fred r. david prentice hall ch 7-1 chapter 7 implementing strategies: management issues strategic...
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Fred R. DavidPrentice Hall
Ch 7-1
Chapter 7Chapter 7Implementing Strategies:Implementing Strategies:
Management IssuesManagement Issues
Strategic Management:
Concepts and Cases. 9th edition
Fred R. David
PowerPoint Slides by
Anthony F. Chelte
Western New England College
Fred R. DavidPrentice Hall
Ch 7-2
Chapter OutlineChapter Outline
• The nature of Strategy Implementation
• Annual Objectives
• Policies
• Resource Allocation
Fred R. DavidPrentice Hall
Ch 7-3
Chapter OutlineChapter Outline
• Managing Conflict
• Matching Structure with Strategy
• Restructuring, Reengineering, and E-Engineering
• Linking Performance and Pay to Strategies
Fred R. DavidPrentice Hall
Ch 7-4
Chapter OutlineChapter Outline
• Managing Resistance to Change
• Managing the Natural Environment
• Creating a Strategy-Supportive Culture
Fred R. DavidPrentice Hall
Ch 7-5
Chapter OutlineChapter Outline
• Production/Operations Concerns When Implementing Strategies
• Human Resource Concerns When Implementing Strategies
Fred R. DavidPrentice Hall
Ch 7-6
Implementing Strategies: Implementing Strategies: Management IssuesManagement Issues
Pretend that every single person you meet has a sign around his or her neck that says, “Make me feel important.”
-- Mary Kay Ash, CEO of Mary Kay, Inc.
Fred R. DavidPrentice Hall
Ch 7-7
Strategy Analysis & ChoiceStrategy Analysis & Choice
Contrasting strategy formulation and Contrasting strategy formulation and strategy implementationstrategy implementation
– Formulation is positioning forces before the action
– Implementation is managing forces during the action
Implementing Strategies: Implementing Strategies: Management IssuesManagement Issues
Fred R. DavidPrentice Hall
Ch 7-8
Strategy Analysis & ChoiceStrategy Analysis & Choice
Contrasting strategy formulation and Contrasting strategy formulation and strategy implementationstrategy implementation
– Formulation focuses on effectiveness
– Implementation focuses on efficiency
Implementing Strategies: Implementing Strategies: Management IssuesManagement Issues
Fred R. DavidPrentice Hall
Ch 7-9
Strategy Analysis & ChoiceStrategy Analysis & Choice
Contrasting strategy formulation and Contrasting strategy formulation and strategy implementationstrategy implementation
– Formulation is primarily an intellectual process
– Implementation is primarily an operational process
Implementing Strategies: Implementing Strategies: Management IssuesManagement Issues
Fred R. DavidPrentice Hall
Ch 7-10
Strategy Analysis & ChoiceStrategy Analysis & Choice
Contrasting strategy formulation and Contrasting strategy formulation and strategy implementationstrategy implementation
– Formulation requires good intuitive and analytical skills
– Implementation requires special motivation and leadership skills
Implementing Strategies: Implementing Strategies: Management IssuesManagement Issues
Fred R. DavidPrentice Hall
Ch 7-11
Strategy Analysis & ChoiceStrategy Analysis & Choice
Contrasting strategy formulation and Contrasting strategy formulation and strategy implementationstrategy implementation
– Formulation requires coordination among a few individuals
– Implementation requires coordination among many persons
Implementing Strategies: Implementing Strategies: Management IssuesManagement Issues
Fred R. DavidPrentice Hall
Ch 7-12
Strategy Analysis & ChoiceStrategy Analysis & Choice
Strategy implementation –Strategy implementation –
– Varies among different types and sizes Varies among different types and sizes of organizations of organizations
Implementing Strategies: Implementing Strategies: Management IssuesManagement Issues
Fred R. DavidPrentice Hall
Ch 7-13
Strategy Analysis & ChoiceStrategy Analysis & Choice
Strategy implementation Actions –Strategy implementation Actions –
– Altering sales territoriesAltering sales territories– Adding new departmentsAdding new departments– Closing facilitiesClosing facilities– Hiring new employeesHiring new employees– Cost-control proceduresCost-control procedures– Changing advertising strategiesChanging advertising strategies– Building new facilities Building new facilities
Implementing Strategies: Implementing Strategies: Management IssuesManagement Issues
Fred R. DavidPrentice Hall
Ch 7-14
Formulation to Implementation Formulation to Implementation transition –transition –
– Shift in responsibilityShift in responsibility• From strategists to division and functional From strategists to division and functional
managers managers
Management PerspectivesManagement Perspectives
Fred R. DavidPrentice Hall
Ch 7-15
Management IssuesManagement Issues
ManagementIssues
ResourcesResources
Organizational structureOrganizational structure
RestructuringRestructuring
Rewards/IncentivesRewards/Incentives
Annual ObjectivesAnnual Objectives
PoliciesPolicies
Fred R. DavidPrentice Hall
Ch 7-16
Management Issues (continued)Management Issues (continued)
ManagementIssues
Supportive cultureSupportive culture
Production/operationsProduction/operations
Human resourcesHuman resources
DownsizingDownsizing
Resistance to ChangeResistance to Change
Managers & strategyManagers & strategy
Fred R. DavidPrentice Hall
Ch 7-17
Annual ObjectivesAnnual Objectives
• Decentralized activityDecentralized activity
• Involves all managers in the firmInvolves all managers in the firm
Fred R. DavidPrentice Hall
Ch 7-18
Annual ObjectivesAnnual Objectives
1.1. Basis for allocating resourcesBasis for allocating resources2.2. Primary mechanism for evaluating Primary mechanism for evaluating
managersmanagers3.3. Major instrument for monitoring Major instrument for monitoring
progress toward long-term objectivesprogress toward long-term objectives4.4. Establish organizational, divisional, and Establish organizational, divisional, and
departmental prioritiesdepartmental priorities
Fred R. DavidPrentice Hall
Ch 7-19
Annual ObjectivesAnnual Objectives
• Horizontal consistency of objectivesHorizontal consistency of objectives
• Vertical consistency of objectivesVertical consistency of objectives
Fred R. DavidPrentice Hall
Ch 7-20
Annual ObjectivesAnnual Objectives
Objectives should state –Objectives should state –
– Quantity– Quality– Cost– Time
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Ch 7-21
PoliciesPolicies
Policies facilitate solving recurring Policies facilitate solving recurring problems and guide the implementation problems and guide the implementation of strategyof strategy
Fred R. DavidPrentice Hall
Ch 7-22
PoliciesPolicies
Policies set –Policies set –
– Boundaries– Constraints– limits
Fred R. DavidPrentice Hall
Ch 7-23
PoliciesPolicies
Example Issues requiring management policy --Example Issues requiring management policy --
– To offer extensive or limited management development workshops and seminars
– To centralize or decentralize employee-training activities
– To recruit through employment agencies, college campuses, and/or newspapers
– To promote from within or hire from the outside– To establish a high- or low-safety stock of
inventory– To buy lease, or rent new production equipment
Fred R. DavidPrentice Hall
Ch 7-24
Resource AllocationResource Allocation
Resource Allocation –Resource Allocation –
A central management activity that allows A central management activity that allows for strategy executionfor strategy execution
Fred R. DavidPrentice Hall
Ch 7-25
Resource AllocationResource Allocation
Four types of resources –Four types of resources –
1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources
Fred R. DavidPrentice Hall
Ch 7-26
Managing ConflictManaging Conflict
Conflict –Conflict –
Disagreement between two or more parties on one or more issues
Fred R. DavidPrentice Hall
Ch 7-27
Managing ConflictManaging Conflict
• Conflict is not always “bad”Conflict is not always “bad”• Absence of conflictAbsence of conflict
– Signal indifference or apathySignal indifference or apathy
• Can energize opposing groups to actionCan energize opposing groups to action• May help managers identify problemsMay help managers identify problems
Fred R. DavidPrentice Hall
Ch 7-28
Managing ConflictManaging Conflict
Conflict Management and Resolution
– Avoidance– Defusion– Confrontation
Fred R. DavidPrentice Hall
Ch 7-29
Matching Structure with StrategyMatching Structure with Strategy
Changes in Strategy Changes in Structure
1. Structure largely dictates how objectives and policies will be established.
2. Structure dictates how resources will be allocated
Fred R. DavidPrentice Hall
Ch 7-30
Chandler’s Strategy-StructureChandler’s Strategy-StructureRelationshipRelationship
New administrativeproblems emerge
New strategyIs formulated
Organizationalperformance
declines
Organizational performance
improves
New organizationalstructure is established
Fred R. DavidPrentice Hall
Ch 7-31
Basic Forms of StructureBasic Forms of Structure
1. Functional Structure• Groups tasks and activities by business
function
2. Divisional Structure• Decentralized and organized by geography,
product, customer, or process
Fred R. DavidPrentice Hall
Ch 7-32
Basic Forms of StructureBasic Forms of Structure
3. Strategic Business Unit Structure (SBU)• Groups similar divisions; delegates authority
and responsibility to SBU executive
4. Matrix Structure• Most complex of all designs. Depends upon
both vertical and horizontal flows of authority and communication
Fred R. DavidPrentice Hall
Ch 7-33
RestructuringRestructuring
Restructuring –
Reducing the size of the firm in terms of number of employees, divisions, or units, and the number of hierarchical levels in the firm’s organizational structure
Fred R. DavidPrentice Hall
Ch 7-34
RestructuringRestructuring
Also called –
– Downsizing– Rightsizing– Delayering
Fred R. DavidPrentice Hall
Ch 7-35
RestructuringRestructuring
• Employed when ratios out of line with benchmarked competitors
• Primary benefit sought is cost reduction
Fred R. DavidPrentice Hall
Ch 7-36
ReengineeringReengineering
Reengineering –
Involves reconfiguring or redesigning work, jobs, and processes to improve cost, quality, service and speed.
Fred R. DavidPrentice Hall
Ch 7-37
ReengineeringReengineering
Also called –
– Process management– Process innovation– Process redesign
Fred R. DavidPrentice Hall
Ch 7-38
ReengineeringReengineering
Reengineering –
Concerned more with employee and customer well-being than shareholder well-being
Fred R. DavidPrentice Hall
Ch 7-39
Linking Performance and PayLinking Performance and Payto Strategiesto Strategies
Most companies practicing pay-for-Most companies practicing pay-for-performanceperformance
Fred R. DavidPrentice Hall
Ch 7-40
Linking Performance and PayLinking Performance and Payto Strategiesto Strategies
• Dual bonus system becoming more commonDual bonus system becoming more common– Based on both annual objectives and long-term Based on both annual objectives and long-term
objectivesobjectives
• Profit SharingProfit Sharing– Incentive compensation used by 30% of companiesIncentive compensation used by 30% of companies
• Gain SharingGain Sharing– Performance targets set for employees or Performance targets set for employees or
departmentsdepartments
Fred R. DavidPrentice Hall
Ch 7-41
Tests for Performance-Pay PlansTests for Performance-Pay Plans
Does the plan capture attention?
Do employees understand the plan?
Is the plan improving communication?
Does the plan pay out when it should?
Is the company or unit performing better?
Fred R. DavidPrentice Hall
Ch 7-42
Managing Resistance to ChangeManaging Resistance to Change
Change raises anxiety over fear of:Change raises anxiety over fear of:
– Economic lossEconomic loss– InconvenienceInconvenience– UncertaintyUncertainty– Break in status-quoBreak in status-quo
Fred R. DavidPrentice Hall
Ch 7-43
Managing Resistance to ChangeManaging Resistance to Change
Resistance to change –Resistance to change –
– Single greatest threat to successful strategy Single greatest threat to successful strategy implementationimplementation
Fred R. DavidPrentice Hall
Ch 7-44
Change StrategiesChange Strategies
• Force Change StrategyForce Change Strategy
• Educative Change StrategyEducative Change Strategy
• Rational or Self-Interest Change StrategyRational or Self-Interest Change Strategy
Fred R. DavidPrentice Hall
Ch 7-45
Managing the Natural Managing the Natural EnvironmentEnvironment
• Wide appreciation for firms that conduct Wide appreciation for firms that conduct operations that “mend” rather than “harm” operations that “mend” rather than “harm” the environment.the environment.
Fred R. DavidPrentice Hall
Ch 7-46
Creating a Strategy-Supportive Creating a Strategy-Supportive CultureCulture
Strategists should strive to preserve, emphasize, and build upon aspects of existing culture that support new strategies.
Fred R. DavidPrentice Hall
Ch 7-47
Creating a Strategy-Supportive Creating a Strategy-Supportive CultureCulture
Elements linking culture to strategy:
1. Formal statements of philosophy, charters, etc. used for recruitment and selection, and socialization
2. Designing of physical spaces, facades, buildings3. Deliberate role modeling, teaching and coaching4. Explicit reward and status system, promotion criteria5. Stories, legends, myths about key people and events6. What leaders pay attention to, measure and control7. Leader reactions to critical incidents and crises8. How the organization is designed and structured9. Organizational systems and procedures10. Criteria used for recruitment, selection, promotion, retirement
Fred R. DavidPrentice Hall
Ch 7-48
Production/Operations ConcernsProduction/Operations Concerns
• Production processes typically constitute more than 70% of firm’s total assets
• Decisions on:– Plant size– Inventory/inventory control– Quality control– Cost control– Technological innovation
Fred R. DavidPrentice Hall
Ch 7-49
Human Resource ConcernsHuman Resource Concerns
• Assessing staffing needs and costs
• Develop performance incentives
• ESOPs
• Child-care policies
• Work-life balance
Fred R. DavidPrentice Hall
Ch 7-50
Key TermsKey Terms
• Annual objectives• Avoidance• Benchmarking• Bonus system• Conflict• Confrontation• Culture• Defusion• Delayering
Fred R. DavidPrentice Hall
Ch 7-51
Key TermsKey Terms
• Decentralized structure• Divisional structure• Downsizing• Educative change strategy• Employee Stock Ownership Plan
(ESOP)
Fred R. DavidPrentice Hall
Ch 7-52
Key TermsKey Terms
• Establishing annual objectives• Force change strategy• Functional structure• Gain sharing• Horizontal consistency of objectives• Just in time• Matrix structure• Policy• Profit sharing
Fred R. DavidPrentice Hall
Ch 7-53
Key TermsKey Terms
• Rational change strategy• Reengineering• Resistance to change• Resource allocation• Restructuring• Rightsizing• Self-interest change• Triangulation• Vertical consistency of objectives