Description
It explains strategy implementation with respect to task focus, organization structure, decision process, reward system and people.
Strategy Implementation
?
Concept of Strategy Implementation
•
Necessity of fit ? Importance of integrating strategy implementation with strategy formulation. ? Interrelationships between components or dimensions of strategy implementation.
•
Focus on structure and control related issues.
Strategy Implementation
•
Sears example ? In 1983 Sears implements one-stop shopping banking-financial services power. ? Sears retail unit fell to #3 behind low-cost providers (Walmart and K-Mart). ? Specialty retailers (focused differentiators) such as The Gap, The Limited, Toys-R-Us, and Kids-R-Us took market share. ? Sears was outperformed by both low-cost and focused differentiators. ? Sears initiated restructuring in 1992 after losing $3.8 billion.
Strategy Implementation
•
Sears example ? What happened? Why did Sears fail so dramatically? - Lost ability to control core business (too diversified). - Resources were taken from retail and given to new ventures. - Managers spent too much time on diversified businesses.
- Managed retail segment using financial controls.
- Sears suffered from post-merger drift. - Lost operational understanding of the competitive dynamics in the retail industry.
Strategy Implementation
Structure Decision Processes and Controls
Task-Focus (Value)
Firm Strategy
Firm Performance
People
Reward Systems
Strategy Implementation
Task-Focus (Value)
Structure
Decision Processes and Controls
? ? ?
Uncertainty Diversity Interdependence
? ? ? ?
Division of labor Departmentalization Shape Distribution of power
? ? ? ?
Planning and control systems Integration roles Information systems Decision making procedures
?
Reward Systems
? ? ?
Performance measures Compensation Promotion Job design
People
? ? ? ?
Recruiting and selection Leader style Transfer and promotion Training and development
Strategy
Dominant Business Vertically Integrated Degree of integration Market share and power Product line breadth Vertical economies
Unrelated Diversified Growth through Acquisition Degree of diversity Types of business Resource allocation across business Entry and exit businesses Financial economies
Related Diversified Growth thru internal development & some acquisition Realization of synergy from related product process, technology, and markets Resource allocation Diversification opportunities Synergistic economies
Task Focus (Value)
Structure
Centralized functional Top control of strategic decisions Delegation of operations through plans and procedures
Highly decentralized product divisions/profit centers Small corporate office No centralized line functions Almost complete delegation of operations and strategy within existing businesses Control thru results, selection of management, and capital allocation No integration across businesses Coordination and information flows between corporate and division levels around management information systems and budgets Formula based bonus on ROI or profitability of divisions Strict objective, impersonal evaluation
Multidivisional/profit centers Grouping of highly related businesses with some centralized functions within groups Delegated responsibility for operation Shared responsibility for strategy
Decision Processes and Controls
Coordination and integration thru structure, rules, planning, and budgeting Use of integrating roles for project activity across functions Performance against functional objectives Mix of objective and subjective performance measures Strategic controls Primarily functional specialists Some inter-functional movement to develop some general managers
Coordinate and integrate across businesses and between levels with planning integrating roles, integrating depths
Reward Systems
Bonus based on divisional and/or corporate performance Mix of objective and subjective performance measures
People
Aggressive, independent general managers of divisions Career development opportunities are primarily intra-divisional
Broad requirements for general managers and integrators Career development is inter-divisional, cross-functional, and corporatedivisional
Strategy Implementation
?
Organization Structures
•
Simple Structure
President
? ? ? ?
Owner-manager makes decisions. Little specialization of tasks. Few rules, little formalization. Advantages: - Provides high flexibility - Rapid product introduction - Few coordination problems
Employees
?
Organization structure
•
Functional structure
President Accounting Legal Affairs
HRM
Finance
Marketing
R&D
Production
Strategy Implementation
?
Organization structure
•
Functional structure
? Advantages
- Centralized control of operations - Promotes in-depth functional expertise - Enhances operating efficiency where tasks are routine ? Disadvantages Functional coordination problems Inter-functional rivalry Overspecialization and narrow viewpoints Hinders development of cross-functional experience Slower to respond in turbulent environments
?
Organization structure
•
Product-divisional structure
President Government Affairs Legal Affairs
Corporate R&D Lab
Strategic Planning
Corporate Human Resources
Corporate Marketing
Corporate Finance
Product Division
Product Division
Product Division
Product Division
Product Division
Strategy Implementation
?
Organization structure
•
Product-divisional structure
? Organization based on products versus functions
? Each division is a separate business in which day-to-day decisions are delegated to divisional managers. ? Divisions are managed using strategic controls – detailed knowledge of firm operations allows managers to remain actively involved. ? Overdiversification leads to inability to process detailed information and a reliance on financial controls to evaluate managers.
Strategy Implementation
?
Organization structure
•
Product-divisional structure
? Advantages
- Decentralized decision making - Each business is organized around products - Puts profit/loss accountability on managers - Facilitates rapid response to environmental changes - Allows efficient management of a large number of units ? Disadvantages
- May lead to costly duplication of functions
- Inter-divisional rivalry - Corporate managers may lose in-depth understanding
•
Matrix Structure
President
R&D
Production
Marketing
Finance
Business Project Business Project Business Project
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Strategy Implementation
?
Organization structure
•
Matrix structure
? Contains aspects of both functional and product-divisional structures. ? Advantages:
- Creates checks and balances between competing viewpoints - Promotes holistic view of the firm - Encourages cooperation and consensus building ? Disadvantages: - Very complex and costly - Shared authority increases communication time - Difficult to respond rapidly - May promote bureaucracy and reduce innovation (in large firms).
Strategy Implementation
•
Network structure ? Group of firms combine resources to achieve together what they can’t achieve alone.
Partner
Partner
? Advantages:
- Firm’s emphasize their own core competencies - Rapid response time
Focal Firm
- Very flexible
- Reduces capital intensity ? Disadvantages - Asymmetric information - Technology expropriation - Trustworthiness of partners - Asset hold-up
Partner
Partner
doc_625439142.ppt
It explains strategy implementation with respect to task focus, organization structure, decision process, reward system and people.
Strategy Implementation
?
Concept of Strategy Implementation
•
Necessity of fit ? Importance of integrating strategy implementation with strategy formulation. ? Interrelationships between components or dimensions of strategy implementation.
•
Focus on structure and control related issues.
Strategy Implementation
•
Sears example ? In 1983 Sears implements one-stop shopping banking-financial services power. ? Sears retail unit fell to #3 behind low-cost providers (Walmart and K-Mart). ? Specialty retailers (focused differentiators) such as The Gap, The Limited, Toys-R-Us, and Kids-R-Us took market share. ? Sears was outperformed by both low-cost and focused differentiators. ? Sears initiated restructuring in 1992 after losing $3.8 billion.
Strategy Implementation
•
Sears example ? What happened? Why did Sears fail so dramatically? - Lost ability to control core business (too diversified). - Resources were taken from retail and given to new ventures. - Managers spent too much time on diversified businesses.
- Managed retail segment using financial controls.
- Sears suffered from post-merger drift. - Lost operational understanding of the competitive dynamics in the retail industry.
Strategy Implementation
Structure Decision Processes and Controls
Task-Focus (Value)
Firm Strategy
Firm Performance
People
Reward Systems
Strategy Implementation
Task-Focus (Value)
Structure
Decision Processes and Controls
? ? ?
Uncertainty Diversity Interdependence
? ? ? ?
Division of labor Departmentalization Shape Distribution of power
? ? ? ?
Planning and control systems Integration roles Information systems Decision making procedures
?
Reward Systems
? ? ?
Performance measures Compensation Promotion Job design
People
? ? ? ?
Recruiting and selection Leader style Transfer and promotion Training and development
Strategy
Dominant Business Vertically Integrated Degree of integration Market share and power Product line breadth Vertical economies
Unrelated Diversified Growth through Acquisition Degree of diversity Types of business Resource allocation across business Entry and exit businesses Financial economies
Related Diversified Growth thru internal development & some acquisition Realization of synergy from related product process, technology, and markets Resource allocation Diversification opportunities Synergistic economies
Task Focus (Value)
Structure
Centralized functional Top control of strategic decisions Delegation of operations through plans and procedures
Highly decentralized product divisions/profit centers Small corporate office No centralized line functions Almost complete delegation of operations and strategy within existing businesses Control thru results, selection of management, and capital allocation No integration across businesses Coordination and information flows between corporate and division levels around management information systems and budgets Formula based bonus on ROI or profitability of divisions Strict objective, impersonal evaluation
Multidivisional/profit centers Grouping of highly related businesses with some centralized functions within groups Delegated responsibility for operation Shared responsibility for strategy
Decision Processes and Controls
Coordination and integration thru structure, rules, planning, and budgeting Use of integrating roles for project activity across functions Performance against functional objectives Mix of objective and subjective performance measures Strategic controls Primarily functional specialists Some inter-functional movement to develop some general managers
Coordinate and integrate across businesses and between levels with planning integrating roles, integrating depths
Reward Systems
Bonus based on divisional and/or corporate performance Mix of objective and subjective performance measures
People
Aggressive, independent general managers of divisions Career development opportunities are primarily intra-divisional
Broad requirements for general managers and integrators Career development is inter-divisional, cross-functional, and corporatedivisional
Strategy Implementation
?
Organization Structures
•
Simple Structure
President
? ? ? ?
Owner-manager makes decisions. Little specialization of tasks. Few rules, little formalization. Advantages: - Provides high flexibility - Rapid product introduction - Few coordination problems
Employees
?
Organization structure
•
Functional structure
President Accounting Legal Affairs
HRM
Finance
Marketing
R&D
Production
Strategy Implementation
?
Organization structure
•
Functional structure
? Advantages
- Centralized control of operations - Promotes in-depth functional expertise - Enhances operating efficiency where tasks are routine ? Disadvantages Functional coordination problems Inter-functional rivalry Overspecialization and narrow viewpoints Hinders development of cross-functional experience Slower to respond in turbulent environments
?
Organization structure
•
Product-divisional structure
President Government Affairs Legal Affairs
Corporate R&D Lab
Strategic Planning
Corporate Human Resources
Corporate Marketing
Corporate Finance
Product Division
Product Division
Product Division
Product Division
Product Division
Strategy Implementation
?
Organization structure
•
Product-divisional structure
? Organization based on products versus functions
? Each division is a separate business in which day-to-day decisions are delegated to divisional managers. ? Divisions are managed using strategic controls – detailed knowledge of firm operations allows managers to remain actively involved. ? Overdiversification leads to inability to process detailed information and a reliance on financial controls to evaluate managers.
Strategy Implementation
?
Organization structure
•
Product-divisional structure
? Advantages
- Decentralized decision making - Each business is organized around products - Puts profit/loss accountability on managers - Facilitates rapid response to environmental changes - Allows efficient management of a large number of units ? Disadvantages
- May lead to costly duplication of functions
- Inter-divisional rivalry - Corporate managers may lose in-depth understanding
•
Matrix Structure
President
R&D
Production
Marketing
Finance
Business Project Business Project Business Project
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Specialists
Strategy Implementation
?
Organization structure
•
Matrix structure
? Contains aspects of both functional and product-divisional structures. ? Advantages:
- Creates checks and balances between competing viewpoints - Promotes holistic view of the firm - Encourages cooperation and consensus building ? Disadvantages: - Very complex and costly - Shared authority increases communication time - Difficult to respond rapidly - May promote bureaucracy and reduce innovation (in large firms).
Strategy Implementation
•
Network structure ? Group of firms combine resources to achieve together what they can’t achieve alone.
Partner
Partner
? Advantages:
- Firm’s emphasize their own core competencies - Rapid response time
Focal Firm
- Very flexible
- Reduces capital intensity ? Disadvantages - Asymmetric information - Technology expropriation - Trustworthiness of partners - Asset hold-up
Partner
Partner
doc_625439142.ppt