ELEMENTS OF STRATEGIC MANAGEMENT, TY BBA (Marketing), VNSGU

CHAPTER 2
STRATEGY IMPLEMENTATION
DEFINITION & MEANING

According to Steiner, “The implementation of strategies is concerned with the design and management of
systems to achieve best integration of people, structures, processes and resources in reaching
organisational objectives”.
• Strategic Implementation is a process of activating the strategy. It is the sum total of all the
activities and choices required for execution of a strategic plan.
• It is the process by which strategies & policies are put into action through the development of
programs, budgets and procedures.
• Strategy implementation consists of acquiring resources, organizing these resources and directing
the use of these resources within and outside the organisation.
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McKINSEY’S 7S FRAMEWORK

INTRODUCTION: McKinsey’s 7S framework was developed in the early 1980s by Tom Peters and
Robert Waterman at the McKinsey & Company, a consulting firm in USA. This model was developed to
find out the causes of organisational problems and to formulate programs for improvement. The basic
aspect of this model is that there are seven internal parts of an organisation. These parts are to be aligned
properly if an organisation wants to be successful.

The 7-S model can be used in different situations, for example;

To help in improving the performance of a company
To examine the possible effects of future changes within a company
To align departments and processes during a merger or acquisition
To determine how best to implement a strategy

THE SEVEN ELEMENTS: The McKinsey 7S model involves seven interdependent factors which are
categorized as either "hard" or "soft" elements:
Hard Elements Soft Elements
Strategy Super-Ordinate Goals
Structure Skills
Systems Style
Staff
"Hard" elements are easier to define or identify and management can directly influence them. "Soft"
elements can be more difficult to describe, and are less tangible and more influenced by culture. However,
these soft elements are as important as the hard elements if the organisation wants to be successful.

THE McKINSEY 7-S MODEL: The way the model is presented in figure below shows the
interdependency of the elements and indicates how a change in one affects all the others. Let's look at
each of the elements specifically:

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 ELEMENTS OF STRATEGIC MANAGEMENT, TY BBA (Marketing), VNSGU

Shared Values: They are also known as super-ordinate goal. They are the core values of the company
that can be seen in the corporate culture and the general work ethics. Shared values of an organisation are
the fundamental ideas around which a business is built. They provide future directions to the organisation.
‘Shared values’ is placed in the middle of the model. This is because these values are highly important in
the development of all the other critical elements. The company's structure, strategy, systems, style, staff
and skills are designed from why the organization was originally created, and what it stands for.

Strategy: The plan formulated to maintain and build competitive advantage over the competitors is known
as strategy. Strategies are long-term plans of the organisation. It is important to design strategies keeping
in mind the SWOT analysis of the organisation.

Structure: Organisational structure is the formal relationships among various positions in the organisation.
Organisation structure involves arrangements about reporting relationships, line of communication, rules
& procedures which guides the various activities performed at different hierarchical levels in the
organisational structure.

Systems: It refers to all rules, regulations, procedures that compliment the organisation structure. It
includes production, planning & control system, cost accounting procedures, capital budgeting system,
recruitment, training & development system, performance evaluation system, product planning system,
new product development system etc.

Style: Style is one of the tools which top managers can use to bring about organisational changes. It is the
pattern of management team over a period of time. Example: Leadership style will decide upon the level
of motivation among the employees to be productive.

Staff: Staffing is the process of acquiring human resources for the organisation & assuring that they have
the potential to contribute to the achievement of the organisational goals. Thus, staffing is selection,
placement, training & development of appropriate and qualified employees.

Skills: Skills are the actual competencies of the employees of the organisation. All employees work in an
organisation with a particular level and type of skill. Their actual achievement is because of the skills that
they have applied.

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 ELEMENTS OF STRATEGIC MANAGEMENT, TY BBA (Marketing), VNSGU

AT KEARNEYS GROWTH DRIVERS

AT Kearney, a US based consultancy firm, conducted a study which included 1100 companies in Europe,
American continent, and Asia-Pacific region to identify organisational growth drivers. In association with
Economic Intelligence Unit, the researchers also surveyed 57 CEOs of Indian and MNC-controlled
companies.
They identified five organisational growth drivers
- leadership
- strategy
- competencies and resources
- organisational design
- organisational culture and climate
The external factors affecting growth were;
- macro environment
- competitive pressure
- customer satisfaction
- shareholder pressure
- technological change
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ISSUES IN STRATEGY IMPLEMENATION

There are many activities/functions which are required to be done when any strategy is implemented.
These activities can be broadly classified as follows;
• Activating strategy
- institutionalization of strategy
- formulation of derivative plans and programs
- converting general objectives into specific objectives
- resources mobilization and allocation
• Procedural Implementation
• Structural Implementation
• Functional Implementation
• Behavioral Implementation
All the above activities are not in a sequence. Hence we can say that all the activities in strategy
implementation must not be done in an order but must be undertaken on a continuous basis.

A. ACTIVATING STRATEGY

Meaning: Activation is the process of stimulating an activity so that it is undertaken effectively.

Activation of strategy is required because only a very small group of people is involved in strategy
formulation while its implementation involves a large number of people in the organisation. As long as
the strategy is not implemented, it remains in the minds of the strategists only. Activation of strategy
requires following activities;
i. Institutionalisation of strategy
ii. Formulation of derivative plans and programs
iii. Translation of general objectives into specific objectives
iv. Resource mobilization and allocation

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 ELEMENTS OF STRATEGIC MANAGEMENT, TY BBA (Marketing), VNSGU

(i) Institutionalisation of Strategy:

Institutionalization of strategy is the first activity involved in activating the strategy. A strategy well
designed does not give any guarantee that it will be successful. The successful implementation of strategy
requires that the leader acts as its promoter and defender. Many times leader only forms the strategy and
his personality forms an important deciding factor in strategy selection. Hence a strategy is almost a
personal strategy of the leader in the organisation. Hence, there is an urgent requirement to institutionalize
the strategy. Institutionalization of strategy involves two aspects: -

a) Communication of strategy: Once the strategy is formulated it must be communicated to those persons
who would implement it. Strategy communication is a process of transferring the strategy information
from the formulators to the implementers. The form of communication may be oral through interaction
between strategist and other persons or in other ways of personal interaction. But for large organizations,
written form of communication would be more appropriate since there are many departments at different
locations for such types of organizations. For example, BHEL (Bharat Heavy Electricals Ltd)
communicates its strategy as shown in below;

BHEL’s Growth Strategy

BHEL published a 24 page document titled “BHEL’s Growth perspectives in
April 1982 as communication from its chief executive, K. L. Puri to the
employees of the company. The contents of the documents were as follows;
1. BHEL’s objectives
2. Business Opportunities and Threats
3. Directions for business development
4. Resources mobilization (human, financial and technological)
5. Research and Development
6. Achieving the targets; and
7. Present activity profile of BHEL

b) Getting Acceptance of Strategy: It is not enough to communicate the strategy to the members of the
organisations, but it is equally important to get their acceptance of the strategy. Accepted strategies can
be implemented effectively. If the acceptance is taken from the employees of the organisation then it will
develop a positive sense of attitude towards the strategy. This helps them to make commitment to strategy
by treating it to be their strategy and not imposed upon them by top management. Creation of such feeling
is very important for effective implementation of strategy.

A major problem in strategy acceptance is that people often resist a new strategy. This happens more if
the new strategy is going to make some major negative changes in their way of working in the organisation.
For example, many of the modernizations strategies have been opposed by trade unions because of their
perception that these would put additional workload on the employees or they may create job-cuts because
of the new strategy.

Here the organisation will have to put into action Change management programme in order to make
strategy acceptance more positive and fruitful. Change management of an organisation will make sure that
the employees become more positive to accept the new changes which are going to come because of the
new strategy.

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 ELEMENTS OF STRATEGIC MANAGEMENT, TY BBA (Marketing), VNSGU

(ii) Formulation of derivative plans and programs:

Once the strategy is institutionalized through its communication and acceptance, the organisation may
proceed to form action plans and programs. Since these plans and programmes are derived from the
strategic plan, these are known as derivative plans and programmes.
Action plans are meant for effective utilization of resources in the organisation so that objectives are
achieved. Action plans can be of different types like buying a new plant, developing a new product etc.
what type of action plan will be formulated depends upon the type of strategy.
A Programme is a single-use plan that covers large number of activities. It specifies major steps, their
order as well as timing and responsibility for each step. These programmes are supported by necessary
resources.

(iii) Translating General Objectives into Specific Objectives:

Organisational objectives are of general and broad type. They provide direction for action on continuous
basis. But these objectives are too general which cannot be easily implemented. Hence, we need to
translate those general objectives into specific objectives. For example, Tata Group has set general growth
objective, but it has made it specific. It has set growth objective in terms of making net profit double in
three years. Hence, the general growth objective is made specific.

(iv) Resources Mobilisation and Allocation:

For implementing a strategy, an organisation needs resources. It has to acquire those resources and allocate
it to various units, departments and functions in such a way that it gets optimally utilized. There are
different types of resources like physical, human, capital etc.
Resource mobilization involves acquiring resources that is required for implementing a strategy in the
organisation. Depending upon the nature of strategy, type of resources will be determined. For example,
if a firm wants to expand its business on a large extent will require huge amount of resources. On one
hand, strategy decides type of resources needed and on the other hand, types of resources available within
the company shall also decide the strategy to be implemented.
After resource mobilization, resource allocation activity is undertaken. This involves allocation of
financial and human resources mainly. It is allocated among various organisational units and departments.

B. PROCEDURAL IMPLEMENTATION

In order to implement the strategies, the management must have good knowledge of the procedures
through which the plans, projects and programmes have to be approved by the government authorities.
The government authorities issues procedural formalities from time to time. Some of the important
procedural requirements are as follows;
1. Formation of a company – The formation of a company is governed by the provision of Indian
Companies Act, 1956. All activities for formation should be carried out such as Registration, obtaining
certificates etc. Documents must be forwarded to Registrar of Companies.
2. Licensing Procedures – Certain industries require licensing procedures. As per the industrial policy,
1991, six industries require licensing manufacturing products such as alcohol, cigarettes, chemical
fertilizers, industrial explosives, defense and Drugs & Pharmaceuticals. Therefore company requiring
the license must apply for the same.
3. FEMA Requirements – if required, organisation must fulfill the necessary requirements of the Foreign
Exchange Management Act, 2000. Those organisations willing to deal in foreign exchange transactions
must ensure that they collect required information in context to provisions of FEMA.
4. Import and Export Requirements – Similarly, organisation willing to deal in Import & Export need
to follow certain procedural requirements, such as they have to register with Directorate General of
Foreign Trade (DGFT) and obtain Importers Exporters Code (IEC)
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 ELEMENTS OF STRATEGIC MANAGEMENT, TY BBA (Marketing), VNSGU

5. Competition Act, 2002 – The government has introduced this act that aims at promoting competition
by restricting anti competitive practices. Large businesses must have a good understanding of the
competitive act.
6. Foreign Collaboration Procedures – For proposals to set up projects with foreign collaborations
require prior government approval. The government authorities such as Reserve Bank of India (RBI),
Foreign Investment Promotion Board (FIPB) and Project Approval Board are major regulatory bodies for
foreign collaborations including joint ventures abroad.
7. SEBI Requirement – Securities and Exchange Board of INDIA (SEBI) became active since 1992 with
the passing of SEBI Act, 1992. the act empowered SEBI with necessary powers to regulate the activities
connected with marketing of securities & investments of stock exchanges, merchant banking, portfolio
management, stock brokers and others connected with securities
8) Consumer Protection Act, 1986 – Business firms must have good knowledge of consumer protection
act, 1986. This act was passed to provide better protection of the interests of consumers. The act seeks to
promote & protect rights of consumers such as: -
• The right to be protected against the marketing of goods that are hazardous to life & property.
• The right to be informed about the quality, quantity, potency, purity standards and price of goods to
protect the consumer against unfair trade practices.
• The right to be heard & be assured that consumers interests will receive due consideration.
• The right to seek redressal against unfair trade practices or exploitation of consumers, etc.
9. Pollution Control Requirements – the govt. of India has passed several laws relating to the protection
of environment. The business organisations should have a good knowledge of such laws. To name few of
them are as follows:
• The Water (Prevention & Control of Pollution), Act, 1974.
• The Air (Prevention & Control of Pollution), Act, 1981.
• The Environment Protection Act, 1986, etc.

C. STRUCTURAL IMPLEMENTATION

Structural implementation of a strategy involves designing organisation structure and interlinking various
units and sub-units of the organisation created from that organisation structure. Organisation structure is
a pattern in which various parts of the organisation are interrelated.
There is a close relationship between an organisation’s strategy and its structure. The understanding of
this relationship is important so that in implementing the strategy, the organisation structure is designed
according to the needs of the strategy. The relationship between strategy and structure is important because
strategy will be implemented with the help of structure only. If a strategy is changed, then it may require
a different type of structure. Hence we can say that first a strategy is decided and then an organisation
structure is created to implement that strategy.
There are various types of organisation structure like;
- functional structure
- divisional structure
- matrix structure
- product structure
- virtual structure
Hence a good structure is one that fits with the strategy.

D. FUNCTIONAL & OPERATIONAL IMPLEMENTATION

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 ELEMENTS OF STRATEGIC MANAGEMENT, TY BBA (Marketing), VNSGU

Functional implementation means preparing policies and plans for different functions like marketing,
finance, HR, R&D, Production etc.
Production plans and policies are prepared in order to achieve the following objectives;
a. To produce goods and services in quantities and in time to meet customer needs.
b. To produce goods and services at the lowest possible cost; and
c. To produce goods and services of quality
In order to achieve the above objectives various factors are to be considered like choice of production
process, production capacity, product / service quality, research and development, modernization of
equipments, machines and plant etc.
Marketing policies and plans are important because organisations come into existence and grow as a result
of their ability to satisfy the needs of their customers through exchange process. For strategy
implementation, following activities of marketing require plans and policies to be prepared;
a. Product types
b. Price of products
c. Product distribution; and
d. Product promotion
Financial policies have three major dimensions;
a. sources of funds
b. usage of funds; and
c. management of earnings
The major factors to be considered in preparing HR related policies are;
a. recruitment of right personnel
b. development of personnel
c. motivation system
d. retaining personnel
e. personnel mobility; and
f. industrial relations

E. BEHAVIOURAL IMPLEMENTATION:

Behavioural implementation deals with those aspects of strategy implementation that have impact on the
behaviour of people in the organisation. Since an organisation is basically created by human beings for
certain definite objectives, the activities and behaviour of its members need to be directed in a certain way.
If this is not done, then organisation will become inefficient and will fail to achieve the objectives. There
are five issues in behavioural implementation part of the strategy implementation;
a. leadership
b. organisation culture
c. values and ethics
d. corporate governance; and
e. organisation politics

Leadership: Leaders play a very important role in any organisation. Leaders are the architects of a strategy
and also the implementer of the strategy. In strategy implementation, a leader plays the following roles;
- Develop new qualities to perform effectively
- Be a visionary, willing to take risk and highly adaptable to change
- Exemplify the values, culture and goals of the organisation and be aware of the environmental
factors affecting the organisation
- Pay attention to strategic thinking

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- Adopt a collective view of leadership in which the leader’s role is spread across all the levels of
an organisation
- Lead by empowering others
- Adopt a style to build subordinate’s skills and confidence to make them change agents
- Facilitate the transformation of followers into leaders even at the lower level
- Delegate authority and give importance to innovation.

Organisation Culture: “Organizational culture refers to a system of shared meaning held by members that
differentiates the organization from other organizations”.
According to a research, there are seven primary characteristics that makes and decides an organization’s
culture. They are;
a. Innovation and risk taking – An organisation’s culture depends on the degree to which
employees are encouraged to do both innovation and risk taking.
b. Attention to detail - Organisation’s culture is also decided by the degree to which employees
are expected to do activities with precision, analysis, and attention to detail.
c. Outcome orientation - Degree to which management focuses on results rather than on processes
used to achieve them.
d. People orientation - Degree to which management decisions consider the effect of outcomes
on people within the organization.
e. Team orientation - Degree to which work activities are organised around teams rather than
individuals.
f. Aggressiveness - Degree to which people are aggressive and competitive.
g. Stability - Degree to which activities emphasize maintaining the status quo.
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INTERDEPENDANCE OF STRATEGY FORMULATION AND

IMPLEMENTATION

✓ Strategy formulation and implementation are interrelated with each other.

✓ There are two types of linkages between strategy formulation and implementation: forward and
backward.
✓ Forward linkage means the impact of strategy formulation on strategy implementation.
✓ Backward linkage means the impact of strategy implementation on strategy formulation.

FORWARD LINKAGE:
✓ Strategy formulation has forward linkage with strategy implementation. This means that all the
implementation activities are performed according the strategy chosen for implementation.
✓ Organisational processes and systems will be determined by strategy for its successful
implementation.
✓ Thus implementation of strategy depends on the formulation of it.

BACKWARD LINKAGE:
✓ Strategy formulation has backward linkage with strategy implementation. This is because normally
organisations will adopt only those strategies which can be implemented with the help of the
present structure of resources.
✓ The strategy is formulated in a particular environment which is dynamic.
✓ Hence, we can say that strategy formulation has backward linkage with strategy implementation.

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 ELEMENTS OF STRATEGIC MANAGEMENT, TY BBA (Marketing), VNSGU

❖ The interdependence of formulation and implementation of strategy does not mean that the managers
should not distinguish between the two.
❖ Interdependence helps managers to take corrective action from the feedback given by the
implementation.
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