Strategy, Implementation, Control

74 SREERAM ACADEMY (FORMERLY SREERAM COACHING POINT)

STRATEGY, IMPLEMENTATION AND CONTROL

Strategy implementation concerns the managerial exercise of putting a freshly chosen strategy into place. The

allocation of the available resources to new course of action will need to be undertaken and there may be a

need for adopting the organization’s structure to handle new activities.

Many managers fail to differentiate between the strategy formulation and strategy implementation. A

company will be successful only when strategy formulation is sound and the implementation is excellent. The

matrix given shows the sound/ flawed strategy formulation, and weak/ excellent strategy implementation.

FORMULATION SOUND A B (SUCCESS)

STRATEGY FLAWED C D

WEAK STRATEGY EXCELLENT IMPLEMENTATION

Square A: This is the situation where the company’s policies are good, but not implemented properly (weak).

This may be due to various reasons like lack of experience, lack of resources, missing leadership etc.

Square B: This is the “SUCCESS” square.

Square C: This is the situation where the company’s strategy is wrongly formulated and implementation is also

very poor. Then the organization has to redesign the strategy as well as the procedures for implementation.

Square D: Policy is not sound, but implementation is excellent. That means, a redesign of the policy is required.

Principal combinations of efficiency and effectiveness

Operational

Management

Strategic Management

Efficient Effective Ineffective

Inefficient Thrive 1 Die Slowly 2

Inefficient Survive 3 Die quickly 4


Note: A technically imperfect plan that is implemented well will achieve more than the perfect plan that never

gets off the paper on which it is typed.

Successful formulation doesn’t guarantee successful implementation. Strategy formulation and

implementation can be contrasted in the following ways:

Strategy Formulation Strategy Implementation

It is the positioning force before the action. It manages forces during the action.

It focuses on effectiveness It focuses on efficiency

It is primarily an intellectual process It is primarily an operational process

It requires good intuitive and analytical skills Its implementation requires special motivation and

leadership skills

It requires coordination among a few individuals It requires combination among many individuals

Strategy formulation and concept tools do not differ greatly for organizations. However, it differs in

implementation, which depends on the type of organization. Implementing strategies requires such actions as

altering sales territories, adding new departments, closing facilities, hiring new employees, benefits,

establishing cost control procedures, etc.

In real life, formulation and implementation processes are intertwined. Two types of linkages exist between

these two plans of strategic management:

Forward Linkage

Backward Linkage

Issues faced in strategy implementation

The different issues involved in strategy implementation cover different areas within the organizations.

The strategic plan devised by the organization proposes the manner in which the strategies could be put into

action. The strategic plans themselves do not lead to action. Strategies have to be achieved through

implementation. When the polices are formulated, the organization should pay attention to both the

effectiveness of the policy and also efficiency of the policy.The strategic plans are devised by the organization:

Strategies should lead to plans.

Plan should consist of programs

Programs lead to the formulation of the projects.

Projects create the needed infrastructure for the day- to-day operations.

Different resources are required to plan the project.


Note: To be effective is to do the right things; to be efficient is to do the things right.

Both are equally important. However, the emphasis should be first on effectiveness rather than efficiency. The

organization should implement the policy at the right time (effectively); then only the policy will serve the

purpose.

The successful strategic policy doesn’t guarantee the successful strategic implementation. Implementation is a

separate activity to the policy in use.

The following points should be considered (sequentially) while implementing the project:

Project implementation Procedural implementation

Resource allocation Structural implementation

Functional implementation Behavioral implementation

Some of these can be performed simultaneously also. Many activities can be performed simultaneously;

certain other activities can be repeated over time.

In all organizations, implementation requires a shift in responsibility from strategists to divisional and

functional managers.

Managers are motivated more by perceived self- interest than by organizational interests. Therefore, divisional

managers and functional managers should be involved in strategy formulation activities. Likewise, strategists

should be involved in implementation.

Management issues include:

Establishing annual objectives

Devising policies

Allocation resources

Altering an existing organizational structure

Restructuring and reengineering

Revising reward and incentive plans

Minimizing resistance to change

Matching the managers with strategy

Developing a strategy supporting culture

Adopting production and operation process.


Managers and employees should participate early and directly in strategy, implementation and decisions.

Strategists’ genuine personal commitment to implementation is necessary. For the managers, the challenges

should be personal than organizational.

Chandler’s strategy- structure relationship

New administration problems emerge- organizational performance declines- A new organizational structure is

established- Organizational performance improves- New strategy is formed.

Organizational Strategy and implementation

The organizational structure largely dictates how the objectives and policies will be established.

The organizational structure also dictates how the resources will be allocated to convert the policies into

performance action.

The structure which is suitable for one organization may not be suitable for another organization.

There are many structures available; some of them are as follows:

Functional Structure

A functional structure groups the tasks and activities by business function such as production,

operations, marketing, etc.

This also promotes specialization of labor, encourages efficiency, minimizes the need for elaborate

control system and allows rapid decision making.


This disadvantage is that it forces the accountability to the top, minimizes career development

opportunities.

Widely used and centralized type structure.

A competitive advantage is created when there is a proper match between strategy and structure.

Selecting the organizational structure and controls which result in effective implementation of chosen

strategies is a fundamental challenge for managers.

A simple organizational structure may result in competitive advantages for some small companies.

Difference in functional specialization and orientation may impede communication and coordination.

The CEO must integrate functional decision making and coordinate the actions of overall business

across the functions.

Functional specialization often may develop narrow perspective, losing sight of the company’s

strategic vision and mission.

To overcome this, the multidivisional structure (M-Form) can be implemented.

M- Form Structure

In this each division represents a separate business. The top corporate officer delegates responsibility

for day to day operations and business unit strategy to division managers.

It was developed in the 1920s. This was developed when coordination and control- oriented problems

were felt in large firms. Functional departments often had difficulty dealing with distinct product lines

and markets. Top managers became overloaded, and over-involved in solving short- run problems such

as coordination, communications and neglected long- run strategic issues.


The new innovative structure is called for:

Creating separate divisions each representing a distinct business.

Each division would house its functional hierarchy.

Division managers would be given responsibility for managing day to

day operations.

A small corporate office that would determine the long run strategic

direction of the firm and exercise financial control over the semi

autonomous divisions.

This new structure is able to monitor the performance of individual businesses, simplifying the control

problems, improving the better allocation of resources etc.

Divisional Structure

As the small organization grows, it faces difficulty managing the different products in different areas for

different segments. The divisional structure is necessary to motivate people.

The divisional structure may be one of the following:

By Geographic areas: It is appropriate for organizations whose strategies need to be tailored to fit the

particular needs and characteristics of customers in different geographical areas.

By Process: It is similar to functional structure because activities are organized according to the way

work is actually performed.

By products or services: It is most effective for implementing strategies when specific products need

special emphasis.

By customers: When a few major customers are important and many services are provided to these

customers then a divisional strategy by customer can be most effective.

Advantages:

The accountability is clear

The divisional managers are responsible for sales and profit levels.


Employee morale is higher

It creates carrier development opportunities

Leads to competitive climate within the organization

Disadvantages:

It is costly.

Some duplication of staff services

Managers must be well qualified, which may attract high salary

Headquarters driven control systems

Some divisions may receive special treatment; hence to maintain consistent companywide practices is

difficult.

SBU Structure

The SBU (strategic business unit) consist of operating units where each unit represents a separate

business.

The top corporate officer delegates responsibility for day- to-day operations if its managers. The

corporate office is responsible for formulating and implementing overall corporate strategy and

manages the SBUs through strategic and financial controls.

SBU structure groups similar divisions into strategic business units, and delegate’s authority and

responsibility for each unit to a senior executive who reports directly to the chief executive officer.


The different divisions can be regrouped into SBUs if they have common characteristics, such as

competing in the same industry, being located in the same area or having the same customers. SBU

structure enables the company to monitor more accurately.

This structure is suitable when more units exist and in each unit many products are manufactured.

The responsibility is delegated to each SBU and further responsibilities are given to each division head.

The structure requires experts for each division. This requires different layers of management to

control the activities.

This structure is very costly because establishment expenses increase owing to higher number of

employees. The advantage is the performance of each SBU and each division can be monitored and

the resources may be diversified from stronger units to weaker units.

In this structure each SBU is forced to compare itself with another SBU which may be a monitoring

factor for the weaker SBU.

For example, Sony has been restructuring to match the SBU structure with ten internal companies, as

organized into 4 strategic business units. It has been pushing the company to make better use of

software products and content in television and audio gear to increase Sony’s profitability.

Matrix Structure

Matrix organizations identified that functional structure or the one around the product and geography

provides an appropriate organizational structure. The matrix structure is a contrast and is suitable

when organizations conclude that neither functional nor divisional form is suitable.

In matrix structure functional and product forms are combined simultaneously at the same level of

organization. Employees have two superiors, a product or project manager and a functional manager.


The home department, i.e. engineering, manufacturing or sales is usually functional and is permanent.

People from functional units are temporarily assigned for different products or different projects.

This is most complex and depends on both horizontal and vertical flows

Dual line of budgetary authorities

Dual sources of reward and punishment, shared authority and dual reporting channels require an

extensive and effective communication system.

Widely used in construction, healthcare, research and defense.

However, the project objectives are clear; many channels of communication, workers can see the

visible results of their work.

In matrix structure organizations need planning, training, clear mutual understanding of roles and

responsibilities, excellent internal communications and mutual trust and confidence.

The matrix structures are more suitable when the organizations are pursuing strategies and new

products, customer groups and technologies in their range of activities.

The matrix structure was developed to combine the stability of the functional structure with the

flexibility of the product form. This structure is very useful when the external environment is complex

and changeable.

This structure is often in SBU when the following three conditions exist-

1. The ideas need to be cross fertilized across projects or products.

2. Resources are scarce.

3. Abilities to process information and to make decisions need to be improved.

For the development of matrix structure, Davis and Lawrence have proposed three distinct phases:

1. Cross functional task forces- Temporary cross functional task forces are initially used when a new

product line is introduced. The project manager is in charge as the key horizontal link.

2. Product/ brand management- If the cross functional task forces become more permanent, the

project manager becomes a product or brand manager and the next phase starts. The product or

brand managers act as the integrators of the semi permanent products or brands.

3. Mature matrix- The third and final phase of matrix development involves a true dual authority

structure. Both the functional and product structures are permanent. All employees are connected

both in a horizontal manner and also a vertical manner.

4. The matrix structure is not very popular because of difficulties in implementation and trouble in

managing.


Network Structure

It is a newer and radical organizational design; it is an example for what could be termed as non-

structure. This is an elimination of in- house business functions.

Many activities are outsourced and obtained from service providers. A corporation organized in this

manner is called a virtual organization because it is composed of a series of project groups or

collaborations linked by network.

This structure is suitable when the environment is unstable and is expected to remain so.

Electronic markets and sophisticated information system reduce the transaction cost of the market

place.

The organization functions with a small headquarters acting as a broker electronically connected to

some completely owned divisions.

Companies like Nike, Reebok and Benetton use the network structure in their operation functions.

This structure provides an organization with flexibility and adaptability to cope with rapid

technological changes. It allows the company to concentrate on its distinctive competitors by

collecting efficiencies from other competitors.

This structure is in response to social and technological advances.

It allows the company to concentrate on its distinctive competitors by collecting efficiencies from

other competitors.

This structure is in response to social and technological advances.

The biggest disadvantage is that the personal interaction is not available in this structure.

Strategic Business units and Core Competence

Nowadays most corporations organize their businesses into appropriate SBUs. This concept is relevant to

multi product, multi business enterprises. It is required to group the products and businesses into

appropriate SBUs, and then to decide for strategic planning. The attention is to be paid for what is the best

way of grouping the products/ businesses of such large enterprise.

An SBU is a grouping of related businesses, which can be considered for composite planning treatment.

The purpose is to provide effective strategic planning for each of the units. Large multi- business firms

were handling businesses planning on to a territorial basis.

Often, the territorial structure did not suit the structure of strategic planning. Since a number of territorial

units handled the same product, it was getting varied strategic planning treatment. Also, since a given

territorial planning unit carried different and unrelated products, products with dissimilar characteristics

were getting identical strategic planning treatment.

The following advantages are derived from an SBU:


1. A scientific method of grouping the business of a multi business corporation which helps the firm in

strategic planning.

2. An improvement over the territorial grouping of business and strategic planning based on territorial

units.

3. An SBU is a grouping of related business that can be taken up for strategic planning distinct from the

rest of the business.

4. Each SBU will have its own set of competitors.

5. Each SBU will have a CEO, who will be responsible for strategic planning.

6. The most important characteristics of SBU are:-

a. It is a single business or collection of related businesses which offer scope for independent

planning and which might feasibly stand alone from the rest of the organization.

b. Has its own set of competitors.

c. Has a manager who has responsibility for strategic planning and profit performance and who ahs

control of profit influencing factors.

An SBU is a grouping of related businesses in a scientific way. The purpose is to provide effective strategic

planning treatment to each of its products/ businesses. The attempt should be to group the businesses into an

appropriate number of strategic business units before the firm takes up the strategy formulation task. The

concept of grouping is that all related from the stand point of “function” should fall under one SBU. SBU

concept helps a multi business corporation in scientifically grouping its businesses into a few distinct business

units. This grouping would provide the organization the right direction to strategic planning by removing the

confusions and difficulties.

Value Chain analysis


This is widely used as a means of describing the activities within and around the organizations. It is to assess

the company’s ability to provide value for money products or services. This was originally introduced as an

accounting analysis to throw light on the “value added” by separate steps in complex manufacturing

processes.

One of the key aspects is the recognition that organizations are much more than a random collection of

machines, men and money. These resources should be properly utilized to achieve the optimum utilization in

the best interest of the company. These resources should be properly deployed otherwise the resources may

not have value. These resources should be properly organized into routines and systems which ensure that

products or services produced are valued by the consumer.

The primary activities of the organization are grouped into 5 main areas, viz.

1. Inbound logistics- are the activities concerned with receiving, storing and distributing the inputs to the

products/ services. This includes material handling, stock control, transport, etc.

2. Operations- transform these various inputs into the final product or services which include machining,

packaging, assembly, training, etc.

3. Outbound logistics- collect store and distribute the product to customers. These would include

warehousing, material handling, transport, etc.

4. Marketing and sales- provide the means whereby consumers/ users are made aware of the product/

service and are able to purchase it. This would include sales administration, advertising, selling and so

on.

5. Services- are all those activities which enhance or maintain the value of the products/ service like

installation, repair training and spares etc.

There are 4 supporting activities: the above mentioned primary activities are linked to the supporting

activities.

Procurement- this refers to the process for acquiring the various inputs to the primary activities.

Technology development- all value activities have technology, if it is simply know- how. The key

technologies may be concerned directly with the product or with the processes or with the

particular resource.

Human resource management- This is a particularly important area, which transacts with all

primary activities. It is concerned with those activities involved in recruiting, managing, training,

developing and rewarding people within an organization.

Infrastructure- The systems of planning, finance, quality control, information management are

crucially important to an organization’s performance in its primary activities. Infrastructure also

consists of the structures and routines of the organization, which sustain its culture.


Identifying Core Competencies

Value chain analysis is useful in describing the separate activities which are necessary to underpin an

organization’s strategies and how they link together both inside and outside the organization. To have

successful operations in the organizations, it is necessary to have threshold competence in the above

activities.

Some activities are very critical; these are called core competencies and will differ from one organization

to another organization depending on how the company is positioned and the strategies it is pursuing. The

unique resources and core competencies allows the organization to gain competitive advantage.

It is important to identify an organization’s core competencies not only for reasons of ensuring fit between

these core competencies and the changing nature of the markets or environment but core competencies

are required to identify the new opportunities. The core competencies can be used for exploiting the new

markets. The development of “added value” services/ or geographical spread of markets are two ways in

which core competencies can be exploited.

Value chain analysis is a reminder that the long term competitive position of an organization is concerned

with its ability to sustain value for money products or services. This can be helpful in identifying those

activities in which the organization must undertake a threshold level of competence and those which

represent the competencies of the organization. It is necessary to identify on what basis the company has

gained competitive advantage and also which are the core competencies in sustaining this advantage.

Managing Linkages

Core competencies in separate activities may provide competitive advantage for an organization, but over

time, these may be limited by competitors. If core competencies relate to the management of linkages within

the organization’s value chain and linkages into supply and distribution chains, then they will be more robust

and difficult to copy .It is the management of these linkages, which provide leverage, and level of performance

which are difficult to match.

The ability to coordinate the activity of specialist teams or departments may create competitive advantage

through improving value for money in the product or services. Specialization of roles and responsibilities is

common in most organizations and is one way in which high levels of competence in separate activities is

achieved. However, often it results in a set of activities which are incompatible- with different departments

pulling in different directions but not achieving the overall goal of the organization.

The management of internal linkages in the value chain could create competitive advantage in a number of

ways. There may be important linkages between the primary activities. The management of the linkages

between a primary activity and a support activity may be the basis for core competencies. There is a chance to

miss out the managing of linkages between the primary activities in an analysis.

Linkages between different support activities may also be the basis of core competencies. In addition to the

management of internal linkage, competitive advantage may also be gained by the ability to complement and

coordinate the organization’s own activities.

Competitive advantage can be gained in a number of different ways-


Vertical integration

Quality control in raw materials and production

Total quality management

Merchandising activities

Leadership and strategic implementation

A strategy manager has many different leadership roles to play: visionary, chief, entrepreneur, chief,

administrator, culture, builder, resource acquirer and allocator, capabilities, builder, process integrator,

crisis, solver, motivator, arbitrator, policy maker, policy enforcer. The managers have to be highly

committed in their work.

Managers have the following 5 leadership roles to play in pushing for good strategy execution:

Staying on top of what is happening, closely monitoring the progress, ferreting out issues, and

learning what obstacles lie in the path of good execution.

Promoting a culture and the spirit that motivate organizational members to execute strategy in a

competent fashion and perform at a high level.

Keeping the organization responsive to changing conditions, alert for new opportunities and ahead

of others, in developing valuable competencies and capabilities.

Exercising ethical leadership and insisting that the company conduct its affairs like a model

corporate citizen.

Pushing corrective actions to improve strategy execution and overall strategic performance.

Documents

Strategy, Implementation, Control