Modul 7.

Implementing strategies : management and

operation issues
 The Nature of Strategy Implementation

Successful of strategy formulation does not guarantee successful strategy implementation. It is

more difficult to do something than to say you are going to do it

Strategy Formulation Strategy Implementation

1. Positioning forces before action 1. Managing forces during the action

2. Focus on effectiveness
3. Primarily an intellectual process
4. Require good intuitive and analytical
skills
5. Require coordination among a few
individuals
2. Focus on efficiency
3. Primarily an operational process
4. Require special motivation and
leadership skill
5. Require coordination among many
individuals
 Management Perspective

1. Establishing Annual Objectives 8. Matching managers with

2. Devising policies strategies
3. Allocating resources 9. Developing strategy-supportive
4. Altering an existing culture
organizational structure 10.Adapting production / operation
5. Restructuring and Reengineering processes
6. Revising reward and incentive 11.Developing an effective human
plans resources function
7. Minimizing resistance to change 12.And if necessary downsizing
Annual Objectives

Long-term Company Objective.

Double company revenues in two years
Through market development and
Market penetration .
(Current revenues $ 2 million)

Division 1 Annual Objectives :

Division 2 Annual Objectives :
Increase divisional revenues by 40% this years
and 40% next year. (Current revenues are $ 1 Increase divisional revenues by 50% this
million) years and 50% next year. (Current revenues
are $ 0,5 million)

R & D Annual Objectives : Marketing Annual Objective : Production Annual Objective :

Develop two new product this year that Increase the number of sales Increase production efficiency by
are successfully marketed people by 40 this year 30% this year
Establishing Annual Objectives
• Is a decentralized activity that directly involves all managers in an
organization.
• Annual objective are essential for strategy implementation
because they :
Represent the basis for allocating resources
Are primary mechanism for evaluating managers
Are the major instrument for monitoring progress toward achieving
long-term objective
Establish organizational, division, and department priority
The Company’s Revenues Expectations (in Million Euros)

2009 2010 2011

Division 1 Revenues 1.00 1.40 1.96
Division 2 Revenues 0.50 0.70 0.98
Division 3 Revenues 0.50 0.75 1.125

Total Company Revenues 2.00 2.85 4.065

1. Annual objective serve as guidelines for action, directing and channeling effort and activities of
organization members
2. They provide a source of legitimacy in an enterprise by justifying activities to stake holders
3. They serve standard of performance
4. They serve as an important source of employee motivation and identification
5. They give incentives for managers and all employees to perform
6. They provide a basic for organization design
Policies
• On day-to-day basis, policies are needed to make a strategy
implemented.
• Policy refers to specific guidelines, methods, procedures, rules, forms
and administrative practices establish to support and encourage work
toward stated goals.
• Example :
• Carnival’s paradise cruise ship has no a smoking policy
anywhere, anytime aboard ship.
• Policy provides a basis for management control, allow coordination
across organizational units and reduce amount of time managers spend
making decision
A Hierarchy of Policies

Company Strategy
Acquire a chain of retail stores to meet our sales growth and profitability objectives.

Supporting Policies
1. “All stores will be open from 8 am to 8 pm Monday through Saturday” (this policy could
increase retail sales if stores currently are open 40 hours a week)
2. “All stores must submit a Monthly Control Data Report” (this policy could reduce
expense-to-sales ratio)
3. “All stores must support company advertising by contributing 5% of their total monthly
revenues for this purpose (this policy could allow the company to establish a national
reputation)
4. “All stores must adhere to the uniforms pricing guidelines set forth in the Company
Handbook (this policy could help assure customers that the company offers a consistent
product in terms of price and quality in all its stores)
Divisional Objectives
Increase the division’s revenues from $ 10 million in 2007 to $ 15 million in 2008.

Supporting Policies
1. “Beginning in January 2008 each one of this division’s salespersons must file weekly
activity report” (this policy could ensure that salespersons do not place too great an
emphasis in certain areas)
2. “Beginning in January 2008 this division will return to its employee 5% of its gross
revenues in the form of holiday bonus” (this policy could increase productivity)
3. “Beginning in January 2008 inventory level carried in warehouse will be decreased by
30% in accordance with a just-in-time (JIT) manufacturing approach” (this policy could
production expenses and thus free funds for increased marketing effort)
Production Department Objective
Increase production from 20,000 units in 2007 to 30,000 units in 2008.

Supporting Policies
1. “Beginning in January 2008 , employee will have the option of working up to 20 hours of
overtime per week” (this policy could minimized the need to hire additional employees)
2. “Beginning in January 2008 perfect attendance award in the amount $ 100 will be given
to all employee who do not miss a workday in a given year ” (this policy could decrease
absenteeism and increase productivity)
3. “Beginning in January 2008 new equipment must be leased rather than purchased ”
(this policy could reduce tax liabilities and thus allow more funds to be invested in
modernizing production process)
Resource Allocation
• Resource allocation is a central management activity that allows for strategy
execution.
• Four types of resources :
 Financial Resources
 Physical Resources
 Human Resources
 Technological Resources
The real value of any resource allocation program lies in the resulting
accomplishment of an organization’s objective
Effective resource allocation does not guarantee successful strategy
implementation, programs, personal, control, and commitment must breathe life
into the resources provided
Managing Conflict
• Conflict can be defined as a disagreement between two or more parties on one or
more issues.
• Conflict will be there because :
 Individuals have different expectation and perception, schedule create pressure, personalities
are incompatible, and misunderstanding with line manager.
 Managers and strategist must trade-off : to emphasize short-term profit or long-term growth,
profit margin or market share, market penetration or market development, growth or
stability, high risk or low risk
• Conflict is not be bad, an absence of conflict signal indifference and apathy.
• Various approach for managing conflict :
 Avoidance
 Deffusion
 Confrontation
Matching Structure with Strategy

• Structure largely dictates how objectives and policies will be

established. Example objective & policies establish under a geographic
• Change in will be different with under product group.
Strategy
require
change in • Structure dictates how resource will be allocated. If an organization’s
structure is based on customer group, then resource will be allocated in
Organizatio that manner, if based on functional business lines, then resource will be
nal allocated by functional area
Structure
• Why ?
Chandler’s Strategy-Structure Relationship

New Strategy New Administrative Organizational

Is Formulated problems emerge performance declines

Organizational A new organizational

performance improves structure is established
The Functional Structure

General
Manager

Marketing Production
Manager Manager

Quality
Advertising Sales Control
The Functional Structure
• Advantage
• Simple and inexpensive
• Promotes specialization of labor
• Encourage efficient use of
managerial and technical talent
• Minimize the need for an
elaborate control system
• Allow rapid decision making
• Disadvantage
• Forces accountability to the top
• Minimize career development
opportunities
• Line/staff conflict
• Poor delegation of authority
• Inadequate planning for product
and markets
The Divisional Structure

BOD BOD

General General
Affair Affair

Regional-1 Division Regional-2 Division Regional-3 Division Automotive Division Agriculture Division Insurance Division
BOD BOD

General General
Affair Affair

Corporate Customer Small Business Retail Electrical Work Painting

Glass Cutting Division
Division Division Division Division Division
The Divisional Structure

Divisional Structure • Org’ whose strategies need to be tailored to fit the particular need
by geographic and characteristic of customers in different area

• It is most effective for implementing strategies when specific

Divisional Structure by product product or service need special emphasis

• It is the effective way to implement strategies to cater to the

Divisional Structure by customers requirement of clearly defined customer group

• It is similar to a functional structure, because activities are

Divisional Structure by process organized according to the way work is actually performed
The Divisional Structure
• Advantage
• Accountability is clear
• Allow local control of local situation
• Creates career dev’ chances
• Promotes delegation of authority
• Leads to competitive climate
internally
• Allow easy adding of new product or
regions
• Allow strict control and attention to
product, customers and/or regions
• Disadvantage
• Can be costly
• Duplication of functional activities
• Required a skilled management force
• Requires an elaborate control system
• Competition among division can
become so intense as to be
dysfunctional
• Can lead to limited sharing of ideas
and resources
• Some regions/product/customers
may receive special treatment
 The Strategic Business Unit (SBU) Structure

Chief Executive
Conoco Product’s Org’ Chart Officer

Chief Strategy Chief Finance Chief Operating Chief Information

VP Human Resource VP Marketing
Officer (CSO) Officer (CFO) Officer (COO) Officer (CIO)

Industrial Product SBU Consumer Product SBU

Adhesive Flexible
Tubes / Cores High Density Film Metal Ends
Packaging Paper Division Reels Division Packaging Rigid Division
Division Division Division
Division Division
The Matrix Structure

Chief Executive
Officer

Chief VP Human
Chief Finance Chief Strategy Chief Information VP Marketing
Operating Resource
Officer (CFO) Officer (CSO) Officer (CIO)
Officer (COO)

Project-1 A B C D E F

Project-2 G H I J K L

Project-3 M N O P Q R
The Matrix Structure
Advantage
• Project objective are clear
• Employee can clearly see result of
their work
• Shutting down a project is easily
accomplished
• Facilitates uses of special
equipment/ personal/ facilities
• Functional resources are shared
instead of duplicated as in a
divisional structure
Disadvantage
• Requires excellent vertical and
horizontal flows of communication
• Costly because create more manager
position
• Violate unity of command principle
• Creates dual lines of budget authority
• Creates dual sources of reward and
punishment
• Creates shared authority and
reporting
• Requires mutual trust and
understanding
 Adopting Best Practices and Striving for Continuous Improvement

A Best Practice is a technique for performing an activity or business process that at least one
company has demonstrated works particularly well

To qualify as a legitimate best practice :

1. Lowering cost
2. Improving quality or performance
3. Shortening time requirement
4. Enhancing safety
5. Delivering some other highly positive operating income.

Benchmarking is the backbone of the process of identifying, studying and implementing

outstanding practices, it involves being humble enough to admit that others have come up with
world-class ways to perform particular activities yet wise enough to try to learn how to match,
and even surpass them.
 Restructuring and Reengineering

Restructuring and Reengineering are becoming commonplace in the organization landscape

across the United States and Europe.

Restructuring also called downsizing, right sizing, or delayering involve reducing the size of the
firm in term of number of employee, number of division, number of hierarchical level in the
organization

Reengineering, a firm uses information technology to breakdown functional barrier to create a

work system based on business process, product, or outputs rather than on function or inputs.
 Linking Performance and Pay to Strategies

Profit Sharing, Gain Sharing, Bonus System

Five tests to determine whether a performance-pay-plan will benefit

An organization

Are people talking more about their activities and taking pride in early success
Does the plan capture attention ?
under the plan ?

Does employee understand the plan Can participants explain how it works and what they need to do to earn
? the incentive
Is the plan improving Do employees know more than they used to about the company’s mission, plans
communication ? & objective?

Does the plan pay out when it Are incentive being paid for desired result-and being withheld when objective
should are not met ?

Is the company or unit performing Are profits up ? Has market share grown ? Have gains resulted in part from the
better ? incentive ?
 Managing Resistance to Change

• Almost any change in structure, technology, people, or strategies potential disrupt

comfortable interaction patterns
• People fear economic loss, inconvenience, uncertainty, and break in normal social
patterns
• Resistance to change can be considered the single greatest threat to successful
strategy implementation.
• Three various approach to implement changes :
 Force change strategy
 Educative change strategy
 Self-interest change strategy
 Creating a Strategy-Supportive Culture

Linkage Culture to Strategy Way for altering

1. Formal statement of organizational • Recruitment

philosophy, charter, creed, material used • Training
for recruitment and selection and • Transfer
socialization
Strategist should strive to • Promotion
2.Designing of physical spaces, facades,
preserve, emphasize, and built
buildings
• Restructuring
upon aspect of an existing
3.Deliberate role modeling, teaching, and • Reengineering
culture that support proposed • Role Modeling
coaching by leader
new strategies
4.Explicit reward and status system, • Positive Reinforcement
promotion criteria • Mentoring
5.Stories, legends, myths and parables about • Revising vision and mission
key people and events • Redesigning space
• Reward system
• Policies, procedures
 Production / Operation Concern

Types of Org’ Strategy being Implemented Production System Adjustment

Adding a cancer center (Product Purchase specialized equipment and add
Hospital
Development) specialized people
Adding 10 new branches (Market
Bank Perform site location analysis
Development)
Purchasing a barely farm operation
Beer Brewery Revise the inventory control system
(Backward Integration)
Acquiring fast-food chain (Unrelated
Steel Manufacturing Improve the quality control system
Diversification)
Purchasing a retail distribution chain Alter the shiping, packaging, and
Computer Co.
(Forward Integration) transportation system
 Human Resource Concern

Human Resources Problem :

1. Disruption of social and political structure
2. Failure to match individual’s aptitude with implementation task
3. Inadequate top management support for implementation activities

Employee Stock Ownership Plans (ESOP):

Employee-benefit plan whereby employee purchase stock of the company through borrowed money
or cash contribution.

Balancing Work Life and Home Life

 Tugas M9.
1. Pelajari Case sesuai dengan kelompok anda.
2. Identifikasi Annual objective dan hirarki objective
3. Bagaimana perusahaan membuat policies untuk guidelines bagi para
pegawai
4. Apakah type struktur organisasinya, gambarkan ?
5. Best practise apakah yang dimiliki oleh perusahaan tersebut?
6. Apakah ada linkage antara performance dengan cash benefit buat
pegawainya ?
7. Tugas dikerjakan mulai saat ini dan dikumpulkan soft copy halaman
paling lambat pada H-1 pertemuan berikut.