Strategic Implementation

Group1Abhishek Singh(M6-01)Anurag Dwivedi (M6-06)Manish Shukla (M6-11)

Prabhakar (M6-16)R.Vishwanath (M6-21)

Sk.Samsoddin Altamas (M6-26)

INTRODUCTION• The strategy formulation is easier than the

implementation.• The test of effectiveness of implementation lies

in the extent of matching of the actual performance with the performance envisaged in the strategy.

• Most of the organizations fail not in the strategy formulation but in the implementation part of it.

• Implementation requires systematic planning and thorough alteration of existing aspects of business.

• The process of implementation is also called Corporate Development.

• The resources of the organization are to be allocated and reallocated in a manner that reinforces choice of strategy.

• The McKinsey 7 S approach captures the essence of Strategy Implementation.

Strategic Implementation

Implementation is the process that turns strategies and plans into actions in order to accomplish strategic objectives and goals. Implementing your strategic plan is as important, or even more important, than your strategy.

Strategy Implementation• Sears example

In 1983 Sears implements one-stop shopping banking-financial services power.

Sears retail unit fell to low-cost providers (Wal-Mart and K-Mart).

Specialty retailers (focused differentiators) such as The Gap, The Limited, Kids-R-Us took market share.

Sears was outperformed by both low-cost and focused differentiators.

Sears initiated restructuring in 1992 after losing $3.8 billion.

Strategy Implementation• Sears example

What happened? Why did Sears fail so dramatically?

- Lost ability to control core business (too diversified).

- Resources were taken from retail and given to new ventures.

- Managers spent too much time on diversified businesses.

- Managed retail segment using financial controls.

- Sears suffered from post-merger drift.

- Lost operational understanding of the competitive dynamics in the retail industry.

McKinsey 7 S Model

• Strategy: the plan devised to maintain and build competitive advantage over the competition.

• Structure: the way the organization is structured and who reports to whom.

• Systems: the daily activities and procedures that staff members engage in to get the job done.

• Shared Values: called "super ordinate goals" when the model was first developed, these are the core values of the company that are evidenced in the corporate culture and the general work ethic.

• Style: the style of leadership adopted. • Staff: the employees and their general capabilities. • Skills: the actual skills and competencies of the employees

working for the company.

Implementation – Two way process

• The implementation flows both from and into the determination of strategy.

• In an ongoing organization, structure, policies and systems are already in place and the choice of strategy is constrained by the firm’s ability to alter them.

• This is also known as Structure VS. Strategy issue.

Activities of Strategy implementation

• Resource Allocation• Structure determination/alteration• Leadership concerns

Resource Allocation

• Resource allocation becomes a critically important exercise when there are major shifts proposed from the past strategies in terms of product/market scope.

Ex: Expansion in one market and Retrenchment in another market will have a bearing upon the resource allocation.

• Resource allocation is a powerful means of communicating the strategy of the organization as it gives the desired signals to all those concerned.

• The use of Formula approach in allocating resources may be inappropriate and counter-productive as the resources may be inefficiently spent.

Ex: Allocating resources on the basis of sales or profits.

Methods of Resource Allocation

1. Display matrices2. Budgeting System a) Capital Budgeting system b) Fixed Budgeting c) Flexible Budgeting d) Zero based Budgeting3. ROI

BCG Matrix – Resource Allocation

• Cash cows - Milk Cash• Dogs - Divest and deploy Cash to other Ventures• Question marks - Invest or Divest• Stars - Allocate maximum Resources

• All high growth businesses may not be stars and allocation of resources to them is a wrong decision. BCG matrix helps us to avoid this mistake.

• Despite the utility of BCG matrix, it should be used with care and only as a guideline

Organizational Structure

Organizational structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims. It can also be considered as the viewing glass or perspective through which individuals see their organization and its environment.

Traditional Organizational Structures

Organizational structure refers to the formalized arrangement of interaction between and responsibility for the tasks, people, and resources in an organization

It is most often seen as a chart, often a pyramidal chart, with

positions or titles and roles in cascading

fashion

Efforts to Improve Traditional Structures

Redefine the role of corporate headquarters from control to support and coordination

Balance the demands for control/differentiation with the need for coordination/integration

Restructure to emphasize and support strategically critical activities

Reengineer strategic business processes Downsize and self-manage

Simple Organizational Structure

A simple organizational structure is one where there is an owner and a few employees and where the arrangement of tasks, responsibilities, and communication is highly informal and accomplished through direct supervision

This type of structure can be very demanding on the owner-manager

Most businesses in this country and around the world are of this type

Functional Organizational Structure

work of the business are divided (such as marketing, operations, and

finance) increasingly formal procedures for

coordinating and integrating their activities to provide the business’s products and services

Merits:• Facilitates Specialization• Brings Economies of Scale

Demerit:• As the organization grows it is difficult to have

functional structure.• Slow response• Poor Accountability

Functional Organization Structures

Divisional Structure

A divisional organizational structure is one in which a set of relatively autonomous units, or divisions, are governed by a central corporate office but where each operating division has its own functional specialists who provide products or services different from those of other divisions

This expedites decision making in response to varied competitive environments

The division usually is given profit responsibility

• Product oriented• Geography oriented• Client orientedMerits:• Enough attention is paid to each division.• Clear Accountability Demerits:• No Centralized service• Expensive as no Central HR or Finance Service

Divisional Organizational Structure

GovernmentAffairs

LegalAffairs

CorporateR&D Lab

StrategicPlanning

CorporateHuman

Resources

CorporateMarketing

CorporateFinance

ProductDivision

ProductDivision

ProductDivision

ProductDivision

ProductDivision

President

Strategic Business Unit

The strategic business unit (SBU) is an adaptation of the divisional structure whereby various divisions or parts of divisions are grouped together based on some common strategic elements, usually linked to distinct product/market differences

The advantages and disadvantages of the SBU form are very similar to those identified for divisional structures

Holding Company Structure

A final form of the divisional organization is the holding company structure, where the corporate entity is a broad collection of often unrelated businesses and divisions such that it (the corporate entity) acts as financial overseer “holding” the ownership interest in the various parts of the company but has little direct managerial involvement

Matrix Organizational Structure

The matrix organizational structure is one in which functional and staff personnel are assigned to both a basic functional area and to a project or product manager

The matrix form is intended to make the best use of talented people within a firm by combining the advantages of functional specialization and product-project specialization

Matrix Organizational Structure

Product-Team Structure

The product-team structure seeks to simplify and amplify the focus of resources on a narrow but strategically important product, project, market, customer, or innovation

The product-team structure assigns functional managers and specialists to a new product,

Project or process team that is empowered to make major decisions about their product

The Product-Team Structure

What a Difference a Century Makes…

BUDGETING

• The cash flows, departmental expenses, revenues and demand for capital expenditure would be different and at different stages of product life cycle.

• Resource allocation is done by taking into consideration this aspect

Capital Budgeting Techniques

• IRR• Pay Back period• Net Present Value• ROI• Residual Income• Fixed Budget• Flexible Budget• Zero based budget

Trends Affecting Organizationsin the 21st Century

• Globalization

• The Internet

• Speed

Creating Agile, Virtual Organizations

Virtual organization: a temporary network of independent companies—suppliers, customers, subcontractors, even competitors—linked primarily by information technology to share skills, access to markets, and costs

An agile organization is one that identifies A set of business capabilities central to high-

profitability operations and then builds a virtual organization around those capabilities

Outsourcing—Creating a Modular Organization

Outsourcing is simply obtaining work previously done by employees inside the companies from sources outside the company

A modular organization provides products or services using different, self-contained specialists or companies brought together—outsourced—to contribute their primary or support activity to result in a successful outcome

Business process outsourcing (BPO) is the most rapidly growing segment of the outsourcing services industry worldwide

Strategic Leadership

Strategic Leadership provides the vision and direction for the growth and success of an organization. To successfully deal with change, all executives need the skills and tools for both strategy formulation and implementation.

Strategic Leadership: Embracing Change

Telecommunications, computers, the Internet, and one global marketplace have increased the pace of change exponentially during the past 10 years

The leadership challenge is to galvanize commitment among people within an organization as well as stakeholders outside the organization to embrace change and implement strategies intended to position the organization to succeed in a vastly different future

Clarifying Strategic Intent

Leaders help their company embrace change by setting for their strategic intent—a clear sense of where they want to lead the company and what results they expect to achieve

Leader’s vision—an articulation of a simple criterion or characterization of what the leader sees the company must become to establish and sustain global leadership

Make clear the performance expectations a leader has for the organization, and managers in it, as they seek to move toward that vision

Building an Organization1. Education and leadership development is the

effort to familiarize future leaders with the skills important to the company and to develop exceptional leaders among the managers you employ.

2. Principles are your fundamental personal standards that guide your sense of honesty, integrity, and ethical behavior.

3. Perseverance is the capacity to see a commitment through to completion long after most people would have stopped trying.

Shaping Organizational Culture

Passion, in a leadership sense, is a highly motivated sense of commitment to what you do and want to do.

Leaders also use reward systems, symbols, and structure among other means to shape the organization’s culture.

Leaders look to managers they need to execute strategy as another source of leadership to accept risk and cope with the complexity that change brings about.

Recruiting and Developing Talented Operational Leadership

New leaders will each be global managers, change agents, strategists, motivators, strategic decision makers, innovators, and collaborators if the business is to survive and prosper

Today’s need for fluid, learning organizations capable of rapid response, sharing, and cross-cultural synergy place incredible demands on young managers to bring important competencies to the organization

What Competencies Should a Manager Possess?

Sources of Power and Influence

Management Processes and Levels of Management

Organizational Culture

Organizational culture is the set of important assumptions (often unstated) that members of an organization share in common

Every organization has its own culture

Assumptions become shared assumptions through internalization among an organization’s individual members

Ethics

Ethical standards are a person’s basis for differentiating right from wrong

The culture of an organization, and particularly the link between the leader and the culture’s very nature, is inextricably tied to the ethical standards of behavior, actions, decisions, and norms that leader personifies