Analysis of Strategy Formation

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Week 8 Holtz – Analysis of Strategy Formation

Strategy is difficult to define. There are many popular and debated definitions available. One idea is that strategy is top management’s plan to attain outcomes consistent with the organization’s mission and goals (Mintzberg, Ahlstrand, & Lambel, 1998). Another definition is that strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage (Hitt, Ireland, & Hoskisson 2013). Some argue that strategy cannot be defined at all because many professionals including researchers, practitioners, and theorists all have different thoughts on what strategy is, how it is formulated, and how it is implemented (Dewit & Meyer, 2010). However, all of these ideas have something in common: a strategy is a roadmap for getting from here to there. It is important to understand that strategy is not a single concept, but rather a process made up of many pieces. For this paper, I will define strategy as a roadmap or blueprint for obtaining a competitive advantage. In this analysis of strategy formation I will examine the most important issues involved in strategy formation and explain why they are important, define how corporate-level strategies relate to business-level strategies and functional-area tactics and how these pieces support each other, and finally, I will outline the primary inputs to strategy formulation in a firm. But, before we answer these questions it is important to share a brief history of strategy.

The word strategy originated from the Greek work strategos. Strategos was coined when Kleisthenis developed a fresh set of organizational structure in ancient Greece in order to promote a better army. The direct definition of the singular stratos means to lead (DeWit &Meyer, 2010). Essentially the concept is derived directly from a need for a higher organizational structure, change and leadership development. Warfare was pas the point of simply winning a battle but instead was focused upon the coordination of units and tactical approaches to battle (DeWit & Meyer, 2010). When we look at how strategy is formed today we also see a parallel in that firms must coordinate corporate-level, business-level and functional-level tactical issues in order to successful formulate a strategy. By coordinating the approach a strategy helps to gain a competitive advantage for firms just as it does for armies on the battlefield. Now that we understand the history behind strategy formation we will discuss the most important points of strategy formation and discuss what makes them important.

Strategy formation can be arduous because planners love to plan out every single details of a plan and press everything into an orderly, mechanistic process (DeWit & Meyer, 2010). It is critical for strategies to follow a mechanistic process with vision and end goal in mind while having a big picture mentality that takes change management and flexibility into account as the unknowns’ surface. Without a proper plan to learn and address needed adjustments the plan can become easily outdated and ineffective. Strategy formation is described as being a new way to understand old problems, however, strategic planning and formation can lead to analysis paralysis if overly complex and planned out (DeWit & Meyer, 2010). Flexibility is an important piece of strategy formation and as strategists we must avoid being married to a specific set of ideas, but rather be open to learning, experimentation, balancing risks and rewards while working towards to vision that creates a competitive advantage. This pattern in a stream of decisions works to get a company to its strategic goal and vision (Dewit & Meyer, 2010). A good approach to this is letting the strategies emerge in the process, rather than focusing on the strategy formation in the beginning. Outside of recognizing the importance of change and emergence there are...
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