Chapter 14: Strategy Implementation

Very Short Question Answer

1. What do you mean by strategy implementation?

Strategy implementation is the process by which strategies and policies are to put into action through the development of programs, budgets and procedures. This is the most important component of strategic management.

2. What is simple structure?

The simple structure has a very low vertical and horizontal differentiation. Owner works as a managers and employees have to generally work as generalists rather than specialists. In simple structure, the owner-manager makes all major decisions.

3. What do you mean by functional structure?

Under functional organization, various activities of the enterprise are classified according to certain functions like production, marketing, finance, human resources and they are put under the charge of functional specialists. to A functional specialist directs the subordinates throughout the organization in his/her particular area of operation.

4. Write a note on multi-divisional structure.

Divisional structure is an organizational structure made semiautonomous divisions SBUS based or up of separate, on products/services or geographical areas. In this design, each unit or division has a manager having responsibility for performance and authority for operation and control.

5. What is matrix structure?

Matrix organization is also called project organization or grid organization. In this structure two forms of authority, namely, functional and project coexist. It is an emerging organization structure and attempts to overcome some drawbacks of other structures.

Short Question Answer

1. What is management system? They should be designed for the implementation of strategy? Explai

Establishment of effective management system is very important for successful implementation of strategy. The management system involves HR system, financial system, leadership, information system and control system.

Designing Management System

The following are some of components of management system.

1. HR System: The implementation of new strategies demands new human resource system. The HR issues for successful implementation of strategy are hiring personnel with new knowledge, skill and abilities. It also involves firing inappropriate personnel and providing training to the existing employees to build new skills. If the organization follows growth strategy, new people are hired and trained. On the other hand, if the strategy pursed is retrenchment, the existing personnel may be laid off.
2. Leading: Successful implementation of strategy also demands leading which involves coaching the employees to use their abilities and skills efficiently and effectively for achieving organizational goals. Without proper direction, the employees work in the ways that they were previously doing. The CEO and other top level managers lead the process of strategy implementation.
3. Resource planning and management: An organization requires different resources for conducting its activities. Strategy implementation demands resources significantly. Hence, the management should plan resources effectively. It involves analysis of current resources, assessing further resource requirement for new strategic direction, acquiring allocating them and managing them properly.
4. Action planning: Action plan states what actions to be taken by whom and by what time frame. It also involves the expected results. Under this, programs, procedures and budgets are prepared. Program makes a strategy action oriented. Budget is a quantitative expression of plan. It is a technique of resource allocation. After programs have been developed, the budget process begins. The implementation of new strategy may demand changes in current procedures. After the program and budgets are approved, procedures must be developed.
5. Decision making system: During implementation of strategy, a number of crucial decisions should be made. Participation of lower level managers and employees in decision making is a way of winning their motivation and commitment towards new strategic orientation. Decision making system dictates organizational design. It involves centralization and decentralization. Management of objectives (MBO) is a technique of participative decision and making.
6. Adoption of Total Quality Management (TQM): Strategy implementation intends competitive advance which can be achieved through enhance customer satisfaction. Total Quality Management (TQM) is an operational philosophy committed to customer satisfaction and continuous improvement. It aims to reduce costs and improve quality. Hence, it can be used to implement an overall low-cost or a differentiation business strategy.
7. Information management: Information management is a central issue of successful strategy implementation can allow an organization reduce its cost, increase quality of goods and service and enhance efficiency and effectiveness of the organization. Information management can provide fine tuning to strategy implementation.

2. Write the difference between strategy formulation and implementation.

Strategy formulation is determining the strategic direction of an organization. On the other hands, strategy implementation is putting the strategy into action. The differences between strategy formulation and implementation are presented below.

Bases of Differences	Strategy Formulation	Strategy Implementation
1. Meaning	Strategy formulation planning the work.	Strategy implementation is working of plan.
2. Forces	It is positioning forces before action.	It is managing forces during action.
3. Focus	It focuses on effectiveness.	It focuses on efficiency.
4. Process	It is an intellectual process.	It is an operational process.
5. Requirement	It requires good intuitive and analytical skills.	It requires special motivation and leadership skills.
6. Coordination	It requires coordination among few individuals.	It requires coordination among many individuals.

2. Describe the process of strategy implementation.

Implementation is turning the strategy into action. It is the process by which strategies and policies are put into action through the development of programs, budgets and procedures. It is critical to a company’s success, addressing who, where, when, and how of reaching the desired goals and objectives. It focuses on the entire organization. Implementation occurs after environmental scans, SWOT analyses, and identifying strategic issues and goals. Implementation involves assigning individuals to tasks and timelines that will help an organization reach its goals

The process of strategy implementation involves the following steps:

1. Structuring an organization: In the first step, strategy implementation requires structuring the organization. Here, structuring is setting relationship among resources. Structuring should be done in such a way that it supports the strategic accomplishment. The common organizational structures are simple structure, functional structure, multi-divisional structure, holding company structure, matrix structure, etc. The suitable structure for the formulated strategy should be chosen.
2. Resource allocation: For effective execution of strategies, resource should be allocated through plans and budgets to implement the strategy successfully. Resource allocation deals with procurement, collection and disbursement of resources to different SBU and operational unit according to the activities.
3. Strategy evaluation and control: Strategy evaluation and control process passes through the following four steps. They are:

• Establishing performance targets and standards,
• Measuring performance,
• Comparing actual with standard, locating deviations and analysing the cause of deviations and
•  Taking corrective action if it is necessary.

3. What is the role of a sound organization structure for effective implementation of strategies? Explain.

The organizational structure defines the levels and roles in an organization. It also facilitates or constraints in the workings of processes and relationship. Organizational structure reflects the relationships among the people with their authority and responsibility. The structure is the means to implement the strategy. There are various types of organizational structures followed for strategy implementation. The selection of a particular structure depends the nature of strategy to be implemented. Thus, there is no single structure to on be said ideal. Each type of strategy needs the specific organizational structure for its better implementation. The role of a sound organizational structure for effective implementation of strategy is mentioned below.

• The establishment of objectives and policies largely depends on structures .For example, an organization having the geographical structure expresses it objectives and policies in geographical terms such as north, south, east, west etc. Likewise, a product based structured organization expresses its objectives and policies in term of different products as product A, B and so on. The structure format for developing objectives and policies can significantly impact all other strategy implementation activities.
• A sound organizational structure is needed as it dictates how the resources are allocated to various business or units. Structural reorientation is needed to successful strategy implementation.
• Organizational structures promote the efficiency in performing jobs which enables the formulation and implementation of strategies effectively. In this way, it can be concluded that the importance of organizational structure is very high since the strategic intent may be achieved only when the structure and implementation match each other.

4. What do you mean by organizational structure? How does it relate to strategy implementation? Write.

Concept of Organizational Structure

Organizational structure specifies the people, positions, procedures, processes, culture, technology and related elements that comprise the organization. It defines how all the pieces, parts and processes work together. The structure must be totally integrated with strategy for the organization to achieve its mission and goals. Structure supports strategy. If an organization changes its strategy, it must change its structure to support the new strategy. Strategy follows structure. When an organization changes its structure and not its strategy, the strategy will change to fit the new structure. There is no one optimal structure for a given strategy or type of organization. What is appropriate for one organization may not be appropriate for another organization.

Organizational Structure for Implementation of Strategy

• The establishment of objectives and policies largely depends on structures. For example, an organization having the geographical structure expresses it objectives and policies in geographical terms such as north, south, east, west etc. Likewise, a product based structured organization expresses its objectives and policies in term of different products as product A, B and so on. The structure format for developing objectives and policies can significantly impact all other strategy implementation activities,
•  A sound organizational structure is needed as it dictates how the resources are allocated to various business or units. Structural reorientation is needed to successful strategy implementation.
• Organizational structures promote the efficiency in performing jobs which enables the formulation and implementation of strategies effectively.

 In this way, it can be concluded that the importance of organizational structure is very high since the strategic intent may be achieved only when the structure and implementation match each other.

5. What are the components in operationalizing the strategy? Explain.

Implementation of strategy is the most crucial part of strategic management. Operationalizing strategy refers to bringing the strategy into action or practice. The following are the important components in operationalizing strategy.

1. Determination of annual objectives and policies: Annual objectives are set for a year. They are set with the involvement of all managers in an organization. It leads to acceptance and commitment of the employees. They are the basis of resource allocation among the different organizational units and act as instrument of measuring progress towards achievement of long term objectives. They should be consistent with long term objectives and supportive of strategies to be implemented. They serve as standard of solving regular problems. Hence, development of annual objectives and policies at different levels of an organization are vital for the successful implementation of strategy.

2. Development of functional strategies and tactics: Functional strategies are concerned with achieving functional objectives. They attempt to achieve corporate and business level objectives and strategies by maximizing resource productivity. They aim for competitive advantage. The different functional strategies pursued by an organization are mentioned below.

• Marketing strategy
• Production/ Operations strategy
• Finance Strategy
• Human Resource Strategy
• Research and Development Strategy

3. Development of programs, budget and procedures

• Programs: Program makes a strategy action oriented. The programs should be developed to match the new strategies. Hence, the new strategy involves a sequence of new programs and activities.
• Budgets: Budget is a quantitative expression of plan. After programs have been developed, the budget process begins. A budget ensures the feasibility of strategy and provides the detailed costs of programs.
• Procedures: After the program and budgets are approved, procedures for strategy implementation must be developed. The procedures detail the various activities that must be carried out to complete programs. They are also known as organizational routines.

6. What is functional structure? Write its advantages and disadvantages.

Definition of Functional Structure

Under functional organization, various activities of the enterprise are classified according to certain functions like production, marketing, finance, human resources and they are put at under the charge of functional specialists. A functional specialist directs the subordinates throughout the organization in his/her particular area of operation. It consists of a chief executive officer and with functional line managers in functional areas such as production, accounting, marketing, R&D, and human resources. It allows for functional specialization. It facilitates active sharing of knowledge within each functional area.

• The advantages of functional structure are as follows.
• Functional specialization can be achieved since the work, responsibility,  and accountability of the employees are clear.
• The efficiency of the employees increases sue to division of labour.
• The direct communication between the functional managers enhances their capability.
• This organizational structure id simple and economical
• It ensures proper allocation of resources among the functional units.
•  The disadvantages of functional structure are as follows.
• Unnecessary conflict may arise due to coordination among the functional units.
• There may be lack of responsibility for the overall organizational performance.
• Since the managers and employees are regularly involved in a particular unit only, it may erode the innovativeness.
• Under this, it is difficult to identify the profitable products and activities.
• This structure cannot address the environmental dynamism

Long Question Answer

1. Discuss the process of strategy implementation.

Implementation is turning the strategy into action. Strategy implementation is the process by which strategies and policies are put into action through the development of programs, budgets and procedures. It is critical to a company’s success, addressing who, where, when, and how of reaching the desired goals and objectives. . It focuses on the entire organization. Implementation occurs after environmental scans, SWOT analyses, and  identifying strategic issues and goals. Implementation involves assigning individuals to tasks and timelines that will help an organization reach its goals.

Process of Strategy Implementation

Structuring an organization: In the first step, strategy implementation requires structuring the organization. Here, structuring is setting relationship among resources. Structuring should be done in such a way that it supports the strategic accomplishment. The common organizational structures are simple structure, functional structure, multi-divisional structure, holding company structure, matrix structure, etc. The suitable structure for the formulated strategy should be chosen.

Resource allocation: For effective execution of strategies, resource should be allocated through plans and budgets to implement the strategy successfully. Resource allocation deals with procurement, collection and disbursement of resources to different SBU and operational unit according to the activities.

Strategy evaluation and control: Strategy evaluation and control process passes through the following four steps. They are:

• Establishing performance targets and standards,
• Measuring performance,
• Comparing actual with standard, locating deviations and analysing the cause of deviations and
• Taking corrective action if it is necessary.

2. Explain in brief the different types of organizational structure for strategy implementation.

Organizational structure defines the work to be done and how to do it with reference to the strategy or strategies. It influences how managers work and the decisions resulting from that work. Organizational Structure determines the processes used to complete organizational tasks to support the implementation of strategies. When the strategy is modified, it demands changes in organizational structure.

For the proper implementation of strategy, implementers have to think of the organizational structure of a firm or business unit. Logically, several courses of action could be identified for any given objective, and for each alternative strategy, an alternative organization structure exists. It implies that there could be a number of ways/strategies to achieve a given objective/s and different organization structure may be appropriate for different strategies. In other words, organization structure is contingent upon strategy that is going to be adopted by the organization.

Depending upon the strategic choice (and other factors like size of the firm, technology used, environmental complexities etc. are also taken into consideration) and to ensure its effective implementation, a firm may pursue one of the following structures.

Different types of Organizational Structure Different types of organizational structure can be classified as follows:

• Simple Structure: In simple structure, the owner-manager makes all major decisions. He/she monitors all activities. The staff serves as the assistant of managers. It is generally suitable for a newly established small scale organization. It is characterized by informal relationships, few rules, limited task specialization, and informal information systems. The coordination is relatively high due to frequent and informal communications between the owner-manager and employees.
• Functional structure: The functional structure consists of a chief executive officer and with functional line managers in functional areas such as production, accounting, marketing, R&D, and human resources. It allows for functional specialization. It facilitates active sharing of knowledge within each functional area. Under this, various activities of the enterprise are classified according to certain functions like production, accounting, marketing, R&D, and human resources.
• Multi-Divisional Structure: Multi-Divisional structure is an organizational structure made up of separate, semiautonomous divisions or SBUs based on products/services or geographical areas. In this design, each unit or div on has a manager having responsibility for performance and authority for operation and control. However, the top management from corporate office controls over certain policy matters and provides financial and other resources. In multi-divisional structure, each division has its own functional departments
• Matrix organization: Matrix organization is also called project organization or grid organization. In this structure two forms of authority, namely, functional and project coexist. It is an emerging organization structure and attempts to overcome some drawbacks of other structures. For organizations having multiple products or projects, it makes appropriate balance by giving appropriate weightage to both project/products and functions. It is the most complex of all structures. Functional and divisional structures depend primarily on vertical flows of authority and communication.
• Holding company structure: A holding company has shareholdings in a variety of separate businesses scattered across even at different countries. The subsidiaries (Wholly or partial owned by the parent company) are part of parent or holding company. But they may operate independently in their own names. Holding company allows the ownership of multiple companies. Its main objective is to increase market power by enhancing the competitiveness by owning property such as patents, estates, trademarks, and other assets. The subsidiary companies function under the control of the holding company. The relationship between the holding and subsidiary company mainly rests on financial issues.
• Network structure: These organizations create a network with outsiders and whenever necessary, contract out the managerial functions like promotion, distribution, account keeping, HRM etc. If management feels that outsiders can undertake these functions in a better and cheaper ways, such functions are outsourced. What is then left with the organization? Very little. That’s why they are also called virtual organizations. It is a series of independent business units linked together by computers information system that designs, produces, and markets a product or service. It is most useful when the environment of a firm is unstable.
• Strategic Business Unit Structure: Strategic business unit structure is the modification of the divisional structure. An organization may be involved in different businesses. They may be operating different environment with different strategic positions. They are known as strategic business units. They are divisions or groups of divisions composed of independent product market segments that are given primary responsibility and authority for the management of their own functional areas.