STRATEGY IMPLEMENTATION

Management and Operations Issues

DR. VERA AYITEY

Learning Objectives (1 of 2)
•Describe the transition from formulating to implementing
strategies.
•Discuss reasons why annual objectives are essential for
effective strategy implementation.
•Identify and discuss the nature and role of policies in strategy
implementation.
•Explain the role of resource allocation and managing conflict in
strategy implementation.
•Discuss the need to match a firm’s structure with its strategy.
Learning Objectives (2 of 2)
•Identify, diagram, and discuss different types of organizational
structure.
•Identify and discuss 15 dos and don’ts in constructing
organizational charts.
•Discuss four strategic production/operations issues vital for
successful strategy implementation.
•Discuss seven strategic human resource issues vital for
successful strategy implementation.
•Describe key strategic marketing issues vital for implementing
strategies.
Annual Objectives
Annual Objectives:
1. Represent the basis for allocating resources
2. Are a primary mechanism for evaluating
managers
3. Are the major instrument for monitoring
progress toward achieving long-term objectives
4. Establish organizational, divisional, and
departmental priorities
5. Are essential for keeping a strategic plan on track
 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
 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
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
Types of Resources
• Financial
• Physical
• Human
• Technological
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
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
Managing Conflict (1 of 2)
• Conflict is not always bad. An absence of conflict can
signal indifference and apathy.
• Approaches for managing conflict range from
• Ignoring the problem
• Physically separating the conflicting individuals
• Holding meetings to seek compromise
 Some Management Trade-Off Decisions
Required in Strategy Implementation
1. To offer extensive or limited management development workshops
and seminars
2. To recruit through employment agencies, college campuses, or
newspapers
3. To promote from within or to hire from the outside
4. To promote on the basis of merit or on the basis of seniority
5. To tie executive compensation to long-term or annual objectives
6. To allow heavy, light, or no overtime work
7. To establish a high- or low-safety stock of inventory
Matching Structure With Strategy

• Structure largely dictates how objectives

and policies will be established
• Structure dictates how resources will be
allocated
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
7. Losing ground to rival firms
8. Revenue or earnings divided by number of employees or
number of managers is low compared to rival firms
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
 Advantages and Disadvantages of a
Functional Organizational Structure
Advantages Disadvantages
1. Simple and inexpensive 1. Accountability forced to the top
2. Capitalizes on specialization of 2. Delegation of authority and responsibility not
business activities such as marketing and encouraged
finance

3. Minimizes need for elaborate control 3. Minimizes career development

system
4. Allows for rapid decision making 4. Low employee and manager morale
5. Inadequate planning for products and markets

6. Leads to short-term, narrow thinking

7. Leads to communication problems
Divisional Structure
• Functional activities are performed both centrally
and in each separate division
• Organized by geographic area, product or service,
customer, or process
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
• 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
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
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
Managing Resistance to Change

• Resistance to change
• May be the single greatest threat to
successful strategy implementation.
• Successful strategy implementation
hinges on managers’ ability to develop
an organizational climate conducive to
change.
Strategic Human Resource Issues
Seven human resource issues:
1. Linking performance and pay to strategy
2. Balancing work life with home life
3. Developing a diverse work force
4. Using caution in hiring a rival’s employees
5. Creating a strategy-supportive culture
6. Using caution in monitoring employees’ social media
7. Developing a corporate wellness program
Ways and Means for Altering an Organization’s Culture
1. Recruitment
2. Training
3. Transfer
4. Promotion
5. Restructuring
6. Reengineering
7. Role modeling
8. Positive reinforcement
9. Mentoring
10. Revising vision or mission
11. Redesigning physical spaces
12. Altering reward system
13. Altering organizational policies, procedures, and practices
Strategic Marketing Issues (1 of 2)
1. How to make advertisements more interactive to be more
effective
2. How to take advantage of social-media conversations about
the company and industry
3. To use exclusive dealerships or multiple channels of
distribution
4. To use heavy, light, or no TV advertising versus online
advertising
Strategic Marketing Issues (2 of 2)
5. To limit (or not) the share of business done with a single
supplier or business customer
6. To be a price leader or a price follower
7. To offer a complete or limited warranty
8. To extend an existing product line or create a new line of
products
 Marketing Strategy

• Marketing strategy
• deals with pricing, selling, and distributing a
product
Marketing Strategy

• Brand extension
• using a successful brand name to market other
products
• Push strategy
• spending a large amount of money on trade
promotion in order to gain or hold shelf space in
retail outlets
• Pull strategy
• advertising to “pull” products through the
distribution channels
Positioning Products to Meet Target Market
Needs
Financial Strategy

• Financial strategy
• examines the financial implications of
corporate and business-level strategic
options and identifies the best financial
course of action
• The management of dividends and stock price is
an important part of a corporation’s financial
strategy.
• Working capital management
Research and Development Strategy

• Research and development (R&D) strategy

• deals with product and process innovation and
improvement
 Research and Development Strategy (2 of 2)

• Technological leader
• pioneering an innovation
• Technological follower
• imitating the products of competitors
• Open innovation
• firm uses alliances and connections with corporate,
government, academic labs, and consumers to develop new
products and processes
 Operations Strategy

• Operations strategy
• determines how and where a product or service is to
be manufactured, the level of vertical integration in the
production process, the deployment of physical
resources, and relationships with suppliers
 Purchasing Strategy

• Purchasing strategy
• deals with obtaining raw materials, parts and supplies
needed to perform the operations function
• multiple, sole, and parallel sourcing
Purchasing Strategy (2 of 2)

• Multiple sourcing
• the purchasing company orders a particular part from
several vendors
• Sole sourcing
• relies on only one supplier for a particular part
• Parallel sourcing
• two suppliers are the sole suppliers of two different
parts, but they are also backup suppliers for each
other’s parts
Logistics Strategy

• Logistics strategy
• deals with the flow of products into and out of the
manufacturing process
 Human Resource Management (HRM)
Strategy
• H R M strategy
• addresses the issue of whether a company or business
unit should hire a large number of low-skilled employees
who receive low pay, perform repetitive jobs, and will
most likely quit after a short time (the fast-food restaurant
strategy)
• or hire skilled employees who receive relatively high pay
and are cross-trained to participate in self-managing work
teams
 Information Technology Strategy

• Follow-the-sun management
• project team members living in one country can
pass their work to team members in another
country in which the work day is just beginning
The Sourcing Decision: Location of
Functions
• Outsourcing
• purchasing from someone else a product or service
that had been previously provided internally
• the reverse of vertical integration

• Offshoring
• the outsourcing of an activity or a function to a
company or an independent provider in another
country
Disadvantages of Outsourcing

• Customer complaints
• Locked in to long-term contracts
• Lack of ability to learn new skills and develop
new core competencies
• Lack of cost savings
• Poor product quality
Management’s Attitude Toward Risk

• Risk
• composed not only of the probability that the
strategy will be effective but also of the amount of
assets the corporation must allocate to that
strategy and the length of time the assets will be
unavailable for other uses
Questions to Assess Stakeholder Concerns

1. How will this decision affect each stakeholder?

2. How much of what stakeholders want are they
likely to get under the alternative?
3. What are the stakeholders likely to do if they
don’t get what they want?
4. What is the probability that they will do it?
Pressures from Stakeholders

• Political strategy
• plan to bring stakeholders into agreement with a
corporation’s actions
• constituency building, advocacy advertising,
lobbying, and coalition building
 Pressures from the Corporate Culture
If there is little fit, management must decide if it should:

• Take a chance on ignoring the culture.

• Manage around the culture and change the implementation
plan.
• Try to change the culture to fit the strategy.
• Change the strategy to fit the culture.
 Avoiding the Consensus Trap/Groupthink
• Devil’s advocate
• assigned to identify potential pitfalls and problems with
a proposed alternative strategy in a formal presentation
• may be an individual or a group
• Dialectical inquiry
• requires that two proposals using different assumptions
be generated for each alternative strategy under
consideration