IMPLEMENTING STRATEGIES :
MANAGEMENT AND OPERATION
ISSUES
Kelompok 1
Rahmawati Nusi
Sulqifli
Asmadin
Rosihan Anwar
The Nature of Strategy Implementation
Successful of strategy formulation does not guarantee successful strategy
implementation. It is more difficult to do something than to say you are going to do it
Strategy Formulation
Strategy Implementation
1. Positioning forces before action
2. Focus on effectiveness
3. Primarily an intellectual process
4. Require good intuitive and analytical
1. Managing forces during the action
2. Focus on efficiency
3. Primarily an operational process
4. Require special motivation and
skills
5. Require coordination among a few
individuals
leadership skill
5. Require coordination among many
individuals
Management Perspective
1. Establishing Annual Objectives
2. Devising policies
3. Allocating resources
4. Altering an existing
organizational structure
5. Restructuring and Reengineering
6. Revising reward and incentive
plans
7. Minimizing resistance to change
8. Matching managers with
strategies
9. Developing strategy-supportive
culture
10.Adapting production / operation
processes
11.Developing an effective human
resources function
12.And if necessary downsizing
ANNUAL OBJECTIVES
Long-term Company Objective.
Double company revenues in two years
Through market development and
Market penetration .
(Current revenues $ 2 million)
Division 1 Annual Objectives :
Increase divisional revenues by 40% this years
and 40% next year. (Current revenues are $ 1
million)
R & D Annual Objectives :
Develop two new product this year that
are successfully marketed
Marketing Annual Objective :
Increase the number of sales
people by 40 this year
Division 2 Annual Objectives :
Increase divisional revenues by 50% this years
and 50% next year. (Current revenues are $
0,5 million)
Production Annual Objective :
Increase production efficiency by
30% this year
ESTABLISHING ANNUAL OBJECTIVES
• Is a decentralized activity that directly involves all managers in an organization.
• Annual objective are essential for strategy implementation because they :
 Represent the basis for allocating resources
 Are primary mechanism for evaluating managers
 Are the major instrument for monitoring progress toward achieving long-term objective
 Establish organizational, division, and department priority
POLICIES
• On day-to-day basis, policies are needed to make a strategy implemented.
• Policy refers to specific guidelines, methods, procedures, rules, forms and administrative practices
establish to support and encourage work toward stated goals.
• Example :
•
Carnival’s paradise cruise ship has no a smoking policy anywhere, anytime aboard ship.
• Policy provides a basis for management control, allow coordination across organizational units and
reduce amount of time managers spend making decision
A HIERARCHY OF POLICIES
Company Strategy
Acquire a chain of retail stores to meet our sales growth and profitability objectives.
Supporting Policies
1. “All stores will be open from 8 am to 8 pm Monday through Saturday” (this policy could
increase retail sales if stores currently are open 40 hours a week)
2. “All stores must submit a Monthly Control Data Report” (this policy could reduce
expense-to-sales ratio)
3. “All stores must support company advertising by contributing 5% of their total
monthly revenues for this purpose (this policy could allow the company to establish a
national reputation)
4. “All stores must adhere to the uniforms pricing guidelines set forth in the Company
Handbook (this policy could help assure customers that the company offers a
consistent product in terms of price and quality in all its stores)
RESOURCE ALLOCATION
• Resource allocation is a central management activity that allows for strategy execution.
• Four types of resources :
 Financial Resources
 Physical Resources
 Human Resources
 Technological Resources
The real value of any resource allocation program lies in the resulting accomplishment of
an organization’s objective
Effective resource allocation does not guarantee successful strategy implementation,
programs, personal, control, and commitment must breathe life into the resources
provided
MANAGING CONFLICT
• Conflict can be defined as a disagreement between two or more parties on one or more
issues.
• Conflict will be there because :
 Individuals have different expectation and perception, schedule create pressure, personalities are
incompatible, and misunderstanding with line manager.
 Managers and strategist must trade-off : to emphasize short-term profit or long-term
growth, profit margin or market share, market penetration or market development,
growth or stability, high risk or low risk
• Conflict is not be bad, an absence of conflict signal indifference and apathy.
• Various approach for managing conflict :
 Avoidance
 Deffusion
 Confrontation
MATCHING STRUCTURE WITH STRATEGY
• Change in
Strategy require
change in
Organizational
Structure
• Why ?
• Structure largely dictates how objectives and policies will be
established. Example objective & policies establish under a geographic
will be different with under product group.
• Structure dictates how resource will be allocated. If an organization’s
structure is based on customer group, then resource will be allocated
in that manner, if based on functional business lines, then resource will
be allocated by functional area
CHANDLER’S STRATEGY-STRUCTURE RELATIONSHIP
New Strategy
Is Formulated
New Administrative
problems emerge
Organizational
performance improves
Organizational
performance declines
A new organizational
structure is established
THE FUNCTIONAL STRUCTURE
General
Manager
Marketing
Manager
Advertising
Production
Manager
Sales
Quality
Control
THE FUNCTIONAL STRUCTURE
• Advantage
• Disadvantage
• Simple and inexpensive
• Forces accountability to the top
• Promotes specialization of labor
• Minimize career development opportunities
• Encourage efficient use of managerial and
technical talent
• Line/staff conflict
• Minimize the need for an elaborate control
system
• Allow rapid decision making
• Poor delegation of authority
• Inadequate planning for product and markets
THE DIVISIONAL STRUCTURE
BOD
BOD
General
Affair
General
Affair
Regional-1 Division
Regional-2 Division
Regional-3 Division
Automotive Division
Insurance Division
BOD
BOD
General
Affair
General
Affair
Corporate Customer
Division
Agriculture Division
Small Business
Division
Retail
Division
Electrical Work
Division
Glass Cutting
Division
Painting
Division
THE DIVISIONAL STRUCTURE
Divisional Structure
by geographic
Divisional Structure
by product
• Org’ whose strategies need to be tailored to fit the particular need
and characteristic of customers in different area
• It is most effective for implementing strategies when specific
product or service need special emphasis
Divisional Structure by customers
• It is the effective way to implement strategies to cater to the
requirement of clearly defined customer group
Divisional Structure by process
• It is similar to a functional structure, because activities are
organized according to the way work is actually performed
THE DIVISIONAL STRUCTURE
• Advantage
• Disadvantage
• Accountability is clear
• Can be costly
• Allow local control of local situation
• Duplication of functional activities
• Creates career dev’ chances
• Required a skilled management force
• Promotes delegation of authority
• Requires an elaborate control system
• Leads to competitive climate internally
• Competition among division can become so
intense as to be dysfunctional
• Allow easy adding of new product or regions
• Allow strict control and attention to product,
customers and/or regions
• Can lead to limited sharing of ideas and
resources
• Some regions/product/customers may receive
special treatment
THE STRATEGIC BUSINESS UNIT (SBU) ST
Chief Executive
Officer
Conoco Product’s Org’ Chart
Chief Strategy
Officer (CSO)
Chief Finance
Officer (CFO)
Chief Operating
Officer (COO)
Chief Information
Officer (CIO)
Industrial Product SBU
Adhesive
Packaging
Division
Tubes / Cores
Division
Paper Division
VP Human Resource
VP Marketing
Consumer Product SBU
Reels Division
Flexible
Packaging
Division
High Density
Film Division
Metal Ends
Division
Rigid Division
THE MATRIX STRUCTURE
Chief Executive
Officer
Chief
Operating
Officer (COO)
Project-1
A
Project-2
G
Project-3
M
Chief Finance
Officer (CFO)
B
Chief Strategy
Officer (CSO)
C
H
N
Chief Information
Officer (CIO)
D
I
O
VP Human
Resource
E
J
P
VP Marketing
F
K
Q
L
R
The Matrix Structure
Advantage
• Project objective are clear
• Employee can clearly see result of
their work
• Shutting down a project is easily
accomplished
• Facilitates uses of special
equipment/ personal/ facilities
• Functional resources are shared
instead of duplicated as in a
divisional structure
Disadvantage
• Requires excellent vertical and
horizontal flows of communication
• Costly because create more manager
position
• Violate unity of command principle
• Creates dual lines of budget authority
• Creates dual sources of reward and
punishment
• Creates shared authority and reporting
• Requires mutual trust and understanding
Adopting Best Practices and Striving for Continuous
Improvement
A Best Practice is a technique for performing an activity or business process that at
least one company has demonstrated works particularly well
To qualify as a legitimate best practice :
1. Lowering cost
2. Improving quality or performance
3. Shortening time requirement
4. Enhancing safety
5. Delivering some other highly positive operating income.
Benchmarking is the backbone of the process of identifying, studying and implementing
outstanding practices, it involves being humble enough to admit that others have come
up with world-class ways to perform particular activities yet wise enough to try to learn
how to match, and even surpass them.
Restructuring and Reengineering
Restructuring and Reengineering are becoming commonplace in the organization
landscape across the United States and Europe.
Restructuring also called downsizing, right sizing, or delayering involve reducing the
size of the firm in term of number of employee, number of division, number of
hierarchical level in the organization
Reengineering, a firm uses information technology to breakdown functional barrier
to create a work system based on business process, product, or outputs rather than
on function or inputs.
LINKING PERFORMANCE AND PAY TO ST
Profit Sharing, Gain Sharing, Bonus System
Five tests to determine whether a performance-pay-plan will benefit
An organization
Does the plan capture attention
?
Are people talking more about their activities and taking pride in early success
under the plan ?
Does employee understand the
plan ?
Can participants explain how it works and what they need to do to
earn the incentive
Is the plan improving
communication ?
Do employees know more than they used to about the company’s mission, plans
& objective?
Does the plan pay out when it
should
Are incentive being paid for desired result-and being withheld when objective
are not met ?
Is the company or unit performing
better ?
Are profits up ? Has market share grown ? Have gains resulted in part from the
incentive ?
MANAGING RESISTANCE TO CH
• Almost any change in structure, technology, people, or strategies potential disrupt
comfortable interaction patterns
• People fear economic loss, inconvenience, uncertainty, and break in normal social
patterns
• Resistance to change can be considered the single greatest threat to successful
strategy implementation.
• Three various approach to implement changes :
 Force change strategy
 Educative change strategy
 Self-interest change strategy
CREATING A STRATEGY-SUPPORTIVE
CULTURE
Way for altering
Linkage Culture to Strategy
Strategist should strive to
preserve, emphasize, and built
upon aspect of an existing
culture that support proposed
new strategies
1. Formal statement of organizational
philosophy, charter, creed, material used
for recruitment and selection and
socialization
2. Designing of physical spaces, facades,
buildings
3. Deliberate role modeling, teaching, and
coaching by leader
4. Explicit reward and status system,
promotion criteria
5. Stories, legends, myths and parables about
key people and events
•
•
•
•
•
•
•
•
•
•
•
•
•
Recruitment
Training
Transfer
Promotion
Restructuring
Reengineering
Role Modeling
Positive Reinforcement
Mentoring
Revising vision and mission
Redesigning space
Reward system
Policies, procedures
PRODUCTION / OPERATION CONCERN
Types of Org’
Strategy being Implemented
Production System Adjustment
Hospital
Adding a cancer center (Product
Development)
Purchase specialized equipment and add
specialized people
Bank
Adding 10 new branches (Market
Development)
Perform site location analysis
Beer Brewery
Purchasing a barely farm operation
(Backward Integration)
Revise the inventory control system
Steel Manufacturing
Acquiring fast-food chain (Unrelated
Diversification)
Improve the quality control system
Computer Co.
Purchasing a retail distribution chain
(Forward Integration)
Alter the shiping, packaging, and transportation
system
HUMAN RESOURCE CONCERN
Human Resources Problem :
1. Disruption of social and political structure
2. Failure to match individual’s aptitude with implementation task
3. Inadequate top management support for implementation activities
Employee Stock Ownership Plans (ESOP):
Employee-benefit plan whereby employee purchase stock of the company through
borrowed money or cash contribution.
Balancing Work Life and Home Life