Strategy Implementation

Strategy Implementation
Good

strategic planning is not enough

Process by which strategies are put into action
Process details are unique to each organization
and each strategy
Sub-strategies, programs, action plans,
policies, procedures, resource allocations,
budgets, authority/responsibility delegation,
teams and task forces, reward and control
systems, and individual assignments

Keys to Strategy Implementation

Resources

and competencies
Functional area sub-strategies
Specific decisions and actions

Resources and Competencies

Strategy implementation depends on resources and

competencies possessed by the firm
These include:

Money in certain amounts

Physical space of certain dimensions
Particular types of equipment
Specified numbers of people with
Certain skills, capabilities, and competencies
Control and reporting systems
Attitude, intuition, and imagination

Resources and Competencies:

Systems
Collections

of policies, procedures, and

protocols, backed by EDP and communications
equipment, and people who work with them
Purpose is to simplify and regularize the
performance of routine, high-volume tasks
Producing results that are as uniform and
predictable as possible
Modern business organizations depend on them

Examples of Organizational Systems

Accounting

and budgeting system

Management information system
Manufacturing control system
Compensation and reward system
Planning system

Resources and Competencies:

Human Resources
People

possess competencies and carry out

details of strategic plans
Personnel costs are high proportion of operating
budget in health care organizations
Ensure enough people in the right places with
the right competencies
Balance operational and strategic duties
Think of strategic human resource management

Resources and Competencies:

Organizational Structure
Taken

for granted and assumed immutable

Formal framework of departments, units, and
groups into which people and the activities they
perform are organized
Some structures are better suited to certain
strategies than other structures
A carefully chosen structure can give an
organization a sustainable competitive
advantage

Organizational Structure
Organizational

Selecting the structure and control

systems that are most strategically
effective for pursuing sustainable
competitive advantage.

The

design

role of structure and control

To coordinate strategy implementation.

To motivate and provide incentives for superior
performance.

The Role of Organizational

Structure
Building

Differentiation in the allocation of people and resources

to create value.

blocks of organizational structure

Vertical differentiation in the

distribution of decision-making
authority.
Horizontal differentiation in
dividing up people and tasks
into functions and divisions.

Integration

The means used in coordinating people and functions to

accomplish organizational tasks.

Differentiation, Integration,
Bureaucratic Costs
Bureaucratic

costs and strategy

implementation:

Bureaucratic costs increase with

organizational complexity.
More differentiation = more managers.
More integration = more coordination.
Better strategy implementation = better bottom-line
performance and profitability.

Vertical Differentiation
Span

of control (division of authority)

The number of subordinates that a single manager

directly manages.

Organizational

Flat structures

hierarchy choices

Few organizational levels

Wide spans of control

Tall structures

Many organizational levels

Narrow spans of control

Tall and Flat Structures

Problems with Tall Structures

Principle

of minimum chain of command

Maintaining a hierarchy with the least number of

levels of authority needed to achieve a strategy.

Sources

of bureaucratic costs:

Centralization or Decentralization
Authority

patterns in organizations:

Centralized

Decision making retained in the

hands of upper-level managers.

Decentralized

Decisions delegated to lower

levels in the organization.

Centralization (Structural) Choice?

Advantages

of
decentralization

Reduced information
overload on upper
managers.
Increased motivation and
accountability throughout
organization.
Fewer managers; lower
bureaucratic costs.

Advantages

of

centralization

Easier coordination of
organizational activities.
Decisions fitted to broad
organizational objectives.
Exercise of strong
leadership in crisis.
Faster decision making and
response.

Horizontal Differentiation
Focus

is on division and grouping of tasks to

meet business objectives.
Simple structure:

Characteristic of small entrepreneurial companies.

Entrepreneur takes on most managerial roles.
No formal organization arrangements.
Horizontal differentiation is low.

Structure Follows Strategy:

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Changes in corporate strategy lead to

changes in organizational structure

Structure Follows Strategy:

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New strategy is created

New administrative problems emerge
Economic performance declines
New appropriate structure is invented
Profit returns to its previous levels

Stages of corporate development

Simple Structure
Functional Structure
Divisional Structure
Beyond SBUs

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Simple Structure:

Stage I:

Entrepreneur
Decision making tightly controlled
Little formal structure
Planning short range/reactive
Flexible and dynamic

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Functional Structure:

Stage II:

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Management team
Functional specialization
Delegation decision making
Concentration/specialization in industry

Divisional Structure:

Stage III:

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Diverse product lines

Decentralized decision making
SBUs
Almost unlimited resources

Beyond SBUs:

Stage IV:

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Increasing environmental uncertainty

Technological advances
Size & scope of worldwide businesses
Multi-industry competitive strategy
Better educated personnel

Functional Structure
Advantages

Task grouping facilitates

specialization and
productivity.
Better monitoring of work
processes, reduced costs.
Greater control over
organizational activities.

Disadvantages

Functional orientation
creates communication
problems.
Performance and
profitability measurement
problems.
Location versus function
problems (coordination).
Strategic problems due to
structural (vertical and
horizontal) mismatches.

Functional Structure

Mutlitdivisional Structure
Advantages

Enhanced corporate
control by division
Enhanced strategic control
of each SBU in portfolio
Growth is easier. New units
dont have to be integrated
across organization
Stronger pursuit of internal
efficiencies. Performance
of individual units is readily
measurable.

Disadvantages

Establishing the divisionalcorporate authority

relationship
Distortion of information by
divisions
Competition for resources
by divisions
Transfer pricing problems
between divisions
Short-term research and
development focus
Bureaucratic costs

Multidivisional Structure

Matrix Structure
Advantages

Flexibility of the structure and membership

Minimum of direct hierarchical control
Maximizes use of employees skills
Motivates employees;
frees up top management

Disadvantages

High bureaucratic costs

High costs (time and money) for building
relationships
Two-boss employees role conflict

Matrix
Structure
Two-boss employee

Network Structure:

non structure elimination of in-house

business functions
Termed virtual organization

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Useful in unstable environments

Need for innovation and quick response

Network Structure

Packagers
Designers

Suppliers
Corporate
Headquarters
(Broker)

Manufacturers

Distributors
Promotion/
Advertising
Agencies

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