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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 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -2 Copyright © 2011 Pearson Education

Nature of Strategy Implementation Formulation vs. Implementation • Strategy implementation is different from strategy formulation • Formulation Skills are. . Good intuitive and analytical skills • Implementation Skills are special motivation and leadership skills. Ch Copyright 8 -4 Copyright 2011 Pearson Education © 2009 Pearson Education, ©Inc. Publishing as Prentice Hall

A technically imperfect plan that is implemented WELL , will achieve MORE than a perfect plan that never gets off the paper on which it is typed Successful strategy formulation dose not guarantee successful strategy implementation. it is always more difficult to do something (to implement strategy) than to say you are going to do it (to formulate strategy). Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Nature of Strategy Implementation Management Perspectives Shift in responsibility Strategists Ch Copyright 8 -5 Copyright 2011 Pearson Education © 2009 Pearson Education, ©Inc. Publishing as Prentice Hall Divisional and Functional Managers

Management Issues Annual Objectives Policies Management Issues Resources Organizational Structure Restructuring Rewards/Incentives Ch Copyright 8 -6 Copyright 2011 Pearson Education © 2009 Pearson Education, ©Inc. Publishing as Prentice Hall

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human Resources Ch Copyright 8 -7 Copyright 2011 Pearson Education © 2009 Pearson Education, ©Inc. Publishing as Prentice Hall

Annual Objectives is a decentralised activity that directly involves all managers in an org. • Annual objectives are essential for strategy implementation because they represent : • Basis for resource allocation • Mechanism for management evaluation • Establish departments priorities Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -8 Copyright © 2011 Pearson Education Ch 7 -8

Policies refer to specific guidelines methods procedures and administrative practices established to support work toward stated goals. Policies are instrument for strategy implementation They provide basis for management control “policy manual” : direct behaviour. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Resource Allocation • • A central management activity When an org dose not use a strategic management approach , how is it going to allocate resources? Personal/political factors Strategic managements enables resources to be allocated according to priorities established by annual objectives. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -9 Copyright © 2011 Pearson Education Ch 7 -9

Conflict Integration of objectives and competition for limited resources leads to CONFLICT. Conflict is a disagreement between 2 or more parties on one or more issues. Establishing annual objectives can lead to conflict because individuals have different expectations. Conflict is unavoidable but need to be managed in early stages. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Managing Conflict • Conflict not always “bad” • Can energize opposing groups to action • May help managers identify problems Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -11 Copyright © 2011 Pearson Education Ch 7 -11

Managing Conflict Approaches for Managing Conflicts Avoidance – ignoring the problem in hopes that the conflict will resolve itself or physically separating the conflict. Defusion – playing down differences between conflicting parties highlighting similarities and common interests (neither a clear winner nor a loser). Confrontation – exchanging members of conflicting parties to work thru their differences. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -12 Copyright © 2011 Pearson Education Ch 7 -12

what is “structure”? Organizational Structure The typically hierarchal arrangement of lines of authority, communications, rights and duties of an organization. Organizational structure determines how the roles, power and responsibilities are assigned, controlled, and coordinated, and how information flows between the different levels of management. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Strategy-Structure Relationship 1 -changes in strategy leads to changes in structure. 2 -Without a strategy and mission it will be difficult to design an effective structure. 3 -there is no one optimal organizational structure for a given strategy. 4 -As org. grow their structures change from simple to complex as a result for linking basic strategies together. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

There are many internal and external forces effect an org no firm can change its structure in response to every one of those forces. However , when a firm changes its strategy the existing org structure may become ineffective. how can we know if its not effective anymore? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Symptoms of an ineffective org. structure 1 -Too many levels of management. 2 -Too many meetings attended by too many people. 3 -Too much attention directed toward solving interdepartmental conflicts. 4 -Too large a span of control 5 -Too many unachieved objectives. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Matching Structure with Strategy Basic Forms of Structure • Functional Structure • Divisional Structure • Strategic Business Unit Structure (SBU) • Matrix Structure Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -15 Copyright © 2011 Pearson Education Ch 7 -15

Restructuring Also called : • Downsizing • Rightsizing • Delayering Its involve reducing the size of the firm in terms of number of employees , divisions, hierarchical levels in the firms organisational structure. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Benefits of Restructuring : 1. 2. 3. 4. 5. 6. improve both efficiency and effectiveness. cutting costs improving the company’s position in the market. protect shareholders. to face challenging competition Facilitate growth (specially in arab world) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Downsides of Restructuring 1. Reduced employee commitment. 2. Restructuring may result to cut some important managerial levels due to seeking for having automated or self managed employees (cost cut). 3. lay off skilled staff or staff in R & D area , which may effect the firm’s future. 4. in Arab world , due to labor laws and social consideration laying of workers is not easy. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Reengineering Concerned more with employees and customer well-being than shareholders well-being also called : • Business process • Process innovation • Process redesign Involves reconfiguring or redesigning work , jobs and processes. Usually dose not affect organisational structure or chart. No job loss or employee layoffs. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Benefits of Reengineering 1. Improving quality of service. 2. reducing cost 3. Improving speed

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. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -21 Copyright © 2011 Pearson Education Ch 7 -21

Linking pay to strategies A dual bonus system based on both annual objectives and longterm objectives is becoming common. Ex. 75% on short term objectives , 25% on long term objectives Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Tests for Performance-Pay Plans • Does the plan capture attention? are people talking more about their activities and successes under the plan? • Do employees understand the plan? can they explain how it works and what they need to do to earn incentives? • Is the plan improving communication? what do employees know about company’s mission plan and objectives? • Does the plan pay out when it should? are incentives being paid for desired results and being withheld when objectives are not met? • Is the company performing better? Ch Copyright 8 -22 © 2009 Pearson Copyright 2011 Pearson Education, ©Inc. Publishing as Prentice Hall

There are various plans and rewards which can be used to motivate managers and employees to actively and effectively engage in strategy implementation. Stock options salary increase bonus recognition promotion Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Product/Operations Concerns when implementing Strategies Production capabilities , limitation and policies can significantly enhance or inhibit the attainment of objectives. Production process constitute 70% of the firms assets. So , a major part of the strategy implementation takes place at the production site. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Production-related decisions • • • Plant size plant location product design choice of equipment size , quality and control of inventory. cost control Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Production management and strategy Implementation Examples of Adjustment in production systems that could be required to implement various strategies Type of Org. Strategy implemented Adujstment Bank Adding 10 new branches(Market Development Site location analysis Computer company Purchasing retail distribution chain (FWD integration ) Alter the transportation system Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Human Resource Concerns Human Resource Strategic Responsibilities • Assessing staffing needs/costs • Developing performance incentives • Employee Stock-Ownership Plans (ESOPs) • Child-care policies • Work–life balance issues Copyright © 2009 Pearson Education, Inc. Copyright © Hall 2009 Pearson Publishing as Prentice Education, Inc. as Copyright Prentice©Hall Ch. Publishing 8 -25 2011 Pearson Education Ch 7 -25

Human Resource Concerns Human Resource Strategic Responsibilities • Assessing staffing needs. • Estimating costs associated to strategy during formulation and implementation. • Developing performance incentives that is linked to strategy. • Matching managers with strategy (transferring managers , developing leadership workshop, offering career development activities ). Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -25 Copyright © 2011 Pearson Education Ch 7 -25

Human Resource Concerns HR problems in Strategic Management The best method to prevent and overcome HR problems is to actively involve as many managers and employees as possible in the process. as this approach builds understanding , trust , commitment and ownership. And reduce resistance to change. THE TRUE POTENTIAL OF STRATEGY FORMULATION AND IMPLEMENTATION RESIDES IN PEOPLE. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall