STRATEGIC MANAGEMENT & BUSINESS POLICY
12TH EDITION
THOMAS L. WHEELEN
J. DAVID HUNGER
C9
Organizing
C9
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Staffing &
Directing
C10
1-2
Strategy Flowchart
Corporate
Growth
Concentration
Vertical Growth
Horizontal Growth
Diversification
Concentric
Conglomerate
Directional
Stability
Pause
No Change
Profit
Retrenchment
Portfolio
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Parenting
Business
Functional
Competitive
Marketing
Lower Cost
Differentiation
Focus
Cooperative
Collusion
Alliance
Financial
R&D
Operations
Purchasing
Logistics
Turnaround
Captive Company
Divestment
Bankruptcy/Liquidation
human
resource
BCG & GE
Information
Technology
2008
Build synergies &
Create value
8-3
Strategy implementation- the sum total of all
activities required for the execution of a strategic plan.
To begin the implementation process, strategy
makers must considers these questions –
•
Who are the people to carry out the strategic plan?
•
What must be done to align company operations in
the intended direction?
•
How are we going to carry out necessary activities?
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9.2
Who Implement Strategy?
In the action program, we always assign each activities to a
responsible person.
In most large, multi-industry operation, the implementers are
everyone in the organization, vice presidents of functional
areas, directors of divisions or strategic business units, plant
managers and every employees.
The more you involve people from all organizational levels in
the formulation and implementation of strategy tends to result
in better organizational performance.
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Developing Programs, Budgets and Procedures
Strategy implementation involve establishing:
•
•
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Programs to create a series of new activities.
Budgets to allocate funds to the new activities.
Procedures to handle day-to-day details.
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Developing Programs, Budgets and Procedures
Matrix of Change
•
•
helps managers to examine the likely impact new
programs will have on the existing organization.
helps managers decide where, when and in what
order to implement change , and whether the
proposed programs are stable and coherent.
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Achieving Synergy
Synergy– exists for a divisional corporation if the
return on investment is greater than what the
return would be if each division were an
independent business.
Forms of Synergy include
•
•
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Shared know-how
Coordinated strategies
Shared tangible resources
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•Economies of scale or scope
•Pooled negotiating power
•New business creation
9-10
Structure Follows Strategy
Size of Organization
Small
Large
Strategy
Centralized
Decentralized
Structure
Functional
Divisional
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Stages of Corporate Development
I.
Simple Structure
•
•
II.
Entrepreneur makes all the important decisions personally
and is involved in every details of the organization.
The strengths of stage one are flexible and dynamic.
Functional Structure
•
•
Entrepreneur is replaced by a team of managers with
functional specialties.
The strengths of stage two are concentration and
specialization in one industry.
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Stages of Corporate Development
III. Divisional Structure
•
•
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Management of diverse product lines in numerous
industries.
Decentralized decision making.
The strengths of stage three is its almost unlimited
resources.
IV. Beyond SBU’s
•
•
•
Matrix
Network
Cellular
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Stages of Corporate Development
Blocks to Changing Stages
•
Internal
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Lack of resources
Lack of ability
Refusal of top management to delegate
External
–
–
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Economy
Labor shortages
Lack of market growth
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Stages of Corporate Development
Blocks to Changing Stages (Entrepreneurs)
Entrepreneurs who start businesses generally have four
tendencies that work very well for small new ventures but
become weak points when they try to manage a larger firm.
•
Loyalty to comrades -> favoritism
•
Task orientation -> excessive attention to details
•
Single-mindedness -> no vision
•
Working in isolation -> brilliant scientist but disastrous
CEO
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Organizational Life Cycle
Organizational Life Cycle
describes how organizations grow,
develop and decline.
Stages include:
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•
•
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Birth
Growth
Maturity
Decline
Death
9-19
Organizational Life Cycle
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Advanced Types of Organizational Structures
– Matrix Structure
– Network Structure (virtual organization)
– Cellular organization
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Advanced Types of Organizational Structures
Matrix structures- functional and product forms are
combined simultaneously at the same level of the
organization.
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Advanced Types of Organizational Structures
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Advanced Types of Organizational Structures
• Network structure (virtual organization):
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–
–
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A “non-structure” organization
Virtually no in-house business function.
Many activities are outsourced.
Used by Nike, Reebok and Benetton
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Advanced Types of Organizational Structures
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Advanced Types of Organizational Structures
Cellular organization
– Composed of a series of project groups or
collaborations linked by constantly changing
non-hierarchical electronic networks.
– Useful in unstable environments that require
innovation and quick response.
– A cellular organization is composed of cells (selfmanaging teams, autonomous business unit).
– It can operate alone or interact with other cells.
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Reengineering and Strategy Implementation
Reengineering –
Reengineering is the radical redesign of the business process
to achieve major gain in cost, service or time. It is not a type
of structure, but it is an effective program to implement a
turnaround strategy.
Rather than organizing a firm into functional specialties (like
production, accounting, marketing, etc.) and looking at the
tasks that each function performs, we should, according to the
reengineering theory, be looking at complete processes from
materials acquisition, to production, to marketing and
distribution. The firm should be reengineered into a series of
processes.
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Six Sigma
•Six Sigma seeks to identify and reduce the defects in
manufacturing and business processes to only 3.4 per
million.
•Six Sigma is originally conceived by Motorola as a quality
improvement program.
•Six Sigma has become a cost-saving program for all types
of manufacturers.
•Six Sigma is an analytical method for achieving near
perfect results on a production line.
•Six Sigma is increasingly being applied to account
receivable, sales and R&D.
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Six Sigma
Lean Six Sigma- incorporates Six Sigma with lean
manufacturing- removes unnecessary production steps
and fixes the remaining steps.
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Designing Jobs to Implement Strategy
Job Design- the study of individual tasks in an attempt to
make them more relevant to the company and to the
employees.
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•
•
•
Job enlargement- Combining tasks to give a worker more of
the same type of duties to perform.
Job rotation- Moving workers through several jobs to increase
varieties.
Job enrichment model- Altering the jobs by giving the worker
more autonomy and control over activities.
Team-based production- The workers are divided into teams.
The teams made managerial decision, imposed discipline on
fellow workers and were required to learn three skill modules.
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Multinational Corporation- a highly developed
international company with a deep involvement throughout
the world with a worldwide perspective in its management
and decision making.
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Forces for Standardization
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•
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Convergence of customer preferences and incomes
across target countries.
Competition from successful global products.
Growing customer awareness of international brands.
Economies of scale.
Falling trading costs across countries.
Cultural exchange and business interactions among
countries.
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Forces for Customization
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Persistent differences in customer preferences.
Persistent differences in customer incomes.
The need to build local brand reputation.
Competition from successful domestic companies.
Variations in trading costs across countries.
Local regulatory requirements.
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Centralization versus Decentralization
Product-group structure- enables the company to
introduce and manage a similar line of products
around the world. The corporation centralizes decision
making along product lines and to reduce costs.
Geographic-area structure- allows the company to
tailor products to regional differences and to achieve
regional coordination. Nestle markets 200 different
varieties of instant coffee. Nestle decentralizes decision
making to local subsidiaries.
Multinational corporations are moving from geographic
area to product group structures.
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Centralization versus Decentralization
“think globally, act locally”
Simultaneous pressures for decentralization to be locally
responsive and centralization to maximally efficient are
causing interesting structural adjustments in most large
corporations.
Companies are tempting to decentralize those operations
that are cultural oriented and closest to the customers –
manufacturing, marketing and human resources.
While the corporations centralize less visible internal
functions – research and development, finance and
information system.
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