ABSTRACT                                                                              

Strategy formulation is a core managerial function that guides organizations in defining long-term goals, allocating resources, and responding effectively to competitive environments. This article examines the essential components of strategy formulation, including environmental scanning, vision and mission development, objective setting, and strategic choice. It reviews established theoretical frameworks and emphasizes the importance of aligning internal capabilities with external opportunities and threats. By integrating analytical tools such as SWOT, PESTLE, and Porter’s Five Forces, organizations can develop coherent strategies that support sustainable performance. The paper concludes by highlighting challenges in strategy formulation and the need for continuous reassessment in dynamic markets.

Keywords: Strategy formulation; Strategic management; Environmental scanning; Strategic planning; Organizational strategy; SWOT analysis; Competitive advantage; Decision-making.

INTRODUCTION

In an era characterized by intense competition, technological disruption, and rapid globalization, organizations must adopt a structured and forward-looking approach to ensure their long-term success Fong, Y. L., & Mahfar, M. (2013). Strategy formulation serves as the foundation of strategic management, providing a roadmap that guides decision-making at all organizational levels. It involves the systematic identification of opportunities and challenges in the external environment, assessment of internal resources and capabilities, and selection of strategic options that align with organizational objectives Harari, M. B., Manapragada, A., & Viswesvaran, C. (2017).

The process begins with a clear articulation of the organization's mission and vision, which define its purpose and long-term aspirations Hassan, N., Mazlan, N. M. W., Halif, M. M, et al. (2020). Environmental scanning then allows firms to understand industry dynamics, customer preferences, regulatory conditions, and competitor behavior. Tools such as PESTLE analysis help examine macro-environmental influences, while Porter’s Five Forces assist in evaluating competitive pressures. Internally, organizations analyze their strengths and weaknesses through resource-based assessments and SWOT frameworks Johnson, G. J., & Johnson, W. R. (1997).

Following this analysis, managers develop strategic alternatives—ranging from market expansion, differentiation, cost leadership, to diversification strategies. Decision-making at this stage must balance risk, resource constraints, and potential returns. Effective strategy formulation not only ensures alignment between strategy and organizational capabilities but also enables flexibility to adjust to emerging trends Johnson, W. R., Morrow, P. C., & Johnson, G. J. (2002).

Despite its importance, strategy formulation is not without challenges. Rapid technological changes, uncertain market conditions, and resource limitations can complicate the process. Organizations must therefore adopt adaptive strategies and engage in continuous monitoring to remain competitive.

CONCLUSION

Strategy formulation is a critical organizational function that shapes long-term direction and enhances competitiveness. By systematically evaluating internal capabilities and external forces, organizations can craft strategies that support sustainable growth and resilience. While traditional frameworks provide valuable insights, modern business environments demand agility, innovation, and ongoing reassessment. Ultimately, effective strategy formulation balances structured analytical approaches with flexible decision-making, enabling organizations to navigate uncertainty and achieve strategic success.

References

Fong, Y. L., & Mahfar, M. (2013). Relationship between occupational stress and turnover intention among employees in a furniture manufacturing company in Selangor. Jurnal Teknologi, 64(1).

Harari, M. B., Manapragada, A., & Viswesvaran, C. (2017). Who thinks they're a big fish in a small pond and why does it matter? A meta-analysis of perceived overqualification. Journal of Vocational Behavior, 102, 28-47.

Hassan, N., Mazlan, N. M. W., Halif, M. M., Noranee, S., & Zainal, N. Z. (2020). The moderating roles of organizational commitment on the relationship between quality of work life and turnover intention among call center employees. Malaysian Journal of Consumer and Family Economics, 24(1), 208-228.

Johnson, G. J., & Johnson, W. R. (1997). Perceived overqualification, emotional support, and health. Journal of Applied Social Psychology, 27(21), 1906-1918.

Johnson, W. R., Morrow, P. C., & Johnson, G. J. (2002). An evaluation of a perceived overqualification scale across work settings. The journal of Psychology, 136(4), 425-441.