Strategy

Implementation
ST RAT EGIC M A N AGEMEN T
A COM P ETITIVE A DVA N TAGE A P P ROACH, CONC EPT A ND C A SES
SI XT EENTH ED I T ION
FRED. R. DAVI D & FOREST R DAVI D
 Isu-isu Utama Isu-isu Khusus
 marketing market segmentation

 finance/accounting market positioning

evaluating the worth of a business
 research and development
(R&D) determining to what extent debt or stock
should be used as a source of capital
 management information
developing projected financial statements
systems (MIS) issues
contracting R&D outside the firm
creating an information support system.
Strategic Marketing
Issues
 Some strategic marketing issues or decisions
are as follows:
1. How to make advertisements more interactive to be more effective
2. How to take advantage of Facebook and Twitter conservations about the company
and industry
3. To use exclusive dealerships or multiple channels of distribution
4. To use heavy, light, or no TV advertising versus online advertising
5. To limit (or not) the share of business done with a single customer
6. To be a price leader or a price follower
7. To offer a complete or limited warranty
8. To reward salespeople based on straight salary, commission, or a combination salary
and commission
Three marketing activities especially important in
strategy implementation are listed below and then
discussed:
1. Engage customers in social media.
2. Segment markets effectively.
3. Develop and use product-positioning/perceptual maps.
 Social Media Marketing
The company website should enable customers to interact with the firm on the following social
media networks

?
 Facebook
Social Media
 Google Plus
Manager(s)?
 Twitter
 LinkedIn
 Instagram Influencer(s)?
 Pinterest
 Foursquare
The socmed manager(s)?
 responds to comments and problems
 track negative or misleading statements
 manage the online discussion about a firm
 gather valuable information about opinions and desires
• Wikis—websites that allow users to add, delete, and edit
content regarding frequently asked questions and information
across the firm’s whole value chain of activities.
• The most common wiki is Wikipedia
Company Website
 The company website must not be just about the company—it must be all
about the customer too.
 Perhaps offer points, discounts, or coupons on the website for customers
who provide ideas, suggestions, or feedback.
 Drive traffic to the company website, and then keep customers at the
website for as long as possible with daily new material, updates, excitement,
and offers.
The New Principles of Marketing
1. Do not just talk at consumers—work with them throughout the marketing process.
2. Give consumers a reason to participate.
3. Listen to—and join—the conversation outside your company’s website.
4. Resist the temptation to sell, sell, sell. Instead attract, attract, attract.
5. Do not control online conversations; let it flow freely.
6. Find a “marketing technologist,” a person who has three excellent skill sets (marketing,
technology and social interaction).
7. Embrace instant messaging and chatting.
 Market Segmentation
 Market segmentation can be defined as the subdividing of a market into
distinct subsets of customers according to needs and buying habits.
 Product Positioning and Perceptual Mapping

An effective product-positioning strategy meets two criteria:

1. it uniquely distinguishes a company from the competition and
2. it leads customers to expect slightly less service than a company can deliver.
 Strategic Finance/Accounting Issues
1. To raise capital with short-term debt, long-term debt, preferred stock, or common stock
2. To lease or buy fixed assets
3. To determine an appropriate dividend payout ratio
4. To use last-in, first-out (LIFO), first-in, first-out (FIFO), or a market-value accounting approach
5. To extend the time of accounts receivable
6. To establish a certain percentage discount on accounts within a specified period of time
7. To determine the amount of cash that should be kept on hand
Five especially important finance/accounting
activities central to strategy implementation:
1. Acquire needed capital to implement strategies; perform EPS/EBIT analysis
2. Develop projected financial statements to show expected impact of strategies
implemented
3. Determine the firm’s value (corporate valuation) in the event an offer is
received
4. Decide whether to go public with an Initial Public Offering (IPO)
5. Decide whether to keep cash offshore that was earned offshore
 EPS/EBIT Analysis: Acquire Needed Capital

1. Can the company obtain the needed capital via stock or debt?
2. Would common stock, bank debt, corporate bonds, or some combination be
better to raise needed capital?
3. What would the firm’s projected EPS values be, given securement of the
capital and implementation of the strategies?
Strategic Research and Development (R&D) Issues

 Developing new products

 Improving old products effectively
 Transferring complex technology
 Adjusting processes to local raw materials
 Adapting processes to local markets
 Altering products to particular tastes and specifications.
Strategic R&D issues include the following:
1. To emphasize product or process improvements.
2. To stress basic or applied research.
3. To be a leader or follower in R&D.
4. To develop robotics or use manual-type processes.
5. To spend a high, average, or low amount of money on R&D.
6. To perform R&D within the firm or contract R&D to outside firms.
7. To use university researchers or private-sector researchers.
Strategic Management Information
Systems (MIS) Issues
Information collection, retrieval, and storage can be used to create
competitive advantages in ways such as cross-selling to customers,
monitoring suppliers, keeping managers and employees informed,
coordinating activities among divisions, and managing funds.
Strategy Execution
ST RAT EGIC M A N AGEMEN T
A COM P ETITIVE A DVA N TAGE A P P ROACH, CONC EPT A ND C A SES
SI XT EENTH ED I T ION
FRED. R. DAVI D & FOREST R DAVI D
Transitioning from
Formulating to
Implementing Strategies
 Successful strategy formulation does not guarantee successful
strategy implementation.
 It is always more difficult to do something (strategy
implementation) than to say you are going to do it (strategy
formulation)!
 Strategy
Strategy Formulation
Implementation

Divisional and
Strategists
Functional Manager
 Contrasting Strategy Formulation with Strategy Implementation
STRATEGY FORMULATION STRATEGY IMPLEMENTATION

Position forces before the action Manage forces during the action

Focus is on effectiveness Focus is on efficiency

Primarily an intellectual process Primarily an operational process

Requires good intuitive and analytical skills Requires special motivation and leadership skills

Requires coordination among a few individuals Requires coordination among many individuals

A science with tools and techniques An art to energize people

Difficult to do well Considerably more difficult to do well

Process-oriented People-oriented

Primary responsibility of top managers Primary responsibility of mid and lower-level managers
Strategy-formulation concepts and tools do not differ greatly for small,
large, for-profit, or nonprofit organizations.
Strategy implementation varies substantially among different types and
sizes of organizations.
Implementing strategies requires such actions as altering sales territories,
adding new departments, closing facilities, hiring new employees,
changing an organization’s pricing strategy, developing financial budgets,
developing new employee benefits, establishing cost-control procedures,
changing advertising strategies, building new facilities, training new
employees, transferring managers among divisions, and building a better
management information system.
These types of activities obviously differ greatly among manufacturing,
service, and governmental organizations.
The Need for Clear Annual Objectives
 Annual objectives are desired milestones an organization needs to achieve to ensure
successful strategy implementation.
1. They represent the basis for allocating resources.
2. They are a primary mechanism for evaluating managers.
3. They enable effective monitoring of progress toward achieving long-term
objectives.
4. They establish organizational, divisional, and departmental priorities.
5. They are essential for keeping a strategic plan on track.
 Annual objectives are often stated in terms of profitability, growth, and market share
by business segment, geographic area, customer groups, and product.
The Stamus Company’s Hierarchy of Aims
LONG-TERM COMPANY OBJECTIVE
Double company revenues in two years through market
development and market penetration.
(Current revenues are $2 million.)

DIVISION I. ANNUAL OBJECTIVE DIVISION II. ANNUAL OBJECTIVE DIVISION III. ANNUAL OBJECTIVE
Increase divisional revenues by Increase divisional revenues by 40% Increase divisional revenues by 50%
40% this year and 40% next year. this year and 40% next year. this year and 50% next year.
(Current revenues are $1 million.) (Current revenues are $0.5 million.) (Current revenues are $0.5 million.)

R&D annual objective Production annual Marketing annual Finance annual Personnel annual
Develop two new objective objective objective objective
products this year that Increase production Increase the number of Obtain long-term Reduce employee
are succesfully efficiency by 30% this salespeople by 40 this financing of $400,000 absenteeism from
marketed. year. year in the next six months 10% to 5% this year.

• Auditing
• Advertising
• Purchasing • Accounting
• Promotion
• Shipping • Investments
• Research
• Quality Control • Collections
• Public Relations
• Working Capital
Characteristics of objectives
 Measurable
 Consistent
 Reasonable
 Challenging
 Clear
 Communicated throughout the organization,
 Characterized by an appropriate time dimension, and
 Accompanied by commensurate rewards and sanctions.
The Need for Clear Policies
 Policies refer to specific guidelines, methods, procedures, rules, forms, and administrative
practices established to support and encourage work toward stated goals.
 Ex. some companies have a policy that bans employees from accessing their personal social
media sites during work hours.
 We are an equal opportunity employer.
 Employees in this department must take at least one training and development course each
year.
 Example..p. 328
Allocate Resources and Manage Conflict
 Resource allocation can be defined as distributing an organization’s “assets”
across products, regions, and segments according to priorities established by
annual objectives.
(1) financial resources, (2) physical resources, (3) human resources, and (4)
technological resources.
Conflict can be defined as a disagreement between two or more parties on
one or more issues.
Establishing annual objectives can lead to conflict because individuals have
different expectations, perceptions, schedules, pressures, obligations, and
personalities.
Conflict?
Short-term profits or long-term growth
Profit margin or market share
Market penetration or market development
Growth or stability
High risk or low risk
Social responsiveness or profit maximization
Match Structure with Strategy
1. Structure largely dictates how objectives and policies will be established.
2. Structure dictates how resources will be allocated.

 Alfred Chandler promoted the notion that “changes in strategy lead to changes in
organizational structure.”
 Structure should be designed to facilitate the strategic pursuit of a firm and, therefore, follow
strategy.
Symptoms of an Ineffective Organizational
Structure
1. Too many levels of management
2. Too many meetings attended by too many people
3. Too much attention being directed toward solving interdepartmental conflicts
4. Too large a span of control
5. Too many unachieved objectives
6. Declining corporate or business performance
7. Losing ground to rival firms
8. Revenue or earnings divided by number of employees or number of managers is low
compared to rival firms
 Types of Organizational Structure
1. Functional
2. Divisional by geographic area
3. Divisional by product
4. Divisional by customer,
5. Divisional by process,
6. Strategic business unit (SBU),
7. Matrix.
 1. The Functional Structure (or centralized type)

 by business function, such as production and operations, marketing, finance and accounting,
research and development, and management information systems.
Advantages Disadvantages
1. Simple and inexpensive 1. Accountability forced to the top
2. Capitalizes on specialization of business 2. Delegation of authority and responsibility
activities such as marketing and finance not encouraged
3. Minimizes need for elaborate control 3. Minimizes career development
system 4. Low employee and manager morale
4. Allows for rapid decision making 5. Inadequate planning for products and
Market
6. Leads to short-term, narrow thinking
7. Leads to communication problems
 2. The Divisional (decentralized) Structure

 Divisions are sometimes referred to as segments, profit centers, or business units.

 The divisional structure can be organized in one of four ways: (1) by geographic area, (2) by
product or service, (3) by customer, or (4) by process.

Advantages Disadvatages
1. Clear accountability 1. Can be costly
2. Allows local control of local situations 2. Duplication of functional activities
3. Creates career development chances 3. Requires a skilled management force
4. Promotes delegation of authority 4. Requires an elaborate control system
5. Leads to competitive climate internally 5. Competition among divisions can become so
6. Allows easy adding of new products or regions intense as to be dysfunctional
7. Allows strict control and attention to products, 6. Can lead to limited sharing of ideas and resources
customers, or regions 7. Some regions, products, or customers may
receive special treatment
3. The Strategic Business Unit (SBU) Structure
4. The Matrix Structure
 the most complex of all designs because it depends on both vertical and horizontal flows of
authority and communication.
Advantages Disadvantages
1. Clear project objectives 1. Requires excellent vertical and horizontal
2. Results of their work clearly seen by flows of communication
employees 2. Costly because creates more manager
3. Easy to shut down a project positions
4. Facilitates uses of special equipment, 3. Violates unity of command principle
personnel, and facilities 4. Creates dual lines of budget authority
5. Shared functional resources instead of 5. Creates dual sources of reward and
duplicated resources, as in a divisional punishment
structure 6. Creates shared authority and reporting
7. Requires mutual trust and understanding
Strategic Production/
Operations Issues
Issues:
 Strategic production-related  Quality control
decisions on plant size
 Cost control
 Plant location
 Use of standards
 Product design
 Job specialization
 Choice of equipment
 Employee training
 Kind of tooling
 Equipment and resource utilization
 Size of inventory
 Shipping and packaging
 Inventory control
 Technological innovation
Issues
1. Restructuring/reengineering
2. Managing resistance to change
3. Deciding where/how to produce goods
4. Managing an ESOP
 1. Restructuring and Reengineering

 Restructuring involves reducing the size of the firm in terms of number of

employees, number of divisions or units, and number of hierarchical levels in the
firm’s organizational structure.
 This reduction in size is intended to improve both efficiency and effectiveness.
 Restructuring is concerned primarily with shareholder well-being rather than
employee well-being.
 1. Restructuring and Reengineering…con’t

 Reengineering involves reconfiguring or redesigning work, jobs, and processes for

the purpose of improving cost, quality, service, and speed.
 The focus of reengineering is changing the way work is actually carried out.
 Reengineering is characterized by many tactical (short-term, business-function-
specific) decisions.
 Restructuring is characterized by strategic (long-term, affecting all business
functions) decisions.
2. Manage Resistance to Change
 Continuous organizational change --- Continuous quality improvement philosophy
3. Decide Where and How to Produce
Goods
Production Management and Strategy Implementation
Type of organization Strategy Being Implemented Production System Adjustments

1. Hospital 1. Adding a cancer center (Product 1. Purchase specialized equipment and

Development) add specialized people
2. Bank 2. Adding 10 new branches (Market 2. Perform site location analysis.
Development)
3. Beer brewery 3. Purchasing a barley farm operation 3. Revise the inventory control system.
(Backward Integration)
4. Steel manufacturer 4. Acquiring a fast-food chain 4. Improve the quality control system.
(Unrelated Diversification)
5. Computer company 5. Purchasing a retail distribution chain 3. Alter the shipping, packaging, and
(Forward Integration) transportation systems.
4. Employee Stock Ownership Plans (ESOPs)
 An ESOP is a tax qualified, defined-contribution, employee-benefit
plan whereby employees purchase stock of the company through
borrowed money or cash contributions.
“The ownership culture really makes a difference, when
management is a facilitator, not a dictator,”
Strategic Human Resource Issues
Issues
1. Linking performance and pay to strategy
2. Balancing work life with home life
3. Developing a diverse work force
4. Using caution in hiring a rival’s employees,
5. Creating a strategy-supportive culture
6. Using caution in monitoring employees’ social media,
7. Developing a corporate wellness program