1. Strategy Implementation: Organizing for Action
Chapter 8
Strategy Implementation:
Organizing for Action
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

2. Concepts in Strategic Management, Canadian Edition
Learning Objectives
After reading this chapter you should be able to:
Develop programs, budgets and procedures to implement organizational strategy
Understand the stages of organizational development and the structures that characterize them
Identify obstacles to organizational change
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

3. Learning Objectives cont.
Construct matrix and network structures to support flexible and nimble organizational strategies
Design jobs to implement strategy
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

4. Strategy Implementation
Sum total of the activities and choices required for the execution of a strategic plan.
Process by which strategies and policies are put into action through programs, budgets, and procedures.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

5. Strategy Implementation
Implementation Process Questions:
Who are the people to carry out the strategic plan?
What must be done to align operations with new direction?
How is work going to be coordinated?
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

6. Strategy Implementation
More time than planned
Unanticipated problems
Activities ineffectively coordinated
Crises deferred attention away
Employees w/o capabilities
Inadequate employee training
Uncontrollable external factors
Inadequate leadership
Poorly defined tasks
Inadequate information systems
Problems in
Implementing
Strategic plans
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

7. Strategy Implementation
Programs:
Purpose is to make the strategy “action-oriented.”
Compare proposed programs and activities with current programs and activities.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

8. Strategy Implementation
Programs:
Matrix of change – offers useful guidelines on where, when, and how fast to implement change
Feasibility
Sequence execution
Location
Pace and nature of change
Stakeholder evaluations
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

9. Concepts in Strategic Management, Canadian Edition
Matrix of Change
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

10. Strategy Implementation
Budgets:
Planning a budget is the last real check a firm has on the feasibility of the selected strategy.
A financial projection of the financial needs of a department or division.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

11. Strategy Implementation
Procedures:
Standard Operating Procedures (SOP’s):
Detail the various activities that must be carried out to complete a corporation’s programs.
Procedures are a type of coordinating mechanism that are essential to organizing the firm.
Procedures prescribe how work is to be done and what behaviours are expected without the need for direct supervision
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

12. Strategy Implementation
Achieving Synergy:
Synergy:
If the return on investment (ROI) is greater than what the return would be if the division was an independent business.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

13. Strategy Implementation
Six Forms of Synergy:
Shared know-how
Coordinated strategies
Shared tangible resources
Economies of scale or scope
Pooled negotiating power
New business creation
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

14. Strategy Implementation
Structure Follows Strategy:
Changes in organizational strategy lead to changes in organizational structure
New strategy is created
New administrative problems emerge
Economic performance declines
New appropriate structure is invented
Profit returns to its previous levels
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

15. Strategy Implementation
Stages of organizational development
Simple Structure
Functional Structure
Divisional Structure
Beyond SBU’s
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

16. Strategy Implementation
Simple Structure:
Stage I:
Entrepreneur
Decision making tightly controlled
Little formal structure
Planning short range/reactive
Flexible and dynamic
Crisis of Leadership
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

17. Strategy Implementation
Functional Structure:
Stage II:
Management team
Functional specialization
Delegation decision making
Concentration/specialization in industry
Crisis of Autonomy
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

18. Strategy Implementation
Divisional Structure:
Stage III:
Diverse product lines
Decentralized decision making
SBU’s
Almost unlimited resources
Crisis of Control
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

19. Strategy Implementation
Beyond SBU’s:
Stage IV:
Increasing environmental uncertainty
Technological advances
Size & scope of worldwide businesses
Multi-industry competitive strategy
Better educated personnel
Pressure-cooker crisis
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

20. Factors Differentiating Stage I, II, and III Companies
Function Stage 1 Stage II Stage III
1. Sizing up: Major problems
2. Objectives
3. Strategy
4. Organisation: Major characteristic of structure
Survival and growth dealing with short-term operating problems.
Personal and subjective.
Implicit and personal; exploitation of immediate opportunities seen by owner-manager.
One unit, “one-man show.”
Growth, rationalization, and expansion of resources, providing for adequate attention to product problems.
Profits and meeting functionally oriented budgets and performance targets.
Functionally oriented moves restricted to “one product” scope; exploitation of one basic product or service field.
One unit, functionally specialized group.
Trusteeship in management and investment and control of large, increasing, and diversified resources. Also, important to diagnose and take action on problems at division level.
ROI, profits, earnings per share.
Growth and product diversification; exploitation of general business opportunities.
Multiunit general staff office and decentralized operating divisions.
(Continued)
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

21. Factors Differentiating Stage I, II, and III Companies
Function Stage 1 Stage II Stage III
5. (a) Measurement and control
5. (b) Key performance indicators
6. Reward-punishment system
Personal, subjective control based on simple accounting system and daily communication and observation.
Personal criteria, relationships with owner, operating efficiency, ability to solve operating problems.
Informal, personal, subjective; used to maintain control and divide small pool of resources to provide personal incentives for key performers.
Control grows beyond one person; assessment of functional operations necessary; structured control systems evolve.
Functional and internal criteria such as sales, performance compared to budget, size of empire, status in group, personal relationships, etc.
More structured; usually based to a greater extent on agreed policies as opposed to personal opinion and relationships.
Complex formal system geared to comparative assessment of performance measures, indicating problems and opportunities and assessing management ability of division managers.
More impersonal application of comparisons such as profits, ROI, P/E ratio, sales, market share, productivity, product leadership, personnel development, employee attitudes, public responsibility.
Allotment by “due process” of a wide variety of different rewards and punishments on a formal and systematic basis. Companywide policies usually apply to many different classes of managers and workers with few major exceptions for individual cases.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

22. Strategy Implementation
Organizational Life Cycle:
Describes how organizations grow, develop and eventually decline.
Stages:
Birth Stage
Growth
Maturity
Decline
Death
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

23. Identifying Obstacles to Organizational Change
Anticipatory
Reactive
Crisis
Firm Performance
High
Declining
Low
Need for Change
Not demonstrated
Somewhat evident
Obvious
Management’s Role
Show need for change
Determine where to start
Acquire resources to make changes quickly
Major obstacles
Lack of commitment to change
Disagreement over what changes to make
Recruiting people to assist turnaround
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

24. Organizational Life Cycle
Stage I Stage II Stage III1 Stage IV Stage V
Dominant Issue Birth Growth Maturity Decline Death
Popular Concentration Horizontal Concentric and Profit strategy Liquidation or Strategies in a niche and vertical conglomerate followed by bankruptcy growth diversification retrenchment
Likely Entrepreneur- Functional Decentralization Structural Dismemberment Structure dominated management into profit or surgery of structure emphasized investment centers
Note: 1. An organisation may enter a Revival Phase either during the Maturity or Decline Stages and thus extend the organisation’s life.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

25. Changing Structural Characteristics of Modern Organization
Old Organizational Design New Organizational Design
One large organization Mini-business units & cooperative relationships
Vertical communication Horizontal communication
Centralized top-down decision making Decentralized participative decision making
Vertical integration Outsourcing & virtual organizations
Work/quality teams Autonomous work teams
Functional work teams Cross-functional work teams
Minimal training Extensive training
Specialized job design focused on individual Value-chain team-focused job design
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

26. Advanced Types of Organizational Structures
Matrix Structure:
3 Distinct Phases
Temporary cross-functional task forces
Product/brand management
Mature matrix
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

27. Concepts in Strategic Management, Canadian Edition
Matrix Structure
Manufacturing
Finance
Sales
Personnel
Manager:
Project A
Unit B C D
Top Management
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

28. Strategy Implementation
Network Structure:
“Non structure” – elimination of in-house business functions
Termed “virtual organisation”
Useful in unstable environments
Need for innovation and quick response
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

29. Concepts in Strategic Management, Canadian Edition
Network Structure
Packagers
Designers
Suppliers
Distributors
Corporate
Headquarters
(Broker)
Promotion/
Advertising
Agencies
Manufacturers
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

30. Strategy Implementation
Cellular organization:
Composed of “cells”
Self-managing teams
Autonomous business units
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

31. Strategy Implementation
Reengineering:
Radical design of business processes to achieve major gains in cost, service, or time.
Effective way to implement a turnaround strategy.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

32. Strategy Implementation
Reengineering Principles:
Organize around outcomes, not tasks
Have those who use the output perform the process
Subsume information-processing work into the real work that produces the information
Treat geographically dispersed resources as though they were centralized
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

33. Strategy Implementation
Reengineering Principles cont.
Link parallel activities instead of integrating their results
Put decision point where work is performed and build control into the process
Capture information once at the source
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

34. Strategy Implementation
Job design
Study of individual tasks to increase relevance
Source of competitive advantage
Job enlargement
Combining tasks
Job rotation
Increase variety of tasks
Job enrichment
More autonomy and control to workers
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

35. Stages of International Development
Domestic company
Some exporting
Export division
International division
Multinational corporation
Multidomestic emphasis
Global emphasis
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

36. Geographic Area Structure for a Multinational Corporation
Board of Directors
President
Corporate
Staff
R & D
Operating
Companies
U.S.
Europe*
Africa
Asia*
Product
Group B
Latin
America A C D
*Note: Because of space limitations, product groups for only Europe and Asia are shown here.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

37. Managing Organizational Change
Organizations can rarely withstand competition or grow without undergoing some type of organizational change
A large part of the problem with many change efforts is human resistance
Four most common reasons people resist change are:
Self-interest
Misunderstanding and lack of trust
Different assessments
Low tolerances for change
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

38. Strategy Implementation
Internet & Hyper-linked organizations
Hyper-linked & decentralized
Hypertime
Directly accessible
Rich data
Broken
Borderless
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

39. Concepts in Strategic Management, Canadian Edition
Discussion Questions
How should a corporation attempt to achieve synergy among functions and business units?
How should an owner-manager prepare a company for its movement from Stage I to Stage II?
How can a corporation keep from sliding into the Decline stage of the organizational life cycle?
Is reengineering just another management fad or does it offer something of lasting value?
How is the cellular organization different from the network structure?
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

40. Strategic Practice Exercise
The Synergy Game
Setup:
Put three to five chairs on either side of a room facing each other in the front of the class. Put a table in the middle with a bell in the middle of the table.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

41. The Synergy Game - Procedure
The instructor/moderator divides the class into teams of three to five people. Each team selects a name for itself. The instructor/moderator lists the team names on the board. The first two teams come to the front and sit in the chairs facing each other. The instructor/moderator reads a list of products or services being provided by an actual company. The winning team must identify (1) possible sources of synergy and (2) the actual company being described.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

42. The Synergy Game - Procedure
For example, if the products/services listed are family restaurants, airline catering, hotels, and retirement centers, the synergy is standardized food service and hospitality settings and the company is The Marriott Corporation. The first team to successfully name the company and the synergy wins the round.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

43. The Synergy Game - Procedure
After one practice session, the game begins. Each of the teams is free to discuss the question with other team members. Once one of the two teams thinks that it has the answer to both parts of the question, it must be the first to ring the bell in order to announce their answer. If it gives the correct answer, it is deemed the winner of round one. Both parts of the answer must be given for a team to have the correct answer.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

44. The Synergy Game - Procedure
If a team correctly provides only one part, that answer is still wrong—no partial credit. The instructor/moderator does not say which part of the answer, if either, was correct. The second team then has the opportunity to state the answer. If the second team is wrong, both teams may try once more. If neither chooses to try again, the instructor/moderator may (1) declare no round winner and both teams sit down, (2) allow the next two teams to provide the answer to round one, or (3) go on to the next round with the same two teams.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks

45. The Synergy Game - Procedure
Two new teams then come to the front for the next round. Once all groups have played once, the winning teams play each other. Rounds continue until there is a grand champion. The instructor should provide a suitable prize, such as candy bars, for the winning team.
This exercise was developed by Professors Yolanda Sarason of Colorado State University and Catherine Banbury of St. Mary’s College and Purdue University and presented at the Organizational Behavior Teaching Conference, June Copyright © 1999 by Yolanda Sarason and Catherine Banbury. Adapted with permission.
Copyright © 2005 Pearson Education Canada Inc.
Concepts in Strategic Management, Canadian Edition
Wheelen, Hunger, Wicks