Chapter 7
Retail Strategy
Formulation in according to Resource analysis and Application
Strategy Formulation
Definition:
Strategy Formulation is an analytical process of selection of the
best suitable course of action to meet the organizational objectives and vision.
It
is one of the steps of the strategic management process.
The strategic plan allows an organization to examine its resources, provides a
financial plan and establishes the most appropriate action plan for increasing
profits.
It
is examined through SWOT analysis.
SWOT is an acronym for strength, weakness, opportunity and threat. The
strategic plan should be informed to all the employees so that they know the
company’s objectives, mission and vision. It provides direction and focus to
the employees.
Steps of Strategy Formulation
The
steps of strategy formulation include the following:
1. Establishing
Organizational Objectives:
This involves establishing long-term goals of an organization. Strategic decisions can be taken once
the organizational objectives are determined.
2. Analysis
of Organizational Environment:
This involves SWOT analysis, meaning identifying the company’s strengths and
weaknesses and keeping vigilance over competitors’ actions to understand
opportunities and threats.
Strengths
and weaknesses are internal factors which the company has control over. Opportunities
and threats, on the other hand, are external factors over which the company has
no control. A successful organization builds on its strengths, overcomes its
weakness, identifies new opportunities and protects against external threats.
3. Forming
quantitative goals:
Defining targets so as to meet the company’s short-term and long-term
objectives. Example, 30% increase in revenue this year of a company.
4. Objectives
in context with divisional plans:
This involves setting up targets for every department so that they work in
coherence with the organization as a whole.
5. Performance
Analysis: This is
done to estimate the degree of variation between the actual and the standard
performance of an organization.
6. Selection
of Strategy: This is
the final step of strategy formulation. It involves evaluation of the
alternatives and selection of the best strategy amongst them to be the strategy of
the organization.
Strategy
formulation process is an integral part of strategic management, as it helps in
framing effective strategies for the organization, to survive and grow in the
dynamic business environment.
Levels
of strategy formulation
There
are three levels of strategy formulation used in an organization:
1. Corporate
level strategy: This
level outlines what you want to achieve: growth, stability, acquisition or
retrenchment. It focuses on what business you are going to enter the market.
2. Business
level strategy: This
level answers the question of how you are going to compete. It plays a role in
those organization which have smaller units of business and each is considered
as the strategic business unit (SBU).
3. Functional
level strategy: This
level concentrates on how an organization is going to grow. It defines daily
actions including allocation of resources to deliver corporate and business
level strategies.
Hence,
all organisations have competitors, and it is the strategy that enables one
business to become more successful and established than the other.
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