Chapter 6

Implementing Strategies:
Management & Operations Issues

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6.1 The Nature of Strategy Implementation
• The strategic-management process does not end
when the firm decides what strategy or strategies
to pursue.
• There must be a translation of strategic thought
into strategic action.
• Successful strategy formulation does not
guarantee successful strategy implementation.
• It is always more difficult to do something
(strategy implementation) than to say you are
going to do it (strategy formulation)!
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 Strategy Formulation vs. Implementation
Strategy Formulation Strategy Implementation
(SF) (SI)
• Positioning forces • Managing forces during
before the action the action
• Focus on effectiveness • Focus on efficiency
• Primarily intellectual • Primarily operational
• Requires good intuitive • Requires special
and analytical skills motivation and leadership
• Requires coordination skills
among a few people • Requires coordination
among many people

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 Shift in responsibility during Strategy Implementation
 The transition from strategy formulation to strategy implementation
requires a shift in responsibility from strategists to divisional and
functional managers.
 The problems can arise specially if strategy-formulation decisions
come as a surprise to middle- and lower-level managers.
 Therefore, it is essential that divisional and functional managers be
involved as much as possible in strategy-formulation activities.
 Of equal importance, strategists should be involved as much as
possible in strategy-implementation activities.

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 6.2.Key Concepts in Strategy Implementation

A. Management Issues central to Strategy Implementation:

• Establish annual objectives • Match managers to strategy

• Devise policies • Develop a strategy-supportive
• Allocate resources culture
• Alter existing organizational • Adapt production/operations
structure processes
• Restructure & reengineer • Develop an effective human
• Revise reward & incentive resources function
plans • Link performance & pay to
• Minimize resistance to strategies
change
Ch 7 -5
 Management Issues….

• Management changes are necessarily more extensive

when strategies to be implemented move a firm in a
major new direction.
• Managers and employees throughout an organization
should participate early and directly in strategy
implementation decisions.
• Their role in strategy implementation should build upon
prior involvement in strategy-formulation activities.
a. Establish annual objectives
Establishing annual objectives is a decentralized activity that directly
involves all managers in an organization.
Active participation in establishing annual objectives can lead to
acceptance and commitment
Ch 7 -6
Purpose of Annual Objectives:
 Basis for resource allocation
 Mechanism for management evaluation
 Major instrument for monitoring progress toward achieving long-term
objectives
 Establish priorities (organizational, divisional, and departmental)
 Serve as guidelines for action, directing and channeling efforts and
activities of organization members.
 b. Policies
 policies are needed to make a strategy work
 Policy refers to specific guidelines, methods, procedures, rules, forms,
and administrative practices established to support and encourage
work toward stated goals
 They are instruments for strategy implementation. .
 They provide a basis for management control, allow coordination
across organizational units, and reduce the amount of time managers
spend making decisions.
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 c. Resource Allocation
• Strategic management enables resources to be allocated according to
priorities established by annual objectives.
• All organizations have at least four types of resources that can be used
to achieve desired objectives:
1.Financial resources 3, Human resources
2.Physical resources 4, Technological resources

d. Matching Structure with Strategy

• Changes in strategy often require changes in the way an organization
is structured because:
• structure largely dictates how objectives and policies will be
established and
• structure dictates how resources will be allocated
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 Matching structure with strategy….

Basic Forms of Structure

I, Functional Structure
ii, Divisional Structure
iii. Strategic Business Unit Structure (SBU)
iv. Matrix Structure

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i. Functional Structure
• Groups tasks and activities by functional areas not by product lines
(e.g. finance, marketing, production, R&D, HR, IT…)
ii. Divisional Structure
Can be organized in one of four ways:
By geographic area
By product or service
By customer
By process
iii. Strategic Business Unit Structure (SBU)
Groups similar divisions into strategic business units and delegates
authority and responsibility for each unit to a senior executive who
reports directly to the CEO.
iv. Matrix Structure
The most complex of all structures because it depends upon
both vertical and horizontal flows of authority and
communication 20
.E. RESTRUCTURING AND REENGINEERING
Restructuring - reducing the size of an organization.
It is called downsizing, rightsizing& de-layering--involves reducing the
number of employees, number of divisions, and number of hierarchical
levels respectively in a firm’s organizational structure.
Reducing the size of an organization is intended to improve its efficiency
and effectiveness.
Reengineering-also called process management, process innovation, or
process redesign.
Involves reconfiguring or redesigning work, jobs, and processes for the
purpose of improving cost, quality, service, and speed.
The purpose is to alter managers and employees mind-sets being defined
by their particular functions rather than by overall customer service,
product quality
Reengineering is concerned more with employee and customer well-
being than shareholder well-being.
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 f. Managing Resistance to Change
• Almost any change in structure, technology, people, or strategies has
the potential to disrupt comfortable interaction patterns.
• Why? The thought of change raises anxieties because people fear
economic loss, inconvenience, uncertainty, and a break in normal
social patterns.
• Thus, resistance to change can be considered as the single greatest
threat to successful strategy implementation.
• Resistance to strategy implementation may be because employees do
not understand what is happening or why changes are taking place.
• Hence employees may simply need accurate information
• Form of resistance to change:
• sabotaging production machines,
• absenteeism, filing
• unfounded grievances and
• unwillingness to cooperate. 30
•Three approaches for implementing changes:
1. A force change strategy: involves giving orders and enforcing those
orders.
 this strategy has the advantage of being fast, but it is plagued by low
commitment and high resistance.
2. The educative change strategy
 It is one that presents information to convince people of the need for
change;
 this type of strategy evokes greater commitment and less resistance.
 the disadvantage of this strategy is that implementation becomes slow
and difficult
3. A rational or self-interest change strategy
 It is one that attempts to convince individuals that the change is to their
personal advantage.
 this one is relatively easy and most desirable.
 However, implementation changes are seldom to everyone’s advantage.
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 g. Creating a Strategy-Supportive Culture
 All organizations have a culture.
 Culture includes the set of shared values, beliefs, attitudes,
customs, norms, personalities, heroes, and heroines that
describe a firm.
 This means success often rests upon the degree of support that
strategies receive from a firm’s culture.
 If a firm’s strategies are supported by cultural products such as values,
beliefs, rituals, etc managers can easily implement strategy.
 For this reason, changing a firm’s culture to fit a new strategy is
usually more effective than changing a strategy to fit an existing
culture.

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 Creating a Strategy-Supportive Culture

Ways and Means for Altering an Organization’s Culture:

• Numerous techniques are available to alter an organization’s
culture:
Altering recruitment, training, transfer, promotion,
Restructure of an organization’s design,
Role modeling,
Positive reinforcement, and mentoring
Revising vision and/or mission
Redesigning physical spaces/facades
Altering reward system
Altering organizational policies/procedures/practices

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B. Production/Operations Decision when implementing Strategy
 A major part of the strategy implementation process takes place at the
production site.
 Production-related decisions during implementation are:
 plant size, plant location, product design, choice of equipment, kind of
tooling,
 size of inventory, inventory control, quality control, cost control, use of
standards, job specialization, employee training, equipment and resource
utilization, shipping and packaging, etc.
C. Human Resource Concerns
Strategic responsibilities of the human resource manager include:
 Assessing the staffing needs and
 Developing a staffing plan for effectively implementing strategies.
The plan includes;
How to manage health care insurance costs.
 How to motivate employees and managers during a time when
layoffs are common and workloads are high.
 development of performance incentives that clearly link
Performance and pay to strategies. 1-16
Labor Cost-Saving Tactics
 Salary freeze
 Hiring freeze
 Salary reductions
 Reduce employee benefits
 Raise employee contribution to health-care premiums
 Reduce employee workweek
 Layoffs
 Early retirement
 Reducing/eliminating bonuses

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 D. Marketing Issues
Market Segmentation and Market position
 Market segmentation and product positioning
are two variables of central importance to strategy implementation:
Market segmentation:
 Is defined as the subdividing of a market into distinct subsets of
customers according to needs and buying habits.
 market segmentation allows a firm to operate with limited
resources because mass production, mass distribution, and mass
advertising are not required.
 market segmentation decisions directly affect marketing mix
variables: product, place, promotion, and price,
 Product Positioning
 Positioning entails developing schematic representations that
reflect how your products or services compare to competitors’ on
dimensions most important to success in the industry. 18
 F. Finance/Accounting Issues
 Finance/accounting concepts considered to be central to strategy
implementation are :
1.Acquiring needed capital (debt and equity)
2.Developing projected financial statements,
3. Preparing financial budgets, and
4.Evaluating the Worth of a Business

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The End!

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