CHAPTER -5

STRATEGY IMPLEMENTATION AND EVALUATION

STRATEGIC MANAGEMENT PROCESS

 The process of developing an organisation’s strategy is methodical (Step by step/well

organised).

 Organisation first develops vision, mission, values and goals.

 Then discusses and analyses themes to determine the most promising options.

 All aspects combine into a strategic plan containing:

o Vision, mission, values, goals

o Strategic themes

o High-level implementation plan

o Key performance measures (KPMs)

 KPMs are used to:

o Link themes with organisational goals

o Measure success after implementation

Nature of Strategic Management Process

 It is dynamic and continuous.

 Change in one component can require change in others.

Examples:

 Economic shift → change in long-term objectives and strategies

 Failure of annual objectives → change in policy

 Competitor’s strategy change → change in mission

 Therefore, formulation, implementation and evaluation should be:

o Continuous

o Not limited to year-end or semi-annual

👉 The process never ends

Strategic Management Model (Fred R. David)

 Develop Vision, Mission and Objectives

 Environmental Analysis
  Organisation Appraisal

 Generate, Analyse and Select Strategies

 Implement Strategies

 Strategic Evaluation and Control

👉 Divided into:

 Formulation

 Implementation

 Evaluation

Model Explanation

 Strategic management process is studied using a model

 Fred R. David model is:

o Widely accepted

o Comprehensive

 It does not guarantee success, but provides:

o Clear

o Practical approach

 Shows relationships among major components

Practical Application

 Process is not in lockstep (not followed in a strict, fixed, step-by-step sequence)

 Involves give-and-take across hierarchical levels(discussions)

 It is iterative (repetitive and cyclical, not one-time) with back-and-forth movement (The
process does not move in a straight line, but keeps moving forward and then going back to
earlier steps for changes.)

 Organisations conduct formal semi-annual meetings to discuss:

o Vision/mission

o Opportunities/threats

o Strengths/weaknesses

o Strategies, objectives, policies, performance

 Requires:

o Creativity
 o Good communication

o Feedback throughout the process

Stages in Strategic Management

 Crafting and executing strategy are the heart and soul of managing a business enterprise.

 Involves developing and executing strategy and determining who has formulation and
execution responsibility beyond top management.

Stages in Strategic Management

1. Developing strategic vision, mission, goals and objectives

2. Environmental and organisational analysis

3. Formulation of strategy

4. Implementation of strategy

5. Strategic evaluation and control

Stage 1: Strategic Vision, Mission and Objectives

 Company determines directional path and required changes in:

o Product

o Market

o Customer

o Technology focus

 Managers draw conclusions about:

o Modifying business makeup

o Desired market position

 Top management’s views form strategic vision:

o Delineates (describe) aspirations

o Highlights direction / strategic path

o Prepares for future

o Mold’s identity

o Communicates aspirations to stakeholders

o Steers organisational energies in common direction

 o motivates and inspires stakeholders

Mission and Strategic Intent

 Mission defines role of organisation

 Helps:

o External stakeholders

o Managers understand objectives and approach

 Focus is on:

o Overall strategic direction

Corporate Goals and Objectives

 Flow from mission and growth ambition

 Represent:

o Quantum of growth in given time frame

 Through objective setting:

o Firm tackles environment

o Decides focus

 Objectives:

o Provide basis for major decisions

o Help realise organisational performance

Purpose of Objectives

 Convert strategic vision into specific performance targets

 Define:

o Results and outcomes to be achieved

 And then Used as yardsticks for tracking progress and performance

Role of Objective Setting

 Should stretch organisation to full potential

 Encourages:
 o Inventiveness

o Urgency in improving performance

o Focused and intentional actions

Objectives at All Levels

 Required at all organisational levels

 Not limited to top management

 Must be broken down into performance targets:

o Business

o Product line

o Functional department

o Individual work unit

 Ensures:

o Each unit contributes to companywide outcomes

 Performance targets should:

o Support companywide objectives

o Not conflict or negate them

Stage 2: Environmental and Organisational Analysis

This stage is the diagnostic phase of strategic analysis.

 It entails two types of analysis:

1. Environmental scanning (External)

2. Organisational analysis(Internal)

Environmental Scanning

 External environment consists of:

o Economic

o Social

o Technological

o Market and other forces

 These forces affect functioning of the firm

  External environment is:

o Dynamic

o Uncertain

 Management must systematically analyse elements of environment to determine:

o Opportunities

o Threats for the firm in future

Organisational Analysis

 Involves review of:

o Financial resources

o Technological resources

o Productive capacity

o Marketing and distribution effectiveness

o Research and development

o Human resource skills

 Reveals:

o Organisational strengths

o Organisational weaknesses

Outcome

 Strengths and weaknesses are matched with:

o Opportunities

o Threats in external environment

 Provides framework for SWOT analysis:

o Strength

o Weakness

o Opportunity

o Threat

 Can be presented in table form highlighting:

o Strengths and weaknesses of the firm

o Opportunities and threats created by the environment

Stage 3: Formulating Strategy

First step: Develop strategic alternatives in light of:

o Organisation strengths and weaknesses

o Opportunities and threats in the environment

 Second step: Deep analysis of strategic alternatives

o Purpose: Choose the most appropriate alternative as strategy

Strategic Alternatives can be -

i. Should the company continue in the same business carrying on the same volume of activities?

ii. If it should continue in the same business:

 Grow by expanding existing units

 Establish new units

 Acquire other units in the industry

iii. If it should diversify:

 Into related areas

 Into unrelated areas

iv. Should it get out of an existing business:

 Fully

 Partially

Types of Strategies

 Stability strategy

 Growth/Expansion strategy

 Retrenchment strategy

 Combination strategy (mix of above alternatives)

Stage 4: Implementation of Strategy

Implementation and execution are operations-oriented activities aimed at shaping performance of

core business activities in a strategy-supportive manner.

 It is the most demanding and time-consuming part of the strategic management process.
  Manager must be able to:

o Direct organisational change

o Motivate people

o Build and strengthen competencies and competitive capabilities

o Create strategy-supportive work climate

o Meet or beat performance targets

Principal Aspects of Strategy Execution

 Developing budgets that steer ample(sufficient) resources into activities critical to strategic
success

 Staffing organisation with needed skills and expertise, building competencies and
competitive capabilities, and organising work effort

 Ensuring policies and operating procedures facilitate effective execution

 Using best-known practices and pushing for continuous improvement (kaizen)

 Installing information and operating systems to support strategic roles

 Motivating people to pursue objectives energetically

 Creating company culture and work climate conducive to implementation

 Exercising internal leadership to drive implementation and improve execution

o Address and rectify stumbling blocks or weaknesses quickly

Good Strategy Execution

 Requires creating strong “fits” between:

o Strategy and organisational capabilities

o Strategy and reward structure

o Strategy and internal operating systems

o Strategy and work climate and culture

Stage 5: Strategic Evaluation and Control

 Final stage:

o Evaluating company’s progress

o Assessing impact of new external developments

 o Making corrective adjustments

 Acts as trigger point to decide whether to:

o Continue or change vision, objectives, strategy, and/or execution methods

When Strategy is Continued

 If direction and strategy are well matched to:

o Industry and competitive conditions

 If performance targets are being met:

o Continue the course

o Fine-tune strategic plan

o Improve strategy execution

When Strategy is Changed

 When company faces disruptive external changes

 When there is:

o Downturn in market position

o Shortfall in performance

 Managers must identify whether causes relate to:

o Poor strategy

o Poor execution

o Both

 Take timely corrective action

Revisiting Strategy

 Direction, objectives, and strategy must be revisited when:

o External or internal conditions warrant/required

 Company may modify:

o Strategic vision

o Direction

o Objectives

o Strategy over time

Strategy Execution and Learning

 Proficient execution is product of organisational learning

 Achieved unevenly:

o Quick in some areas

o Problematic in others

 Requires:

o Periodic assessment of what works and what needs improvement

 Successful execution involves:

o Continuous improvement

o Corrective adjustments whenever and wherever needed

Strategy Formulation – Corporate Strategy

Planning and Corporate Strategy

 Planning entails choosing what has to be done in future and creating action plans.

 An essential element of effective management is adequate planning.

 Choosing a path of action to achieve defined goals is part of planning.

 The game plan directing company towards success is called corporate strategy.

Types of Planning-

Planning may be operational or strategic-

(A) Strategic Planning

 Done by senior management

 Based on organisation’s:

o Strengths and weaknesses

o Opportunities and threats

 Involves:

o Gathering and allocating resources

o Achieving organisational goals

(B) Operational Planning

 Done by middle and lower-level management

  Provides specifics on:

o Effective use of resources

Characteristics

Strategic Planning

 Shapes organisation and its resources

 Assesses impact of environmental variables

 Takes holistic view of organisation

 Develops overall objectives and strategies

 Concerned with long-term success

 Responsibility of senior management

Operational Planning

 Deals with current deployment of resources

 Develops tactics rather than strategy

 Projects current operations into future

 Makes modifications to business functions, not fundamental changes

 Responsibility of functional managers

Strategic Planning vs Operational Planning (Comparison

Table)
Strategic Planning Operational Planning
Shapes organisation and its
Deals with current deployment of resources
resources
Assesses impact of environmental
Develops tactics rather than strategy
variables
Takes holistic view of organisation Projects current operations into future
Develops overall objectives and Makes modifications to business functions, not
strategies fundamental changes
Concerned with long-term success Responsibility of functional managers
Responsibility of senior
management

Strategic Planning
  The game plan that really directs the company towards success is called “corporate strategy”.

 Success depends on effectiveness of this game plan

 Formation of corporate strategy is result of strategic planning process

Definition and Features of Strategic Planning

 It is Process of determining:

o Objectives of firm

o Resources required

o Policies for acquisition, use and disposition of resources

 Involves:

o Interactive and overlapping decisions

o Development of effective strategy

 Determines:

o Where organisation is going

o Ways to reach there

 Can be:

o Organisation-wide

o Focused on major function/division

Strategic Uncertainty

 Refers to unpredictability of future events affecting strategy and goals

 Like online games banned in India

 Caused by:

o Market changes

o Technology

o Competition

o Regulation

o Other external factors

 Requires:

o Flexibility

o Resilience
 o Agility(quickness)

to quickly respond to changes in the environment and minimize its impact.

 Should be grouped into:

o Logical clusters/themes

 Importance assessed to set priorities for:

o Information gathering and analysis

Dealing with Strategic Uncertainty

 Flexibility: Adapt to environmental changes

 Diversification: Reduce impact by diversifying products portfolio, markets, customers

(Conglomerates)

 Monitoring & Scenario Planning: Organizations can regularly monitor key indicators of
change and conduct scenario planning to understand how different future scenarios might
impact their strategies. (Like Japan is best in planning)

 Building Resilience: Organizations can invest in building internal resilience through

Strengthen processes, financial flexibility, risk management. (like building immunity)

 Collaboration & Partnerships: Share risk, access markets and technologies (like Maruti and
Toyota partnership)

Impact of Uncertainty

 Each uncertainty involves potential trends/events affecting:

o Present

o Proposed

o Potential businesses

 Example:

o Trend toward natural foods → opportunity for juices for aerated drink producing firm

 Impact depends on importance of SBU, Some SBUs are more important than others.

 Importance indicated by:

o Sales

o Profits

o Costs

 May need supplementation for:

o Potential growth
 o True value assessment

Strategy Implementation
Meaning

 Strategy implementation concerns managerial exercise of putting a chosen strategy into

action.

 Deals with:

o Supervising ongoing pursuit of strategy

o Making it work

o Improving competence of execution

o Showing measurable progress in achieving targeted results

 Concerned with translating strategic decision into action

o Decision made after considering feasibility and acceptability

 Requires:

o Allocation of resources

o Adapting organisation structure

o Training personnel

o Devising appropriate systems

Relationship with Strategy Formulation

 Managers often fail to distinguish between:

o Strategy formulation

o Strategy implementation

 Both require very different skills

 Company success depends on:

o Sound strategy formulation

o Excellent implementation

 No such thing as successful strategic design alone

  Often people, blame the strategy model for the failure of a company while the main flaw
might lie in failed implementation.

 Failure may be due to:

o Implementation, not strategy

👉 Organisational success = Good strategy + Proper implementation

Strategy Formulation and Implementation Matrix

 Square A:

o Sound strategy

o Difficulties in implementation

o Causes: lack of experience, resources, missing leadership

o Aim: move to Square B

 Square B:

o Sound strategy

o Excellent implementation

o Ideal situation

 Square D:

o Flawed strategy

o Excellent implementation
 o Need: redesign strategy

 Square C:

o Flawed strategy

o Weak implementation

o Need: redesign strategy and readjust implementation

Concept of Strategy

 Strategy is a chosen set of actions to achieve and maintain competitive position

 Not synonymous with long-term plan

 Involves:

o Reaching preferred future state

o Adapting competitive position as circumstances change

 Strategic moves may need modification due to competitors’ actions

Efficiency vs Effectiveness

 Some organisations focus on:

o Cost cutting

o Shedding unprofitable divisions

 Focus on:

o Efficiency (input-output, short-term)

instead of

o Effectiveness (achievement of goals and competitive position)

 Efficiency:

o Introspective

o Responsibility of operational managers

 Effectiveness:

o Links organisation with environment

o Responsibility of top management

Efficiency-Effectiveness Matrix

 Cell 1: Efficient + Effective → Thrive (grow)

 Cell 2: Efficient + Ineffective → Die slowly

 Cell 3: Inefficient + Effective → Survive

 Cell 4: Inefficient + Ineffective → Die quickly

 Cell 2 worse than Cell 3

 So, Effectiveness ensures survival

Key Distinction

 Effectiveness → Doing the right thing

 Efficiency → Doing the thing right

 Emphasis on efficiency over effectiveness is wrong

Stakeholders and Effectiveness

 Organisation is coalition of diverse interest groups:

o Shareholders → dividends

o Employees → wages
 o Suppliers → continued business

o Consumers → satisfaction

o Government → legal compliance

o Society/environment → responsible behaviour

Importance of Implementation

 Strategic plan has little value if not implemented effectively

 Organisations often focus( by putting time, money, and effort) more on planning than
implementation

 Change comes through implementation and evaluation, not through the plan.

 Imperfect plan implemented well > perfect plan not implemented

Final Insight

 Successful formulation does not guarantee successful implementation

 Implementation is more difficult than formulation

Difference between Strategy Formulation and Implementation -

Basic Understanding

 Strategy implementation is fundamentally different from strategy formulation, though both

are inextricably(strongly) linked

Strategy Formulation vs Strategy Implementation

Strategy Formulation Strategy Implementation

Includes planning and decision-making involved in Involves all those means related to
developing organisation’s strategic goals and plans executing strategic plans

Placing the forces before the action Managing forces during the action

Entrepreneurial activity based on strategic decision- Administrative task based on strategic and
making operational decisions

Emphasizes on effectiveness Emphasizes on efficiency

Primarily intellectual and rational process Primarily operational process

Requires coordination among few individuals at top Requires coordination among many
level individuals at middle and lower levels
Strategy Formulation Strategy Implementation

Requires initiative, logical skills, conceptual, intuitive Requires specific motivational and
and analytical skills leadership traits

Precedes strategy implementation Follows strategy formulation

Additional Points

 Strategy formulation concepts and tools do not differ greatly for:

o Small or large

o For-profit or non-profit organisations

 Strategy implementation varies substantially across:

o Types

o Sizes of organisations

Examples of Strategy Implementation Activities

 Altering sales territories

 Adding new departments

 Closing facilities

 Hiring new employees

 Changing pricing strategy

 Developing financial budgets

 Developing employee benefits

 Establishing cost-control procedures

 Changing advertising strategies

 Building new facilities

 Training employees

 Transferring managers

 Building management information system

 Activities differ across:

o Manufacturing

o Service

o Government organisations
Link between Formulation and Implementation

 Division into phases is only for orderly study

 In reality, both are intertwined

Two Linkages:

 Forward linkage: Impact of formulation on implementation

 Backward linkage: Impact of implementation on formulation

Linkages and Issues in Strategy Implementation

Linkages

 Strategy formulation is primarily an entrepreneurial activity based on strategic decision-

making

 Strategy implementation is mainly an administrative task based on strategic as well as

operational decision-making

Forward Linkages

 Elements in strategy formulation:

o Objective setting

o Environmental and organisational appraisal

o Strategic alternatives and choice

o Strategic plan

 These determine the course adopted by the organisation

 With new or reformulated strategies:

o Changes are required within organisation

 Examples:

o Organisational structure changes

o Leadership style adapted

👉 Formulation has forward linkages with implementation

Backward Linkages

 Implementation also affects strategy formulation

 While making strategic choice:

o Past strategic actions influence decisions

 Organisations adopt strategies:

o Which can be implemented with the help of present resources

o With some additional efforts

 Incremental changes over time:

o Move organisation from present position to desired position

Issues in Strategy Implementation

 This section focuses on various issues involved in implementation of strategies.

 Issues cover practically everything included in management discipline.

 Strategist requires wide range of:

o Knowledge

o Skills

o Attitudes

o Abilities

 Implementation tasks test ability to:

o Allocate resources

o Design organisational structure

o Formulate functional policies

o Provide strategic leadership

Key Points

 Strategic plan proposes manner in which strategies are put into action

 Strategies are statement of intent and do not lead to action by themselves

 Implementation tasks realise the intent

 Strategies have to be activated through implementation

Strategy → Programme →Project

Programmes and Projects

 Strategies lead to formulation of programmes

o Programmes Includes goals, policies, procedures, rules, steps

o Supported by funds

 Programmes lead to formulation of projects

o Highly specific programmes

o For which Time schedule and costs predetermined

o Require capital budgeting

o Example: R&D programme consists of multiple projects

Strategy:
Promote electric vehicles to reduce pollution

👉 Programme:
Develop EV ecosystem in the country

 Policies, incentives, infrastructure plan, budget

👉 Projects:

 Set up EV charging stations in cities

 Establish battery manufacturing plant

 Launch subsidy scheme for EV buyers

Beyond Plans

 Implementation not limited to plans, programmes, projects

 Requires:

o Resources

o Proper Organisational structure

o Systems are installed

o Functional policies

o Behavioural inputs

Sequential Issues in Strategy Implementation

  Project implementation

 Procedural implementation

 Resource allocation

 Structural implementation

 Functional implementation

 Behavioural implementation

Nature of Activities

 Sequence does not mean strict order

 Activities may:

o Be simultaneous

o Be repeated

o Occur once

 Overlapping and changes in order possible

Shift in Responsibility

 Transition requires shift from strategy formulation to strategy implementation requires a

shift in responsibility:

o Strategists → Divisional and functional managers

 Problems arise when:

o Strategic decisions come as surprise to middle and lower-level managers.

 Managers/employees motivated by:

o Self-interest unless aligned with organisational interest

 Therefore:

o Managers should be involved in formulation

o Strategists should be involved in implementation

Management Issues

 Establishing annual objectives

 Devising policies

 Allocating resources
  Altering organisational structure

 Restructuring and reengineering

 Revising reward and incentive plans

 Minimizing resistance to change

 Developing strategy-supportive culture

 Adapting production/operations

 Developing HR system

 Downsizing if necessary

 Changes more extensive when strategy moves firm in new direction

Participation and Commitment

 Managers and employees should:

o Participate early and directly in strategy-implementation activities.

 Role in implementation builds on formulation involvement

 Strategists’ personal commitment is:

o Necessary and powerful motivational force

 Lack of interest can harm organisational success

Communication and Awareness

 Rationale for objectives and strategies must be clear

 Competitors’:

o Accomplishments

o Products

o Plans

o Actions

o Performance should be apparent to all organizational members.

 External opportunities and threats must be clear

 Questions of managers/employees must be answered

Communication Flow is essential

 Top-down communication essential

  Develop bottom-up support

Competitive Focus and Training

 Develop competitor focus at all levels

 Gather and distribute competitive intelligence

 Employees should benchmark with best competitors

 Firms should provide training to:

o Managers

o Employees

 Ensure skills for world-class performance