CHAPTER SIX

PART THREE: STRATEGY

IMPLIMENTATION
Chapter 6: Implementing Strategic
Management Issues
 CONTENTS

Ch 7 Strategy Implementation
 Correlation between strategic formulation and
implementation
 Requirements for Implementation (components
and skills needed)
 Problems of Implementation
 7- S model/Framework

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 LEARNING OBJECTIVES

Ch 7 Strategy Implementation
 Explain the correlation between strategic
formulation and strategic implementation;
 Describe the components of strategy
implementation
 Give explanation about the 7S’s model

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 INTRODUCTION
 When you have strategies and polices, you need
put them into action through the development
programs, budgets and procedures. This process is
called strategy implementation.
 It might contain changes within the overall
structure, culture, and management system of the
entire company.
 This is an important stage in strategic management
process. Well-designed strategies may fail in
implementation.
 CONT’D…
 Hence, adaptability of strategies and
implementation process should be clearly
mentioned while formulating strategy.

Ch 7 Strategy Implementation
 It is the strategist’s responsibility to take care of
implementing strategies in accordance with the
requirements of an organization.

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Strategy formulation & implementation

Strategy Formulation Strategy Implementation

Ch 7 Strategy Implementation
Does the strategy fit the How well has the strategy
resources & environment? been executed?

Strongly • Achieve strategic competitiveness

• Earn above-average returns Successfully

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 STRATEGY FORMULATION AND
IMPLEMENTATION

Ch 7 Strategy Implementation
 Strategy formulation is what an organization is going to
do.
 Strategy implementation = materialization of the
formulated strategy.
 As an example, the execution of the chosen strategy may
involve:
 Building new facilities
 Establishing cost control procedures
 Modifying employee hiring practices & benefits
 Developing new pricing policies, etc
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 STRATEGY IMPLEMENTATION
 Strategies that have been carefully formulated are of

Ch 7 Strategy Implementation
little value if they cannot be successfully
implemented.
 Strategy implementation involves transferring
formulated strategies into action.
 For successful execution of the formulated strategy,
the following must be considered:
Acquiring human, financial, & physical resources;
Organizational structure, culture, & internal
systems must be consistent with the formulated
strategy 8
 CONT’D …

Ch 7 Strategy Implementation
Making necessary internal changes in order to
achieve the already set objectives & goals.
 Thus, resources must match with the formulated
strategy for its implementation
 For instance, an organization wants to broaden its
revenue base through new products & customers –
strategy formulation

9
 CONT’D …
 Consistently,
strategy implementation should focus on:
Increased resource allocation to:
Research & Development

Ch 7 Strategy Implementation
Marketing effort

Changing the way activities are grouped

Rearranging reporting relationships
Reward system for encouraging extra attention
needed by new activities
Controlling & information systems, etc.
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 COMPONENTS OF STRATEGY
IMPLEMENTATION

Ch 7 Strategy Implementation
1. Is the formulated strategy communicated properly?
2. Are structuring mechanisms properly aligned?
3. Are functional area conflicts reconciled?
4. Does leadership inspire commitment to the formulated
strategy?
5. Do reward systems reinforce appropriate behavior?
6. Are functional issues addressed & implemented?
7. Does the control system provide appropriate
feedback?

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1. COMMUNICATING
STRATEGY

Ch 7 Strategy Implementation
 Before a strategy can be implemented, it must be
understood.

A clear understanding of strategy gives purpose to

the activities of each organization member.

 Itallows the employee to link whatever task is at

hand to the overall organizational direction

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2. STRATEGY & STRUCTURE

Ch 7 Strategy Implementation
 Achieving a fit between strategy & structure is a
complex process that involves how:
 Activities will be grouped &

 Groups will be coordinated

 This refers to the need for identifying the

appropriate types of organizational structure, linking
organizational units, & decision making.

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ORGANIZATIONAL STRUCTURE

Ch 7 Strategy Implementation
 It is a firm’s role configuration, procedures,
governance, control mechanisms, authority &
decision-making processes.
 Thus, organizational structure must be congruent
with the strategy to achieve strategic
competitiveness
 However, the structure should be changed when no
longer provides the coordination, control &
direction required to implement the strategy
successfully. 14
 CONT’D …
 Organizational structure facilitates the

Ch 7 Strategy Implementation
implementation of the strategy
 According to Alfred D. Chandler structure follows
strategy. In other words, changes in strategy
ultimately led to or resulted in changes in the
organization’s structure.
 Therefore, from among the several different types of
structures, firms are expected to select the right type
of structure that matches with the formulated
strategy.

Read Alfred Chandler’s work

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on strategy and structure
3. RECONCILING FUNCTIONAL AREA
CONFLICTS

Ch 7 Strategy Implementation
 Operations – maintain efficiency by having few
production runs & variations as possible.
 Marketing – provide customers with wider product lines
& as many options as possible (color, accessories, etc.)
 This can lead to conflict & poor strategy implementation
unless it is explicitly managed.
 Thus, integrate functional strategies – formulation,
communication, participation, & trade-offs in needed.

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 4. LEADERSHIP COMMITMENT

Ch 7 Strategy Implementation
 The behavior & activities of top management
contribute to strategy implementation by:
 Supporting the strategy & building the culture of
the organization
 Making decisions based on skills, personality, &
experience

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 5. DESIGN & IMPLEMENT REWARD
SYSTEMS

Ch 7 Strategy Implementation
 Recognizing outstanding performance sends
different signals
 The timing & criteria used to determine salary
increments & bonuses have impacts on performance
 Differentiate b/n monetary reward vs. status,
recognition, & attention – there are employees who
highly value the latter

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 6. FUNCTIONAL ISSUES

Ch 7 Strategy Implementation
 The most common functional areas & issues:
 Marketing:
 Products/services
 Pricing & distribution
 Promotion, etc.

 Operations:
 Production methods & processes
 Adequate capacity to meet demand
 Adequate inventory level & proper inventory control
 Availability of appropriate employees & raw materials, etc.

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 CONT’D …

Ch 7 Strategy Implementation
Accounting & Finance:
 Availability of long & short-term financing
 Cost of capital
 Dividend policy
 The effect of currency revaluation & devaluation
 The overall tax regimes
 Preparation of budgets, etc.

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 CONT’D …
 Research & Development:

Ch 7 Strategy Implementation
 Basic & applied research activity
 Develop & improve products
 New & improved production processes for efficiency
improvement, etc.
 Personnel & labor relations:
 Obtain in a timely & cost effective manner new
employees
 Retain & maintain appropriate human resources
 Administer salary & benefits
 Enhancing cooperation with union & avoid labor strikes
to promote implementation of the strategy, etc.
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 CONT’D …

Ch 7 Strategy Implementation
 Informationsystems
Provide support for internal decision-making &
for monitoring the progress of strategy
implementation
Provide information about external trends:
markets, political, economic, technological
environments, etc.
It is important that the information system
provides information that is:
Timely
Relevant
Complete 22
 7. IMPLEMENTATION AS A PROCESS
 In general, implementation is the action phase of the

Ch 7 Strategy Implementation
strategic management process.
 Implementation is the process of making things
happen & involves (Holt, 1993):
Allocating resources through budgets
Developing programs & projects that activate the
organization
Articulating policies, procedures & rules that can be
used in guiding activities on daily basis
The application of certain operational management
techniques to ensure that planned tasks occur when
& as designed.
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 SKILLS NEEDED FOR IMPLEMENTATION

Ch 7 Strategy Implementation
 Team and Craftsman skills:
 Organizations need the capability to manage their
systems as well as controlling the financial and
human resources aspects properly.
 They should possess a balance of skills necessary to
implement a strategy successfully.
The breadth of services or products offered has
implications for the types of skill required.
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 CONT’D …

Ch 7 Strategy Implementation
A broad scope of services may be dealt with:
Either by competent, adaptable individuals who
can turn their hands to a variety of tasks (the
‘craftsman’ approach), or
Through a number of specialists brought
together in project teams to tackle specific
problems (the ‘team’ approach).
Both approaches require highly trained,
experienced and probably expensive staff.

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 CONT’D …

Ch 7 Strategy Implementation
 The organization needs to be able to convince its clients that
it can perform better than the competition.
 A deep understanding of the customer’s business and its
problems is essential for success,
 The ability to communicate how the organization can solve
problems (add value) is an important prerequisite to
securing the business.
 The way that an organization’s skills are linked together in
the value chain can also be a source of competitive
advantage and have been referred to as the non tradable
assets of the organization.

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 CONT’D …

Ch 7 Strategy Implementation
 If team working is necessary to carry out the
strategy, then the ways that the team behave and
communicate are also important.
 Strategicchange will have a significant impact on the
people within the organization.
 The issues, which are important, are manpower
configuration/arrangement, recruitment, training, and
development.

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SKILLS TO SUPPORT DIFFERENT STR
ATEGIES

Ch 7 Strategy Implementation
 Depending on the type of strategy, there will be diff
erent resource requirements.
 Itis important to identify those value activities, whi
ch are critical to the success of particular types of st
rategy.
A strategy of low price will require emphasis on
plant and processes, which are cost efficient, and
possibly on low cost distribution systems.

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 CONT’D …

Ch 7 Strategy Implementation
 Thekey skills required are planning the processes and
labor supervision, supported by management systems
to ensure that cost efficiency actually delivered.
 Costleadership requires skills in controlling the sources
of costs: the cost drivers.
 The largest components of unit costs need to be
identified and ruthlessly controlled.
 Where the manufacturing process involves the use of
expensive equipment it may well be that scheduling
skills are required to achieve maximum utilization of
capacity.
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 CONT’D …
 In a labor intensive assembly process, where labor forms a

Ch 7 Strategy Implementation
large component of costs, then skills in method study, payment
by result schemes, supervision, job design and operating skills
are required.
 A strategy of differentiation is likely to need skills in
marketing, research, and creative ability, with an emphasis on
product development.
 The requirements for systems may not be so stringent, but
there should be a strong emphasis on coordinating the separate
value activities to ensure that they are genuinely adding value
in the process of creating and delivering the service or product.

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 PROBLEMS OF
IMPLEMENTATION

Ch 7 Strategy Implementation
 Strategy implementation model based on an
integrated approach to decision making can be
developed. In this respect, two questions may be
posed:

 What decisions and actions can be taken by

managers who are implementing strategy?

 How can these decisions be organized to meet the

criteria of logic, action, and contingent prescription?

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 CONT’D …

Ch 7 Strategy Implementation
 From these questions, guidance can be obtained
from the principles of:
 Intended rationality, which is based on the
premise that top management has both limited
time and limited capacity to think through
decisions fully;
 Minimum intervention, which implies that, in
implementing strategy, managers should change
only what is necessary and sufficient to produce
an enduring solution to the strategic problem
being assessed. 32
 KEY IMPLEMENTATION ISSUES

Ch 7 Strategy Implementation
 One of the major problems with strategy
implementation in many organizations is a failure
to translate declarations of strategic purpose into a
practical statement of those factors,
 Which are critical to achieving the targets, and the
key tasks, which will ensure success.

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 CONT’D …

Ch 7 Strategy Implementation
 These issues can be addressed systematically:
 The critical success factors (CSF) for the specific
strategy must be agreed and scrutinized to make
sure that all the factors are genuinely necessary and
the list is sufficient to underpin success
 The key tasks, which are essential to the delivery of
each critical success factor, must be identified.
 These may relate to the organizations value
activities, identified in the value chain, and
 Include improvements in support activities or
changes in linkages within the value system.
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 CONT’D …

Ch 7 Strategy Implementation
 For example, an office supply company with a critical
success factor of customer care would underpin the
CSF through the three key tasks of:
 responding to enquiries,
 supplying accurate information and
 An efficient and quick breakdown and maintenance
service.
 These tasks are dependent on the office supplies
company’s infrastructure.
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 7-S MODEL/FRAMEWORK
 McKinsey has developed 7-S Framework for evaluating

Ch 7 Strategy Implementation
strategy.
 Theunderlying premise of this model is that the value of
any given strategy depends not only on its content but
equally on whether it can be successfully executed.
 “Structure alone could not solve the problem of how
to coordinate resource allocation, incentives, & actions
across large organizations.”
 Thus, the 7-S Framework is based on the concept that
any strategy, in order to be successfully implemented,
must fit with the culture of the organization.
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 CONT’D …
 According to the model:

Ch 7 Strategy Implementation
A strategy is usually successful when the other S’s in the
framework fit, or support, the strategy.
 If a chosen strategy has run into problems during
implementation, it is often because there is a lack of fit b/n
the strategy & one or more of the other S’s.
 The 7-S model posits that organizations are successful when
they achieve an integrated harmony among:
 Three hard S's of strategy, structure, & systems, and
 Four soft S's of skills, staff, style, & super-ordinate goals
(now referred to as shared values)
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 Structure

Strategy Systems

Ch 7 Strategy Implementation
Shared
Values

Skills Style

Staff
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 CONT’D …
Strategy

Ch 7 Strategy Implementation
 The positioning & actions taken by an enterprise, in
response to or anticipation of changes in the external
environment, intended to achieve competitive advantage.
Structure
 The way in which tasks & people are specialized & divided,
& authority is distributed; how activities & reporting
relationships are grouped; the mechanisms by which
activities in the organization are coordinated.

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 CONT’D …

Systems

Ch 7 Strategy Implementation
The formal & informal procedures used to manage
the organization, including management control
systems, performance measurement & reward
systems, planning, budgeting & resource allocation
systems, & management information systems
Staff
 The people, their backgrounds & competencies; how
the organization recruits, selects, trains, socializes,
manages the careers, & promotes employees
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 CONT’D …
Skills

Ch 7 Strategy Implementation
 The distinctive competencies of the organization; what it
does best along dimensions such as people, management
practices, processes, systems, technology, & customer
relationships
Style/culture
 What they focus attention on, what questions they ask of
employees, how they make decisions; also the organizational
culture
Shared values
 The leadership style of managers - how they spend their
time, the core or fundamental set of values that are widely
shared in the organization & serve as guiding principles of41
what is important