ch7 SM

Chapter 7
Implementing Strategies: Management &

Operations Issues
Strategic Management:
Concepts & Cases
11th Edition
Fred David
By:
Waseem sadiq
Ch 7-1
Copyright 2007 Prentice Hall
Chapter Outline
The Nature of Strategy Implementation
Annual Objectives
Policies
Ch 7-2
Chapter Outline (contd)
Resource Allocation
Managing Conflict
Matching Structure with Strategy
Ch 7-3
Restructuring, Reengineering & E-Engineering
Linking Performance & Pay to Strategies
Managing Resistance to Change
Ch 7-4
Managing the Natural Environment
Creating a Strategy-Supportive Culture
Production/Operations Concerns When

Implementing Strategies
Ch 7-5
Human Resource Concerns When

Ch 7-6
Pretend that every single person you meet

has a sign around his or her neck that says,
Make me feel important
Mary Kay Ash, CEO of Mary Kay, Inc.
Ch 7-7
The Nature of Strategy
Implementation
-- Successful strategy formulation does not

guarantee successful strategy implementation
Ch 7-8
Nature of Strategy
Implementation
Formulation vs. Implementation
Formulation positions forces before the action
Implementation manages forces during the

action
Ch 7-9
Nature of Strategy
Implementation
Formulation focuses on effectiveness
Implementation focuses on efficiency
Ch 7-10
Nature of Strategy
Implementation
Formulation is primarily an intellectual process
Implementation is primarily an operational

process
Ch 7-11
Nature of Strategy
Implementation
Formulation requires good intuitive & analytical

skills
Implementation requires special motivational &

leadership skills
Ch 7-12
Nature of Strategy
Implementation
Formulation requires coordination among a

few individuals
Implementation requires coordination among

many individuals
Ch 7-13
Nature of Strategy
Implementation
Strategy Implementation
Varies among different types & sizes of

organizations
Ch 7-14
Nature of Strategy
Implementation
Implementation Activities
Altering sales territories
Adding new departments
Closing facilities
Hiring new employees
Cost-control procedures
Modifying advertising strategies
Building new facilities
Ch 7-15
Nature of Strategy
Implementation
Management Perspectives
Shift in responsibility
Division or
Strategists Functional
Managers
Ch 7-16
Management Issues
Annual Objectives
Policies
Resources
Management
Issues Organizational structure
Restructuring
Rewards/Incentives
Ch 7-17
Management Issues (contd)
Resistance to Change
Natural Environment
Supportive Culture
Management
Issues Production/Operations
Human Resources
Ch 7-18
Management Issues
Annual Objectives --
-- Decentralized activity
-- Directly involve all managers in the
organization
Ch 7-19
Management Issues
Purpose of Annual Objectives --
Basis for resource allocation

Mechanism for management evaluation
Metric for gauging progress on long-term
objectives
Establish priorities (organizational, division,
& departmental)
Ch 7-20
Management Issues
Consistency of Annual Objectives --
Across hierarchical levels

Horizontally consistent
Vertically consistent
Ch 7-21
Management Issues
Requirements of Annual Objectives
Measurable
Consistent
Reasonable
Challenging
Clear
Understood
Timely
Ch 7-22
Management Issues
Annual Objectives Should State
Quantity
Quality
Cost
Time
Be Verifiable
Ch 7-23
Management Issues
Annual Objectives
Policies
Resources
Management
Restructuring
Rewards/Incentives
Ch 7-24
Management Issues
Policies --
-- Facilitate the solving or recurring

problems & guide implementation of
strategy
Ch 7-25
Management Issues
Policies Establish --
Boundaries
Constraints
Limits
Ch 7-26
Management Issues
Annual Objectives
Policies
Resources
Management
Restructuring
Rewards/Incentives
Ch 7-27
Management Issues
Resource Allocation
-- Central management activity that

allows for the execution of strategy
Ch 7-28
Management Issues
4 Types of Resources
1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources
Ch 7-29
Management Issues
Managing Conflict
-- Disagreement between two more

parties on one or more issues
Ch 7-30
Management Issues
Managing Conflict
Conflict not always bad
No conflict may signal apathy
Can energize opposing groups to
action
May help managers identify problems
Ch 7-31
Management Issues
Conflict Management & Resolution
Avoidance
Diffusion
Confrontation
Ch 7-32
Management Issues
Annual Objectives
Policies
Resources
Management
Restructuring
Rewards/Incentives
Ch 7-33
Management Issues
Matching Structure w/ Strategy
-- Changes in strategy = Changes in

structure
Ch 7-34
Management Issues
Structure & Strategy
Structure dictates how objectives &

policies will be established
Structure dictates how resources will
be allocated
Ch 7-35
Chandlers Strategy-Structure
Relationship
Organizational
New strategy New administrative
performance
Is formulated problems emerge
declines
Organizational
New organizational
performance
structure is established
improves
Ch 7-36
Management Issues
Basic Forms of Structure
Functional Structure
Divisional Structure
Strategic Business Unit Structure (SBU)
Matrix Structure
Ch 7-37
Functional Structure
Most widely used

Simple and least expensive
Groups activities by business function
Disadvantages
Forces accountability to the top
Minimizes career development opportunities
Characterized by low employee morale, line/staff
conflict, poor delegation of authority, inadequate
planning for products and markets
Often leads to short-term and narrow thinking
Ch 7-38
Second most common type of structure

Can be organized by:
Geographic area
Product or service
Customer
Process
Ch 7-39
Advantages
Clear accountability
Higher employee morale
Creates career development opportunities for
managers
Allows local control of situations
Leads to a competitive climate within an
organization
Allows new businesses and products to be added
easily
Ch 7-40
Disadvantages
Can be costly to set up
Each division requires functional specialists
Duplication of staff services, facilities, and
personnel
Managers must be well qualified
Requires an elaborate, headquarters-driven
control system
Competition between divisions may become so
intense that it is dysfunctional
Ch 7-41
Appropriateness of Divisional Structure
Geographic area Organizations whose

strategies need to be tailored to fit the needs
and characteristics of customers in different
geographic areas
Product or Service When specific products
or services need special emphasis
Process When each process (division) is
responsible for generating revenues and
profits
Ch 7-42
The Strategic Business Unit (SBU)
In multidivisional organizations, an SBU

structure can greatly facilitate strategy-
implementation efforts.
Advantages of improved coordination and
accountability
Disadvantages
Requires an additional layer of management
Role of the group vice president is often
ambiguous
Ch 7-43
Ch 7-44
The Matrix Structure
Most complex of all designs requires both
vertical and horizontal flows of authority and
communication
Disadvantages
Can result in higher overhead
Dual lines of budget authority
Dual sources of reward and punishment
Shared authority
Dual reporting channels
Need for an extensive and effective
communication system
Ch 7-45
The Matrix Structure
Advantages
Project objectives are clear
Many channels of communication
Workers can see visible results of their work
Shutting down a project can be accomplished
relatively easily
Facilitates the use of specialized personnel,
equipment, and facilities
Ch 7-46
Ch 7-47
Dos and Donts in Developing
Organizational Charts
Dos Donts
Reserve the title CEO for Use the title president for
the top executive the top executive
Use the title chief or Use the title president for
VP or manager for functional business
functional business executives
executives
Directly below the CEO it
is best to have a COO
and other chief officers
Ch 7-48
Ch 7-49
Management Issues
Annual Objectives
Policies
Resources
Management
Restructuring
Rewards/Incentives
Ch 7-50
Management Issues
Restructuring
-- Reducing the size of the firm # of

employees, divisions and/or units, # of
hierarchical levels
Ch 7-51
Management Issues
Restructuring
Downsizing
Rightsizing
Delayering
Ch 7-52
Management Issues
Reengineering
-- Reconfiguring or redesigning work,

jobs, & processes to improve cost,
quality, service, & speed
Ch 7-53
Management Issues
Reengineering
Process management
Process innovation
Process redesign
Ch 7-54
Management Issues
Annual Objectives
Policies
Resources
Management
Restructuring
Rewards/Incentives
Ch 7-55
Management Issues
Linking Pay/Performance to Strategies
-- Pay for performance systems
Ch 7-56
Management Issues
Linking Pay/Performance to Strategies
Dual bonus systems

Profit sharing systems
Gain sharing systems
Ch 7-57
Tests for Performance-Pay Plans
Does the plan capture attention?
Do employees understand the plan?
Is the plan improving communication?
Does the plan pay out when it should?
Is the company or unit performing better?
Ch 7-58
Ch 7-59
Natural Environment
Supportive Culture
Management
Human Resources
Ch 7-60
Management Issues
-- Single greatest threat to successful

strategy implementation
Ch 7-61
Management Issues
-- Raises anxiety; fear concerning

Economic loss
Inconvenience
Uncertainty
Break in status-quo
Ch 7-62
Management Issues
Change Strategies
Force Change Strategy

Educative Change Strategy
Rational or Self-Interest Change
Strategy
Ch 7-63
Natural Environment
Supportive Culture
Management
Human Resources
Ch 7-64
Management Issues
Natural Environment
-- Wide appreciation for firms that

mend rather than harm the
environment
Ch 7-65
Management Issues
Natural Environment Environmental

Strategies
Develop/acquire green businesses

Divesting environmental-damaging
business
Low-cost producer through waste
minimization & energy conservation
Ch 7-66
Natural Environment
Supportive Culture
Management
Human Resources
Ch 7-67
Management Issues
Strategy-Supportive Culture
-- Preserve, emphasize, & build upon

aspects of existing culture that support
new strategies
Ch 7-68
Management Issues
Elements linking culture to strategy:
Formal statements of philosophy, charters, etc. used

for recruitment and selection, socialization
Designing of physical spaces, facades, buildings
Deliberate role modeling, teaching and coaching
Explicit reward and status system, promotion criteria
Stories, legends, myths about key people and events
Ch 7-69
Management Issues
Elements linking culture to strategy:
What leaders pay attention to, measure and control

Leader reactions to critical incidents and crises
How the organization is designed and structured
Organizational systems and procedures
Criteria used for recruitment, selection, promotion,
retirement
Ch 7-70
Natural Environment
Supportive Culture
Management
Human Resources
Ch 7-71
Management Issues
Production/Operations Concerns
-- Production processes typically

constitute more than 70% of firms total
assets
Ch 7-72
Management Issues
Production/Operations Decisions
Plant size
Inventory/Inventory control
Quality control
Cost control
Technological innovation
Ch 7-73
Natural Environment
Supportive Culture
Management
Human Resources
Ch 7-74
Management Issues
Human Resource Concerns
-- HR manager position has strategic

responsibility & has changed
dramatically as companies continue to
reorganize, outsource, etc.
Ch 7-75
Management Issues
Human Resource Strategic Responsibilities
Assessing staffing needs/costs

Developing performance incentives
ESOPs
Child-care policies
Work-life balance issues
Ch 7-76
Diversity Issues
Women CEOs in U.S. 2005 (examples)

CEO Company Age
Meg Whitman eBay 49
Andrea Jung Avon Products 47
Anne Mulcahy Xerox 52
Marjorie Magner Citigroup 56
Betsy Holden Kraft Foods 49
Ann Moore AOL Time Warner 57
Ch 7-77
Benefits of a Diverse Workforce
Improves corporate culture

Improves employee morale
Leads to a higher retention of employees
Leads to easier recruitment of employees
Decreases complaints and litigation
Increases creativity
Decreases interpersonal conflict
Ch 7-78
Benefits of a Diverse Workforce
Enables the organization to move into

emerging markets
Improves client relations
Increases productivity
Improves the bottom line
Maximizes brand identity
Reduces training costs
Ch 7-79
For Review (Chapter 7)
Key Terms & Concepts
Annual Objectives Conflict
Avoidance Confrontation
Benchmarking Culture
Bonus System Defusion
Ch 7-80
Educative Change
Delayering
Strategy
Employee Stock Ownership

De-centralized Structure
Plans (ESOPs)
Establishing Annual
Objectives
Downsizing Force Change Strategy
Ch 7-81
Functional Structure Just in Time (JIT)
Gain Sharing Matrix Structure
Glass Ceiling Policy
Horizontal Consistency
Profit Sharing
of Objectives
Ch 7-82
Rational Change
Restructuring
Strategy
Reengineering Rightsizing
Self-Interest Change
Strategy
Strategic Business Unit

Resource Allocation
(SBU)
Ch 7-83
Vertical Consistency
Triangulation
of Objectives
Ch 7-84

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Chapter 7

Implementing Strategies: Management &

The Nature of Strategy Implementation

Matching Structure with Strategy

Restructuring, Reengineering & E-Engineering

Linking Performance & Pay to Strategies

Managing Resistance to Change

Managing the Natural Environment

Creating a Strategy-Supportive Culture

Production/Operations Concerns When

Human Resource Concerns When

Pretend that every single person you meet

-- Successful strategy formulation does not

Formulation positions forces before the action

Implementation manages forces during the

Formulation focuses on effectiveness

Implementation focuses on efficiency

Formulation is primarily an intellectual process

Implementation is primarily an operational

Formulation requires good intuitive & analytical

Implementation requires special motivational &

Formulation requires coordination among a

Implementation requires coordination among

Varies among different types & sizes of

Basis for resource allocation

Across hierarchical levels

Annual Objectives Should State

-- Facilitate the solving or recurring

-- Central management activity that

-- Disagreement between two more

Conflict Management & Resolution

Matching Structure w/ Strategy

-- Changes in strategy = Changes in

Structure & Strategy

Structure dictates how objectives &

Basic Forms of Structure

Most widely used

Second most common type of structure

Geographic area Organizations whose

In multidivisional organizations, an SBU

-- Reducing the size of the firm # of

-- Reconfiguring or redesigning work,

Linking Pay/Performance to Strategies

-- Pay for performance systems

Linking Pay/Performance to Strategies

Dual bonus systems

Do employees understand the plan?

Is the plan improving communication?

Does the plan pay out when it should?

Is the company or unit performing better?

-- Single greatest threat to successful

-- Raises anxiety; fear concerning

Force Change Strategy

-- Wide appreciation for firms that

Natural Environment Environmental

Develop/acquire green businesses

-- Preserve, emphasize, & build upon

Formal statements of philosophy, charters, etc. used

What leaders pay attention to, measure and control

-- Production processes typically

Human Resource Concerns

-- HR manager position has strategic

Assessing staffing needs/costs

Women CEOs in U.S. 2005 (examples)