Slide strategic management 6e by harrison chapter 7 strategy implementation

Learning ObjectivesTo understand:  functional strategies and their importance to strategy implementation  various organizational structures, their strengths and weaknesses, and how th

Chapter 7 Strategy Implementation

Chapter 7 Strategy Implementation

Learning Objectives

To understand:

 functional strategies and their importance to

strategy implementation

 various organizational structures, their strengths and weaknesses, and how they are used to support strategy

 organizational culture and energy and their

importance in bringing about change

 tactics used to foster innovation and

To understand:

 functional strategies and their importance to

strategy implementation

 various organizational structures, their strengths and weaknesses, and how they are used to support strategy

 organizational culture and energy and their

importance in bringing about change

 tactics used to foster innovation and

entrepreneurship

Direction

Strategy Formulation (corporate and business level)

Strategy Implementation

and Control

Strategic Restructuring

External and Internal

Analysis

Strategic Management Process

Well-Developed Functional

Strategies

Well-Developed Functional

Strategies

Business-level strategies are implemented at

the functional level

• Decisions made in each functional area are

consistent with each other

• Decisions made within one function are

consistent with those made in other functions

• Decisions within functions are consistent

Business-level strategies are implemented at

the functional level

• Decisions made in each functional area are

consistent with each other

• Decisions made within one function are

consistent with those made in other functions

• Decisions within functions are consistent

with the strategies of the business

Marketing Strategy

• The plan for investing marketing efforts and resources

(advertising, branding, distribution, etc.) to achieve business goals

› To support growth strategies - identify new customers, suggest

product opportunities, create advertising and promotional programs, arrange distribution channels, and creates pricing and customer

service policies

› To support low-cost competitive strategies - develop low cost channels

of distribution and low-risk product and market development

activities

› To support differentiation strategies - identify the attributes of

products that customers will value, price and distribute in ways that capitalize on the differentiation, and advertise and promote the image

of difference

• The plan for investing marketing efforts and resources

(advertising, branding, distribution, etc.) to achieve business goals

› To support growth strategies - identify new customers, suggest

product opportunities, create advertising and promotional programs, arrange distribution channels, and creates pricing and customer

service policies

› To support low-cost competitive strategies - develop low cost channels

of distribution and low-risk product and market development

activities

› To support differentiation strategies - identify the attributes of

products that customers will value, price and distribute in ways that capitalize on the differentiation, and advertise and promote the image

of difference

Operations Strategy

• The plan for aligning the production and/or service

functions of the firm with the intended business strategies

› Supply chain management - integration of the interests of the focal

company, the company's customers, and the company's suppliers

› To support growth strategies - capacity expansions, hiring of new

employees, and new sourcing arrangements can put pressure on systems and procedures

› To support differentiation strategies - may require flexibility in

workforce, special arrangements with suppliers and high levels of training

• The plan for aligning the production and/or service

functions of the firm with the intended business strategies

› Supply chain management - integration of the interests of the focal

company, the company's customers, and the company's suppliers

› To support growth strategies - capacity expansions, hiring of new

employees, and new sourcing arrangements can put pressure on

systems and procedures

› To support differentiation strategies - may require flexibility in

workforce, special arrangements with suppliers and high levels of training

Research and Development

Strategy

Research and Development

Strategy

• Defines the priorities for:

› new product and service development

› long-range innovation

› intellectual property protection

› new R&D-related alliances and joint ventures

• Process R&D is equally or more important than

product research in many firms.

• Fostering an atmosphere that supports innovation

is the key to success in many industries

• Defines the priorities for:

› new product and service development

› long-range innovation

› intellectual property protection

› new R&D-related alliances and joint ventures

• Process R&D is equally or more important than

product research in many firms.

• Fostering an atmosphere that supports innovation

is the key to success in many industries

Human Resources Strategy

• Defines approach to recruitment, selection, training,

performance evaluation, performance rewards, and other

key HR practices

› Effective human resources strategies can be excellent

sources of competitive advantage

› HR m anagers serve a coordinating role between the

organization’s management and employees, and between

the organization and external stakeholder groups

› Important to establish effective human resources policies

and communicate them to all of the managers in the

organization who are involved in carrying them out

• Defines approach to recruitment, selection, training,

performance evaluation, performance rewards, and other

key HR practices

› Effective human resources strategies can be excellent

sources of competitive advantage

› HR m anagers serve a coordinating role between the

organization’s management and employees, and between

the organization and external stakeholder groups

› Important to establish effective human resources policies

and communicate them to all of the managers in the

organization who are involved in carrying them out

Financial Strategy

• Play a strategic role within organizations because they

control the funds that are needed to acquire, develop, and utilize strategic resources

› T hree sources of funds are needed:

¤ capital to support growth

¤ capital to develop and maintain resources leading

to competitive advantage

¤ expense budgets to support ongoing activities

› T rade-offs carry significant implications – dividends vs reinvestment, long-run or short-run emphasis, which

stakeholders are given priority

› Ensure compliance – letter and spirit of ethical and

regulatory guidelines

• Play a strategic role within organizations because they

control the funds that are needed to acquire, develop,

and utilize strategic resources

› T hree sources of funds are needed:

¤ capital to support growth

¤ capital to develop and maintain resources leading

to competitive advantage

¤ expense budgets to support ongoing activities

› T rade-offs carry significant implications – dividends vs reinvestment, long-run or short-run emphasis, which

stakeholders are given priority

› Ensure compliance – letter and spirit of ethical and

regulatory guidelines

Information Systems Strategy

• Provide the organization with the technology and

systems necessary for operating, planning and

controlling the business

› Well-designed and integrated information systems serve as the

foundation for a competitive advantage

¤ allow more aggressive cost management than competitors

¤ providing more effective use of timely market information

¤ allow integrated transactions within the supply chain

› manage the flow of information through the organization

• Provide the organization with the technology and

systems necessary for operating, planning and

controlling the business

› Well-designed and integrated information systems serve as the

foundation for a competitive advantage

¤ allow more aggressive cost management than competitors

¤ providing more effective use of timely market information

¤ allow integrated transactions within the supply chain

• Enterprise resource planning (ERP)

› manage the flow of information through the organization

Organizational Structure

• The number and types of departments or groups, formal reporting relationships and lines of

communication

› Structure is a means, not an end

› There is no one best structure

› Structure can constrain future strategic choices

› Administrative inefficiencies, poor service,

communication problems or employee frustrations may indicated a strategy-structure mismatch

• The number and types of departments or groups,

formal reporting relationships and lines of

communication

› Structure is a means, not an end

› There is no one best structure

› Structure can constrain future strategic choices

› Administrative inefficiencies, poor service,

communication problems or employee frustrations may indicated a strategy-structure mismatch

Functional Structure

Organizing Framework

• Inputs such as marketing and production

Degree of Centralization

• High

Organizing Framework

• Inputs such as marketing and production

Degree of Centralization

• High

General Manager

Divisional Structure

Organizing Framework

• Outputs such as product groups, customers, or geographic regions

Degree of Centralization

• Low

Organizing Framework

• Outputs such as product groups, customers, or

geographic regions

Degree of Centralization

• Low

General Manager

Administrative Departments

Matrix Structure

Organizing Framework

• Inputs and Outputs Degree of Centralization

• Decentralization with Sharing

Organizing Framework

• Inputs and Outputs

Degree of Centralization

• Decentralization with Sharing

General Manager

Administrative Depts.

Project A Project B

Network Structure

Organizing Framework

• Outputs

Degree of Centralization

• Very Low (High Decentralization)

Organizing Framework

• Outputs

Degree of Centralization

• Very Low (High Decentralization)

Info.

Center

Less Structured Corporate Forms

A result of the need for strategic flexibility in a

competitive global marketplace

• May be called modular, virtual or network (not to

be confused with the network structure just

presented)

• Loosely interconnected organizational components

with poorly defined boundaries.

• Include and extended network with external

stakeholders (suppliers, subcontractors, partners)

A result of the need for strategic flexibility in a

competitive global marketplace

• May be called modular, virtual or network (not to

be confused with the network structure just

presented)

• Loosely interconnected organizational components

with poorly defined boundaries.

• Include and extended network with external

stakeholders (suppliers, subcontractors, partners)

Foreign Subsidiaries

• Local implementation – focus on one country,

making only minor adjustments to business

strategy to meet local needs

• Specialized contribution – play a unique role as a

member of an interdependent network of

subsidiaries, often as the production arm or as a

distributor to a particular region

• Global mandate – responsible for an entire global

business; they craft and execute strategies

• Local implementation – focus on one country,

making only minor adjustments to business

strategy to meet local needs

• Specialized contribution – play a unique role as a

member of an interdependent network of

subsidiaries, often as the production arm or as a

distributor to a particular region

• Global mandate – responsible for an entire global

business; they craft and execute strategies

Organizational Culture

An organization’s culture, the system of shared values

that guides employee beliefs and behavior, influences

the success of strategy implementation

• Often reflects the values and leadership styles of top

executives

• Human resource management practices can influence

culture – recruitment, training, performance evaluation

• Organizational energy – intensity and extent to which it

is directed towards achievement of firm goals

An organization’s culture, the system of shared values

that guides employee beliefs and behavior, influences

the success of strategy implementation

• Often reflects the values and leadership styles of top

executives

• Human resource management practices can influence

culture – recruitment, training, performance evaluation

• Organizational energy – intensity and extent to which it

is directed towards achievement of firm goals

Factors that Encourage Innovation

and Entrepreneurship

Factors that Encourage Innovation

and Entrepreneurship

•Strategic direction that incorporates innovation and entrepreneurship

•Culture that encourages creative thinking and risk taking

•Top management support of entrepreneurship

•Open communications supported by an integrated information systems

•Valuing the ideas of every employee

•Large rewards for internal entrepreneurs

•Teamwork and collaboration

•A flat management hierarchy with decentralized decision making

•Organizational champions to gather resources

•Focus on learning

•Slack resources available to invest in entrepreneurship

Factors that Discourage Innovation

and Entrepreneurship

Factors that Discourage Innovation

and Entrepreneurship

•Strategic direction that emphasizes financial returns or operating

efficiency

efficiency

•Culture that rewards conformance and discourages novel ideas

•Top management that encourages maintaining the status quo

•Closed door offices and disorganized and ineffective information system.

•Attention given mostly to researchers or managers

•Harsh penalties for failures

•Authoritarian leadership

• A tall hierarchy - a lot of bureaucratic red tape and many approval levels

•Approval process that makes it difficult to gather new resources