The eight components of implementing strategy

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The eight components of implementing strategy

Strategy Implementer’s

Action Agenda

Allocation Resources

Building a Capable Organization

Establishing Strategy-Supportive Policies

Exercising strategic Leadership

Instituting Best Practices for Continuous Improvement

Installing Support Systems to Carry out Strategic Roles

Shaping Corporate Culture to Fit Strategy

Tying rewards to achievement of key strategic targets

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Building a capable organization

Select able people for key positions

Develop skills, core competencies, managerial talents, competitive capabilities

Organize business processes, value chain activities, and decision-making to promote

successful strategy execution

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Strategy and organization structure

• Few hard and fast rules for organizing•Main Rule: Structure must support and facilitate good

strategy execution

• Each firm’s organization structure is idiosyncratic, reflecting•Prior arrangements, internal politics•Executive judgments and preferences about how to arrange

reporting relationships

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Matching organization structure to strategy: the steps to take

1. Pinpoint critical activities and capabilities

2. Decide which activities to outsource

3. Decide which activities require “Partners”

4. Make primary, internally-performed activities the main building blocks

5. Determine degree of authority to delegate

6. Establish ways to achieve coordination

7. Assign responsibility for managing relationships with outsiders

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Uniting efforts of interrelated organizational units: the options

• Coordinating teams• Cross-functional task forces• Dual reporting relationships• Informal networking• Incentive compensation tied to group performance• Teamwork and interdepartmental cooperation

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Why structure follows strategy

• Changes in strategy typically require a new structure for implementation to be successful

• Research indicates• Structure affects performance• Structure merits reassessment whenever strategy

changes• New strategy involves different skills and key activities

• How work is structure is a means to an end-not an end in itself!

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Strategy and Structure: Evolutionary Pattern

Organization form in which the owner-manager take all decisions and monitors all activities, while staff aids in monitoring & supervising

• Less Specialization• No Communication Barriers• Quick Decisions

(e.g. Restaurants, Retail Shops)

Simple Structure

Efficient Implementation

of Strategy

Sales Growth Integration &

Control Problem

Functional Structure

CEO and functional line managers in dominant areas like production, marketing, HR, finance etc.

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Strategy and Structure: Evolutionary Pattern

CEO and functional line managers in dominant areas like production, marketing, HR, Finance etc.

Sales Growth Integration Problems

* Efficient Implementation of formulated

strategyMulti Divisional Structure

Excessive diversification and complexity calls for this designOperation Divisions each a separate SBU and top officer delegates unit strategy to divisional managers.

• Organization structures are modified when they no longer “ENABLE COORDINATION & CONTROL” Managers require for implementing newly designed strategy

• Impose STRATEGIC and FINANCIAL controls and evaluate performance

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When do traditional hierarchical structures make strategic sense?

• When activities can be divided into simple, repeatable tasks and are efficiently performed in mass quantity

• There are important benefits to deep functional expertise

• Customer needs are standardized

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When are multi-layered authoritarian structures liability?

• Market conditions are fluid • Customer preferences shift from standardized to customized

products and features• Personalized customer service is essential• Product life-cycles grow shorter• Flexible manufacturing replaces mass production• Customers want to be treated as individuals• Pace of technological change accelerates

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Organizational structures of the future: success depends on …

• Quick response to shifting customer preferences • short design – to – market cycles• First-time quality• Custom order and multi-version production• Expedited delivery and accurate order filling • Personalized customer service• Rapid assimilation of new technologies Creativity and

innovativeness• Speedy reaction to competitive developments

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Organizational structures of the future: meeting the new requirements

• Decentralized structures with fewer managers• Small-scale business units• Reengineering to decrease fragmentation• Development of stronger and newer capabilities• Collaborative partnerships with outsiders• Empowerment and self-directed work teams• Lean staffing of corporate support functions• Open communications (e-mail, IS, etc)• Accountability for results

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Characteristics of organizations of the future

• Fewer boundaries between• Different vertical ranks• Functions and disciplines• Units in different geographic locations• Firm and its suppliers, distributors, strategic allies, and

customers• Capacity for change and learning• Collaborative efforts among people in different functions

and geographic locations

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MINTZBERG

Techno-structure

Support staff

Operating core

Strategic apex

Middle line

Ideology

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Functional Structure: Implementing Business Level Strategy

1. COST LEADERSHIP

PRESIDENT

ENGINEERING

CORPORATE STAFF

MARKETING OPERATIONS PERSONNEL

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• Specialization, centralization play a pivotal role in implementation of cost leadership strategy

1. SPECIALIZATION Divide work into homogenous groups.Cost reduction through efficiency achievedBy employee specialization in few activities

2. CENTRALIZATION Decision making authority at managerial level. However, managers strive to push down some decision making

authority lover

3. FORMALIZATION Rules and procedures govern activities foster efficient operations, R & D improvements and mass scale production of standardized goods

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2. DIFFERENTIATED STRATEGY

PRESIDENT & CORPORATE STAFF

NEW PRODUCT R & D

MARKETING

MARKETING OPERATIONS FINANCE

R & D

HR

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• Decision making authority is decentralized• Coordinate and integrate activities• Concensus style of decision making• Marketing and R & D functions More Focus• Product innovations (L’OREAL)• Flat structure, more flexible, and jobs less structures

Constantly seeking improvement in product design, image, quality

Creative Advertising

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3. THE INTEGRATED APPROACH:

• Provide value which differs from that offered by rival firms• Low Cost• Valuable Differentiated features

• For cost leadership focus in on process recast and operational excellence (Standardised product)

• For differentiation in features emphasis is on marketing, innovation & new product development

• Therefore, functional form has to be supplemented by cross function a teams and strong culture.

(e.g. TOYATA MOTORS – Differentiated production & Design process)

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4. SHIFT TO MULTIDIVISIONAL DESIGN:

• The above average profits through successful implementation of business level strategy results in diversification of the firm’s operations

• Product portfolio diversification• Market diversification

Corporate level strategy business level strategy for each SBU

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ORGANISATION STRUCTURE: Corporate Level Strategy

Multi Divisional Structure (M-Form)

CO OPERATIVE FORM

COMPETITIVE FORM

SBU FORM

THREE VARIETIES OF MULIDIVISIONAL STRUCTURE

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• COOPERATIVE Related constrained strategy• HR practices to foster cooperation• Integration of firms divisions

• SBU FORM Related linked strategy • Each SBU has corporate leader, SBU groups

and divisions grouped by relatedness• SBU Individual decision makers seek guidance

from SBU heads

• COMPETITIVE FORM Unrelated Diversification Strategy• Competition between business units• Allocation of capital based on performance

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COOPERATIVE DESIGN

CORP. HQ.

CORPORATE R & D

LEGAL AFFAIRS

CORPORATE HR

STRATEGIC PLANNING

CORPORATE

FINANCE

GOVT.

CORPORATE MARKETING

PRODUCT DIVION

PRODUCT DIVISION

PRODUCT DIVIONS

PRODUCT DIVISION

• Tight links across all divisions and strong relationship• Centralization at corporate office to foster co-operation between divisions• Cooperative sharing• Rewards are governed by divisional and corporate performance

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SBU DESIGN

CORP. HQ.

CORPORATE R & D

CORPORATE HR

STRATEGIC PLANNING

CORPORATE

FINANCECORPORATE MARKETING

SBU 2SBU 1 SBU 3

• Integration among divisions within SBUs, but independence across SBUs• Each SBU-own budget & staff to foster integration• Corporate planning most prominent for managing approval process• Corporate HQ staff advise SBUs and Divisions

Division Div 2 Div 3 Div 2 Div 3 Div 2 Div 3Div 1 Div 1

PRESIDENT

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COMPETING DESIGN

CORP. HQ.

LEGAL AFFAIRS

AUDITINGFINANCE

DIVISION

• Corporate HQ Lean and competent• Finance and Auditing Prominent Functions to Manage cash flows and

disclose performance information• Divisions are independent Retain corporate control• The legal affairs function most prominent - Acquisition or Divestiture• Compete for corporate resources

PRESIDENT

DIVISION DIVISION DIVISIONDIVISION

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ORGANIZATIO STRUCTURE: Implementing International Strategies

1. MULIDOMESTIC STRATEGY• Strategic and operating decisions are decentralized t business units in each

country• No need for integration or coordination• A structure concentrating on national interests to satisfy local & cultural

mismatches

2. GLOBAL STRATEGY• Decision making authority is centralized • Need to coordinate and integrate operations• Superior communication systems and quick decisions

3. TRANSNATIONAL STRATEGY• Combination of global efficiency and local responsiveness• Geographic and product structure• Incredibly difficult to accomplish• Cultural change must be effective to foster leadership and a shared vision

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PRODUCT DIVISIONAL

STRUCTURE: GLOBAL

STRATEGY

• Centralize to coordinate information flow among worldwide products• Facilitate global economies of scale & Scope• Allocate financial resources in a cooperative manner• Centralized federation

COST LEADERSHIP ADVANTAGE

GLOBAL CORP HQ

Worldwide Products Division




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WORLDWIDE GEOGRAPHICAL

AREA STRUCTURE:

MULTIDOMESTIC STRATEGY

• Decentralization of operations• Emphasis and attention on local needs to match country culture• Decentralized federation• Corporate HQ Coordinates resources among independent

subsidiaries

MULTINATIONAL HQ

ASIA

MIDDLE EAST/ GULF

USA

EUROPE

LATIN AMERICA

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Structural Types for Multinationals (1)

• International Divisions• Usually dominant home base• With its own structure• And additional international division• Drawing on products or services of home division

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• International Subsidiaries• Independent operations by country• Allowing for high local responsiveness• Perhaps with central planning or reporting• But now ultimate central control

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• Global Businesses• Product/ service divisions managed globally• Aim is to produce scale efficiencies• And transfer of resources/ skills• Requires sophisticated co-ordination• May reduce sensitivity to local markets

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Increasing Devolution- Some common problems

• Concept not understood• Centre cannot let go• Centre lets go too much• Self-sufficiency vs. bargaining• Enabling framework vs. regulations• Fear of accountability

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The eight components of implementing strategy