Strategy Implementation Organizing for Action Chapter 9 Learning

Strategy Implementation: Organizing for Action Chapter 9

Learning Objectives ª Develop programs, budgets and procedures to implement strategic change ª Understand the importance of achieving synergy during strategy implementation ª List the stages of corporate development and the structure that characterizes each stage ª Identify the blocks to changing from one stage to another Copyright © 2015 Pearson Education, Inc. 9 -2

Learning Objectives ª Construct matrix and network structures to support flexible and nimble organizational strategies ª Decide when and if programs such as reengineering, Six Sigma and job redesign are appropriate methods of strategy implementation ª Understand the centralization versus decentralization issue in multinational corporations Copyright © 2015 Pearson Education, Inc. 9 -3

Strategy Implementation ªStrategy implementation 9 the sum total of all activities and choices required for the execution of a strategic plan ª Who are the people to carry out the strategic plan? ª What must be done to align company operations in the intended direction? ª How is everyone going to work together to do what is needed? Copyright © 2015 Pearson Education, Inc. 9 -4

Common Strategy Implementation Problems 1. 2. 3. 4. 5. 6. 7. 8. 9. Took more time than planned Unanticipated major problems Ineffective coordination Competing activities and crises created distractions Employees with insufficient capabilities Lower-level employees were inadequately trained Uncontrollable external environmental factors Poor departmental leadership and direction Inadequately defined implementation tasks and activities 10. Inefficient information system to monitor activities Copyright © 2015 Pearson Education, Inc. 9 -5

Developing Programs, Budgets and Procedures ªProgram 9 a collection of tactics where a tactic is the individual action taken by the organization as an element of the effort to accomplish a plan ª The purpose of a program or a tactic is to make a strategy action-oriented. Copyright © 2015 Pearson Education, Inc. 9 -6

Timing Tactics: When to Compete ª Timing tactic 9 deals with when a company implements a strategy ª First mover 9 first company to manufacture and sell a new product or service ª Late movers 9 may be able to imitate the technological advances of others, keep risks down by waiting until a new technological standard or market is established and take advantage of the first mover’s natural inclination to ignore market segments Copyright © 2015 Pearson Education, Inc. 9 -7

Market Location Tactics: Where to Compete ª Market location tactic 9 deals with where a company implements a strategy. ª Offensive tactic 9 usually takes place in an established competitor’s market location ª Defensive tactic 9 usually takes place in the firm’s own current market position as a defense against possible attack by a rival Copyright © 2015 Pearson Education, Inc. 9 -8

Offensive Tactics Frontal assault Flanking maneuver Encirclement Bypass attack Guerilla warfare Copyright © 2015 Pearson Education, Inc. 9 -9

Defensive Tactics ªRaise structural barriers ªIncrease expected retaliation ªLower the inducement for attack Copyright © 2015 Pearson Education, Inc. 9 -10

Developing Programs, Budgets and Procedures ªPlanning a budget is the last real check a corporation has on the feasibility of its selected strategy. ªProcedures 9 detail the various activities that must be carried out to complete a corporation’s programs 9 Standard operating procedures Copyright © 2015 Pearson Education, Inc. 9 -11

Achieving Synergy ªSynergy 9 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 Copyright © 2015 Pearson Education, Inc. 9 -12

Forms of Synergy Shared know-how Coordinated strategies Shared tangible resources Economies of scale or scope Pooled negotiating power New business creation Copyright © 2015 Pearson Education, Inc. 9 -13

Structure Follows Strategy ªStructure Follows Strategy 9 changes in corporate strategy lead to changes in organizational structure 1. 2. 3. 4. 5. New strategy is created New administrative problems emerge Economic performance declines New appropriate structure is invented Profit returns to its previous level Copyright © 2015 Pearson Education, Inc. 9 -14

Factors Differentiating Stage I, II and III Companies Copyright © 2015 Pearson Education, Inc. 9 -15

Stages of Corporate Development I. II. Simple Structure 9 Flexible and dynamic Functional Structure 9 Entrepreneur is replaced by a team of managers III. Divisional Structure 9 Management of diverse product lines in numerous industries 9 Decentralized decision making IV. Beyond SBU’s 9 Matrix 9 Network Copyright © 2015 Pearson Education, Inc. 9 -16

Blocks to Changing Stages ªInternal 9 Lack of resources 9 Lack of ability 9 Refusal of top management to delegate ªExternal 9 Economic conditions 9 Labor shortages 9 Lack of market growth Copyright © 2015 Pearson Education, Inc. 9 -17

Blocks to Changing Stages (Entrepreneurs) Loyalty to comrades Task oriented Single-mindedness Working in isolation Copyright © 2015 Pearson Education, Inc. 9 -18

Organizational Life Cycle ªOrganizational life cycle 9 describes how organizations grow, develop and decline Copyright © 2015 Pearson Education, Inc. 9 -19

Advanced Types of Organizational Structures ªMatrix structures 9 functional and product forms are combined simultaneously at the same level of the organization Copyright © 2015 Pearson Education, Inc. 9 -20

Matrix Structure Figure 9 -1 Copyright © 2015 Pearson Education, Inc. 9 -21

Advanced Types of Organizational Structures Conditions for matrix structures include: ªIdeas need to be cross-fertilized across projects or products ªScarcity of resources ªAbilities to process information and to make decisions needs to be improved Copyright © 2015 Pearson Education, Inc. 9 -22

Advanced Types of Organizational Structures Phases of matrix structure development ªTemporary cross-functional task forces ªProduct/brand management ªMature matrix Copyright © 2015 Pearson Education, Inc. 9 -23

Advanced Types of Organizational Structures ªNetwork structure 9 virtual elimination of in-house business functions ªVirtual organization 9 composed of a series of project groups or collaborations linked by constantly changing nonhierarchical, cobweb-like electronic networks Copyright © 2015 Pearson Education, Inc. 9 -24

Network Structure Figure 9 -1 Copyright © 2015 Pearson Education, Inc. 9 -25

Cellular/Modular Organization: A New Type of Structure? ªCellular/Modular structure 9 composed of cells (self-managing teams, autonomous business units, etc. ) which can operate alone but which can interact with other cells to produce a more potent and competent business mechanism ª Beginning to appear in firms that are focused on rapid product and service innovation Copyright © 2015 Pearson Education, Inc. 9 -26

Reengineering and Strategy Implementation ªReengineering 9 the radical redesign of business processes to achieve major gains in cost, service or time 9 effective program to implement a turnaround strategy Copyright © 2015 Pearson Education, Inc. 9 -27

Principles for Reengineering ªOrganize around outcomes, not tasks ªHave those who use the output of the process perform the process ªSubsume information-processing work into real work that produces information ªTreat geographically-dispersed resources as though they were centralized Copyright © 2015 Pearson Education, Inc. 9 -28

Principles for Reengineering ªLink parallel activities instead of integrating their results ªPut the decision point where the work is performed and build control into the process ªCapture information once and at the source Copyright © 2015 Pearson Education, Inc. 9 -29

Six Sigma ªSix Sigma 9 analytical method for achieving near perfect results on a production line 9 emphasis is on reducing product variance in order to boost quality and efficiency ªLean Six Sigma 9 includes the removal of unnecessary steps in any process and fixing those that remain Copyright © 2015 Pearson Education, Inc. 9 -30

Process of Six Sigma 1. 3. Define a process where results are poorer than average Measure the process to determine current performance Analyze the information to pinpoint where things 4. 5. Improve the process and eliminate the error Establish controls to prevent future defects from 2. are going wrong occurring Copyright © 2015 Pearson Education, Inc. 9 -31

Designing Jobs to Implement Strategy ªJob design 9 the study of individual tasks in an attempt to make them more relevant to the company and to the employees ª Job enlargement 9 combining tasks to give a worker more of the same type of duties to perform ª Job rotation 9 moving workers through several jobs to increase variety Copyright © 2015 Pearson Education, Inc. 9 -32

Designing Jobs to Implement Strategy ªJob characteristics 9 using task characteristics to improve employee motivation ªJob enrichment 9 altering the jobs by giving the worker more autonomy and control over activities Copyright © 2015 Pearson Education, Inc. 9 -33

International Issues in Strategy Implementation ªMultinational corporation (MNC) 9 a highly developed international company with a deep involvement throughout the world, plus a worldwide perspective in its management and decision making Copyright © 2015 Pearson Education, Inc. 9 -34

Drivers for Strategic Fit among Alliance Partners ª Partners must agree on values and vision ª Alliance must be derived from business, corporate and functional strategy ª Alliance must be important to partners, especially top management ª Partners must be mutually dependent for achieving objectives Copyright © 2015 Pearson Education, Inc. 9 -35

Stages of International Development Stage 1: Domestic company Stage 2: Domestic company with export division Stage 3: Primarily domestic company with international division Stage 4: Multinational corporation with multidomestic emphasis Stage 5: Multinational corporation with global emphasis Copyright © 2015 Pearson Education, Inc. 9 -36

Centralization versus Decentralization ªProduct group structure 9 enables the company to introduce and manage a similar line of products around the world 9 enables the corporation to centralize decision making along product lines and to reduce costs ªGeographic area structure 9 allows the company to tailor products to regional differences and to achieve regional coordination Copyright © 2015 Pearson Education, Inc. 9 -37

Geographic Area Structure for an MNC Figure 9 -2 Copyright © 2015 Pearson Education, Inc. 9 -38

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