Class 5 Chap 2: Crafting and Executing Strategy Learning Objectives

1. 2.

Understand the hierarchy of the Firms strategies Understand why the initiatives at various organizational levels must be coordinated to achieve company strategic targets. Be aware of that crafting a strategy is a task for a companys entire management team. See that a strategy is a collection of strategic initiatives and actions taken at many organizational levels. Understand the role and responsibility of the board of directors in the strategic management process.
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3. 4.

5.

If you dont know where you are going, any road will take you there.
Cheshire Cat to Alice
Lewis Carroll, Alice in Wonderland

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The Strategic Plan is the Roadmap

Elements of a Firms Strategic Plan

Its strategic vision, business mission, and core values

Its strategic and financial objectives

Its chosen strategy

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Figure 2.1 The Strategy-Making, Strategy-Executing Process

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Task 3: Crafting a Strategy

Crafting a strategy entails stitching together
managements answers to a series of hows:
How to attract and please customers How to compete against rivals How to position the company in the marketplace and

capitalize on attractive opportunities to grow the business How best to respond to changing economic and market conditions How to manage each functional piece of the business How to achieve the companys performance targets.
And this stitching together must result in a coherent and coordinated game plan for running the firm successfully.
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A Firms Strategy-Making Hierarchy

Crafting

strategy is a collaborative effort

that:
Involves managers from various

levels of the organization

Is not something only high-

level executives engage in

Requires jointly choosing among

the various strategic alternatives

A

firms strategy is crafted into a collection of initiatives undertaken by managers at all levels in the organizational hierarchy
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The Strategy-Making Hierarchy

Corporate strategy Is orchestrated by the CEO and other senior executives and establishes an overall game plan for managing a set of businesses in a diversified, multibusiness company. Addresses the questions of how to capture cross-business synergies, what businesses to hold or divest, which new markets to enter, and how to best enter new marketsby acquisition, creation of a strategic alliance, or through internal development.

Business strategy
Functional-area strategies

Is primarily concerned with building competitive advantage in a single business unit of a diversified company or strengthening the market position of a nondiversified single business company.
Are concerned with the strategies specifically related to particular functions or processes within a business (marketing strategy, production strategy, finance strategy, customer service strategy, product development strategy, and human resources strategy). Are relatively narrow strategic initiatives and approaches of limited scope for managing key operating units (plants, distribution centers, geographic units) and specific operating activities such as materials purchasing or Internet sales.
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Operating strategies

StrategyMaking Hierarchy
Figure 2.2

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A Unified Overall Strategy

Uniting the Strategy-Making Effort

Entails creating a cohesive collection of mutually

reinforcing initiatives that fit and work together

Conflicting or inconsistent strategic elements impair a firms performance.

Requires that lower-level strategies be modified to fit

with higher-level strategies.

Requires that higher-level strategies be adapted to

accommodate more appealing lower-level strategy ideas and initiatives as they arise.

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Task 4: Implementing and Executing the Strategy

Implementation and execution of strategy

Is an operations-oriented, make-things-happen task aimed at

performing core business strategy-supportive initiatives . Is the most demanding and time-consuming part of the strategy management process.

Converting plans into actions tests a managers ability to:

Direct organizational change to build and strengthen company

competencies and competitive capabilities Create and nurture a strategy-supportive work climate that motivates people to meet or beat performance targets. To put the strategy in place and execute it proficiently on many organizational fronts.
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The Strategy Execution Process Involves Many Initiatives, For Example:

Staffing needed skills and expertise to build and strengthen strategy-supportive competencies and competitive capabilities. Allocating ample resources to activities critical to strategic success. Ensuring policies and procedures facilitate rather than impede execution. Using best practices to perform core business activities and push for continuous improvement. Installing information and operating systems that enable personnel to better carry out their strategic roles. Tying rewards and incentives directly to the achievement of performance objectives and good strategy execution. Creating a culture and work climate conducive to the strategy. Exerting the leadership needed to keep improving on how the strategy is being executed.
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Task 5: Evaluating Performance and Initiating Corrective Adjustments

This task involves:

Examining one or more aspects of the firms strategy

implementation and execution to determine if all is going as well as intended.

Evaluating organizational learning about strategy

execution and making adjustments that will move the firm closer to operating excellence.
Deciding whether or not to continue or change the

firms current vision, objectives, strategy, and/or strategy execution methods.

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Stage 5: Evaluating Performance and Initiating Corrective Adjustments

Triggering

change as needed:

Monitoring new external developments

Evaluating the firms progress Making corrective adjustments
Managing

strategy is an ongoing process, not an every-now-and-then task

A firms vision, objectives, strategy, and approach

to strategy execution are never final

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Successful Strategy Execution

Strategy execution
Is a job for the entire management team and requires diligent

pursuit of operating excellence.

Hinges upon the skills and cooperation of operating managers

who can push needed changes in their units and consistently deliver good results.

Handling of the strategy implementation/execution process is considered successful if the firm:

Achieves or exceeds strategic and financial performance targets.

Shows good progress in achieving its strategic vision.

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Corporate Governance:
Role of the Board of Directors in Strategy-Making & Strategy-Executing

The Board of directors duty is to:

Exercise strong oversight of how the firms business is

being conducted and managed including strategycrafting & strategy-execution tasks.

Effective

corporate governance is undermined:

when boards of directors fail in their responsibility to

maintain ultimate control over

the firms strategic direction, the major elements of its strategy, How management is implementing and executing the strategy, executive compensation, and the financial reporting process.

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Strong Boards Lead to Good Corporate Governance

A

Strong, Independent Board of Directors:

Is well informed about the companys performance

Guides and judges the CEO and other top executives Has the courage to curb management actions it

believes are inappropriate or unduly risky

Certifies to shareholders that the CEO is doing what

the board expects

Provides insight and advice to management Is intensely involved in debating the pros and cons of

key decisions and actions

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Why Does It MeanThat a Firm Exhibits Strategic Intent?

A firm with an unshakableoften obsessive commitment to achieving its strategic intent typically:
Goes all out to marshal resources and capabilities to close in on its

strategic target. Crafts potent offensive strategies to throw rivals off-balance, put them on the defensive, and force them into a game of catch-up. Tries to alter the market contest and tilt the rules for competing in its favor. Rallies its personnel in efforts to make its strategic intent a reality.

Firms with strategic intent are thus a force to be reckoned with and often are more formidable competitors than rivals having modest strategic objectives and market ambitions.
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Final Thought for the Glo-bus Simulation: Lead the Development of Better Competitive Capabilities
Lead

efforts to strengthen existing competitive capabilities Anticipate changes in industry environment Proactively build competencies and capabilities that hold promise for building a stronger competitive edge

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Team Exercise
Convert

your strategic vision into a set of initiatives required to implement the vision. the initiatives into specific actions/decisions you will make in the practice round.

Transform

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