SCHOOL OF BUSINESS AND ECONOMICS

Business Policy and Strategic Management

Lecturer: Dr. Yohannes W.

Individual Assignment II: Chapter summary (4and 5)

Name: Alemnesh Merid

Date Submitted: 05/25/2021

Student ID: GSE/2068/11

 Chapter Four Summary

Strategy Implementation

Strategy Implementation is the process of putting the formulated strategy in to effect as a

part the job. It is also the process of selecting appropriate strategy, mechanism for resource
allocation and applying suitable motivation. It requires a firm to establish annual
objectives, devise policies, motivating employees & allocate resources so that formulated
strategies can be executed. It includes developing strategy supportive culture, creating an
effective organizational structure, redirecting marketing efforts, preparing budgets,
developing and utilizing information system and linking employee compensation to
organizational performance.

Strategy is a unified, comprehensive and integrated plan relating the strategic advantages
of the firm to the challenges of the environment. It is designed to ensure that basic
objectives of the enterprise are achieved

Corporate governance: is the set of mechanism used to manage the relationship among all
stakeholders to determine and control the strategic direction and performance of the
company. It includes electing board of directors, appointing a CEO and etc.

Organizational Structure: is the framework by which the hierarchy of the authority,

responsibility, and reporting direction to manage the company is depicted on. It can be
classified as functional, divisional, strategic business unit and matrix structure.

Functional Structure: the structure that indicates group tasks and activities based on
business functions which include marketing, Finance, HRM and etc. It is simple and
inexpensive, allow rapid decision making, focused on specialization of business and
minimize need for elaborating control system. On the other hand in the functional structure
accountability forced to the top, minimize career development, low employee or manager
morale, discourage delegation of authority and responsibility, communication problems,
inadequate planning for product and market and etc.

Divisional Structure: the structure that is used for geographic area, product or service,
customer and process. It contains clear accountability; local control of local situation,
development of career, delegation of authority is encouraged, internal competitive
environment, flexible to add new area or product and strict control and attention to
products, customers or regions. However it can be costly, duplication of functional
activities, required a skilled management force and elaborate control system, intense
competition as to be dysfunctional and etc.
Strategic Business Unit Structure: Group similar divisions into strategic business units
and delegate authority and responsibility for each unit to a senior executive who reports
directly to the chief executive officer of the overall company

Matrix Structure: it is the most complex of all designs because it depends upon both
vertical and horizontal flows of authority and communication. In this structure we can see
clear project objectives, clear employee performance and result, we can easily accomplish
shutting down of a project, functional resources are shared instead of duplicate. On the
other hand it requires excellent vertical and horizontal flows of communication, it is costly
as it creates more manager positions, violates unity of command principles, creates dual
lines of budget authority and source of reward or punishment, create shared authority and
reporting and requires mutual trust and understanding.

Strategy Vs Structure: Structure supports strategy. If an organization changes its

strategy, it must change its structure to support the new strategy. Changing strategy means
changing what everyone in the organization does. When an organization changes its
structures and not its strategy, the strategy will change to fit the new structure. Strategy
and structure have a reciprocal relationship. This relationship highlights the
interconnectedness between strategy formulation and strategy implementation. In general,
the reciprocal relationship finds structure flowing from or following the selection of the
firm’s strategy. Once in place, structure can influence current strategic actions as well as
choices about future strategies.

Corporate Culture Vs Strategy Implementation: Culture can be defined as a combination

of shared values and beliefs. These are commonly reinforced with corporate symbols and
symbolic behavior that govern people within the organization. It is pervasive and refers to
how people within the corporation think and act as members of the organization. Culture is
essential in terms of encouraging employees to be motivated and take risk, to give attention
to the details and to be outcome oriented, People orientation, the degree to which
management decisions take into consideration the effect of outcomes on people within the
organization. Team orientation, the degree to which work activities are organized around
teams rather than individuals. Aggressiveness, the degree to which people are aggressive
and competitive rather than easygoing. Stability, the degree to which organizational
activities emphasize maintaining the status quo in contrast to growth.

Strategic Leadership Actions in Strategy Implementation;

Leadership: The role of the leader is to get the best out of people and deal with the
unexpected. They should be viewed as facilitators. This is achieved by creating an
environment where actions can take place. Leaders require effective people skills such as
negotiation and delegation. Often leaders acquire their leadership position by means of
technical expertise. This can be dangerous, since their primary function is to facilitate
rather than undertake the work themselves. The leader needs transferable management
skills in addition to technical and marketing competence. Leadership is influencing the
behavior of followers (employees) to get compliance/adherence with the goal to get the job
done.

Strategic Leadership: is the ability to anticipate, envision, maintain flexibility, and

empower others to create strategic change as necessary.

Key Strategic leadership Actions: includes (a) determining strategic direction, which
determining image/reputation that the firm wishes to build in the future, (b) effectively
managing the Firm’s Resource Portfolio – effectively managing the firm’s resource
bases: financial capital, human capital, social capital, and organizational capital (including
organizational culture) and (c) exploiting and maintaining core competencies - Core
competencies are capabilities that serve as a source of competitive advantage for a firm
over its rivals.

(d) Developing human capital and social capital – Human capital refers to the
knowledge and skills of a firm’s entire workforce. Social capital involves relationships
inside (eg with employees) and outside the firm (eg with stakeholders such as other
partner firms, communities, government….) that help the firms accomplishes tasks and
create value for customers and shareholders. (e) Sustaining Entrepreneurial Mind-Set -
encourages and promotes innovation. (f) Changing the Organizational Culture and
Restructuring (if necessary) (g) Emphasizing Ethical Practices - act ethically and (h)
Establishing Balanced Organization- use both financial and non financial measures using
tools like Balanced Scorecard BSC.

Balanced Scorecard: ) is a strategic planning and management system that organizations

use to: communicate what they are trying to accomplish, align the day-to-day work that
everyone is doing with strategy, prioritize projects, products, and services and measure
and monitor progress towards strategic targets. It has a financial objectives and strategic
objectives. The financial objective is outcome focused on improving financial performance
and strategic objective focuses on customer value creations, internal process value creating
process and Learning and growth which help to aligning organizational, information and
human capital with strategy.

The BSC suggests that we view the organization from four perspectives, and to develop
objectives, measures (KPIs), targets, and initiatives (actions) relative to each of these
points of view:
Financial: this perspective views organizational financial performance and the use of
financial resources. Customer/Stakeholder: this perspective views organizational
performance from the point of view the customer or other key stakeholders that the
organization is designed to serve. Internal Process: views organizational performance
through the lenses of the quality and efficiency related to our product or services or other
key business processes. Organizational Capacity (originally called Learning and
Growth): views organizational performance through the lenses of human capital,
infrastructure, technology, culture and other capacities that are key to breakthrough
performance.
 Chapter Five Summary

STRATEGIC MONITORING, EVALUATION, AND CONTROL

We need to review evaluate and control strategies because strategies become obsolete,
internal and external environment are dynamic by their nature.

Strategy evaluation is the process of evaluating how the strategy has been implemented
as well as the outcomes of the strategy. It is the primary means for obtaining information
whether a given strategy is successful or not.

We can observe three fundamental strategy-evaluation activities which are:

(1) Reviewing external and internal factors that are the bases for current strategies,

(2) Measuring performance, and

(3) Taking corrective actions.

Strategy Evaluation is not only final performance as the strategy itself should be
evaluated. This is important because: vital to the organization’s wellbeing, alert
management to potential/actual problems in a timely fashion, erroneous strategic
decisions can have severe negative impact on organizations.

Under strategic monitoring, evaluation and control we can observe three basic activities;
examine the underlying bases of a firm’s strategy, compare expected to actual results and
take corrective actions to ensure that performance conforms to plans.

Criteria for evaluation strategy: Strategy Review, Evaluation, and Control - Richard
Rumelt offered four criteria that could be used to evaluate a strategy which are consistency,
consonance, feasibility, and advantage. These four criteria also called Rumelt’s 4 criteria.

Rumelt’s evaluation aims at simplifying the process of evaluation using for criteria
including consistency, consonance, feasibility and advantage to determine the efficiency as
well as alignment of the strategy with mission and goals of a business. The criteria are vital
in evaluation of a business strategy.

Consistency: Strategy should not present inconsistent goals and policies. Inconsistent
goals and policies lead to wrong direction because they cause confusion
Consonance: Need for strategists to examine sets of trends, as well as individual trends.
This is trying to understand individual variables in the environment and their combined
impact or interaction and relationships with one another (e.g impact of political change on
the economy). A strategy must represent an adaptive response to the external environment
and to the critical changes occurring within it.

Feasibility: can we do it? Do we have the resources that it takes? Neither overtax
resources nor create unsolvable sub-problems. The final broad test of strategy is its
feasibility; that is, can the strategy be attempted within the physical, human, and financial
resources of the enterprise?

Advantage: will this strategy create a competitive advantage to our company? Creation or
maintenance of competitive advantage is an important consideration. A strategy must
provide for the creation and/or maintenance of a competitive advantage in a selected area
of activity. Competitive advantages normally are the result of superiority in one of three
areas: (1) resources, (2) skills, or (3) position.

Strategic Evaluation Framework functions by enforcing a constant benchmarking of the

evolving product in development relative to the original characteristics of a therapy that
would be both differentiated and solve some as yet unmet market need.

Strategy evaluation is the last phase of the strategic management process in which
managers try to assure that the strategic choice is properly implemented and is meeting
the objectives of the organization.

In fact, in strategy evaluation, managers review or appraise the progress in the

performance related to strategy implementation, try to find out any deviations of actual
performance from the chosen strategy that has been put into action, and then take
appropriate actions for making the strategy work.

Strategy evaluation is one kind of follow-through on strategy. Strategy evaluation requires

an effective computerized information system for providing managers with timely
feedback in order to enable them to promptly act on the data.

In practice, strategy evaluation during, (and/or after) implementation requires a control

system -both are integral parts of the monitoring system of the organization.

In large organizations, the strategy-evaluation system should be elaborate and detailed.

This is needed because the existence of many departments/divisions requires effective
coordination.
Strategic Evaluation framework has three activities which are;

1. Reviewing bases of strategy

Internal strengths and weaknesses, as well as external opportunities and threats, form the
bases for a strategy. The opportunities, threats, strengths, and weaknesses are hot likely to
remain valid for a long time.

So, when the implementation of a strategy takes a long time (some strategies may even
take several years for full implementation), these bases (i.e., SWOT data) of strategy should
be reviewed.

A review would reveal how competitors have reacted to the firm’s strategies, how
competitors have changed their strategies in response of (our) company’s strategies,
whether strengths and weaknesses have changed, whether new opportunities by now have
emerged or new threats have surfaced, and above all whether the already-identified
opportunities, threats, strengths, and weaknesses are still as they were at the time of SWOT
analysis, an many other issues like these. Review of the bases of strategy enables the
managers to identify the real reasons for unsatisfactory results.

It may so happen that ineffective strategy has been chosen or strategy has been
implemented very poorly, or sudden changes in the external factors (such as changes in
demand, changes in technology, new policies by government, or actions by competitors)
have prohibited the company from achieving the objectives. The review helps in
discovering these changes.

2. Measuring organizational performance

The second component or activity of the strategy-evaluation framework is the

measurement of organizational performance. Managers need to compare the planned
activities against the actual progress toward achieving stated objectives. That is, actual
results are compared with the planned results.

Then, deviations are detected, if there is any. Evaluation is also made of individual
performance. Progress toward achieving original objectives is evaluated.

3. Taking corrective actions

Corrective actions are not necessary if there are no significant differences between the
planned resort and the actual results. In such a situation, managers will continue to present
a course of action managers take corrective actions only when significant deviations exist.
Actions need to be undertaken on the basis of the nature of the deviation and the causes of
such deviation. It may be necessary to make directives in objectives, the strategy itself,
organization structure, human resources deployed on strategy implementation, policies,
resource allocation, reword systems and more.

Measuring Organizational Performance: Measuring performance is a vital part of

monitoring an organization progress. It comprises measuring the actual or performance
outcomes or results of an organization against its intended goals. The strategic plan
provides performances targets for the organization and it sets the corporate direction.

It also compare expected to actual results including;

 Investigate deviations from plan

 Evaluate individual performance

 Examine progress toward stated objectives

Contingency Planning: is a plan devised for outcome other than in the usual plan. It is
often for risk management for an exceptional risk that, though unlikely would have
catastrophic consequences. We should always have contingency plans (plan B).

These are alternative plans that can be put into effect if certain key events do not occur as
expected

Difficulties of strategy review, evaluation and control: Strategy evaluation is becoming

increasingly difficult with the passage of time, for many reasons.

In previous times, domestic and world economies were more stable in years past, product
life cycles were longer, product development cycles were longer, technological
advancement was slower, and change occurred less frequently, there were fewer
competitors, foreign companies (in non western countries) were weak, and there were
more regulated industries.

Nonetheless, that’s not the reality in today’s business dynamics making strategy evaluation
a challenge to managers.

Other reasons why strategy evaluation is more difficult today include the following trends:
A dramatic increase in the environment’s complexity, the increasing difficulty of predicting
the future with accuracy, the increasing number of variables (environmental variables)
In addition the rapid rate of obsolescence of even the best plans and the increase in the
number of both domestic and world events affecting organizations as well as the
decreasing time span for which planning can be done with any degree of certainty.