MODULE 7
1 STRATEGY IMPLEMENTATION AND FUNCTIONAL
STATEGIES
NATURE OF STRATEGY IMPLEMENTATION
Concerns the managerial exercise of putting a freshly
chosen strategy into place
Strategies are a statement of intent, implementation
tasks are meant to realize intent
Action Orientation
Comprehensive in scope
Covers all management activities
Demanding varied skills
Wide-ranging involvement
Necessitates involvement of all levels of managers
Integrated process
Interrelated activities
2
BARRIERS TO STRATEGY IMPLEMENTATION
An inability to manage change
Poor or vague strategy
Not having policies or a model to guide implementation efforts
Poor or inadequate information sharing
Unclear responsibility & accountability
Working against the organizational power structure
3
OVERCOMING BARRIERS
Adopting a clear model of strategy implementation
Providing unambiguous guidelines, themes
of implementation, high level of
understanding
Effective management of change in complex situations
Addressing behavioral issues, cultural
changes, etc
4
ORGANIZATIONAL STRUCTURE AND
CONTROLS
Organizational structure specifies:
The firm’s formal reporting relationships, procedures,
controls, and authority and decision-making processes
The work to be done and how to do it, given the firm’s
strategy or strategies
It is critical to match organizational structure to the
firm’s strategy.
11–5
ORGANIZATIONAL STRUCTURE
Effective structures provide:
Stability
Flexibility
Structural stability provides:
The capacity required to consistently and predictably manage
daily work routines
Structural flexibility provides for:
The opportunity to explore competitive possibilities
The allocation of resources to activities that shape needed
competitive advantages
11–6
ORGANIZATIONAL CONTROLS
Purposes of Organizational Controls:
Guide the use of strategy.
Indicate how to compare actual results with expected results.
Suggest corrective actions to take when the difference
between actual and expected results is unacceptable.
Two Types of Organizational Controls
Strategic controls
Financial controls
11–7
RELATIONSHIPS BETWEEN STRATEGY
AND STRUCTURE
Strategy and structure have a reciprocal relationship:
Structure flows from or follows the selection of the firm’s
strategy but …
Once in place, structure can influence current strategic
actions as well as choices about future strategies.
11–8
EVOLUTIONARY PATTERNS OF STRUCTURE
AND ORGANIZATIONAL STRUCTURE
(CONT’D)
All organizations require some form of organizational structure
to implement and manage their strategies
Firms frequently alter their structure as they grow in size and
complexity
Three basic structure types:
Simple structure
Functional structure
Multidivisional structure (M-form)
11–9
STRATEGY AND STRUCTURE: SIMPLE
STRUCTURE
Owner-manager
Makes all major decisions directly.
Monitors all activities.
Staff
Serves as an extension of the manager’s supervisor authority.
Matched with focus strategies and business-level
strategies
Commonly complete by offering a single product line in a
single geographic market.
11–10
SIMPLE STRUCTURE (CONT’D)
Growth creates:
Complexity
Managerial and structural challenges
Owner-managers
Commonly lack organizational skills and experience.
Become ineffective in managing the specialized and complex
tasks involved with multiple organizational functions.
11–11
STRATEGY AND STRUCTURE:
FUNCTIONAL STRUCTURE
Chief Executive Officer (CEO)
Limited corporate staff
Functional line managers in dominant organizational
areas of:
Production Marketing Engineering
Accounting R&D Human resources
Supports use of business-level strategies and some
corporate-level strategies
Single or dominant business with low levels of diversification
11–12
FUNCTIONAL STRUCTURE (CONT’D)
Differences in orientation among organizational
functions can:
Impede communication and coordination.
Increase the need for CEO to integrate decisions and actions
of business functions.
Facilitatecareer paths and professional development in
specialized functional areas.
Cause functional-area managers to focus on local versus
overall company strategic issues.
11–13
STRATEGY AND STRUCTURE:
MULTIDIVISIONAL STRUCTURE
Strategic Control
Operating divisions function as separate businesses or profit centers
Top corporate officer delegates responsibilities to division
managers
For day-to-day operations
For business-unit strategy
Appropriate as firm grows through diversification
11–14
MULTIDIVISIONAL STRUCTURE
(CONT’D)
Three Major Benefits
Corporate officers are able to more accurately monitor the
performance of each business, which simplifies the problem
of control.
Facilitates comparisons between divisions, which improves
the resource allocation process.
Stimulates managers of poorly performing divisions to look
for ways of improving performance.
11–15
EFFORTS TO IMPROVE TRADITIONAL
STRUCTURES
Redefine the role of corporate headquarters from control to
support and coordination
GE Medical Systems Organization
Balance the demands for control / differentiation with the need
for coordination / integration
Coca-Cola
Restructure to emphasize and support strategically critical
activities
Wal-Mart – logistics and purchasing efficiencies
Coca-cola – distribution, advertising and retail support to bottlers
Reengineer strategic business processes
BPR is intended to place decision-making authority closer to customer, in
order to make firm more customer-centric.
Downsize and self-manage
GE went from 400,000 to 280,000 employees in last decade.
16
CREATING AGILE, VIRTUAL ORGANIZATIONS
A Virtual organization is defined as a temporary network of
independent companies—suppliers, customers, subcontractors,
even competitors—linked primarily by information technology to
share skills, access to markets, and costs.
An agile organization is one that identifies a set of business
capabilities central to high- profitability operations and then builds
a virtual organization around those capabilities.
Outsourcing
Strategic Alliances
Reengineering
Restructuring
17
TOWARDS BOUNDARYLESS
STRUCTURES
Jack Welch coined the term “boundaryless” to
illustrate his vision for GE, removing
Horizontal boundaries—between different departments or
functions in a firm.
Vertical boundaries—between operations and
management, and levels of management, between
“corporate” and “division”
Geographic boundaries—between different physical
locations; between different countries or regions of the
world and between cultures
External interface boundaries—between a company and its
customers, suppliers, partners, regulators, and competitors
18
TRANSLATING STRATEGY INTO ACTION
1. Identify short term objectives
2. Initiate specific functional tactics
3. Outsource non-essential functions
4. Communicate policies that empower people in the
organization
5. Design effective rewards
19
IDENTIFY SHORT TERM OBJECTIVES
Short-term objectives are measurable outcomes
achievable in one year or less
Discussion about short-term objectives helps raise
issues and potential conflicts within an organization
Specificity
Time frame for completion
Who is responsible—Accountability
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 20
INITIATE SPECIFIC FUNCTIONAL TACTICS
Functional tactics are the key, routine activities that must be
undertaken in each functional area to provide the business’s
products and services
Every value chain activity in a company executes functional
tactics that support the business’s strategy and help
accomplish strategic objectives
Functional tactics in:
OPERATIONS – facilities & equipment, sourcing, operation planning &
control
MARKETING - product, price, place, promotion
FINANCE – capital acquisition, capital allocation, dividend and working
capital management
HRM – recruitment, selection & orientation, career development and
training, compensation, evaluation, discipline and control, labor
relations & equal opportunities requirements 21
R&D – basic research vs. product and process development, time
horizon, organizational fit, basic R&D posture
22
OUTSOURCING FUNCTIONAL
ACTIVITIES
Outsourcing is acquiring an activity, service,
or product necessary to provide a company’s
products or services from “outside” the
people or operations controlled by that
acquiring company
Outsourcing can save valuable time and
money for many organizations
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