Fred R.

David
Prentice Hall
Ch 7-1
Chapter 7
Implementing Strategies:
Management Issues
Strategic Management:
Concepts and Cases. 9
th
edition
Fred R. David

PowerPoint Slides by
Anthony F. Chelte
Western New England College
Fred R. David
Prentice Hall
Ch 7-2
Chapter Outline
The nature of Strategy Implementation

Annual Objectives

Policies

Resource Allocation
Fred R. David
Prentice Hall
Ch 7-3
Chapter Outline
Managing Conflict

Matching Structure with Strategy

Restructuring, Reengineering, and E-
Engineering

Linking Performance and Pay to Strategies
Fred R. David
Prentice Hall
Ch 7-4
Chapter Outline
Managing Resistance to Change

Managing the Natural Environment

Creating a Strategy-Supportive Culture
Fred R. David
Prentice Hall
Ch 7-5
Chapter Outline
Production/Operations Concerns
When Implementing Strategies

Human Resource Concerns When
Implementing Strategies
Fred R. David
Prentice Hall
Ch 7-6
Implementing Strategies:
Management 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. David
Prentice Hall
Ch 7-7
Strategy Analysis & Choice
Contrasting strategy formulation and
strategy implementation

Formulation is positioning forces before the action

Implementation is managing forces during the action
Implementing Strategies:
Management Issues
Fred R. David
Prentice Hall
Ch 7-8
Strategy Analysis & Choice
Contrasting strategy formulation and
strategy implementation

Formulation focuses on effectiveness

Implementation focuses on efficiency
Implementing Strategies:
Management Issues
Fred R. David
Prentice Hall
Ch 7-9
Strategy Analysis & Choice
Contrasting strategy formulation and
strategy implementation

Formulation is primarily an intellectual process

Implementation is primarily an operational process
Implementing Strategies:
Management Issues
Fred R. David
Prentice Hall
Ch 7-10
Strategy Analysis & Choice
Contrasting strategy formulation and
strategy implementation

Formulation requires good intuitive and analytical
skills

Implementation requires special motivation and
leadership skills
Implementing Strategies:
Management Issues
Fred R. David
Prentice Hall
Ch 7-11
Strategy Analysis & Choice
Contrasting strategy formulation and
strategy implementation

Formulation requires coordination among a few
individuals

Implementation requires coordination among many
persons
Implementing Strategies:
Management Issues
Fred R. David
Prentice Hall
Ch 7-12
Strategy Analysis & Choice
Strategy implementation

Varies among different types and sizes
of organizations
Implementing Strategies:
Management Issues
Fred R. David
Prentice Hall
Ch 7-13
Strategy Analysis & Choice
Strategy implementation Actions

Altering sales territories
Adding new departments
Closing facilities
Hiring new employees
Cost-control procedures
Changing advertising strategies
Building new facilities
Implementing Strategies:
Management Issues
Fred R. David
Prentice Hall
Ch 7-14
Formulation to Implementation
transition

Shift in responsibility
From strategists to division and functional
managers
Management Perspectives
Fred R. David
Prentice Hall
Ch 7-15
Management Issues
Management
Issues
Resources
Organizational structure
Restructuring
Rewards/Incentives
Annual Objectives
Policies
Fred R. David
Prentice Hall
Ch 7-16
Management Issues (continued)
Management
Issues
Supportive culture
Production/operations
Human resources
Downsizing
Resistance to Change
Managers & strategy
Fred R. David
Prentice Hall
Ch 7-17
Annual Objectives
Decentralized activity
Involves all managers in the firm

Fred R. David
Prentice Hall
Ch 7-18
Annual Objectives
1. Basis for allocating resources
2. Primary mechanism for evaluating
managers
3. Major instrument for monitoring
progress toward long-term objectives
4. Establish organizational, divisional, and
departmental priorities
Fred R. David
Prentice Hall
Ch 7-19
Annual Objectives
Horizontal consistency of objectives

Vertical consistency of objectives
Fred R. David
Prentice Hall
Ch 7-20
Annual Objectives
Objectives should state

Quantity
Quality
Cost
Time
Fred R. David
Prentice Hall
Ch 7-21
Policies
Policies facilitate solving recurring
problems and guide the implementation
of strategy
Fred R. David
Prentice Hall
Ch 7-22
Policies
Policies set

Boundaries
Constraints
limits
Fred R. David
Prentice Hall
Ch 7-23
Policies
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. David
Prentice Hall
Ch 7-24
Resource Allocation
Resource Allocation

A central management activity that allows
for strategy execution
Fred R. David
Prentice Hall
Ch 7-25
Resource Allocation
Four types of resources

1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources
Fred R. David
Prentice Hall
Ch 7-26
Managing Conflict
Conflict

Disagreement between two or more parties
on one or more issues
Fred R. David
Prentice Hall
Ch 7-27
Managing Conflict
Conflict is not always bad
Absence of conflict
Signal indifference or apathy
Can energize opposing groups to action
May help managers identify problems
Fred R. David
Prentice Hall
Ch 7-28
Managing Conflict
Conflict Management and Resolution

Avoidance
Defusion
Confrontation
Fred R. David
Prentice Hall
Ch 7-29
Matching 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. David
Prentice Hall
Ch 7-30
Chandlers Strategy-Structure
Relationship
New administrative
problems emerge
New strategy
Is formulated
Organizational
performance
declines
Organizational
performance
improves
New organizational
structure is established
Fred R. David
Prentice Hall
Ch 7-31
Basic 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. David
Prentice Hall
Ch 7-32
Basic 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. David
Prentice Hall
Ch 7-33
Restructuring
Restructuring

Reducing the size of the firm in terms of
number of employees, divisions, or
units, and the number of hierarchical
levels in the firms organizational
structure
Fred R. David
Prentice Hall
Ch 7-34
Restructuring
Also called

Downsizing
Rightsizing
Delayering

Fred R. David
Prentice Hall
Ch 7-35
Restructuring
Employed when ratios out of line with
benchmarked competitors

Primary benefit sought is cost reduction
Fred R. David
Prentice Hall
Ch 7-36
Reengineering
Reengineering

Involves reconfiguring or redesigning work,
jobs, and processes to improve cost,
quality, service and speed.
Fred R. David
Prentice Hall
Ch 7-37
Reengineering
Also called

Process management
Process innovation
Process redesign
Fred R. David
Prentice Hall
Ch 7-38
Reengineering
Reengineering

Concerned more with employee and
customer well-being than shareholder
well-being
Fred R. David
Prentice Hall
Ch 7-39
Linking Performance and Pay
to Strategies
Most companies practicing pay-for-
performance

Fred R. David
Prentice Hall
Ch 7-40
Linking Performance and Pay
to Strategies
Dual bonus system becoming more common
Based on both annual objectives and long-term
objectives

Profit Sharing
Incentive compensation used by 30% of companies

Gain Sharing
Performance targets set for employees or
departments

Fred R. David
Prentice Hall
Ch 7-41
Tests 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. David
Prentice Hall
Ch 7-42
Managing Resistance to Change
Change raises anxiety over fear of:

Economic loss
Inconvenience
Uncertainty
Break in status-quo
Fred R. David
Prentice Hall
Ch 7-43
Managing Resistance to Change
Resistance to change

Single greatest threat to successful strategy
implementation
Fred R. David
Prentice Hall
Ch 7-44
Change Strategies
Force Change Strategy
Educative Change Strategy
Rational or Self-Interest Change Strategy

Fred R. David
Prentice Hall
Ch 7-45
Managing the Natural
Environment
Wide appreciation for firms that conduct
operations that mend rather than harm
the environment.
Fred R. David
Prentice Hall
Ch 7-46
Creating a Strategy-Supportive
Culture
Strategists should strive to preserve,
emphasize, and build upon aspects of
existing culture that support new
strategies.
Fred R. David
Prentice Hall
Ch 7-47
Creating a Strategy-Supportive
Culture
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, buildings
3. Deliberate role modeling, teaching and coaching
4. Explicit reward and status system, promotion criteria
5. Stories, legends, myths about key people and events
6. What leaders pay attention to, measure and control
7. Leader reactions to critical incidents and crises
8. How the organization is designed and structured
9. Organizational systems and procedures
10. Criteria used for recruitment, selection, promotion, retirement

Fred R. David
Prentice Hall
Ch 7-48
Production/Operations Concerns
Production processes typically
constitute more than 70% of firms total
assets
Decisions on:
Plant size
Inventory/inventory control
Quality control
Cost control
Technological innovation
Fred R. David
Prentice Hall
Ch 7-49
Human Resource Concerns
Assessing staffing needs and costs
Develop performance incentives
ESOPs
Child-care policies
Work-life balance

Fred R. David
Prentice Hall
Ch 7-50
Key Terms
Annual objectives
Avoidance
Benchmarking
Bonus system
Conflict
Confrontation
Culture
Defusion
Delayering
Fred R. David
Prentice Hall
Ch 7-51
Key Terms
Decentralized structure
Divisional structure
Downsizing
Educative change strategy
Employee Stock Ownership Plan
(ESOP)

Fred R. David
Prentice Hall
Ch 7-52
Key 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. David
Prentice Hall
Ch 7-53
Key Terms
Rational change strategy
Reengineering
Resistance to change
Resource allocation
Restructuring
Rightsizing
Self-interest change
Triangulation
Vertical consistency of objectives