10-07-2021

Strategic Management - II
SESSION 3

Functional Strategies
Standardized Products
Product Lower prices, margins as compared to competitors
Marketing
Strategies Little or modest promotion/ marketing
Avoid less profitable accounts
Economies of scale (invest in larger sized plants and machinery)
Low Cost Leadership

Production/ Use modern automated machinery to reduce costs

operational Full capacity utilization
strategies Products made to inventory – maintain tight levels
Aggressive use of JIT, TQM etc.

R&D and Redesign products to reduce cost of manufacture

engineering Strong process engineering capability
strategies Emphasize process innovation rather than basic research
Tight budgeting and control procedures – check costs and overheads
Organizationa Incentives and bonuses rewarding productivity – piece rate
l and control
strategies Simple functional organization – hierarchal structure
Lean Structure

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Functional Strategies
Customized Products
Product Higher prices, margins as compared to competitors
Marketing
Strategies Large expenditures on promotion/ marketing
Extensive after sales service, generous warranties, strong channel support
No EOS but customization, flexibility to meet changing demand
Overall Differentiation

Invest heavily in building corporate and brand image

Production/
operational Invest in marketing, quality, service, reliability and channels
strategies
Capacity utilization in anticipation of demand to ensure availability
Products made to order, flexible manufacturing
Redesign products to create benefits to customers
R&D and
engineering Strong product design capability
strategies
Emphasize product innovation and basic research
Less formal, less rigid hierarchy to promote innovation and entrepreneurship
Organizational Subjective system of incentives and rewarding long term performance of
and control employees and managers, geared to wards attracting creative talent
strategies Higher than average pay to attract workers
Lean Structure

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Linking Strategy Formulation to

Strategy Implementation

Culture

Input Output
Strategy Performance
Task People
Environment Organizational
Resources Outcomes

Structure

The Congruence Fit model

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Strategy Execution Framework

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Linking Strategy Formulation to

Strategy Implementation
People
 Staffing the organization with managers and employees capable of
executing the strategy well
Tasks
 Developing the resources and organizational capabilities required for
successful strategy execution
 Allocating sufficient resources (budgetary and otherwise) to the
strategy execution effort
 Instituting policies and procedures that facilitate strategy execution

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Linking Strategy Formulation to

Strategy Implementation
Structure
 Creating a strategy-supportive organizational structure
 Adopting business management processes that drive continuous
improvement in strategy execution activities
 Installing information and operating systems that support strategy
implementation activities
 Tying rewards directly to the achievement of performance objectives
Culture
 Fostering a corporate culture that promotes good strategy execution
 Exercising the leadership needed to propel implementation forward

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Strategy Execution – Managing

Operations
 Allocating ample resources to execution-critical value chain activities
 Instituting policies and procedures that facilitate good strategy
execution
 Employing process management tools to drive continuous
improvement in how value chain activities are performed
 Installing information and operating systems that enable company
personnel to carry out their strategic roles proficiently
 Using rewards and incentives to promote better strategy execution and
the achievement of strategic and financial targets

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4. Allocating resources
 A change in strategy nearly always calls for budget reallocations and resource
shifting
 Requires putting enough resources behind new strategic initiatives to fuel their
success and making tough decisions to kill projects and activities that are no
longer justified.
• Toyota killed Qualis in favour of Innova
• Gillette first killed its highly successful single-edge razor blades in favor of the twin
blade, then killing that with triple blade and recently by quadruple blade.

 Visible actions to reallocate operating funds and move people into new
organizational units signal a determined commitment to strategic change.
• Such actions can catalyze the implementation process and give it credibility.
• Microsoft has made a practice of regularly shifting hundreds of programmers to new
high-priority programming initiatives within a matter of weeks or even days.

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5. Instituting Policies and Procedures

for Strategy Execution
Policies and operating procedures facilitate strategy execution by:
1. Providing top-down guidance regarding how things need to be done
• Policies are a particularly useful way to counteract tendencies for some people to resist change.
• Example – Google’s 20% time policy
2. Helping ensure consistency in how execution-critical activities are performed
• For example, eliminating significant differences in the operating practices of different plants, sales
regions, or customer service centers or in the individual outlets in a chain operation helps a company
deliver consistent product quality and service to customers.
3. Promoting the creation of a work climate that facilitates good strategy execution
• “how we do things around here”
• For example – Mc Donald’s Policies for discarding cooked food
 Ideally, prescribe enough policies to give organization members clear direction
and to place reasonable boundaries on their actions; then empower them to act
within these boundaries in pursuit of company goals

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6. Employing Business Process

Management Tools
Benchmarking

Best Process
practices reengineering
Managing for
Continuous
Improvement

Total quality
Six Sigma quality
management
programs
(TQM)

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Employing Business Process

Management Tools
On the execution part, the management must –
 Demonstrate visible, unequivocal, and unyielding commitment to Business
Process Tools
 Nudge people toward quality-supportive behaviors by -
• Hiring those with attitudes and aptitudes suited for quality-based performance.
• Providing quality training for employees.
• Using teams and team-building to reinforce and nurture individual effort.
• Recognizing and rewarding individual and team efforts to improve quality
regularly and systematically.
• Stressing prevention, not correction.
 Use online systems to provide all stakeholders with the latest best
practices, thereby speeding the diffusion and adoption of best practices

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7. Installing Information and

Operating Systems
Benefits of information technologies
 Enable better strategy execution through data-based decisions
 Strengthen organizational capabilities
 Allow for real-time tracking of implementation initiatives and daily
operations
 Provide monitoring of empowered employee performance
(electronic scorecards)
 Build closer relationships with customers

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Instituting adequate information systems

performance tracking and controls

Key Strategic Performance Indicators

Tracked by Information Systems

Customer Financial
data performance data

Employee
Operations data Supplier/partner/
data collaborative ally data

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8. Using Rewards and Incentives to

promote better strategy execution
Providing incentives and engaging in
motivational practices that facilitate good
Techniques for strategy execution
winning sustained,
energetic
Striking the right balance between rewards
commitment of and punishment for individual performance
employees to the
strategy execution
process Linking employee rewards to strategically
relevant organizational performance
outcomes

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Incentives and Motivational Practices

That Facilitate Good Strategy Execution
 Generous financial rewards act as high-powered incentives
for individuals to exert their best efforts
 A company’s package of monetary rewards includes some
combination of –
• Base-pay increases
• Performance bonuses
• Profit-sharing plans
• Stock awards
• Retirement plans, and
• piecework incentives (in the case of production workers)

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Non-Monetary Incentives
 Provide attractive perks and fringe benefits
 Give awards and other forms of public recognition
 Rely on promotion from within whenever possible
 Invite and act on ideas and suggestions
 Create a work atmosphere of caring and mutual respect
 State the strategic vision in inspirational terms
 Share the firm’s critical information with employees
 Provide a comfortable working environment

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Linking Rewards to Strategically

Relevant Performance Outcomes
 Focus on and reward results, not effort
 Create a results-oriented work environment that focuses on what to
achieve, not what to do
 Set strategically-relevant, specific, and measurable stretch
performance goals that are difficult but achievable
 Link the performance goals of each individual in an organizational unit
to the unit’s goals
 Reward and recognize as success - superior performance in
accomplishing the goals

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Guidelines for Designing Effective

Compensation Systems
 Make financial incentives a major, not minor, piece of the total
compensation package
 Have incentives that extend to all managers and all workers, not just
top management
 Administer the reward system with scrupulous objectivity and fairness
 Ensure that the performance targets set for each individual or team
involve outcomes that the individual or team can personally affect
 Keep the time between achieving performance target and receiving the
reward as short as possible
 Avoid rewarding effort rather than results

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Thank You………..

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