CHAPTER 6

IMPLEMENTING
STRATEGIES: MANAGEMENT
& OPERATIONS ISSUES
Strategy Implementation is the process by which
strategies and policies are put to action through the
development of programs, budgets and procedures
Strategy Implementation is the secondary function of
the organization

It is an administration task which ensures that the

strategy formulated is executed in the right direction
to achieve the stated objectives

It determines the success of an organization

DEVELOPING PROGRAMS, BUDGETS AND PROCEDURES

Strategy implementation is composed of 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 activities)
The different aspects of strategy implementation
are:

1. Strategies:
 It consists of the combination of competitive moves and
business approaches that managers employ to please
customers, compete successfully, and achieve
organizational objectives
 A strategy provides a central purpose and direction to the
activities of the organization
2. Policies:
 A policy is a verbal, written, or implied overall
guide setting up boundaries that supply the
general limits and directions in which managerial
actions will take place
 Policies provide the framework within which,
decision makers will operate while making
decisions relating to the organization
3. Procedures:
 Procedures are a guide to action and represent
how a particular activity is to be carried out
 They establish the time sequence for the work to
be done
4. Programs:
 Programs detail out every small aspect of an activity
i.e., when will a particular thing be done, how it will
be done, within that time frame, where it will be
done, and the like.
 Programs are actually POAs (Plans of Action) that
provide clear-cut guidelines and specifications
5. Rules:
 Rules specify what can be done and what cannot be
done.
 Rules demand strict compliance and are very rigid
 Violation of rules attracts disciplinary action
6. Methods:
 Methods specify the way in which a particular step is
to be formed
 Its scope is limited as compared to a procedure as it
addresses only one step of procedure
 However, it is more detailed than procedure as it
explains the concerned step in detail
7. Budgets:
 Budgets essentially give information on the quantum
of money available for a particular activity
 Budgets have to be developed to steer ample resources
into those value chain activities critical to strategic
success
Strategy Formulation vs. Implementation
Strategy Formulation (SF)Strategy Implementation (SI)
Positioning forcesManaging forces during the
before the action action
Focus on effectiveness Focus on efficiency
Primarily intellectual Primarily operational
Requires good intuitive Requires special motivation
and analytical skills and leadership skills
Requires coordination Requires coordination
among a few people among many people
 Nature of Strategy Implementation
SI problems can arise because of the shift in responsibility,
especially if SF decisions come as a surprise to middle- and
lower-level managers.
Therefore, it is essential to involve divisional and functional
managers in SF.
Shift in responsibility

Divisional or
Strategists Functional
Managers
Management Issues Central to Strategy
Implementation
Establish annual Match managers to strategy
objectives Develop a strategy-
Devise policies supportive culture
Allocate resources Adapt
Alter existing production/operations
organizational structure processes
Restructure & reengineer Develop an effective human
Revise reward & incentive resources function
plans Downsize & furlough as
Minimize resistance to needed
change Link performance & pay to
 Management Issues …
Annual Objectives
• Decentralized activity
• Directly involve all managers in the organization

Purpose of Annual Objectives

 Basis for resource allocation
 Mechanism for management evaluation
 Major instrument for monitoring progress toward

achieving long-term objectives

Requirements of Annual Objectives
 Measurable Annual Objectives Should State
 Consistent  Quantity
 Reasonable  Quality
 Cost
 Challenging
 Time
 Clear
 Understood
 Timely
Policies
• A policy is a verbal, written, or implied overall guide
setting up boundaries that supply the general limits and
directions in which managerial actions will take place
• Policies Facilitate the solving of recurring
problems & guide implementation of annual
objectives (and strategy).
• Policies Establish:
 Boundaries
 Constraints
Resource Allocation
-- Central management activity that allows
for the execution of strategy
Four Types of Resources
1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources
Managing Conflict
Conflict – a disagreement between two or more parties.
Interdependency of objectives and competition for
limited resources can cause conflict.

 Conflict not always “bad”

 Lack of conflict may signal apathy
 Can energize opposing groups to action
 May help managers identify problems
Matching Structure with Strategy
Changes in strategy often require changes in the way an
organization is structured because:
(1) structure largely dictates how objectives and policies will be
established
(2) structure dictates how resources will be allocated
Structure should be designed to facilitate the strategic
pursuit of a firm and, therefore, follow strategy.
When a firm changes its strategy, the existing
organizational structure may become ineffective.
For example, new strategies to reduce payroll costs
may require a change in span of control.
Chandler’s Strategy-Structure Relationship

Organizational
New strategy New administrative
performance
Is formulated problems emerge
declines

Organizational
New organizational
performance
structure is established
improves
Basic Forms of Structure
 Functional Structure
 Divisional Structure
 Strategic Business Unit Structure (SBU)
 Matrix Structure
Functional Structure
Groups tasks and activities by business function (e.g.
production, finance, marketing, R&D, HR, IT, etc.).
Divisional Structure
Can be organized in one of four ways:
By geographic area
By product or service
By customer
By process
Divisional Structure
Geographical organization structure:
 Adopted by organizations that operate in various
geographical regions
 Each geographical division performs all the
functions required to produce and market the
products
 Advantage of serving the needs of the customers
in different regions
 Products can be designed to suit each
geographical region and responsibility for profit
can be fixed for each region
Product based structure:
 All the functions important for the production of
a product or service are grouped together
 The organization is split into product division
 Suitable for an organization manufacturing
multiple products and having distinct
manufacturing and marketing facilities
 Performance evaluation of each unit is simple
and easy, quicker decision making is possible and
responsibility for profit can be fixed at divisional
levels
Strategic Business Unit Structure (SBU)
Groups similar divisions into strategic business units
and delegates authority and responsibility for each unit
to a senior executive who reports directly to the chief
executive officer.
Each SBU operates as a separate organization
The most complex of all structures because it
depends upon both vertical and horizontal flows
of authority and communication.
 Each SBU has the responsibility of achieving the
best results in their business units
 Advantage of in-depth business planning and
easy accountability
 However, too many SBUs may cause difficulty in
efficient management, and may create unhealthy
competition for corporate resources
Matrix structure:
 It operates on a dual channel of authority, performance,
responsibility, evaluation and control
 Subordinates report to functional area managers as well as
product/project managers
 It is a conflict resolution system through which strategic
and operating priorities are negotiated, power is shared
and resources are allocated internally
 It has the capacity of accomplishing a wide variety of
project oriented business activity
 It helps in optimum utilization of resources
 It makes an organization more dynamic and result
oriented.
 However, dual authority system leads to confusion and
greater administrative cost
Matrix Structure
 Restructuring
 Restructuring - reducing the size of an organization.
Also called:
 Downsizing: reducing the number of employees
 Rightsizing: reducing the number of divisions,
 Delayering : number of hierarchical levels in a firm’s

organizational structure
• Reducing the size of an organization is intended to
improve its efficiency and effectiveness.
Reengineering:

Reconfiguring or redesigning work, jobs, &

processes to improve cost, quality, service, &
speed.
 Process management
 Process innovation
 Process redesign
REENGINEERING AND STRATEGY IMPLEMENTATION
Reengineering is the radical redesign of
business processes to achieve major gains in
cost, service, quality, or time
It is an effective way to implement a turn-
around strategy
It strives to break away from the old rules and
procedures that develop and become ingrained
in every organization over the years
These may be combination of policies,
procedures and rules
 PRINCIPLES FOR REENGINEERING
Organize individual’s/department’s job around
outcomes, instead of a single task
With computer-based IS, processes can now be
reengineered so that the people who need the result
of the process can do it themselves
People or departments that produce information can
also process it for use instead of just sending raw data
to others in the organization to interpret
Companies with modern IS, can provide flexible
service locally by keeping the resources in a
centralized location
Link parallel activities instead of integrating
their results
Put the decision point where the work is
performed, and build control into the process
Capture information once and at the source
In a survey of 782 corporations using reengineering, 75%
of the executives said their companies had succeeded in
reducing operating expenses and increasing productivity
Ex.: The Mossville Engine Centre, a business unit of
Caterpiller, Inc., used reengineering to decrease
process cycle times by 50%, reduce the number of
process steps by 45%, reduce manpower by 8%, and
improve cross divisional interactions and overall
employee decision making
Nevertheless, other studies report that somewhere from
50% to 70% of engineering programs fail to achieve their
objectives
Resistance to Change
• Single greatest threat to successful strategy
implementation.
• Raises anxiety; fear concerning
 Economic loss
 Inconvenience
 Uncertainty
 Break in status-quo
 Change Strategies
• Force Change Strategy: involves giving orders and enforcing those
orders; this strategy has the advantage of being fast, but it is plagued
by low commitment and high resistance.
• Educative Change Strategy: presents information to convince
people of the need for change; the disadvantage of an educative
change strategy is that implementation becomes slow and difficult.
However, this type of strategy evokes greater commitment and less
resistance than does the force change strategy.
• Rational or Self-Interest Change Strategy: attempts to convince
individuals that the change is to their personal advantage. When this
appeal is successful, strategy implementation can be relatively easy.
However, implementation changes are seldom to everyone’s
advantage.
Natural Environment
• Wide appreciation for firms that “mend” rather
than “harm” the environment.
Environmental Strategies
Develop/acquire “green” businesses
Divesting environmental-damaging
business
Low-cost producer through waste
minimization & energy conservation
 Strategy-Supportive Culture
Preserve, emphasize, & build upon aspects of
existing culture that support new strategies

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
 Production/Operations Decision
Production processes typically constitute more than
70% of firm’s total assets

Examples
 Plant size

 Inventory / Inventory control

 Quality control

 Cost control

 Technological innovation
Human Resource Concerns
HR manager position has strategic responsibility &
has changed dramatically as companies continue
to reorganize, outsource, etc.
 Assessing staffing needs and costs.
 Selection Methods.
 Employee Training.
 Motivating Employees – Developing
Performance Incentives; Work-Life Balance
Issues; etc.
 Selecting Appropriate Leadership Styles.
MANAGEMENT BY OBJECTIVES (MBO)
MBO is an organization-wide approach to help
ensure purposeful action toward desired objectives
MBO links organizational objectives and the
behavior of individuals
It is a system that links with performance and it is
a powerful implementation technique
MBO provides an opportunity for the corporation
to connect the objectives of people at each level to
those at the next higher level
The MBO Process involves:
Establishing and communicating organizational
objectives
Setting individual objectives (through superior-
subordinate interaction) that help implement
organizational ones
Developing an action plan of activities needed to
achieve the objectives
Periodically (at least quarterly) reviewing
performance as it relates to the objectives and
including the results in the annual performance
appraisal
MBO therefore, to tie together corporate, business,
and functional objectives, as well as the strategies
developed to achieve them
One of the real benefits of MBO is that it can reduce
the amount of internal policies operating within a
large corporation
Political actions within a firm can cause conflict and
create divisions between the people and groups who
should be working together to implement strategy
People are less likely to jockey for position if the
company’s mission and objectives are clear and they
know that the reward system is based not on game
playing, but on achieving clearly communicated,
measurable objectives
 TOTAL QUALITY MANAGEMENT (TQM)
TQM is an operational philosophy committed to
customer satisfaction and continuous improvement
TQM is committed to quality/excellence and to
being the best in all functions
TQM aims to reduce costs and improve quality
It can be used a program to implement both an
overall low cost or a differentiation business strategy
Successful TQM programs occur in those companies
in which “top managers move beyond defensive and
tactical orientations to embrace a developmental
orientation
TQM has four objectives:
1. Better, less variable quality of the product
and service
2. Quicker, less variable response in processes
to customer needs
3. Greater flexibility in adjusting to customer’s
shifting requirements
4. Lower cost through quality improvement
and elimination of non-value-adding work
According to TQM, faulty processes, not poorly
motivated employees, are the cause of defects in
quality
The program involves a significant change in
corporate culture, requiring strong leadership
from top management, employee training,
empowerment of lower level employees, and team
work for it to succeed in a company
TQM emphasizes prevention, not correction
Quality circles or quality improvement teams are
formed to identify problems and to suggest how to
improve the process that may be causing the
problems
TQM’s essential ingredients are:

An intense focus on customer satisfaction

Accurate measurement of every critical
variable in a company’s operations
Continuous improvement of products and
services
Network relationships based on trust and
teamwork
END

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