This chapter aims to provide the major works in the field of strategy formulation with particular concern for small and medium sized entrepreneurial firms. Traditional thinking on strategy tends to define it in terms of planning to arrive at the optimum strategy for a given context. The planning model, therefore, focuses on the links between the organization and its external environment. While the term "strategic planning' is the cornerstone for an entire discipline, there is remarkably little consistency in its operationalization. The first phase in the strategy formation process, as aptly illustrated by McCarthy and Leavy (2000), is characterized as a quasi-strategic phase. The second phase has been referred to as the defining episode in the process of strategy formulation in SMEs. The third phase seems to be characterized by greater planning and control, particularly of the financial side of the business. Strategic management model includes environmental scanning, strategy formulation, strategy implementation and evaluation of strategy.