STRATEGIC IMPLEMENTATION Requirements for Strategic Implementation 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Strategy implementation- the sum total of all activities and choices required for the execution of a strategic plan 1.Who are the people to carry out the strategic plan? 2.What must be done to align company operations in the intended direction? 3.How is everyone going to work together to do what is needed? 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Common Strategy Implementation Problems 1.Took more time than planned 2.Unanticipated major problems 3.Poor coordination 4.Competing activities and crises created distractions 5.Employees with insufficient capabilities 6.Poor subordinate training 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 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Strategy Implementation Effective strategic implementation requires the follows: 1- Organizational structure appropriateness. 2- Sound leadership of the company. 3- Effective motivational system 4- Annual objectives 5- Functional strategies 6- Clear budget 7- Detailed action plan 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Criticisms of SWOT analysis 1.Generates lengthy lists 2.Uses no weights to reflect priorities 3.Uses ambiguous/vague words and phrases 4.Same factor can be in 2 categories 5.No obligation to verify opinion with data or analysis 6.Requires only a single level of analysis 7.No logical link to strategy implementation Prentice Hall, Inc. ©

Communicating Strategy Strategy must be clearly understood. It provides employees with general guidance to make decision. 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Strategy & Structure Definition of Organizational Structure: The structure can either facilitate or inhibit strategy implementation. Chandler says: Changes in strategy ultimately lead to changes in the organization ’ s structure. E.g., open branch, add new product line, retrenchment, growth.. 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Types of organizational structure 1- Functional 2- Geographical 3- Divisional 4- Customer-based 5- Matrix 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Departmentalization by Type Functional –Grouping jobs by functions performed Product –Grouping jobs by product line Geographic –Grouping jobs on the basis of territory or geography Process –Grouping jobs on the basis of product or customer flow Customer –Grouping jobs by type of customer and needs Copyright © 2005 Prentice Hall, Inc. All rights reserved. 10–9

Functional Departmentalization Copyright © 2005 Prentice Hall, Inc. All rights reserved. 10–10 Figure 10.2a Advantages Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations Coordination within functional area In-depth specialization Disadvantages Poor communication across functional areas Limited view of organizational goals

G eographical Departmentalization Copyright © 2005 Prentice Hall, Inc. All rights reserved. 10–11 Figure 10.2b Advantages More effective and efficient handling of specific regional issues that arise Serve needs of unique geographic markets better Disadvantages Duplication of functions Can feel isolated from other organizational areas

Product Departmentalization Copyright © 2005 Prentice Hall, Inc. All rights reserved. 10–12 Figure 10.2c +Allows specialization in particular products and services +Managers can become experts in their industry +Closer to customers –Duplication of functions –Limited view of organizational goals Source: Bombardier Annual Report.

Process Departmentalization Copyright © 2005 Prentice Hall, Inc. All rights reserved. 10–13 Figure 10.2d +More efficient flow of work activities –Can only be used with certain types of products

Customer Departmentalization Copyright © 2005 Prentice Hall, Inc. All rights reserved. 10–14 Figure 10.2d + Customers’ needs and problems can be met by specialists - Duplication of functions - Limited view of organizational goals

An assessment of Org. Structure No structure is appropriate for all situations. Appropriate structure may change as the organization develops. Examples require structure change: Introducing new strategy, having problems in achieving its objectives, leadership changes. 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Mechanistic versus Organic Organization Copyright © 2005 Prentice Hall, Inc. All rights reserved. 10– 16 Figure 10.5

Contingency Factors Affect Structure Structure is influenced by: –Overall strategy of the organization Organizational structure follows strategy. –Size of the organization Firms change from organic to mechanistic organizations as they grow in size. –Technology use by the organization Firms adapt their structure to the technology they use. –Degree of environmental uncertainty Dynamic environments require organic structures; mechanistic structures need stable environments. Copyright © 2005 Prentice Hall, Inc. All rights reserved. 10– 17

Contingency Factors Affect Structure Strategy Frameworks: organic or mechanistic –Innovation Pursuing competitive advantage through meaningful and unique innovations favors an organic structuring. –Cost minimization Focusing on tightly controlling costs requires a mechanistic structure for the organization. –Imitation Minimizing risks and maximizing profitability by copying market leaders requires both organic and mechanistic elements in the organization’s structure. Copyright © 2005 Prentice Hall, Inc. All rights reserved. 10– 18

Contingency Factors Affect Structure Strategy and Structure –Achievement of strategic goals is facilitated by changes in organizational structure that accommodate and support change. Size and Structure –As an organization grows larger, its structure tends to change from organic to mechanistic with increased specialization, departmentalization, centralization, and rules and regulations. Copyright © 2005 Prentice Hall, Inc. All rights reserved. 10– 19

Symptoms of an ineffective org. Structure According to P. Drucker: 1- Too many management levels make cooperation and communication difficult 2- Too many meetings attended by too many. 3- Too much attentions are given to resolve interdepartmental conflict. 4- Excessive decision making at top management. 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Evolution of organizational structure: Alfred D. Chandler 1.Changing strategy. 2.Administrative problems leading to decline performance. 3.Revised structure subsequent return to economic health. 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Structural adjustments: Chandler When does it happen? 1.Market expansion. 2.Product line diversification. 3.Vertical integration. 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Relationship between strategy and Org. Structure The process of matching structure to strategy is complex and should be undertaken with a thorough understanding of: 1. the historical development of the organizational structure. 2.The requirements of the organization ’ s environment and technology. 3.The political relationships that might be affected inside the organization. 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Organizational Culture. Culture : Refers to the values and patterns of belief and behavior that are accepted and practiced by the members of a particular organizations Org. culture change as environment changes. The founder and Top management shape the org. culture. Change in strategy requires change in culture. 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Organizational Leadership The leader is an individual who is able to influence the attitudes and opinion of others by motivation and guiding. The leader must have a clear vision. Different strategies need different skills. 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Strategy and Motivational systems Organizational reward system influence the entire organizational climate. Organizational rewards include all types of rewards, tangible and intangible. 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Deployment of Resources through Budgeting Budgeting: Is the process of allocating resources to be employed to achieve objectives. Budget should be directly linked to strategy implementation. 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra

Developing functional Strategies Functional Strategies describe the methods and means at functional level to achieve corporate strategies and business unit strategies. 20/02/1438 Strategic Management Prof. Dr. Majed El-Farra