UNIT 5

Strategy Implementation &

Control

Dr.P.Karthikeyan
School of Management Studies
Kongu Engineering College
 Introduction

• Implementation of strategy is the process through which a chosen strategy

is put into action. It involves the design and management of systems to
achieve the best integration of people, structure, processes and resources
in achieving organizational objectives.
• Implementation of Strategy affects an organization from top to bottom, it
affects all the functional and divisional areas of business.
• Institutionalization of strategy
• Setting Proper Organizational Climate
• Developing Appropriate Operating Plans
• Developing Appropriate Organization Structures
• Review of Implemented Strategy
 Strategy Formulation – Implementation:
Interrelationship
Strategy implementation
means putting chosen
strategic decision into
action (strategic choice).

Allocation of resources to
new course of action
needs to be undertaken
besides need to adapt
organization’s structure
to the chose strategy.
 Strategy Formulation – Implementation:
Interrelationship

Strategy formulation and

Strategy Implementation are B

SOUND
different and it needs to be A
(success)

STRATEGY FORMULATION
sound and excellent.

Strategy fails because of

failed implementation and
not because of strategy FLAWED
model. C D
The matrix shows various
combination of strategy WEAK EXCELLENT
formulation and STRATEGY IMPLEMENTATION
implementation.
 Strategy Formulation – Implementation:
Interrelationship
• Square A shows formulation of competitive strategy but has difficulties in
implementing it successfully. This may be due to various factors like lack of
experience, lack of resources, missing leadership etc. Companies like to move from
square A to square B by realizing their implementation difficulties.
• Square D shows formulation of flawed strategy but company has excellent
implementation skills. Thus they should redesign their strategy before
implementation.
• Square C shows neither the sound strategy formulation nor is effective in strategy
implementation. They should redesign business model by implementation –
execution readjustment.
• Square B is ideal situation where company has succeeded in designing a sound
competitive strategy besides effectively implementing it.
 Strategy Formulation – Implementation:
Interrelationship
• Strategy is not a long term plan but rather consists of organizations
attempt to reach some future state by adapting is competitive position as
circumstances change.
• In organizations that lack strategic direction there is tendency to look
inwards at time of stress, management to cut costs and shedding
unprofitable division. This means that focus is on efficiency (relationship
between inputs and outputs in short time horizon) rather than effectiveness
( attainment of desired competitive position).
• Efficiency is introspective whereas effectiveness highlights the links between
the organization and its environment.
 Strategy Formulation – Implementation:
Interrelationship

In cell 1 organization thrives, since it is

achieving what it aspires to achieve
2. Die

Efficient
with efficient output/input ratio. 1. Thrive
Slowly

Operational Management
Where in cell 2 and cell 4 organization
is doomed unless it can establish
strategic direction. In cell 3 strategic
direction is present to ensure
Inefficient
4. Die
effectiveness even if rather too much 3. Survive
Quickly
input is being used to generate
outputs. Thus to be effective is to Effective Ineffective

survive whereas efficiency is not Strategic Management

sufficient for survival.

 Strategy Formulation – Implementation:
Interrelationship

STRATEGY FORMULATION STRATEGY IMPLEMENTATION

• It is positioning forces before action. • It is managing forces during action.
• It focuses on effectiveness. • It focuses on efficiency.
• It is an intellectual process • It is primarily and operational process.
• It requires good intuitive and • It requires special motivational and
analytical skills. leadership skills.
• It requires coordination among few • It requires combination of many
individuals. individuals.
• Concepts and tools do not differ • Concepts and tools varies substantially
greatly for small, large, profit or non among small, large, profit or non profit
profit organization. organization.
 Issues in Strategy Implementation

• Implementation task tests strategist ability to allocate resources, design

structures, formulate functional policies, identify leadership styles etc.
• Strategies have to be activated through implementation and realize the
intent.
• Strategies leads to plans. Plans result in different kinds of programmes
which includes goals, policies, procedures, rules and steps to be taken in
putting them into action.
• Programs leads to formulation of the project which is time scheduled and
costs are predetermined. It requires allocation of funds based on capital
budgeting of the organization.
• Projects creates need for infrastructure for day to day operations in
organization. Resource allocation is key to successful projects.
 Issues in Strategy Implementation

• Sequence in which strategy implementation issues are to be considered:

• Project Implementation
• Procedural Implementation
• Resource Allocation
• Structural Implementation
• Functional Implementation
• Behavioral Implementation

• These activities are not performed in the same order (can be performed
simultaneously, can be repeated etc.).
• Transition from strategy formulation to strategy implementation requires
shift in responsibility from strategist to divisional and functional managers
and their involvement should be maximum during strategy formulation.
 Organization and Strategy Implementation

• Strategic change requires change in structure of organization.

• Structure largely dictates how objectives and policies will be established and can
significantly impact all other strategy implementation activities.
• Structure dictates how major resources will be allocated.
• There is no optimal organizational design or structure for a given strategy or
the type of organization and what is appropriate for one organization may
not work for other organization even though industry is organized in same
way.
• For example consumer good companies tend to emulate the divisional structure
by product form or organization.
• Small firms are functionally structured (centralized)
• Medium sized firms are divisionally structured (decentralized)
• Large firms are structured on basis of SBU (Strategic Business Unit / Matrix
Structure).
• With growth of organization structure usually changes from simple to
complex as a result of linking of several basic strategies.
 Organization and Strategy Implementation

• Structural change is not affected by change in external and internal factors.

• With change in firms strategy organizational structure becomes ineffective.

For example – Too many levels of management, too many meetings
attended by too many people, interdepartmental conflict resolution, large
span of control, and too many unachieved objectives.
• Sometimes structure can shape the choice of strategy and to know what
type of structural change is needed to implement new strategies and how
these changes can be best accomplished.
• The organizational structures studied are : Division by
• Functional, Geographic, Product, Customer, Divisional process, Strategic business
unit (SBU), matrix
Strategy – Structure Relationship: Chandler’s

New Administrative
Problem Emerges

New Strategy is Organizational

Formed Performance Declines

Organizational A New Organizational

Performance Structure is
Improves Established
 The Functional Structure

• The most common structure found within organizations, functional

structure consists of units or departmental groups identified by specialty,
such as engineering, development, marketing, finance, sales or human
resources that are controlled from the top level of management.
• Advantages: Functional structure promotes specialization of labour,
encourages efficiency, minimizes the need for an elaborate control system,
and allows rapid decision making.
• Disadvantages: It forces accountability at the top, minimize career
development opportunities, low employee morale, line/staff conflicts, poor
delegation of authority, inadequate planning for products and markets.
Mostly it is abandoned in favour of decentralization and improved
accountability.
 The Functional Structure

CEO

Corporate
Corporate Corporate Strategic Corporate
Human
R&D Finance Planning Marketing
Resources

Sales and Human

Finance Production Engineering Accounting
Marketing Resources

Proper match between strategy and structure gives competitive edge or else it
will result into failure.
Companies must be flexible, innovative, and creative in global economy to
exploit their core competencies. Useful Information contributes the for the
formation and use of effective structures and controls, which yield improved
decision making.
 The Functional Structure

• With growth of companies in size, and level of diversification, new strategies

my be required. Organizational structure is companies formal configuration
of its intended roles, procedures, governance mechanism, authority and
decision making processes etc. The structure adopted must fit with the
companies strategy.
• Simple organization structure offers little specialization of tasks, few rules,
little formalization, direct involvement of owner-manager in all operations
and decision making.
• Functional structure is used by large companies and companies having low
level of diversification. It also impedes communication and coordination and
have narrow view.
• Use of multidivisional structure where each division represents separate
business entity, each division would house its own functional hierarchy,
divisional managers will be responsible to manage day to day responsibility
besides a small corporate office that would determine long term strategic
direction and exercise overall financial control over semi-autonomous
divisions.
 The Divisional Structure

• When a company expands to supply goods or services to a variety of

customers, offers a variety of different products or are engaged in business
in several different markets, the company could adopt a divisional
organizational structure.
• A divisional structure groups its divisions according to the specific demands
of products, markets or customers. Unlike the functional organizational
structure, where the different organizational functions of the company
conduct activities satisfying all customers, markets and products, the
divisional structure focuses on a higher degree of specialization within a
specific division, so that each division is given the resources, and autonomy,
to swiftly react to changes in their specific business environment. Therefore,
each division often has all the necessary resources and functions within it to
satisfy the demands put on the division
• Each division will likely be structured as a functional structure. A company
with a divisional structure therefore has a subset of different and
specialized SBU's satisfying the demands of different customers, markets or
products.
 The Divisional Structure
• In divisional structure, the
organization is organized into
various divisions based on
basically three criteria product,
market or geographical
structures.
• Advantages:
• Market Information
• Management Motivation
• Management Development
• Specialist Knowledge
• Timely Decisions
• Allowing Strategic roles for Top
Management
 The Divisional Structure

• The benefit of this organizational structure is that companies are able to

specialize its activities into self-reliant divisions, each capable of satisfying
e.g. customer demands and changes within the business environment.
 The Strategic Business Unit (SBU) Structure

• Large, diversified companies organize themselves into divisions to break the

management of the company into smaller, organizationally cohesive parts.
The company headquarters still gives the divisions strategic direction.
• Strategic Business Units, or SBUs, are organizationally complete and
separate units that develop their own strategic direction. They still report
back to company headquarters but operate as independent businesses
organized according to their target markets. They are often large enough to
have their own internal organizational divisions.
• SBU advantages
• SBU supports cooperation between the departments of the company which has a
similar range of activities;
• Improvement of strategic management
• Improvement of accounting operations,
• Easier planning of activities
 The Strategic Business Unit (SBU) Structure

SBU Disadvantages
• Difficulty with contact with higher management
• May cause of internal tension due to difficult access to internal and external sources of
funding,
• May be the cause of the unclear situation with regard to the management activities.
 The Matrix Structure

• The matrix structure is an organizational design that groups employees by

both function and product. The organizational structure is very flat, and the
structure of the matrix is differentiated into whatever functions are needed
to accomplish certain goals. Each functional worker usually reports to the
functional heads, but do not normally work directly under their supervision.
• Instead, the worker is controlled by the membership of a certain project,
and each functional worker usually works under the supervision of a project
manager. This way, each worker has two superiors, who will jointly ensure
the progress of the project. The functional head may be more interested in
developing the most exiting products or technologies, whereas the project
manager may be more concerned with keeping deadlines and controlling
product costs.
• When work is accomplished, the project team may get dissolved, and
workers from different functional areas may get reassigned to other projects
and tasks.
Matrix Structure
 The Matrix Structure

• The peculiarities or characteristics a matrix organization are:-

• Hybrid Structure : It combines functional organization with a project organization.
• Functional Manager : The Functional Manager has authority over the technical
(functional) aspects of the project.
• Project Manager : The Project manager has authority over the administrative aspects
of the project. He has full authority over the financial and physical resources which he
can use for completing the project.
• Problem of Unity of Command This is so, because the subordinates receive orders
from two bosses viz., the Project Manager and the Functional Manager.
• Specialization : In a Matrix organization, there is a specialization. The project manager
concentrates on the administrative aspects of the project while the functional
manager concentrates on the technical aspects of the project.
• Suitability : Matrix organization is suitable for multi-project organizations. It is mainly
used by large construction companies, that construct huge residential and commercial
projects in different places at the same time. Each project is looked after (handled) by
a project manager. He is supported by many functional managers and employees of
the company.
 Advantages of Matrix Structure

• The advantages of a matrix organization are:-

• Sound Decisions : In a Matrix Organization, all decisions are taken by experts.
• Development of Skills : It helps the employees to widen their skills.
• Top Management can concentrate on Strategic Planning : They can delegate all
the routine, repetitive and less important work to the project managers.
• Responds to Changes in Environment : because it takes quick decisions.
• Specialization : In a matrix organization, there is a specialization.
• Optimum Utilization of Resources : In the matrix organization, many projects are
run at the same time. Therefore, it makes optimum use of the human and physical
resources.
• Motivation : In a matrix organization, the employees work as a team. So, they are
motivated to perform better.
• Higher Efficiency : The Matrix organization results in a higher efficiency. It gives
high returns at lower costs.
 Limitations of Matrix Organization

• The limitations of a matrix organization are:-

• Increase in Work Load : In a matrix organization, work load is very high.
• High Operational Cost : In a matrix organization, the operational cost is very high.
This is because it involves a lot of paperwork, reports, meetings, etc.
• Absence of Unity of Command : In a matrix organization, there is no unity of
command. This is because, each subordinate has two bosses, viz., Functional
Manager and Project Manager.
• Difficulty of Balance : It is also difficult to balance the authority & responsibilities
of the project manager and functional manager.
• Power Struggle : In a matrix organization, there may be a power struggle
between the project manager and the functional manager. Each one looks after his
own interest, which causes conflicts.
• Morale : In a matrix organization, the morale of the employees is very low. This is
because they work on different projects at different times.
• Complexity : Matrix organization is very complex and the most difficult type of
organization.
• Shifting of Responsibility : If the project fails, the project manager may shift the
responsibility on the functional manager.
 Old – New Organization Design
Old Organization Design New Organization Design
One large corporation Mini business units and cooperative
relationships
Vertical Communication Horizontal Communication
Centralized Top Down Decision Making Decentralized Participative Decision Making
Vertical Integration Outsourcing and Virtual Organizations
Work Quality Teams Autonomous Work Teams
Functional Work Teams Cross Functional Work Teams
Minimal Training Extensive Training
Specialized Job Design Focused on Value chain Team Focused Job Design
Individual
 Network Structure

• A group of legally independent companies or subsidiary business units that

use various methods of coordinating and controlling their interaction
in order to appear like a larger entity. In a business context, three
main types of network organization are typically seen:
• Internal where a large company has separate units acting as profit centers
• Stable where a central company outsources some work to others, and
• Dynamic where a network integrator outsources heavily to other companies.
• 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 non-hierarchical, cobweb like networks.
• This structure is important in unstable conditions where regular employees
are replaced with contract laborer or suppliers contracts are for specific
project and length of time etc.
• The 'wiring' of information-age organizations needs to be different and more
complex. This has given rise to the concept of the Network Organization.
 Network Structure

• A joint venture of companies for sharing skill or core competencies to

manufacture a product or provide a service. The companies rely on
relationships between people across structural, temporal and geographic
boundaries.
• It is more than outsourcing and has flexibility as in a network structure there
is a continuous change in partners and the arrangements are goal oriented
and loose. All efforts are made to bring about new products and services.
The process changes more quickly for innovative products.
• The characteristics of a network organization are:
• Independent teams
• Departments which share common values
• Projects which support each other
• Multiple links between projects
• Information and Communications Technology is used to connect the projects.
• There is a key coordinating role for the Chief Executive to construct the teams and
manage the interrelationship of projects (a kind of 'air traffic control').
 Network Structure

An example of a networked organization is

Asea Brown Boveri. This giant corporation split
its business into 1,300 companies as separate
and distinct business units. All the energy and
resources of the corporate centre are then
geared to facilitating cross-company co-
operation, with computer networks and
knowledge sharing being at the centre of this
process.
 SBU and Core Competence

• Strategic business units are absolutely essential for multi product

organizations. These business units are basically known as profit centres.
They are focused towards a set of products and are responsible for each and
every decision / strategy to be taken for that particular set of products.
• An autonomous division or organizational unit, small enough to be flexible
and large enough to exercise control over most of the factors affecting
its long-term performance. Because strategic business units are more agile
(and usually have independent missions and objectives), they allow
the owning conglomerate to respond quickly to changing economic
or market situations.
 Attributes of SBU

• A scientific method of grouping the businesses of multi-business

corporation which helps firm in strategic planning.
• Improvement over territorial grouping of business / strategic planning.
• SBU is grouping of related businesses that can be taken up for strategic
planning.
• Unrelated product / business in any group are separated based on criteria of
functional relation.
• Grouping of businesses on SBU lines helps the firm in strategic planning by
removing confusion and vagueness and provides right setting for correct
strategic planning.
• Each SBU has distinct set of competitors and its own distinct strategy.
• Each SBU will have a CEO who will be responsible for strategic planning for
the SBU and its profit performance. He will also exercise control over
activities of SBU.
SBU
• a strategic business unit is a profit center which focuses on
product offering and market segment.
• SBUs typically have a discrete marketing plan, analysis of
competition, and marketing campaign, even though they may
be part of a larger business entity.
SBU-ITC
 Related Set of SBU or Not? / Characteristics

• SBU might be build on similar technologies and provide similar sorts of

products / services.
• SBU might be serving similar or different markets. Even if technology /
products differ it may be that customers are similar.
• Technologies for frozen food, washing powders, and butter production may be
very different but they are all sold through retail operations (Unilever).
• It may be different competencies on which the competitive advantage of
different SBU’s are built.
• For example Unilever may argue that the marketing skills associated with the
three product markets are similar etc.

• The FOUR Important Characteristics of SBU are:

• It is a single business or collection of related businesses
• It has its own competitors
• It has a manager who is accountable for its operation
• It is an area that can be independently planned for within the organization
 Leadership and Strategic Implementation

• Businesses today face change on all fronts– economic, regulatory,

competitive, customer, and access to resources. Consequently, every
company is adjusting its strategy and that implies change. The success of
your strategy depends on your people – will they be able to implement the
strategy and achieve the goals?
• Strategic leadership provides the vision, direction, the purpose for growth,
and context for the success of the corporation. It also initiates "outside-the-
box" thinking to generate future growth. Strategic leadership is not about
micromanaging business strategies. Rather, it provides the umbrella under
which businesses devise appropriate strategies and create value.
• If you are a leader at any level, your people look to you for guidance on
what needs to be done, and how. The key requirements of leaders are to:
• Set the strategy
• Communicate the strategy
• Implement the strategy through people
• Get results
 Roles to Play For Good Strategy Execution

• Staying on top of what is happening, closely monitoring progress, fretting out issues,
learning what obstacle lie in path of good strategic implementation.
• Promoting the culture of Esprit de corps that mobilizes and energizes organizational
members to execute strategy in competent fashion and perform at high level.
• Keeping organizations responsive to changing conditions, alert for new opportunities,
innovative ideas, ahead of rivals in developing competitively valuable competencies
and capabilities.
• Exercising ethics leadership and model conduct and Pushing corrective actions to
improve strategy execution and overall performance.
• The role of leader is Introducing Change, Integrating Conflicting Interests, Developing
Leadership Effectiveness of Managers, Developing Appropriate Organizational
Climate, Motivational system, Clarity of goals, Relationships, Involvement, Interest,
Monitoring, Change as and when required.
 Leadership Role in Implementation

• Strategic leadership entails the ability to anticipate, envision, maintain

flexibility, and empower others to create strategic change as necessary.
• A manager with strategic leadership skills exhibits the ability to guide the
company through the new competitive landscape by influencing the
behavior, thoughts, and feelings of co-workers, managing thought of others
and successfully dealing with rapid, complex change and uncertainty.
• Strategic leaders are CEO, Board of Directors, Top Management Teams,
Divisional General Managers. They must be able to deal with the diverse
and cognitive complex competitive situations that are characteristic of
today’s competitive situation.
 Responsibilities of Strategic Leaders

• Managing Human Capital

• Effectively managing company’s Operations
• Sustaining High performance over time
• Being willing to make candid, courageous, yet pragmatic decisions.
• Seeking feedback from face to face communication.
• Having decision making responsibility that cannot be delegated.
• Navigator
• Strategist
• Entrepreneur
• Mobilizer
• Talent advocate
• Captivator
• Global thinker
• Change driver
• Enterprise Euardian
What is Strategic Control ?
• Process used by organizations to control the formation and
execution of strategic plans; it is a specialized form of
management control, and differs from other forms of
management control in respect of its need to handle
uncertainty and ambiguity at various points in the control
process.
• Focused on THE ACHIEVEMENT OF FURURE GOALS.
• SC involves tracking a strategy as it’s been implemented.
An ideal control system
Types of Strategic Control
•  Premise Control
•  Special Alert Control
•  Implementation Control
•  Strategic Surveillance
Premise Control
•  Every strategy is based on certain planning premises or
predictions.
•  Premise control is designed to check methodically and
constantly whether the premises on which a strategy is
grounded on are still valid.
•  If you discover that an important premise is no longer valid,
the strategy may have to be changed. The sooner you
recognize and reject an invalid premise, the better.
•  This is because the strategy can be adjusted to reflect the
reality.
Special Alert Control
•  The rigorous and rapid reassessment of the organization’s
strategy because of the occurrence of an immediate,
unforeseen event.
•  An example of such event is the acquisition of a company’s
competitor by an outsider.
•  Such an event will trigger an immediate and intense
reassessment of the firm’s strategy.
Implementation Control
•  Implementing a strategy takes place as a series of steps,
activities, investments and acts that occur over a lengthy
period.
•  As a manager, one will mobilize resources, carry out special
projects and employ or reassign staff.
•  Must be carried out as the events unfold.
•  Two types: Strategic thrusts or projects and milestone
reviews.
Strategic Surveillance
•  Designed to observe a wide range of events within and
outside the organization that are likely to affect the track of
the organization’s strategy.
•  Based on the idea that one can uncover important yet
unanticipated information by monitoring multiple information
sources.
•  Such sources include trade magazines, journals such as The
Wall Street Journal, trade conferences, conversations and
observations
Managing Strategic Change
A framework for managing
Strategic Change:

• 1. Diagnosing the change situation

• 2. management styles and roles.
• 3. Levers for managing change
1. Diagnosing the type of change
Types of strategic change
• Adaptation : change which is accommodated within the
current paradigm and occur incrementally. It is the most
common form of change in organizations ,
e.g. Herbal skin care products from HUL implementing ERP in
organizations
• Evolution : Evolution is a change in strategy which requires
paradigm change, but over time,
e.g., Dabur’s foray into beauty care products with
the acquisition of FEM
• Revolution : Revolution is change which requires rapid and
major strategic and paradigm change,
e.g. GE’s Focus from being a manufacturing to a
service oriented company.
Marico’s foray into skin care- kaya (service)
• Reconstruction :Reconstruction is the type of change
which could be rapid and could involve a good deal of upheaval
in the organization, but which does not fundamentally change
the paradigm.,
e.g. Acquisition of JLR by Tata Motors.
2.Change management: Styles
and roles
• Styles
• 1. Education
• 2.Collaboration/participation
• 3.intervention
• 4. Direction
• 5. Coercion /evict
3.Levers for Managing Strategic
Change
• Structure and control systems
• organizational routines
• symbolic processes
• power and political processes
• communicating change
• change tactics