FINALS

COVERAGE
SUMMARY
DR. REGINO S. ROBLES

IN PARTIAL FULFILMENT OF THE REQUIREMENTS IN

BMG 334 - CORPORATE MANAGEMENT

1M / 5:00 - 6:00 / SFC 309

SUBMITTED BY:
(#28) MARQUEZ, LYRA HASTINE C.

SEPTEMBER 20, 2019

Strategy Implementation refers to the execution of the plans and strategies, so as to
accomplish the long-term goals of the organization. It converts the opted strategy into
the moves and actions of the organisation to achieve the objectives.

Simply put, strategy implementation is the technique through which the firm develops,
utilises and integrates its structure, culture, resources, people and control system to
follow the strategies to have the edge over other competitors in the market.

Strategy Implementation is the fourth stage of the Strategic Management process, the
other three being a determination of strategic mission, vision and objectives,
environmental and organisational analysis, and formulating the strategy. It is followed
by Strategic Evaluation and Control.

Process of Strategy Implementation

1. Building an organization, that possess the capability to put the strategies into
action successfully.
2. Supplying resources, in sufficient quantity, to strategy-essential activities.
3. Developing policies which encourage strategy.
4. Such policies and programs are employed which helps in continuous improvement.
5. Combining the reward structure, for achieving the results.
6. Using strategic leadership.
The process of strategy implementation has an important role to play in the company’s
success. The process takes places after environmental scanning, SWOT analyses and
ascertaining the strategic issues.
Prerequisites of Strategy Implementation
• Institutionalization of Strategy: First of all the strategy is to be institutionalized,
in the sense that the one who framed it should promote or defend it in front of the
members, because it may be undermined.
• Developing proper organizational climate: Organizational climate implies the
components of the internal environment, that includes the cooperation,
development of personnel,  the degree of commitment and determination,
efficiency, etc., which converts the purpose into results.
• Formulation of operating plans: Operating plans refers to the action plans,
decisions and the programs, that take place regularly, in different parts of the
company. If they are framed to indicate the proposed strategic results, they assist
in attaining the objectives of the organization by concentrating on the factors
which are significant.
• Developing proper organisational structure: Organization structure implies the
way in which different parts of the organisation are linked together. It highlights
the relationships between various designations, positions and roles. To implement
a strategy, the structure is to be designed as per the requirements of the strategy.
• Periodic Review of Strategy: Review of the strategy is to be taken at regular
intervals so as to identify whether the strategy so implemented is relevant to the
purpose of the organisation. As the organization operates in a dynamic
environment, which may change anytime, so it is essential to take a review, to
know if it can fulfil the needs of the organization.

Aspects of Strategy Implementation

• Creating budgets which provide sufficient resources to those activities which are
relevant to the strategic success of the business.
• Supplying the organization with skilled and experienced staff.
• Conforming that the policies and procedures of the organisation assist in the
successful execution of the strategies.
• Leading practices are to be employed for carrying out key business functions.
• Setting up an information and communication system, that facilitate the
workforce of the organisation, to perform their roles effectively.
• Developing a favourable work climate and culture, for proper implementation of
the strategy.

Annual objectives are specific, measurable statements of what an organization subunit is

expected to achieve in contributing to the accomplishment of the business's grand
strategy.

Establishing long-term strategic objectives and organization-wide goals can be a

daunting task. We at OnStrategy know and understand this so we have provided you
with a quick and easy overview of what to consider when you are ready to embark on
this endeavor.
Long-Term Strategic Objectives–You will find the four key areas emphasized by the
Balanced Scorecard* provided in OnStrategy to guide you in creating strategic
objectives. Using the information gathered in your SWOT, for each of the following
areas develop at least one objective, but no more than five to seven.

• The “Financial” perspective indicates whether the company’s strategy,

implementation, and execution are contributing to top and bottom line
improvement include the following: Cash flow, Sales growth, Market share, and
ROE.
• The “Customer” perspective is focused primarily on creating value and
differentiation when acquiring, retaining or servicing the customer. This driver
deals primarily with gaining and growing customers and market share.
• Focusing on “Internal Processes” in operations has the greatest impact on customer
satisfaction. Positive long term results rely on defining the competencies needed to
maintain market leadership and maximizing the effectiveness of those internal
systems.
• The “People/Learning” perspective relies on a company’s commitment to its
greatest resource—people. This area focuses on creating value by developing an
environment that fosters learning, innovation, and prioritizing on its “human
asset.” The premise is that people drive the other three elements to achieve the
company’s goals.

Resource allocation is the process of assigning and managing assets in a manner that
supports an organization's strategic goals. Resource allocation includes managing
tangible assets such as hardware to make the best use of softer assets such as human
capital.

In strategic planning, resource allocation is a plan for using available resources, for
example human resources, especially in the near term, to achieve goals for the future. It
is the process of allocating scarce resources among the various projects or business
units.

Restructuring is an action taken by a company to significantly modify the financial and

operational aspects of the company, usually when the business is facing financial
pressures. Restructuring is a type of corporate action taken that involves significantly
modifying the debt, operations or structure of a company as a way of limiting financial
harm and improving the business.

When a company is having trouble making payments on its debt, it will often
consolidate and adjust the terms of the debt in a debt restructuring, creating a way to
pay off bondholders. A company restructures its operations or structure by cutting costs,
such as payroll, or reducing its size through the sale of assets.

Electrical engineering is a technical discipline concerned with the study, design and
application of equipment, devices and systems which use electricity, electronics, and
electromagnetism. It emerged as an identified activity in the latter half of the 19th
century after commercialization of the electric telegraph, the telephone, and electrical
power generation, distribution and use.

Reengineering is most commonly defined as the redesign of business processes—and

the associated systems and organizational structures—to achieve a dramatic
improvement in business performance. BPR has been described as a radical new
approach to business improvement, with the potential to achieve dramatic improvement
in business performance. BPR should not be considered downsizing, restructuring,
reorganization, and/or new technology. It is the examination and change of five
components of the business strategy, process, technology, organization, and culture.
Many companies continue to experiment with reengineering, even if they have failed in
previous attempts.

As a leader in your organization who has put the time and effort into building your
strategic plan, you want to be sure your employees adopt your vision and sense of
purpose. As part of our “how to get the most of your performance management
software” series, we now look at performance-based compensation as a tool to aide
implementation.

Here are some best practices to make your incentive plan as successful as possible:
• Tie incentives to corporate results, team results, and individual performance,
where appropriate.
• Fit the compensation plan in with your core values and culture.
• Simplify a complicated plan so everyone, regardless of education level, can
understand it.
• Communicate your incentive plan as much as possible.
• Involve employees in the process by sending out an employee survey before you
structure your plan to see what they’re looking for.
• Shell out incentives in the form of cash, time off, company perks, group outings,
and so on. Don’t be tightfisted: Outstanding results can come from a history of
outstanding rewards.
• Get your employees energized about the incentive plan by making the plan exciting
and motivational.
• Share financial and business plans with employees and provide education if they
don’t understand financial issues.
• Don’t expect attitudes and behaviors to change overnight: Implementing an
incentive program involves a long-term process, not a one-time event.

A FEW OTHER POINTERS ON LINKING PAY TO PERFORMANCE:

1. Differentiate bonuses from incentive pay. Bonuses are paid based on past
outcomes. Incentives are intended to motivate future outcomes.
2. Match the incentive cycle to the work cycle. Consider linking incentives to the
speed of work. For example, if your employee has just finished a six-week project,
pay the incentive at the end of that six weeks.
 3. Align your incentives at the individual, team and organizational level. Every
objective is either met or missed because of actions taken at the individual, team
and organizational level. Make sure your incentives reflect this reality.
4. Think about the mix of base pay to variable pay, depending on your organization’s
size, the types of jobs, your industry and so on.
5. Aim for self-funding, i.e., plan for incentives to come out of increases in sales or
productivity.
6. Keep it simple. If your comp plan is too complicated, your employees won’t
understand it and won’t be motivated by it. Plan administrators will struggle with
it, too.

Resistance to change is the action taken by individuals and groups when they perceive
that a change that is occurring as a threat to them. Key words here are 'perceive' and
'threat'. The threat need not be real or large for resistance to occur.

Natural resource management refers to the management of natural resources such as

land, water, soil, plants and animals, with a particular focus on how management affects
the quality of life for both present and future generations (stewardship). ...
Environmental management is also similar to natural resource management.

Creating a Strategy-Supportive Culture

1.Formal statements of organizational philosophy

2.Design of physical spaces
3.Deliberate role modeling, teaching, and coaching
4.Explicit reward and status system
5.Stories, legends, myths, and parables
6.What leaders pay attention to
7.Leader reactions to critical incidents and crises
8.Organizational design and structure
9.Organizational systems and procedures
10.Criteria for recruitment, selection, promotion, leveling off, retirement, and
“excommunication” of people

To some employees, autonomy means setting their own hours, while others may see it as
the freedom to perform a task their own way — to decide what they do and how and
when they do it. But whatever it means to the people in your organization, this is one
intangible that’s too important to leave to chance.

Here is a 4-step approach for building a culture of autonomy:

1. Hire talented people of high character

Trust is the foundation of autonomy. So, while you want talented people on your team, if
you’re forced to choose between someone who has the skills and someone you’re certain
you can trust, choose the latter.
Go to great lengths in the hiring process to make certain you’re bringing on people who
have unquestionable ethics and character.
2. Clarify goals and objectives
Cultures that promote autonomy need employees to work toward targeted, concrete
objectives — priorities and deadlines set by their manager.
Think of it like establishing the rules of the game before the players take the field. The
employees have the opportunity to use their strategic skills and creativity to score more
points, but they must know what victory looks like.
3. Train process and procedure
The confidence to correctly make difficult decisions stems from the training an
employee receives. That’s why great companies are relentless in their training processes.
• The Container Store ensures that all new hires receive hundreds of hours of
training before they ever set foot on the sales floor.
• At Marriott Hotels, every employee is cross-trained to do just about any job in the
hotel just in case they need to fill in for someone at a moment’s notice.
• At Wegmans, the deli worker can tell you the reason that a particular type of
prosciutto costs $90 per pound is that it came from an Iberian pig that was hand-
fed acorns from an organic forest in Brazil.
Great companies know that training doesn’t just make a difference; it IS the difference.
4. Empower your people
The key to “letting go” is to begin empowering people to make small decisions and work
their way up. Use those occasions when your employees approach you for help as
opportunities to empower them to make the decision.
• We’re out of printing paper? Here’s the number for the supply company. Can you
order 50 boxes?
• The new hire needs to learn the system. Why don’t you spend the afternoon
walking him through it?
• The customer wasn’t happy with the food? Next time that happens, use your
judgment and decide if you should give her a discount.

The idea is to trust them make a decision and encourage them regardless of how it plays
out. However, be sure to hold them accountable for the outcomes as it will motivate
them to carefully think things through and take responsibility for the results. That’s
essential for building leadership skills.
You also need to evaluate
In the end, the results will always speak for themselves. If the employee demonstrates
the ability to make good decisions, they should be granted more trust and more
independent decision-making latitude.
But if things go awry, take it as a sign that they need more support from you. And
scolding them for a bad result or micromanaging them to the “n-th” degree is not what
is implied by the term support. It simply means that they may need a more clearly
defined goal, more training, or even more confidence.

Production is the method of turning raw materials or inputs into finished goods or
products in a manufacturing process.
Management issues considered central to strategy implementation include matching
organizational structure with strategy, linking performance and pay to strategies,
creating an organizational climate conducive to change, managing political
relationships, creating a strategy- supportive culture, adapting production.

Strategy Implementations by Human Resources. Trial and error have gradually allowed
HR to carve its niche in the business world; in recent years, HR has proven itself
especially useful in the innovative development of organizational strategy. The time has
come, however, for Human Resource professionals to push past the strategy-
development phase and put their plans into action. The implementation of strategy is a
key element of business success, and HR authorities are uniquely positioned to pioneer
the realization of such strategies.

Strategic HR: Driving Business Change

The notion of “strategic HR” is common enough. Certainly, a multitude  of books,
articles,  white papers,  and courses  exist to spur HR professionals towards strategizing
their business management. A great deal of progress has been made along this trend,
but the fact is that much of this strategy development remains strictly conceptual; very
little ground is being gained in terms of actual organizational change. Strategy, in order
to be effective, must naturally be implemented. If a business needs  to change, people
must drive the wheels of that change—and that is where HR’s true role emerges.

Leaping the Hurdles of Change

Before HR professionals can work to implement strategy, they must first ascertain what
obstacles presently exist to prevent the desired changes from occurring in their
organization. Strategy implementation is, in many ways, a systematized process of
removing the company’s many internal roadblocks to change. Every strategy will
encounter some measure of resistance, even when it’s been unanimously agreed that
change is imperative; and the more dramatic the change in strategy, of course, the more
struggle there will be.

HR can preempt many potential battles by anticipating and addressing some of the
problems that will likely arise. As a general rule of thumb, there are five basic causes for
strategy implementation failure, and from these causes stem ten or so foreseeable
hurdles that HR management must endeavor to overcome.

The core causes and their related issues are as follows:

1. Poor Coordination Within Management
• Incongruous goals, opinions, and policies among upper-level executives can
obstruct the cross-system cooperation required by the strategy.
2. Employees Aren’t Buying In
• Employees within the company do not understand the strategy.
 • Employees feel no personal responsibility to fulfill the strategy. It’s possible they
may feel that their efforts will be inconsequential in actually bringing about a
change, or perhaps they are contemptuous of management.
• Employees are impassive towards the execution of the strategy, and exert no
enthusiasm in taking part.
• Employees are uninspired by the overarching goals of the strategy.
3. Inadequate Change Within the Work Unit
• Managers fail to direct the efforts of their work units toward conforming with the
new strategy.
• Managers’ styles and tactics undermine employee enthusiasm about the strategy.
• Work proceeds as usual even within those units which the strategy requires to
exhibit swift and considerable change.
4. Weak Inter-Departmental Collaboration
• There are insufficient processes employed to advance the collaboration between
different operating and functional areas.
5. There Exists No Measurement of Progress
• A method of measuring progress toward the desired goals is either deficient or
else entirely absent. It is difficult, if not impossible, to tell what exactly is
changing.

In order to establish which of these barriers to change will pose the most difficulty
within a given organization, consider the following questions:
• Which of these problems will most directly affect the achievement of our goals?
• If these problems persist, what kinds of challenges could result?
• If we remove or reduce these problems, what quantifiable business benefits will
we see?
• Which of these problems comprises the most immediate, pressing issue?
• How can HR work to address these problems?

The most crucial element to solving these kinds of internal company issues is to identify
them from the start. Like any disease left undiagnosed, small discrepancies in
communication and leadership can rankle deeply and result in long-term and
potentially devastating problems. In order to effectively implement strategy, HR leaders
must take a proactive role in seeking out and carefully eradicating these various
obstacles to change.

From a big-picture perspective, there are four vital tasks that all businesses must
accomplish. These four jobs, when properly fulfilled, add up to the bare-bones work of
strategy implementation, and they are:

1. Helping employees to understand the strategy.

Not only must employees understand the strategic direction itself, they must also
comprehend the reason for the strategy, as well as the driving forces behind it.
Employees are the cogs around which the gears of business turn. If the employees don’t
understand where the strategy is headed, they will be incapable of realizing their full
potential in aiding the strategy implementation.

2. Augmenting employee commitment to the strategy.

Changes in strategy mean changes for people on an individual level, and individual
change tends to mean frustration, disappointment, and challenge. If an employee is
going to put in any extra effort toward propelling a conceived strategy to fruition, he
must genuinely believe that, in the long run, the end product will be worth the difficult
sacrifices made in order to implement the strategy.

3. Streamlining local effort with the strategy.

Though invariably all employees must be on board for understanding and committing to
the strategy, this in and of itself is not enough. Implementing a strategy means
legitimately changing work production. In order to achieve the business strategy, all off-
strategy work must terminate and all on-strategy work must proceed with renewed
urgency and dedication.

4. Inducing cross-system cooperation.

The final and most important step in strategy implementation is that of realigning
departmental relationships within the system. Implementing strategy means carving
deeper relationships between inter-dependent organizational units, such as sales and
manufacturing, or customer service and distribution. This last job is as challenging as it
is critical, because it demands that employees within discrete work units learn to share
and interact across the traditional boundaries of their job descriptions.

Implementation of Strategy
This system of change as organized into four jobs is rather unique among most designs
for strategic HR. Where many plans focus in on how HR can appeal to, motivate, and
enrich the contribution of the individual, the Four Jobs system recognizes the work that
must be done on all three tiers of organization, from the individual to the work unit to
the department as a whole. Implementation of strategy is an all-encompassing
procedure, demanding change at all levels of the business’s social system.

And why is job four so much more difficult than job one? Proceeding through the steps
of strategy implementation, there is a distinct trend of increasing difficulty. The reasons
for this are several:
• Technically speaking, HR can accomplish jobs one and two without really
partnering with the line organization (and it certainly often tries to) – but HR
could not possibly hope to achieve jobs three and four on its own. To really hold
weight over what work is done and how it is completed, HR must have an
agreeable client who wants the offered help.
•
 • As jobs one and two suggest, it is one thing to guide people in understanding
something, and another thing entirely to motivate them to take action with what
they’ve learned. This, of course, is one of HR’s specialties – but though HR might
be pro at instilling such changes within its own field of the business, it should be
careful not to do so otherwise without line manager involvement.
•
• As important as it is that employees understand the strategy, as in job one, it is
exponentially more critical that they apply what they know, as through jobs three
and four. Unfortunately, this is where traditional training begins to grow less
effective, and different, less conventional approaches become necessary.
•
• Job three does not apply merely to the individual – it is a sweeping movement
throughout entire work units, driving a collective change in focus, work habits,
and processes. To successfully accomplish such a far-flung task, HR must work
closely with line managers, often in situations which are out of HR’s usual
comfort zone.

The Real Role of Human Resources

Having established that these four jobs form the core work of strategy implementation,
the question now remains: exactly whose work is it? Certainly HR has a necessary role in
helping the business to address each of these jobs, but it is not the place of HR to carry
them all out. HR should follow its own initiative to complete those tasks it can, and a
solid partnership with the executive line will see to the rest. Put simply, HR must
establish itself as the driving force behind the strategy implementation effort.

Management will have the greatest success in implementing strategy given a:

• Thorough understanding of the strategic objectives
• Willingness to make sacrifices in order to achieve the strategy
• Common view regarding what parts of the organization must change
• Commitment to a systematic plan of employee management, support, and inter-
departmental relations that will cultivate efficient execution of the strategy

Checklist for Strategy Implementation Success.

1. Look at the big-picture business problems, not just HR bustle.
Be down-to-earth and talk to people about what’s really going on. Ask a line executive
what problems are weighing on him – chances are good he’ll launch into a spiel on
customer response time, bottlenecks, production costs, waste, sales slumps, and the like,
not the cost of new hires or lack of corporate values. Don’t worry too much about what
strategic problems HR professionals should “bother with” getting involved in, whether
they’re “HR-type” priority or not. The important thing is that HR is helping the
organization to make changes, and any point that falls in line with the strategy is worth
HR’s time.

2. Gauge HR in terms of business results.

HR often deals with the difficult-to-quantify, yes – but it’s worthwhile to encourage HR
to be more market-driven. HR will be more successful in earning respect within the
company if it can contribute what the line executives need, want, and will appreciate.

3. Buddy up with the top line executives.

A good partnership includes two parties which are working to achieve a common goal.
HR and the executive line should both be open to receiving feedback with regard to how
they are helping one another accomplish the strategy objectives. This sort of relationship
operates far more effectively than the unfortunate habit of HR simply dictating coldly to
the line functions what the problems are and what “must be done” to solve them.

4. Be obstinate in building alliances.

Job four is pivotal – there must be inter-departmental collaboration and change in
order for strategy implementation to succeed. The different business processes, so
accustomed to their separate and competitive ways, may very will dig their heels in and
resist the building of cross-system relationships, but HR professionals should stick to
their guns and manhandle the company into cooperation.

5. Get savvy about business change.

HR professionals should be exactly that – professional. They, more than anyone else,
should know their stuff when it comes to what’s going on in and around the business.
Nothing is more valuable than a thorough understanding of how HR must operate. This
article itself is a mere sampler of what HR is responsible for knowing.

6. Branch out for support.

Don’t shy away from hiring outside partners in order to help HR compile and carry out a
method of tying in organization to strategy. “Hiring out” is not a sign of weakness or
incompetence – on the contrary, it shows business maturity in seeking diversity and
creativity in order to solve problems. Oftentimes HR is too far buried within its own
issues to see clearly, and an outside perspective can offer a crisp new form of insight.

Market segmentation is the process of dividing a market of potential customers into

groups, or segments, based on different characteristics. The segments created are
composed of consumers who will respond similarly to marketing strategies and who
share traits such as similar interests, needs, or locations.

The process of defining and subdividing a large homogenous market into clearly
identifiable segments having similar needs, wants, or demand characteristics. Its
objective is to design a marketing mix that precisely matches the expectations of
customers in the targeted segment.
Strategic planning for any business involves allocating resources toward long-range
goals. Almost without exception, long-term planning involves depending on certain
financial assumptions, whether they relate to product success, marketing costs, key
employees, the outcome of litigation matters or any number of contingencies.
Accordingly, various unexpected financial problems may arise which will impact
strategic planning.

Strategic Vision
The strategic vision for a company often comes from its executives. They are charged
with evaluating the competition, identifying corporate opportunities and developing and
implementing the business plan. A strategy may relate to certain markets (product
markets or geographic markets) or it may relate to the improvement of internal work
processes and overall efficiency of the enterprise, or a myriad of other goals. Regardless
of the objective or objectives a corporation may have, it is important to plan for financial
contingencies and be able to adapt since unwelcome surprises can frequently occur.

Financial Planning
The success of strategic planning is largely dependent on the success of financial
planning. Without access to capital, plans cannot be put into action. So, if a company is
relying on credit to finance an expansion, and suddenly credit is unavailable due to
adverse market conditions, strategic planning will suffer. Likewise, if a company is
depending on equity capital to fund its strategic objectives, it may be disappointed if
cash is misappropriated, or if due to an emergency the capital must be allocated to more
urgent matters. Furthermore, assumptions about profitability may be overly optimistic,
thus there may be insufficient retained earnings available for re-investment in strategic
objectives.

Operational Performance
Management frequently is responsible for the capital budgeting process. This involves
forecasting sales and related expenses, and making financial estimates for future
comparison. Inherent in these estimates are assumptions about financial performance,
which may prove to be unreliable. For instance, sales can be down dramatically from
previous years, costs of doing business can increase without notice, the sales cycle may
be longer than expected, and market demand may be smaller than expected. These
operational issues cause immediate financial problems that adversely impact strategic
planning.

Strategy Development
Sophisticated management knows that strategic planning requires being able to adapt to
innumerable changing operational and financial variables. Thus, if a company is
experiencing financial problems, management may implement measures to lower its
"burn rate," or negative cash flow, by cutting expenses until the unwelcome problems
are resolved. Continuous dynamic adjustments of the strategic plan and its financial
constraints make it a work in progress, not an all-or-nothing proposition. Accordingly,
best practices in change management suggest that the optimum strategy is to diversify
strategies, since depending on only one to work out may be overly optimistic.

The Strategic-Planning and Decision-Making Process

1. Vision Statement
The creation of a broad statement about the company’s values, purpose, and future
direction is the first step in the strategic-planning process. The vision statement must
express the company’s core ideologies—what it stands for and why it exists—and its
vision for the future, that is, what it aspires to be, achieve, or create.

2. Mission Statement
An effective mission statement conveys eight key components about the firm: target
customers and markets; main products and services; geographic domain; core
technologies; commitment to survival, growth, and profitability; philosophy; self-
concept; and desired public image. The finance component is represented by the
company’s commitment to survival, growth, and profitability. The company’s long-term
financial goals represent its commitment to a strategy that is innovative, updated,
unique, value-driven, and superior to those of competitors.

3. Analysis
This third step is an analysis of the firm’s business trends, external opportunities,
internal resources, and core competencies. For external analysis, firms often utilize
Porter’s five forces model of industry competition, which identifies the company’s level
of rivalry with existing competitors, the threat of substitute products, the potential for
new entrants, the bargaining power of suppliers, and the bargaining power of
customers.

SWOT (strengths, weaknesses, opportunities, and threats) is a classic model of internal

and external analysis providing management information to set priorities and fully
utilize the firm’s competencies and capabilities to exploit external opportunities,
determine the critical weaknesses that need to be corrected, and counter existing
threats.

4. Strategy Formulation
To formulate a long-term strategy, Porter’s generic strategies model [18] is useful as it
helps the firm aim for one of the following competitive advantages: a) low-cost
leadership (product is a commodity, buyers are price-sensitive, and there are few
opportunities for differentiation); b) differentiation (buyers’ needs and preferences are
diverse and there are opportunities for product differentiation); c) best-cost provider
(buyers expect superior value at a lower price); d) focused low-cost (market niches with
specific tastes and needs); or e) focused differentiation (market niches with unique
preferences and needs).

5. Strategy Implementation and Management

In the last ten years, the balanced scorecard (BSC) has become one of the most effective
management instruments for implementing and monitoring strategy execution as it
helps to align strategy with expected performance and it stresses the importance of
establishing financial goals for employees, functional areas, and business units. The BSC
ensures that the strategy is translated into objectives, operational actions, and financial
goals and focuses on four key dimensions: financial factors, employee learning and
growth, customer satisfaction, and internal business processes.

The Role of Finance

Financial metrics have long been the standard for assessing a firm’s performance. The
BSC supports the role of finance in establishing and monitoring specific and measurable
financial strategic goals on a coordinated, integrated basis, thus enabling the firm to
operate efficiently and effectively. Financial goals and metrics are established based on
benchmarking the “best-in-industry” and include:

1. Free Cash Flow

This is a measure of the firm’s financial soundness and shows how efficiently its
financial resources are being utilized to generate additional cash for future investments.
It represents the net cash available after deducting the investments and working capital
increases from the firm’s operating cash flow. Companies should utilize this metric
when they anticipate substantial capital expenditures in the near future or follow-
through for implemented projects.

2. Economic Value-Added
This is the bottom-line contribution on a risk-adjusted basis and helps management to
make effective, timely decisions to expand businesses that increase the firm’s economic
value and to implement corrective actions in those that are destroying its value.[23] It is
determined by deducting the operating capital cost from the net income. Companies set
economic value-added goals to effectively assess their businesses’ value contributions
and improve the resource allocation process.

3. Asset Management
This calls for the efficient management of current assets (cash, receivables, inventory)
and current liabilities (payables, accruals) turnovers and the enhanced management of
its working capital and cash conversion cycle. Companies must utilize this practice when
their operating performance falls behind industry benchmarks or benchmarked
companies.

4. Financing Decisions and Capital Structure

Here, financing is limited to the optimal capital structure (debt ratio or leverage), which
is the level that minimizes the firm’s cost of capital. This optimal capital structure
determines the firm’s reserve borrowing capacity (short- and long-term) and the risk of
potential financial distress. Companies establish this structure when their cost of capital
rises above that of direct competitors and there is a lack of new investments.

5. Profitability Ratios
This is a measure of the operational efficiency of a firm. Profitability ratios also indicate
inefficient areas that require corrective actions by management; they measure profit
relationships with sales, total assets, and net worth. Companies must set profitability
ratio goals when they need to operate more effectively and pursue improvements in
their value-chain activities.

6. Growth Indices
Growth indices evaluate sales and market share growth and determine the acceptable
trade-off of growth with respect to reductions in cash flows, profit margins, and returns
on investment. Growth usually drains cash and reserve borrowing funds, and
sometimes, aggressive asset management is required to ensure sufficient cash and
limited borrowing. Companies must set growth index goals when growth rates have
lagged behind the industry norms or when they have high operating leverage.

7. Risk Assessment and Management

A firm must address its key uncertainties by identifying, measuring, and controlling its
existing risks in corporate governance and regulatory compliance, the likelihood of their
occurrence, and their economic impact. Then, a process must be implemented to
mitigate the causes and effects of those risks. Companies must make these assessments
when they anticipate greater uncertainty in their business or when there is a need to
enhance their risk culture.

8. Tax Optimization
Many functional areas and business units need to manage the level of tax liability
undertaken in conducting business and to understand that mitigating risk also reduces
expected taxes. Moreover, new initiatives, acquisitions, and product development
projects must be weighed against their tax implications and net after-tax contribution to
the firm’s value. In general, performance must, whenever possible, be measured on an
after-tax basis. Global companies must adopt this measure when operating in different
tax environments, where they are able to take advantage of inconsistencies in tax
regulations.

Strategy implementation is the translation of chosen strategy into organizational action

so as to achieve strategic goals and objectives. Organizational culture refers to the
specialized collection of values, attitudes, norms and beliefs shared by organizational
members and groups.

All businesses share one common asset, regardless of the type of business. It does not
matter if they manufacture goods or provide services. It is a vital part of any business
entity, whether a sole proprietorship or a multinational corporation. That common asset
is information.

An information system is a computer system that provides management and other

personnel within an organization with up-to-date information regarding the
organization's performance; for example, current inventory and sales. It usually is
linked to a computer network, which is created by joining different computers together
in order to share data and resources. It is designed to capture, transmit, store, retrieve,
manipulate, and or display information used in one or more business processes. These
systems output information in a form that is useable at all levels of the organization:
strategic, tactical, and operational.

Management Information System, commonly referred to as MIS is a phrase consisting

of three words: management, information and systems. Looking at these three words,
it’s easy to define Management Information Systems as systems that provide
information to management.

The Nature of Strategy Evaluation Strategic Evaluation is defined as the process of

determining the effectiveness of a given strategy in achieving the organizational
objectives and taking corrective action wherever required.

Strategy evaluation means collecting information about how well the strategic plan is
progressing. Strategic Evaluation is defined as the process of determining the
effectiveness of a given strategy in achieving the organizational objectives and taking
corrective action wherever required.

A Good evaluation system must posses various qualities. It must meet several basic
requirements to be. effective. First, strategy-evaluation activities must be economical;
too much information can be just as bad. as too little information; and too many
controls can do more harm than good.

Strategy evaluation should be designed to provide a true picture of what is happening.

For example, in a severe economic downturn, productivity and profitability ratios may
drop alarmingly, although employees and managers are actually working harder.
Strategy evaluations should portray this type of situation fairly. Information derived
from the strategy-evaluation process should facilitate action and should be directed to
those individuals in the organization who need to take action based on it. Managers
commonly ignore evaluative reports that are provided for informational purposes only;
not all managers need to receive all reports. Controls need to be action-oriented rather
than information-oriented. The strategy-evaluation process should not dominate
decisions; it should foster mutual understanding, trust, and common sense! No
department should fail to cooperate with another in evaluating strategies. Strategy
evaluations should be simple, not too cumbersome, and not too restrictive. Complex
strategy evaluation systems often confuse people and accomplish little. The test of an
effective evaluation system is its usefulness, not its complexity.
Contingency Planning
A basic premise of good strategic management is that firms plan ways to deal with
unfavorable and favorable events before they occur. Too many organizations prepare
contingency plans just for unfavorable events; this is a mistake, because both
minimizing threats and capitalizing on opportunities can improve a firm's competitive
position.

Auditing
A frequently used tool in strategy evaluation is the audit. Auditing is defined by the
American Accounting Association (AAA) as "a systematic process of objectively
obtaining and evaluating evidence regarding assertions about economic actions and
events to ascertain the degree of correspondence between those assertions and
established criteria, and communicating the results to interested users." People who
perform audits can be divided into three groups: independent auditors, government
auditors, and internal auditors. Independent auditors basically are certified public
accountants (CPAs) who provide their services.

The Environmental Audit

For an increasing number of firms, overseeing environmental affairs is no longer a
technical function performed by specialists; it rather has become an important strategic-
management concern. Product design, manufacturing, transportation, customer use,
packaging, product disposal, and corporate rewards and sanctions should reflect
environmental considerations.

Using Computers to Evaluate Strategies

When properly designed, installed, and operated, a computer network can efficiently
acquire information promptly and accurately. Networks can allow diverse strategy-
evaluation reports to be generated for—and responded to by—different levels and types
of managers. For example, strategists will want reports concerned with whether the
mission, objectives, and strategies of the enterprise are being achieved.

The Nature of Strategy Evaluation

The strategic-management process results in decisions that can have significant, long-
lasting consequences. Erroneous strategic decisions can inflict severe penalties and can
be exceedingly difficult, if not impossible, to reverse. Most strategists agree, therefore,
that strategy evaluation is vital to an organization's well-being; timely evaluations can
alert management to problems or potential problems before a situation becomes
critical. Strategy evaluation includes three basic activities: (1) examining the underlying
bases of a firm's strategy, (2) comparing expected results with actual results, and (3)
taking corrective actions to ensure that performance conforms to plans.