Strategy Implementation

• Strategy implementation refers to the sum total of the

activities required for the successful execution of
strategy.
• While the strategy formulation is the planning of
work, strategy implementation is working of plan.
• Strategy implementation should address the questions
such as:
– what must be done to align the firm’s operations in the new
strategic direction?
– What preparation should be accomplished for the
execution of the strategy?
– Who are the people who will carry out the strategic plan?
– How is everyone going to do what is needed?
• Since the strategy implementation is translation of
strategic thought into strategic action, it is essentially
necessary to ensure that:
– Sufficient quantity of resources needed for the
implementation is available.
– Right type of human resources of the right at the right
time are available.
– People with the responsibility to carry out the
implementation activities have complete knowledge of the
vision, mission, objectives, and strategies of the company.
– The management system to be applied is aligned to the
need of strategy.
– There is sincere commitment from the top management.
 McKinsey’s 7-S Model
• McKinsey 7-S model is useful framework for
viewing the strategy implementation.
• It describes the integrated activities which are
considered important in executing the
strategies.
• This model suggests seven activities which are
interrelated and interdependent.
 McKinsey’s 7-S Framework

Structure Strategy

Shared
Systems Style
values

skills Staff
• STRATEGY: A set of decisions and actions aimed at gaining a
sustainable competitive advantage from the market.
• STRUCTURE: The organizational chart defining roles and
responsibilities of different divisions, sections etc.
• SYSTEMS: The flow of activities in the daily operation of a
business, including the core process and the support system.
• STYLE: The way managers collectively spend their time and
attention and their symbolic behaviors.
• STAFF: The way companies develop employees and shape
basic values.
• SHARED VALUES: Commonly held beliefs, mindsets, and
assumptions that shape how an organization behaves.
• SKILLS: An organization’s dominant capabilities and
competencies
 Process of Strategy Implementation
• Although, there is no hard and fast rule with regard
to strategy implementation, a tentative flow of the
strategic process may be developed as follows:
– Identification of measurable, mutually determined annual
objectives.
– Developing functional strategies and tactics.
– Developing and communicating concise business policies.
– Developing programs and procedures.
– Structuring organization for strategy implementation.
– Management system and control.
– Measurement feedback and corrective mechanism.
 Strategic Evaluation and Control
• Strategic management process consists of four components:
– Environmental analysis: Concerned with the identification of
opportunities and threats resulting from the changes in external
environment and strengths and threats resulting from the
resources of the organization.
– Strategy formulation: Concerned with identifying strategic options
and selecting the proper strategy or strategies.
– Strategy implementation: Concerned with the execution of the
strategy in action through developing resource allocation,
structure, and management systems.
– Strategy evaluation and control: Concerned with ensuring that the
strategies are effectively implemented and the organization is
achieving its goals and objectives.
• Although, all the four components of strategic
management process are equally important, the
last component i.e. strategy evaluation and
control is considered significance due to the fact
that the first three components are triggered to
achieve the objectives of the organization.
• Evaluation and control is the mechanism which
ensures that the activities are carried out in
planned manner and that they are leading the
organization to achieve the pre-determined goals.
• Evaluation and control is based on the information
of performance and activity reports.
 Evaluation and Control Processes

Establish
Determine what Measure
predetermined
to measure performance
standards

Does
performance
match
standards?

Take corrective
action
 Types of Controls

• Controls can be established to focus on

– Actual performance results (output),
– The activities that generate the performance (behavior),
– On resources that are used in performance (input)
– Behavior controls specify what is to be done through
policies, rules, standard operating procedures, and
orders from superior.
– Output controls specify what is to be accomplished by
focusing on the end result.
– Input controls focus on resources, such as knowledge,
skills, abilities, values, and motives of employees.
 Strategic Control
• Premise control
– Strategies are developed based on certain
environmental assumptions.
– Change in environmental forces has direct impact
on strategy.
– Premise control is designed to check
systematically and continually whether the
premises on which the strategy is based are still
valid.
– If the premises are no longer valid, the strategy
may have to be changed.
• Strategic Surveillance
– A control mechanism designed to monitor a broad
range of events inside and outside the firm that
are likely to affect the course of its strategy.
• Specific Alert Control
– It refers to the thorough, often rapid,
reconsideration of the firm’s strategy because of a
sudden, unexpected event.
– Events like 9/11, sudden acquisition of a leading
firm, tsunami, a political coup etc. have a impact
on a firm’s strategic move.
• Implementation Control
– The control mechanism which is devised to
examine the performance of the projects on
phase-wise basis.
– Some of the business activities are implemented
on a phase-wise basis.
– Implementation of subsequent phase depends on
the performance of previous phase.
– In such case, the examination and control of first
phase becomes necessary.
 Performance Evaluation
• Evaluation of performance of a company can be done
– Qualitatively
– Quantitatively
• However, the commonly used measures include
– Financial (ROI, EPS, ROE)
– Stakeholder measures
– Shareholder value
• EVA (Economic Value Added) which is after-tax operating income minus the total annual cost of capital.
• MVA (Market Value Added) which is the difference between the market value of a corporation and the
capital contributed by shareholders and lenders.
– Balanced Scorecard Approach: An approach which blends nonfinancial and financial
measures. This approach evaluates the performance of a corporation in four major areas
such as:
• Financial (How do we appear to shareholders?)
• Customer (How do customers view us?)
• Internal Business perspective (What must we excel at?)
• Innovation (can we continue to improve and create value?)
– Management Audit