Strategic Management II

Operationalizing
Strategy
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Strategy Implementation
Strategy implementation is the sum total of
the activities and choices required for the
execution of a strategic plan.
It is the process by which objectives,
strategies, and policies are put into action
through the development of programs,
budgets, and procedures.
Though
implementation
is
usually
considered after strategy has been
formulated, implementation is a key part of
strategic management.
Strategy
formulation
and
strategy
implementation
should thus be considered
Strategy
implementation
is
concerned with the following points
1. Who are the people who will carry
out the strategic plan?
2. What must be done to support the
companys operations in the new
intended direction?
3. How is everyone going to work
together to do what is needed?
Problems associated with implementation of

strategic change
1. Implementation may take more time than
originally planned
2. Unanticipated major problems may arise
3. Activities are ineffectively coordinated
4. Competing activities and crises may take
attention away from implementation
5. The involved employees may have insufficient
capabilities to perform their jobs.
6. Lower level employees may inadequately
trained
7. Uncontrollable external environmental factors
can create problems
8. Departmental
managers
may
provide
inadequate leadership and direction.
9. Key implementation tasks and activities may
poorly defined
10.The information system may inadequately
Who Implement
Strategy
Depending on how a corporation is

organized, those who implement
strategy will probably be a much
more diverse set of people than
those who formulate it.
In most large, multi industry
corporations, the implementers are
everyone in the organization.
Vice presidents of functional areas
and directors of divisions or strategic
business units (SBUs) work with their
subordinates to put together large
Plant managers, project managers, and

unit heads put together plans for their
specific plants, departments, and units.
Every operational manager down to
the first line supervisor and every
employee is involved in some way in
the implementation of corporate,
business and functional strategies.
What must be done?
The managers of divisions and
functional areas work with their fellow
managers
to
develop
programs,
budgets, and procedures for the
implementation of strategy.
Nature of Strategy
Implementation
Successful strategy formulation does
not guarantee successful strategy
implementation.
1. Requires managerial forces during
the action
2. Focuses on efficiency
3. Primarily is an operational process
4. Requires special motivation and
leadership skills
5. Requires coordination among many
Short Term Objectives

Short
term
objectives
are
measurable outcomes achievable or
intended to be achieved in one year
or less.
They
are
specific,
usually
quantitative,
results
operating
managers set out to achieve in the
immediate future.
For example
Objectives
1. More
inventory
Less
3. Fast order processing

Cheap
order processing
4. Fast delivery
Lowest cost
routing
5. Field warehousing
Less
warehousing
Plant
warehousing
Importance of short term
objectives
1. Short term objectives operationalize
long term objectives.
For example if we commit to a 20
percent gain in revenue over five
2. Short term objectives help raise

issues and potential conflicts within
an organization that usually require
coordination to avoid otherwise
dysfunctional consequences.
3. Short term objectives assist strategy
implementation
by
identifying
measurable outcomes of action
plans or functional activities, which
can be used to make feedback,
correction, and evaluation more
relevant and acceptable.
We have to design action plan so as
The action plan specify what exactly

is to be done inside the organization.
The action plan also clear about
time frame for completion i.e. when
the effort will begin and when its
results will be accomplished.
Moreover the action plan also
identify
the
person
who
is
responsible to perform the task.
The accountability is very much
important to ensure actions plans
are acted upon.
Qualities of Effective
Short Term Objectives
1. Measurable
Short term objectives are more consistent
and concerned with
1. What is to be accomplished
2. When it will be accomplished
3. How
its
accomplishment
will
be
measured.
It is far easier to quantify the objectives
of line units (production) than of certain
staff areas (personnel).
Difficulties in Puonlinenotes.blogspot.com
quantifying objectives often
2. Priorities
Short term objectives requires
priority because of a timing
consideration or their particular
impact on a strategys success.
If we are not establishing priorities
conflicting assumptions about the
relative
importance
of
annual
objectives may inhibit progress
toward strategic effectiveness.
We can prioritize
based on the
discussion and negotiation during
the planning process.
3.Linked to long term objectives

Short term objectives can add
breadth and specificity in identifying
what must be accomplished to
achieve long term objectives.
The value added benefits of short
term objectives and action plans
1. It provides operating personnel a
better understanding of their role in
the firms mission.
Moreover it also provides clarity of
purpose and the use of people
assets of the organization.
2. Short term objectives and action plans

become the forum for raising and
resolving conflicts between strategic
intention and operational realities.
3. It provides a basis for strategic control.
It provides a clear, measurable basis for
developing budgets, schedules and other
mechanisms
for
controlling
the
4. It provides the motivational payoff.
It clarify the personnel and group roles in
a firms strategies and are also
measurable, realistic, and challenging can
Long Term Objectives

The results that an organization
seeks to achieve over a multiyear
period is called long term objectives
It represents the results expected
from pursuing certain strategies
Strategies represent the actions to
be taken to accomplish long term
objectives.
The time frame for objectives and
strategies
should
be
consistent,
usually from two to five years.
Qualities of Long Term Objectives

1.
2.
3.
4.
5.
6.
7.
Acceptable
Flexible
Measurable over time
Motivating
Suitable
Understandable
Achievable
Acceptable
Long term corporate objectives frequently are
designed to be acceptable to groups external to
the firm.
For example the efforts to decrease air pollution
that are undertaken at the resolve of the
Environmental Protection
Agency.
Flexible
Objectives should be adaptable to
unforeseen or extraordinary changes in
the
firms
competitive
or
environmental forecasts.
For example the personnel department
objective of providing managerial
developing training for 15 supervisors
per year over a next five year period
might be adjusted by changing the
number of people to be trained.
Measurable
Objectives must clearly and concretely
state what will be achieved and when it
For example the objective of

substantially improving our return on
investment would be better stated
as
increasing
the
return
on
investment on our line of paper
products by a minimum of 1% a year
and a total of 5% over the next three
years.
Motivating
The objectives should be productive
and have to set at a motivating level
i.e. one high enough to challenge
but not so high as to frustrate or so
A broad objective that challenges

one group frustrates another and
minimally interests a third.
The objectives be tailored to specific
groups
Suitable
Objectives must be suited to the
broad aims of the firm, which are
expressed in its mission statement.
Each objective should be a step
toward the attainment of overall
goals.
Understandable
Strategic managers at all levels
must understand what is to be
achieved.
Objectives must be clear meaningful
and unambiguous.
Achievable
Objectives must be possible to
achieve
However turbulence in the remote
and operating environments affects
a firms internal operations, creating
Areas of long term objectives

1.
2.
3.
4.
5.
6.
7.
Profitability
Productivity
Competitive position
Employee development
Employee relations
Technological leadership
Public responsibility
Policies
Policies are directives designed to
guide the thinking,decisions,and
actions of managers and their
subordinates in implementing a
firms strategy.
Policies are also called
these
standard operating procedures.
Policies
increase
managerial
effectiveness by standardizing many
routine decisions and clarifying the
direction
managers
and
Policies are derived from functional

tactics with a key purpose of aiding
strategy execution.
Policies facilitate solving repetitive
problems
and
guide
the
Moreover it refers to specific
guidelines,methods,procedures,rules
,forms,and administrative practices
established
to
support
and
encourage work toward stated goals.
These are the instruments of
strategy implementation.
These
are
boundaries,constraints,and
limits
on
the
kinds
of
administrative actions that can
be taken to reward and sanction
behavior.
Policies clarify what can and
cannot be done in pursuit of an
organizations objectives.
For example corporate relate to
surfing the web while at work.
Importance of policies
1.Policies establish indirect control
over independent action
It states how things are to be done
and empower employees to conduct
activities without direct intervention by
top management.
2.Policies promote uniform handling of
similar activities
It facilitates the coordination of work
tasks
and
helps
to
reduce
friction/resistance
arising
from
3. Policies ensures quicker decisions

It standardizes answers to answers
to previously answered questions
that otherwise would recur and be
pushed
up
the
management
hierarchy again and again.
4. Policies institutionalize basic aspects
of organization behavior
It minimizes conflicting practices
and establishes consistent patterns
of action in attempt to make the
strategy work.
5. Policies
reduce
uncertainty
in
repetitive and day to day decision
making
It provides necessary foundation for
coordination, efficient efforts and
freeing operating personnel to act.
6. Policies counteract resistance to or
rejection of chosen strategies by
organization members.
When major strategic change is
undertaken unambiguous operating
policies clarify what is expected and
facilitate acceptance, particularly
7. Policies
offer
predetermined
answers to routine problems
It provides more time to review
previously applied answers for
ordinary
and
extraordinary
problems.
8. Policies
afford
managers
a
mechanism for avoiding speedy and
ill conceived decisions in changing
operations.
Policies may be written and formal

or unwritten and informal.
Informal unwritten policies are
usually associated with a strategic
need for competitive secrecy.
Formal written policies have at least
following advantages.
1. They require managers to think
through
the
policys
meaning,
content and intended use.
2. They reduce misunderstanding
3. They make equitable and consistent
4. They
ensure
unalterable
transmission of policies
5. They communicate the authorization
or sanction of policies more clearly
6. The supply of convenient and
authoritative reference
7. They
systematically
enhance
indirect control and organization
wide coordination of the key
purposes of policies.
Functional Tactics to
Operationalize Strategy
Functional tactics are the key, routine
activities that must be undertaken in
each
functional
areas
such
as
marketing, finance, POM,R&D and HRM
to provide the goods and services.
Functional tactics translate grand
strategy into action designed to
accomplish
specific
short
term
objectives.
Every value chain activity in a
company executes functional tactics
POM
Functional
Tactic
Typical questions that the functional tactic should

answer
Facilities
and
equipment
One big facilities or several small facilities

Integration of separate processes
Mechanization or automation level
Size and capacity toward peak or normal level
Sourcing
Suppliers sources
Suppliers selection, retention and development
Use of hedging tools (forward buying)
Operation
planning
and control
Make to order or make to buy

Inventory level
Inventory used, controlled and replenished
Quality control, labor cost, product use
Maintenance of assets or breakdown
Job specialization, plant safety, safety standards
Marketing
Functional
tactic
Typical questions that the functional tactic should

answer
Product/
service
Products and service emphasized

Products and service contribution to profitability
Product and service image we seek to project
Consumer needs does the product seek to meet
Changes in the product and service to influence
customer
Price
Price base competition

Discounts
Standard pricing or regional control
Price segments we target
Gross profit margin
Competition based pricing or cost/demand based
pricing
Place
Market coverage, geographic areas, channels of

distribution
Channel objectives, structure and management
Relationships of marketing managers with distributors,
sales reps and direct sellers
Organization we want
Sales forcePuonlinenotes.blogspot.com
organized around territory,market,or
product
Finance and
Accounting
Functional
tactic
Typical questions that the functional tactics should

answer
Capital
acquisition
Cost of capital
Long term and short term debt, preferred and
common stock
Internal and external financing
Risk and ownership restrictions
Leasing
Capital
allocation
Priorities for capital allocation

Selection of projects
Operations manager autonomy for capital allocation
Dividend and
working
capital
management
Dividend payout ratio

Dividend stability (importance)
Cash or stock dividend
Cash flow requirement, minimum and maximum cash
flow
Credit policies
Limits, payment terms, and collection procedures
Payment timing and procedure
R&D
Functional
tactic
Typical questions that the functional tactics should

answer
Basic
research
versus
product and
process
development
Innovation and breakthrough research

Product development,refinement,and modification
Time horizon
Short term or long term

Marketing and production strategy
Organizationa In build R&D or contracted R&D

l fit
Centralized or decentralized R&D
Relationships of R&D units with product managers,
production managers and marketing managers
Basic R&D
posture
Offensive posture to lead innovation

HRM
Functional
tactic
Typical questions that HRM tactics should answer
Recruitment,
selection and
orientation
Human resources to chosen strategy

Recruitment, selection and socialization
Career
development
and training
Demand for future human resource needs

Training and development
Compensation
Pay
Motivation and retention
Payment,incentive,benefits and seniority policy
Evaluation,dis
cpline and
control
Evaluation of people formally or informally

Disciplinary actions
Control of individual and group behavior
Labor relations Labor management cooperation

and equal
Hiring policies
opportunity
requirements
Difference between
business strategies and
functional tactics
Functional tactics are different from

business strategies in three ways
1. Time horizon
2. Specificity
3. Participants who develop them
1.Time horizon
Functional tactics
Functional tactics identify activities
to be undertaken now in or in the
immediate future.
Functional tactics focuses on now
and it adjusts to changing current
situations.
Business strategies
Business strategies focus on the
firms posture three to five years
out.
2. Specificity
Functional tactics
Functional tactics are more specific than
business strategies
Business strategies
Business strategies are more general than
functional tactics.
3. Participants
Functional tactics
Functional tactics are developed by
business
managers
and
operating
managers.
Business strategies
Business strategies are developed by
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:
financial
resources,
physical
resources, human resources and
technological resources.
Allocating resources to particular
The following factors may influence

in the resource allocation decisions
1. An overprotection of resources
2. Too great an emphasis on short-run
financial criteria
3. Organizational politics
4. Vague strategy targets
5. A reluctance to take risks
6. A lack of sufficient knowledge
The real value of any resource
allocation program lies in the
resulting accomplishment of an
Effective resource allocation does

not guarantee successful strategy
implementation
because
programs,personnel,controls,and
commitment must breathe life into
the resources provided.
Strategic management itself is
sometimes referred to as a resource
allocation process.
Managing Conflict
Interdependency of objectives and
competition for limited resources
often leads to conflict.
Conflict can be defined as a
disagreement between two or more
parties on one or more issues.
Establishing annual objectives can
lead to conflict because individuals
have different expectations and
perceptations,schedules
create
pressure,
personalities
are
incompatible, and misunderstandings
Establishing objectives can lead to

conflict because managers and
strategists must make trade offs in
the areas of
1. Short term profits or long term
profits
2. Profit margin or market share
3. Market
penetration
or
market
development
4. Growth or stability
5. High risk or low risk
6. Social responsiveness or profit
Conflict
is
unavoidable
in
organizations.
It should be managed and resolved
before dysfunctional consequences
affect organizational performance.
Conflict can serve to energize
opposing groups into action and
may
help
managers
identify
problems.
Approaching to
managing conflict
1. Avoidance
2. Diffusion
3. Confrontation
Avoidance
Avoidance includes such actions as
ignoring the problem in hopes that
the conflict will resolve itself or
physically separating the conflicting
individuals or groups.
Diffusion
Diffusion
can include playing down
differences between conflicting parties
while emphasizing
similarities and
common interests, compromising so that
there is neither a clear winner nor loser,
resorting to majority rule, appealing to a
higher authority, or redesigning present
positions.
Confrontation
It is exemplified by exchanging members
of conflicting parties so that each can
gain an appreciation of the others point
of view, or holding
a meeting at which
Employee
empowerment
Empowerment is the act of allowing
an
individual or team the right and flexibility
to make decisions and initiate action.
It is being expanded and widely
advocated in many organizations today.
Some of the employee empowerment
techniques are training, self managed
work groups, eliminating whole layers of
hierarchy, and use of automation.
The effort of employee empowerment
should have ensure and consistent with
mission, strategy and tactics.
The
employee
should
have
get
The End

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Operationalizing

Problems associated with implementation of

Depending on how a corporation is

Plant managers, project managers, and

Short Term Objectives

3. Fast order processing

2. Short term objectives help raise

The action plan specify what exactly

3.Linked to long term objectives

2. Short term objectives and action plans

Long Term Objectives

Qualities of Long Term Objectives

For example the objective of

A broad objective that challenges

Areas of long term objectives

Policies are derived from functional

3. Policies ensures quicker decisions

Policies may be written and formal

Typical questions that the functional tactic should

One big facilities or several small facilities

Make to order or make to buy

Typical questions that the functional tactic should

Products and service emphasized

Price base competition

Market coverage, geographic areas, channels of

Typical questions that the functional tactics should

Priorities for capital allocation

Dividend payout ratio

Typical questions that the functional tactics should

Innovation and breakthrough research

Short term or long term

Organizationa In build R&D or contracted R&D

Offensive posture to lead innovation

Typical questions that HRM tactics should answer

Human resources to chosen strategy

Demand for future human resource needs

Evaluation of people formally or informally

Labor relations Labor management cooperation

Functional tactics are different from

The following factors may influence

Effective resource allocation does

Establishing objectives can lead to

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