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Strategy Implementation

Strategy Implementation
 Strategy implementation is the activation of the strategy.

Formulation addresses What & Why while implementation addresses Who, When, Where & How.  The implementation of strategies is concerned with the design & management of systems to achieve the best integration of people, structures, processes, & resources in reaching organizational purposes.  It may be said to consist of securing resources, organizing these resources, & directing the use of these resources within & outside the organization.

Strategy Implementation
 Strategy formulation & strategy implementation are

interrelated :  These two elements are interwoven, though they seem to be two completely different functions. They have two types of linkages :  Forward Linkage : Formulation has a forward linkage with implementation since the total implementation activities are structured according to the strategy chosen. What would be organizational processes & systems is going to be determined by the strategy. Thus implementation is dependent on the formulation.

 Backward Linkage :  Formulation has got a backward linkage

with implementation since as organizations tend to adopt those strategies which can be implemented with the help of present structures and resources combined with some additional efforts.

 Activating a strategy involves the following activities :  Institutionalization of strategy : Usually a strategy reflects

the philosophy of the Top Boss and hence as soon as a strategy has been finalized, it should immediately be circulated and talked about in the entire organization to increase acceptability. All employees should be motivated to absorb the strategy in their minds as their own strategy, to get the maximum co-operation from employees.  Formulation of action plans : Taking into consideration the objectives of the strategy, action plans have to be formulated by thinking about all possible ways to reach the achievement of the strategic objectives.

 Resources allocation : For the achievements of

strategic goals, all kinds of resources will have to be allocated viz. money, building, plants, & most imp. management talents and technical skills. The success is going to depend upon the quality of resources allocated & its effective utilization. Two types of problems are faced in resources allocation:  Basis of resources allocation  Problems in resources allocation

 Basis of resources allocation :  Budgeting is the way through which resources are

allocated to various organizational units. Resources are allocated either by :  Deciding a place where they have maximum contributions or  According to the needs of various units / subunits.

 Budgeting has to be oriented to the objectives of

the organization & the way each unit of the organization will contribute to the achievement of these objectives. Following types of Budgeting are most common :  Capital Budgeting  Performance Budgeting  Zero Based Budgeting  Strategic Budgeting

 Capital Budgeting : Is the planning of deployment

of financial resources for the purpose of maximizing the long term profitability of the organization. It takes into consideration factors like avg. rate of return, payback period, internal rate of return, Net present value etc.  Performance Budgeting : It is an input / output or cost / result budgeting. It compares the past performance and allocates resources to most promising areas.

 Zero Based Budgeting : ZBB is based on a system where

each function, old or new, must be justified in its entirety each time a budget is made. It seeks to answer the reason why managers need to spend any resources at all. All functions are ranked by taking the base of Zero and resources are allocated by the value of importance.  Strategic Budgeting : Here, first questions relating to what activities are need to be performed to generate the required results are solved. It is a two stage process : 1. Preparation of position paper : That shows the background on which strategic budgets are prepared. Include position papers on environment, organizational constraints & resources, Past performance, Future direction of activities etc. 2. Preparation of Budget : Done through the alignment of Corporate Level and SBU Levels.

 Problems in Resource Allocation :  Whatever Basis of allocation is adopted, there are

problems in allocation of resources because:  Resources are scarce  There are competing organizational units each trying to have a major share.  Organization has some past commitments to be fulfilled & hence these past commitments get priority.

Structural Implementation
 It is a pattern in which various parts of an

organization are interrelated and interconnected.  Involves designing of organizational structure & interlinking various units and subunits of the organization created as a result of organization structure.  It addresses how the work of an organization will be divided and assigned among various positions, groups, divisions etc & the co-ordination necessary to achieve objectives will be achieved. Thus there are two aspects : Differentiation & Integration.

Structural Implementation

Phases of Organizational Growth : Initial expansion & accumulation of resources Rationalization of the use of resources. Expansion into new products & business lines Development of new organization structure to enable effective mobilization & utilization of resources. The above 4 stages give rise to 3 types of organization structures : Type 01 : One organization, single product market, hence central decision making. Type 02 : Expansion and hence top boss delegated some decision making & authority to managers. Type 03 : Diversification leads to multi product multi structure and hence need for complete de centralization arises.

 Functional Structure :  Created by grouping the activities on the

basis of functions required for implementing the strategy.  There are two types of Organizational Structures. Formal & Informal. Both need to be considered before finalizing the org. structure.

Types of Org. Structures

 Simple org. structure : Two levels, owner manager &

employee. Useful for small firms. Implementation most easy. Success depends upon the skill levels of the owner.  Functional org. structure : As an org. grows & develops a number of related products and markets, structure changes to reflect specialization in functional areas i.e production, marketing, R&D, etc.  Divisional Org. structure : As firms develop new products in different industries and markets, they may evolve divisional org. structure. Each division may operate autonomously under a divisional head.

Types of Org. Structures

 SBU Structure : When divisional structures

become unmanageable by one CEO, orgs. May re organize themselves by appointing VPs for each related business.  Matrix org. structure : Used to facilitate & development & execution of various programmes or projects. Each of the VPs have functional responsibility for all the projects, while each project manager has project responsibility completing and implementing strategy.