Strategic Management Prof. Dr. Majed El-Farra Strategic Implementation Requirements for Strategic Implementation

Strategy implementation ‘Strategy implementation is the process by which strategies and policies are put into action through the development of programs, budgets, and procedures’. the implementation of strategy directly or indirectly connects to all facts of management. Thus it is fundamental to follow a holistic approach when analyzing and assessing complex issues of strategy implementation. Strategic Management Prof. Dr. Majed El-Farra

The importance of strategy implementation phase In spite of all the energy and resources spent in the pursuit of the wonderful strategy, it is surprising to consider how little effort is dedicated towards its implementation. Most managers stumble in the implementation stage. A current economic survey found that a discouraging 57 percent of firms failed at carrying out strategic initiatives over the past three years, according to their senior operating executives. Strategic Management Prof. Dr. Majed El-Farra

Difficulties One major source of difficulty encountered in implementing strategy comes from the fact that, in most organizations, the pre-strategy decision-making processes are heavily political in nature. Strategy presents elements of rationality which are disruptive to the historical culture of the organization and threatening to the political process. A natural organizational reaction is to struggle against the disruption of the historical culture and power structure, rather than confront the challenges posed by the environment. This reaction has been widely observed during the introduction of strategic planning into business firms. Strategic Management Prof. Dr. Majed El-Farra

Difficulties A no less important difficulty is that the introduction of strategic planning triggers conflict between the historical profit making activities (for example serving the community in NGOs) and the new creative activities. Organizations usually do not have the capability, the capacity or the motivational systems to act and to think strategically. Finally organizations generally have limited information about themselves and their environment which is necessary for effective strategic planning. They also have no managerial talents capable of the formulation and implementation strategy (Ansoff, 1988). Strategic Management Prof. Dr. Majed El-Farra

Strategy implementation Hunger and Wheelen (2003) stress that a good strategy can result in a disaster through poor strategy implementation, therefore strategy formulation and strategy implementation should be considered as two sides of the same coin. Allison and Kaye (2005) claim that there are two main obstacles facing the effective implementation of the strategy: The difficulty of transformation big ideas into particular steps. The difficulty of protecting the focus that was accomplished through the planning process. Strategic Management Prof. Dr. Majed El-Farra

Strategy implementation They address the first difficulty by developing annual operating plans, and address the second one by assessing the plan and setting up regular monitoring of the plan. Strategic Management Prof. Dr. Majed El-Farra

Strategy implementation framework Okumus (2003) reviewed the literature in strategy implementation; his work can be concluded as the following: One of the most cited implementation frameworks was proposed by Waterman et al., (1980) which was derived from their research and consultancy work. Strategic Management Prof. Dr. Majed El-Farra

Strategy implementation framework These writers argued that successful strategy implementation is fundamentally attending to the relationship between the following seven elements: Strategy Structure Systems Style Staff Skills Subordinate goals. Strategic Management Prof. Dr. Majed El-Farra

10 Strategy Implementation  Effective strategic implementation requires the follows: 1- Organizational structure appropriateness. 2- Sound leadership of the company. 3- Effective motivational system 4- Annual objectives 5- Functional strategies 6- Clear budget 7- Detailed action plan

Strategic Management Prof. Dr. Majed El-Farra Communicating Strategy Strategy must be clearly understood. It provides employees with general guidance to make decision.

Strategic Management Prof. Dr. Majed El-Farra Strategy & Structure Definition of Organizational Structure: The structure can either facilitate or inhibit strategy implementation. Chandler says: Changes in strategy ultimately lead to changes in the organization ’ s structure.

Strategic Management Prof. Dr. Majed El-Farra Types of organizational structure 1- Functional 2- Geographical 3- Divisional 4- Customer-based 5- Matrix

Functional Structure The most widely used structure is the functional or centralized type because this structure is the simplest and least expensive of the seven alternatives. A functional structure groups tasks and activities by business function such as product/operations, marketing, finance/accounting, R&D, and computer information systems. Strategic Management Prof. Dr. Majed El-Farra

Functional Structure Advantages: Besides being simple and inexpensive, a functional structure also promotes specialization of labor, encourages efficiency, minimizes the need for an elaborate control system, and allows rapid decision-making. Strategic Management Prof. Dr. Majed El-Farra

Functional Structure Disadvantages: Some disadvantages of a functional structure are that it forces accountability to the top, minimizes career development opportunities, and is sometimes characterized by low employee morale. Strategic Management Prof. Dr. Majed El-Farra

The Divisional Structure The divisional or decentralized structure is the second most common type used by American businesses. The divisional structure can be organized in one of four ways: by geographic area, product or service, customer, or process. With a divisional structure, functional activities are performed both centrally and in each separate division Strategic Management Prof. Dr. Majed El-Farra

Divisional Structure Advantages: A divisional structure has some clear advantages. First, and perhaps foremost, is accountability. Other advantages of the divisional structure are that it creates career development opportunities for managers, allows local control of local situations, leads to a competitive climate within an organization, and allows new businesses and products to be added easily. Disadvantages: Perhaps the most important limitation is that a divisional structure is costly. Strategic Management Prof. Dr. Majed El-Farra

Divisional structure A divisional structure by geographic area is appropriate for organizations whose strategies need to be tailored to fit the particular needs and characteristics of customers in different geographic regions. A division structure by product is most effective for implementing strategies when specific products or services need special emphasis. A division structure by process is similar to a functional structure, because activities are organized according to the way work is actually performed. Strategic Management Prof. Dr. Majed El-Farra

The Matrix Structure  It is the most complex of all designs because it depends upon both vertical and horizontal flows of authority and communication.  It can result in higher overhead because it creates more managerial positions.  It also creates dual lines of budget authority, dual sources of reward and punishment, shared authority, and dual reporting channels.  Its advantages are that project objectives are clear, there are many channels of communication, workers can see visible results of work, and projects can be shut down easily. Strategic Management Prof. Dr. Majed El-Farra

Strategic Management Prof. Dr. Majed El-Farra

Strategic Management Prof. Dr. Majed El-Farra An assessment of Org. Structure  No structure is appropriate for all situations.  Appropriate structure may change as the organization develops.  Examples require structure change: Introducing new strategy, having problems in achieving its objectives, leadership changes.

Strategic Management Prof. Dr. Majed El-Farra Symptoms of an ineffective of org. Structure According to P. Drucker: 1- Too many management levels make cooperation and communication difficult 2- Too many meetings attended by too many. 3- Too much attentions are given to resolve interdepartmental conflict. 4- Excessive decision making at top management

Strategic Management Prof. Dr. Majed El-Farra Evolution of organizational structure: Alfred D. Chandler 1.Changing strategy. 2.Administrative problems leading to decline performance. 3.Revised structure subsequent return to economic health.

Strategic Management Prof. Dr. Majed El-Farra Structural adjustments : Chandler  When does it happen? 1.Market expansion. 2.Product line diversification. 3.Vertical integration.

Strategic Management Prof. Dr. Majed El-Farra Relationship between strategy and Org. Structure The process of matching structure to strategy is complex and should be undertaken with a thorough understanding of :  the historical development of the organizational structure.  The requirements of the organization ’ s environment and technology.  The political relationships that might be affected.

Strategic Management Prof. Dr. Majed El-Farra Organizational Culture . Culture: Refers to the values and patterns of belief and behavior that are accepted and practiced by the members of a particular organizations  Org. culture change as environment changes.  The founder and Top management shape the org. culture.  Change in strategy requires change in culture.

Strategic Management Prof. Dr. Majed El-Farra Organizational Leadership The leader is an individual who is able to influence the attitudes and opinion of others. The leader must have a clear vision. Different strategies need different skills.

Strategic Management Prof. Dr. Majed El-Farra Strategy and Motivational systems  Organizational reward system influence the entire organizational climate. Organizational rewards include all types of rewards, tangible and intangible.

Strategic Management Prof. Dr. Majed El-Farra Deployment of Resources through Budgeting  Budgeting: Is the process of allocating resources to be employed to achieve objectives.  Budget should be directly linked to strategy implementation.

Strategic Management Prof. Dr. Majed El-Farra Developing functional Strategies  Functional Strategies describe the methods and means at functional level to achieve corporate strategies and business unit strategies.