Strategy Implementation and Control

Strategy Implementation & ControlProf. Prashant MehtaNational Law University, Jodhpur

STRATEGY IMPLEMENTATION AND CONTROL

• Introduction

• Interrelationship Between Strategy Formulation and

Implementation

• Issues in Strategy Implementation

• Organization and Strategy Implementation

• Strategic Business Unit and Core Competence

• Leadership and Strategic Implementation

• Building Strategy and Supportive Corporate Culture

Introduction

• Implementation of strategy is 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 to

new course of action

needs to be undertaken

besides need to adapt

organization’s structure

to the chose strategy.


A B (success)

C D

WEAK EXCELLENT

FLA

WE

DS

OU

ND

STRATEGY IMPLEMENTATION

ST

RA

TE

GY

FO

RM

ULA

TIO

N

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

Strategy fails because of failed implementation and not because of strategy model.

The matrix shows various combination of strategy formulation and implementation.


• 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 a sound

competitive strategy besides effectively implementing it.


• Strategy is not a long term plan but rather consists of organizations attempt

to reach some future state by adapting is competitive position as

circumstances change.

• In organizations that lack strategic direction there is tendency to look

inwards at time of stress, management to cut costs and shedding

unprofitable division. This means that focus is on efficiency (relationship

between inputs and outputs in short time horizon) rather than effectiveness

( attainment of desired competitive position).

• Efficiency is introspective whereas effectiveness highlights the links between

the organization and its environment.


1. Thrive 2. Die Slowly

3. Survive 4. Die Quickly

Effective Ineffective

Strategic Management

Effi

cie

nt

Ine

ffici

en

t

Op

era

tion

al M

an

ag

em

en

t

In cell 1 organization thrives, since it is

achieving what it aspires to 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 whereas efficiency is not

sufficient for survival.


STRATEGY FORMULATION

• It is positioning forces before action.

• It focuses on effectiveness.

• It is an intellectual process

• It requires good intuitive and

analytical skills.

• It requires coordination among few

individuals.

• Concepts and tools do not differ

greatly for small, large, profit or non

profit organization.

STRATEGY IMPLEMENTATION

• It is managing forces during action.

• It focuses on efficiency.

• It is primarily and operational process.

• It requires special motivational and

leadership skills.

• It requires combination of many

individuals.

• Concepts and tools varies substantially

among small, large, profit or non profit

organization.


• 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 deals with impact of formulation and implementation

• Backward linkage is concerned with impact in the opposite direction.


• 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 operations in

organization. Resource allocation is key to successful projects.


• 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 to divisional and functional managers

and their involvement should be maximum during strategy formulation.


• 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

strategist. Provide training to all to be world class performers.

Organization 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 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

• Functional, Geographic, Product, Customer, Divisional process, Strategic business

unit (SBU), matrix

Strategy – Structure Relationship: Chandler’s

New Administrative

Problem Emerges

Organizational Performance

Declines

A New Organizational

Structure is Established

Organizational Performance

Improves

New Strategy is Formed

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 favour of decentralization and improved

accountability.


CEO

Corporate R&D

Corporate Finance

Strategic Planning

Finance Production Engineering Accounting Sales and Marketing Human Resources

Corporate Marketing

Corporate Human 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.


• 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 semi-autonomous divisions.

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. Unlike the 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 specific business 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 structure therefore has a subset of different and specialized SBU's satisfying the demands of different customers, markets or products.


• In divisional structure, the organization is organized into various divisions based on basically three criteria product, market of geographical structures.

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

Management

• 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 supports cooperation between 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 activities.

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 or characteristics a matrix organization are:-• Hybrid Structure : It combines functional organization with a project organization. • Functional Manager : The Functional Manager has authority over the technical

(functional) aspects of the project.• Project Manager : The Project manager has authority over the administrative aspects

of the project. He has full authority over the financial and physical resources which he can use for completing the project.

• Problem of Unity of Command This is so, because the subordinates receive orders from two bosses viz., the Project Manager and the Functional Manager.

• Specialization : In a Matrix organization, there is a specialization. The project manager concentrates on the administrative aspects of the project while the functional manager concentrates on the technical aspects of the 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 project manager. He is supported by many functional managers and employees of the company.

Advantages of Matrix Structure

• The advantages 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 to the project managers.• 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, the employees work as a team. So, they are motivated to perform better.

• Higher Efficiency : The Matrix organization results in a higher efficiency. It gives high returns at lower 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 of the project manager and functional manager.

• Power Struggle : In a matrix organization, there may be a power struggle between the project manager 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.

• Shifting of Responsibility : If the project fails, the project manager may shift the responsibility on the functional manager.

Old – New Organization Design

Old Organization Design New Organization Design

One large corporation Mini business units and cooperative relationships

Vertical Communication Horizontal Communication

Centralized Top Down Decision Making Decentralized Participative Decision Making

Vertical Integration Outsourcing and Virtual Organizations

Work Quality Teams Autonomous Work Teams

Functional Work Teams Cross Functional Work Teams

Minimal Training Extensive Training

Specialized Job Design Focused on Individual

Value chain Team Focused Job Design

Network Structure

• A group of legally independent companies or subsidiary business units that use various methods of coordinating and controlling their interaction in order to appear like a larger entity. In a business context, three main types of network organization are typically seen: • Internal where a large company has separate units acting as profit centers• Stable where a central company outsources some work to others, and• Dynamic where a network integrator outsources heavily to other companies.

• A corporation organized in this manner is often called a virtual organization because it is composed of a series of project groups or collaborations linked by constantly changing non-hierarchical, cobweb like networks.

• This structure is important in unstable conditions where regular employees are replaced with contract laborer or suppliers contracts are for specific project and length of time etc.

• The 'wiring' of information-age organizations needs to be different and more complex. This has given rise to the concept of the Network Organization.

Network Structure

• A joint venture of companies for sharing skill or core competencies to manufacture a product or provide a service. The companies rely on relationships between people across structural, temporal and geographic boundaries.

• It is more than outsourcing and has flexibility as in a network structure there is a continuous change in partners and the arrangements are goal oriented and loose. All efforts are made to bring about new products and services. The process changes more quickly for innovative products.

• The characteristics of a network organization are: • Independent teams• Departments which share common values• Projects which support each other• Multiple links between projects• Information and Communications Technology is used to connect the projects.• There is a key coordinating role for the Chief Executive to construct the teams and

manage the interrelationship of projects (a kind of 'air traffic control').

Network Structure

An example of a networked organization is Asea Brown Boveri. This giant corporation split its business into 1,300 companies as separate and distinct business units. All the energy and resources of the corporate centre are then geared to facilitating cross-company co-operation, with computer networks and knowledge sharing being at the centre of this process.

SBU and Core Competence

• Strategic business units are absolutely essential for multi product

organizations. These business units are basically known as profit centres.

They are focused towards a set of products and are responsible for each and

every decision / strategy to be taken for that particular set of products.

• An autonomous division or organizational unit, small enough to be flexible

and large enough to exercise control over most of the factors affecting

its long-term performance. Because strategic business units are more agile

(and usually have independent missions and objectives), they allow

the owning conglomerate to respond quickly to changing economic

or market situations.

Attributes of SBU

• A scientific method of grouping the businesses of multi-business corporation which helps firm in strategic planning.

• Improvement over territorial grouping of business / strategic planning.• SBU is grouping of related businesses that can be taken up for strategic

planning.• Unrelated product / business in any group are separated based on criteria of

functional relation.• Grouping of businesses on SBU lines helps the firm in strategic planning by

removing confusion and vagueness and provides right setting for correct strategic planning.

• Each SBU has distinct set of competitors and its own distinct strategy.• Each SBU will have a CEO who will be responsible for strategic planning for

the SBU and its profit performance. He will also exercise control over activities of SBU.

Related Set of SBU or Not? / Characteristics

• SBU might be build on similar technologies and provide similar sorts of products / services.

• SBU might be serving similar or different markets. Even if technology / products differ it may be that customers are similar. • Technologies for frozen food, washing powders, and butter production may be

very different but they are all sold through retail operations (Unilever).• It may be different competencies on which the competitive advantage of

different SBU’s are built. • For example Unilever may argue that the marketing skills associated with the

three product markets are similar etc.

• The three Important Characteristics of SBU are:• It is a single business or collection of related businesses• It has its own competitors• It has a manager who is accountable for its operation• It is an area that can be independently planned for within the organization

The Value Chain Analysis: By Michael Porter

• Can be used to examine the various activities of the firm and how they

interact in order to provide a source of competitive advantage by:

• Performing these activities better and At a lower cost than the competitors

Types of Firms Activities

• The value chain is basically the set of activities that an organization

performs. Primary activities are directly involved in serving the customer

while secondary support the primary ones.

• Most importantly of all, understand which ones add value to the customer.

This type of analysis can help in understanding which activities should be

outsourced and which ones should remain in house or be bought in

(insourcing).

• Primary - Those that are involved in the creation, sale and transfer of products

(including after-sales service)

• Support - those that merely support the primary activities.

Primary Activities

• Inbound logistics is concerned with receiving, storing, distributing inputs

(e.g. Handling of raw materials, warehousing, inventory control) .

• Operations - comprise the transformation of the inputs into the final

product form (e.g. Production, assembly, and packaging)

• Outbound logistics - involve the collecting, storing, and distributing the

product to the buyers (e.g. Processing of orders, warehousing of finished

goods, and delivery)

• Marketing and sales - how buyers can be convinced to purchase the product

(e.g. Advertising, promotion, distribution)

• Service - involves how to maintain the value of the product after it is

purchased (e.g. Installation, repair, maintenance, and training).

Secondary Activities

• Procurement - concerned with the tasks of purchasing inputs such as raw

materials, equipment, and even labor

• Technology Development - these activities are intended to improve the

product and the process, can occur in many parts of the firm.

• Human Resource Management - involved in recruiting, hiring, training,

development and compensation

• Firm Infrastructure - the activities which are not specific to any activity area

such as general management, planning, finance, and accounting are

categorized under firm infrastructure.

Identifying Core Competences

• Core competencies differentiate an organization from its competition—they

create a company’s competitive advantage in the marketplace. Typically, a

core competency refers to a company’s set of skills or experience in some

activity, rather than physical or financial assets. An organizational core

competency is an organization’s strategic strength.

• Eg: Honda’s strategic strength, for example, lies in its small engine design and

manufacturing; Sony has a core competency in miniaturization; Federal Express

has a core competency in logistics and customer service.

• Core competency is “an area of specialized expertise that is the result of

harmonizing complex streams of technology and work activity.” Identifying

and developing your company’s core competencies are management keys to

sustaining your company’s long-term competitive advantage.


• Three tests can be applied to determine a core competency:

• A core competency must be capable of developing new products and services and

must provide potential access to a wide variety of markets.

• A core competency must make a significant contribution to the perceived benefits

of the end product.

• A core competency should be difficult for competitors to imitate. In many

industries, such competencies are likely to be unique.

• In determining your company’s core competencies, you need to ask what is

the underlying skill, ability, knowledge, experience, technology or process

that enables your company to provide its unique set of products / services.


• You next need to determine how you can use your company’s core

competencies to develop strategic responsiveness to gain competitive

advantage. High-performing companies develop new core competencies

and expand their existing ones to enter new and future markets.

• Apple’s unique competence seems to be its product design process. Simplicity

turned out to be the core attribute that made the iPod a revolutionary product,

one that changed consumer expectations.

• Company executives should be aware that even the most successful strategy

will fail unless it is continually monitored and refreshed to meet changing

market conditions.

Three Tests to True Core Competences:

• Relevance: Firstly, the competence must give your customer something that strongly influences him or her to choose your product or service. If it does not, then it has no effect on your competitive position and is not a core competence.

• Difficulty of Imitation: Secondly, the core competence should be difficult to imitate. This allows you to provide products that are better than those of your competition. And because you're continually working to improve these skills, means that you can sustain its competitive position.

• Breadth of Application: Thirdly, it should be something that opens up a good number of potential markets. If it only opens up a few small, niche markets, then success in these markets will not be enough to sustain significant growth.• An example: You might consider strong industry knowledge and expertise to be a

core competence in serving your industry. However, if your competitors have equivalent expertise, then this is not a core competence. All it does is make it more difficult for new competitors to enter the market.

Examples of Core Competency

• Eg: How small shops compete with supermarkets in grocery retailing.

• Supermarkets core competency is lower prices is due to merchandizing, lower cost

supplies and in store management where as corner shop gains advantage by

concentrating more on convenience and service.

• Note core competency between rival supermarkets.

• In auto industry Japanese core competency was zero defect manufacturing,

Ford and GM by market access and dealer network, to provide unique

product design and low volumes of manufacturing / reduced life cycle of

products.

• Core competency helps organizations to stretch into new opportunities and

provide value added service.

• Value chain analysis provides long term competitive position in markets.

Audit resources- core resources

The resource audit identifies the resources „available” to an organisation in supporting its strategies both from within and outside the organisation

The resource audit identifies the resources „available” to an organisation in supporting its strategies both from within and outside the organisation

Resources can be groupedResources can be grouped

• • Material assets

• Immobility• Machines

• Others• Current assets

• Inventory• Nature of assets

• age• condition• location

• • Material assets

• Immobility• Machines

• Others• Current assets

• Inventory• Nature of assets

• age• condition• location

• Number of employees• Skills

• Education• Experience

• Loyalty• Corporate culture

• Number of employees• Skills

• Education• Experience

• Loyalty• Corporate culture

• Equity• Debt

• Credibility• Relationship with

• Suppliers• Investors• Bankers

• Managing cash

• Equity• Debt

• Credibility• Relationship with

• Suppliers• Investors• Bankers

• Managing cash

• Goodwill• Loyalty of consumers

• Brand name• Good contacts with

• Politicians• CEOs

• Corporate image

• Goodwill• Loyalty of consumers

• Brand name• Good contacts with

• Politicians• CEOs

• Corporate image

Physical resourcesPhysical resources IntangiblesIntangiblesFinancial resourcesFinancial resourcesHuman resourcesHuman resources

Audit resources- core resources

NecessaryResourcesNecessaryResources

UniqueResources

UniqueResources

ResourcesResources

Easy toimitate

Easy toimitate

Difficult toimitate

Difficult toimitate

Same as competitorsSame as

competitorsBetter than competitorsBetter than competitors

Define core resourcesDefine core resources

Core Resources

COMPETENCES

• How an organisation employs and deploys its resources• Efficiency and effectiveness of physical, financial, human and intellectual

resources• How they are managed• Cooperation between people• Adaptability• Innovation• Customer and supplier relationships• Learning

The differences between resources and competences

Resources Competences

Tangible Intangible

Measureble Mostly difficult to measure

Easy to identify the „owners” Difficult to identify the „owners”

You can buy and sell You can acquire by „learnind by doing”

Analysing competences and core competences

The competence undertake the activities of the organisation. It shows how to link the different activities together and how to deploy resources to sustain excellent performance

The competence undertake the activities of the organisation. It shows how to link the different activities together and how to deploy resources to sustain excellent performance

Cost efficiencyCost efficiency

Value addedValue added

Managing linkagesManaging linkages

RobustnessRobustness

Bases of competences

Economies of scale: offers the ability in mass consumer advertising, Supply costs: well managed input costs, with IT or personal networks

Experience: the cumulative experience decrease the R+D and unit costs

Economies of scale: offers the ability in mass consumer advertising, Supply costs: well managed input costs, with IT or personal networks

Experience: the cumulative experience decrease the R+D and unit costs

How well are matched the products/services to the identified needs of the chosen customers. Value added activity must be done from the viewpoint

of the customer or user of the production or service.

How well are matched the products/services to the identified needs of the chosen customers. Value added activity must be done from the viewpoint

of the customer or user of the production or service.

Competences are likely to be more robust and difficult to imitate if there are linkages within the organisation’s value chain and linkages into the

supply and distribution channels.

Competences are likely to be more robust and difficult to imitate if there are linkages within the organisation’s value chain and linkages into the

supply and distribution channels.

The strategic importance of an organisation’s competences relates to howeasy or difficult they are to imitate.

The strategic importance of an organisation’s competences relates to howeasy or difficult they are to imitate.

Managing Linkages

• Core competencies are likely to be ore robust and difficult to imitate if they

relate to the management of linkages within the organization value chain

and linkages into supply and distribution chains.

• Specialization is key and so is coordination of activities.

• The management of internal linkages in the value chain would create

competitive advantage in number of ways such as:

• There may be important linkage between primary activities. ( high levels of

inventory may ease production but will add to overall cost of production).

• Linkages between Primary activities like Marketing and Production and so on.

• Management of linkage between Primary activity and Support activity provides

core competency (investment in infrastructure, computer technology etc.)

Managing Linkages

• Linkages between different support activities. Eg. Extent to which human development is tune with new technologies etc.

• Besides managing internal linkages organizations needs to complement / coordinate activities with those of suppliers, channel members, and customers. This can be achieved by:

• Vertical integration to improve performance through ownership of more parts of

value system making more linkages internal to the organization.

• Controlling performance of suppliers is critical to enhance quality and reduce

costs.

• Total quality management which improves performance through closer working

relationships with specialists within the value chain. Like involving suppliers and

distributors at design stage of product or project.

• Merchandising activities which manufacturers undertake with their distributors is

much improved.

Leadership and Strategic Implementation

• Businesses today face change on all fronts– economic, regulatory, competitive, customer, and access to resources. Consequently, every company is adjusting its strategy and that implies change. The success of your strategy depends on your people – will they be able to implement the strategy and achieve the goals?

• Strategic leadership provides the vision, direction, the purpose for growth, and context for the success of the corporation. It also initiates "outside-the-box" thinking to generate future growth. Strategic leadership is not about micromanaging business strategies. Rather, it provides the umbrella under which businesses devise appropriate strategies and create value.

• If you are a leader at any level, your people look to you for guidance on what needs to be done, and how. The key requirements of leaders are to:• Set the strategy• Communicate the strategy• Implement the strategy through people• Get results

Roles to Play For Good Strategy Execution

• Staying on top of what is happening, closely monitoring progress, fretting out issues,

learning what obstacle lie in path of good strategic implementation.

• Promoting the culture of Esprit de corps that mobilizes and energizes organizational

members to execute strategy in competent fashion and perform at high level.

• Keeping organizations responsive to changing conditions, alert for new opportunities,

innovative ideas, ahead of rivals in developing competitively valuable competencies

and capabilities.

• Exercising ethics leadership and model conduct and Pushing corrective actions to

improve strategy execution and overall performance.

• The role of leader is Introducing Change, Integrating Conflicting Interests, Developing

Leadership Effectiveness of Managers, Developing Appropriate Organizational

Climate, Motivational system, Clarity of goals, Relationships, Involvement, Interest,

Monitoring, Change as and when required.

Leadership Role in Implementation

• Strategic leadership entails the ability to anticipate, envision, maintain

flexibility, and empower others to create strategic change as necessary.

• A manager with strategic leadership skills exhibits the ability to guide the

company through the new competitive landscape by influencing the

behavior, thoughts, and feelings of co-workers, managing thought of others

and successfully dealing with rapid, complex change and uncertainty.

• Strategic leaders are CEO, Board of Directors, Top Management Teams,

Divisional General Managers. They must be able to deal with the diverse

and cognitive complex competitive situations that are characteristic of

today’s competitive situation.

Responsibilities of Strategic Leaders

• Managing Human Capital• Effectively managing company’s Operations• Sustaining High performance over time• Being willing to make candid, courageous, yet pragmatic decisions.• Seeking feedback from face to face communication.• Having decision making responsibility that cannot be delegated.

• Navigator• Strategist• Entrepreneur • Mobilizer• Talent advocate• Captivator• Global thinker• Change driver• Enterprise Euardian

Building A Strategy Supportive Corporate Culture

• “An organization’s capacity to execute its strategy depends on its “hard” infrastructure--its organization structure and systems--and on its “soft” infrastructure--its culture and norms.”

• Building a Strategy-Supportive Corporate Culture• Where Does Corporate Culture Come From?• Culture and Strategy Execution• Types of Cultures• Creating a Fit Between Strategy and Culture• Establishing Ethical Standards• Building a Spirit of High Performance

• Exerting Strategic Leadership• Staying on Top of How Well Things are Going• Establishing a Strategy-Supportive Culture• Keeping Internal Organization Innovative• Exercising Ethics Leadership• Making Corrective Adjustments

What Makes Up a Company’s Culture?

• Beliefs about how business ought to be conducted• Values and principles of management• Work climate and atmosphere• Patterns of “how we do things around here”• Oft-told stories illustrating company’s values• Taboos and political don’ts• Traditions and Ethical standards

Where Does Corporate Culture Come From?• Founder or early leader

• Influential individual or work group

• Policies, vision, or strategies

• Traditions, supervisory practices, employee attitudes

• Organizational politics

• Relationships with stakeholders and Internal sociological forces

Culture and Strategy Execution: Ally or Obstacle?

• Culture can contribute to -- or hinder -- successful strategy execution.• Requirements for successful strategy execution may -- or may not -- be

compatible with culture.• A close match between culture and strategy promotes effective

strategy execution

• Why Culture Matters: Benefits of a Good Culture-Strategy FitStrategy-supportive cultures

• Shape mood and temperament of the work force, positively affecting organizational energy, work habits, and operating practices

• Provide standards, values, informal rules and peer pressures that nurture and motivate people to do their jobs in ways that promote good strategy execution

• Strengthen employee identification with the company, its performance targets, and strategy

Strategy-Supportive cultures

• Stimulate people to take on the challenge of realizing the company’s

vision, do their jobs competently and with enthusiasm, and collaborate

with others to execute the strategy

• Optimal condition: A work environment that Promotes can do attitudes,

Accepts change, Breeds needed capabilities.

Forces and Factors Causing Culture to Evolve

• Internal crises

• Revolutionary technologies

• New challenges

• Arrival of new leaders

• Turnover of key employees

• Diversification into new businesses

• Expansion into different geographic areas

• Rapid growth adding new employees

• Merger with or acquisition of another company

• Globalization

Step 1 Diagnose which facets of present culture are strategy-supportive and which are not

Step 2Talk openly about why aspects

of present culture need to be changed

Step 3Follow with swift, visible actions to modify

culture - include both substantive and symbolic actions

Creating a Strong Fit Between Strategy and Culture

Types of Corporate Cultures

Strong vs. Weak Cultures

Unhealthy Cultures

Adaptive Cultures

Characteristics of Strong Culture Companies

• Conduct business according to a clear, widely-understood philosophy

• Management spends considerable time communicating and reinforcing

values

• Values are widely shared and deeply rooted

• Typically have a values statement

• Careful screening/selection of new employees to be sure they will “fit in”

• Visible rewards for those following norms; penalties for those who don’t

How Does a Culture Come to Be Strong?

• Leader who establishes values consistent with

• Customer needs

• Competitive conditions

• Strategic requirements

• A deep, abiding commitment to espoused values and business philosophy

• Practicing what is preached!

• Genuine concern for well-being of

• Customers

• Employees

• Shareholders

Characteristics of Weak Culture Companies

• Many subcultures

• Few values and norms widely shared

• Few strong traditions

• Little cohesion among the departments

• Weak employee allegiance to company’s vision and strategy

• No strong sense of company identity

Characteristics of Unhealthy or LowPerformance Cultures

• Politicized internal environment

• Issues resolved on basis of turf

• Hostility to change

• Experimentation and efforts to alter status quo discouraged

• Avoid risks and don’t screw up

• Promotion of managers more concerned about process and details than

results

• Aversion to look outside for superior practices

• Must-be-invented here syndrome

Hallmarks of Adaptive Cultures

• Introduction of new strategies to achieve superior performance

• Strategic agility and fast response to new conditions

• Risk-taking, experimentation, and innovation to satisfy stakeholders

• Proactive approaches to implement workable solutions

• Entrepreneurship encouraged and rewarded

• Top managers exhibit genuine concern for customers, employees,

shareholders, suppliers

Types of Culture - Changing Actions

• Revising policies and procedures to help drive cultural change

• Altering incentive compensation to reward desired cultural behavior

• Visibly praising and recognizing people who display new cultural traits

• Hiring new managers and employees who have desired cultural traits and

can serve as role models

• Replacing key executives strongly associated with old culture

• Communicating to all employees the basis for cultural change and its

benefits

Symbolic Culture - Changing Actions

• Emphasize frugality

• Eliminate executive perks

• Require executives to spend

time talking with customers

• Alter practices identified as cultural hindrances

• Visible awards to honor heroes

• Ceremonial events to praise people and teams who “get with the program”

Substantive Culture - Changing Actions

• Benchmarking and best practices

• Set world-class performance targets

• Bring in new blood, replacing traditional managers

• Shake up the organizational structure

• Change reward structure

• Increase commitment to employee training

• Reallocate budget, downsizing and upsizing