Unit 7 implementation phase of strategic management

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Unit 7 : Implementation Phase

Implementation is the execution of the necessary strategies to meet the objectives that have been set. To ensure success, all employees should understand their roles and responsibilities. Appropriate activity measures provide necessary feedback with facts that identify positive impacts and areas for change. In this phase, companies pay attention to details and monitor processes to implement quick changes as required. For example, if a common customer complaint is that products take too long to arrive, an analysis of the shipping process may reveal ways to expedite delivery.

Compiled by-Roshan pant NCC MBM

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Strategy implementation• Implementing strategy entails converting the organization’s strategic plan into

action and then into results. No matter how brilliantly strategy is formulated, if not implemented properly, it will simply be a futile exercise.`

• Implementation is the process that turns strategies and plans into actions in order to accomplish strategic objectives and goals.

• Strategy implementation is also defined as the manner in which an organization should develop, utilize, and amalgamate organizational structure, control systems, and culture to follow strategies that lead to competitive advantage and a better performance.

• Organizational structure allocates special value developing tasks and roles to the employees and states how these tasks and roles can be correlated so as maximize efficiency, quality, and customer satisfaction-the pillars of competitive advantage.

• It is concerned with Sub-strategies, programs, action plans, policies, procedures, resource allocations, budgets, authority/responsibility delegation, teams and task forces, reward and control systems, and individual assignments

Compiled by-Roshan pant NCC MBM

Compiled by-Roshan pant NCC MBM 3

Issues Central to Strategy Implementation

• Establish short-term (annual) objectives• Devise and communicate policies• Initiate specific functional tactics or action

plans• Outsource functional activities, as deemed

appropriate


Strategy Formulation Strategy ImplementationStrategy Formulation includes planning and decision-making involved in developing organization’s strategic goals and plans.

Strategy Implementation involves all those means related to executing the strategic plans.

In short, Strategy Formulation is placing the Forces before the action. In short, Strategy Implementation is managing forces during the action.

Strategy Formulation is an Entrepreneurial Activity based on strategic decision-making.

Strategic Implementation is mainly an Administrative Task based on strategic and operational decisions.

Strategy Formulation emphasizes on effectiveness. Strategy Implementation emphasizes on efficiency.

Strategy Formulation is a rational process. Strategy Implementation is basically an operational process.

Strategy Formulation requires co-ordination among few individuals. Strategy Implementation requires co-ordination among many individuals.

Strategy Formulation requires a great deal of initiative and logical skills. Strategy Implementation requires specific motivational and leadership traits.

Strategic Formulation precedes Strategy Implementation. STrategy Implementation follows Strategy Formulation.


Functional plan• For effective implementation, strategists have to provide direction to functional

managers regarding the plans and policies to be adopted. • Strategy of one functional area cannot be looked at in isolation. Different

functional tasks of the business are interwoven together and how a strategy is synergised with other areas determines its effectiveness.

• Functional strategies play two important roles. Firstly, they provide support to the overall business strategy.

• Secondly, they spell out as to how functional managers will work so as to ensure better performance in their respective functional areas.

• For each functional area, first the major sub areas are identified and then for each of these sub functional areas, content of functional strategies, important factors, and their importance in the process of strategy implementation are identified.

• Functional area strategy may include marketing, financial, production and human resource management etc based on the functional capabilities of an organisation.


Reasons why functional strategies are needed ?

♦The development of functional strategies is aimed at making the strategies-formulated at the top management level-practically feasible at the functional level. ♦ Functional strategies facilitate flow of strategic decisions to the different parts of an organization. ♦ They act as basis for controlling activities in the differen t functional areas of business. ♦The time spent by functional managers in decision-making is reduced as

plans lay down clearly what is to be done and policies provide the discretionary framework within which decisions need to be taken. ♦Functional strategies help in bringing harmony and coordination as they

remain part of major strategies. ♦ Similar situations occurring in different functional areas are handled in a consistent manner by the functional managers.


Functional plans and the basic issues to be handeled under them for proper

implementation of strategy


1.Financefinancial plan includes the areas of ; source of financing. Inflows, outflows, leverage, profitability and ratios, net worth and growth

• Sources of Funds: Capital Mix Decisions:

Capitalstructure, procurement of capital and working capitalborrowings, reserves and surplus, relationship withlenders, banks and financial institutions.

• Usage of Funds:Investment or asset-mix decisions:Capital investment, fixed asset acquisition, currentassets, loan and advances , dividend decisions etc

• Management of Funds: The system of finance,accounting and budgeting, cash, credit and riskmanagement, cost control and reduction etc.


2. MarketingMarketing: product and service mix, supply chain and value chain. net worth and growth

• Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging products of value with others.A business organization faces countless marketing variables that affect the success or failure of strategy implementation. Some marketing decisions that may require special attention are as follows:

1. The kind of distribution network to be used. Whether to use exclusive dealerships or multiple channels of distribution.

2. The amount and the extent of advertising. Whether to use heavy or light advertising. What should be the amount of advertising in print media, television or internet?

3. Whether to limit or enhance the share of business done with a single or a few customers? 4. Whether to be a price leader or a price follower? 5. Whether to offer a complete or limited warranty? 6. Whether to reward salespeople based on straight salary, straight commission, or on a

combination of salary/commission?

• Product: quality, features, choice of models ,brand names, packaging etc.• Pricing: Discount, mode of payment,allowances, payment period, credit terms etc.• Place: Channels to be used, transportation,logistics and inventory storage managementand coverage of markets etc.• Promotion :Advertising, personal selling, salespromotion and publicity.


3. Production operationProduction and operation: plant, location and layout; transportation and material handling; product design and production; value addition and

modification

• Production system- capacity, location, layout, product or service design,work systems, degree of automation, extent of vertical integration.

• Operations Planning and control – aggregate production planning;materials supply; inventory, cost and quality

management; and maintenanceof plant and equipment. • Research and development- product development, personnel and facilities,level of technology used, technology transfer

and absorption, technological collaboration and support.

Breaking the above points: Plant size (large or small)

Plant Location (keeping in view infrastructure facilities, security, wages, transportation cost, political risk factors etc.)

Inventory / Inventory control (ABC Analysis; EOQ; JIT etc.)

Quality control (inspection, checklist, control chart, sampling etc.)

Cost control (standard costing, budgetary control etc)

Technological innovation (amount, use of experts etc.)


4.Human Resource• KSA-I (knowledge, skills, abilities and interest) interest means to pursue career plan,• - Acquisition,• development,• motivation, • MaintenanceBreaking the above activities: Human Resource Planning Recruitment & Selection Training & Development Compensation Management Performance Appraisal Motivation and Rewards Work-Life Balance etc.


5. Research and development

• innovation and technology development, • technology transfer and absorption, • experimentation and testing, • Improvement and optimization• sustainability and support, • engineering and re-engineering and reverse

engineering


6. Management information system(MIS)

• Databases• Integration of databases• Analysis and interpretation Type of MIS (MIS/DSS/SIS/FAIS) Type of software System security Training for users Data update System improvement, etc.


7.General management work plan

• planning;• organizing;• leading; • controlling (Re)designing the organization structure Developing strategy supportive culture Managing conflicts Overcoming resistance to change etc.


Outsourcing functional activities Outsourcing is concerned with sub-contracting out some of

the business functions/process to outside parties/organizations.

This is done through negotiating contract agreements with a vendor who takes on the responsibility for the production process, people management, quality, customer service and key asset management of the function.

Sometimes, strategists may decide to outsource some functions to take advantages of cost, quality, speed, flexibility and to allow the firm focus on core/strategic issues.

Nike is doing this very successfully.


Advantages of Outsourcing functional activities

• Cost Savings:here can be significant cost savings when a business function is outsourced. Employee compensation costs, office space expenses and other costs associated with providing a work space or manufacturing setup are eliminated and free up resources for other purposes.

• Focus on Core Business:Outsourcing allows organization to focus on their expertise and core business. When organizations go outside their expertise, they get into business functions and processes that they may not be as knowledgeable about and could potentially take away from their main focus.

• Improved Quality:Improved quality can be achieved by using vendors with more expertise and more specialized processes

• Customer Satisfaction:The advantage of having a vendor contract is they are bound to certain levels of service and quality

• Operational Efficiency:Outsourcing gives an organization exposure to vendor specialized systems. Specialization provides more efficiency that allows for a quicker turnaround time and higher levels of quality.


Disadvantages of Outsourcing functional activities

• Quality Risk:Outsourcing can expose an organization to potential risks and legal exposure.As an example, if a car is recalled for faulty parts and that part was outsourced, the car manufacturer carries the burden of correcting the potentially damaged reputation of the car maker.

• too dependence upon the specialist provider • Quality Service:Unless a contract specifically identifies a measurable process for quality service reporting,

there could be a poor service quality experience. Some contracts are written to intentionally leave service levels out to save on costs.

• Language Barriers:If a customer call center is outsourced to a country that speaks a different language, there may be levels of dissatisfaction for customers dealing with the language barriers of someone with a strong accent.

• Employee/Public Opinion:There can be negative perceptions with outsourcing and the sympathy of lost jobs. This needs to be managed with sensitivity and grace.

• Organizational Knowledge:There is the potential that an outsourced employee will come in contact with customers and not be as knowledgeable of the organization, resulting in a negative customer experience.

• Labor Issues:how the workforce responds to outsourcing and can affect their daily productivity.• Legal Compliance and Security:Processes that are outsourced need to be managed to ensure there is

diligence with legal compliance and system security.• Employee Layoffs:Outsourcing commonly results in the need to reduce staffing levels.


Empowerment of Operating Personnel (Employee Empowerment)

• In simple sense it is the process of giving lower-level employees decision making power.

In broad sense empowerment=Adequate authority,information, resources, and learning opportunities

Employee empowerment thus aims of making employees more capable of doing their jobs.

t is quite important for successful implementation of strategies because: “it is the people who make everything happen in organizations”.


Guidelines for Employee Empowerment

1. Create and Share Vision, Mission, Values, Objectives and Strategies

2. Trust People and Provide Information for Decision Making3. Delegate Authority and Define Responsibility4. Link Performance with Incentives; Not Just More Work5. Provide Trainings and Provide Adequate Resources6. Give the Opportunity for People to Work in Teams7. Don’t Blame People, Fix the System8. Provide Rewards (extrinsic) and/or Help Employees Feel

Rewarded (intrinsic)9. Monitor the Progress and Provide Frequent Feedback


Empowerment essential: Trust (Schindler & Thomas, 1993)

• Integrity; honesty and truthfulness• Competence: technical and interpersonal

knowledge and skills• Consistency: reliability, predictability, and good

judgement in handling situations• Loyalty: willingness to protect a persons,

physically and emotionally• Openness: willingness to share ideas and

information freely


Degree of employee empowerment

• Encouraging: employees to pay more active and their work

• Involving: employees in taking responsibility for improving the way things are done

• Enabling: employees to make more and bigger decisions without having to refer to someone more senior


Employees’ empowerment: Beliefs

• Enhance employees’ confidence• Employees perceive the meaning of their work• Employees feel competent• Employees desire a sense of self-

determination • Employees have an impact on important

decision


Functional policies• policies that define the broad guideline for strategy implementation, functional

decision-making and actions to be takes.• They are guides to thinking that establish the boundaries or limits within which

decisions are to be made. • Within these boundaries, judgment must be exercised. The degree of discretion

permitted will vary from policy to policy. Some policies are quite broad and allow much latitude, whereas others are narrowly constructed and leave little room for judgment.

They may be:• procedures/ techniques / formalities• standards / ideas/ ethics• guidelines/rules/ advices• baselines/ starting point/ references point


Role of functional policies• First and foremost, they simplify decision making• policies will focus on legal and ethical behavior.• They delimit the area of search for possible alternatives and preclude the need for repeated, in-depth analysis

of recurring, similar problems. Consequently, they promote efficiency in the utilization of functional managerial time.

• sets clear boundaries with which employees operate

• restrict top management strategic options and intuitive decisions

• links the strategic goals, tactical goals, and operational goals with strategic plans, tactical plans and operational plans correspondingly

• policies help secure consistency and equity in organizational decisions. Thus, if several managers make decisions in a particular policy area, their decisions will be consistent within the limits established by the governing policy.

• balance resource demands• test the strategic soundness of a particular action


Thank you

Leadership & Management

Unit 7 implementation phase of strategic management