This document discusses key issues related to implementing strategies once they have been formulated. It outlines that strategy implementation is more difficult than strategy formulation and requires translating strategic thought into action. Annual objectives and policies are important tools to guide implementation. Organizational structure should be designed to facilitate the strategic goals of the firm. Resource allocation, managing conflict, and adapting production processes are also central management issues for successful strategy implementation.

1. TOPIC 10
IMPLEMENTING STRATEGIES:
MANAGEMENT AND
OPERATIONS ISSUES
Strategy Implementation & Evaluation
Module 3

2. Chapter Objectives
1. Strategy implementation is more difficult than
strategy formulation.
2. The importance of annual objectives and
policies.
3. Why organizational structure is important in
strategy implementation.
4. The relationships between production /
operations and strategy implementation.

3. Comprehensive Strategic-
Management Model
Copyright ©2017 Pearson Education, Inc.
7-3

4. Introduction
◻ The SM process does not end when the firm
decides what strategy or strategies to pursue.
◻ There must be a translation of strategic thought
into strategic action.
� Easier if managers and employees of the firm
understand the business.
� Feel a part of the company through involvement
in strategy-formulation activities.

5. Introduction
◻ Implementing strategy affects an organization
from top to bottom; it affects all the functional
and divisional areas of a business.
◻ Many organizations tend to spend countless
amount of time, money and effort on developing
the strategic plan, but not on the implementation
process.

6. The Nature of Strategy
Implementation
◻ Successful strategy formulation does not
guarantee successful strategy implementation.
◻ It is always more difficult to do something
(strategy implementation) than to say you are
going to do it (strategy formulation)!
◻ There are differences between Strategy
Formulation and Strategy Implementation.

7. The Nature of Strategy
Implementation
#1
Strategy
formulation is
positioning
forces before
the action.
Strategy
implementation
is managing
forces during
the action.
#2
Strategy
formulation
focuses on
effectiveness.
Strategy
implementation
focuses on
efficiency.
#3
Strategy
formulation is
primarily an
intellectual
process.
Strategy
implementation
is primarily an
operational
process.
#4
Strategy
formulation
requires good
intuitive and
analytical
skills.
Strategy
implementation
requires
special
motivation and
leadership
skills.
#5
Strategy
formulation
requires
coordination
among a few
individuals.
Strategy
implementation
requires
coordination
among many
individuals.
◻ Strategy formulation and implementation can be
contrasted in the following ways:

8. The Nature of Strategy
Implementation
◻ Strategy-formulation concepts and tools do not
differ greatly for small, large, for-profit, or
nonprofit organizations.
◻ However, strategy implementation varies among
different types and sizes of organizations.

9. The Nature of Strategy
Implementation
◻ Implementing strategies requires such actions:
❖ Altering sales territories, Adding new departments,
Closing / Building new facilities.
❖ Hiring / Training new employees, Developing new
employee benefits, Transferring managers among
divisions.
❖ Changing organization’s pricing strategy, Developing
financial budgets, Establishing cost-control
procedures, Changing advertising strategies.
❑ These types of activities differ greatly between
manufacturing, service and governmental
organizations.

10. Management Perspectives
◻ The transition from SF to SI requires a shift in
responsibility from strategists to divisional and
functional managers.
◻ Implementation problems can arise in this shift
of responsibility:
❖ Especially if strategy-formulation decisions come
as a surprise to middle- and lower-level
managers.

11. Management Perspectives
◻ Things that need to be communicated
throughout an organization.
� The objectives and strategies.
� Major competitors’ accomplishments, products,
plans, actions and performance.
� Major external opportunities and threats.
◻ Top down flow of communication is essential for
developing bottom-up support.

12. Management Perspectives
◻ Therefore, it is essential that:
i. Divisional and functional managers be involved
as much as possible in strategy-formulation
activities.
ii. Strategists should be involved as much as
possible in strategy-implementation activities.

13. Management Perspectives
Establishing
annual
objectives
Devising
policies
Allocating
resources
Altering an
existing
organization
al structure
Effective HR
function,
and
downsizing
Developing
a strategy
supportive
culture
Revising
reward and
incentive
plans
Minimizing
resistance
to change
Matching
managers
with
strategy
Adapting
production/
operations
processes
◻ Management issues central to strategy
implementation includes:

14. Annual Objectives
◻ Active participation in establishing annual
objectives can lead to acceptance and
commitment.
◻ Annual objectives, stated in terms of profitability,
growth and market share by business segment,
geographic area, customer groups and product
are common in organizations.

15. Annual Objectives
◻ Annual objectives are essential for strategy
implementation because they
1. Represent the basis for allocating resources.
2. Primary mechanism for evaluating
managers.
3. Major instrument for monitoring progress
toward achieving long-term objectives.
4. Establish organizational, divisional and
departmental priorities.

17. Annual Objectives
◻ Annual objectives should be:
❖ Measurable, consistent, reasonable, challenging,
clear, communicated throughout the organization,
have appropriate time dimension and
accompanied by rewards and recognition.
◻ Sometimes, objectives are stated in
generalities, with little operational usefulness.
❖ Such as “to improve communication” or “to
improve performance” - not clear, specific, or
measurable.

18. Annual Objectives
◻ Objectives should state:
� Quantity, quality, cost, and time
� Terms such as maximize, minimize, as soon as
possible and adequate should be avoided.
◻ Clear annual objectives do not guarantee
successful strategy implementation, but
increase the likelihood that the aims can be
accomplished.

19. Annual Objectives
◻ Overemphasis on achieving objectives can
result in:
❖ Faking the numbers and distorting the records.

20. Policies
◻ Policy:
❖ Specific guidelines, methods, procedures, rules,
forms and administrative practices established to
support and encourage work toward stated goals.
◻ Policies:
❖ Set boundaries, constraints, and limits on the
kinds of administrative actions that can be taken
to reward behavior.
❖ Clarify what can and cannot be done in pursuit of
an organization’s objectives.

21. Policies
◻ Policies let both employees and managers
know what is expected of them:
❖ Increasing the likelihood that strategies will be
implemented successfully.
◻ Provide:
i. A basis for management control
ii. Allow coordination across organizational units
iii. Reduce the amount of time managers spend
making decisions

22. Policies
◻ Policies can apply to all divisions and
departments
� “We are an equal opportunity employer”
◻ Some policies apply to a single department
� “Employees in this department must take at least
one training and development course each year”
◻ Policies should be stated in writing as they
represent the means for carrying out strategic
decisions.
Examples of policies that support a company strategy, a
divisional objective, and a departmental objective see Table 7-3.

24. Resource Allocation
◻ SM enables resources to be allocated according
to priorities established by annual objectives.
◻ All organizations have at least four types of
resources:
1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources

25. Resource Allocation
◻ Allocating resources to particular divisions and
departments does not mean that strategies will
be successfully implemented.
◻ Factors commonly cause ineffective resource
allocation:
� Overprotection of resources
� Organizational politics
� Vague strategy targets
� Reluctance to take risks
� Lack of sufficient knowledge

26. Managing Conflict
◻ Conflict – Disagreement between two or more
parties on one or more issues.
◻ Interdependency of objectives and competition
for limited resources often leads to conflict.
◻ Establishing annual objectives can lead to
conflict as individuals have different:
� Expectations and perceptions, schedules,
pressure, incompatible personalities and
misunderstandings between line managers (such
as production supervisors) and staff managers
(such as human resource specialists).

27. Managing Conflict
◻ Conflict is unavoidable, so it is important to
manage and resolve before negative
consequences affect organizational
performance.
◻ Conflict is not always bad.
❖ Conflict can serve to energize opposing groups
into action and may help managers identify
problems.

28. Managing Conflict
◻ Approaches for managing and resolving conflict:
• Includes actions such as ignoring the problem in hopes that the
conflict will resolve itself or physically separating the conflicting
individuals (or groups).
Avoidance
• Include reducing differences between conflicting parties while
emphasizing similarities and common interests, compromising so
that there is neither a clear winner nor loser, resorting to majority
rule or redesigning present positions.
Defusion
• 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.
Confrontation

29. Matching Structure with Strategy
◻ Changes in strategy lead to changes in
organizational structure.
◻ Structure should be designed to facilitate the
strategic pursuit of a firm
◻ Without a strategy or reasons (mission),
companies find it difficult to design an effective
structure.

30. Matching Structure with Strategy
◻ There is no one optimal organizational design or
structure for a given strategy or type of
organization
◻ What is appropriate for one organization may
not be appropriate for a similar firm.
◻ As organizations grow, their structures generally
change from simple to complex.

31. Matching Structure with Strategy
◻ For example:
1. Consumer goods companies tend to emulate
the divisional structure-by-product form of
organization.
2. Small firms tend to be functionally structured
(centralized).
3. Medium-sized firms tend to be divisionally
structured (decentralized).
4. Large firms tend to use a strategic business unit
(SBU) or matrix structure.

32. Matching Structure with Strategy
◻ Symptoms of an ineffective organizational
structure:
1. Too many levels of management
2. Too many meetings attended by too many
people
3. Too much attention being directed toward
solving interdepartmental conflicts
4. Too large a span of control
5. Too many unachieved objectives
6. Declining corporate or business performance

33. Matching Structure with Strategy
◻ 7 basic types of organizational structure:
Functional
Divisional by geographic area
Divisional by product / service
Divisional by customer
Divisional by process
Strategic business unit (SBU)
Matrix

34. Matching Structure with Strategy
◻ The most widely used structure because it is the
simplest and least expensive.
◻ A functional structure groups tasks and activities
by business function, such as:
❖ Production/operations, marketing,
finance/accounting, research and development,
and management information systems.
The Functional Structure

35. Matching Structure with Strategy
◻ Advantages:
1. Simple and inexpensive
2. Promotes specialization of labor
3. Encourages efficient use of managerial and
technical talent
4. Minimizes the need for an elaborate control
system
5. Allows rapid decision making
The Functional Structure

36. Matching Structure with Strategy
◻ Disadvantages:
1. Forces accountability to the top
2. Minimizes career development opportunities
3. Low employee morale, line/staff conflicts
4. Poor delegation of authority
5. Inadequate planning for products and markets
6. Leads to communication problem
The Functional Structure

37. Matching Structure with Strategy
The Divisional Structure
◻ The divisional or decentralized structure is the
second most common type.
◻ The divisional structure can be organized in
one of four ways:
1. By geographic area
2. By product or service
3. By customer
4. By process

38. Matching Structure with Strategy
The Divisional Structure
◻ Advantages:
1. Accountability is clear
■ Divisional managers can be held responsible for
sales and profit levels. Managers and employees
can easily see the results of their good or bad
performances.
2. Creates career development opportunities for
managers, allows local control of situations.
3. Leads to a competitive climate within an
organization, and allows new businesses and
products to be added easily.

39. Matching Structure with Strategy
The Divisional Structure
Disadvantages:
◻ Costly, for a number of reasons.
1. There exists duplication of staff services,
facilities, and personnel.
2. Managers must be well qualified - better-
qualified individuals require higher salaries.
3. Competition between divisions may leads to
limited sharing of ideas and resources for the
common good of the firm.

40. Matching Structure with Strategy
Divisional by geographic area
◻ Suitable for organizations whose strategies
need to be tailored to fit the particular needs and
characteristics of customers in different
geographic areas.
◻ Suitable for organizations that have similar
branch facilities located in widely dispersed
areas.
◻ Allows local participation in decision making and
improved coordination within a region.

41. Matching Structure with Strategy
Divisional by product / service
◻ Most effective when specific products or
services need special emphasis.
◻ Widely used when an organization offers only a
few products or services or when an
organization’s products or services differ greatly.
◻ Allows strict control and attention to product
lines, but also require more skilled management
force and reduced top management control.

42. Matching Structure with Strategy
Divisional by customer
◻ When a few major customers are of paramount
importance and many different services are
provided to these customers
◻ Allows an organization to cater effectively to the
requirements of clearly defined customer groups.
◻ For example:
i. Book publishing companies often organize their
activities around customer groups – colleges,
secondary schools and private commercial schools.
ii. Airline companies have 2 major customer divisions
– passengers & freight or cargo services.

43. Matching Structure with Strategy
Divisional by process
◻ Similar to a functional structure, as activities are
organized according to the way work is actually
performed.
◻ Difference between these 2 designs is that
functional departments are not accountable for
profits or revenues, whereas divisional process
departments are evaluated on these criteria.

44. Matching Structure with Strategy
Strategic business unit (SBU)
◻ As the number, size and diversity of divisions in
an organization increase, controlling &
evaluating divisional operations become more
difficult for strategists.
◻ In multidivisional organizations, an SBU
structure can greatly facilitate strategy-
implementation efforts.

45. Matching Structure with Strategy
Strategic business unit (SBU)
◻ SBU, groups similar divisions and delegates
authority and responsibility for each unit to a
senior executive who reports directly to the
CEO.
◻ In a 100-division organization, the divisions
could be regrouped into 10 SBUs according to
certain common characteristics – Competing in
the same industry, being located in the same
area, or having the same customers.

46. Matching Structure with Strategy
Strategic business unit (SBU)
◻ Disadvantages:
i. Requires an additional layer of management,
which increases salary expenses.
ii. The role of the group vice president is often
ambiguous.
◻ Advantages:
i. Improved coordination and accountability.
ii. Tasks of planning and controlling by the
corporate office is more manageable.

47. Matching Structure with Strategy
Strategic business unit (SBU)
Example:
◻ Dell reorganized in 2009 into two SBUs:
� Consumer Products and Commercial.
◻ Dell deleted the geographic divisions within its
Consumer Products segment.
◻ Added 3 units in its Commercial segment:
� Large enterprise, Public sector & Small and
midsize businesses.

48. Matching Structure with Strategy
Matrix Structure
◻ Most complex because it depends upon both
vertical and horizontal flows of authority and
communication (hence the term matrix).
◻ In contrast, functional and divisional structures
depend primarily on vertical flows of authority
and communication.
◻ Despite complexity, is widely used in
construction, research, health care and defense.

49. Matching Structure with Strategy
Matrix Structure
Disadvantages:
◻ Can result in higher overhead because it
creates more management positions.
◻ Contribute to overall complexity include
� Dual lines of budget authority (a violation of the
unity-of-command principle)
� Dual sources of reward and punishment
� Shared authority, dual reporting channels
� A need for an extensive and effective
communication system

50. Matching Structure with Strategy
Matrix Structure
Advantages:
◻ Project objectives are clear
◻ Many channels of communication
◻ Workers can see the visible results of their work
◻ Shutting down a project is easily accomplished
◻ Facilitates the use of specialized personnel,
equipment, and facilities
◻ Functional resources are shared instead of
duplicated as in a divisional structure

51. Creating a Strategy-Supportive
Culture
◻ New strategies are often market-driven and
dictated by competitive forces.
◻ That’s why, changing a firm’s culture to fit a
new strategy is usually more effective than
changing a strategy to fit an existing culture.

52. Creating a Strategy-Supportive
Culture
◻ Techniques used to alter an organization’s
culture:
1. Recruitment, Training, Transfer, Promotion
2. Restructuring, Role modeling, Positive
reinforcement, Mentoring
3. Revising vision and/or mission
4. Redesigning physical spaces/facades
5. Altering reward system, Altering organizational
policies / procedures / practices

53. Production/Operations Concerns
When Implementing Strategies
◻ Production processes constitute more than 70
% of a firm’s total assets.
◻ A major part of the strategy-implementation
process takes place at the production site.
◻ Production-related decisions have a dramatic
impact on the success or failure of strategy-
implementation efforts.

54. Production/Operations Concerns
When Implementing Strategies
◻ Production-related decisions:
❖ Plant size, Plant location,
❖ Product design, Choice of equipment
❖ Size of inventory, Inventory control, Quality
control, Cost control
❖ Job specialization, Employee training,
❖ Equipment and resource utilization, Shipping and
packaging
❖ Technological innovation

55. Human Resource Concerns When
Implementing Strategies
◻ More companies are using furloughs to cut
costs as an alternative to laying off employees.
◻ Strategic responsibilities of the HR manager:
i. Assessing the staffing needs and costs for
proposed alternative strategies.
ii. Developing a staffing plan for effectively
implementing strategies.
iii. Motivate employees during a time when layoffs
are common and workloads are high.

56. Human Resource Concerns When
Implementing Strategies
◻ Labor Cost-Saving Tactics
1. Salary freeze, Hiring freeze
2. Salary reductions, Reduce employee benefits
3. Reduce employee, Reduce employee workweek
4. Mandatory furlough, Voluntary furlough
5. Hire temporary instead of full-time employees
6. Hire contract employees instead of full-time
employees
7. Halt production for 3 days a week (Toyota Motor is
doing this)
8. Layoffs, Early retirement
9. Reducing/eliminating bonuses

57. Human Resource Concerns When
Implementing Strategies
◻ HR problems that arise during strategy
implementation are usually due to:
1. Disruption of social and political structures
2. Failure to match individuals’ aptitudes with
implementation tasks
3. Inadequate top management support for
implementation activities

58. Human Resource Concerns When
Implementing Strategies
◻ The best method for preventing and overcoming
HR problems in SM is to actively involve as
many managers and employees as possible in
the process.
◻ Although time consuming, this approach builds
understanding, trust, commitment and reduces
resentment and resistance.

59. Group Activity
◻ Discuss ONE of the following:
1. Balancing Work Life and Home Life
2. Benefits of a Diverse Workforce
3. Corporate Wellness Programs
Find one example of company implementing any of
the above.

60. END