1. Strategy Implementation
Chapter 6
Strategy Implementation

2. Learning Objectives To understand:
· functional strategies and their importance to strategy implementation
· corporate and business level organizational structures, and their strengths and weaknesses

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

4. Links Between Business and Marketing Strategies
For growth strategies - identify new customers, suggest product opportunities, create advertising and promotional programs, arrange distribution channels, and creates pricing and customer service policies
For stability or retrenchment strategies - focus on most profitable segments by reducing number of customer groups, distribution channels, and products in the product line
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.

5. Links Between Business and Marketing Strategies
For low-cost competitive strategies - develop low cost channels of distribution and low-risk product and market development activities.
For 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.
The competitive strategy of the firm also influences marketing decisions. Low-cost competitive strategies require low cost channels of distribution and low-risk product and market development activities. Differentiation strategies require that marketing identify the attributes of products and services that customers will value, price and distribute the product or service in ways that capitalize on the differentiation, and advertise and promote the image of difference.
Discussion Prompt: Suppose several business students have decided to form a club for business students. What would be an appropriate mission, growth strategy, and competitive strategy for the club? Given the mission and strategies outlined, what would be the elements of a marketing strategy for such an organization?

6. Links Between Business and Operations Strategies
Growth strategies - expand capacity, improve procedures for scheduling customer orders, hire/train new employees, increase quantities of inputs, cultivate new supplier arrangements, invest in larger volume equipment.
Retrenchment strategies - scale back numbers of line employees, idle equipment, close plants.
Differentiation strategies - develop higher quality standards, make investments in technology, develop high skilled workforce, cultivate special arrangements with suppliers.
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. Links Between Business and R&D Strategies
Growth Strategies -- develop new products
Low Cost/Retrenchment Strategies - develop low cost processes
Differentiation Strategies - develop unique products and proprietary processes
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. Information Systems Strategies
At a minimum - provide the organization with the technology and systems that are necessary for operating, planning, and controlling the business.
To support a competitive advantage - allow more superior cost management and customer knowledge, by providing more effective use of timely market information, or by allowing integrated transactions within the supply chain of customers and suppliers.
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?

9. Human Resources Strategies
Establish the performance evaluation, training, rewards, and benefits programs that support chosen strategies
Recruit management and employees that fulfill the strategic needs of the organization.
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.

10. Financial Strategies
Decide the appropriate levels of debt, equity, and internal financing needed to support strategies. Trade-offs carry significant implications.
Determine hurdle rates for new investments.
Determine dividend policies and, through preparation of financial reports, communicate financial performance to stockholders.
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?

11. Well-Developed Functional Strategies
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?

12. Functional Structure General Manager Marketing Finance Production HR
Organizing Framework
- Inputs such as marketing and production
Degree of Centralization
High
Competitive Environment
Stable
Growth Strategy
Market Penetration (efficiency or quality, etc.)
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. Product/Market Structure
General Manager
Administrative Departments
Flight Simulators
Design Graphics
Design
Manufac.
Organizing Framework
Outputs such as product groups
Degree of Centralization
Low
Competitive Environment
Dynamic with External Market Pressures
Growth Strategy
Market and/or Product Development (serving particular markets well)
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. Project Matrix Structure
General Manager
Administrative Depts.
Project A
Project B
Marketing
Production
Organizing Framework
Inputs and Outputs
Degree of Centralization
Decentralization with Sharing
Competitive Environment
Dynamic with Dual Pressures
Growth Strategy
Frequent New Product/Market Development
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)
Competitive Environment
Conditions vary from region to region
Growth Strategy
Market Penetration and Market Development
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. Multidivisional CEO Moderate/low relatedness across divisions
Corporate Staff
Division VP
Division VP
Division VP
Moderate/low relatedness across divisions
Moderate/low need for coordination across divisions
Financial synergy may be available across divisions and some operational synergy (although limited) only to the extent that the divisions are related to each other
If an organization has a few businesses in its portfolio, management may choose a line-of-business or multidivisional structure, with each business existing as an autonomous unit. Each division has its own support activities, including sales, accounting/finance, personnel, and research and development.
By existing as a separate unit, each business is better able to focus its efforts on the needs of its particular stakeholders, without being distracted by the problems of other businesses.
Competition for corporate resources (R&D, legal, investment funds) may create coordination difficulties among divisions. Also, organizational efforts may be duplicated, particularly when the different businesses within the corporate portfolio are highly related. Furthermore, multidivisional corporate structures may interfere with the creation of synergies within organizations.

17. Strategic Business Unit
CEO
Corporate Staff
SBU Manager
SBU Manager
SBU Manager
SBU Staff
SBU Staff
SBU Staff
Related Divisions
Related Divisions
Related Divisions
Groups (SBUs) of related businesses
Moderate need for coordination within each SBU; low need for coordination between SBUs
Financial synergy only across SBUs, potential exists for operational synergy within SBUs
When an organization is broadly diversified with several businesses in its portfolio, management may choose to form strategic business units (SBU) with each SBU incorporating a few closely related businesses.
The intent of the structure is to provide top management with a manageable number of units to keep track of and to force responsibility for decision-making lower in the organization, near the important internal and external stakeholders.

18. Corporate Matrix CEO and Staff Division 1 Division 2 Marketing
Operations
R&D
The corporate matrix is the corporate-level counterpart to the project matrix structure described earlier. It is a way to achieve a high degree of coordination among several related businesses.
Corporate matrix structures are used when the individual businesses within a corporation's portfolio need to take advantage of resource, information, or technology sharing in order to succeed in their industries.
The corporate matrix structure tries to reach a balance between pressures to decentralize units closer to market and technological trends, and pressures to maintain centralized control to bring about economies of scope and shared learning.
The corporate matrix structure is particularly appropriate for related diversification strategies and global strategies.
Any number of businesses
Highly related businesses
Very high level of coordination required
Many opportunities exist for operational synergies (to reduce costs, gain access or share innovation)

19. Transnational Function Country Product
Many businesses in different nations
Highly related businesses
Very high level of coordination is required
Many opportunities exist for operational synergies on a world wide scale (to reduce costs, gain access or share innovation)
A more complex version of the corporate matrix structure is the transnational form. Whereas the global matrix structure organizes businesses along two dimensions, the transnational structure organizes businesses along three dimensions: nation or region, product, and function.
The transnational form is an attempt to achieve integration within product categories, within nations, and within functions while simultaneously achieving coordination across all of those activities.
Organizations which employ transnational structures can build three capabilities: responsiveness and flexibility at the national level, global scale economies, and learning which transcends national, functional and product boundaries.
Discussion Prompt: You’ve just joined a large corporation. According to the rumor mill, the CEO is contemplating a new organization structure to take advantage of synergies among related business units. Develop a letter for the CEO, offering a well-reasoned comparison of the benefits and disadvantages of the corporate structure options