Strategy

Implementation

PREPARED BY
ANISH A
MATHEW
SMS, CUSAT

Introduction
Implementation ofstrategyis the process through which a
chosen strategy is put into action. It involves the design and
management of systems to achieve the best integration of
people, structure, processes and resources in achieving
organizational objectives.
Implementation of Strategy affects an organization from top
to bottom, it affects all the functional and divisional areas of
business.
Institutionalization of strategy
Setting Proper Organizational Climate
Developing Appropriate Operating Plans
Developing Appropriate Organization Structures
Review of Implemented Strategy

Strategy Formulation Implementation:

Interrelationship
Strategy
implementation
means

putting

chosen

strategic

decision into action

(strategic choice).

Allocation

of

resources
course
needs

to

of
to

new
action
be

undertaken besides

The
matrix
shows
various combination of
strategy
formulation
and implementation.

SOUND

Strategy fails because

of
failed
implementation and not
because of strategy
model.

B
(succes
s)

FLAWED

Strategy
formulation
and
Strategy
Implementation
are
different and it needs to
be sound and excellent.

STRATEGY FORMULATION

Strategy Formulation
Implementation: Interrelationship

WEAK

EXCELLENT

STRATEGY IMPLEMENTATION

Strategy Formulation
Implementation: Interrelationship
Square A shows formulation of competitive strategy but has
difficulties in implementing it successfully. This may be due to
various factors like lack of experience, lack of resources, missing
leadership etc. Companies like to move from square A to square B by
realizing their implementation difficulties.
Square D shows formulation of flawed strategy but company has
excellent implementation skills. Thus they should redesign their
strategy before implementation.
Square C shows neither the sound strategy formulation nor is
effective in strategy implementation. They should redesign business
model by implementation execution readjustment.
Square B is ideal situation where company has succeeded in
designing

sound

implementing it.

competitive

strategy

besides

effectively

Strategy Formulation
Implementation: Interrelationship
In cell 1 organization thrives,
achieve

with

efficient

output/input

ratio.

Where in cell 2 and cell 4

organization is doomed unless
it

can

establish

strategic

direction. In cell 3 strategic

direction is present to ensure
effectiveness even if rather
too much input is being used
to generate outputs. Thus to
be

effective

is

to

survive

Efficient

to

1. Thrive

2. Die
Slowly

Inefficient

aspires

Operational Management

since it is achieving what it

3.
Survive

4. Die
Quickly

Effective

Ineffective

Strategic Management

Strategy Formulation
Implementation: Interrelationship
STRATEGY
FORMULATION

It

It is positioning forces before

action.

STRATEGY
forces during
IMPLEMENTATION

is

managing

action.

It focuses on efficiency.

It focuses on effectiveness.
It is an intellectual process
It requires good intuitive and
analytical skills.

It is primarily and operational

process.
It requires special motivational
and leadership skills.

It requires coordination among

few individuals.

It requires combination of many

individuals.

Concepts and tools do not

Concepts

and

tools

varies

differ greatly for small, large,

substantially among small, large,

profit

profit or non profit organization.

or

organization.

non

profit

Strategy Formulation
Implementation: Interrelationship
Implementing strategy requires altering sales territories,
adding new departments, closing facilities, hiring new
employees,

changing

organizational

pricing

strategy,

developing financial budgets, developing new employee

benefits, establishing cost control procedures, changing
advertising strategies, building new facilities, training new
employees, building MIS etc.
These

types

of

activities

differ

greatly

between

manufacturing, service, and governmental organizations.

Two types of linkage exists between tow phases of strategic
management.
Forward

linkage

implementation

deals

with

impact

of

formulation

and

Strategy Formulation
Implementation: Interrelationship
Forward Linkage - Different elements in strategy formulation
(objective

setting,

environmental

and

organizational

appraisal, strategic alternatives and choice to strategic plan)

determines

the

course

that

organization

adopts

itself.

Formulation and reformulation is continuous process.

Backward Linkage While dealing with strategic choice past
strategic

actions

also

determine

choice

of

strategy.

Organizations tends to adopt those strategies which can be

implemented with the help of present structure of resources
combined with some additional effort. Such incremental
changes over a period of time take the organization from
where it is to where it wishes to be.

Issues in Strategy Implementation

Implementation task tests strategist ability to allocate
resources, design structures, formulate functional policies,
identify leadership styles etc.
Strategies have to be activated through implementation and
realize the intent.
Strategies leads to plans. Plans result in different kinds of
programmes which includes goals, policies, procedures, rules
and steps to be taken in putting them into action.
Programs leads to formulation of the project which is time
scheduled and costs are predetermined. It requires allocation
of funds based on capital budgeting of the organization.
Projects creates need for infrastructure for day to day

Issues in Strategy Implementation

Sequence in which strategy implementation issues are to be
considered:
Project Implementation
Procedural Implementation

Resource Allocation

Structural Implementation
Functional Implementation
Behavioral Implementation

These activities are not performed in the same order (can be

performed simultaneously, can be repeated etc.).
Transition

from

strategy

formulation

to

strategy

implementation requires shift in responsibility from strategist

Issues in Strategy Implementation

Management issues central to strategy implementation
includes establishing annual objectives, devising policies,
allocating resources, altering an existing organizational
structure, restructuring, reengineering, revising rewards and
incentive plans, minimizing resistance to change, matching
manager with strategy, developing strategy supportive
culture,

adapting

production

and

operation

processes,

developing effective human resource function and even

downsizing to give firm a new direction.
Strategy implementation is key, top down communication
must

be

clear

for

developing

bottom

up

support,

competitions intelligence gathering and benchmarking effort

of employees is very important and challenge for a

Organization Structure and Strategy

Implementation
Strategic change requires change in structure of
organization.
Structure largely dictates how objectives and policies will be
established and can significantly impact all other strategy
implementation activities.
Structure dictates how major resources will be allocated.

There is no optimal organizational design or structure for a

given strategy or the type of organization and what is
appropriate for one organization may not work for other
organization even though industry is organized in same way.
For example consumer good companies tend to emulate the
divisional structure by product form or organization.
Small firms are functionally structured (centralized)
Medium sized firms are divisionally structured (decentralized)
Large firms are structured on basis of SBU (Strategic Business Unit
/ Matrix Structure).

With growth of organization structure usually changes from

simple to complex as a result of linking of several basic
strategies.

Organization Structure and Strategy

Implementation
Structural change is not affected by change in external and
internal factors.
With change in firms strategy organizational structure
becomes ineffective. For example Too many levels of
management, too many meetings attended by too many
people, interdepartmental conflict resolution, large span of
control, and too many unachieved objectives.
Sometimes structure can shape the choice of strategy and to
know what type of structural change is needed to implement
new strategies and how these changes can be best
accomplished.
The organizational structures studied are : Division by

Strategy Structure Relationship:

Chandlers
New
New
Administrative
Administrative
Problem
Problem Emerges
Emerges

New
New Strategy
Strategy is
is
Formed
Formed

Organizational
Organizational
Performance
Performance
Improves
Improves

Organizational
Organizational
Performance
Performance
Declines
Declines

A
A New
New
Organizational
Organizational
Structure
Structure is
is
Established
Established

The Functional Structure

The most common structure found within organizations,
functional structure consists of units or departmental groups
identified by specialty, such as engineering, development,
marketing, finance, sales or human resources that are
controlled from the top level of management.
Advantages: Functional structure promotes specialization of
labour, encourages efficiency, minimizes the need for an
elaborate control system, and allows rapid decision making.
Disadvantages: It forces accountability at the top, minimize
career development opportunities, low employee morale,
line/staff conflicts, poor delegation of authority, inadequate
planning for products and markets. Mostly it is abandoned in

The Functional Structure

CEO
CEO

Corporate
Corporate
R&D
R&D

Finance
Finance

Corporate
Corporate
Finance
Finance

Production
Production

Strategic
Strategic
Planning
Planning

Engineerin
Engineerin
gg

Corporate
Corporate
Marketing
Marketing

Accounting
Accounting

Corporate
Corporate
Human
Human
Resources
Resources

Sales
Sales and
and
Marketing
Marketing

Human
Human
Resources
Resources

Proper match between strategy and structure gives competitive

edge or else it will result into failure.
Companies must be flexible, innovative, and creative in global
economy to exploit their core competencies. Useful Information
contributes the for the formation and use of effective structures
and controls, which yield improved decision making.

The Functional Structure

With growth of companies in size, and level of diversification,
new strategies my be required. Organizational structure is
companies formal configuration of its intended roles,
procedures, governance mechanism, authority and decision
making processes etc. The structure adopted must fit with
the companies strategy.
Simple organization structure offers little specialization of
tasks, few rules, little formalization, direct involvement of
owner-manager in all operations and decision making.
Functional structure is used by large companies and
companies having low level of diversification. It also impedes
communication and coordination and have narrow view.
Use of multidivisional structure where each division
represents separate business entity, each division would
house its own functional hierarchy, divisional managers will
be responsible to manage day to day responsibility besides a
small corporate office that would determine long term
strategic direction and exercise overall financial control over

The Divisional Structure

When a company expands to supply goods or services to a
variety of customers, offers a variety of different products or
are engaged in business in several different markets, the
company could adopt a divisional organizational structure.
A divisional structure groups its divisions according to the
specific demands of products, markets or customers.
Unlikethe functional organizational structure, where the
different organizational functions of the company conduct
activities satisfying all customers, markets and products, the
divisional structure focuses on a higher degree of
specialization within a specific division, so that each division
is given the resources, and autonomy, to swiftly react to
changes in their specificbusiness environment. Therefore,
each division often has all the necessary resources and
functions within it to satisfy the demands put on the division
Each division will likely be structured as a functional
structure.A
company
with
a
divisional
structurethereforehas
a
subset
of
different
and

The Divisional Structure

In divisionalstructure, the
organization is organized
into
various
divisions
based on basically three
criteriaproduct, market of
geographical structures.
Advantages:

Market Information
Management Motivation
Management Development
Specialist Knowledge
Timely Decisions
Allowing Strategic roles for Top
Management

The Divisional Structure

The benefit of this organizational structure is that companies
are able to specialize its activities into self-reliant divisions,
each capable of satisfying e.g. customer demands and
changes within the business environment.

The Strategic Business Unit (SBU)

Structure
Large, diversified companies organize themselves into
divisions to break the management of the company into
smaller, organizationally cohesive parts. The company
headquarters still gives the divisions strategic direction.
Strategic Business Units, or SBUs, are organizationally
complete and separate units that develop their own strategic
direction. They still report back to company headquarters but
operate as independent businesses organized according to
their target markets. They are often large enough to have
their own internal organizational divisions.
SBU advantages
SBU supportscooperationbetween the departments of the
company which has a similar range of activities;
Improvement of strategic management
Improvement of accounting operations,
Easier planning of activities

The Strategic Business Unit (SBU)

Structure

SBU Disadvantages
Difficulty with contact with higher management
May cause of internal tension due to difficult access to internal and external
sources of funding,
May be the cause of the unclear situation with regard to the management

The Matrix Structure

The matrix structure is an organizational design that groups
employees by both function and product. The organizational
structure is very flat, and the structure of the matrix is
differentiated into whatever functions are needed to
accomplish certain goals. Each functional worker usually
reports to the functional heads, but do not normally work
directly under their supervision.
Instead, the worker is controlled by the membership of a
certain project, and each functional worker usually works
under the supervision of a project manager. This way, each
worker has two superiors, who will jointly ensure the progress
of the project. The functional head may be more interested in
developing the most exiting products or technologies,
whereas the project manager may be more concerned with
keeping deadlines and controlling product costs.
When work is accomplished, the project team may get
dissolved, and workers from different functional areas may
get reassigned to other projects and tasks.

Matrix Structure

The Matrix Structure

The peculiarities orcharacteristicsa matrix organization are: Hybrid Structure: It combines functional organization with
aproject organization.
Functional Manager: The Functional Manager has authority over
the technical (functional) aspects ofthe project.
Project Manager:The Projectmanager has authority over the
administrative aspects ofthe project. He has full authority over the
financial and physical resources which he can use for completingthe
project.
Problem of Unity of CommandThis is so, because the
subordinates
receive
orders
from
two
bosses
viz.,the
ProjectManager and the Functional Manager.
Specialization:
In
a
Matrix
organization,
there
is
a
specialization.The
projectmanager
concentrates
on
the
administrative aspects ofthe project while the functional manager
concentrates on the technical aspects ofthe project.
Suitability: Matrix organization is suitable for multi-project
organizations. It is mainly used by large construction companies, that
construct huge residential and commercial projects in different
places at the same time. Each project is looked after (handled) by a

Advantages of Matrix Structure

Theadvantages of a matrix organization are: Sound Decisions: In a Matrix Organization, all decisions are
taken by experts.
Development of Skills: It helps the employees to widen their
skills.
Top Management can concentrate on Strategic Planning:
They can delegate all the routine, repetitive and less important
work tothe projectmanagers.
Responds to Changes in Environment: because it takes quick
decisions.
Specialization: In a matrix organization, there is a
specialization.
Optimum Utilization of Resources: In the matrix organization,
many projects are run at the same time. Therefore, it makes
optimum use of the human and physical resources.
Motivation: In a matrix organization, theemployees workas a
team. So, they are motivated to perform better.
Higher Efficiency: The Matrix organizationresults ina higher
efficiency. It gives high returns atlower costs.

Limitations of Matrix Organization

The limitations of a matrix organization are: Increase in Work Load: In a matrix organization, work load is
very high.
High Operational Cost: In a matrix organization, the
operational cost is very high. This is because it involves a lot of
paperwork, reports, meetings, etc.
Absence of Unity of Command: In a matrix organization, there
is no unity of command. This is because, each subordinate has
two bosses, viz., Functional Manager and Project Manager.
Difficulty of Balance: It is also difficult to balance the authority
& responsibilities ofthe projectmanager and functional manager.
Power Struggle: In a matrix organization, there may be a power
struggle betweenthe projectmanager and the functional
manager. Each one looks after his own interest, which causes
conflicts.
Morale: In a matrix organization, the morale of the employees is
very low. This is because they work on different projects at
different times.
Complexity: Matrix organization is very complex and the most
difficult type of organization.