Strategic Management Unit-3

Strategic ManagementUnit-3

-BY Dr. Amit Seth

Strategy Implementation: Aspects

Nature of Strategy Implementation

• Strategy implementation concerns the managerial exercise of putting a freshly chosen strategy into place.

• Any Strategic Intent: implementation tasks are meant to realize the intent. Strategies, therefore, have to be activated through implementation.

• Characteristics of Strategy Implementation:

1. Action Oriented2. Comprehensive in scope3. Demanding varying Skill4. Wide-ranging involvement5. Integrated Process

(c) Dr. Azhar Kazmi 2008 4

Barriers to strategy implementation and overcoming them

An inability to manage change Poor or vague strategy Not having guidelines or a model to guide

implementation efforts Poor or inadequate information sharing Unclear responsibility and accountability Working against the organizational power structure

Overcoming barriers• Adopting a clear model of strategy implementation• Effective management of change in complex situations

Eight out of ten companies failed to deploy their strategiesReason for unsuccessful-Inadequate management skills, poor comprehension of roles, inadequate leadership, ill defined task and lack of employee commitment


Two-way linkage between formulation and implementation of strategy

STRATEGY FORMULATION

(THOUGHT)

STRATEGY IMPLEMENTATION

(ACTION)


Mintzberg’s conception of the type of strategies

Intended strategy

Realised strategy

Deliberate strategy

Emergent strategy

Formulated strategy

Implementedstrategy

Unrealised strategy

Based on H. Mintzberg: “Pattern in strategy formation” Management Science May 1978; 24, 9, p. 945.


A model of strategy implementation

PROJECT IMPLEMENTATION

PROCEDURAL IMPLEMENTATION

RESOURCE ALLOCATION

STRUCTURAL IMPLEMENTATION

LEADERSHIP IMPLEMENTATION

BEHAVIOURAL IMPLEMENTATION

FUNCTIONAL IMPLEMENTATION

OPERATIONAL IMPLEMENTATION

STRATEGIC PLAN

EVALUATION & CONTROL

ACTIVATING MANAGING ACHIEVING STRATEGIES CHANGE EFFECTIVENESS

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FEEDBACK


Major themes in strategy implementation

• Activating strategies• Managing change• Achieving effectiveness


The pyramid of strategy activation

STRATEGY

PLANS

PROGRAMMES

PROJECTS

BUDGETS

POLICIES, PROCEDURES, RULES AND REGULATIONS


Project implementation

• A project is the basic unit of a programme. A programme is a portfolio of projects that may be interrelated and interdependent in complex ways. Several programmes are required to implement a plan. A number of plans are involved in implementing a strategy.


The process of project management

• Initiating• Planning• Executing• Controlling• Closing


Strategy implementation through project management

INITIATING CLOSINGCONTROLLINGEXECUTINGPLANNING

STRATEGY IMPLEMENTATION STRATEGY EVALUATION AND CONTROL

STRATEGIC MANAGEMENT PROCESS

PROJECTOBJECTIVES

CONTROL MEASURES

PROJECT MANAGEMENT PROCESS


Procedural implementation• Regulatory mechanisms in India

Formation of a company Licensing procedures Securities and Exchange Board of India (SEBI) requirements Monopolies and Restrictive Trade Practices (MRTP) requirements Foreign collaboration procedures Import and export requirements Patenting and trade marks requirements Labour legislation requirements Environmental protection and pollution control requirements Consumer protection requirements Incentives and facilities benefits


Procedural implementation in action

• Strategists may adopt a submissive, confrontational, or collaborative stance. They can try to conform to the regulations, confront the regulations by informed criticism and lobbying and public relations or work with the government to improve the regulatory framework. At the same time they can adopt an 'existentialist' view and continually look for opportunities within the business environment as such an environment is substantially affected by government plans, priorities, policies and actions.


Resource allocation

• Resource allocation deals with the procurement, commitment, and distribution of financial, human, informational, and physical resources to strategic tasks for the achievement of organisational objectives. Strategic budgeting Aligning resource allocation to strategy Factors affecting resource allocation Difficulties in resource allocation


Making of a strategic budget

Structural Implementation


Structural considerations• From a strategy implementation standpoint, an organisation

structure is the arrangement of tasks and sub-tasks required to implement a strategy.

• Organisation structure specifies three key components as below.1. It identifies formal reporting relationships, including the

number of levels in the hierarchy and the span of control of managers.

2. It specifies the grouping of individuals into departments and of departments into the total organisation.

3. It consists of design of systems to ensure effective communication, coordination, and integration of efforts across departments.

J. Child: Organization New York: Harper & Row, 1984.


Vertical and horizontal structures

Vertical structure dominant: • Specialised tasks• Hierarchy of authority• Rules and regulations• Vertical communication and• Formal reporting systems• Centralised decision making• Emphasis on efficiency

Horizontal structure dominant:• Shared tasks• Flexible authority• Few rules and regulations• Horizontal communication

and sharing of information• Decentralised • decision-making• Emphasis on learning


Interrelationship between structure and strategy

STRUCTURESTRATEGYdetermines

affects


Why is structural implementation needed?

Strategic plan is implemented

New strategies put in place

Performance declines

Effectiveness is reduced

Implementation of new strategies

Structure is changed

Performance improves

Mismatches occur


Environment, strategy, structure, and effectiveness

Strategy

Structure

Effectiveness

Environment


Stages of development of organisations

• Stage I organisations• Stage II organisations• Stage III organisations• Stage IV organisations


Types of organisational structures

• Entrepreneurial• Functional• Divisional• SBU• Matrix• Network• Other types of structures: Product-based, customer-based, process-based, geographic, and

intrapreneurial structures


Emerging forms of structures• Horizontal organisations are based on structure that

corresponds to the process of providing product or service to the customer rather than the functions that the organisations perform.

• Delaminated matrices are combinations of horizontal organisations with functional structure.

• Mechanistic structures are rigid, hierarchical, suited to stable conditions while organic structures are flexible arrangements, adapting to conditions of rapid change and innovation.

• The structure of an organisation may consist of the characteristics of mechanistic and organic structures in different parts making it an ambidextrous organisation structure


Inter organisational relationship of a biotechnology consortium

Design & Change


Organisational design and change• Organisation design has two dimensions:

• Organisational change has two dimensions: Structural changes Accompanying behavioural changes

• Structural Dimensions• Formalization• Specialization• Hierarchy• Centralization• Professionalism• Personnel Ratios

• Contextual Dimensions• Environment• Goals & Strategy• Culture• Technology• Size


Steps in organisation design• Identification of key activities necessary to be performed for the

achievement of objectives and realisation of mission through the formulated strategy.

• Grouping of activities that are similar in nature and need a common set of skills to be performed.

• Choice of structure that could accommodate the different groups of activities.

• Creation of departments, divisions, etc. to which the group of activities could be assigned.

• Establishing interrelationship between different departments for the purpose of coordination and communication.


Organisation design for business strategies

CEO CEO

Fin HRM Mktg Oper Fin HRM Oper

Centralised staffR&D Mktg

Structure for attaining cost leadership

Structure for attaining differentiation


Suggested structure for implementing related diversification

CEO

PRLegal

Corporate Finance

Corporate HRM Corporate Marketing

Corporate Operation

Strategic Business Unit D

Strategic Business Unit C

Strategic Business Unit B

Strategic Business Unit A


Suggested structure for implementing unrelated diversification

CEO

Corporate Finance Corporate HRM Corporate Legal Corporate PR

Division A Division B Division C Division D


Structures for internationalisation strategy

GlobalStrategy

Global Product Structure

InternationalStrategy

International division structure

TransnationalStrategy

Global Matrix Structure

Multi domesticStrategy

Global Geographic Structure

Pressures for local responsiveness

Pres

sure

s for

cos

t red

uctio

n

Adapted from R. E. White & T. A. Poynter: “Organizing for worldwide advantage” Business Quarterly Summer, 1989, pp. 84-89


Evolution of systems and processes within organisations

• Defining the major tasks required to implement a strategy• Grouping tasks on the basis of common skill requirements

or activities in value chain• Sub-division of responsibility and delegation of authority to

perform tasks• Coordination of divided responsibility• Design and administration of the information system• Design and administration of the control system• Design and administration of the appraisal system• Design and administration of the motivation system• Design and administration of the reward system• Design and administration of the development system• Design and administration of the planning system.


The control cycle

Behavioral Implementation-Leadership


The organisation-stakeholders relationship

External stakeholders

CustomersSuppliers

Government regulatorsBanks / creditors

Trade unionsEmployers’ organizations

Mass mediaNGOs/activists

Local communitiesGeneral public

Internal stakeholders

ShareholdersEmployeesManagersDirectors

CONTRIBUTIONS / SUPPORT

EXPECTATIONS/ CLAIMS


Stakeholders’ analysis mapPower of the stakeholder over strategic decision

Unknown Little / no power Moderate degree of power

Significant power

Unknown

Little or no effect

Moderate effect

Significant effect

Effect of strategy on the

stakeholder

Adapted from R. E. Freeman: Strategic Management: A Stakeholder Approach Boston, M.A.: Pitman, 1984


Corporate governance and strategic management

• The management of relationship between the directors, and managers of the organisation and the other stakeholders is called corporate governance.

Agency theory Stewardship theory


Relating corporate governance to strategic management

• Corporate governance and strategic intent • Corporate governance and strategy

formulation • Corporate governance and strategy

implementation • Corporate governance and strategy evaluation


Role of board of directors and strategic management

• The role of the board in strategic management is to guide the senior management in setting and accomplishing objectives, reviewing, and evaluating organisational performance and appointing senior executives.

• The function of the board is usually seen in terms of setting the strategic direction which involves establishing objectives and strategy and subsequently monitoring and reviewing achievement


Strategic leadership

• Strategic leadership is the ability to lead an organisation towards achievement of its objectives. The tasks involved in exercising strategic leadership are typically to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary.


Tasks of strategic leaders

• Determining strategic direction • Effectively managing the organisational

resources portfolio • Sustaining an effective organisational culture • Emphasising ethical practices • Establishing balanced organisational controls


Roles of strategic leaders

• Role of chief executive officer • Role of senior managers • Role of business-level executives • Role of functional and operational managers


The Tasks of Strategic Leaders

• The choice of future strategists • Career planning and development • Succession planning

Developing strategic leaders

• Determining Strategic Direction• Effectively Managing the Organizational Resources Portfolio• Sustaining an Effective Organizational Culture• Emphasizing Ethical Practices• Establishing Balanced Organizational Controls

Culture


Corporate culture and strategic management

• Composition of corporate culture• Impact of culture on corporate life• Strategy-culture relationship


Strategy-supportive culture

• Approaches to create strategy-supportive culture:

To ignore corporate culture To adapt strategy implementation to suit

corporate culture To change the corporate culture to suit strategic

requirements To change the strategy to fit the corporate culture


Corporate politics and use of power• Understanding power and politics

1. Reward Power2. Coercive Power3. Legitimate Power4. Referent Power5. Expert Power

• Strategic use of power and politics- A manager cannot effectively formulate and implement strategy without being perceptive about company politics and being adept at political maneuvering.

• Corporate politics and power in Indian context

Value & Ethics


Personal values and business ethics

• Meaning of value and ethics• Importance of values and ethics in business• Values, ethics and strategy• Matching values and ethics to strategy

Inculcating the right set of values Reconciling divergent values Modifying values


Social responsibility and strategic management

• Differing views on social responsibility• Social responsibility in the Indian context• Social responsiveness and strategic

management

BUSINESS ETHICS Business ethics refers to the application of ethical principles and moral

values while conducting business

All stakeholders, be they employees, equity investors, creditors, or the local community, are aware of their rights and responsibilities, and it is important to ensure that they are protected by the system

Standards of all internal functions are reasonably maintained in a controlled environment, and are managed through policy, procedures, and punishments

Ethical issues in human resource management

Fudging bills and expenses Favouring selective

employees due to personal bias

Misusing official position for personal favours

Engaging in corrupt practices Harassing colleagues sexually Not adhering to the contract

of employment

Misrepresenting facts to claim jobs and promotions

Management discriminating against the workforce on employment and growth

Intervening intentionally in representation of concerns, unjust and discriminatory practice, and disrespect for freedom and expression of opinions

Human resources management ethics is all about an egalitarian

workplace and the dignity of the workforce

Ethical issues in Finance

Intended false reporting, creative accounting, fudging and/ or misrepresentation of facts, earnings mismanagement, and misleading financial analysis

Insider trading, securities fraud, and foreign exchange scams

Criminal activities such as bribery, kickbacks, and facilitating payments for favors towards funding of projects, sanctioning of loans, and soliciting equity comprise

Unfair executive compensation to top management either directly or indirectly

Contd…

Enron, an energy company, was filed with the SEC as an investment bank and received $1 billion in subsidized loans from US government. It fleeced consumers by manipulating the prices of electricity and gas. It even fleeced the investors and its own staff

On 7 January 2009,B. Ramalinga Raju, founder chairman of Satyam Computer Services, disclosed that he was compelled to fudge the accounts to show high returns to boost investor confidence. The disclosure pushed the fourth largest Indian IT company into a crisis, exposing it to acquisitions and leaving the future of 53,000 employees in balance.

Ethical issues in Sales and Marketing Anti-competitive practices including pricing tactics and manipulation

of loyalty and supply chains

Specific marketing strategies, including false discount sale activities, inflated benefits, and disguised costs are common.

For example, offering products at low prices without providing adequate post-sale service

Black marketing, encouragement of grey markets, and infringement of copyrights and originality

Willful misrepresentation, wrong and objectionable advertisement, and persuasive material of malign intent

Pricing tools through promotion and other techniques, which are false by nature and design, are also used by companies.

Ethics issues in Production Defective, addictive or inherently dangerous products and services or

some other harmful input materials

Ethical relations between the company and its environment, For instance

discharge of polluting agents in air and water, Lack of safety standards

Ethical problems arising out of new technologies

Ex. genetically modified food, mobile phone radiation etc

Product testing ethics, where animals and economically poor people are

subjected to tests without having any detailed understanding about the

implications

Use of supplier relationships to one’s advantage and restricting their

earnings and economic benefits

Ethics of Property, Property Rights, and Intellectual Property Rights(IPR) Patent infringement, copyright infringement, and trademark

infringement

Misuse of intellectual property systems to stifle competition—patent

misuse, copyright misuse, Patent trolls, submarine patents

Industrial espionage including spying, garnering intelligence on critical

business ideas and deals, and sharing them with competitors

Managing human assets by way of attracting key employees away from

a competitor to take unfair advantage

Ethics issues in International Business Comparison of ethical business traditions in different countries.

Corruption rankings by rating agencies and institutions across the globe.

The search for universal values as a basis for international commercial behaviour

Comparison of ethical business traditions by interaction via business forums, federations and confederations, and participation in business fairs and meetings.

Critically analyzing the laws of various lands and studying the pattern of legal recourse and its effectiveness.

Understanding the way in which multinationals take advantage of international differences

For instance outsourcing production (in clothes manufacture) and services (call centres) to low-wage countries.

Strategic Management Unit-3

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