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Topics Covered: • STRATEGIC IMPLEMENTATION – Organizational Structure • STRATEGIC IMPLEMENTATION – Behavioral Issues • STRATEGIC IMPLEMENTATION – Functional Issues
Analyzing Strategic Change:
Stable strategy Routine Strategy change Limited Strategy Change
MARKET APPEAL Same
Radical Strategy Change
Managing Strategic Change For managing the change formulation and implementation of strategy. Two linkages exist between strategy formulation and strategy implementation: (i) Forward linkage: deals with preparing organizational activities like organizational structure, leadership, culture etc. necessary for strategic implementation (ii) Backward linkage: deals with the pressure of implementation on strategy formulation.
Issues in Strategy Implementation Project Implementation: •Project is a highly specific programme for which the time schedule and specific costs are determined in advance. •Projects create all necessary conditions and facilities for the strategy implementation. Procedural Implementation: •Strategy implementation requires executing the strategy, based on the rules, regulations and procedures formulated by the government. •Strategists should study the procedural aspects like licensing procedures, foreign collaboration procedures, Foreign Exchange and Regulation Act requirements, incentives and benefits and other legislations.
Organization Structure It is means to an end of achieving organizational mission and objectives. Organizational structure refers to the methods of allocating duties and responsibilities to individuals, and the way that individuals are grouped together into units, departments and divisions.
Organizational structures for Strategies 1. 2. 3. Entrepreneurial Structure Vertical / Tall Organization Horizontal / Flat organization
Entrepreneurial Organizational structures: •An Organisation owned and managed by one person. •Organisations are mainly single business, product or service organisations that serve local market.
Advantages • Centralized power leads to quick decision making. • Timely response to environmental changes. • Simple organisation system.
Disadvantages • Excessive dependency on the ownermanager. • Sometimes diverts the attention of owner-manager to day-to-day operational activities to ignore strategic matters. • Inadequate in case of expansion of a business.
2. Tall Structure (narrow)
3. Flat Structure (wide)
•Narrow span of control •Large no. of management levels •centralized decision making Advantages: •Close supervision •Close control of subordinates •Fast communication Disadvantages: •Too much control •Many levels of management •High costs •Excessive distance between lowest level and highest level
•Wide span of control •Reduced management levels •Decentralized decision making Advantages: •More Delegation of Authority •Development of Managers •Clear policies Disadvantages: •Overloaded supervisors •Danger of superiors loss of control •Requirement of highly trained managerial personnel •Block in decision making
Approaches to Organization Structure 1. 2. 3. 4. 5. Functional Organizational Structures Product Organization Structure Geographical Organization Structure Strategic Business Unit Structure Matrix Organization Structure
1. FUNCTIONAL STRUCTURE
• Efficient distribution of work through specialization. • Delegation of day-to day operational functions. • Provides time for the top management to focus on the strategic decisions.
• Creates difficulty in coordination among different functional areas. • Creates specialties that result in narrow specialization in different fields. • Leads to functional and line and staff conflicts.
2 . P R O D U C T D E PA R T M E N T S T R U C T U R E
PRODUCT ORGANIZATION STRUCTURE
• Appropriate for organizations with multiple products. • Improves coordination across functions. • Suited to a more dynamic environment. • Moves decisions close to the problem. • Clarifies profit / loss accountability.
• Result in inconsistent decisions form one department to another. • Involves difficulty in allocating over heads. • Results in duplication of equipment and personnel. • Encourages dysfunctional competition for resources. • Results in loss of specialization. • Emphasis departmental rather than organizational goals.
TERRITORY / GEOGRAPHICAL ORGANIZTION STRUCTURE •Based on Geographical departmentation •Example : banking, insurance, transportation •Operations are grouped into zones, divisions, branches etc.
3. TERRITORY / GEOGRAPHICAL ORGANIZATION STRUCTURE
Head Office (Mumbai) Northern Zone (New Delhi) Southern Zone (Chennai)
Eastern Zone (Kolkata)
Central Zone (Kanpur)
Western Zone (Mumbai)
New Delhi Division
TERRITORY / GEOGRAPHICAL STRUCTURE
• Allows tailoring of strategy to needs of each geographical market. • Delegates profit / loss responsibility to lowest strategic level. • Improves functions coordination within the target market. • Takes advantages of economies of local operations. • Resulting good functional coordination.
• • • • • •
Greater difficulty in maintaining consistent company image. Can result in duplication of staff services at headquarters and regional levels. Results in inconsistent decisions form one region to another. Results in duplication of equipment and personnel. Encourages dysfunctional competition for resources Emphasizes regional rather than company goals.
4. STRATEGIC BUSINESS UNIT ORGANIZATIONAL STRUCTURES • Strategic Business Units re the part of business organisation that is treated separately for the strategic management purpose. • SBU Organizational structure is created by adding another level of management in the divisional structure of an organisation after the divisions have been grouped under the divisional top management authority on the basis common strategic interests.
STRATEGIC BUSINESS UNIT ORGANIZATIONAL STRUCTURE
Group Head SBU 1 Divisions A B C
Group Head SBU 2 Divisions D E F
Group Head SBU 3 Divisions G H I
SBU’S ORGANIZATIONAL STRUCTURE
Advantages • Establishes coordination between divisions with common strategic interests. • Facilitates strategic management in large organisations. • Establishes accountability at different levels at business units.
Disadvantages • Difficulty in handling too many SBU’s in a large diversified organisation. • Difficulty in assigning responsibility and defining autonomy for SBU heads. • Existence of another layer of management between corporate and divisional management.
5. MATRIX STRUCTURE •Matrix Structure enables an organisation to assign functional specialists to work on special or new projects. •For the duration of the project, specialists from different areas or departments form a group or a team members. Once the project complete, the team members revert back to their departments.
Project Manager A Project Manager B Project Manager C
MATRIX STRUCTURE Strategic Advantages
• • • • Gives formal attention to each dimension of strategic priority. Creates checks and balances among competing view points. Facilitates capture of functionality based strategy fits in diversified companies. Encourages cooperation, consensus-building, conflict resolution and coordination of related activities. Permits focus of attention on more variables and encourages generation of new ideas. Encourages optimization of organizational goals. • • •
Very complex to manage. Hard to maintain balance between the two lines of authority. It is hard to move quickly and decisively without getting clearance from many other people. Violates unity of command. Managers should have interpersonal skills. Requires too much time for meetings and collaboration. Requires decision making input from any sources. May result in conflict between functional and project managers.
Matching Structure and STrategy Stages of organization development is an important factor that influence the match between strategy and structure. 3 models are developed by Thain, Cannon and Greiner. 1. Cannon’s stages of Development Model 2. Thain’s stages of Corporate Model 3. Greiner’s Phases of Organizational Growth
Cannon’s stages of Development Model Stage I: Entrepreneurial Stage (Owner-Manager) Stage II: functional managers will be hired. Problems push the company to the next stage. Stage III: restructured based on product or geographic. Stage IV: management employ additional human resources to assist top management. Stage V: move to recentralization may be as part of a cutback and turnaround strategy.
Thain’s stages of Corporate Development Model Stage I: Entrepreneurial Stage (Owner-Manager) Stage II: specializes in product and concentrates in one area. Companies try to overcome this danger by diversifying the activities. Stage III: conglomerately diversified with multiple operating units controlled by corporate office.
Greiner’s stages of Corporate Development Model
Stage I: Creativity centers around the development of products and markets. Management spends most of the time in solving operating problems, rather than in managing the company. Stage II: Functional managers improve the organizational efficiency and performance. Decision-making is centralized among the functional managers. Stage III: concerned with delegation. Lower level mangers are delegated with strategic decision making authority for particular products or markets. Top level management concentrates on business growth and diversification. Absence of coordination among business units relating to products or markets creates revolution. Stage IV: Improvement and maintenance of coordination is the main concern. Decentralized units are combined into strategic business units. Stage V: strives to enhance collaboration. Behavioral orientation, group working, project teams and matrix structures are adopted to improve problem solving.
• STRATEGIC IMPLEMENTATION – Behavioral Issues
LEADERSHIP • Leadership is the relationship in which one person influences others to work together willingly on a related task to attain goals devised by the leader.
Autocratic Leader He believes that he is able to control people through rewards and punishments. Example : Army Democratic Leader He believes in sharing ideas and opinions. He encourages two-way communication and participation of subordinates in all types of decisions. Free-rein Leadership He gives complete freedom to subordinates. People are encouraged to set their goals and means of achieving them.
Transformational Leader and Transactional Leadership Styles 1. Transactional Leader He use the authority to exchange rewards like pay, fringe benefits, status for employees contribution to the job and organization. Transformational Leadership Inspire involvement in a mission, giving followers, a dream of a higher order than the followers.
CORPORATE CULTURE Corporate Culture refers to the values and patterns of beliefs and behavior that are accepted and practiced by the members of a company.
VALUES Individual values influence the organizations as well as the strategy. Values are shaped by the organizational environment and nature of the business.
POWER Strategic management to which individuals or groups are able to persuade, induce others into following certain courses of actions.
SOCIAL RESPONSIBILITIES Stake holder of a company is an individual or a group who has a stake in the consequences of management decisions and can influence those decisions.
ETHICS Business Ethics “is concerned primarily with the relationship of business goals and techniques to specifically human ends.”
Be good corporate citizen Contribute resources to the community; Improve quality of life. Be Ethical Obligation to do what is right, just, and fair. Avoid harm. Obey the law. Law is society’s codification of right and wrong. Play by the rules of the game.
Be Profitable The foundation upon which all others rest.
Golden Rule: Act in a way that results expect others to act towards you. Act in a way that results in the greatest good for the greatest number. Act in such a way that the action you take could be a universal law or rule of behavior under the circumstances. Take actions that a disinterested panel of professional colleagues would view as proper.
ORGANIZATIONAL CHANGE Strategists are called a change agent as his role to initiate the change, and help make it work successfully. Employees support is most essential in implementing the change successfully as they are at the helm of affairs, tough the strategist is an agent of change.
ORGANIZATIONAL DEVELOPMENT A complex educational strategy designed to increase organizational effectiveness and wealth through planned inventions by a consultant using theory and techniques of applied behavioral science.
STRATEGIC IMPLEMENTATION – Functional Issues
1. 2. 3. 4. OPERATIONAL / PRODUCTION POLICIES MARKETING POLICIES FINANCIAL POLICIES HUMAN RESOURCE POLICIES
OPERATIONAL / PRODUCTION POLICIES
• • • • • • •
Operations Production Function (Process, Capacity, Inventory, HR, Quality) Decision Making in Operations (Cost, Quality, Dependability, Flexibility) Product Design (Market Driven, Technology Driven, Interfunctional View) Process Selection (Line-Flow, Intermittent Flow, Project) Choice of Technology Process Flow Analysis (Plant Location) Facilities Decisions (warehouse location, retail store location, emergency service location) • Inventory management (what to order, when to order, control system) • Quality Planning and Control (Quality of design, Quality of conformance)
MARKETING POLICIES • • • • • • • • • • Market-Oriented Strategic Planning Differentiating and Positioning the Market Offering Developing New Products Choosing a General Attack Strategy Managing Product Lines, Brands and Packaging Designing pricing Strategies and Programmes Marketing Channels/Place Promotion/Marketing Communications Electronic Markets Online Marketing
FINANCIAL POLICIES • Planning and Managing Assets • Management of Cash • Management of Accounts Receivables
HUMAN RESOURCE POLICIES • Employment • Job Design & Analysis • Recruitment and Selection
• Human Resource Development • Performance Analysis and Development • Training and Development • Career Planning and Developments • Wages and Benefits • Wage and Salary • Fringe Benefits
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