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Lecture 6. Strategy Implementation – Organizing for action. Strategy Implementation. Sum total of all activities and choices required for the execution of a strategic plan Questions to be considered by strategy makers Who are the people who will carry out the strategic plan? - PowerPoint PPT Presentation
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Lecture 6Strategy Implementation – Organizing for action
Strategy Implementation Sum total of all activities and choices required for the
execution of a strategic plan Questions to be considered by strategy makers
◦ Who are the people who will carry out the strategic plan?◦ What must be done to align the company’s operations in
the new intended direction?◦ How is everyone going to work together to do what is
needed? These need to be considered right at the time of
making the choices Revisit before implementation Who implements strategy?
◦ Everyone in the organization◦ Complete buy-in is very important by all especially the
operational people
What must be done?Developing programs, budgets and procedures
◦ Programs: purpose of a program is to make strategy action-oriented Feasibility: coherent stable system? Ease of transition Sequence of execution: where should change begin? Does
sequence change affect success Location: where to implement? Pace and nature of change: slow or fast? Incremental or radical? Stakeholder evaluations: buy-in from stakeholders? More inputs
needed?◦ Budgets: Last chance to identify any problems in the
strategic plan. program, divisional and corporate budgets
◦ Procedures: Standard operating procedures, need to be revisited from time to time, ensures consistency over time and location
Achieving Synergy One of the goals to be achieved in strategic
implementation is synergy Synergy happens when a division independently
would earn less than what it would earn as a part of the organization
Synergy can happen through◦ Shared know-how◦ Coordinated strategies◦ Shared tangible resources◦ Economies of scale or scope◦ Pooled negotiating power◦ New Business Creation
Organizing for actionAny change in strategy leads to
some change in the way an organization is structured
Structure follows strategyStages of Corporate
Development
Stages of corporate developmentFunction Stage I Stage II Stage III
Sizing Up – Major Problems
Survival and growth dealing with short-term operating problems
Growth, rationalization, and expansion of resources, providing for adequate attention to products
Trusteeship in mgmt and control of large & diversified resources; deal with probs at divisional level
Objectives Personal and subjective
Profits and meeting functionally oriented budgets &performance targets
ROI, profits, earnings per share
Strategy Implicit and personal; exploitation of immediate opportunities seen by owner
Functionally oriented moves restricted to “one product” scope
Growth and product diversification; exploitation of general business opportunities
Stages of corporate developmentFunction Stage I Stage II Stage III
Organization: characteristic of structure
One unit, “one-man show”
One unit, functionally specialized group
Multiunit general staff office and decentralized operating division
Measurement & Control
Personal, subjective control based on simple accounting system and daily communication
Control grows beyond one person; assessment of functional operations; structured controls
Complex formal systems geared to comparative assessment of performance measures
KPIs Personal criteria, relationships with owner, operating efficiency, ability to solve operating problems
Functional and internal criteria such as sales, performance compared to budget, size of empire, status in group etc.
More impersonal application of comparisons such as profits, ROI, P/E ratio, sales etc.
Stages of corporate developmentFunction Stage I Stage II Stage IIIReward-punishment system
Informal, personal, subjective; used to maintain control and divide small pool of resources to provide personal incentives for key performers
More structured; usually based to a great extent on agreed policies as opposed to personal opinion and relationships
Allotment by “due process” of a wide variety of different rewards and punishments on a formal and systematic basis. Companywide policies usually apply to many different classes of managers and workers with few major exceptions for individual cases
Stages of corporate developmentStage I: Simple structure
◦ Crisis of leadership due to entrepreneur flounderingStage II: Functional structure
◦ Challenge for the founder to change management styleStage III: Divisional structure
◦ Crisis of control due to the various divisions acting independently
◦ Red tape crisisStage IV: Beyond SBUsBlocks to changing stages
◦ Internal: lack of resources, ability, refusal of top mgmt to delegate decision making
◦ External: economic conditions, labor shortages, lack of market growth
External Environment & Structure
Dynamic
• High rate of change• Use team-based, network, or
other organic structure
Stable
• Steady conditions, predictable change
• Use mechanistic structure
Complex
• Many elements (such as stakeholders)
• Decentralize
Simple
• Few environmental elements• Less need to decentralize
Diverse
• Several products, clients, regions
• Use divisional form aligned with the diversity
Hostile
• Competition and resource scarcity
• Use organic structure for responsiveness
Integrated
• Single product, client, place• Use functional structure, or
geographic division if global
Munificent
• Plenty of resources and product demand
• Less need for organic structure
External Environment & Structure (con’t)
Organizational lifecycleStage I Stage II Stage
IIIStage IV
Stage V
Dominant Issue
Birth Growth Maturity Decline Death
Popular Strategies
Concentration in a niche
Horizontal and vertical growth
Concentric and conglomerate diversification
Profit strategy followed by retrenchment
Liquidation or bankruptcy
Likely structure
Entrepreneur dominated
Functional management emphasized
Decentralization into profit or investment centers
Structural surgery
Dismemberment of structure
OrganizationalStructureElements
Span ofControl
Centralization
Department-alization
Formalization
Elements of Organizational Structure
Formal decision making authority is held by a few people, usually at the top
Centralization
Decision making authority isdispersed throughout the organization
Decentralization
Centralization and Decentralization
FormalizationThe degree to which organizations standardize
behavior through rules, procedures, formal training, and related mechanisms.
Formalization increases as firms get older, larger, and more regulated
Problems◦ Reduces organizational flexibility◦ Work rules can undermine productivity◦ Employees feel disempowered◦ Rules become focus of attention
Advanced types of Org Structures – Matrix Structure
Advantageous when external environment is complex and changing
Conditions for typically having matrix structure◦ Ideas need to be cross fertilized across projects or products◦ Resources are scarce◦ Abilities to process information and to make decisions need
to be implemented Distinct phases of development
of matrix structure◦ Temporary cross-functional task
forces◦ Product/ Brand Management◦ Mature Matrix
CoreFirm
Productdevelopmen
t partner(U.S.A.)
Call centerpartner(India)
Accounting partner
(Canada)
Package design partner
(UK)
Assembly partner
(Mexico)
Network Organizational Structure
Advanced types of Org Structures – Network Structure
Virtual elimination of in-house business functions
Virtual organizationKey characteristics
◦ Heavily dependant on outsourcing◦ Organizations business functions are spread◦ Most useful when the environment of a firm is
unstable and is expected to remain so◦ Organization is in effect only a shell with a small
headquarters acting as a broker electronically connected to some completely owned divisions, partially owned subsidiaries and other independent companies
Reengineering and strategy implementation Reengineering is the radical redesign of business
processes to achieve major gains in cost, service or time
Principles for reengineering◦ Organizing around outcomes and not tasks◦ Have those who use the output of the process perform the
process◦ Subsume information-processing work into real work that
produces the information◦ Treat geographically dispersed resources as though they
were centralized◦ Link parallel activities instead of integrating their results◦ Put the decision point where the work is performed and
build control into the process◦ Capture information once and at the source
Designing jobs to implement strategyStrategy implementation also
involves redesigning the way jobs are done
Job design refers to the design of individual tasks in an attempt to make them more relevant to the company ◦Job Enlargement◦Job Rotation◦Job Enrichment
International issues in strategy implementationStages in international development
◦ Stage I (Domestic company)◦ Stage II (Domestic company with export division)◦ Stage III (Primarily domestic company with international
division)◦ Stage IV (Multinational corporation with multi-domestic
emphasis)◦ Stage V (Multinational corporation with global emphasis)
Sequence might not be always as shown aboveSame organization can be at a different stage with
respect to its multiple productsCentralization vs Decentralization
◦ Product group structure e.g. American Cynamid◦ Geographic area structure e.g Nestle