Strategy Implementation
Strategy Implementation
Good
strategic planning is not enough
Process by which strategies are put into action
Process details are unique to each organization
and each strategy
Sub-strategies, programs, action plans,
policies, procedures, resource allocations,
budgets, authority/responsibility delegation,
teams and task forces, reward and control
systems, and individual assignments
Keys to Strategy Implementation
Resources
and competencies
Functional area sub-strategies
Specific decisions and actions
Resources and Competencies
Strategy implementation depends on resources and
competencies possessed by the firm
These include:
Money in certain amounts
Physical space of certain dimensions
Particular types of equipment
Specified numbers of people with
Certain skills, capabilities, and competencies
Control and reporting systems
Attitude, intuition, and imagination
Resources and Competencies:
Systems
Collections
of policies, procedures, and
protocols, backed by EDP and communications
equipment, and people who work with them
Purpose is to simplify and regularize the
performance of routine, high-volume tasks
Producing results that are as uniform and
predictable as possible
Modern business organizations depend on them
Examples of Organizational Systems
Accounting
and budgeting system
Management information system
Manufacturing control system
Compensation and reward system
Planning system
Resources and Competencies:
Human Resources
People
possess competencies and carry out
details of strategic plans
Personnel costs are high proportion of operating
budget in health care organizations
Ensure enough people in the right places with
the right competencies
Balance operational and strategic duties
Think of strategic human resource management
Resources and Competencies:
Organizational Structure
Taken
for granted and assumed immutable
Formal framework of departments, units, and
groups into which people and the activities they
perform are organized
Some structures are better suited to certain
strategies than other structures
A carefully chosen structure can give an
organization a sustainable competitive
advantage
Organizational Structure
Organizational
Selecting the structure and control
systems that are most strategically
effective for pursuing sustainable
competitive advantage.
The
design
role of structure and control
To coordinate strategy implementation.
To motivate and provide incentives for superior
performance.
The Role of Organizational
Structure
Building
Differentiation in the allocation of people and resources
to create value.
blocks of organizational structure
Vertical differentiation in the
distribution of decision-making
authority.
Horizontal differentiation in
dividing up people and tasks
into functions and divisions.
Integration
The means used in coordinating people and functions to
accomplish organizational tasks.
Differentiation, Integration,
Bureaucratic Costs
Bureaucratic
costs and strategy
implementation:
Bureaucratic costs increase with
organizational complexity.
More differentiation = more managers.
More integration = more coordination.
Better strategy implementation = better bottom-line
performance and profitability.
Vertical Differentiation
Span
of control (division of authority)
The number of subordinates that a single manager
directly manages.
Organizational
Flat structures
hierarchy choices
Few organizational levels
Wide spans of control
Tall structures
Many organizational levels
Narrow spans of control
Tall and Flat Structures
Problems with Tall Structures
Principle
of minimum chain of command
Maintaining a hierarchy with the least number of
levels of authority needed to achieve a strategy.
Sources
of bureaucratic costs:
Centralization or Decentralization
Authority
patterns in organizations:
Centralized
Decision making retained in the
hands of upper-level managers.
Decentralized
Decisions delegated to lower
levels in the organization.
Centralization (Structural) Choice?
Advantages
of
decentralization
Reduced information
overload on upper
managers.
Increased motivation and
accountability throughout
organization.
Fewer managers; lower
bureaucratic costs.
Advantages
of
centralization
Easier coordination of
organizational activities.
Decisions fitted to broad
organizational objectives.
Exercise of strong
leadership in crisis.
Faster decision making and
response.
Horizontal Differentiation
Focus
is on division and grouping of tasks to
meet business objectives.
Simple structure:
Characteristic of small entrepreneurial companies.
Entrepreneur takes on most managerial roles.
No formal organization arrangements.
Horizontal differentiation is low.
Structure Follows Strategy:
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Changes in corporate strategy lead to
changes in organizational structure
Structure Follows Strategy:
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New strategy is created
New administrative problems emerge
Economic performance declines
New appropriate structure is invented
Profit returns to its previous levels
Stages of corporate development
Simple Structure
Functional Structure
Divisional Structure
Beyond SBUs
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Simple Structure:
Stage I:
Entrepreneur
Decision making tightly controlled
Little formal structure
Planning short range/reactive
Flexible and dynamic
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Functional Structure:
Stage II:
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Management team
Functional specialization
Delegation decision making
Concentration/specialization in industry
Divisional Structure:
Stage III:
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Diverse product lines
Decentralized decision making
SBUs
Almost unlimited resources
Beyond SBUs:
Stage IV:
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Increasing environmental uncertainty
Technological advances
Size & scope of worldwide businesses
Multi-industry competitive strategy
Better educated personnel
Functional Structure
Advantages
Task grouping facilitates
specialization and
productivity.
Better monitoring of work
processes, reduced costs.
Greater control over
organizational activities.
Disadvantages
Functional orientation
creates communication
problems.
Performance and
profitability measurement
problems.
Location versus function
problems (coordination).
Strategic problems due to
structural (vertical and
horizontal) mismatches.
Functional Structure
Mutlitdivisional Structure
Advantages
Enhanced corporate
control by division
Enhanced strategic control
of each SBU in portfolio
Growth is easier. New units
dont have to be integrated
across organization
Stronger pursuit of internal
efficiencies. Performance
of individual units is readily
measurable.
Disadvantages
Establishing the divisionalcorporate authority
relationship
Distortion of information by
divisions
Competition for resources
by divisions
Transfer pricing problems
between divisions
Short-term research and
development focus
Bureaucratic costs
Multidivisional Structure
Matrix Structure
Advantages
Flexibility of the structure and membership
Minimum of direct hierarchical control
Maximizes use of employees skills
Motivates employees;
frees up top management
Disadvantages
High bureaucratic costs
High costs (time and money) for building
relationships
Two-boss employees role conflict
Matrix
Structure
Two-boss employee
Network Structure:
non structure elimination of in-house
business functions
Termed virtual organization
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Useful in unstable environments
Need for innovation and quick response
Network Structure
Packagers
Designers
Suppliers
Corporate
Headquarters
(Broker)
Manufacturers
Distributors
Promotion/
Advertising
Agencies
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