Business Strategy/The Three Processes of Strategy

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Overview of Strategic Planning
[[Business Strategy
The Art, Science, and Craft of Decision-Making]]
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Approaches to Strategic Management
The Three Processes of Strategy

Strategic management is a combination of three main processes which are as follows:


  • Performing a situation analysis, self-evaluation and competitor analysis: both internal and external; both micro-environmental and macro-environmental.
  • Concurrent with this assessment, objectives are set. These objectives should be parallel to a timeline; some are in the short-term and others on the long-term. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives.
  • These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these objectives.

This three-step strategy formulation process is sometimes referred to as determining where you are now, determining where you want to go, and then determining how to get there. These three questions are the essence of strategic planning. I/O Economics for the external factors and RBV for the internal factors.

/* Strategy implementation */

  • Performing a situation analysis, self-evaluation and competitor analysis: both internal and external; both micro-environmental and macro-environmental.
  • Concurrent with this assessment, objectives are set. These objectives should be parallel to a timeline; some are in the short-term and others on the long-term. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives.
  • These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these objectives.

This three-step strategy formulation process is sometimes referred to as determining where you are now, determining where you want to go, and then determining how to get there. These three questions are the essence of strategic planning. I/O Economics for the external factors and RBV for the internal factors.

Strategy evaluation[edit | edit source]

  • Measuring the effectiveness of the organizational strategy, it's extremely important to conduct a SWOT analysis to figure out the strengths, weaknesses, opportunities and threats (both internal and external) of the entity in question. This may require to take certain precautionary measures or even to change the entire strategy.

In corporate strategy, Johnson and Scholes present a model in which strategic options are evaluated against three key success criteria:

  • Suitability (would it work?)
  • Feasibility (can it be made to work?)
  • Acceptability (will they work it?)

Suitability[edit | edit source]

Suitability deals with the overall rationale of the strategy. The key point to consider is whether the strategy would address the key strategic issues underlined by the organisation's strategic position.

  • Does it make economic sense?
  • Would the organisation obtain economies of scale, economies of scope or experience economy?
  • Would it be suitable in terms of environment and capabilities?

Tools that can be used to evaluate suitability include:

Feasibility[edit | edit source]

Feasibility is concerned with the resources required to implement the strategy are available, can be developed or obtained. Resources include funding, people, time and information.

Tools that can be used to evaluate feasibility include:

  • cash flow analysis and forecasting
  • break-even analysis
  • resource deployment analysis

Acceptability[edit | edit source]

Acceptability is concerned with the expectations of the identified stakeholders (mainly shareholders, employees and customers) with the expected performance outcomes, which can be return, risk and stakeholder reactions.

  • Return deals with the benefits expected by the stakeholders (financial and non-financial). For example, shareholders would expect the increase of their wealth, employees would expect improvement in their careers and customers would expect better value for money.
  • Risk deals with the probability and consequences of failure of a strategy (financial and non-financial).
  • Stakeholder reactions deals with anticipating the likely reaction of stakeholders. Shareholders could oppose the issuing of new shares, employees and unions could oppose outsourcing for fear of losing their jobs, customers could have concerns over a merger with regards to quality and support.Try and test.

Tools that can be used to evaluate acceptability include:

  • what-if analysis
  • stakeholder mapping
Previous page
Overview of Strategic Planning
[[Business Strategy
The Art, Science, and Craft of Decision-Making]]
Next page
Approaches to Strategic Management
The Three Processes of Strategy