Chapter 10

Strategy Execution

Strategic Management:
Concepts and Cases. 15th edition
Fred R. David

Fred R. David
Prentice Hall
 Strategy Execution

• Strategic management process does not end on deciding what

strategies to persue,rather it requires translation of strategic
thought into strategic action.

• Translation will be easier if managers and employees of the firm

understand the business

• Without employee involvement in entire process strategy

implementation process will be troublesome.

• Strategy implementation effects an organization from top to

bottom including all functional and divisional areas of business
 Strategy Execution

• Change comes through implementation

and evaluation, not through the plan

• A technically imperfect plan that is

implemented well will achieve more than
the perfect plan that never get off the
paper on which it is types
 Nature of Strategy implementation
• Successful strategy formulation does not guarantee successful
strategy implementation. Strategy formulation and implementation
can be contrasted into following ways:

Strategy Formulation Strategy Implementation

• Positioning forces before the action • Managing forces during the action
• Focuses on effectiveness • Focuses on efficiency
• Primarily an intellectual process • Primarily an operational process
• Requires good intuitive and analytical • Requires special motivation and
skills
leadership skills
• Requires coordination among few
individuals
• Requires coordination among
• Concepts and tools are almost similar
many individuals
of all types and sizes of organizations • Implementation varies for different
types and sizes of organizations
 Management issues central to strategy
implementation
• In all organizations transition from strategy formulation to strategy
implementation requires a shift in responsibility from strategists to
divisional and functional managers.

• Implementation problems arise because of this shift in

responsibility, especially if strategy formulation decisions come as
a surprise to middle and lower level managers

• Managers and employees are motivated more by perceived self

interest than by organizational interests, unless the two coincide.

• This is the primary reason why divisional and functional managers

should involved in strategy formulation and implementation
strategies
 Management issues central to strategy
implementation
• Following are some management issues central to strategy
implementation:

 Establishing annual objectives

 Devise policies
 Allocate resources
 Alter an existing organizational structure
 Restructure and reengineer
 Revise reward and incentive plans
 Minimize resistance to change
 Match managers with strategy
 Develop a strategy supportive culture
 Adapt production and operation processes
 Develop an effective HR function
 Downsize or layoff as needed
 Link performance and pay to strategies
 Annual Objectives(Management issues in implementation)
• A decentralized activity that directly involves all managers in an
organization, active participation leads to acceptance.

• These are essential for strategy implementation because they:

 They represent the basis for allocating resources
 Primary mechanism for evaluating managers
 Major instruments to measure progress towards long term goals
 Establish organizational, divisional and departmental priorities

• Considerable time should be spent to ensuring that annual objectives are well
conceived, consistent with long term objectives, and supportive for strategies to be
implemented

• Horizontal consistency of objectives is as important as vertical consistency

• Annual objectives should be measureable, consistent, reasonable, challenging,

clear, communicated throughout the organization characterized by an appropriate
time dimension along with rewards and sanctions.
 Policies(Management issues in implementation)
• Policy refer to specific guidelines, methods, procedures, rules, forms and
administrative practices established to support and encourage work
towards stated goals.

• Policies facilitate solving recurring problems and guide the

implementation of strategy.

• Policies set boundaries, constraints and limits on the kinds of

administrative actions that can be taken to reward and sanction behavior
• They clarify what can and cannot be done in pursuit of an organization’s
objectives

• They set expectations, provide basis for managerial control, allow

coordination among organizational units, reduce the amount of time
managers spend in decision making
 Resource Allocation(Management issues in implementation)
• Resource allocation is a central strategic management activity.Strategic
Management enables resources to be allocated according to priorities
established by annual objectives.

• Organizations that don’t use strategic management approach to decision

making, resource allocation is based on political and personal factors.

• Each organization has four types of resources that can be used to

achieve desired objectives i.e. Financial,physical,human and
technological resources

• Effective allocation does not guarantee successful strategy

implementation because programs, personnel, controls and commitment
must breathe life into the resources provided.
 Managing conflicts(Management issues in implementation)
• Conflicts can be defined as a disagreement between two or more parties
on one or more issues.

• Establishing annual objectives can lead to conflicts because individual

has different expectations, perceptions, schedules create pressure,
personalities are incompatible, misunderstanding between line managers
and staff managers may occur.

• Establishing objectives can lead to conflict because managers and

strategists must make trade offs.

• Conflict is unavoidable in organizations ,so it is important to manage the

conflicts before dysfunctional consequences effect organizational
performance.

• Three approaches for resolving conflicts 1) Avoidance 2) Defusion

3)Confrontation
 Managing structure with strategy
(Management issues in implementation)

• Changes in strategy may require changes in the way the organization is

structured for two major reasons:
 First, Structure largely dictates how objectives and policies will be
established
 Second, structure dictates how resources will be allocated

• There is no one optimal organizational design or structure for a given

strategy or type of organization. As organization grow their structure
generally change from simple to complex

• Numerous external and internal forces affect an organization, no firm

change its structure in response to every factor but with change in strategy
structure may become ineffective.

• Both structure and strategy influence each other

 The Functional structure
(Management issues in implementation)

A functional structure group tasks and activities by business function

such as production and operation, marketing ,finance, accounting, R
& D and MIS.

Disadvantages
Advantages
• Simple and inexpensive
• Capitalizes on specialization of business
• Accountability forced to the top
activities such as marketing and finance • Delegation of authority and responsibility
not encouraged
• Minimize need for elaborate control
system • Minimize career development
• Allow for rapid decision making • Low employee and manager morale
• Inadequate planning for products and
markets
• Leads towards short term and narrow
thinking
• Communication problems
 The Divisional structure
(Management issues in implementation)

• With divisional structure ,functional activities are performed both

centrally and in each separate division. It is organized in one of for
ways i.e. By geographic area, by product or service, ,by customer
and by process.

Advantages Disadvantages
• Accountability is clear
• Can be costly
• Allow local control of local situations
• Duplication of functional activities
• Create career development chances
• Require a skilled Management force
• Promote delegation of authority
• Require an elaborate control system
• Leads to competitive climate internally
• Competition among divisions can become
dysfunctional
• Allow easy adding of new products or
Regions
• Can leads to limited sharing of ideas and
resources
• Allow strict control and attention to
products, customers or Regions
• Some regions, products or customers may
receive special treatment
 The Strategic Business unit structure
(Management issues in implementation)

• The SBU structure groups similar divisions into SBUs and

delegate authority and responsibility for each unit to a senior
executive who reports directly to the chief executive officer.

Advantages Disadvantages

• Improved coordination and

• It requires an additional layer of
accountability management which increases salary
expenses
• The role of group vice president is
• It makes the tasks of planning and
often ambiguous
control by the corporate office more
manageable
 The Matrix structure
(Management issues in implementation)

• It is the most complex of all organizational designs because it

depends on both vertical and horizontal flows of authority and
communication.
Advantages Disadvantages

• Project objectives are clear • Require vertical and horizontal flow of

• Employees can clearly see results of communication
their work • Costly
• Shutting down a project is easily • Violates unity of command principle
accomplished • Create dual lines of budget authority
• Facilities uses of special equipment, • Creates dual sources of reward and
personnel and facilities punishment
• Functional resources are shared • Creates shared authority and reporting
• Require mutual trust and
understanding
 Restructuring
(Management issues in implementation)

• Restructuring also called downsizing, rightsizing or delayering involves

reducing the size of the firm in terms of number of employees. number of
divisions or units and number of hierarchical levels in the firm’s
organizational structure.
• This reduction in size is intended to improve both efficiency and
effectiveness.
• Restructuring is concerned primarily with shareholder well-being rather
than employee well being.
• Firms often restructure when various ratios appear out of line with
competitors as determined through benchmarking exercises.

Advantages Disadvantages
• Cost reduction • It reduce employee commitment,
• It rescue the highly bureaucratic firms creativity and innovation that
from global competition and demise accompanies the uncertainty and
trauma associated with pending and
actual employee layoffs.
 Reengineering
(Management issues in implementation)

• Reengineering is concerned more with employee and customer

well being than shareholder well-being.

• It is also called process management, process innovation, or

process redesign-involves configuring or redesigning work, jobs
and process for the purpose of improving cost,quality,service and
speed

Reengineering Restructuring

• Its concerned with eliminating or

• It does not effect organizational
establishing, shrinking or enlarging
structure or chart nor any job loss or
and moving organizational
employee layoffs
departments and divisions

• Characterized by many tactical (short • Characterized by (long term affecting

term, business function specific
all business functions) decisions
decisions)
 Linking performance and pay to strategies
(Management issues in implementation)

How an organization’s reward system be more closely linked to

strategic performance?
How can decisions on salary increases, promotions, merit pay and
bonuses be more closely aligned to support the long term strategic
objectives of the organization?

• A Dual bonus system based on both annual and long term objectives

• Focus on performance based pay rather than seniority based pay

• Appraisal system with genuine feedback is important to avoid losing best people

• Gain sharing

• Criteria such as sales profit, production efficiency, quality, safety could also serve
as bases for an effective bonus system
 Managing Resistance to change
(Management issues in implementation)

• The thought of change raise anxieties because people fear

economic loss, inconvenience, uncertainty, and a break in normal
social patterns due to which people resist change

• Resistance to change can be considered the single greatest threat

to strategy implementation

• Resistance results in negative employee behaviors, the reason is

the lack of communication and understanding

• There are three strategies to implement change:

1. Force change strategy
2. Educative change strategy
3. Rational/self interest change strategy
 Creating a strategy supportive culture
(Management issues in implementation)

• Following elements are more useful in linking culture to strategy:

 Formal statements of an organization’s philosophy used for

recruitment, selection and socialization
 Designing of physical spaces and buildings
 Deliberate role modeling, teaching and coaching by leaders
 Explicit rewards and promotion criteria
 Stories, legends, myths and parables about key people and events
 What leaders pay attention to measure and control
 Leaders reactions to critical incidents and organizational crises
 How the organization is designed and structured
 Organizational system and procedures
 Criteria used for recruitment ,selection, promotion and retirements
 Production and Operations concerns
(Strategy implementation)

• Production and operations capabilities, limitations and policies

can significantly enhance or hinder the attainment of objectives

• Production processes typically constitute more than 70% of a

firm’s total assets, therefore major part of strategy
implementation process takes place at the production site.

• Production related decisions like plant size, plant location,

product design, choice of equipment, kind of tooling, size of
inventory, inventory control, quality control, cost control, use of
standards, job specialization, employee training, equipment and
resource utilization, shipping and packaging and technological
innovations can have a dramatic impact on the success or failure
of strategy implementation efforts.
 Human Resource Concerns
(Strategy implementation)
• Human resource problems that arise when business implement
strategies can usually be traced to one of three causes:

1. Disruption of social and political structure

2. Failure to match individuals aptitudes with implementation tasks
3. Inadequate top management support for implementation activities

• Employee stock ownership plans

• Balancing work life and home life

• Benefits of diverse workforce

• Corporate wellness programs

Strategic Management project
• Vision & Mission
• Evaluation Matrix of mission statement
• Long term objectives
• SOWT Analysis
• Value Chain Analysis
• Supply Chain analysis
• IFE Matrix
• EFE Matrix
• CPM
• SOWT Matrix, SPACE Matrix, BCG Matrix, IE Matrix, Grand Strategy
Matrix, QSPM
• Strategies
• Ethical/Environmental concerns (optional)