Chapter 7 Implementing Strategies: Management & Operations Issues

Strategic Management: Concepts & Cases 13th Edition Fred David

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Ch 7 -1

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Ch 7 -2

Strategy Formulation vs. Implementation

Strategy Formulation (SF) Positioning forces before the action Focus on effectiveness Primarily intellectual Requires good intuitive and analytical skills

Requires coordination among a few people

Strategy Implementation (SI) Managing forces during the action Focus on efficiency Primarily operational Requires special motivation and leadership skills Requires coordination among many people
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Nature of Strategy Implementation

SI problems can arise because of the shift in responsibility, especially if SF decisions come as a surprise to middle- and lower-level managers. Therefore, it is essential to involve divisional and functional managers in SF.

Shift in responsibility
Divisional or Functional Managers

Strategists

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Ch 7 -4

Management Issues Central to Strategy Implementation

Establish annual objectives Devise policies Allocate resources Alter existing organizational structure Restructure & reengineer Revise reward & incentive plans Minimize resistance to change

Match managers to strategy Develop a strategysupportive culture Adapt production/operations processes Develop an effective human resources function Downsize & furlough as needed Link performance & pay to strategies
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Purpose of Annual Objectives

Basis

for resource allocation

for management evaluation

Mechanism Major

instrument for monitoring progress toward achieving long-term objectives

Establish

priorities (organizational, divisional, and departmental)

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Ch 7 -6

Resource Allocation
Four Types of Resources
1. Financial resources 2. Physical resources 3. Human resources 4. Technological resources

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Ch 7 -7

Managing Conflict
Conflict a disagreement between two or more parties. Interdependency of objectives and competition for limited resources can cause conflict.

Conflict not always bad Lack of conflict may signal apathy Can energize opposing groups to action May help managers identify problems
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MATCHING STRUCTURE WITH STRATEGY

Changes in strategy often require changes in the way an organization is structured because: (1) structure largely dictates how objectives and policies will be established (e.g., objectives and policies established under a geographic organizational structure are couched in geographic terms) and (2) structure dictates how resources will be allocated (e.g., if an organizations structure is based on customer groups, then resources will be allocated in that manner). Structure should be designed to facilitate the strategic pursuit of a firm and, therefore, follow strategy. When a firm changes its strategy, the existing organizational structure may become ineffective. For example, new strategies to reduce payroll costs may require a change in span of control.

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Ch 7 -9

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Ch 7 -10

Basic Forms of Structure

Functional Structure
Divisional Structure Strategic Business Unit Structure (SBU) Matrix Structure

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Ch 7 -11

Functional Structure

Groups tasks and activities by business function (e.g., production, finance,

marketing, R&D, HR, IT, etc.).

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Ch 7 -12

Functional Structure

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Ch 7 -13

Divisional Structure
Can

be organized in one of four ways:

By geographic area By product or service By customer By process

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Divisional Structure

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Ch 7 -15

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 chief executive officer.
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Matrix Structure

The most complex of all structures because it depends upon both vertical and horizontal flows of authority and communication.

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Ch 7 -17

Matrix Structure

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Ch 7 -18

Restructuring
Restructuring - reducing the size of an organization. Also called:

Downsizing Rightsizing Delayering

These methods involve, respectively, reducing the number of employees, number of divisions, and number of hierarchical levels in a firms organizational structure. Reducing the size of an organization is intended to improve its efficiency and effectiveness.

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Ch 7 -19

Creating a Strategy-Supportive Culture

1.

2. 3.

4. 5.

Formal statements of organizational philosophy Design of physical spaces Deliberate role modeling, teaching, and coaching Explicit reward and status system Stories, legends, myths, and parables
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Creating a Strategy-Supportive Culture

6. 7.

8. 9. 10.

What leaders pay attention to Leader reactions to critical incidents and crises Organizational design and structure Organizational systems and procedures Criteria for recruitment, selection, promotion, leveling off, retirement, and excommunication of people
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Production/Operations Decision Examples

Plant

size
/ Inventory control

Inventory Quality Cost

control

control

Technological

innovation
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Human Resource Concerns

Assessing staffing needs and costs. Selection Methods. Employee Training. Motivating Employees Developing Performance Incentives; Work-Life Balance Issues; etc. Selecting Appropriate Leadership Styles.
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