Strategy Implementation

Formulation of a strategy is not the end of strategic management. In fact, it is the beginning of a whole new episode of success or failure of an organization. Implementing a strategy requires a very high level of commitment from the top management, employees, organization culture, structure, leadership, departments etc. Strategy formulation and implementation are interrelated.

Forward linkage : Deals with preparing the organizational activities including the org. structure, leadership, culture etc required for implementation. Backward linkage : Deals with the influence of implementation on the strategy formulation. (To avoid any deviations in the ground reality ) Different strategies require different changes in the business processes.

Stability strategy requires least change. A strategy of changing price requires minor changes in the marketing dept. and a few changes in the day to day business activities. Joint Ventures require radical change like replacing org. structure, technology, new markets, new practices etc.

Project implementation

Strategies give rise to plans, programmes, projects, budgets, policies, procedures, rules and regulations. Project : A project can be defined as a One shot, time limited, goal oriented, major undertaking requiring the commitment of varied skills and resources

A project passes through the following phases : Conception : Of a number of strategic alternatives that generate at the time of strategy formulation, some ideas form the platform for the beginning of projects. These ideas are developed further and ranked on priority.

Definition phase :Of all the project ideas selected and ranked, a preliminary analysis is done from the point of view of marketing, technical, financial, ecological feasibility. After studying the viable projects, a detailed project report is prepared for submitting to the financial institutions. This report contains all details about the project such as the promoters, nature, capacity, location, size, cost, assets, selling arrangements etc.

Planning and organizing : Detailed planning regarding the technical aspects, engineering design, infrastructure, schedules, budgets etc is worked. Implementation : The detailed engineering, issuance of orders, civil construction, etc are undertaken. Clean up : Finishing and handing over the plant to operating personnel.

Procedural Implementation

Formation of a company is governed by the provisions of the companies act 1956 and consists of promotion ( primary step ), registration of the memorandum of the company with the Registrar and flotation of the company ( Raising Capital ). The IRDA of 1951 divided all industries in three categories. Government Private Joint

Procedural Implementation

Licensing procedures : A license is a written permission by the government to an industrial undertaking to manufacturers specified in the schedule. Post 1991, after the govt. adopted the policy of LPG, licensing procedures for all sectors of non strategic importance were abolished. The only strategically important sectors were the defense, environment etc.

Procedural Implementation

SEBI requirements : The SEBI Act of 1992, had three main objectives : The protect the interest of investors in security To promote the development of security markets. To regulate the security market. All strategies should be developed by taking into consideration all the regulations laid by the SEBI.

Procedural Implementation

The MRTP Act of 1969 had the main aim of preventing the concentration of economic power.. It oversees and prevents : Collusions and Cartels Price discrimination among different customers Forcing buyers to buy a whole range of products. There should always be free and fair competition.

Procedural Implementation

Foreign collaboration procedures : many strategies result in foreign collaborations. Foreign investment is of two types : FDI takes place through wholly owned subsidiaries foreign institutional Joint Ventures and Acquisitions. FII takes place when the outside parties invest in instruments such as GDR ( Global Depositary Receipts ) FCCBs (Foreign currency convertible bonds ). Special incentives are given to NRIs for this purpose.

Procedural Implementation

FERA / FEMA has now considerably liberalized rules related to maintenance of dollar accounts by exporters, remittance of foreign exchange for visits abroad, agency commission export claims etc.

Procedural Implementation

Export Import requirements : The government today supports import substitutions and offers incentives to organizations who take initiatives in production of capital goods and raw material which is currently imported.

Procedural Implementation

Patenting and Trademark requirements : Owning to the international change, patents, trademarks, copyrights, designs are assuming greater importance. Important industries where innovations are taking place are chemical, computer software, entertainment, food, pharma etc where patents are a major tool. These elements are governed by the Trademark and Merchandise Mark Act, 1958, Copyright Act 1957.

Procedural Implementation

Labour Legislation requirements : Various laws related to the betterment of the workforce have been formulated. These include : Labour Laws related to women and children. Labour Laws related to specific industries like mines, minerals etc. Rules regarding the provision of a base for wages, social security, bonus have been formulated.

Procedural Implementation

Environment Protection and Pollution Control : Stern control has to be enforced on use of non renewable sources of energy such as oil and natural gas. Increased national and global awareness about overuse and misuse of natural resources such as air, land, water, has resulted into a number of environment protection acts such as the Environment Protection Act, 1986, The Water ( Prevention and Control of Pollution ) Act 1974, The Air (), 1981, The wildlife Protection Act, 1972 etc. Besides this the Central and state governments have set up separate pollution control boards.

Procedural Implementation

Consumer Protection Requirements : To protect the consumers from any unethical practices and unfair acts, all organizations have to abide to the provisions of the Consumer Protection Act. The issues of consumer protection is highlighted in the procedural implementation and at the time of formulation business and operational level strategies.

Structural Implementation

Org. growth : With a change in the objectives in an upward direction, suitable changes are to be made in the formal and informal organization. Org. structure : In alignment with the changed strategies, suitable changes have to be made in the org. structure. Shifting from simple structures to more complex structures like the Matrix or Hybrid structures may be essential.

Structural Implementation

Phases of Organizational Growth : Initial expansion & accumulation of resources Rationalization of the use of resources. Expansion into new products & business lines Development of new organization structure to enable effective mobilization & utilization of resources.

Options

The above 4 stages give rise to 3 types of organization structures : Type 01 : One organization, single product market, hence central decision making. Type 02 : Expansion and hence top boss delegated some decision making & authority to managers. Type 03 : Diversification leads to multi product multi structure and hence need for complete de centralization arises.

Types of Org. Structures

Simple org. structure : Two levels, owner manager & employee. Useful for small firms. Implementation most easy. Success depends upon the skill levels of the owner. Functional org. structure : As an org. grows & develops a number of related products and markets, structure changes to reflect specialization in functional areas i.e production, marketing, R&D, etc. Divisional Org. structure : As firms develop new products in different industries and markets, they may evolve divisional org. structure. Each division may operate autonomously under a divisional head.

Types of Org. Structures

SBU Structure : When divisional structures become unmanageable by one CEO, orgs. may re organize themselves by appointing VPs for each related business. Matrix org. structure : Used to facilitate & development & execution of various programmes or projects. Each of the VPs have functional responsibility for all the projects, while each project manager has project responsibility completing and implementing strategy.

Patterns of Growth of Large Corporations:

Simple Structure

Simple structure is the oldest and most common organizational form

Staff serve as an extension of the top executives personality Highly informal Coordination of tasks by direct supervision Decision making is highly centralized Little specialization of tasks, few rules and regulations, informal evaluation and reward system

Patterns of Growth of Large Corporations:

Functional Structure

Lower-level managers, specialists, and operating personnel

Divisional Structure

Lower-level managers, specialists, and operating personnel

Divisional Structure

Organized around products, projects, or markets Each division includes its own functional specialists typically organized into departments Divisions are relative autonomous and consist of products and services that are different from those of other divisions Division executives help determine productmarket and financial objectives

Divisional Structure

Strategic business unit (SBU) structure Divisions with similar products, markets, and/or technologies are grouped into homogenous SBUs Task of planning and control at corporate office is more manageable May become difficult to achieve synergies across SBUs

Matrix Structure

Keys for org. structure

Functional Structure It is used for a single production or a related product, single location organization, medium in size. Eg. John deer, Tractor manufacturing. Divisional Structure It is used for multi product, multi location organization, vast in the turnover, complex to control, may be multinationals. Eg. Tata Motors in Pune Matrix Structure It is used where you want to make the organization innovative or sometime you want cost optimization. Strategic Business Unit SBU are used to make organization profit and result oriented.

Behavioral Implementation

Leadership: Three Interdependent Activities

Leadership is the process of transforming

organizations from what they are to what the leader would have them become

Leadership should be

Proactive Goal-oriented Focused on the creation and implementation of a creative vision

Exercise of Effective Leadership

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

Determining Strategic Direction

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

Strategic direction means the development of a longterm vision of a firms strategic intent.

A charismatic leader can help achieve strategic intent. It is important not to lose sight of the strengths of the
organization when making changes required by a new strategic direction.

Executives must structure the firm effectively to help

achieve the vision.

Exploiting & Maintaining Core Competencies

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

Core competencies are resources and capabilities that serve as

a source of competitive advantage for a firm over its rivals.

Strategic leaders must verify that the firms competencies are

emphasized in strategy implementation efforts.

In many large firms, and certainly in related diversified ones,

core competencies are exploited effectively when they are developed and applied across different organizational units.

Core competencies cannot be developed or exploited

effectively without developing the capabilities of human capital.

Developing Human Capital

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

Human capital refers to the knowledge and skills of the firms

entire workforce.

Employees are viewed as a capital resource that requires

investment.

No strategy can be effective unless the firm is able to develop and

retain good people to carry it out.

The effective development and management of the firms

human capital may be the primary determinant of a firms ability to formulate and implement strategies successfully.

Sustaining an Effective Organizational Culture

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

An organizational culture consists of a complex set of

ideologies, symbols, and core values that are shared throughout the firm and influences the way it conducts business.

Shaping the firms culture is a central task of effective

strategic leadership.

An appropriate organizational culture encourages the

development of an entrepreneurial orientation among employees and an ability to change the culture as necessary.

Reengineering can facilitate this process.

Changing Culture and Reengineering

The benefits of business reengineering are maximized when employees believe that: Every job in the company is essential and important All employees must create value through their work Constant learning is a vital part of every persons job Teamwork is essential to implementation success Problems are solved only when teams accept the responsibility for the solution

Emphasizing Ethical Practices

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

Ethical practices increase the effectiveness of strategy

implementation processes.

Ethical companies encourage and enable people at all

organizational levels to exercise ethical judgment.

To properly influence employee judgment and behavior,

ethical practices must shape the firms decision-making process and be an integral part of an organizations culture. honesty and ethical practices among employees.

Leaders set the tone for creating an environment of mutual respect,

Establishing Balanced Organizational Controls

Effective Strategic Leadership

Determining Strategic Direction

Establishing Balanced Organizational Controls

Exploiting & Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

Organizational controls provide the parameters within which

strategies are to be implemented and corrective actions taken.

Financial controls are often emphasized in large

corporations and focus on short-term financial outcomes.

Strategic control focuses on the content of strategic actions,

rather than their outcomes.

Successful strategic leaders balance strategic control and

financial control (they do not eliminate financial control) with the intent of achieving more positive long-term returns.

A Leaders Bases of Power

Functional Implementation

Five functional areas that need special address in implementation are :

Marketing Research

and development Production-operations-manufacturing Human resource management Financial-accounting

Marketing

Marketing is defined as a process of assessing and meeting individuals or groups wants and needs by creating, offering, and exchanging products of value.

Possible Marketing Strategies

Segmentation Strategies
Geographic Demographic Psychographic Behavioral

Target Market Selection Strategies

Single-segment concentration Selective specialization Product specialization Market specialization Full market coverage

Differentiation Strategies
Product itself Services Personnel Image

Positioning Strategies
Attribute positioning Benefit positioning Use-application positioning User positioning Competitor positioning Product category positioning Quality-price positioning

Marketing Mix Strategies

New-product development Product line Brand Packaging-labeling Product life cycle decisions

Product Life Cycle

Introduction Growth Maturity Decline

Sales

Time

PLC

The product life cycle (PLC) concept is a recognition that a products sales rise and decline, bringing about the need for different strategies for coping with these ups and downs.
The various stages of the PLC might require changes not only in the product strategies, but in the other Ps, as well.

Marketing Mix Strategies

Pricing The pricing strategy depends upon the organizations pricing objectives survival, maximum current profit, maximum current revenue, maximum sales growth, maximum market skimming, product-quality leadership, or other. Markup pricing Perceived-value pricing Going-rate pricing Geographical pricing Price discounts-allowances Product mix pricing Target-return pricing Value pricing Sealed-bid pricing Promotional pricing Discriminatory pricing

Promoting

Advertising Billboards Point-of purchase displays Symbols and logos Packaging inserts Sales promotion Public relations Personal selling Direct marketing

Possible HRM Strategies

Organize for efficiency or innovation Organize for control or flexibility Use specialized or broad job categories Use detailed or loose work planning Use internal or external recruitment Who makes hiring decision Whats important in hiring Formal or informal approach

Possible Human Resource Management Strategies

Employee Separations How to downsize Hiring freeze Support for terminated employees Preferential or non-preferential rehiring process Performance Appraisal Customized or uniform appraisals Appraisal for developmental or control purposes Multipurpose or focused appraisals Use multiple or one input

Possible Human Resource Management Strategies

Training and Development Buy or develop skills Individual or team-based training On-the-job or external training Job-specific or generic training

Compensation Fixed-pay or variable pay system Job-based or individual pay Seniority-based or performance-based system Centralize or decentralize pay decisions

Possible Research and Development Strategies

R&D Emphasis Basic scientific research Product development Process development

R&D Timing

First mover Follower

First Mover Advantages-Disadvantages

An organization thats first to bring a new product innovation to the marketplace or to use a new process innovation is called a first mover. Being a first mover has certain strategic advantages and disadvantages.

Advantages

Reputation for being innovative and industry leader Cost and learning benefits resulting from moving along experience curve first Control over scarce assets preventing competitors from having access to them Opportunity to begin building customer relationships and customer loyalty

Disadvantages

Uncertain over exact direction technology and market will go Risk of competitors imitating innovations (free-rider effect) Financial and strategic risks High development costs

Possible Research and Development Strategies

Product and Process Development Who conducts R & D

Separate R&D department Cross-functional team Some variation How is R& D conducted Use prototypes Use product tests Use design reviews Use test markets How to implement new design How to evaluate success of new design

Possible Financing-Accounting Strategies

Evaluating Financial Performance
How often How much analysis

Financial Forecasting, Planning, and Budgeting

Percent of sales forecast Discretionary financial needed model Sustainable rate of growth model; Types of budgets used

Financing Mix
Financial structure-capital structure Short-term versus long-term fund sources Permanent or long-term sources

Possible Financial-Accounting Strategies

Other Financial Management Decisions

Capital budgeting choices Stock dividend policy Capital budgeting Cash flow management Working capital management and short-term financing Cash and marketable securities management Accounts receivable and inventory management Use term loans or leases

Current Financial-Accounting Strategies

Controlling costs Compliance; New financial performance measures Valuing intangible assets