Strategic

The Rational (prescriptive) Approach to Strategy Formulation

Steps to develop a strategy

The rational planning approach sought to identify a process by which successful strategy can be formulated.

The main stages in the rational approach are:

  1. Conduct a corporate appraisal: This involves assessing the present business environment and assessing how it may develop over the timescale of the plan horizon (typically five + years). It will also consider the internal position of the business, including such things as its present staffing, quality of products and financial condition.

2. Set mission and objectives: Management will assess whether the long-term interests of the business are best met in its present industry and competing in its present way or whether the business needs to strike out in a new direction. This is called its mission. Objectives will be set for the coming years. The job of strategy is to attain them.

3. Gap analysis: Involves forecasting performance forward and comparing it with the strategic objectives set by management. If forecast performance is below the objectives set then this exposes a gap which must be filled by new and better strategy.

4. Strategic choice: Management must generate new business options for the firm such as new products or markets, and evaluate these to arrive at a set of potentially successful and affordable strategies to help the firm reach the objectives set.

5. Strategy implementation: Management carries out the strategy at corporate, business and functional levels by the development of organizational structures, policies and programmes to carry it out.

Show More

Related Articles

Back to top button

Adblock Detected

Please consider supporting us by disabling your ad blocker