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Lecture 6

Lecture 6. Strategy Implementation – Organizing for action. Strategy Implementation. Sum total of all activities and choices required for the execution of a strategic plan Questions to be considered by strategy makers Who are the people who will carry out the strategic plan?

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Lecture 6

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  1. Lecture 6 Strategy Implementation – Organizing for action

  2. Strategy Implementation • Sum total of all activities and choices required for the execution of a strategic plan • Questions to be considered by strategy makers • Who are the people who will carry out the strategic plan? • What must be done to align the company’s operations in the new intended direction? • How is everyone going to work together to do what is needed? • These need to be considered right at the time of making the choices • Revisit before implementation • Who implements strategy? • Everyone in the organization • Complete buy-in is very important by all especially the operational people

  3. What must be done? • Developing programs, budgets and procedures • Programs: purpose of a program is to make strategy action-oriented • Feasibility: coherent stable system? Ease of transition • Sequence of execution: where should change begin? Does sequence change affect success • Location: where to implement? • Pace and nature of change: slow or fast? Incremental or radical? • Stakeholder evaluations: buy-in from stakeholders? More inputs needed? • Budgets: Last chance to identify any problems in the strategic plan. program, divisional and corporate budgets • Procedures: Standard operating procedures, need to be revisited from time to time, ensures consistency over time and location

  4. Achieving Synergy • One of the goals to be achieved in strategic implementation is synergy • Synergy happens when a division independently would earn less than what it would earn as a part of the organization • Synergy can happen through • Shared know-how • Coordinated strategies • Shared tangible resources • Economies of scale or scope • Pooled negotiating power • New Business Creation

  5. Organizing for action • Any change in strategy leads to some change in the way an organization is structured • Structure follows strategy • Stages of Corporate Development

  6. Stages of corporate development

  7. Stages of corporate development

  8. Stages of corporate development

  9. Stages of corporate development • Stage I: Simple structure • Crisis of leadership due to entrepreneur floundering • Stage II: Functional structure • Challenge for the founder to change management style • Stage III: Divisional structure • Crisis of control due to the various divisions acting independently • Red tape crisis • Stage IV: Beyond SBUs • Blocks to changing stages • Internal: lack of resources, ability, refusal of top mgmt to delegate decision making • External: economic conditions, labor shortages, lack of market growth

  10. Dynamic Stable • High rate of change • Use team-based, network, or other organic structure • Steady conditions, predictable change • Use mechanistic structure Complex Simple • Many elements (such as stakeholders) • Decentralize • Few environmental elements • Less need to decentralize External Environment & Structure

  11. Diverse Integrated • Several products, clients, regions • Use divisional form aligned with the diversity • Single product, client, place • Use functional structure, or geographic division if global Hostile Munificent • Competition and resource scarcity • Use organic structure for responsiveness • Plenty of resources and product demand • Less need for organic structure External Environment & Structure (con’t)

  12. Organizational lifecycle

  13. Elements of Organizational Structure Department- alization Span of Control Organizational Structure Elements Formalization Centralization

  14. Formal decision making authority is held by a few people, usually at the top • Decision making authority isdispersed throughout the organization Centralization Decentralization Centralization and Decentralization

  15. Formalization • The degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms. • Formalization increases as firms get older, larger, and more regulated • Problems • Reduces organizational flexibility • Work rules can undermine productivity • Employees feel disempowered • Rules become focus of attention

  16. Advanced types of Org Structures – Matrix Structure • Advantageous when external environment is complex and changing • Conditions for typically having matrix structure • Ideas need to be cross fertilized across projects or products • Resources are scarce • Abilities to process information and to make decisions need to be implemented • Distinct phases of development of matrix structure • Temporary cross-functional task forces • Product/ Brand Management • Mature Matrix

  17. Network Organizational Structure Call centerpartner(India) Productdevelopment partner(U.S.A.) CoreFirm Accounting partner (Canada) Package design partner(UK) Assembly partner(Mexico)

  18. Advanced types of Org Structures – Network Structure • Virtual elimination of in-house business functions • Virtual organization • Key characteristics • Heavily dependant on outsourcing • Organizations business functions are spread • Most useful when the environment of a firm is unstable and is expected to remain so • Organization is in effect only a shell with a small headquarters acting as a broker electronically connected to some completely owned divisions, partially owned subsidiaries and other independent companies

  19. Reengineering and strategy implementation • Reengineering is the radical redesign of business processes to achieve major gains in cost, service or time • Principles for reengineering • Organizing around outcomes and not tasks • Have those who use the output of the process perform the process • Subsume information-processing work into real work that produces the information • Treat geographically dispersed resources as though they were centralized • Link parallel activities instead of integrating their results • Put the decision point where the work is performed and build control into the process • Capture information once and at the source

  20. Designing jobs to implement strategy • Strategy implementation also involves redesigning the way jobs are done • Job design refers to the design of individual tasks in an attempt to make them more relevant to the company • Job Enlargement • Job Rotation • Job Enrichment

  21. International issues in strategy implementation • Stages in international development • Stage I (Domestic company) • Stage II (Domestic company with export division) • Stage III (Primarily domestic company with international division) • Stage IV (Multinational corporation with multi-domestic emphasis) • Stage V (Multinational corporation with global emphasis) • Sequence might not be always as shown above • Same organization can be at a different stage with respect to its multiple products • Centralization vs Decentralization • Product group structure e.g. American Cynamid • Geographic area structure e.g Nestle

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