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Institutionalizing

Strategy

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Organizational structure refers to the


formalized arrangement of interaction
between and responsibility for the
tasks, people, and resources in an
organization.
It is a chart often a pyramidal with
positions or titles and roles in
cascading fashion.
Institutionalizing of strategy refers to
the getting work of the business done
efficiently and effectively so as to the
strategy work.
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It is concerned with the best way to


organize people and tasks to execute the
strategy effectively.
It also denotes the activities that are
done
inside
the
organization
and
activities that are done outside the
organization (outsourcing).
It is also concerned with the structure of
the organization we want to aspire.
Moreover it refers to the degree of
control, coordination, openness, and
innovation in implementing a strategy as
per the company situation
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1.
2.
3.
4.
5.
6.
7.

Types of Organization
Structures

Simple organizational structure


Functional organizational structure
Divisional structure
Strategic business units
Holding company
Matrix organizational structure
Product team structure

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Simple organizational structure


Structure in which there is an owner and
a few employees and where the
arrangement of tasks, responsibilities,
and communication is highly informal
and
accomplished
through
direct
supervision
is
called
simple
organizational structure.
The very smallest business enterprise
follow this organization structure.
All strategic and operating decisions are
made by the owner, or a small owner
partner team.Puonlinenotes.blogspot.com

In this structure there will be limited


scope,
little
formalized
roles,
communication and procedures.
One bad strategic decision could provide
threatened to the continuance of the
business.
This structure provides high degree of
owners control.
It also allows rapid response to product/
market shifts and ability to accommodate
unique customer demands without major
coordination difficulties.
This structure encourage employees to
multitasking as
well.
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Functional
organizational
structure
Structure
in
which
the
tasks,people,and
technologies
necessary to do the work of the
business are divided into separate
functional
group
(e.g.
marketing,operations,and
finance)
with increasingly formal procedures
for coordinating and integrating their
activities to provide the businesss
products and services.
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CEOEngineering

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Functional Organizational Structure

Strategic Advantages

Strategic
Disadvantages

1. Achieves efficiency through


specialization
2. Develop functional
expertise
3. Differentiates and
delegates day to day
operating decisions
4. Retains centralized control
of strategic decisions
5. Tightly links structure to
strategy by designating key
activities as separate units

1. Promotes narrow specialization


and functional rivalry or conflict
2. Creates difficulties in functional
coordination and interfunctional
decision making
3. Limits development of general
managers
4. Has a strong potential for
interfunctional conflict priority
placed on functional areas, not
the entire business
5. May cost more to do a function
than it does outside the
company, unless outsourced.

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Divisional Structure
When a firm diversifies its product/service
lines, covers broad geographic areas,
utilizes unrelated market channels, or
begins to serve heterogeneous customer
groups, a functional structure rapidly
becomes inadequate.
A divisional organizational structure is one
in which a set of relatively autonomous
units, or divisions, are governed by central
corporate office but where each operation
division has its own functional specialists
who provide products or services different
from those of other divisions.
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A
divisional
structure
allows
corporate management to delegate
authority
for
the
strategic
management of distinct business
entities-the division.
This enables decision making in
response to varied competitive
environments
and
corporate
management to concentrate on
corporate
level
strategic
level
decisions.
The division usually is given profit
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Divisional
Organizational
Structure

Chief Executive
Officer

VP Administrative
Services
General
Manager
Division A/SBU
A
Manager HR
Manager
Account and
Finance
Manager R&D
Manager
Marketing and
Sales
Manager POM

VP Operating
Support
General
Manager
Division B/SBU
B
Person
nel
Accounting
and Control
Division
Plannin
g
Marketi
ng
POM

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General
Manager
Division C/SBU
C
Person
nel
Accounting
and Control
Division
Plannin
g
Marketi
ng
POM

Advantages and disadvantages


Strategic advantages

Strategic
disadvantages

1. Forces coordination and


1. Fosters potentially dysfunctional
necessary down to the
competition for corporate level
appropriate level for rapid
resources
response
2. Presents the problem of
2. Places strategy development and
determining how much authority
implementation in closer
should be given to divisional
proximity to the unique
managers
environments of the division
3. Creates a potential for policy
3. Frees chief executive officer for
inconsistencies among divisions
broader strategic decision making
4. Presents the problem of
4. Sharply focuses accountability for
distributing corporate overhead
performance
costs in a way that is acceptable
5. Retains functional specialization
to division managers with profit
within each division
responsibility
6. Provides good training good for
5. Increases costs incurred through
strategic managers
duplication functions
7. Increases focus on products,
6. Creates difficulty maintaining
markets, and quick response to
overall corporate image.
change
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Strategic Business Unit


The SBU is an adaptation of the divisional
structure where by various divisions or parts
of divisions are grouped together based on
some common strategic elements usually
linked to distinct product market differences.
For example General Foods has its own SBUs
such as Breakfast foods, beverages, main
meals, and pet foods etc.
Some
firms
encounter
difficulty
in
controlling their divisional operations as the
diversity,size,and number of these units
continues to increase and add the SBU
layers in their hierarchy.
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Holding Company
Structure in which the corporate
entity is a broad collection of often
unrelated businesses and divisions
such that it (the corporate entity) acts
as financial overseer holding the
ownership interest in the various parts
of the company, but has a little direct
managerial involvement.
It reduces the cost and one of the
drawback of this structure is lack of
control over decisions to make timely
corrections and adjustments.
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Matrix Organization Structure


The matrix organizational structure is one
in which functional and staff personnel
are assigned to both a basic functional
area and to a project or product manager.
It provides dual channels of authority,
performance responsibility, evaluation,
and control.
The matrix form is intended to make the
best use of talented people within a firm
by
combining
the
advantages
of
functional specialization and product
project specialization.
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The matrix organization structure increases the


number of middle managers who exercise
general management responsibilities through
the project manager role.
It broadens the middle managers exposure to
organization wide strategic concerns.
It overcomes a key deficiency of functional
organizations while retains the advantages of
functional specialization.
It is difficult to implement.
Dual chains of command challenge fundamental
organizational problems.
Negotiating shared responsibilities the use of
resources
and
priorities
can
create
misunderstanding
or
confusion
among
subordinates.
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Chief Executive
Officer

Project
Manager
A

VP
Engineeri
ng

VP
Productio
n

Engineeri
ng Staff

Productio
n
Staff

Project
Manager
B

Engineeri
ng Staff

Project
Manager
C

Engineeri
ng Staff

VP
Purchasin
g

VP
Administrati
on

Purchasin
g Agent

Administrati
on
Coordinator

Purchasin
g Agent

Administrati
on
Coordinator

Productio
Purchasin
n
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g Agent
Staff

Administrati
on
Coordinator

Productio
n
Staff

Advantages and
Strategic
Disadvantages
Strategic advantages
disadvantages
1. May result is
1. Accommodates a wide
variety of project oriented
business activities
2. Provides good training
ground for strategic
managers
3. Maximizes efficient use of
functional managers
4. Fosters creativity and
multiple sources of
diversity
5. Give middle management
broader exposure to
strategic issues

confusion and
contradictory policies
2. Necessitates
tremendous
horizontal and
vertical coordination
3. Can reproduce
information and
excess reporting
4. Can cause
neighborhood battles
and loss of
accountability

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Product Team Structure


The product team structure seeks to
simplify and increase the focus of
resources on a narrow but strategically
important
product,
project,
market,
customer, or innovation.
The product team structure assigns
functional managers and specialists to a
new product, project, or process team that
is empowered to make major decision
about their product.
The team is created at the inception of the
new product idea and they stay with it
indefinitely if it becomes a viable business.
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Instead of being assigned on a


temporary basis as in the matrix
structure
team
members
are
assigned permanently to that team
in most cases.
This
result
in
much
lower
coordination costs and because
every function is represented usually
reduces the number of management
levels above the team level needed
to approve team decisions.
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Chief Executive
Officer

Research
and
Developme
nt

Engineering

Operations

Product
or
Process
Team

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Finance

Sales and
Marketing

Structuring an Effective
Organization
Major efforts to improve traditional
organizational structures seek to
reduce unnecessary control and
focus
on
enhancing
core
competencies, reducing costs, and
opening organizations more fully to
outside involvement and influence.

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Today
and
tomorrow,
organizational
structure reflects an external focus,
flexible interaction,interdepedency, and a
bottom up approach, just to mention a few
characteristics associated with strategy
execution and success.
The fundamental trends are driving
decisions about effective organizational
structures in the twenty first century are
1. Globalization
2. Internet
3. Speed of decision making
4. Match structure
with strategy
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Globalization
The need for global coordination and
innovation
is
forcing
constant
experimentation and adjustment to
get the right mix of local initiative,
information flow, leadership, and
corporate culture.
Global
firms
have
to
locate
operations in numerous countries.
Today it will call on talents and
resources wherever they can be
found around the globe, just as it
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For example some MNCs based in the


USA,do its software programming in New
Delhi, its engineering in Germany, and
its manufacturing in Indonesia.
Organizations
structures
are
revolutionary day by day.
Internet
The internet gives everyone in the
organization, or working with it, from
lowest clerk to the CEO to any supplier
or customer, the ability to access a vast
array of information-instantaneously,
from anywhere.
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We can access ideas,requests,instructions from the


global in the blink of an eye.
It allows the global enterprise with different
functions, offices, and activities spread around the
world to be flawlessly connected so that far
customers, employees and suppliers can work
together in real time.
Speed
Technology or digitization means removing human
minds and hands from an organizations most
routine tasks and replacing them with computers
and networks.
Digitizing everything from employee benefits to
accounts receivable to product design cuts cost,
time, and payroll resulting in cost savings and vast
improvements in speed.
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Match structure with strategy


1. A single product firm or single dominant
business firm should employ a functional
structure
2. A firm in several lines of business that are
somehow related should employ a functional
structure
3. A firm in several unrelated lines of business
should be organized into strategic business units
4. Early achievement of a strategy structure fit can
be a competitive advantage

Here are some efforts which helps to make


structuring an effective organization.
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1. Redefine the role of corporate headquarters


from control to support and coordination
.Every multibusiness companies are in trouble
regarding resource exploitation, market
responsiveness and creativity.
.Rigorous financial controls and reporting
enable cost efficiency, resource deployment
and autonomy across different units.
.Flexible
controls
are
conducive
to
responsiveness, and innovation
.The creation of new resources and
capabilities will generate future competitive
advantage.
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Aggressive portfolio management


provides
maximum
shareholder
value
through
independent
businesses.
It needs cross coordination and
recognition between these business
interdependencies
2. Balance
the
demands
for
control/differentiation with the need
for coordination/integration
Specialization of work and effort
allows a unit to develop greater
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Organizations strategy depends on


dividing different activities within
the firm into logical, common
groupingssales,operations,administration,
or
geography-so that each set of
activities
can
be
done
most
effectively.
Control of sets of actitivities is at a
premium.
Dividing each set of activities is an
important structural decision.
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3. Restructuring to emphasize and support


strategically critical activities
.Restructuring is redesigning an organizational
structure with the intent of emphasizing and
enabling activities most critical to the firms
strategy to function at maximum effectiveness.
.At the heart of the restructuring trend is the
notion that some activities within a businesss
value chain are more critical to the success of
the businesss strategy than others.
.For example Wal-Mart organizational structure
is designed to ensure that its impressive
logistics
and
purchasing
competitive
advantages operate flawlessly.
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4. Reengineer strategic business processes


.A popular method by which organizations
worldwide undergo restructuring efforts to
remain competitive.
.It involves fundamental rethinking and radical
redesigning of a business process so that a
company can best create value for customer
by eliminating barriers that create distance
between employees and customers.
.It
reduces
fragmentation
by
crossing
traditional departmental lines and reducing
overhead to compress formerly separate steps
and tasks that are strategically intertwined in
the process of meeting customer needs.
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Critical areas under BPR


Scratch the flowchart of business with
value chain activities
Streamline the performance (eliminate
unnecessary tasks and steps)
Business process automation/introduction
of new technologies
Focus on strategically critical activities/
benchmak with top leaders
Consider outsourcing for non critical
activities
design a new organization structure and
arrange tasks, people and resources
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5. Downsize and self manage :force decision to


operating level
.Eliminate
the
number
of
employees,
particularly middle management in a
company.
.Allow work groups or work teams to supervise
and administer their work as a group or team
without a direct supervisor exercising the
supervisory role.
.The team set parameters of their work, make
decisions about work related matters, and
perform most of the managerial functions
previously done by their direct supervisor.
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6. Allow
multiple
structures
to
operate
simultaneously within the organization to
accommodate products, geography, innovation
and customers
. Follow matrix and product team structure
7. Take advantage of being a virtual organization
. This organization structure is primarily formed in a
temporary manner.
. It is defined as a network of independent
companies-suppliers, customers, subcontractors
or even competitors.
. This network links via information technology to
share skills, access to markets, and costs
. Outsourcing and strategic alliances are two major
areas of virtual organization.
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Strategic
Alliances

Saab
io
t
ra
o
b
la
y
l
g
o
o
C on ol
n chn
nt
e
e
t d
on
n
S
p
u
a m pplies
co small c
ars
s
GM

Makes
t
componelln
a
s
sm

lie
p
p
u
S rs
ca

Suzuki

s
ke
Ma
car

Daewoo

M
va ake
n s

Jo
Pr int
od
uc
ti
on

Su
ca pplie
r
ss
tru s,
ma
ll
pa cks
rts an
d
Isuzu

Fiat

Fuji
Toyota
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New
United
Motor
Manufactu
ring

8. Web based
organization
Custo
mer
Driven
Service
Enhanc
ed
Custo
mizatio
n

Virtual
Corporation
extended

Value
Creation

Supplie
r
Driven
Mass
Product
ion

B-Web

Internetw
orked
enterprise

Industrial
Age
Corporation
Vertical
Integrated
Physical
Scarce

Resources
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Digital
Abunda
nt

9. Remove structural barriers


boundryless organization
10.Knowledge centric
11.Boundless
12.Learning organization

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and

Organizational Culture
Organizational culture is the set of
important
assumptions
often
unstated that members of an
organization share in common.
It is intangible in nature.
It provides the basic theme as well
as meaning,direction,and the basis
for function.
The organizations shared norms and
values or beliefs can influence
organizations members opinions and
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These
values
aware
the
organizational members and guide
to appropriate behavior in the
organization.
If the actions of the members are
according to the organizational
values the employees get satisfied.
The
organizations
assumptions
become shared assumptions through
internalization
among
an
organization's individual members.
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1.
2.
3.

4.

Techniques to manage
culture
Leaders typically
attempt to manage and
create distinct cultures through a variety
of ways
Some of the common ways are as follows.
Emphasize key themes or dominant
values
Encourage dissemination of stories and
legends about core values
Institutionalize
practices
that
systematically reinforce desired beliefs
and values
Adapt some very common themes in their
own unique ways
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Emphasize key themes or dominant


values
Quality,differentiation,cost
advantage, and speed are four key
success of competitive advantage
Key theme or dominant values may
centre around wording in an
advertisement.
They are often found in internal
company communications.
This try to address who we are.
For
example
Xerox-respect
for
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Encourage dissemination of stories and


legends about core values
Companies with strong cultures are
enthusiastic collectors and tellers of
stories and legends/traditions in support
of basic beliefs.
Institutionalize practices that systematically
reinforce desired beliefs and values
Companies with strong cultures are clear
on what their beliefs and values need to
be and take the process of shaping those
beliefs and values very seriously.
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Adapt some very common themes in their


own unique ways
The most typical beliefs that shape
organizational culture include
1. A belief in being the best
2. A belief in superior quality and services
3. A belief in the importance of people as
individuals and a faith in their ability to
make a strong contribution.
4. A belief in the importance of the details
of execution, the nuts and bolts of
doing the job well.
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5. A belief that customers should


(supremacy) supreme
6. A belief in inspiring people to do
their best, whatever their ability.
7. A belief in the importance of
informal communication
8. A belief that growth and profits are
essential to a companys well being.

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Managing organizational culture in a


global organization
The global organizational culture
must recognize cultural diversity in
the areas of
a. Social norms
b. Values and attitude
c. Religion
d. Education etc.
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Managing the strategy culture relationship

Many
Changes
in key
organizati
onal
factors
that are
necessary
to
implemen
Few
t the new
strategy

Link changes to
basic mission
and
fundamental
organizational
norms

Synergistic
focus on
reinforcing
culture

High

1
2

Reformulate
strategy or
prepare
carefully for
long term,
4 difficult cultural
change
3

Manage around
the culture

Low
Potential compatibility of changes with
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existing culture

Link to mission
A firm in cell 1 requires several changes in
structure,systems,managerial
assignments,
operating procedures or other fundamental
aspects of the firm.
The following considerations are appropriate
a. Key changes should be visible linked to the
basic company mission
b. Emphasis should be placed on the use of
existing personnel
c. Care should be taken if adjustments in the
reward system are needed
d. Key attention should be paid to the changes
that are least compatible with the current
culture
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Maximize synergy
A firm in cell 2 needs only a few
organizational changes to implement its
new strategy, and those changes are
potentially quite compatible with its
current culture
The firm can apply two broad themes
a. Take advantage of the situation to
reinforce and solidify the current culture
b. Use this time of relative stability to
remove organizational road blocks to
the desired culture
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Manage around the culture


A firm in cell 3 must make a few major organizational
changes to implement its new strategy
But these changes are potentially inconsistent with
the firms current organizational culture.
A firm can manage around the culture in various ways
For example
a. A separate firm or division
b. Use task forces
c. Teams
d. Program coordinators
e. Subcontract
f. Bring in an outsider
g. Sell out
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Reformulate the strategy or culture


A firm in cell 4 faces the most
difficult challenge in managing the
strategy culture relationship
A firm in this situation faces the
complex, expensive and often long
term challenge of changing its
culture.

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Organizational
Leadership

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Organizational
leadership
is
concerned
with
providing
the
direction to the followers.
It is cope with change
It guides the organization to deal
with constant change
It clarifies the strategic intent and
shape
the
culture
to
fit
organizational
opportunities
and
challenges change affords.
It identifies and supplies the
organization
with
operating
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Strategic Leadership :Acceptance Change


Change has become an integral part of what
leaders and managers deal with daily.
The leadership challenge is to galvanize
commitment
among
people
within
organization as well as outside stakeholders.
Leaders galvanize/stimulate commitment to
embrace change through three interrelated
activities.
1. Clarifying strategic intent
2. Building an organization
3. Shaping organizational culture
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Clarifying strategic intent


Leaders help stakeholders accept change by
setting clear vision where the organization
needs to head.
Building an organization
Leaders spend considerable time shaping and
refining their organizational structure and
making it function effectively to accomplish
strategic intent.
All managers adapt structures, create teams,
implement systems, and otherwise generate
ways to coordinate,integrate,and share
information about what their organization is
doing and might do.
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Shaping organization culture


Leaders know well that the values
and beliefs shared throughout their
organization will shape how the work
of the organization is done.
Leaders
use
reward
systems,symbols,and
structure
among other means to shape the
organization culture.

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Recruiting and developing talented operational


leadership
Accelerated pace and complexity of business
will increase pressure on corporations to push
authority down to their organization.
Every line manager will have to exercise
leaderships prerogatives to an extent
unthinkable a generation earlier.
Every line managers are global managers,
change
agents,strategists,motivators,strategic
decision makers,innovators,and collaborators
if the business is to survive and prosper.
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The required competencies the


managers should have possess
The leadership needs of
organizations
The ability to:
Build confidence
Build enthusiasm
Cooperative
Deliver results
Form networks
Influence others
Use information

The required
competencies of
business leaders
Build literacy
Creativity
Cross cultural
effectiveness
Empathy/understandin
g
Flexibility
Proactively
Problem solving
Relation building
Teamwork
vision
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Building Resource
Strengths and
Organizational
Capabilities
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Implementing and executing strategy is


an operation driven activity revolving
around the management of people and
business processes.
The
managerial
emphasis
is
on
converting strategic plans into actions
and good results.
When the company achieves the
targeted
strategic
and
financial
performance and shows good progress in
making its strategic vision a reality.
Shortfalls in performance signal weak
strategy, weak execution, or both.
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A good assessment of strategy


execution depends upon the task we
do differently and better to carryout
the strategy successfully.
Executing strategy is a job for a
companys
whole
management
team.
Top level managers have to rely on
the active support and cooperation
of middle and lower managers to
push
strategy
changes
into
functional and operating units.
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The following are the managerial tasks used by


the organization to good strategy execution
1. Building
an
organization
with
the
competencies,capabilities,and
resource
strengths to execute strategy successfully.
2. Organizing sufficient money and people behind
the driver for strategy execution.
3. Instituting policies and procedures that facilitate
rather than hamper strategy execution
4. Adopting best practices and pushing for
continuous improvement in how value chain
activities are performed.
5. Installing information and operating systems
that enable company personnel to carry out
their strategic roles
proficiently.
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6. Tying rewards directly to the


achievement
of
strategic
and
financial targets and to good
strategy execution
7. Shaping the work environment and
corporate culture to fit the strategy
8. Exercising strong leadership to drive
execution forward, keep improving
on the details of execution, and
achieve operating excellence as
rapidly as feasible.
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Building an organization capable of good


strategy execution entails three types of
organization building actions:
1. Staffing the organization
.Assembling a talented, can do management
team,
and
recruiting
and
retaining
employees with the needed experience,
technical skills, and intellectual capital.
2. Building core competencies and competitive
capabilities
.That will enable good strategy execution and
update the external environment change
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3. Structuring the organization and work effort


.Organization value chain activities and
business processes and deciding how much
decision making authority to push down to
lower level managers and front line
employees.
Building core competencies and competitive
capabilities involves these stages
1. Developing the ability to do something
2. Coordinating group efforts to learn how to
perform the activity consistently well at an
acceptable cost
3.
continue to polish and refine the
organizations know how.
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Structuring the organization and


organizing the work effort in a
strategy supportive fashion
1. Deciding which value chain activities
to perform internally and externally
2. Making
internally
performed
strategy critical activities
3. How much authority to centralize
and how much to decentralize
4. Providing for internal cross unit
collaboration
5. Coordination and collaborating with
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Managing the internal


organization to promote
better strategy execution

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Managers have to identify the resource requirements


and
budget
to
suitable
to
the
strategy
implementation and execution
Managers have to review the existing policies and
operating procedures proactively to the new strategy
execution.
Newly or freshly revised policies and operating
procedures aids the task execution.
These procedures provide top down guidance to
operating managers.
Enforcing consistency in how particular strategy
critical
activities
are
performed
inside
the
organization.
Promote the creation of new work climate and
corporate culture that promotes good strategy
execution
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Benchmarking,TQM and BPR will


help to improve efficiency, lower
costs, better product quality, and
greater customer satisfaction.
These initiatives are important tools
for learning how to execute
a
strategy more proficiently.

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Installing support
system and supportive
reward system

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The information system will support to


the execution process
Strategy
supportive
motivational
practices and reward systems are
powerful management tools for gaining
employee commitment
The monetary and non monetary reward
system also helps to execute the strategy
For incentive compensation system to
work well
1. The monetary payoff should be a major
percentage of the compensation package
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2. The use of incentives should expand to all


managers and workers
3. The system should be administered with care
and fairness
4. The
incentive
should
be
linked
to
performance targets spelled out in the
strategic plan
5. Each individual performance targets should
involve outcomes the person can personally
affect
6. Rewards
should
promptly
follow
the
determination of good performance
7. Monetary rewards should be supplemented
with liberal use of nonmonetary rewards
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The End

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Crimson College of Technology


Level: Bachelor Year: 2013
Programme: BBA Full Marks: 50
Course: Strategic Management II
Pass Marks: 23
Time: 2 hrs
Candidates are required to give their answers in their own words as far as practicable.
The figures in the margin indicate full marks.
Attempt all the questions
a) The success of any firms depends on the use of formal strategic planning process. Justify 7
b) Suppose you are in charge of Bhatbhateni Supermarket. Since its establishment, you are
involved in developing the strategy for the products of the company. Now the BOD has
passed the decision to open branch outlets in foreign countries including SAARC region. You
are asked to develop strategy relating with home appliances such as washing machines to
launch in these areas. Which strategy you would like to suggest multicountry or global?
7
a) How does environmental analysis at the domestic level differ from global analysis? 7
b) Briefly describe the behavioral factors that would affect strategic analysis and choice
decisions in organization. 7
a) Why are short term objectives needed when long term objectives are already available? 7
b) Weak leadership can destroy the soundest strategy; forceful execution of even a poor plan
can often bring success. Elucidate 5
Write short notes (any two) 5*2=10
Networking strategies
Policies
The patching approach

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