Unit - 6_Strategic Management (18MBA25)_Strategy Implementation

Strategy Implementation
MBA Programme – BIET, DavangereProf. Vijay K S
Unit – 6

Strategic Management
18MBA25
As Per the VTU Syllabus
Unit – 6

Meaning
Strategy implementation is also defined as the manner in which an
organization should develop, utilize, and amalgamate organizational
structure, control systems, and culture to follow
strategies that lead to competitive advantage and a better
performance.
Strategy implementation is the translation of chosen strategy into
organizational action so as to achieve strategic goals and objectives.

Established Objectives
Corporate & Business Level
Strategies Selected
Several activities to
make sure that the
Strategy is successful
Main concern in the implementation
of strategies – Operationalize that
strategy throughout the organization

Operationalizing strategy
 Transcending the various components of the strategy to
different level
• Mobilization and allocation of resources
• Structuring authority, responsibility
• Task and information flows
• Establishing policies and evaluation and control.

Operationalizing strategy
There are number of tools to accomplish this …
- Annual Objectives
- Functional Strategies
- Policies
- Resource Allocation
- Action Plans

Operationalizing strategy - Annual Objectives
Annual operating objective designed to contribute to the
long term objectives is a critical step in strategy
implementation. Long term objectives indicate the planned
long term positioning of the organization.

Operationalizing strategy - Annual Objectives
• For monitoring progress towards achieving long term objectives
• Serve as standards of performance
• Primary tool for evaluating employees
• Serve as a source of employee motivation and identification
• Provide a basis for organization design
• Represent basis for allocating resources
• Establish priorities at all levels

Operationalizing strategy - Functional Strategies
 Marketing strategy
 Financial strategy
 R&D Strategy
 Operations strategy
 Purchasing strategy
 Logistics strategy
 HRM strategy
 Information systems strategy

- Marketing strategyInvolved with pricing, selling, and distributing a product.
 Market development strategy
• Capture a larger share of existing market through market saturation and market penetration.
• Develop new markets for current products
 Product development strategy
• Develop new products for existing markets
• Develop new products for new markets
 Advertising or Promotion strategy
• Push marketing strategy
 Investing in trade promotion to gain or hold share
• Pull marketing strategy - Investing in consumer advertising to build brand awareness

- Marketing strategy
Other marketing strategies
• Should a company use distributors and dealers to sell its products
or should it sell directly to by using direct marketing model
• Selling their products through big departmental stores.
• Skimming pricing or penetration pricing strategy

- Financial strategy
Finance is a fundamental resource for starting and conducting of a business
Financial strategies are centered around acquiring capital, reducing cost capital etc.
Also making complex investment decisions through
- capital budgeting
- financing and dividend decisions
- capital structure
- working capital strategies in terms of accounts receivables,
inventories, cash flow management etc.

- R & D strategy
Deals with product and process innovation and
improvement
Choice:
 Technological leader
 Technological follower

- Operations strategy Determines:
• How and where product is to be manufactured
• Level of vertical integration in production process
• Deployment of physical resources
• Relationships with suppliers
 Affected by product life cycle
 Movement from mass production to:
• Continuous improvement
• Modular manufacturing
• Mass customization

- Purchase strategy
Obtaining raw materials, parts and supplies
 Basic Purchasing Choices:
• Multiple sourcing
• Sole sourcing
• Parallel sourcing

- Logistics strategy
Logistics strategy
Flow of products into and out of the process
 Three current trends:
• Centralization
• Outsourcing
• Use of the Internet

- HRM strategy
• This is the critical, dynamic and living resource of an orgn. Unlike other resources
• HRM strategies percolate into other functional strategies and integrates all of them
towards corporate and business level strategies
• HRM is managing the functions of employing, developing, compensating and utilizing
human resources
• This results in development of human and industrial relations which would shape the
future policies and practices of human resource management
• This is with a view to contribute proportionately to the organizational, individual and
social goals

Operationalizing strategy - Policies
 Developing and communicating concise policies
Effective implementation of strategy requires formulation of
policies. “A policy is a broad, general guide to action with constrains
or directs goal attainment. Thus, policies serve to channel and guide
the implementation of strategies

Organizational Structure to
implement strategies at
different level

Organizational Structure and Control Systems
will give a framework within which the strategies at
different level will get implemented

Organizational Structure
 Specifies firm’s formal reporting relationships, procedures,
controls, authority & decision-making processes (i.e., work to be
done and how to do it!)
 Effective use of firm’s strategies facilitated when structure is
properly aligned
 Structural stability: Capacity firm requires to consistently and
predictably manage its daily work routines
 Structural flexibility: Opportunity to explore competitive
advantages firm will need to be successful in the future

Control System
 Guide the use of strategy, indicate how to compare actual results
with expected results, and suggest corrective actions to take
when the difference is unacceptable
 Two types include
 Strategic and
 Financial

The Relationship between strategy and
structure is reciprocal; change in one leads to
change in the other. “Research shows
strategy has a much more important
influence on structure than the reverse.”

Different Types of Structure
Line
Organization
Functional
Organization Line and Staff
Project
Based Organization
Division
Based
Organization
Matrix
Based Organization

implement business Level
strategies

 Organizational Structure for Cost Leadership
CEO / MD
Operations Marketing HRM
Finance and
Accounts
Logistics
Central Reporting

Organizational structures used to implement
different business level strategies
 Organizational Structure for Cost Leadership
• Simple Reporting relationship
• Few decision-making and authority layers
• Centralized corporate staff
• Strong operational focus on process improvements
• Low-cost culture
• Centralized staff decision-making authority
• Jobs specialization
• Highly formalized rules and procedures

Organizational Structure for Differentiation
CEO / MD
Operations Marketing HRM
Finance and
Accounts
R&D, Research
TEam
R & DEntre of Excellence
Team

 Organizational Structure for Differentiation
• Complex and flexible reporting relationships
• Cross-functional product development teams
• Strong focus on marketing and product R&D
• Development-oriented culture
• Decentralized decision making
• Broad job descriptions
• Informal rules and procedures

 Organizational Structure for integrated Cost
leadership & Differentiation
• These firms may sell products that create value because of
relatively low price and reasonable sources of differentiation
• Difficult to implement, but frequently used in the global
economy
• Challenge due to primary/support activities
• Need to successfully combine specialization, formalization
and centralization

implement Corporate Level
strategies

Multidivisional structure is used to
implement the corporate level strategies
There are three types of Multidivisional structures
- Cooperative form
- Strategic Business Unit form
- Competitive form

- Cooperative form
MD / CEO
Public Relations Compliance
Centralized R&D
Lab
Strategic Planning
Team
Corporate HRM
Team
Corporate
Marketing Division
Corporate
Finance Team
Product Division 1 Product Division 2 Product Division 3 Product Division 4

- Cooperative form
• Organizational structure using horizontal integration to bring about interdivisional
cooperation
• Divisions formed around products, markets or both
• All of the divisions share one or more corporate strengths
• Interdivisional sharing depends on cooperation
• Links resulting from effective integration mechanisms support sharing of both
tangible and intangible resources
• Centralization is one integrating mechanism that can be used to link activities among
divisions, allowing firms to exploit common strengths and share competencies
• Success influenced by how well information is processed among divisions
• Success can be influenced by managerial commitment levels and the response to
some lost managerial autonomy

- Strategic Business Unit (SBU) Form
MD / CEO
Centralized R&D
Lab
Strategic Planning
Team
Corporate HRM
Team
Corporate
Marketing Division
Corporate
Finance Team
SBU 1
Division
1
Division
2
Division
3
SBU 1
Division
1
Division
2
Division
3
SBU 1
Division
1
Division
2
Division
3

- Strategic Business Unit (SBU’s) form
• Divisions within each SBU are related in terms of shared products and/or markets
• Divisions of one SBU have little in common with divisions of other SBUs
• Divisions within each SBU share product or market competencies to develop
economies of scope
• Integrations used in cooperative form are equally effective for the SBU form
• Each SBU is a profit center
• Financial controls are more vital for evaluating performance

- Competitive Form
MD / CEO
Centralized R&D
Lab
Strategic Planning
Team
Corporate HRM
Team
Corporate
Marketing Division
Corporate
Finance Team
Division
1
Division
2
Division
3
Division
4
Division
5
Division
6
Division
7
Division
8
Division
9

- Competitive Form
• Competitive form defined: organizational structure in which the firm's divisions are
completely independent
• Divisions do not share common corporate strengths
• Integration devices not developed to coordinate activities across divisions
• Efficient capital markets in unrelated strategies require organizational arrangements
that emphasize divisional competition rather than cooperation
• Specific performance expectations and accountability for independent divisions
stimulate internal competition for future resources

- Competitive Form Conti…
• Headquarters maintains a distant relationship to avoid intervention in divisional
affairs
• Strategic controls are used to monitor performance relative to targeted returns
• Headquarters remains responsible for cash flow allocation, performance appraisal,
resource allocation, and the legal aspects related to acquisitions

The McKinsey 7S
Framework

• Developed in the early 1980s by Tom Peters and
Robert Waterman
• The basic premise of the model is that there are
seven internal aspects of an organization that
need to be aligned if it wats to be successful.

Where 7S model can be used?
• To improve the performance of a company,
• To examine the likely effects of future changes within a company,
• To align departments and processes,
• To determine what is the best way to implement a proposed
strategy.

The Seven Elements
Hard elements Soft elements
Strategy Shared values
Structure Skills
Systems Style
Staff
"Hard" elements are easier to define or identify and management can
directly influence them: These are strategy statements; organization charts
and reporting lines; and formal processes and IT systems.
"Soft" elements, on the other hand, can be more difficult to describe, and
are less tangible and more influenced by culture. However, these soft
elements are as important as the hard elements if the organization is going
to be successful.

• The key point of the
model is that all the
seven areas are
interconnected and a
change in one area
requires change in
the rest of them for it
to function
effectively.

• Strategy: the plan devised to maintain and build
competitive advantage over the competition.
• Structure: the way the organization is structured
and who reports to whom.
• Systems: the daily activities and procedures that
staff members engage in to get the job done.

• Shared Values: these are the core values of the
company that are evidenced in the corporate culture
and the general work ethic.
• Style: the style of leadership adopted.
• Staff: the employees and their general capabilities.
• Skills: the actual skills and competencies of the
employees working for the company

Apple Inc
• Shared Values - business is aligned around the values of design and user experience
• Strategy - focus on a small number of products and to make them innovative and excellent – enabling the
business to capture a huge market share relative to its size, and build a loyal customer following
• Staff - offers their employees huge benefits
• Skills - highly qualified and creative employees
• Systems - supply chain with built capacity for launching and supplying huge new market-dominating products
• Style - people are free to innovate – as long as they met Jobs’ high standards

• Staff - offers their employees huge benefits
• Skills - highly qualified and creative employees
• Systems - supply chain with built capacity for
launching and supplying huge new market-
dominating products
• Style - people are free to innovate – as long as
they met Jobs’ high standards

How to use the tool?
• Step 1. Identify the areas that are not effectively aligned
• Step 2. Determine the optimal organization design
• Step 3. Decide where and what changes should be made
• Step 4. Make the necessary changes
• Step 5. Continuously review the 7s

How corporate culture
promotes implementation of
strategy?

“An organization’s capacity to execute its
strategy depends on its “hard”
infrastructure--its organization structure and
systems--and on its “soft” infrastructure--its
culture and norms.”

Building a Strategy-Supportive Corporate Culture
• Where Does Corporate Culture Come From?
• Culture and Strategy Execution
• Types of Cultures
• Creating a Fit Between Strategy and Culture
• Establishing Ethical Standards
• Building a Spirit of High Performance

What Makes up a Company’s Culture ?
• Beliefs about how business ought to be conducted
• Values and principles of management
• Work climate and atmosphere
• Patterns of “how we do things around here”
• Oft-told stories illustrating company’s values
• Taboos and political don’ts
• Traditions and Ethical standards

Where Does Corporate Culture Come From?
• Founder or early leader
• Influential individual or work group
• Policies, vision, or strategies
• Traditions, supervisory practices, employee attitudes
• Organizational politics
• Relationships with stakeholders and Internal sociological forces

Why Culture matters?
• Shape mood and temperament of the work force, positively affecting organizational energy, work habits,
and operating practices
• Provide standards, values, informal rules and peer pressures that nurture and motivate people to do their
jobs in ways that promote good strategy execution
• Strengthen employee identification with the company, its performance targets, and strategy
• Stimulate people to take on the challenge of realizing the company’s vision, do their jobs competently
and with enthusiasm, and collaborate with others to execute the strategy
• Optimal condition: A work environment that Promotes can do attitudes, Accepts change, Breeds needed
capabilities

Creating a Strong Fit Between Strategy and Culture
Step 1
Diagnose which facets of present culture are strategy-
supportive and which are not
Step 2
Talk openly about why aspects of present culture need to be
changed
Step 3
Follow with swift, visible actions to modify culture - include
both substantive and symbolic actions

Characteristics of Strong Culture
• Conduct business according to a clear, widely-understood philosophy
• Management spends considerable time communicating and
reinforcing values
• Values are widely shared and deeply rooted
• Typically have a values statement
• Careful screening/selection of new employees to be sure they will
“fit in”
• Visible rewards for those following norms; penalties for those who
don’t

How does the culture come to be strong
• Leader who establishes values consistent with
• Customer needs
• Competitive conditions
• Strategic requirements
• A deep, abiding commitment to espoused values and business philosophy
• Practicing what is preached!
• Genuine concern for well-being of
• Customers
• Employees
• Shareholders

 Leadership and Culture
Leadership is basically the ability to persuade others to seek defined objectives willingly
and enthusiastically.
Organizational leadership involves
action on two fronts
Guiding the
organization to
deal with
constant change
Providing the
management skill
to cope with the
ramifications of
constant change

Strategic Leadership: Embracing Change
Activities
involved in
galvanizing
commitment
to change
Clarifying strategic intent
Building an organization
Shaping organizational
culture

 Ethical process and Corporate Social Responsibility
“Ethical management means, with a positive, subjective attitude:
observation of corporate ethics; carrying on all economical, legal
responsibilities of the corporation; recognizing personal responsibilities
as corporation obligations; and first taking ethical aspect into
consideration when pursuit of personal gains corporate ethics.”

Strategic Management
• Strategy can be framed by due
intelligence of a person.
• Strategic management will not
help in fixing the standards
rather it helps in achieving the
standards.
• Strategies differ from
organization to organization
Ethical process
• ethics can be framed by fixing moral
values and standards.
• ethical management helps in fixing
the standards. And while fixing the
standards it considers the
achievability, so it fixes the achievable
standards.
• Strategies differ from organization to
organization, but ethical practices are
universal, it considers the universally
accepted code of ethics.

 Organizational Controls
- Guide the use of strategy, indicate how to compare actual results with
expected results, and suggest corrective actions to take when the
difference is unacceptable
- Two types include strategic and financial

1. Strategic controls: largely subjective criteria intended to verify that
the firm is using appropriate strategies for the conditions in the external
environment and the company’s competitive advantages
• Concerned with what firm might do vs. what it can do
• Used to evaluate degree to which firm focuses on the requirement to
implement strategies (i.e., SUB: primary and support activities;
corporate level: knowledge, markets & technologies across
businesses) Focus on the content of strategic actions
• Encourage decisions that incorporate moderate and acceptable
levels of risk

2. Financial controls:
• Objective criteria used to measure firm’s performance against
previously established quantitative standards (used for unrelated
diversification)
• Focus on short-term financial outcomes
• Produce risk-averse managerial decisions

Unit - 6_Strategic Management (18MBA25)_Strategy Implementation

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