Implementation of a strategy

Successful strategy formulation does not guarantee successful strategy implementation. Less than 10% of strategies formulated are successfully implemented! The Nature of Strategy Implementation Implementation may fail due to: e.g. –Not recognizing benefit of computers (I.T.) in managing information: use of data warehouse and data mining to improve intensive strategies

Formulation vs. Implementation Formulation focuses on effectiveness Implementation focuses on efficiency Formulation requires good intuitive & analytical skills Implementation requires special motivational & leadership skills Formulation requires coordination among a few individuals Implementation requires coordination among many individuals

Management Issues with implementation Management Issues Resources Organizational structure Annual Objectives Resistance to Change Business process reengineering

Management Issues Annual Objectives --  Basis for resource allocation  Mechanism for management (e.g. IT management) evaluation  Metric for gauging progress on long-term objectives  Help Establish priorities (organizational, division, & departmental)

Management Issues Resource Allocation The process that enables resources to be allocated according to priorities established by annual objectives. However it may cause conflict between the different functions: 1. Financial resources 2. Physical resources 3. Human resources 4. Technological resources

Management Issues Matching Organisational Structure w/ Strategy Changes in strategy => Changes in structure  Structure dictates how objectives & policies will be established  How resources will be allocated;  E.g. is structure based on location or based on the product…How do you think this may affect the above?

Management Issues Reengineering the business process In reengineering, a firm uses information technology to break down functional barriers and create a work system based on business processes… Reconfiguring or redesigning work, jobs, & processes to improve cost, quality… (alteration of Scott Morton’s value chain) Think of an examples

Management Issues Resistance to Change -- Single greatest threat to successful strategy implementation Raises anxiety and fear concerning: e conomic loss, inconvenience or uncertainty…  Implemented via:  Force Change Strategy  Educative Change Strategy  Rational or Self-Interest Change Strategy

1.Failing to segment markets appropriately 2.Paying too much for a new acquisition 3.Falling behind competition in R&D 4.Not recognizing benefit of computers in managing information Key areas of Strategy Implementation Strategy Implementation can have a low success rate if attention is not paid to key areas of the business e.g.:

Marketing Segmentation Market Segmentation: Subdividing of a market into distinct subsets of customers according to their needs and buying habits Market segmentation variables include: –Product: quality, features, brandname –Place: Distribution channels, outlets, logistics –Price: level, payment terms

Acquiring needed capital Developing projected financial statements Evaluating worth of a business or product Finance/Accounting Issues Essential for implementation

Management Information Systems (MIS) Issues Information is the basis for understanding the firm and is one of the most important factors differentiating successful from unsuccessful firms MIS used to : –Data collection, retrieval, & storage –Converting data into information; creating charts –Keeping managers informed: Executive information system (E.I.S.) of KPI –Coordination of activities among divisions –Allow firm to reduce costs

Questions Explain, using suitable examples, 3 keys issues that managers need to consider in implementing strategies derived during strategy formulation processes. (12 marks)