The Formal Strategy Making Process

People think that strategy is the output of the formal planning process and most of the thinking and planning process is done by the top management. This opinion has basic reality but that’s not the whole story. Valuable strategies often emerge from deep within the organization with the input from the team who are constantly tackling problems on the ground, this could be the manager, executives or section head, etc.

The formal strategy planning has 5 main steps:

1.     Select the corporate vision, mission and values and goals/objectives.

Vision is a statement of some desired future state, mission is the reason for existence- what an organization does, and values is a statement of key values that an organization committed to.

2.     Opportunities and threats

Analyze the external competitive environment to identify opportunities and threats.

3.     Strengths and weakness

Analyze the organization’s internal environment to identify its strengths and weakness.

4.     Select a set of action that :

·         Build on the organization’s strengths and fix its weakness- in order to take advantage of external opportunities and counter external threats.

·         Consistent with the organization’s vision, mission, values and goals/objectives.

·         Congruent and constitute a viable business model.

5.     Implement by aligning the organization’s people and activities with the action plan/strategies.

The main task is to analyzing the organization external and internal environment then selecting the appropriate action that constitutes strategy formulation. But the hardest part is the implementation, which is taking actions consistent with the selected strategies of the company at the corporate level, allocating roles and responsibilities among managers, allocating resources, designing reward systems.

Some organizations go through a new cycle of the strategic planning process every year. This does not necessarily mean that managers choose a new strategy each year. In many instances, the result is simply to modify and reaffirm a strategy and structure already in place. The strategic plans generated by the planning process generally look ahead for a period of one to five years, with the plan being updated or rolled forward every year. In most organizations, the results of annual strategic planning process are used as input into the budgetary process for the coming year so that strategic planning is used to allocate resources within the organization.