Model 3

Strategy Implementation
 Strategy Implementation

Strategy Implementation:
– Sum total of the activities and choices
required for the execution of a strategic
plan.
– Process by which strategies and policies
are put into action through programs,
budgets, and procedures.
 Strategy Implementation

Implementation Process Questions:

– Who are the people to carry out the
strategic plan?
– What must be done to align operations
with new direction?
– How is work going to be coordinated?
 Strategy Implementation

More time than planned

Unanticipated problems
Activities ineffectively coordinated
Problems in Crises deferred attention away
Implementing Employees w/o capabilities
Strategic plans Inadequate employee training
Uncontrollable external factors
Inadequate leadership
Poorly defined tasks
Inadequate information systems
 Strategy Implementation

Programs:
– Purpose is to make the strategy “action-
oriented.”
• Compare proposed programs and activities with
current programs and activities.
 Strategy Implementation

Programs:
– Matrix of change
• Feasibility
• Sequence execution
• Location
• Pace and nature of change
• Stakeholder evaluations
Matrix of Change
 Strategy Implementation

Budgets:
– Planning a budget is the last real
check a firm has on the feasibility of
the selected strategy.
 Strategy Implementation

Procedures:
– SOP’s:
• Detail the various activities that must be carried
out to complete a corporation’s programs.
 Strategy Implementation

Achieving Synergy:
– Synergy:
• If the return on investment (ROI) is greater than
what the return would be if the division was an
independent business.
 Strategy Implementation

6 Forms of Synergy:
• Shared know-how
• Coordinated strategies
• Shared tangible resources
• Economies of scale or scope
• Pooled negotiating power
• New business creation
 Strategy Implementation

Structure Follows Strategy:

– Changes in corporate strategy lead to

changes in organizational structure
 Strategy Implementation

Structure Follows Strategy:

• New strategy is created
• New administrative problems emerge
• Economic performance declines
• New appropriate structure is invented
• Profit returns to its previous levels
 Strategy Implementation

Stages of corporate development

• Simple Structure
• Functional Structure
• Divisional Structure
• Beyond SBU’s
 Strategy Implementation

Simple Structure:
– Stage I:
• Entrepreneur
– Decision making tightly controlled
– Little formal structure
– Planning short range/reactive
– Flexible and dynamic
 Strategy Implementation

Functional Structure:
– Stage II:
• Management team
• Functional specialization
• Delegation decision making
• Concentration/specialization in industry
 Strategy Implementation

Divisional Structure:
– Stage III:
• Diverse product lines
• Decentralized decision making
• SBU’s
• Almost unlimited resources
 Strategy Implementation

Beyond SBU’s:
– Stage IV:
• Increasing environmental uncertainty
• Technological advances
• Size & scope of worldwide businesses
• Multi-industry competitive strategy
• Better educated personnel
 Factors Differentiating Stage I, II, and III
Companies
Function Stage 1 Stage II Stage III
1. Sizing up: Survival and growth dealing Growth, rationalization, and Trusteeship in management
Major problems with short-term operating expansion of resources, and investment and control
problems. providing for adequate of large, increasing, and
attention to product diversified resources. Also,
problems. important to diagnose and
take action on problems at
division level.
2. Objectives Personal and subjective. Profits and meeting ROI, profits, earnings per
functionally oriented share.
budgets and performance
targets.
3. Strategy Implicit and personal; Functionally oriented moves Growth and product
exploitation of immediate restricted to “one product” diversification; exploitation
opportunities seen by scope; exploitation of one of general business
owner-manager. basic product or service opportunities.
field.
4. Organization: One unit, “one-man show.” One unit, functionally Multiunit general staff office
Major characteristic specialized group. and decentralized operating
of structure divisions.

(Continued)
 Factors Differentiating Stage I, II, and III Companies

Function Stage 1 Stage II Stage III

5. (a) Measurement Personal, subjective control Control grows beyond one Complex formal system
and control based on simple accounting person; assessment of geared to comparative
system and daily functional operations assessment of performance
communication and necessary; structured measures, indicating problems
observation. control systems evolve. and opportunities and
assessing management ability
of division managers.
5. (b) Key performance Personal criteria, Functional and internal More impersonal application of
indicators relationships with owner, criteria such as sales, comparisons such as profits,
operating efficiency, ability performance compared to ROI, P/E ratio, sales, market
to solve operating budget, size of empire, share, productivity, product
problems. status in group, personal leadership, personnel
relationships, etc. development, employee
attitudes, public responsibility.
6. Reward-punishment Informal, personal, More structured; usually Allotment by “due process” of
system subjective; used to maintain based to a greater extent a wide variety of different
control and divide small on agreed policies as rewards and punishments on a
pool of resources to provide opposed to personal formal and systematic basis.
personal incentives for key opinion and relationships. Companywide policies usually
performers. apply to many different classes
of managers and workers with
few major exceptions for
individual cases.
 Strategy Implementation

Organizational Life Cycle:

– Describes how organizations grow,
develop and eventually decline.
• Stages:
– Birth Stage
– Growth
– Maturity
– Decline
– Death
 Organizational Life Cycle

Stage I Stage II Stage III1 Stage IV Stage V

Dominant Issue Birth Growth Maturity Decline Death
Popular Concentration Horizontal Concentric and Profit strategy Liquidation or
Strategies in a niche and vertical conglomerate followed by bankruptcy
growth diversification retrenchment
Likely Entrepreneur- Functional Decentralization Structural Dismemberment
Structure dominated management into profit or surgery of structure
emphasized investment centers
Note: 1. An organization may enter a Revival Phase either during the Maturity or Decline Stages and thus
extend the organization’s life.
 Changing Structural Characteristics
of Modern Corporation
Old Organizational Design New Organizational Design
One large corporation Mini-business units & cooperative relationships
Vertical communication Horizontal communication
Centralized top-down decision making Decentralized participative decision making
Vertical integration Outsourcing & virtual organizations
Work/quality teams Autonomous work teams
Functional work teams Cross-functional work teams
Minimal training Extensive training
Specialized job design focused on individual Value-chain team-focused job design
 Strategy Implementation

Matrix Structure:
– 3 Distinct Phases
• Temporary cross-functional task forces
• Product/brand management
• Mature matrix
 Matrix Structure
Top Management

Manufacturing Sales Finance Personnel

Manager: Manufacturing Sales Finance Personnel

Project Unit Unit Unit Unit
A

Manager: Manufacturing Sales Finance Personnel

Project Unit Unit Unit Unit
B

Manager: Manufacturing Sales Finance Personnel

Project Unit Unit Unit Unit
C

Manager: Manufacturing Sales Finance Personnel

Project Unit Unit Unit Unit
D
 Strategy Implementation

Network Structure:
– “non structure” – elimination of in-
house business functions
– Termed “virtual organization”
• Useful in unstable environments
• Need for innovation and quick response
 Network Structure

Packagers

Designers Suppliers

Corporate
Headquarters
(Broker)

Manufacturers Distributors

Promotion/
Advertising
Agencies
 Strategy Implementation

Cellular Organization:
– composed of “cells”
• Self-managing teams
• Autonomous business units
 Strategy Implementation

Reengineering:
– Radical design of business processes
to achieve major gains in cost,
service, or time. Effect way to
implement a turnaround strategy.
 Strategy Implementation
Reengineering Principles:

– Organize around outcomes, not tasks

– Have those who use the output perform the
process
– Subsume information-processing work into the real
work that produces the information
– Treat geographically dispersed resources as
though they were centralized
– Link parallel activities instead of integrating their
results
– Put decision point where work is performed and
build control into the process
– Capture information once at the source
 Strategy Implementation
• Job Design source of competitive
advantage

– Job design
• Study of individual tasks to increase relevance
– Job enlargement
• Combining tasks
– Job rotation
• Increase variety of tasks
– Job enrichment
• More autonomy and control to workers
 Stages of International
Development
• Domestic company—some exporting
• Domestic company—export division
• Domestic company—international
division
• Multinational corporation—
multidomestic emphasis
• Multinational corporation—global
emphasis
Geographic Area Structure for a Multinational Corporation

Board of Directors

President

Corporate
R&D
Staff

*Note: Because of space

limitations, product
groups for only Europe
Operating Operating Operating Operating Operating and Asia are shown
Companies Companies Companies Companies Companies here.
U.S. Europe* Latin Africa Asia*
America

Product Product Product Product Product

Group Group Group Group Group
A B C B D
 Strategy Implementation

Internet & Hyper-linked organizations

– Hyper-linked & decentralized
– Hyper time
– Directly accessible
– Rich data
– Broken
– Borderless
 Trajectories of Decline

• Focusing
• Venturing
• Inventing
• Decoupling