Strategy implementation

is the sum total of the activities and choices required for the execution of a strategic plan. It is the process by
which objectives, strategies, and policies are put into action through the development of programs, budgets,
and procedures. Although implementation is usually considered after strategy has been formulated,
implementation is a key part of strategic management. Strategy formulation and strategy implementation
should thus be considered as two sides of the same coin. Poor implementation has been blamed for a number
of strategic failures To begin the implementation process, strategy makers must consider these questions:

_ 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?

A survey of 93 Fortune 500 firms revealed that more than half of the corporations experienced the following
10 problems when they attempted to implement a strategic change. These problems are listed in order of
frequency:

1. Implementation took more time than originally planned.

2. Unanticipated major problems arose.

3. Activities were ineffectively coordinated.

4. Competing activities and crises took attention away from implementation.

5. The involved employees had insufficient capabilities to perform their jobs.

6. Lower-level employees were inadequately trained.

7. Uncontrollable external environmental factors created problems.

8. Departmental managers provided inadequate leadership and direction.

9. Key implementation tasks and activities were poorly defined.

10. The information system inadequately monitored activities.6

Who implements Strategy

Depending on how a corporation is organized, those who implement strategy will probably be a much more
diverse set of people than those who formulate it. In most large, multi-industry corporations, the
implementers are everyone in the organization. Vice presidents of functional areas and directors of divisions
or strategic business units (SBUs) work with their subordinates to put together large-scale implementation
plans. Plant managers, project managers, and unit heads put together plans for their specific plants,
departments, and units. Therefore, every operational manager down to the first-line supervisor and every
employee is involved in some way in the implementation of corporate, business, and functional strategies.

What must be done

The managers of divisions and functional areas work with their fellow managers to develop programs,
budgets, and procedures for the implementation of strategy. They also work to achieve synergy among the
divisions and functional areas in order to establish and maintain a company’s distinctive competence.

DEVELOPING PROGRAMS, BUDGETS, AND PROCEDURES

Strategy implementation involves establishing programs to create a series of new organizational activities,
budgets to allocate funds to the new activities, and procedures to handle the day-to-day details.

Programs
The purpose of a program is to make a strategy action oriented. One way to examine the likely impact new
programs will have on an existing organization is to compare proposed programs and activities with current
programs and activities. Brynjolfsson, Renshaw, and Van Alstyne proposed a matrix of change to help
managers decide how quickly change should proceed, in what order changes should take place, whether to
start at a new site, and whether the proposed systems are stable and coherent.

Figure matrix of change 9-1

vertical axis and existing practices (current activities) are drawn on the horizontal axis. As shown, any new
strategy will likely involve a sequence of new programs and activities. Anyone of these may conflict with
existing practices/activities—and that creates implementation problems. Use the following steps to create
the matrix:
1. Compare the new programs/target practices with each other to see if they are complementary (_),
interfering (_), or have no effect on each other (leave blank).
2. Examine existing practices/activities for their interactions with each other using the same symbols as in
step 1.
3. Compare each new program/target practice with each existing practice/activity for any interaction effects.
Place the appropriate symbols in the cells in the lower-right part of the matrix.
4. Evaluate each program/activity in terms of its relative importance to achieving the strategy or getting the
job accomplished.
5. Examine the overall matrix to identify problem areas where proposed programs are likely to either
interfere with each other or with existing practices/activities. Note in Figure 9–1 that the proposed program
of installing flexible equipment interferes with the proposed

Budgets
After programs have been developed, the budget process begins. Planning a budget is the last real check a
corporation has on the feasibility of its selected strategy. An ideal strategy might be found to be completely
impractical only after specific implementation programs are costed in detail.
Procedures
After the program, divisional, and corporate budgets are approved, procedures must be developed. Often
called Standard Operating Procedures (SOPs), they typically detail the various activities that must be carried
out to complete a corporation’s programs. Also known as organizational routines, procedures are the primary
means by which organizations accomplish much of what they do.12 Once in place, procedures must be
updated to reflect any changes in technology as well as in strategy
ACHIEVING SYNERGY
One of the goals to be achieved in strategy implementation is synergy between and among functions and
business units synergy can take place in one of six forms:
_ Shared know-how: Combined units often benefit from sharing knowledge or skills. This is a leveraging of
core competencies. One reason that Procter & Gamble purchased Gillette was to combine P&G’s knowledge of
the female consumer with Gillette’s knowledge of the male consumer.
_ Coordinated strategies: Aligning the business strategies of two or more business units may provide a
corporation significant advantage by reducing inter-unit competition and developing a coordinated response
to common competitors (horizontal strategy). The merger between Arcelor and Mittal Steel, for example,
gave the combined company enhanced R&D capabilities and wider global coverage while presenting a
common face to the market.
_ Shared tangible resources: Combined units can sometimes save money by sharing resources, such as a
common manufacturing facility or R&D lab. The alliance between Renault and Nissan allowed it to build new
factories that would build both Nissan and Renault vehicles.
_ Economies of scale or scope: Coordinating the flow of products or services of one unit with that of another
unit can reduce inventory, increase capacity utilization, and improve market access. This was a reason Delta
Airlines bought Northwest Airlines.
_ Pooled negotiating power: Combined units can combine their purchasing to gain bargaining power over
common suppliers to reduce costs and improve quality. The same can be done with common distributors. The
acquisitions of Macy’s and the May Company enabled Federated Department Stores (which changed its name
to Macy’s in 2007) to gain purchasing economies for all of its stores.
_ New business creation: Exchanging knowledge and skills can facilitate new products or services by
extracting discrete activities from various units and combining them in a new unit or by establishing joint
ventures among internal business units. Oracle, for example, purchased a number of software companies in
order to create a suite of software codenamed “Project Fusion” to help corporations run everything from
accounting and sales to customer relations and supply-chain management.15

STAGES OF CORPORATE DEVELOPMENT

Successful corporations tend to follow a pattern of structural development as they grow and expand.
Beginning with the simple structure of the entrepreneurial firm (in which everybody does everything),
successful corporations usually get larger and organize along functional lines, with marketing, production,
and finance departments. With continuing success, the company adds new product lines in different
industries and organizes itself into interconnected divisions
table 9-1

ORGANIZATIONAL LIFE CYCLE

Instead of considering stages of development in terms of structure, the organizational life cycle approach
places the primary emphasis on the dominant issue facing the corporation. Organizational structure is only a
secondary concern. The organizational life cycle describes how organizations grow, develop, and eventually
decline.
Table 9-2

Matrix Structure

In matrixstructures, functional and product forms are combined simultaneously at the same level of the
organization. (See Figure 9–2.) Employees have two superiors, a product or project manager, and a
functional manager.
figure 9-2

REENGINEERING AND STRATEGY IMPLEMENTATION

Reengineering is the radical redesign of business processes to achieve major gains in cost, service, or time. It
is not in itself a type of structure, but it is an effective program to implement a turnaround strategy. Business
process reengineering strives to break away from the old rules and procedures that develop and become
ingrained in every organization over the years. They may be a combination of policies, rules, and procedures
that have never been seriously questioned because they were established years earlier.

CENTRALIZATION VERSUS DECENTRALIZATION

A basic dilemma an MNC faces is how to organize authority centrally so that it operates as a vast interlocking
system that achieves synergy and at the same time decentralize authority so that local managers can make
the decisions necessary to meet the demands of the local market or host government.67 To deal with this
problem, MNCs tend to structure themselves either along product groups or geographic areas. They may even
combine both in a matrix structure
figure 9-3