CHAPTER 9 Strategy Implementation: Organizing for Action STRATEGIC MANAGEMENT & BUSINESS POLICY 10TH EDITION THOMAS L. WHEELEN J. DAVID HUNGER Prentice Hall, Inc. © 2006 Prentice Hall 2006

STRATEGY IMPLEMENTATION --Sum total of activities & choices required for strategic plan execution It is a process by which; objectives + strategies + policies are put into action through the development of; programs + budgets + procedures Prentice Hall, Inc. © 2006 Prentice Hall 2006

The most mentioned problems related to poor strategy implementation: Poor communication Unrealistic synergy expectations Structural problems Missing master plan Lost momentum Lack of top management commitment Unclear strategic fit Research; A.T.Kearney Prentice Hall, Inc. © 2006 Prentice Hall 2006

Strategy Implementation The most frequently experienced problems related to poor strategy implementation: Implementation took more time than originally planned Unanticipated major problems arose Activities were ineffectively coordinated Competing activities and crises took attention away from implementation The involved employees had insufficient capabilities to perform their jobs Lover level employees were inadequately trained Uncontrollable external environmental factors created problems Departmental managers provided inadequate leadership and direction Key implementation tasks and activities were poorly defined The information system inadequately monitored activities Research; L.D.Alexander Prentice Hall, Inc. © 2006 Prentice Hall 2006

Who carries out strategic plan? Strategy Implementation Key Implementation Questions – Who carries out strategic plan? What needs doing for alignment w/ strategy? How is work coordinated? Prentice Hall, Inc. © 2006 Prentice Hall 2006

everyone in the organization Strategy Implementation Who carries out strategic plan ? The implementers are; everyone in the organization Unless changes in mission, objectives, strategies and policies and their importance to the company are communicated clearly to all operational managers, there can be a lot of resistance and foot dragging. This is the reason why involving people from all organizational levels in the formulation and implementation of strategy tends to result in better organizational performance. Prentice Hall, Inc. © 2006 Prentice Hall 2006

Strategy Implementation WHAT MUST BE DONE ? The managers of divisions and functional areas work with their fellow managers to develop; Programs Budgets, and Procedures to implement strategy They also work to achieve synergy among the divisions and functional areas in order to establish and maintain a company’s distinctive competence Prentice Hall, Inc. © 2006 Prentice Hall 2006

The purpose of a program is to make a strategy “Action oriented” Strategy Implementation Programs – The purpose of a program is to make a strategy “Action oriented” Matrix of change Feasibility Sequence of execution Location Pace & nature of change (evolution or revolution) Stakeholder evaluations Prentice Hall, Inc. © 2006 Prentice Hall 2006

The Matrix of Change Prentice Hall, Inc. © 2006 Prentice Hall 2006

Strategy Implementation Budgets – Planning a budget is the last real check a corporation has on the feasibility of its selected strategy Standard Operating Procedures (SOP’s) Organizational Routines Prentice Hall, Inc. © 2006 Prentice Hall 2006

Coordinated strategies Shared tangible resources Strategy Implementation Achieving Synergy – Shared know-how Coordinated strategies Shared tangible resources Economies of scale or scope Pooled negotiating power New business creation Prentice Hall, Inc. © 2006 Prentice Hall 2006

Organizing Staffing Directing Controlling Strategy Implementation How is strategy to be implemented ? Organizing Staffing Directing Controlling Prentice Hall, Inc. © 2006 Prentice Hall 2006

Any change in corporate strategy is very likely to require Strategy Implementation ORGANIZING Any change in corporate strategy is very likely to require some sort of change in the way an organization is structured Prentice Hall, Inc. © 2006 Prentice Hall 2006

Organizational Structure Strategy Implementation Organizational Structure The formal arrangement of jobs within an organization. Organizational Design A process involving decisions about six key elements: Work specialization Departmentalization Chain of command Span of control Centralization and decentralization Formalization Prentice Hall, Inc. © 2006 Prentice Hall 2006

Structure follows strategy – New strategy is created Strategy Implementation Structure follows strategy – New strategy is created New administrative problems emerge Economic performance declines New appropriate structure is invented Profit returns to previous level Prentice Hall, Inc. © 2006 Prentice Hall 2006

Departmentalization by Type Strategy Implementation Departmentalization by Type Functional Grouping jobs by functions performed Product Grouping jobs by product line Geographical 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 Prentice Hall, Inc. © 2006 Prentice Hall 2006

Stages of Corporate Development – Strategy Implementation Stages of Corporate Development – Stage I: Simple structure (crisis of leadership) Stage II: Functional structure (crisis of autonomy) Stage III: Divisional structure (crisis of control) SBU’s; performance-and-results-oriented-control Stage IV: Beyond SBU’s (red tape crisis) Company becomes so large and complex that it tends to become relatively inflexible Procedures takes precedence over problem solving PROPOSED SOLUTION: MATRIX OR NETWORK ORGANIZATION (pressure-cooker crisis) Prentice Hall, Inc. © 2006 Prentice Hall 2006

Loyalty to comrades Task oriented Single-mindedness Strategy Implementation Blocks to Changing Stages – Loyalty to comrades Task oriented Single-mindedness Working in isolation Prentice Hall, Inc. © 2006 Prentice Hall 2006

Organizational Life Cycle Even though a company’s strategy may still be sound, its aging structure, culture, and processes may be such that they prevent the strategy from being executed properly. Its core competencies become core rigidities that are no longer adapt to changing conditions – thus the company moves into decline. Prentice Hall, Inc. © 2006 Prentice Hall 2006

Changing Structural Characteristics of Modern Organizations Prentice Hall, Inc. © 2006 Prentice Hall 2006

Advanced Types of Organizational Structures – Strategy Implementation Advanced Types of Organizational Structures – Matrix Temporary cross-functional task forces Product/brand management Mature matrix Prentice Hall, Inc. © 2006 Prentice Hall 2006

Independence - Interdependence Strategy Implementation Advanced Types of Organizational Structures – Network structure (virtual organization) Cellular organization Cells: self managing teams, autonomous business units, etc …can operate alone – can interact with other cells The combination of Independence - Interdependence Prentice Hall, Inc. © 2006 Prentice Hall 2006

Network Structure Prentice Hall, Inc. © 2006 Prentice Hall 2006

“If this were a new company, How would we run this place ?” Strategy Implementation Reengineering Radical redesign of business processes to achieve major gains in; Cost, Service, or Time “If this were a new company, How would we run this place ?” Prentice Hall, Inc. © 2006 Prentice Hall 2006

Six Sigma – (3,4 defects per million) Strategy Implementation Six Sigma – (3,4 defects per million) Define Measure Analyze (pinpoint where things are going wrong) Improve Establish controls Lean Six Sigma – Lean Manufacturing + Six Sigma Prentice Hall, Inc. © 2006 Prentice Hall 2006

Job design to implement strategy – Strategy Implementation Job design to implement strategy – Job enlargement (combining tasks) Job rotation (moving workers through other jobs) Job enrichment (altering jobs for more autonomy and control by the worker) Job characteristics model (combination of the above) Prentice Hall, Inc. © 2006 Prentice Hall 2006

MNC’s (multidomestic – global) Strategy Implementation International Issues – MNC’s (multidomestic – global) For an MNC to be considered global, it must manage its worldwide operations as if they were totally interconnected. International Strategic Alliances Partners contribute key strengths but protect core competencies. Prentice Hall, Inc. © 2006 Prentice Hall 2006

International Development Stages– Domestic company Strategy Implementation International Development Stages– Domestic company Domestic company w/export division Domestic company w/int’l division MNC w/multidomestic emphasis MNC w/global emphasis (Any one corporation can be at different stages simultaneously, with different products in different markets at different levels.) Prentice Hall, Inc. © 2006 Prentice Hall 2006

Centralization vs. Decentralization Strategy Implementation Centralization vs. Decentralization Centralization The degree to which decision-making is concentrated at a single point in the organizations. Organizations in which top managers make all the decisions and lower-level employees simply carry out those orders. Decentralization Organizations in which decision-making is pushed down to the managers who are closest to the action. Prentice Hall, Inc. © 2006 Prentice Hall 2006

Centralization vs. Decentralization Strategy Implementation Centralization vs. Decentralization How to organize authority centrally so that it operates as a vast interlocking system that achieves synergy and at the same time decentralize authority so that local managers can make the decisions necessary to meet the demands of the local market or host government Product-group structure Geographic-area structure Prentice Hall, Inc. © 2006 Prentice Hall 2006

“think globally – act locally” Geographic Area Structure Simultaneous pressures for decentralization to be locally responsive and centralization to be maximally effective are causing interesting structural adjustments. “think globally – act locally” Prentice Hall, Inc. © 2006 Prentice Hall 2006