II. Implementation Explained (Topic 8)II. Implementation Explained (Topic 8)

Strategy implementationStrategy implementation is - activities and choices used to put is - activities and choices used to put strategies and policies into action.strategies and policies into action.

Implementing requires the development of programs, budgets Implementing requires the development of programs, budgets and procedures. May include important factors that we and procedures. May include important factors that we won’t do.won’t do.

Specific information on how to write up the implementation of Specific information on how to write up the implementation of strategies is found in the individual and team case handout strategies is found in the individual and team case handout in supplement.in supplement.

We’ve covered strategy formulation in which we reviewed the We’ve covered strategy formulation in which we reviewed the development of a mission, objectives, and Internal-External development of a mission, objectives, and Internal-External audit. We are now ready to discuss specifics including audit. We are now ready to discuss specifics including development of annual or program objectives and a step-development of annual or program objectives and a step-by-step method of scheduling and budgeting activities to by-step method of scheduling and budgeting activities to implement strategies.implement strategies.

TM-2

Strategic Management Strategic Management ModelModel

Strategy Formulation

Strategy Implementation

Evaluation and Control

Mission

Objectives

Strategies

Feedback/Learning

Environmental Scanning

Societal Environment

General Forces

Task Environment

Industry Analysis

Structure Chain of Command

Resources Assets, Skills

Competencies, Knowledge

Culture Beliefs, Expectations,

Values

Reason for existence

What results to accomplish by when Plan to

achieve the mission & objectives

Programs

Activities needed to accomplish a plan

Budgets

Cost of the programs Procedures

Sequence of steps needed to do the job

Process to monitor performanceand take corrective action

Performance

External

Internal

Go through decision- making process andDetermine alternative

strategy To select

II. A. ProgramII. A. Program - a Statement of - a Statement of Activities and Steps Needed to Activities and Steps Needed to Accomplish a Single Use Plan. Accomplish a Single Use Plan.

Programs include budgets, procedures Programs include budgets, procedures and policies.and policies.

I.E. - Open new Budweiser plant in Germany - this I.E. - Open new Budweiser plant in Germany - this takes:takes:

A. Construction planA. Construction plan

B. Financial programB. Financial program

C. Hiring/training program etcC. Hiring/training program etc

II. A. BudgetsII. A. Budgets - a Statement - a Statement Detailing Program in $ and Unit Detailing Program in $ and Unit

TermsTerms• Construction budget - $100 million, 2 years Construction budget - $100 million, 2 years

allocated for: ??allocated for: ??• Marketing budget 6% of net sales: to pay for: ??Marketing budget 6% of net sales: to pay for: ??• Human resource budget - $5 million, 3 years to Human resource budget - $5 million, 3 years to

pay for :pay for :• develop job specificationsdevelop job specifications• recruitment adsrecruitment ads• paper workpaper work• interviews and travelinterviews and travel• testingtesting• orientation and trainingorientation and training• compensation compensation

II. A. Procedures II. A. Procedures - the steps - the steps describing in detail how a plan is describing in detail how a plan is

put togetherput together• Sop’s (standard operating procedures)Sop’s (standard operating procedures)• Rop’s (revised operating procedures)Rop’s (revised operating procedures)

• Learn the definitions of programs, budgets and Learn the definitions of programs, budgets and proceduresprocedures

Strategy & ImplementationStrategy & Implementation

Good Strategy Poor Strategy

GoodImplementation

Success(Microsoft)

Rescue(IBM)

PoorImplementation

Trouble(KC Casino)

Failure(KC Hotel)

Implementation QuestionsImplementation Questions

• A. Who will carry out strategic plans?A. Who will carry out strategic plans?• B. What must be done?B. What must be done?• C. When will actions be taken? Start and end.C. When will actions be taken? Start and end.• How are actions going to be performed?How are actions going to be performed?

A. Who Carries Out PlansA. Who Carries Out PlansTop executives involved (6th ed. Page 209)Top executives involved (6th ed. Page 209)• Dynamic Dynamic industry expertindustry expert

• Attractive industry, good companyAttractive industry, good company

• Stability (Stability (cautious profit plannercautious profit planner))• Medium industry attractiveness, good to average companyMedium industry attractiveness, good to average company

• Analytical portfolio managerAnalytical portfolio manager• Poor industry, good companyPoor industry, good company

• Retrenchment Retrenchment turnaround specialistturnaround specialist• Medium to good industry, poor companyMedium to good industry, poor company

• Professional liquidatorProfessional liquidator• Bad company, poor industryBad company, poor industry

Matching Chief Executive “Types” With Matching Chief Executive “Types” With StrategyStrategy

Matching Chief Executive “Types” with Strategy

Average

Hig

hL

ow

Business Strength/Competitive Position

Strong

Growth—Concentration

Dynamic Industry Expert

Stability

Cautious Profit Planner

Retrenchment—Close Company

Professional Liquidator

Retrenchment—Save Company

Turnaround Specialist

Ind

us

try

Att

rac

tiv

en

es

s

Source: Thomas L. Wheelen and J. David Hunger, “Matching Proposed Chief Executive ‘Types’ with Corporate Strategy.” Copyright © 1991 by Wheelen and Hunger Associates. Reprinted by permission.

Me

diu

m

Weak

Growth—Diversification

Analytical Portfolio Manager

A. Middle & Lower Level A. Middle & Lower Level ManagersManagers

• Are involved in implementing plans if their Are involved in implementing plans if their functions such as marketing, HRM, POM, etc. are functions such as marketing, HRM, POM, etc. are changed by new strategieschanged by new strategies

• Require the establishment of annual objectives Require the establishment of annual objectives or program goals for there functional area in or program goals for there functional area in marketing, HRM, POM, etc.marketing, HRM, POM, etc.

B.B. What will be changed?What will be changed? Internal Environment in Our Class Is Internal Environment in Our Class Is Functional Resource Approach. Functional Resource Approach. Therefore We Will Implement Strategic Therefore We Will Implement Strategic Plans & Change Structure, Culture, Plans & Change Structure, Culture, Resources on a Need Basis.Resources on a Need Basis.

1. 1. Organizational restructuring Organizational restructuring

2. 2. Organizational culture adaptationsOrganizational culture adaptations

3. 3. Resource changes Resource changes (changing assets, skills (changing assets, skills competencies and knowledge in appropriate competencies and knowledge in appropriate functional resource areas as needed by our functional resource areas as needed by our strategic changes.)strategic changes.)

B. 1. Structure Follows B. 1. Structure Follows StrategyStrategy

a. a. New strategy is createdNew strategy is created

b. b. New administrative problems emergeNew administrative problems emerge

c. c. Economic performance declinesEconomic performance declines

d. d. New appropriate structure is inventedNew appropriate structure is invented

e. e. Profit returns to its previous levelProfit returns to its previous level

B.1. Internal EnvironmentB.1. Internal Environment

1. Organizational structure changes are for 1. Organizational structure changes are for example:example:

a. Change portfolio of sbu’s (add, delete)a. Change portfolio of sbu’s (add, delete)

b. Change functional areasb. Change functional areas• I.E. Add an advertising departmentI.E. Add an advertising department

• Use backward vertical integrationUse backward vertical integration

• Delete a product departmentDelete a product department

• Set up matrix organizational structureSet up matrix organizational structure

TM-14

Internal Environment Internal Environment (Continued)(Continued)

• c. Change overall structure, change from c. Change overall structure, change from functional to divisional depending on what stage functional to divisional depending on what stage of organizational life cycle (see next slide).of organizational life cycle (see next slide).

• d. Centralize or more likely Decentralize your d. Centralize or more likely Decentralize your organizational structure and make your span of organizational structure and make your span of control wider.control wider.

Organizational Life CycleOrganizational Life Cycle

Stage I Stage II Stage III1 Stage IV Stage V

Dominant Issue Birth Growth Maturity Decline Death

Popular Concentration Horizontal Concentric and Profit strategy Liquidation orStrategies in a niche and vertical conglomerate followed by bankruptcy

growth diversification retrenchment

Likely Entrepreneur- Functional Decentralization Structural DismembermentStructure dominated management into profit or surgery of structure

emphasized investment centers

Note: 1. An organization may enter a Revival Phase either during the Maturity or Decline Stages and thus extend the organiza-tion’s life.

Changing Structural Changing Structural Characteristics of Modern Characteristics of Modern

CorporationCorporationOld Organizational Design New Organizational Design

One large corporation Mini-business units & cooperative relationships

Vertical communication Horizontal communication

Centralized top-down decision making Decentralized participative decision making

Vertical integration Outsourcing & 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

Source: Adapted from B. Macy and H. Izumi, “Organizational Change, Design, and Work Innovation: A Meta-Analysis of 131 North American Field Studies—1961–1991,” Research in Organizational Change and Development, Vol. 7, JAI Press (1993), p. 298. Reprinted with permission.

B.2. Determine What B.2. Determine What Organizational Organizational CultureCulture Changes Should Be Made. Changes Should Be Made.

Choices are:Choices are:• No changeNo change• Integrate (give & take)Integrate (give & take)• SeparationSeparation• Assimilation (domination by one)Assimilation (domination by one)• De-culturation (get rid of culture--no give and De-culturation (get rid of culture--no give and

taketake

Methods of Managing the Culture of an Methods of Managing the Culture of an Acquired FirmAcquired Firm

Methods of Managing the Culture of an Acquired Firm

Not at All

How Much Members of the Acquired Firm Value Preservation of Their Own Culture

Very Much

Integration Assimilation

Separation Deculturation

Per

cep

tio

n o

f th

e A

ttra

ctiv

enes

s o

f th

e A

cqu

irer

Not

at A

ll A

ttrac

tive

Ver

y A

ttrac

tive

Source: A. Nahavardi and A. R. Malekzadeh, “Accultutation in Mergers and Acquisitions,” Academy of Management Review (January 1988), p. 83. Copyright © 1988 by the Academy of Management. Reprinted by permission.

Determine Work Design Determine Work Design Changes:Changes:

Falls under organizational structure culture or HRMFalls under organizational structure culture or HRM

• Re-engineeringRe-engineering• Use job characteristic model to improve Use job characteristic model to improve

performanceperformance• Use downsizing (rightsizing)Use downsizing (rightsizing)• Use lean Six Sigma for TQM modelUse lean Six Sigma for TQM model

Principles for Re-Principles for Re-engineeringengineering

• Organize around outcomes, not tasksOrganize around outcomes, not tasks

• Have those who use the output perform the processHave those who use the output perform the process

• Subsume information-processing work into the real Subsume information-processing work into the real work that produces the informationwork that produces the information

• Treat geographically dispersed resources as though Treat geographically dispersed resources as though they were centralizedthey were centralized

• Put decision point where work is performed and build Put decision point where work is performed and build control into the processcontrol into the process

• Capture information once at the sourceCapture information once at the source

Job Characteristics ModelJob Characteristics Model

• Combine tasksCombine tasks• Form natural work unitsForm natural work units• Vertically load the jobVertically load the job• Establish client relationshipsEstablish client relationships• Open feedback channelsOpen feedback channels

Downsizing Guidelines Downsizing Guidelines more recently Rightsizing more recently Rightsizing has become more popular has become more popular

• Eliminate unnecessary workEliminate unnecessary work• Contract out work that others can do cheaperContract out work that others can do cheaper• Plan for long-run efficienciesPlan for long-run efficiencies• Communicate the reasons for actionsCommunicate the reasons for actions• Invest in the remaining employeesInvest in the remaining employees• Develop value-added jobs to balance out job Develop value-added jobs to balance out job

eliminationelimination• Under RIGHTSIZING new positions may be addedUnder RIGHTSIZING new positions may be added

Use Lean Six Sigma to Use Lean Six Sigma to implement TQM in implement TQM in organizationsorganizations1. Better, less variable quality of product / service 1. Better, less variable quality of product / service

(use Six Sigma).(use Six Sigma).

2. Quicker, less variable response to customers’ 2. Quicker, less variable response to customers’ needs.needs.

3. Greater flexibility in adjusting to customers’ 3. Greater flexibility in adjusting to customers’ shifting requirements.shifting requirements.

4. Lower cost through quality improvements and 4. Lower cost through quality improvements and elimination of non value-adding work (make elimination of non value-adding work (make processes lean)processes lean)

C.1. Resource Program C.1. Resource Program ChangesChanges

This is the 3rd area of the internal environment that This is the 3rd area of the internal environment that may need to be changed after structure and may need to be changed after structure and culture are changed because of the adoption of culture are changed because of the adoption of new strategiesnew strategies

For example, marketing, finance, POM, HRM, IS, For example, marketing, finance, POM, HRM, IS, R&D could be areas in which new implementing R&D could be areas in which new implementing programs may need to be developed..programs may need to be developed..

Determining Staff Changes Determining Staff Changes +/-+/-HRM changes are determined after changes are HRM changes are determined after changes are

made in various areas such as marketing and made in various areas such as marketing and production production

• Organizational structure changes may cause Organizational structure changes may cause changes is staffing needschanges is staffing needs

• New programs in functional areas may require New programs in functional areas may require workersworkers

• I.E. A new R&D department needs 30 employees I.E. A new R&D department needs 30 employees or or

• The production department cuts 100 workers The production department cuts 100 workers and substitutes robot machineryand substitutes robot machinery

III.III. Examples of implementation Examples of implementation program. The Following are program. The Following are

Questions You Need to Answer Questions You Need to Answer

for Each Programfor Each Program..Outline for implementation program.Outline for implementation program.

A. Program Objective (Annual Objectives or longer)A. Program Objective (Annual Objectives or longer)

B. Manager ResponsibleB. Manager Responsible

C.C. Action Plans—Including when activities start or Action Plans—Including when activities start or stopstop

D.D. D. Budgets in $’s/time D. Budgets in $’s/time

E. Results of ProgramE. Results of Program

The following slide is an example of an implementing The following slide is an example of an implementing programprogram

A. A. ProgramProgram: Marketing: Marketing

ObjectiveObjective: Reach new market in Europe with Budweiser : Reach new market in Europe with Budweiser (20% market share in 5 years).(20% market share in 5 years).

Target market changes distribution, product, pricing, and Target market changes distribution, product, pricing, and promotion mixpromotion mix

B. Managers responsible (VP Marketing, Advertising B. Managers responsible (VP Marketing, Advertising Executives) Executives)

C. Set up distribution network in 6 months to 18 months. C. Set up distribution network in 6 months to 18 months. Begin Promotion (advertising) in next 6 months Begin Promotion (advertising) in next 6 months

D. Budget (Distribution - 2% of estimated sales, Promotion - D. Budget (Distribution - 2% of estimated sales, Promotion - $12 Million Dollars)$12 Million Dollars)

E. Results of this marketing program might be brand E. Results of this marketing program might be brand awareness of 80% of public and 20%awareness of 80% of public and 20%

of people willing to try product.of people willing to try product.

Mapping Strategic Groups in the U.S. Mapping Strategic Groups in the U.S. Restaurant Chain IndustryRestaurant Chain Industry

Product Positioning through Mapping of Strategic Groups on Important Product Variables

Product-Line Breadth

High

LowLimited Menu Full Menu

Arby's Wendy's Domino's Dairy Queen

Hardee's Taco Bell Burger King McDonald's

Shoney's Denny's

Country Kitchen

Kentucky Fried Chicken Pizza Hut

Long John Silver's

Ponderosa Bonanza

Perkins International House

of Pancakes

Red Lobster Olive Garden

ChiChi's

Pri

ce

TM-29

The Product Life CycleThe Product Life Cycle

Introduction Growth* Maturity Decline

Time

Sal

es

*The right end of the Growth stage is often called Competitive Turbulence because of price and distribution competition that shakes out the weaker competitors. For further information, see C. R. Wasson, Dynamic Competitive Strategy and Product Life Cycles, 3rd ed. (Austin, Tex.: Austin Press, 1978).

TM-30

C. Marketing Mix VariablesC. Marketing Mix Variables

Product Place Promotion Price

Quality Channels Advertising List price

Features Coverage Personal selling Discounts

Options Locations Sales promotion Allowances

Style Inventory Publicity Payment periods

Brand name Transport Credit terms

Packaging

Sizes

Services

Warranties

Returns

Source: Philip Kotler, Marketing Management: Analysis, Planning, and Control, 4th ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1980), p. 89. Copyright © 1980. Reprinted by permission of Prentice-Hall, Inc.

A second example of the bare bones of a A second example of the bare bones of a implementing programimplementing program

A. Program: Financing New FactoryA. Program: Financing New Factory

ObjectiveObjective: Get $400M of loans, $100 corporate bonds. : Get $400M of loans, $100 corporate bonds. 7% cost of money7% cost of money

B. B. Managers ResponsibleManagers Responsible (VP Finance and Controller) (VP Finance and Controller)

C. C. Action PlanAction Plan obtain financing commitment in next six obtain financing commitment in next six months (months (will be detailed in next slidewill be detailed in next slide))

D. D. Determine BudgetDetermine Budget $1M for forecasting and analysis over $1M for forecasting and analysis over next two years.next two years.

E. E. Results Results might be financing received in time, and at or might be financing received in time, and at or below market rates. Improved relations with financing below market rates. Improved relations with financing companies.companies.

Action Planning – Fits under Action Planning – Fits under C. on previous slideC. on previous slide

1. List specific actions.1. List specific actions.2. List dates to begin and end each action.2. List dates to begin and end each action.3. Name person responsible for each action.3. Name person responsible for each action.4. Name person responsible for monitoring 4. Name person responsible for monitoring

timelines and effectiveness of each action.timelines and effectiveness of each action.5. Estimate expected financial and physical 5. Estimate expected financial and physical

consequences of each action.consequences of each action.6. Develop contingency plans.6. Develop contingency plans.

Go to previous slide to end chapter.Go to previous slide to end chapter.