Module 8: Implementing and Evaluating Strategy

8.1. Implementing Plans

Even though strategy is an ongoing process and there is constant feedback, managers must have
some perception of the strategic plan; and implementation is concerned with (1) resource
allocation and (2) monitoring in order to get there.

8.2. Organizational Structure

Different strategies require different structures. But it could be that structure dictates strategy
and not vice versa.

Structure is a method of resource allocation which is relevant to objectives, the competitive

environment and strategy.

Different forms of company structures:

Structure Advantages Disadvantages

Functional Specialization, Tight control Co-ordination and
communication problems
Divisional Ability to measure divisional Duplication of effort, loss of
performance, good control
coordination
Matrix Networks Communication, Economies of No unity of command
scope

8.3. Resource Allocation

Reallocation of resources involves change and organization of people may be resistant to change.
Managers need to keep this in mind when implementing change and there are techniques which
ease the transition, such as survey feedback.

Critical success factors are taken from critical path analysis and they are events which most occur
before other things can be completed.

Companies differ in management skills and management styles (e.g. autocratic management vs.
management by exception) and both need be matched with strategy.

Budgets appear at the corporate and the SBU level. At the corporate level, capital rationing really
ought not occur because the financial markets provide unlimited funds. But it does due to market
inefficiencies; and motivational aspects play a role in allocating budgets as well as stringent
financial analysis.

Incentives need be lived up with objectives and what may appear to be resistance to change
could be due to a poorly designed incentive system.

Sales targets should not be set as sales maximization. Instead, marginal analysis should be used.
This involves estimating expected marginal revenue and costs and tools such as sensitivity
analysis can help do that.

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Resource planning is essential to competitive advantage and it involves such things as
coordinating marketing and production activities to get inventories right, introducing new
technologies at the right time, and just-in-time approaches.

8.4. Evaluation and Control

A strategic plan serves as a benchmark for actual outcomes where (1) variances are investigated,
(2) their causes are identified, and (3) it is asked whether the causes were within the control of
the company.

Control can be tight even though no planning was undertaken, it will then enter on financial
ratios. On the other hand, loose control companies do plan but do not monitor and do not use
incentives:

High
Loose Control Planning Control
Degree of Planning
Strategic Control
Medium

Financial Control
Low

Flexible Tight Tight

Strategic Financial

Type of control

Goold and Compbell recommend: 91) set few objectives and derive targets, (2) identify
milestones, and (3) do not rely on financial measures alone.

Monitoring could take into account:

(1) Market performance-why is market share lower than planned and what are the costs and
benefits of bringing it up to plan.
(2) Profitability measures depend on accounting conventions such as inventory valuation.
One valuable measure could be net contribution.
(3) Cash flow does not depend on profitability alone, asset disposals or investment programs
can play a part. Negative cash flows need be put in context: is the product is question a
star? Are the negative cash flows due to an investment program and will revert in the
future?

8.5. Feedback

Feedback is necessary because the environment is changing and plans need be adopted.

Effective feedback depend on:

(1) Company adaptability: are we willing to accept unpleasant information and act on it?
(2) Company communications: how does information disseminate up and down the hierarchy
and between functional departments and divisions.

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Feedback is more about organizational culture than about formal meetings. Companies need to
learn from experience.

8.6. Analyzing the ongoing competitive position

Strategy cannot be implemented unless a company is aware of it competitive position at all time.
Identifying and predicting strengths and weaknesses, likely success and failure, and the
competitive position requires a wide range of tools and a structured approach.
(See table 8.2 on page 8/21 for a summary of tools)

One such structure is provided by the functional model and its stages (1) Who decides to do
what?, (2) Analysis and diagnosis, (3) Choice, and (4) Implementation and Feedback.

(See section 8.6 for a summary of the functional model).