MGT 240:Strategic Management

Sibahari Mainali
Suggested Readings:
• Bhattacharya, S. C. Strategic Management; Concepts and Cases, Wheeler Publishing.
• David, F. R. Strategic Management; Concept and Cases, Pearson Education Inc.
• Henry, E. A. Understanding Strategic Management, Oxford.
• Jauch, L. R. and Glueck, W. F. Business Policy and Strategic Management;
Formulation, Implementation and Control, McGraw-Hill.
• Kazmi, A. Business Policy and Strategic Management, Tata McGraw Hill.
• Prasad, L. M. Business Policy and Strategic Management, Sultan Chand and Sons.
• Wheelan, T. L. and Hunger, J. D. Strategic Management and Business Policy, Pearson
Education Inc.
• Chalise, M and Bhandari, D.R. Strategic Management, Asmita Publication,
Kathmandu
Strategy Implementation
• Concept of strategy implementation
o Strategy implementation may be defined as the sum total of the
activities required for the successful execution of strategy. Strategy
formulation and implementation are viewed as the two sides of the
same coin. Strategy formulation is the planning of work whereas
strategy implementation is working of plan.
Strategy Implementation
o Process of strategy implementation/operationalizing the strategy
Determination of annual objectives and policies: Annual
objectives are set with the involvement of all managers in an
organization. Policies facilitate solving regular problems.
Development of functional strategies and tactics: Functional
strategies are developed to achieve functional objectives. After
determinations of functional strategies, functional tactics should be
formulated. Tactics link formulation and implementation of
strategy.
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 Financial planning
 Marketing planning
 HR planning
 R & D planning
 Production/operation planning
 Management information system
 General management
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 Development of programs, budget and procedures
 Programs: Program makes a strategy action oriented. The new strategy
involves a sequence of new programs and activities.
 Budgets: Budget ensures the feasibility of strategy.
 Procedures: After the program and budgets are approved, procedures must
be developed.
 Guidelines and policies: They are established to achieve stated objectives.
 Communication: Strategy should be communicated to the participants.
 Managing conflict: Establishing objectives can lead to conflict which should
be managed and resolved.
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 Matching strategy with structure: When a firm changes its strategy,

the existing organizational structure may become ineffective.

Changes in strategy often require changes in organizational
structure.
 Restructuring and reengineering: Restructuring involves reducing

the size of the firm in terms of number of employees, divisions or

units, and hierarchies. Reengineering is concerned more with
employee and customer well being. It involves redesigning work,
jobs and processes to improve cost, quality, service and speed.
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 Linking performance and pay to strategies: Successful implementation of

strategy demands linking performance and pay to strategies.

 Managing resistance to change: People may fear change due to economic

loss, inconvenience, uncertainty and a break in normal social patterns.

Change must be viewed as an opportunity rather than as a threat by
managers and employees and managed accordingly.
 Force change strategy
 Educative change strategy
 Rational or self-interest change strategy
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Creating a strategy supportive culture: New strategies may

demand different culture. Aspects of an existing culture that are

incompatible to a proposed strategy should identifies and changed.
Strategy evaluation and control to take corrective actions if

necessary to ensure that the direction of strategy implementation is

in the right way.
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• Relationship between strategy and structure
o New strategy is formulated
o New administrative problem emerges
o Organizational performance decreases
o A new organizational structure is established
o Organizational performance improves

The process repeats again and again.

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• Difference between strategy formulation and implementation
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• Organizational structure for strategy implementation
o Simple / Entrepreneurial Structure: In simple structure, the owner/
manager makes all major decisions. He / she monitors all activities.
This structure is characterized by informal relationships, few rules,
limited task specialization and informal information systems.
Coordination is relatively high due to frequent and informal
communications between the manager and employees.
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o Advantages
 Has minimum hierarchy.

 Business decision are quick and effective since they are made by owner or managers.

 It is suitable if the size of the organization is small.

 Motivation of owner or manager is high due to control over the business activities.

 Through direct communication, congenial relationship may be maintained with the

supplier, customer and employees.

o Disadvantages
 It is not suitable to address complex and dynamic business environment.

 Less chance of developing professionalism among the employees due to improper

allocation of jobs.
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o Functional structure: The functional structure consists of a chief
executive officer with functional line managers in functional areas
such as production, accounting, marketing, R&D and human
resources. It allows for functional specialization.
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o Advantages
 Functional specialization can be achieved since the work, responsibility and accountability of the employees
are clear.
 Efficiency of the employees increases due to the division of labor.
 The direct communication between the functional managers enhances their capability.
 This structure is simple and economical.
 It ensures proper allocation of resources among the functional units.

o Disadvantages
 Unnecessary conflict may arise due to coordination among the functional units.
 There may be lack of responsibility for the overall organizational performance.
 Since the managers and employees are regularly involved in a particular unit only, it may erode the
innovativeness.
 It is difficult to identify the profitable products and activities.
 This structure can not address the environmental dynamism.
Strategy Implementation
o Multi division structure: The multi division structure consists of a
corporate office and operating divisions which represents a separate
business or profit center. The responsibility for day-to-day operations
are delegated to divisional managers.
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o Advantages

This structure is suitable for the business having multi products.

The organizational effectives may be enhanced due to high coordination among the
functional units.
Each functional unit can address the environmental components.

It encourages the management to concentrate on the business and functional strategy.

It encourages management development.

It enables the top management to monitor the performance of each business
accurately and look for ways of improving performance.
It facilitates comparisons between divisions, which improves the resources allocation
process.
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o Disadvantages
Unnecessary conflict and misunderstand may emerge as a result of
poor communications among the divisions.
Since the divisions work independently, there may be lack of
coordination among them.
There may be problems in allocation of resources among the
departments.
Organizational complexity may increase due to multiple divisions.
Strategy Implementation
o 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. In multi divisional structure, there may be difficulty
in managing all the divisions due to extreme diversification and large size.
In such a situation, strategic business unit structure is suitable. Under this,
the products or businesses with similar strategic positions are grouped in a
strategic business unit.
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o Advantages
Helps manage and maintain coordination among the various strategic
business units.
Brings efficiency in strategic management of large and diversified
organization.
Accountability of each strategic business unit is clear.

Management development of each strategic business unit is possible.

Strategy Implementation
o Disadvantages
The organizational layers may be very high due to a large number
of strategic business units.
There may be unnecessary conflict among the strategic business
units for obtaining more resources.
It may be difficult to build corporate image due to presence of
different strategic business units.
Strategy Implementation
o Holding company structure: If a company acquires more than 50 percent of
another company for the sake of control, the former is called the holding
company and the latter subsidiary company. Its main objective is to
increase market power by enhancing the competitiveness by owning
property such as patents, estates, trademarks, and other assets. The
subsidiary company function under the control of the holding company.
They have the ability to bring in outside shareholders as partners and can
buy and sell their subsidiaries as conditions change. There is little scope for
synergy because subsidiaries are autonomous and often operate in
unrelated areas.
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Strategy Implementation
o Advantages
Subsidiaries can operate independently.

Business risks are allocated to the subsidiaries.

Cost burden decreases due to allocation of overheads to subsidiaries.

Holding company concentrates itself in financial control only.

Subsidiaries can address their problem quickly.

o Disadvantages
Lack of coordination among the subsidiaries.

Risk for the holding company to get its investment in subsidiaries back.

Lack of managerial capacity with holding company to manage subsidiaries.

Strategy Implementation
o Project-based structure: A project has temporary nature. Its initial and
termination time are predetermined. The timing, cost, and standards are
also pre-determined. In a project-based structure, most of the business
functions are organized in projects. The employees are assigned to projects
and report to the project managers. The project manager has direct control
and authority over project operations.
Strategy Implementation
o Advantages
A project is goal oriented.

Duties and responsibilities of the employees within project are clear.

There is operational flexibility in a project. The resources are planned, hence

they are easily available.
It helps to concentrate on project and market.

o Disadvantages
There is chance of repetition of resources among the projects.

Since the project has short tenure, the employees may feel less secure as a
result of which their commitment level may be low.
Strategy Implementation
o Matrix structure: A matrix structure is the most complex of all structures. A
matrix structure depends on both vertical and horizontal flows of authority
and communication. It includes dual lines of budget authority with dual
sources of reward and punishment, shared authority, dual reporting
channels and a need for an extensive and effective communication systems.
Strategy Implementation
o Advantages
It enables organizational effectiveness by utilizing the resources in an
optimum way.
Decisions are effective as it attempts to address the interest of stakeholders.

Decrease in bureaucracy due to direct coordination between different levels

or units of the organization.
It facilitates communication by enhancing motivation and commitment of the
employees.
The creativity of the employees can be enhanced by utilizing the human
resources scientifically.
Strategy Implementation
o Disadvantages
There may be delay in decision making due to the involvement of
different units and departments.
There may not be clarity in the responsibility and accountability
towards the work.
The accountability of profit and cost center may not be clear.
There may be conflict among the departments for the acquisition
of resources.
This structure is complex and costly.
Strategy Implementation
o Team-based structure: A team comprises a group of people linked in a
common purpose. Teams normally have members with complementary
skills, knowledge, educational level, and experience. A team generates
synergy through a coordinated effort which allows each member to
maximize their strengths and minimize their weaknesses. A team attempts
to achieve objective through collective performance. It operates through
collective leadership, and decisions are also taken collectively. A team is
composed of the employees from different units or departments.
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o Advantages
Collective efforts are made for the achievement of organizational
objectives.
The decision-making power rests on the team.
There is no any hierarchy in a team.
The utilization of the skill and knowledge of the employees is
high.
Performance appraisal is done within the team. It enhances the
motivation and commitment of the employees.
Strategy Implementation
o Disadvantages
A team may imitate the activities of the units and departments. It causes
unnecessary duplication.
The performance of the team is situational since a number of factors
may affect this.
There may be unnecessary conflict between the teams. Similarly,
conflicts are likely between teams and departments or units.
Strategy Implementation
o Network structure: A network structure is also called virtual structure or
non-structure. It is a series of independent business units linked together by
computers information system that designs, produces and markets a
product or service. It is most useful when the environment of a firm is
unstable.
Strategy Implementation
o Advantages
This structure is flexible to cope the environmental dynamism.

It allows gathering efficiencies from other firms which enhances

organizational effectiveness.
It allows an organization to concentrate in the core competency.

o Disadvantages
It involves many business units which may create unnecessary conflict
among them.
It is difficult for the organization to control its network.
 Strategy Implementation
• Management system
Management system plays a crucial role in the process of turning strategies into
action by ensuring that the necessary resources, structure, and culture are aligned to
achieve strategic goals.
o Leadership

Strategic leaders are people located in different parts of the firm using the strategic
management process to help the firm reach its vision and mission. Strategic
leadership is the ability to anticipate, envision, maintain flexibility and empower
others to create strategic change as necessary.
 Strategy Implementation
Leadership capabilities
Sensemaking: Knowing what is happening inside as well as outside the company

Relating: Working with people demands understanding who they are, what they
care about, why they think, what they think and how they view the situation
Visioning: Visioning is the capacity to create the possible picture of future

Inventing: They create things that have never existed before

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Leadership roles
Determining vision, mission, objectives and strategies

Effectively managing the firm’s resource

Providing information about strategy to the implementers

Sustaining an effective organizational culture and ethical practices

Establishing balanced organizational controls

Managing conflict

Managing resistance to change

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Leadership and management

Management is also involved in controlling and decision making. Control

ensures that people’s behaviours are in line with the plan and variance if any
can be identified and corrected quickly. In contrast, leadership is about
changing people’s behaviour towards new direction. It ensures that
organizational vision is in line with the values of the employees. In this way,
management deals with complexity and leadership deals with change.
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o Motivation

Motivated employees have positive attitude and are always committed

towards organizational well being. Factors that affect motivation of the
employees:
 Communication

 Challenging the existing work

 Opportunities

 Recognition and reward for performance

 Control over the job

 Business impact
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o Organizational culture

Culture refers to shared values, beliefs and attitudes in an organization. It can also

be used to understand the problems and requirements of strategic change. It is used

to analyze the current culture of an organization and assess the desired culture for

successful strategic change. It is reflected by:

 Common interest of the stakeholders

 Teamwork and collaboration

 Autonomy and power in work

 Centralization and decentralization

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o Resource planning

There must be a good fit between the organizational resources and

environmental opportunities. Process of resource allocation:

Define the mission

Assess the current inventory of resources

Assess and acquire the required resources

Allocate the resources

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o Control system

Control is taking corrective actions if any deviation exists between the standard

and actual. It ensures that the organization is using appropriate strategies to deal

with the environmental conditions. Control systems provide mechanisms that

organizations use to monitor and regulate performance, ensuring that the

company’s goals and objectives are achieved efficiently and effectively.