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Definition of strategic management

Strategic management is the art and science of formulating, implementing, and

evaluating cross-functional decisions that enable an organization to achieve its
objectives. As this definition implies:
Strategic management focuses on integrating management, marketing,
finance/accounting, production/operations, research and development, and
information systems to achieve organizational success.
Overview of Strategic Management Process

There are 7 steps strategic management process. These are:
1. Define the Current Business- Every company must choose the terrain on which
it will competein particular, what products it will sell, where it will sell them,
and how its products or services will differ from its competitors.
2. Perform External and Internal Audits- Ideally, managers begin their strategic
planning by methodically analyzing their external and internal situations. The
strategic plan should provide a direction for the firm that makes sense, in terms
of the external opportunities and threats the firm faces and the internal strengths
and weaknesses it possesses.
3. Formulate New Business and Mission Statements- Based on the situation
analysis, what should our new business be, in terms of what products it will sell,
where it will sell them, and how its products or services will differ from its
competitors? What is our new mission and vision?
4. Translate the Mission into Strategic Goals-
5. Formulate Strategies to Achieve the Strategic Goals- The strategies bridge
where the company is now, with where it wants to be tomorrow. The best
strategies are concise enough for the manager to express in an easily
communicated phrase that resonates with employees.
6. Implement the Strategies- Strategy implementation means translating the
strategies into actions and resultsby actually hiring (or firing) people, building
(or closing) plants, and adding (or eliminating) products and product lines.
Strategy implementation involves drawing on and applying all the management
functions: planning, organizing, staffing, leading, and controlling.
7. Evaluate Performance- Strategies dont always succeed. The manager must
evaluate the current performance of the organization by comparing the expected
result and actual performance.

Characteristics of strategic management
a. It is a combination of strategy formulation and strategy implementation
b. It is the highest level of managerial activity
c. It is performed by an organizations CEO and executive team
d. It provides overall direction to the enterprise.

Environmental scanning
Environmental scanning is the internal communication of external information about
issues that may potentially influence an organization's decision making process.
Environmental scanning focuses on the identification of emerging issues, situations,
and potential pitfalls that may affect an organization's future. The information
gathered, including the events, trends, and relationships that are external to an
organization, is provided to key managers within the organization and is used to guide
management in future plans. It is also used to evaluate an organization's strengths and
weaknesses in response to external threats and opportunities. In essence,
environmental scanning is a method for identifying, collecting, and translating
information about external influences into useful plans and decisions.
Why Environmental Scanning?
There are many important reasons to do environmental scanning.
Because of rapid changes in today's marketplace and new and emerging business
It is easy for an organization to fall behind by not keeping up in areas such as
technology, regulations, and various rising trends.
It reduces the chance of being blindsided and results in greater anticipatory
Factors to be consider for environmental scanning:
1. Events are important and specific occurrences taking place in different
environmental sectors.
2. Trends are the general tendencies or the courses of action along which events
take place.
3. Issues are the current concerns that arise in response to events and treats.
4. Expectations are the demands made by interested groups in the light of their
concern for issues.
Guidelines for Crafting Successful Business Strategies
13 commandments for crafting successful business strategies:
Always put top priority on crafting and executing strategic moves that enhance
the firms competitive position for the long-term and that serve to establish it
as an industry leader.
Understand that a clear, consistent strategy when well-crafted and well
executed build reputation and recognizable industry position whereas a
strategy aims solely at capturing momentary market opportunities yields brief
Endeavour not to get stuck back in the pack with no coherent long-term
strategy or distinctive competitive position and little prospects of climbing into
the ranks of industry leaders.
Invest in creating a sustainable competitive advantage for it is a more
dependable contributor to above average profitability.
Play aggressive offend to build competitive advantage and aggressive defend to
protect it.
Avoid strategies capable of succeeding only in the best of circumstance.
Avoid rigidly prescribed or inflexible strategies- changing market conditions
may render it quickly obsolete.
Dont underestimate the reactions and the commitment of the rival firms.
Beware of attacking strong, resourceful rivals without having solid competitive
advantage and ample financial strength.
Consider that attacking competitive weakness is usually more profitable than
attacking competitive strength.
Be judicious in cutting prices without an establish cost advantage.
Beware that aggressive strategic moves to wrest crucial markets share away
from rivals often provoke aggressive retaliation in the form of marketing arms
race and/or price wars.
Employ bold strategic moves in pursuing differentiation strategies so as to
open up very meaningful gaps in quality or service or advertising or other
product attrib
Environmental Threat and Opportunity Profile (ETOP)
ETOP is summarized depiction of the environmental actors and their impact on the
organization. The preparation of ETOP involves dividing the environment into different
sectors and then analyzing the impact of each factor of the organization. A derailed
ETOP subdivides each environment sector into sub factor and then the impact of each
sub factor on the organization and is described in a form of statement. A summary of
ETOP shows only the major factors. ETOP is the most useful way of structuring the
result of environmental analysis.
Environmental Factors Degree of Importance Degree of Impact
Political Legal

Advantage of ETOP
1. It provides a clear of which sector and sub sectors have favorable impact on the organization. It
helps interpret the result of environment analysis.
2. The organization can assess its competitive position.
3. Appropriate strategies can be formulated to take advantage of opportunities and counter the threat.
4. SWOT analysis (Strategic weakness, opportunities and threats.)
Organizational Capability Profile (OCP)
OCP is summarized statement which provides overview of strength and weakness in
key result areas likely to affect future operation of the organization. Information in this
profile may be presented in qualitative terms or quantitative terms.
After the preparation of OCP, the organization is in a position to assess its relative
strength and weaknesses vis-a-vis its competitors. If there is any gap in area, suitable
action may be taken to overcome that.OCP shows the companys capacity. OCP tells
about companys potential and capability. OCP tells what company can do.
Capability Factors Degree of strength and
1. Financial capability factors
a. Source of fund and cost
b. Usage of funds
c. Management of funds

2. Marketing capability factor
a. Product related
b. Price related
c. Promotion related
d. Distribution related

3. Operation capability factor
a. Plant location
b. Production system
c. Operation and control system
d. R & D system

4. Personal capability factor
a. Personnel system
b. Organizational and employee characteristics
c. Industrial relations
d. Quality and motivation of personnel

5. General management capability factor
a. General management system
b. External relations
c. Organizational climate

Strategy formulation
Strategy formulation refers to the process of choosing the most appropriate course of
action for the realization of organizational goals and objectives and thereby achieving
the organizational vision. The process of strategy formulation basically involves six
main steps. Though these steps do not follow a rigid chronological order, however they
are very rational and can be easily followed in this order.
1. Setting Organizations objectives - The key component of any strategy
statement is to set the long-term objectives of the organization. It is known that
strategy is generally a medium for realization of organizational objectives.
Objectives stress the state of being there whereas Strategy stresses upon the
process of reaching there. Strategy includes both the fixation of objectives as well
the medium to be used to realize those objectives. Thus, strategy is a wider term
which believes in the manner of deployment of resources so as to achieve the
objectives. While fixing the organizational objectives, it is essential that the factors
which influence the selection of objectives must be analyzed before the selection of
objectives. Once the objectives and the factors influencing strategic decisions have
been determined, it is easy to take strategic decisions.
2. Evaluating the Organizational Environment - The next step is to evaluate the
general economic and industrial environment in which the organization operates.
This includes a review of the organizations competitive position. It is essential to
conduct a qualitative and quantitative review of an organizations existing product
line. The purpose of such a review is to make sure that the factors important for
competitive success in the market can be discovered so that the management can
identify their own strengths and weaknesses as well as their competitors strengths
and weaknesses. After identifying its strengths and weaknesses, an organization
must keep a track of competitors moves and actions so as to discover probable
opportunities of threats to its market or supply sources.
3. Setting Quantitative Targets - In this step, an organization must practically fix
the quantitative target values for some of the organizational objectives. The idea
behind this is to compare with long term customers, so as to evaluate the
contribution that might be made by various product zones or operating
4. Aiming in context with the divisional plans - In this step, the contributions
made by each department or division or product category within the organization
is identified and accordingly strategic planning is done for each sub-unit. This
requires a careful analysis of macroeconomic trends.
5. Performance Analysis - Performance analysis includes discovering and analyzing
the gap between the planned or desired and the actual performance. A critical
evaluation of the organizations past performance, present condition and the
desired future conditions must be done by the organization. This critical
evaluation identifies the degree of gap that persists between the actual reality and
the long-term aspirations of the organization. An attempt is made by the
organization to estimate its probable future condition if the current trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best
course of action is actually chosen after considering organizational goals,
organizational strengths, potential and limitations as well as the external

Levels of Strategy Formulation
There are three aspects or levels of strategy formulation, each with a different focus,
need to be dealt with in the formulation phase of strategic management. Such as
corporate level, business and functional level strategy.
Corporate Level Strategy: In this aspect of strategy, we are concerned with broad
decisions about the total organization's scope and direction. Basically, we consider
what changes should be made in our growth objective and strategy for achieving it, the
lines of business we are in, and how these lines of business fit together.
Growth Strategies
All growth strategies can be classified into one of two fundamental categories:
concentration within existing industries or diversification into other lines of business or
industries. When a company's current industries are attractive, have good growth
potential, and do not face serious threats, concentrating resources in the existing
industries makes good sense. Diversification tends to have greater risks, but is an
appropriate option when a company's current industries have little growth potential or
are unattractive in other ways. When an industry consolidates and becomes mature,
unless there are other markets to seek (for example other international markets), a
company may have no choice for growth but diversification.
There are two basic concentration strategies, vertical integration and horizontal growth.
Vertical Integration: This type of strategy can be a good one if the company has a
strong competitive position in a growing, attractive industry. A company can grow by
taking over functions earlier in the value chain that were previously provided by
suppliers or other organizations ("backward integration"). This strategy can have
advantages, e.g., in cost, stability and quality of components, and making operations
more difficult for competitors. However, it also reduces flexibility, raises exit barriers
for the company to leave that industry, and prevents the company from seeking the
best and latest components from suppliers competing for their business.
A company also can grow by taking over functions forward in the value chain previously
provided by final manufacturers, distributors, or retailers ("forward integration"). This
strategy provides more control over such things as final products/services and
distribution, but may involve new critical success factors that the parent company may
not be able to master and deliver. For example, being a world-class manufacturer does
not make a company an effective retailer.
Horizontal Growth: This strategy alternative category involves expanding the
company's existing products into other locations and/or market segments, or
increasing the range of products/services offered to current markets, or a combination
of both. It amounts to expanding sideways at the point(s) in the value chain that the
company is currently engaged in. One of the primary advantages of this alternative is
being able to choose from a fairly continuous range of choices, from modest extensions
of present products/markets to major expansions -- each with corresponding amounts
of cost and risk.
Diversification strategies can be divided into related (or concentric) and unrelated
(conglomerate) diversification.
Related Diversification (aka Concentric Diversification): In this alternative, a
company expands into a related industry, one having synergy with the company's
existing lines of business, creating a situation in which the existing and new lines of
business share and gain special advantages from commonalities such as technology,
customers, distribution, location, product or manufacturing similarities, and
government access. This is often an appropriate corporate strategy when a company
has a strong competitive position and distinctive competencies, but its existing industry
is not very attractive.
4. Unrelated Diversification (aka Conglomerate Diversification): This fourth major
category of corporate strategy alternatives for growth involves diversifying into a line of
business unrelated to the current ones. The reasons to consider this alternative are
primarily seeking more attractive opportunities for growth in which to invest available
funds (in contrast to rather unattractive opportunities in existing industries), risk
reduction, and/or preparing to exit an existing line of business (for example, one in the
decline stage of the product life cycle). Further, this may be an appropriate strategy
when, not only the present industry is unattractive, but the company lacks outstanding
competencies that it could transfer to related products or industries. However, because
it is difficult to manage and excel in unrelated business units, it can be difficult to
realize the hoped-for value added.
Stability Strategies
There are a number of circumstances in which the most appropriate growth stance for
a company is stability, rather than growth. Often, this may be used for a relatively
short period, after which further growth is planned. Such circumstances usually
involve a reasonable successful company, combined with circumstances that either
permit a period of comfortable coasting or suggest a pause or caution. Three
alternatives are outlined:
1. Pause and Then Proceed: This stability strategy alternative (essentially a timeout)
may be appropriate in either of two situations: (a) the need for an opportunity to rest,
digest, and consolidate after growth or some turbulent events - before continuing a
growth strategy, or (b) an uncertain or hostile environment in which it is prudent to
stay in a "holding pattern" until there is change in or more clarity about the future in
the environment.
2. No Change: This alternative could be a cop-out, representing indecision or timidity
in making a choice for change. Alternatively, it may be a comfortable, even long-term
strategy in a mature, rather stable environment, e.g., a small business in a small town
with few competitors.
3. Grab Profits While You Can: This is a non-recommended strategy to try to mask a
deteriorating situation by artificially supporting profits or their appearance, or
otherwise trying to act as though the problems will go away. It is an unstable,
temporary strategy in a worsening situation, usually chosen either to try to delay letting
stakeholders know how bad things are or to extract personal gain before things
collapse. Recent terrible examples in the USA are Enron and WorldCom.
Retrenchment Strategies
Retrenchment occurs when an organization regroups through cost and asset reduction
to reverse declining sales and profits.
Turnaround: This strategy, dealing with a company in serious trouble, attempts to
resuscitate or revive the company through a combination of contraction (general, major
cutbacks in size and costs) and consolidation (creating and stabilizing a smaller, leaner
company). Although difficult, when done very effectively it can succeed in both
retaining enough key employees and revitalizing the company.
Captive Company Strategy: This strategy involves giving up independence in
exchange for some security by becoming another company's sole supplier, distributor,
or a dependent subsidiary.
Sell Out: If a company in a weak position is unable or unlikely to succeed with a
turnaround or captive company strategy, it has few choices other than to try to find a
buyer and sell itself (or divest, if part of a diversified corporation).
Liquidation: When a company has been unsuccessful in or has none of the previous
three strategic alternatives available, the only remaining alternative is liquidation, often
involving a bankruptcy. There is a modest advantage of a voluntary liquidation over
bankruptcy in that the board and top management make the decisions rather than
turning them over to a court, which often ignores stockholders' interests.
Five guidelines for when retrenchment may be an especially effective strategy to pursue
are as follows:
When an organization has a clearly distinctive competence but has failed consistently
to meet its objectives and goals over time.
When an organization is one of the weaker competitors in a given industry.
When an organization is plagued by inefficiency, low profitability, poor employee
morale, and pressure from stockholders to improve performance.
When an organization has failed to capitalize on external opportunities, minimize
external threats, take advantage of internal strengths, and overcome internal
weaknesses over time; that is, when the organizations strategic managers have failed
(and possibly will be replaced by more competent individuals).
When an organization has grown so large so quickly that major internal
reorganization is needed.
It is the combined working together of two or more parts of a system so that the
combined effect is greater than the sum of the efforts of the parts. In business and
technology, the term describes a hoped-for or real effect resulting from different
individuals, departments, or companies working together and stimulating new ideas
that result in greater productivity.
Corporate restructuring
It refer to the collection of actions taken by a firm or business unit which involves
changes to its operational efficiency, its asset/business portfolio and its capital and
ownership structure. Corporate restructuring provides a powerful strategic alternative
for distressed companies to resolve financial and operational issues and to navigate
troubled economic times.
Corporate restructuring is a process in which a company changes the organizational
structure and processes of the business. This can happen through breaking up a
company into smaller entities, through buy outs and mergers. When a company uses
one of these methods, it could strengthen the company or it could create more
problems than it is worth.
Advantages and Disadvantages of Corporate Restructuring
1. increasing Value of Parts
One of the main reasons that businesses use corporate restructuring is to divide the
business up for sale. If a company is trying to sell as a conglomerate, it will likely get
lower offers from investors. When the company is split up into separate parts, it can
often get better offers for those individual parts. This can increase the value of the
company as a whole and help get a higher sales price for the business.
2. Reduce Costs
Another benefit of restructuring a company is to reduce business costs. For example, a
company could merge with another company that is very similar and use economies of
scale to run more efficiently. It could cut back on employees and equipment to
streamline business operations. In this way, the company can expand its reach without
adding too much to the overhead of the business. If handled correctly, the company can
add significant value for its shareholders.
Disadvantage /Costs of Restructure
Even though you can reduce long-term costs by restructuring the business, the process
of restructuring can be expensive in itself. When a company restructures itself, it
must pay legal fees and other costs associated with the restructure. If a company
merges with another company, it will also have to come up with the money to buy the
other company. If the restructure does not work out, it could cost the company dearly
and ultimately lead to its demise.
When a company goes through a corporate restructure, it can significantly hurt its
relations with employees. Employees fear change and when they are scared of being
downsized, it can affect morale. In many of these moves, companies have to release
some of the workforce. This can affect the loyalty of employees and it could hurt the
company in the long run. When employees do not know if they will be one of the
unlucky few who get released, it can create tension.

Strategic Analysis and Choice
Boston Consulting Group(BCG)
BCG matrix is a framework created by Boston Consulting Group to evaluate the
strategic position of the business brand portfolio and its potential. It classifies business
portfolio into four categories based on industry attractiveness (growth rate of that
industry) and competitive position (relative market share). These two dimensions reveal
likely profitability of the business portfolio in terms of cash needed to support that unit
and cash generated by it. The general purpose of the analysis is to help understand,
which brands the firm should invest in and which ones should be divested

Relative market share- One of the dimensions used to evaluate business portfolio is
relative market share. Higher corporates market share results in higher cash returns.
This is because a firm that produces more, benefits from higher economies of scale and
experience curve, which results in higher profits. Nonetheless, it is worth to note that
some firms may experience the same benefits with lower production outputs and lower
market share.
Market growth rate- High market growth rate means higher earnings and sometimes
profits but it also consumes lots of cash, which is used as investment to stimulate
further growth. Therefore, business units that operate in rapid growth industries are
cash users and are worth investing in only when they are expected to grow or maintain
market share in the future.
There are four quadrants into which firms brands are classified:
1. Dogs- Dogs hold low market share compared to competitors and operate in a slowly
growing market. In general, they are not worth investing in because they generate
low or negative cash returns. But this is not always the truth. Some dogs may be
profitable for long period of time, they may provide synergies for other brands or
SBUs or simple act as a defense to counter competitors moves. Therefore, it is
always important to perform deeper analysis of each brand or SBU to make sure
they are not worth investing in or have to be divested. Strategic choices:
Retrenchment, divestiture, liquidation.
2. Cash cows- Cash cows are the most profitable brands and should be milked to
provide as much cash as possible. The cash gained from cows should be invested
into stars to support their further growth. According to growth-share matrix,
corporates should not invest into cash cows to induce growth but only to support
them so they can maintain their current market share. Again, this is not always the
truth. Cash cows are usually large corporations or SBUs that are capable of
innovating new products or processes, which may become new stars. If there would
be no support for cash cows, they would not be capable of such innovations.
Strategic choices: Product development, diversification, divestiture, retrenchment.
3. Stars- Stars operate in high growth industries and maintain high market share.
Stars are both cash generators and cash users. They are the primary units in which
the company should invest its money, because stars are expected to become cash
cows and generate positive cash flows. Yet, not all stars become cash flows. This is
especially true in rapidly changing industries, where new innovative products can
soon be outcompeted by new technological advancements, so a star instead of
becoming a cash cow, becomes a dog. Strategic choices: Vertical integration,
horizontal integration, market penetration, market development, product
4. Question marks- Question marks are the brands that require much closer
consideration. They hold low market share in fast growing markets consuming large
amount of cash and incurring losses. It has potential to gain market share and
become a star, which would later become cash cow. Question marks do not always
succeed and even after large amount of investments they struggle to gain market
share and eventually become dogs. Therefore, they require very close consideration
to decide if they are worth investing in or not. Strategic choices: Market penetration,
market development, product development, divestiture

Advantage and limitation of the BCG Model
1. It is easy to use
2. it is quantifiable
3. it draws attention to the cash flows
4. it draws attention to the investment needs

1. it is too simplistic
2. link between market share and profitability is not strong
3. growth rate is only one aspect of industry attractiveness
4. it is not always clear how markets should be defined
5. market share is considered as the only aspect of overall competitive position
Many products or business units fall right in the middle of the matrix, and cannot
easily be classified

Definition of Strategy implementation
Strategy implementation is the translation of chosen strategy into organizational
action so as to achieve strategic goals and objectives.
Strategy implementation is also defined as the manner in which an organization
should develop, utilize, and amalgamate organizational structure, control systems, and
culture to follow strategies that lead to competitive advantage and a better performance.
Implementation involves actually executing the strategic game plan. This includes
setting polices, designing the organization structure and developing a corporate culture
to enable the attainment of organizational objectives. Strategic implementation is a
process by which strategies and policies are put into action through the development of
programs, budgets, and procedures. Strategic implementation is mainly concerned
regarding two issues: Structural Issues and Bhavioural Issues

Every organization has a unique structure. An organizational structure is the reflection
of the companys past history, reporting relationships and internal politics. When
implementing new strategies the management has to take a very close look at the
organization structure and evaluate if it supports the formulated strategy. The CEO has
to customize the organizational structure to fit the strategy. This would improve the
performance of the organization. Different types of organizational structure involve in
response to strategic change.

a. Functional Structure: In a functional structure, the division of labor in an
organization is grouped by the main activities or functions that need to be
performed within the organizationsales, marketing, human resources, and so on.
Each functional group within the organization is vertically integrated from the
bottom to the top of the organization. For example, a Vice President of Marketing
would lead all the marketing people, grouped into the marketing department.
Employees within the functional divisions of an organization tend to perform a
specialized set of tasks, for instance the engineering department would be staffed only
with engineers. This leads to operational efficiencies within that group. However it
could also lead to a lack of communication between the functional groups within an
organization, making the organization slow and inflexible.
As a whole, a functional organization is best suited as a producer of standardized goods
and services at large volume and low cost. Coordination and specialization of tasks are
centralized in a functional structure, which makes producing a limited amount of
products or services efficient and predictable. Moreover, efficiencies can further be
realized as functional organizations integrate their activities vertically so that products
are sold and distributed quickly and at low cost.
Functional Structure

b. Divisional Structure: Also called a "Product Structure", the divisional structure
groups each organizational function into divisions. Each division within a divisional
structure contains all the necessary resources and functions within it. Hence, Work
divided on the basis of product lines, type of customers served, or geographic area

c. Matrix Structure: Matrix structure groups employees by both function and product.
This structure can combine the best of both separate structures. A matrix organization
frequently uses teams of employees to accomplish work, in order to take advantage of
the strengths, as well as make up for the weaknesses, of functional and decentralized
forms. These type of structure is created by assigning functional specialists to work on
a special project or a new product or service. For the duration of the project, specialists
from different areas form a group or team and report to a team leader. Simultaneously
they may work in their respective parent department. Once the project is completed, the
team members revert to their parent departments.

Strategic Business Unit Organization Structure: A strategic business unit is a
distinctive business with its own set of competitors that can be managed reasonably
independently of other business within the organization. Each unit will have a clearly
defined strategy, based on the capabilities and overall organizational needs. Hence, any
part of business org which is treated separately for strategic management purposes.

a. Network structure
Spider web or virtual org.
Non hierarchical highly decentralized & organized around customer groups.


It is vital to bear in mind that organizational change is not an intellectual process
concerned with the design of ever-more-complex and elegant organization structures. It
is to do with the human side of enterprise and is essentially about changing people's
attitudes, feelings and - above all else - their behaviour. The behavioural of the
employees affect the success of the organization. Strategic implementation requires
support, discipline, motivation and hard work from all manager and employees
Influence Tactics: The organizational leaders have to successfully implement the
strategies and achieve the objectives. Therefore the leader has to change the behaviour
of superiors, peers or subordinates. For this they must develop and communicate the
vision of the future and motivate organizational members to move into that direction
Power: it is the potential ability to influence the behaviour of others. Leaders often use
their power their power to influence others and implement strategy. Formal authority
that comes through leaders position in the organization (He cannot use the power to
influence customers and government officials) the leaders have to exercise something
more than that of the formal authority (Expertise, charisma, reward power, information
power, legitimate power, coercive power)
Empowerment as a way of Influencing Behaviour: The top executives have to
empower lower level employees. Training, self managed work groups eliminating whole
levels of management in organization and aggressive use of automation are some of the
ways to empower people at various places.
Political Implications of Power: organization politics is defined as those set of
activities engaged in by people in order to acquire, enhance and employ power and
other resources to achieve preferred outcomes in organizational setting characterized by
uncertainties. Organization must try to manage political behviour while implementing
strategies. They should
Define job duties clearly
Design job properly
Demonstrate proper behaviours.
Promote understanding
Allocate resources judiciously
Leadership Style and Culture Change: Culture is the set of values, beliefs, behaviours
that help its members understand what the organization stands for, how it does things
and what it considers important. Firms culture must be appropriate and support their
firm. The culture should have some value in it .
To change the corporate culture involves persuading people to abandon many of their
existing beliefs and values, and the behaviours that stem from them, and to adopt new
The first difficulty that arises in practice is to identify the principal characteristics of
the existing culture. The process of understanding and gaining insight into the existing
culture can be aided by using one of the standard and properly validated inventories or
questionnaires that a number of consultants have developed to measure characteristics
of corporate culture. These offer the advantage of being able to benchmark the culture
against those of other, comparable firms that have used the same instruments. The
weakness of this approach is that the information thus obtained tends to be more
superficial and less rich than material from other sources such as interviews and group
discussions and from study of the company's history.
In carrying out this diagnostic exercise, such instruments can be supplemented by
surveys of employee opinions and attitudes and complementary information from
surveys of customers and suppliers or the public at large.
Values and Culture: Value is something that has worth and importance to an
individual. People should have shared values. This value keeps the everyone from the
top management down to factory persons on the factory floor pulling in the same
Ethics and Strategy: Ethics are contemporary standards and a principle or conducts
that govern the action and behviour of individuals within the organization. In order that
the business system function successfully the organization has to avoid certain
unethical practices and the organization has to bound by legal laws and government
rules and regulations
Managing Resistance to Change: To change is almost always unavoidable, but its
strength can be minimized by careful advance Top management tends to see change in
its strategic context. Rank-and-file employees are most likely to be aware of its impact
on important aspects of their working lives.
Some resistance planning, which involves thinking about such issues as: Who will be
affected by the proposed changes, both directly and indirectly? From their point of view,
what aspects of their working lives will be affected? Who should communicate
information about change, when and by what means? What management style is to be
Managing Conflict: Conflict is a process in which an effort is purposefully made by one
person or unit to block another that results in frustrating the attainment of the others
goals or the furthering of his interests. The organization has to resolve the conflicts.
Linking Performance and Pay to Strategies: In order to implement the strategies
effectively the organization has to align salary increases, promotions, merit pay,
etc., more closely to support the long term objectives of the organization.

What are the key challenges in strategy implementation?
Many good plans are doomed to failure because they are not implemented correctly.
Strategy must be supported by structure, technology, human resources, rewards,
information systems, culture, leadership, and so on. Ultimately, the success of a plan
depends on how well employees at low levels are able and willing to implement it.
Participative management is one of the more popular approaches used by executives to
gain employees input and ensure their commitment to strategy implementation.
Steps of Strategy Implementation
Institutionalization of strategy.
Formulation of Action Plans.
Project Implementation.
Procedural Implementation.
Resource Allocation.
Structural Implementation.
Functional Implementation.
Behavioral Implementation.

Project implementation
Project implementation refers to the act of putting into action what was planned.
However, given the uncertainty of the project environment the actions taken may
require some modifications on what was planned. Some of the actions include
mobilizing materials and putting them to intended use.
Project implementation

ed to projects is covered under project management
project is a one shot goal limited, time limited , major undertaking , requiring the
commitment of various skills & resources.

Phases of project
Conception phase
Definition phase
Planning & organizing phase
Implementation phase
Clean up phase
Procedural implementation

t act FEMA

demarks requirement

Resource allocation
procurement & commitment of financial , physical & HR to strategic
tasks for the achievement of org. objectives.


Production/Operations Concerns When Implementing Strategies
Production/operations capabilities, limitations, and policies can significantly enhance
or inhibit the attainment of objectives. Production processes typically constitute more
than 70 percent of a firms total assets. A major part of the strategy-implementation
process takes place at the production site. Production-related decisions on plant size,
plant location, product design, choice of equipment, kind of tooling, size of inventory,
inventory control, quality control, cost control, use of standards, job specialization,
employee training, equipment and resource utilization, shipping and packaging, and
technological innovation can have a dramatic impact on the success or failure of
strategy-implementation efforts.

Human Resource Concerns When Implementing
The job of human resource manager is changing rapidly as companies continue to
downsize and reorganize. Strategic responsibilities of the human resource manager
include assessing the staffing needs and costs for alternative strategies proposed during
strategy formulation and developing a staffing plan for effectively implementing
strategies. This plan must consider how best to manage spiraling health care insurance
costs. Employers health coverage expenses consume an average 26 percent of firms
net profits, even though most companies now require employees to pay part of their
health insurance premiums. The plan must also include how to motivate employees
and managers during a time when layoffs are common and workloads are high.
Marketing Issues
Countless marketing variables affect the success or failure of strategy implementation,
and the scope of this text does not allow us to address all those issues. Some examples
of marketing decisions that may require policies are as follows:
1. To use exclusive dealerships or multiple channels of distribution
2. To use heavy, light, or no TV advertising
3. To limit (or not) the share of business done with a single customer
4. To be a price leader or a price follower
5. To offer a complete or limited warranty
6. To reward salespeople based on straight salary, straight commission, or a
combination salary/commission
7. To advertise online or not

Finance/Accounting Issues
In this section, we examine several finance/accounting concepts considered to be
central to strategy implementation: acquiring needed capital, developing projected
financial statements, preparing financial budgets, and evaluating the worth of a
business. Some examples of decisions that may require finance/accounting policies are
1. To raise capital with short-term debt, long-term debt, preferred stock, or common
2. To lease or buy fixed assets
3. To determine an appropriate dividend payout ratio
4. To use LIFO (Last-in, First-out), FIFO (First-in, First-out), or a market-value
accounting approach
5. To extend the time of accounts receivable
6. To establish a certain percentage discount on accounts within a specified period of
7. To determine the amount of cash that should be kept on hand
Management Information Systems (MIS) Issues
Firms that gather, assimilate, and evaluate external and internal information most
effectively are gaining competitive advantages over other firms. Having an effective
management information system (MIS) may be the most important factor in
differentiating successful from unsuccessful firms. The process of strategic
management is facilitated immensely in firms that have an effective information system.
Information collection, retrieval, and storage can be used to create competitive
advantages in ways such as cross-selling to customers, monitoring suppliers, keeping
managers and employees informed, coordinating activities among divisions, and
managing funds. Like inventory and human resources, information is now recognized
as a valuable organizational asset that can be controlled and managed. Firms that
implement strategies using the best information will reap competitive advantages in the
twenty-first century.
Performance Measurement
Performance measurement is a tool to help managers control the outcomes of their
organizations. It enables them to be the driver rather than a passenger on their
organizational journey. The value of performance measurement is summarized in this
lighthearted ditty.
If it can't be measured, it can't be managed.
What gets measured gets watched.
What gets watched gets done.
Principles Of Performance Measurement
1. All significant work activity must be measured.
Work that is not measured or assessed cannot be managed because there is no
objective information to determine its value. Therefore it is assumed that this
work is inherently valuable regardless of its outcomes. The best that can be
accomplished with this type of activity is to supervise a level of effort.
Unmeasured work should be minimized or eliminated.
Work measurement must include the resources (manpower, expenses, and
investment) required to accomplish the desired results.
2. Desired performance outcomes must be established for all measured work.
Outcomes provide the basis for establishing accountability for results rather than
just requiring a level of effort.
Desired outcomes are necessary for work evaluation and meaningful performance
Defining performance in terms of desired results is how managers and
supervisors make their work assignments operational.
3. A time phased performance baseline must be developed to evaluate total
organizational performance.
This baseline must incorporate all organizational activity. This includes:
o Operating performance outcomes that define the desired results from operations
and the operational resources (manpower, material, assemblies, etc.) required to
achieve these results.
o Financial performance outcomes that define the expected revenue and expense
results, and investment required to support operating activity.
o Schedule performance that defines when these results and investment are
expected to occur.
This baseline provides the standard for evaluating organizational results,
determining variances from the plan, and implementing corrective action.
4. Operating and financial performance reporting must be synchronized with
the same reporting periods and reporting frequency.
Reporting periods and frequency must be consistent with the time phasing of the
performance baseline.
5. Performance reporting and variance analyses must be accomplished
Frequent reporting enables timely corrective action.
Timely corrective action is needed for effective management control.
The purpose of variance analysis is to determine the corrective action needed (if any) to
accomplish the desired operating and financial results.
Variance analysis effectiveness is directly proportional to the level of detail used
to develop the performance measurement baseline.
o Comparing the estimating relationships used to develop the baseline with current
measured values provides advance notice of the accuracy of the baseline
o Comparing the baseline to an estimate using these updated relationships will
show how current results are impacting final performance.
The decision whether to take corrective action is driven by the impact of current
performance on estimated final results.
Variance analysis contributes to learning and understanding the system
dynamics that causes the observed results.
Variance analysis has the following objectives.
Analyze the impact of current performance on final operating and financial
o This will determine whether corrective action is indicated.
o If the estimated final results are unacceptable, corrective action is needed.
Determine the root causes of the existing variances.
o Evaluating the estimating relationships used to develop the baseline will assist in
this process.
o A Root Cause Problem Solving model in this website provides a technique to do
Determine the corrective action needed to achieve the desired results.
Operating results must be reported promptly and on a consistent schedule.
Timely corrective action requires prompt variance analysis.
Performance reporting should include the data needed to analyze the estimating
relationships that were used to develop the baseline.