PREPARED BY

09-4330
UMAR IKRAM
09-4439
ZAIGHAM GHAZA
09-4309
ZEESHAN TARIQ R

SUBMITTED TO MR.FAISAL MALI

[PREPARED FOR
ENGINEERING
MANAGEMENT]

Contents
Strategy Formulation Process..................................................................................... 3
INTRODUCTION........................................................................................................... 3
STRATEGY MANGEMENT.............................................................................................. 3
DIAGNOSIS.............................................................................................................. 3
FORMULATION......................................................................................................... 3
IMPLEMENTATION.................................................................................................... 4
THREE ASPECTS OF STRATEGY FORMULATION PROCESS............................................4
CORPORATE LEVEL STRATEGY................................................................................. 4
COMPETITIVE (BUSINESS LEVEL) STRATEGY............................................................5
FUNCTIONAL STRATEGIES........................................................................................ 6
Steps in Strategy Formulation Process.......................................................................7
I.

Setting Organizations objectives......................................................................7

Mission Statement of a Company.........................................................................7
Mission Statement of Mobilink.............................................................................. 7
Vision Statement of Mobilink................................................................................ 7
Strategic Goals of Mobilink...................................................................................7

II.

Evaluating the Organizational Environment......................................................7

Internal Strengths of Mobilink..............................................................................8
Internal Weaknesses of Mobilink..........................................................................8
Opportunities of Mobilink..................................................................................... 8
Threats of Mobilink............................................................................................... 8

III.

Setting Quantitative Targets..........................................................................8

IV.

Aiming in context with the divisional plans....................................................8

V.

Performance Analysis........................................................................................ 9

VI.

Evaluating Formulated Strategy.....................................................................9

Suitability............................................................................................................. 9
Feasibility............................................................................................................. 9
Acceptability...................................................................................................... 10
Strategy Formulation vs. Successful Strategy.......................................................10
ACKNOWLEDGEMENTS............................................................................................. 11
REFERENCES............................................................................................................ 12

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Strategy Formulation Process

INTRODUCTION
It is useful to consider strategy formulation as part of a strategic management
process that comprises three phases: diagnosis, formulation, and implementation.
Strategic management is an ongoing process to develop and revise future-oriented
strategies that allow an organization to achieve its objectives, considering its
capabilities, constraints, and the environment in which it operates.

STRATEGY MANGEMENT
DIAGNOSIS
FORMULATION
IMPLEMENTATION
Let just put a light on these three terms.

DIAGNOSIS
Diagnosis includes: (a) performing a situation analysis (analysis of the internal
environment of the organization), including identification and evaluation of current
mission, strategic objectives, strategies, and results, plus major strengths and
weaknesses; (b) analyzing the organization's external environment, including major
opportunities and threats; and (c) identifying the major critical issues, which are a
small set, typically two to five, of major problems, threats, weaknesses, and/or
opportunities that require particularly high priority attention by management.

FORMULATION
Formulation, the second phase in the strategic management process, produces a
clear set of recommendations, with supporting justification, that revise as necessary
the mission and objectives of the organization, and supply the strategies for
accomplishing them. In formulation, we are trying to modify the current objectives
and strategies in ways to make the organization more successful. This includes
trying to create "sustainable" competitive advantages -- although most competitive
advantages are eroded steadily by the efforts of competitors.
A good recommendation should be: effective in solving the stated problem(s),
practical (can be implemented in this situation, with the resources available),
feasible within a reasonable time frame, cost-effective, not overly disruptive, and
acceptable to key "stakeholders" in the organization. It is important to consider
"fits" between resources plus competencies with opportunities, and also fits
between risks and expectations.

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There are four primary steps in this phase:

1. Reviewing the current key objectives and strategies of the organization,
which usually would have been identified and evaluated as part of the
diagnosis
2. Identifying a rich range of strategic alternatives to address the three levels of
strategy formulation outlined below, including but not limited to dealing with
the critical issues
3. Doing a balanced evaluation of advantages and disadvantages of the
alternatives relative to their feasibility plus expected effects on the issues
and contributions to the success of the organization
4. Deciding on the alternatives that should be implemented or recommended.

IMPLEMENTATION
In organizations, and in the practice of strategic management, strategies must be
implemented to achieve the intended results. The most wonderful strategy in the
history of the world is useless if not implemented successfully. This third and final
stage in the strategic management process involves developing an implementation
plan and then doing whatever it takes to make the new strategy operational and
effective in achieving the organization's objectives.

THREE ASPECTS OF STRATEGY FORMULATION PROCESS

The following three aspects or levels of strategy formulation, each with a different
focus, need to be dealt with in the formulation phase of strategic management. The
three sets of recommendations must be internally consistent and fit together in a
mutually supportive manner that forms an integrated hierarchy of strategy, in the
order given.
Corporate Level Strategy
Competitive Strategy (often called Business Level Strategy)
Functional Strategy

CORPORATE LEVEL STRATEGY

This comprises the overall strategy elements for the corporation as a whole, the
grand strategy, if you please. Corporate strategy involves four kinds of initiatives:
1. Making the necessary moves to establish positions in different businesses
and achieve an appropriate amount and kind of diversification. A key part of
corporate strategy is making decisions on how many, what types, and which
specific lines of business the company should be in. This may involve
deciding to increase or decrease the amount and breadth of diversification. It

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may involve closing out some LOB's (lines of business), adding others, and/or
changing emphasis among LOB's.
2. Initiating actions to boost the combined performance of the businesses the
company has diversified into: This may involve vigorously pursuing rapidgrowth strategies in the most promising LOB's, keeping the other core
businesses healthy, initiating turnaround efforts in weak-performing LOB's
with promise, and dropping LOB's that are no longer attractive or don't fit into
the corporation's overall plans. It also may involve supplying financial,
managerial, and other resources, or acquiring and/or merging other
companies with an existing LOB.
3. Pursuing ways to capture valuable cross-business strategic fits and turn them
into competitive advantages -- especially transferring and sharing related
technology, procurement leverage, operating facilities, distribution channels,
and/or customers.
4. Establishing investment priorities and moving more corporate resources into
the most attractive LOB's.
It is useful to organize the corporate level strategy considerations and initiatives
into a framework with the following main strategy component:
What Should be Our Growth Objective and Strategies?
Growth objectives can range from drastic retrenchment through aggressive growth.
Organizational leaders need to revisit and make decisions about the growth
objectives and the fundamental strategies the organization will use to achieve
them. There are forces that tend to push top decision-makers toward a growth
stance even when a company is in trouble and should not be trying to grow, for
example bonuses, stock options, fame, ego. Leaders need to resist such
temptations and select a growth strategy stance that is appropriate for the
organization and its situation. Stability and retrenchment strategies are
underutilized.

COMPETITIVE (BUSINESS LEVEL) STRATEGY

In this second aspect of a company's strategy, the focus is on how to compete
successfully in each of the lines of business the company has chosen to engage in.
The central thrust is how to build and improve the company's competitive position
for each of its lines of business. A company has competitive advantage whenever it
can attract customers and defend against competitive forces better than its rivals.
Companies want to develop competitive advantages that have some sustainability
(although the typical term "sustainable competitive advantage" is usually only true
dynamically, as a firm works to continue it). Successful competitive strategies
usually involve building uniquely strong or distinctive competencies in one or
several areas crucial to success and using them to maintain a competitive edge
over rivals. Some examples of distinctive competencies are superior technology

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and/or product features, better manufacturing technology and skills, superior sales
and distribution capabilities, and better customer service and convenience.
Competitive strategy is about being different. It means
deliberately choosing to perform activities differently or to
perform different activities than rivals to deliver a unique
mix of value. (Michael E. Porter)
The essence of strategy lies in creating tomorrow's
competitive advantages faster than competitors mimic the
ones you possess today. (Gary Hamel & C. K. Prahalad)

FUNCTIONAL STRATEGIES
Functional strategies are relatively short-term activities that each functional area
within a company will carry out to implement the broader, longer-term corporate
level and business level strategies. Each functional area has a number of strategy
choices,that interact with and must be consistent with the overall company
strategies.
Three basic characteristics distinguish functional strategies from corporate level and
business level strategies: shorter time horizon, greater specificity, and primary
involvement of operating managers.
A few examples follow of functional strategy topics for the major functional areas of
marketing, finance, production/operations, research and development, and human
resources management. Each area needs to deal with sourcing strategy, i.e., what
should be done in-house and what should be outsourced?
Marketing strategy deals with product/service choices and features, pricing
strategy, markets to be targeted, distribution, and promotion considerations.
Financial strategies include decisions about capital acquisition, capital allocation,
dividend policy, and investment and working capital management. The production
or operations functional strategies address choices about how and where the
products or services will be manufactured or delivered, technology to be used,
management of resources, plus purchasing and relationships with suppliers. For
firms in high-tech industries, R&D strategy may be so central that many of the
decisions will be made at the business or even corporate level, for example the role
of technology in the company's competitive strategy, including choices between
being a technology leader or follower. However, there will remain more specific
decisions that are part of R&D functional strategy, such as the relative emphasis
between product and process R&D, how new technology will be obtained (internal
development vs. external through purchasing, acquisition, licensing, alliances, etc.),
and degree of centralization for R&D activities. Human resources functional
strategy includes many topics, typically recommended by the human resources
department, but many requiring top management approval. Examples are job
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categories and descriptions; pay and benefits; recruiting, selection, and orientation;
career development and training; evaluation and incentive systems; policies and
discipline; and management/executive selection processes. And working of all the
departments together like this is a basic definition of SYNERGY.
All the brands like AUDI, BMW, MICHELIN, NESTLE and others invest huge amount of
money to formulate the best strategy because BRAND needs to have a buzz. For
that they pass through all the levels of strategy as elaborated above. So, strategy
formulation is by far the most appropriate course of action that leads to objective
and aim of organization.

Steps in Strategy Formulation Process

Strategy formulation refers to the process of choosing the most appropriate course of action for
the realization of organizational goals and objectives and thereby achieving the organizational
vision. The process of strategy formulation basically involves six main steps. Though
these steps do not follow a rigid chronological order, however they are very rational and can be
easily followed in this order.

I.

Setting Organizations objectives

The key component of any strategy statement is to set the long-term objectives of the
organization. It is known that strategy is generally a medium for realization of organizational
objectives. Objectives stress the state of being there whereas Strategy stresses upon the process
of reaching there. Strategy includes both the fixation of objectives as well the medium to be used
to realize those objectives. Thus, strategy is a wider term which believes in the manner of
deployment of resources so as to achieve the objectives.
While fixing the organizational objectives, it is essential that the factors which
influence the selection of objectives must be analyzed before the selection of
objectives. Once the objectives and the factors influencing strategic decisions have
been determined, it is easy to take strategic decisions.
Mission Statement of a Company
It should consist of following components
The needs to be served by the company.
The targeted customer group.
How the company will provide the product/services.
Mission Statement of Mobilink
Mobilink wants to be a superior communication service company in Pakistan, which
will provide best services to their customers, employees, business partners and
shareholders.

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Vision Statement of Mobilink

To be the leading telecommunication services provider in Pakistan by offering
innovative communication solution for our customers while exceeding shareholder
value and employee expectations.
Strategic Goals of Mobilink
With increasing usage of internet and communication between data and cellular
technologies, Mobilinks focus is on the integration of internet with its cellular
offering, With this objective in mind, it plans to invest heavily in Value Added
Services, which will result in increasing the efficiency and effectiveness of cellular
communications for their customers.

II.

Evaluating the Organizational Environment

The next step is to evaluate the general economic and industrial environment in
which the organization operates. This includes a review of the organizations
competitive position. It is essential to conduct a qualitative and quantitative review
of an organizations existing product line. The purpose of such a review is to make
sure that the factors important for competitive success in the market can be
discovered so that the management can identify their own strengths and
weaknesses as well as their competitors strengths and weaknesses.
After identifying its strengths and weaknesses, an organization must keep a track of
competitors moves and actions so as to discover probable opportunities of threats
to its market or supply sources.
Internal Strengths of Mobilink
Mobilink is an acknowledged market leader of all companies of its kind.
Pioneer in GSM services in Pakistan.
Highest market shares not in terms of subscribers but also in terms of
revenue.
It has adequate financial resources.
Premium brand image.
The company has good competitive skills.
Internal Weaknesses of Mobilink
Mobilink provides costly services to customers as compared to other mobile
companies.
Sometimes the network is busy and over loaded which results in poor
connectivity.
The product line is too narrow.
Call dis-connectivity is too much.
Customer services centre is not providing good quality services.
Opportunities of Mobilink
Can lower prices to make business difficult for other companies.
Mobilink can expand its target markets and enter new market segments.

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 Mobilink has faster market growth so it must try to introduce such packages
that attract more and more customers.
Threats of Mobilink
Others companies can offer packages for corporate customers in better way.
Current price war may reach at a position where only brand names survives.
Due to expensive quality of services now a days customers can shift to other
companies.

III.

Setting Quantitative Targets

In this step, an organization must practically fix the quantitative target values for
some of the organizational objectives. The idea behind this is to compare with long
term customers, so as to evaluate the contribution that might be made by various
product zones or operating departments.

IV.

Aiming in context with the divisional plans

In this step, the contributions made by each department or division or product

category within the organization is identified and accordingly strategic planning is
done for each sub-unit. This requires a careful analysis of macroeconomic trends.

V.

Performance Analysis

Performance analysis includes discovering and analyzing the gap between the
planned or desired performance. A critical evaluation of the organizations past
performance, present condition and the desired future conditions must be done by
the organization. This critical evaluation identifies the degree of gap that persists
between the actual reality and the long-term aspirations of the organization. An
attempt is made by the organization to estimate its probable future condition if the
current trends persist.
Lets analyze Mobilinks number of subscribers, on yearly basis, to elaborate
performance analysis.
Year

2005

2006

2007

Targeted

8,000,000

15,000,000

25,000,000

Actual

7,469,085

17,205,555

26,466,451

Before Mobilink formulates a strategy for year 2008, they have to study the past
figures.
From the table above it can be clearly observed that actual number of subscribers is
less then planned number of subscribers in year 2005 and vice versa in the year
2006. During strategy formulation Mobilink has to take in account the factors that
decrease their subscribers and also the factors which increase them, and formulate
a strategy that yields maximum number of subscribers.
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VI.

Evaluating Formulated Strategy

It is the next and ultimate step in the strategy formulation process.

The best course of action is actually chosen after considering organizational goals,
organizational strengths, potential and limitations as well as the external
opportunities.
Formulated strategy is evaluated on the basis of three factors.
Suitability
Suitability deals with the overall rationale of the strategy.
the strategy should address the mission
it must reflect the organization's capabilities
it should make economic sense
Evaluation tools include strength, weakness, opportunity, threat ( SWOT) analysis.
Feasibility
Feasibility is concerned with whether the organization has the resources required to
implement the strategy. Resources include capital, people, time, market access and
expertise.

Evaluation tools include :

cash flow analysis and forecasting

break-even analysis
resource deployment analysis

Acceptability
Acceptability is concerned with the expectations of the identified stakeholders
(shareholders, employees and customers, etc.) with the expected financial and nonfinancial outcomes. Return deals with stakeholder benefits. Risk deals with the
probability and consequences of failure. Employees are particularly likely to have
concerns about non-financial issues such as working conditions and outsourcing.
Evaluation tools include:

what-if analysis
stakeholder mapping

Strategy Formulation vs. Successful Strategy

Once strategy formulation is done on the basis of the steps elaborated , does the
formulated strategy guarantee 100% success?

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In real world when formulated strategy is implemented factors, such as society

forces, political and regulatory forces and many other affect the strategy, these
factors cant be catered during formulation process as they are highly
unpredictable. Due to which sometimes strategy fails.
So strategy formulation is really necessary but it does not mean that you will
succeed for sure.

Action is the foundational key to all Success.

Pablo Picasso

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ACKNOWLEDGEMENTS
In the end we would like to thank Google and Wikipedia, for providing us the
required authentic information. We would also like to thank Mr.Faisal Malik as he
gave us an opportunity to take a in-depth look at the topic of Strategy
Formulation Process.

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REFERENCES
http://en.wikipedia.org/wiki/Strategic_management
http://wiki.answers.com/Q/What_is_strategy_formulation
http://www.managementstudyguide.com/strategy-formulation-process.htm
http://www.kepner-tregoe.com/solutions-services/executive-leadership/strategyformulation-and-implementation/

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