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Strategy Implementation and Control


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Strategy Implementation and Control

  1. 1. Strategy Implementation & Control Prof. Prashant Mehta National Law University, Jodhpur
  2. 2. STRATEGYIMPLEMENTATIONAND CONTROL • Introduction • Interrelationship Between Strategy Formulation and Implementation • Issues in Strategy Implementation • Organization and Strategy Implementation • Strategic Business Unit and Core Competence • Leadership and Strategic Implementation • Building Strategy and Supportive Corporate Culture
  3. 3. 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
  4. 4. 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 organization’s structure to the chose strategy.
  5. 5. Strategy Formulation – Implementation: Interrelationship A B (success) C D WEAK EXCELLENT FLAWEDSOUND STRATEGY IMPLEMENTATION STRATEGYFORMULATION Strategy formulation and Strategy Implementation are different and it needs to be sound and excellent. Strategy fails because of failed implementation and not because of strategy model. The matrix shows various combination of strategy formulation and implementation.
  6. 6. 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.
  7. 7. 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.
  8. 8. Strategy Formulation – Implementation: Interrelationship 1. Thrive 2. Die Slowly 3. Survive 4. Die Quickly Effective Ineffective Strategic Management EfficientInefficient OperationalManagement In cell 1 organization thrives, since it is achieving what it aspires to achieve with efficient output/input ratio. 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 effectiveness even if rather too much input is being used to generate outputs. Thus to be effective is to survive whereas efficiency is not sufficient for survival.
  9. 9. Strategy Formulation – Implementation: Interrelationship STRATEGY FORMULATION • It is positioning forces before action. • It focuses on effectiveness. • It is an intellectual process • It requires good intuitive and analytical skills. • It requires coordination among few individuals. • Concepts and tools do not differ greatly for small, large, profit or non profit organization. STRATEGY IMPLEMENTATION • It is managing forces during action. • It focuses on efficiency. • It is primarily and operational process. • It requires special motivational and leadership skills. • It requires combination of many individuals. • Concepts and tools varies substantially among small, large, profit or non profit organization.
  10. 10. 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.
  11. 11. 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.
  12. 12. Issuesin 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.
  13. 13. Issuesin 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.
  14. 14. Issuesin 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.
  15. 15. Organization and StrategyImplementation • 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.
  16. 16. Organization and StrategyImplementation • 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
  17. 17. Strategy– Structure Relationship: Chandler’s New Administrative Problem Emerges Organizational Performance Declines A New Organizational Structure is Established Organizational Performance Improves New Strategy is Formed
  18. 18. 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.
  19. 19. The Functional Structure CEO Corporate R&D Corporate Finance Strategic Planning Finance Production Engineering Accounting Sales and Marketing Human Resources Corporate Marketing Corporate Human 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.
  20. 20. 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.
  21. 21. 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.
  22. 22. 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
  23. 23. • 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 Divisional Structure
  24. 24. 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
  25. 25. 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.
  26. 26. 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.
  27. 27. Matrix Structure
  28. 28. 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.
  29. 29. 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.
  30. 30. 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.
  31. 31. 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 Individual Value chain Team Focused Job Design
  32. 32. NetworkStructure • 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. •
  33. 33. NetworkStructure • 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').
  34. 34. NetworkStructure 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.
  35. 35. 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.
  36. 36. 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.
  37. 37. 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 SBU’s 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
  38. 38. 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
  39. 39. 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. •
  40. 40. 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).
  41. 41. SecondaryActivities • 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.
  42. 42. Identifying Core Competences • Core competencies differentiate an organization from its competition—they create a company’s competitive advantage in the marketplace. Typically, a core competency refers to a company’s set of skills or experience in some activity, rather than physical or financial assets. An organizational core competency is an organization’s strategic strength. • Eg: Honda’s 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 company’s core competencies are management keys to sustaining your company’s long-term competitive advantage.
  43. 43. 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 company’s 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.
  44. 44. Identifying Core Competences • You next need to determine how you can use your company’s 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. • Apple’s 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.
  45. 45. 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.
  46. 46. 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.
  47. 47. 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 • • Material assets • Immobility • Machines • Others • Current assets • Inventory • Nature of assets • age • condition • location • Number of employees • Skills • Education • Experience • Loyalty •Corporate culture • Equity • Debt • Credibility • Relationship with • Suppliers • Investors • Bankers • Managing cash • Goodwill • Loyalty of consumers • Brand name • Good contacts with • Politicians • CEOs • Corporate image Physical resources IntangiblesFinancial resourcesHuman resources
  48. 48. Audit resources- core resources Necessary Resources Unique Resources Resources Easy to imitate Difficult to imitate Same as competitors Better than competitors Define core resources Core Resources
  49. 49. 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”
  50. 50. 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 Cost efficiency Value added Managing linkages Robustness Bases of competences Economies of scale: offers the ability in mass consumer advertising, 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 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 are linkages within the organisation’s value chain and linkages into the supply and distribution channels. The strategic importance of an organisation’s competences relates to how easy or difficult they are to imitate.
  51. 51. 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.)
  52. 52. 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.
  53. 53. 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
  54. 54. Rolesto 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.
  55. 55. 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 today’s competitive situation.
  56. 56. Responsibilities of StrategicLeaders • Managing Human Capital • Effectively managing company’s 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
  57. 57. Building A StrategySupportive CorporateCulture • “An organization’s 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
  58. 58. What Makes Up a Company’s 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 company’s values • Taboos and political don’ts • 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
  59. 59. 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
  60. 60. Strategy-Supportivecultures • Stimulate people to take on the challenge of realizing the company’s 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.
  61. 61. 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
  62. 62. Step 1 Diagnose which facets of present culture are strategy-supportive and which are not Step 2 Talk openly about why aspects of present culture need to be changed Step 3 Follow with swift, visible actions to modify culture - include both substantive and symbolic actions Creating a Strong Fit Between Strategy and Culture
  63. 63. Types of Corporate Cultures Strong vs. Weak Cultures Unhealthy Cultures Adaptive Cultures
  64. 64. 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 don’t
  65. 65. 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
  66. 66. 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 company’s vision and strategy • No strong sense of company identity
  67. 67. 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 don’t 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
  68. 68. 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
  69. 69. 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
  70. 70. 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”
  71. 71. 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