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Strategy Implementation

Introduction

Implementation of strategy is the process through which a chosen strategy


is put into action. It involves the design and management of systems to
achieve the best integration of people, structure, processes and resources in
achieving organizational objectives.

Implementation of Strategy affects an organization from top to bottom, it


affects all the functional and divisional areas of business.
Institutionalization of strategy

Setting Proper Organizational Climate

Developing Appropriate Operating Plans

Developing Appropriate Organization Structures

Review of Implemented Strategy


Strategy Formulation Implementation:
Interrelationship
Strategy implementation
means putting chosen
strategic decision into
action (strategic choice).

Allocation of resources
to new course of action
needs to be undertaken
besides need to adapt
organizations structure
to the chose strategy.
Strategy Formulation Implementation:
Interrelationship

Strategy formulation and


Strategy Implementation are B

SOUND
different and it needs to be A

STRATEGY FORMULATION
sound and excellent.
(success)

Strategy fails because of


failed implementation and
not because of strategy FLAWED
model. C D
The matrix shows various
combination of strategy WEAK EXCELLENT
formulation and STRATEGY IMPLEMENTATION
implementation.
Strategy Formulation Implementation:
Interrelationship
Square A shows formulation of competitive strategy but has difficulties in
implementing it successfully. This may be due to various factors like lack of
experience, lack of resources, missing leadership etc. Companies like to move from
square A to square B by realizing their implementation difficulties.

Square D shows formulation of flawed strategy but company has excellent


implementation skills. Thus they should redesign their strategy before
implementation.

Square C shows neither the sound strategy formulation nor is effective in strategy
implementation. They should redesign business model by implementation execution
readjustment.

Square B is ideal situation where company has succeeded in designing a sound


competitive strategy besides effectively implementing it.
Strategy Formulation Implementation:
Interrelationship
Strategy is not a long term plan but rather consists of organizations attempt
to reach some future state by adapting is competitive position as
circumstances change.

In organizations that lack strategic direction there is tendency to look


inwards at time of stress, management to cut costs and shedding
unprofitable division. This means that focus is on efficiency (relationship
between inputs and outputs in short time horizon) rather than effectiveness
( attainment of desired competitive position).

Efficiency is introspective whereas effectiveness highlights the links between


the organization and its environment.
Strategy Formulation Implementation:
Interrelationship

STRATEGY FORMULATION STRATEGY IMPLEMENTATION


It is positioning forces before action. It is managing forces during action.

It focuses on effectiveness. It focuses on efficiency.

It is an intellectual process It is primarily and operational process.

It requires good intuitive and It requires special motivational and


analytical skills. leadership skills.

It requires coordination among few It requires combination of many


individuals. individuals.

Concepts and tools do not differ Concepts and tools varies substantially
greatly for small, large, profit or non among small, large, profit or non profit
profit organization. organization.
Strategy Formulation Implementation:
Interrelationship

In cell 1 organization thrives, since it is


achieving what it aspires to achieve

Efficient
with efficient output/input ratio. 2. Die
1. Thrive
Slowly

Operational Management
Where in cell 2 and cell 4 organization
is doomed unless it can establish
strategic direction. In cell 3 strategic
direction is present to ensure
Inefficient
4. Die
effectiveness even if rather too much 3. Survive
Quickly
input is being used to generate
outputs. Thus to be effective is to Effective Ineffective

survive whereas efficiency is not Strategic Management

sufficient for survival.


Strategy Formulation Implementation:
Interrelationship
Implementing strategy requires altering sales territories, adding new
departments, closing facilities, hiring new employees, changing
organizational pricing strategy, developing financial budgets, developing
new employee benefits, establishing cost control procedures, changing
advertising strategies, building new facilities, training new employees,
building MIS etc.

These types of activities differ greatly between manufacturing, service, and


governmental organizations.

Two types of linkage exists between tow phases of strategic management.


Forward linkage deals with impact of formulation and implementation

Backward linkage is concerned with impact in the opposite direction.


Strategy Formulation Implementation:
Interrelationship
Forward Linkage - Different elements in strategy formulation (objective
setting, environmental and organizational appraisal, strategic alternatives
and choice to strategic plan) determines the course that organization adopts
itself. Formulation and reformulation is continuous process.

Backward Linkage While dealing with strategic choice past strategic


actions also determine choice of strategy. Organizations tends to adopt
those strategies which can be implemented with the help of present
structure of resources combined with some additional effort. Such
incremental changes over a period of time take the organization from where
it is to where it wishes to be.
Barriers in Strategy Implementation

The Vision Barrier


Only 5% of the work force understands the strategy. The command and
control mechanisms of the industrial age, when employees were merely
spokes in the wheel, who required little knowledge of the company vision
are no longer effective in the age of the knowledge-based economy.

The People Barrier


Only 25% of managers have personal objectives and incentives linked to
strategy. Most incentive compensation systems are tied to short-term
financial results, rather than the long-term initiatives that support strategy
execution.
Barriers in Strategy Implementation

The Resource Barrier


60% of organizations don't link budgets to strategy. This occurrence is not
uncommon, as in many companies the budgeting and strategic planning
functions don't interact! Amazing! And since budgets are the traditional
tools for planning the allocation of human and financial resources, strategic
plans and strategic initiatives may fall short in terms of necessary resources.

The Management Barrier


85% of executive teams spend less than one hour per moth discussing
strategy. Have you ever conducted a monthly operations review meeting
with your staff? When you hold operations reviews, is the majority of time
dedicated to a discussion of financial results, focusing on "budget versus
actual" variances. Not uncommon. But, since budgets are often not linked to
the strategic plan, the discussions may completely avoid any focus on the
true value drivers in the business.
The 7-S Framework of McKinsey is a management
model which includes 7 factors to organize a
company in an holistic and effective way.
History
The 7-S Framework was first mentioned in "The Art Of Japanese
Management" by Richard Pascale and Anthony Athos in 1981.
It also appeared in "In Search of Excellence" by Peters and
Waterman 1982.
The model was born at a meeting of these four authors in 1978.
McKinseys 7s Model
Shared Values
(Superordinate Goals)
the interconnecting center of McKinsey's model
set of traits, behaviors, and characteristics that the organization
believes in
include the organizations mission and vision
Strategy
plans for the allocation of a firms scarce resources over time to
reach identified goals

plans of action an organization prepares in response to, or


anticipation of, changes in its external environment
Structure
represents how the company is organized

refers to how organization's units relate to each other: centralized;


decentralized; matrix, network
System
refers to the formal and informal procedures that govern
everyday activity, covering everything from management
information systems, through to the systems at the point of
contact with the customer (retail systems, call center systems)
Staff
refers to the company's people resources and how they are
developed, trained and motivated

selection, reward, recognition, retention, motivation and


assignment to appropriate work are all key issues here
Style
refers to the employees shared and
common way of thinking and behaving -
unwritten norms of behaviour and
thought
Skill
refers to the distinctive capabilities of
personnel or of the organization as a
whole which are needed to effectively
execute the companys vision, values,
goals and strategies
Uses of the 7-S Model
helps identify the strengths and weaknesses of an organization and
understanding the core and most influential factors in an
organizations strategy
determining how best to realign an organization to a new strategy
or other organization design
Issues in Strategy Implementation

Implementation task tests strategist ability to allocate resources, design


structures, formulate functional policies, identify leadership styles etc.

Strategies have to be activated through implementation and realize the


intent.

Strategies leads to plans. Plans result in different kinds of programmes


which includes goals, policies, procedures, rules and steps to be taken in
putting them into action.

Programs leads to formulation of the project which is time scheduled and


costs are predetermined. It requires allocation of funds based on capital
budgeting of the organization.

Projects creates need for infrastructure for day to day operations in


organization. Resource allocation is key to successful projects.
Issues in Strategy Implementation

Sequence in which strategy implementation issues are to be considered:


Project Implementation

Procedural Implementation

Resource Allocation

Structural Implementation

Functional Implementation

Behavioral Implementation

These activities are not performed in the same order (can be performed
simultaneously, can be repeated etc.).

Transition from strategy formulation to strategy implementation requires


shift in responsibility from strategist to divisional and functional managers
and their involvement should be maximum during strategy formulation.
Issues in Strategy Implementation

Management issues central to strategy implementation includes


establishing annual objectives, devising policies, allocating resources,
altering an existing organizational structure, restructuring, reengineering,
revising rewards and incentive plans, minimizing resistance to change,
matching manager with strategy, developing strategy supportive culture,
adapting production and operation processes, developing effective human
resource function and even downsizing to give firm a new direction.

Strategy implementation is key, top down communication must be clear for


developing bottom up support, competitions intelligence gathering and
benchmarking effort of employees is very important and challenge for a
strategist. Provide training to all to be world class performers.
Organization and Strategy Implementation

Strategic change requires change in structure of organization.


Structure largely dictates how objectives and policies will be established and can
significantly impact all other strategy implementation activities.
Structure dictates how major resources will be allocated.
There is no optimal organizational design or structure for a given strategy or
the type of organization and what is appropriate for one organization may
not work for other organization even though industry is organized in same
way.
For example consumer good companies tend to emulate the divisional structure
by product form or organization.
Small firms are functionally structured (centralized)
Medium sized firms are divisionally structured (decentralized)
Large firms are structured on basis of SBU (Strategic Business Unit / Matrix
Structure).
With growth of organization structure usually changes from simple to
complex as a result of linking of several basic strategies.
Organization and Strategy Implementation

Structural change is not affected by change in external and internal factors.

With change in firms strategy organizational structure becomes ineffective.


For example Too many levels of management, too many meetings
attended by too many people, interdepartmental conflict resolution, large
span of control, and too many unachieved objectives.

Sometimes structure can shape the choice of strategy and to know what
type of structural change is needed to implement new strategies and how
these changes can be best accomplished.

The organizational structures studied are : Division by


Functional, Geographic, Product, Customer, Divisional process, Strategic business
unit (SBU), matrix
Strategy Structure Relationship: Chandlers

New Administrative
Problem Emerges

New Strategy is Organizational


Formed Performance Declines

A New Organizational
Organizational
Structure is
Performance Improves
Established
The Functional Structure

The most common structure found within organizations, functional


structure consists of units or departmental groups identified by specialty,
such as engineering, development, marketing, finance, sales or human
resources that are controlled from the top level of management.

Advantages: Functional structure promotes specialization of labour,


encourages efficiency, minimizes the need for an elaborate control system,
and allows rapid decision making.

Disadvantages: It forces accountability at the top, minimize career


development opportunities, low employee morale, line/staff conflicts, poor
delegation of authority, inadequate planning for products and markets.
Mostly it is abandoned in favour of decentralization and improved
accountability.
The Functional Structure

CEO

Corporate
Corporate Corporate Strategic Corporate
Human
R&D Finance Planning Marketing
Resources

Sales and Human


Finance Production Engineering Accounting
Marketing Resources

Proper match between strategy and structure gives competitive edge or else it
will result into failure.
Companies must be flexible, innovative, and creative in global economy to
exploit their core competencies. Useful Information contributes the for the
formation and use of effective structures and controls, which yield improved
decision making.
The Functional Structure

With growth of companies in size, and level of diversification, new strategies


my be required. Organizational structure is companies formal configuration
of its intended roles, procedures, governance mechanism, authority and
decision making processes etc. The structure adopted must fit with the
companies strategy.
Simple organization structure offers little specialization of tasks, few rules,
little formalization, direct involvement of owner-manager in all operations
and decision making.
Functional structure is used by large companies and companies having low
level of diversification. It also impedes communication and coordination and
have narrow view.
Use of multidivisional structure where each division represents separate
business entity, each division would house its own functional hierarchy,
divisional managers will be responsible to manage day to day responsibility
besides a small corporate office that would determine long term strategic
direction and exercise overall financial control over semi-autonomous
divisions.
The Divisional Structure

When a company expands to supply goods or services to a variety of


customers, offers a variety of different products or are engaged in business
in several different markets, the company could adopt a divisional
organizational structure.
A divisional structure groups its divisions according to the specific demands
of products, markets or customers. Unlike the functional organizational
structure, where the different organizational functions of the company
conduct activities satisfying all customers, markets and products, the
divisional structure focuses on a higher degree of specialization within a
specific division, so that each division is given the resources, and autonomy,
to swiftly react to changes in their specific business environment. Therefore,
each division often has all the necessary resources and functions within it to
satisfy the demands put on the division
Each division will likely be structured as a functional structure. A company
with a divisional structure therefore has a subset of different and
specialized SBU's satisfying the demands of different customers, markets or
products.
The Divisional Structure
In divisional structure, the
organization is organized into
various divisions based on
basically three criteria product,
market of geographical
structures.
Advantages:
Market Information
Management Motivation
Management Development
Specialist Knowledge
Timely Decisions
Allowing Strategic roles for Top
Management
The Divisional Structure

The benefit of this organizational structure is that companies are able to


specialize its activities into self-reliant divisions, each capable of satisfying
e.g. customer demands and changes within the business environment.
The Strategic Business Unit (SBU) Structure

Large, diversified companies organize themselves into divisions to break the


management of the company into smaller, organizationally cohesive parts.
The company headquarters still gives the divisions strategic direction.
Strategic Business Units, or SBUs, are organizationally complete and
separate units that develop their own strategic direction. They still report
back to company headquarters but operate as independent businesses
organized according to their target markets. They are often large enough to
have their own internal organizational divisions.
SBU advantages
SBU supports cooperation between the departments of the company which has a
similar range of activities;
Improvement of strategic management
Improvement of accounting operations,
Easier planning of activities
The Strategic Business Unit (SBU) Structure

SBU Disadvantages
Difficulty with contact with higher management
May cause of internal tension due to difficult access to internal and external sources of funding,
May be the cause of the unclear situation with regard to the management activities.
The Matrix Structure

The matrix structure is an organizational design that groups employees by


both function and product. The organizational structure is very flat, and the
structure of the matrix is differentiated into whatever functions are needed
to accomplish certain goals. Each functional worker usually reports to the
functional heads, but do not normally work directly under their supervision.
Instead, the worker is controlled by the membership of a certain project,
and each functional worker usually works under the supervision of a project
manager. This way, each worker has two superiors, who will jointly ensure
the progress of the project. The functional head may be more interested in
developing the most exiting products or technologies, whereas the project
manager may be more concerned with keeping deadlines and controlling
product costs.
When work is accomplished, the project team may get dissolved, and
workers from different functional areas may get reassigned to other projects
and tasks.
Matrix Structure
The Matrix Structure

The peculiarities or characteristics a matrix organization are:-


Hybrid Structure : It combines functional organization with a project organization.
Functional Manager : The Functional Manager has authority over the technical
(functional) aspects of the project.
Project Manager : The Project manager has authority over the administrative aspects
of the project. He has full authority over the financial and physical resources which he
can use for completing the project.
Problem of Unity of Command This is so, because the subordinates receive orders
from two bosses viz., the Project Manager and the Functional Manager.
Specialization : In a Matrix organization, there is a specialization. The project manager
concentrates on the administrative aspects of the project while the functional
manager concentrates on the technical aspects of the project.
Suitability : Matrix organization is suitable for multi-project organizations. It is mainly
used by large construction companies, that construct huge residential and commercial
projects in different places at the same time. Each project is looked after (handled) by
a project manager. He is supported by many functional managers and employees of
the company.
Advantages of Matrix Structure

The advantages of a matrix organization are:-


Sound Decisions : In a Matrix Organization, all decisions are taken by experts.
Development of Skills : It helps the employees to widen their skills.
Top Management can concentrate on Strategic Planning : They can delegate all
the routine, repetitive and less important work to the project managers.
Responds to Changes in Environment : because it takes quick decisions.
Specialization : In a matrix organization, there is a specialization.
Optimum Utilization of Resources : In the matrix organization, many projects are
run at the same time. Therefore, it makes optimum use of the human and physical
resources.
Motivation : In a matrix organization, the employees work as a team. So, they are
motivated to perform better.
Higher Efficiency : The Matrix organization results in a higher efficiency. It gives
high returns at lower costs.
Limitations of Matrix Organization

The limitations of a matrix organization are:-


Increase in Work Load : In a matrix organization, work load is very high.
High Operational Cost : In a matrix organization, the operational cost is very high.
This is because it involves a lot of paperwork, reports, meetings, etc.
Absence of Unity of Command : In a matrix organization, there is no unity of
command. This is because, each subordinate has two bosses, viz., Functional
Manager and Project Manager.
Difficulty of Balance : It is also difficult to balance the authority & responsibilities
of the project manager and functional manager.
Power Struggle : In a matrix organization, there may be a power struggle
between the project manager and the functional manager. Each one looks after
his own interest, which causes conflicts.
Morale : In a matrix organization, the morale of the employees is very low. This is
because they work on different projects at different times.
Complexity : Matrix organization is very complex and the most difficult type of
organization.
Shifting of Responsibility : If the project fails, the project manager may shift the
responsibility on the functional manager.
Old New Organization Design

Old Organization Design New Organization Design


One large corporation Mini business units and cooperative
relationships
Vertical Communication Horizontal Communication
Centralized Top Down Decision Making Decentralized Participative Decision Making
Vertical Integration Outsourcing and Virtual Organizations
Work Quality Teams Autonomous Work Teams
Functional Work Teams Cross Functional Work Teams
Minimal Training Extensive Training
Specialized Job Design Focused on Value chain Team Focused Job Design
Individual
Network Structure

A group of legally independent companies or subsidiary business units that


use various methods of coordinating and controlling their interaction
in order to appear like a larger entity. In a business context, three
main types of network organization are typically seen:
Internal where a large company has separate units acting as profit centers
Stable where a central company outsources some work to others, and
Dynamic where a network integrator outsources heavily to other companies.
A corporation organized in this manner is often called a virtual organization
because it is composed of a series of project groups or collaborations linked
by constantly changing non-hierarchical, cobweb like networks.
This structure is important in unstable conditions where regular employees
are replaced with contract laborer or suppliers contracts are for specific
project and length of time etc.
The 'wiring' of information-age organizations needs to be different and
more complex. This has given rise to the concept of the Network
Organization.

Network Structure

A joint venture of companies for sharing skill or core competencies to


manufacture a product or provide a service. The companies rely on
relationships between people across structural, temporal and geographic
boundaries.
It is more than outsourcing and has flexibility as in a network structure
there is a continuous change in partners and the arrangements are goal
oriented and loose. All efforts are made to bring about new products and
services. The process changes more quickly for innovative products.
The characteristics of a network organization are:
Independent teams
Departments which share common values
Projects which support each other
Multiple links between projects
Information and Communications Technology is used to connect the projects.
There is a key coordinating role for the Chief Executive to construct the teams and
manage the interrelationship of projects (a kind of 'air traffic control').
Network Structure

An example of a networked organization is


Asea Brown Boveri. This giant corporation split
its business into 1,300 companies as separate
and distinct business units. All the energy and
resources of the corporate centre are then
geared to facilitating cross-company co-
operation, with computer networks and
knowledge sharing being at the centre of this
process.
SBU and Core Competence

Strategic business units are absolutely essential for multi product


organizations. These business units are basically known as profit centres.
They are focused towards a set of products and are responsible for each and
every decision / strategy to be taken for that particular set of products.

An autonomous division or organizational unit, small enough to be flexible


and large enough to exercise control over most of the factors affecting
its long-term performance. Because strategic business units are more agile
(and usually have independent missions and objectives), they allow
the owning conglomerate to respond quickly to changing economic
or market situations.
Attributes of SBU

A scientific method of grouping the businesses of multi-business


corporation which helps firm in strategic planning.
Improvement over territorial grouping of business / strategic planning.
SBU is grouping of related businesses that can be taken up for strategic
planning.
Unrelated product / business in any group are separated based on criteria of
functional relation.
Grouping of businesses on SBU lines helps the firm in strategic planning by
removing confusion and vagueness and provides right setting for correct
strategic planning.
Each SBU has distinct set of competitors and its own distinct strategy.
Each SBU will have a CEO who will be responsible for strategic planning for
the SBU and its profit performance. He will also exercise control over
activities of SBU.
Related Set of SBU or Not? / Characteristics

SBU might be build on similar technologies and provide similar sorts of


products / services.
SBU might be serving similar or different markets. Even if technology /
products differ it may be that customers are similar.
Technologies for frozen food, washing powders, and butter production may be
very different but they are all sold through retail operations (Unilever).
It may be different competencies on which the competitive advantage of
different SBUs are built.
For example Unilever may argue that the marketing skills associated with the
three product markets are similar etc.

The three Important Characteristics of SBU are:


It is a single business or collection of related businesses
It has its own competitors
It has a manager who is accountable for its operation
It is an area that can be independently planned for within the organization
The Value Chain Analysis: By Michael Porter

Can be used to examine the various activities of the firm and how they
interact in order to provide a source of competitive advantage by:
Performing these activities better and At a lower cost than the competitors
Types of Firms Activities

The value chain is basically the set of activities that an organization


performs. Primary activities are directly involved in serving the customer
while secondary support the primary ones.

Most importantly of all, understand which ones add value to the customer.
This type of analysis can help in understanding which activities should be
outsourced and which ones should remain in house or be bought in
(insourcing).
Primary - Those that are involved in the creation, sale and transfer of products
(including after-sales service)

Support - those that merely support the primary activities.


Primary Activities

Inbound logistics is concerned with receiving, storing, distributing inputs


(e.g. Handling of raw materials, warehousing, inventory control) .

Operations - comprise the transformation of the inputs into the final


product form (e.g. Production, assembly, and packaging)

Outbound logistics - involve the collecting, storing, and distributing the


product to the buyers (e.g. Processing of orders, warehousing of finished
goods, and delivery)

Marketing and sales - how buyers can be convinced to purchase the product
(e.g. Advertising, promotion, distribution)

Service - involves how to maintain the value of the product after it is


purchased (e.g. Installation, repair, maintenance, and training).
Secondary Activities

Procurement - concerned with the tasks of purchasing inputs such as raw


materials, equipment, and even labor

Technology Development - these activities are intended to improve the


product and the process, can occur in many parts of the firm.

Human Resource Management - involved in recruiting, hiring, training,


development and compensation

Firm Infrastructure - the activities which are not specific to any activity area
such as general management, planning, finance, and accounting are
categorized under firm infrastructure.
Identifying Core Competences

Core competencies differentiate an organization from its competitionthey


create a companys competitive advantage in the marketplace. Typically, a
core competency refers to a companys set of skills or experience in some
activity, rather than physical or financial assets. An organizational core
competency is an organizations strategic strength.
Eg: Hondas strategic strength, for example, lies in its small engine design and
manufacturing; Sony has a core competency in miniaturization; Federal Express
has a core competency in logistics and customer service.

Core competency is an area of specialized expertise that is the result of


harmonizing complex streams of technology and work activity. Identifying
and developing your companys core competencies are management keys to
sustaining your companys long-term competitive advantage.
Identifying Core Competences

Three tests can be applied to determine a core competency:


A core competency must be capable of developing new products and services and
must provide potential access to a wide variety of markets.

A core competency must make a significant contribution to the perceived benefits


of the end product.

A core competency should be difficult for competitors to imitate. In many


industries, such competencies are likely to be unique.

In determining your companys core competencies, you need to ask what is


the underlying skill, ability, knowledge, experience, technology or process
that enables your company to provide its unique set of products / services.
Identifying Core Competences

You next need to determine how you can use your companys core
competencies to develop strategic responsiveness to gain competitive
advantage. High-performing companies develop new core competencies
and expand their existing ones to enter new and future markets.
Apples unique competence seems to be its product design process. Simplicity
turned out to be the core attribute that made the iPod a revolutionary product,
one that changed consumer expectations.

Company executives should be aware that even the most successful strategy
will fail unless it is continually monitored and refreshed to meet changing
market conditions.
Three Tests to True Core Competences:

Relevance: Firstly, the competence must give your customer something that
strongly influences him or her to choose your product or service. If it does
not, then it has no effect on your competitive position and is not a core
competence.
Difficulty of Imitation: Secondly, the core competence should be difficult to
imitate. This allows you to provide products that are better than those of
your competition. And because you're continually working to improve these
skills, means that you can sustain its competitive position.
Breadth of Application: Thirdly, it should be something that opens up a
good number of potential markets. If it only opens up a few small, niche
markets, then success in these markets will not be enough to sustain
significant growth.
An example: You might consider strong industry knowledge and expertise to be a
core competence in serving your industry. However, if your competitors have
equivalent expertise, then this is not a core competence. All it does is make it
more difficult for new competitors to enter the market.
Examples of Core Competency

Eg: How small shops compete with supermarkets in grocery retailing.


Supermarkets core competency is lower prices is due to merchandizing, lower cost
supplies and in store management where as corner shop gains advantage by
concentrating more on convenience and service.

Note core competency between rival supermarkets.

In auto industry Japanese core competency was zero defect manufacturing,


Ford and GM by market access and dealer network, to provide unique
product design and low volumes of manufacturing / reduced life cycle of
products.

Core competency helps organizations to stretch into new opportunities and


provide value added service.

Value chain analysis provides long term competitive position in markets.


Audit resources- core resources

The resource audit identifies the resources available to an organisation in supporting


its strategies both from within and outside the organisation

Resources can be grouped

Physical resources Human resources Financial resources Intangibles



Material assets Number of employees Equity Goodwill
Immobility Skills Debt Loyalty of consumers
Machines Education Credibility Brand name
Others Experience Relationship with Good contacts with
Current assets Loyalty Suppliers Politicians
Inventory Corporate culture Investors CEOs
Nature of assets Bankers Corporate image
age Managing cash
condition
location
Audit resources- core resources

Define core resources

Easy to Difficult to
imitate imitate

Resources Necessary Unique Core Resources


Resources Resources

Same as Better than


competitors competitors
COMPETENCES
How an organisation employs and deploys its resources
Efficiency and effectiveness of physical, financial, human and intellectual
resources
How they are managed
Cooperation between people
Adaptability
Innovation
Customer and supplier relationships
Learning
The differences between resources and competences

Resources Competences
Tangible Intangible

Measureble Mostly difficult to measure

Easy to identify the owners Difficult to identify the owners

You can buy and sell You can acquire by learnind by doing
Analysing competences and core competences

The competence undertake the activities of the organisation. It shows how to link the
different activities together and how to deploy resources to sustain excellent performance

Bases of
competences

Economies of scale: offers the ability in mass consumer advertising,


Cost efficiency
Supply costs: well managed input costs, with IT or personal networks
Experience: the cumulative experience decrease the R+D and unit costs

How well are matched the products/services to the identified needs of the
Value added
chosen customers. Value added activity must be done from the viewpoint
of the customer or user of the production or service.

Competences are likely to be more robust and difficult to imitate if there


Managing linkages
are linkages within the organisations value chain and linkages into the
supply and distribution channels.

Robustness The strategic importance of an organisations competences relates to how


easy or difficult they are to imitate.
Managing Linkages

Core competencies are likely to be ore robust and difficult to imitate if they
relate to the management of linkages within the organization value chain
and linkages into supply and distribution chains.

Specialization is key and so is coordination of activities.

The management of internal linkages in the value chain would create


competitive advantage in number of ways such as:
There may be important linkage between primary activities. ( high levels of
inventory may ease production but will add to overall cost of production).

Linkages between Primary activities like Marketing and Production and so on.

Management of linkage between Primary activity and Support activity provides


core competency (investment in infrastructure, computer technology etc.)
Managing Linkages
Linkages between different support activities. Eg. Extent to which human
development is tune with new technologies etc.
Besides managing internal linkages organizations needs to complement /
coordinate activities with those of suppliers, channel members, and
customers. This can be achieved by:
Vertical integration to improve performance through ownership of more parts of
value system making more linkages internal to the organization.

Controlling performance of suppliers is critical to enhance quality and reduce


costs.

Total quality management which improves performance through closer working


relationships with specialists within the value chain. Like involving suppliers and
distributors at design stage of product or project.

Merchandising activities which manufacturers undertake with their distributors is


much improved.
Leadership and Strategic Implementation

Businesses today face change on all fronts economic, regulatory,


competitive, customer, and access to resources. Consequently, every
company is adjusting its strategy and that implies change. The success of
your strategy depends on your people will they be able to implement the
strategy and achieve the goals?
Strategic leadership provides the vision, direction, the purpose for growth,
and context for the success of the corporation. It also initiates "outside-the-
box" thinking to generate future growth. Strategic leadership is not about
micromanaging business strategies. Rather, it provides the umbrella under
which businesses devise appropriate strategies and create value.
If you are a leader at any level, your people look to you for guidance on
what needs to be done, and how. The key requirements of leaders are to:
Set the strategy
Communicate the strategy
Implement the strategy through people
Get results
Roles to Play For Good Strategy Execution

Staying on top of what is happening, closely monitoring progress, fretting out issues,
learning what obstacle lie in path of good strategic implementation.

Promoting the culture of Esprit de corps that mobilizes and energizes organizational
members to execute strategy in competent fashion and perform at high level.

Keeping organizations responsive to changing conditions, alert for new


opportunities, innovative ideas, ahead of rivals in developing competitively valuable
competencies and capabilities.

Exercising ethics leadership and model conduct and Pushing corrective actions to
improve strategy execution and overall performance.

The role of leader is Introducing Change, Integrating Conflicting Interests,


Developing Leadership Effectiveness of Managers, Developing Appropriate
Organizational Climate, Motivational system, Clarity of goals, Relationships,
Involvement, Interest, Monitoring, Change as and when required.
Leadership Role in Implementation

Strategic leadership entails the ability to anticipate, envision, maintain


flexibility, and empower others to create strategic change as necessary.

A manager with strategic leadership skills exhibits the ability to guide the
company through the new competitive landscape by influencing the
behavior, thoughts, and feelings of co-workers, managing thought of others
and successfully dealing with rapid, complex change and uncertainty.

Strategic leaders are CEO, Board of Directors, Top Management Teams,


Divisional General Managers. They must be able to deal with the diverse
and cognitive complex competitive situations that are characteristic of
todays competitive situation.
Responsibilities of Strategic Leaders

Managing Human Capital


Effectively managing companys Operations
Sustaining High performance over time
Being willing to make candid, courageous, yet pragmatic decisions.
Seeking feedback from face to face communication.
Having decision making responsibility that cannot be delegated.
Navigator
Strategist
Entrepreneur
Mobilizer
Talent advocate
Captivator
Global thinker
Change driver
Enterprise Euardian
Building A Strategy Supportive Corporate Culture

An organizations capacity to execute its strategy depends on its hard


infrastructure--its organization structure and systems--and on its soft
infrastructure--its culture and norms.
Building a Strategy-Supportive Corporate Culture
Where Does Corporate Culture Come From?
Culture and Strategy Execution
Types of Cultures
Creating a Fit Between Strategy and Culture
Establishing Ethical Standards
Building a Spirit of High Performance
Exerting Strategic Leadership
Staying on Top of How Well Things are Going
Establishing a Strategy-Supportive Culture
Keeping Internal Organization Innovative
Exercising Ethics Leadership
Making Corrective Adjustments
What Makes Up a Companys Culture?

Beliefs about how business ought to be conducted


Values and principles of management
Work climate and atmosphere
Patterns of how we do things around here
Oft-told stories illustrating companys values
Taboos and political donts
Traditions and Ethical standards
Where Does Corporate Culture Come From?
Founder or early leader
Influential individual or work group
Policies, vision, or strategies
Traditions, supervisory practices, employee attitudes
Organizational politics
Relationships with stakeholders and Internal sociological forces
Culture and Strategy Execution:
Ally or Obstacle?
Culture can contribute to -- or hinder -- successful strategy execution.
Requirements for successful strategy execution may -- or may not -- be
compatible with culture.
A close match between culture and strategy promotes effective
strategy execution

Why Culture Matters: Benefits of a Good Culture-Strategy Fit


Strategy-supportive cultures
Shape mood and temperament of the work force, positively affecting
organizational energy, work habits, and operating practices
Provide standards, values, informal rules and peer pressures that nurture and
motivate people to do their jobs in ways that promote
good strategy execution
Strengthen employee identification with the company, its performance
targets, and strategy
Strategy-Supportive cultures

Stimulate people to take on the challenge of realizing the companys


vision, do their jobs competently and with enthusiasm, and collaborate
with others to execute the strategy

Optimal condition: A work environment that Promotes can do attitudes,


Accepts change, Breeds needed capabilities.
Forces and Factors Causing Culture to Evolve

Internal crises

Revolutionary technologies

New challenges

Arrival of new leaders

Turnover of key employees

Diversification into new businesses

Expansion into different geographic areas

Rapid growth adding new employees

Merger with or acquisition of another company

Globalization
Creating a Strong Fit Between Strategy and Culture

Diagnose which facets of present culture


Step 1 are strategy-supportive and which are not

Talk openly about why aspects


Step 2 of present culture need
to be changed

Follow with swift, visible actions to modify


Step 3 culture - include both substantive and
symbolic actions
Types of Corporate Cultures

Strong vs. Weak Cultures

Unhealthy Cultures

Adaptive Cultures
Characteristics of Strong Culture Companies

Conduct business according to a clear, widely-understood philosophy

Management spends considerable time communicating and reinforcing


values

Values are widely shared and deeply rooted

Typically have a values statement

Careful screening/selection of new employees to be sure they will fit in

Visible rewards for those following norms; penalties for those who dont
How Does a Culture Come to Be Strong?

Leader who establishes values consistent with


Customer needs
Competitive conditions
Strategic requirements
A deep, abiding commitment to espoused values and business philosophy
Practicing what is preached!
Genuine concern for well-being of
Customers
Employees
Shareholders
Characteristics of Weak Culture Companies

Many subcultures
Few values and norms widely shared
Few strong traditions
Little cohesion among the departments
Weak employee allegiance to companys vision and strategy
No strong sense of company identity
Characteristics of Unhealthy or Low
Performance Cultures
Politicized internal environment

Issues resolved on basis of turf

Hostility to change

Experimentation and efforts to alter status quo discouraged

Avoid risks and dont screw up

Promotion of managers more concerned about process and details than


results

Aversion to look outside for superior practices

Must-be-invented here syndrome


Hallmarks of Adaptive Cultures

Introduction of new strategies to achieve superior performance

Strategic agility and fast response to new conditions

Risk-taking, experimentation, and innovation to satisfy stakeholders

Proactive approaches to implement workable solutions

Entrepreneurship encouraged and rewarded

Top managers exhibit genuine concern for customers, employees,


shareholders, suppliers
Types of Culture - Changing Actions

Revising policies and procedures to help drive cultural change


Altering incentive compensation to reward desired cultural behavior
Visibly praising and recognizing people who display new cultural traits
Hiring new managers and employees who have desired cultural traits and
can serve as role models
Replacing key executives strongly associated with old culture
Communicating to all employees the basis for cultural change and its
benefits
Symbolic Culture - Changing Actions

Emphasize frugality

Eliminate executive perks

Require executives to spend


time talking with customers

Alter practices identified as cultural hindrances

Visible awards to honor heroes

Ceremonial events to praise people and teams who get with the program
Substantive Culture - Changing Actions

Benchmarking and best practices

Set world-class performance targets

Bring in new blood, replacing traditional managers

Shake up the organizational structure

Change reward structure

Increase commitment to employee training

Reallocate budget, downsizing and upsizing