Strategic Management: Concepts and Cases

Arab World Edition

Fred R. David
Abbas J. Ali
Abdulrahman Y. Al-Aali

Chapter 8:
Implementing Strategies:
Management and
Operations Issues

Ch 8 -1 Copyright © 2011 Pearson Education

Chapter Outline
The Nature of Strategy Implementation
Annual Objectives
Policies
Resource Allocation
Managing Conflict

Matching Structure with Strategy

Restructuring, Reengineering & E-Engineering

Ch 7-2
Chapter Outline (cont’d)
Linking Performance & Pay to Strategies

Managing Resistance to Change

Managing the Natural Environment
Creating a Strategy-Supportive Culture
Production/Operations Concerns When
Implementing Strategies
Human Resource Concerns When
Implementing Strategies

Ch 7-3
Nature of Strategy
Implementation
Formulation vs. Implementation
 Formulation positions forces before the action
whereas Implementation manages forces during the
action
 Formulation is primarily an intellectual process
whereas Implementation is primarily an operational
process
 Formulation requires good intuitive & analytical skills
whereas Implementation requires special motivational
& leadership skills
 Formulation requires coordination among a few
individuals whereas Implementation requires
coordination among many individuals
Ch 7-4
Nature of Strategy
Implementation
Management Perspectives
 Shift in responsibility from strategists to
managers:
Division or
Strategists Functional
Managers

Ch 7-5
Management Issues

Annual Objectives

Policies

Resources allocation
Management
Issues Matching structure with strategy

Restructuring, Reengineering

Rewards/pay

Ch 7-6
Management Issues (cont’d)

Resistance to Change

Natural Environment

Supportive Culture
Management
Issues Production/Operations

Human Resources

Ch 7-7
Management Issues

Annual Objectives --

-- Establishing annual objectives is a decentralized

activity that involves all managers, this leads to
acceptance and commitment.

Ch 7-8
Management Issues
Annual Objectives are essential for strategy
implementation because they are:--

Basis for resource allocation

Mechanism for evaluating managers
Instrument for gauging progress toward
achieving long-term objectives.
Establish priorities (organizational, division,
& departmental).

Ch 7-9
Management Issues
Characteristics of Annual Objectives

Measurable
Consistent
Reasonable
Challenging
Clear
Understood
Timely
Ch 7-10
Management Issues

Annual Objectives Should State

Quantity (increase revenues by 40%)

Quality (develop 2 products that are
successful)
Cost (obtain finance of $200,000 this year)
Time ( increase production by 20% in 6
months)

Ch 7-11
Management Issues

Annual Objectives

Policies

Resources
Management
Issues Organizational structure

Restructuring

Rewards/Incentives

Ch 7-12
Management Issues

Policies --
-- They facilitate the solving of problems &
guide implementation of strategy. Policy is
a set of guidelines, rules, procedures and
practices that support and encourage work
toward stated goals.
-- policies are needed if our new strategies
include recruiting new people, rent or lease
new facilities…etc.
Ch 7-13
Management Issues

Policies Establish --

Boundaries
Constraints
Limits

Ch 7-14
Management Issues

Annual Objectives

Policies

Resources
Management
Issues Organizational structure

Restructuring

Rewards/Incentives

Ch 7-15
Management Issues

Resource Allocation
-- It is a central management activity
that allows for the execution of strategy
-- annual objectives allow resources to
be allocated according to priorities.
-- it is very detrimental to strategy
implementation if resources are not
allocated on the basis of priorities.
Ch 7-16
Management Issues

4 Types of Resources

1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources

Ch 7-17
Management Issues
Managing Conflict
-- A conflict is a disagreement between two or more
parties on one or more issues
-- competition for limited resources can lead to
conflicts.
-- annual objectives could lead to this competition.
Example: financial manager objective of reducing
debts by 20% in a given year may conflict with R&D
manager objective to invest in developing 2 new
products.

Ch 7-18
Management Issues

Managing Conflict
 Conflicts are not always “bad”: they
may help managers identify problems,
such as people apathy/carelessnes.

Ch 7-19
Management Issues

Conflicts can be Resolved by:

 Avoidance: ignore the problem in hopes that
the conflict will resolve itself (can sometimes
lead to devastating results).
 Diffusion: compromising so that there is no
loser or winner.
 Confrontation: holding a meeting at which
conflicting parties present their views and
work through their differences.

Ch 7-20
CLASS TASK: 30 MINUTES
 Robin Hood Case: for  Devise alternative
the case presented in strategies that can
the article, the student help Robin Hood in
groups are required to
the current situation.
summarize the
strengths,
weaknesses,
 Proposed group size
opportunities and
is 4-5 students.
threats available for
Robin Hood

Ch 7-21
Management Issues

Annual Objectives

Policies

Resources
Management
Issues Matching structure

Restructuring

Rewards/Incentives

Ch 7-22
Management Issues
Structure & Strategy
-- Changes in strategy = Changes in structure for
two reasons:
 Structure dictates how objectives & policies will
be established: if a strategy needs an
organization to develop multinational branches,
then policies and objectives will be stated around
international locations and international laws.
 Structure dictates how resources will be
allocated: if a strategy needs an organization to
be divided into functional areas rather than
product divisions, then resources will be allocated
to functions.
Ch 7-23
Ch 8 -24 Copyright © 2011 Pearson Education
Management Issues

Annual Objectives

Policies

Resources
Management
Issues Organizational structure

Restructuring

Rewards/Incentives

Ch 7-25
Management Issues
Restructuring and Reengineering:
1- Restructuring:
-- Also called downsizing, rightsizing, delayering:
Reducing the size of the firm, number of employees,
divisions and/or units, number of hierarchical levels
It aims at improving both efficiency and
effectiveness. It is concerned about shareholders
well-being rather than employee well-being.
Recession has caused many firms to lose business
opportunity and incurred losses, restructuring can
help reduce losses and expenses.
Ch 7-26
Management Issues
2- Reengineering
-- it is concerned about employee and customer
well-being rather than shareholders well-being.
-- it is reconfiguring or redesigning work, jobs, &
processes to improve cost, quality, service, & speed.
-- it is also called process management, process
redesign, and process innovation. It usually does
not imply employee layoffs or job loss.

Ch 7-27
Management Issues

Annual Objectives

Policies

Resources
Management
Issues Organizational structure

Restructuring

Rewards/Incentives

Ch 7-28
 Reward and Incentives:
Linking Performance and Pay to Strategies
Situation in the Arab World

• Most companies adopt a compensation system which

primarily includes a base salary with annual rises.

• Increasingly in large Arab corporations there is a

tendency to utilize pay systems similar to those found in
western countries. Some of these are explained in the
next slide:

Ch 7-29
Ch 8 -29 Copyright © 2011 Pearson Education
Management Issues
Linking Pay and Performance to Strategies
Dual bonus systems: based on annual objectives
and long-term objectives is very common. Example:
annual bonus is linked with achieving 75% of annual
objectives and 25% of long-term objectives.
Profit sharing systems: annual bonus is linked
with achieving organizational financial winnings such
as increasing profits by 10% this year.
Gain sharing systems: bonus is linked with
performance targets, such as increasing sales by
30% this year.

Ch 7-30
Tests for Performance-Pay Plans
Five tests are used to determine whether performance-pay plan will
benefit an organization
Does the plan capture attention?

Do employees understand the plan? Can they explain what they need
to do to get incentive

Is the plan improving communication?

Does the plan pay out when it should

(when desired results are achieved)?

Is the company or unit performing better? Profits up?

Market share grown?

Ch 7-31
Management Issues (cont’d)

Resistance to Change

Natural Environment

Supportive Culture
Management
Issues Production/Operations

Human Resources

Ch 7-32
Management Issues

Resistance to Change

-- Single greatest threat to successful

strategy implementation

Ch 7-33
Management Issues (cont’d)

Resistance to Change

Natural Environment

Supportive Culture
Management
Issues Production/Operations

Human Resources

Ch 7-34
Management Issues

Natural Environment

-- Wide appreciation for firms that

“mend” rather than “harm” the
environment

Ch 7-35
Management Issues

Natural Environment – Environmental

Strategies

Develop/acquire “green” businesses

Divesting environmental-damaging
business
Low-cost producer through waste
minimization & energy conservation

Ch 7-36
Management Issues (cont’d)

Resistance to Change

Natural Environment

Supportive Culture
Management
Issues Production/Operations

Human Resources

Ch 7-37
Management Issues

Strategy-Supportive Culture

-- strategists should strive to preserve,

emphasize, & build upon aspects of
existing culture that support new
strategies

Ch 7-38
Management Issues
Elements linking culture to strategy:

• Formal statements of philosophy, charters, etc. used

for recruitment and selection, socialization
• Designing of physical spaces, facades, buildings
• Deliberate role modeling, teaching and coaching
• Explicit reward and status system, promotion criteria
• Stories about key people and events

Ch 7-39
Management Issues (cont’d)

Resistance to Change

Natural Environment

Supportive Culture
Management
Issues Production/Operations

Human Resources

Ch 7-40
Management Issues

Production/Operations Concerns

-- Production processes typically

constitute more than 70% of firm’s total
assets

Ch 7-41
Management Issues

Production/Operations Decisions

Plant size
Inventory/Inventory control
Quality control
Cost control
Technological innovation
Ch 7-42
Management Issues (cont’d)

Resistance to Change

Natural Environment

Supportive Culture
Management
Issues Production/Operations

Human Resources

Ch 7-43
Management Issues

Human Resource Concerns

-- HR manager position has strategic

responsibility & has changed
dramatically as companies continue to
reorganize, outsource, etc.

Ch 7-44
Management Issues
Human Resource Strategic Responsibilities
Assessing staffing needs/costs
Developing performance incentives
ESOP’s (employee stock ownership
plan): employees buying shares in the
company.
Child-care policies
Work-life balance issues
Ch 7-45
Benefits of a Diverse Workforce

 Improves corporate culture

 Improves employee morale
 Leads to a higher retention of employees
 Leads to easier recruitment of employees
 Decreases complaints and litigation
 Increases creativity
 Decreases interpersonal conflict

Ch 7-46
Benefits of a Diverse Workforce

 Enables the organization to move into

emerging markets
 Improves client relations
 Increases productivity
 Maximizes brand identity
 Reduces training costs

Ch 7-47