Organisational mission and objectives are the starting point of strategy formulation. As discussed earlier, the mission is the fundamental unique purpose of an organisation that sets it apart from other organisations and objective is the end result which an organisation strives to achieve. These together provide the direction for other aspects of the process.
2. Environmental Analysis.
The second aspect of the process is the environmental analysis. Since the basic objective of strategies is to integrate the organisation with its environment, it must know the kind of environment in which it has to work. This can be known by environmental analysis. The process of environmental analysis includes a collection of relevant information from the environment, interpreting its impact on the future organisational working, and determining what opportunities and threats-positive and negative aspects are offered by the environment. The environmental information can be collected from various sources like various publications, verbal information from various people, spying, and forecasting. The pro-cess of environmental analysis works better if it is undertaken on a continuous basis and is made an intrinsic part of the strategy formulation.
3. Corporate Analysis.
While environmental analysis is the analysis of external factors, corporate analysis takes into account the internal factors. These together are known as SWOT (strengths, weaknesses, opportunities and threats) analysis. It is not merely enough to locate what opportunities and threats are offered by the environment but equally important is the analysis of how the organisation can take the advantages of these opportunities and overcome threats. Corporate analysis discloses strengths and weaknesses of the organisation and points out the areas in which business can be undertaken. The corporate analysis is performed by identifying the factors which are critical for the success of the present or future business of the organisation and then evaluating these factors whether they are contributing in a positive way or in a negative way. A positive contribution is a strength and a negative contribution is a weakness. [ Organisational Mission ]
4. Identification of Alternatives.
Environmental analysis and corporate analysis taken together will specify the various alternatives for strategy. Usually, this process will bring a large number of alternatives. For example, if an organisation is strong in financial resources, these can be used in many ways, taking several projects. However, all the ways or projects cannot be selected. Therefore, some criteria should be set up to evaluate each alternative. Normally the criteria are set in the light of organisational mission and objectives.
5. Choice of Strategy.
The identification and evaluation of various alternatives will narrow down the range of strategies which can seriously be considered for choice. The choice is deciding the acceptable alternative among the several which fits with the organisational objectives. Normally at this stage, personal values and expectations of decision-maker play an important role in strategy because he will decide the course of action depending on his own likings and dislikings. This happens because in one way the organisational objectives reflect the personal philosophy of individuals, particularly at the top management level.
After the strategy has been chosen, it is put to implementation, that is, it is put into action. Choice of strategy is mostly analytical and conceptual while implementation is operational or putting into action. Various factors which are necessary for implementation are the design of suitable organisation structure, developing and motivating people to take up work, designing effective control and information system, allocation of resources, etc.
When these are undertaken, these may produce results which can be compared in the light of objectives set and control process comes into operation. If the results and objectives differ, a further analysis is required to find out the reasons for the gap and taking suitable actions to overcome the problems because of which the gap exists. This may also- require a change in strategy if there is a problem because of the formulation inadequacy. This puts back the managers at the starting point of the strategy formulation. [ Organisational Mission ]