Strategy Implementation

 

Strategy Strat egy Implementation Implementation Modu dulle ::- 3

 

Meaning of Strategy Implementation •

•

•

Strategy Implementation cab be define as a Strategy process through which a chosen strategy strategy is put into action. A good strategy without effective implementation can hardly be expected to succeed. Strategy implementation is the translation of Strategy formulated formulat ed strategy into action so as to achieve strategic strategic goals and objectives.

 

Definition •

According to Harvey, “ Implementation involves actually executing the strategic game

plan. This includes setting policies, designing the organization organiza tion structure, and d developing eveloping a corporate corpora te culture to enable the attainment of organizational objectives”.

 

Interdependence Inter dependence of Strategy formulation and implementation implementation or linkages between Strategy formulation and implementation •

Forward Forwar d linkages:

•

Backward linkages

 

Difference between SF and SI Strategy formulation

Strategy Implementation

Strategy Formulation includes planning of strate str ategic gic plan plans. s.

Strategy Implementation involves the executing the strategic plans

In short, Strategy Formulation is placing

In short, Strategy Implementation is

the resou resourc rces es bef befor ore e the act action ion.

managing the reso managing resourc urces es during the action.

Strategy Formulation is an Entrepreneurial Entrepreneu rial Activity based on strategic decision-making

strategic Implementation is mainly an Administrative Task based on strategic and operational decisions.

strategy Formulation emphasizes on effectiveness

Strategy Implementation emphasizes on efficiency

Strategy Formulation requires coordination among few individual

Strategy Implementation requires coordination among many individuals.

Strategy Formulation requires a great deal of and logical skills

Strategy Implementation requires specific motivational and leadership traits

Strategic Formulation precedes Strategy

Strategy Implementation follows Strategy

Im leme lemen ntat atio ion n

 

Formulation

Nature of strategy Implementation •

Action orientation

•

Comprehensive in scope

•

Demanding varied skill Wide-ranging involvement involvement

•

Integrated process

•

 

Barriers to Strategy Implementation •

Inadequate management skill

•

Poor or vague strategy

•

•

•

Not having guidelines or a model to guide implementation effort effort poor or inadequate inadequ ate information information sharing Unclear responsibility and authority

 

A model of Strategy Implementation

 

 Activating Strategy  Activating strategy is to prepare the ground for managerial task and activities of Strat Strategy egy Implementation Three sets of activities require for Activating Strategy Project Implementation Procedural Implementation Resource allocation

 

Managing the Change Managing the change have identified three activities Structural Implementa Imp lementation tion leadership Implementa Impl ementation tion behavioral behavior al Implementation

 

Achieving Effectiveness ffectiveness It means organizational effectiveness. Suppose a company sets an objective to achieve a return on investment 10% 1 0% a year year.. After the year is over, it measures and finds that it has achieved 10% or more return on investment. We can say that ‘company is effective’ or ‘the company has achieved its effectiveness’

 

The Pyramid of Strategy Activation strategy plans programmes budgets

 

Strategy should led to plan for example if expansion strategy strategy have been adopted, various

types of expansion should beplant formulated like plan the could be design to set up plan an additional to manufacture same product if diversification strategy then plan could be related to new product development plans Plan results in different dif ferent kind of programme programme includes goals, policies, procedures, rules, regulations etc. need to putting plan into action Programme led to formulation of project  A project is a highly specific programme for which the time schedule and costs are predetermine. Budget 

Each project requires allocation of fund.

 

Project Implementation Project Implementation pass sse es through ough following phases ses that •

•

are as follows: Conc Co ncep epti tion on Ph Phas ase e  – This phase is an extension of strategy formulation phase. In this phase, project ideas are generated during the process of strategic alternatives & strategic choice that may be implemented in future by organization. Project Analysis Phase  – The project ideas have to be arranged according to priority for the purpose of   develo lop pme men nt. Be Beffore se sellecting a project for developm opment, a preliminary project analysis have to be made in respect of  marketing, technical, finance, etc…and check out such analysis is required to analyze whether project would appeal to investors ors, banks & FI’s.

 

Project Implementation •

Planning Phase – In this phase, management undertak undertakes es detailed planning of project. The detailed planning should cover different areas of project such as production schedules, plant design & layout, technical arrangements,

•

•

marketing, finance, etc… Organizing Phase – The management must must organize for necessary resources such as manpower, finance, systems and procedures to implement the project.

Implementation Phase – During this phase, the Implementation management must undertake engineering, order placement for equipment & material etc… leading to the testing, trial & working of plant.

 

Project Implementation •

Operation Phase Operation Phas e – The final phase involves involves handing over the plant to the operating personnel for for operation operatio n purpose. At this stage the production starts.

 

Procedural Implementation •

Regulatory elements to be reviewed  –

 –

Licensing procedure

 –

SEBI requiremen requirements ts Labor legislation requirements

 –

Environmental Envir onmental protection and pollution control control

 –

requirements Patentt and trade mark requirements Paten

 

Procedural Implementation. •

In order to implement the strategies, strategies, the management must have good knowledge of the procedural framework within which the plans, projects and programmes have to be approved by the government authorities. The government authorities besides the policy guidelines issued by the government authorities from time to time. Some of the important procedural requirements can be elaborated as follows: 1. Formation of a company – The formation of a company is governed by the provision of Indian companies act, 1956 as amended from time to time. All activities for formation should be carried out such as Registration, Registration, obtaining certificates, documentation must be forwarded to registrar of companies, etc…

 

Procedural Implementation. 2. Licensing Procedures – Certain industries require licensing procedures. As per the industrial policy, policy, 1991, six industries require licensing manufacturing products such as alcohol, cigaret cigarettes, tes, chemical fertilizers, fertilizers, industrial explosives, defense defense and Drugs & Pharmaceuticals. Therefore Theref ore company requiring the license must apply for the same. 3. FEMA Requirements – if required, organization must fulfill the necessary requiremen requirements ts of the Foreign Exchange Management Act, 2000. Those organizations willing to deal in foreign exchang exchange e transactions must ensure that they collect required information in context to provisions of FEMA.

 

Procedural Implementation. 4. Import and Export Requirements – Similarly, organization org anization willing to deal in Import & Export need to follow certain procedural requirements, requirements, such as they have to register with Directorate General of Foreign Trade (DGFT) and obtain Importers Exporterss Code Exporter Cod e (IEC) 5. Competition Act, 2002 – The government has introduced this act that aims at promoting competition by restricting anti competitive practices. Large businesses must have a good understanding unders tanding of the competitive act.

 

Procedural Implementation. 6. Foreign Collaboration Co llaboration Procedur Procedures es – For proposals to set up projects with foreign collaborations collaborations require prior government approval. The government authorities such as Reserve Bank of India (RBI), Foreign Investment Investment Promotion Board (FIPB) and Project Approval Board are major regulatory bodies for foreign collaborations including joint ventures abroad. 7. SEBI Requiremen Requirementt – Securities and Exchange Board of INDIA (SEBI) became active since 1992 with the passing of SEBI Act, 1992. the act empowered SEBI with necessary powers to regulate the activities connected with marketing of securities & investments of stock exchanges, merchant banking, portfolio management, stock brokers brokers and others connected with securities

 

Procedural Implementation. 8) Consumer Protection Act, 1986  – Business firms must have good knowledge of consumer protection act, 1986. This act was passed to provide better protection of the interests of consumers.The act seeks to promote & protect rights of consumers such as: •

•

•

•

The right to be protected against the marketing marketing of goods that are hazardous to llife ife & property property.. The right to be informed about the quality, quantity, potency, purity standards and price of goods to protect the consumer against unfair trade practices. The right to be heard & be assured that consumers interests inter ests will receive due consideration. The right to seek redressal against unfair trade practices or exploitation of consumers, etc…

 

Procedural Implementation.

•

•

9. Pollution Control Requirements – the govt. of India has passed several laws relating relating to the protection protecti on of environment. environment. The business b usiness organizations org anizations should have a good knowledge of such laws. To name few of them are as follows: The Water (Prevention & Control of Pollution), Act, 1974. The Air (Prevention & Control of Pollution), Act, 1981.

•

The Environment Protection Act, 1986, etc…

 

Procedural Implementation. 10. Labour Legislation Requir Requirements ements – The govt. of India has passed several laws laws to protect the interest of the workers. Business Organizations should have a good knowledge of such laws, which include: •

•

The factories Act, 1948.

•

The Workmen Compensation Act, 1923. The Bonus Act, 1965.

•

The Minimum Wages Act, 1948.

•

The Industrial Disputes Act, 1947, etc…

 

Resource Allocation •

•

A major task of top manager is resource allocation Resource allocation deals with the Resource procurement, commitment, and distribution of financial, human, informational and physical resources

 

Managing the Change Managing the change have identified three activities Structural Implementa Imp lementation tion leadership Implementa Impl ementation tion behavioral behavior al Implementation

 

•

•

•

Structural Implementation Organization culture is another element Organization which affects strategy implementation as it provides a framework framework within, which the behavior of the members take take place It is belief, common perception and understanding of an organization

 

Structure and Strategy Interrelationship Interr elationship of Structure and Strategy Strategy determines

Structure

Strategy affects

 

Why is Structural Implementation needed? Strategic plan is Implemented

Performance Improves

New strategies put in place

Structure is changed

Implementatio n of new strategies

Mismatches occurs

Effectiveness is reduced

Performance decline

 

Types of Organization Structure Structure

 

Simple organizational structure/entrepreneurial structure

Owner-manager

employees

 

Cont…… •

•

•

•

Appropriate for an organization that is owned and managed by one person A small scale industrial unit, a small proprietary or a mini-service outlet may exhibit on an entrepreneurial structure These organizations are single-business, product, or service firms that serve local marke markets. ts. The ownerowner- manag manager er look lookss after al alll decisi decisions, ons, whether they are day-to-day operational matters or of strategic nature.

 

Cont……. •

Advantages: –

 –

 –

•

Quick decision making, making , as power is centralized centralized Informal and simple organizational organizational structure Timely response to environmental environmental changes

Disadvantages: –

 –

May ignore the strategic strategic decision due to the busy in day-to-day operational matters Inadequate if volume of business expands in future

 

Functional organizational structure •

As the volume of business expands, the need arises for specialized skill and delega delegation tion of authority to managers who can look after the different functional areas.

•

Advantages: –

Efficient distribution of work through specialization

 –

Delegation of day-to-day operational functions

 –

Providing time for the top management to focus on strategic decisions

 

Functional organizational structure

CEO

Human resource

marketing

Finance

Production and operations

 

Divisional Structure •

When the organization grow in terms of geographic expansion, market segmentation and diversification make the functional structure

inadequate. some form of divisional structure structure is necessary to deal with such situation In this structure work work is divided on the basis of product line, types of customers served or geographic area covered, and then separate divisions or groups are creat created ed and placed under the divisional-level management.

 

Cont….. •

Within divisions, the functional structure may still operate

 

Divisional organizational structure

CEO

Manager division-1

Manager division-2

Manager division-3

Manager division-4

 

Cont……………….. •

Advantages: –

 –

 –

Enables grouping of functions required required for the performance of activities related to a division generate quick response to environmen e nvironmental tal changes affecting the business of different different divisions Enable the top management to focus on strategic strategic matters

 

Cont………….. •

Disadvantages: –

Inconsistency arising from the sharing of authority

 –

between the corporate corporate and divisional level Policy inconsistencies between the different divisions.

 

SBU Structure •

•

•

When the size and divisions increase, it becomes difficult for the top management to exercise strategic control Then, the concept of SBU is helpful in creating an SBU organizational structure Advantages: –

 –

 –

Establishes coordination between divisions having common strategic interest Facilitates strategic management and control of large, diverse organizations Fixes accountability at the level of distinct business unit

 

Cont……. •

Disadvantages: –

There are too many different SBUs to handle

 –

effectively, in large, diverse organization Difficulty in assigning responsibility and defining autonomy for for SBU heads

 –

Addition another layer of management managemen t between of corporat corporate e and divisional management

 

Strategic business unit structure CEO

Vice president SBU 1

Vice president SBU 2

Vice president SBU 3

Division manager

Division manager

Division manager

1

2

3

4

1

2

3

4

1

2

3

4

 

Matrix structure •

•

•

•

•

In large organization, organization, there is often a need to work on major products or projects, each of which is strategically significant The result is requirement of matrix type of organization organization structure For the duration of project, specialist from different areas from a group or team and report to a team leader. Simultaneously,, they may also work in their respective Simultaneously parent department. Once the project is completed, the team members revert to their parent departments.

 

Cont……. •

Advantages: –

Allows individual specialist to be assigned assigne d where

 –

their talent is most needed Fosters creativity because of pooling of divers talents

 –

Provides good exposure to specialist in general management

 

cont… •

Disadvantages: –

Dual accountability creates confusion and

 –

difficulties for individual team member Requires a high level of vertical and horizontal combination

 –

Shared authority may create communication communication problems.

 

Matrix organizational structure CEO

General R &manager d Project 1 manager

Project 2 manager

Project 3 manager

General manager marketing

General manager finance

manager  

Network organizations •

The network structure is most suited to organizations that face a continually changing environment, requiring quick response, high level of adaptability and strong innovativ innovative e skills

•

The structure makes extensive use of outsourcing of support services require required d to produce and market products and services

•

Relies heavily on outsiders who specialized in their respectiv respective e areas.

 

Cont… •

Advantages: –

High level of flexibility to change structural

 –

arrangements in line with business requirements arrangements requirements Permits concentration on core competencies of the firm

 –

Adaptability to cope with rapid environmental change

 

Cont…. •

Disadvantage: –

Loss of control and lack of coordination as there

 –

are several partners Risk of overspecialization as most tasks are performed by others

 –

High cost as duplication of o f resources could exist

 

Network organizations Public relations firm(US) Product development firm(US)

Call center firm(Canada)

Core firm Accounting firm(US)

Manufacturing firm(Malaysia)

Assembly firm(mexico)

 

Other types of structure •

•

Product based structure Geographical based structure

 

Product organization structure •

Activities are divided on the basis of individual products, product line, services and grouped into departments in product organiza organization tion structure

 

Product organization structure Managing Director

General Manager

Manager bicycles

Manager motorcycle

Manager Scooter

Manager cars

 

Cont……. Advantages:1) app apprropr opria iate te w with ith org organi aniza zatio tions ns wi with th mu multi ltiple ple 2) 3) 4) 5) 6)

products Op Opti timu mum m us use e of spe speci cial aliz ized ed sski kill llss and and equipments Sui Suite ted d tto o a more more d dyna ynamic mic en envir vironm onmen entt Mov Moves es decisi decisions ons clo close se to the pr produ oducti ction on Release managing director’ director ’s time Cla Clarif rifies ies profi profit/l t/loss oss acc accoun ounta tabil bility ity

 

Cont…………. •

Disadvantage: –

 –

 –

 –

Involves Involv es difficulty in allocating overheads Inconsistent decisions from one department to Inconsistent another Emphasis departmental departmental ra rather ther than organizational organizational goal Conflicts arise regarding sharing of common resources

 

Geographical organization structure •

The activities or functions are grouped into departments based on the activities performed in the geographical areas/regions.

 

Geographical organization structure Managing Director

General Manager

Corporate Managers Production, Marketing, Finance, R&D

Manager

Manager

Manager

Manager

Manager

Northern Region

Southern Region

Central Region

Western Region

eastern region

 

Cont….. Advantages:1) De Desi sign gned ed as p per er the the cli clima mati ticc and ccult ultur ure e needs 2) Des Designe igned do orr serv serve e as as per per the custo customer merss needs 3) Enab Enable le to adapt adapt vary varying ing legal legal syste ystem m 4) Respo esponsi nsibil bilit ity y of prof profit its/ s/lo losse ssess

 

Cont…………. •

Disadvantage: –

Coordination of companywide activities would be

 –

difficult Inter competition

 –

Emphasize on regional goal instead of company goal

 

Customer based organization structure •

•

In customer based organization organization structure the activities are groped on the basis of customers It would enable en able the organization to provide exclusive attention to separate and distinct customer groups

 

Cont………… Managing Director

General Manager

Individual customer

Institutional customer

 

•

Advantages: –

 –

 –

•

Serve customer better Use of specialized skill Timely response to customer’ customer ’s changing needs

Disadvantages: –

Apply when sales volume of customers group  justifiess the crea  justifie creation tion of separat separate e division divisionss

 

Structure for Business Strategy •

Cost Leadership Strategy Strategy  –

Efficiency orientation

 –

Strong central authority Tight cost control

 –

Close supervision

 –

Routine tasks

 –

 

Organization design for cost leadership strategy

 

Differentiation Differ entiation Strat Strategy egy flexible-loosely-knit organization organization

l

strong capability on R&D reward for risk taking earning orientation

 

Organizational Design for Differentiation

 

Suggested Structure for Related Diversification

 

Suggested Structure for Unrelated Diversification

 

Suggested Structure for International International Strategies Strategies

 

Behavioral Implementation

 

Introduction •

•

•

Organization gains financial success through Organization effective strategies The behavior of the strategist strategist in guiding the organization to success is crucial Strategist means  –

 –

•

Stakeholders Leaders etc.

Because strategist are the individuals and groups

of individuals who actually implement them. them.  

Stakeholders Stak eholders and S Strat trategic egic •

•

•

•

Management

Stakeholders are the individuals and groups who can affect and are affected by, or claims on a firm’s performance The stakeholders’ stakeholders’ association with the organization is a two-way relationship Stakeholders provide support to the organization and contribute in many different ways. In return, the organization tries to satisfy the expectations of the stakeholders and honor their

claim

 

Stakeholders’ Analysis •

•

All stakeholder’s are not equally important to an organization in terms of their power to influence strategy. Stakeholder analysis follows the steps below  –

 –

 –

 –

Indentify the stakeholder Indentify the stakeholders’ expectation, interest and concerns Identify the claims stakeholders are likely to make on the organization Identify the stakeholders who are important from the organizations’ perspective

 

Strategic Leadership

 

Introduction •

•

•

Leaders influence the behavior of subordinates subordinates so that they willingly and enthusiastic enthusiastically ally work towards the achievement of organizational objective Strategic Strat egic leaders leadership hip is the ability to lead an organization towards the achievement of its objectives. The task involved in exercising strategic leadership are typically to anticipate, envision, envision, maintain flexibility, and empower others to create strategic change as and when necessary

 

cont……… •

•

•

Strategic leadership is multifunctional in nature………… It involves managing others, managing an entire enterprise rather rather than a functional subunit……… Coping with the change with continues to increase in the global glob al economy………

 

Strategic leaders at different levels in Organization

•

Corporate Level:  –

•

Business, Division, SBU Level:  –

•

CEO, Senior Executives, Corporate Staff

General manager or vice president

Functional Level:  –

Marketing managers, Operations managers

 

Strategic leadership and strategic management process Effective strategic leadership

Vision

Mission

Successful strategic action

Formulation of strategies

Implementation of strategies

Strategic competitiveness above-average returns  

Key Strategic Leadership Actions • •

Determining strategic direction Effectively Managing the Firm’s Resource portfolio  –

 –

•

Sustaining an Effective Organizational Culture  –

• •

Exploiting and Maintaining Core Competencies Developing Human Capital and Social Capital

Entrepreneurial Mind-Set

Emphasizing Ethical Practices Establishing Balanced Organizational controls  –

Financial and non-financial contr control ol

 

The role of strategic leaders •

Role of chief executive officer :  –

The role of CEO evident through through all the phases of

 –

process of Strategic Strategic Management CEO plays a major role in strategic decision making. He or she is chiefly responsible for the ex execution ecution ofto functions which are of strategic strategic importance the organization

 

•

CEO performs the strategic task are…..  –

Provide a direction to the organization so that it

 –

achieve its purpose Plays a pivotal role in setting the mission of the organization

 –

 –

Deciding the objectives and goals Formulating and implementing the strategy strategy in general

 

•

Role of senior managers:  –

Senior managers perform a variety of roles by assisting the board and chief executive executive in the formulation, implementation implementation and evaluation of strategy

 –

Assigned specif specific ic responsibility like look after modernization, technology up gradation, plan implementation, evaluation of strategy etc..

 

Organizational culture

 

•

Culture is another element which affects strategy stra tegy implementation as it provides a framework within, which the behavior of the members take place

•

When the belief belief,, values, and norms are shared in an organization, they create corporate culture.

 

•

•

Corporate culture generally remains below the Corporate surface and emerges at the time of organizational change. organizational It has either two effects: it support the change or oppose them.  –

 –

 –

 –

Shared things (the way people dress) Shared sayings(let’s get down to work)

Shared action(service-oriented approach) Shared feelings(hard work is rewarded here)

 

Elements of the culture •

Stories, histories, myths

•

Rituals, rites, ceremonies, celebration

•

•

•

•

Heroes: person act as idealized example, example, by which cultural members learn of the correct or perfect behavior beliefs, assumption, attitudes Rules, norms, values, ethical codes

Artifacts: physical symbol of a culture  

Relating culture and strategy •

In relating strategy and culture, strategist have four alternatives  –

 –

 –

 –

To ignore corporate culture To adapt adapt strategy implementation to suit corporate culture To change the strategy to fit the corporate culture To change the corporate culture to suit strategic requirements

 

Operationalizing the Strategy

 

•

Operationalizing the strategy is an approach adopted by an org. to achieve operational operational effectiveness .

 

Operational Effectiveness ffectiveness •

When org. performs value creating activities optimally and in a way which is better than its competitors, it results in operational competitors, effectiveness.

•

According to Michale E. Porter: –

“ Success requires both right strategy and operational effectiveness”

 

Strategy and Operational Operational Eff Effectiveness ectiveness

Organizational Success

Strategy

OE Operational Effectiveness

 

Areas of OE •

•

•

•

Productiv Produc tivity: ity:-- the ratio ratio of the quantit quantity y of output to the quantity of input Process: Proce ss:-- activi activitie tiess perform perform in in sy syst stema ematic tic an and d orderly procedures or a sequential step or in a chronological chronolo gical order. order. Peopl eople: e:-- stakeh akehol olde derrs Pace:- ef Pace:efficien ficiency cy,, amount of work done( or performance ) per unit time

 

Functional Policies and Plans •

Functional Strategy:Strategy: –

A functional strategy strategy is a strat strategy egy of a particular group of company like like marketing, production, sales etc.

 –

 –

It is a blue print of g group roup strategies strategies These translate the grand strategies strategies decided at corporate corpora te level into specific plans for each function within a company company..

 

Cont.…. •

Functional Policy:Policy: –

 –

Policies are guides to action They are in the form of specific statements statements or general understanding which provides guidance in decision making to members in respect of any course of action.

 

Cont. •

Role of Functional Policies:Policies: –

Provide guidance for managerial decisions

 –

Basis for contr control ol

 –

Provides co-ordination across different functions.

 

•

Financial plans and policies: –

 –  –

•

Source of fund Usage of fund Management of fund

Marketing Mark eting plans and a nd policies: –

 –

 –

 –

Product Pricing Place

promotion  

•

Operation Plan and Polices  –

Production system •

 –

It is concerned concerne d with the capacit capacity y, location, layout, product and service design

Operations Planning and Control •

It is related with aggregate production planning, material supply, inventory, quality and cost, maintenance of plant and equipment

 –

Research and development •

It is deal with product development, technology