

Strategic
Management MGT603
VU
Lesson
23
STRATEGYFORMULATION
FRAMEWORK
Learning
Objectives
After
understanding this topic you able to
understand the basic phenomena of
strategy formulation
frame
work
and also under stand the
stages of strategy formulation
frame work
Objectives:
Objective
placing an important role in
strategic management Strategic
analysis and choice largely
involves
making
subjective decisions based on objective
information. This topic includes
important concepts
that
can
help strategists generate
feasible alternatives, evaluate
those alternatives, and
choose a specific course
of
action.
Behavioral aspects of strategy
formulation are described,
including politics, culture, ethics, and
social
responsibility
considerations. Modern tools
for formulating strategies
are described, and the appropriate
role
of
a board of directors is discussed
A
Comprehensive StrategyFormulation
Framework
Important
strategyformulation techniques can be integrated
into a threestage decisionmaking
framework,
as
shown below. The tools
presented in this framework are
applicable to all sizes and
types of organizations
and
can help strategists
identify, evaluate, and
select strategies.
Stage1
(Formulation Framework)
1.
External factor
evaluation
2.
Competitive matrix profile
3.
Internal factor
evaluation
Stage2
(Matching stage)
1.
TWOS Matrix (ThreatsOpportunitiesWeaknessesStrengths)
2.
SPACE Matrix (Strategic
Position and Action
Evaluation)
3.
BCG Matrix (Boston Consulting
Group)
4.
IE Matrix (Internal
and external)
5.
GS Matrix (Grand
Strategy)
Stage3
(Decision stage)
1.
QSPM (Quantitative
Strategic Planning Matrix)
Stage
1 of the
formulation framework consists of the EFE
Matrix, the IFE Matrix, and
the Competitive
Profile
Matrix. Called the Input
Stage, Stage
1 summarizes the basic input
information needed to
formulate
strategies.
Stage
2, called
the Matching
Stage, focuses
upon generating feasible alternative
strategies by
aligning
key external and internal
factors. Stage 2 techniques include the
ThreatsOpportunities
WeaknessesStrengths
(TOWS) Matrix, the Strategic
Position and Action
Evaluation (SPACE) Matrix, the
Boston
Consulting Group (BCG) Matrix, the
InternalExternal (IE) Matrix,
and the Grand Strategy
Matrix.
Stage
3, called
the Decision
Stage, and
involves a single technique, the
Quantitative Strategic Planning
Matrix
(QSPM).
A QSPM uses input
information from Stage 1 to
objectively evaluate feasible alternative
strategies
identified
in Stage 2. A QSPM reveals the relative
attractiveness of alternative strategies
and, thus, provides
an
objective basis for selecting
specific strategies.
All
nine techniques included in the strategyformulation
framework require
integration of intuition and
analysis.
Autonomous
divisions in an organization commonly use strategyformulation
techniques to develop
strategies
and objectives. Divisional
analyses provide a basis for
identifying, evaluating, and selecting
among
alternative
corporatelevel strategies.
Strategists
themselves, not analytic tools,
are always responsible and
accountable for strategic
decisions.
Lenz
emphasized that the shift
from a wordsoriented to a numbersoriented planning
process can give rise
to
a false sense of certainty; it can
reduce dialogue, discussion,
and argument as a means to
explore
understandings,
test assumptions and foster
organizational learning. Strategists, therefore, must
be wary of
this
possibility and use
analytical tools to facilitate, rather than diminish,
communication. Without objective
information
and analysis, personal
biases, politics, emotions,
personalities, and halo
error (the
tendency to put
too
much weight on a single factor)
unfortunately may play a dominant
role in the strategyformulation
process.
97
Table of Contents:

