This report aims at explaining the differences between the strategy formulation of small and large firms, by examining major factors directly influencing the management and the strategy formulation within a firm. This analysis indicates that strategy formulation in large firms is a very formal process handled by top executives especially dedicated to this process. Small firms in contrast often suffer from a lack of resources and managerial skills. As a result, in small companies, the importance of strategy is often underestimated and not worked out with sufficient accuracy. This leads to a company’s performance often remaining under its market opportunities.