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Chapter [6] Strategy Implementation and Control Strategy Implementation and Control.

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3 Chapter [6] Strategy Implementation and Control Strategy Implementation and Control

4 Interrelation between Formulation and Implementation Translation of strategic plan into strategic action. To be strategically successful Strategy formulation should be effective and implementation should be efficient. Organization place more focus on efficiency rather then effectiveness.

5 Thrive Die slowly SurviveDie Quickly EffectiveIneffective Efficient Inefficient Strategy Formulation Strategy Implementation

6 Formulation An intellectual process Performed by top management Requires managerial focus before action Focus is on effectiveness Requires creative and analytical skill Requires coordination among few individuals Based on Forward linkages Implementation An Operational process Performed by divisional or functional management Requires management focus during action Focus is on efficiency Requires motivational and leadership skills Requires coordination among many individual Based on Backward linkages

7 Issues in Strategy Implementation Strategy:Stability Strategic plan:Modernization Programme:R&D Project:15 months, 1cr., Infrastructure:Civil construction, Machinery installation, Skill development Procedural Implementation, Resources Implementation, Structural Implementation, Functional Implementation, Behavioral Implementation

8 Structural Implementation Structure dictates how strategies should be developed and resources will be allocated. E.g. - Product structure develops product based strategy. Competitive advantages are created when there is a proper match between strategy and structure. Strategy is influenced by structure and structure should be changed according to the newly developed strategy.

9 Organization Structure Organization Structure FunctionalDivisionalSBUMatrixNetwork

10 Functional Structure CEO MarketingFinanceProductionR&DHR

11 Advantages ~  It promotes specialization of labour  Encourage efficiency  Minimum elaborate control  Rapid decision making Disadvantages ~  It forces accountability to the top  Min. career development opportunities  Possible staff conflicts  Poor delegation of authority  Functional specialist may develop narrow perspective.

12 Divisional Structure CEO Division A Marketing Production HRM Division B Marketing Production HRM Division C Marketing Production HRM

13 Type ~  Geographic Area  Product  Customer  Process Advantages ~  Accountability is clear  Extensive delegation of authority  High employee morale  Offer career development opportunity Disadvantages ~  Costly  Duplication of staff  Elaborate H.Q. Control system  Certain region, product, customer may suffer.

14 SBU Structure President CEO SBU - A Division Dicision CEO SBU - B Division

15 Characteristics ~ SBU is a grouping of related business that can be taken up together for strategic planning. Corporate office manages SBU through strategic and financial control and delegate authority and responsibility for day-to-day operations. SBU divides into divisions under a senior executive who reports directly to the CEO. Advantages ~ More accurate monitoring of individual business Simplifies the control problem Better allocation of resources Synergy among the divisions of the group can be achieved Disadvantages ~ Costly

16 Matrix Structure Project - A Project - B Project - C Production unit Production Production unit Marketing unit Marketing Marketing unit Finance unit Finance Finance unit Step 1 : Cross-functional task force Step 2 : Product Management Step 3 : Mature Matrix

17 Characteristics ~  It is combination of divisional and functional structure.  Employees have 2 bosses.  It has dual-line of authority, dual-source of reward and punishment, dual-reporting channels.  Home department of employees is functional and they are often assigned temporarily to one or more projects. Advantages ~  Project objectives are clear.  There are many channels of communication  Workers can see the result of their work  Shutting down a project is relatively easy  It has stability of functional structure and flexibility of divisional form.

18 Network Structure The corporations organized in this manner is often called virtual organization. In such organizations many activities are out- sourced. The organization is only a shell with a small HQ acting as a Broker and electronically connected to some independent organizations. Advantages ~ –Provides increased flexibility and adaptability to cope with rapid technological changes. –Allows company to concentrate on its distinctive competencies. Disadvantages ~ –Availability of numerous potential partners can be source of trouble. –Keep the firm away from the benefit of synergy

19 Strategic Business Unit Relevant to multi-business, multi-product organization, which group strategically related products into a business unit. Traditionally organizations handles planning on territorial basis, which had 2 disadvantages – Same product – separate treatment Different products – Same treatment

20 Characteristics of SBU ~  A group of related business that can taken up together for strategic planning.  On the basic factor such as mission, objectives, competition, and strategy one SBU is different from other SBU.  Each SBU will have its CEO who is responsible for business level planning and profit.  Facilitate correct allocation of resources

21 Value Chain Analysis  Value chain is a set of activities within and around an organization to provide value- for-money product/services.  VC analysis is a 2 steps process : First identify separate activities and Second assessing the value added by each of them.

22 Support Activities Primary Activities Firms Infrastructure Human Resources Management Technology Development Inbound Logistics OperationsOutbound Logistics Marketing & Sales Services Procurement

23 Core Competences  CC is a unique strength of an organization which critically support its competitive advantages.  These tend to be easily imitated, so, organization should continually shift the ground of competition.  VC analysis can be helpful in identifying those activities which represents the competences of the organization.

24 –Linkages between primary activities ~ E.g. Outbound Logistics (Inventory of finished goods) and Operations (Manufacturing). –Linkages between support activities ~ E.g. Human Resource Management and Technology Development –Linkages between primary and support activities ~ E.g. Infrastructure (MIS) and Operations (Service delivery) External linkages –Vertical linkages attempts to improve performance through ownership of more part of value system. –TQM –Merchandising Activities

25 Leadership and Strategy Implementation A strategy manager has many leadership role : Visionary, Chief administrator, Culture builder, Resource allocater, Crisis solver, Motivator, Arbitrator etc. On the top of all these he is a change agent. 5 leadership role in implementation ~ –Staying on the top of what is happening. –Promoting a culture to execute strategy –Keeping organization responsive to change –Exercise ethical leadership to make organization as good corporate citizen. –Pushing corrective action to improve strategy execution.

26 Leadership role in Implementation  Strategic leaders guide company in formation of mission, objectives and strategy.  Strategic leaders guide company implement the strategy by influencing the behavior, thought and feelings of co-workers.  They can use their frame of reference which is set of assumptions, promises and accepted wisdom to deal with environment and perform the responsibility.

27 Leadership Style Transformational leadership  They use charisma and enthusiasm to inspire people to exert for the good of the company.  This appropriate in turbulent environment and when major changes are required to be made.  This style offers excitement, personal satisfaction, dream of higher level etc. to achieve dramatic improvement.  Such leaders motivate followers to stretch their abilities to do more, increase self- confidence and create innovation.

28 Leadership Style Transactional leadership  This style focuses only on controlling organization activities and improve present situation.  This style uses authority of its office and follow a formalized approach of motivation such as punishment and rewards.  It is appropriate in settled environment and in mature industries.

29 Strategic Change Modification in strategies due to the changes in the environment is called Strategic Change. Need for change Create shared vision Institutionalise the change.

30 Recognize the need for change  Diagnose which part of corporate culture is not supportive to strategy so that strategy can be changed according to it.  This calls for SWOT analysis and then determine scope for change. Create a shared vision to manage change  Communicate the vision with every one so that there is no conflict between the objectives of individuals and organization.  Convince all that the change is not superficial or cosmetic. Actions must be highly visible and indicative of management’s seriousness.

31 Institutionalise the change  This is action stage where changed strategy is implemented.  It calls for creating supportive attitude and ensure it does not slips back  Change process is regularly monitored and analysed for deviation; And if necessary corrective actions are taken.

32 Kurt Lewin change process Un- freezing Changing Re- freezing

33 Un-freezing the situation  It is the process of braking down old attitude, behavior, customs and traditions.  It is the process of making employees aware of the necessity for changes because sudden changes are socially destructive.  It is all done by making announcements, holding meetings and promoting ideas etc.

34 Changing the new situations –Three methods of changing pattern of behavior~ Compliance It focuses on strictly enforcing rewards and punishment Identification It focuses on creating role models. Internalization It focuses on freedom to learn to change the individual’s thought process. Re-freezing –When new behavior becomes a normal way of life it must be continuously reinforced by orientation training.

35 Organizational Control Control is the check exercised to ensure that –  Performance meets the standard  Undesirable events are prevented, detected and corrected.  Use of resources is efficient  Assets are adequately safeguarded. Control function involve Monitoring, Measuring, Correcting and Maintaining the system

36 Setting objectives as standardMeasuring actual performanceComparing with standardDetecting deviation Identifying the improvement Feeding back corrective instruction Control Process

37 Controls Operatio nal Manage ment StrategicPremise Surveilla nce Special alert Impleme ntation

38 [A] Operational Control –This control is applied on individual tasks where measurable relationship between input and output exist. –It regulates the process within certain tolerable boundaries. –Example : Quality control, Cost control, Inventory control, Production control etc.

39 [B] Management Control –This control is applied over integrated activities of a department, division or entire enterprise. –It helps to achieve corporate goals in most effective and efficient manner. –According to Robert Anthony ~ “Management control is the process by which managers assure that resources are used effectively and efficiently in the accomplishment of the organizational objectives.”

40 [C] Strategic Control –According to Schendel and Hofer ~ “Strategic control focuses on the dual questions of whether : (1) the strategy is being implemented as planned and (2) he results produced by the strategy are those intended.” 1. Premise control Strategy is formed within certain premises or assumptions about environment. PC is a tool to verify the validity and accuracy of these premises on which the strategy is built. PC focuses on environmental factors : economic, social, technological, legal, competitive, supplier, customer etc.

41 2. Surveillance Control Unlike Premise control it is unfocussed. It involve general monitoring of sources of information to uncover unanticipated information having bearing on strategy. It includes reading newspaper, business magazines, meeting, conferences discussions etc. 3. Special Alert Control This control focuses on sudden changes in government, natural calamities, terrorist attack, unexpected merger/acquisition by competitors and such other event that may calls for intense review of strategy.

42 4. Implementation Control  This control directed towards assessing the need for changes in the strategy in the light of company performance.  It requires continuous monitoring of direction movement of strategy.  Types ~ Monitoring strategic thrust Determine whether strategy is progressing as desired. Milestone reviews Evaluating the milestone achieved.

43 Building a strategy supportive culture  Company’s Values, Belief, Business principles, traditions, approach to decision making and problem solving etc are all collectively make corporate culture.  Organization culture comes from the complex combination of socio-cultural background of its employees.

44 Culture : Alloy or Obstacle An organization culture is either a contributor or an obstacle in the successful strategy execution. For e.g. – a culture where frugality is strongly shared by employee is very supportive to successfully execution of a Cost leadership strategy. A tight strategy-culture alignment gives 2 benefits ~ –It develops a system of informal rules –Nurtures and motivates people to do their job in strategy supportive manner.

45  A sizable and prolonged strategy-culture conflict weakens the managerial efforts to make the strategy work.  It is strategy maker’s responsibility to select strategy compatible with unchanged part of culture; and  It is responsibility of strategy implementer to change which ever part of culture is in conflict with strategy.

46 Changing a problem culture Tough to change heavy anchor of deeply held values. Requires concerned managerial actions over a period of time. Talk to all those concerned with that aspect of culture which is to be changed. Talk should be followed swiftly by visible aggressive actions to modify culture.

47 There are several ways to accomplish this ~ –Visibly praising and recognizing people who display the new cultural traits. –Engineer some quick successes –Replace old-culture managers with new one. –Change long standing policies that are dysfunctional. –Re-organize corporate structure in alignment with strategy –Tying incentives directly to new measures. –Making major budgetary re-allocations. –Sincere, sustained commitment by CEO

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