the eight components of implementing strategy
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Strategy Implementer’s Action Agenda. The eight components of implementing strategy. Allocation Resources. Establishing Strategy-Supportive Policies. Building a Capable Organization. Exercising strategic Leadership. Instituting Best Practices for Continuous Improvement. - PowerPoint PPT PresentationTRANSCRIPT
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The eight components of implementing strategy
Strategy Implementer’s
Action Agenda
Allocation Resources
Building a Capable Organization
Establishing Strategy-Supportive Policies
Exercising strategic Leadership
Instituting Best Practices for Continuous Improvement
Installing Support Systems to Carry out Strategic Roles
Shaping Corporate Culture to Fit Strategy
Tying rewards to achievement of key strategic targets
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Building a capable organization
Select able people for key positions
Develop skills, core competencies, managerial talents, competitive capabilities
Organize business processes, value chain activities, and decision-making to promote
successful strategy execution
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Strategy and organization structure
• Few hard and fast rules for organizing•Main Rule: Structure must support and facilitate good
strategy execution
• Each firm’s organization structure is idiosyncratic, reflecting•Prior arrangements, internal politics•Executive judgments and preferences about how to arrange
reporting relationships
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Matching organization structure to strategy: the steps to take
1. Pinpoint critical activities and capabilities
2. Decide which activities to outsource
3. Decide which activities require “Partners”
4. Make primary, internally-performed activities the main building blocks
5. Determine degree of authority to delegate
6. Establish ways to achieve coordination
7. Assign responsibility for managing relationships with outsiders
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Uniting efforts of interrelated organizational units: the options
• Coordinating teams• Cross-functional task forces• Dual reporting relationships• Informal networking• Incentive compensation tied to group performance• Teamwork and interdepartmental cooperation
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Why structure follows strategy
• Changes in strategy typically require a new structure for implementation to be successful
• Research indicates• Structure affects performance• Structure merits reassessment whenever strategy
changes• New strategy involves different skills and key activities
• How work is structure is a means to an end-not an end in itself!
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Strategy and Structure: Evolutionary Pattern
Organization form in which the owner-manager take all decisions and monitors all activities, while staff aids in monitoring & supervising
• Less Specialization• No Communication Barriers• Quick Decisions
(e.g. Restaurants, Retail Shops)
Simple Structure
Efficient Implementation
of Strategy
Sales Growth Integration &
Control Problem
Functional Structure
CEO and functional line managers in dominant areas like production, marketing, HR, finance etc.
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Strategy and Structure: Evolutionary Pattern
CEO and functional line managers in dominant areas like production, marketing, HR, Finance etc.
Sales Growth Integration Problems
* Efficient Implementation of formulated
strategyMulti Divisional Structure
Excessive diversification and complexity calls for this designOperation Divisions each a separate SBU and top officer delegates unit strategy to divisional managers.
• Organization structures are modified when they no longer “ENABLE COORDINATION & CONTROL” Managers require for implementing newly designed strategy
• Impose STRATEGIC and FINANCIAL controls and evaluate performance
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When do traditional hierarchical structures make strategic sense?
• When activities can be divided into simple, repeatable tasks and are efficiently performed in mass quantity
• There are important benefits to deep functional expertise
• Customer needs are standardized
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When are multi-layered authoritarian structures liability?
• Market conditions are fluid • Customer preferences shift from standardized to customized
products and features• Personalized customer service is essential• Product life-cycles grow shorter• Flexible manufacturing replaces mass production• Customers want to be treated as individuals• Pace of technological change accelerates
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Organizational structures of the future: success depends on …
• Quick response to shifting customer preferences • short design – to – market cycles• First-time quality• Custom order and multi-version production• Expedited delivery and accurate order filling • Personalized customer service• Rapid assimilation of new technologies Creativity and
innovativeness• Speedy reaction to competitive developments
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Organizational structures of the future: meeting the new requirements
• Decentralized structures with fewer managers• Small-scale business units• Reengineering to decrease fragmentation• Development of stronger and newer capabilities• Collaborative partnerships with outsiders• Empowerment and self-directed work teams• Lean staffing of corporate support functions• Open communications (e-mail, IS, etc)• Accountability for results
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Characteristics of organizations of the future
• Fewer boundaries between• Different vertical ranks• Functions and disciplines• Units in different geographic locations• Firm and its suppliers, distributors, strategic allies, and
customers• Capacity for change and learning• Collaborative efforts among people in different functions
and geographic locations
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MINTZBERG
Techno-structure
Support staff
Operating core
Strategic apex
Middle line
Ideology
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Functional Structure: Implementing Business Level Strategy
1. COST LEADERSHIP
PRESIDENT
ENGINEERING
CORPORATE STAFF
MARKETING OPERATIONS PERSONNEL
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• Specialization, centralization play a pivotal role in implementation of cost leadership strategy
1. SPECIALIZATION Divide work into homogenous groups.Cost reduction through efficiency achievedBy employee specialization in few activities
2. CENTRALIZATION Decision making authority at managerial level. However, managers strive to push down some decision making
authority lover
3. FORMALIZATION Rules and procedures govern activities foster efficient operations, R & D improvements and mass scale production of standardized goods
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2. DIFFERENTIATED STRATEGY
PRESIDENT & CORPORATE STAFF
NEW PRODUCT R & D
MARKETING
MARKETING OPERATIONS FINANCE
R & D
HR
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• Decision making authority is decentralized• Coordinate and integrate activities• Concensus style of decision making• Marketing and R & D functions More Focus• Product innovations (L’OREAL)• Flat structure, more flexible, and jobs less structures
Constantly seeking improvement in product design, image, quality
Creative Advertising
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3. THE INTEGRATED APPROACH:
• Provide value which differs from that offered by rival firms• Low Cost• Valuable Differentiated features
• For cost leadership focus in on process recast and operational excellence (Standardised product)
• For differentiation in features emphasis is on marketing, innovation & new product development
• Therefore, functional form has to be supplemented by cross function a teams and strong culture.
(e.g. TOYATA MOTORS – Differentiated production & Design process)
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4. SHIFT TO MULTIDIVISIONAL DESIGN:
• The above average profits through successful implementation of business level strategy results in diversification of the firm’s operations
• Product portfolio diversification• Market diversification
Corporate level strategy business level strategy for each SBU
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ORGANISATION STRUCTURE: Corporate Level Strategy
Multi Divisional Structure (M-Form)
CO OPERATIVE FORM
COMPETITIVE FORM
SBU FORM
THREE VARIETIES OF MULIDIVISIONAL STRUCTURE
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• COOPERATIVE Related constrained strategy• HR practices to foster cooperation• Integration of firms divisions
• SBU FORM Related linked strategy • Each SBU has corporate leader, SBU groups
and divisions grouped by relatedness• SBU Individual decision makers seek guidance
from SBU heads
• COMPETITIVE FORM Unrelated Diversification Strategy• Competition between business units• Allocation of capital based on performance
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COOPERATIVE DESIGN
CORP. HQ.
CORPORATE R & D
LEGAL AFFAIRS
CORPORATE HR
STRATEGIC PLANNING
CORPORATE
FINANCE
GOVT.
CORPORATE MARKETING
PRODUCT DIVION
PRODUCT DIVISION
PRODUCT DIVIONS
PRODUCT DIVISION
• Tight links across all divisions and strong relationship• Centralization at corporate office to foster co-operation between divisions• Cooperative sharing• Rewards are governed by divisional and corporate performance
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SBU DESIGN
CORP. HQ.
CORPORATE R & D
CORPORATE HR
STRATEGIC PLANNING
CORPORATE
FINANCECORPORATE MARKETING
SBU 2SBU 1 SBU 3
• Integration among divisions within SBUs, but independence across SBUs• Each SBU-own budget & staff to foster integration• Corporate planning most prominent for managing approval process• Corporate HQ staff advise SBUs and Divisions
Division Div 2 Div 3 Div 2 Div 3 Div 2 Div 3Div 1 Div 1
PRESIDENT
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COMPETING DESIGN
CORP. HQ.
LEGAL AFFAIRS
AUDITINGFINANCE
DIVISION
• Corporate HQ Lean and competent• Finance and Auditing Prominent Functions to Manage cash flows and
disclose performance information• Divisions are independent Retain corporate control• The legal affairs function most prominent - Acquisition or Divestiture• Compete for corporate resources
PRESIDENT
DIVISION DIVISION DIVISIONDIVISION
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ORGANIZATIO STRUCTURE: Implementing International Strategies
1. MULIDOMESTIC STRATEGY• Strategic and operating decisions are decentralized t business units in each
country• No need for integration or coordination• A structure concentrating on national interests to satisfy local & cultural
mismatches
2. GLOBAL STRATEGY• Decision making authority is centralized • Need to coordinate and integrate operations• Superior communication systems and quick decisions
3. TRANSNATIONAL STRATEGY• Combination of global efficiency and local responsiveness• Geographic and product structure• Incredibly difficult to accomplish• Cultural change must be effective to foster leadership and a shared vision
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PRODUCT DIVISIONAL
STRUCTURE: GLOBAL
STRATEGY
• Centralize to coordinate information flow among worldwide products• Facilitate global economies of scale & Scope• Allocate financial resources in a cooperative manner• Centralized federation
COST LEADERSHIP ADVANTAGE
GLOBAL CORP HQ
Worldwide Products Division
Worldwide Products Division
Worldwide Products Division
Worldwide Products Division
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WORLDWIDE GEOGRAPHICAL
AREA STRUCTURE:
MULTIDOMESTIC STRATEGY
• Decentralization of operations• Emphasis and attention on local needs to match country culture• Decentralized federation• Corporate HQ Coordinates resources among independent
subsidiaries
MULTINATIONAL HQ
ASIA
MIDDLE EAST/ GULF
USA
EUROPE
LATIN AMERICA
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Structural Types for Multinationals (1)
• International Divisions• Usually dominant home base• With its own structure• And additional international division• Drawing on products or services of home division
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Structural Types for Multinationals (2)
• International Subsidiaries• Independent operations by country• Allowing for high local responsiveness• Perhaps with central planning or reporting• But now ultimate central control
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Structural Types for Multinationals (3)
• Global Businesses• Product/ service divisions managed globally• Aim is to produce scale efficiencies• And transfer of resources/ skills• Requires sophisticated co-ordination• May reduce sensitivity to local markets
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Increasing Devolution- Some common problems
• Concept not understood• Centre cannot let go• Centre lets go too much• Self-sufficiency vs. bargaining• Enabling framework vs. regulations• Fear of accountability