Strategy is a roadmap designed to route the direction of the organization towards achieving its goals. Through an understanding of the organization’s vision and mission and the matching of resources and skills to the environment, the company can formulate and implement strategic plans to achieve long-term sustainable competitive advantage, meet the needs of consumers and satisfy stakeholder’s expectations (Johnson, Scholes and Whittington 2004).
Before formulating a strategy, an organization has to gauge its current position in the market using strategic analysis. This involves the use of internal and external analysis tools to gain both an inside view of an organization and the macro environment.
Internal analysis tools are used to identify and evaluate an organization’s strengths and weaknesses in terms of its resources, operational capabilities and core competencies. This gives the organization a picture of what strengths to exploit and develop further, and what weaknesses should be corrected to reduce market liability (Hill and Jones 2012). External analysis tools such as Porter’s five forces gives a view of the immediate competitive environment to reveal market opportunities and threats. It allows the organization to identify the market forces, which they have little to no control over, in order to develop contingencies into their strategic plans (Porter 1980). Dynamic capabilities such as SWOT analysis, is a combination of internal and external analysis to reflect an organization’s ability to adapt to volatile markets (Teece 2009).
The strategic analysis process would provide a comprehensive overview of an organization’s competency, which then provides the basis for strategic formulation.
A suitable approach to strategy formulation would strongly depend on the size and nature of the organization. One method that can be applied across different