Two of the most vital stages of a strategic management process are strategy formulation and strategy implementation. In strategy formulation, various strategies are developed and the most appropriate one is then selected so that the goals and objectives of the organization can be accomplished. On the other hand, when the strategy is actually put into action, the process is known as strategy implementation. In other words, strategy formulation pertains to the development of plans, while strategy implementation pertains to the application of those plans. When strategy formulation is successful, it does not mean that there will be successful strategy implementation as the two are distinct from one another. In this article, the two terms are described in detail and the differences between them are highlighted.
Definitions and explanations
In strategy formulation, strategies are designed and developed, and the best strategy is selected for implementation in accordance with the objectives of the organization.
The existing business strategy is analyzed in the process of strategy formulation, and the ways in which it can be enhanced is determined. In addition, the issues being faced by the organization are identified and solutions are determined. Different plans are formed, keeping in view all the factors that are relevant for the organization. After this, the strategy most appropriate is formulated so that it can subsequently be implemented in the next stage of strategic management.
The steps given below are part of strategy formulation:
- Developing long-term goals and objectives of an organization so that strategic decisions can be taken.
- Examining the organizational environment by performing the SWOT analysis. This analysis is carried out to determine the strengths and weaknesses of the company, and monitoring the activities of the competitors to comprehend the opportunities and threats.
- Establishing quantitative and measurable targets to ensure that both the short-term and the long-term goals of the organization are attained.
- Developing target for every level of the organization so that they work together to achieve organizational objectives on the whole.
- Analyzing performance to determine the extent to which the actual performance of the organization is different from the desired performance.
- Examining the different strategies and choosing the one that is most appropriate for the organization.
In any organization, strategy formulation is carried out at three levels, i.e. the corporate level, business level and the functional level.
Strategy implementation is the next step of strategic management, where the strategy that has been developed is executed with the aim of achieving organizational objectives. In strategy implementation, the decisions that have been made earlier are converted into action.
Strategy implementation involves taking corrective actions so as to enhance performance and attain the desired outcomes.
Strategy implementation typically involves the following activities:
- Assigning resources, including human resources, money, machinery, technology, etc. to activities that are needed for the execution of strategy.
- Establishing policies and procedures
- Developing the organizational structure to facilitate the execution of strategy.
- Training the workforce
- Establishing a reward structure for achieving results.
- Adopting a strategic leadership approach within the organization.
Difference between strategy formulation and strategy implementation
The difference between strategy formulation and strategy implementation has been detailed below:
Strategy formulation is the process in which the strategic objectives and plans of the organization are developed, while strategy implementation signifies the process in which the strategy that has been determined is executed. In other words, decisions are made in strategy formulation, which are then enforced in strategy implementation.
2. Key idea
In strategy formulation, all the forces required for action are positioned, while strategy implementation involves managing those forces while they are being implemented.
3. Kind of process
Strategy formulation can be considered as a logical process as it involves a series of processes that flow in a logical order. In contrast, the strategy implementation process is operational in nature.
4. Focus on
The focus of strategy formulation is on effectiveness, whereas the focus of strategy implementation is on efficiency.
5. Carried out by
It is the responsibility of the top management to formulate strategies and plans in accordance with the objectives of the organization. These strategies are then implemented by the middle level management, i.e. the functional managers.
6. Skills required
Intuitive and analytical skills are mainly required for strategy formulation. On the other hand, strategy implementation essentially requires motivational skills as well as leadership skills to coordinate several people to work towards the same goal.
7. Type of function
Strategy formulation is an entrepreneurial function, while strategy implementation is an administrative function
Strategy formulation vs strategy implementation – tabular comparison
A tabular comparison of strategy formulation and strategy implementation is given below:
|Designing and developing organizational strategy||Executing the strategy developed|
|Positioning the forces||Managing the forces|
|Kind of process|
|Carried out by|
|Top management||Middle level management|
|Intuitive and analytical skills||Motivational and leadership skills|
|Type of function|
|Entrepreneurial function||Administrative function|
Conclusion – Strategy formulation vs strategy implementation
Strategy formulation and strategy implementation are two important functions of strategic management. Strategy formulation takes place before strategy implementation in this process. In strategy formulation, different strategies are developed after analyzing the business environment, organizational vision for the future, and the resources and competencies available. From these strategies, the strategy that is best for the organization is selected. This strategy is then implemented in the strategy implementation process, where the strategy identified in the strategy formulation process is put into action. These two processes are critical for an organization as they ensure that the organization accomplishes its strategic plans and objectives and stays ahead of competition in the market.