1. Analysing Strategic Change
The first step in the implementation process is analysis of strategic change. This step can
be broken down into two areas:
A. Determine Necessary Level of Change for Successful Implementation
Analyzing the degree to which the organization will have to change in order to
successfully implement the chosen strategy becomes a very important first step in the
implementation process. Some strategies require only minimal changes, such as an
organization that selects the market penetration strategy. A market penetration
strategy entails an increase in marketing efforts (such as increasing advertising or
distribution) or a decrease in prices. Such a strategy execution would not change the
way the organization operates its day-to-day business; only a few people within the
organization would get new assignments. On the other hand, if the organization
decides to jump into a variety of new businesses, it would require a new direction for
sales growth or stability. However, the implementation of a new strategy may call for
the organization to reshape its structure.
B. Classifying Levels of Strategic Change
For strategy implementation purposes, strategic change is divided into the five stages:
• Continuation Strategy
• Routine Strategy Change
• Limited Change
• Radical Change
• Organizational Redirection
Continuation strategy is one in which the same strategy that was used in the
previous planning period is repeated. This strategy is based on the stability of the
existing environmental factors and the fact that no new skills or unfamiliar tasks are
involved. In this stage, managers monitor the ongoing activities to ensure that the
assigned short-run goals are met on time. Due to past experience, the learning curve
effects will reduce the operating costs and increase productivity.
Routine strategy involves normal changes in the appeals used to interest customers.
Examples of routine strategy changes include redesigning the product packaging,
altering the advertising theme, changing the sales promotion, adopting new pricing
tactics, and changing distributors or distribution methods. Implementing such
strategies is only part of the managers’ routine job. A manager contacts some outside
agencies and intermediaries, sets schedules for each activity, and monitors how well
each activity proceeds. Coordinating skills are required for managers to ensure that all
necessary messages are appropriately handled and all the necessary information is
gathered. An important routine strategy change involves positioning or repositioning
a product in the minds of consumers. Here, consumer reaction is an indicator to
measure the managers’ performance in strategy implementation. This approach is
powerful, not too difficult to execute, and furthermore does not require a big change
in the organization.
Limited strategy change offers new products to new markets within the same
general product area. Historical data shows that the more successful diversified
companies stay with businesses related to their current area of expertise. The rationale
is that the experience and competence gained in one part of the portfolio will be
valuable to the other business units in the portfolio. Synergy and balance are both
involved. How much the organization will have to change to implement this kind of
strategy depends upon the degree of difference between new products and existing
products.
Radical strategy change involves reorganization, such as mergers or acquisitions
between two firms in the same industry. For example, Nestlé acquired Carnation
(both were in the food industry) and Procter & Gamble acquired Richardson-Vicks
(both in consumer products). Such acquisitions are particularly complex when
attempts are made to completely integrate the two firms. The acquiring firm not only
obtains new products and markets, but also confronts legal problems, the
complexities of developing a New organizational structure, and the need to reconcile
conflicting organizational values and beliefs. Radical strategy changes can also
involve numerous changes in the organizational structure, multiple acquisitions, and
sales of subsidiaries.
2. Building A Capable Organization
The second step in the implementation process is building an organization capable of
carrying out the strategic plan. This can be broken down into three sub steps:
i. Matching Structure to Strategy
ii. Building Distinctive Competencies
iii. Assembling a Management Team
-Matching Structure to Strategy
Strategy implementation is accomplished through organizational design and structure. It
is the way the company chooses to create its arrangements and design that will help it to
achieve the formulated strategy efficiently and effectively. Strategic implementation is
how to assign tasks and responsibilities to members of the organization and how to group
them into departments or divisions. Then the task is finding the best way to connect the
activities of different people in various divisions.
Organizational design deals with the selection of organizational structures and control
systems that will assure the application of the company’s strategy effectively and create
or sustain its competitive advantage. The organization should adopt a combination of
structure and control systems that improve quality, create value, reduce cost, and improve
communication. Management should find out how to motivate corporate employees and
provide them with the incentives to achieve efficiency, quality, innovation, and customer
satisfaction. Management must also learn how to coordinate employee activities so that
they work together effectively to implement strategy that increases the company’s
competitive position. Organizational design and control shape the way people behave and
determine how they will act in the organizational setting.
Strategy outlines the tasks that must be performed and structure coordinates the people
who perform those tasks. Therefore, strategy and structure must have a proper fit. The
right type of employee at an appropriate number ensures that tasks can be carried out in a
manner consistent with overall strategy if situated in the proper place within an
organization.
The process of structuring an organization begins with the manager’s preference for the
appropriate number of hierarchical levels in the company and the appropriate span of
control for each manager. The span of control is the number of subordinates a manager
directly manages. The primary decision is between
(1) a flat structure with few hierarchical levels, and thus a relatively wide span of control; or (2) a tall structure with many levels and a small span of control.
The type of structure a company chooses depends heavily on the number of employees and the type of business. In general, most companies have fewer than nine levels. Too many levels in the hierarchy may create some problems. For example, the tall structure is very expensive because it requires more managers. Managers’ salaries, expenses, and other benefits cost a great deal of resources.
Communication between different levels in the hierarchy and integration become difficult.
The choice of structure must be determined by the firm’s strategy. The chosen structure
must segment key activities and/or strategic operating units to enhance efficiency through
specialization, response to competitive environment, and freedom to act. At the same
time, the structure must effectively integrate and coordinate these activities and units to
accommodate interdependence between the activities and overall control. The chosen
structure should reflect the needs of the strategy in terms of the firm’s:
1. Size
2. Product/service diversity
3. Competitive environment and volatility
4. Internal political considerations
5. Information and coordination needs of each component of the firm
6. Growth potential
The philosophy of top management is the primary determinant of strategy as well as the
prime source of strategic initiative. Furthermore, without suitable managers, a good
match between organizational structure and strategy soon becomes an unrealistic
aspiration. With these internal resources, an organization may have a unique ability to
overcome one or more special situations.
Building Distinctive Competencies
An organization’s distinctive competencies have to be meticulously developed. This
development may take years and involves technical skills, habits, attitudes, and
managerial capabilities. Superior performance in a few select subunits can significantly
contribute to strategic success. “General managers take immediate actions to see that the
organization is staffed with enough of the right kinds of people and that these people
have the budgetary and administrative support needed to generate a distinctive
competence.”
Consequently, for a distinctive competency to emerge from organization building actions,
strategy implementers have to push aggressively to establish top-notch technical skills
and capabilities for subunits. Superior performance of strategically critical tasks can
make a real contribution to strategic success. Once distinctive competencies are
developed, the strengths and capabilities that are attached to them become logical
cornerstones for successful strategy implementation as well as for the actual strategy
itself.
Assembling a Management Team
Assembling a capable management team is an obviously important part of the strategy
implementation task. The recurring administrative issues are dependent on the type of
core management team that is needed to carry out the strategy in addition to finding the
right people to fill each slot. Sometimes the existing management team is suitable.
However, sometimes the core executive group needs to be strengthened and/or expanded
by promoting qualified people from within or by bringing in skilled managerial talent
from the outside. It is important to assemble a core executive group with the proper
balance of backgrounds, experience, knowledge, values, beliefs, styles of managing, and
personalities. It is often during the first part of strategy implementation that a company
assembles a solid management team. However, until all the key positions are filled with
the right people, it is hard for strategy implementation to proceed correctly at full speed.
4. Allocating Resources to Match Strategic Objectives
The third phase of the strategy implementation process is the allocation of resources to
support the organization’s strategic objectives. “Nothing could be more detrimental to the
strategic-management process than for management to fail to support approved goals by
not allocating resources according to the priorities indicated by these goals.”. In most
cases, changes in strategic objectives will require a change in the allocation of the firm’s
resources. The general manager must play a central role in determining the distribution
and reallocation of resources. The general manager must have knowledge of:
A. Types of Resources
B. Importance of Allocation
C. Distribution of Resources
D. Maintaining Flexible Organization
E. Overcoming Barriers to Distribution
F. Utilizing a Combination Approach
G. Applying the Systematic Allocation Method
An organization’s resources can be classified into four groups: financial, physical, human,
and technological. Financial resources are made up of liquid assets (such as cash,
receivables, and marketable securities), liabilities (such as bonds and bank notes), and
equity (such as retained earnings and stocks). Physical resources include the firm’s tangible
assets such as plants, equipment, land, and inventory. The organization’s employees are its
human resources. They include managers, engineers, lawyers, and skilled and unskilled
hourly workers. Technical resources are the knowledge, skills, methods, and tools of the
organization used to carry out its business activities. They can include the firm’s accounting
methods, communication systems, R&D skills, and management information systems.
The organizational subunits must have basic resources to carry out the strategic plans. It is
up to the general manager to see that they get these basic resources. For example, if a 10
percent increase in sales for a subunit is part of the strategic objective, the general manager
would need to determine advertising and public relations budget changes, manufacturing
equipment expansions or improvements, distribution changes, and so forth, to allow the
subunit to meet its new goal. If the general manager allocates too little resources to a
strategic area, that area may not be able to achieve its strategic objective. If too much is
given, waste and inefficiency occurs, and company performance could suffer. The general
manager must be willing to redistribute resources to meet goals. If the current strategy is
only a fine-tuning of the previous strategy, then less reallocation will be needed.
In such cases, incremental changes in budgets, staffing, etc. could be used to reach the
desired levels. A large change in strategy could require big movements of financial and
human resources from one area to another. The general manager must be strong enough and
determined enough to take risks, as well as to overcome company politics and the
overprotection of resources between the units to allow these shifts to take place. The general
manager must establish or maintain a flexible atmosphere that, in turn, allows an improved
chance for successful strategy implementation. “A fluid, flexible approach to reorganization
and reallocation of people and budgets is characteristic of implementing strategic change
successfully.” Even if the general manager maintains such a flexible organization, there are
two prominent barriers hindering effective resource allocation.
The first barrier is the fact that general managers may not possess enough knowledge about
the diversified operations to make specific resource allocation decisions. As the organization
grows, the general manager’s ability to maintain a strong working knowledge of all the
organization’s operations wanes. This fact forces the general manager to rely on the middle-
and lower-level managers to assist in allocation decisions. This reliance leads to the next
barrier hindering effective resource allocation. Lower-level managers are typically more
concerned with their particular areas and are even less knowledgeable about the overall
strategy. Resource allocation at this level could, therefore, favor the more influential
managers, even though their areas may not have the most strategic importance. The result is
a resource allocation that does not fit the strategic desires of the organization.
Because of these two barriers, neither a top-down nor a bottom-up resource allocation
approach is appropriate. Instead, a combination approach is recommended. Top managers
should develop strategic programs, as new strategies are created, which describe what,
where, and when resources are needed. The strategic programs are then delivered to the
middle- and lower level managers, who review the programs and use them to prepare formal
resource requests. The formal resource requests must be accompanied by statements
describing which resources are to be used to fulfill which strategic objectives. Resources are
then distributed as deemed necessary, using the judgments of all the managerial levels. This
combined approach can be utilized to enhance the resource-allocation phase in the strategy
implementation process.
Since the demand for resources exceeds the supply in most organizations, resource
allocation should be performed in a systematic manner to achieve optimum results.
Resource allocation consists of
(1) producing a summary of the available resources,
(2)breaking down the summary to show the inventory of resources in each division and
department,
(3) producing division and departmental resource requests, and
(4) determining the allocation of resources to each division and department.
The first step, the summary of available resources, consists of determining what the firm
currently has, or what can be made available to it. It includes not only the firm’s financial
resources, but also its physical, human, and technological resources . The second step
indicates the areas in which the resources are currently located. The third step then lists the
desired resources of these individual areas. The final step is the actual resource allocation
process. It starts by comparing the resource requests with the available resources. Resources
can then be distributed in the most efficient manner, with any shortages being felt by those
areas that have less strategic significance.
5 Establishing Organization-Wide Commitment To The Strategic Plan
The fourth phase in the implementation process is the establishment of an organization-wide
commitment to the strategic plan. The corporate culture must support the strategic plan. A
mind-set must be developed in which employees energetically and enthusiastically pursue
strategic goals. As with all phases of the implementation process, the general manager must
play a key role. The general manager must
(1) be able to motivate the firm,
(2) understand the corporate culture and develop a strategy-supportive culture,
(3) create a results orientation, and
(4) link reward to performance.
The corporate culture is a pattern of norms, attitudes, values, beliefs, and customs that
governs the behavior of people within the organization. It is pervasive and refers to how
people within the corporation think and act as members of the organization. Culture, by its
very nature, is
(1) intertwined in the fabric of the organization,
(2) passed on from year to year, and
(3) very resistant to change. When organizational strategy is compatible with
corporate culture, strategy implementation is facilitated. However, when strategy and culture
are incompatible, implementation often suffers from “strategy sabotage.” In this difficult
situation, efforts must be made to close the gap between the corporate culture and the
proposed strategy. Since it is very difficult to change culture, a modification or complete
change of strategy may be deemed necessary.
It is critical that the entire organization, from top management down to the line workers, is
committed and motivated to successfully implementing the strategic plan. To get this
commitment, the general manager may need to use motivational tools such as rewards and
incentives. The rewards may be in the form of praise or company recognition, or can come
as salary increases and/or bonuses. Other sources of motivation include inspirational
meetings and open communication through memos and letters. Many companies who
applied management by objectives (MBO) in their organization have included a reward to
motivate employees to accomplish the established objectives. The reward is given when
these organizations achieve their goals and objectives efficiently and effectively.
Titany answered the question on October 19, 2021 at 13:27