Chapter 7

Strategy Implementation:
Organizing for Action

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 Strategy Implementation

Strategy Implementation:
– Sum total of the activities and choices
required for the execution of a
strategic plan.
– Process by which strategies and
policies are put into action through
programs, budgets, and procedures.

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 Strategy Implementation

Implementation Process Questions:

– Who are the people to carry out the
strategic plan?
– What must be done to align operations
with new direction?
– How is work going to be coordinated?

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 Components of Strategy Implementation

• Communication
• Structure
• Reconciling functional area conflicts
• Leadership commitment
• Reward system
• Functional issues
• Information system
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Strategy Formulation Vs. Implementation

Poor
Stra Roulette Failure
tegy
For
mul
atio Good Trouble
Success
n

Good Poor

Strategy Implementation
Fig. Interrelationship between strategy formulation and implementation
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 Strategy Implementation

More time than planned

Unanticipated problems
Activities ineffectively coordinated
Problems in Crises deferred attention away
Employees w/o capabilities
Implementing
Strategic plans Inadequate employee training
Uncontrollable external factors
Inadequate leadership
Poorly defined tasks
Inadequate information systems

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 Strategy Implementation

Programs:
– Purpose is to make the strategy
“action-oriented.”
• Compare proposed programs and
activities with current programs and
activities.

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 Strategy Implementation

Programs:
– Matrix of change
• Feasibility
• Sequence execution
• Location
• Pace and nature of change
• Stakeholder evaluations

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Matrix of Change

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 Strategy Implementation

Budgets:
– Planning a budget is the last real
check a firm has on the feasibility of
the selected strategy.

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 Strategy Implementation

Procedures:

• Detail the various activities that must be

carried out to complete a corporation’s
programs.

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 Strategy Implementation

Achieving Synergy:
– Synergy:
• If the return on investment (ROI) is greater
than what the return would be if the
division was an independent business.

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 Strategy Implementation

6 Forms of Synergy:
• Shared know-how
• Coordinated strategies
• Shared tangible resources
• Economies of scale or scope
• Pooled negotiating power
• New business creation

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 Strategy Implementation

Structure Follows Strategy:

– Changes in corporate strategy lead to

changes in organizational structure

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 Strategy Implementation

Structure Follows Strategy:

• New strategy is created
• New administrative problems emerge
• Economic performance declines
• New appropriate structure is invented
• Profit returns to its previous levels

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 Strategy Implementation

Stages of corporate development

• Simple Structure
• Functional Structure
• Divisional Structure
• Beyond SBU’s

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 Strategy Implementation

Simple Structure:
– Stage I:
• Entrepreneur
– Decision making tightly controlled
– Little formal structure
– Planning short range/reactive
– Flexible and dynamic

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 Strategy Implementation

Functional Structure:
– Stage II:
• Management team
• Functional specialization
• Delegation decision making
• Concentration/specialization in industry

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 Strategy Implementation

Divisional Structure:
– Stage III:
• Diverse product lines
• Decentralized decision making
• SBU’s
• Almost unlimited resources

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 Strategy Implementation

Beyond SBU’s:
– Stage IV:
• Increasing environmental uncertainty
• Technological advances
• Size & scope of worldwide businesses
• Multi-industry competitive strategy
• Better educated personnel

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 Factors Differentiating Stage I, II, and III
Companies
Function Stage 1 Stage II Stage III
1. Sizing up: Survival and growth dealing Growth, rationalization, and Trusteeship in management
Major problems with short-term operating expansion of resources, and investment and control
problems. providing for adequate of large, increasing, and
attention to product diversified resources. Also,
problems. important to diagnose and
take action on problems at
division level.
2. Objectives Personal and subjective. Profits and meeting ROI, profits, earnings per
functionally oriented share.
budgets and performance
targets.
3. Strategy Implicit and personal; Functionally oriented moves Growth and product
exploitation of immediate restricted to “one product” diversification; exploitation
opportunities seen by scope; exploitation of one of general business
owner-manager. basic product or service opportunities.
field.
4. Organization: One unit, “one-man show.” One unit, functionally Multiunit general staff office
Major characteristic specialized group. and decentralized operating
of structure divisions.

(Continued)

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 Factors Differentiating Stage I, II, and III Companies

Function Stage 1 Stage II Stage III

5. (a) Measurement Personal, subjective control Control grows beyond one Complex formal system geared
and control based on simple accounting person; assessment of to comparative assessment of
system and daily functional operations performance measures,
communication and necessary; structured indicating problems and
observation. control systems evolve. opportunities and assessing
management ability of division
managers.
5. (b) Key performance Personal criteria, Functional and internal More impersonal application of
indicators relationships with owner, criteria such as sales, comparisons such as profits,
operating efficiency, ability performance compared to ROI, P/E ratio, sales, market
to solve operating problems. budget, size of empire, share, productivity, product
status in group, personal leadership, personnel
relationships, etc. development, employee
Informal, personal, attitudes, public responsibility.
6. Reward-punishment subjective; used to maintain More structured; usually Allotment by “due process” of a
system control and divide small based to a greater extent on wide variety of different
pool of resources to provide agreed policies as opposed rewards and punishments on a
personal incentives for key to personal opinion and formal and systematic basis.
performers. relationships. Companywide policies usually
apply to many different classes
of managers and workers with
few major exceptions for
individual cases.

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 Strategy Implementation

Organizational Life Cycle:

– Describes how organizations grow,
develop and eventually decline.
• Stages:
– Birth Stage
– Growth
– Maturity
– Decline
– Death

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 Organizational Life Cycle

Stage I Stage II Stage III1 Stage IV Stage V

Dominant Issue Birth Growth Maturity Decline Death

Popular Concentration Horizontal Concentric and Profit strategy Liquidation or

Strategies in a niche and vertical conglomerate followed by bankruptcy
growth diversification retrenchment

Likely Entrepreneur- Functional Decentralization Structural Dismemberment

Structure dominated management into profit or surgery of structure
emphasized investment centers

Note: 1. An organization may enter a Revival Phase either during the Maturity or Decline Stages and thus
extend the organization’s life.

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 Changing Structural Characteristics
of Modern Corporation
Old Organizational Design New Organizational Design

One large corporation Mini-business units & cooperative relationships

Vertical communication Horizontal communication

Centralized top-down decision making Decentralized participative decision making

Vertical integration Outsourcing & 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

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 Strategy Implementation

Matrix Structure:
– 3 Distinct Phases
• Temporary cross-functional task forces
• Product/brand management
• Mature matrix

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 Matrix Structure
Top Management

Manufacturing Sales Finance Personnel

Manager: Manufacturing Sales Finance Personnel

Project Unit Unit Unit Unit
A

Manager: Manufacturing Sales Finance Personnel

Project Unit Unit Unit Unit
B

Manager: Manufacturing Sales Finance Personnel

Project Unit Unit Unit Unit
C

Manager: Manufacturing Sales Finance Personnel

Project Unit Unit Unit Unit
D

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 Strategy Implementation

Network Structure:
– “non structure” – elimination of in-
house business functions
– Termed “virtual organization”
• Useful in unstable environments
• Need for innovation and quick response

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 Network Structure

Packagers

Designers Suppliers

Corporate
Headquarters
(Broker)

Manufacturers Distributors

Promotion/
Advertising
Agencies

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 Strategy Implementation

Cellular Organization:
– composed of “cells”
• Self-managing teams
• Autonomous business units

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 Strategy Implementation

Reengineering:
– Radical design of business processes
to achieve major gains in cost,
service, or time. Effective way to
implement a turnaround strategy.

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 Strategy Implementation
Reengineering Principles:

– Organize around outcomes, not tasks

– Have those who use the output perform the
process
– Subsume information-processing work into the
real work that produces the information
– Treat geographically dispersed resources as
though they were centralized
– Link parallel activities instead of integrating their
results
– Put decision point where work is performed and
build control into the process
– Capture information once at the source
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 Strategy Implementation
• Job Design source of competitive advantage

– Job design
• Study of individual tasks to increase relevance
– Job enlargement
• Combining tasks
– Job rotation
• Increase variety of tasks
– Job enrichment
• More autonomy and control to workers

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 Trajectories of Decline

• Focusing
• Venturing
• Inventing
• Decoupling

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 Concluding Remarks

Actions Speak Louder than Words!

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