STRATEGY

EXECUTION
Presented by
Group 5
Objectives
After studying this chapter, you should be able to do the following:

Describe the transition from formulating to implementing strategies

Discuss five reasons why annual objectives are essential for effective strategy implementation.
Identify and discuss six reasons why policies are essential for effective strategy implementation.
Explain the role of resource allocation and managing conflict in strategy implementation.
Discuss the need to match a firm’s structure with its strategy.
Identify, diagram, and discuss seven different types of organizational structure.
Identify and discuss fifteen dos and don’ts in constructing organizational charts.
Discuss four strategic production/operations issues vital for successful strategy implementation.
Discuss seven strategic human resource issues vital for successful strategy implementation.
STRATEGY EXECUTION

Strategy Strategy
Formulation Implemenation
Formulation Implementation

Analytical, intellectual process Preparing the organization to act

Top-management driven Setting annual objectives, developing

policies, allocating resources
Deciding what strategy to pursue
Done mostly by divisional/functional
Focus: Effectiveness (choosing the managers
right strategy)
Focus: Efficiency (organizing the right
way)
Figure 10-2
Contrasting Strategy
formulation with
strategy implementation
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Strategy
Implementation

Strategy
Execution
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Why the Transition Matters

Implementation prepares the organization; execution activates it

Systems, policies, and objectives are now converted into day-to-day

actions

Success depends on employee commitment, motivation, and discipline

Even a perfect strategy fails without effective execution

STRATEGY EXECUTION

From organizing → to operating

From planning resources → to using them

From assigning responsibilities → to performing them

From aligning the system → to achieving real results

From structure-building → to productivity and performance

STRATEGY EXECUTION

The Need for Clear Annual Objectives

Annual objectives are desired milestones an organization

needs to achieve to ensure successful strategy
implementation.
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Five Reasons Annual Objectives Are Critical

1. They represent the basis for allocating resources.

2. They are a primary mechanism for evaluating managers.

3. They enable effective monitoring of progress toward achieving long-

term objectives.

4. They establish organizational, divisional, and departmental priorities.

5. They are essential for keeping a strategic plan on track.

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The Need for Clear Policies

Policies refer to specific guidelines, methods, procedures, rules,

forms, and administrative practices established to support and
encourage work toward stated goals.
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Six Reasons Why Policies Are Essential

Policies are essential because they:

1. Set boundaries and limits on actions

2. Clarify what is expected of employees and managers

3. Provide a basis for management control and coordination

4. Reduce decision-making time and clarify responsibilities

5. Promote delegation

6. Clarify what can and cannot be done in pursuit of objectives

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TYPE OF ORGANIZATIONAL
STRUCTURE
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Seven Basic Types of Organizational Structure

1. Functional Structure

2. Divisional by geographic area

3. Divisional by product

4. Divisional by customer

5. Divisional by process,

6. Strategic business unit (SBU)

7. Matrix Structure
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FUNCTIONAL STRUCTURE

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.
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Why it is widely used

Simplest and least expensive organizational structure.

Groups tasks by business function (e.g., marketing, finance,

operations, MIS, R&D).

Common in various organizations, including universities with

functions like academic affairs, student services, athletics, etc.

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STRATEGY EXECUTION

Most large companies have abandoned the functional structure in

favor of decentralization and improved accountability. However,
some large companies still operate from a functional type of
organizational design.

Ex: Apple, Starbuck, and Coca-Cola

STRATEGY EXECUTION

DIVISIONAL STRUCTURE
The divisional (decentralized) structure is the second-most common
type. Divisions are sometimes referred to as segments, profit centers,
or business units.

The divisional structure can be organized in one of four ways:

(1) by geographic area
(2) by product or service
(3) by customer
(4) by process
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STRATEGY EXECUTION

DIVISIONAL STRUCTURE BY GEOGRAPHIC AREA

Best for organizations needing strategies tailored to specific regional
customer needs.
Suitable for companies with similar branch facilities spread across wide
geographic areas.
Enables local decision-making and improves regional coordination.
Helps organizations adapt more effectively to local preferences and
market conditions.
Example:
McDonald’s USA reorganized from three regions into four geographic
zones to better respond to local tastes due to declining revenues.
Crocs, Inc. also uses a geographic divisional structure.
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DIVISIONAL STRUCTURE BY PRODUCT

Most effective when specific products or services require focused
attention.
Commonly used when an organization offers:
A limited number of products/services, or
Products/services that differ significantly.
Provides strong control and oversight of each product line.
Requires more highly skilled managers.
Reduces direct control by top management.
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DIVISIONAL STRUCTURE BY CUSTOMER

Effective when a few major customers are highly important and require
many different services.
Helps organizations meet the specific needs of clearly defined customer
groups.

Common examples:
Book publishers: divisions for colleges, secondary schools, commercial
schools.
Airlines: divisions for passengers and cargo/freight services.
Utility companies: divisions for commercial, residential, and industrial
customers.
STRATEGY EXECUTION

DIVISIONAL STRUCTURE BY PROCESS

Similar to a functional structure because activities are grouped by how work
is performed.
Key difference:
Functional departments → not accountable for profits or revenues.
Process divisions → evaluated based on profits and revenues.
Each division handles all operations for its specific process and is responsible
for generating revenue and profit.
Most effective when competitiveness depends on distinct production
processes.

Example: a manufacturing firm with divisions such as electrical work, glass

cutting, welding, grinding, painting, and foundry.
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STRATEGIC BUSINESS UNIT (SBU) STRUCTURE

Helps facilitate strategy implementation by grouping divisions.
Groups similar divisions into SBUs.
Delegates authority and responsibility for each SBU to a senior executive who
reports directly to the CEO.
Facilitates strategy implementation by:
Improving coordination between similar divisions.
Channeling accountability to distinct business units.
In large conglomerates (e.g., 100 divisions), divisions can be regrouped into
fewer SBUs (e.g., 10) based on:
Competing in the same industry.
Being located in the same geographic area.
Serving the same customers.
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Disadvantages
Requires an additional layer of management, increasing salary expenses.
Role of the group vice president can be ambiguous.

Advantages
Benefits of improved coordination and accountability often outweigh
disadvantages.
Makes planning and control at the corporate level more manageable.

Example:
Microsoft (2015): Reorganized into 3 product-based SBUs:
Windows and Devices Group (WDG)
Cloud and Enterprise (C+E)
Applications and Services Group (ASG)
STRATEGY EXECUTION

MATRIX STRUCTURE
Most complex organizational design due to both vertical and horizontal flows
of authority and communication.
Higher overhead because of more management positions.
Widely used in construction, health care, research, and defense industries.

Requirements for effectiveness

Participative planning.
Proper training for all involved.
Clear mutual understanding of roles and responsibilities.
Excellent internal communication.
Mutual trust and confidence among employees and managers.
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Key Principles
Avoid multiple bosses for a single employee (unity-of-
command principle).
Ensure clear lines of authority for efficient management and
communication.
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ALLOCATE RESOURCES
AND MANAGE CONFLICTS
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RESOURCE ALLOCATION - defined as distributing an

organization’s “assets” across products, regIons, and
segments according to priorities established by annual
objectives.
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Four Types of Resources or Assets

1. Financial Resources

2. Physical Resources

3. Human resources

4. Technological Resources
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MANAGE CONFLICTS
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CONFLICTS - can be defined as disagreement between two or

more parties on one or more issues.

Personal Indifferences ( expectations, perceptions,

schedules, pressures, obligations and personalities)
Misunderstandings
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CONFLICT IS NOT ALWAYS BAD

“If everyone is thinking alike, then somebody

is not thinking”
-General George Patton

Conflict must be managed for strategy

implementation to be successful.
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APPROACHES FOR MANAGING AND RESOLVING CONFLICTS

Avoidance

Defusion

Confrontation
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MATCH STRUCTURE WITH STRATEGY

Changes in strategy often require changes in the way an organization is
structured.

Two Major Reasons

1. Structure largely dictates how objectives and policies will be
established.
2. Structure dictates how resources will be allocated.
STRATEGY EXECUTION

“changes in strategy lead to changes in

organizational structure”
-Alfred chandler

Examples:
Consumer Goods Companies - divisional structure-by-
product form
Small Firms - functionally structured (Centralized)
Medium Size firms - divisionally structured (Decentralized)
Large Firms - Strategic Business Unit Structure
STRATEGY EXECUTION

Strategic Production/Operation Issues for Strategy Implementation

1. Restructuring and Reengineering

2. Manage Resistance to Change

3. Decide where and how to produce goods

4. Employee Stock Ownership Plans (ESOPs)

STRATEGY EXECUTION

1. Restructuring and Reengineering

Restructuring: Reducing size (employees, divisions, hierarchical levels).

Focus: Shareholder well-being. Primary benefit: Cost reduction. Example:
Avon Products (from six to two business units).

Reengineering: Reconfiguring work, jobs, and processes. Focus: Employee

and customer well-being. Goal: Improve cost, quality, service, and speed.
Focus: Changing the way work is actually carried out.

Six Sigma: Quality-boosting process improvement technique. Example:

Target Corp. ($100M+ savings).
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2. Manage Resistance to Change

Resistance to change is the single-greatest threat to successful strategy
implementation.

Reasons for resistance: Fear of economic loss, inconvenience, uncertainty, and

disruption of social patterns.

Three common change strategies:

Force change strategy (Fast, but low commitment/high resistance).
Educative change strategy (Slow/difficult, but greater commitment/less
resistance).
Rational or self-interest change strategy (Change is to personal advantage).

Positive action: Involve affected individuals; offer training and development;

effectively communicate the need for changes.
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3. Decide where and how to produce goods

Strategic decisions on production include: plant size, plant location, choice of
equipment, kind of tooling, size of inventory, quality control, technological
innovation, etc..
Location Factors: Availability of major resources, prevailing wage rates,
transportation costs, location of major markets, political risks, availability of
trainable employees.
Just-in-time (JIT): Parts/materials delivered just as they are needed; significantly
reduces costs and frees up capital. Example: Harley-Davidson (freed $22 million in
inventory).
Outsourcing/Integration: Example: Huffy (ended own production, now contracts to
Asian/Mexican manufacturers).
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4. Employee Stock Ownership Plans (ESOPs)

ESOP is a tax-qualified, defined-contribution, employee-benefit plan.

Employees purchase stock through borrowed money or cash.

Benefits: Reduces worker alienation, stimulates productivity, and offers

substantial tax savings.

Empowers employees to work as owners.

Growth: Over 10,000 firms covering over 14 million employees.

STRATEGY EXECUTION

Seven Strategic 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
STRATEGY EXECUTION

1. Linking Performance and Pay to Strategy

Core Principle: An organization's compensation system needs to be aligned
with strategic outcomes. Decisions on salary increases, promotions, merit
pay, and bonuses need to support the long-term and annual objectives of
the firm.
Mechanisms: Dual bonus system based on both annual and long-term
objectives can be helpful. Gain sharing requires employees or departments
to establish performance targets.
Examples: Aflac (2007), Apple (2008), and H&R Block instituted policies to
allow their shareholders to vote on executive compensation policies.
PepsiCo recently began using profit and cash flow instead of stock price to
focus managers
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2. Balancing Work Life and Home Life

Benefit: Work and family strategies now represent a competitive advantage
for those firms that offer benefits like elder care assistance and flexible
scheduling. A good home life contributes immensely to a good work life.
Specific Measures: Providing spouse relocation assistance , establishing
employee country clubs (e.g., at IBM and Bethlehem Steel) , and creating
family and work interaction opportunities.
The Barrier: Glass ceiling refers to the invisible barrier in many firms that
bars women and minorities from top-level management positions.
Statistic: Only 5.2 percent (26/500) of Fortune 500 firms have a woman CEO
STRATEGY EXECUTION

3. Develop a Diverse Workforce

Alignment: An organization can perhaps be most effective when its workforce
mirrors the diversity of its customers.

Financial Insight: Study by McKinsey & Co. revealed that Asian companies' average
return on equity improves from 15 to 22 percent when more and more women hold
high-level positions.

Key Benefits:

Women and minorities have different insights, opinions, and perspectives that
should be considered.
A diverse workforce portrays a firm committed to nondiscrimination.
It helps protect the firm against discrimination lawsuits.
It strengthens a firm's social responsibility and ethical position.
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4. Use Caution in Hiring a Rival's Employees

Risk Area: Firms must consider whether the person had access to the "secret
sauce formula, customer list, programming algorithm, or any proprietary or
confidential information" of the rival firm.
Legal Danger: Lawsuits could follow, especially if the person was under
contract or had signed a "noncompete agreement".
Safeguard: A "well-written employee handbook" addressing the issue is
necessary to help safeguard the firm.
Strategic Issue: The practice is becoming a strategic issue to be managed, to
avoid litigation. A company does not want to become known as one that
"steals" employees.
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5. Create a Strategy-Supportive Culture

Key Action: Changing a firm's culture to fit a new strategy is usually more
effective than changing a strategy to fit an existing culture.
Action Steps: Strategists should strive to preserve, emphasize, and build on
aspects of an existing culture that support proposed new strategies. Aspects
that are antagonistic to a proposed strategy should be identified and changed.
Techniques (Table 10-17): Recruitment, Training, Transfer, Promotion,
Restructuring, Reengineering, Role modeling, Positive reinforcement, and
Mentoring.
Risk: Weak linkages between strategic management and organizational culture
can jeopardize performance and success.
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6. Use Caution in Monitoring Employees' Social Media

The Right: Companies have the legal right to monitor employees' and
prospective employees' social media activities.
Pro Arguments: A company's reputation can easily be damaged by disgruntled
employees venting. Social media records can be subpoenaed and used as
evidence against the company.
Con Arguments: It is an invasion of privacy. Rejecting potential employees
because of private behavior unrelated to work is unfair. Social media discovery
information could be the basis of a discrimination suit against the firm.
Balance: Companies generally should monitor whenever they have a reason to
believe the person is engaged in illegal or unethical conduct.
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7. Develop a Corporate Wellness Program

The Issue: Corporate wellness has become a major strategic issue because
health insurance premiums are more costly for an unhealthy workforce.
Program Tools: "Carrots," such as giving employee discounts on insurance
premiums, and "sticks," such as imposing surcharges on premiums. Example:
Caesars offers a $40 per paycheck reduction in premiums.
Returns: Companies like Johnson & Johnson (J&J) and Lowe's Home-
Improvement report impressive returns on investment, sometimes as high as six
to one.
Focus Areas: Programs are largely aimed at reducing workforce obesity , and
also focus on stress management.
Hiring: Healthiness is more and more becoming a hiring factor.
Table 10-18: Seven Keys to Staying Healthy
Strategy Execution Group 5

Thank you
For your attention