Implementing Strategy

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Operationalizing The Strategy

Three major issues1. How to measure

2. Developing specific functional strategies

3. Communicating policies to take decisions

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Annual Objectives

• Measurable • Creating benchmarks• Achievement critical

- Will lead to achieving long- term plans

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Success Factors-Annual Objectives

• Time frame

• Focus- Specific- What will be accomplished- Futuristic

• Specificity - Objectivity

• Measurable- Quantifiable- Absolute terms

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Annual Objectives- Examples

TATA MOTORS• Achieve market share of 80%• Sell 5000 Indica cars in July 02• Achieve cost reduction of 15% for Indica in year

02• Achieve ROI of 15%• Quantifiable• Specific

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Operationalizing Annual Objectives

• Sell 5000 Indicas – July 02 • Improve product quality/styling • Appoint more dealers• Introduce rewards for dealers• Improve brand image • Reduce defects• Hire personnel from ‘ISO 9002’companies.

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Developing Functional Strategies

• Short-term game plan• Functional area• How each area will be measured• Contribution of each functional area.

- Marketing- Design- Production- Finance- HR

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Example Functional Strategies

Annual Objectives – TATA MOTORS• Achieve profit of 145 crores in 2002-03 against

loss of 60 crores in 2001-02• Marketing

- Change Image from ‘Utility’ car to ‘Sporty’

• Finance- Replace high cost loans with low cost loans

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Example Functional Strategies

• IT- Network all warehouses/production

departments to being down the cost of inventory

• Production- Introduce high technology to reduce labor costs

• Human Resources- Offer VRS to 700 employees- Introduce stock options

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Developing And Communicating Concise Policies

• Policies- Guidelines

• Purpose- Establish indirect control over independent action

- Policies promote uniform handling of similar activities

- Policies ensure quick decision

- Policies help institutionalize basic aspects of organization behavior

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Developing And Communicating Concise Policies

- Policies reduce uncertainty in repetitive and day-to-day decision making

- Policies can counteract resistance to or rejection of chosen strategies by organization members

- Policies offer a predetermined answer to continue problems

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Policies

1. GE- Never hire personnel from competitor

2. COKE- Employees must have multifunctional

exposures

3. General Electric- Only be in those businesses where you are

No.1 or No.2- Top 3 players

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Implementing Strategy Structure, Leadership And Cultural Issues

Vital for strategy implementation

– Structure

– Leadership

– Cultural

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Structural Considerations

• How tasks are distributed• Organization structure • Relevance important as size increases• You also need

- Reward Systems

- Information

- Budgeting Systems

• Concept of SBU- Strategic Business Unit

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Matrix Structure

• Dual Reporting

• Reporting to two superiors

• Many organizations use this

- GE, Shell, Citi Bank

• Easy to design

• Difficult to implement

• Satisfying two bosses

Implementing Matrix structure is a Challenge

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Leadership Practices- INTEL

• Founded in 1968• Founder-Andy Grove• Informal management style

- No reserved parking

- No executive dining rooms

- No corporate jets

- Half cubicles

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Leadership Practices- INTEL

• Technology• Rapid changes• Faster communication• Facilitate decision making

Gives an informal touch

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Organizational Leadership

• Two Major Issues- Role of CEO- Assignment of key managers

A. Role of CEO

- Key player- Symbol of new strategy- Personal goals and values- Changes in CEO- Changes in strategy

Example of role of HP CEO in HP-Compaq merger

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Organizational Leadership

B. Assignment of key managers –Tata Motor’s entry into car Market

• Telco’s entry into car market• Truck market for 50 years• Customers very different• Entry into car market• Different market • Car and Truck businesses are very different

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Organizational Leadership

• Two approachesa. Hire new employees who have experience of Car

Marketsb. Train existing employees to new environment• Went for first option• Hired personnel from Marketing oriented companies• Bring fresh blood• Young Managers• Amenable to new ideas

Empowered to take decisions

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Organizational Culture

• Is the set of important assumptions that members of an organization share in common

• You can change marketing mix, production techniques introduce technologies

• How you change the way people think ?• Very challenging task

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Strategic Evaluation And Control

• Concerned with tracking strategy• Tracking problems during implementation• Two issues

- Are key things falling into place

- How are we performing

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Types of Strategic Control

1. Premise Control

2. Implementation Control

3. Strategic Surveillance

4. Special alert control

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Premise Control

• Each strategy has assumptions • You predict conditions• Are these still valid• What could these be ?

a. Environmental factors

b. Industry factors

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Environmental Factors

• What could change significantly- Inflation

- Technology

- Interest rates

- Demographic changes

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Industry factors

Example- Hewlett Packard

• HP’s plan to make computer printers• Plans outside America• Make printers in India• 1994 to 2002

- Significant changes- Drastic fall in international prices of printers

Manufacture in India did not make sense

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Premise control -Citicorp

• Aggressive growth• All over in the world• Gives loans aggressively• Exposure to third world• Defaults• Developed a premise control that 10% of its

third world loans will default annually over next five years.

• Monitors• Premise could be challenged• Default by Peru Government • Raised default charge by CitiCorp

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Implementation Control

• How strategies are implemented - Steps- Programs- Investments- People added– Concrete steps– Taken over a period of time

Two waysa. Monitoring strategic thrustsb. Milestone reviews

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Implementation Control –Days Inns.

Lodging Industry• Budget Segment• Mostly company owned hotels initially• Competitors entering lodging industry• Day inns decides to expand outside America • How ?• More franchisee operated hotels• All over the world• Major changeover• Formulated implementation controls for controlling

franchisee operations

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Strategic Surveillance

• To monitor a broad range of events inside and outside the company that are likely to threaten, the course of the firm’s strategy.

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Strategic Surveillance- IBM

• Selling Computers• Initial years difficult• Targeted scientific/ research markets• Poor response• One salesman- focus on librarians• Found large number of transactions in libraries• Libraries

- Large no. of transactions

- Flush with funds

- Targeted by IBM

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Strategic Surveillance- IBM

• Became major market for mainframes• First success for IBM

What was the reason ?

IBM continuous surveillance by reading articles

gave valuable insights.

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Special Alert Control

• A need to thoroughly and often rapidly reconsider the firm’s basic strategy based on a sudden, unexpected event.

Examples– A war in Afghanistan

– World Trade Center attacks

– Iraq attacking Kuwait

– Earthquake in Gujarat

– Disclosures by Satyam promoter

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Special Alert Control-United Airlines

• Air crash• Disastrous• Always Prepared• Permanent Team• Any Crash• Team Takes over• Who are Members

- Stress Handlers

• Expanding Role• Handle Hijacking