Definition of strategic management

Strategic management is the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. As this definition implies:

Strategic management focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and information systems to achieve organizational success.

Overview of Strategic Management Process

There are 7 steps strategic management process. These are: 1. Define the Current Business- Every company must choose the terrain on

which it will compete—in particular, what products it will sell, where it will sell them, and how its products or services will differ from its competitors.

2.Perform External and Internal Audits- Ideally, managers begin their strategic planning by methodically analyzing their external and internal situations. The strategic plan should provide a direction for the firm that makes sense, in terms of the external opportunities and threats the firm faces and the internal strengths and weaknesses it possesses.

3.Formulate New Business and Mission Statements- Based on the situation analysis, what should our new business be, in terms of what products it will sell, where it will sell them, and how its products or services will differ from its competitors’? What is our new mission and vision?

4.Translate the Mission into Strategic Goals-5.Formulate Strategies to Achieve the Strategic Goals- The strategies

bridge where the company is now, with where it wants to be tomorrow. The best strategies are concise enough for the manager to express in an easily communicated phrase that resonates with employees.

6.Implement the Strategies- Strategy implementation means translating the strategies into actions and results—by actually hiring (or firing) people, building (or closing) plants, and adding (or eliminating) products and product lines.

Strategy implementation involves drawing on and applying all the management functions: planning, organizing, staffing, leading, and controlling.

7. Evaluate Performance- Strategies don’t always succeed. The manager must evaluate the current performance of the organization by comparing the expected result and actual performance.

Characteristics of strategic management a. It is a combination of strategy formulation and strategy implementationb. It is the highest level of managerial activityc. It is performed by an organization’s CEO and executive teamd. It provides overall direction to the enterprise.

Environmental scanning

Environmental scanning is the internal communication of external information about issues that may potentially influence an organization's decision making process. Environmental scanning focuses on the identification of emerging issues, situations, and potential pitfalls that may affect an organization's future. The information gathered, including the events, trends, and relationships that are external to an organization, is provided to key managers within the organization and is used to guide management in future plans. It is also used to evaluate an organization's strengths and weaknesses in response to external threats and opportunities. In essence, environmental scanning is a method for identifying, collecting, and translating information about external influences into useful plans and decisions.

Why Environmental Scanning?

There are many important reasons to do environmental scanning.

Because of rapid changes in today's marketplace and new and emerging business practices

It is easy for an organization to fall behind by not keeping up in areas such as technology, regulations, and various rising trends.

It reduces the chance of being blindsided and results in greater anticipatory management.

Factors to be consider for environmental scanning:

1. Events are important and specific occurrences taking place in different environmental sectors.2. Trends are the general tendencies or the courses of action along which events take place.3. Issues are the current concerns that arise in response to events and treats.4. Expectations are the demands made by interested groups in the light of their concern for issues.

Guidelines for Crafting Successful Business Strategies

13 commandments for crafting successful business strategies:

Always put top priority on crafting and executing strategic moves that enhance the firm’s competitive position for the long-term and that serve to establish it as an industry leader.

Understand that a clear, consistent strategy when well-crafted and well executed build reputation and recognizable industry position whereas a strategy aims solely at capturing momentary market opportunities yields brief benefits.

Endeavour not to get stuck back in the pack with no coherent long-term strategy or distinctive competitive position and little prospects of climbing into the ranks of industry leaders.

Invest in creating a sustainable competitive advantage for it is a more dependable contributor to above average profitability.

Play aggressive offend to build competitive advantage and aggressive defend to protect it.

Avoid strategies capable of succeeding only in the best of circumstance. Avoid rigidly prescribed or inflexible strategies- changing market conditions

may render it quickly obsolete. Don’t underestimate the reactions and the commitment of the rival firms. Beware of attacking strong, resourceful rivals without having solid

competitive advantage and ample financial strength. Consider that attacking competitive weakness is usually more profitable

than attacking competitive strength. Be judicious in cutting prices without an establish cost advantage. Beware that aggressive strategic moves to wrest crucial markets share

away from rivals often provoke aggressive retaliation in the form of marketing “arms race” and/or price wars.

Employ bold strategic moves in pursuing differentiation strategies so as to open up very meaningful gaps in quality or service or advertising or other product attrib

Environmental Threat and Opportunity Profile (ETOP)

ETOP is summarized depiction of the environmental actors and their impact on the organization. The preparation of ETOP involves dividing the environment into different sectors and then analyzing the impact of each factor of the organization. A derailed ETOP subdivides each environment sector into sub factor and then the impact of each sub factor on the organization and is described in a form of statement. A summary of ETOP shows only the major factors. ETOP is the most useful way of structuring the result of environmental analysis.

Environmental Factors Degree of Importance Degree of ImpactHigh(3)

Medium(2)

Low(1)

High±3

Medium±2

Low±1

EconomicPolitical – LegalTechnological

Socio-culturalCompetitive

Advantage of ETOP

1. It provides a clear of which sector and sub sectors have favorable impact on the organization. It

helps interpret the result of environment analysis.

2. The organization can assess its competitive position.

3. Appropriate strategies can be formulated to take advantage of opportunities and counter the threat.

4. SWOT analysis (Strategic weakness, opportunities and threats.)

Organizational Capability Profile (OCP)

OCP is summarized statement which provides overview of strength and weakness in key result areas likely to affect future operation of the organization. Information in this profile may be presented in qualitative terms or quantitative terms.

After the preparation of OCP, the organization is in a position to assess its relative strength and weaknesses vis-a-vis its competitors. If there is any gap in area, suitable action may be taken to overcome that.OCP shows the company’s capacity. OCP tells about company’s potential and capability. OCP tells what company can do.

Capability Factors Degree of strength and weakness

1. Financial capability factorsa. Source of fund and costb. Usage of fundsc. Management of funds

2. Marketing capability factora. Product relatedb. Price relatedc. Promotion relatedd. Distribution related3. Operation capability factora. Plant locationb. Production systemc. Operation and control systemd. R & D system4. Personal capability factora. Personnel systemb. Organizational and employee characteristicsc. Industrial relationsd. Quality and motivation of personnel5. General management capability factora. General management systemb. External relationsc. Organizational climate

Strategy formulation

Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of organizational goals and objectives and thereby achieving the organizational vision. The process of strategy formulation basically involves six main steps. Though these steps do not follow a rigid chronological order, however they are very rational and can be easily followed in this order.

1. Setting Organizations’ objectives - The key component of any strategy statement is to set the long-term objectives of the organization. It is known that strategy is generally a medium for realization of organizational objectives. Objectives stress the state of being there whereas Strategy stresses upon the process of reaching there. Strategy includes both the fixation of objectives as well the medium to be used to realize those objectives. Thus, strategy is a wider term which believes in the manner of deployment of resources so as to achieve the objectives. While fixing the organizational objectives, it is essential that the factors which influence the selection of objectives must be analyzed before the selection of objectives. Once the objectives and the factors influencing strategic decisions have been determined, it is easy to take strategic decisions.

2. Evaluating the Organizational Environment - The next step is to evaluate the general economic and industrial environment in which the organization operates. This includes a review of the organizations competitive position. It is essential to conduct a qualitative and quantitative review of an organizations existing product line. The purpose of such a review is to make sure that the factors important for competitive success in the market can be discovered so that the management can identify their own strengths and weaknesses as well as their competitors’ strengths and weaknesses. After identifying its strengths and weaknesses, an organization must keep a track of competitors’ moves and actions so as to discover probable opportunities of threats to its market or supply sources.

3. Setting Quantitative Targets - In this step, an organization must practically fix the quantitative target values for some of the organizational objectives. The idea behind this is to compare with long term customers, so as to evaluate the contribution that might be made by various product zones or operating departments.

4. Aiming in context with the divisional plans - In this step, the contributions made by each department or division or product category within the organization is identified and accordingly strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic trends.

5. Performance Analysis - Performance analysis includes discovering and analyzing the gap between the planned or desired and the actual performance. A critical evaluation of the organizations past performance, present condition and the desired future conditions must be done by the organization. This critical evaluation identifies the degree of gap that persists between the actual reality and the long-term aspirations of the organization. An attempt is made by the organization to estimate its probable future condition if the current trends persist.

6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action is actually chosen after considering organizational goals, organizational strengths, potential and limitations as well as the external opportunities.

Levels of Strategy Formulation

There are three aspects or levels of strategy formulation, each with a different focus, need to be dealt with in the formulation phase of strategic management. Such as corporate level, business and functional level strategy.

Corporate Level Strategy: In this aspect of strategy, we are concerned with broad decisions about the total organization's scope and direction. Basically, we consider what changes should be made in our growth objective and strategy for achieving it, the lines of business we are in, and how these lines of business fit together.

Growth Strategies

All growth strategies can be classified into one of two fundamental categories: concentration within existing industries or diversification into other lines of business or industries. When a company's current industries are attractive, have good growth potential, and do not face serious threats, concentrating resources in the existing industries makes good sense. Diversification tends to have greater risks, but is an appropriate option when a company's current industries have little growth potential

or are unattractive in other ways. When an industry consolidates and becomes mature, unless there are other markets to seek (for example other international markets), a company may have no choice for growth but diversification.

There are two basic concentration strategies, vertical integration and horizontal growth.

Vertical Integration: This type of strategy can be a good one if the company has a strong competitive position in a growing, attractive industry. A company can grow by taking over functions earlier in the value chain that were previously provided by suppliers or other organizations ("backward integration"). This strategy can have advantages, e.g., in cost, stability and quality of components, and making operations more difficult for competitors. However, it also reduces flexibility, raises exit barriers for the company to leave that industry, and prevents the company from seeking the best and latest components from suppliers competing for their business.

A company also can grow by taking over functions forward in the value chain previously provided by final manufacturers, distributors, or retailers ("forward integration"). This strategy provides more control over such things as final products/services and distribution, but may involve new critical success factors that the parent company may not be able to master and deliver. For example, being a world-class manufacturer does not make a company an effective retailer.

Horizontal Growth: This strategy alternative category involves expanding the company's existing products into other locations and/or market segments, or increasing the range of products/services offered to current markets, or a combination of both. It amounts to expanding sideways at the point(s) in the value chain that the company is currently engaged in. One of the primary advantages of this alternative is being able to choose from a fairly continuous range of choices, from modest extensions of present products/markets to major expansions -- each with corresponding amounts of cost and risk.

Diversification strategies can be divided into related (or concentric) and unrelated (conglomerate) diversification.

Related Diversification (aka Concentric Diversification): In this alternative, a company expands into a related industry, one having synergy with the company's existing lines of business, creating a situation in which the existing and new lines of business share and gain special advantages from commonalities such as technology, customers, distribution, location, product or manufacturing similarities, and government access. This is often an appropriate corporate strategy when a company has a strong competitive position and distinctive competencies, but its existing industry is not very attractive.

4. Unrelated Diversification (aka Conglomerate Diversification): This fourth major category of corporate strategy alternatives for growth involves diversifying into a line of business unrelated to the current ones. The reasons to consider this alternative are primarily seeking more attractive opportunities for growth in which to invest available funds (in contrast to rather unattractive opportunities in existing industries), risk reduction, and/or preparing to exit an existing line of business (for example, one in the decline stage of the product life cycle). Further, this may be an appropriate strategy when, not only the present industry is unattractive, but the company lacks outstanding competencies that it could transfer to related products or industries. However, because it is difficult to manage and excel in unrelated business units, it can be difficult to realize the hoped-for value added.

Stability Strategies

There are a number of circumstances in which the most appropriate growth stance for a company is stability, rather than growth. Often, this may be used for a relatively short period, after which further growth is planned. Such circumstances usually involve a reasonable successful company, combined with circumstances that either permit a period of comfortable coasting or suggest a pause or caution. Three alternatives are outlined:

1. Pause and Then Proceed: This stability strategy alternative (essentially a timeout) may be appropriate in either of two situations: (a) the need for an opportunity to rest, digest, and consolidate after growth or some turbulent events - before continuing a growth strategy, or (b) an uncertain or hostile environment in which it is prudent to stay in a "holding pattern" until there is change in or more clarity about the future in the environment.

2. No Change: This alternative could be a cop-out, representing indecision or timidity in making a choice for change. Alternatively, it may be a comfortable, even long-term strategy in a mature, rather stable environment, e.g., a small business in a small town with few competitors.

3. Grab Profits While You Can: This is a non-recommended strategy to try to mask a deteriorating situation by artificially supporting profits or their appearance, or otherwise trying to act as though the problems will go away. It is an unstable, temporary strategy in a worsening situation, usually chosen either to try to delay letting stakeholders know how bad things are or to extract personal gain before things collapse. Recent terrible examples in the USA are Enron and WorldCom.

Retrenchment Strategies

Retrenchment occurs when an organization regroups through cost and asset reduction to reverse declining sales and profits.

Turnaround: This strategy, dealing with a company in serious trouble, attempts to resuscitate or revive the company through a combination of contraction (general, major cutbacks in size and costs) and consolidation (creating and stabilizing a smaller, leaner company). Although difficult, when done very effectively it can succeed in both retaining enough key employees and revitalizing the company.

Captive Company Strategy: This strategy involves giving up independence in exchange for some security by becoming another company's sole supplier, distributor, or a dependent subsidiary.

Sell Out: If a company in a weak position is unable or unlikely to succeed with a turnaround or captive company strategy, it has few choices other than to try to find a buyer and sell itself (or divest, if part of a diversified corporation).

Liquidation: When a company has been unsuccessful in or has none of the previous three strategic alternatives available, the only remaining alternative is liquidation, often involving a bankruptcy. There is a modest advantage of a voluntary liquidation over bankruptcy in that the board and top management make the decisions rather than turning them over to a court, which often ignores stockholders' interests.

Five guidelines for when retrenchment may be an especially effective strategy to pursue are as follows:

• When an organization has a clearly distinctive competence but has failed consistently to meet its objectives and goals over time.

• When an organization is one of the weaker competitors in a given industry.

• When an organization is plagued by inefficiency, low profitability, poor employee morale, and pressure from stockholders to improve performance.

• When an organization has failed to capitalize on external opportunities, minimize external threats, take advantage of internal strengths, and overcome internal weaknesses over time; that is, when the organization’s strategic managers have failed (and possibly will be replaced by more competent individuals).

• When an organization has grown so large so quickly that major internal reorganization is needed.

Synergy

It is the combined working together of two or more parts of a system so that the combined effect is greater than the sum of the efforts of the parts. In business and technology, the term describes a hoped-for or real effect resulting from different

individuals, departments, or companies working together and stimulating new ideas that result in greater productivity.

Corporate restructuring

It refer to the collection of actions taken by a firm or business unit which involves changes to its operational efficiency, its asset/business portfolio and its capital and ownership structure. Corporate restructuring provides a powerful strategic alternative for distressed companies to resolve financial and operational issues and to navigate troubled economic times.

Corporate restructuring is a process in which a company changes the organizational structure and processes of the business. This can happen through breaking up a company into smaller entities, through buy outs and mergers. When a company uses one of these methods, it could strengthen the company or it could create more problems than it is worth.

Advantages and Disadvantages of Corporate Restructuring

Advantage

1. increasing Value of Parts

One of the main reasons that businesses use corporate restructuring is to divide the business up for sale. If a company is trying to sell as a conglomerate, it will likely get lower offers from investors. When the company is split up into separate parts, it can often get better offers for those individual parts. This can increase the value of the company as a whole and help get a higher sales price for the business.

2. Reduce Costs

Another benefit of restructuring a company is to reduce business costs. For example, a company could merge with another company that is very similar and use economies of scale to run more efficiently. It could cut back on employees and

equipment to streamline business operations. In this way, the company can expand its reach without adding too much to the overhead of the business. If handled correctly, the company can add significant value for its shareholders.

Disadvantage /Costs of Restructure

Even though you can reduce long-term costs by restructuring the business, the process of restructuring can be expensive in itself. When a company restructures itself, it must pay legal fees and other costs associated with the restructure. If a company merges with another company, it will also have to come up with the money to buy the other company. If the restructure does not work out, it could cost the company dearly and ultimately lead to its demise.

When a company goes through a corporate restructure, it can significantly hurt its relations with employees. Employees fear change and when they are scared of being downsized, it can affect morale. In many of these moves, companies have to release some of the workforce. This can affect the loyalty of employees and it could hurt the company in the long run. When employees do not know if they will be one of the unlucky few who get released, it can create tension.

Strategic Analysis and ChoiceBoston Consulting Group(BCG)

BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of the business brand portfolio and its potential. It classifies business portfolio into four categories based on industry attractiveness (growth rate of that industry) and competitive position (relative market share). These two dimensions reveal likely profitability of the business portfolio in terms of cash needed to support that unit and cash generated by it. The general purpose of the analysis is

to help understand, which brands the firm should invest in and which ones should be divested

Relative market share- One of the dimensions used to evaluate business portfolio is relative market share. Higher corporate’s market share results in higher cash returns. This is because a firm that produces more, benefits from higher economies of scale and experience curve, which results in higher profits. Nonetheless, it is worth to note that some firms may experience the same benefits with lower production outputs and lower market share.

Market growth rate- High market growth rate means higher earnings and sometimes profits but it also consumes lots of cash, which is used as investment to stimulate further growth. Therefore, business units that operate in rapid growth industries are cash users and are worth investing in only when they are expected to grow or maintain market share in the future.

There are four quadrants into which firms brands are classified:

1. Dogs- Dogs hold low market share compared to competitors and operate in a slowly growing market. In general, they are not worth investing in because they generate low or negative cash returns. But this is not always the truth. Some dogs may be profitable for long period of time, they may provide synergies for

other brands or SBUs or simple act as a defense to counter competitors moves. Therefore, it is always important to perform deeper analysis of each brand or SBU to make sure they are not worth investing in or have to be divested. Strategic choices: Retrenchment, divestiture, liquidation.

2. Cash cows- Cash cows are the most profitable brands and should be “milked” to provide as much cash as possible. The cash gained from “cows” should be invested into stars to support their further growth. According to growth-share matrix, corporates should not invest into cash cows to induce growth but only to support them so they can maintain their current market share. Again, this is not always the truth. Cash cows are usually large corporations or SBUs that are capable of innovating new products or processes, which may become new stars. If there would be no support for cash cows, they would not be capable of such innovations. Strategic choices: Product development, diversification, divestiture, retrenchment.

3. Stars- Stars operate in high growth industries and maintain high market share. Stars are both cash generators and cash users. They are the primary units in which the company should invest its money, because stars are expected to become cash cows and generate positive cash flows. Yet, not all stars become cash flows. This is especially true in rapidly changing industries, where new innovative products can soon be outcompeted by new technological advancements, so a star instead of becoming a cash cow, becomes a dog. Strategic choices: Vertical integration, horizontal integration, market penetration, market development, product development.

4. Question marks- Question marks are the brands that require much closer consideration. They hold low market share in fast growing markets consuming large amount of cash and incurring losses. It has potential to gain market share and become a star, which would later become cash cow. Question marks do not always succeed and even after large amount of investments they struggle to gain market share and eventually become dogs. Therefore, they require very close consideration to decide if they are worth investing in or not. Strategic choices: Market penetration, market development, product development, divestiture

Advantage and limitation of the BCG Model

Advantages

1. It is easy to use2. it is quantifiable3. it draws attention to the cash flows4. it draws attention to the investment needs

Limitations

1. it is too simplistic2. link between market share and profitability is not strong3. growth rate is only one aspect of industry attractiveness4. it is not always clear how markets should be defined5. market share is considered as the only aspect of overall competitive position

Many products or business units fall right in the middle of the matrix, and cannot easily be classified

Definition of Strategy implementation

Strategy implementation is the translation of chosen strategy into organizational action so as to achieve strategic goals and objectives.

Strategy implementation is also defined as the manner in which an organization should develop, utilize, and amalgamate organizational structure, control systems, and culture to follow strategies that lead to competitive advantage and a better performance.

Implementation involves actually executing the strategic game plan. This includes setting polices, designing the organization structure and developing a corporate culture to enable the attainment of organizational objectives. Strategic implementation is a process by which strategies and policies are put into action through the development of programs, budgets, and procedures. Strategic implementation is mainly concerned regarding two issues: Structural Issues and Bhavioural Issues

STRUCTURAL ISSUESEvery organization has a unique structure. An organizational structure is the reflection of the company’s past history, reporting relationships and internal politics. When implementing new strategies the management has to take a very close look at the organization structure and evaluate if it supports the formulated strategy. The CEO has to customize the organizational structure to fit the strategy. This would improve the performance of the organization. Different types of organizational structure involve in response to strategic change.

a. Functional Structure: In a functional structure, the division of labor in an organization is grouped by the main activities or functions that need to be performed within the organization—sales, marketing, human resources, and so on. Each functional group within the organization is vertically integrated from the bottom to the top of the organization. For example, a Vice President of Marketing would lead all the marketing people, grouped into the marketing department.

Employees within the functional divisions of an organization tend to perform a specialized set of tasks, for instance the engineering department would be staffed only with engineers. This leads to operational efficiencies within that group. However it could also lead to a lack of communication between the functional groups within an organization, making the organization slow and inflexible.

As a whole, a functional organization is best suited as a producer of standardized goods and services at large volume and low cost. Coordination and specialization of tasks are centralized in a functional structure, which makes producing a limited amount of products or services efficient and predictable. Moreover, efficiencies can further be realized as functional organizations integrate their activities vertically so that products are sold and distributed quickly and at low cost.Functional Structure

b.Divisional Structure: Also called a "Product Structure", the divisional structure groups each organizational function into divisions. Each division within a divisional structure contains all the necessary resources and functions within it. Hence, Work divided on the basis of product lines, type of customers served, or geographic area covered.

c.Matrix Structure: Matrix structure groups employees by both function and product.

This structure can combine the best of both separate structures. A matrix organization frequently uses teams of employees to accomplish work, in order to take advantage of the strengths, as well as make up for the weaknesses, of functional and decentralized forms. These type of structure is created by assigning functional specialists to work on a special project or a new product or service. For the duration of the project, specialists from different areas form a group or team and report to a team leader. Simultaneously they may work in their respective parent department. Once the project is completed, the team members revert to their parent departments.

Strategic Business Unit Organization Structure: A strategic business unit is a distinctive business with its own set of competitors that can be managed reasonably independently of other business within the organization. Each unit will have a clearly defined strategy, based on the capabilities and overall organizational needs. Hence, any part of business org which is treated separately for strategic management purposes.

a. Network structure Spider web or virtual org.Non hierarchical highly decentralized & organized around customer groups.

BEHAVIOURAL ISSUES

It is vital to bear in mind that organizational change is not an intellectual process concerned with the design of ever-more-complex and elegant organization structures. It is to do with the human side of enterprise and is essentially about changing people's attitudes, feelings and - above all else - their behaviour. The behavioural of the employees affect the success of the organization. Strategic implementation requires support, discipline, motivation and hard work from all manager and employees Influence Tactics: The organizational leaders have to successfully implement the strategies and achieve the objectives. Therefore the leader has to change the behaviour of superiors, peers or subordinates. For this they must develop and communicate the vision of the future and motivate organizational members to move into that directionPower: it is the potential ability to influence the behaviour of others. Leaders often use their power their power to influence others and implement strategy. Formal authority that comes through leaders position in the organization (He cannot use the power to influence customers and government officials) the leaders have to exercise

something more than that of the formal authority (Expertise, charisma, reward power, information power, legitimate power, coercive power) Empowerment as a way of Influencing Behaviour: The top executives have to empower lower level employees. Training, self managed work groups eliminating whole levels of management in organization and aggressive use of automation are some of the ways to empower people at various places.Political Implications of Power: organization politics is defined as those set of activities engaged in by people in order to acquire, enhance and employ power and other resources to achieve preferred outcomes in organizational setting characterized by uncertainties. Organization must try to manage political behviour while implementing strategies. They should· Define job duties clearly· Design job properly· Demonstrate proper behaviours.· Promote understanding· Allocate resources judiciouslyLeadership Style and Culture Change: Culture is the set of values, beliefs, behaviours that help its members understand what the organization stands for, how it does things and what it considers important. Firms culture must be appropriate and support their firm. The culture should have some value in it .To change the corporate culture involves persuading people to abandon many of their existing beliefs and values, and the behaviours that stem from them, and to adopt new ones.The first difficulty that arises in practice is to identify the principal characteristics of the existing culture. The process of understanding and gaining insight into the existing culture can be aided by using one of the standard and properly validated inventories or questionnaires that a number of consultants have developed to measure characteristics of corporate culture. These offer the advantage of being able to benchmark the culture against those of other, comparable firms that have used the same instruments. The weakness of this approach is that the information thus

obtained tends to be more superficial and less rich than material from other sources such as interviews and group discussions and from study of the company's history.In carrying out this diagnostic exercise, such instruments can be supplemented by surveys of employee opinions and attitudes and complementary information from surveys of customers and suppliers or the public at large.Values and Culture: Value is something that has worth and importance to an individual. People should have shared values. This value keeps the everyone from the top management down to factory persons on the factory floor pulling in the same direction.Ethics and Strategy: Ethics are contemporary standards and a principle or conducts that govern the action and behviour of individuals within the organization. In order that the business system function successfully the organization has to avoid certain unethical practices and the organization has to bound by legal laws and government rules and regulationsManaging Resistance to Change: To change is almost always unavoidable, but its strength can be minimized by careful advance Top management tends to see change in its strategic context. Rank-and-file employees are most likely to be aware of its impact on important aspects of their working lives.Some resistance planning, which involves thinking about such issues as: Who will be affected by the proposed changes, both directly and indirectly? From their point of view, what aspects of their working lives will be affected? Who should communicate information about change, when and by what means? What management style is to be used?Managing Conflict: Conflict is a process in which an effort is purposefully made by one person or unit to block another that results in frustrating the attainment of the others goals or the furthering of his interests. The organization has to resolve the conflicts.Linking Performance and Pay to Strategies: In order to implement the strategies effectively the organization has to align salary increases, promotions, merit pay, bonusesetc., more closely to support the long term objectives of the organization.

What are the key challenges in strategy implementation? Many good plans are doomed to failure because they are not implemented correctly. Strategy must be supported by structure, technology, human resources, rewards, information systems, culture, leadership, and so on. Ultimately, the success of a plan depends on how well employees at low levels are able and willing to implement it. Participative management is one of the more popular approaches used by executives to gain employees input and ensure their commitment to strategy implementation.Steps of Strategy Implementation

• Institutionalization of strategy.• Formulation of Action Plans.• Project Implementation.• Procedural Implementation.• Resource Allocation.• Structural Implementation.• Functional Implementation.• Behavioral Implementation.

 Project implementationProject implementation refers to the act of putting into action what was planned. However, given the uncertainty of the project environment the actions taken may require some modifications on what was planned. Some of the actions include mobilizing materials and putting them to intended use.Project implementation

Strategies lead to plans, programs, and projects.

Knowledge related to projects is covered under project management

A project is a one shot goal limited, time limited , major undertaking , requiring the commitment of various skills & resources.

Goals are derived from plans & programs

Phases of project

Conception phaseDefinition phasePlanning & organizing phaseImplementation phaseClean up phase

Procedural implementationFormulation of a company

Licensing procedures

Securities & exchange board of india

Monopolies & restrictive trade practices MRTP

Foreign collaboration procedure

Foreign exchange management act FEMA

Import & export requirements

Patenting & trademarks requirement

Labor legislation requirement

Environment protection & pollution control

Consumer protection requirements

Incentives & facilities benefits

Resource allocation

deals with the procurement & commitment of financial , physical & HR to strategic tasks for the achievement of org. objectives.

Both one time & continuous process

New project requires

What sources are tapped

What factors affect

What approaches adopted

How it takes place

What are the difficulties

STRATEGIC IMPLEMENTATION

Production/Operations Concerns When Implementing Strategies

Production/operations capabilities, limitations, and policies can significantly enhance or inhibit the attainment of objectives. Production processes typically constitute more than 70 percent of a firm’s total assets. A major part of the strategy-implementation process takes place at the production site. Production-related decisions on plant size, plant location, product design, choice of equipment, kind of tooling, size of inventory, inventory control, quality control, cost control, use of standards, job specialization, employee training, equipment and resource utilization, shipping and packaging, and technological innovation can have a dramatic impact on the success or failure of strategy-implementation efforts.

Human Resource Concerns When Implementing

The job of human resource manager is changing rapidly as companies continue to downsize and reorganize. Strategic responsibilities of the human resource manager include assessing the staffing needs and costs for alternative strategies proposed during strategy formulation and developing a staffing plan for effectively implementing strategies. This plan must consider how best to manage spiraling health care insurance costs. Employers’ health coverage expenses consume an average 26 percent of firms’ net profits, even though most companies now require employees to pay part of their health insurance premiums. The plan must also include how to motivate employees and managers during a time when layoffs are common and workloads are high.

Marketing Issues

Countless marketing variables affect the success or failure of strategy implementation, and the scope of this text does not allow us to address all those issues. Some examples of marketing decisions that may require policies are as follows:

1. To use exclusive dealerships or multiple channels of distribution

2. To use heavy, light, or no TV advertising

3. To limit (or not) the share of business done with a single customer

4. To be a price leader or a price follower

5. To offer a complete or limited warranty

6. To reward salespeople based on straight salary, straight commission, or a combination salary/commission

7. To advertise online or not

Finance/Accounting Issues

In this section, we examine several finance/accounting concepts considered to be central to strategy implementation: acquiring needed capital, developing projected financial statements, preparing financial budgets, and evaluating the worth of a business. Some examples of decisions that may require finance/accounting policies are these:

1. To raise capital with short-term debt, long-term debt, preferred stock, or common stock

2. To lease or buy fixed assets

3. To determine an appropriate dividend payout ratio

4. To use LIFO (Last-in, First-out), FIFO (First-in, First-out), or a market-value accounting approach

5. To extend the time of accounts receivable

6. To establish a certain percentage discount on accounts within a specified period of time

7. To determine the amount of cash that should be kept on hand

Management Information Systems (MIS) Issues

Firms that gather, assimilate, and evaluate external and internal information most effectively are gaining competitive advantages over other firms. Having an effective management information system (MIS) may be the most important factor in differentiating successful from unsuccessful firms. The process of strategic management is facilitated immensely in firms that have an effective information system.

Information collection, retrieval, and storage can be used to create competitive advantages in ways such as cross-selling to customers, monitoring suppliers, keeping managers and employees informed, coordinating activities among divisions, and managing funds. Like inventory and human resources, information is now recognized as a valuable organizational asset that can be controlled and managed. Firms that implement strategies using the best information will reap competitive advantages in the twenty-first century.

Performance Measurement

Performance measurement is a tool to help managers control the outcomes of their organizations.  It enables them to be the driver rather than a passenger on their organizational journey.  The value of performance measurement is summarized in this lighthearted ditty.

If it can't be measured, it can't be managed.

What gets measured gets watched. What gets watched gets done.

Principles Of Performance Measurement

1. All significant work activity must be measured.

Work that is not measured or assessed cannot be managed because there is no objective information to determine its value.  Therefore it is assumed that this work is inherently valuable regardless of its outcomes.  The best that can be accomplished with this type of activity is to supervise a level of effort.

Unmeasured work should be minimized or eliminated. Work measurement must include the resources (manpower, expenses, and

investment) required to accomplish the desired results.

2. Desired performance outcomes must be established for all measured work.

Outcomes provide the basis for establishing accountability for results rather than just requiring a level of effort.

Desired outcomes are necessary for work evaluation and meaningful performance appraisal.

Defining performance in terms of desired results is how managers and supervisors make their work assignments operational.

3. A time phased performance baseline must be developed to evaluate total organizational performance.

This baseline must incorporate all organizational activity.  This includes:

o Operating performance outcomes that define the desired results from operations and the operational resources (manpower, material, assemblies, etc.) required to achieve these results.

o Financial performance outcomes that define the expected revenue and expense results, and investment required to support operating activity.

o Schedule performance that defines when these results and investment are expected to occur.

This baseline provides the standard for evaluating organizational results, determining variances from the plan, and implementing corrective action.

4. Operating and financial performance reporting must be synchronized with the same reporting periods and reporting frequency.

Reporting periods and frequency must be consistent with the time phasing of the performance baseline.

5. Performance reporting and variance analyses must be accomplished frequently.

Frequent reporting enables timely corrective action. Timely corrective action is needed for effective management control.

VARIANCE ANALYSIS

The purpose of variance analysis is to determine the corrective action needed (if any) to accomplish the desired operating and financial results.

Variance analysis effectiveness is directly proportional to the level of detail used to develop the performance measurement baseline.

o Comparing the estimating relationships used to develop the baseline with current measured values provides advance notice of the accuracy of the baseline estimates.

o Comparing the baseline to an estimate using these updated relationships will show how current results are impacting final performance.

The decision whether to take corrective action is driven by the impact of current performance on estimated final results.

Variance analysis contributes to learning and understanding the system dynamics that causes the observed results.

Variance analysis has the following objectives.

Analyze the impact of current performance on final operating and financial results.

o This will determine whether corrective action is indicated.o If the estimated final results are unacceptable, corrective action is needed.

Determine the root causes of the existing variances.

o Evaluating the estimating relationships used to develop the baseline will assist in this process.

o A Root Cause Problem Solving model in this website provides a technique to do this.

Determine the corrective action needed to achieve the desired results. 

Operating results must be reported promptly and on a consistent schedule.

Timely corrective action requires prompt variance analysis. Performance reporting should include the data needed to analyze the

estimating relationships that were used to develop the baseline.