Penoliar, Miriam Anne C.

Soriano, Syra Mae P.

Chapter 7: Implementing Strategies: Management and Operations Issues

Strategic Management Process

Nature of Strategy Implementation

 Successful strategy formulation does not guarantee successful strategy implementation.

Strategy Formulation vs. Implementation

Strategy Formulation Strategy Implementation

• Positioning forces before the action
• Focus on effectiveness
• Primarily intellectual
• Requires good intuitive and analytical
skills
• Requires coordination among a few
people
• Managing forces during the action
• Focus on efficiency
• Primarily operational
• Requires special motivation and
leadership skills
• Requires coordination among many
people

Management Perspectives

 Managers and employees are motivated more by perceived self-interests than by

organizational interests, unless the two coincide.

Management Issues Central to Strategy Implementation

A. Annual Objectives
 It serves the following purposes:

 Basis for resource allocation

 Mechanism for evaluating managers

 Instrument for monitoring progress toward achieving long-term

objectives

 Establish priorities (organizational, divisional, departmental)

  Characteristics:

 Smart

 Measurable

 Attainable

 Realistic

 Time-bound

B. Policies
 Resource Allocation Policy refers to specific guidelines, methods, procedures,
rules, forms, and administrative practices established to support and encourage
work toward stated goals.

 Policies clarify what work to be done and by whom.

 Whatever their scope and form, policies serve as a mechanism for implementing
strategies and obtaining objectives.

C. Resource Allocation
 Strategic management allows or enables resources to be allocated according to
priorities established by annual objectives.

 Types:

 Financial resources

 Physical resources

 Human resources

 Technological resources

D. Managing Conflict
o Conflict – disagreement between two or more parties on one or more issues
 Conflict is not always “bad”
 Lack of conflict may signal apathy
 Can energize opposing groups to action
 May help managers identify problems
Conflict Management and Resolution

 Avoidance

 Defusion

 Confrontation
 E. Matching Structure with Strategy
 Changes in strategy lead to changes in structure.

 Two major reasons:

 Structure dictates how objectives and policies will be established

 Structure dictates how resources will be allocated

Chandler’s Strategy-Structure Relationship

New strategy New administrative Organizational

Is formulated problems emerge Performance
declines

Organizational New organizational

performance structure is
improves established

Basic Types of Organizational Structure

 Functional Structure

 Divisional Structure

 Strategic Business Unit (SBU) Structure

 Matrix Structure

1. Functional or Centralized Structure

 Most widely used structure

 Simplest and least expensive

 Groups tasks and activities by business function

2. Divisional or Decentralized Structure
 Typically used by larger companies that have difficulty in managing different
products and services in different markets.

 Can be organized into four ways:

• By geographic area

• By product or service

• By customer

• By process

a. Divisional Structure by Geographic Area

 This type of structure is appropriate for organizations whose strategies
need to be tailored to fit the particular needs and characteristics of
customers in different geographic areas.
  Best type of structure for organizations that have similar branched
facilities located in widely dispersed areas.

b. Divisional Structure by Product or Service

 Most effective structure for implementing strategies when specific
products or services need special emphasis.
 This structure is widely used when an organization offers few products or
services or when an organization’s products or services differ
substantially.

c. Divisional Structure by Customer

 This type of structure is appropriate for organizations to cater
effectively to the requirements of clearly defined customer groups.

d. Divisional Structure by Process

 This type of structure is appropriate when activities are organized
according to the way work is actually performed. It is similar to
functional structure.

Divisional Structure
3. Strategic Business Unit (SBU) Structure
 The SBU structure groups similar divisions into strategic business units and
delegates authority and responsibility for each unit to a senior executive who
reports directly to the CEO.
 Advantages:
 Improved coordination and accountability
 Makes the tasks of planning and controlling more manageable
 Disadvantages:
 Increases in salary expenses
 Role of VP is ambiguous
 4. Matrix Structure
 This is the most complex of all designs because it depends upon vertical and
horizontal flows of authority and communication.
 For it to be effective, organizations need participative planning, training, clear
mutual understanding of roles and responsibilities, excellent internal
communication, and mutual trust and confidence.

F. Restructuring and Reengineering

 Restructuring means reducing the size of the firm in terms of number of
employees, number of divisions or units, and number of hierarchical levels in the
firm’s organizational structure.
 It is also called as downsizing, rightsizing, or delayering.
 The primary benefit of restructuring is cost reduction.
 Primarily concerned with the shareholders well-being.
 Reengineering means reconfiguring or redesigning work, jobs, and processes to
improve cost, quality, service and speed.
 It is primarily concerned with the employees and customers well-being.
 Also called as process management, process innovation, or process redesign.

G. Linking Performance and Pay to Strategies

 This refers to incentive or bonus systems given by the company to its managers
and employees.
 Some form of incentive compensation:
 Dual bonus system
 Profit sharing
 Gain sharing
  Five tests to determine whether a performance-pay plan will benefit an
organization:
 Does the plan capture attention?
 Do employees understand the plan?
 Is the plan improving communication?
 Does the plan pay out when out should?
 Is the company or unit performing better?

H. Managing Resistance to Change

 Resistance to change can be considered the single greatest threat to successful
strategy implementation.
 Three Commonly Used Strategy for Implementing Change:
 Force Change Strategy
 Educative Change Strategy
 Rational or Self-Interest Change Strategy

I. Creating a Strategy-Supportive Culture

 Strategists should strive to preserve, emphasize, and build upon aspects of
existing culture that support proposed new strategies.

J. Production/ Operations Concerns when Implementing Strategies

 Production/operation capabilities, limitations, and policies can significantly
enhance or inhibit the attainment of objectives.
 Production-related decisions have a dramatic impact on the success or failure of
strategy-implementation efforts.

K. Human Resource Concerns when Implementing Strategies

 Employee Stock Ownership Plans (ESOPs)
 An ESOP is a tax-qualified, defined-contribution, employee-benefit plan
whereby employees purchase stock of the company through borrowed
money or cash contributions.
 Balancing Work Life and Home Life
 A good home life contributes to a good work life
 The work and family topic is being made part of the agenda at meetings
and thus is being discussed in many organizations
 Benefits of a Diverse Workforce
 An organization can perhaps be most effective when its workforce
mirrors the diversity of its customers. For global companies, the goal can
be optimistic, and is worthwhile.
 Corporate Wellness Program
 Wellness programs provide counseling to employees and seek lifestyle
changes to achieve healthier living.