Strategy Implementation

Module :- 3
 Meaning of Strategy Implementation
• Strategy Implementation cab be define as a
process through which a chosen strategy is
put into action.
• A good strategy without effective
implementation can hardly be expected to
succeed.
• Strategy implementation is the translation of
formulated strategy into action so as to
achieve strategic goals and objectives.
 Definition
• According to Harvey, “ Implementation
involves actually executing the strategic game
plan. This includes setting policies, designing
the organization structure, and developing a
corporate culture to enable the attainment of
organizational objectives”.
 Interdependence of Strategy formulation and implementation
or
linkages between Strategy formulation and implementation

• Forward linkages:
• Backward linkages
 Difference between SF and SI
Strategy formulation
Strategy Formulation includes planning of
strategic plans.
In short, Strategy Formulation is placing
the resources before the action.
Strategy Formulation is an
Entrepreneurial Activity based on
strategic decision-making
strategy Formulation emphasizes on
effectiveness
Strategy Formulation requires co-
ordination among few individual
Strategy Formulation requires a great deal Strategy Implementation requires specific
of and logical skills
Strategic Formulation precedes Strategy
Strategy Implementation
Strategy Implementation involves the
executing the strategic plans
In short, Strategy Implementation is
managing the resources during the
action.
strategic Implementation is mainly an
Administrative Task based on strategic
and operational decisions.
Strategy Implementation emphasizes on
efficiency
Strategy Implementation requires co-
ordination among many individuals.
motivational and leadership traits
Strategy Implementation follows Strategy
Nature of strategy Implementation
• Action orientation
• Comprehensive in scope
• Demanding varied skill
• Wide-ranging involvement
• Integrated process
 Barriers to Strategy Implementation
• Inadequate management skill
• Poor or vague strategy
• Not having guidelines or a model to guide
implementation effort
• poor or inadequate information sharing
• Unclear responsibility and authority
A model of Strategy Implementation
Activating Strategy
Activating strategy is to prepare the ground for
managerial task and activities of Strategy
Implementation
Three sets of activities require for Activating
Strategy
Project Implementation
Procedural Implementation
Resource allocation
Managing the Change
Managing the change have identified three
activities
Structural Implementation
leadership Implementation
behavioral Implementation
Achieving Effectiveness
It means organizational effectiveness.

Suppose a company sets an objective to achieve a return on

investment 10% a year.

After the year is over, it measures and finds that it has achieved 10% or
more return on investment. We can say that ‘company is effective’ or
‘the company has achieved its effectiveness’
The Pyramid of Strategy Activation

strategy

plans

programmes

budgets
Strategy should led to plan
for example if expansion strategy have been adopted, various
types of expansion plan should be formulated like plan could
be design to set up an additional plant to manufacture the
same product
if diversification strategy then plan could be related to new
product development plans
Plan results in different kind of programme
programme includes goals, policies, procedures, rules,
regulations etc. need to putting plan into action
Programme led to formulation of project
A project is a highly specific programme for which the time
schedule and costs are predetermine.
Budget
Each project requires allocation of fund.
 Project Implementation
Project Implementation passes through following phases that
are as follows:
• Conception Phase – This phase is an extension of strategy
formulation phase. In this phase, project ideas are
generated during the process of strategic alternatives &
strategic choice that may be implemented in future by
organization.
• Project Analysis Phase – The project ideas have to be
arranged according to priority for the purpose of
development. Before selecting a project for development, a
preliminary project analysis have to be made in respect of
marketing, technical, finance, etc…and check out such
analysis is required to analyze whether project would
appeal to investors, banks & FI’s.
 Project Implementation
• Planning Phase – In this phase, management undertakes
detailed planning of project. The detailed planning should
cover different areas of project such as production
schedules, plant design & layout, technical arrangements,
marketing, finance, etc…
• Organizing Phase – The management must organize for
necessary resources such as manpower, finance, systems
and procedures to implement the project.
• Implementation Phase – During this phase, the
management must undertake engineering, order
placement for equipment & material etc… leading to the
testing, trial & working of plant.
 Project Implementation
• Operation Phase – The final phase involves handing
over the plant to the operating personnel for
operation purpose. At this stage the production
starts.
 Procedural Implementation
• Regulatory elements to be reviewed
– Licensing procedure
– SEBI requirements
– Labor legislation requirements
– Environmental protection and pollution control
requirements
– Patent and trade mark requirements
 Procedural Implementation.
• In order to implement the strategies, the management
must have good knowledge of the procedural framework
within which the plans, projects and programmes have to
be approved by the government authorities. The
government authorities besides the policy guidelines issued
by the government authorities from time to time. Some of
the important procedural requirements can be elaborated
as follows: -
1. Formation of a company – The formation of a company is
governed by the provision of Indian companies act, 1956 as
amended from time to time. All activities for formation
should be carried out such as Registration, obtaining
certificates, documentation must be forwarded to registrar
of companies, etc…
 Procedural Implementation.
2. Licensing Procedures – Certain industries require
licensing procedures. As per the industrial policy, 1991,
six industries require licensing manufacturing products
such as alcohol, cigarettes, chemical fertilizers, industrial
explosives, defense and Drugs & Pharmaceuticals.
Therefore company requiring the license must apply for
the same.
3. FEMA Requirements – if required, organization must
fulfill the necessary requirements of the Foreign
Exchange Management Act, 2000. Those organizations
willing to deal in foreign exchange transactions must
ensure that they collect required information in context
to provisions of FEMA.
 Procedural Implementation.
4. Import and Export Requirements – Similarly,
organization willing to deal in Import & Export need
to follow certain procedural requirements, such as
they have to register with Directorate General of
Foreign Trade (DGFT) and obtain Importers
Exporters Code (IEC)
5. Competition Act, 2002 – The government has
introduced this act that aims at promoting
competition by restricting anti competitive
practices. Large businesses must have a good
understanding of the competitive act.
 Procedural Implementation.
6. Foreign Collaboration Procedures – For proposals to set
up projects with foreign collaborations require prior
government approval. The government authorities such as
Reserve Bank of India (RBI), Foreign Investment Promotion
Board (FIPB) and Project Approval Board are major
regulatory bodies for foreign collaborations including joint
ventures abroad.
7. SEBI Requirement – Securities and Exchange Board of
INDIA (SEBI) became active since 1992 with the passing of
SEBI Act, 1992. the act empowered SEBI with necessary
powers to regulate the activities connected with marketing
of securities & investments of stock exchanges, merchant
banking, portfolio management, stock brokers and others
connected with securities
 Procedural Implementation.
8) Consumer Protection Act, 1986 – Business firms must
have good knowledge of consumer protection act, 1986.
This act was passed to provide better protection of the
interests of consumers.The act seeks to promote & protect
rights of consumers such as: -
• The right to be protected against the marketing of goods
that are hazardous to life & property.
• The right to be informed about the quality, quantity,
potency, purity standards and price of goods to protect the
consumer against unfair trade practices.
• The right to be heard & be assured that consumers
interests will receive due consideration.
• The right to seek redressal against unfair trade practices or
exploitation of consumers, etc…
 Procedural Implementation.
9. Pollution Control Requirements – the govt. of
India has passed several laws relating to the
protection of environment. The business
organizations should have a good knowledge of
such laws. To name few of them are as follows:
• The Water (Prevention & Control of Pollution), Act,
1974.
• The Air (Prevention & Control of Pollution), Act,
1981.
• The Environment Protection Act, 1986, etc…
 Procedural Implementation.
10. Labour Legislation Requirements – The govt.
of India has passed several laws to protect the
interest of the workers. Business Organizations
should have a good knowledge of such laws,
which include:
• The factories Act, 1948.
• The Workmen Compensation Act, 1923.
• The Bonus Act, 1965.
• The Minimum Wages Act, 1948.
• The Industrial Disputes Act, 1947, etc…
 Resource Allocation
• A major task of top manager is resource
allocation
• Resource allocation deals with the
procurement, commitment, and distribution
of financial, human, informational and
physical resources
Managing the Change
Managing the change have identified three
activities
Structural Implementation
leadership Implementation
behavioral Implementation
• Structural Implementation
• Organization culture is another element
which affects strategy implementation as it
provides a framework within, which the
behavior of the members take place
• It is belief, common perception and
understanding of an organization
Structure and Strategy
Interrelationship of Structure and Strategy

determines

Structure
Strategy
affects
 Why is Structural Implementation
needed?
Strategic plan Implementatio
New strategies Mismatches
is n of new
put in place occurs
Implemented strategies

Performance Structure is Effectiveness is Performance

Improves changed reduced decline
Types of Organization Structure
 Simple organizational
structure/entrepreneurial structure

Owner-manager

employees
 Cont……
• Appropriate for an organization that is owned
and managed by one person
• A small scale industrial unit, a small proprietary
or a mini-service outlet may exhibit on an
entrepreneurial structure
• These organizations are single-business, product,
or service firms that serve local markets.
• The owner- manager looks after all decisions,
whether they are day-to-day operational matters
or of strategic nature.
 Cont…….
• Advantages:-
– Quick decision making, as power is centralized
– Informal and simple organizational structure
– Timely response to environmental changes
• Disadvantages:-
– May ignore the strategic decision due to the busy
in day-to-day operational matters
– Inadequate if volume of business expands in
future
Functional organizational structure
• As the volume of business expands, the need
arises for specialized skill and delegation of
authority to managers who can look after the
different functional areas.
• Advantages:-
– Efficient distribution of work through specialization
– Delegation of day-to-day operational functions
– Providing time for the top management to focus on
strategic decisions
Functional organizational structure

CEO

Production and
Human resource marketing Finance
operations
 Divisional Structure
• When the organization grow in terms of
geographic expansion, market segmentation and
diversification make the functional structure
inadequate.
some form of divisional structure is necessary to
deal with such situation
In this structure work is divided on the basis of
product line, types of customers served or
geographic area covered, and then separate
divisions or groups are created and placed under
the divisional-level management.
 Cont…..
• Within divisions, the functional structure may
still operate
Divisional organizational structure

CEO

Manager Manager Manager Manager

division-1 division-2 division-3 division-4
 Cont………………..
• Advantages:-
– Enables grouping of functions required for the
performance of activities related to a division
– generate quick response to environmental
changes affecting the business of different
divisions
– Enable the top management to focus on strategic
matters
 Cont…………..
• Disadvantages:-
– Inconsistency arising from the sharing of authority
between the corporate and divisional level
– Policy inconsistencies between the different
divisions.
 SBU Structure
• When the size and divisions increase, it becomes
difficult for the top management to exercise
strategic control
• Then, the concept of SBU is helpful in creating an
SBU organizational structure
• Advantages:-
– Establishes coordination between divisions having
common strategic interest
– Facilitates strategic management and control of large,
diverse organizations
– Fixes accountability at the level of distinct business
unit
 Cont…….
• Disadvantages:-
– There are too many different SBUs to handle
effectively, in large, diverse organization
– Difficulty in assigning responsibility and defining
autonomy for SBU heads
– Addition of another layer of management
between corporate and divisional management
Strategic business unit structure
CEO

Vice president Vice president Vice president

SBU 1 SBU 2 SBU 3

Division manager Division manager Division manager

1 2 3 4 1 2 3 4 1 2 3 4
 Matrix structure
• In large organization, there is often a need to work on
major products or projects, each of which is
strategically significant
• The result is requirement of matrix type of organization
structure
• For the duration of project, specialist from different
areas from a group or team and report to a team
leader.
• Simultaneously, they may also work in their respective
parent department.
• Once the project is completed, the team members
revert to their parent departments.
 Cont…….
• Advantages:-
– Allows individual specialist to be assigned where
their talent is most needed
– Fosters creativity because of pooling of divers
talents
– Provides good exposure to specialist in general
management
 cont…
• Disadvantages:-
– Dual accountability creates confusion and
difficulties for individual team member
– Requires a high level of vertical and horizontal
combination
– Shared authority may create communication
problems.
 Matrix organizational structure
CEO

General manager General manager General manager

R&d marketing finance

Project 1
manager

Project 2
manager

Project 3
manager
 Network organizations
• The network structure is most suited to
organizations that face a continually changing
environment, requiring quick response, high level
of adaptability and strong innovative skills
• The structure makes extensive use of outsourcing
of support services required to produce and
market products and services
• Relies heavily on outsiders who specialized in
their respective areas.
 Cont…
• Advantages:-
– High level of flexibility to change structural
arrangements in line with business requirements
– Permits concentration on core competencies of
the firm
– Adaptability to cope with rapid environmental
change
 Cont….
• Disadvantage:-
– Loss of control and lack of coordination as there
are several partners
– Risk of overspecialization as most tasks are
performed by others
– High cost as duplication of resources could exist
Network organizations
Public
relations
firm(US)

Product
Call center
development
firm(Canada)
firm(US)

Core
firm
Accounting Manufacturing
firm(US) firm(Malaysia)

Assembly
firm(mexico)
 Other types of structure
• Product based structure
• Geographical based structure
 Product organization structure
• Activities are divided on the basis of individual
products, product line, services and grouped
into departments in product organization
structure
 Product organization structure

Managing Director

General Manager

Manager Manager Manager

Manager cars
bicycles motorcycle Scooter
 Cont…….
Advantages:-
1) appropriate with organizations with multiple
products
2) Optimum use of specialized skills and
equipments
3) Suited to a more dynamic environment
4) Moves decisions close to the production
5) Release managing director’s time
6) Clarifies profit/loss accountability
 Cont………….
• Disadvantage:-
– Involves difficulty in allocating overheads
– Inconsistent decisions from one department to
another
– Emphasis departmental rather than organizational
goal
– Conflicts arise regarding sharing of common
resources
 Geographical organization structure
• The activities or functions are grouped into
departments based on the activities
performed in the geographical areas/regions.
 Geographical organization structure

Managing Director

General Manager

Corporate Managers
Production, Marketing, Finance, R&D

Manager Manager Manager Manager Manager

Northern Southern Central Western eastern
Region Region Region Region region
 Cont…..
Advantages:-
1) Designed as per the climatic and culture
needs
2) Designed or serve as per the customers
needs
3) Enable to adapt varying legal system
4) Responsibility of profits/losses
 Cont………….
• Disadvantage:-
– Coordination of companywide activities would be
difficult
– Inter competition
– Emphasize on regional goal instead of company
goal
Customer based organization structure
• In customer based organization structure the
activities are groped on the basis of customers
• It would enable the organization to provide
exclusive attention to separate and distinct
customer groups
 Cont…………

Managing Director

General Manager

Individual Institutional customer

customer
• Advantages:-
– Serve customer better
– Use of specialized skill
– Timely response to customer’s changing needs
• Disadvantages:-
– Apply when sales volume of customers group
justifies the creation of separate divisions
 Structure for Business Strategy
• Cost Leadership Strategy
– Efficiency orientation
– Strong central authority
– Tight cost control
– Close supervision
– Routine tasks
Organization design for cost leadership
strategy
Differentiation Strategy
flexible-loosely-knit organization
strong capability on R&D
reward for risk taking
l earning orientation
Organizational Design for
Differentiation
Suggested Structure for Related Diversification
Suggested Structure for Unrelated Diversification
Suggested Structure for International Strategies
Behavioral Implementation
 Introduction
• Organization gains financial success through
effective strategies
• The behavior of the strategist in guiding the
organization to success is crucial
• Strategist means
– Stakeholders
– Leaders etc.
• Because strategist are the individuals and groups
of individuals who actually implement them.
 Stakeholders and Strategic
Management
• Stakeholders are the individuals and groups who
can affect and are affected by, or claims on a
firm’s performance
• The stakeholders’ association with the
organization is a two-way relationship
• Stakeholders provide support to the organization
and contribute in many different ways.
• In return, the organization tries to satisfy the
expectations of the stakeholders and honor their
claim
 Stakeholders’ Analysis
• All stakeholder’s are not equally important to an
organization in terms of their power to influence
strategy.
• Stakeholder analysis follows the steps below
– Indentify the stakeholder
– Indentify the stakeholders’ expectation, interest and
concerns
– Identify the claims stakeholders are likely to make on
the organization
– Identify the stakeholders who are important from the
organizations’ perspective
Strategic Leadership
 Introduction
• Leaders influence the behavior of subordinates so
that they willingly and enthusiastically work
towards the achievement of organizational
objective
• Strategic leadership is the ability to lead an
organization towards the achievement of its
objectives.
• The task involved in exercising strategic
leadership are typically to anticipate, envision,
maintain flexibility, and empower others to create
strategic change as and when necessary
 cont………
• Strategic leadership is multifunctional in
nature…………
• It involves managing others, managing an
entire enterprise rather than a functional
subunit………
• Coping with the change with continues to
increase in the global economy………
 Strategic leaders at different levels in
Organization
• Corporate Level:
– CEO, Senior Executives, Corporate Staff
• Business, Division, SBU Level:
– General manager or vice president
• Functional Level:
– Marketing managers, Operations managers
Strategic leadership and strategic
management process
Effective strategic leadership

Vision Mission

Successful strategic action

Formulation of strategies Implementation of strategies

Strategic competitiveness
above-average returns
 Key Strategic Leadership Actions
• Determining strategic direction
• Effectively Managing the Firm’s Resource
portfolio
– Exploiting and Maintaining Core Competencies
– Developing Human Capital and Social Capital
• Sustaining an Effective Organizational Culture
– Entrepreneurial Mind-Set
• Emphasizing Ethical Practices
• Establishing Balanced Organizational controls
– Financial and non-financial control
 The role of strategic leaders
• Role of chief executive officer :
– The role of CEO evident through all the phases of
process of Strategic Management
– CEO plays a major role in strategic decision
making. He or she is chiefly responsible for the
execution of functions which are of strategic
importance to the organization
• CEO performs the strategic task are…..
– Provide a direction to the organization so that it
achieve its purpose
– Plays a pivotal role in setting the mission of the
organization
– Deciding the objectives and goals
– Formulating and implementing the strategy in
general
• Role of senior managers:
– Senior managers perform a variety of roles by
assisting the board and chief executive in the
formulation, implementation and evaluation of
strategy
– Assigned specific responsibility like look after
modernization, technology up gradation, plan
implementation, evaluation of strategy etc..
Organizational culture
• Culture is another element which affects
strategy implementation as it provides a
framework within, which the behavior of the
members take place
• When the belief, values, and norms are shared
in an organization, they create corporate
culture.
• Corporate culture generally remains below the
surface and emerges at the time of
organizational change.
• It has either two effects: it support the change
or oppose them.
– Shared things (the way people dress)
– Shared sayings(let’s get down to work)
– Shared action(service-oriented approach)
– Shared feelings(hard work is rewarded here)
 Elements of the culture
• Stories, histories, myths
• Rituals, rites, ceremonies, celebration
• Heroes: person act as idealized example, by
which cultural members learn of the correct
or perfect behavior
• beliefs, assumption, attitudes
• Rules, norms, values, ethical codes
• Artifacts: physical symbol of a culture
 Relating culture and strategy
• In relating strategy and culture, strategist have
four alternatives
– To ignore corporate culture
– To adapt strategy implementation to suit
corporate culture
– To change the strategy to fit the corporate culture
– To change the corporate culture to suit strategic
requirements
Operationalizing the Strategy
• Operationalizing the strategy is an approach
adopted by an org. to achieve operational
effectiveness .
 Operational Effectiveness
• When org. performs value creating activities
optimally and in a way which is better than its
competitors, it results in operational
effectiveness.
• According to Michale E. Porter:-
– “ Success requires both right strategy and
operational effectiveness”
Strategy and Operational Effectiveness

Organizational Success

Strategy OE
Operational
Effectiveness
 Areas of OE
• Productivity:- the ratio of the quantity of
output to the quantity of input
• Process:- activities perform in systematic and
orderly procedures or a sequential step or in a
chronological order.
• People:- stakeholders
• Pace:- efficiency, amount of work done( or
performance ) per unit time
 Functional Policies and Plans
• Functional Strategy:-
– A functional strategy is a strategy of a particular
group of company like marketing, production,
sales etc.
– It is a blue print of group strategies
– These translate the grand strategies decided at
corporate level into specific plans for each
function within a company.
 Cont.….
• Functional Policy:-
– Policies are guides to action
– They are in the form of specific statements or
general understanding which provides guidance in
decision making to members in respect of any
course of action.
 Cont.
• Role of Functional Policies:-
– Provide guidance for managerial decisions
– Basis for control
– Provides co-ordination across different functions.
• Financial plans and policies:-
– Source of fund
– Usage of fund
– Management of fund
• Marketing plans and policies:-
– Product
– Pricing
– Place
– promotion
• Operation Plan and Polices
– Production system
• It is concerned with the capacity, location, layout,
product and service design
– Operations Planning and Control
• It is related with aggregate production planning,
material supply, inventory, quality and cost,
maintenance of plant and equipment
– Research and development
• It is deal with product development, technology
development