1. Chapter 7 Strategy Implementation

2. Learning Objectives To understand:
functional strategies and their importance to strategy implementation
various organizational structures, their strengths and weaknesses, and how they are used to support strategy
organizational culture and energy and their importance in bringing about change
tactics used to foster innovation and entrepreneurship

3. Strategic Management Process
External and Internal Analysis
Strategy Formulation
(corporate and business level)
Strategic
Direction
Strategy Implementation
and Control
Strategic Restructuring

4. Well-Developed Functional Strategies
Business-level strategies are implemented at the functional level
Decisions made in each functional area are consistent with each other
Decisions made within one function are consistent with those made in other functions
Decisions within functions are consistent with the strategies of the business
Well-developed functional strategies should have the following characteristics:
1. Decisions made within each function will be consistent with each other.
2. Decisions made within one function will be consistent with those made in other functions.
3. Decisions made within functions will be consistent with the strategies of the business.
Discussion Prompt: Looking back over the various functional strategies developed for the club, how consistent are the functional strategies internally, among functions, and between functions and the growth/competitive strategies?

5. Marketing Strategy
The plan for investing marketing efforts and resources (advertising, branding, distribution, etc.) to achieve business goals
To support growth strategies - identify new customers, suggest product opportunities, create advertising and promotional programs, arrange distribution channels, and creates pricing and customer service policies
To support low-cost competitive strategies - develop low cost channels of distribution and low-risk product and market development activities.
To support differentiation strategies - identify the attributes of products that customers will value, price and distribute in ways that capitalize on the differentiation, and advertise and promote the image of difference.
Marketing strategy evolves from the cumulative pattern of decisions made by the employees who interact with customers and perform marketing activities.
1. To support growth strategies, marketing identifies new customer opportunities, suggests product opportunities, creates advertising and promotional programs, arranges distribution channels, and creates pricing and customer service policies which help position the company's products for the proper customer groups.
2. If a company pursues a stability or retrenchment strategy within one of its businesses, marketing may manage a reduction in the number of customer groups, distribution channels, and products in the product line--all in an attempt to focus on the more profitable and promising aspects of the business.

6. Operations Strategy
The plan for aligning the production and/or service functions of the firm with the intended business strategies
Supply chain management - integration of the interests of the focal company, the company's customers, and the company's suppliers
To support growth strategies - capacity expansions, hiring of new employees, and new sourcing arrangements can put pressure on systems and procedures
To support differentiation strategies - may require flexibility in workforce, special arrangements with suppliers and high levels of training
Operations strategy emerges from the pattern of decisions made within the firm about production or service operations. The task of operations managers is to design and manage an operations organization that can create the products and services the firm must have to compete in the marketplace.
Growth strategies put pressure on the systems and procedures used to schedule customer orders, plan employee work arrangements, order raw materials, and manage inventories.
Retrenchment strategies often target the activities of operations first: line employees are laid-off, equipment is idled, plants (offices and stores) are closed.
Differentiation strategies based on flexibility and high quality service may require a flexible or temporary workforce, special arrangements with suppliers, and very high levels of training for employees.
Discussion Prompt: What would be the relevant operations issues for the club? (Pay particular attention to meeting locations, facility capacity, scheduling, etc.)

7. Research and Development Strategy
Defines the priorities for:
new product and service development
long-range innovation
intellectual property protection
new R&D-related alliances and joint ventures
Process R&D is equally or more important than product research in many firms.
Fostering an atmosphere that supports innovation is the key to success in many industries.
The strategy that emerges from the decisions and actions within R&D, engineering and technical support activities is the research and development strategy.
Once products and entire product lines begin to mature, the focus of much of the R&D effort often shifts to process development.

8. Human Resources Strategy
Defines approach to recruitment, selection, training, performance evaluation, performance rewards, and other key HR practices
Effective human resources strategies can be excellent sources of competitive advantage.
HR managers serve a coordinating role between the organization’s management and employees, and between the organization and external stakeholder groups
Important to establish effective human resources policies and communicate them to all of the managers in the organization who are involved in carrying them out.
The pattern of decisions made by managers about performance evaluation, selection, training, rewards, and benefits creates a human resources strategy.
Human resources managers serve a coordinating role between the organization's management and employees, and between the organization and external stakeholder groups.
Although the HR staff serves as a resource, most of the actual HR decisions are made by line managers. All managers, whether they are involved in marketing, operations, R&D, or information systems, play the key roles in deciding employee performance levels, training needs, selection criteria, and salary levels.

9. Financial Strategy
Play a strategic role within organizations because they control the funds that are needed to acquire, develop, and utilize strategic resources
Three sources of funds are needed:
capital to support growth
capital to develop and maintain resources leading to competitive advantage
expense budgets to support ongoing activities
Trade-offs carry significant implications – dividends vs. reinvestment, long-run or short-run emphasis, which stakeholders are given priority
Ensure compliance – letter and spirit of ethical and regulatory guidelines
The primary purpose of a financial strategy is to provide the organization with the capital structure and funds that are appropriate for implementing growth and competitive strategies.
The finance group decides the appropriate levels of debt, equity, and internal financing needed to support strategies by weighing the costs of each alternative, the plans for the funds, and the financial interests of various internal and external stakeholder groups.
Finance also determines dividend policies and, through preparation of financial reports, influences how financial performance will be interpreted and presented to stockholders.
All expenditures in capital and expense budgets should be linked back to the strategies of the firm.
The trade-offs that are embedded in financial decisions carry significant implications for strategy implementation.
Discussion Prompt: What would be the elements of the financial strategy of the club?

10. Information Systems Strategy
Provide the organization with the technology and systems necessary for operating, planning and controlling the business
Well-designed and integrated information systems serve as the foundation for a competitive advantage
allow more aggressive cost management than competitors
providing more effective use of timely market information
allow integrated transactions within the supply chain
Enterprise resource planning (ERP)
manage the flow of information through the organization
supports operations and supply chain management, finance and accounting, human resources, distribution and customer relationship management from a shared data source
The purpose of the information systems strategy is to provide the organization with the technology and systems that, at a minimum, are necessary for operating, planning, and controlling the business.
Well-designed integrated information systems serve as the foundation for a competitive advantage by allowing more aggressive cost management than competitors, by providing more effective use of timely market information, or by allowing integrated transactions within the supply chain of customers and suppliers.
Some organizations have built their entire competitive strategy on effective use of information systems.
Discussion Prompt: Would it be appropriate for the club to develop an information systems strategy, including use of computer systems for communications, record-keeping, and planning?

11. Organizational Structure
The number and types of departments or groups, formal reporting relationships and lines of communication
Structure is a means, not an end
There is no one best structure
Structure can constrain future strategic choices
Administrative inefficiencies, poor service, communication problems or employee frustrations may indicated a strategy-structure mismatch
Well-developed functional strategies should have the following characteristics:
1. Decisions made within each function will be consistent with each other.
2. Decisions made within one function will be consistent with those made in other functions.
3. Decisions made within functions will be consistent with the strategies of the business.
Discussion Prompt: Looking back over the various functional strategies developed for the club, how consistent are the functional strategies internally, among functions, and between functions and the growth/competitive strategies?

12. Functional Structure General Manager Marketing Finance Production HR
Organizing Framework
Inputs such as marketing and production
Degree of Centralization
High
A functional structure is organized around the inputs or activities that are required to produce products and services, such as marketing, operations, finance, and R&D.
The structure is centralized, highly specialized, and most appropriate when a limited product line is offered to a particular market segment and the needs of external stakeholders are relatively stable.
The functional structure is oriented toward internal efficiency and encourages functional expertise. It is particularly appropriate in organizations that want to exploit economies of scale and learning effects from focused activities.

13. Divisional Structure General Manager Flight Simulators Design Graphics
Administrative Departments
Flight Simulators
Design Graphics
Design
Manufac.
Organizing Framework
Outputs such as product groups, customers, or geographic regions
Degree of Centralization
Low
A product or market group structure organizes activities around the outputs of the organization system, such as products, customers, or geographical regions.
When a business pursues a product development strategy, it adds products to its product line and interacts with more customers, distributors, and suppliers. If the growth and complexity leads to administrative inefficiencies and confusion, then the business may need to shift from a functional structure to product divisions or groups.
Firms that pursue market development growth strategies also add complexity that may require a new structure. A firm that expands its business from a regional market base to a national market base may form new units around geographical market segments. A firm that seeks out new customer groups and new product applications, may reorganize around customer groups.
Discussion Prompt: Consider a company that sells nationwide in each of the following industries – (1) fast food, (2) commodity chemical, and (3) specialty medical products sold to hospitals, nursing homes, and pharmacies. What organization structure is most likely for each?

14. Matrix Structure General Manager Project A Project B Marketing
Administrative Depts.
Project A
Project B
Marketing
Production
Organizing Framework
Inputs and Outputs
Degree of Centralization
Decentralization with Sharing
A hybrid structure that combines some elements of both functional and product/market forms is called a project matrix structure.
Project matrix structures are most common in turbulent or uncertain competitive environments where coordination between different functional departments is extremely important, and external stakeholder demands are diverse and changing.
Matrix structures can improve communications between groups, increase the amount of information the organization can handle, and allow more flexible use of people and equipment.
Matrix structures can be disconcerting for employees because of the "too many bosses" problem. The overall complexity of the structure can create ambiguity and conflict between functional and product managers and between individuals.

15. Network Structure Info. Center Organizing Framework Outputs
Degree of Centralization
Very Low (High Decentralization)
The network structure is very decentralized and organized around customer groups or geographical regions. Network structure represents a web of independent units, with little or no formal hierarchy to organize and control their relationship.

16. Less Structured Corporate Forms
A result of the need for strategic flexibility in a competitive global marketplace
May be called modular, virtual or network (not to be confused with the network structure just presented)
Loosely interconnected organizational components with poorly defined boundaries.
Include and extended network with external stakeholders (suppliers, subcontractors, partners)
Production involves many firms simultaneously
Often supplemental to existing firm structure
The strategy that emerges from the decisions and actions within R&D, engineering and technical support activities is the research and development strategy.
Once products and entire product lines begin to mature, the focus of much of the R&D effort often shifts to process development.

17. Foreign Subsidiaries
Local implementation – focus on one country, making only minor adjustments to business strategy to meet local needs
Specialized contribution – play a unique role as a member of an interdependent network of subsidiaries, often as the production arm or as a distributor to a particular region
Global mandate – responsible for an entire global business; they craft and execute strategies
The strategy that emerges from the decisions and actions within R&D, engineering and technical support activities is the research and development strategy.
Once products and entire product lines begin to mature, the focus of much of the R&D effort often shifts to process development.

18. Organizational Culture
An organization’s culture, the system of shared values that guides employee beliefs and behavior, influences the success of strategy implementation.
Often reflects the values and leadership styles of top executives
Human resource management practices can influence culture – recruitment, training, performance evaluation
Organizational energy – intensity and extent to which it is directed towards achievement of firm goals
Employees and Organizational Culture can be important sources of competitive advantage.
1. Management of human resources will become more difficult in the next several years, but will bring a bigger pay-off than ever before.
2. The workforce will be specialized and mobile, and much more diverse demographically, ethnically and geographically.
3. These trends should affect job design, reward systems, and increase the difficulty of molding an effective organizational culture.
4. An organization’s culture, the system of shared values that guides employee beliefs and behavior, is another important component of the internal environment.
a. Organization culture often reflects the values and leadership styles of the executives and managers.
b. An organization’s culture can be its greatest strength or its greatest weakness.
Discussion prompt: Suppose you discover that the company you have just joined has a cynical, largely dysfunctional culture. Is there anything that can be done about it, or should you look for another job elsewhere?

19. Factors that Encourage Innovation and Entrepreneurship
Strategic direction that incorporates innovation and entrepreneurship
Culture that encourages creative thinking and risk taking
Top management support of entrepreneurship
Open communications supported by an integrated information systems
Valuing the ideas of every employee
Large rewards for internal entrepreneurs
Teamwork and collaboration
A flat management hierarchy with decentralized decision making
Organizational champions to gather resources
Focus on learning
Slack resources available to invest in entrepreneurship
The successful mergers were related to low-to-moderate amounts of debt, a high level of relatedness leading to synergy, friendly negotiations (no resistance), a continued focus on the core business, careful selection of and negotiations with the acquired firm, and a strong cash or debt position.
The largest shareholder gains from merger occurred when the cultures and the top management styles of the two companies were similar (organizational fit).

20. Factors that Discourage Innovation and Entrepreneurship
Strategic direction that emphasizes financial returns or operating efficiency
Culture that rewards conformance and discourages novel ideas
Top management that encourages maintaining the status quo
Closed door offices and disorganized and ineffective information system.
Attention given mostly to researchers or managers
Harsh penalties for failures
Authoritarian leadership
A tall hierarchy - a lot of bureaucratic red tape and many approval levels
Approval process that makes it difficult to gather new resources
Exclusive emphasis on measurable outcomes
Tight finances (high debt, few liquid assets)
The successful mergers were related to low-to-moderate amounts of debt, a high level of relatedness leading to synergy, friendly negotiations (no resistance), a continued focus on the core business, careful selection of and negotiations with the acquired firm, and a strong cash or debt position.
The largest shareholder gains from merger occurred when the cultures and the top management styles of the two companies were similar (organizational fit).