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SOM497 – Business Policy & Strategy

CHAPTER 9CHAPTER 9: Strategy Implementation:

Organizing for Action

STRATEGIC MANAGEMENT & BUSINESS POLICY 10TH EDITIONTHOMAS L. WHEELEN & J. DAVID HUNGER

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Strategy Implementation

What is it?

How is it achieved?

Differs from Strategy Formulation

Key Implementation Questions (for strategy makers) Who carries out strategic plan? What needs doing for alignment w/ strategy? How is work coordinated?

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What must be done? (To align firm’s operations)

Programs: make a strategy action oriented Always evaluating and monitoring impact from new programs

on existing organization Feasibility Sequence of execution Location Pace & nature of change Stakeholder evaluations

Budgets: statement of firm’s programs in terms of money required

Procedures: a list of steps that describe how tasks/job are to be done

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What must be done?

Achieving Synergy for a divisional corporation

benefits from greater ROI for each division working together than if each division were independent

Forms Shared know-how

Coordinated strategies

Shared tangible resources

Economies of scale or scope

Pooled negotiating power

New business creation

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How is strategy to be implemented? (via organization)

Firms should be appropriately structured

Structure follows strategy New strategy is created New administrative problems emerge Economic performance declines New appropriate structure is invented Profit returns to previous level

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How is strategy to be implemented?

Common structural development pattern of growth

Stages of Corporate Development Stage I: Simple structure Stage II: Functional structure Stage III: Divisional structure Stage IV: Beyond SBU’s

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Stages of Corporate Development

Stage I: Simple structure Entrepreneur tends to be the

owner of firm Owner makes all the decisions Managerial functions are

limited Little formal structure Weakness: Crisis of leadership

Stage II: Functional structure When firm grows and need a

change in managerial style CEO and limited corporate staff Team of functional line

managers Tends to concentrate/specialize

in one industry Weakness: Crisis of Autonomy

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Stages of Corporate Development

Stage III: Divisional structure Firm has several product lines in

several industries that need specialists in regards to product/market distinctions

CEO and greater corporate staff in central headquarters

There are decentralized operating divisions

Weakness: Crisis of control

Stage IV: SBUs & Matrix

Strategic business units (SBU’s) Modification of Divisional structure SBU has its own business

strategy Weakness: objectives &

competitors can be different from those of the parent company

Matrix Structure (next slide)

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Advanced Organizational Structures

Matrix Structure Structure combines both functional specialization and business

product/project specialization Weakness: Pressure (e.g. multiple superiors, intensity for

innovation)

Manufacturing

Finance

Sales

Personnel

Manager:Project A

Manufacturing

UnitFinance

UnitPersonnel

Unit

Manager:Project B

Manufacturing

UnitFinance

UnitSales Unit

Personnel Unit

Manager:Project C

Manufacturing

UnitFinance

UnitSales Unit

PersonnelUnit

Manager:Project D

Manufacturing

UnitFinance

UnitSales Unit

Personnel Unit

Top Management

Sales Unit

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Organizational Life Cycle PHASE 1 PHASE 2 PHASE 3 PHASE 4 PHASE 5

Dominant Issue

Birth Growth Maturity Decline Death

Popular Strategies

Concentrating on niche

Horizontal & vertical growth

Concentric and conglomerate diversification

Profit strategy followed by retrenchment

Liquidation or bankruptcy

Strategic Focus

Make & Sell Efficiency of operations

Expansion of markets

Consolidate organization

Problem solving & innovation

Organization Structure

Informal / family Entrepreneur dominated

Centralized & functional management emphasized

Decentralized & geographic

Line-staff product team groups or Structural surgery

Task grouping activities or dismemberment of structure

Style Individualistic entrepreneurial

Directive Delegate Watchdog Participative

Systems Market results Standards & cost centers

Reports & profit centers

Plans & investment centers

Mutual goal setting

Rewards Ownership Salary & merit increases

Individual bonus

Profit sharing & stock options

Team bonus

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Advanced Organizational Structures

Future Organizational Structure

Decentralized Small-scale SBUs Reengineering Stronger capabilities Collaborative Networks Empowerment Electronic information Accountability e-commerce Cellular

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How is strategy to be implemented?(via organization)

Job Design to implement strategy

Job enlargement

Job rotation

Job enrichment

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International Issues in Strategy Implementation Multinational corporations (MNCs)

Highly developed international firm Deep involvement throughout world

The design of organizations structure is affected by The company’s development stage in international activities The types of industries the company’s involved in

Some issues: Should strategic alliances be used as a complement or substitute

for internal functions? Should authority be centralized or decentralized?

Product group structure Geographic area structure

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Next Class… Cola Wars

Handouts (x2) have been distributed to the class If you need the handouts, pick them up after class

or print them off the course website

But wait…

Mid-Term Review

Format will include: Multiple Choice Fill-in the blank SWOT Porter’s Five Forces

(Hint: memorize all 5 forces)

Topics covered are: (Will be discussed during class)

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