The document discusses key issues in implementing organizational strategies. It contrasts strategy formulation, which focuses on positioning and effectiveness, with strategy implementation, which focuses on efficiency. Effective implementation requires establishing objectives, allocating resources, adapting structures and processes, and developing a strategy-supportive culture. It also requires matching managers' skills to the strategy and minimizing resistance to change.

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Ch 7 -1
Chapter 7
Implementing Strategies: Management &
Operations Issues
Strategic Management:
Concepts & Cases
13th Edition
Fred David

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Ch 7 -2

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Strategy Formulation vs.
Implementation
Strategy Formulation (SF)
 Positioning forces
before the action
 Focus on effectiveness
 Primarily intellectual
 Requires good intuitive
and analytical skills
 Requires coordination
among a few people
Strategy Implementation
(SI)
 Managing forces during
the action
 Focus on efficiency
 Primarily operational
 Requires special
motivation and
leadership skills
 Requires coordination
among many people

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 Shift in responsibility
Nature of Strategy Implementation
SI problems can arise because of the shift in responsibility,
especially if SF decisions come as a surprise to middle- and
lower-level managers. Therefore, it is essential to involve
divisional and functional managers in SF.
Divisional or
Functional
Managers
Strategists

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Management Issues Central to
Strategy Implementation
 Establish annual
objectives
 Devise policies
 Allocate resources
 Alter existing
organizational structure
 Restructure & reengineer
 Revise reward & incentive
plans
 Minimize resistance to
change
 Match managers to strategy
 Develop a strategy-
supportive culture
 Adapt production/operations
processes
 Develop an effective human
resources function
 Downsize & furlough as
needed
 Link performance & pay to
strategies

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Purpose of Annual Objectives
Basis for resource allocation
Mechanism for management evaluation
Major instrument for monitoring progress
toward achieving long-term objectives
Establish priorities (organizational, divisional,
and departmental)

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Resource Allocation
1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources
Four Types of Resources

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Managing Conflict
Conflict – a disagreement between two or more
parties. Interdependency of objectives and
competition for limited resources can cause
conflict.
 Conflict not always “bad”
 Lack of conflict may signal apathy
 Can energize opposing groups to action
 May help managers identify problems

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MATCHING STRUCTURE WITH
STRATEGY
 Changes in strategy often require changes in the way an
organization is structured because: (1) structure largely dictates how
objectives and policies will be established (e.g., objectives and
policies established under a geographic organizational structure are
couched in geographic terms) and (2) structure dictates how
resources will be allocated (e.g., if an organization’s structure is
based on customer groups, then resources will be allocated in that
manner).
 Structure should be designed to facilitate the strategic pursuit of a
firm and, therefore, follow strategy.
 When a firm changes its strategy, the existing organizational
structure may become ineffective. For example, new strategies to
reduce payroll costs may require a change in span of control.

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Basic Forms of Structure
 Functional Structure
 Divisional Structure
 Strategic Business Unit Structure
(SBU)
 Matrix Structure

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Functional Structure
 Groups tasks and activities by business
function (e.g., production, finance,
marketing, R&D, HR, IT, etc.).

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Functional Structure

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Divisional Structure
 Can be organized in one of four
ways:
 By geographic area
 By product or service
 By customer
 By process

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Divisional Structure

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Strategic Business Unit Structure
(SBU)
 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.

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Matrix Structure
 The most complex of all structures
because it depends upon both
vertical and horizontal flows of
authority and communication.

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Matrix Structure

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Restructuring
 Restructuring - reducing the size of an organization.
Also called:
Downsizing
Rightsizing
Delayering
These methods involve, respectively, reducing the
number of employees, number of divisions, and number
of hierarchical levels in a firm’s organizational structure.
Reducing the size of an organization is intended to
improve its efficiency and effectiveness.

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Creating a Strategy-Supportive Culture
1. Formal statements of organizational
philosophy
2. Design of physical spaces
3. Deliberate role modeling, teaching,
and coaching
4. Explicit reward and status system
5. Stories, legends, myths, and parables

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Creating a Strategy-Supportive Culture
6. What leaders pay attention to
7. Leader reactions to critical incidents and
crises
8. Organizational design and structure
9. Organizational systems and procedures
10. Criteria for recruitment, selection,
promotion, leveling off, retirement, and
“excommunication” of people

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Production/Operations Decision
Examples
Plant size
Inventory / Inventory control
Quality control
Cost control
Technological innovation

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Human Resource Concerns
Assessing staffing needs and costs.
Selection Methods.
Employee Training.
Motivating Employees – Developing
Performance Incentives; Work-Life
Balance Issues; etc.
Selecting Appropriate Leadership
Styles.