1. Strategy Implementation
Session 18
Strategy Implementation

2. Strategic Management Model
Company mission & social responsibility
External Environment
Possible?
Internal analysis
Desired?
Strategic analysis & choice
Long-term objectives
Generic & grand strategies
Feedback
Feedback
Short-term objectives; reward system
Functional tactics
Policies that empower action
Restructuring, reengineering & refocusing the organization
Legend
Major impact
Strategic control & continuous improvement
Minor impact

3. Strategy Implementation
Identify short-term objectives
Involves development of support systems that
Initiate specific functional tactics (short term strategies)
Communicate policies to empower people
Institutionalization - Design effective support systems

4. What are Short-Term Objectives?
Provide specific guidance for what is to be done, translating vision into action

5. Role of Short-Term Objectives in Implementing Strategy
1. “Operationalize” long-term objectives
2. Raise issues and potential conflicts requiring coordination to avoid dysfunctional consequences
3. Identify measurable outcomes of functional activities to be used to make feedback, correction, and evaluation more relevant

6. Examples Of Financial Objectives
Growth in revenues
Growth in earnings
Wider profit margins
Bigger cash flows
Higher returns on invested capital
Attractive and sustainable increases in market value added (MVA)
A more diversified revenue base

7. Examples Of Strategic Market Objectives
Bigger market share
Quicker design-to-market times than rivals
Higher product quality than rivals
Lower costs relative to key competitors
A stronger reputation with customers than rivals
Superior customer service
Wider geographic coverage than rivals
Higher levels of customer satisfaction than rivals

8. Potential Conflicting Objectives and Priorities
Chief Executive Officer
Marketing
Finance and accounting
Manufacturing
Distribution channels
Customer service
Inventory obsolescence
Communications and data processing
Carrying inventory
Production supply alternatives
Warehousing
Transportation
Responsibilities
Objectives
More inventory
Less inventory
Frequent short runs
Long production runs
Fast order processing
Cheap order processing
Fast delivery
Lowest cost routing
Field warehousing
Less warehousing
Plant warehousing

9. Provide a clear time frame for completion
Relationship of Functional Tactics (Short Term Strategies) to Short-Term Objectives
Specificity - Identify functional activities to be undertaken to build competitive advantage
Short terms objectives (Action plans) enhance short-term objectives in three ways
Provide a clear time frame for completion
Identify who is responsible for each action in the plan

10. Qualities of Effective Short-term Objectives
Measurable
Prioritized
Linked to long-term objectives

11. Creating Measurable Objectives
Examples of Deficient Objectives
Examples of Objectives with Measurable Criteria
for Performance
To improve morale in the division (plant, department, etc.)
To improve support of sales effort
To improve firm’s image
To reduce turnover (absenteeism, number of rejects, etc.) among sales managers by 10 percent by January 1, 2001.
To reduce the time lapse between order data and delivery by 8 percent (two days) by June 1, 2001.
To reduce the cost of goods produced by 6 percent to support a product price decrease of 2 percent by December 1, 2001.
To increase the rate of before- or on-schedule delivery by 5 percent by June 1, 2001.
To conduct a public opinion poll using random samples in the five largest U.S. metropolitan markets to determine average scores on 10 dimensions of corporate responsibility by May 15, To increase our score on those dimensions by an average of 7.5 percent by May 1, 2002.
Assumption: Morale is related to measurable outcomes (I.e., high and low morale are associated with different results).

12. What are Functional Tactics (aka STS)?
Key, routine activities that must be undertaken in each functional area to provide the
Translate grand strategies into action designed to accomplish specific short-term objectives
business’s products

13. Functional Tactics at General Cinema Corporation
Soft drink bottlers
Movie exhibition
Sunkist products
Concentration and market development selective
Maintain and selectively expand leading nationwide position in the movie exhibition industry to provide positive cash flow for corporate diversification.
Functional tactics: Marketing
Seek only first-run films by outbidding competition in each local market; provide primarily family-oriented movies; and maintain an admission price only slightly above that of local competition.
Functional tactics: Finance
Use lease or sale and leaseback arrangements of each theater to maximize cash flow for corporate expansions; seek profitability through volume, not higher ticket prices.
Functional tactics: Operations
Use multiscreen facilities with minimal maintenance requirements and a joint service area to serve each minitheater.
Corporate Strategy
Business Strategies
Functional Tactics
Corporate strategy
Achieve % annual growth through existing businesses and carefully selected diversification into leisure-oriented, consumer-oriented product/service businesses to absorb increasing cash flow from theater and soft-drink bottling operations.

14. Here’s Where you Focus on the Two More Significant of the Functional Areas Operations Marketing Accounting and Finance R&D – Technology Human Resources

15. Characteristics of Functional Tactics in Operations
Viewed as core function of an organization
Involves converting inputs into value-enhanced output
Focuses on decisions regarding
Basic nature of firm’s operations,
Seeks optimum balance between investment input and production/operations output
Location
Facilities design
Process planning on a short-term basis

16. Key Functional Tactics in Operations
Typical Questions the Functional Tactic Should Answer
Facilities and equipment
Sourcing
Operations planning and control
How centralized should the facilities be?
How integrated should the separate processes be?
To what extent should further mechanization or automation be pursued?
Should size and capacity be oriented toward peak or normal operating levels?
How many sources are needed?
How should suppliers be selected, and how should relationships with suppliers be managed over time?
What level of forward buying (hedging) is appropriate?
Should work be scheduled to order or to stock?
What level of inventory is appropriate?
How should inventory be used (FIFO/LIFO), controlled, and replenished?
What are the key foci for control efforts?
Should maintenance be oriented to prevention or to breakdown?

17. Characteristics of Functional Tactics in Marketing
Lead to strategic success of the firm through the profitable sale of products/services in target markets
Clearly identify customer needs that products/services aim to meet
Identify where, when, and by whom products/services are to be sold
Define how firm will communicate with target markets
Directly influence supply, demand, profitability, consumer perception, and regulatory response through pricing

18. Key Functional Tactics in Marketing
Typical Questions the Functional Tactic Should Answer
Product or service
Price
Which products do we emphasize?
Which products/services contribute most to profitability?
What product/service image do we seek to project?
What consumer needs does the product/service seek to meet?
What changes should be influencing our customer orientation?
Are we competing primarily on price?
Can we offer discounts or other pricing modifications?
Are our pricing policies standard nationally, or is there regional control?
What price segments are targeting?
What is the gross profit margin?
Place
What level of market coverage is necessary?
Are there priority geographic areas?
What are the key channels of distribution?
What are the channel objectives, structure, and management?
What sales organization do we want?
Promotion
What are the key promotion priorities and approaches?
Which advertising/communication priorities and approaches are linked to different products, markets, and territories?
Which media would be most consistent with the total marketing strategy?

19. Characteristics of Functional Tactics in Accounting and Finance
Time frame of finance tactics varies because they direct use of financial resources supporting the business strategy, long-term goals, and annual objectives
Long-term tactics guide decisions in
Long-term capital investment
Debt financing
Dividend allocation
Leveraging
Short-term tactics guide decisions in
Managing working capital and short-term assets
Accounting-focused tactics have taken on increased strategic significance in last decade

20. Key Functional Tactics in Finance and Accounting
Typical Questions the Functional Tactic Should Answer
Capital acquisition
Capital allocation
Dividend and working capital manage-ment
What is an acceptable cost of capital?
What is desired proportion of short- and long-term debt? Preferred and common stock?
What balance is desired between internal and external funding?
What risk and ownership restrictions are appropriate?
What level and forms of leasing should be used?
What are the priorities for capital allocation projects?
On what basis should the final selection of projects be made?
What level of capital allocation can be made by operating managers without higher approval?
What portion of earnings should be paid out as dividends?
Are things other than cash appropriate as dividends?
What are the cash flow requirements? Minimum and maximum?
How liberal/conservative should credit policies be?
What limits, payment terms, and collection procedures are necessary?
What payment timing and procedure should be followed?

21. Characteristics of Functional Tactics in R&D
Assumed a key strategic role in many firms due to increasing rate of technological change
May be more critical instruments of business strategy in some industries than in others

22. Key Functional Tactics in R&D
Typical Questions the Functional Tactic Should Answer
Basic research vs. product and process development
Time horizon
To what extent should innovation and breakthrough research be emphasized? In relation to the emphasis on product development, refinement, and modification?
What critical operating processes need R&D attention?
What new products are necessary to support growth?
Is the emphasis short-term or long-term?
Which orientation best supports the business strategy? The marketing and production strategy?
Organiza-tional fit
Should R&D be done in-house or contracted out?
Should R&D be centralized or decentralized?
What should be the relationship between the R&D units and product managers? Marketing managers? Production managers?
Basic R&D posture
Should the firm maintain an offensive posture, seeking to lead innovation in its industry?
Should the firm adopt a defensive posture, responding to the innovations of its competitors?

23. Characteristics of Functional Tactics in HRM
Assumed increasing strategic importance in the 1990s
Aid long-term success in
Development of managerial talent and competent employees
Creating systems to manage compensation or regulatory concerns
Guiding effective utilization of human resources to achieve both the
Firm’s short-term objectives
Employees’ satisfaction and development

24. Key Functional Tactics in HRM
Typical Questions the Functional Tactic Should Answer
Recruitment, selection, and orientation
Career development and training
What key human resources are needed to support chosen strategy?
How do we recruit these human resources?
How sophisticated should our selection process be?
How should we introduce new employees to the organization?
What are our future human resource needs?
How can we prepare our people to meet these needs?
How can we help our people develop?
Compensa-tion
What levels of pay are appropriate for the tasks we require?
How can we motivate and retain good people?
How should we interpret our payment, incentive, benefit, and seniority policies?
Evaluation, discipline, and control
How often should we evaluate our people? Formally or informally?
What disciplinary steps should we take to deal with poor performance or inappropriate behavior?
In what ways should we “control” individual and group performance?
Labor relations and EEO requirements
How can we maximize labor-management cooperation?
How do our personnel practices affect women/minorities/
Should we have hiring policies?

25. Role of Policies in Implementing Strategy
Directives designed to guide thinking, decisions, and actions of managers and employees in implementing strategy
Increase managerial effectiveness by
Standardizing many routine decisions
Clarifying discretion managers and employees can exercise in implementing functional tactics
Should be derived from functional tactics with key purpose of aiding strategy execution

26. Why Policies Empower People
1. Establish indirect control over independent action by clearly stating how things are to be done now
2. Promote uniform handling of similar activities
3. Ensure quicker decisions by standardizing answers to previously answered questions
4. Institutionalize basic aspects of organization behavior
5. Reduce uncertainty in repetitive and day-to-day decision making
6. Counteract resistance to or rejection of chosen strategies by organization members
7. Offer predetermined answers to routine problems
8. Afford managers a mechanism for avoiding hasty and ill-conceived decisions in changing operations

27. Advantages of Formal Written Policies
1. Require managers to think through policy’s meaning, content, and intended use
2. Reduce misunderstanding
3. Make equitable and consistent treatment of problems more likely
4. Ensure unalterable transmission of policies
5. Communicate authorization or sanction of policies more clearly
6. Supply a convenient and authoritative reference
7. Systematically enhance indirect control and organization-wide coordination of the key purposes of policies