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Chapter 7 implementing strategies
- 1. CHAPTER 7 Implementation of A Strategy KARINA PUTRI DARMAWAN (1511011003) MUTIARA FITRI ANDINI (1511011007)
- 2. Objectives: • Explain why strategy implementation is more difficult than strategy formulation. • Discuss importance of annual objectives and policies in achieving organizational commitment for strategies to be implemented. • Explain why organizational structure is important in strategy implementation. • Compare and contrast restructuring and reengineering. • Describe the relationships between production/ operations and strategy implementations • Explain how a firm can effectively link performance and pay to strategies. • Discuss employee stock ownership plans (ESOPs) as a strategic – management concept. • Describe how to modify an organizational culture to support new strategies.
- 3. The greatest strategy is doomed if it’s implemented badly. Successful strategy formulation does not guarantee successful strategy implementation. Less than 10% of strategies formulated are successfully implemented! The Nature of Strategy Implementation • Implementation may fail due to: – Paying too much for a new acquisition – Not recognizing benefit of computers in managing information
- 4. Formulation vs. Implementation• Formulation focuses on effectiveness • Implementation focuses on efficiency • Formulation is primarily an intellectual process • Implementation is primarily an operational process • Formulation requires good intuitive & analytical skills • Implementation requires special motivational & leadership skills • Formulation requires coordination among a few individuals • Implementation requires coordination among many individuals
- 5. • Varies among different types & sizes of organizations Nature of Strategy Implementation Strategy Implementation • Altering sales territories • Adding new departments • Closing facilities • Hiring new employees • Cost-control procedures • Modifying advertising strategies • Building new facilities Implementation Activities
- 6. • Shift in responsibility Management Perspectives Division or Functional Managers Strategists Nature of Strategy Implementation
- 7. Management Issues Management Issues ResourcesResources Organizational structureOrganizational structure RestructuringRestructuring Annual ObjectivesAnnual Objectives Production/OperationsProduction/Operations Resistance to ChangeResistance to Change
- 8. Management Issues Purpose of Annual Objectives -- Basis for resource allocation Mechanism for management (e.g. IT management) evaluation Metric for gauging progress on long-term objectives Establish priorities (organizational, division, & departmental)
- 9. Management Issues Requirements of Annual Objectives Measurable Consistent Reasonable Challenging Clear Understood Timely Annual Objectives Should State Quantity Quality Cost Time Be Verifiable
- 10. Policies Instruments for strategy implementation. • Provide basis for management control • Allow coordination across organizational units • Reduce useless time in decision making.
- 11. Management Issues : Resource Allocation enables resources to be allocated according to priorities established by annual objectives. 1. Financial resources 2. Physical resources 3. Human resources 4. Technological resources 4 Types of Resources
- 12. New administrative problems emerge New strategy Is formulated Organizational performance declines Organizational performance improves New organizational structure is established Structure should be designed to facilitate the strategic pursuit of a firm
- 13. Management Issues : Matching Structure with Strategy 4 Basic Types of Organizational Structure 1. Functional 2. Divisional 3. Strategic Business Unit (SBU) 4. Matrix
- 14. Pro and Cons of Functional Organizational Structure Pros Cons A Functional Structure is the simplest and least expensive out of the 7 alternatives.
- 15. • Divided into 4 ways: geographic, product/service, customer and process Pro and Cons of Divisional Organizational Structure Pros Cons A Divisional Structure generally becomes necessary to motivate employees, control operations and compete succesfully.
- 16. The Strategic Business Unit (SBU) is used in order to increase control and evaluating divisional operations in a company which have increasing number, size and diversity.
- 17. Pro and Cons of Matrix Structure Pros Cons The Matrix Structure is the most complex of all designs. It depends upon both vertical and organizational flows of authority and communication
- 18. Example of Matrix Structure
- 19. Management Issues: Restructuring -- Reducing the size of the firm – # of employees, divisions and/or units, # of hierarchical levels.
- 20. Management Issues : Reengineering In reengineering, a firm uses information technology to break down functional barriers and create a work system based on business processes… Reconfiguring or redesigning work, jobs, & processes to improve cost, quality.
- 21. Management Issues Resistance to Change -- Single greatest threat to successful strategy implementation Raises anxiety; fear concerning: economic loss, Inconvenience or Uncertainty Force Change Strategy Educative Change Strategy Rational or Self-Interest Change Strategy
- 22. Creating a Strategy-Supportive Culture New strategies are often market-driven and dictated by competitive forces. Elements on linking culture to strategies: -Formal statements of organizational legacy -Designing of physical evidence -Deliberate teaching -Explicit incentives -Stories, legends, myths, and parables about key people and events
- 23. Production/Operations Concerns when Implementing Strategies Can significantly enhance or inhibit the attainment of objectives. Major part of the strategy- implementation process takes place at the production site.
- 24. HR Concerns When Implementing Strategies • The job of HR is changing rapidly as companies continue to downsize and reorganize. Strategies include: a. Assessing the need of employees. b. Develop plan for effective strategy implementations.
- 26. LECTURER: DR. NOVA MARDIANA, S.E., M.M. KARINA PUTRI DARMAWAN (1511011003) MUTIARA FITRI ANDINI (1511011007) SPECIAL CREDITS TO: -Strategic Management; Concept and Cases (Fred R. David, Prentice Hall) - Nageswar Annangi (Youtube) - Three Sixty Property Group (Youtube) - The Madison Group (Youtube)
Editor's Notes
- Successful strategy formulation will take a long way before it will be accepted and implemented in the end. Not every formulation can results in a positive way thr company wants. There is no such guarantee for that. Let’s face it, it will always be difficult to do the work rather than to say it. It is the same case as the matter we have here. Implementation would occur a lot of things to consider than when it was just being implemented.
- As we continue with the contrast between Strategy Formulation and Strategy Implementation, here are several differences between them:
- Strategy formulation concepts and tools do not differ for every types of company yet it is different with strategy implementations. Strategy implementations are varied among different types and sizes of organizations. The activities of strategy implementation include:
- In a company, the transition from strategy formulation to strategy implementation requires the shifts between strategist who is in charge of the formulations to managers which are in charge of the implementation. It is essential for divisional and functional managers be involved mainly in strategy-formulation activities. As it is also important for strategist to be involved in strategy implementation activities
- In a management of a company, there is also several issues. Management issues especially in strategy implementation include with these matter right here. The main priority, is setting annual objectives for the company. Then it’ll be followed by having the right resources and organizational structure, ways of restructuring the organizations, conclude ideas on how to stay on track, and of course the company’s operations strategy. To handle it, it is necessary for the managers and employees throughout the company to be involved directly in strategy implementation decisions.
- Let us begin with the Annual Objectives, Annual objectives itself is the decentralized activity that directly involves all managers in an organization. The active participation for these objectives will results in full acceptance and commitment. It is an essential matters because it represents the basis of resource allocations, are a primary mechanism of evaluation, are the monitoring tool, and establish organizational, divisional, and departmental priorities.
- In setting annual objectives, there are few requirements and criteria on how it should be included with: Annual objectives required to be..... And it should state.....
- Changes in a company’s strategies do not occur automatically. It needs policies to work the gear up. Policy itself is a specific guide-lines, methods, prrocedures, rules, forms, and administrative practices established to support and encourage work toward stated goals. Policies let both managers and employees know what is expected for them, therefore it will increase the likelihood for the strategies to be implemented successfully. They provide a basis for management control, allow coordination across organizational units and reduce amount of time managers spend making decisions. It is also clarify what work is to be done and by whom. Policies also can be applied to all divisions and departments.
- The next issue in management would be the resource allocation. It is the activity which allows for strategy execution, it is often based on political or personal factors. All organizations have at least four types of resources that can be used to achieve desired objectives:
- Changes in strategy often require changes for 2 reasons: first, structure dictates how policies and objectives should be established. And second, structure often dictates how resources will be allocated. Since changes in strategy could lead some changes in organizational structure, structure should be designed to facilitate the pursuit of the organization. Alfred Chandler on his book called Strategy and Structure in 1962 found the structure sequence that continuously happened which are:
- The strategy formulated have to be workable, in a way that it wont affect the organizations to take another alternatives. But more importantly, what type of structural changes needed to implement new strategies? That is why we are going to talk about the 4 basic types of the organizational structure, which are:
- First of, the Functional Structure. It is most used because it is the least complicated and expensive than the other structures. A functional structure group tasks and activities by business function, such as production/operations, marketing, finance/accounting, R&D, and MIS. This structure have it’s own advantages and disadvantages:
- Second, the Divisional Structure. Divisional structure generally formed in order to motivate employees, control operations, and compete successfully in diverse locations. It can ve used in 4 ways: by geographic area, by product or service, by customer, and by it’s process. Along with the previous structure, it also have several pros and cons:
- Third, the Strategic Business Unit. It is used to increase control and evaluations for operations. The advantage of this structure is that it makes the tasks of planning and control by the organizations to be more manageable. Meanwhile, the disadvantages of this structure are, one, it requires an additional layer of management, which increases the salary expenses, and two, the role of vice president is often ambiguous.
- Finally, the Matrix Structure. It is the most complex of all structure because it depends on both vertical and organizational flows of authority and communication, it also has it’s own pros and cons:
- And here is the example of the matrix structure.
- We will continue with the next management issue which is the restructuring and reengineering. These two issues are becoming regular in the organization. Restructuring, or we can call as downsizing, rightsizing, or delayering – involoves reducing the size of the firm in terms of number of employees, divisions or unit, hierarchical levels in the firms; organizational structure. It is intended to improve both efficiency and effectiveness.
- Meanwhile in reengineering, firm uses information technology to break down functional barriers and create a work system based on business processes.
- Last but not least, the resistance to change. It is can be considered as the single greatest threat to a successful strategy implementation. Resistance regularly occurs in organizations in the form of sabotaging production machines, absenteeism, filling unfounded grievances, and an unwillingness to cooperate. It could emerge in any level of the strategy implementation process. Although there are several approaches for implementation changes there are three of them which commonly used: Force Change Strategy involves giving orders and enforcing them. Educative Change Strategy presents information to convince people of the need for change, and Rational or Self-interest Change Strategy attempts to convince individuals that the change is to their personal advantage. When these appeals are successful, strategy implementation can be done easily. However, implementation changes rarely to everyone’s advantage. Managers can improve the likelihood of the success rate of implementation change by carefully designing change efforts. How? By providing the right of participation during the making of strategy, motivation or incentives, and finally a proper communication.
- And that’s it for now, thank you for your attention!