1. Chapter 7 Strategy Implementation 1

2. 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 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. 3 StrategicDirection Strategy Formulation (corporate and business level) Strategy Implementation and Control Strategic Restructuring External and Internal Analysis Strategic Management Process

4. 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 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

5. 5 Marketing Strategy The plan for investing marketing efforts and resources (advertising, branding, distribution, etc.) to achieve business goalsThe 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. The plan for investing marketing efforts and resources (advertising, branding, distribution, etc.) to achieve business goalsThe 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.

6. 6 Operations Strategy The plan for aligning the production and/or service functions of the firm with the intended business strategiesThe 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 The plan for aligning the production and/or service functions of the firm with the intended business strategiesThe 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

7. 7 Research and Development Strategy Defines the priorities for: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.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.Fostering an atmosphere that supports innovation is the key to success in many industries. Defines the priorities for: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.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.Fostering an atmosphere that supports innovation is the key to success in many industries.

8. 8 Human Resources Strategy Defines approach to recruitment, selection, training, performance evaluation, performance rewards, and other key HR practicesDefines 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 m anagers 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. Defines approach to recruitment, selection, training, performance evaluation, performance rewards, and other key HR practicesDefines 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 m anagers 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.

9. 9 Financial Strategy Play a strategic role within organizations because they control the funds that are needed to acquire, develop, and utilize strategic resourcesPlay a strategic role within organizations because they control the funds that are needed to acquire, develop, and utilize strategic resources ›T hree 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 ›T rade-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 Play a strategic role within organizations because they control the funds that are needed to acquire, develop, and utilize strategic resourcesPlay a strategic role within organizations because they control the funds that are needed to acquire, develop, and utilize strategic resources ›T hree 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 ›T rade-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

10. 10 Information Systems Strategy Provide the organization with the technology and systems necessary for operating, planning and controlling the businessProvide 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)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 Provide the organization with the technology and systems necessary for operating, planning and controlling the businessProvide 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)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

11. 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 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

12. 12 Functional Structure Organizing Framework Inputs such as marketing and production Degree of Centralization High Organizing Framework Inputs such as marketing and production Degree of Centralization High General Manager MarketingFinance Production HR

13. 13 Divisional Structure Organizing Framework Outputs such as product groups, customers, or geographic regions Degree of Centralization Low Organizing Framework Outputs such as product groups, customers, or geographic regions Degree of Centralization Low General Manager Administrative Departments Flight SimulatorsDesign Graphics DesignManufac.DesignManufac.

14. 14 Matrix Structure Organizing Framework Inputs and Outputs Degree of Centralization Decentralization with Sharing Organizing Framework Inputs and Outputs Degree of Centralization Decentralization with Sharing General Manager Administrative Depts. Project A Project B MarketingProduction

15. 15 Network Structure Organizing Framework Outputs Degree of Centralization Very Low (High Decentralization) Organizing Framework Outputs Degree of Centralization Very Low (High Decentralization) Info. Center

16. 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)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.Loosely interconnected organizational components with poorly defined boundaries. Include and extended network with external stakeholders (suppliers, subcontractors, partners)Include and extended network with external stakeholders (suppliers, subcontractors, partners) Production involves many firms simultaneouslyProduction involves many firms simultaneously Often supplemental to existing firm structureOften supplemental to existing firm structure 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)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.Loosely interconnected organizational components with poorly defined boundaries. Include and extended network with external stakeholders (suppliers, subcontractors, partners)Include and extended network with external stakeholders (suppliers, subcontractors, partners) Production involves many firms simultaneouslyProduction involves many firms simultaneously Often supplemental to existing firm structureOften supplemental to existing firm structure

17. 17 Foreign Subsidiaries Local implementation – focus on one country, making only minor adjustments to business strategy to meet local needsLocal 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 regionSpecialized 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 strategiesGlobal mandate – responsible for an entire global business; they craft and execute strategies Local implementation – focus on one country, making only minor adjustments to business strategy to meet local needsLocal 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 regionSpecialized 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 strategiesGlobal mandate – responsible for an entire global business; they craft and execute strategies

18. 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 executivesOften reflects the values and leadership styles of top executives Human resource management practices can influence culture – recruitment, training, performance evaluationHuman resource management practices can influence culture – recruitment, training, performance evaluation Organizational energy – intensity and extent to which it is directed towards achievement of firm goalsOrganizational energy – intensity and extent to which it is directed towards achievement of firm goals 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 executivesOften reflects the values and leadership styles of top executives Human resource management practices can influence culture – recruitment, training, performance evaluationHuman resource management practices can influence culture – recruitment, training, performance evaluation Organizational energy – intensity and extent to which it is directed towards achievement of firm goalsOrganizational energy – intensity and extent to which it is directed towards achievement of firm goals

19. 19 Factors that Encourage Innovation and Entrepreneurship Strategic direction that incorporates innovation and entrepreneurshipStrategic direction that incorporates innovation and entrepreneurship Culture that encourages creative thinking and risk takingCulture that encourages creative thinking and risk taking Top management support of entrepreneurshipTop management support of entrepreneurship Open communications supported by an integrated information systemsOpen communications supported by an integrated information systems Valuing the ideas of every employeeValuing the ideas of every employee Large rewards for internal entrepreneursLarge rewards for internal entrepreneurs Teamwork and collaborationTeamwork and collaboration A flat management hierarchy with decentralized decision makingA flat management hierarchy with decentralized decision making Organizational champions to gather resourcesOrganizational champions to gather resources Focus on learningFocus on learning Slack resources available to invest in entrepreneurshipSlack resources available to invest in entrepreneurship

20. 20 Factors that Discourage Innovation and Entrepreneurship Strategic direction that emphasizes financial returns or operating efficiencyStrategic direction that emphasizes financial returns or operating efficiency Culture that rewards conformance and discourages novel ideasCulture that rewards conformance and discourages novel ideas Top management that encourages maintaining the status quoTop management that encourages maintaining the status quo Closed door offices and disorganized and ineffective information system.Closed door offices and disorganized and ineffective information system. Attention given mostly to researchers or managersAttention given mostly to researchers or managers Harsh penalties for failuresHarsh penalties for failures Authoritarian leadershipAuthoritarian leadership A tall hierarchy - a lot of bureaucratic red tape and many approval levels A tall hierarchy - a lot of bureaucratic red tape and many approval levels Approval process that makes it difficult to gather new resourcesApproval process that makes it difficult to gather new resources Exclusive emphasis on measurable outcomesExclusive emphasis on measurable outcomes Tight finances (high debt, few liquid assets)Tight finances (high debt, few liquid assets)