Strategic Management: Formulation and Implementation

Strategy Formulation Constraints

In order for managers to formulate useful strategies, they must be aware of certain organizational constraints. Some of the major ones are:

Availability of financial resources
Even when a particular strategy appears optimal for an organization, serious consideration must be given to where the money to finance the strategy is going to come from.
Attitude toward risk
Some firms are willing to accept only minimal levels of risk, regardless of the level of potential return.
Organizational capabilities
Some otherwise excellent strategies may require capabilities beyond those an organization currently possesses.
Channel relationships
Strategies that call for the development of new channels of distribution or that involve new suppliers require careful consideration of the availability of these other organizations and their willingness to work with the firm.
Competitive retaliation
Some strategies may have the unintended effect of dramatically increasing competitors' efforts in the marketplace.