THE NATURE OF STRATEGY IMPLEMENTATION
physically separating the conflicting individuals
Strategy implementation is the second stage of
strategic management. Successful strategy formulation does
not guarantee successful strategy implementation. It is always
more difficult to do something (strategy implementation) than to
say you are going to do it (strategy formulation). Although
inextricably linked, strategy implementation is fundamentally
different from strategy formulation and they can be contrasted
in the following ways:
 Strategy formulation is positioning forces before the
action; strategy implementation is managing forces
during the action
 Strategy formulation focuses on effectiveness;
strategy implementation focuses on efficiency
 Strategy formulation is primarily an intellectual
process; strategy implementation is primarily an
operational process
 Strategy formulation requires good intuitive and
analytical skills; strategy implementation requires
special motivation and leadership skills
Annual Objectives
Establishing annual objectives is a decentralized
activity that directly involves all managers in an organization.
Active participation in establishing annual objectives can lead
to acceptance and commitment.
Annual objectives are essential for strategy
implementation because they represent the basis for allocating
resources, are a primary mechanism for evaluating managers,
are major instrument for monitoring progress toward achieving
long-term objectives and establishing organizational, divisional
and departmental priorities
Resource Allocation
Resource allocation is a central management activity
that allows for strategy execution. All organizations have at
least four types of resources that can be used to achieve
desired objectives: financial resources, physical resources,
human resources and technological resources- human
resources being the most important.
The real value of any resource allocation program lies
in the resulting accomplishment of an organization’s objectives.
Effective resource allocation does not guarantee successful
strategy implementation because programs, personnel,
controls and commitment must breathe life into the resources
provided.
Managing Conflict
Interdependency of objectives and competition for
limited resources often leads to conflict. Conflict can be defined
as a disagreement between two or more parties o one or more
issues.
Conflict is unavoidable in organizations, so it is
important that conflict be managed and resolved before
dysfunctional consequences affect organizational performance.
Various approaches for managing and resolving conflict can be
categorized into three:
1. Avoidance: includes such actions as ignoring the
problem in hopes that the conflict will resolve itself or
2. Defusion: Can include playing down differences
between conflicting parties while accentuating
similarities and common interests, compromising so
that there is neither a winner nor loser, resorting to
majority rule, appealing to a higher authority, etc.
3. Confrontation: is exemplified by exchanging members
of conflicting parties so that each can gain
appreciation of the other’s point of view or holding a
meeting at which conflicting parties present their
views and work through their differences
Matching Structure with Strategy
Changes in strategy lead to changes in organizational
structure. Structure should be designed to facilitate the stra
tegic pursuit of a firm and therefore, follow strategy. There is no
one optimal organizational design or structure for a given
strategy or type of organization. What is appropriate for one
organization may not be appropriate for similar firm.
Basic Types of Organizational Structure
1. The Functional Structure: Groups tasks and activities
by business function such as production/operations,
marketing, finance/accounting, research and
development, and management and information
systems.
2. Divisional Structure: Also called decentralized
structure. It is the second most common type of
organizational structure used by businesses. The
divisional structure can be organized in one or four
ways: by geographic area, by product or service, by
customer or by process.
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 areas.
A divisional structure by product (services) is
most effective for implementing strategies when
specific products or services need special
emphasis. Plus, this type of structure is widely
used when an organization offers only a few
products or services or when an organization’s
products and services differ substantially
A divisional structure by process is similar to a
functional structure because activities are
organized according to the way work is actually
done. However, the key difference between these
two designs is that functional departments are not
accountable for profits or revenues, whereas
divisional process departments are evaluated on
these criteria.
3. Strategic Business Unit Structure: The SBU structure
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
4. The Matrix Structure: A matrix structure is the most
complex of all designs because it depends upon both
 vertical and horizontal flows of authority and  Sales growth
communication.  Asset growth
Qualitative Evaluation of Strategy
STRATEGY REVIEW, EVALUATION AND
CONTROL 1. Internal consistency of strategy
2. Consistency with environment
The best formulated and best implemented 3. Appropriateness in view of resources
strategies become obsolete as a firm’s external and 4. Acceptable degree of risk
internal environments change. Therefore, it is 5. Appropriate time frame
essential for strategists to systematically review, 6. Workability of the strategy
evaluate, and control the execution of strategies.
Strategy Evaluation is vital to an Contingency Planning
organization’s well being. Timely evaluations can alert
management to potential or actual problems before a Alternative plans that can be put into effect if
situation becomes critical. certain key events do not occur as expected
Strategy evaluation includes three basic
activities: Auditing

1. Examining the underlying bases of a firm’s strategy Financial audits determine correspondence between
2. Comparing expected results to actual results assertions based on strategic plan and established criteria
3. Taking corrective actions to ensure that performance while environmental audits ensure sound and safe practices
conforms to plans
Techniques of Strategic Evaluation
Strategy Evaluation
1. Gap Analysis- used to measure the gap between the
Adequate and timely feedback is the organization’s current position and its desired position
cornerstone of effective strategy evaluation. 2. SWOT Analysis- is essential in determining how to
The Rumelt’s Criteria for strategy evaluation best focus resources to take advantage of the
gives basis for measuring effectiveness of the strengths and opportunities and combat weaknesses
strategy, to wit: and threats
3. Balanced Scorecard- an important strategy evaluation
1. Consistency- strategy should not present inconsistent technique that allows firms to evaluate strategies from
goals and policies four key perspectives: financial performance,
2. Consonance- need for strategists to examine sets of customer knowledge, internal business processes and
trends, as well as individual trends learning and growth
3. Feasibility- create unsolvable problems 4. PERT and CPM- the Program Evaluation Review
4. Advantage- creation or maintenance of competitive Technique and Critical Path Method were developed
advantage enable to plan and control activities

Difficulties in Strategy Evaluation PERT helps the management to know:

1. Increase in environment’s complexity  When will the project be completed?

2. Difficulty predicting the future with accuracy  When will each individual part of the project start
3. Increasing number of variables and finish?
4. Rate of obsolescence of plans  Of the many parts in a project, which ones should
5. Domestic and global events be completed on tie to avoid delaying the
6. Decreasing time span for planning certainty project?

Quantitative Criteria for Strategy Evaluation CPM was developed for the purpose of
scheduling. It is concerned with the reconciliation,
Financial Ratios enumerates the relationship between applying more
resources to shorten the duration of a given project
1. Compare performance over different periods and increase cost of these resources
2. Compare performance to competitors
3. Compare performance to industry averages Steps in Strategy Evaluation

Key Financial Ratios 1. Evaluation Starts at the Start

 Return on investment It may sound counter-intuitive but ideally,

 Return on Equity you'll be kicking off your strategy evaluation process
 Profit margin back in the planning stage. Strategy evaluation is
 Market share essentially the process of figuring out:
 Debt to equity
 Earnings per share  What did we do well?
  How can we improve upon what we did well?
 What did we learn about ourselves and the
environment along the way?

2. Implement Consistent Processes and Tools

Effective strategy evaluation requires

planning that goes beyond the setting of good KPIs.
You'll also need to plan out your 'strategy rhythm' -
things like:

 How often will I measure progress against my goals?

 What standardized set of reports will be used throughout
my business?
 What level of detail shall we capture in our written
commentary of progress against the plan?

3. Empower Teams to Evaluate Strategies

Empowerment plays a critical role in strategy

execution regardless. However it's especially
important as part of the strategy evaluation process. 

4. Take Corrective Action

Make bettering actions whenever necessary

5. Iterate Your Plan

Find a balance between redefining your

goals and versus changing them without even really
achieving something