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STRATEGY
IMPLEMENTATION:
ORGANIZING FOR ACTION
 Strategy Implementation
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 Strategy implementation
 the sum total of all activities and choices
required for the execution of a strategic plan
 It is the process by which objectives, strategies,
and policies are put into action through the
development of programs, budgets, and
procedures.
 To begin the implementation process, strategy
makers must consider these questions:
 Who are the people to carry out the strategic
plan?
 What must be done to align company operations
in the intended direction?
 How is everyone going to work together to do
what is needed?
 Common Strategy
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Implementation Problems
 A survey of 93 Fortune 500 firms revealed that
more than half of the corporations experienced
the following 10 problems when they attempted
to implement a strategic change:
1. Took more time than planned
2. Unanticipated major problems
3. Ineffective coordination
4. Competing activities and crises created distractions
5. Employees with insufficient capabilities
6. Lower-level employees were inadequately trained
7. Uncontrollable external environmental factors
8. Poor departmental leadership and direction
9. Inadequately defined implementation of tasks and
activities
10. Inefficient information system to monitor activities
 Who implements Strategy?
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 In most large, multi-industry corporations,

the implementers are everyone in the
organization.
 Changes in mission, objectives, strategies,
and policies and their importance to the
company should be communicated clearly
to all operational managers.
 Involving people from all organizational
levels in the formulation and
implementation of strategy tends to result
in better organizational performance.
 What must be done?
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 The managers of divisions and functional

areas work with their fellow managers to
develop programs, budgets, and
procedures for the implementation of
strategy.
 They also work to achieve synergy among
the divisions and functional areas in order
to establish and maintain a company’s
distinctive competence.
 Developing Programs, Budgets

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and Procedures
 Strategy implementation involves establishing
programs to create a series of new
organizational activities, budgets to allocate
funds to the new activities, and procedures to
handle the day-to-day details.
 Program
 a collection of tactics where a tactic is the
individual action taken by the organization as an
element of the effort to accomplish a plan
 The purpose of a program or a tactic is to
make a strategy action-oriented.
 Developing Programs, Budgets

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and Procedures
 After programs have been developed, the
budget process begins.
 Planning a budget is the last real check a
corporation has on the feasibility of its
selected strategy.
 An ideal strategy might be found to be
completely impractical only after specific
implementation programs are costed in detail.
 Procedures
 detail the various activities that must be carried
out to complete a corporation’s programs
 Also called standard operating procedures
 Achieving Synergy
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 Synergy
 One of the goals to be achieved in strategy
implementation is synergy between and
among functions and business units.
 exists for a divisional corporation if the return
on investment is greater than what the
return would be if each division were an
independent business
 Forms of Synergy
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 How Is Strategy to Be
Implemented?
Organizing for Action
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 Before plans can lead to actual

performance, a corporation should be
appropriately organized, programs should
be adequately staffed, and activities should
be directed toward achieving desired
objectives.
 Any change in corporate strategy is very
likely to require some sort of change in the
way an organization is structured and in
the kind of skills needed in particular
positions.
 Structure Follows Strategy
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 Structure Follows Strategy

 changes in corporate strategy lead to
changes in organizational structure
 the following are the sequence of
what occurs:
1. New strategy is created
2. New administrative problems emerge
3. Economic performance declines
4. New appropriate structure is invented
5. Profit returns to its previous level
 Stages of Corporate
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Development
 Successful, large conglomerate
organizations have tended to follow a
pattern of structural development as
they grow and expand.
I. Simple Structure
 Flexible and dynamic
II. Functional Structure
 Entrepreneur is replaced by a team of managers
III. Divisional Structure
 Management of diverse product lines in numerous
industries
 Decentralized decision making
IV. Beyond SBU’s
 Matrix
 Network
 Blocks to Changing Stages
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 Corporations often find themselves in difficulty

because they are blocked from moving into the
next logical stage of development. Blocks to
development may be internal or external.
 Internal
 Lack of resources
 Lack of ability
 Refusal of top management to delegate
 External
 Economic conditions
 Labor shortages
 Lack of market growth
 Blocks to Changing Stages
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(Entrepreneurs)
 Loyalty to comrades: This is good at the
beginning but soon becomes a liability as
“favoritism.”
 Task oriented: Focusing on the job is critical
at first but then becomes excessive attention
to detail.
 Single-mindedness: A grand vision is needed
to introduce a new product but can become
tunnel vision as the company grows into more
markets and products.
 Working in isolation: This is good for a
brilliant scientist but disastrous for a CEO with
multiple constituencies.
 Organizational Life Cycle
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 Organizational life cycle

 describes how organizations grow, develop
and decline
 Advanced Types of
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Organizational Structures
 A new strategy may require more flexible
characteristics than the traditional
functional or divisional structure can offer.
 Today’s business organizations are
becoming less centralized with a greater
use of cross-functional work teams.
 Matrix structures
 functional and product forms are combined
simultaneously at the same level of the
organization
 Employees have two superiors, a product or
project manager, and a functional manager.
 Matrix Structure
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 Advanced Types of
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Organizational Structures
Conditions for matrix structures include:
Ideas need to be cross-fertilized across

projects or products
Scarcity of resources

Abilities to process information and to

make decisions needs to be improved

 Advanced Types of
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Organizational Structures
 Network structure
 virtual elimination of in-house business functions
 A corporation organized in this manner is often called
a virtual organization
 Many activities are outsourced
 A network structure could be termed a “nonstructure”
because of its virtual elimination of in-house business
functions.
 A corporation organized in this manner is often called a
Virtual organization because it is composed of a
series of project groups or collaborations linked by
constantly changing nonhierarchical, cobweb-like
electronic networks.
 The network structure becomes most useful when the
environment of a firm is unstable and is expected to
remain so.
 Network Structure
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 Cellular/Modular Organization:
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A New Type of Structure?
 Cellular/Modular structure
 composed of cells (self-managing teams,
autonomous business units, etc.) which can
operate alone but which can interact with other
cells to produce a more potent and competent
business mechanism
 Beginning to appear in firms that are focused
on rapid product and service innovation.
 The cellular/modular structure is used when it is
possible to break up a company’s products into
self-contained modules or cells and where
interfaces can be specified such that the
cells/modules work when they are joined
together.
 International Issues in
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Strategy Implementation
 Multinational corporation (MNC)
 a highly developed international company
with a deep involvement throughout the
world, plus a worldwide perspective in its
management and decision making
 The global MNC faces the dual challenge
of achieving scale economies through
standardization while at the same time
responding to local customer
differences.
 Stages of International
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Development
 Corporations operating internationally tend to evolve
through five common stages, both in their
relationships with widely dispersed geographic
markets and in the manner in which they structure
their operations and programs.
Stage 1: Domestic company-exports some of its products
through local dealers and distributors in the
foreign countries.
Stage 2: Domestic company with export division-
establishes its own sales company with offices in
other countries.
Stage 3: Primarily domestic company with international
division-establishes manufacturing facilities in
addition to sales offices
 Stages of International
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Development…
 Centralization versus
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Decentralization
 A basic dilemma an MNC faces is how to
organize authority centrally so that it operates
as a vast interlocking system that achieves
synergy and at the same time decentralize
authority so that local managers can make the
decisions necessary to meet the demands of
the local market or host government.
 Product group structure
 enables the company to introduce and manage a
similar line of products around the world
 enables the corporation to centralize decision
making along product lines and to reduce costs
 Geographic area structure
 allows the company to tailor products to regional
differences and to achieve regional coordination
 Chapter End questions
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1. How should an owner-manager prepare a

company for its movement from Stage I to
Stage II?
2. How can a corporation keep from sliding into
the Decline stage of the organizational life
cycle?
3. How is the cellular/modular structure different
from the network structure?
 Strategy Implementation:
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Staffing
To be a successful integration manager,
a person should have:
Deep knowledge of the company

Flexible management style

Ability to work in cross-functional teams

Willingness to work independently

Sufficient emotional and cultural

intelligence to work in a diverse

environment
 Staffing Follows Strategy
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 One way to implement a company’s

business strategy, such as overall low
cost, is through training and
development.
 Executive characteristics influence
strategic outcomes for a corporation.
 Matching the Manager
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to the Strategy
 Executive type
 executives with a particular mix of skills
and experiences
 paired with a specific corporate strategy
 Executive Types
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 Executive Types…
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 A corporation following a concentration strategy

emphasizing vertical or horizontal growth would probably
want an aggressive new chief executive with a great deal
of experience in that particular industry—a dynamic
industry expert.
 A diversification strategy, in contrast, might call for
someone with an analytical mind who is highly
knowledgeable in other industries and can manage diverse
product lines—an analytical portfolio manager.
 A corporation choosing to follow a stability strategy would
probably want as its CEO a cautious profit planner, a
person with a conservative style, a production or
engineering background and experience with controlling
budgets, capital expenditures, inventories and
standardization procedures.
 Executive Types…
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 Weak companies in a relatively attractive

industry tend to turn to a type of challenge-
oriented executive known as a turnaround
specialist to save the company.
 If a company cannot be saved, a professional
liquidator might be called on by a bankruptcy
court to close the firm and liquidate its assets
 Selection and Management
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Development
 Executive succession
 process of replacing a key top manager
 Succession planning
 identifying candidates below the top layer
of management
 measuring internal candidates against
external candidates
 providing financial incentives
 Identifying Abilities and
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Potential
 Performance appraisal systems identify
good performers with promotion
potential.
 Assessment centers evaluate a person’s
suitability for an advanced position.
 Job rotation ensures employees are
gaining a mix of experience to prepare
them for future responsibilities.
 Problems in Retrenchment
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 Downsizing
 the planned elimination of positions or jobs
 also called “rightsizing” or “resizing”
 Can damage the learning capacity of
an organization
 Creativity drops significantly and it
becomes very difficult to keep high
performers from leaving the company
 Guidelines for
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Successful Downsizing
 Eliminate unnecessary work instead of
making across the board cuts
 Contract out work that others can do
cheaper
 Plan for long-run efficiencies
 Communicate the reasons for actions
 Invest in the remaining employees
 Develop value added jobs to balance
out job elimination
 Leading
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 Implementation
 involves leading and coaching people to
use their abilities and skills most effectively
and efficiently to achieve organizational
objectives
 Without direction, people tend to do their
work according to their personal view of
what tasks should be done, how and in
what order.
 Managing Corporate Culture
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 Strong cultures are resistant to change.

 Optimal culture supports mission and
strategies.
 Management must evaluate what a
particular change in strategy means to
the corporate culture, assess whether a
change in culture is needed and decide
whether an attempt to change the
culture is worth the likely costs.
 Assessing Strategy—Culture
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Compatibility
 Is the proposed strategy compatible with
the company’s current culture?
 Can the culture be easily modified to make
it more compatible with the new strategy?
 Is management willing and able to make
major organizational changes and accept
probable delays and a likely increase in
costs?
 Is management still committed to
implementing the strategy?
 Assessing Strategy—Culture
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Compatibility
 Managing Cultural Change
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Through Communication
Companies in which major cultural changes
have successfully taken place had the
following characteristics in common:
The CEO and other top managers had a

strategic vision of what the company could

become and communicated that vision to
employees at all levels.
The vision was translated into the key
elements necessary to accomplish that
vision.
 Action Planning
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 Action plan
 Activities can be directed toward

accomplishing strategic goals through

action planning.
 states what actions are going to be taken,
by whom, during what time frame and with
what expected results
 Action Planning
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1. Specific actions to be taken to make the

program operational
2. Dates to begin and end each action
3. Person responsible for carrying out each
action
4. Person responsible for monitoring the
timeliness and effectiveness of each
action
5. Expected financial and physical
consequences of each action
6. Contingency plans
 Importance of an Action
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Plan
 Serves as a link between strategy
formulation and evaluation and control
 Specifies what needs to be done differently
from current operations
 Helps in both the appraisal of performance
and in the identification of any remedial
actions
 Explicit assignment of responsibilities for
implementing and monitoring the programs
may contribute to better motivation