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Strategy Implementation

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  1. Strategy Implementation • What must we do to put the strategy in place, execute it proficiently, and produce good results? • Creating FITS between strategy and external environment and creating FITS inside the organization • Control, coordination, and motivation issues

  2. Figure 10.1: The Eight Componentsof the Strategy Execution Process The Action Agenda for Executing Strategy

  3. Figure 10.2: The Three Components of Building a Capable Organization

  4. CEO Vice President Vice President Vice President Matching Organization Structure to Strategy • Few hard and fast rules for organizing • The One Big Rule: The role and purpose of the organization structure is to support and facilitate good strategy execution! • Each firm’s structure is idiosyncratic, reflecting • Prior arrangements and internal politics • Executive judgments and preferences about how to arrange reporting relationships • How best to integrate and coordinate work effort of different work groups and departments

  5. What is Structure? • How the firm is organized? • Includes • Reporting relationships • How coordination is achieved • Authority • Degree of centralization • Degree of integration • Formalization • Used to control, coordinate, and motivate employees and the activities they perform

  6. Figure 10.3: Structuring the Work Effort to Promote Successful Strategy Execution

  7. Important Implications of Structure • Appropriate structure depends on the firm’s strategy • Changes in strategy typically require a new structure • New strategy often involves different skills, different key activities, different staffing and organizational requirements • Hence, a new strategy signals a need to reassess the organization structure

  8. Perspectives on Organizing • All basic organization designs have strategy-related strengths and weaknesses • No ideal organization design exists • To do a good job of matching structure to strategy • Pick a basic design • Modify as needed • Supplement with appropriate coordinating, networking, and communication mechanisms to support effective execution of the strategy

  9. Structural Arrangements: The Basics Simple Functional and process specialization Geographic organization Multidivisional Strategic business units

  10. A Traditional FunctionalOrganizational Structure General Manager Research & Development Manufacturing Human Resources Engineering Marketing Finance & Accounting

  11. General Manager Foundry & Castings Screw Machining Inspection Customer Service Milling & Grinding Finishing & Heat Treating Loading & Shipping Billing & Accounting A Process-Oriented Functional Structure

  12. General Manager Centralized Staff Accounting Engineering Operations Marketing Personnel Functional Structure for Cost Leadership Strategy • Operations is main function • Process engineering is emphasized over R&D • Large centralized staff • Formalized procedures • Structure is mechanical, job roles highly structured

  13. General Manager and Limited Staff Marketing R&D Operations Human Resources New Product R&D Finance Marketing Functional Structure for Differentiation Strategy • Marketing is the main function for tracking new product ideas • New product R&D is emphasized • Most functions are decentralized • Formalization is limited to foster change and promote new ideas • Overall structure is organic; job roles are less structured

  14. Corporate Staff GM Europe GM North America GM Latin America GM Asia Pacific GM Central Asia & Africa District Staff Engineering & Prod. Design Production Marketing & Distribution A GeographicOrganizational Structure CEO

  15. CEO Corporate Services GM Business A GM Business C GM Business B Functional/Process Departments Functional/Process Departments Functional/Process Departments A Multidivisional Organizational Structure

  16. An SBU Organization Structure CEO Corporate Services Group VP SBU I Group VP SBU III Group VP SBU II Strategically Related Business Units Strategically Related Business Units Strategically Related Business Units

  17. Options to Supplement theBasic Organization Structure • Coordinating mechanisms • Cross-functional task forces, special project teams, self-contained work teams, etc… • Instituting networking and communications arrangements that support implementation