Chapter 7
Implementing Strategies: Management &
Operations Issues
A technically imperfect
plan that is implemented
well will achieve more than
the perfect plan that never
gets off the paper on which
it is typed.
Ch 7-1
Strategy Implementation


The Strategic Management process does not
end when the firm decides what strategy or
strategies to pursue
There must be a translation of strategic
thought into strategic action



Implementing strategy affects an organization from
top –bottom
This chapter focuses on management issues
Chapter 8 focuses on Marketing,
finance/accounting , R&D, MIS issues
Ch 7-2
Summary




Strategy Implementation means “Change”
Real works begins when strategists are
formulated
Strategic Implementation requires support &
hard work from all managers & employees
Formulating the right strategies are not
enough- managers & employees must be
motivated to implement those strategies
Ch 7-3
Nature of Strategy Implementation




Formulation vs. Implementation
Formulation focuses on effectiveness
Implementation focuses on efficiency
Formulation is positioning forces before the
action
Implementation is managing forces during the
action
It is always more difficult to do something
(strategy implementation ) than to say you
are going to do it (strategy formulation )
Ch 7-4
Nature of Strategy
Implementation
Management Perspectives

Shift in responsibility
Strategists
Division or
Functional
Managers
Ch 7-5
Management Issues
This chapter focuses on Management
Issues most central to Implementing
Strategies
Annual Objectives
Policies
Management
Issues
Resources
Organizational structure
Restructuring
Rewards/Incentives
Ch 7-6
Management Issues (cont’d)
Resistance to Change
Natural Environment
Management
Issues
Supportive Culture
Production/Operations
Human Resources
Ch 7-7
Management Issues
Purpose of Annual Objectives -Basis for resource allocation
Mechanism for management evaluation
Major instrument for gauging progress on
long-term objectives
Establish priorities (organizational, division,
& departmental)
Ch 7-8
Hierarchy of
Aims
Long term Company Objective
Double company revenues in
two years through Market
development & Market
penetration
Divisional I Annual Objective
Increase divisional revenues by
40% this year & 40% next year
(Current revenues are $2 million)
R&D annual
Objective
Develop
new
products
this year
that are
successfully
marketed
Personnel
annual obj
Reduce
employee
absenteeis
m from
10% to 5%
this year
Marketing
Increase
number of
sales
people by
40 this year
Divisional II
Increase divisional
revenues by 40% this
year & 40% next year
(Current revenues are
$2 million)
Horizontal consistency of Obj as imp as
Ch 7-9
Vertical Consistency of Obj
Policies

Company Strategy


Divisional Strategy


Supporting policies
Supporting policies
Departmental Strategy

Supporting Policies
Refers to specific guidelines, methods, procedures, rules, forms &
administrative practices established to support and encourage work
toward stated goals
Ch 7-10
Management Issues
Central management
activity that allows for
Resources Allocation strategy execution
Harmful if not
consistent with priorities
indicated by approved
1. Financial resources
annual objectives
Resource allocation
2. Physical resources
often based on political &
personal factors in those
3. Human resources
Org that do not use SM
4. Technological resources approach
SM itself is sometimes
referred to as a “Resource
allocation process”
Ch 7-11
Management Issues
Managing Conflict
Approaches to manage conflict
Avoidance
Defusion
Confrontation
 Interdependence of Obj &Competition
for limited resources often leads to
Conflict
 Conflict not always “bad”
 No conflict may signal apathy(lack of
concern / laziness)

 Can energize opposing groups to action
 May help managers identify problems
Ch 7-12
Matching Structure with Strategy

Changes in strategy often require changes in
the way an organization is structured for two
major reasons:
Ch 7-13
Chandler’s Strategy-
Changes in strategy
lead to changes in Org
structure
Structure Relationship.. Matching Structure with Strategy
New strategy
Is formulated
Organizational
performance
improves
New administrative
problems emerge
Organizational
performance
declines
New organizational
structure is established
• Structure largely dictates how objectives & policies will be established
Ch 7-14
Management Issues
Basic Forms of Structure
 Functional Structure
 Divisional Structure
 Strategic Business Unit Structure (SBU)
 Matrix Structure
Ch 7-15
Management Issues
Restructuring
Downsizing
Rightsizing
Delayering
Involves reducing
the size of the firm
in terms of number
of employees,
number of divisions
or units, and
number of
hierarchical levels
in the firms
organization’s
structure
Ch 7-16
Management Issues
Reengineering
Process management
Process innovation
Concerned more with
employee and customer wellbeing than shareholder wellbeing
Involves redesigning work,
jobs, and processes for the
purpose of improving cost,
quality, service and speed
Process redesign
Ch 7-17
Restructuring

Reengineering

Concerned with
eliminating or

establishing, shrinking
or enlarging and moving
Org departments and

divisions


Focus is changing the way work
is actually carried out.
Concerned more with employee
and customer well being than
shareholder well being
Cornerstone-Decentralization,
reciprocal interdependence & info
sharing
No longer is it enough for
companies to put up simple Web
sites for customers and
employees
Companies must reinvent the
way they do business to take full
Ch 7-18
advantage of the internet- Eengineering
Linking Performance-Pay to Strategies


How can an Organization’s reward system be
more closely linked to strategic performance?
How can decisions on salary increases,
promotions, merit pay, and bonuses be more
closely aligned to support the Long term
strategic objectives of the Organization?
No widely accepted answers to these questions, but a dual bonus system
based on both Annual objectives & Long term objectives is becoming
common
A bonus system can be an effective tool for motivating individuals to
support Strategy implementation efforts
Ch 7-19
Resistance to change

Why do people resist change?



Do not understand what is happening
Why changes are taking place
Approaches for implementing change



Force change strategy
Educative change strategy
Rational /self-interest change strategy
Which one is
more desirable?
Need
accurate
information
Develop
Org
climate
conducive
to change
Must be
viewed as
opportunity
rather than
as a threat
by
managers
&
Ch 7-20
employees

Forced change strategy
•Involves giving orders and enforcing those orders;
•Fast but plagued by low commitment & high resistance

Educative change strategy
•Presents info to convince people of the need to change;
•Implementation become slow & difficult
•Evokes greater commitment & less resistance

Rational /self-interest change strategy
•Convince individuals that the change is to their personal advantage
•Four steps (Read Book)
•
Ch 7-21
Managing Resistance to Change



No organization or individual can escape
change
SM process can impose major changes
Reorienting an organization to get people to
think and act strategically is not an easy task




Sabotaging production machines
Absenteeism
Filling unfounded grievances
Unwillingness to cooperate
Resistance
regularly
occurs
Ch 7-22
Managing the Natural Environment


Earth itself has become a stakeholder for all
business firms
All businesses functions are affected by natural
environment considerations or by striving to
make a profit


Firms that take more than give to the natural
environment 
The ecological challenge facing all organizations
requires managers to formulate strategies that
preserve & conserve natural resources & control
pollution
Natural environmental issues in Business
administration curricula
Ch 7-23

Firms should formulate & implement strategies
from an environmental perspective







Developing or acquiring green businesses
Divesting or altering environmental damaging
businesses
Waste minimization and energy conservation &
pursuing differentiation strategy through green
product features
Environmental representative on BOD
Conduct regular environmental audits
Incorporate Environmental values in Mission
statement
Provide training programs for Employees/managers
Ch 7-24
Creating a Strategy-Supportive Culture


Strategists should strive to preserve,
emphasize, and build upon aspects of an
existing culture that support proposed new
strategies
Strategies are often market-driven & dictated
by competitive forces

Changing firm’s culture to fit a new strategy is
usually more effective than changing a strategy to
Determin
fit an existing culture
Obtrusive Observation
e firms
Questionnaire
Jack Duncan Triangulation
Personal interviews
culture
changes
that
needs to
be made
Management Issues
Production/Operations Concerns
-- adjustments in production systems that
could be required to implement various
strategies Table 7-4
 Bank- adding 10 new branches(market
development)-site location analysis
Hospital- adding cancer center( Product
development)- Purchase of specialized
equipment
Ch 7-26
Management Issues
Production/Operations Decisions
Plant size
Inventory/Inventory control
Quality control
Cost control
Technological innovation
Ch 7-27
Management Issues
Human Resource Strategic Responsibilities
Assessing staffing needs/costs
Developing performance incentives
ESOP’s
Child-care policies
Work-life balance issues
Ch 7-28
Diversity Issues
Women CEO’s in U.S. 2004 (examples)
Carly Fiorina
Hewlett-Packard 49 yrs old
Meg Whitman
eBay
47 yrs old
Andrea Jung
Avon Products
45 yrs old
Anne Mulcahy
Xerox
50 yrs old
Marjorie Magner
Citigroup
54 yrs old
Betsy Holden
Kraft Foods
47 yrs old
Mary Sammons
Rite Aid
57 yrs old
Ch 7-29