I.

Introduction

Many companies and marketing managers have dedicated staff for strategy formulation. It is a very

important process for the company, as it tells the future direction which the company has to take and the
way that the company can succeed.

The 10 school of thoughts tell us how Strategy formulation can be done, and what are the various ways that
you can formulate a strategy.

II. Objectives

The learners must be able to:

 Identify the Schools of thought for Strategy Formulation

 Understand the Strategy Process

III. Pre Test

Enumerate and discuss the process in Strategic Management.

IV. Discussion

Strategic Management Process

STRATEGIC INTENT

Defining the levels of strategic intent of the business:

 Establishing vision
 Designing mission
 Setting objectives
 Strategic Intent

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Definition: Strategic Intent can be understood as the philosophical base of the strategic management
process. It implies the purpose, which an organization endeavor of achieving. It is a statement, that
provides a perspective of the means, which will lead the organization, reach the vision in the long run.

Strategic intent gives an idea of what the organization desires to attain in future. It answers the question
what the organization strives or stands for? It indicates the long-term market position, which the
organization desires to create or occupy and the opportunity for exploring new possibilities.

Strategic Intent Hierarchy

 Vision: Vision implies the blueprint of the company’s future position. It describes where the
organization wants to land. It is the dream of the business and inspiration, base for the planning
process. It depicts the company’s aspirations for the business and provides a peep of what the
organization would like to become in future. Every single component of the organization is required
to follow its vision.
 Mission: Mission delineates the firm’s business, its goals and ways to reach the goals. It explains
the reason for the existence of the business. It is designed to help potential shareholders and
investors understand the purpose of the company. A mission statement helps to identify, ‘what
business the company undertakes.’ It defines the present capabilities, activities, customer focus
and business makeup.
 Business Definition: It seeks to explain the business undertaken by the firm, with respect to
customer needs, target audience, and alternative technologies. With the help of business definition,
one can ascertain the strategic business choices. The corporate restructuring also depends upon
the business definition.
 Business Model: Business model, as the name implies is a strategy for the effective operation of
the business, ascertaining sources of income, desired customer base, and financing details. Rival
firms, operating in the same industry relies on the different business model due to their strategic
choice.
 Goals and Objectives: These are the base of measurement. Goals are the end results, that the
organization attempts to achieve. On the other hand, objectives are time-based measurable
actions, which help in the accomplishment of goals. These are the end results which are to be
attained with the help of an overall plan, over the particular period.

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The vision, mission, business definition, and business model explains the philosophy of business but the
goals and objectives are established with the purpose of achieving them.

Strategic Intent is extremely important for the future growth and success of the enterprise, irrespective of its
size and nature.

FORMULATION OF STRATEGY

 Performing environmental and organizational appraisal

 Considering strategies
 Carrying out strategic analysis
 Making strategies
 Preparing strategic plan

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:

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  Establishing Organizational Objectives: This involves establishing long-term goals of
an organization. Strategic decisions can be taken once the organizational objectives are
determined.
 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.
 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.
 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.
 Performance Analysis: This is done to estimate the degree of variation between the actual and the
standard performance of an organization.
 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:

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  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.
 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).
 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 organizations have competitors, and it is the strategy that enables one business to become more
successful and established than the other.

IMPLEMENTATION OF STRATEGY

 Putting strategies into practice

 Developing structures and systems
 Managing behavioral and functional implementation

Definition: Strategy Implementation refers to the execution of the plans and strategies, so as to accomplish
the long-term goals of the organization. It converts the opted strategy into the moves and actions of the
organization to achieve the objectives.

Simply put, strategy implementation is the technique through which the firm develops, utilizes and
integrates its structure, culture, resources, people and control system to follow the strategies to have the
edge over other competitors in the market.

Strategy Implementation is the fourth stage of the Strategic Management process, the other three being a
determination of strategic mission, vision and objectives, environmental and organizational analysis,
and formulating the strategy. It is followed by Strategic Evaluation and Control.

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Process of Strategy Implementation

 Building an organization, that possess the capability to put the strategies into action successfully.
 Supplying resources, in sufficient quantity, to strategy-essential activities.
 Developing policies which encourage strategy.
 Such policies and programs are employed which helps in continuous improvement.
 Combining the reward structure, for achieving the results.

Using strategic leadership.

The process of strategy implementation has an important role to play in the company’s success. The
process takes places after environmental scanning, SWOT analyses and ascertaining the strategic issues.

Prerequisites of Strategy Implementation

 Institutionalization of Strategy: First of all the strategy is to be institutionalized, in the sense that the
one who framed it should promote or defend it in front of the members, because it may be
undermined.
 Developing proper organizational climate: Organizational climate implies the components of the
internal environment, that includes the cooperation, development of personnel, the degree of
commitment and determination, efficiency, etc., which converts the purpose into results.
 Formulation of operating plans: Operating plans refers to the action plans, decisions and the
programs, that take place regularly, in different parts of the company. If they are framed to indicate
the proposed strategic results, they assist in attaining the objectives of the organization by
concentrating on the factors which are significant.
 Developing proper organizational structure: Organization structure implies the way in which
different parts of the organization are linked together. It highlights the relationships between
various designations, positions and roles. To implement a strategy, the structure is to be designed
as per the requirements of the strategy.
 Periodic Review of Strategy: Review of the strategy is to be taken at regular intervals so as to
identify whether the strategy so implemented is relevant to the purpose of the organization. As the
organization operates in a dynamic environment, which may change anytime, so it is essential to
take a review, to know if it can fulfill the needs of the organization.

Even the best-formulated strategies fail if they are not implemented in an appropriate manner. Further, it
should be kept in mind that, if there is an alignment between strategy and other elements like resource
allocation, organizational structure, work climate, culture, process and reward structure, then only the
effective implementation is possible.

Aspects of Strategy Implementation

 Creating budgets which provide sufficient resources to those activities which are relevant to the
strategic success of the business.

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  Supplying the organization with skilled and experienced staff.
 Conforming that the policies and procedures of the organization assist in the successful execution
of the strategies.
 Leading practices are to be employed for carrying out key business functions.
 Setting up an information and communication system, that facilitate the workforce of the
organization, to perform their roles effectively.
 Developing a favorable work climate and culture, for proper implementation of the strategy.
 Strategy implementation is the time-taking part of the overall process, as it puts the formulated
plans into actions and desired results.

STRATEGIC EVALUATION AND CONTROL

 Performing evaluation
 Exercising control
 Recreating strategies

Strategic Management is all about specifying organization’s vision, mission and objectives, environment
scanning, crafting strategies, evaluation and control.

Strategy evaluation is the last phase of the strategic management process in which managers try to assure
that the strategic choice is properly implemented and is meeting the objectives of the organization.

In fact, in strategy evaluation, managers review or appraise the progress in the performance related to
strategy implementation, try to find out any deviations of actual performance from the chosen strategy that
has been put into action, and then take appropriate actions for making the strategy work.

Strategy evaluation is one kind of follow-through on strategy. Strategy evaluation requires an effective
computerized information system for providing managers with timely feedback in order to enable them to
promptly act on the data.

In practice, strategy evaluation during, (and/or after) implementation requires a control system -both are
integral parts of the monitoring system of the organization.

Both the systems, help the managers monitor the progress of a strategic plan. The essence of strategy
evaluation is keeping track of current performance and anticipating changes

Necessity of Strategic Evaluation and Control Systems

 Strategy evaluation and control systems help managers to find out;

 whether the implementers of strategy are making decisions consistent with the organizational
policies;
 adequate resources have been allocated and they are being used wisely;
 the events in the external environment are, occurring as anticipated;

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  the long-term and short-term goals are being met; and
 the strategy-implementers are on the right track. The evaluation process alerts the implementers to
any unexpected events in the above issues. Thus, they can take corrective action either to get
back to the track or change the track or make changes in other relevant aspects of strategy.

Obtaining data for corrective actions

Dynamic environments compel organizations to carefully evaluate their strategic actions. The key internal
and external factors change quickly and dramatically. These changes affect strategy implementation.

Regular evaluation of strategy while being implemented provides relevant data for taking corrective actions.

Keeping track of progress

Regular evaluation of strategic actions during the implementation of competitive strategies facilitates
tracking of progress.

Evaluation results/information help managers gauge the actual situations in respect of the implementation
of strategies. They can go for instant actions if there is slow progress.

Detection of flaws

Nobody could guarantee that a particular strategy will work or that it is the most sound strategy. Therefore,
strategy should be evaluated for critical flaws.

The strategy managers, through a review of results and future possibilities, determine whether the strategy
is working. If any flaw is detected in the implementation of strategy, they take steps to make it work.

Making managers proactive

Installation of an evaluation system . puts the managers in a systematic trap, which compels them not to/
neglect the importance of assessing the impact of changes in the organizational environments.

It reminds them not to be complacent about the present achievement It makes them feel that success today
is no guarantee for success tomorrow.

Developing a sense of commitment

When all managers and employees are involved in the process of evaluating strategy on a continuing
basis, they become committed to keeping the company moving steadily toward achieving objectives.

Adjustments or modifications may be needed in the vision of mission, or objectives strategies or in the
approaches to execution of the strategies. If corrective actions or adjustments not initiated properly and on
time, it may invite catastrophe consequences for the organization.

Requirements of Effective Strategic Evaluation Systems

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A strategy-evaluation system in order to be effective and successful must meet certain requirements.
These requirements are the characteristics of an effective evaluation system.

We discuss below the-major requirements of an ideal strategy-evaluation system:

Economical

The activities related to the evaluation of strategy must be economical. If they are not cost-effective,
wastage would creep up, a balance needs to be maintained in obtaining information; not too much or not
too little Very often, too much data and too many controls do more harm than good.

Meaningful

The strategy-evaluation activities must be meaningful in the sense that they have to be related specifically
to the objectives against which strategy has been adopted.

Providing useful information

The information collected through evaluation must be useful. Redundant information is useless to
managers in decision-making.

Providing timely information

The strategy-evaluation system should be established in such a way that it can provide information to
relevant managers on time. Untimely delivery of information may mean ‘no information’ as because they
cannot be used whenever they were heeded.

Providing a true picture of events

The strategy-evaluation activities should be able to provide true picture of what is happening in the
organization regarding the implementation of the strategy.

Being directed towards right persons

The strategy-evaluation system should be: directed to the right persons who really matter in taking actions
based on data. Thus, it should try to facilitate rather than simply providing information for information’s
sake.

Being elaborate and detailed

In large organizations, the strategy-evaluation system should be elaborate and detailed. This is needed
because the existence of many departments/divisions requires effective coordination.

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 MINTZBERG’S 10 SCHOOL OF THOUGHTS FOR STRATEGY FORMULATION – SCHOOL OF
THOUGHTS IN MANAGEMENT

Here are the 10 school of thoughts of Strategy formulation.

1. The Design School

In this thought process of strategy formulation, the focus is on conception of ideas and to design new ideas.

The company does an internal analysis with the help of SWOT analysis

The company then tries to match its internal strength with the market strength which is required.

This works well in a stable environment, where competitors might not disrupt the market suddenly & it gives
time to the firm to adapt.

However, we have to understand that conducting an internal analysis of the firm depends on the firm’s own
knowledge about itself. Similarly, matching the firms internal abilities to the external market, requires
external market knowledge. Ultimately, knowledge is a limitation to the Design school of thought of strategy
formulation. If proper knowledge is not used, this school of thought will fail.

2. The Planning School 

In this case, the thought process runs towards planning the entire strategy in a rigorous manner, so that the
firm advances forward.

The complete process and the plan which the company will implement is documented from the start to
finish.

At all times the plan is referred to whenever the management wants to take new decisions.

With the plan in hand, the management gets a clear direction to move in, helping the company to move
forward unanimously.

The issue arises in the planning school of thoughts when anything happens out of plan. If you have planned
for years in advance, and any new competitor pops up, or any external business variable is changed, then
the complete plan gets affected. Hence, proper prediction is most essential when using the planning school
of thought.

3. The Positioning School

In this process of strategy formulation, the management decides that they want to position the  product at
the top of the mind and makes decisions accordingly.

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The management has to determine the competition already present in the market, and where is their own
company positioned.

Once the market has been analyzed, the right strategy is needed to improve the positioning of the product.

Again, in the positioning school of thought, the strategy assumes the market as it is, and does not take into
consideration future entrants or change in business environment. Like the planning strategy, the positioning
of school of thought can also fail if there are major changes in the business environment.

4. The Entrepreneurial School

This school of thought puts all the focus on the CEO of the company. Most observed in small businesses
which want to make it large, or even large corporations which trust their leaders (Steve jobs, Mark
Zuckerberg), in this strategic process, the company follows whatever the CEO says.

In this case, the CEO needs to be visionary, needs strong leadership skill, and has to have the right
judgment and direction.

This strategy has been proven right in very few cases over the years where the leaders were legendary by
themselves. Steve jobs, Bill gates, Mark Zuckerberg are all examples of people who have grown
companies to astounding proportions due to their leadership skills.

The problem with this management school of thought is a single one – How do you find such a leader? If
you want to design your marketing strategy based on the recommendations by the leader of the company,
then this leader can be wrong as well. And you need someone who is very strong on the business front and
is dynamic to make the necessary changes.

5. The Cognitive School

In this thought process, people’s perception and information is studied. One of the best examples of
cognitive studies is the Johari window. Wherein, you can better your business by understanding your
customers.

It is a mental and psychological process to find out what is in the minds of the  consumer and how do we
improve on that or use that information.

Once you know customers perception and thought process about you, you can change the same with
strategy. You can either improve or you can communicate better so that your customers have more
information about you.

The problem with the cognitive model is that it is not practical beyond a certain point. A top company
cannot rely on surveys alone to find new ideas or to make connections with their customers, because it has
become a mass company by that time. Cognitive reasoning cannot be done at a mass stage.

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Moreover, innovations are brought when you think of products which the customers have not thought of –
which is not possible in the cognitive school of thought. Because you are only improving on the things
which your customers perceive.

6. The Learning School

In this thought process, the management keeps a watch over what has already happened and then forms
the future strategy looking at the past. It might not necessarily look at its own past. It might look at the way
things worked for some other company, or how some other company failed. And then decide on which
strategy to implement and which one to ignore.

The company looks at things that worked and tries to implement the same thing over time with the
assumption that it will work again.

The company also looks at things that did not work in its favor (or in favor of a competitor who tried the
same thing), and discards such things / processes.

More than a strategy, the learning school of thought looks like maneuvering or guiding the company on the
basis of the previous road that has gone by. We all know it’s not a good decision because the road can
change at any time. Hence this thought process is not at all useful at time of crisis, nor does it help in
creating something outstanding. This strategy can be used when the firm is stable, and wants to work on
auto mode while it develops something else in the meantime.

7. The Power School

In this school of thought, the people who are in power take the decisions. These people can be your
customers, they can be your stakeholders, they can also be certain people from within the management.

Anyone who is known to have power over the company can drive the company forward.

This ensures that there is lesser resistance for the strategy to be implemented

It is a very realistic thought process, because incorporates, there are so many people that power should
reside in few hands.

The problem with the power school happens when the powerful people stop listening to feedback or stop
implementing measures of improvement, and only focus on minor improvements. At such times, the power
needs to change hands so that the company keeps moving forward.

8. The Cultural School

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The cultural school of thought says that the company has a fantastic capital in terms of its human capital as
well as its social capital. A positive culture in the firm can give a proper direction to the firm.

The cultural school tries to involve many different departments within a company.

It is most useful during mergers and acquisitions.

It emphasizes the role of social values, beliefs and culture in decision making

There can be resistance to the cultural school as the same people whom we are trying to unite, might not
like the idea of change, due to which they become united and the company moves in the opposite direction.
Moreover, even if you have got the people united, and have built a strong culture, your direction still
remains unclear.

9. The Environmental School

More of a situational school of thought, the environmental school gives most of the importance to the
environment. For example – In a paper industry, wood plays a major role. And if the wood is scarce, the
strategy formulation will have to be done on the basis of wherever the wood is available.

Major emphasis is on the environment – which can be a raw material or a major factor in the strategy of the
company.

Situational analysis is the most used tool in the environmental school.

Obviously, this thought process depends on the situation, and is used when there is total dependence on
environmental factors.

10. The Configuration School

One of the most preferred amongst the 10 School of thoughts is the configuration school. It basically says,
that the strategy needs to be configured. The strategy allows the firm to move from one position to another,
hence a simple set of values will not help this movement.

As per the configuration school, strategy needs to consider a lot of thing which can go wrong, and cannot
be derived from simple set of values.

Over a period of time, an organization forms various sets of values which have to be transformed so that
the organization reaches the point that it desires.

To do this, the organizations stable business might need to be disrupted, and the organization has to be
configured so that it reaches the success it was looking for.

Hence, the name configuration school, so that the organization is configured over and over again unless it
reaches the desired result.

This school of thought tries to attain stability via various ways, and keeps transforming as long as needed.

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Overall, the Mintzberg’s 10 school of thoughts for strategy formulation are applicable even today. However,
one firm can follow a single strategy only.

And hence, deciding where your firm stands, the influencers in the firm, its dependency on environment
and culture, and in general looking at your own firm, you can decide which of the 10 school of thoughts of
management are suitable for you.

III. Post Test

To be Posted later

References:

https://www.marketing91.com/10-schools-thoughts/

https://businessjargons.com/strategic-management.html

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