Chapter 7

Implementing Strategies: Management &

Operations Issues

Ch 7 -1
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 Ch 7 -2
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Strategy Formulation vs.
Implementation
Strategy Formulation (SF)
n Positioning forces
before the action
n Focus on effectiveness
n Primarily intellectual
n Requires good intuitive
and analytical skills
n Requires coordination
among a few people
DMU- strategic management
Strategy Implementation
(SI)
n Managing forces during
the action
n Focus on efficiency
n Primarily operational
n Requires special
motivation and
leadership skills
n Requires coordination
among many people
Ch 7 -3
Nature of Strategy Implementation
SI problems can arise because of the shift in responsibility,
especially if SF decisions come as a surprise to middle- and
lower-level managers. Therefore, it is essential to involve
divisional and functional managers in SF.

n Shift in responsibility

Divisional or
Strategists Functional
Managers

Ch 7 -4
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 Management Issues Central to
Strategy Implementation
n Establish annual
objectives
n Devise policies
n Allocate resources
n Alter existing
organizational structure
n Restructure & reengineer
n Revise reward & incentive
plans
n Minimize resistance to
change
DMU- strategic management
n Match managers to strategy
n Develop a strategy-
supportive culture
n Adapt production/operations
processes
n Develop an effective human
resources function
n Downsize as needed
n Link performance & pay to
strategies
Ch 7 -5
Purpose of Annual Objectives

nBasis for resource allocation

nMechanism for management evaluation
nMajor instrument for monitoring progress
toward achieving long-term objectives
nEstablishpriorities (organizational, divisional,
and departmental)

Ch 7 -6
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Resource Allocation

Four Types of Resources

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

Ch 7 -7
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 MATCHING STRUCTURE WITH STRATEGY

n Changes in strategy often require changes in the way an

organization is structured because:
n (1) structure largely dictates how objectives and policies will be
established (e.g., objectives and policies established under a
geographic organizational structure are couched in geographic
terms) and
n (2) structure dictates how resources will be allocated (e.g., if an
organization’s structure is based on customer groups, then resources
will be allocated in that manner).
n Structure should be designed to facilitate the strategic pursuit of a
firm and, therefore, follow strategy.
n When a firm changes its strategy, the existing organizational
structure may become ineffective.
n For example, new strategies to reduce payroll costs may require a
change in span of control.
Ch 7 -8
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 Ch 7 -9
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Basic Forms of Structure

n Functional Structure
n Divisional Structure
n Strategic Business Unit Structure
(SBU)
n Matrix Structure

Ch 7 -10
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Functional Structure

n Groups tasks and activities by business

function (e.g., production, finance,
marketing, R&D, HR, IT, etc.).

Ch 7 -11
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Functional Structure

Ch 7 -12
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Divisional Structure

n Canbe organized in one of four

ways:
q By geographic area
q By product or service

q By customer

q By process

Ch 7 -13
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Divisional Structure

Ch 7 -14
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Strategic Business Unit Structure
(SBU)
n Groups similar divisions into
strategic business units and
delegates authority and
responsibility for each unit to a
senior executive who reports
directly to the chief executive
officer.
Ch 7 -15
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Matrix Structure

n The most complex of all structures

because it depends upon both
vertical and horizontal flows of
authority and communication.

Ch 7 -16
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Matrix Structure

Ch 7 -17
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 Restructuring

nRestructuring - reducing the size of an organization.

Also called:
q Downsizing
q Rightsizing
q Delayering
These methods involve, respectively, reducing the
number of employees, number of divisions, and number
of hierarchical levels in a firm’s organizational structure.
Reducing the size of an organization is intended to
improve its efficiency and effectiveness.

Ch 7 -18
DMU- strategic management
Creating a Strategy-Supportive Culture
1. Formal statements of organizational
philosophy
2. Design of physical spaces
3. Deliberate role modeling, teaching, and
coaching
4. Explicit reward and status system
5. Stories, legends

Ch 7 -19
DMU- strategic management
Creating a Strategy-Supportive Culture

6. What leaders pay attention to

7. Leader reactions to critical incidents and
crises
8. Organizational design and structure
9. Organizational systems and procedures
10. Criteria for recruitment, selection,
promotion,, retirement, and of people

Ch 7 -20
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Production/Operations Decision
Examples
nPlant size
nInventory / Inventory control
nQuality control
nCost control
nTechnological innovation
Ch 7 -21
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Human Resource Concerns
§Assessing staffing needs and costs.
§Selection Methods.
§Employee Training.
§Motivating Employees – Developing
Performance Incentives; Work-Life
Balance Issues; etc.
§Selecting Appropriate Leadership
Styles.
Ch 7 -22
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