Strategic management process and stratergic implementation PPT MBA FINANCE

Strategic management process

Strategic management process

Vision

and

Mission

External

Audit

Internal

Audit

Long-

term

objectives

Generates

evaluates

select

strategy

Implement

strategy

mgt issues

Implement

strategies

marketing,

Finance/A/c

R&D &CIS

Measure&

evaluate

performance

Strategy Implementation

So far we have studied strategy formulation, analysis of alternative strategies, and then making a strategic choice.

What Next ?

The strategy must be translated into concrete action, and

That action must be carefully implemented.

Implementation is initiated in three stages:

1. Identification of annual objectives

2. Development of specific functional strategies

3. Development and communication of concise policies to guide decisions.

Implementing Strategy:

Strategy

Implementer’s

Action

Agenda

Building a

Capable

Organization

Allocating Resources

Establishing Strategy-

Supportive Policies

Instituting Best

Practices for

Continuous

Improvement

Installing Support

Systems to Carry

out Strategic Roles Tying Rewards

to Achievement

of Key Strategic Targets

Exercising

Strategic

Leadership

Shaping Corporate

Culture to Fit

Strategy

Factors Influencing Managers in Leading Implementation Process

Experience and knowledge of business

New to job or seasoned

Network of personal relationships

Diagnostic, administrative, interpersonal, and problem-solving skills

Authority given manager

Leadership style most comfortable with

View of role to get things done

Context of organization’s situation

Strategy choice & implementation – the ‘Nestle’ story.

Nestle has a presence in India over a century !!

For a long time it imported condensed milk (milk maid) & infant food items.

Lately, it woke up to the food- market potentials in India and set long-term objectives:

Launch variety of dairy products – Milk, Butter, curd

Increase food products – instant coffee (nescafe), Maggie, KitKat, Cerelac, Nestrum, Munch etc.

Penetrate vast rural, middle-class segments

Maintain competitive edge (HLL. Cadburry, Heinz & locals)

The Strategy

Nurture the best selling brand, Price cuts, economy packs at different price points, strengthen distribution network, expand product base to include daily consumable items, build volumes through price cuts, reach out with appealing adds.

Nestle Story – the current market scenario:

Milk Products & Baby food: Amul has focussed on Milk Products and Babyfood- giving tough competition. Local coops. Entering the market, Britania JV with Fonterra is a big challenge.

Beverages: HLL’s Bru favoured in South India, the coffee belt, Barista-Tata coffee poses threat, Bisleri & Kinley price war

Processed Food: HLL making strong bid, locals like MTR in the fray.

Chocolate & Confectionery: Cadbury adopting Nestle’s strategy, ITC, Amul, HLL in the fray using their distribution network to their advantage.

Strategy Implementation

Operationalizing strategy

This phase is the translation of the agreed upon long term objectives, the strategic plan, into organizational action.

Here the focus shifts from strategy formulation to strategy implementation.

There are four important things to be done well to make this transition:

1. Identify short term objectives

They translate long term objectives into annual targets for action.

They provide clarity and can be very powerful motivator and facilitator of effective strategy implementation.

2. Initiate specific functional strategies

They translate business strategy into daily activities.

Functional managers are involved in developing these tactics and their participation helps in clarifying what needs to be done to implement the strategy.

3. Communicate policies that empower people in the organization

Policies are empowerment tools that simplify decision making by empowering operational managers and their subordinates.

They empower the people involved in execution by reducing the time required to decide and act.

4. Design effective rewards

It is aimed at rewarding the desired actions and results.

Annual or short term objectives

They provide a guidance to the people in the organization as to what needs to be done currently to make the long term objectives become reality.

They provide specific guidelines about the things to be done.

They "operationalize" long -term objectives. e.g. if the long term, say five year plan is to gain forty percent market share from the current twenty percent, then what needs to be done in this year to increase the current market share by "X" percent

Annual or short term objectives

Discussion and agreement on short-term strategies help raise issues and potential conflicts that requires coordination to avoid serious consequences.

It identifies measurable outcomes of action plans or functional activities, which can be used to make feedback, correction, and evaluation more relevant and acceptable.

Short-term objectives are accompanied by action plans, which help short-term objectives in three ways:

1. These action plans identify functional tactics and activities that will be undertaken in the next week, month or quarter to build competitive advantage. They specify what exactly needs to be done.

2. They provide a time frame for completion - a schedule with starting and ending dates.

3. It identifies who is responsible for each action in the plan.

Qualities of effective short-term objectives

1. Measurable

Short-term objectives are more consistent when they clearly state

what is to be accomplished

when it will be accomplished

how its accomplishment will be measured

This helps in effectively monitoring each activity and the progress across several interrelated activities.

Measurable objectives make misunderstanding less likely among interdependent managers who must act on the plans.

It is easier to quantify objectives of line units (e.g. production) than staff areas (e.g. personal).

Difficulties in quantifying objectives often can be overcome by initially focusing on measurable activity and then identifying measurable outcomes.

2. Priorities Some annual objectives would require higher priority either because of the timing considerations or because of their effect on a strategy's success. E.g. new product development may be more important than promotional activities

Not prioritizing will lead to conflicting assumptions which may inhibit progress towards strategic effectiveness.

The various ways on which priorities can be established are:

1. Ranking method

2. Terms such as primary, top and secondary can be used.

3. Objectives can be given weights (e.g. 0 to 100 percent) to establish and communicate the relative priority.

3. Linked to long-term objectives

Short-term objectives can add specificity in identifying what must be accomplished to achieve long-term objective.

e.g. Adobe systems has an long-term objective of achieving five percent of its total revenue to come from India in the next 5 years. To achieve this it can have a series of short-term objectives like focusing on particular products.

The link between the short-term and long-term objectives should resemble cascades through the firm, from basic long-term objectives to specific short-term objectives in key operational areas.

The cascading effect provides a clear reference for communications and negotiation, which may be necessary to integrate and coordinate objectives and activities at the operating level.