Strategy Imnlamentatinn & CantroSTRATEGY IMPLEMENTATION AND CONTROL * Introduction * Interrelationship Between Strategy Formulation and Implementation * Issues in Strategy Implementation * Organization and Strategy Implementation * Strategic Business Unit and Core Competence * Leadership and Strategic Implementation * Building Strategy and Supportive Corporate CultureIntroduction Implementation of strategy is the process through which a chosen strateg is put into action. It involves the design and management of systems t achieve the best integration of people, structure, processes and resources i achieving organizational objectives. Implementation of Strategy affects an organization from top to bottom, | affects all the functional and divisional areas of business. + Institutionalization of strategy * Setting Proper Organizational Climate * Developing Appropriate Operating Plans * Developing Appropriate Organization Structures * Review of Implemented StrategyStrategy Formulation — Implementation: Interrelationship Strategy implementation | MEEIZINEIM + mode ot te elements of strategic management means putting chosen Strategic decision into action (strategic choice). Allocation of resources to new course of action needs to be undertaken besides need to adapt organization's structure to the chose strategy.Strategy Formulation — Implementation: Interrelationship SOUND not because of strategy model. ‘STRATEGY FORMULATION FLAWED. Strategy fails because of failed implementation and EXCELLENT The matrix shows various Strategy formulation and Strategy Implementation are r] different and it needs to be rN ent seeres| sound and excellent. * WEAK combination of strategy formulation and implementation. STRATEGY IMPLEMENTATIONStrategy Formulation — Implementation: Interrelationship Square A shows formulation of competitive strategy but has difficulties implementing it successfully, This may be due to various factors like lack experience, lack of resources, missing leadership etc. Companies like to move fra square A to square B by realizing their implementation difficulties. Square D shows formulation of flawed strategy but company has excelle implementation skills. Thus they should redesign their strategy befo imple mentation. Square C shows neither the sound strategy formulation nor is effective in strate implementation. They should redesign business model by implementation — executis readjustment. Square B is ideal situation where company has succeeded in designing a sou competitive strategy besides effectively implementing it.Strategy Formulation — Implementation: Interrelationship Strategy is not a long term plan but rather consists of organizations attemr to reach some future state by adapting is competitive position a circumstances change. In organizations that lack strategic direction there is tendency to loo inwards at time of stress, management to cut costs and sheddin unprofitable division. This means that focus is on efficiency (relationshi between inputs and outputs in short time horizon) rather than effectivenes ({ attainment of desired competitive position). Efficiency is introspective whereas effectiveness highlights the links betwee the organization and its environment.Strategy Formulation — Implementation: Interrelationship In cell 1 organization thrives, since it is achieving what it aspires to achieve with efficient output/input ratio. Where in cell 2 and cell 4 organization is doomed unless it can establish strategic direction. In cell 3 strategic direction is present to ensure effectiveness even if rather too much input is being used to generate outputs. Thus to be effective is to survive whereas efficiency is not sufficient for survival. Operational Management Efficient Inefiicient vee] Sra oP ata) cme BT Quickly Effective Inetlecive Strategic ManagementStrategy Formulation — Implementation: Interrelationship STRATEGY FORMULATION It is positioning forces before action. It focuses on effectiveness. It is an intellectual process It requires good intuitive and analytical skills. It requires coordination among few individuals. Concepts and tools do not differ greatly for small, large, profit or non profit organization. STRATEGY IMPLEMENTATION It is managing forces during action. Itfocuses on efficiency, itis primarily and operational process It requires special motivational a leadership skills. It requires combination of ma individuals. ‘Concepts and tools varies substantia among small, large, profit or non pro organization.Strategy Formulation — Implementation: Interrelationship = Implementing strategy requires altering sales territories, adding ne departments, closing facilities, hiring mew employees, changit organizational pricing strategy, developing financial budgets, developi new employee benefits, establishing cost control procedures, changi adver! ig strategies, building new facilities, training new employee building MIS etc. * These types of activities differ greatly between manufacturing, service, ar governmental organizations. = Two types of linkage exists between tow phases of strategic management. * Forward linkage deals with impact of formulation and implementation * Backward linkage is concerned with impact in the apposite direction.Strategy Formulation — Implementation: Interrelationship * Forward Linkage - Different elements in strategy formulation (abjectiv setting, environmental and organizational appraisal, strategic alternative and choice to strategic plan) determines the course that organization adopt itself. Formulation and reformulation is continuous process. * Backward Linkage — While dealing with strategic choice past strategi actions also determine choice of strategy. Organizations tends to ador those strategies which can be implemented with the help of preser structure of resources combined with some additional effort. Suc incremental changes over a period of time take the organization from wher it is to where it wishes to be.Issues in Strategy Implementation Implementation task tests strategist ability to allocate resources, design structures, formulate functional po! ies, identify leadership styles etc. Strategies have to be activated through implementation and realize the intent. Strategies leads to plans. Plans result in different kinds of programmes which includes goals, policies, procedures, rules and steps to be taken in putting them into action. Programs leads to formulation of the project which is time scheduled and casts are predetermined. It requires allocation of funds based on capital budgeting of the organization. Projects creates need for infrastructure for day to day operations in ee oe Een we. Ek pape, tO eaiilinae da igen tm eames LencoIssues in Strategy Implementation = Sequence in which strategy implementation issues are to be considered: + Project Implementation * Procedural implementation: * Resource Allocation > Structural Implementation * Functional Implementation * Behavioral Implementation + These activities are not performed in the same order (can be performe simultaneously, can be repeated etc.). * Transition from strategy formulation to strategy implementation require shift in responsibility from strategist to divisional and functional manager and their invalvernent chould be maximum during ctrateey formulation.Issues in Strategy Implementation Management issues central to strategy implementation include establishing annual objectives, devising policies, allocating resource: altering an existing organizational structure, restructuring, reengineering revising rewards and incentive plans, minimizing resistance to change matching manager with strategy, developing strategy supportive culture adapting production and operation processes, developing effective huma resource function and even downsizing to give firm a new direction. Strategy implementation is key, tap down communication must be clear fe developing bottom up support, competitions intelligence gathering an benchmarking effort of employees is very important and challenge for strategist. Provide training to all to be world class performers.Organization and Strategy Implementation * Strategic change requires change in structure of organization. + Structure largely dictates how objectives and policies will be established and can significantly impact all other strategy implementation activities. * Structure dictates how major resources will be allocated. * There is no optimal organizational design or structure for a given strategy o1 the type of organization and what is appropriate for one organization may not work for other organization even though industry is organized in same way. * For example consumer good companies tend to emulate the divisional structure by product form or organization. * Small firms are functionally structured (centralized) + Medium sized firms are divisionally structured (decentralized) * Large firms are structured on basis of SBU (Strategic Business Unit / Matrix Structure). * With growth of organization structure usually changes from simple to complex as a result of linking of several basic strategies.Organization and Strategy Implementation * Structural change is not affected by change in external and internal factors. + With change in firms strategy organizational structure becomes ineffective. For example — Too many levels of management, too many meetings attended by too many people, interdepartmental conflict resolution, large span of control, and too many unachieved objectives. * Sometimes structure can shape the choice of strategy and to know what type of structural change is needed to implement new strategies and how these changes can be best accomplished. + The organizational structures studied are : Divi jon by * Functional, Geographic, Product, Customer, Divisional process, Strategic busines: unit (SBU), matrixStrategy — Structure Relationship: Chandler’sThe Functional Structure * The most common structure found within organizations, function: structure consists of units or departmental groups identified by specialt such as engineering, development, marketing, finance, sales or huma resources that are controlled from the top level of management. + Advantages: Functional structure promotes specialization of labou encourages efficiency, minimizes the need for an elaborate control systerr and allows rapid decision making. + Disadvantages: It forces accountability at the top, minimize caree development opportunities, low employee morale, line/staff conflicts, poo delegation of authority, inadequate planning for products and market: Mostly it is abandoned in favour of decentralization and improve accountability.The Functional Structure Proper match between strategy and structure gives competitive edge or else will result into failure. Companies must be flexible, innovative, and creative in global economy t exploit their core competencies. Useful Information contributes the for th formation and use of effective structures and controls, which yield improve decision making.The Functional Structure With growth of companies in size, and level of diversification, new strate, my be required. Organizational structure is companies formal configuratic of its intended roles, procedures, governance mechanism, authority ar de in making processes etc. The structure adopted must fit with tl companies strategy. Simple organization structure offers little specialization of tasks, few rule little formalization, direct involvement of owner-manager in all operatior and decision making. Functional structure is used by large companies and companies having lo level of diversification. It also impedes communication and coordination ar have narrow view. Use of multidivisional structure where each division represents separa business entity, each division would house its own functional hierarct divisional managers will be responsible to manage day to day responsibili besides a small corporate office that would determine long term strateg direction and exercise overall financial control over semi-autonomo divisions.The Divisional Structure * When a company expands to supply goods or services to a variety c customers, offers a variety of different products or are engaged in busines in several different markets, the company could adopt a division: organizational structure. + Adivisional structure groups its divisions according to the specific demand of products, markets or customers. Unlike the functional organization: structure, where the different organizational functions of the compan conduct activities satisfying all customers, markets and products, th divisional structure focuses on a higher degree of specialization within specific division, so that each division is given the resources, and autononm to swiftly react to changes in their specific business environment. Therefore each division often has all the necessary resources and functions within it t satisfy the demands put on the division * Each division will likely be structured as a functional structure. A compan with a divisional structure therefore has a subset of different an specialized SBU's satisfying the demands of different customers, markets o roducts.The Divisional Structure * In divisional structure, the organization is organized into various divisions based on basically three criteria product, market of geographical oe structures. * Advantages: Market Information Management Motivation Management Development Specialist Knowledge Timely Decisions Allowing Strategic rales for Top Management Exarpie: Divisional Orgertzational Structure. The two fst atennre se go.ped by counky The it two we go.ced by produd Eat drisen has ts ow intend structiveThe Divisional Structure * The benefit of this organizational structure is that companies are able specialize its activities into self-reliant divisions, each capable of satisfyi e.g. customer demands and changes within the business environment. Vice Preudent, ‘Operating Support Vice President, Administrative Services Personne! |— Personnel Resources Manager, Accounting ‘pea eearies: ‘Accounting and Control |}— Accounting and Control 2 a Division Planning |— bivision PanningThe Strategic Business Unit (SBU) Structure * Large, diversified companies organize themselves into ons to break th management of the company into smaller, organizationally cohesive part: The company headquarters still gives the divisions strategic direction. = Strategic Business Units, or SBUs, are organizationally complete an separate units that develop their own strategic direction. They still repor back to company headquarters but operate as independent businesse organized according to their target markets. They are often large enough t have their own internal organizational di’ » SBU advantages = SBU supports cooperation between the departments of the company which has similar range of activities; = Improvement of strategic management = Improvement of accounting operations, + Easier planning of activitiesThe Strategic Business Unit (SBU) Structure Headquarters Office SBU Disadvantages * Difficulty with contact with higher management + May cause of intemal tension due to difficult access to internal and external sources of fur * May be the cause of the unclear situation with regard to the management activities.The Matrix Structure + The matrix structure is an organizational design that groups employees b both function and product. The organizational structure is very flat, and th structure of the matrix is differentiated into whatever functions are neede ‘to accomplish certain goals. Each functional worker usually reports to th functional heads, but do not normally work directly under their supervision Instead, the worker is controlled by the membership of a certain projec’ and each functional worker usually works under the supervision of a projec manager. This way, each worker has two superiors, who will jointly ensur the progress of the project. The functional head may be more interested i developing the most exiting products or technologies, whereas the projec manager may be more concerned with keeping deadlines and controllin product costs. * When work is accomplished, the project team may get dissolved, an workers from different functional areas may get reassigned to other project and tasks.Matrix StructureThe Matrix Structure The peculiarities or characteristics a matrix organization are: Hybrid Structure : It combines functional organization with a project organization. Functional Manager : The Functional Manager has authority over the technic (functional) aspects of the project. Project Manager : The Project manager has authority over the administrative aspect of the project. He has full authority over the financial and physical resources which h can use for completing the project. Problem of Unity of Command This is so, because the subordinates receive ordet from two bosses viz., the Project Manager and the Functional Manager. Specialization : In a Matrix organization, there is a specialization. The project manage concentrates on the administrative aspects of the project while the function: manager concentrates on the technical aspects of the project. Suitability : Matrix organization is suitable for multi-project organizations. It is main! used by large construction companies, that construct huge residential and commerci projects in different places at the same time. Each project is looked after (handled) b a project manager. He is supported by many functional managers and employees ¢ the company.Advantages of Matrix Structure + The advantages of a matrix organization are:- Sound Decisions : Ina Matrix Organization, all decisions are taken by experts. Development of Skills : It helps the employees to widen their skills. Top Management can concentrate on Strategic Planning : They can delegate all the routine, repetitive and less important work to the project managers. Responds to Changes in Environment : because it takes quick decisions. Specialization : In a matrix organization, there is a specialization. Optimum Utilization of Resources : In the matrix organization, many projects are run at the same time. Therefore, it makes optimum use of the human and physica resources. Motivation : In a matrix organization, the employees work as a team. So, they are motivated to perform better. Higher Efficiency : The Matrix organization results ina higher efficiency. It gives high returns at lower costs.Limitations of Matrix Organization * The limitations of a matrix organization are:- * Increase in Work Load : Ina matrix organization, work load is very high. * High Operational Cost: In a matrix organization, the operational cost is very high. Thisis because it involves a lot of paperwork, reports, meetings, ete. * Absence of Unity of Command : in a matrix organization, there is no unity of command. This is because, each subordinate has two bosses, viz., Functional Manager and Project Manager. * Difficulty of Balance : It is also difficult to balance the authority & responsibilities of the project manager and functional manager. * Power Struggle : In a matrix organization, there may be a power struggle between the project manager and the functional manager. Each one looks after his own interest, which causes conflicts. * Morale : In a matrix organization, the morale of the employees is very low. This is because they work on different projects at different times. * Complexity : Matrix organization is very complex and the most difficult type of organization. * Shifting of Responsibility : If the project fails, the project manager may shift the responsibility on the functional manager.