Stategic Management

Fred R. DavidPrentice Hall

Ch 7-1

Chapter 7Chapter 7Implementing Strategies:Implementing Strategies:

Management IssuesManagement Issues

Strategic Management:

Concepts and Cases. 9th edition

Fred R. David

PowerPoint Slides by

Anthony F. Chelte

Western New England College


Ch 7-2

Chapter OutlineChapter Outline

• The nature of Strategy Implementation

• Annual Objectives

• Policies

• Resource Allocation


Ch 7-3


• Managing Conflict

• Matching Structure with Strategy

• Restructuring, Reengineering, and E-Engineering

• Linking Performance and Pay to Strategies


Ch 7-4


• Managing Resistance to Change

• Managing the Natural Environment

• Creating a Strategy-Supportive Culture


Ch 7-5


• Production/Operations Concerns When Implementing Strategies

• Human Resource Concerns When Implementing Strategies


Ch 7-6

Implementing Strategies: Implementing Strategies: Management IssuesManagement Issues

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

Strategy Analysis & ChoiceStrategy Analysis & Choice

Contrasting strategy formulation and Contrasting strategy formulation and strategy implementationstrategy implementation

– Formulation is positioning forces before the action

– Implementation is managing forces during the action



Ch 7-8



– Formulation focuses on effectiveness

– Implementation focuses on efficiency



Ch 7-9



– Formulation is primarily an intellectual process

– Implementation is primarily an operational process



Ch 7-10



– Formulation requires good intuitive and analytical skills

– Implementation requires special motivation and leadership skills



Ch 7-11



– Formulation requires coordination among a few individuals

– Implementation requires coordination among many persons



Ch 7-12


Strategy implementation –Strategy implementation –

– Varies among different types and sizes Varies among different types and sizes of organizations of organizations



Ch 7-13


Strategy implementation Actions –Strategy implementation Actions –

– Altering sales territoriesAltering sales territories– Adding new departmentsAdding new departments– Closing facilitiesClosing facilities– Hiring new employeesHiring new employees– Cost-control proceduresCost-control procedures– Changing advertising strategiesChanging advertising strategies– Building new facilities Building new facilities



Ch 7-14

Formulation to Implementation Formulation to Implementation transition –transition –

– Shift in responsibilityShift in responsibility• From strategists to division and functional From strategists to division and functional

managers managers

Management PerspectivesManagement Perspectives


Ch 7-15

Management IssuesManagement Issues

ManagementIssues

ResourcesResources

Organizational structureOrganizational structure

RestructuringRestructuring

Rewards/IncentivesRewards/Incentives

Annual ObjectivesAnnual Objectives

PoliciesPolicies


Ch 7-16

Management Issues (continued)Management Issues (continued)

ManagementIssues

Supportive cultureSupportive culture

Production/operationsProduction/operations

Human resourcesHuman resources

DownsizingDownsizing

Resistance to ChangeResistance to Change

Managers & strategyManagers & strategy


Ch 7-17


• Decentralized activityDecentralized activity

• Involves all managers in the firmInvolves all managers in the firm


Ch 7-18


1.1. Basis for allocating resourcesBasis for allocating resources2.2. Primary mechanism for evaluating Primary mechanism for evaluating

managersmanagers3.3. Major instrument for monitoring Major instrument for monitoring

progress toward long-term objectivesprogress toward long-term objectives4.4. Establish organizational, divisional, and Establish organizational, divisional, and

departmental prioritiesdepartmental priorities


Ch 7-19


• Horizontal consistency of objectivesHorizontal consistency of objectives

• Vertical consistency of objectivesVertical consistency of objectives


Ch 7-20


Objectives should state –Objectives should state –

– Quantity– Quality– Cost– Time


Ch 7-21

PoliciesPolicies

Policies facilitate solving recurring Policies facilitate solving recurring problems and guide the implementation problems and guide the implementation of strategyof strategy


Ch 7-22

PoliciesPolicies

Policies set –Policies set –

– Boundaries– Constraints– limits


Ch 7-23

PoliciesPolicies

Example Issues requiring management policy --Example Issues requiring management policy --

– To offer extensive or limited management development workshops and seminars

– To centralize or decentralize employee-training activities

– To recruit through employment agencies, college campuses, and/or newspapers

– To promote from within or hire from the outside– To establish a high- or low-safety stock of

inventory– To buy lease, or rent new production equipment


Ch 7-24

Resource AllocationResource Allocation

Resource Allocation –Resource Allocation –

A central management activity that allows A central management activity that allows for strategy executionfor strategy execution


Ch 7-25

Resource AllocationResource Allocation

Four types of resources –Four types of resources –

1. Financial resources

2. Physical resources

3. Human resources

4. Technological resources


Ch 7-26

Managing ConflictManaging Conflict

Conflict –Conflict –

Disagreement between two or more parties on one or more issues


Ch 7-27


• Conflict is not always “bad”Conflict is not always “bad”• Absence of conflictAbsence of conflict

– Signal indifference or apathySignal indifference or apathy

• Can energize opposing groups to actionCan energize opposing groups to action• May help managers identify problemsMay help managers identify problems


Ch 7-28


Conflict Management and Resolution

– Avoidance– Defusion– Confrontation


Ch 7-29

Matching Structure with StrategyMatching Structure with Strategy

Changes in Strategy Changes in Structure

1. Structure largely dictates how objectives and policies will be established.

2. Structure dictates how resources will be allocated


Ch 7-30

Chandler’s Strategy-StructureChandler’s Strategy-StructureRelationshipRelationship

New administrativeproblems emerge

New strategyIs formulated

Organizationalperformance

declines

Organizational performance

improves

New organizationalstructure is established


Ch 7-31

Basic Forms of StructureBasic Forms of Structure

1. Functional Structure• Groups tasks and activities by business

function

2. Divisional Structure• Decentralized and organized by geography,

product, customer, or process


Ch 7-32

Basic Forms of StructureBasic Forms of Structure

3. Strategic Business Unit Structure (SBU)• Groups similar divisions; delegates authority

and responsibility to SBU executive

4. Matrix Structure• Most complex of all designs. Depends upon

both vertical and horizontal flows of authority and communication


Ch 7-33


Restructuring –

Reducing the size of the firm in terms of number of employees, divisions, or units, and the number of hierarchical levels in the firm’s organizational structure


Ch 7-34


Also called –

– Downsizing– Rightsizing– Delayering


Ch 7-35


• Employed when ratios out of line with benchmarked competitors

• Primary benefit sought is cost reduction


Ch 7-36

ReengineeringReengineering

Reengineering –

Involves reconfiguring or redesigning work, jobs, and processes to improve cost, quality, service and speed.


Ch 7-37


Also called –

– Process management– Process innovation– Process redesign


Ch 7-38


Reengineering –

Concerned more with employee and customer well-being than shareholder well-being


Ch 7-39

Linking Performance and PayLinking Performance and Payto Strategiesto Strategies

Most companies practicing pay-for-Most companies practicing pay-for-performanceperformance


Ch 7-40

Linking Performance and PayLinking Performance and Payto Strategiesto Strategies

• Dual bonus system becoming more commonDual bonus system becoming more common– Based on both annual objectives and long-term Based on both annual objectives and long-term

objectivesobjectives

• Profit SharingProfit Sharing– Incentive compensation used by 30% of companiesIncentive compensation used by 30% of companies

• Gain SharingGain Sharing– Performance targets set for employees or Performance targets set for employees or

departmentsdepartments


Ch 7-41

Tests for Performance-Pay PlansTests 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 7-42

Managing Resistance to ChangeManaging Resistance to Change

Change raises anxiety over fear of:Change raises anxiety over fear of:

– Economic lossEconomic loss– InconvenienceInconvenience– UncertaintyUncertainty– Break in status-quoBreak in status-quo


Ch 7-43

Managing Resistance to ChangeManaging Resistance to Change

Resistance to change –Resistance to change –

– Single greatest threat to successful strategy Single greatest threat to successful strategy implementationimplementation


Ch 7-44

Change StrategiesChange Strategies

• Force Change StrategyForce Change Strategy

• Educative Change StrategyEducative Change Strategy

• Rational or Self-Interest Change StrategyRational or Self-Interest Change Strategy


Ch 7-45

Managing the Natural Managing the Natural EnvironmentEnvironment

• Wide appreciation for firms that conduct Wide appreciation for firms that conduct operations that “mend” rather than “harm” operations that “mend” rather than “harm” the environment.the environment.


Ch 7-46

Creating a Strategy-Supportive Creating a Strategy-Supportive CultureCulture

Strategists should strive to preserve, emphasize, and build upon aspects of existing culture that support new strategies.


Ch 7-47

Creating a Strategy-Supportive Creating a Strategy-Supportive CultureCulture

Elements linking culture to strategy:

1. Formal statements of philosophy, charters, etc. used for recruitment and selection, and socialization

2. Designing of physical spaces, facades, buildings3. Deliberate role modeling, teaching and coaching4. Explicit reward and status system, promotion criteria5. Stories, legends, myths about key people and events6. What leaders pay attention to, measure and control7. Leader reactions to critical incidents and crises8. How the organization is designed and structured9. Organizational systems and procedures10. Criteria used for recruitment, selection, promotion, retirement


Ch 7-48

Production/Operations ConcernsProduction/Operations Concerns

• Production processes typically constitute more than 70% of firm’s total assets

• Decisions on:– Plant size– Inventory/inventory control– Quality control– Cost control– Technological innovation


Ch 7-49

Human Resource ConcernsHuman Resource Concerns

• Assessing staffing needs and costs

• Develop performance incentives

• ESOPs

• Child-care policies

• Work-life balance


Ch 7-50

Key TermsKey Terms

• Annual objectives• Avoidance• Benchmarking• Bonus system• Conflict• Confrontation• Culture• Defusion• Delayering


Ch 7-51

Key TermsKey Terms

• Decentralized structure• Divisional structure• Downsizing• Educative change strategy• Employee Stock Ownership Plan

(ESOP)


Ch 7-52

Key TermsKey Terms

• Establishing annual objectives• Force change strategy• Functional structure• Gain sharing• Horizontal consistency of objectives• Just in time• Matrix structure• Policy• Profit sharing


Ch 7-53

Key TermsKey Terms

• Rational change strategy• Reengineering• Resistance to change• Resource allocation• Restructuring• Rightsizing• Self-interest change• Triangulation• Vertical consistency of objectives

Stategic Management

Documents

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strategy implementation

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linking performance

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basic forms

annual objectives

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