Developing an International Entry Strategy

Learning Topic

Strategy Formulation

An effective vision helps to maintain the long-term direction of an organization amid management changes. The hallmark of a carefully crafted vision and mission statement is that it brings a sharp focus to the goals, objectives, and activities of an organization to help it gain a position of leadership in its desired areas. In addition to providing strategic guidance, it acts as a motivational force.

The starting point of strategy formulation is the analysis of the current situation. This step involves an understanding and appraisal of the stated vision and mission statements, goals, and objectives of the organization. The objectives should state how success will be determined in measurable terms.

A scan of the internal and external factors affecting the organization is taken as a starting point of the strategic planning process, as shown in the figure below. The next steps are to measure the impact of trends in the environment (including economic, social, political, legal, and technological trends) on the organization's activities, and to analyze the industry the organization operates in—its internal strengths and weaknesses and external opportunities and threats.

Strategy Formulation Process

Arising out of this analysis, we explore options for strategies that would help achieve the stated goals and objectives. Alternatives could include focusing on product development for selected market segments or providing a broader market focus. They could also include a focus on value-added or low-cost solutions to evolve the organization’s strategic intent. The strategic intent helps the organization concentrate on targets to enhance competitiveness and gives direction on deployment of key resources.

The final part of the strategy formulation centers on achieving the stated objectives. It helps us align the organization’s core competencies with market needs and identify measures of success. In addition, the strategy formulation analyzes the risk that a financial investment's actual return will be lower than expected. The goal of strategic alignment is to reduce risk by managing it.

The feedback loop in the figure above shows that formulation of strategy is not a static process. Learning is an essential component in this process. Once the organization starts implementing its strategy, it begins to learn how well tuned it is to its competitive environment, how its rivals are responding, and how it should realign its resources to meet its mission and goals.

SWOT analysis provides useful information on how to match the resources of the organization with its capabilities. The following figure, Framework of SWOT Analysis, summarizes this concept.

Framework of SWOT Analysis

The process begins by eliciting individual perceptions of the organization in the areas of strengths, weaknesses, opportunities, and threats. This process is best done in small groups, and the group’s views are consolidated to capture a cross-section of ideas.

The SWOT analysis is only one step in the organization’s strategy formulation. While it highlights the organization’s distinctive competencies and resources, it also helps identify opportunities the organization is not in a position to take advantage of because it lacks the required resources. However, since the analysis does not use relative weights to reflect priorities, it does not provide a logical link to strategy formulation.

While SWOT analysis is used to assess the organization's current situation, it can also be helpful in the decision to overcome a weakness so the organization can prepare itself to pursue an opportunity. This decision can be fostered by extending the SWOT analysis through an external factor analysis summary (EFAS) and internal factor analysis summary (IFAS) and by examining four strategy options that arise out of the combination of (1) strengths and opportunities, (2) strengths and threats, (3) weaknesses and opportunities, and (4) weaknesses and threats.

Resources

· Focused SWOT: Diagnosing Critical Strengths and Weaknesses

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