Chapter 6 Strategy Implementation

1. Chapter 6 Strategy Implementation

2. Learning Objectives To understand: · functional strategies and their importance to strategy implementation · corporate and business level organizational structures, and their strengths and weaknesses

3. The Strategic Management Process Internal and External Analysis Strategy Formulation (corporate and business level) Strategic Direction Strategy Implementation and Control Strategic Restructuring

4. Links Between Business and Marketing Strategies • For growth strategies - identify new customers, suggest product opportunities, create advertising and promotional programs, arrange distribution channels, and creates pricing and customer service policies • For stability or retrenchment strategies - focus on most profitable segments by reducing number of customer groups, distribution channels, and products in the product line

5. Links Between Business and Marketing Strategies • For low-cost competitive strategies - develop low cost channels of distribution and low-risk product and market development activities. • For differentiation strategies - identify the attributes of products that customers will value, price and distribute in ways that capitalize on the differentiation, and advertise and promote the image of difference.

6. Links Between Business and Operations Strategies • Growth strategies - expand capacity, improve procedures for scheduling customer orders, hire/train new employees, increase quantities of inputs, cultivate new supplier arrangements, invest in larger volume equipment. • Retrenchment strategies - scale back numbers of line employees, idle equipment, close plants. • Differentiation strategies - develop higher quality standards, make investments in technology, develop high skilled workforce, cultivate special arrangements with suppliers.

7. Links Between Business and R&D Strategies • Growth Strategies -- develop new products • Low Cost/Retrenchment Strategies - develop low cost processes • Differentiation Strategies - develop unique products and proprietary processes

8. Information Systems Strategies • At a minimum - provide the organization with the technology and systems that are necessary for operating, planning, and controlling the business. • To support a competitive advantage - allow more superior cost management and customer knowledge, by providing more effective use of timely market information, or by allowing integrated transactions within the supply chain of customers and suppliers.

9. Human Resources Strategies • Establish the performance evaluation, training, rewards, and benefits programs that support chosen strategies • Recruit management and employees that fulfill the strategic needs of the organization.

10. Financial Strategies • Decide the appropriate levels of debt, equity, and internal financing needed to support strategies. Trade-offs carry significant implications. • Determine hurdle rates for new investments. • Determine dividend policies and, through preparation of financial reports, communicate financial performance to stockholders.

11. Well-Developed Functional Strategies • Decisions made in each functional area are consistent with each other • Decisions made within one function are consistent with those made in other functions • Decisions within functions are consistent with the strategies of the business

12. Functional Structure General Manager Organizing Framework • - Inputs such as marketing and production Degree of Centralization • High Competitive Environment • Stable Growth Strategy • Market Penetration (efficiency or quality, etc.) Marketing Finance HR Production

13. Flight Simulators Design Graphics Design Manufac. Design Manufac. Product/Market Structure General Manager Administrative Departments Organizing Framework • Outputs such as product groups Degree of Centralization • Low Competitive Environment • Dynamic with External Market Pressures Growth Strategy • Market and/or Product Development (serving particular markets well)

14. Marketing Production Project A Project B Project Matrix Structure General Manager Administrative Depts. Organizing Framework • Inputs and Outputs Degree of Centralization • Decentralization with Sharing Competitive Environment • Dynamic with Dual Pressures Growth Strategy • Frequent New Product/Market Development

15. Info. Center Network Structure Organizing Framework • Outputs Degree of Centralization • Very Low (High Decentralization) Competitive Environment • Conditions vary from region to region Growth Strategy • Market Penetration and Market Development

16. Multidivisional CEO Corporate Staff • Moderate/low relatedness across divisions • Moderate/low need for coordination across divisions • Financial synergy may be available across divisions and some operational synergy (although limited) only to the extent that the divisions are related to each other Division VP Division VP Division VP

17. Strategic Business Unit CEO Corporate Staff • Groups (SBUs) of related businesses • Moderate need for coordination within each SBU; low need for coordination between SBUs • Financial synergy only across SBUs, potential exists for operational synergy within SBUs SBU Manager SBU Manager SBU Manager SBU Staff SBU Staff SBU Staff Related Divisions Related Divisions Related Divisions

18. Corporate Matrix CEO and Staff Division 1 Division 2 • Any number of businesses • Highly related businesses • Very high level of coordination required • Many opportunities exist for operational synergies (to reduce costs, gain access or share innovation) Marketing Operations R&D

19. Transnational Function Country • Many businesses in different nations • Highly related businesses • Very high level of coordination is required • Many opportunities exist for operational synergies on a world wide scale (to reduce costs, gain access or share innovation) Product