The strategic-management process consists of three stages: strategy formulation, strategy
implementation, and strategy evaluation. Strategy formulation includes developing a vision
and mission, identifying an organization’s external opportunities and threats, determining
internal strengths and weaknesses, establishing long-term objectives, generating alternative
strategies, and choosing particular strategies to pursue. Strategy-formulation issues include
deciding what new businesses to enter, what businesses to abandon, how to allocate resources,
whether to expand operations or diversify, whether to enter international markets, whether to
merge or form a joint venture, and how to avoid a hostile takeover.
Because no organization has unlimited resources, strategists must decide which alternative strategies will benefit the firm most. Strategy-formulation decisions commit an
organization to specific products, markets, resources, and technologies over an extended
period of time. Strategies determine long-term competitive advantages. For better or
worse, strategic decisions have major multifunctional consequences and enduring effects
on an organization. Top managers have the best perspective to understand fully the ramifications of strategy-formulation decisions; they have the authority to commit the resources
necessary for implementation.