STRATEGY

FORMULATION

PREPARED BY: GROUP 4_BSA 1205

 Often referred to as strategic planning or long-
range planning, Strategy formulation is the process
STRATEGY of determining and establishing the goals, mission
and objectives of an organization, and identifying
FORMULATION the appropriate and best courses or plans of action
among all available alternative strategies to achieve
them.
重点工作情况
STEPS FOR ANEFFECTIVE AND
WINNING STRATEGY FORMULATION

01 02 03 04 05 06

Define the Review the Reexamine Define the Implementation Evaluate

organization strategic the strategic competitive of strategies progress and
and its mission and objectives strategy effectiveness
environment vision and goals
Reviewing the strategic mission and vision

A reexamination of an organization’s mission and vision

must be made before strategies can be generated and evaluated.
Mission and vision statements are concise, inspiring statements
that clearly communicate the direction and values of an
organization. Both provide purpose and goals, which are
necessary elements of a strategy.
 • purpose or reason for the organization’s
existence
• focuses more on where the company is at the
Mission present time and the tactical steps it wants to
use to achieve its objectives
Statement • provides detailed information about what the
organization does, how it does, and who it
does it for
• promotes shared expectations among
employees
Example of a Mission Statement:

Amazon
Mission Statement

“To be Earth’s most customer-centric company, where

customers can find and discover anything they might want
to buy online, and endeavors to offer its customers the
lowest possible prices.”
 • mental image of where the business intend to
be at some point in the future
• focuses on its goals and aspirations, which
Vision describes how the future will look if the
organization achieves its mission
Statement • it is timeless, even if the business changes its
strategy, the vision will often stay the same
• a guide to help the organization make
decisions that align with its philosophy and
declared set of goals.
Vision Statement
Components
Example of a Vision Statement:
Amazon
Vision Statement

"Our vision is to be earth's most customer centric

company; to build a place where people can come to
find and discover anything they might want to buy
online."
 Difference Between
Vision and Mission
RELEVANCE OF MISSION/ VISION STATEMENTS

Define the purpose of Increase efficiency and Imbue the employees with a
sense of belonging and identity
the organization productivity

Clear and effective guide Important tools of

for decision- making strategic planning
Reexamining the strategic goals and objectives

Same as the mission and vision, reexamination of an

organization’s goals and objectives must be made before
strategies can be generated. Consequently, objectives should be
constantly reviewed to ensure their usefulness. The strategic
goals and objectives will serve as a directional guide on how
the business will make use of its resources and carry out key
functions and activities.
 • set a wide, overarching target for the
company to set their eyes on as a whole
• define the general intentions and ambitions of
Goals the business
• create a vision with a wide range, objectives
focus on the individual, achievable outcomes
• usually long-term and represent
organization’s vision
 • precise actions or measurable steps an
organization takes to move closer to the goal
• specific targets that typically have a time-
Objectives bound schedule or timeline for completion
• the end results of planned activity
- what is to be accomplished
- time in which to accomplish it
- quantified when possible
 GOALS VS. OBJECTIVES

For example, if ABC Company has a goal to

grow revenues and to become well- known to
the customers, then their objective is to
introduce three new products by 2021 Quarter 3
and to increase their marketing and advertising
budget by 5%.
Identifying the competitive strategy
The next step in strategy formulation is where the
organization will start identifying and coming up with its
long-term plan to gain advantage – and maintain it – over
the competition. This is known as the competitive
advantage, and the plan is referred to as the competitive
strategy.
 • useful framework for organizations to identify
Porter’s a potential niche in which they can gain a
competitive advantage in a particular industry
Generic • referred to as generic as they can be applied
to products, services across all industries, and
Strategies in organizations of a variety of sizes
Michael Porter proposes two “generic” competitive strategies for outperforming
other corporations in a particular industry: lower cost and differentiation.

• Lower cost strategy- is the ability of a company or a business unit to design,

produce, and market a comparable product more efficiently than its
competitors
• Differentiation strategy- is the ability of a company to provide unique and
superior value to the buyer in terms of product quality, special features, or
after-sale service.

Porter further proposes that a firm’s competitive advantage in an industry is

determined by its competitive scope, that is, the breadth of the company’s or
business unit’s target market
Combining these two types of target markets, broad target (aim at the middle
of the mass market) or a narrow target (aim at a market niche) with the two
competitive strategies results in the four variations of generic strategies:

1. Cost Leadership
2. Differentiation
3. Cost Focus
4. Differentiation Focus

When the lower-cost and differentiation strategies have a broad mass-market

target, they are simply called cost leadership and differentiation. When they
are focused on a market niche (narrow target), however, they are called cost
focus and differentiation focus
 • lower-cost competitive strategy that aims at the
broad mass market
• all about minimizing the cost to the organization
of delivering products and services
Cost • Because of its lower costs, the cost leader can
charge a lower price for its products than its
Leadership competitors and still make a satisfactory profit
• The primary principle in cost leadership is to have
the products at a lower cost compared to
competitor pricing.
There are different ways that an organization can achieve a lower cost
for their products. Following are a few of the cost leadership strategies:

Economies Size
of Scale Advantages

Raw Technology
Materials
 Advantages Disadvantages
Better profitability Financial Cuts

Market Share Product Innovation

Business Sustainability Customer Feedback

More capital Copycats

Reduces Competition Substandard Quality

Not for every product

Capital Availability
 • aimed at the broad mass market and involves the
creation of a product or service that is perceived
throughout its industry as unique compared to other
competitors
Differentiation • a business will usually accomplish this by analyzing
its strengths and weaknesses, the needs of its
customers and the overall value it can provide
• viable strategy for earning above-average returns in a
specific business because the resulting brand loyalty
lowers customers’ sensitivity to price
There are different ways that a business can differentiate themselves to
their competitiors. Following are a few of the differentiation strategies:

Customer
Innovation
Relations

Target
Branding Specific
Consumers
 Advantages Disadvantages
Reduced price competition Customer Perception

Unique products Higher Cost

Difficulty in sustaining a price

Better profit margins
premium
Risks of overdoing
Consumer brand loyalty
differentiation
Easily out differentiate by other
No perceived substitutes
firms
 • involves offering the niche-customers a product
customized to their tastes and requirements
• it is directed towards serving the needs of a limited
customer group
Focus • a company usually follows a focus strategy when
it can serve a narrow piece of the market better
Strategy than competitors
• It is divided into two types:
- Cost Focus
- Differentiation Focus
 • a low-cost competitive strategy that focuses on a
particular buyer group or geographic market and
attempts to serve only this niche, to the exclusion
of others
• It matches the quality of the well-known brands,
Cost Focus but keeps costs low by eliminating advertising and
promotion expenses
• The product will be basic - perhaps a similar
product to the higher-priced and featured market
leader, but acceptable to sufficient consumers
 • an approach to competitive advantage in which a
company attempts to outperform its rivals by
offering a product that is perceived by consumers
to be superior to that of competitors even though
Differentiation its price is higher
• In adopting this strategy, the company focuses on
Focus narrow market coverage, seeking only to attract a
small, specialized segment
• the focuser company competes against competitors
not based on low-cost, rather based on product
differentiation
 Advantages of Focus Strategy
It helps to build strong relationships within each target market

It improves the pricing structure for the business

It brings expertise into the products or services

It allows you to identify your future customers with specificity

It typically offers lower production costs

It may limit the competition

It is a chance to provide a higher quality product

Disadvantages of Focus Strategy
It may limit the initial demand of a product or service

It can limit future growth

It may focus on a temporary demographic

It could be too specific for the market

It does not eliminate the threat of disruptors

It offers lower equipment utilization rates

Choosing the Right Generic Strategy
The generic strategy effectively underpins the majority of business and
competitive decisions made by them. In his work, Porter emphasized the importance of
not trying to utilize more than one strategy, as each appeals to a different consumer
base, and to different organizational strengths and attributes. Use the following steps to
help you choose:

Step 1: For each generic strategy, carry out a SWOT Analysis of your strengths and
weaknesses, and the opportunities and threats you would face, if you adopted that
strategy.
Step 2: Use Five Forces Analysis to understand the nature of the industry you are in.
Step 3: Compare the SWOT Analyses of the viable strategic options with the results of
your Five Forces analysis.
 • a business framework used for tracking and
managing an organization’s strategy
• a performance metric used to identify, improve, and
control a business's various functions and resulting
outcomes
Balance • it balances financial measures with performance
measures and objectives related to all other parts of
Scorecard the organization
• the BSC framework is based on the balance between
leading and lagging indicators, which can
respectively be thought of as the drivers and
outcomes of your company goals
FOUR PERSPECTIVES OF BALANCE SCORECARD
重点工作情况
views an organization’s views the quality and
financial performance efficiency of an organization’s
and the use of financial performance related to the
resources product, services, or other key
Internal business processes
Financial
(Process)
In文字
Perspective
Perspective

views human capital,

views organizational
infrastructure, technology,
performance from the
culture, and other capacities
perspective of the
that are key to breakthrough
customer the organization
performance
is designed to serve
BSC
A Balanced Scorecard is most often used in three
ways:

1. To bring an organization’s strategy to life.

2. To communicate the strategy across the organization.
3. To track strategic performance.
重点工作情况
HOW TO CREATE A BALANCE SCORECARD

01 02 03 04 05

Create a Design a Draw a Choose Align

purpose change agenda strategy map measures to initiatives or
statement (inward view) with strategic help drive key projects to
(outward view) objectives the strategy the strategy
Example of Balance Scorecard
 Balance Scorecard

Pros Cons
Expensive and Time
Provides a clear picture
Consuming

Indicates company
Requires data mining
performance

Makes goals achievable Poor support from employees

Prepared by: Group 4_BSA 1205

ALO, Lyka Jane

CUEVAS, Ace Ramason
HERNANDEZ, Adriane Joshua
LLANTE, Stella Maris
TOLENTINO, Jiorella