CHAPTER 6

STRATEGY
IMPLEMENTATION

Strategic Management
 Concepts of Strategy Implementation

 Successful strategy formulation does not guarantee successful

strategy implementation

 It is always more difficult to do something (strategy

implementation) than to say you are going to do it (strategy
formulation)!

 If it is not implemented, even the most technically perfect strategic

plan will serve little purpose

 A theoretically imperfect plan that is, executed well will

accomplish more than the perfect plan that never gets off the paper
on which it is typed.
 Cont’d

 Most companies have strategies, but according to recent studies,

between 70% and 90% of organizations that have formulated
strategies fail to execute them.

 Study has shown that 7 out of 10 CEOs, who fail, do so not because
of bad strategy, but because of bad execution.

 In another study of Times 1000 companies, 80% of directors said

they had the right strategies but only 14% thought they were
implementing them well.
 What is Strategy Implementation?

 The sum total of the activates and choices required for

the execution of a strategic plan – it is the process by
which strategies are put into action through budgets,
programs, and procedures.
 Cont’d

 Programs and Tactics

 Tactics: tactic is the individual action taken by the organization as
an element of the effort to accomplish a plan. Tactic is action plan
 Programs: It is a collection of tactics
 A program is a single use plan intended to achieve a precise
objective.
 It clearly designates the steps to be taken, the resources to be used,
and the time period within which the task is to be accomplished
 Cont’d

 Tactics, therefore, may be viewed (like policies) as a link between the

formulation and implementation of strategy
 Some of the tactics available to implement competitive strategies are timing
tactics and market location tactics

i) Timing Tactics: When to Compete

 A timing tactic deals with when a company implements a strategy.

 A timing tactics can be first mover or late mover

First Mover
 The first company to manufacture and sell a new product or service is called

the first mover (or pioneer).

 This tactic hs its own advantage and disadvantage
 Cont’d

Late movers:
 Research indicates that successful late movers tend to be large

firms with considerable resources and related experience

Advantage of late mover
 Late movers may be able to imitate the technological advances of

others (and thus keep R&D costs low),

 keep risks down by waiting until a new technological standard or

market is established, and

 take advantage of the first mover’s natural inclination to ignore

market segments.
 The advantage of late mover is the disadvantage of first mover & vice-versa
 Cont’d

ii) Market Location Tactics: Where to Compete

A company or business unit can implement a competitive strategy
either offensively or defensively.
 An offensive tactic: usually takes place in an established
competitor’s market location.
 A defensive tactic usually takes place in the firm’s own current
market position as a defense against possible attack by a rival
 Cont’d

Offensive Tactics
Some of the methods used to attack a competitor’s position are:
 Frontal assault: the attacking firm goes head to head with its
competitor. It matches the competitor in every category from price to
promotion to distribution channel
 This is generally a very expensive tactic and depressing profits for the
whole industry.
 Flanking maneuver: firm may attack a part of the market where the
competitor is weak.
 Bypass attack: change the rules of the game by cutting the market out
from under the established defender by offering a new type of product
that makes the competitor’s product unnecessary.
 cont’d

 Encirclement: attacking company or unit encircles the competitor’s

position in terms of products or markets or both
 The encircler has greater product variety and/or serves more markets

 Guerrilla warfare: a firm or business unit may choose to “hit and run”
 Characterized by the use of small, intermittent assaults on different
market segments held by the competitor
 Cont’d

Defensive tactics
 defensive tactics aim to lower the probability of attack, divert attacks to less
threatening avenues, or lessen the intensity of an attack
 Instead of increasing competitive advantage per se, they make a company’s/
business unit’s competitive advantage more sustainable by causing a challenger
to conclude that an attack is unattractive
 These tactics deliberately reduce short-term profitability to ensure long-term
profitability
 Raise structural barriers- entry barriers act to block a challenger’s logical
avenues of attack.
 Increase expected retaliation: this tactic is any action that increases the
perceived threat of retaliation for an attack.
 Lower the inducement for attack: a third type of defensive tactic is to reduce a
challenger’s expectations of future profits in the industry
 cont’d

 Budgets
• After programs and tactical plans have been developed, the budget
process begins.
 Budget is the cost of the program
 Planning a budget is the last real check a corporation has on the
feasibility of its selected strategy.
 An ideal strategy might be found to be completely impractical only after
specific implementation programs and tactics are costed in detail
 Cont’d

 Procedures (outlining organizational routines)

 After the divisional and corporate budgets are approved, procedures
must be developed
 To implement the strategy an organization must follow various
procedural requirements.
 Standard Operating Procedures typically detail the various activities
that must be carried out to complete a corporation’s programs &tactical
plans

 Properly planned procedures can help eliminate poor service by making

sure that employees do not use excuses to justify poor behavior toward
customers.
 Who Implements?

 Implementation involves a the whole management team

 Every unit and all employees have a role and need to be
committed

 CEO, other senior executives, and heads of major

organizational units must lead the process and
orchestrate major initiatives
 But they must rely on middle and lower-level managers to push
things on the front line and see that strategy is well-executed on
a daily basis.
 Management Issues Central to Strategy
Implementation
Ch 7 -15
 Establish annual objectives
 Allocate resources
 Alter existing organizational
structure
 Restructure & reengineer
 Revise reward & incentive
plans
 Minimize resistance to
change
 Devise policies
 Match manager 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
 1. Establishing Annual Objectives
 To facilitate implementation, annual objectives should be derived from
the strategic objectives
 The top management frame the general objectives.
 Functional managers must set specific short term objectives(annual
objectives) within the framework of the general objectives.

 Purpose of Annual Objectives

Basis for resource allocation
Mechanism for management evaluation
Major instrument for monitoring progress toward achieving
strategic/long-term objectives
Establish priorities (organizational, divisional, and departmental)
 2. Resource allocation

 There must be proper resource allocation to various units and

activities for successful implementation of strategy and hence
resource allocation is a central management activity.
 To achieve desired objectives all organizations have at least 4
types of resources that can be used Monetary, Physical, Human
and Technological resources.

 Strategic management allows these resources to be assigned

consequently to priorities established by annual objectives
Steps involved in Resource Allocation

 1. Determining the type and the amount of resources

 2. Determining the sources of resources
 3. Mobilization of resources
 4. Resource Allocation
 5. Utilization of Resources
 6. Monitoring the Resources Allocation
 Problems in Resource Allocation

1. Scarcity of Resources: It would be difficult for the management

to obtain right type and right amount of resources due to scarcity
of resources.
2. Over-estimation of Resource need
 Due to over-estimation of resource needs the resource allocation

problem may arise.

 Normally each department may try to obtain maximum amount of

resources. This may be to avoid lack of resources in future.

 Higher the demand of resources from the whole department

makes it problematic to allocate resources appropriately.

Sometimes department gets used to overemphasizing resource
requirements.
 Cont’d

3. Organization’s past allocation of resources

 In the past as their activities were more important than other

activities some units may be allocated with more resources.

 Even though now their activities are not so important sometimes

same allocation is followed in the present situations.

 On the other hand other due to past allocation, department’s

activities may be more important at present, but they do not get

required amount of resources.
 So top management should consider relative importance of the

activities and the allocation of the resources.

 Cont’d

4. Problem of internal politics

 Some manager may involve the internal politics. E.g. departmental

heads for their departments are in a position to get more funds may
be due to their power or influence they have over top management
 As a result those departments who actually deserve more funds do
not get required amount of resources.
 Cont’d

6. Poor financial climate

 Many investors do not invest in the shares issued by the company

due to financial climate. So to raise additional finance company

finds it difficult.
 For strategy implementation this affects the resource allocation.

Sometimes company may have to go for additional loans from

financial institutions at higher cost
 Cont’d

7. Conflicts of interest
 Between management and various other parties (shareholders,

trader unions, employees, government, society etc) there may be

problem of conflict of interest

 For example trade union may insist to assign resources to

employee’s welfare; management may like to assign resources for
transformation.

 With proper conversation between management and various

parties and proper planning of resource allocation this conflict can
be solved
 3. Matching Structure with Strategy
 Changes in strategy leads to changes in organizational structure.
 Structure should be designed to facilitate strategic pursuit of the
firm and therefore, follows strategy.
 Restructuring is the corporate management term for the act of
partially dismantling and reorganizing a company for the purpose
of making it more efficient and therefore more profitable
 However, most of the researchers are of the opinion that there exist
reciprocal relationship between the strategy and the structure.
 The following figure indicates the two way relationships existing
between the structure and strategy
 .Strategy determine the structure .The structure also has
impact on strategy

25

Strategy

Affects
Determines

structure
 Cont’d
26

Restructuring -also called downsizing, rightsizing, or

delaying involves reducing the size of the firm in terms of:
-number of employees,
-number of division or units, or
-number of hierarchical levels in the organizational
structure.
 The reduction in size is intended to improve both efficiency
and effectiveness.
 Restructuring is concerned primarily with shareholders
well-being rather than employee well being.
 4.Matching Staff with Strategy

As in the case of structure, staffing requirements should follow a change

in strategy.
 Changing Hiring & Training Requirements: Having formulated a new
strategy, a corporation may find that it may need to hire new employees, train
current employees or promote experienced employees to implement the new
growth strategy or even firing people with inappropriate or substandard skills.
 Experienced people with the necessary skills need to be found for promotion to
newly created managerial positions.
 Matching the Manager to the Strategy: It is possible that a current CEO may
not be appropriate to implement a new strategy.
 career life cycle for top executives: learning stage, harvest stage & decline stage
 5. Reengineering
28

Reengineering: is the radical redesign of an organization's processes

 It involves redesigning work, jobs, and processes for the

purpose of improving cost, quality, service, and speed.
 It does not imply employee layoffs.
 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.
 6. Managing Resistance to Change

 No organization or individual can escape change. And strategy

implementation often results in 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 strategy implementation
 Cont’d

 Resistance to change can be considered the single greatest threat

to successful strategy implementation

 Resistance in the form of sabotaging production machines,

absenteeism, filing unfounded grievances, and an unwillingness to
cooperate regularly occurs in organizations

 People often resist strategy implementation because they do not

understand what is happening or why changes are taking place
 Thus, managers must manage resistance to change
 Approaches for implement change
Change Advantage
31 Description Disadvantages
strategies

Force change Giving order Implemented High

&enforcing fast resistance, low
commitment
Educative Convince High Implementatio
change people for commitment, n slow, and
change less difficult
resistance
Rational change Convince individual Implementation
easy
(self interest)
 Managing resistance: Institutionalization of
strategy

Institutionalization of strategy is key solution to manage

resistance to change
Institutionalization of strategy involves two aspects
a) Communication and training on Strategy
Communication is a process of sharing the strategy information from
the formulators to the implementer
Strategy must be communicated to those people who would implement
it
once the strategy is formulated. The communication is normally
Divisional or in
writing Strategists Functional
Managers
 Cont’d

(b) Securing acceptance of strategy:

 It is not sufficient to communicate the strategy to the members of
organizations, but it is similarly significant to secure their acceptance
of the strategy, so that they implement the strategy efficiently.

 It is advisable to make a preliminary draft of strategy, and it is spread

among all those who are expected to apply it.

 Management may ask for their recommendations, if required

necessary changes are made in the strategy and after that final
strategy is prepared.
7. Follow right Leadership style

 Leadership should be:

 Proactive
 Goal-oriented
 Focused on the creation and implementation of a
creative vision
8. Create Strategy supportive
Culture
 Consider the following:
 Is the planned strategy compatible with the firm’s
current culture?
 Can the culture be easily modified to make it more
compatible with new strategy?
 Is management willing to make major organizational
changes?
 Is management committed to implementing the strategy
Cont’d

 .Ways of creating strategy supportive culture

9. Establish Strategic Reward Systems

To motivate employees, the company should relate reward with

performance
Individual reward systems

 Piecework plans
 Commission systems
 Bonus plans
 Promotion
 Group and organizational reward systems
 Group-based bonus systems
 Profit sharing systems
 Employee stock option systems
 Organization bonus systems
Why strategies fail during implementation
stage?

There are many reasons that may cause a strategic plan to fail, which
include:
 The company’s senior management has not taking it seriously
enough, that there is a failure to get management involved right from
the start, and the failure to obtain sufficient company resources to
accomplish the task.
 Failure to understand the customer: the strategic plan that instead of
understanding a customer needs and wants fail to deliver. It fails to
answer the question “Why do they buy?” It is also caused by them
doing inadequate or incorrect marketing research
 Cont’d

 Failing in developing new employee and management skills.

 Failure to coordinate: Reporting and control relationships may not be

adequate.

 Failure to obtain employee commitment: the new strategy that is gone to be

applied is not well explained to employees. Also, there are no incentives given
to workers to embrace the new strategy.

 Under-estimation of time requirements: No critical path analysis is been done.

 Failure to follow the plan: No follow through after initial planning, and no
tracking of progress against plan.
 Cont’d

 Failure to manage change: Inadequate understanding of the

internal resistance to change. In addition to, lack of vision on the
relationships between processes, technology and organization.

 Poor communications: Insufficient information sharing among

stakeholders. Exclusion of stakeholders and delegates

 Failure to focus: Inability or unwillingness to make choices which

are true to the strategic mission (i.e. to do fewer things, better),
leads to mediocrity, and inability to compete.
 Increasing Implementation Success rate
41

a) Use Mc Kinsey’s 7-s framework

successful strategy implementation requires the 7-S factors
1. Strategy: A set of decision & action which aims to gain competitive
advantage
2.structure: The organizational chart presenting ,who reports to whom,
and how task to be divide.
3. Systems: Sequential activities engaged in the daily operations
4.Style (leadership)
5. Staff (management):It related to employees training
6. Shared values (culture):is subjected to commonly used
beliefs ,mindsets &assumptions
7.Skills (management):concerned with organization’s dominant
capabilities & competencies
b) Prepare proper action plan

Elements in a Strategy Action Plan

 Policies
 Procedures
 Methods
 Rules
 Objectives
 Time deadlines
 Personnel assignments
 Strategy Implementation Actions (I)

 Overall strategy broken down into manageable parts

 Scope of each part defined in detail
 Goals and deadlines set for accomplishment
 Appropriate resources allocated
 Right numbers and types of people assigned
 Policies and procedures to guide their actions
 One person assigned overall responsibility for each part
 Progress measured and tracked
 Changes and adjustments when appropriate
 Examples of Strategy Implementation Actions
(I)

 Marketing campaigns – new, refocus, expand or

contract, discontinue, different media, test pilots
 Facilities – new, expand, repurpose, close
 Products/services – new (create, develop, invent),
redesign, add new features, discontinue
 Product prices – raise, lower, bundle or unbundle
products
Cont’d
 Operating processes – reengineer, tasks (new,
reorder, combine, separate, perform differently or
less expensively)
 Departments, offices, teams – new, refocus,
discontinue, expand, split up
 Employees – new, transfer, retrain or develop, lay
off
 New systems for monitoring and measuring
operating performance
.

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