Chapter 7

Implementing Strategies:
Management Issues
Strategic Management:
Concepts and Cases. 9th edition
Fred R. David

PowerPoint Slides by
Anthony F. Chelte
Western New England College
Ch 7-1
Fred R. David
Prentice Hall
 Chapter Outline

• The nature of Strategy Implementation

• Annual Objectives

• Policies

• Resource Allocation
Ch 7-2
Fred R. David
Prentice Hall
 Chapter Outline
• Managing Conflict

• Matching Structure with Strategy

• Restructuring, Reengineering, and E-

Engineering

• Linking Performance and Pay to Strategies

Ch 7-3
Fred R. David
Prentice Hall
 Chapter Outline

• Managing Resistance to Change

• Managing the Natural Environment

• Creating a Strategy-Supportive Culture

Ch 7-4
Fred R. David
Prentice Hall
 Chapter Outline

• Production/Operations Concerns
When Implementing Strategies

• Human Resource Concerns When

Implementing Strategies

Ch 7-5
Fred R. David
Prentice Hall
 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.

Ch 7-6
Fred R. David
Prentice Hall
 Implementing Strategies:
Strategy Analysis & Choice
Management Issues

Contrasting strategy formulation and

strategy implementation

– Formulation is positioning forces before the action

– Implementation is managing forces during the action

Ch 7-7
Fred R. David
Prentice Hall
 Implementing Strategies:
Strategy Analysis & Choice
Management Issues

Contrasting strategy formulation and

strategy implementation

– Formulation focuses on effectiveness

– Implementation focuses on efficiency

Ch 7-8
Fred R. David
Prentice Hall
 Implementing Strategies:
Strategy Analysis & Choice
Management Issues

Contrasting strategy formulation and

strategy implementation

– Formulation is primarily an intellectual process

– Implementation is primarily an operational process

Ch 7-9
Fred R. David
Prentice Hall
 Implementing Strategies:
Strategy Analysis & Choice
Management Issues

Contrasting strategy formulation and

strategy implementation

– Formulation requires good intuitive and analytical

skills

– Implementation requires special motivation and

leadership skills

Ch 7-10
Fred R. David
Prentice Hall
 Implementing Strategies:
Strategy Analysis & Choice
Management Issues

Contrasting strategy formulation and

strategy implementation

– Formulation requires coordination among a few

individuals

– Implementation requires coordination among many

persons

Ch 7-11
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Prentice Hall
 Implementing Strategies:
Strategy Analysis & Choice
Management Issues

Strategy implementation –

– Varies among different types and sizes

of organizations

Ch 7-12
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Prentice Hall
 Implementing Strategies:
Strategy Analysis & Choice
Management Issues
Strategy implementation Actions –

– Altering sales territories

– Adding new departments
– Closing facilities
– Hiring new employees
– Cost-control procedures
– Changing advertising strategies
– Building new facilities
Ch 7-13
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 Management Perspectives

Formulation to Implementation
transition –

– Shift in responsibility
• From strategists to division and functional
managers

Ch 7-14
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 Management Issues

Annual Objectives

Policies

Resources
Management
Issues Organizational structure

Restructuring

Rewards/Incentives

Ch 7-15
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Prentice Hall
 Management Issues (continued)

Resistance to Change

Managers & strategy

Supportive culture
Management
Issues Production/operations

Human resources

Downsizing

Ch 7-16
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 Annual Objectives

• Decentralized activity
• Involves all managers in the firm

Ch 7-17
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 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

Ch 7-18
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 Annual Objectives

• Horizontal consistency of objectives

• Vertical consistency of objectives

Ch 7-19
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 Annual Objectives

Objectives should state –

– Quantity
– Quality
– Cost
– Time

Ch 7-20
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 Policies

Policies facilitate solving recurring

problems and guide the implementation
of strategy

Ch 7-21
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 Policies

Policies set –

– Boundaries
– Constraints
– limits

Ch 7-22
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 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
Ch 7-23
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 Resource Allocation

Resource Allocation –

A central management activity that allows

for strategy execution

Ch 7-24
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 Resource Allocation

Four types of resources –

1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources

Ch 7-25
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 Managing Conflict

Conflict –

Disagreement between two or more parties

on one or more issues

Ch 7-26
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 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

Ch 7-27
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 Managing Conflict

Conflict Management and Resolution

– Avoidance
– Defusion
– Confrontation

Ch 7-28
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Prentice Hall
 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
Ch 7-29
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 Chandler’s Strategy-Structure
Relationship

Organizational
New strategy New administrative
performance
Is formulated problems emerge
declines

Organizational
New organizational
performance
structure is established
improves

Ch 7-30
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 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

Ch 7-31
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Prentice Hall
 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

Ch 7-32
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 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 firm’s organizational
structure

Ch 7-33
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 Restructuring

Also called –

– Downsizing
– Rightsizing
– Delayering

Ch 7-34
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 Restructuring

• Employed when ratios out of line with

benchmarked competitors

• Primary benefit sought is cost reduction

Ch 7-35
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 Reengineering

Reengineering –

Involves reconfiguring or redesigning work,

jobs, and processes to improve cost,
quality, service and speed.

Ch 7-36
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 Reengineering

Also called –

– Process management
– Process innovation
– Process redesign

Ch 7-37
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 Reengineering

Reengineering –

Concerned more with employee and

customer well-being than shareholder
well-being

Ch 7-38
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 Linking Performance and Pay
to Strategies

Most companies practicing pay-for-

performance

Ch 7-39
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 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

Ch 7-40
Fred R. David
Prentice Hall
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?

Ch 7-41
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Managing Resistance to Change

Change raises anxiety over fear of:

– Economic loss
– Inconvenience
– Uncertainty
– Break in status-quo

Ch 7-42
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Managing Resistance to Change

Resistance to change –

– Single greatest threat to successful strategy

implementation

Ch 7-43
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 Change Strategies

• Force Change Strategy

• Educative Change Strategy
• Rational or Self-Interest Change Strategy

Ch 7-44
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 Managing the Natural
Environment

• Wide appreciation for firms that conduct

operations that “mend” rather than “harm”
the environment.

Ch 7-45
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 Creating a Strategy-Supportive
Culture

Strategists should strive to preserve,

emphasize, and build upon aspects of
existing culture that support new
strategies.

Ch 7-46
Fred R. David
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 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

Ch 7-47
Fred R. David
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Production/Operations Concerns

• Production processes typically

constitute more than 70% of firm’s total
assets
• Decisions on:
– Plant size
– Inventory/inventory control
– Quality control
– Cost control
– Technological innovation
Ch 7-48
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 Human Resource Concerns

• Assessing staffing needs and costs

• Develop performance incentives
• ESOPs
• Child-care policies
• Work-life balance

Ch 7-49
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 Key Terms
• Annual objectives
• Avoidance
• Benchmarking
• Bonus system
• Conflict
• Confrontation
• Culture
• Defusion
• Delayering
Ch 7-50
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 Key Terms

• Decentralized structure
• Divisional structure
• Downsizing
• Educative change strategy
• Employee Stock Ownership Plan
(ESOP)

Ch 7-51
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 Key Terms
• Establishing annual objectives
• Force change strategy
• Functional structure
• Gain sharing
• Horizontal consistency of objectives
• Just in time
• Matrix structure
• Policy
• Profit sharing
Ch 7-52
Fred R. David
Prentice Hall
 Key Terms
• Rational change strategy
• Reengineering
• Resistance to change
• Resource allocation
• Restructuring
• Rightsizing
• Self-interest change
• Triangulation
• Vertical consistency of objectives
Ch 7-53
Fred R. David
Prentice Hall