Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

48

Transcript of Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Page 1: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.
Page 2: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.
Page 3: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Chapter [6]

Strategy Implementation and

Control

Strategy Implementation and

Control

Page 4: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Interrelation between Formulation and Implementation

• Translation of strategic plan into strategic action.

• To be strategically successful Strategy formulation should be effective and implementation should be efficient.

• Organization place more focus on efficiency rather then effectiveness.

Page 5: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Thrive Die slowly

Survive Die Quickly

Effective Ineffective

Efficient

Inefficient

Strategy FormulationS

tra

teg

y Im

ple

me

nta

tio

n

Page 6: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Formulation

• An intellectual process• Performed by top

management• Requires managerial

focus before action• Focus is on effectiveness• Requires creative and

analytical skill• Requires coordination

among few individuals• Based on Forward

linkages

Implementation

• An Operational process• Performed by divisional

or functional management

• Requires management focus during action

• Focus is on efficiency • Requires motivational

and leadership skills• Requires coordination

among many individual• Based on Backward

linkages

Page 7: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Issues in Strategy Implementation

Strategy : Stability

Strategic plan : Modernization

Programme : R&D

Project : 15 months, 1cr.,

Infrastructure : Civil construction, Machinery installation,

Skill development

Procedural Implementation, Resources Implementation, Structural Implementation, Functional Implementation, Behavioral Implementation

Page 8: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Structural Implementation

• Structure dictates how strategies should be developed and resources will be allocated. E.g. - Product structure develops product based strategy.

• Competitive advantages are created when there is a proper match between strategy and structure.

• Strategy is influenced by structure and structure should be changed according to the newly developed strategy.

Page 9: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Organization Structure

Organization

Structure

Functional

Divisional

SBU

Matrix

Network

Page 10: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Functional Structure

CEO

Marketing Finance Production R&D HR

Page 11: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Advantages ~It promotes specialization of labourEncourage efficiencyMinimum elaborate controlRapid decision making

Disadvantages ~It forces accountability to the topMin. career development opportunitiesPossible staff conflictsPoor delegation of authorityFunctional specialist may develop narrow

perspective.

Page 12: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Divisional StructureCEO

Division A

Marketing

Production

HRM

Division B

Marketing

Production

HRM

Division C

Marketing

Production

HRM

Page 13: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Type ~ Geographic Area Product Customer Process

Advantages ~ Accountability is clear Extensive delegation of authority High employee morale Offer career development opportunity

Disadvantages ~ Costly Duplication of staff Elaborate H.Q. Control system Certain region, product, customer may suffer.

Page 14: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

SBU StructureSBU StructurePresident

CEO SBU - A

Division

Division

Dicision

CEO SBU - B

Division

Division

Division

Page 15: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Characteristics ~SBU is a grouping of related business that can be

taken up together for strategic planning.Corporate office manages SBU through strategic and

financial control and delegate authority and responsibility for day-to-day operations.

SBU divides into divisions under a senior executive who reports directly to the CEO.

Advantages ~More accurate monitoring of individual businessSimplifies the control problemBetter allocation of resourcesSynergy among the divisions of the group can be

achieved

Disadvantages ~Costly

Page 16: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Matrix Structure

Project - A

Project - B

Project - C

Production unit

Production

Production unit

Production unit

Marketing unit

Marketing

Marketing unit

Marketing unit

Finance unit

Finance

Finance unit

Finance unit

Step 1 : Cross-functional task forceStep 2 : Product ManagementStep 3 : Mature Matrix

Page 17: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Characteristics ~ It is combination of divisional and functional

structure. Employees have 2 bosses. It has dual-line of authority, dual-source of

reward and punishment, dual-reporting channels. Home department of employees is functional and

they are often assigned temporarily to one or more projects.

Advantages ~ Project objectives are clear. There are many channels of communication Workers can see the result of their work Shutting down a project is relatively easy It has stability of functional structure and

flexibility of divisional form.

Page 18: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Network Structure• The corporations organized in this manner is often

called virtual organization.• In such organizations many activities are out-

sourced.• The organization is only a shell with a small HQ

acting as a Broker and electronically connected to some independent organizations.

• Advantages ~– Provides increased flexibility and adaptability to cope with

rapid technological changes.– Allows company to concentrate on its distinctive

competencies.

• Disadvantages ~– Availability of numerous potential partners can be source

of trouble.– Keep the firm away from the benefit of synergy

Page 19: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Strategic Business Unit

• Relevant to multi-business, multi-product organization, which group strategically related products into a business unit.

• Traditionally organizations handles planning on territorial basis, which had 2 disadvantages –

Same product – separate treatment

Different products – Same treatment

Page 20: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Characteristics of SBU ~

A group of related business that can taken

up together for strategic planning.

On the basic factor such as mission,

objectives, competition, and strategy one

SBU is different from other SBU.

Each SBU will have its CEO who is

responsible for business level planning and

profit.

Facilitate correct allocation of resources

Page 21: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Value Chain Analysis

Value chain is a set of activities within and around an organization to provide value-for-money product/services.

VC analysis is a 2 steps process : First identify separate activities and Second assessing the value added by each of them.

Page 22: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

SupportActivities

Primary Activities

Firms Infrastructure

Human Resources Management

Technology Development

InboundLogistics

Operations OutboundLogistics

Marketing& Sales

Services

Procurement

Page 23: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Core CompetencesCore CompetencesCC is a unique strength of an organization

which critically support its competitive advantages.

These tend to be easily imitated, so, organization should continually shift the ground of competition.

VC analysis can be helpful in identifying those activities which represents the competences of the organization.

Page 24: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

– Linkages between primary activities ~• E.g. Outbound Logistics (Inventory of finished goods) and

Operations (Manufacturing).

– Linkages between support activities ~• E.g. Human Resource Management and Technology

Development

– Linkages between primary and support activities ~• E.g. Infrastructure (MIS) and Operations (Service delivery)

External linkages– Vertical linkages attempts to improve performance

through ownership of more part of value system.– TQM– Merchandising Activities

Page 25: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Leadership and Strategy Implementation

• A strategy manager has many leadership role : Visionary, Chief administrator, Culture builder, Resource allocater, Crisis solver, Motivator, Arbitrator etc.

• On the top of all these he is a change agent.• 5 leadership role in implementation ~

– Staying on the top of what is happening.– Promoting a culture to execute strategy– Keeping organization responsive to change– Exercise ethical leadership to make organization as

good corporate citizen.– Pushing corrective action to improve strategy

execution.

Page 26: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Leadership role in Implementation

Strategic leaders guide company in formation of mission, objectives and strategy.

Strategic leaders guide company implement the strategy by influencing the behavior, thought and feelings of co-workers.

They can use their frame of reference which is set of assumptions, promises and accepted wisdom to deal with environment and perform the responsibility.

Page 27: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Leadership StyleTransformational leadership

They use charisma and enthusiasm to inspire people to exert for the good of the company.

This appropriate in turbulent environment and when major changes are required to be made.

This style offers excitement, personal satisfaction, dream of higher level etc. to achieve dramatic improvement.

Such leaders motivate followers to stretch their abilities to do more, increase self-confidence and create innovation.

Page 28: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Leadership StyleTransactional leadership

This style focuses only on controlling organization activities and improve present situation.

This style uses authority of its office and follow a formalized approach of motivation such as punishment and rewards.

It is appropriate in settled environment and in mature industries.

Page 29: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Strategic ChangeModification in strategies due to the changes in the environment is called Strategic Change.

Need for

change

Create shared vision

Institutionalise the

change.

Page 30: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

• Recognize the need for changeDiagnose which part of corporate culture is

not supportive to strategy so that strategy can be changed according to it.

This calls for SWOT analysis and then determine scope for change.

• Create a shared vision to manage changeCommunicate the vision with every one so

that there is no conflict between the objectives of individuals and organization.

Convince all that the change is not superficial or cosmetic. Actions must be highly visible and indicative of management’s seriousness.

Page 31: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

• Institutionalise the change

This is action stage where changed strategy is implemented.

It calls for creating supportive attitude and ensure it does not slips back

Change process is regularly monitored and analysed for deviation; And if necessary corrective actions are taken.

Page 32: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Kurt Lewin change process

Page 33: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Un-freezing the situation

It is the process of braking down old attitude, behavior, customs and traditions.

It is the process of making employees aware of the necessity for changes because sudden changes are socially destructive.

It is all done by making announcements, holding meetings and promoting ideas etc.

Page 34: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Changing the new situations– Three methods of changing pattern of behavior~

ComplianceIt focuses on strictly enforcing rewards and punishment

IdentificationIt focuses on creating role models.

InternalizationIt focuses on freedom to learn to change the individual’s thought process.

Re-freezing– When new behavior becomes a normal way of

life it must be continuously reinforced by orientation training.

Page 35: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Organizational Control

Control is the check exercised to ensure that – Performance meets the standard Undesirable events are prevented, detected

and corrected. Use of resources is efficient Assets are adequately safeguarded.

Control function involve Monitoring, Measuring, Correcting and Maintaining the system

Page 36: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Setting objectives as standard

Measuring actual performance

Comparing with standard

Detecting deviation

Identifying the improvement

Feeding back corrective instruction

Co

ntr

ol P

roce

ss

Page 37: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Controls

Operational

Management Strategic

Premise

Surveillance

Special alert

Implementation

Page 38: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

[A] Operational Control

– This control is applied on individual tasks where measurable relationship between input and output exist.

– It regulates the process within certain tolerable boundaries.

– Example : Quality control, Cost control, Inventory control, Production control etc.

Page 39: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

[B] Management Control

– This control is applied over integrated activities of a department, division or entire enterprise.

– It helps to achieve corporate goals in most effective and efficient manner.

– According to Robert Anthony ~

“Management control is the process by which managers assure that resources are used effectively and efficiently in the accomplishment of the organizational objectives.”

Page 40: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

[C] Strategic Control– According to Schendel and Hofer ~

“Strategic control focuses on the dual questions of whether : (1) the strategy is being implemented as planned and (2) he results produced by the strategy are those intended.”

1. Premise control• Strategy is formed within certain premises or

assumptions about environment.• PC is a tool to verify the validity and accuracy of

these premises on which the strategy is built.• PC focuses on environmental factors : economic,

social, technological, legal, competitive, supplier, customer etc.

Page 41: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

2. Surveillance Control• Unlike Premise control it is unfocussed.

• It involve general monitoring of sources of information to uncover unanticipated information having bearing on strategy.

• It includes reading newspaper, business magazines, meeting, conferences discussions etc.

3. Special Alert Control• This control focuses on sudden changes in

government, natural calamities, terrorist attack, unexpected merger/acquisition by competitors and such other event that may calls for intense review of strategy.

Page 42: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

4. Implementation Control This control directed towards assessing the

need for changes in the strategy in the light of company performance.

It requires continuous monitoring of direction movement of strategy.

Types ~• Monitoring strategic thrust

Determine whether strategy is progressing as desired .

• Milestone reviews

Evaluating the milestone achieved.

Page 43: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Building a strategy supportive culture

Company’s Values, Belief, Business principles, traditions, approach to decision making and problem solving etc are all collectively make corporate culture.

Organization culture comes from the complex combination of socio-cultural background of its employees.

Page 44: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Culture : Alloy or Obstacle• An organization culture is either a

contributor or an obstacle in the successful strategy execution.

• For e.g. – a culture where frugality is strongly shared by employee is very supportive to successfully execution of a Cost leadership strategy.

• A tight strategy-culture alignment gives 2 benefits ~– It develops a system of informal rules– Nurtures and motivates people to do their job in

strategy supportive manner.

Page 45: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

A sizable and prolonged strategy-culture conflict weakens the managerial efforts to make the strategy work.

It is strategy maker’s responsibility to select strategy compatible with unchanged part of culture; and

It is responsibility of strategy implementer to change which ever part of culture is in conflict with strategy.

Page 46: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

Changing a problem culture

• Tough to change heavy anchor of deeply held values.

• Requires concerned managerial actions over a period of time.

• Talk to all those concerned with that aspect of culture which is to be changed.

• Talk should be followed swiftly by visible aggressive actions to modify culture.

Page 47: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

• There are several ways to accomplish this ~– Visibly praising and recognizing people who

display the new cultural traits.– Engineer some quick successes– Replace old-culture managers with new one.– Change long standing policies that are

dysfunctional.– Re-organize corporate structure in

alignment with strategy– Tying incentives directly to new measures.– Making major budgetary re-allocations.– Sincere, sustained commitment by CEO

Page 48: Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.