topic 11 strategy implementation ppt3223

7/29/2019 Topic 11 Strategy Implementation Ppt3223

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Strategy Implementation

Concept of Strategy Implementation

Necessity of fit

Importance of integrating strategy implementation withstrategy formulation.

Interrelationships between components or dimensions of strategyimplementation.

Focus on structure and control related issues.


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Sears example

In 1983 Sears implements one-stop shopping banking-financialservices power.

Sears retail unit fell to #3 behind low-cost providers (Walmartand K-Mart).

Specialty retailers (focused differentiators) such as The Gap,The Limited, Toys-R-Us, and 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.


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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.


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FirmStrategy

FirmPerformance

Task-Focus

(Value)

Structure

DecisionProcesses

andControls

RewardSystems

People


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Task-Focus(Value) Structure

Uncertainty Diversity Interdependence

Division of labor Departmentalization Shape Distribution of power

DecisionProcesses

andControls

Planning and control systems Integration roles Information systems Decision making procedures

RewardSystems People

Recruiting and selection Leader style Transfer and promotion Training and development

Performancemeasures

Compensation Promotion Job design


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Strategy Dominant BusinessVertically Integrated Unrelated DiversifiedGrowth through Acquisition Related DiversifiedGrowth thru internal development &

some acquisitionTask Focus

(Value) Degree of integrationMarket share and powerProduct line breadth

Vertical economies

Degree of diversity

Types of business

Resource allocation across business

Entry and exit businesses

Financial economies

Realization of synergy from related

product process, technology, and

markets

Resource allocation

Diversification opportunities

Synergistic economiesStructure Centralized functional

Top control of strategic decisions

Delegation of operations

through plans and procedures

Highly decentralized product

divisions/profit centers

Small corporate office

No centralized line functions

Almost complete delegation

of operations and strategy within existing

businesses

Control thru results, selection

of management, and capital allocation

Multidivisional/profit centers

Grouping of highly related

businesses with some centralized

functions within groups

Delegated responsibility for

operation

Shared responsibility for strategy

Decision Processes

and Controls

Coordination and integration thru

structure, rules, planning, and

budgeting

Use of integrating roles for

project activity across functions

No integration across businesses

Coordination and information flows

between corporate and division levels

around management information systems

and budgets

Coordinate and integrate across

businesses and between levels with

planning integrating roles, integrating

depths

Reward Systems Performance against functionalobjectives

Mix of objective and subjective

performance measures

Strategic controls

Formula based bonus on ROI or

profitability of divisions

Strict objective, impersonal evaluationBonus based on divisional and/or

corporate performance

Mix of objective and subjective

performance measures

People Primarily functional specialistsSome inter-functional movement to

develop some general managers

Aggressive, independent general managers of

divisions

Career development opportunities are

primarily intra-divisional

Broad requirements for general

managers and integrators

Career development is inter-divisional,

cross-functional, and corporate-divisional


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Organization Structures

Simple Structure

President

Employees

Owner-manager makes decisions. Little specialization of tasks.

Few rules, little formalization. Advantages:

- Provides high flexibility- Rapid product introduction- Few coordination problems


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AccountingLegal

Affairs

HRM Finance Marketing R&D Production

President

Organization structure

Functional structure


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Functional structure

Advantages

- Centralized control of operations- Promotes in-depth functional expertise

- Enhances operating efficiency where tasks are routine

Disadvantages

- Functional coordination problems

- Inter-functional rivalry- Overspecialization and narrow viewpoints- Hinders development of cross-functional experience- Slower to respond in turbulent environments


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Government

Affairs

Legal

Affairs

Corporate

R&D Lab

Strategic

Planning

Corporate

Human

Resources

Corporate

Marketing

Corporate

Finance

Product

Division

Product

Division

Product

Division

Product

Division

Product

Division

President


Product-divisional structure


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Organization based on products versus functions

Each division is a separate business in which day-to-daydecisions are delegated to divisional managers.

Divisions are managed using strategic controls detailedknowledge of firm operations allows managers to remain activelyinvolved.

Overdiversification leads to inability to process detailed informationand a reliance on financial controls to evaluate managers.


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Advantages

- Decentralized decision making

- Each business is organized around products

- Puts profit/loss accountability on managers

- Facilitates rapid response to environmental changes

- Allows efficient management of a large number of units

Disadvantages

- May lead to costly duplication of functions

- Inter-divisional rivalry

- Corporate managers may lose in-depth understanding


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Business

Project

BusinessProject

Business

Project

R&D Production Marketing Finance

Specialists

Specialists

Specialists

Specialists

Specialists

Specialists Specialists

Specialists

Specialists

Specialists

Specialists

Specialists

President Matrix Structure


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Matrix structure

Contains aspects of both functional and product-divisionalstructures.

Advantages:

- Creates checks and balances between competing viewpoints- Promotes holistic view of the firm

- Encourages cooperation and consensus building

Disadvantages:

- Very complex and costly

- Shared authority increases communication time

- Difficult to respond rapidly

- May promote bureaucracy and reduce innovation (in large firms).


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Focal

Firm

Partner

Partner

Partner

Partner

Network structure Group of firms combine resources to

achieve together what they cant achievealone.

Advantages:

- Firms emphasize their own corecompetencies

- Rapid response time

- Very flexible

- Reduces capital intensity

Disadvantages

- Asymmetric information

- Technology expropriation

- Trustworthiness of partners

- Asset hold-up

topic 11 strategy implementation ppt3223

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