strategic management prof. dr. majed el-farra 2009 1 strategic implementation requirements for...

Strategic Management Prof. Dr. Majed El-Farra 2009

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Strategic Implementation

Requirements for Strategic Implementation

Strategy implementation

‘Strategy implementation is the process by which strategies and policies are put into action through the development of programs, budgets, and procedures.’

the implementation of strategy directly or indirectly connects to all facts of management. Thus it is fundamental to follow a holistic approach when analyzing and assessing complex issues of strategy implementation .


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The importance of strategy implementation phase

In spite of all the energy and resources spent in the pursuit of the wonderful strategy, it is surprising to consider how little effort is dedicated towards its implementation. Most managers stumble in the implementation stage. A current economic survey found that a discouraging 57 percent of firms failed at carrying out strategic initiatives over the past three years, according to their senior operating executives.


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Difficulties

One major source of difficulty encountered in implementing strategy comes from the fact that, in most organizations, the pre-strategy decision-making processes are heavily political in nature. Strategy presents elements of rationality which are disruptive to the historical culture of the organization and threatening to the political process. A natural organizational reaction is to struggle against the disruption of the historical culture and power structure, rather than confront the challenges posed by the environment. This reaction has been widely observed during the introduction of strategic planning into business firms.


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DifficultiesA no less important difficulty is that the introduction of strategic planning triggers conflict between the historical profit making activities (for example serving the community in NGOs) and the new creative activities. Organizations usually do not have the capability, the capacity or the motivational systems to act and to think strategically. Finally organizations generally have limited information about themselves and their environment which is necessary for effective strategic planning. They also have no managerial talents capable of the formulation and implementation strategy (Ansoff, 1988).


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Hunger and Wheelen (2003) stress that a good strategy can result in a disaster through poor strategy implementation, therefore strategy formulation and strategy implementation should be considered as two sides of the same coin. Allison and Kaye (2005) claim that there are two main obstacles facing the effective implementation of the strategy:

The difficulty of transformation big ideas into particular steps.

The difficulty of protecting the focus that was accomplished through the planning process.


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They address the first difficulty by developing annual operating plans, and address the second one by assessing the plan and setting up regular monitoring of the plan .


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Strategy implementation framework

Okumus (2003) reviewed the literature in strategy implementation; his work can be concluded as the following: One of the most cited implementation frameworks was proposed by Waterman et al., (1980) which was derived from their research and consultancy work .


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Strategy implementation frameworkThese writers argued that successful strategy implementation is fundamentally attending to the relationship between the following seven elements:

StrategyStructureSystemsStyleStaffSkills

Subordinate goals.


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Strategy Implementation Effective strategic implementation requires

the follows:1- Organizational structure appropriateness. 2- Sound leadership of the company.3- Effective motivational system4- Annual objectives5- Functional strategies6- Clear budget7- Detailed action plan


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Communicating Strategy

Strategy must be clearly understood.It provides employees with general

guidance to make decision.


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Strategy & Structure

Definition of Organizational Structure:The structure can either facilitate or

inhibit strategy implementation. Chandler says: Changes in strategy

ultimately lead to changes in the organization’s structure.


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Types of organizational structure

1- Functional2- Geographical3- Divisional4- Customer-based5- Matrix

Functional Structure

The most widely used structure is the functional or centralized type because this structure is the simplest and least expensive of the seven alternatives.

A functional structure groups tasks and activities by business function such as product/operations, marketing, finance/accounting, R&D, and computer information systems.


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Advantages: Besides being simple and inexpensive, a functional structure also promotes specialization of labor, encourages efficiency, minimizes the need for an elaborate control system, and allows rapid decision-making.


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Disadvantages: Some disadvantages of a functional structure are that it forces accountability to the top, minimizes career development opportunities, and is sometimes characterized by low employee morale.


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The Divisional Structure

The divisional or decentralized structure is the second most common type used by American businesses.

The divisional structure can be organized in one of four ways: by geographic area, product or service, customer, or process. With a divisional structure, functional activities are performed both centrally and in each separate division


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Divisional Structure

Advantages: A divisional structure has some clear advantages. First, and perhaps foremost, is accountability. Other advantages of the divisional structure are that it creates career development opportunities for managers, allows local control of local situations, leads to a competitive climate within an organization, and allows new businesses and products to be added easily.

Disadvantages: Perhaps the most important limitation is that a divisional structure is costly.


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Divisional structure

A divisional structure by geographic area is appropriate for organizations whose strategies need to be tailored to fit the particular needs and characteristics of customers in different geographic regions.A division structure by product is most effective for implementing strategies when specific products or services need special emphasis.A division structure by process is similar to a functional structure, because activities are organized according to the way work is actually performed.


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The Matrix StructureIt is the most complex of all designs because it depends

upon both vertical and horizontal flows of authority and communication.

It can result in higher overhead because it creates more managerial positions .

It also creates dual lines of budget authority, dual sources of reward and punishment, shared authority, and dual reporting channels.

Its advantages are that project objectives are clear, there are many channels of communication, workers can see visible results of work, and projects can be shut down easily.


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An assessment of Org. Structure

No structure is appropriate for all situations.

Appropriate structure may change as the organization develops.

Examples require structure change:Introducing new strategy, having

problems in achieving its objectives, leadership changes.


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Symptoms of an ineffective of org. Structure

According to P. Drucker:1- Too many management levels make

cooperation and communication difficult2- Too many meetings attended by too

many.3- Too much attentions are given to resolve

interdepartmental conflict.4- Excessive decision making at top

management


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Evolution of organizational structure: Alfred D. Chandler

1. Changing strategy.2. Administrative problems leading to

decline performance.3. Revised structure subsequent return

to economic health.


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Structural adjustments : Chandler

When does it happen?1. Market expansion.2. Product line diversification.3. Vertical integration.


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Relationship between strategy and Org. Structure

The process of matching structure to strategy is complex and should be undertaken with a thorough understanding of :

the historical development of the organizational structure.

The requirements of the organization’s environment and technology.

The political relationships that might be affected.


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Organizational Culture

. Culture: Refers to the values and patterns of belief and behavior that are accepted and practiced by the members of a particular organizations

Org. culture change as environment changes. The founder and Top management shape the

org. culture. Change in strategy requires change in

culture.


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Organizational Leadership

The leader is an individual who is able to influence the attitudes and opinion of others.

The leader must have a clear vision.Different strategies need different skills.


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Strategy and Motivational systems

Organizational reward system influence the entire organizational climate.

Organizational rewards include all types of rewards, tangible and intangible.


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Deployment of Resources through Budgeting

Budgeting: Is the process of allocating resources to be employed to achieve objectives.

Budget should be directly linked to strategy implementation.


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Developing functional Strategies

Functional Strategies describe the methods and means at functional level to achieve corporate strategies and business unit strategies.