Organizing and Planning for Effective Implementation Chapter 17 Organizing and Planning for Effective Implementation McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Designing Appropriate Administrative Relationships Designing appropriate administrative relationships for the implementation of different competitive strategies: The degree of autonomy provided to each business unit manager. The degree to which the business unit shares functional programs and facilities with other units. The manner in which the corporation evaluates and rewards the performance of its SBU managers.

Designing Appropriate Administrative Relationships Business-unit autonomy Prospectors are likely to perform better on the critical dimensions of new product success. Decentralized decision making allows the managers closest to the market to make more major decisions on their own. Managers will be more flexible and adaptable. Coordination problems across business units. Low-cost defender SBUs perform better on ROI and cash flow by giving their managers relatively little autonomy.

Designing Appropriate Administrative Relationships Shared programs and facilities Some firms attempt to avoid the trade-off between efficiency and adaptability by designing relatively small, narrowly focused units, but then having two or more units share functional programs or facilities. Sharing resources can pose a problem for prospector business units. Functional independence usually facilitates good performance for prospector businesses.

Designing Appropriate Administrative Relationships Evaluation and reward systems For defenders in relatively mature markets, operating efficiency and profitability tend to be the most important objectives. Basing too large a portion of managers’ rewards on current profitability may cause problems for prospectors. Systems that place more emphasis on sales volume or market share objectives, or on the percentage of volume generated by new products, may be more appropriate for prospectors.

Designing Appropriate Organizational Structures and Processes Successful implementation of a given strategy is more likely when the business: Has the functional competencies demanded by its strategy and supports them with substantial resources relative to competitors, Is organized suitably for its technical, market, and competitive environment, and Has developed appropriate mechanisms for coordinating efforts and resolving conflicts across functional departments.

Designing Appropriate Organizational Structures and Processes Functional competencies and resource allocation Competence in marketing, sales, product R&D, and engineering are critical to the success of prospector businesses. In low-cost defender businesses the functional areas most directly related to operating efficiency.

Designing Appropriate Organizational Structures and Processes Service organizations Competence in human resource development is more crucial for service businesses pursuing prospector strategies than for those focused primarily on efficiency and low cost. Personnel management is an important adjunct to the production and marketing efforts of high-contact service organizations.

Designing Appropriate Organizational Structures and Processes Organizational structures: Variables Formalization is the degree to which formal rules and standard policies and procedures govern decisions and working relationships. Centralization refers to the location of decision authority and control within an organization’s hierarchy. Specialization refers to the division of tasks and activities across positions within the organizational unit.

Functional Organization of an SBU and Its Marketing Department

Designing Appropriate Organizational Structures and Processes Functional organizations The simplest and most bureaucratic design. This is the most centralized and formalized organization form and relies primarily on hierarchical mechanisms for resolving conflicts across functional areas.

A Marketing Department with a Product Management Organization

Designing Appropriate Organizational Structures and Processes Product management organizations This structure decentralizes decision making while increasing the amount of product specialization. Although the product managers are responsible for obtaining cooperation from other functional areas both within and outside the marketing department, they have no formal authority over these areas.

A Marketing Department with a Market Management Organization

Designing Appropriate Organizational Structures and Processes Market management organizations In some industries an SBU may market a single product to a large number of markets where customers have very different requirements and preferences. The intermediaries and marketing activities involved in selling to the different markets are so different that it makes sense to have separate market managers in charge of each.

Designing Appropriate Organizational Structures and Processes Matrix organizations The least bureaucratic or centralized and the most specialized type of organization. Brings together two or more different types of specialists within a participative coordination structure. Suits prospector businesses and the management of new product development projects within analyzer or differentiated defender businesses.

Designing Appropriate Organizational Structures and Processes Recent trends in organizational design Organizations will increasingly emphasize the managing of business processes in contrast to functional areas. Process management is quite different from the management of a function: It uses external objectives. People with different skills are grouped to undertake a complete piece of work; their work is done simultaneously, not in sequence. Information flows directly to where it is used.

Designing Appropriate Organizational Structures and Processes Recent trends in organizational design (cont.) The use of self-managing teams. Collaborative networks.

Designing Appropriate Organizational Structures and Processes Organizational adjustments as firms grow and markets change Five key drivers of such decisions: Customer needs. Informational requirements of the sales and marketing personnel charged with meeting those needs. Ability of a given structure to motivate and coordinate the kinds of activities that market conditions require. Available competencies and resources, and costs. Growing firms or those serving rapidly changing markets are likely to need to rethink—and perhaps change—the structure of their sales and marketing organizations frequently.

Designing Appropriate Organizational Structures and Processes Organizational designs for global markets Little or no formal organization Ranges between the domestic organization handling international transactions and a separate export department. An international division Often established to house all international activities, most of which relate to marketing. Serves best with a limited number of products that lack cultural sensitivity.

Designing Appropriate Organizational Structures and Processes Global structures The most common global structure is one based on products. The area structure is appropriate when there is considerable variance across markets regarding product acceptance and marketing activities. A hybrid organization is some combination of the functional, product, or area types of structure.

Designing Appropriate Organizational Structures and Processes Decision making and organizational structure Global organization structures can be centralized or decentralized in terms of decision making. Multinationals faced with strong global competition require more centralization.

Marketing Plans: The Foundation for Implementing Marketing Actions Preparation of a written plan is a key step in ensuring the effective execution of a strategic marketing program because it spells out what actions are to be taken, when, and by whom.

Contents of an Annual Marketing Plan

Marketing Plans: The Foundation for Implementing Marketing Actions The situational analysis Market situation Competitive situation Macroenvironmental situation Past product performance Sales forecast and other key assumptions

Marketing Plans: The Foundation for Implementing Marketing Actions Key issues After analyzing the current situation, the product manager must identify the most important issues facing the product in the coming year. This section should also highlight any special strengths of the product or weaknesses that must be overcome in responding to future threats and opportunities.

Marketing Plans: The Foundation for Implementing Marketing Actions Objectives Financial objectives provide goals for the overall performance of the brand and should reflect the objectives for the SBU as a whole and its competitive strategy. Those financial goals must then be converted into marketing objectives.

Marketing Plans: The Foundation for Implementing Marketing Actions Marketing strategy The manager must now specify the overall marketing strategy to be pursued. The chosen strategy should fit the market and competitive conditions faced by the product and its strategic objectives. It should also incorporate all of the necessary decisions concerning the 4Ps.

Marketing Plans: The Foundation for Implementing Marketing Actions Action plans The most crucial part of the annual marketing plan for ensuring proper execution. The specific actions necessary to implement the strategy for the product are listed, together with a clear statement of who is responsible for each action, when it will be done, and how much is to be spent on each activity. Specific timelines and milestones are set forth.

Marketing Plans: The Foundation for Implementing Marketing Actions Projected profit-and-loss statement The action plan includes a supporting budget that is essentially a projected profit-and-loss statement. This budget is then presented to higher levels of management for review and possible modification. Once approved, the budget serves as a basis for the plans and resource allocation decisions of other functional departments within the SBU.

Marketing Plans: The Foundation for Implementing Marketing Actions Contingency plans The manager might also detail contingency plans to be implemented if specific threats or opportunities should occur during the planning period.

Take-Aways Strategies are worthless without good implementation. Therefore, marketing managers, and general managers concerned about marketplace issues, must attend to organizational design issues. A business’s structure, policies, procedures, and resources must fit its chosen strategy or else implementation will fall short.

Take-Aways For firms with multiple businesses or product lines, different administrative relationships between the business unit and corporate headquarters are appropriate for different competitive strategies. Prospector businesses perform better with high levels of autonomy, fewer shared resources, and more top-line focused reward systems than defender businesses.

Take-Aways Within a given business—whether it’s part of a larger organization or a one-product entrepreneurial start-up— different functional competencies, levels of specialization, amounts of employee participation in decision making, and mechanisms for the resolution of internal conflicts are needed to effectively implement varying competitive strategies.

Take-Aways Several different organizational designs incorporate differences in both structural variables (formalization, centralization, and specialization) and mechanisms for resolving interfunctional conflicts. These include functional, product management, market management, and various types of matrix organizational designs.

Take-Aways Writing a formal marketing action plan is a key step toward ensuring the effective execution of a strategic marketing program because it spells out what actions need to be taken, when, and by whom. Written plans also provide the benchmarks by which the marketing strategy can be evaluated and controlled, as discussed in the next chapter.