Ch 8 1 Copyright 2011 Pearson Education Strategic

Ch 8 -1 Copyright © 2011 Pearson Education

Strategic Management: Concepts and Cases Arab World Edition Fred R. David Abbas J. Ali Abdulrahman Y. Al-Aali Chapter 8: Implementing Strategies: Management and Operations Issues Ch 8 -2 Copyright © 2011 Pearson Education

Chapter Outline • The Nature of Strategy Implementation • Annual Objectives • Policies • Resource Allocation • Managing Conflict • Matching Structure With Strategy Ch 8 -3 Copyright © 2011 Pearson Education

Chapter Outline (cont’d) • Restructuring, Reengineering, and E-Engineering • Linking Performance and Pay to Strategies • Managing Resistance to Change • Managing the Natural Environment • Production/Operations Concerns When Implementing Strategies • Human Resource Concerns When Implementing Strategies Ch 8 -4 Copyright © 2011 Pearson Education

Source: Adapted from Fred R. David, “How Companies Define Their Mission, ” Long Range Planning 22, no. 3 (June 1988) 40. Ch 8 -5 Copyright © 2011 Pearson Education

Nature of Strategy Implementation Formulation vs. Implementation • Strategy implementation is different from strategy formulation • Formulation focuses on effectiveness • Implementation focuses on efficiency Ch 8 -6 Copyright © 2011 Pearson Education

Nature of Strategy Implementation Management Perspectives Shift in responsibility Strategists Ch 8 -7 Copyright © 2011 Pearson Education Divisional and Functional Managers

Management Issues Annual Objectives Policies Management Issues Resources Organizational Structure Restructuring Rewards/Incentives Ch 8 -8 Copyright © 2011 Pearson Education

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human Resources Ch 8 -9 Copyright © 2011 Pearson Education

Annual Objectives Purpose of Annual Objectives • Basis for resource allocation • Mechanism for management evaluation • Metric for measuring the progress on longterm objectives • Establish priorities (organizational, divisional, and departmental) Ch 7 -10 Ch 8 -10 Copyright © 2011 Pearson Education

• • Polices Refers to specific guidelines , methods , procedures , rules , forms and administrative practices established to support and encourage work toward stated goals Some examples that may requires a policy: To use one or more suppliers To operate one , two , or three shifts To discourage smoking at work To discourage insider trading To discourage working on a secondary job for a different employees Ch 7 Copyright © 2009 Pearson Education, Inc. 11 Publishing as Prentice Hall

Resource Allocation • Resources allocation is a central management activity • A process of allocating resources consistent with priorities indicated by approved annual objectives • All organizations have four types of resources: 1. Financial resources 2. Physical resources 3. Human resources 4. Technological resources Ch 8 -12 Copyright © 2011 Pearson Education Ch 7 -12

Managing Conflict • Conflict can be defined as----- a disagreement between two or more parties on one or more issues • Conflict not always “bad” • An absence of conflict can signal apathy • Conflict can help managers identify problems Ch 7 -13 Ch 8 -13 Copyright © 2011 Pearson Education

Managing Conflict Approaches for Managing Conflicts Avoidance Ignoring the problem in hopes that the conflict will resolve itself Compromising (Defusing) playing down differences between conflicting parties (there is neither a clear winner nor loser ) Confrontation holding a meeting at which conflicting parties present their views and work through their differences. Ch 7 -14 Ch 8 -14 Copyright © 2011 Pearson Education

Matching Structure with Strategy • Changes in strategy lead to changes in organizational Structure q Structure largely dictates how objectives and policies will be established q Structure dictates how resources will be allocated Ch 7 -15 Ch 8 -15 Copyright © 2011 Pearson Education

Matching Structure with Strategy Basic Forms of Structure • Functional Structure • Divisional Structure • Strategic Business Unit Structure (SBU) • Matrix Structure Ch 7 -16 Ch 8 -16 Copyright © 2011 Pearson Education

The Functional Structure • A functional structure groups tasks & activities by business functions such as production &operation ; marketing ; finance ; accounting …etc • The functional structure is the widely used structure because it is the simplest , least expensive, and promotes much specialization of labor • A university may structure its activates by major functions that include academic affairs , student service , alumni relation , maintenance , and accounting Ch 7 Copyright © 2009 Pearson Education, Inc. 17 Publishing as Prentice Hall

The Divisional Structure (decentralized structure ) It is suitable for the large corporations • It can be organized in one of four ways v By geographic area v By product or service v By customers v By process The divisional structure is the second widely used structure because it enables the corporation to motivate employees ; control operation and compete successfully in diverse location The national investor (a comprehensive banking investment firm ) organizes its activates into four divisions ; investment banking ; private equity ; asset management ; and real estate • Ch 7 Copyright © 2009 Pearson Education, Inc. 18 Publishing as Prentice Hall

The Strategic Business Unit (SBU) structure • As the number , size , and diversity of divisions in an organization increase , the SBU structure is needed. • SABIC has grouped its many divisions into six primary SBUs ; chemicals ; ; plastic ; polymers ; innovative plastics ; fertilizers and metals • SBU can greatly facilitate strategy implementation efforts • The SBU structure places similar divisions into SBU and delegates authority and responsibility for each unit to a senior executive who directly report to the CEO • Ch 7 Copyright © 2009 Pearson Education, Inc. 19 Publishing as Prentice Hall

The Matrix Structure • q v v v v v A matrix structure is the most complex of all design because it depends on both vertical and horizontal flows of authority and communication some advantages of the matrix structure ; The project objectives are clear channel of communication will be increased Facilitate the use of specialized personal, equipments , and facilities For a matrix structure to be effective , Organizations need participative planning Training Clear mutual understanding of roles and responsibilities Excellent internal communication Mutual trust and confidence Ch 7 Copyright © 2009 Pearson Education, Inc. 20 Publishing as Prentice Hall

Restructuring, , and Re-Engineering Restructuring (also called Downsizing, rightsizing) ) • Reducing the size of the firm in terms of number of employees , number of divisions or units • The target is----- to improve both efficiency and effectiveness Ch 7 -21 Ch 8 -21 Copyright © 2011 Pearson Education

Re-engineering ; it is called also Process innovation , Process redesign • Reengineering is concerned with employee and customer well being than shareholder well – being. • The purpose is improving cost - quality – service – and speed of the production Ch 7 -22 Ch 8 -22 Copyright © 2011 Pearson Education

Linking Performance and Pay to Strategies Situation in the Arab World • Most companies adopt a compensation system which primarily includes a base salary with annual rises. • Increasingly in large Arab corporations there is a tendency to utilize pay systems similar to those found in western countries. Ch 7 -23 Ch 8 -23 Copyright © 2011 Pearson Education

Production/Operations Concerns Production processes typically constitute more than 70% of firm’s total assets. Ch 7 -24 Ch 8 -24 Copyright © 2011 Pearson Education

Production/Operations Concerns (cont’d) Production/Operations Decisions • Plant size • Kind of tooling • Plant location • Product design • Inventory / Inventory control • Choice of equipment • Quality control • Shipping and packaging • Cost control • Technological innovation • Use of standards • Equipment and resource utilization • Job specialization Ch 8 -25 Copyright © 2011 Pearson Education • Employee training

Human Resource Concerns Human Resource Strategic Responsibilities • Assessing staffing needs/costs • Developing performance incentives • Child-care policies • Work–life balance issues Ch 7 -26 Ch 8 -26 Copyright © 2011 Pearson Education

Benefits of a Diverse Workforce • Improves corporate culture • Improves employee morale • Leads to easier recruitment of employees • Decreases complaints and litigation • Increases creativity • Improves client relations • Increases productivity • Maximizes brand identity • Reduces training costs Ch 8 -27 Copyright © 2011 Pearson Education