CHAPTER SIX

Strategy Implementation

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 Strategy Implementation
 Strategy Implementation
 The sum total of all activities and choices required
for the execution of a strategic plan
 It is the process by which objectives, strategies, and policies are
put into action through the development of programs, budgets,
and procedures.
 To begin the implementation process, strategy makers must
consider these questions:
 Who are the people to carry out the strategic plan?
 What must be done to align company operations in the
intended direction?
 How is everyone going to work together to do what is needed?
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 Discussion
• Discuss strategy implementation
problems in Ethiopia?

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 Common Strategy Implementation Problems
 A survey of 93 Fortune 500 firms revealed that more than half of the
corporations experienced the following 10 problems when they
attempted to implement a strategic change:
1. Took more time than planned
2. Unanticipated major problems
3. Ineffective coordination
4. Competing activities and crisis created distractions
5. Employees with insufficient capabilities
6. Lower-level employees were inadequately trained
7. Uncontrollable external environmental factors
8. Poor departmental leadership and direction
9. Inadequately defined implementation tasks and activities
10. Inefficient information system to monitor activities
05/24/2021 SM 4
 Who implement Strategy?
• In most large, multi-industry corporations,
the implementers are everyone in the
organization.
• Changes in mission, objectives, strategies,
and policies and their importance to the
company should be communicated clearly to
all operational managers.
• Involving people from all organizational levels
in the formulation and implementation of
strategy tends to result in better
organizational performance.
05/24/2021 SM 5
 What must be done?
• The managers of divisions and functional
areas work with their fellow managers to
develop programs, budgets, 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 company’s
distinctive competence.

05/24/2021 SM 6
 Developing Programs, Budgets and Procedures
• Strategy implementation involves establishing programs
to create a series of new organizational activities,
budgets to allocate funds to the new activities, and
procedures to handle the day-to-day details.
• Program
 a collection of tactics where a tactic is the individual
action taken by the organization as an element of the
effort to accomplish a plan

• The purpose of a program or a tactic is to make a

strategy action-oriented.

05/24/2021 SM 7
 Developing Programs, Budgets and Procedures
 After programs have been developed, the budget
process begins.
 Planning a budget is the last real check a corporation
has on the feasibility of its selected strategy.
 An ideal strategy might be found to be completely
impractical only after specific implementation
programs are costed in detail.
 Procedures
 Detail the various activities that must be carried
out to complete a corporation’s programs
 Standard operating procedures
05/24/2021 SM 8
 Achieving Synergy
• Synergy
 One of the goals to be achieved in strategy implementation
is synergy between and among functions and business units.
 exists for a divisional corporation if the return on
investment is greater than what the return would be if
each division were an independent business

“The whole is greater than the sum of its parts.”

-Aristotle

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 Forms of Synergy
Shared know-how

Coordinated strategies

Shared tangible resources

Economies of scale or scope

Pooled negotiating power

New business creation

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• Shared know-how: Combined units often benefit from sharing
knowledge or skills.
• Coordinated strategies: Aligning the business strategies of two or
more business units may provide a corporation significant advantage
by reducing inter-unit competition and developing a coordinated
response to common competitors (horizontal strategy).
• Shared tangible resources: Combined units can sometimes save
money by sharing resources, such as a common manufacturing
facility or R&D lab.
• Economies of scale or scope: Coordinating the flow of products or
services to increase capacity utilization, and improve market
access. The average total cost of production decreases as a result
of increasing the number of different goods produced.
• Pooled negotiating power: Combined units can combine their
purchasing to gain bargaining power over common suppliers to
reduce costs and improve quality.
• New business creation: Exchanging knowledge and skills can
facilitate new products or services by extracting discrete activities
from various units and combining them in a new unit or by
establishing joint ventures among internal business units.
 How is strategy to be implemented?
Organizing for action

• Before plans can lead to actual performance,

a corporation should be appropriately
organized, programs should be adequately
staffed, and activities should be directed
toward achieving desired objectives.
• Any change in corporate strategy is very
likely to require some sort of change in the
way an organization is structured and in the
kind of skills needed in particular positions.
05/24/2021 SM 12
 Structure Follows Strategy
 Structure Follows Strategy
 Changes in corporate strategy lead to
changes in organizational structure
 The following are the sequence of what
occurs:
 New strategy is created
 New administrative problems emerge
 Economic performance declines
 New appropriate structure is invented
 Profit returns to its previous level
05/24/2021 SM 13
 Stages of Corporate Development
 Successful, large conglomerate organizations have
tended to follow a pattern of structural development
as they grow and expand.
I. Simple Structure
 Flexible and dynamic
II.Functional Structure
 Entrepreneur is replaced by a team of managers
III.Divisional Structure
 Management of diverse product lines in numerous industries
 Decentralized decision making
IV.Beyond SBU’s
 Matrix
 Network
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 Organizational Life Cycle
• Organizational life cycle
 Describes how organizations grow, develop
and decline

Organizational Life Cycle

Stage I Stage II Stage III Stage IV Stage V
Dominant Birth Growth Maturity Decline Death
Issue
Popular Concentration Horizontal & Concentric & Profit Liquidation
Strategies in a niche vertical conglomerate strategy or
growth diversification followed by bankruptcy
retrenchment
Likely Entrepreneur Functional Decentralization Structural Dismember
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Structure management SMinto profit or surgery 15 of
ment
 Advanced Types of Organizational Structures
 A new strategy may require more flexible
characteristics than the traditional functional or
divisional structure can offer.
 Today’s business organizations are becoming less
centralized with a greater use of cross-functional
work teams.
 Matrix structures
 Functional and product forms are combined
simultaneously at the same level of the organization
 Employees have two superiors, a product or project
manager, and a functional manager.
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 Matrix Structure

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 Advanced Types of Organizational Structures

Conditions for matrix structures include:

 Ideas need to be cross-fertilized
across projects or products
 Scarcity of resources
 Abilities to process information and
to make decisions needs to be
improved

05/24/2021 SM 18
 Advanced Types of Organizational Structures
 Network structure
 Virtual elimination of in-house business functions
 A corporation organized in this manner is often called a virtual
organization because it is composed of a series of project
groups or collaborations linked by constantly changing
nonhierarchical.
• This structure becomes most useful when the
environment of a firm is unstable and is expected to
remain so.
• There is usually a strong need for innovation and quick
response. Instead of having salaried employees, the
company may contract with people for a specific project
or length of time.
 Many activities are outsourced
 A network structure could be termed a “nonstructure” because
of its virtual elimination of in-house business functions.
05/24/2021 SM 19
05/24/2021 SM 20
 Staffing
Staffing is one of the key issues in strategy
implementation. Considerations are:
 Deep knowledge of the acquiring company
 Flexible management style
 Ability to work in cross-functional teams
 Willingness to work independently
 Sufficient emotional and cultural
intelligence to work in a diverse environment

05/24/2021 SM 21
 Staffing Follows Strategy
 One way to implement a company’s business
strategy, such as overall low cost, is through
training and development.
 Human resource planning depends on the
different types of strategies that are pursued
at different levels. And each will lead to
different staffing strategies.
 Strategic directions determine the HRP.
 Business level and functional level strategies
determine the focus of the different HR
activities.
05/24/2021 SM 22
 Staffing ….
Human resource functions such as
• Recruitment and selection: timing, amount, skill
mix etc,
• Placement: positions, assignments etc,
• Training: type, frequency, depth etc,
• Job design: team vs individual focus, cost vs
innovation focus etc,
• Promotion: intensity, considerations etc,
Depend all on the type of strategy pursued.

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 Staffing…
Issues to consider:
• Downsizing
• Outsourcing
• Non-permanent jobs
• Project works

05/24/2021 SM 24
 Guidelines for Successful Downsizing
 Eliminate unnecessary work instead of making across
the board cuts
 Contract out work that others can do cheaper
 Plan for long-run efficiencies
 Communicate the reasons for actions
 Invest in the remaining employees
 Develop value added jobs to balance out job
elimination

05/24/2021 SM 25
 International Issues in Staffing
Companies that do a good job of managing foreign
assignments follow three general practices:
i. They focus on transferring knowledge and
developing global leadership.
ii. They make foreign assignments to people whose
technical skills are matched or exceeded by their
cross-cultural abilities.
iii. They end foreign assignments with a deliberate
repatriation process, with career guidance and jobs
where the employees can apply what they learned
in their assignments.
05/24/2021 SM 26
 Leading
 Implementation
 Involves leading and coaching people to use
their abilities and skills most effectively
and efficiently to achieve organizational
objectives
 Without direction, people tend to do their work
according to their personal view of what tasks should
be done, how and in what order.

05/24/2021 SM 27
 Managing Corporate Culture
 Strong cultures are resistant to change.
 Optimal culture supports mission and
strategies.
 Management must evaluate:
 What a particular change in strategy means
to the corporate culture,
 Assess whether a change in culture is needed
and decide whether an attempt to change the
culture is worth the likely costs.

05/24/2021 SM 28
Assessing Strategy—Culture Compatibility
 Is the proposed strategy compatible with the
company’s current culture?
 Can the culture be easily modified to make it
more compatible with the new strategy?
 Is management willing and able to make major
organizational changes and accept probable
delays and a likely increase in costs?
 Is management still committed to
implementing the strategy?

05/24/2021 SM 29
 Assessing Strategy—Culture Compatibility

05/24/2021 SM 30
Managing Cultural Change Through Communication

Companies in which major cultural changes have

successfully taken place had the following
characteristics in common:
 The CEO and other top managers had a strategic
vision of what the company could become and
communicated that vision to employees at all levels.
 The vision was translated into the key elements
necessary to accomplish that vision.

05/24/2021 SM 31
 Action planning
 An action plan states what actions are going to
be taken, by whom, during what time frame and
with what expected results.
 Activities can be directed toward accomplishing
strategic goals through action planning.
 States what actions are going to be taken, by
whom, during what time frame and with what
expected results
05/24/2021 SM 32
 Action Planning
1. Specific actions to be taken to make the
program operational
2. Dates to begin and end each action
3. Person responsible for carrying out each
action
4. Person responsible for monitoring the
timeliness and effectiveness of each action
5. Expected financial and physical consequences
of each action
6. Contingency plans
05/24/2021 SM 33
 Importance of an Action Plan
 Serves as a link between strategy
formulation and evaluation and control
 Specifies what needs to be done
differently from current operations
 Helps in both the appraisal of performance
and in the identification of any remedial
actions
 Explicit assignment of responsibilities for
implementing and monitoring the programs
may contribute to better motivation
05/24/2021 SM 34
 7-S MODEL / FRAMEWORK
(Reading Assignment)

• McKinsey 7-S Framework for evaluating strategy

• The underlying premise of this model is that the value

of any given strategy depends not only on its content
but equally on whether it can be successfully
executed

35

05/24/2021 SM 35
 McKinsey partners Tom Peters & Robert Waterman –
concluded that:
“Structure alone could not solve the problem of
how to coordinate resource allocation, incentives, &
actions across large organizations.”
Thus, the 7-S Framework is based on the concept
that any strategy, in order to be successfully
implemented, must fit with the culture of the
organization.

05/24/2021 SM 36
 7-S Model cont’d …
• According to the model:
 A strategy is usually successful when the other S’s in
the framework fit, or support, the strategy
 If a chosen strategy has run into problems during
implementation, it is often because there is a lack
of fit b/n the strategy & one or more of the other
S’s
• The 7-S model posits that organizations are successful
when they achieve an integrated harmony among
 Three hard S's of strategy, structure, & systems, and
 Four soft S's of skills, staff, style, & super-ordinate
37
goals (now referred to as shared values)
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 Structure
Structure

Strategy
Strategy Systems
Systems

Shared
Shared
Values
Values

Skills
Skills Style
Style

Staff
Staff

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 7-S Model cont’d …
• Strategy
 The positioning & actions taken by an enterprise,
in response to or anticipation of changes in the
external environment, intended to achieve
competitive advantage
• Structure
 The way in which tasks & people are specialized
& divided, & authority is distributed; how
activities & reporting relationships are grouped;
the mechanisms by which activities in the
organization are coordinated 39

05/24/2021 SM 39
 7-S Model cont’d …
• Systems
 The formal & informal procedures used to
manage the organization, including management
control systems, performance measurement &
reward systems, planning, budgeting & resource
allocation systems, & management information
systems
• Staff
 The people, their backgrounds & competencies;
how the organization recruits, selects, trains,
socializes, manages the careers, & promotes
employees 40

05/24/2021 SM 40
 7-S Model cont’d …
• Skills
 The distinctive competencies of the
organization; what it does best along
dimensions such as people, management
practices, processes, systems, technology, &
customer relationships
• Style/culture
 the style of leadership adopted
• Shared values
 called "superordinate goals" when the model
was first developed, these are the core values of
the company that are evidenced in the
corporate culture and the general work ethic. 41
05/24/2021 SM 41