Chapter STRATEGY

IMPLEMENTATION
Four
 The nature of strategy implementation
 Strategy implementation is the sum total of the activities
and choices required for the execution of a strategic plan.
 It is the process by which objectives, strategies, and
policies are put into action through the development of
programs, budgets, and procedures.
Who Implements Strategy?
 In most large, multi-industry corporations, the implementers are
everyone in the organization.
 Therefore, every operational manager down to the first-line
supervisor and every employee are involved in some way in the
implementation of corporate, business, and functional strategies.
What Must Be Done?
 The managers of divisions and functional areas work with their
fellow managers to develop programs, budgets, and procedures
for the implementation of strategy.
 They also work to achieve synergy among the divisions and
functional areas in order to establish and maintain a company’s
distinctive competence.
 Achieving Synergy
 One of the goals to be achieved in strategy implementation is synergy between and
among functions and business units.
 According to Goold and Campbell, synergy can take place in one of six forms:
 Shared know-how: Combined units often benefit from sharing knowledge or
skills.
 Coordinated strategies: Aligning the business strategies of two or more
business units may provide a corporation significant advantage by reducing
inter-unit competition.
 Shared tangible resources: Combined units can sometimes save money by
sharing resources, such as a common manufacturing facility or R&D lab.
 Economies of scale or scope: Coordinating the flow of products or services of
one unit with that of another unit can reduce inventory, increase capacity
utilization, and improve market access.
 Pooled negotiating power: Combined units can combine their purchasing to
gain bargaining power over common suppliers to reduce costs and improve
quality.
 New business creation: Exchanging knowledge and skills can facilitate new
products or services by extracting discrete activities from various units.
 Some Management issues central to strategy
implementation
1. Establishing Annual Objectives: Annual objectives are
essential for strategy implementation because
 They represent the basis for allocating resources
 Are a primary mechanism for evaluating
managers
 Are the major instrument for monitoring
progress toward achieving long-term objectives
 Establish organizational, divisional, and
departmental priorities
2. Developing Policies: Policies facilitate solving chronic
problems and guide the implementation of strategy
Policy refers to specific guidelines, methods,
procedures, rules, forms, and administrative practices
established to support and encourage work toward stated
goals
Policies are instruments for strategy implementation
Policies also clarify what work is to be done and by
whom
3. Resource Allocation: Strategic management enables
resources to be allocated according to priorities established
by annual objectives
The real value of any resource allocation program lies in
the resulting accomplishment of an organization’s
objectives
4. Matching Structure with Strategy: Changes in strategy
lead to changes in organizational structure
 Without a strategy or reasons for being (mission), companies find
it difficult to design an effective structure
 Basic types of organizational structure
The Functional Structure: A functional structure groups
tasks and activities by business function, such as
production/operations, marketing, finance/accounting,
research and development, and management information
systems.
 The most widely used structure is the functional structure
because this structure is the simplest and least expensive
Cond’t
The Divisional Structure
As a small organization grows, it has more difficulty
managing different products and services in different
markets
Some form of divisional structure generally becomes
necessary to motivate employees, control operations,
and compete successfully in diverse locations
Cond’t
 The divisional structure can be organized in one of four
ways:
 By geographic area,
 By product or service,
 By customer, or
 By process
The Matrix Structure
A matrix structure is the most complex of all designs
because it depends upon both vertical and horizontal
flows of authority and communication
In contrast, functional and divisional structures depend
primarily on vertical flows of authority and
communication
Cond’t
Arranging of Program for Implementing Strategy
 Strategy is implemented by modifying structure (organizing), selecting the
appropriate people to carry out the strategy (staffing), and communicating
clearly how the strategy can be put into action (leading).
 A number of programs, such as organizational and job design,
reengineering, Six Sigma, MBO, TQM, and action planning, can be used to
implement a new strategy.
 Reengineering and Strategy Implementation:
 Reengineering also called process management, process innovation, or
process redesign involves reconfiguring or redesigning work, jobs, and
processes for the purpose of improving cost, quality, service, and speed.
 Reengineering is concerned more with employee and customer well-
being than shareholder well-being
 The focus of reengineering is changing the way work is actually carried
out
 Reengineering is the radical redesign of business processes to achieve
major gains in cost, service, or time.
 Restructuring (designing Jobs) to Implement Strategy:
 Restructuring also called downsizing, rightsizing, or delayering
involves reducing the size of the firm in terms of number of
employees, number of divisions or units, and number of
hierarchical levels in the firm’s organizational structure
 This reduction in size is intended to improve both efficiency and
effectiveness
 Restructuring is concerned primarily with shareholder well-being
rather than employee well-being.
 Job design refers to the study of individual tasks in an attempt to
make them more relevant to the company and to the employee(s).
Managing Resistance to Change:
 No organization or individual can escape change
 But the thought of change raises anxieties because people fear
economic loss, inconvenience, uncertainty, and a break in normal
social patterns
 Almost any change in structure, technology, people, or strategies
has the potential to disrupt comfortable interaction patterns. For
this reason, people resist change.
Causes of Resistance to Change:
 Lack of trust
 Perception that change is not necessary
 Perception that change is not possible.
 Relatively high cost
 Fear of personal failure
 Loss of status or power
 Social, cultural or organizational disagreements
Handling Resistance to Change:
 Supporting employees and providing training for any new
responsibilities
 Leadership commitment
 Knowledge of change
 Effective communication
 Active participation
 Building the requisite technical capacity
 Coercion
 Negotiation
Human Resource to Implementing Strategies:
 The implementation of new strategies and policies often calls for
new human resource management priorities and a different use of
personnel.
 Such staffing issues can involve hiring new people with new
skills, firing people with inappropriate or substandard skills,
and/or training existing employees to learn new skills.
 If growth strategies are to be implemented, new people may need
to be hired and trained.
 Experienced people with the necessary skills need to be found for
promotion to newly created managerial positions.
 If a corporation adopts a retrenchment strategy, however, a large
number of people may need to be laid off or fired and top
management, as well as the divisional managers, needs to specify
the criteria to be used in making these personnel decisions.
 Leading to implementing strategy:
 Implementation also involves leading through coaching people to use their
abilities and skills most effectively and efficiently to achieve organizational
objectives.
 Without direction, people tend to do their work according to their personal
view of what tasks should be done, how, and in what order.
 Management by Objectives:
 It is a technique that encourages participative decision making through shared
goal setting at all organizational levels and performance assessment based on
the achievement of stated objectives.
 MBO links organizational objectives and the behavior of individuals.
 The MBO process involves:
o Establishing and communicating organizational objectives.
o Setting individual objectives (through superior-subordinate interaction) that
help implement organizational ones.
o Developing an action plan of activities needed to achieve the objectives.
o Periodically (at least quarterly) reviewing performance as it relates to the
objectives and including the results in the annual performance appraisal.
 Managing Corporate Culture:
 Because an organization’s culture can exert a powerful influence on the
behavior of all employees, it can strongly affect a company’s ability to shift its
strategic direction.
 A problem for a strong culture is that a change in mission, objectives,
strategies, or policies is not likely to be successful if it is in opposition to the
accepted culture of the company.
 An optimal culture is one that best supports the mission and strategy of the
company of which it is a part. This means that corporate culture should support
the strategy.
 Unless strategy is in complete agreement with the culture, any significant
change in strategy should be followed by a modification of the organization’s
culture.
 A key job of management involves managing corporate culture. The corporate
culture subject to modification if some new things exists in the environment.
 Assessing Strategy-Culture Compatibility
 When implementing a new strategy, a company should take the time
to assess strategy-culture compatibility.
 Consider the following questions regarding a corporation’s culture:
 Is the proposed strategy compatible with the company’s current
culture?
 Can the culture be easily modified to make it more compatible
with the new strategy?
 Is management willing and able to make major organizational
changes and accept probable delays and a likely increase in costs?
 Is management still committed to implementing the strategy?
Total Quality Management:
 Total Quality Management (TQM) is an operational philosophy
committed to customer satisfaction and continuous improvement.
 Because TQM aims to reduce costs and improve quality, it can be used
as a program to implement an overall low-cost or a differentiation
business strategy.
 TQM has four objectives:
o Better, less variable quality of the product and service
o Quicker, less variable response in processes to customer needs
o Greater flexibility in adjusting to customers’ shifting requirements
o Lower cost through quality improvement and elimination of non-
value-adding work
 TQM emphasizes prevention, not correction. Inspection for quality still
takes place, but the emphasis is on improving the process to prevent
errors and deficiencies.
Action Planning:
 Activities can be directed toward accomplishing strategic goals through
action planning.
 At a minimum, an action plan states what actions are going to be
taken, by whom, during what time frame, and with what expected
results.
 After a program has been selected to implement a particular strategy, an
action plan should be developed to put the program in place.
 Action plans are important for several reasons:
o Action plans serve as a link between strategy formulation and
evaluation and control.
o The action plan specifies what needs to be done differently from the
way operations are currently carried out.
o During the evaluation and control process that comes later, an action
plan helps in both the appraisal of performance and in the
identification of any remedial actions, as needed.
Factors Causing Unsuccessful Implementation of
Strategy
Unsatisfactory combination of strategy
and operational actions
Insufficient Attention
Defective Strategy
10Q FOR YOUR ATTENTION!!

END OF CHAPTER FOUR