CHAPTER 4-STRATEGY

IMPLEMENTATION
By: Prof Shilpa Chadichal
 External The Strategic
Environment
Management
Strategic
Inputs
Strategic Intent
Strategic Mission
Internal
Process
Environment

Strategy Formulation Strategy Implementation

Business-Level Competitive Corporate-Level Corporate Structure

Strategic
Actions

Strategy Dynamics Strategy Governance & Control

Acquisitions & International Cooperative Strategic Entrepreneurship

Restructuring Strategy Strategies Leadership & Innovation

Strategic
Outcomes
Strategic

Competitiveness
Feedback Above Average
Returns
 Inter-relationship between Strategy
Formulation & Implementation
Strategy Formulation Strategy Implementation
Strategy formulation is positioning forces Strategy implementation is managing forces
before the action during the action

Strategy formulation focuses on effectiveness Strategy implementation focuses on efficiency

Strategy formulation is primarily an intellectual Strategy implementation is primarily an

process operational process

Strategy formulation requires good intuitive Strategy implementation requires special

and analytical skills. motivation and leadership skills

Strategy formulation requires coordination Strategy implementation requires coordination

among a few individuals among many persons
 Strategy Implementation- Role
 Evolve a systematic procedure to implement the strategy chosen
 Procedural implementation plan
 Proper resource allocation plan
 Structural implementation plan
 Functional implementation plan
 Behavioural implementation plan

• Evaluate and control through strategic and operational control

measures

• Success of a strategy is very much dependent on how the strategy is

executed
 Strategic Advantage

Organisational Capability

Competencies

Synergistic Effects

Strength and Weaknesses

Organisational Resources + Organisational Behaviour

Pyramid of Strategy Implementation

strategies

Plans

programs

projects

budgets

Policies , procedures, rules & regulations

 Procedural implementation
 Formulation of a company
 Licensing procedures
 Securities & exchange board of india
 Monopolies & restrictive trade practices MRTP
 Foreign collaboration procedure
 Foreign exchange management act FEMA
 Import & export requirements
 Patenting & trademarks requirement
 Labor legislation requirement
 Environment protection & pollution control
 Consumer protection requirements
 Incentives & facilities benefits
 TYPES OF IMPLEMENTATION

STRUCTURAL BEHAVIORAL FUNCTIONAL

IMPLEMENTATION IMPLEMENTATION & OPERATIONAL
IMPLEMENTATION
Structural Implementation
structural considerations, structures for strategies, Organisational
design and change, Organisational systems.
Structural Implementation:
 Structure: It is the way in which the tasks and subtasks required to
implement a strategy are arranged.
 The diagrammatical representation of structure could be an
organization chart but the chart shows only the outline.
What is Structural Mechanism?
 Defining the major task required to implement a strategy.
 Grouping tasks on the basis of common skill requirements.
 Subdivision of responsibility & delegation of authority to perform
tasks.
 Coordination of divided responsibility.
 Design and administration of the information system.
 Design and administration of the appraisal system.
 Design and administration of the motivation system.
 Design and administration of the development systems.
 Design and administration of the planning system.
Structure for Strategies
1. Entrepreneurial Structure.
2. Functional Structure.
3. Divisional Structure.
4. SBU
5. Matrix Structure.
6. Network Structure.
7. Product based Structure.
8. Customer based Structure.
9. Geographic Structure.
 1. Entrepreneur structure
ADVANTAGES:-
•Quick decision making
•Timely response to
environmental changes
•Informal & simple org
Owner - manager
systems

Disadvantages:-
•Excessive reliance on the
manager – owner &
proves demanding employees
•May divert the attention
of owner to day to day
activities.
•Inadequate for future if
business expands
 2. FUNCTIONAL STRUCTURE
Advantages:-
•Efficient distribution of
work through
specialization
CEO
•Delegation of day to day
operational functions
•Providing time for top
management to focus on Public
Legal
the strategic decisions. relations

finance marketing personnel production

Disadvantages:-
•Difficulty in
coordination

•Functional , line & staff

conflicts
3. Divisional structure
Work divided on the basis of product lines,
Advantages :-
type of customers served, or geographic
•Enables grouping of functions area covered
related to a division.
•Generates quick response to Corporate legal/
Corporate finance
environmental changes PR
affecting the different
divisions. General manager General manger
•Enables top management to
focus on strategies.
marketing marketing
Disadvantages:-
operations operations
•Problem in resource allocation
•Inconsistency from the
sharing of authority between personnel personnel
corporate & divisional levels
•Policy inconsistency between
the different divisions
 Head office

Central services
( e.g. Finance)

Division A
Division A Division A Division A

functions
functions functions functions

A MULTIDIVISIONAL STRUCTURE
Multidivisional Structure
Advantages of a Multidivisional Structure
Research suggests that large companies that adopt
a multidivisional structure outperform those that
retain the functional structure:
 Enhanced corporate financial control
 Profitability of divisions is clearly visible
 Corporate office acts as the ‘investor’ – channeling funds to high-yield uses
 Enhanced strategic control
 Frees corporate managers from business-level responsibilities
 Corporate managers can deal with the wider strategic issues
 Growth
 Overcomes organizational limit to its growth
 Stronger pursuit of internal efficiency
 Can compare one division against another
 In a better position to identify inefficiencies
4. SBU- Strategic Business Unit
Any part of business org which is
Advantages:- treated separately for strategic
•Establishing coordination management purposes.
between divisions having
common strategic interests.
•Facilitates strategic
management & control of
large, diverse org.
CEO

Disadvantages:-
•There are too many diff.
Group head Group head Group head
SBU’s to handle effectively
in a large , diverse org.
SBU 1 SBU 2 SBU 3
•Difficulty in assigning
responsibility & defining
autonomy for SBU heads. Divisions Divisions Divisions
•Addition of another level of
management between
ABC DEF GHI
corporate & divisional
management
5. Matrix structure
In large org. there is a need to work on
Advantages:- projects & products.
•Individual talent to be This results in requirement of matrix
assigned where talent is org.
needed
•Fosters creativity
Once a project is completed , the team
because of pooling of members revert to their parent
talents
departments.
•Provides exposure to
specialists
finance marketing personnel
Disadvantages:-
•Dual accountability
creates confusion for Project Functional
individual team members manager A specialists
•Requires high level of
vertical & horizontal
combination Project
•Shared authority may manager B
create communication
problems
6. Network structure Spider web or virtual org.
Non hierarchical, highly decentralized &
organized around customer groups
Advantages:-
•High level of flexibility
•Permits concentration of
core competencies of the Project
firm group M
•Adaptability to cope with
Region Function
rapid changes A X

Disadvantages:- Corporate
head quarter
•Loss of control & lack of
coordination Region Function
•High costs as duplication B Y
of resources could be there
Project
group N
 Other Types of Structures
7. Product based Structure:-
 Volume of sales is prevalent
8. Customer based Structure:-
 Sales volume of individual customer groups justifies the
separate divisions.
9. Geographic structure:-
 Adopted by organizations that operate in various geographic
regions.
Nokia’s Product Structure

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Market Structure

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Geographic Structure

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Organisational Design & Change
Steps:-
 Identify key activities to be performed to accomplish the goals &
mission grouping of activities similar in nature.
 Choice of structure that can accommodate group of activities.
 Creation of departments , divisions
 Establishing interrelationship between departments.
 Strategies formulated for
 Span of management
 Line & staff relationship
 Use of committees & group decision making
 Restructuring, reengineering, delayering, flatter structures
Implementing Strategy Through Organizational Design
Organizational Design: the process of selecting the right
combination of organizational structure, control systems,
and culture to pursue a business model successfully.

 Organizational Structure
Assigns employees to specific value creation tasks and roles
To coordinate and integrate the efforts of all employees
 Strategic Control Systems
A set of incentives to motivate employees
To provides feedback on performance so corrective action can be taken
 Organizational Culture
The collection of values, norms, beliefs, and attitudes shared within an organizations
To control interactions within and outside the organization

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Implementing Strategy Through Organizational Design

Organizational structure, control, and culture shape people’s

behaviors, values, and attitudes – and determine how they will
implement an organization’s business model and strategies.
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 Liz Claibrone: Like other well-know apparel makers, embarked on a major product
expansion strategy in the 1990s when it acquired many smaller-branded clothing and
accessory companies and internally ventured new brands of its own.

 The company’s goal was to achieve greater operating efficiencies so that rising sales would
also result in rising profits.

 By 2005, it had grown to 36 different brands, but while revenue had soared from $2 billion
to more than $5billion, its profits had not kept pace.
 In fact, profits were falling because costs were rising due to the enormous complexity and
expense involved in managing so many brands. Also, in the 200s, clothing retailers like Wal-
Mart, Macy's and target were increasingly offering their own private-label brands; this put
pressure on apparel makers to reduce their prices if they wished to keep selling their brands
in these store chains.

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Contd…..
 Liz Claibrone recruited a new CEOs, William Mc Comb, to turn around the troubled
company.
 Within months, he decided to reverse course, shrink the company, and move to a new
form of organizational structure that would reduce the problems associated with
managing its 36 different brands and once again allow it to grow, but this time with
increasingly profitability.
 McComb believed the company had developed a “culture of complexity” that had
gotten out of control.
 Liz Claiborne’s core merchandising culture that had made its rapid growth and lovely
complex organizational structure.
 Liz Claibrone former top mangers had created five different apparel divisions to
manage its 36 brands , brands were grouped into different divisions according to nature
of the clothing or accessories they made.
 For example …
 Each division was controlled by a separate management team, and each division
performed all the functional activities that marketing and design needed to support its
brands.
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Contd…..
 The problem was that over time it had become increasingly difficult both
to differentiate between apparel brands in each divisions, because fashion
styles change quickly in response to changing customer tastes.
 Also, costs were rising because of duplication of activities between
divisions, and as noted earlier, increasingly industry competition was
pressuring the company to lower prices to retail stores to protect its
sales.
 Mc comb decided to streamline and change Liz Claibrone’s
organizational structure to meet the changing needs of customers and
increasing competition in the retailing industry.
 First , he decided the company would either sell, license , or close down
16 of its 36 brands and focus on the remaining 20 brands that had the
most chance of generating good future profits.
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Contd…..
 To better manage these 20 brands, he reorganized the company’s
structure and reduced its five divisions to just two .
 This eliminated the duplication in marketing , distribution, and retail
functions across the original five divisions. The result was a huge drop in
operating costs and a simple organization to manage.
 Mc Comb realized that to reduced complexity and allow each division to
build the right merchandising culture, it was necessary to change Liz
Claiborne's organizational structure.
 The real problem is that each division faces a quite different set of
strategic and operational problems.

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Organization Systems
 Another way of looking at organizational structure is to view it as
a means of subdividing the total authority and responsibility
among different organizational units and positions.

 Since the organization has to perform a set of tasks designed to

achieve its objectives, a need arises to evolve systems that would
bind the different units and positions, so that the performance of
activities takes place in a coordinated manner.

 these systems could be collectively referred to as organization

systems.
Six organizational systems are:
 Information System.
 Control System.
 Appraisal System.
 Motivation System.
 Development System.
 Planning System.
Behavioral implementation
Leadership implementation, corporate culture, corporate politics
and use of power.
Behavioral implementation
 The five major issues involved in Behavior Implementation are:
 Leadership.
 Corporate Culture.
 Corporate politics & use of power.
 Personal Values & Ethics.
 Social Responsibility.
 Leadership Implementation
 The role of appropriate leadership in strategic success is highly
significant.

 Leadership plays a critical role in the success and failure of

enterprise.

 It is considered as one of the most important elements affecting

organizational performance
Theory of leadership states:
A leader must
 Develop new qualities to perform effectively.
 Be a visionary.
 Exemplify the values, goals and culture of the organization.
 Pay attention to strategic thinking and intellectual activities.
 Lead by empowering others.
 Create leadership at lower levels.
 Delegate authority and place emphasis on motivation.
Styles of Leadership
 Risk Taking:Willing to take risks.
 Technology: Use of planning, qualified personnel and techniques.
 Organicity: Extent of organizational structural flexibility.
 Participation: Involvement of managers.
 Coercion: Domination by Top Management.
 Corporate Culture
 The phenomenon that often distinguishes good organization from
bad organization is termed as Corporate Culture.

 The well managed organizations apparently have distinct cultures

that are in some way responsible for their ability to successfully
implement strategies.
 Composition of Corporate Culture
 It is the set of important assumptions- often unstated – that members of
an organization share in common.

 There are two major assumptions in common:

 Beliefs.
 Values.

 Beliefs are assumptions about reality & are derived and reinforced by
experience.

 Values are assumptions about ideals that are desirable and worth striving
for.

 When beliefs and values are shared in an organization, they create a

corporate culture.
 Corporate politics and use of power
 All corporate cultures include a political component and
therefore all organizations are political in nature.

 Organizational members bring with them their likes, dislikes,

views, opinions, prejudices and inclinations when they enter
organization.
 Understanding Power & Politics
 Power is defined as the ability to influence others and corporate
politics is the carrying out of the activities not prescribed by the
policies for the purpose of influencing the distribution of
advantages within the organization.

 Politics is related to the use of Power but it is not similar.

Understanding Power & Politics Contd……
Power within an org. is derived from 5 sources:-
 Reward power
 Coercive power
 Legitimate power
 Referent power
 Expert power
 Formal Power
 Coercive
 Coercive power is conveyed through fear of losing one’s job, being
demoted, receiving a poor performance review, having prime projects
taken away, etc. This power is gotten through threatening others. For
example, the VP of Sales who threatens sales folks to meet their goals
or get replaced.
 Reward
 Reward power is conveyed through rewarding individuals for
compliance with one’s wishes. This may be done through giving
bonuses, raises, a promotion, extra time off from work, etc. For
example, the supervisor who provides employees comp time when
they meet an objective she sets for a project.
 Formal Power Contd….
 Legitimate
 Legitimate power comes from having a position of power in an
organization, such as being the boss or a key member of a leadership
team. This power comes when employees in the organization
recognize the authority of the individual.

 For example, the CEO who determines the overall direction of the
company and the resource needs of the company.
Personal Power
 Expert
 Expert power comes from one’s experiences, skills or knowledge.
As we gain experience in particular areas, and become thought
leaders in those areas, we begin to gather expert power that can be
utilized to get others to help us meet our goals.

 For example, the Project Manager who is an expert at solving

particularly challenging problems to ensure a project stays on
track.
Personal Power Contd…….

 Referent
 Referent power comes from being trusted and respected. We can
gain referent power when others trust what we do and respect us for
how we handle situations.

 For example, the Human Resource Associate who is known for

ensuring employees are treated fairly and coming to the rescue of
those who are not.
Understanding Power & Politics – Strategic
Use of Politics
 Understand how org. power structure works
 Be sensitive alert to political signals
 Reward org. commitments & penalize indifferent attitude.
 Practice principled politics & use openness & honesty.
 Personal values & business ethics
 CSR
Functional & operational
implementation
Functional strategies, Functional Plans and policies, Financial,
marketing, operational and personnel dimensions of functional plans
and policies. Integration of functional plans and policies.
 Functional & Operational Implementation
 Functional strategies deal with a relatively restricted plan which
provides the objectives for a specific function, for the allocation of
resources among different operations within the functional area
and for enabling a coordination between them for an optimal
contribution to the achievement of the business and corporate
level objectives.

 Functional strategies are derived from business and corporate

strategies and are implemented through functional and
operational plans and policies implementation.
Vertical fit
 It leads us to define functional strategies in terms of their
capability to contribute to the creation of a strategic
advantage for the organization.

 Types of Functional Strategies:

 Strategic marketing management.
 Strategic financial management.
 Strategic operations management.
 Strategic human resource management.
 Strategic information management
Horizontal fit
 It means that there has to be an integration of the operational
activities undertaken to provide a product or service to a customer.

 These have to take place in the course of operational

implementation.
 Functional Plans And Policies-Nature
 In terms of the levels of strategy formulation functional
strategies operate below the SBU or business level strategies.

 They are actually plans or tactics to implement business

strategies that are made within the guidelines set at higher levels
.
 Plans are made to select a course of action while policies are
required to act as guidelines to action.

 Functional plans and policies therefore are operational plans and

tactics to make a strategy work.
 Need for functional Plans & Policies
 Functional plans and policies are developed to ensure that:-
i) The strategic decisions are implemented by all the parts of an
organisation.
ii) There is a basis available for controlling activities in the
different functional areas of business.
iii) The time spent by functional managers in decision making is
reduced as plans lay down clearly what is to be done and
policies provide discretionary framework within which
decisions need to be taken.
iv) Coordination across the different functions takes place where
necessary.
 1. Financial Plans & Policies
 The financial plans and policies of an organisation are related to the
availability , usage and management of funds.
1. Source of Funds
2. Usage of Funds
3. Management Of Funds
 1. Financial Plans & Policies
1. Source of Funds
The major factors regarding which plans and policies have to
be made are- i) Capital Structure
ii) Procurement of Capital &Working Capital
borrowings
iii) Reserves and Surplus as source of funds
iv) Relationships with lenders, banks and financial
institutions
2. Plans and policies related to sources of funds are important since
they determine how financial resources will be made available
for the implementation of strategies.
 1. Financial Plans & Policies
2. Usage of Funds
i) The important factors regarding which plans and policies are to be
made are:- i) Capital Investment
ii) Fixed Asset Acquisition
iii) Current Assets
iv) Loans & Advances
v) Dividend Decisions
vi) Relationship with Shareholder
ii) Usage of funds is important since it relates to the efficiency and
effectiveness of resource utilization in the strategy implementation
process.
iii) If plans and policies are not clear , the usage of funds is inefficient
leading to less than optimum utilization of resources.
 1. Financial Plans & Policies
3. Management Of Funds
i) The major factors regarding which plans and policies related to
the management of funds have to be made are :-
i) the systems of finance, accounting and budgeting
ii) cash credit and risk management
iii) cost control & reduction
iv) tax planning
ii) These are important because they aim at the conservation and
optimum utilization of funds.
iii) Organizations implementing strategies of stability, growth or
retrenchment require rigours of proper management of funds.
 2. Marketing Plans & Policies
 Plans and policies related to marketing have to be formulated and
implemented on the basis of 4Ps of the marketing mix.
1. Product
2. Price
3. Place
4. Promotion
 3. Operations Plans & Policies

Strategy Formulation

Nature of Nature of markets Manner in which

Product/service To be served Markets are to be served

Operations System Operations System

Structure Objective

Operations Plans &

Policies

Impact Of Strategy on Operations , Plans & Policies

 3. Operations Plans & Policies
 The Production System:- this is concerned with capacity ,
location, lay out , product or service design, work system, degree of
automation, extent of integrations etc.
 Plans & Policies related to production system are significant because
they deal with vital issues affecting the capability of the organization
to achieve its objectives.
 Also production system factors are important because they involve
long term decisions and influence not only operations capability of
an organization but also its ability to implement strategies.
 3. Operations Plans & Policies
 Operations Planning & Control:-Plans & Policies related to
operations planning and control are concerned with-
i) Aggregate Production Planning
ii) Materials Supply
iii) Inventory
iv) Cost & Quality Management
v) Maintenance of plant & equipment
Here the aim of strategy implementation is to see how
efficiently resources are utilized and in what manner the day to
day operations can be managed keeping in focus the long term
objectives.
 3. Operations Plans & Policies
 Research & Development:- Plans and Policies for R&D deal with-
i) Product Development
ii) Level of technology used
iii) Technology transfer and absorption
iv) Technological Collaboration and Support
For strategy implementation R&D is used as a foundation for
implementing strategies such as product development and
diversification
R&D is also used as a Competitive Strategic Tool
 4. Personnel Plans & Policies
 Personnel Plans and Policies relate to
i) The Personnel System
ii) Organizational & Employee Characteristics
iii) Industrial Relations
 4. Personnel Plans & Policies
 Personnel System
Plans and Policies related to the personnel system deal with
factors like:-
i) Manpower Planning
ii) Selection Development
iii) Compensation
iv) Communication
v) Appraisal
 4. Personnel Plans & Policies
 Organizational & Employee Characteristics
This include factors like:-
i) Corporate Image
ii) Quality of managers
iii) Staff and workers
iv) Perception of the image of the organization as an employer
v) Availability of development opportunities for employees
vi) Working conditions
 4. Personnel Plans & Policies
 Industrial Relations:- Plans & Policies related to industrial
relations deal with issues such as :-
i) Union Management Relationship
ii) Collective Bargaining
iii) Safety
iv) Welfare & Security
v) Employee Satisfaction
vi) Morale
Integration of Functional Plans & Policies
 The considerations that guide strategists in the integration of
functional plans and policies could be grouped under five
headings:-
i) Need for internal consistency
ii) Relevance to development of organizational capability
iii) Making trade Off decisions
iv) Determination of intensity of linkages
v) Timing of implementation of plans and policies
THANK YOU