Strategy Formulation

STRATEGY FORMULATION

Strategy is a concept that has been borrowed from the military and adapted for use in business. In business, as in the military, strategy bridges the gap between policy and tactics. Together, strategy and tactics bridge the gap between ends and means.

Using the SWOT analysis, internal analysis and external analysis, problems are dissected opportunities are identified and priorities are set. These become the basis of developing strategies.

A good strategic plan must therefore contain the fourteen “F’s” to be effective.

Fourteen F's of Effective Strategies

Good strategies must:

Be Fundamentally Sound and Correct. This means it must be anchored on the realities of the environment or situation the organization is in. It must recognize major trends and directions in this environment. It must take account of what the organization can do and can not do, what it has and does not have.

Have Foresight. It must be able to determine the most likely future scenario in order to properly position the organization.

Take a Favored Course of Action. The implementors of the strategy must empathize with what they are doing. Otherwise, their motivation level would be low. They must actually identify with their strategy based on their vision, values and preferences.

Focus Efforts on a Few but Critical Activities. Effective strategies are rifle shots at a chosen target, not shotgun blasts that scatter the resources of the organization. They choose the few things that would make a big difference.

Have Force behind the Chosen Few Things. Organizations must put their full force and major resources behind the strategies taken. They must “put their money where their mouth is.”

Follow Through. A golfer or tennis player knows that hitting the ball is not enough. There must be a complete swing that directs the ball to its chosen destination. The whole organization must move to support its major thrust all the way to final acceptance by and satisfaction of its client system.

Have a Fit Among the Objectives, Tasks, People and Structure of the Organization. There must be consistently between the type of people operating within certain organizational structures and systems and the defined objectives, the chosen strategies and tasks of the organization. Avoid mismatches.

Have a Finite Time Frame. Unreachable stars have less motivating power than realizable objectives within finite time frames of five, ten to seven twenty years.

Be Feasible. This means that strategies must be do-able by the organization. It must work out in the field and produce good benefit-cost relationship.

Take a Full and Holistic Approach. Compartmentalized approaches lead to partial solutions that often lead to greater problems. Organizations must look at the full implications of relationships among variables reinforce rather than cancel each other out.

Get Feedback through Good Monitoring and Evaluation Systems. Every action produces a reaction and this reaction must be monitored closely and assessed as to whether it is moving towards the desired objectives.

Be Felt with Sufficient Impact by the Intended Targets. Development organizations tend to forget the very purpose of their strategy which is to positively affect the lives of the people they are serving. Strategies must therefore translate into felt impact.

Be Flexible Depending on Environmental Changes. The assumptions governing strategies chosen may change overtime. Hence, there is a need to modify, alter or overhaul strategies in the face of environmental changes.

Be Final Results Oriented. At the end of the day, the development organization must be responsible for its intended results and be accountable to the beneficiaries for such results. They should not concentrate on inputs or tasks only but should make sure that these inputs or tasks lead to the desired outputs and outcomes.

Other Concepts on Strategy
Strategy is about means. It is about the attainment of ends, not their specification. The specification of ends is a matter of stating those future conditions and circumstances toward which effort is to be devoted until such time as those ends are obtained. Strategy is concerned with how you will achieve your aims, not with what those aims are or ought to be, or how they are established. If strategy has any meaning at all, it is only in relation to some aim or end in view. Example: The objective is to increase profit by 20% annually in the next five years. The determinant factors for increasing profits would be a) increase sales with proportionately less cost b) reduction in costs without decrease in sales c) increase price to increase profit margin.The strategies therefore will have to be along these factors. Should the enterprise adopt reduction in cost as the core strategy, the programs and tactics could be those that will improve production costs such as 1) production intensification to reduce per unit overhead costs 2) JIT production in order to reduce inventory costs, handling costs and storage costs . Sales Efficiency Improvement Program could support the "increase in sales strategy. This will increase sales outputs of sale personnel. Should the company decides to pursue increasing margins as a strategy, then re-pricing program will have to be implemented. This will have to consider the price-sensitivity of the market, because undue price increases may affect sales volume.

Strategy is one element in a four-part structure. First are the ends to be obtained. Second are the strategies for obtaining them, the ways in which resources will be deployed. Third are tactics, the ways in which resources that have been deployed are actually used or employed. Fourth and last are the resources themselves, the means at our disposal. Thus it is that strategy and tactics bridge the gap between ends and means.

Establishing the aims or ends of an enterprise is a matter of policy (setting vision, missions, objectives and policies) is a matter of governance and not of management and, conversely, achieving them is mostly a matter of management and supervision and not of governance.
Those who govern are responsible for seeing to it that the ends of the enterprise are clear to the people who people that enterprise and that these ends are legitimate, ethical and that they benefit the enterprise and its members.

Strategy is the joint area of those who govern and those who manage. Tactics (programs and projects) belong to those who manage and supervise. Means or resources are jointly controlled. Those who govern and manage are jointly responsible for the deployment of resources. Those who manage are responsible for the employment of those resources—but always in the context of the ends sought and the strategy for their achievement.

Over time, the employment of resources yields actual results and these, in light of intended results, shape the future deployment of resources. Thus it is that "realized" strategy emerges from the pattern of actions and decisions. And thus it is that strategy is an adaptive, evolving view of what is required to obtain the ends in view.
Regardless of the definition of strategy, or the many factors affecting the choice of corporate or competitive strategy, there are some fundamental questions to be asked and answered. These include the following:

Related to Mission & Vision
Who are we?
What do we do?
Why are we here?
What kind of company are we?
What kind of company do we want to become?
What kind of company must we become?
Related to Corporate Strategy
What is the current strategy, implicit or explicit?
What assumptions have to hold for the current strategy to be viable?
What is happening in the larger environments?
What are our growth, size, and profitability goals?
In which markets will we compete?
In which businesses?
In which geographic areas?
Related to Competitive Strategy
What is the current strategy, implicit or explicit?
What assumptions have to hold for the current strategy to be viable?
What is happening in the industry, with our competitors, and in general?
What are our growth, size, and profitability goals?
What products and services will we offer?
To what customers or users?
How will the selling/buying decisions be made?
How will we distribute our products and services?
What technologies will we employ?
What capabilities and capacities will we require?
Which ones are core?
What will we make, what will we buy, and what will we acquire through alliance?
What are our options?
On what basis will we compete?