Business Management 3A

COBMA3

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Week 6
Lesson 11: Strategy Execution (Chapter 7)
Introduction
By the end of this lesson you should be able to discuss the transition from
formulating to implementing strategies, reason why annual objectives and policies
are essential for effective strategy will also be unpacked. You will also be able to
explain the role of resource allocation and managing conflict in strategy
implementation. Types of organisational structures, production/operations and
human resource issues will also be analysed.
Learning Outcome:
10. Describe the strategy execution.

Assessment Criteria:
10.1. Describe the transition from formulating to implementing strategies.
10.2. Discuss five reasons why annual objectives are essential for effective strategy implementation.
10.3. Identify and discuss six reasons why policies are essential for effective strategy
implementation.
10.4. Explain the role of resource allocation and managing conflict in strategy implementation.
10.5. Identify, apply, and discuss seven different types of organisational structure (advantages and
disadvantages must not be ignored).
10.6. Analyse and discuss four strategic production/operations issues that are vital for successful
strategy implementation.
10.7. Analyse and discuss seven strategic human resource issues vital for successful strategy
implementation.

What will be covered

in today’s lesson?

Week 6
Lesson 11
 What will be covered
in today’s lesson?

Week 6
Lesson 11

Transitioning from Formulating to Implementing

Strategies
• Successful strategy formulation does not guarantee successful strategy
implementation.
• It is always more difficult to do something (strategy implementation) than to say
you are going to do it (strategy formulation).
• Although inextricably linked, strategy implementation is fundamentally different
from strategy formulation.

EXEMPLARY STRATEGIST SHOWCASED: Indra Nooyi, Former CEO of PepsiCo

(p. 230)

Figure 7-2: Contrasting Strategy Formulation with Strategy Implementation (p. 231)
 The Need for Clear Annual Objectives
• Annual Objectives are desired milestones an organization needs to achieve to
ensure successful strategy implementation.
• Annual objectives are desired milestones an organization needs to achieve to
ensure successful strategy implementation:
1. Represent the basis for allocating resources
2. Are a primary mechanism for evaluating managers
3. Are the major instrument for monitoring progress toward achieving long-
term objectives
4. Establish organizational, divisional, and departmental priorities
5. Are essential for keeping a strategic plan on track

The Need for Clear Annual Objectives

• Clearly stated and communicated objectives are critical to success in all types
and sizes of firms.
• Annual objectives should be measurable, consistent, reasonable, challenging,
clear, communicated throughout the organization, characterized by an
appropriate time dimension, and accompanied by commensurate rewards and
sanctions.
Figure 7-3: The Stamus Company’s Hierarchy of Aims (p. 232)

Table 7-1: The Stamus Company’s Revenue Expectations (in millions, $) (p. 232)

Table 7-2: The Most Admired Companies in the World (p. 233)
 Establish Policies
• Policies refer to specific guidelines, methods, procedures, rules, forms, and
administrative practices established to support and encourage work toward
stated goals.
• Policies are essential Instruments for strategy implementation:
1. Set boundaries, constraints, and limits on the kinds of administrative actions
that can be taken to reward and sanction behavior.
2. Let both employees and managers know what is expected of them, thereby
increasing the likelihood that strategies will be implemented successfully.
3. Provide a basis for management control and allow coordination across
organizational units.

Establish Policies
1. Reduce the amount of time managers spend making decisions. Policies
also clarify what work is to be done and by whom.
2. Promote delegation of decision making to appropriate managerial levels
where various problems usually arise.
3. Clarify what can and cannot be done in pursuit of an organization’s
objectives.
Figure 7-3: A Hierarchy of Policies (p. 234)

Table 7-4: Some Issues That May Require a Management Policy (p. 235)

ETHICS CAPSULE 7: Do Firms Need a Policy against Workplace Phubbing?

(p. 235)
 Allocate Resources and Manage Conflict
Allocate Resources
• All organizations have at least four types of resources (or assets) that can be
used to achieve desired objectives:
‒ Financial resources
‒ Physical resources
‒ Human resources
‒ Technological resources
• Resource allocation can be defined as distributing an organization’s “assets”
across products, regions, and segments according to priorities established by
annual objectives.
• Allocating resources is a vital strategy-implementation activity.

Allocate Resources and Manage Conflict

Manage Conflict
• Conflict can be a Disagreement between two or more parties on one or more
issues.
• Establishing annual objectives can lead to conflict because individuals have
different expectations and perceptions, schedules create pressure, personalities
are incompatible, and misunderstandings occur between line managers and
staff managers.

Table 7-5: Some Management Trade-Off Decisions Required in Strategy

Implementation (p. 236)
 Match Structure with Strategy
• Structure largely dictates how objectives and policies will be established.
• Structure dictates how resources will be allocated.
• Changes in strategy often require changes in the way an organization is
structured, for two major reasons:
1. Structure largely dictates how objectives and policies will be established
2. Structure dictates how resources will be allocated

Table 7-6: Symptoms of an Ineffective Organizational Structure (p. 237)

Types of Organizational Structure

• There are seven basic types of organizational structure:
1. Functional
2. Divisional-by-region
3. Divisional-by-product
4. Divisional-by-customer
5. Divisional-by-process
6. Strategic business unit (SBU)
7. Matrix
 Types of Organizational Structure
The Functional Structure
• Groups tasks and activities by business function, such as production/operations,
marketing, finance/accounting, research and development, and management
information systems.
• The most widely used structure is the functional or centralized type because this
structure is the simplest and least expensive of the seven alternatives.

Table 7-7: Advantages and Disadvantages of a Functional Organizational Structure

(p. 238)

Types of Organizational Structure

The Divisional Structure
• Functional activities are performed both centrally and in each separate division.
• Organized by geographic area, product or service, customer, or process.
• The divisional (decentralized) structure is the second-most common type.
• Divisions are sometimes referred to as segments, profit centers, or business
units.
• As a small organization grows, it has more difficulty managing different products
and services in different markets.

Table 7-8: Advantages and Disadvantages of a Divisional Organizational Structure

(p. 239)
 Types of Organizational Structure
The Strategic Business Unit (SBU) Structure
• Groups similar divisions into strategic business units and delegates authority and
responsibility for each unit to a senior executive who reports directly to the chief
executive officer.
• Can facilitate strategy implementation by improving coordination between similar
divisions and channeling accountability to distinct business units.
• As the number, size, and diversity of divisions in an organization increase,
controlling and evaluating divisional operations become increasingly difficult for
strategists.

Types of Organizational Structure

The Matrix Structure
• Most complex of all designs because it depends upon both vertical and
horizontal flows of authority and communication.
• For a matrix structure to be effective, organizations need participative planning,
training, clear mutual understanding of roles and responsibilities, excellent
internal communication, and mutual trust and confidence.
• Despite its complexity, the matrix structure is widely used in many industries,
including construction, health care, research, and defense.

Figure 7-4: A Typical Matrix Structure with Typical Executive Titles in a Large Firm
(p. 241)

Table 7-9: Advantages and Disadvantages of a Matrix Structure (p. 241)

 Do’s and Don’ts in Developing Organizational
Charts
• One never knows for sure if a proposed or actual structure is indeed most
effective for a particular firm.
• Declining financial performance signals a need for altering the structure. Important
guidelines to follow in devising organizational charts for companies are provided
in Table 7-10.

Table 7-10: 15 Guidelines for Developing an Organizational Chart (p. 243)

Do’s and Don’ts in Developing Organizational

Charts
How to Depict an Organizational Chart
• Follow three simple steps to develop organizational charts:
1. List executive positions by title and number. Numbering positions enables
numbers, rather than boxes or circles, to be used in a structure diagram to
reveal reporting relationships; it is just easier to use numbers.
2. Using numbers to denote positions, devise your chart to show reporting
relationships, consistent with guidelines presented in this chapter.
3. Using numbers to denote positions, devise your chart to show reporting
relationships, consistent with guidelines presented in this chapter.
 Do’s and Don’ts in Developing Organizational
Charts

Figure 7-5: ABC Company’s Existing (Not Good) Organizational Chart (p. 244)

Figure 7-6: ABC Company’s Improved (Excellent) Organizational Chart (p. 244)

Figure 7-7: Winnebago’s Actual (Not Good) Organizational Chart (p. 245)

Figure 7-8: Winnebago’s Improved (Excellent) Organizational Chart (p. 245)

Strategic Production/Operations Issues

• Production/operations capabilities, limitations, and policies can significantly
enhance or inhibit the attainment of objectives.
• Production processes typically constitute more than 70 percent of a firm’s total
assets.
• Three production/operations issues:
1. Restructuring/reengineering
2. Managing resistance to change
3. Deciding where and how to produce goods.
 Strategic Production/Operations Issues
Restructuring and Reengineering
• Restructuring
‒ Involves reducing the size of the firm in terms of number of employees,
number of divisions or units, and number of hierarchical levels in the firm's
organizational structure.
‒ Primary benefit sought from restructuring is cost reduction.
• Reengineering
‒ Involves reconfiguring or redesigning work, jobs, and processes for the
purpose of improving cost, quality, service, and speed.
‒ Does not usually affect the organizational structure or chart, nor does it imply
job loss or employee layoffs.

Strategic Production/Operations Issues

Manage Resistance to Change
• May be the single greatest threat to successful strategy implementation.
• Successful strategy implementation hinges on managers’ ability to develop an
organizational climate conducive to change.
• Resistance to change may be the single greatest threat to successful strategy
implementation. Successful strategy implementation hinges on managers’ ability
to develop an organizational climate conducive to change.
 Strategic Production/Operations Issues
Decide Where and How to Produce Goods
• Examples of adjustments in production systems that could be required to
implement various strategies are provided in Table 7-11 for both for-profit and
nonprofit organizations.

Table 7-11: Production Management and Strategy Implementation (p. 247)

Strategic Human Resource Issues

• Any organization is only as good as its people! Thus, human resource issues
can make or break successful strategy implementation.
• Seven human resource issues:
1. Linking performance and pay to strategy
2. Balancing work life with home life
3. Developing a diverse work force
4. Using caution in hiring a rival’s employees
5. Creating a strategy-supportive culture
6. Using caution in monitoring employees’ social media
7. Developing a corporate wellness program
 Strategic Human Resource Issues
Linking Performance and Pay to Strategies
• Decisions on salary increases, promotions, merit pay, and bonuses need to
support the long-term and annual objectives of the firm.
• Gain sharing and bonus systems can be used.
• An organization’s compensation system needs to be aligned with strategic
outcomes.

Strategic Human Resource Issues

Balance Work Life and Home Life
• Work and family strategies now represent a competitive advantage for those
firms that offer such benefits as:
‒ Elder care assistance
‒ Flexible scheduling
‒ Job sharing
‒ Adoption benefits
‒ Onsite summer camp
‒ Employee help line
‒ Pet care
‒ Lawn service referrals
Table 7-12: Top 10 Companies for Working Women (p. 249)
 Strategic Human Resource Issues
Promote Diversity
• An organization can perhaps be most effective when its workforce mirrors the
diversity of its customers.
• Six benefits of having a diverse workforce are:
1. Women and minorities have different insights, opinions, and perspectives
that should be considered.
2. A diverse workforce portrays a firm committed to nondiscrimination.
3. A workforce that mirrors a customer base can help attract customers, build
customer loyalty, and design/offer products/services that meet customer
needs/wants.
4. A diverse workforce helps protect the firm against discrimination lawsuits.

Strategic Human Resource Issues

1. Women and minorities represent a huge additional pool of qualified
applicants.
2. A diverse workforce strengthens a firm’s social responsibility and ethical
position.
 Strategic Human Resource Issues
Use Caution in Hiring a Rival’s Employees
• The practice of hiring employees from rival firms has a long tradition, but
increasingly in our lawsuit-happy environment, firms must consider whether that
person(s) had access to the “secret sauce formula, customer list, programming
algorithm, or any proprietary or confidential information” of the rival firm.

Strategic Human Resource Issues

Create a Strategy-Supportive Culture
• All organizations have a unique culture.
• Strategists should strive to preserve, emphasize, and build on aspects of an
existing culture that support proposed new strategies.
• Aspects of an existing culture that are antagonistic to a proposed strategy should
be identified and changed.

Table 7-13: Ways and Means for Altering an Organization’s Culture (p. 250)
 Strategic Human Resource Issues
Use Caution in Monitoring Employees’ Social Media
• Proponents of companies monitoring employees’ social-media activities
emphasize that:
‒ A company’s reputation in the marketplace can easily be damaged by
disgruntled employees venting on social media sites.
‒ Social media records can be subpoenaed, like email, and used as evidence
against the company.
• Many companies monitor employees’ and prospective employees’ social media
activities, and have the legal right to do so, but there are many pros and cons of
this activity.

Strategic Human Resource Issues

Develop a Corporate Well-Being Program
• The Affordable Care Act increased the maximum incentives and penalties
employers may use to encourage employee well-being.
• Most companies have both:
‒ “Carrots,” such as giving employee discounts on insurance premiums or even
extra cash, and
‒ “Sticks,” such as imposing surcharges on premiums for those who do not
make progress toward getting healthy.
Implications for Strategists

Figure 7-13: How to Gain and Sustain Competitive Advantages (p. 258)

Implications for Students

Issues for Review and Discussion

• Students must work through questions 7-1 to 7-53 for revision.
 End of Chapter Case Study
The Cohesion Case: Coca-Cola Company 2018 (p. 56-
65)
Also do an additional internet search for more information by
searching the term: Company Profile: Coca-Cola

Application of Theory Activity:

Set 1: Strategic planning for Coca-Cola
• Exercise 7B, Steps 1-2 (p. 261-262)

Source: David, F. R., David, F. R. & David, M. E. 2023. Strategic

Management: A Competitive Advantage Approach: Concepts and
Cases. 17th ed. Pearson

Practice Quiz
• Please complete the Practice Quiz on myLMS: Week
6 – Lesson 11

Practice Activity
• Please complete the Practice Activity on myLMS:
Week 6 – Lesson 11
 What Happens Next?
Prepare for Week 7:
• Lesson 12: Strategy Monitoring (Chapter 9)
‒ Learning outcome 11: Understand and describe strategy monitoring