Download Crafting a strategy

Strategic Implementation
Requirements for Strategic Implementation
Strategic Management Prof. Dr.
Majed El-Farra 2009
1
Strategy implementation
‘Strategy implementation is the process by which
strategies and policies are put into action
through the development of programs,
budgets, and procedures’.
the implementation of strategy directly or
indirectly connects to all facts of management.
Thus it is fundamental to follow a holistic
approach when analyzing and assessing
complex issues of strategy implementation.
Strategic Management Prof. Dr.
Majed El-Farra 2009
2
The importance of strategy
implementation phase
In spite of all the energy and resources spent in
the pursuit of the wonderful strategy, it is
surprising to consider how little effort is
dedicated towards its implementation. Most
managers stumble in the implementation
stage. A current economic survey found that a
discouraging 57 percent of firms failed at
carrying out strategic initiatives over the past
three years, according to their senior operating
executives.
Strategic Management Prof. Dr.
Majed El-Farra 2009
3
Difficulties
One major source of difficulty encountered in implementing
strategy comes from the fact that, in most organizations,
the pre-strategy decision-making processes are heavily
political in nature. Strategy presents elements of
rationality which are disruptive to the historical culture of
the organization and threatening to the political process.
A natural organizational reaction is to struggle against
the disruption of the historical culture and power
structure, rather than confront the challenges posed by
the environment. This reaction has been widely observed
during the introduction of strategic planning into
business firms.
Strategic Management Prof. Dr.
Majed El-Farra 2009
4
Difficulties
A no less important difficulty is that the introduction of
strategic planning triggers conflict between the historical
profit making activities (for example serving the
community in NGOs) and the new creative activities.
Organizations usually do not have the capability, the
capacity or the motivational systems to act and to think
strategically. Finally organizations generally have limited
information about themselves and their environment
which is necessary for effective strategic planning. They
also have no managerial talents capable of the
formulation and implementation strategy (Ansoff, 1988).
Strategic Management Prof. Dr.
Majed El-Farra 2009
5
Strategy implementation
Hunger and Wheelen (2003) stress that a good strategy can
result in a disaster through poor strategy
implementation, therefore strategy formulation and
strategy implementation should be considered as two
sides of the same coin. Allison and Kaye (2005) claim
that there are two main obstacles facing the effective
implementation of the strategy:
The difficulty of transformation big ideas into particular
steps.
The difficulty of protecting the focus that was accomplished
through the planning process.
Strategic Management Prof. Dr.
Majed El-Farra 2009
6
Strategy implementation
They address the first difficulty by
developing annual operating plans,
and address the second one by
assessing the plan and setting up
regular monitoring of the plan.
Strategic Management Prof. Dr.
Majed El-Farra 2009
7
Strategy implementation
framework
Okumus (2003) reviewed the literature in
strategy implementation; his work can
be concluded as the following: One of
the most cited implementation
frameworks was proposed by Waterman
et al., (1980) which was derived from
their research and consultancy work.
Strategic Management Prof. Dr.
Majed El-Farra 2009
8
Strategy implementation
framework
These writers argued that successful strategy
implementation is fundamentally attending to the
relationship between the following seven elements:
Strategy
Structure
Systems
Style
Staff
Skills
Subordinate goals.
Strategic Management Prof. Dr.
Majed El-Farra 2009
9
Strategy Implementation
 Effective strategic implementation requires
the follows:
1- Organizational structure appropriateness.
2- Sound leadership of the company.
3- Effective motivational system
4- Annual objectives
5- Functional strategies
6- Clear budget
7- Detailed action plan
Strategic Management Prof. Dr.
Majed El-Farra 2009
10
Communicating Strategy
Strategy must be clearly understood.
It provides employees with general
guidance to make decision.
Strategic Management Prof. Dr.
Majed El-Farra 2009
11
Strategy & Structure
Definition of Organizational Structure:
The structure can either facilitate or
inhibit strategy implementation.
Chandler says: Changes in strategy
ultimately lead to changes in the
organization’s structure.
Strategic Management Prof. Dr.
Majed El-Farra 2009
12
Types of organizational
structure
12345-
Functional
Geographical
Divisional
Customer-based
Matrix
Strategic Management Prof. Dr.
Majed El-Farra 2009
13
Functional Structure
The most widely used structure is the
functional or centralized type because
this structure is the simplest and least
expensive of the seven alternatives.
A functional structure groups tasks and
activities by business function such as
product/operations, marketing,
finance/accounting, R&D, and computer
information systems.
Strategic Management Prof. Dr.
Majed El-Farra 2009
14
Functional Structure
Advantages: Besides being simple and
inexpensive, a functional structure
also promotes specialization of labor,
encourages efficiency, minimizes the
need for an elaborate control system,
and allows rapid decision-making.
Strategic Management Prof. Dr.
Majed El-Farra 2009
15
Functional Structure
Disadvantages: Some disadvantages of
a functional structure are that it
forces accountability to the top,
minimizes career development
opportunities, and is sometimes
characterized by low employee
morale.
Strategic Management Prof. Dr.
Majed El-Farra 2009
16
The Divisional Structure
The divisional or decentralized structure is
the second most common type used by
American businesses.
The divisional structure can be organized in
one of four ways: by geographic area,
product or service, customer, or
process. With a divisional structure,
functional activities are performed both
centrally and in each separate division
Strategic Management Prof. Dr.
Majed El-Farra 2009
17
Divisional Structure
Advantages: A divisional structure has some clear
advantages. First, and perhaps foremost, is
accountability. Other advantages of the
divisional structure are that it creates career
development opportunities for managers,
allows local control of local situations, leads to
a competitive climate within an organization,
and allows new businesses and products to be
added easily.
Disadvantages: Perhaps the most important
limitation is that a divisional structure is
costly.
Strategic Management Prof. Dr.
Majed El-Farra 2009
18
Divisional structure
A divisional structure by geographic area is appropriate
for organizations whose strategies need to be tailored to
fit the particular needs and characteristics of customers
in different geographic regions.
A division structure by product is most effective for
implementing strategies when specific products or
services need special emphasis.
A division structure by process is similar to a functional
structure, because activities are organized according to
the way work is actually performed.
Strategic Management Prof. Dr.
Majed El-Farra 2009
19
The Matrix Structure
It is the most complex of all designs because it depends
upon both vertical and horizontal flows of authority and
communication.
It can result in higher overhead because it creates more
managerial positions.
It also creates dual lines of budget authority, dual

sources of reward and punishment, shared authority,
and dual reporting channels.
Its advantages are that project objectives are clear,

there are many channels of communication, workers
can see visible results of work, and projects can be shut
down easily.
Strategic Management Prof. Dr.
Majed El-Farra 2009
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
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Strategic Management Prof. Dr.
Majed El-Farra 2009
21
An assessment of Org.
Structure
 No structure is appropriate for all
situations.
 Appropriate structure may change as
the organization develops.
 Examples require structure change:
Introducing new strategy, having
problems in achieving its objectives,
leadership changes.
Strategic Management Prof. Dr.
Majed El-Farra 2009
22
Symptoms of an ineffective of
org. Structure
According to P. Drucker:
1- Too many management levels make
cooperation and communication difficult
2- Too many meetings attended by too
many.
3- Too much attentions are given to
resolve interdepartmental conflict.
4- Excessive decision making at top
management
Strategic Management Prof. Dr.
Majed El-Farra 2009
23
Evolution of organizational structure: Alfred
D. Chandler
1. Changing strategy.
2. Administrative problems leading to
decline performance.
3. Revised structure subsequent return
to economic health.
Strategic Management Prof. Dr.
Majed El-Farra 2009
24
Structural adjustments : Chandler

1.
2.
3.
When does it happen?
Market expansion.
Product line diversification.
Vertical integration.
Strategic Management Prof. Dr.
Majed El-Farra 2009
25
Relationship between strategy and
Org. Structure
The process of matching structure to strategy is complex
and should be undertaken with a thorough
understanding of :
 the historical development of the organizational
structure.
 The requirements of the organization’s environment and
technology.
 The political relationships that might be affected.
Strategic Management Prof. Dr.
Majed El-Farra 2009
26
Organizational Culture
 . Culture: Refers to the values and patterns
of belief and behavior that are accepted and
practiced by the members of a particular
organizations
 Org. culture change as environment
changes.
 The founder and Top management shape
the org. culture.
 Change in strategy requires change in
culture.
Strategic Management Prof. Dr.
Majed El-Farra 2009
27
Organizational Leadership
The leader is an individual who is able
to influence the attitudes and opinion
of others.
The leader must have a clear vision.
Different strategies need different skills.
Strategic Management Prof. Dr.
Majed El-Farra 2009
28
Strategy and Motivational systems
 Organizational reward system
influence the entire organizational
climate.
Organizational rewards include all
types of rewards, tangible and
intangible.
Strategic Management Prof. Dr.
Majed El-Farra 2009
29
Deployment of Resources
through Budgeting
 Budgeting: Is the process of
allocating resources to be employed
to achieve objectives.
 Budget should be directly linked to
strategy implementation.
Strategic Management Prof. Dr.
Majed El-Farra 2009
30
Developing functional
Strategies
 Functional Strategies describe the
methods and means at functional
level to achieve corporate strategies
and business unit strategies.
Strategic Management Prof. Dr.
Majed El-Farra 2009
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