STRATEGY-FORMULATION FRAMEWORK:A Comprehensive Strategy-Formulation Framework

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Strategic Management MGT603

Lesson 23

STRATEGY-FORMULATION 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 Strategy-Formulation Framework

Important strategy-formulation techniques can be integrated into a three-stage decision-making 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.

Stage-1 (Formulation Framework)

1. External factor evaluation

2. Competitive matrix profile

3. Internal factor evaluation

Stage-2 (Matching stage)

1. TWOS Matrix (Threats-Opportunities-Weaknesses-Strengths)

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)

Stage-3 (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 Threats-Opportunities-

Weaknesses-Strengths (TOWS) Matrix, the Strategic Position and Action Evaluation (SPACE) Matrix, the

Boston Consulting Group (BCG) Matrix, the Internal-External (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 strategy-formulation framework require integration of intuition and analysis.

Autonomous divisions in an organization commonly use strategy-formulation techniques to develop

strategies and objectives. Divisional analyses provide a basis for identifying, evaluating, and selecting among

alternative corporate-level strategies.

Strategists themselves, not analytic tools, are always responsible and accountable for strategic decisions.

Lenz emphasized that the shift from a words-oriented to a numbers-oriented 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 strategy-formulation

process.

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