Strategy implementation

• Implementation involves putting into action the conceptualized

strategy, by formulating various programs, budgets, procedures
and policies.
• Miller defined strategy implementation in the following words-
“Strategy implementation is the process by which strategies and
policies are put into action through the development of
programs, budgets and procedures.”
Process of Strategy implementation
Implementation includes the following steps
i) Resource allocation
ii) Organisation structure design
iii) Planning framework
iv) Leading and staffing
v) Change and communication
vi) Evaluation
Resource allocation

• This has vital significance in strategy implementation. In a single

product firm, it may involve assessment of the resource needs of
different functional departments.
• In a multi divisional organisation, it implies assessing the resource
needs of different SBUs or product divisions.
• Methods of resource allocation include use of:
Percentage of sales or profits
BCG matrix
Budgeting system
Organization structure design

• Appropriate organization structure is to be designed to make strategy

implementable.
• The relation between strategy and structure is established based on
organizational life cycle, corporate development stages and
international businesses.
• Organization design involves changes like:
Job design- Making the jobs more challenging by job analysis and role
redefinition.
Reengineering- Reengineering is a radical redesign of business
process to achieve major gains in cost, service and time. It is an
effective way of implementing turn around strategy. It breaks away
old rules and procedures
 Planning frame work
• The managers involved in implementation of plan and develop programmes,
budgets and procedures.
• Managers should also work for achieving synergy among the divisions and
functional areas in order to maintain distinctive competence.
 Programme- Programmes make strategy action oriented. Ex: Reliance vertical (forward)
integration strategy for growth.

Budgets- This begins after programmes. It is a check on the feasibility of

selected strategy. Budget is expression of programmes in quantitative
terms. Without budgets implementation becomes impractical.
Procedures- After programmes and budgets, Standard operating procedures
(SOPs) must be developed. They detail the various activities that must be
carried out to complete a corporation’s programme. Ex: Mc Donald’s developed very
detailed procedure to ensure that policies are carried out in its fast food retail outlets.
Leadership and staffing
• Implementation involves leading people to utilize their abilities and skill
efficiently and effectively to meet organisational goals.
• Leaders are the key organic elements, who help the organization cope with
changes.
• Failure of leadership may result in goal incongruence, communication break
down, ambiguity etc,.
• Leaders help in transformation in three phases
 Recognising need for revitalization
 Creating a new vision
Institutionalizing change
• Staffing issues involve hiring new people with new skills, firing unskilled or
inappropriately skilled people, or training employed to acquire new skills.
• Staffing requirements are likely to follow a change in human resource strategy
relating to number and quality of people.
Change and communication
• Change is inevitable during implementation. Rationale for strategic
changes should be communicated to workers through news letters
and speeches and even in training programmes.
• Companies in which major cultural changes took place have the
following.
• The CEO with strategic vision, who communicated their vision to
employees at all levels and constantly compared themselves with
competitors for updating.
• Vision , that is translated into key elements for implementation. They
are widely communicated through contests, recognition, rewards etc,
Evaluation

• The importance of strategic evaluation lies in its ability to coordinate

the tasks performed by individual managers, and also groups, division
or SBUs, through the control of performance.
• In the absence of coordinating and controlling mechanisms, individual
managers may pursue goals, which are inconsistent with the overall
objectives of the department, division, SBU or the whole organization
 Resource Allocation
• Most strategies need resources to be allocated to them if
they are to be implemented successfully.
• Resource allocation decisions about how much to invest in
which areas of business reinforce the strategy and commit
the organisation to the chosen strategy.
• Resource allocation deals with the procurement and
commitment of financial, physical and human resources to
strategic tasks for achievement of organisational objectives.
• This involves the process of providing resources to particular
business units, divisions, functions etc for the purpose of
implementing strategies.
Resource Allocation
All organisations have at least five types of resources:
1. Physical Resources
2. Financial Resources
3. Human Resources
4. Technological Resources
5. Intellectual Resources
• These resources may already exist in the organisation or may have to
be acquired.
Approaches to resource allocation
• There are three approaches to resource allocation:
1. Top-down approach
2. Bottom-up approach
3. Strategic budgeting
Approaches….
Top-Down approach
• In this approach, resources are allocated through a process of
segregation down to the operating levels. The Board of Directors, the
Managing Director or members of top management typically decide
the requirements of each subunit and distribute resources
accordingly.
Approaches
Bottom-up approach
• In this approach, resources are distributed through a process of
aggregation from the operating level.
• The operating levels work out the requirements of each subunit and
the resources are allocated accordingly.
Approaches….
Strategic budgeting
This approach is a mix of the above two approaches, and involves an
interactive form of decision-making between different levels of
management.
 Difficulties in Resource Allocation
• The difficulties that can create problems are:
1. Scarcity of Resources: Resources are hard to find. Even if finance is available,
the cost of capital could be a constraint. Non-availability of highly skilled people
could be another problem.
2. Restrictions on Generating Resources: Within organisations, the new units
which have greater potential for growth in the future, may not be able to
generate resources in the short run. Allocation of resources on par with existing
SBUs, divisions and departments through the usual budgeting process, will put
them at a disadvantage.
3. Bloated Demands: Unit managers may sometimes submit inflated or
overstated demands for funds to guard against any budget-cuts. This subverts the
decision process.
4. Negative Attitude: Units, which do not get the desired allocations, may develop
a negative attitude towards the corporate managers. They may work at cross
purposes, which may obstruct the implementation of the intended strategy.
Difficulties….
5. Budget Battles: The actual allocation of funds to any unit has a major
effect on the work environment of the unit and the career of the
manager concerned. If a manager loses the ‘budget battle’, his
subordinates feel that the manager has failed them, and may not
cooperate with him.
6. Budgetary Process: The budgetary process itself can lead to problems
if it is not tied to the strategic plans of the firm. If top management fails
to communicate the shifts in the strategic plans and the lower levels
are unaware of the shifts, any intended strategy is unlikely to succeed .
7. New SBUs: The budgetary process is tied to the way units and
divisions are arranged organisationally. New SBUs can be at a
disadvantage if they are unaware of the intricacies of the budget
procedures used in their organisations.
 Strategic evaluation and control
• The strategist has to evaluate the strategy and its
programme to assess whether the implementation of the
strategy is as per the strategic plan.

• A number of deviations either in the external environment

or in organisational environment may take place. These
deviations, may necessitate a change in the strategy. These
changes also require a strategic evaluation and control.
 Importance of Strategic evaluation
Strategic evaluation is important due to several factors.
• Need for feedback- Within an organization, there is a need to receive
feedback on current performance, so that good performance is rewarded
and poor performance is corrected.
• Validates strategic choice- Strategic evaluation helps to keep a check on
the validity of a strategic choice. An ongoing process of evaluation would, in
fact, provide feedback on the continued relevance of the strategic choice
made during the formulation phase.
• Congruence between decisions and intended strategy- During the course of
strategy implementation managers are required to take scores of decisions.
Strategic evaluation can help to assess whether the decisions match the
intended strategy requirements.
• New Strategy planning- Lastly, the process of strategic evaluation provides a
considerable amount of information and experience to strategists that can
be useful in new strategic planning.
 Process of evaluation
The process of evaluation basically deals with four steps:
• 1. Setting standards of performance-Standards refer to
performance expectations.
• 2. Measurement of performance- Measurement of actual
performance or results requires appraisal based on
standards.
• 3. Analyzing variances- The comparison between standards
and results gives variances.
• 4. Taking corrective action- The identifications of undesirable
variances prompt managers to think about ways of corrective
them
 Strategic control
• Strategic control is related to that aspect of strategic
management through which an organization ensures
whether it is achieving its objectives contemplated in
the strategic action. If not, what corrective actions are
required for strategic effectiveness.
 Purposes of Strategic Control
• The basic purpose of strategic control is to help top management to achieve
strategic goals as planned.
• To be specific, the purposes of strategic control are to answer the questions such
as:
• Are our internal strengths still holding good?
• Have we added other internal strengths?
• Are our internal weaknesses still holding good?
• Do we have other weaknesses?
• Are our opportunities still opportunities?
• Are there new opportunities?
• Are our threats still existing?
• Are there new threats?
Purposes…..
• Are the decisions being made consistent with policy?
• Are there sufficient resources to achieve the objectives?
• Are goals and targets being met?
• Are the organisational vision, mission and objectives
appropriate to the changing environment factors?
 Types of strategic controls
The different types of strategic controls are discussed in brief here.
• Premise control - A company may base its strategy on important
assumptions related to environmental factors (e.g., government
policies), industrial factors (e.g. nature of competition), and
organizational factors (e.g. breakthrough in R&D).
• Premise control continually verifies whether such assumptions are
right or wrong. If they are not valid corrective action is initiated
and strategy is made right.
• The responsibility for premise control can be assigned to the
corporate planning staff who can identify for assumptions and
keep a regular check on their validity.
 Types of strategic controls ……
• Implementation control - Implementation control can be done using
milestone review. This is similar to the identification- though on a smaller
scale-of events and activities in PERT/CPM networks.
Project Evaluation and Review Technique/ Critical Path Method

• After the identification of milestones, a comprehensive review of

implementation is made to reassess its continued relevance to the
achievement of objectives.

• Strategic Surveillance - This is aimed at a more generalized and overarching

control.
• Strategic surveillance can be done through a broad based, general monitoring
on the basis of selected information sources to uncover events that are likely
to affect the strategy of an organization.
Types of strategic controls ……

• Special Alert Control - This is based on a trigger mechanism for rapid

response and immediate reassessment of strategy in the light of
sudden and unexpected events.
• Special alert control can be exercised through the formulation of
contingency strategies and assigning the responsibility of handling
unforeseen events to crisis management teams.
• Examples of such events can be the sudden fall of a government at
the central or state level, instant change in a competitor’s posture, an
unfortunate industrial disaster, or a natural catastrophe.
Types of strategic controls ……….
• Strategic momentum control- These types of evaluation techniques
are aimed at finding out what needs to be done in order to allow the
organization to maintain its existing strategic momentum.
• There are three techniques, which could be used to achieve these
aims:
1. Responsibility control centers
2. Critical success factors
3. Generic strategies
 Approaches to Strategic Control
• According to Dess, Lumpkin and Taylor, there are two approaches to strategic control.
Traditional Approach
• Traditional approach to strategic control is sequential:
1. Strategies are formulated and top management sets goals
2. Strategies are implemented
3. Performance is measured against goals
4. Corrective measures are taken, if there are deviations.
• Control is based on a feedback loop from performance measurement to strategy
formulation. This process typically involves lengthy time lags and often tied to a
firm’s annual planning cycle.
• This reactive measure is not sufficient to control a strategy. As already explained, this
is because a strategy takes a long period for implementation and to produce results.
• The uncertain future requires continuous evaluation of the planning premises and
strategy implementation. There is a better contemporary approach for strategic
control.
 Approaches to Strategic Control……
Contemporary Approach
• Under this approach, adapting to and anticipating both internal and external
environment change is an integral part of strategic control.
• This approach addresses the assumptions and premises that provide the foundation
for the strategy.
• The key question addressed here is: do the organisation’s goals and strategies still fit
within the context of the current environment?
• This involves two key actions:
1. Managers must continuously scan and monitor the external and internal
environment
2. Managers must continuously update and challenge the assumptions underlying
the strategy.
• This may even need changes in the strategic direction of the firm. While strategic
control requires the contemporary approach, operational control is generally done
through traditional approach
 Strategic control process
• Top management, initially must decide what elements of the
environment and the organisation need to be monitored,
evaluated and controlled.
• The strategic control process consists of six steps .
 Strategic control process
• Step 1: Key Areas to be Monitored
The three key areas to be monitored and controlled are:
• The macro-environment,
• The industry environment and
• Internal operations.
Strategic control process ……Step 1

• Macro-environment: Normally, individual companies cannot

influence the environment significantly. But, the external
environmental forces must be continuously monitored as the
changes in the environment influence the strategic
implementation process of the company.
• Strategic Monitoring and Control Includes: Modifying any
one or more of the areas like company’s mission, objectives,
goals, strategy formulation and strategy implementation.
• The modification depends upon the nature and degree of
changes and shifts in the environment
Strategic control process ……Step 1
• Industry Environment: The strategist also monitors and control the
industry related environment. The environmental forces may not be
as they were planned.
• The changes in the environment may provide new opportunities or
pose new threats. The strategy, therefore, should be modified
accordingly.
• The purpose is to modify the company’s strategy, goals and
operations in order to capitalise the new opportunities and defend
against the new threats effectively.
• The industry environment of the future should be considered by the
top management for the purpose of strategic evaluation and control
 Strategic control process…… Step 1
• Internal Operations: The strategist has to evaluate the internal
operations continuously in view of the changes in the macro-
environment and industry environment.
• The strategist has to introduce changes in internal operations
when the changes in the environment affect the strategy.
Strategic control process ……

• Step 2: Establishing Standards

• These standards may be the previous year’s achievements or
the competitor’s records or the fresh standards established by
the management.
• Qualitative judgements like the qualitative features of the
product or service in the last year may be used.
• Quantitative measures like return or investment, return on
sales may also be used for judging the performance.
• Companies should establish the standards for evaluating the
performance of the strategies taking several factors into
consideration.
 Strategic control process …… Step 2…
The standards may include:
• Quality of Products/Services
• Quantity of Products to be Produced
• Quality of Management
• Innovativeness/Creativity
• Long term investment value
• Volume of sales and/or market share
• Financial soundness in terms of return on investment, return on equity capital,
market price of the share, earnings per share, etc.
• Community and environmental responsibility in terms of amount spent on
community development, variety of facilities provided to the community,
programmes undertaken for the environmental protection and ecological
balance, etc.
 Strategic control process …..
• Step 3: Measuring Performance
• The strategist has to measure the performance of various areas of
the organisation before taking an action.
• Strategic audits and strategic audit measurement methods are
useful to measure the organisational performance
• Strategic Audit - strategic audit is an execution and evaluation of
organisation’s operations affected by the strategy implementation.
Strategic audit may be very comprehensive, emphasising all facets
of a strategic management process. It may also be narrowly
focused, emphasising only on a single part of the process such as
environmental process.
 Strategic control process ….
• Step 4: Compare Performance with Standards
• Once the performance of the different aspects of the organisation
is measured, it should be compared with the predetermined standards.
Standards are set to achieve the already formulated
organisational goals and strategies. Organisational standards are
yardsticks and benchmarks that place organisational performance
in perspective.
• The strategists should set standards for all performance areas of
the organisation based on the organisational goals and strategies.
Normally, the standards vary from one company to the other
company. Further, they also vary from time to time in the same
company. The standards developed by General Electric can be
used as model standards. These standards include.
 Strategic control process …. Step 4….
• 1. Profitability Standards: These standards include how much gross profit, net profit, return on investment, earning
per share, percentage of profit to sales the company should earn in a given time period.
• 2. Market Position Standards: These standards include total sales, sales-region-wise and product-wise, market share,
marketing costs, customer service, customer satisfaction, price, customer loyalty shifts from other organisations’
products etc.
• 3. Productivity Standards: These standards indicate the performance of the organisation in terms of conversion of
inputs into outputs. These standards include capital productivity, labour productivity, material productivity, etc.
• 4. Product Leadership Standards: These standards include the innovations and modifications in products to increase
the new uses of the existing product, developing new products with new uses, etc
• 5. Human Resource Standards: Human resource standards include providing competitive salaries, benefits and
different aspects of quality of work-life. These standards also include human resource performance, productivity,
turnover rates, absenteeism rates, etc
• 6. Employee Attitude Standards: Employee attitude standards include employees’ favourable attitude towards the
nature of work, organisation, salaries, benefits, working environment, quantity of work-life, treatment by superiors,
etc. 7. Social Responsibility Standards: All organisations discharge their responsibilities towards different sections of
the society. These standards are related to the services of the organisations towards community, government,
employees, suppliers, creditors, etc.
• 8. Standards Reflecting Balance between Short-range and Long-range Goals: Short-range and long-range strategies
should be balanced successfully. Standards in these areas should bring balance between short-range and long-range
goals.
 Strategic control process …..
Step 5: Take No Action if Performance is in Harmony with Standards
• If the performance of various organisational areas match with the
standards, the strategist need not take any action.
• He should just allow the process to continue. However, he can try to
improve the performance above the standards, if it would be possible,
without having any negative impact on the existing process.
 Strategic control process …..
• Step 6: Take Corrective Action, if necessary
• Strategist should take necessary corrective action, if performance is not
in harmony with standards.
• The strategists compare the performance with standards. If they find any
deviation between the standards and performance, they should take
corrective action to bridge the gap between the standards and
performance.
• Causes of Deviations: It is very easy to conclude that someone made a
mistake, when deviations are identified. But, the deviation may be the
result of an unexpected move by a competitor, a typical whether patterns
or changes in external environment.

• the strategist should consider the following before making a decision, in this regard: • Was the cause of deviation internal or external? • Was the cause random, or should it have been anticipated? • Is the change temporary or permanent? • Are the present strategies still appropriate? • Does
 Strategic control process ….. Step 6
• Corrective Action: Corrective action may be defined as change in a company’s
operations to ensure that it can more effectively and efficiently reach its goals
and perform up to its established standards.
• Strategies that do not achieve standards produce three possible responses, viz.
• (i) to revise strategies,
• (ii) to change standards, and
• (iii) to take corrective action in the existing process without changing standards
and strategies.
• Strategy change may require a ‘fine tuning’ of the existing strategy or complete
changes in strategies. If it is realised that the existing standards are unrealistic
under the present conditions, the strategist should reset the standards taking
the existing conditions into consideration.