This document discusses different approaches to strategy formation: 1) The planning approach views strategy as the outcome of sequential, planned procedures including analysis, formulation, implementation, and control. 2) The learning approach sees strategies as emerging through trial and error rather than a rational process. 3) The contingency approach argues successful strategies depend on internal and external environmental factors.

1. Chapter 8
Strategy Formation-Strategy
Formulation and Implementation

2. Learning Objectives
After reading this chapter, you should be able to:
Define strategy formation: strategy formulation
and implementation.
Discuss the evaluation of different approaches to
strategy formation.
Evaluate assumptions of different schools of
thought about strategy formation.
Comment on strategy formation in the
international context.

3. Introduction
The evolution of strategic management can be
traced in two context-management practices
adopted over the period of time by different
organization and strategic management
education.

4. Based on Practices
Essentially, the evolution and development of strategic
management in practice have followed the pattern of
development of management in general. (Hofer et al.) have
identified four phases through which strategic management
practices have developed over the period of time .
These are as follows:
i. First phase till mid-1930s (paradigm of ad hoc policy).
ii. Second phase 1930-1940s (paradigm of planned policy).
iii. Third phase 1960s (strategy paradigm).
iv. Fourth phase 1980s (paradigm of strategic management).

5. Based on Education
In order to meet the growing needs of managers
with general management skills, courses in
strategic management were introduced in
business management curriculum.

6. Strategy formation Definition
Strategy formation creates strategy, designing
new businesses and organization to carry out
those businesses. Formation involves
exploration, the search for new advantages and
business possibilities.

7. Schools of Strategy Formation
Henry Mintzberg has built a strategy formation
framework which classifies approaches to
strategy based on thinking types and the
strategy formulator’s view of the world. He calls
these schools of strategy.

8. Descriptive Schools (Stacey classifies as
Organizational Learning)
• Entrepreneurial
• Cognitive
• Learning
• Power
• Cultural
Descriptive School (Stacey Classifies as
Evolutionary)
• Environmental

9. Planning Approach
• This approach views strategy formation as the outcome
of sequential, planned, and deliberate procedures.
• According to this view, strategic planning consists of four
separate elements:
– analysis
– strategy formulation
– strategy implementation, and;
– control/monitoring.
This approach gives more emphasis to the formal
analysis of the issues in both the external and internal
environments.

10. The three (3) Strategic Planning Principles
that corporate offices, senior executives, and
specialized departments such as corporate
strategic planning office considered.
1. PESTEL Analysis – is a strategic framework
used to evaluate the external environment of
a business by breaking down the
opportunities and risks into Political,
Economic, Social, Technological,
Environmental, and Legal factors.

11. 2. Porter's Industry Structure Analysis – is a model
that identifies and analyzes five competitive forces
that shape every industry and helps determine an
industry's weaknesses and strengths.
Porter's five forces are:
1. Competition in the industry
2. Potential of new entrants into the industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products

12. 3. SWOT Analysis – is one of the most
commonly used tools to assess the internal and
external environments of a company and is part
of a company’s strategic planning process.
(Strengths, Weaknesses, Opportunities, and
Threats)

13. Planning Approach
• This approach advocates well-specified plans
with clear, objectives, timetables, budgets and
resources allocations, clear lines of
responsibility, limited participation in strategy
development, and minimum discretion for all
levels of implementers.

14. The Learning or Emergent Approach
• The learning approach does not see strategy
formation as a neat, sequential, and rational
process. This school of thought suggests that
strategies often emerge from the pragmatic
processes of trial and error and that they are
often developed and executed in an
incremental, trial-and-error way, mainly by
middle managers, and that the strategy
formulation and implementation stages often
overlap.

15. The Contingency Approach
• The contingency school of thought suggests
that successful strategies are not developed
and implemented by a simple or single set of
factors. Instead, their successes depend on
many factors in the internal and external
environments of the company.

16. The Configurational Approach
• Attempts were made to combine all of the
previous strategic management schools of
thought into one single perspective, which is
called the configurational view. It was
intended to eliminate the disadvantages of
the previous approaches and offer a holistic
view.

17. The Complexity Approach
• This view suggest that organizations are
adaptive systems that take the form of
nonlinear negative and positive feedback
loops that connect the individuals, groups,
functions, and processes in an organization to
one another, and connect an organization to
other systems in the environment

18. These five approach are grouped by
Stacey (1996) into only two categories:
Ordinary management
• Planning
• Learning
• Contingency, and;
• Configural views
Extraordinary management
• Complexity view

19. The main criticism can be summarized
as follows:
1. It sees the external environment as simple and stable,
although it is often complex and dynamic.
2. It views the strategy formation process as planned, linear,
rational, process, but the same strategies generally
emerge from pragmatic processes and existing practices.
3. It recommends detailed and clear plans for strategy
formation, but imposing such precise and detailed plans is
not always helpful, in practice plans may not be
appropriate and helpful in dynamic and complex
environment.
4. It separates strategy formulation form strategy
implementation, although in many cases they are not
separable.

20. 5. It does not contemplate the importance of
involvement of implementers or middle
managers in strategy development
6. It does not consider organizational culture
and politics, although in many cases these
factors can be very influential.
7. It tends to focus on financial objectives, but
aiming only for high profit and market share
may not always be important. In practice, there
are other important issues to be considered,
such as internal politics, organizational culture,
customers, competitors, and employees.