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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.

Implementation Process Questions:

Who are the people to carry out the strategic plan? What must be done to align the companys operations in the new intended direction? How is everyone going to do what is needeed?

Problems in Implementing Strategic plans

Depending on how the corporation is organized, those who implement strategy will probably be a much more diverse set of people than those who formula it. In most large, multi-industry corporations, the implementers are everyone in the organization. Many of the people in the organization who are crucial to successful strategy implementation probably have little to do with the development of the corporate and even business strategy.
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The Managers of divisions and functional areas work with their fellow managers to develop programs, budget, and procedures for the implementation of strategy. They also work to achieve synergy among the divisions and functional areas in order to establish and maintain a companys distinctive competence.

Programs:
Purpose is to make the strategy action-oriented.
Compare proposed programs and activities with current

programs and activities.

Budgets:
Planning a budget is the last real check a firm has on

the feasibility of the selected strategy.

Procedures:
SOPs:
Detail the various activities that must be carried out to

complete a corporations programs.

Achieving Synergy: One of the goals to be achieved in strategy implementation is sinergy between and among functions and business units. This is the reason why corporations commomly reorganize after an acquisition. Synergy is said to exist for a divisional corporation if the return on investment (ROI) is greater than what the return would be if the division was an independent business.

Before plans can lead to actual performance, a corporation should be appropriately organized, programs should be adequately staffed, and activities should be directed to ward achieving desired objects. Changes in corporate startegy lead to changes in organizational structure.

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

Functional Structure:
Stage II:
Management team Functional specialization Delegation decision making Concentration/specialization in industry
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Divisional Structure:
Stage III:
Diverse product lines Decentralized decision making SBUs Almost unlimited resources

Beyond SBUs:
Stage IV:
Increasing environmental uncertainty Technological advances Size & scope of worldwide businesses Multi-industry competitive strategy Better educated personnel
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Factors Differentiating Stage I, II, and III Companies

Function 1. Sizing up: Major problems Stage 1 Survival and growth dealing with short-term operating problems. Stage II Growth, rationalization, and expansion of resources, providing for adequate attention to product problems. Stage III Trusteeship in management and investment and control of large, increasing, and diversified resources. Also, important to diagnose and take action on problems at division level. ROI, profits, earnings per share.

2. Objectives

Personal and subjective.

Profits and meeting functionally oriented budgets and performance targets. Functionally oriented moves restricted to one product scope; exploitation of one basic product or service field. One unit, functionally specialized group.

3. Strategy

Implicit and personal; exploitation of immediate opportunities seen by owner-manager. One unit, one-man show.

Growth and product diversification; exploitation of general business opportunities. Multiunit general staff office and decentralized operating divisions. (Continued)

4. Organization: Major characteristic of structure

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Factors Differentiating Stage I, II, and III Companies

Function
5. (a) Measurement and control

Stage 1
Personal, subjective control based on simple accounting system and daily communication and observation.

Stage II
Control grows beyond one person; assessment of functional operations necessary; structured control systems evolve.

Stage III
Complex formal system geared to comparative assessment of performance measures, indicating problems and opportunities and assessing management ability of division managers. More impersonal application of comparisons such as profits, ROI, P/E ratio, sales, market share, productivity, product leadership, personnel development, employee attitudes, public responsibility. Allotment by due process of a wide variety of different rewards and punishments on a formal and systematic basis. Companywide policies usually apply to many different classes of managers and workers with few major exceptions for individual cases.

5. (b) Key performance indicators

Personal criteria, relationships with owner, operating efficiency, ability to solve operating problems.

Functional and internal criteria such as sales, performance compared to budget, size of empire, status in group, personal relationships, etc. More structured; usually based to a greater extent on agreed policies as opposed to personal opinion and relationships.

6. Reward-punishment system

Informal, personal, subjective; used to maintain control and divide small pool of resources to provide personal incentives for key performers.

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Organizational Life Cycle:

Describes how organizations grow, develop and eventually decline. It is the organizational equivalent of the product life cycle in marketing.

The Stages are:

Birth Stage Growth Maturity Decline Death

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Stage I Dominant Issue Birth Popular Strategies Likely Structure Concentration in a niche Entrepreneurdominated

Stage II Growth Horizontal and vertical growth Functional management emphasized

Stage III1 Maturity Concentric and conglomerate diversification Decentralization into profit or investment centers

Stage IV Decline Profit strategy followed by retrenchment Structural surgery

Stage V Death Liquidation or bankruptcy Dismemberment of structure

Note: 1. An organization may enter a Revival Phase either during the Maturity or Decline Stages and thus extend the organizations life.

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Matrix Structure
The matrix structure, in contrast, maybe very appropriate when organizations conclude that neither functional nor divisional forms, even when combined with horizontal linking mechanism like strategic business units, are right for their situations. In matrix structures, functional and product forms are combined simultaneously at the same level of the organization. 3 Distinct Phases Temporary cross-functional task forces Product/brand management Mature matrix

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Matrix Structure
Top Management

Manufacturing

Sales

Finance

Personnel

Manager: Project A

Manufacturing Unit

Sales Unit

Finance Unit

Personnel Unit

Manager: Project B

Manufacturing Unit

Sales Unit

Finance Unit

Personnel Unit

Manager: Project C

Manufacturing Unit

Sales Unit

Finance Unit

Personnel Unit

Manager: Project D

Manufacturing Unit

Sales Unit

Finance Unit

Personnel Unit

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Changing Structural Characteristics of Modern Corporation

Old Organizational Design One large corporation New Organizational Design Mini-business units & cooperative relationships

Vertical communication
Centralized top-down decision making Vertical integration Work/quality teams

Horizontal communication
Decentralized participative decision making Outsourcing & virtual organizations Autonomous work teams

Functional work teams

Minimal training Specialized job design focused on individual

Cross-functional work teams

Extensive training Value-chain team-focused job design

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Network Structure
The network structure is an example of what could be termed a non structure by its virtual elimination of in-house business functions. A corporation organized in this manner is often called a virtual organization because it composed of a series of project groups or collaboration linked by constantly changing nonhierarchical. The network structure becomes most useful when : The environment in unstable environments Need for innovation and quick response

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Packagers Designers Corporate Headquarters (Broker) Manufacturers Promotion/ Advertising Agencies Distributors Suppliers

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Reengineering
Reengineering is the radical redesign of business processes to achieve major gains in cost, service, or time. Effect way to implement a turnaround strategy. It is not in itself a type of structure, but it is an effective way to implement a turnaround strategy. Reengineering strives to break away from the old rules and procedures that develop and become ingrained in every organization over the years.

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Reengineering Principles:
1. Organize around outcomes, not tasks 2. Have those who use the output perform the process 3. Subsume information-processing work into the real work that produces the information 4. Treat geographically dispersed resources as though they were centralized 5. Link parallel activities instead of integrating their results 6. Put decision point where work is performed and build control into the process 7. Capture information once at the source
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Designing Jobs to Implement Strategy

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

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Designing Jobs with The Job Characteristics Model

The job characteristics model is an advanced approach to job design based on the belief that task can be described in terms of certain objective characteristics affect employee motivation.

In order for the job to be motivation 1.The worker needs to feel a sense of responsibility, feel the task to be meaningful, and receive useful feedback on performance. 2.The job has to satisfy needs that are inmportant to the worker.
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International Issues in Strategy Implementation

An international company is one that engages in any combination of activities, in foreign countries. Multinational Corporation (MNC) is highly developed international company with a deep involvement thoughout the world, plus a worldwide perspective in its management and decision making.

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Stages of International Development

1. Domestic companysome exporting 2. Domestic companyexport division 3. Primarily Domestic companyinternational division 4. Multinational corporationmultidomestic emphasis 5. Multinational corporationglobal emphasis

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Centralization versus Decentralization

A basic dilemma a multinational corporation faces is how to organized authority centrally so that it operates as a vast interlocking system that achieves synergy, and at the same time decentralize authority so that local managers can make the decisions necessary to meet the demands of the local market or host government.

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Geographic Area Structure for a Multinational Corporation

Board of Directors

President

R&D

Corporate Staff

Operating Companies U.S.

Operating Companies Europe*

Operating Companies Latin America

Operating Companies Africa

Operating Companies Asia*

*Note: Because of space limitations, product groups for only Europe and Asia are shown here.

Product Group A

Product Group B

Product Group C

Product Group B

Product Group D

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Thank you for attention !

Prentice Hall, 2004

Chapter 8 Wheelen/Hunger

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