1. Master Strategy:
A master or grand strategy implies the entire pattern of goals, policies and resource deployment of an organization. It provides unified direction to the entire organization. For instance, development of a new product to replace a declining product is a master strategy.
2. Programme or derivative strategy:
It refers to the specific deploy mint of resources. It is designed to support the master strategy for the achievement of organizational goals. For instance, heavy advertising is a programme strategy for the master strategy described above.
3. Sub-strategy or minor strategy:
It is more specific and detailed and it is prepared to execute a programme strategy. In the above example, employment of a particular advertising agency may be a sub-strategy.
Strategies may also be classified as grand strategy, competitive strategy and growth strategy. Grand strategy determines the future picture-of the organization while competitive strategy is designed to encounter the forces of competition. Growth strategy is formulated to achieve desired rate and form of growth of the organization.
The responsibility for strategy formulation lies with the top management. Formulation of effective strategies requires a thorough analysis of external environment (for opportunities and threats) as well as of internal environment (for resources and capabilities). The main steps in strategy formulation are as follows:
1. Environmental Analysis:
A corporate strategy is a plan designed to provide an optimal match between the company and its environment. Therefore, evaluation of environment is the first step in strategy formulation. Such evaluation helps to identify environmental opportunities and threats.
The environment of an organization is the pattern of all external influences that affect its life and development. It consists of governmental policies and laws, political set up, -economic factors, social and cultural factors, etc.
2. Corporate appraisal:
Assessment of organizational strengths and weaknesses is essential. With the help of such appraisal, a strategy can be designed to capitalize on strengths while avoiding weaknesses.
3. Strategic decision making:
This step involves three steps. First of them is developing alternative strategies. Secondly, the strategic alternatives are evaluated. Thirdly, the most appropriate strategy alternative is selected in the light of the goals, values and anticipated environment of the organization.