COLLEGE OF BUSINESS & ACCOUNTANCY

MODULE 9
STRATEGY EXECUTION & MONITORING

STRATEGIC MANAGEMENT & BUSINESS POLICY

PROF. JANICE TANADA
Strategic Management Framework

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STRATEGIC MANAGEMENT & BUSINESS POLICY
The Nature of Strategy Execution
Ø Successful strategy formulation does not guarantee successful
strategy implementation.

Ø It is always more difficult to do something (strategy

implementation) than to say you are going to do it (strategy
formulation)!

Ø Strategy-formulation concepts and tools do not differ greatly for

small, large, for-profit, or nonprofit organizations. However,
strategy implementation varies substantially among different
types and sizes of organizations.

Ø Implementing strategies requires such actions as altering sales

territories, adding new departments, closing facilities, hiring
new employees, changing an organization’s pricing strategy,
developing financial budgets, developing new employee
benefits, establishing cost-control procedures, changing
advertising strategies, building new facilities, etc.

STRATEGIC MANAGEMENT & BUSINESS POLICY

 Strategy formulation VS
Strategy implementation

• Strategy formulation is positioning forces before the action.

• Strategy implementation is managing forces during the action.
• Strategy formulation focuses on effectiveness.
• Strategy implementation focuses on efficiency.
• Strategy formulation is primarily an intellectual process.
• Strategy implementation is primarily an operational process.
• Strategy formulation requires good intuitive and analytical skills.
• Strategy implementation requires special motivation and leadership skills.
• Strategy formulation requires coordination among a few individuals.
• Strategy implementation requires coordination among many individuals.

STRATEGIC MANAGEMENT & BUSINESS POLICY

STRATEGY EXECUTION
Ø Managers and employees throughout an organization should
participate directly in strategy-implementation decisions.

Ø Their role in strategy implementation should build on prior

involvement in strategy-formulation activities.

Ø The rationale for objectives and strategies should be

understood and clearly communicated throughout an
organization.

Ø Major competitors’ accomplishments, products, plans,

actions, and performance should be apparent to all
organizational members. Major external opportunities and
threats should be clear, and managers’ and employees’
questions should be answered.

Ø Top-down flow of communication is essential for developing

bottom-up support.

STRATEGIC MANAGEMENT & BUSINESS POLICY

Annual Objectives

• Establishing annual objectives is a decentralized

activity that directly involves all managers in an
organization. Active participation in establishing
annual objectives can lead to acceptance and
commitment.

• Annual objectives are essential for strategy

implementation because they:
a) represent the basis for allocating resources;
b) are a primary mechanism for evaluating
managers;
c) are the major instrument for monitoring
progress toward achieving long-
term objectives; and
d) establish organizational, divisional, and
departmental priorities.

STRATEGIC MANAGEMENT & BUSINESS POLICY

Policies
• Policy refers to specific guidelines,
methods, procedures, rules, forms, and
administrative practices established to
support and encourage work toward stated
goals.

• Policies are instruments for strategy

implementation.

• Policies set boundaries, constraints, and

limits on the kinds of administrative actions
that can be taken to reward and sanction
behavior; they clarify what can and cannot
be done in pursuit of an organization’s
objectives.

STRATEGIC MANAGEMENT & BUSINESS POLICY

Resource Allocation

• Resource allocation is a central management activity that allows for strategy execution.

• Strategic management enables resources to be allocated according to priorities established by annual

objectives.

• All organizations have at least four types of resources that can be used to achieve desired objectives:
1. financial resources
2. physical resources
3. human resources
4. technological resources

STRATEGIC MANAGEMENT & BUSINESS POLICY

Managing Conflict

• Conflict can be defined as 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 between line
managers (such as production supervisors) and staff managers (such as human resource specialists) occur.

• Establishing objectives can lead to conflict because managers and strategists must make trade-offs, such as
whether to emphasize short-term profits or long-term growth, profit margin or market share, market
penetration or market development, growth or stability, high risk or low risk, and social responsiveness or
profit maximization.

• Conflict is unavoidable in organizations, so it is important that conflict be managed and resolved before
dysfunctional consequences affect organizational performance. Conflict is not always bad. An absence of
conflict can signal indifference and apathy. Conflict can serve to energize opposing groups into action and
may help managers identify problems. General George Patton once said: “If everyone is thinking alike, then
somebody isn’t thinking.”

STRATEGIC MANAGEMENT & BUSINESS POLICY

Various approaches for managing and resolving conflict can be classified into three
categories: avoidance, defusion, and confrontation
a. Avoidance includes such actions as ignoring the
problem in hopes that the conflict will resolve itself or physically
separating the conflicting individuals (or groups).

b. Defusion can include playing down differences between

conflicting parties while accentuating similarities and common
interests, compromising so that there is neither a clear winner nor
loser, resorting to majority rule, appealing to a higher authority,
or redesigning present positions.

c. Confrontation is exemplified by exchanging members of

conflicting parties so that each can gain an appreciation of the
other’s point of view or holding a meeting at which conflicting
parties present their views and work through their differences.

STRATEGIC MANAGEMENT & BUSINESS POLICY

 Matching Structure with Strategy

• Changes in strategy often require changes in the way

an organization is structured, for two major reasons.
• First, structure largely dictates how
objectives and policies will be established.
• Second, a structure dictates how resources
will be allocated.

• There are seven basic types of organizational structure:

functional, divisional by geographic area, divisional by
product, divisional by customer, divisional process,
strategic business unit (SBU), and matrix.

STRATEGIC MANAGEMENT & BUSINESS POLICY

The Functional Structure

A functional structure groups tasks and activities by business function, such as production and operations,
marketing, finance and accounting, research and development, and management information systems.

STRATEGIC MANAGEMENT & BUSINESS POLICY

The Divisional Structure
The divisional structure or decentralized structure is the second most common type used by
U.S. businesses. As a small organization grows, it has more difficulty managing different
products and services in different markets.

STRATEGIC MANAGEMENT & BUSINESS POLICY

The Strategic Business Unit (SBU) Structure

The SBU structure groups similar

divisions into SBUs and delegates authority
and responsibility for each unit to a senior
executive who reports directly to the chief
executive officer. This change in structure
can facilitate strategy implementation by
improving coordination between similar
divisions and channeling accountability to
distinct business units.

STRATEGIC MANAGEMENT & BUSINESS POLICY

The Matrix Structure
A matrix structure is the most complex of all designs because it depends on both vertical and
horizontal flows of authority and communication (hence the term matrix).

STRATEGIC MANAGEMENT & BUSINESS POLICY

Strategy Monitoring

In many organizations, strategy evaluation is simply an

appraisal of how well an organization has performed. Have the
firm’s assets increased? Has there been an increase in
profitability? Have sales increased? Have productivity levels
increased? Have profit margin, return on invest- ment, and
earnings-per-share ratios increased?

STRATEGIC MANAGEMENT & BUSINESS POLICY

A Strategy-Evaluation Framework

STRATEGIC MANAGEMENT & BUSINESS POLICY

Measuring Organizational Performance

STRATEGIC MANAGEMENT & BUSINESS POLICY

Taking Corrective Actions

The final strategy-evaluation activity, taking corrective actions,

requires making changes to competitively reposition a firm for
the future.

As indicated in Table 11-4, examples of changes that may be

needed are altering an organization’s structure, replacing one or
more key individuals, selling a division, or revising a business
mission.

Other changes could include establishing or revising objectives,

devising new policies, issuing stock to raise capital, adding
additional salespersons, differently allocating resources, or
developing new performance incentives.

Taking corrective actions does not necessarily mean that

existing strategies will be abandoned or even that new
strategies must be formulated.

STRATEGIC MANAGEMENT & BUSINESS POLICY

The Balanced Scorecard

• Developed in 1993 by Harvard Business School professors

Robert Kaplan and David Norton, and refined continually
through today.

• The Balanced Scorecard is a strategy evaluation and control

technique.

• Balanced Scorecard derives its name from the perceived

need of firms to “balance” financial measures that are
oftentimes used exclusively in strategy evaluation and control
with nonfinancial measures such as product quality and
customer service.

• An effective Balanced Scorecard contains a carefully chosen

combination of strategic and financial objectives tailored to
the company’s business.

STRATEGIC MANAGEMENT & BUSINESS POLICY

The Balanced Scorecard is an important strategy-evaluation tool.

It is a process that allows firms to evaluate strategies from four perspectives: financial performance, customer
knowledge, internal business processes, and learning and growth.

The Balanced Scorecard analysis requires that firms seek answers to the following questions and use that
information, in conjunction with financial measures, to adequately and more effectively evaluate strategies
being implemented:

[Link] well is the firm continually improving and creating value along measures such as innovation,
technological leadership, product quality, operational process efficiencies, and so on?

[Link] well is the firm sustaining and even improving on its core competencies and competitive
advantages?

[Link] satisfied are the firm’s customers?

STRATEGIC MANAGEMENT & BUSINESS POLICY

STRATEGIC MANAGEMENT & BUSINESS POLICY
STRATEGIC MANAGEMENT & BUSINESS POLICY
STRATEGIC MANAGEMENT & BUSINESS POLICY
Strategic Management Framework

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STRATEGIC MANAGEMENT & BUSINESS POLICY