Strategy formulation: Focusing on core competencies and processes

Abstract

The linkage between the external environment, strategy process, organizational structure and performance has been changing over time. To begin with, the relationship was considered unidirectional, i.e. environment deciding the strategy which in turn influenced the structure leading to superior performance. The strategy process was seen as hierarchical and function oriented. This view of linkage has changed considerably in recent times. The concepts of core competencies/capabilities transformed strategic thinking. More recently, business process re-engineering (BPR), seen by many as the means of transforming organizations, is radically altering organizational structures. These developments call for a reappraisal of the traditional views on strategy-structure linkages and the process of strategy formulation. This paper attempts to identify some of the important issues in this debate and provide a framework for developing a more robust environment-strategy-structure-performance linkage which reflects the current trends.