Strategic Management Concepts A Competitive Advantage Approach.docx

Strategic Management Concepts: A Competitive Advantage
Approach
Sixteenth Edition
Chapter 7
Implementing Strategies: Management, Operations, and Human
Resource Issues
Copyright © 2017, 2015, 2013 Pearson Education, Inc. All
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Learning Objectives (1 of 2)
7.1 Describe the transition from formulating to implementing
strategies.
7.2 Discuss five reasons why annual objectives are essential for
effective strategy implementation.
7.3 Identify and discuss six reasons why policies are essential
for effective strategy implementation.
7.4 Explain the role of resource allocation and managing
conflict in strategy implementation.
7.5 Discuss the need to match a firm’s structure with its
strategy.

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After studying this chapter, you should be able to do the
following:
7-1. Describe the transition from formulating to implementing
strategies
7-2. Discuss five reasons why annual objectives are essential
for effective strategy
implementation.
7-3. Identify and discuss six reasons why policies are essential
for effective strategy
implementation.
7-4. Explain the role of resource allocation and managing
conflict in strategy
implementation.
7-5. Discuss the need to match a firm’s structure with its
strategy.
7-6. Identify, diagram, and discuss seven different types of
organizational structure.
7-7. Identify and discuss fifteen dos and don’ts in constructing
organizational charts.
7-8. Discuss four strategic production/operations issues vital for
successful strategy
implementation.
7-9. Discuss seven strategic human resource issues vital for
successful strategy
implementation.
Learning Objectives (2 of 2)
7.6 Identify, diagram, and discuss seven different types of
organizational structure.
7.7 Identify and discuss fifteen dos and don’ts in constructing
organizational charts.
7.8 Discuss four strategic production/operations issues vital for

successful strategy implementation.
7.9 Discuss seven strategic human resource issues vital for
successful strategy implementation.
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Figure 7-1 Comprehensive Strategic-Management Model
Source: Fred R. David, “How Companies Define Their
Mission,” Long Range Planning 22, no. 3 (June 1988): 40. See
also Anik Ratnaningsih, Nadjadji Anwar, Patdono Suwignjo,
and Putu Artama Wiguna, “Balance Scorecard of David’s
Strategic Modeling at Industrial Business for National
Construction Contractor of Indonesia,” Journal of Mathematics
and Technology, no. 4, (October 2010): 20.
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This chapter is highlighted in the strategic planning model.
The Nature of Strategy Implementation
Strategy Formulation
Strategy formulation is positioning forces before the action.
Strategy formulation focuses on effectiveness.
Strategy formulation is primarily an intellectual process.
Strategy formulation requires good intuitive and analytical
skills.
Strategy Implementation
Strategy implementation is managing forces during the action.
Strategy implementation focuses on efficiency.
Strategy implementation is primarily an operational process.

Strategy implementation requires special motivation and
leadership skills.
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It is always more difficult to do something (strategy
implementation) than to say you are going to do it (strategy
formulation)! Although inextricably linked, strategy
implementation is fundamentally different from strategy
formulation.
Annual Objectives
Annual Objectives:
Represent the basis for allocating resources
Are a primary mechanism for evaluating managers
Are the major instrument for monitoring progress toward
achieving long-term objectives
Establish organizational, divisional, and departmental priorities
Are essential for keeping a strategic plan on track
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Annual objectives are desired milestones an organization needs
to achieve to ensure successful strategy implementation.
Figure 7-3 The Stamus Company’s Hierarchy of Aims
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Clearly stated and communicated objectives are critical to
success in all types and sizes of firms. Annual objectives are
often stated in terms of profitability, growth, and market share
by business segment, geographic area, customer groups, and
product.
Policies (1 of 3)
Policy
specific guidelines, methods, procedures, rules, forms, and
administrative practices established to support and encourage
work toward stated goals
instruments for strategy implementation
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Changes in a firm’s strategic direction do not occur
automatically. On a day-to-day basis, policies are needed to
make a strategy work.
Policies (2 of 3)
Policies
set boundaries, constraints, and limits on the kinds of
administrative actions that can be taken to reward and sanction
behavior
let both employees and managers know what is expected of
them, thereby increasing the likelihood that strategies will be
implemented successfully
provide a basis for management control and allow coordination
across organizational units
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Policies are essential instruments for strategy implementation,
for at least six reasons.
Policies (3 of 3)
Policies
reduce the amount of time managers spend making decisions.
Policies also clarify what work is to be done and by whom.
promote delegation of decision making to appropriate
managerial levels where various problems usually arise.
clarify what can and cannot be done in pursuit of an
organization’s objectives.
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Types of Resources
Financial
Physical
Human
Technological
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All organizations have at least four types of resources (or
assets) that can be used to achieve desired objectives: (1)
financial resources, (2) physical resources, (3) human resources,
and (4) technological resources.
Resource Allocation
Resource Allocation
central management activity that allows for strategy execution
Strategic management enables resources to be allocated

according to priorities established by annual objectives
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Resource allocation can be defined as distributing an
organization’s “assets” across products, regions, and segments
according to priorities established by annual objectives.
Allocating resources is a vital strategy-implementation activity.
Managing Conflict
Conflict
Disagreement between two or more parties on one or more
issues
Establishing annual objectives can lead to conflict because
individuals have different expectations and perceptions,
schedules create pressure, personalities are incompatible, and
misunderstandings occur between line managers and staff
managers
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Honest differences of opinion, turf protection, and competition
for limited resources can inevitably lead to conflict. Conflict
can be defined as a disagreement between two or more parties
on one or more issues.
Managing Conflict (1 of 2)
Avoidance
Includes such actions as ignoring the problem in hopes that the
conflict will resolve itself or physically separating the
conflicting individuals
Defusion

Includes playing down differences between conflicting parties
while accentuating similarities and common interests
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Various approaches for managing and resolving conflict can be
classified into three categories: avoidance, defusion, and
confrontation.
Managing Conflict (2 of 2)
Confrontation
exemplified by exchanging members of conflicting parties so
that each can gain an appreciation of the other’s point of view
or holding a meeting at which conflicting parties present their
views and work through their differences
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Table 7-5 Some Management Trade-Off Decisions Required in
Strategy ImplementationTo emphasize short-term profits or
long-term growthTo emphasize profit margin or market shareTo
emphasize market development or market penetrationTo lay off
or furloughTo seek growth or stabilityTo take high risk or low
riskTo be more socially responsible or more profitableTo
outsource jobs or pay more to keep jobs at homeTo acquire
externally or to build internallyTo restructure or reengineerTo
use leverage or equity to raise fundsTo use part-time or full-
time employees
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Table 7-5 reveals some important management trade-off

decisions required in strategy implementation. Strategic
planning necessitates making effective trade-off decisions.
Matching Structure With Strategy
Structure largely dictates how objectives and policies will be
established
Structure dictates how resources will be allocated
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Changes in strategy often require changes in the way an
organization is structured, for two major reasons.
Table 7-6 Symptoms of an Ineffective Organizational
Structure1.Too many levels of management2.Too many
meetings attended by too many people3.Too much attention
being directed toward solving interdepartmental conflicts4.Too
large a span of control5.Too many unachieved
objectives6.Declining corporate or business
performance7.Losing ground to rival firms8.Revenue or
earnings divided by number of employees or number of
managers is low compared to rival firms
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When a firm changes its strategy, the existing organizational
structure may become ineffective.
The Functional Structure
Functional Structure
groups tasks and activities by business function, such as

production/operations, marketing, finance/accounting, research
and development, and management information systems
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The most widely used structure is the functional or centralized
type because this structure is the simplest and least expensive of
the seven alternatives.
Table 7-7 Advantages and Disadvantages of a Functional
Organizational StructureAdvantagesDisadvantages1. Simple and
inexpensive1. Accountability forced to the top2. Capitalizes on
specialization of business activities such as marketing and
finance2. Delegation of authority and responsibility not
encouraged3. Minimizes need for elaborate control system3.
Minimizes career development4. Allows for rapid decision
making4. Low employee and manager moraleBlank5. Inadequate
planning for products and
marketsBlank6. Leads to short-term, narrow thinkingBlank7.
Leads to communication problems
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Table 7-7 summarizes the advantages and disadvantages of a
functional organizational structure.
Divisional Structure
Functional activities are performed both centrally and in each
separate division
Organized by geographic area, product or service, customer, or
process

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The divisional (decentralized) structure is the second-most
common type. Divisions are sometimes referred to as segments,
profit centers, or business units. As a small organization grows,
it has more difficulty managing different products and services
in different markets.
Table 7-8 Advantages and Disadvantages of a Divisional
Organizational StructureAdvantagesDisadvantages1. Clear
accountability1. Can be costly2. Allows local control of local
situations2. Duplication of functional activities3. Creates career
development chances3. Requires a skilled management force4.
Promotes delegation of authority4. Requires an elaborate
control system5. Leads to competitive climate internally5.
Competition among divisions can become so intense as to be
dysfunctional6. Allows easy adding of new products or
regions6. Can lead to limited sharing of ideas and Resources7.
Allows strict control and attention to products, customers, or
regions7. Some regions, products, or customers may receive
special treatment
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Table 7-8 summarizes the advantages and disadvantages of
divisional organizational structure.
The Strategic Business Unit (S B U) Structure
S B U 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

can facilitate strategy implementation by improving
coordination between similar divisions and channeling
accountability to distinct business units
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As the number, size, and diversity of divisions in an
organization increase, controlling and evaluating divisional
operations become increasingly difficult for strategists.
The Matrix Structure (1 of 2)
Matrix Structure
most complex of all designs because it depends upon both
vertical and horizontal flows of authority and communication
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A matrix structure can result in higher overhead because it
creates more management positions.
The Matrix Structure (2 of 2)
For a matrix structure to be effective, organizations need
participative planning, training, clear mutual understanding of
roles and responsibilities, excellent internal communication,
and mutual trust and confidence
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Despite its complexity, the matrix structure is widely used in
many industries, including construction, health care, research,
and defense.

Table 7-9 Advantages and Disadvantages of a Matrix
StructureAdvantagesDisadvantages1. Clear project objectives1.
Requires excellent vertical and horizontal flows of
communication2. Results of their work clearly seen by
employees2. Costly because creates more manager positions3.
Easy to shut down a project3. Violates unity of command
principle4. Facilitates uses of special equipment, personnel, and
facilities4. Creates dual lines of budget authority5. Shared
functional resources instead of duplicated resources, as in a
divisional structure5. Creates dual sources of reward and
punishmentBlank6. Creates shared authority and
reportingBlank7. Requires mutual trust and understanding
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As indicated in Table 7-9, some advantages of a matrix
structure are that project objectives are clear, there are many
channels of communication, workers can see the visible results
of their work, shutting down a project can be accomplished
relatively easily, and it facilitates the use of specialized
personnel, equipment, and facilities.
Figure 7-6 Typical Top Managers of a Large Firm
Note: Titles spelled out as follows.
Chief Executive Officer (C E O)
Chief Finance Officer (C F O)
Chief Strategy Officer (C S O)
Chief Information Officer (C I O)
Human Resources Manager (H R M)
Chief Operating Officer (C O O)
Chief Legal Officer (C L O)

Research & Development Officer (R & D)
Chief Marketing Officer (C M O)
Chief Technology Officer (C T O)
Competitive Intelligence Officer (C I O)
Maintenance Officer (M O)
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Note: Titles spelled out as follows.
Chief Executive Officer (CEO)
Chief Finance Officer (CFO)
Chief Strategy Officer (CSO)
Chief Information Officer (CIO)
Human Resources Manager (HRM)
Chief Operating Officer (COO)
Chief Legal Officer (CLO)
Research & Development Officer (R&D)
Chief Marketing Officer (CMO)
Chief Technology Officer (CTO)
Competitive Intelligence Officer (CIO)
Maintenance Officer (MO)
Restructuring
Restructuring
involves reducing the size of the firm in terms of number of
employees, number of divisions or units, and number of
hierarchical levels in the firm's organizational structure
primary benefit sought from restructuring is cost reduction
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Restructuring and reengineering are becoming commonplace on
the corporate landscape across the United States and Europe.
Reengineering
Reengineering
involves reconfiguring or redesigning work, jobs, and processes
for the purpose of improving cost, quality, service, and speed
does not usually affect the organizational structure or chart, nor
does it imply job loss or employee layoffs
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In contrast to restructuring, reengineering is concerned more
with employee and customer well-being than shareholder well-
being.
Managing Resistance to Change
Force Change Strategy
involves giving orders and enforcing those orders
Educative Change Strategy
presents information to convince people of the need for change
Self-interest Change Strategy
attempts to convince individuals that the change is to their
personal advantage
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Resistance to change can emerge at any stage or level of the
strategy-implementation process. Although there are various
approaches for implementing changes, three commonly used
strategies are a force change strategy, an educative change
strategy, and a rational or self-interest change strategy.

Strategic Human Resource Issues
Seven human resource issues:
Linking performance and pay to strategy
Balancing work life with home life
Developing a diverse work force
Using caution in hiring a rival’s employees
Creating a strategy-supportive culture
Using caution in monitoring employees’ social media
Developing a corporate wellness program
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Any organization is only as good as its people! Thus, human
resource issues can make or break successful strategy
implementation.
Linking Performance and Pay to Strategies
Decisions on salary increases, promotions, merit pay, and
bonuses need to support the long-term and annual objectives of
the firm
Gain sharing and bonus systems can be used
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An organization’s compensation system needs to be aligned
with strategic outcomes.
Balance Work and Home Life
Work and family strategies now represent a competitive
advantage for those firms that offer such benefits as:

elder care assistance
flexible scheduling
job sharing
adoption benefits
onsite summer camp
employee help line
pet care
lawn service referrals
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A corporate objective to become more lean and mean must
today include consideration for the fact that a good home life
contributes immensely to a good work life.
Develop a Diverse Workforce (1 of 2)
Six benefits of having a diverse workforce are:
Women and minorities have different insights, opinions, and
perspectives that should be considered.
A diverse workforce portrays a firm committed to
nondiscrimination.
A workforce that mirrors a customer base can help attract
customers, build customer loyalty, and design/offer
products/services that meet customer needs/wants.
A diverse workforce helps protect the firm against
discrimination lawsuits.
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An organization can perhaps be most effective when its
workforce mirrors the diversity of its customers.

Develop a Diverse Workforce (2 of 2)
Women and minorities represent a huge additional pool of
qualified applicants.
A diverse workforce strengthens a firm’s social responsibility
and ethical position
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An organization can perhaps be most effective when its
workforce mirrors the diversity of its customers.
Creating a Strategy-Supportive Culture (1 of 2)
Formal statements of organizational philosophy, charters,
creeds, materials used for recruitment and selection, and
socialization
Designing of physical spaces, facades, buildings
Deliberate role modeling, teaching, and coaching by leaders
Explicit reward and status system, promotion criteria
Stories, legends, myths, and parables about key people and
events
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Strategists should strive to preserve, emphasize, and build on
aspects of an existing culture that support proposed new
strategies.
Creating a Strategy-Supportive Culture (2 of 2)
What leaders pay attention to, measure, and control
Leader reactions to critical incidents and organizational crises
How the organization is designed and structured
Organizational systems and procedures

Criteria used for recruitment, selection, promotion, leveling off,
retirement, and “excommunication” of people
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Monitoring Social Media
Proponents of companies monitoring employees’ social-media
activities emphasize that
a company’s reputation in the marketplace can easily be
damaged by disgruntled employees venting on social media sites
social-media records can be subpoenaed, like email, and used as
evidence against the company.
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Many companies monitor employees’ and prospective
employees’ social media activities, and have the legal right to
do so, but there are many pros and cons of this activity.
Corporate Wellness Program
The Affordable Care Act increased the maximum incentives and
penalties employers may use to encourage employee well-being
Most companies have both
“carrots,” such as giving employee discounts on insurance
premiums or even extra cash,
“sticks,” such as imposing surcharges on premiums for those
who do not make progress toward getting healthy.
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Corporate wellness has become a major strategic issue in
companies.

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