesses of its competitors; thus, formulate
strategies to gain competitive advantage.

The essence of corporate strategy is to be able to

improve both operational and competitive strategies.
There should be a synergy between the operating
units and thus, competitive strategies should support
overall corporate strategies.
The strategic management process continues with the
formulation of strategies. The first step is the
mission/vision statement.

VISION/MISSION STATEMENT
Mission summarizes the purpose of the reason for the
company's existence. It tells what a company is now
and what it is doing at the present. It tells what type of
costumers are being served, how the company does its
products or services and its desired level of
performance.
Vision is what the company wants to become in the
future. It serves as a challenge for the company. It
visualizes the company's future and takes glimpse of
what the organization will be like in a certain period.

THE FIVE POWER Ps

• Position. Is the advantage that an organization
gains in the hands of the consumers. It is a position
that a company should not allow to be snatched by
its competitors. Position strategies are best
exemplified by Porter's Generic Strategies.
• Power. A company should enjoy power over its
competitors. It is competitive edge, a following of
some sort that a company should not allow
competitors to surpass.There are power
strategies that can be used by a
company.

• Pace. There is timing and intensity of strategy put

on the ground. It is the right time for a strategy to
work. This includes the adoptive methods.
• Potential. It is probability of the success elements
of a particular strategy. It is necessary to know the
important characteristics of a product or service
that will spell success.

• Performance. It is the effective implementation of

a particular strategy. Excellent performance
relates to growth strategies.
PORTER'S GENERIC STRATEGIES
Michael Porter developed three basic competitive
approaches in strategic management.
Cost Approach. It concentrates on keeping costs low.
With lower costs, the company can offer the product or
service lower than the competition.
Differentiation Approach. The company makes its
product or service unique and distinct. In this approach,
the costumer is willing to buy at a higher price as long as it
can satisfy her/his taste based on its quality, uniqueness
and distinct appeal or feature.
Focus Approach. It is specializing or concentrating
in a particular market segment just like what
Rustan's Department Store is doing for a high-end
market segment.
POWER STRATEGIES
1. Horizontal Integration is the strategy of the
company to expand its business into different
products that are similar to current lines.
2. Vertical Integration has two subtypes: backward
integration and forward integration. Forward
integration is a strategy of a company to control the
direct distribution of its products. Backward
integration is a strategy of a company to purchase a
supplier in order to reduce dependency.
ADAPTIVE METHODS
Miles and Snow (1978 cited in Encyclopedia
management 2015-06) discussed the need of the
company to adapt to a constantly changing
competitive environment. With this, they created
three approaches of creating a competitive
strategiey.

Prospector Approach. This is based on innovation

and at the same time exploration of new market
opportunities.
Defender Approach. It is based of making vast
improvements in its present products or services.

Analyzer Approach. It is based on making attempts

to copy and thereby make improvements in the
success of product or service offering provided by
the competition.
ESSENTIAL OF POTENTIAL STRATEGIES
For a company to be competitive in the market, the
product or service should have the potential to
succeed. This potential is expressed in the following
characteristics:
Transferability. The product or service can be
transformed into something highly valued by
costumers.

Competitive Dominance. The product or service is

better than the capabilities of competitors.
Uniqueness. The product or service cannot easily
be copied by competitors.

Substitutability. The product or service cannot be

replaced through substitution by competitors.

Durability. The product or service does not

deteriorate or depreciate quickly.
GROWTH STRATEGIES
Diversification. It is the development of new
products for new markets. This is risky because both
the product and market are untested yet.

Market Development. It is the development of a

new market for existing products and services. This
can be in the form of export or tapping an
unexplored segment of the market.
Product Development. It is the development of new
products to existing market it requires some form of
creativity or ingenuity to develop new products.

Market Penetration. It is the desire to achieve

greater percentage of the market share through the
company's existing products in existing market.
The Balance Scorecard is a strategic planning
system that is now use extensively by different types
of organization worldwide.

The Balance Scorecard included not financial

metrics which is a far cry from the traditional
performance measurement of an organization. It is
also helps in predicting what should be done and
measured in the future.
This strategy uses four key processes in order to put
short-term activities in the long term objectives of the
organization.
1. Developing a clear cut strategy. This is a direct
conversion of strategic objectives into
measurable quantifiable.
2. Communicating the strategic objectives. The
next step is to communicate the strategy to the
entire organization.
3. Planning strategies. Targets are set and efforts
are aligned to reach the planned targets.
4. Monitoring strategic implementation. After the
implementation of the strategies top management
monitor and received feedback.

In line with these strategies are four basic

processes:
Financial perspective includes financial measures
such as operating income, return on investment, and
economic value. It measures the flow of funds in a
timely and consistent manner.
Costumer perspective includes measure on costumer
satisfaction, costumer loyalty, and market share. It
focuses on costumer satisfaction.

Business process perspective includes procurement of

materials, production and other fulfillment.

Learning and growth perspective includes measures of

employees satisfaction and retention.
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