Nature of Strategy Implementation:Strategy implementation is the second stage of strategic management. Contrast Between Strategic Implementation and Strategic FormulationStrategy formation focus on effectivenessStrategy implementation focus on effacingStrategy formulation is primarily an operational processStrategy formulation requires good intuitive and an analyticalskillsStrategy implementation requires motivation & leadership
Annual Objective:Short term milestone that organization must achieve to reach its long term objective.Annual objective essential because they are: Represent the basis for resource allocation Primary mechanism for evaluating manager Major instrument for monitoring progress toward achieving long term objective Establish organizational divisional and departmental priorities.
Policies:Specific guidelines, methods, procedures, rules, forms to support and encourage work together stated goals.Policies are instrument for strategy implementation.
Resource AllocationThe process of dividing up and distributing available, limited resources to competing, alternative uses that satisfy unlimited wants and needs.
Relation with Strategic Management:Central management activityAllows for strategy executionPolitical & personal factors applied by organizations having non-strategic management approachTypes of Resources:1. Financial resources2. Physical resources3. Human resources4. Technological resources
Factors Prohibiting Effecting Resources Allocation: Overproduction of resources Organizational politics Vague strategy targetsManaging Conflicts:“A disagreement between two or more parties on one or more issues”.Reasons: Competition for limited resources Establishing annual objectives can lead to conflict.Example:A manager can have objective to deduce bad doubts by 50% in a given year & can have conflict with the manager having objective to increase sales by 20%.
Matching Structure with Strategy:Change in strategy lead to changes in organizational structure.Reasons for Changing Structure:1. Structure dilates how policies & objectives will be established.2. Structure dilates how resources will be allocatedExample: Customer Groups The structure might be suitable only 91 firm. Growth of organization leads to changes in structure Structure can shape choices of strategies.
Types of structural changes needed to implement new strategies Functional Divisional by geographic area Divisional by product Divisional by customer Divisional process Strategic business unit (SBU) structure Matrix
Functional or centralized structureFunctional structure groups tasks & activities by business function, such as production/operations, accounting/finance, R&D, MIS. A university may structure its activities by major functions that include academic affairs, student service, maintenance, athletics & accounting.
Merits of functional structure Simple & inexpensive. Allows rapid decision making. Efficient use of managerial & technical talent. Promotes specialization of labor. Widely use of resources. Minimizes need for elaborate control .
Demerits of functional structure Delegation of authority is not encouraged. Minimize career development. Leads to communication problem. Leads to narrow thinking. Accountability is forced to the top. Inadequate planning for products & markets.
Divisional or decentralized structure As a small organization grows, it has more difficulty managing differentproducts or services in different markets. The divisional structure can be organized into four ways.
Divisional structure by geographic area This divisional structure is appropriate for organizations whose strategies to be fit for the particular needs & characteristics of customers in different geographic area. This type of structure can be most appropriate for organizations that have similar branched facilities located in widely dispersed areas Example: Mcdonald’s
Divisional structure by product or service This type of structure is most appropriate for implementing strategies when specific products or services need special emphasis. This structure is widely used when an organization offers few products or services. Microsoft recently reorganized the whole corporation into three large divisions by product. Headed by president. New divisions are Platform products & services Business Entertainment & devices
Divisional structure by customers This type of structure is appropriate for organizations to cater the requirements of clearly defined customer groups. Example : Book publishing companies often organize their activities around customer groups such as Universities Colleges Secondary schools
Divisional structure by process This type of structure is appropriate when activities are organized according to the way work is actually performed. This structure is similar to a functional structure. Example : In Textile Mills activities are divided according to their process. cutting, dying, printing. each process (division) would be responsible for generating profits.
Merits of divisional structure Creates career development chances. Leads to competitive environment internally. Allows strict control or attention to regions, product, customer, process. Promotes delegation of authorities. Accountability is clear. Allows easy adding of new products or regions.
Demerits of divisional structure Costly. Lead to limited sharing of resources & ideas. Requires skilled management. Some regions , products, customers, process may special attention. Each division requires functional specialist who must be paid. Elaborate control system.
The Strategic Business Unit Structure:Use: In large firmsIntroduction:A separate operating division of a company with some degree of autonomy referred to as a (Strategic Business Unit) structure.Need Of Business:When the number, size and diversity of divisions in an organization increase, controlling and evaluating divisional operations becomes difficult for strategists.Solution:The solution of this problem is the “SUB” structure.
Advantages of SBU Disadvantages of SBUStructure Matching with StructureStrategy1. Improving coordination 1. Increase expenses2. Channeling accountability 2. Inter functional rivalry3. Manageable task 3. Slow response time4. Minimum problems 4. Responsibility5. Response 5. Critical process6. Focus Despite its disadvantages many organizations use this structure.
The Matrix Unit Structure:Use: In large firmsIntroduction:An organizational structure that facilitate the horizontal flow of skills and information as well as vertical flow of authority and communication.Need for Matrix Structure:1. Management of large projects.2. Product development process.Working of Matrix Structure:Employee report on day to day performance to the project manager and also report to HOD.Manager’s authority flows horizontally.HOD authority flows vertically.
Advantages Disadvantages1. Project objectives clear 1. Require excellent2. Employees can see communication result 2. Costly3. Shifting down project is 3. Violates unity of easy communication4. Facilitates uses of 4. Dual budget authority special equipments 5. Dual sources of reward5. Resources are shared and punishment 6. Shared authority and reporting 7. Require mutual trust.
Restructuring• Reducing the size of the firm in terms of number of employees, division or units and the number of hierarchical levels in the firm`s organizational structures.• Primary benefit of restructuring is cost reduction• Primarily concerned with the shareholders well being.
Reengineering• Reconfiguring or redesigning work jobs and processes to improve cost, quality, service and speed.• It is primarily concern with the employees and customers well being than shareholders wellbeing.
ReengineeringAlso called• Process management• Process Innovation• Process redesign