Download STRATEGIC MAGEMENT 4. Strategy implementation

STRATEGIC MAGEMENT
4. Strategy implementation
Features of the Hungarian firms
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Types of implementation strategies
At the time of implementation the types of
corporate strategies in the US were analysed in
the framework of more than 150 interviews with
managers of great firms ( Farkas – de Backer). 5
main types were distinguished (in the practice
however often their mix can be adopted).
1. In spite of the general recognition of the importance of a
strategy only 20 % of the US managers think, that their
main task is the development of this strategy. These
firms are so called strategy-based ones. Their managers
concentrated on the future – on the coordination of the
development of the strategy and the control of its
fulfilment.
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2. The main goal of some – so called HR based strategies is the development of managerial
talent and competent employees, to achieve
both the firm’s objectives and the employees’
satisfaction.
Here the manager (boss) first of all aims at the
creation of a team. He knows as many
employees as possible personally. He always
enter into conversation with them on firm’s
values, decision-making and performances. He
takes part in the carrier-planning and the
development of the staff’s human relations.
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3. Other strategy-type is the expert based one. Here the
CEO and the other managers are specialised in some
areas (products, technologies etc.), in which the firm has
market advantages, and they work hard to distribute
their knowledge among the firm’s units, which is the
base of competitiveness.
4. In some firms the manager has a box-oriented strategy.
Here exact regulatory systems, strict rules, fixed
processes determine the employees’ actions, and the
control is an important task of managers. In the US this
is often the strategy in banks .
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5. Exchange management is the fifth strategy type.
It can be adopted at firms, where managers
think, that a fundamental exchange (e.g. a rapid
adaptation) or continuous exchanges are needed
for success. So, he destroys the traditional
systems and familiarize employees with the lack
of the continuity.
Firms apply all of these strategies parallel (but the
proportions of their application is different). The
main task of all managers is to introduce first of
all the type of the strategy, which suits the
situation and opportunities of his firm.
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HR management
Key factors of strategies’ implementation are
always human resources (behaviour of
managers, employees). Utilisation of its give a
lot of tasks for the management.
1. After the plan has been accepted, it has to be
presented (in a communication process) to
the employees (being responsible for the
realisation). They have to know the details
which imply their tasks. But often the wide
publication of some strategic goals is an
effective method of publicity as well.
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2. Human resources strategies begin with
recruitment and the selection of employees.
There are many tools for these works (e.g. poster,
advertisement, interviews, jury, tests, exams …).
Parkinson’s remark: effectivity of that methods is always uncertain.
3. Traditional tools of HR management are
motivation and respect (fixing of salaries and
bonuses, laudation or abuse, titles, rewards or
penalties, promotion).
4. Participation (e.g. when the firm gives
employees possibilities to influence how they do
their jobs) can be also a good manner to increase
productivity.
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A market leading firm has to be a learning organisation,
where the staff collects new ideas systematically from
their customers and suppliers etc., R&D is part of the
business process and employees always change their
knowledge.
5. Effective tools of the development of the
intellectual power of employees are the postgraduate schools and trainings. The mobility
(scholarships, exchange of posts in the firm, or
between firms) helps the development of young
people. In the developed economies employees
have to adapt to the requirements of the long-life
learning as well.
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Implementation decisions
Development of a traditional production (service)
strategy can be supported by the decision-making
in many questions. E.g.:
• the rational extent of the production can be
decided by break-even analysis (see the next
slides),
• the effective proportions of production „factors”
(e.g. labour and capital) can be analysed by isocurves (see above),
• good production scheduling can be determined by
flow-charts etc. (see the third coming slides).
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Profitable extent of the production
Break-even analysis compares the revenues and
total costs (sum of fixed and variable costs) and
helps the managers determine the minimal
volume from which the production can be
profitable (the point at which the these functions
are equal).
Variable costs are those that vary as a function of operations. Fixed
costs are those that do not vary if the level of production changes.
Total costs are the sum of the two mentioned.
Often planners presume that the functions of
revenues and costs are linear, but sometimes a
non-linear analysis is needed as well (figure).
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Linear functions
Dollars
Non-linear functions
Dollars
Revenues
Break-even
points
Break even point
TC
R
Total
costs
loss
profit
Volume of output (Q)
profit
Max. profit
Q
Source: own figure based on many publications
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Exercise. Determination the rational proportion of
the production factors by break-even analysis.
In Paris-lines KLM’s old airplanes can transport 200
passengers, one flight costs 78.200 USD
(overhead) and 420 USD pro passenger. New
airplanes can transport 300 passengers, the flight
costs 85.400 USD and 360 USD pro passenger.
In case of how many passengers would it be
rational to replace old plains by the modern
type? (See the next figure as well)
420 x + 78.200 = 360 x + 85.400
x = 120
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Costs
old
new
85.40
0
78.200
120
Number of passengers
Red line: the rational decision about the utilisation of airplaine’s type
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Proportions of the resources of the production
According to the classical theories the main production
„factors” (resources) are labour and capital.
Theoretically we can determine their optimal proportion
in production by iso-curve analysis. The optimal
proportion is, where the iso-cost line is tangential to the
iso-quant curve (figure).
Iso-cost line: volumes of production factors, aggregated value of
which are the same.
Iso-quant: volumes of production factors, utilisation of which the
volume of the production will be the same.
Often in the practice this analyse can be realised by
the help of break-even analysis as well (exercise).
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Iso-curve analysis
Capital
Iso-quants
Qn
Iso-cost
Q1
Labour
Source: own figure based on many publications
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Scheduling
Many production processes are very complex. To
organise and control them it is essential for
managers to have a good scheduling technique.
A traditional – and simple – method for scheduling
is the graphic Gantt diagram (flow-chart), a bar
chart where each bar represent a project task
and the row of bars depict the overlap of
scheduled actions as well (see the next slide).
Another technique is PERT (Project Evaluation and
Review Technique) or CPM (Critical Path
Method).
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Gantt diagram
Tasks
Actual time
Milestones
Time
Completed works
Remaining works
Milestone: planned event, which proves the execution of a task
Source: own figure based on many publications
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PERT identifies the activities necessary in a project,
developing a network that specifies the
interrelationships among those activities,
determining how much time each activity will
take (and how much they will cost).
A specific advantage of PERT is the determination
of the critical path (the longest path through the
project) and the opportunity to reduce it.
There are good computer programs to optimize
PERT (e.g. to minimise the time of the
implementation).
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A, B, C … : project’s activities
1, 3, 4 … : times, which are necessary to their realisation
PERT
3
4
A
1
F
B
1
G
1
1
C
1
D
E
Critical path: A – B – F - G
Source: own figure based on many publications
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New techniques of production strategy (e.g.
outsourcing and strategic alliances)
concentrate on adaptability.
Outsourcing is the action, when a large firm
transfers one part of its production to
subcontractors where it is cheaper. E.g.
maquiladoras, which are assembly plants built
in Northern Mexico close to the US border.
Strategic alliance is a cooperation agreement of
large firms to work together, e.g. to develop
new products or technologies, to get raw
materials, to enter a new market etc.
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Control of the implementation
In the framework of monitoring, the manager
observes external and internal processes
which influence the realisation of a strategy.
Controlling is the process of monitoring and
adjusting firm’s activities towards goal
attainment. It is a traditional management
function. During the last decades its methods
developed rapidly creating and adapting some
systems of strategic indices like Balanced
Scorecard or SAP.
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Features of the Hungarian firms
There are two enterprise statistics in Hungary.
Registered firms are units which figure in the
register of treaty.
Active firms are units which supplied tax reports
or statistical information.
The number of (registered) Hungarian firms is 1,6
millions (table), so on average there are 16 firms
owned by 100 Hungarians. This latter number is
more than two times higher than in the EU. But
the number of great firms is, limited (table).
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Analysis of enterprise situation
There are some effective techniques of an analysis
on the situation, problems, goals and behaviour
of enterprises. I.e.:
• Interviews of managers, employees, which can
map the views of the questioned persons.
• Survey. The main factors determining the
credibility of a survey result are the random
selection, and a „high” number of questioned
persons. (In case of a simple „yes/no” question this
number is high, if it is greather than 30)
GKI realises always many enterprise surveys.
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According to the survey results the main
competitiveness problems of the Hungarian
firms are in their marketing. The methods used
are simple. Usually products are developed by
the firm, R&D cooperation is exceptional. Pricepolicy is growth oriented, sales promotions are
frequent, the practice of product differentiation
is quite unknown. In most of the cases channels
of purchasing are traditional. Publicity is
concentrated on throwaways and fly-bills, high
quality catalogues are very rare. Only a small
proportion of firms protect their image (tables).
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Distribution of firms according to the level of
competitiveness of their products, services
Source: Enterprise survey of GKI.
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Distribution of firms according to the level of
competitiveness of their prices
Source: Enterprise survey of GKI.
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Distribution of firms according to the level of
competitiveness of their purchasing network
Source: Enterprise survey of GKI.
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Distribution of firms according to the level of
competitiveness of their marketing
Source: Enterprise survey of GKI.
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Proportions of firms (%) declaring that the given
factor is an important obstacle of their growth
Source: Enterprise survey of GKI.
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Thank you for your attention!
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