Chapter 7

Implementing Strategies

Ch 7 -1
Strategy Formulation vs.
Implementation
Strategy Formulation (SF) Strategy Implementation
 Positioning forces (SI)
before the action  Managing forces during
 Focus on effectiveness the action
 Primarily intellectual  Focus on efficiency

 Requires good intuitive  Primarily operational

and analytical skills  Requires special

motivation and
 Requires coordination leadership skills
 Requires coordination
among a few people
among many people
Ch 7 -2
Nature of Strategy Implementation
SI problems can arise because of the shift in responsibility,
especially if strategic formulation (SF) decisions come as a surprise to
middle- and lower-level managers. Therefore, it is essential to involve
divisional and functional managers in SF.

 Shift in responsibility
Divisional or
Strategists Functional
Managers

Ch 7 -3
 Management Issues
Implementation
 Establish annual
objectives
 Devise policies
 Allocate resources
 Alter existing
organizational structure
 Restructure & reengineer
 Revise reward & incentive
plans
 Minimize resistance to
change
Central to Strategy
 Match managers to strategy
 Develop a strategy-
supportive culture
 Adapt production/operations
processes
 Develop an effective human
resources function
 Downsize & furlough as
needed
 Link performance & pay to
strategies
Ch 7 -4
Purpose of Annual Objectives
Basis for resource allocation
Mechanism for management evaluation
Major instrument for monitoring progress
toward achieving long-term objectives
Establishpriorities (organizational, divisional,
and departmental)

Ch 7 -5
Resource Allocation

Four Types of Resources

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

Ch 7 -6
Managing Conflict
Conflict – a disagreement between two or more parties.
Interdependency of objectives and competition for limited
resources can cause conflict.

 Conflict not always “bad”

 Lack of conflict may signal apathy
 Can energize opposing groups to action
 May help managers identify problems

Ch 7 -7
Matching Structure With Strategy
 Changes in strategy often require changes in the way an organization
is structured because:
 (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
 (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).
 Structure should be designed to facilitate the strategic
pursuit of a firm and, therefore, follow strategy.
 When a firm changes its strategy, the existing
organizational structure may become ineffective. For
example, new strategies to reduce payroll costs may
require a change in span of control.
Ch 7 -8
Ch 7 -9
Basic Forms of Structure

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

Ch 7 -10
Functional Structure
 Groups tasks and activities by business
function (e.g., production, finance,
marketing, R&D, HR, IT, etc.).

Ch 7 -11
Functional Structure

Ch 7 -12
Divisional Structure

 Canbe organized in one of four

ways:
 By geographic area
 By product or service

 By customer

 By process

Ch 7 -13
Divisional Structure

Ch 7 -14
Strategic Business Unit Structure
(SBU)
 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
Matrix Structure

 The most complex of all structures

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

Ch 7 -16
Matrix Structure

Ch 7 -17
 Restructuring
 Restructuring - reducing the size of an organization. Also called:
 Downsizing
 Rightsizing
 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
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, myths, and parables

Ch 7 -19
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, leveling off, retirement, and
“excommunication” of people
Ch 7 -20
Production/Operations Decision
Examples
Plant size
Inventory / Inventory control
Quality control
Cost control
Technological innovation

Ch 7 -21
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