Strategy Formulation involves developing a company’s mission, vision, goals, and strategies. It includes processes like environmental scanning, internal analysis, and strategy development. Key principles emphasize alignment with values and long-term focus. Tools such as SWOT analysis and models like Porter’s Five Forces aid in strategic decision-making.
Avoiding short-term, reactionary strategies in favor of those that create lasting value.
Tools and Models:
Porter’s Five Forces:
Analyzes industry competitiveness by examining factors such as supplier power, buyer power, competitive rivalry, threat of substitutes, and threat of new entrants.
Helps organizations understand their competitive position.
BCG Matrix (Boston Consulting Group Matrix):
Evaluates a portfolio of business units based on their market growth rate and relative market share.
Units are classified as stars, question marks, cash cows, or dogs, guiding resource allocation decisions.
Scenario Planning:
Considers various possible future scenarios and their implications.
Enables organizations to be prepared for different outcomes and make informed decisions in uncertain environments.
Ansoff Matrix:
Provides a framework for growth strategies, including market penetration, market development, product development, and diversification.
Helps organizations decide how to expand and diversify their product or service offerings.
Case Studies
Mission Statement Examples:
Google: “To organize the world’s information and make it universally accessible and useful.”
Tesla: “To accelerate the world’s transition to sustainable energy.”
UNICEF: “To work for a world in which every child has a fair chance in life.”
Vision Statement Examples:
Amazon: “To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online.”
Microsoft: “A computer on every desk and in every home.”
SpaceX: “To enable humans to become a spacefaring civilization and a multi-planet species.”
Regulatory challenges related to marketing and labeling
Goals and Objectives Examples:
General Electric (GE): “To become the world’s premier digital industrial company by 2020.”
Objective: “Achieve $20 billion in software revenue by 2020.”
Walmart: “To save people money so they can live better.”
Objective: “Reduce greenhouse gas emissions in our supply chain by one billion metric tons by 2030.”
Strategic Planning Examples:
Apple: Apple’s strategic planning involves a focus on product innovation, premium pricing, and building a loyal customer base. Their strategy includes launching new iPhone models, expanding services like Apple Music, and entering healthcare through initiatives like the Apple Watch.
Starbucks: Starbucks’ strategic planning revolves around providing a premium coffee experience, expanding globally, and enhancing customer loyalty through its rewards program. Their strategies include opening new stores in emerging markets and investing in sustainable sourcing.
Competitive Advantage Examples:
McDonald’s: McDonald’s competitive advantage is based on cost leadership, efficient operations, and global scale. They maintain low prices, quick service, and consistency across their outlets.
Apple: Apple’s competitive advantage lies in product differentiation and innovation. They continuously introduce groundbreaking products like the iPhone and iPad, creating a loyal customer base willing to pay a premium for their devices.
Long-Term Focus Examples:
Amazon: Amazon’s long-term focus is evident in its investments in infrastructure, logistics, and technology. They prioritize long-term growth over short-term profits, aiming for market dominance.
Tesla: Tesla’s commitment to electric vehicles and sustainable energy solutions demonstrates a long-term focus on addressing environmental challenges. Their Gigafactories and research in battery technology exemplify this approach.
Porter’s Five Forces Examples:
Apple vs. Samsung: The rivalry between these smartphone giants creates intense competition in the industry, driving innovation and customer benefits.
Automobile Industry: Supplier power is relatively high because automakers rely on a network of suppliers for components. This can impact pricing and quality.
BCG Matrix Examples:
Apple’s iPhone Line: The iPhone typically falls into the “Star” category, with high market growth and high market share. Other products like the Mac may be “Cash Cows.”
Procter & Gamble (P&G): P&G’s diverse product portfolio includes “Cash Cow” brands like Tide and “Question Mark” brands in emerging markets.
Key Highlights
Mission and Vision Statements: Mission statements define an organization’s purpose, while vision statements articulate its long-term aspirations. They serve as guiding principles for strategic decisions and communication.
SWOT Analysis: SWOT analysis involves assessing an organization’s strengths, weaknesses, opportunities, and threats. It provides a holistic view of its internal and external factors, aiding in strategy development.
Goals and Objectives: Clear and measurable goals and objectives help organizations align their efforts and track progress toward strategic outcomes.
Strategic Planning: Strategic planning is the process of defining an organization’s strategy, which includes setting priorities, allocating resources, and establishing action plans.
Competitive Advantage: Organizations seek competitive advantage through factors like cost leadership, product differentiation, innovation, and market positioning.
Long-Term Focus: Many successful organizations prioritize long-term goals and sustainability over short-term gains, investing in research, development, and infrastructure.
Porter’s Five Forces: This framework assesses the competitive forces within an industry, helping organizations understand their competitive environment.
BCG Matrix: The BCG Matrix categorizes products or business units into “Stars,” “Cash Cows,” “Question Marks,” and “Dogs,” aiding in resource allocation decisions.
Strategic Planning Examples: Organizations like Apple and Starbucks have well-defined strategies that align with their missions and visions.
Competitive Advantage Examples: Companies like McDonald’s and Apple showcase different approaches to gaining a competitive edge.
Long-Term Focus Examples: Amazon’s emphasis on growth and Tesla’s commitment to sustainability exemplify long-term orientations.
Strategic Analysis Tools: SWOT analysis, Porter’s Five Forces, and the BCG Matrix are crucial tools for assessing and formulating strategies.
The ADKAR model is a management tool designed to assist employees and businesses in transitioning through organizational change. To maximize the chances of employees embracing change, the ADKAR model was developed by author and engineer Jeff Hiatt in 2003. The model seeks to guide people through the change process and importantly, ensure that people do not revert to habitual ways of operating after some time has passed.
You can use the Ansoff Matrix as a strategic framework to understand what growthstrategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growthstrategy can be derived from whether the market is new or existing, and whether the product is new or existing.
The business model canvas is a framework proposed by Alexander Osterwalder and Yves Pigneur in Busines Model Generation enabling the design of business models through nine building blocks comprising: key partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure, and revenue streams.
The lean startup canvas is an adaptation by Ash Maurya of the business model canvas by Alexander Osterwalder, which adds a layer that focuses on problems, solutions, key metrics, unfair advantage based, and a unique value proposition. Thus, starting from mastering the problem rather than the solution.
The Blitzscaling business model canvas is a model based on the concept of Blitzscaling, which is a particular process of massive growth under uncertainty, and that prioritizes speed over efficiency and focuses on market domination to create a first-scaler advantage in a scenario of uncertainty.
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is valueinnovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.
First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is valueinnovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
A gap analysis helps an organization assess its alignment with strategic objectives to determine whether the current execution is in line with the company’s mission and long-term vision. Gap analyses then help reach a target performance by assisting organizations to use their resources better. A good gap analysis is a powerful tool to improve execution.
The GE McKinsey Matrix was developed in the 1970s after General Electric asked its consultant McKinsey to develop a portfolio management model. This matrix is a strategy tool that provides guidance on how a corporation should prioritize its investments among its business units, leading to three possible scenarios: invest, protect, harvest, and divest.
The McKinsey 7-S Model was developed in the late 1970s by Robert Waterman and Thomas Peters, who were consultants at McKinsey & Company. Waterman and Peters created seven key internal elements that inform a business of how well positioned it is to achieve its goals, based on three hard elements and four soft elements.
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.
The McKinsey Horizon Model helps a business focus on innovation and growth. The model is a strategy framework divided into three broad categories, otherwise known as horizons. Thus, the framework is sometimes referred to as McKinsey’s Three Horizons of Growth.
Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces.
According to Michael Porter, a competitive advantage, in a given industry could be pursued in two key ways: low cost (cost leadership), or differentiation. A third generic strategy is focus. According to Porter a failure to do so would end up stuck in the middle scenario, where the company will not retain a long-term competitive advantage.
In his 1985 book Competitive Advantage, Porter explains that a value chain is a collection of processes that a company performs to create value for its consumers. As a result, he asserts that value chain analysis is directly linked to competitive advantage. Porter’s Value Chain Model is a strategic management tool developed by Harvard Business School professor Michael Porter. The tool analyses a company’s value chain – defined as the combination of processes that the company uses to make money.
Porter’s Diamond Model is a diamond-shaped framework that explains why specific industries in a nation become internationally competitive while those in other nations do not. The model was first published in Michael Porter’s 1990 book The Competitive Advantage of Nations. This framework looks at the firm strategy, structure/rivalry, factor conditions, demand conditions, related and supporting industries.
A SWOT Analysis is a framework used for evaluating the business‘s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision making by avoiding two pitfalls: underprediction, and overprediction.
The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.
A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
