Strategy Implementation

STRATEGIC MANAGEMENT

Chapter 6

Strategy Implementation

Management and Operations Issues

MANAGEMENT ISSUES:

a. Establishing annual Objectives serve are guidelines for action, directing, and channeling efforts and activities of organization members and should be consistent across the hierarchy. Horizontal consistency of objectives is as important as vertical consistency.

Annual objectives should be:

· measurable

· consistent

· reasonable

· challenging

· clear

· communicated throughout the organization

· characterized by appropriate time dimension

· accompanied by commensurate rewards and sanctions.

b. Devising policies refers to specific guidelines, methods, procedures, rules, forms, and administrative practices established to support and encourage work towards stated goals. Policies set boundaries, constraints, and limits on the kinds of administrative actions that can be taken to reward and sanction behavior.

c. Resource allocation is a central management activity that allows for strategy execution. Resources should be allocated according to priorities established by annual objectives.

Four types of resources: Financial, physical, human, and technological.

d. Managing conflict: Conflict can be defined as a disagreement between two or more parties on one or more issues.  Conflicts occurs because:

-  individuals have different expectations and perceptions,

- schedules create pressure

- personalities are incompatible

- misunderstanding between line managers( production supervisors) and staff managers(human resource specialists.

Various approaches for managing and resolving conflicts:

· Avoidance – includes such actions as ignoring the problem in hopes that the conflict will resolve itself or physically separating the conflicting individuals or groups.

· 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 a loser, resorting to majority rule, appealing to higher authority, or redesigning present positions.

· Confrontation – is exemplified by exchanging members of conflicting parties so that each can gain an appreciation of the other’s point of view, or holding a meeting at which conflicting parties present their views and work through their differences.

e. Matching Structure with Strategy: Structure should be designed to facilitate the strategic pursuit of a firm. There is no one optimal organizational design for a given strategy or type of organization.

Basic Types of Organizational Structure:

1. Functional – group tasks and activities by business functions, such as production/operations, marketing, finance/accounting, research and development,  and management information system.

2. Divisional or decentralized – can be grouped by: geographic area; product or service; customer; process.

3. Strategic Business Unit (SBU)- groups similar divisions into strategic business units and delegate authority and responsibility for each unit to a senior who reports directly to the chief executive officer.

4. Matrix – the most complex of all designs because it depends upon both vertical and horizontal flows of authority and communication.

f. Restructuring, Reengineering and E-engineering.

Restructuring – also called downsizing, rightsizing, or delayering – involves reducing the size of the firm in terms of number of employees, number of divisions or units, and number of hierarchical levels in the firm’s organizational structure.

Reengineering- also called process management, process innovation, or process redesign – involves configuring or redesigning work, jobs, and processes for the purpose for improving costs , quality service, and speed.

The Internet is ushering in a new wave of business transformation. To take full advantage of the Internet, companies need to change the way they distribute goods, deals with suppliers, attract customers, and serve customers. The internet eliminates the geographic protection/monopoly of local businesses.

g. Linking Performance with Pay Strategies

Most companies today are practicing some form of pay-for-performance for employees and managers other then top executives.

· Profit Sharing – a widely used form of incentive compensation. Profits are divided or shared among employees.

· Gain sharing -  if actual results exceed objectives, all members get bonuses.

· Bonus system – if an organization meets certain understood, agreed-upon profit objectives, every member of the enterprise should share in the harvest. 

h. Managing Resistance to Change

Resistance to change can be considered the single greatest threat to successful strategy implementation. People often resist strategy implementation because they do not understand what is happening or why changes are taking place. Resistance in the form of sabotaging production machines, absenteeism, filing ungrounded grievance, and an unwillingness t cooperate regularly occurs in an organization.

Three commonly used strategies in implementing change:

· Force change strategy – involves giving orders and enforcing those orders, this has the advantage of being fast, but it is plagued by low commitment and high resistance.

· Educative change strategy -  is one that represents information to convince people of the need for change, the disadvantage is that implementation is becomes slow and difficult.

· Rational or self interest change strategy – is one that attempts to convince individuals that the change is to their personal advantage. When the appeal is successful strategy implementation is relatively easy.

I. Managing the Natural Environment

The ecological challenge facing all organizations require managers for formulate strategies that preserve and conserve the natural resources and control pollution.

Firms are developing green product lines that are biodegradable and/or are made from recycled products. Green products sell well.

J. Creating a Strategy-Supportive Culture     

Strategists should strive to preserve, emphasize, and build upon aspects of an existing culture that support proposed strategies. Aspects of an existing culture that are antagonistic to a proposed strategy should b identified and changed.

Triangulation – an effective, multi-method technique for studying and altering a firm’s  culture. It includes the combined use of obtrusive observation, self administered questionnaires, and personal interviews to determine the nature of the firm’s culture. The process of triangulation reveals changes that needed to be made to firms’ culture in order to benefit strategy.

PRODUCTION/OPERATIONS CONCERNS

          Production/operations capabilities, limitations, and policies can significantly enhance or inhibit the attainment of objectives. Production processes  typically constitute more than 70% of a firm’s total assets. A major part of the strategy implantation process takes place at the production site.

      Production related decisions can include:

· plant size

· plant location

· product design

· choice of equipment

· kind of tools

· size of inventory

· inventory control

· quality control

· use of standards

· job specialization

· employee training

· equipment and resource utilization

· shipping and packaging

· technological innovation

Just-In-Time (JIT)

          Just-In-Time  production approach significantly reduces the costs of implementing strategies.  With JIT, parts and materials are delivered to a production site just are they are needed, rather than being stockpiled as hedge against deliveries.

Examples of Adjustment in Production Systems

Type of Organization	Strategy Being Implemented	Production System Adjustments
Hospital	Adding a cancer center(Product Development)	Purchase specialized equipment and add specialized people
Bank	Adding ten new branches(Market Development	Perform site location analysis