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Download Strategic Management Concepts and Cases 13th Edition David Solutions Manual all chapters
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Chapter 7: Implementing Strategies: Management and Operations Issues
CHAPTER 7
CHAPTER OUTLINE
CHAPTER OBJECTIVES
144
The strategic-management process does not end when the firm decides which strategy or
strategies to pursue. There must be a translation of strategic thought into strategic action. This
translation is much easier if managers and employees of the firm understand the business, feel a
part of the company, and, through involvement in strategy-formulation activities, have become
committed to helping the organization succeed. Without understanding and commitment,
strategy-implementation efforts face major problems. This chapter focuses on management
issues most central to implementing strategies in 2010-2011.
B. Management Perspectives
1. In all but the smallest organizations, the transition from strategy formulation to
strategy implementation requires a shift in responsibility from strategists to divisional
and functional managers.
145
3. Clearly stated and communicated objectives are critical to success in all types and
sizes of firms. Figure 7-2 illustrates how the Statmus Company could establish annual
objectives based on long-term objectives. Table 7-1 reveals associated revenue figures
that correspond to the objectives in Figure 7-2.
c. Too often, objectives are stated in generalities, with little operational usefulness.
146
III. POLICIES
B. Broadly defined, policy refers to specific guidelines, methods, procedures, rules, forms,
and administrative practices established to support and encourage work toward stated
goals.
C. Policies let both employees and managers know what is expected of them, thereby
increasing the likelihood that strategies will be implemented successfully.
E. Some example issues that may require a management policy are provided in Table 7-4.
A. Resource allocation is a central management activity that allows for strategy execution.
B. All organizations have at least four types of resources that can be used to achieve desired
objectives:
1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources
V. MANAGING CONFLICT
A. Resource-Specific Conflict
147
2. Conflict can be defined as a disagreement between two or more parties on one or more
issues.
3. Establishing objectives can lead to conflict because managers and strategists must
make trade-offs. Table 7-5 reveals some important management trade-off decisions
required in strategy implementation.
Various approaches for managing and resolving conflict can be classified into three
categories: avoidance, defusion, and confrontation.
1. Avoidance includes such actions as ignoring the problem in hopes that the conflict will
resolve itself or physically separating the conflicting individuals (or groups).
2. Defusion can include playing down differences between conflicting parties while
accentuating similarities and common interests, compromising so that there is neither
a clear winner nor loser, resorting to majority rule, appealing to a higher authority, or
redesigning present positions.
Teaching Tip: In the United States, there are a number of nonprofit organizations that are dedicated to
helping businesses, communities, families, schools, and any other conflicting parties resolve their
disputes in a fair, sensible manner.
Teaching Tip: Unfortunately, workplace conflict spills over into workplace violence on occasion. As
a result, it is important that managers be familiar with how to deal with workplace violence if it
occurs. The U.S. Department of Labor provides several resources for managing situations involving
workplace violence, see http://www.osha.gov/SLTC/workplaceviolence/. The Division of Human
Resources at the University of California-Davis has an excellent online brochure on dealing with
workplace violence. It is available at http://www.hr.ucdavis.edu/Elr/Er/Violence/Brochure.
148
1. Changes in strategy often require changes in the way an organization is structured for
two major reasons.
a. First, structure largely dictates how objectives and policies will be established.
For example, objectives and policies established under a geographic
organizational structure are couched in geographic terms. Objectives and policies
are stated largely in terms of products in an organization whose structure is based
on product groups. The structural formula for developing objectives and policies
can significantly impact all other strategy-implementation issues.
b. The second major reason why changes in strategy often require changes in
structure is that structure dictates how resources will be allocated.
3. There is not just one optimal organizational design or structure for a given strategy or
type of organization.
VTN (Visit the Net): www.smartdraw.com offers software for drawing organizational charts. It offers
a free thirty-day trial.
1. The most widely used structure is the functional or centralized type because this
structure is the simplest and least expensive of the seven alternatives.
149
1. The divisional or decentralized structure is the second most common type used by
U.S. businesses.
2. The divisional structure can be organized in one of four ways: by geographic area, by
product or service, by customer, or by process. With a divisional structure, functional
activities are performed both centrally and in each separate division.
a. Advantages: A divisional structure has some clear advantages. First, and perhaps
foremost, accountability is clear. 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.
150
1. 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 CEO.
4. Figure 7-4 illustrates the SBU Structure used by Sonoco Products Corporation.
1. It is the most complex of all designs because it depends upon both vertical and
horizontal flows of authority and communication.
3. It also creates dual lines of budget authority, dual sources of reward and punishment,
shared authority, and dual reporting channels.
4. As indicated in Table 7-9, some advantages of a matrix structure 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. This structure also
facilitates the use of specialized personnel, equipment, and facilities.
151
1. Reserve the title of CEO for the top person in the organization and use the term
President for division top managers, if there are divisions in the firm.
2. Functional business executives should have titles like Chief, Vice President, Manager,
or Officer.
3. It is best to have a COO reporting to the CEO and all divisional presidents will report
to the COO.
4. Figure 7-6 illustrates an organizational chart for top managers of a large firm.
2. Reengineering is concerned more with employee and customer well-being than with
shareholder well-being.
B. Restructuring
1. Firms often employ restructuring when various ratios appear out of line with
competitors, as determined through benchmarking exercises.
2. The primary benefit sought from restructuring is cost reduction. The downside of
restructuring can be reduced employee commitment, creativity, and innovation that
accompanies the uncertainty and trauma associated with pending and actual employee
layoffs.
152
3. Another downside of restructuring is that many people today do not aspire to become
managers, and many present-day managers are trying to get off the management track.
C. Reengineering
A. Pay-for-Performance
a. One aspect of the deepening global recession is that companies are instituting
policies to allow their shareholders to vote on executive compensation policies.
b. These new policies underscore how the financial crisis and shareholder outrage
about top executive pay has affected compensation practice.
2. Profit sharing is another widely used form of incentive compensation.
4. Criteria such as sales, profit, production efficiency, quality, and safety could also serve
as bases for an effective bonus system.
B. Five tests are often used to determine whether a performance-pay plan will benefit an
organization:
153
D. There is rising public resentment over executive pay, and there are government restrictions
on compensation. Executive pay declined slightly in 2008 and is expected to decrease
somewhat substantially in 2009 as pressure for shareholders and government subsidy
constraints lower payouts.
A. Resistance to Change
1. Resistance to change can be considered the single greatest threat to successful strategy
implementation.
a. Force change strategy – involves giving orders and enforcing those orders.
b. Educative change strategy – presents information to people
c. Rational or Self-interest change strategy – attempts to convince individuals that
the change is to their personal advantage.
Teaching Tip: The Journal of Organizational Change Management is an excellent resource to obtain
material on change for classroom discussion. The journal explores all aspects of organizational change
and resistance to change in a comprehensive and interesting manner.
A. Strategists should strive to preserve, emphasize, and build on aspects of an existing culture
that support proposed new strategies.
154
C. Just-in-time (JIT) production approaches have withstood the test of time. With JIT, parts
and materials are delivered to a production site just as they are needed, rather than being
stockpiled as a hedge against later deliveries.
A. Resource Concerns
1. More and more companies are instituting furloughs, or temporary layoffs, to cut costs
as an alternative to laying off employees. Table 7-12 lists ways that companies today
are reducing labor costs to stay financially sound.
2. Strategic responsibilities of the human resource manager include assessing the staffing
needs and costs for alternative strategies proposed during strategy formulation and
developing a staffing plan for effectively implementing strategies.
3. The human resource department must develop performance incentives that clearly link
performance and pay to strategies.
4. Human Resource problems that arise when businesses implement strategies can
usually be traced to one of three causes:
155
5. Perhaps the best method for preventing and overcoming human resource problems in
strategic management is to actively involve as many managers and employees as
possible in the process.
2. ESOPs empower employees and reduce worker alienation, stimulate productivity, and
allow substantial tax savings for the firm.
1. Work/family strategies have become so popular among companies that the strategies
now represent a competitive advantage for those firms that offer such benefits.
4. There is great room for improvement in removing the glass ceiling domestically,
especially considering that women make up 47 percent of the U.S. labor force.
1. An organization can perhaps be most effective when its workforce mirrors the
diversity of its customers. For global companies, this goal can be optimistic, but it is a
worthwhile goal.
1. Wellness of employees has become a strategic issue for many firms. Many firms are
implementing wellness programs, requiring employees to get healthier or pay higher
insurance premiums.
156
4. Seven key lifestyle habits listed in Table 7-16 may significantly improve health and
longevity.
Teaching Tip: Visit the text’s website at www.prenhall.com/david for this chapter’s Web exercises.
1. List the five labor cost-saving activities that you believe would be most effective for (1) Best
Buy, (2) your university, and (3) the U.S. Postal Service. Give a rationale for each company
Answer: Examples offered by students will vary, but will include many of the labor cost-saving
tactics presented in Table 7-12. These include salary freeze, hiring freeze, salary reductions,
reductions in employee benefits, increasing employee contribution to health care premiums,
reducing 40-K match, reducing employee workweek, mandatory furlough, voluntary furlough,
hiring temporary or contractual employees instead of fulltime employees, volunteer buyouts,
reduced production, layoffs, early retirement, and reducing or eliminating bonuses.
2. Define and give an example of furloughs as they could apply to your business school.
Answer: Furloughs are temporary layoffs that more and more companies are instituting to cut
costs as an alternative to laying off employees. Many colleges and universities have implemented
furloughs as a result of the economic recession. An example in a business school would be
mandatory furlough days that would require all faculty and staff within the business school to take
unpaid leave. Such a move would only be effective if it included all employees, not just those
within the business school.
Answer: Student opinions on the importance of effectiveness and efficiency will vary and
certainly both are important for successful strategic planning. Effectiveness is associated more
with strategy formulation, i.e. doing the right things which means having an excellent game plan
or strategic plan. Efficiency is associated more with strategy implementation. Efficiency means
finding the best means to accomplish something. Because strategy implementation is usually
more difficult to accomplish than formulation, some students may feel that efficiency is more
157
4. In stating objectives, why should terms such as increase, minimize, maximize, as soon as
possible, adequate, and decrease be avoided?
Answer: Terms such as increase, minimize, maximize, as soon as possible, adequate, and decrease
should be avoided when setting objectives because they too general, are unclear, lack specificity,
and are not measureable. Instead, objectives should state quantity, quality, cost, time, and should
be verifiable.
5. What are four types of resources that all organizations have? List them in order of
importance for your university or business school.
Answer: The four types of resources that all organizations have include financial, physical,
human, and technological resources. Rankings will vary by student and also depend on qualities
of the university or business school.
Answer: Preferences will vary based on the levels of conflict that students are comfortable with.
The lowest level of conflict involves avoidance, or ignoring the problem. Defusion can include
playing down differences between conflicting parties. The highest level of conflict is
confrontation, which involves presenting the viewpoints of all conflicting parties to resolve the
issue.
158
Answer: A functional structure groups tasks and activities by business function, whereas a
divisional structure is grouped by geographic area, product/service, customer, or process.
Responses will vary among students and characteristics of the restaurant such as size, scope, and
type may play a factor. Responses should take into consideration some of the advantages and
disadvantages of both structures presented in Table 7-7 and Table 7-8.
Answer: A divisional structure by product is most effective for implementing strategies when
specific products need special emphasis. This type of structure is also widely used when an
organization offers only a few products or when there are major differences among products. A
divisional-by-region structure is appropriate for organizations whose strategies need to be tailored
to fit the particular needs and characteristics of customers in different geographic areas.
10. Think of a company that would operate best in your opinion in a division-by-services
organizational structure. Explain your reasoning.
Answer: The divisional by services structure is most effective for implementing strategies when
specific services need special emphasis. Also, this type of structure is widely used when an
organization offers only a few services or when an organization’s services differ substantially.
11. What are the two major disadvantages of an SBU-type organizational structure? What are
the two major advantages? At what point in a firm’s growth do you feel the advantages
offset the disadvantages? Explain.
Answer: The two major disadvantages of an SBU-type organizational structure are that it requires
an additional layer of management, which increases salary expenses. Also, the role of the group
vice president is often ambiguous. However, these limitations often do not outweigh the
advantages of improved coordination and accountability. Another advantage is that it makes the
tasks of planning and control by the corporate office more manageable. As the number, size,
diversity, and complexity of divisions in a firm increases, an SBU-type structure becomes more
advantageous.
12. In order of importance in your opinion, list six advantages of a matrix organizational
structure.
Answer: Six advantages of a matrix organizational structure include: (1) objectives are clear, (2)
employees can see results of their work, (3) shutting down a project is easily accomplished, (4)
facilitates the use of personnel, (5) facilitates the use of facilities, and (6) functional resources are
shared instead of duplicated. Rankings of importance will vary among students.
159
13. Why should division head persons have the title president rather than vice president?
Answer: Because the title of CEO should be reserved for the top executive in the firm, division top
managers should have the “president” title, since they serve as division leaders.
Answer: Six Sigma is a quality-boosting process improvement technique that entails training
several key persons in the firm in the techniques to monitor, measure, and improve processes and
eliminate defects. It is a reengineering technique as opposed to a restructuring technique, because
it involves reconfiguring or redesigning work, jobs, and processes for the purpose of improving
cost, quality, service, and speed.
15. Compare and contrast profit sharing with gain sharing as employee performance incentives.
Answer: Profit sharing provides an incentive for employees to help the company succeed
financially, because they get a return on profit. Critics of profit sharing emphasize that too many
factors affect profits for this to be a good criterion. Gain sharing requires employees or
departments to establish performance targets; if actual results exceed objectives, all members get
bonuses.
16. List three resistance to change strategies. Give an example when you would use each
method or approach.
Answer: Three resistance to change strategies include force change strategy, educative change
strategy, and rational or self-interest change strategy.
• Force change strategy involves giving orders and enforcing those orders, such as when a
manager tells a subordinate to perform a task differently.
• Educative change strategy presents information to present people of the need for change.
Examples include posters used to communicate reasoning for implementing a new
company policy.
• Rational or self-interest change strategy attempts to convince individuals that the change is
to their personal advantage. For example, strategies involving employee wellness have
tremendous benefits to all parties involved.
17. In order of importance in your opinion, list six techniques or activities widely used to alter
an organization’s culture.
Answer: Techniques used to alter an organization’s culture include recruitment, training, transfer,
promotion, restructuring, reengineering, role modeling, positive reinforcement, mentoring,
revising vision and/or mission, redesigning physical spaces/facades, altering reward system, and
altering organizational policies/procedures/practices. Ranking of these activities will vary among
students.
160
19. List reasons why it is important for an organization not to have a “glass ceiling”.
Answer: It is important for an organization not to have a “glass ceiling”, because according to
recent studies, companies with more female executives and directors outperform other firms.
Companies with a mix of men and women will outperform competitors that rely on leadership of a
single sex. A mix of thinking styles is key to management effectiveness.
20. Allocating resources can be a political and an ad hoc activity in firms that do not use
strategic management. Why is this true? Does adopting strategic management ensure easy
resource allocation? Why?
Answer: Allocating resources can be ad hoc and political in the absence of strategic management
because no good substitute approach for making major decisions exists. Intuition, subjectivity,
and emotions are not adequate for making resource allocation decisions that have strategic
ramification for an entire organization. Strategic management does not assure easy resource
allocation, but it generally results in more effective resource allocation.
21. Compare strategy formulation with strategy implementation in terms of each being an art
or a science.
Answer: Interrelationships among organizational objectives, strategies, and policies are revealed
in the strategic-management model. Note that long-term objectives and strategies are part of the
strategy-formulation process, whereas annual objectives and policies are part of strategy
implementation. Clear policies facilitate attainment of annual objectives.
23. Identify a long-term objective and two supporting annual objectives for a familiar
organization.
161
24. Identify and discuss three policies that apply to your present strategic-management class.
Answer: Answers to this question will vary for each class. Policies that may be discussed include
grading policies, attendance policies, and honor code policies.
25. Explain the following statement: Horizontal consistency of goals is as important as vertical
consistency.
26. Describe several reasons why conflict may occur during objective-setting activities.
Answer: The objective-setting process can lead to conflict due to competition over scarce
resources, different expectations among individuals, different perceptions among individuals,
miscommunication, time pressure, personality incompatibility, and line and staff
misunderstandings.
27. In your opinion, what approaches to conflict resolution would be best for resolving a
disagreement between a personnel manager and a sales manager over the firing of a
particular salesperson? Why?
Answer: Various approaches for minimizing and resolving conflict can be classified in three ways:
avoidance, defusion, and confrontation. Depending on the situation, any of these three alternative
approaches could justifiably be most effective in solving a dispute between a personnel manager
and sales manager.
Answer: Answers to this question will vary by college or university. Every institution has different
rituals, values, stories, legends, heroes, ceremonies, and the like.
162
30. In your opinion, how many separate divisions could an organization reasonably have
without using an SBU-type organizational structure? Why?
Answer: The answer to this question depends on the size and type of divisions, but, generally
speaking, a firm that has six or more divisions could benefit from an SBU-type of organizational
structure.
31. Would you recommend a divisional structure by geographic area, product, customer, or
process for a medium-sized bank in your local area? Why?
32. What are the advantages and disadvantages of decentralizing the wage and salary function
of an organization? How could this be accomplished?
Answer: Decentralizing the wage and salary function of an organization could allow a firm’s
reward system to be more closely linked to strategic performance. It also could allow decisions on
salary increases, promotions, merit pay, and bonuses to be more closely aligned to support the
long-term strategic objectives of an organization.
33. Consider a college organization with which you are familiar. How did management issues
affect strategy implementation in that organization?
34. As production manager of a local newspaper, what problems would you anticipate in
implementing a strategy to increase the average number of pages in the paper by 40
percent?
163
[2]
WHITMAN, WALT. Gathering of the forces. il
2v *$15 Putnam 814
Reviewed by E. F. Edgett
Boston Transcript p4 D 24 ’20 1550w
“To those who knew him only by his great and minor poems or by
the stories of his vanities and eccentricities, these volumes will be a
revelation. They reveal his soul as it grew; and nothing will be more
surprising than their conventional form, their respect for the current
conventions of morality, and their unforced and clear style.” M. F.
Egan
(Eng ed 20–14622)
20–773
“Clear cut, interesting little sketches into which the same people
step again and again until one knows quite the whole village.”
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small tragedies and happinesses into what seems a very truthful
representation of an American town. Whether or not these stories
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must be conceded that Miss Widdemer has done a more difficult
thing and revealed a more mature and a surer art.” D. L. M.
20–5609
20–13699
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“A lively and amusing tale. Not a big book nor a provable story, but
agreeable ‘summer reading.’”
20–7013
The book is archaeological and etymological, showing how many of
the plants believed to have been indigenous to America, and how
much of the language and customs of the Indians, have an African
origin. Besides a long list of the sources quoted, illustrations, a word
and a subject index, the book contains: The journal of the first
voyage and the first letter of Columbus; The second voyage; Tobacco;
The bread roots.
20–26999
Reviewed by E: S. Corwin
(Eng ed A20–616)
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This is a book for boys about boys who have gained success,
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than twenty-six sketches of successful men, among them: Philip
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immortal telephone inventor, and humanitarian; James Buchanan
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sketch.
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