Strategy formulation

Topics: Strategic management, Strategic planning, Balanced scorecard Pages: 5 (1070 words) Published: October 11, 2014
STRATEGY FORMULATION:
Objectives:
After you have studied this chapter, you should be able to:
1.Know the porter’s generic strategy
2.Describe the 5 powers of P’S
3.Explain the Essentials of Balance Score card
4.Discuss the Strategic Evaluation and Control
Strategy Formulation
-Stage of strategic management that involves planning and decision making that lead to the establishment of the organization’s goals and of a specific strategic plan. The Five Power P’S
There are five power Ps that spell strategies in the works for a particular organization. 1. Position
- The advantage that an organization gains in the hands of the consumers. It is a position that a company should not allow the snatched by its competitors. Position strategies are the best exemplified by Porter’s Generic- Strategies. 2. Power

- A company should enjoy power over its competitors. It is a competitive edge, a following of some sort that a company should not allow competitors to surpass. There are power strategies that can be used in the company. 3. Pace

- There is timing and intensity of strategy put on the ground. It is the right time for strategy to work. This includes the adaptive methods. 4. Potential
- It is the probability of the success element of a particular strategy. It is necessary to know the important characteristics of a product or service that will spell success. 5. Performance
- It is the effective implementation of a particular strategy. Excellence performance relates to growth strategies.

Power Strategies
There are two power strategies available for organizations. 1.Horizontal Integration.
2. Vertical Integration
Forward Integration
Backward Integration
Adaptive Methods
Miles and Snow discussed the need of the company to adapt to a constantly changing competitive environment. With this, they created three approaches of creating a competitive strategy. THREE APPROACHES OF CREATING A COMPETITIVE STRATEGY

Prospector Approach
Defender Approach.
Analyzer Approach

Essentials of Potential Strategies
For a company to be competitive in the market, the product or service should have the potential to succeed. This potential is expressed in the following characteristics: Transferability
-The product or service can be transformed into something highly valued by customers.  Competitive Dominance
-The product or service is better than the capabilities of the competitors. Uniqueness
-The product or service cannot easily be copied by the competitors. Substitutability
-The product or service cannot be replaced through substitution by competitors.

Durability
- The product or service does not deteriorate or depreciate quickly. Growth Strategies
Diversification
-it is the development of new products of new markets.
Market Development
-it is the development of a new market for existing products and services. This can be in form of export or tapping an unexplored segment of the markets.  Product Development
-it is the development of new products to existing markets. It requires some form of creativity or ingenuity to develop new products.  Market Penetration
-it is the desire to achieve greater percentage of the market share through the company’s existing products existing markets. Balanced Scorecard
Balance Scorecard is a system that measures the organization’s progress in accomplishing its strategic objectives. In 1992, Robert Kaplan and David Norton developed the Balance Scorecard which incorporates financial indicators as well as three other aspects: customers, internal business, and learning/innovation. The Scorecard enables management to link the perspective and how they affect each other. The Balance Scorecard is a strategic planning system is now used extensively by different types of organizations worldwide. The purpose of the Balanced Scorecard is to align the company’s vision and strategies to the activities of the...
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