Strategy Implementation

Implementing Strategy in Companies That Compete in a Single Industry

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Overview

 Strategy

implementation

 How

a company should create, use, and combine organizational structure, control systems, and culture to pursue strategies that lead to a competitive advantage and superior performance 2

Implementing Strategy Through Organizational Structure, Control, and Culture

 Organizational

structure

 Assigns

employees to specific value creation tasks and roles and specifies how those are linked to increase efficiency, quality, innovation, and responsiveness to customers  To coordinate and integrate the efforts of all employees 3

Implementing Strategy Through Organizational Structure, Control, and Culture (cont’d)  Control

system

A set of incentives to motivate employees to increase efficiency, quality, innovation, and responsiveness to customers  Provides feedback on performance so corrective action can be taken 

 Organizational 

culture

The collection of values, norms, beliefs, and attitudes shared within an organizations and that control interactions within and outside the organization 4

Implementing Strategy

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Building Blocks of Organizational Structure

 Grouping

tasks, functions, and divisions

 Organizational

structure follows the range and variety of tasks that an organization pursues  Companies group people and tasks into functions and then functions into divisions  Bureaucratic costs 6

Building Blocks of Organizational Structure (cont’d)  Allocating

authority and responsibility

 Hierarchy

of authority (chain of command)  Span of control (number of subordinates)  Tall and flat organizations  Drawbacks of taller organizations  Less

flexibility and slower response time  Communication problems  Distortion of commands  Expense 7

Tall and Flat Structures

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Allocating Authority and Responsibility (cont’d) 

The minimum chain of command To combat an organization that is too tall  Hand responsibility up and empower those below 



Centralization or decentralization? Delegating responsibility reduces information overload and enables managers to focus on strategy  Empowering lower-level managers increases motivation and accountability  Empowering employees requires fewer managers  Centralized decisions allow easier coordination of activities  Centralization means that decisions fit broad organizational objectives 

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Building Blocks of Organizational Structure (cont’d)  Integration

and integrating mechanisms

 Direct

contact among managers across functions or divisions  Liaison roles  Gives

one manager in each function or division the responsibility for coordinating with the other

 Teams

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Strategic Control Systems

 Four

basic building blocks

 Control

and efficiency  Control and quality  Control and innovation  Control and responsiveness to customers

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Steps in Designing an Effective Control System

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Levels of Organizational Control

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Types of Strategic Control System  Personal 

Face-to-face interaction

 Output 

control

Performance goals for each division, department, and employee

 Behavior 

control

control

Rules and procedures to direction actions or behaviors of divisions, functions, and individuals Operating budget  Standardization 

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Using Information Technology  Behavior

control

 IT

standardizes behavior through the use of a consistent, cross-functional software platform

 Output

control

 IT

allows all employees or functions to use the same software platform to provide information on their activities

 Integrating

mechanism

 IT

provides people at all levels and across all functions with more information 15

Strategic Reward Systems

 Based

on strategy managers must decide which behaviors to reward  A control system measures those behaviors and links the reward structure to them

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Organizational Culture  Culture

and strategic leadership  Traits of strong and adaptive corporate cultures  Bias

for action  Nature of the organization’s mission (sticking with what the organization does best)  How to operate the organization (motivating employees to do their best) 17

Building Distinctive Competencies at the Functional Level  Grouping

by function: functional structure

 Grouping

people on the basis of their expertise or because they use the same resources  Advantages  People

can learn from one another  People can monitor each other  Managers have greater control  With different functional hierarchies, the company can avoid becoming too tall 18

Functional Structure

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The Functional Level  The

role of strategic control

Managers and employees can monitor and improve operating procedures  Easier to apply output control 

 Developing

culture

Managers must implement functional strategy and develop incentive systems to allow each function to succeed  Manufacturing: TQM  R&D: innovation to bring products quickly to market  Sales: output and behavior controls 

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Functional Structure and Bureaucratic Costs  Communications

problems  Measurement problems  Customer problems  Location problems  Strategic problems  The outsourcing option 21

Implementing Strategy in a Single Industry  Implementation

begins at the functional level, however, managers must coordinate and integrate across functions and business units  Effective strategy implementation at the business level  Increases

differentiation, adds value for customers, allows for a premium price  Reduces bureaucratic costs 22

How Organizational Design Increases Profitability

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Implementing Strategy in a Single Industry (cont’d)

 Implementing

a cost-leadership approach

Reducing costs across all functions  Continuously monitoring for effective operation 

 Implementing 

a differentiation approach

Design structure around the source of distinctive competency, differentiated product, and customer groups

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Implementing Strategy in a Single Industry (cont’d)  Implementing

a broad product line— product structure  Group

the overall product line into product groups  Centralize support value chain functions to lower costs  Divide support functions into product-oriented teams of functional specialists who focus on the needs of one specific product group 25

Kodak’s Product Structure

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Implementing Strategy in a Single Industry (cont’d)  Increasing

responsiveness to customer groups—market structure  Group

people and functions by customer or market segments  Different managers are responsible for developing products for each group of customers

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Market Structure

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Implementing Strategy in a Single Industry (cont’d)

 Expanding

nationally—geographic

structure  To

be responsive to needs of regional customers  To reduce transportation costs

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Geographic Structure

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Implementing Strategy in a Single Industry (cont’d)  Competing

in fast-changing, high-tech environments—product-team and matrix structures  Matrix

structure

 Value

chain activities are grouped by function and by product or project  Flat and decentralized  Promotes innovation and speed  Norms and values based on innovation and product excellence 31

Matrix Structure

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Implementing Strategy in a Single Industry (cont’d) Competing

in fast-changing, hightech environments—product-team and matrix structures (cont’d) Product-team

structure

Tasks

divided along product or project lines Functional specialists are part of permanent cross-functional teams

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Product-Team Structure

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Implementing Strategy in a Single Industry (cont’d)

 Focusing

on a narrow product line

 Tends

to have higher production costs because output is lower, reducing opportunity for scale economies  Has to develop some form of distinctive competency  Functional structure is appropriate 35

Restructuring and Reengineering  Restructuring

involves

Streamlining hierarchy of authority and reducing number of levels  Downsizing the workforce to reduce costs 

 Reasons

Change in the business environment  Excess capacity  Organization grew too tall and inflexible; bureaucratic costs  To improve competitive advantage and stay on top 

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Restructuring and Reengineering (cont’d)  Reengineering  Fundamental

rethinking and radical redesign of business processes to achieve dramatic improvements  Focuses not on functions, but on processes (which cut across functions)

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