annual objectives unit i
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Strategy ImplementationStrategy ImplementationStrategy ImplementationStrategy Implementation
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Strategy Implementation
• Translating thought into a Strategic action
• Three Concern Areas:
– Identification of Measurable, Mutually determined annual objectives
– Development of Specific Functional Strategies
– Communication of Concise policies to guide decisions
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Annual Objectives• Translation of Long Term aspirations into
Year’s budget • Specific basis for Monitoring & Controlling
organizational Performance • Alert Top Management to variations in
Key Performance Areas • Specific, Measurable statements of what
an organization subunit is expected to achieve in contributing to accomplishment of Business’s Grand Strategy
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Annual ObjectivesQualities of Effective Annual Objectives:
• Linkage to Long Term objectives – Add breadth & specifies what must be
accomplished in order to achieve long term objective
– Provide Targets for performance of operating areas
• Consistency in Annual Objectives:– What, When & How Measurement
• Measurable:– Measurable activity & measurable outcomes
• Priorities:– Prioritize short term objectives – Objectives critical to success deserve additional
attention
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Qualities of Effective Annual Objectives
• Acceptable• Flexible• Suitable• Motivating • Understandable• Achievable
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Annual ObjectivesBenefits of Annual Objectives:• Tangible & Meaningful focus through which
managers translate long term objectives & grand strategies into specific actions
• Clarity of Purpose: A better understanding of each person’s role in business mission
• Link b/w Strategic Intent & operating reality: Process to form annual objectives form for addressing conflicting political concerns
• Basis for Strategic Control: Developing budgets, schedules, Trigger points & other mechanisms for controlling strategy implementation
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Annual Objectives
• Motivational Pay Offs in strategy Implementation - Link to Business reward structure
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Functional Strategies • Functional Strategy is short term game plan for
a key functional area within a company • Specific details about how key functional areas
are to be managed in the near future • Areas of Marketing, Finance, Production, R&D &
Personnel • Implementing Grand Strategy by organizing &
activating specific sub units of the company to pursue the business strategy in daily activities
• Translate Grand Strategy into action designed to accomplish specific annual objectives
• Identify & coordinate actions that support the grand strategy & improve the likelihood of accomplishing annual objectives
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Distinction B/W Grand & Functional Strategy
• Time Horizon:– Shorter for Functional Strategy – Identify & coordinate short term actions – Shorter time span focuses manager’s
attention on what needs to be done now to make grand strategy work
– Shorter time framework allows functional managers to recognize current conditions & adjust to changing conditions in developing functional strategies
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Distinction B/W Grand & Functional Strategy
• Specificity:– More specific than Grand Strategy – Functional actions but Grand Strategy provides
general direction – Specific guidance to acc annual objectives – How to meet annual objectives – Adds Substance, Completeness & meaning to
what a specific sub unit of a business must do – Clarifies Top Management how functional
managers intend to accomplish grand strategy – Facilitate coordination b/w operating units within
orgn by clarifying areas of interdependence & potential conflict
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Distinction B/W Grand & Functional Strategy
• Participants:– Functional strategy is delegated by
business level manager to principal subordinates for running operating area of the business
– Involvement of operating managers essential as he is the front runner & active involvement increases commitment to strategies developed
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Functional Strategies in the Marketing Area
• Product:– Identification of customer needs – Features, Product Lines, Packaging,
Quality & NPD – Product Service Concept & Target Markets – Most profitable Product lines – Changes to influence customer orientation – Which products do we emphasize
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Price • Approach to pricing strategy: Cost
oriented, market oriented or competition oriented
• Discounting structures • Pricing policies: National or Regional
differences • Price Segments to be Targeted • Profit margins• Market Skimming or Market Penetration
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Place
• Decisions regarding channel management
• Level of Market Coverage• Priority geographic areas • Channel objectives & Structures • Sales organization structure • SCM
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Promotion• Key Promotion priorities &
Approaches • Advertising, Communication
priorities & approaches linked to different products or markets
• Media Management • Promotion Budgeting
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Functional Strategies in the Finance Area
• Capital Acquisition:– Acceptable cost of capital – Desired proportion of short term &
long term debt; Preferred & common equity
– Balance b/w Internal & External Funding
– Appropriate Risk & Ownership structures
– Levels & Forms of leasing for providing assets
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• Capital Allocation:– Priorities for Capital Allocation Projects – Final selection of Projects – Capital Allocation by operating
Managers w/o approval• Dividend & Working Capital
Management:– Proportion of earnings as dividends – Importance of dividend stability – Cash Flow Requirements; Minimum &
Maximum Cash balances – Liberal/ Conservative Credit Policies – Payment timings & Procedures
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Functional Strategies in the R & D Area
• Research vs. Commercial Development:– Emphasis on Innovation & Break
Through – Emphasis on product development,
Refinement & modification
• Time Horizon:– Short Term or Long Term – Orientation to support business
strategy
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• Organizational Fit:– In House R & D or contracting out– Centralized or Decentralized
• Basic R&D Posture:– Offensive posture leading Innovation &
Development in Industry – Defensive posture reacting to
competitor’s development
Functional Strategies in the R & D Area
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Functional Strategies in Personnel
• Development of Managerial Talent:– Employee Recruitment, Selection &
Orientation – Career Development & Counseling, Training
& Development
• Compensation & Regulatory Concerns:– Compensation, Labor/Union Relations
• Competent & Well Motivated:– Discipline, Control & Evaluation – Performance Appraisal, 360 degree
Feedback
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Developing & Communicating Concise Policies
• Policies: Directives designed to guide the thinking, decisions & actions of managers & subordinates in implementing orgn strategy
• Guidelines for establishing & controlling ongoing operations consistent with Firm’s strategic objectives
• Increase managerial effectiveness by standardizing routine decisions & controlling discretion of managers
• Policies are derived from functional strategies with key purpose of aiding strategy execution
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Purpose of Policies• Indirect control over Independent Action • Uniform Handling of Similar Actions ‘• Quicker decisions by standardizing answers • Institutionalize the basic aspects of Orgn.
Behavior• Reduce Uncertainty in Repetitive & day –to
day decision making • Counteract resistance to or rejection for
chosen strategies by organization members • Predetermined answer to routine problems • Afford managers a mechanism for avoiding
hasty & ill conceived decisions in changing operations
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Policies
• Policies can vary in their strategic significance
• Policies can be externally imposed or internally driven