Class 5 Chap 2 Create Implement Strategy

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Class 5 Chap 2: Crafting and Executing Strategy

Learning Objectives

1. Understand the hierarchy of the Firms strategies

2. Understand why the initiatives at various

organizational levels must be coordinated to

achieve company strategic targets.

3. Be aware of that crafting a strategy is a task for acompanys entire management team.

4. See that a strategy is a collection of strategic

initiatives and actions taken at many

organizational levels.5. Understand the role and responsibility of the

board of directors in the strategic management

process.


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22Copyright 2012 by Glo-Bus Software, Inc.

If you dont know where you are

going, any road will take youthere.

Cheshire Cat to Alice

Lewis Carroll, Alice in Wonderland


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The Strategic Plan is the Roadmap

Its strategic vision, business

mission, and core values

Its strategic and financial

objectives

Its chosen strategy

Elements of a Firms

Strategic Plan

23Copyright 2012 by Glo-Bus Software, Inc.


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2.1 The Strategy-Making, Strategy-Executing ProcessFigure

Copyright 2012 by Glo-Bus Software, Inc.


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Task 3: Crafting a Strategy

Crafting a strategy entails stitching together

managements answers to a series of hows:

Howto attract and please customers

How to compete against rivals

Howto position the company in the marketplace and

capitalize on attractive opportunities to grow the business

Howbest to respond to changing economic and market

conditions

Howto manage each functional piece of the businessHowto achieve the companys performance targets.

And this stitching together must result in a coherent andcoordinated game plan for running the firm successfully.

25 Copyright 2012 by Glo-Bus Software, Inc.


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A Firms Strategy-Making Hierarchy

Crafting strategy is a collaborative effort

that:

Involves managers from various

levels of the organization

Is not something only high-level executives engage in

Requires jointly choosing among

the various strategic alternatives

A firms strategy is crafted into a collection

of initiatives undertaken by managers at all

levels in the organizational hierarchy


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The Strategy-Making Hierarchy

Corporate

strategy

Is orchestrated by the CEO and other senior executives and

establishes an overall game plan for managing a set of businesses

in a diversified, multibusiness company.

Addresses the questions of how to capture cross-business

synergies, what businesses to hold or divest, which new markets to

enter, and how to best enter new marketsby acquisition, creation

of a strategic alliance, or through internal development.

Business

strategy

Is primarily concerned with building competitive advantage in a

single business unit of a diversified company or strengthening the

market position of a nondiversified single business company.

Functional-area

strategies

Are concerned with the strategies specifically related to particular

functions or processes within a business (marketing strategy,

production strategy, finance strategy, customer service strategy,product development strategy, and human resources strategy).

Operating

strategies

Are relatively narrow strategic initiatives and approaches of limited

scope for managing key operating units (plants, distribution centers,

geographic units) and specific operating activities such as materials

purchasing or Internet sales.


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Figure 2.2

Strategy-MakingHierarchy


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A Unified Overall Strategy

Uniting the Strategy-Making Effort

Entails creating a cohesive collection of mutually

reinforcing initiatives that fit and work together

Conflicting or inconsistent strategic elements impair a firmsperformance.

Requires that lower-level strategies be modified to fit

with higher-level strategies.

Requires that higher-level strategies be adapted toaccommodate more appealing lower-level strategy

ideas and initiatives as they arise.



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Task 4: Implementing and

Executing the Strategy

Implementation and execution of strategy Is an operations-oriented, make-things-happen task aimed at

performing core business strategy-supportive initiatives .

Is the most demanding and time-consuming part of the strategy

management process.

Converting plans into actions tests a managers

ability to:

Direct organizational change to build and strengthen company

competencies and competitive capabilities

Create and nurture a strategy-supportive work climate thatmotivates people to meet or beat performance targets.

To put the strategy in place and execute it proficiently on many

organizational fronts.

210

Copyright 2012 by Glo-Bus Software, Inc.


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The Strategy Execution Process Involves

Many Initiatives, For Example:

Staffing needed skills and expertise to build and strengthen

strategy-supportive competencies and competitive capabilities.

Allocating ample resources to activities critical to strategic

success.

Ensuring policies and procedures facilitate rather than impede

execution. Using best practices to perform core business activities and

push for continuous improvement.

Installing information and operating systems that enable

personnel to better carry out their strategic roles.

Tying rewards and incentives directly to the achievement of

performance objectives and good strategy execution.

Creating a culture and work climate conducive to the strategy.

Exerting the leadership needed to keep improving on how the

strategy is being executed.211 Copyright 2012 by Glo-Bus Software, Inc.


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Task 5: Evaluating Performance and

Initiating Corrective Adjustments

This task involves:

Examining one or more aspects of the firms strategy

implementation and execution to determine if all is

going as well as intended.

Evaluating organizational learning about strategy

execution and making adjustments that will move the

firm closer to operating excellence.

Deciding whether or not to continue or change the

firms current vision, objectives, strategy, and/or

strategy execution methods.



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Stage 5: Evaluating Performance and

Initiating Corrective Adjustments

Triggering change as needed:

Monitoring new external developments

Evaluating the firms progress

Making corrective adjustments

Managing strategy is an ongoing process,

not an every-now-and-then task

A firms vision, objectives, strategy, and approach

to strategy execution are never final


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Successful Strategy Execution

Strategy execution Is a job for the entire management team and requires diligent

pursuit of operating excellence.

Hinges upon the skills and cooperation of operating managers

who can push needed changes in their units and consistentlydeliver good results.

Handling of the strategy implementation/execution

process is considered successful if the firm:

Achieves or exceeds strategic and financial performance targets. Shows good progress in achieving its strategic vision.



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Corporate Governance:Role of the Board of Directors in Strategy-Making & Strategy-Executing

The Board of directors duty is to:Exercise strong oversight of how the firms business is

being conducted and managed including strategy-

crafting & strategy-execution tasks.

Effective corporate governance is undermined:when boards of directors fail in their responsibility to

maintain ultimate control over

the firms strategic direction,

the major elements of its strategy, How management is implementing and executing the strategy,

executive compensation, and

the financial reporting process.



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Strong Boards Lead to Good

Corporate Governance

A Strong, Independent Board of Directors:

Is well informed about the companys performance

Guides and judges the CEO and other top executives

Has the courage to curb management actions itbelieves are inappropriate or unduly risky

Certifies to shareholders that the CEO is doing what

the board expects

Provides insight and advice to management

Is intensely involved in debating the pros and cons of

key decisions and actions


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Why Does It MeanThat a Firm

Exhibits Strategic Intent?

A firm with an unshakableoften obsessive

commitment to achieving its strategic intent typically:

Goes all out to marshal resources and capabilities to close in on its

strategic target.

Crafts potent offensive strategies to throw rivals off-balance, put

them on the defensive, and force them into a game of catch-up.

Tries to alter the market contest and tilt the rules for competing in

its favor.

Rallies its personnel in efforts to make its strategic intent a reality.

Firms with strategic intent are thus a force to be reckonedwith and often are more formidable competitors than rivalshaving modest strategic objectives and market ambitions.



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Final Thought for the Glo-bus Simulation:

Lead the Development of Better Competitive

Capabilities

Lead efforts to strengthen existingcompetitive capabilities

Anticipate changes in industry environment

Proactively build competencies andcapabilities that hold promise for building

a stronger competitive edge


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Team Exercise

Convert your strategic vision into a set ofinitiatives required to implement the vision.

Transform the initiatives into specific

actions/decisions you will make in the

practice round.

2013 by The McGraw-Hill Companies, Inc. All rights reserved. 219

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Class 5 Chap 2 Create Implement Strategy