Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 7 -1 Chapter 7 Implementing Strategies: Management & Operations Issues Strategic Management: Concepts & Cases 13 th Edition Fred David

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 7 -2

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 7 -3 Strategy Formulation vs. Implementation Strategy Formulation (SF) Positioning forces before the action Focus on effectiveness Primarily intellectual Requires good intuitive and analytical skills Requires coordination among a few people Strategy Implementation (SI) Managing forces during the action Focus on efficiency Primarily operational Requires special motivation and leadership skills Requires coordination among many people

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 7 -4 Shift in responsibility Nature of Strategy Implementation SI problems can arise because of the shift in responsibility, especially if SF decisions come as a surprise to middle- and lower-level managers. Therefore, it is essential to involve divisional and functional managers in SF. Divisional or Functional Managers Strategists

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 7 -5 Management Issues Central to Strategy Implementation Establish annual objectives Devise policies Allocate resources Alter existing organizational structure Restructure & reengineer Revise reward & incentive plans Minimize resistance to change Match managers to strategy Develop a strategy- supportive culture Adapt production/operations processes Develop an effective human resources function Downsize & furlough as needed Link performance & pay to strategies

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 7 -6 Purpose of Annual Objectives Basis for resource allocation Mechanism for management evaluation Major instrument for monitoring progress toward achieving long-term objectives Establish priorities (organizational, divisional, and departmental)

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 7 -7 Resource Allocation 1. Financial resources 2. Physical resources 3. Human resources 4. Technological resources Four Types of Resources

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 7 -8 Managing Conflict Conflict – a disagreement between two or more parties. Interdependency of objectives and competition for limited resources can cause conflict. Conflict not always “bad” Lack of conflict may signal apathy Can energize opposing groups to action May help managers identify problems

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 7 -9 MATCHING STRUCTURE WITH STRATEGY Changes in strategy often require changes in the way an organization is structured because: (1) structure largely dictates how objectives and policies will be established (e.g., objectives and policies established under a geographic organizational structure are couched in geographic terms) and (2) structure dictates how resources will be allocated (e.g., if an organization’s structure is based on customer groups, then resources will be allocated in that manner). Structure should be designed to facilitate the strategic pursuit of a firm and, therefore, follow strategy. When a firm changes its strategy, the existing organizational structure may become ineffective. For example, new strategies to reduce payroll costs may require a change in span of control.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 7 -10

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Basic Forms of Structure Functional Structure Divisional Structure Strategic Business Unit Structure (SBU) Matrix Structure

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Functional Structure Groups tasks and activities by business function (e.g., production, finance, marketing, R&D, HR, IT, etc.).

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Functional Structure

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Divisional Structure Can be organized in one of four ways:  By geographic area  By product or service  By customer  By process

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Divisional Structure

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Strategic Business Unit Structure (SBU) Groups similar divisions into strategic business units and delegates authority and responsibility for each unit to a senior executive who reports directly to the chief executive officer.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Matrix Structure The most complex of all structures because it depends upon both vertical and horizontal flows of authority and communication.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Matrix Structure

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Restructuring Restructuring - reducing the size of an organization. Also called:  Downsizing  Rightsizing  Delayering These methods involve, respectively, reducing the number of employees, number of divisions, and number of hierarchical levels in a firm’s organizational structure. Reducing the size of an organization is intended to improve its efficiency and effectiveness.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Creating a Strategy-Supportive Culture 1. Formal statements of organizational philosophy 2. Design of physical spaces 3. Deliberate role modeling, teaching, and coaching 4. Explicit reward and status system 5. Stories, legends, myths, and parables

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Creating a Strategy-Supportive Culture 6. What leaders pay attention to 7. Leader reactions to critical incidents and crises 8. Organizational design and structure 9. Organizational systems and procedures 10. Criteria for recruitment, selection, promotion, leveling off, retirement, and “excommunication” of people

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Production/Operations Decision Examples Plant size Inventory / Inventory control Quality control Cost control Technological innovation

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Human Resource Concerns  Assessing staffing needs and costs.  Selection Methods.  Employee Training.  Motivating Employees – Developing Performance Incentives; Work-Life Balance Issues; etc.  Selecting Appropriate Leadership Styles.