STRATEGY IMPLEMENTATION

Strategy management process does not end when the firms decide what strategy or strategies
to pursue. There must be a translation into strategy action.
Nature of Strategy Implementation

Strategy Formulation Strategy Implementation

✓ Positioning forces before by action
✓. Focuses on effectiveness
✓ Intellectual process
✓ Good intuitive and analytical skills
✓ Coordination among few individual
✓ Managing forces during action
✓ Focuses on efficiency
✓ Operational process
✓ Special motivation and leadership skills
✓ Coordination among many individuals

Management Issues Central to Strategy Implementation:

1. Annual objectives
2. Policies
3. Resource Allocation
4. Managing Conflict
5. Matching structure with strategy
a. Functional Structure
b. Divisional Structure
c. Strategic Business Unit (SBU) Structure
d. Matrix Structure
6. Linking performance and pay to strategies
7. Creating a strategy-supportive culture

1. Annual objectives
- Serves as guidelines of action, directing, channelling efforts and activities of organization
members.
- Serves as standards of performance.
- Importance of Annual Objectives:
a. Represent the basis for allocating resources.
b. Primary mechanism for evaluating managers.
c. Major instrument for monitoring progress toward achieving long term objective.
d. Establish organizational, divisional, and department priorities.

2. Policies
- Specific guidelines, procedures, rules, forms, and administrative practices established to
support and encourage work toward stated goals.
- Set boundaries and constraints on the kinds of administrative actions that can be taken to
reward or sanction behavior.
3. Resource Allocation
- Central management activity that allows for execution.

- Types of Resources:
a. Financial Resources
b. Physical Resources
c. Technological Resources
d. Human Resources
- Factors commonly Prohibit Effective Resource Allocation:
a. Overprotection of resources
b. Too great an emphasis on short-run financial criteria
c. Organizational politics
d. Vague strategy targets
e. Reluctance to take risks
f. Lack of insufficient knowledge

4. Managing Conflict
- Conflict
- Disagreement between two or more parties on one or more issues.

- 3 Approaches for Managing Conflict:

a. Avoidance
b. Defusion
c. Confrontation
5. Matching structure with strategy:
a. Functional Structure
b. Divisional Structure
*by geographic area
*by product
*by customer
*by process
c. Strategic Business Unit (SBU) Structure
d. Matrix Structure
Changes in strategy often require changes in the way an organization is structured for 2 major
reasons:
1. Structure largely dictates how objectives and policies will be established.
2. Structure dictates how resources will be allocated.

Some symptoms of an ineffective organizational structure:

1. Too many levels of management
2. Too many meetings attended by too many people
3. Too much attention being directed toward solving interdepartmental conflicts
4. Too large a span of control
5. Too many unachieved objectives
Functional Structure
- Most widely used structure is functional or centralized type, because this structure is
the simplest and least expensive of the seven alternatives.
- Groups tasks and activities by business function such as production/operations,
marketing, finance /accounting, research and development, and computer information
systems.
-
Advantages:
1. Simple and inexpensive.
2. Capitalizes on specialization of business activities such as marketing and finance.
3. Minimizes need for elaborate control systems.
4. Allows for rapid decision making.

Disadvantages:
1. Accountability forced to the top
2. Delegation of authority and responsibility not encouraged
3. Minimizes career development
4. Low employee/manager morale
5. Inadequate planning for products and markets
6. Leads to short-term, narrow thinking
7. Leads to communication problems

The Divisional Structure / Decentralized Structure

- Instead of focusing on specialties, this structure groups individuals based on the
products or projects they are undertaking.
- The divisional structure can be organized in one of four ways:
1. by geographic area
2. by product or service
3. by customer
4. by process

* by geographic area
A divisional structure by geographic area is appropriate for organizations whose strategies need
to be tailored to fit the particular needs and characteristics of customers in different geographic
areas.
* by product (or services)
- The divisional structure by product (or services) is most effective for implementing strategies
when specific products or services need special emphasis.
- This type of structure is widely used when an organization offers only a few products or
services or when an organization’s products or services differ substantially.
* by customer
When a few major customers are of paramount importance and many different services are
provided to these customers, then a divisional structure by customer can be the most effective
way to implement strategies.
* by process
- A divisional structure by process is similar to a functional structure, because activities are
organized according to the way work is actually performed.
- a key difference between these two designs is that functional departments are not
accountable for profits or revenues, whereas divisional process departments are evaluated on
these criteria.

Advantages and Disadvantages of a Divisional Organizational Structure

Advantages:
1. Accountability is clear
2. Allows local control of local situations
3. Creates career development chances
4. Promotes delegation of authority
5. Leads to competitive climate internally
6. Allows easy adding of new products or regions
7. Allows strict control and attention to products, customers, and/or regions

Disadvantages:
1. Can be costly
2. Duplication of functional activities
3. Requires a skilled management force
4. Requires an elaborate control system
5. Competition among divisions can become as intense as to be dysfunctional
6. Can lead to limited sharing of ideas and resources
7. Some regions/products/customers may receive special treatment

Strategic Business Unit

(SBU) Structure
The SBU structure 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.

Disadvantages:
1. It requires an additional layer of management, which increases salary expenses.
2. The role of the group vice president is often ambiguous.
Advantages:
1. Improved coordination and accountability.
2. The tasks of planning and control by the corporate office is more manageable.
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.

Disadvantages:
1. Requires excellent vertical and horizontal flows of communication.
2. Costly because it creates more managerial positions.
3. Violates unity of command principle.
4. Creates dual lines of budget authority.
5. Creates dual sources of reward and punishment.
6. Creates shared authority and reporting.
7. Requires mutual trust and understanding.

Advantages:
1. Project objectives are clear.
2. Employees can clearly see results of their work.
3. Shutting down a project is easily accomplished.
4. Facilitates uses of special equipment/personnel/facilities.
5. Functional resources are shared instead of duplicated as in a divisional structure.

For a matrix structure to be effective, organizations need participative planning, training, clear
mutual understanding of roles and responsibilities, excellent internal communication, and
mutual trust and confidence.

6. Linking Performance and Pay To Strategies

Criterion used to link performance and pay to strategies:
- “Say-on-pay” Policy
- Seniority-based pay to performance-based approaches
- Profit Sharing
- Gain Sharing
- Bonus System
- Combination of reward strategy incentives

Five tests are often used to determine whether a performance-pay plan will benefit an
organization:
1.Doestheplancaptureattention?
2.Doemployeesunderstandtheplan?
3.Istheplanimprovingcommunication?
4.Doestheplanpay-outwhenitshould?
5. Is the company or unit performing better?
7. Creating a Strategy-Supportive Culture

Ways and Means For Altering an Organization’s Culture:

1. Recruitment
2. Training
3. Transfer
4. Promotion
5. Restructuring
6. Reengineering
7. Role Modeling
8. Positive reinforcement
9. Mentoring
10. Revising vision and/or mission
11. Redesigning physical spaces/facades
12. Altering Reward System
13. Altering organizational policies/procedures/practices