Unit iv

BACKWARD
LINKAGE FORWARD
LINKAGE
STRATEGY
FORMULATION
STRATEGY
IMPLEMENTATION
Modification in
structure, leadership
styles & other changes
Effect of past
strategies
implemented

STRATEGY
FORMULATION
• Entrepreneurial
Activity
• Analysis & thinking
STRATEGY
IMPLEMENTATION
• Administrative
Activity
• Action & doing

Pyramid of Strategy Implementation
Strategies
Plans
Programs
Projects
Budgets
Policies, Procedures, rules and regulations

Hierarchy of Strategy
 A strategy consists of several plans
 A plan consists of several programs
 A program consists of several projects
 A program includes goals, policies, rules, procedures
steps taken to put a plan into action
 Each project is highly specific with a time and cost
schedule.
 A project decides how the day to day operations will be
done

Strategy Implementation
1. Project Implementation
2. Procedural Implementation
3. Resource allocation
4. Structural Implementation
5. Behavioral Implementation
6. Functional & Operational
Implementation

Project Implementation
Conception
Generation of
Ideas for projects
Prioritization of the
projects
Definition
Preliminary
analysis- marketing,
financial, economic,
technical
Generation of project
feasibility report
Planning &
Organizing
Infrastructure,
engineering
designs, finance
Manpower, systems
procedures
Implementati
on
Place order for
materials, award
contracts
Testing, trial,
commissioning of plant,
Clean up
phase
Disbanding the project
infrastructure
Handing over plant to
operating personnel

Procedural Implementation
Regulatory Elements
1. Formation of company
2. Licensing procedures
3. SEBI requirements
4. MRTP requirements
5. Foreign collaboration procedures
6. FEMA requirements
7. Import & Export requirements
8. Patenting & Trademark requirements
9. Labour legislation requirements
10. Environmental protection & Pollution control
requirements
11. Consumer protection requirements
12. Incentives & facilities benefits

Resource Allocation
 Sources of Finance
 Long term & Short term
 External & internal

Types of Budgeting systems
1. Strategic Budgeting
2. BCG based Budgeting
3. PLC based Budgeting
4. Capital Budgeting
5. Zero based Budgeting
6. Parta system (establishing return on Investment
based on Cost Management)

Factors affecting Resource
allocation
 Objectives of organization
 Implicit
 Explicit
 Preference of dominant strategists
 Internal politics
 External influences

Difficulties of Resource Allocation
 Scarcity of resources
 Restriction of generating resources
 Overstatement of needs

Structural Implementation
Structural Mechanisms
Creation of Structure
Defining major tasks required to
implement Strategy
Group tasks on the basis of
common skill requirements
Subdivision of responsibility and
delegation of authority to perform
tasks
Coordination of divided
responsibility
Hold & Sustain the Structure
Design & administration of
Information system
Control system
Appraisal system
Motivation system
Development
Planning

Traditional Forms of
Organizational Structure
 Organizational structure
 refers to formalized patterns of interactions that link a
firm’s tasks, technologies, and people

Traditional Forms of
Organizational Structure
 Structure provides a means of balancing two
conflicting forces
 Need for the division of tasks into meaningful
groupings
 Need to integrate the groupings for efficiency and
effectiveness

Entrepreneurial Structure
 Entrepreneurial Structure
 An organizational form in which the owner-manager
makes most of the decisions and controls activities,
and the staff serve as an extension of the top
executive.
10-16

Entrepreneurial Structure
 Advantages
 Highly informal
 Centralized decision
making
 Little specialization
 Disadvantages
 Employees may not
understand their
responsibilities
 May take advantage
of lack of regulation
10-17

Functional Structure
 Functional Structure
 An organizational form in which the major functions of
the firm, such as production, marketing, R&D, and
accounting, are grouped internally.
10-19

Functional Structure
Advantages
 Specialisation – each
department focuses on
its own work
 Accountability –
someone is responsible
for the section
 Clarity – know your and
others’ roles
Disadvantages
 Closed communication
could lead to lack
of focus
 Departments can
become resistant
to change
 Coordination
may take too long
 Gap between top and
bottom

Divisional Structure
 Divisional organizational structure
 An organizational form in which products, projects, or
product markets are grouped internally.
 Also called multidivisional structure or M-Form
10-22

 Advantages
 Quick response to important changes in external
environment
 Minimal problems of sharing resources across
functional departments
 Development of general management talent is
enhanced
10-23

 Disadvantages
 Can be very expensive
 Can be dysfunctional competition among divisions
 Differences in image and quality may occur across
divisions
 Can focus on short-term performance
10-24

SBU Structure
 Strategic business unit (SBU) structure
 An organizational form in which products, projects, or
product market divisions are grouped into
homogeneous units.
10-25
CEO
SBU 1
DIV 1..2.3
SBU 2
DIV
1..2..3
SBU 3
DIV1..2..3
SBU 4
DIV
1..2..3

SBU Structure
 Advantages
 task of planning and
control by the
corporate office more
manageable
 individual businesses
can react more
quickly to important
changes
 Disadvantages
 may become difficult
to achieve synergies
 additional level of
management
increases overhead
expenses
10-26

Matrix Structure
 Matrix organizational structure
 an organizational form in which there are multiple lines
of authority and some individuals report to at least two
managers.
10-28

Matrix Structure
 Advantages
 Facilitates the use of
specialized
personnel, equipment
and facilities
 Provides
professionals with a
broader range of
responsibility and
experience
 Disadvantages
 Can cause
uncertainty and lead
to intense power
struggles
 Working relationships
become more
complicated
 Decisions may take
longer
10-29

The Network Organization
Structure
 Network organization
CORPORATE
HEADQUARTER
S
Project
Group
Function
X
Region ARegion B
Function
M

Pros and Cons of Network Structures
PROS CONS
High level of flexibility
to change structural
arrangements in line
with business
requirements
Loss of control and
coordination
Permits concentration of
core competencies of
firm
Risk of over
specialization
Adaptability to cope with
rapid environmental
change
High costs due to
duplication of resources

Product/ Activity based structure
Imaging
and
Printing
Group
Personal
Systems
Group
Enterprise
Systems Group
HP Services HP Financial
Services
Hewlett Packard

Organisation by Product/Activity
Advantages
 Clear focus on market
segment helps meet
customers’ needs
 Positive competition
between divisions
 Better control as each
division can act as
separate profit centre
Disadvantages
 Duplication of functions
(e.g. different sales force
for each division)
 Negative effects of
competition
 Lack of central control
over each separate
division

Hewlett-Packard’s Headquarters Worldwide
Americas
Houston, Texas Europe, Middle East,
Africa
Geneva, Switzerland
Asia Pacific
Hong Kong
Hewlett Packard

INTRAPRENEUR 1
RESOURCES,
FINANCE,
MARKETING &
OTHER SUPPORTS
INTRAPRENEUR 2
RESOURCES,
FINANCE,
MARKETING &
OTHER SUPPORTS

Intrapreneurial Structure
Advantages
 Revitalizes the
organization
 Opportunities for
innovation and talent
 Development of new
idea, products & services
 Motivation for highly
talented individuals
Disadvantages
 Difficulty in control &
coordination
 Risks of time and
resources
 New projects may not
always be successful

The Virtual Organization
 Virtual organization
 a continually evolving
network of independent
companies that are
linked together to share
skills, costs, and
access to one
another’s markets.

Pros and Cons of Virtual Structures
PROS CONS
Enables sharing of
costs & skills
No boundaries, close
interdependence
Increases market
responsiveness
Problems with control
Good utilization of
competencies
New and different
types of managerial
skills
Knowledge sharing
and organizational
learning

FIVE ISSUES
 Leadership
 Corporate Culture
 Corporate politics & Power
 Personal values & Business ethics
 Social Responsibility

Leadership implementation
 Be a visionary
 Be willing to take risks
 Be aware of environmental factors affecting the
organization
 Strategic thinking & activities
 Collective view
 Build subordinate skills and confidence
 Lead by empowering others
 Create leadership at lower levels
 Delegate authority
 Emphasize innovation

Leadership styles by Khandwalla
STYLE
DIMENSIONS
RISK
TAKING
TECHNOCRACY ORGANICITY PARTICIPATION COERCION
ENTREPRENEURIA
L
HIGH MODERATE
TO LOW
MODERAT
E TO LOW
MODERATE
TO LOW
VARIABLE
NEO SCIENTIFIC MODER
ATE
HIGH HIGH VARIABLE VARIABLE
QUASI SCIENTIFIC MODER
ATE
HIGH HIGH VARIABLE VARIABLE
MUDDLING
THROUGH
HIGH LOW VARIABLE VARIABLE MODERA
TE TO
HIGH
CONSERVATIVE LOW HIGH LOW VARIABLE HIGH
DEMOCRATIC MODER
ATE TO
LOW
MODERATE
TO LOW
MODERAT
E TO LOW
HIGH VARIABLE
MIDDLE OF THE
ROAD
MODER
ATE TO
LOW
MODERATE
TO LOW
MODERAT
E TO LOW
MODERATE
TO LOW
MODERA
TE TO
LOW

 Shared things (way of dressing)
 Shared sayings (talking, jargon)
 Shared actions (service oriented approach)
 Shared feelings (hard work is not rewarded here)
CORPORATE CULTURE

CORPORATE CULTURE
Facilitates Hinders
 Communication
 Decision making
 Control
 Cooperation & commitment
 Resistance to change
 When there are too many
subcultures
 When there is lack of shared
values and norms

BUILDING A STRONG CULTURE BY
 Influential leader with strong positive values
 Sincere and dedicated commitment to operate the
business according to those values
 Genuine concern for the wellbeing of the
organization’s stakeholders

Four approaches to create Strategy
supportive culture
 To ignore corporate culture- when it is impossible to
change culture
 To adapt strategy implementation to suit corporate
culture-
 To change corporate culture to suit strategic
requirements
 To change strategy to fit corporate culture –
economical to consider the culture when formulating
strategy

Corporate Culture Changes
Warner Hindustan Parke Davis
 Multi location
 Task oriented culture
 High level of cost and profit
consciousness
 Controlled, formal and
documented work culture
 Risk taking was encouraged
 Single location
 People oriented culture
 Participative and democratic
values
 Trust and respect for each
other
 Conservative company

POST MERGER SCENARIO
 Culture clashes
 Average employee felt alienated and insecure
 Formation of cliques
 Conflicts – work stoppages, low productivity

Politics & Power
5 Sources of Power
1. Reward power- reward positive outcomes
2. Coercive power- penalize negative outcomes
3. Legitimate power-use of position to influence
4. Referent power- effect of charisma/ personality
5. Expert power- due to competence, knowledge and
expertise

Politics is
 Use of power
 Managing coalitions
 Consensus building
 Creation of commitment

Approaches to Strategic use of
power and politics
 Accept the inevitability of power
 Understand how the power structure works
 Be sensitive and alert to political signals emanating
from different parts of the organization
 Know how to tread softly and be diplomatic

Approaches to Strategic use of
power and politics contd…
 Judicious use of Machiavellian methods
 Be patient until consensus emerges
 Let negative decisions emerge as group consensus than
directive from top
 Gather support for acceptable proposals and let
unacceptable ideas die a natural death
 Reward organizational commitment and penalize
negative attitude

Personal Values & Business Ethics
 Business ethics – study of how personal moral norms
apply to activities and goals of a commercial enterprise
 Values and ethic decide how power and politics will be
used

Indian companies with known
excellent values
 Asian Paints
 Bajaj Auto
 ICICI
 Infosys
 Amul

Some ethical concerns in Indian
Industry
 Misuse of confidential information
 Poor quality of goods and services
 Insider trading
 Receiving gifts or favours from suppliers
 Mission statement focus only on customer satisfaction
and fail to address- sexual harassment, language bias,
regional bias, casteism
 Belief that ethics is an external problem – in
government and politics only

Strategic implementation of
business ethics and values
 Inculcate values and ethics
 During recruitment and selection- compatibility of
employee character and organizational ethics
 Incorporating statement of values and ethics in
employee training and education
 ‘Walk the talk’ by top management
 Communicate the values and ethics consistently
 Monitor compliance
 Nurture values through policies, procedures and actions
 Pay special attention to ethically sensitive activities like
purchasing, procurement, dealing with government

Strategic implementation of
business ethics and values contd….
 Reconcile divergent values
 Modify values to create consistency

Social Responsibility
 Responsibility of the business towards society
 What the organization ought to do

Examples of social responsibility in
Indian companies
 Asian Paints – large scale community development
project
 BHEL- development of quality of life in rural areas
 Brooke Bond – animal welfare
 Colgate- Palmolive- promotion of sports, dental
health, small scale industry
 ITC- agriculture, sports, pollution control
 SAIL- agriculture, industry, education, health care

FUNCTIONAL STRATEGIES
 Restrictive plan providing objectives for a specific
function, allocation of resources among different
operations within that functional area and
coordination between them for optimal contribution
to the achievement of organizational objectives
 Defined in terms of plans & policies
 Plans are courses of action
 Policies are guidelines to action

Vertical & Horizontal Fit
Vertical Fit
 Congruence and
coordination among the
strategies operating at
different levels is a
vertical fit
 Vertical fit leads to the
alignment of all
functional areas to the
requirement of strategy
through functional
implementation
Horizontal Fit
 Congruence and
coordination of
activities taking place a
the same level is a
horizontal fit
 Horizontal fit leads to
the alignment of all
activities taking place
at the working level
through operational
implementation

Vertical Fit
Functional implementation through -
 Strategic marketing management
 Strategic financial management
 Strategic operations management
 Strategic human resources management
 Strategic information management
 Aligning each functional area with the corporate
and business strategies to gain a strategic
advantage

Horizontal Fit
Operational implementation through
 Value creation- value chain analysis- primary activities,
secondary activities- inbound logistics- outbound
logistics

Value Chain Analysis
PRIMARY ACTIVITIES
INBOUND
LOGISTICS:
materials
handling,
warehousing,
inventory
control,
transportation
OPERATIO
NS: machine
operating,
assembly,
packaging,
testing and
maintenance
OUTBOUN
D
LOGISTICS:
order
processing,
warehousing
,
transportati
on and
distribution
MARKETIN
G AND
SALES:
advertising,
promotion,
selling,
pricing,
channel
management
SERVICE:
installation,
servicing,
spare part
management

Value Chain Analysis
SUPPORT ACTIVITIES
FIRM
INFRASTRUCTU
RE: general
management,
planning,
finance, legal,
investor
relations;
HUMAN
RESOURCE
MANAGEMEN
T:
recruitment,
education,
promotion,
reward
systems;
TECHNOLOGY
DEVELOPMEN
T: research &
development,
IT, product
and process
development
PROCUREME
NT:
purchasing
raw materials,
lease
properties,
supplier
contract
negotiations

Functional Plans & Policies Nature
 Plans- What has to be done
 Policies- How it should be done
 Need
 To ensure that strategic decisions are implemented by all
parts of organization
 A basis for control
 Saves on time and effort in decision making
 Consistent handling of similar situations
 Coordination

Development of Functional plans
and policies
 Financial
 Sources of funds
 Usage of funds
 Management of funds
 Marketing
 Product
 Price
 Place
 Promotion

and policies contd…
 Operations
 Production
 Operations planning & control
 R & D
 Personnel
 Personnel system
 Organizational & employee characteristics
 Industrial relations

and policies contd…
 Information
 Acquisition & retention of information
 Processing & synthesis of information
 Retrieval & usage of information
 Transmission & Dissemination of information

Operational Implementation
 Operational Effectiveness- performing similar
activities better than rivals perform them
Four areas of operational effectiveness
1. Productivity- ratio of qty of output to qty of
input
2. Processes- course of action used for operational
implementation- optimum utilization of
resources
3. People- stakeholders of the organization
4. Pace- speed of operational implementation
measured in terms of time, efficiency is the
parameter that expresses the pace of operational
implementation

Definition
The process of determining the effectiveness of a given
strategy in achieving the organizational objectives and
taking corrective action wherever required

Evaluation is important because…
1. It enables the control of strategic implementation and
performance.
2. It helps to check if the Strategic Management Process was
successful
3. It helps to check the validity of strategic choice
4. It helps to check if the decisions match intended strategy
5. It helps to provide feedback, appraisal & reward
6. It helps to create inputs for new strategic planning

Participants of Evaluation
 CEOs
 SBU heads
 Financial controller
 Audit committees

Barriers of Evaluation
 Limits of control
 Difficulties in measurement
 Resistance to evaluation
 Tendency to rely on short term assessment
 Relying on efficiency versus effectiveness

Effective Evaluation by..
 Control using minimum information
 Monitor only managerial activities and results
 Be timely
 Has long term and short term controls
 Aim at pinpointing exceptions (80:20 principle)
 Emphasize rewards for meeting or exceeding
standards

Two levels of Evaluation
 Strategic
Continuous assessment of
changing environment
 Premise control
 Implementation control
 Strategic surveillance of
environment
 Special alert control to
create rapid response to
meet unexpected
changes
 Operational
Evaluation of real time action
 Setting quantitative &
qualitative criteria
 Measurement of
performance through
information system
 Analyzing variance by
comparing actual with
standard performance
 Taking corrective action
 Reformulation of
strategies, plans and
objectives

Techniques for control
 Strategic
1. Strategic momentum
control system
2. Strategic Leap control
system
 Operational
1. Internal analysis
2. Comparative analysis
3. Comprehensive
analysis

Strategic momentum control
 Are the basic assumptions still valid?
 How can we maintain the existing strategic momentum?
Three techniques -
1. Responsibility control centers approach – revenue,
expense, profit and investment centers
2. Underlying success factors (CSF) approach
3. Generic strategies approach

Strategic Leap Control
 Techniques of evaluation when the environment is
relatively unstable
1. Strategic Issue Management
2. Strategic Field analysis
3. Systems modelling
4. Scenarios

Organizational systems that play
significant roles in Strategic Evaluation
& Control
1. Information system
2. Control system
3. Appraisal system
4. Motivation system
5. Development system
6. Planning system

 Internal Analysis
 VRIO framework
 Value Chain Analysis
 Quantitative Analysis (Financial & Non-financial analysis)
 Qualitative Analysis
 Comparative Analysis
 Historical analysis
 Industry norms
 Benchmarking
 Comprehensive Analysis
 Key factor rating
 Business intelligence systems
 Balance scorecard
Organizational Appraisal :
Methods and Techniques Used

Unit iv

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Unit iv

Editor's Notes