Global Business Strategy: Strategy Implementation: Organizing For Action

Global Business Strategy
Strategy Implementation: Organizing for Action
Prof. Sergio Galarza M.

Strategy Implementation
Strategy implementation is the sum of the activities and choices

required for the execution of a strategic plan. It is the process by which
strategies and policies are put into action through the development of
programs, budgets, and procedures.
Strategy formulation and strategy implementation should be

considered as two sides of the same coin.

These are the ten most common problems firms face when they
attempt to implement a strategic change:
1.Implementation takes more time than originally planned.

2.Unanticipated major problems arise.
3.Activities are ineffectively coordinated.
4.Competing activities and crises take attention away from
implementation.
5.The involved employees have insufficient capabilities to perform their
jobs.
6.Lower-level employees are inadequately trained.
7.Uncontrollable external environmental factors create problems.
8.Departmental managers provide inadequate leadership and direction.
9.Key implementation tasks and activities are poorly defined.
10.The information system inadequately monitors activities.

To begin with the implementation process, strategy makers must

decide:
Who will carry out the strategic plan?
What must be done to align the companys operations in the

new direction?
How is everyone going to do what is needed?

Who Implements Strategy?
Plant Managers.
Project Managers.
Unit Heads.
They put together plans for their specific plants, departments, and
units.

What Must Be Done?
Develop Programs, Budgets, and Procedures.
Programs.
The purpose of a program is to make the strategy action-oriented.
Budgets.
After programs have been developed, the budget process begins. Planning a
budget is the last real check a corporation has on the feasibility of its selected
strategy. An ideal strategy might be found to be completely impractical only
after specific implementation programs are cost in detail.

What Must Be Done?
Procedures.
After the program and budgets are approved, standard operating

procedures (SOPs) must be developed.
They typically detail the various activities that must be carried out to complete
a corporations programs.

How is Strategy to be Implemented? Organizing for Action.
A corporation should be appropriately organized, programs should be

adequately staffed, and activities should be directed toward achieving desired
objectives.

Structure Follows Strategy
Alfred Chandler concludes that changes in corporate strategy lead to changes

in organizational structure.
He also proposes that organizations follow a pattern of development from one

kind of structural arrangement to another as they expand.

Chandler proposes the following as the sequence of what occurs:
1. New strategy is created.
2. New administrative problems emerge.
3. Economic performance declines.
4. New appropriate structure is invented.
5. Profit returns to its previous level.

Strategy, structure, and the environment need to be closely aligned; otherwise,

organizational performance will likely suffer.
There is no rule about an optimal organizational design.
The general conclusion seems to be that forms following similar strategies in

similar industries tend to adopt similar structures.

Stages of Corporate Development
Successful corporations tend to follow a pattern of structural development as

they grow and expand.
Stage I: Simple Structure.

Typified by the entrepreneur, who founds the company. The entrepreneur
tends to make all the important decisions personally and is involved in every
detail and phase of the organization.
The typical managerial functions of planning, organizing, directing, staffing,

and controlling are usually performed to a very limited degree.
The greatest strengths of a Stage I corporation are its flexibility and dynamism.
Its greatest weakness is its extreme reliance in the entrepreneur to decide

general strategies as well as detailed procedures.

Stage I: Simple Structure

Stage II: Functional Structure.
At this point the entrepreneur is replaced by a team of managers who have

functional specialization.
The great strength of a Stage II corporation lies in its concentration and

specialization in one industry.
Its great weakness is that all of its eggs are in one basket.
A crisis of autonomy may appear, as people managing diversified product lines

need more decision-making freedom than top management is willing to
delegate to them.

Stage II: Functional Structure

Stage III: Divisional Structure (or Conglomerate Structure).
The corporation manages diverse product lines in numerous industries; it

decentralizes the decision-making authority.
They move to a divisional structure with a central headquarters and

decentralized operating divisions.
Each division or business unit is a functionally organized Stage II company.
The greatest strength of a Stage III corporation is its almost unlimited

resources.
Its most significant weakness is that it is usually so large and complex that it
tends to become relatively inflexible.

Stage III: Divisional/Conglomerate Structure

Stage IV: Beyond SBUs
The matrix and the network structures are two possibilities.
This stage not only emphasizes horizontal over vertical connections between
people and groups, but also organizes work around temporary projects in
which sophisticated information systems support collaborative activities.

Stage IV: Matrix Structure

Stage IV: Network Structure

Factors Differentiating Stage I, II, & III Companies
Function Stage 1 Stage II Stage III

1. Sizing up: Survival and growth Growth, rationalization, Trusteeship in
Major problems dealing with short-term and expansion of management and
operating problems. resources, providing for investment and control of
adequate attention to large, increasing, and
product problems. diversified resources.
Also, important to
diagnose and take action
2. Objectives Personal and subjective. Profits and meeting on problems at division
functionally oriented level.
budgets and performance ROI, profits, earnings per
targets. share.
3. Strategy Implicit and personal; Functionally oriented Growth and product

exploitation of immediate moves restricted to one diversification;
opportunities seen by product scope; exploitation of general
owner-manager. exploitation of one basic business opportunities.
product or service field.
4. Organization: One unit, one-man One unit, functionally Multiunit general staff
Major characteristic show. specialized group. office and decentralized
of structure operating divisions.
Global Business Strategy (Continued)

Factors Differentiating Stage I, II, & III Companies
Function Stage 1 Stage II Stage III

5. (a) Measurement Personal, subjective Control grows beyond Complex formal system
and control control based on simple one person; assessment geared to comparative
accounting system and of functional operations assessment of performance
daily communication and necessary; structured measures, indicating
observation. control systems evolve. problems and opportunities
and assessing management
ability of division managers.
5. (b) Key performance Personal criteria, Functional and internal More impersonal application
indicators relationships with owner, criteria such as sales, of comparisons such as
operating efficiency, performance compared to profits, ROI, P/E ratio, sales,
ability to solve operating budget, size of empire, market share, productivity,
problems. status in group, personal product leadership,
relationships, etc. personnel development,
employee attitudes, public
responsibility.
Informal, personal, More structured; usually Allotment by due process
6. Reward-punishment
subjective; used to based to a greater extent of a wide variety of different
system
maintain control and on agreed policies as rewards and punishments
divide small pool of opposed to personal on a formal and systematic
resources to provide opinion and relationships. basis. Companywide
personal incentives for policies usually apply to
key performers. many different classes of
managers and workers with
few major exceptions for
individual cases.

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Global Business Strategy

Strategy Implementation: Organizing for Action

Prof. Sergio Galarza M.

Strategy implementation is the sum of the activities and choices

Strategy formulation and strategy implementation should be