STRATEGY, IMPLEMENTATION AND CONTROL

Strategy implementation concerns the managerial exercise of putting a freshly chosen strategy into place. The
allocation of the available resources to new course of action will need to be undertaken and there may be a
need for adopting the organizations structure to handle new activities.
Many managers fail to differentiate between the strategy formulation and strategy implementation. A
company will be successful only when strategy formulation is sound and the implementation is excellent. The
matrix given shows the sound/ flawed strategy formulation, and weak/ excellent strategy implementation.
FORMULATION SOUND

B (SUCCESS)

STRATEGY FLAWED

WEAK STRATEGY

EXCELLENT IMPLEMENTATION

Square A: This is the situation where the companys policies are good, but not implemented properly (weak).
This may be due to various reasons like lack of experience, lack of resources, missing leadership etc.
Square B: This is the SUCCESS square.
Square C: This is the situation where the companys strategy is wrongly formulated and implementation is also
very poor. Then the organization has to redesign the strategy as well as the procedures for implementation.
Square D: Policy is not sound, but implementation is excellent. That means, a redesign of the policy is required.
Principal combinations of efficiency and effectiveness
Operational
Management

Strategic Management

Efficient

Effective

Inefficient

Thrive

Die Slowly

Inefficient

Survive

Die quickly

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Note: A technically imperfect plan that is implemented well will achieve more than the perfect plan that never
gets off the paper on which it is typed.
Successful formulation doesnt guarantee successful implementation. Strategy formulation and
implementation can be contrasted in the following ways:
Strategy Formulation

Strategy Implementation

It is the positioning force before the action.

It manages forces during the action.

It focuses on effectiveness

It focuses on efficiency

It is primarily an intellectual process

It is primarily an operational process

It requires good intuitive and analytical skills

Its implementation requires special motivation and

leadership skills

It requires coordination among a few individuals

It requires combination among many individuals

Strategy formulation and concept tools do not differ greatly for organizations. However, it differs in
implementation, which depends on the type of organization. Implementing strategies requires such actions as
altering sales territories, adding new departments, closing facilities, hiring new employees, benefits,
establishing cost control procedures, etc.
In real life, formulation and implementation processes are intertwined. Two types of linkages exist between
these two plans of strategic management:
Forward Linkage
Backward Linkage
Issues faced in strategy implementation
The different issues involved in strategy implementation cover different areas within the organizations.
The strategic plan devised by the organization proposes the manner in which the strategies could be put into
action. The strategic plans themselves do not lead to action. Strategies have to be achieved through
implementation. When the polices are formulated, the organization should pay attention to both the
effectiveness of the policy and also efficiency of the policy.The strategic plans are devised by the organization:
Strategies should lead to plans.
Plan should consist of programs
Programs lead to the formulation of the projects.
Projects create the needed infrastructure for the day- to-day operations.
Different resources are required to plan the project.

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Note: To be effective is to do the right things; to be efficient is to do the things right.

Both are equally important. However, the emphasis should be first on effectiveness rather than efficiency. The
organization should implement the policy at the right time (effectively); then only the policy will serve the
purpose.
The successful strategic policy doesnt guarantee the successful strategic implementation. Implementation is a
separate activity to the policy in use.
The following points should be considered (sequentially) while implementing the project:
Project implementation

Procedural implementation

Resource allocation

Structural implementation

Functional implementation

Behavioral implementation

Some of these can be performed simultaneously also. Many activities can be performed simultaneously;
certain other activities can be repeated over time.
In all organizations, implementation requires a shift in responsibility from strategists to divisional and
functional managers.
Managers are motivated more by perceived self- interest than by organizational interests. Therefore, divisional
managers and functional managers should be involved in strategy formulation activities. Likewise, strategists
should be involved in implementation.
Management issues include:
Establishing annual objectives
Devising policies
Allocation resources
Altering an existing organizational structure
Restructuring and reengineering
Revising reward and incentive plans
Minimizing resistance to change
Matching the managers with strategy
Developing a strategy supporting culture
Adopting production and operation process.

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Managers and employees should participate early and directly in strategy, implementation and decisions.
Strategists genuine personal commitment to implementation is necessary. For the managers, the challenges
should be personal than organizational.
Chandlers strategy- structure relationship
New administration problems emerge- organizational performance declines- A new organizational structure is
established- Organizational performance improves- New strategy is formed.
Organizational Strategy and implementation
The organizational structure largely dictates how the objectives and policies will be established.
The organizational structure also dictates how the resources will be allocated to convert the policies into
performance action.
The structure which is suitable for one organization may not be suitable for another organization.
There are many structures available; some of them are as follows:
Functional Structure

A functional structure groups the tasks and activities by business function such as production,
operations, marketing, etc.
This also promotes specialization of labor, encourages efficiency, minimizes the need for elaborate
control system and allows rapid decision making.

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 This disadvantage is that it forces the accountability to the top, minimizes career development
opportunities.
Widely used and centralized type structure.
A competitive advantage is created when there is a proper match between strategy and structure.
Selecting the organizational structure and controls which result in effective implementation of chosen
strategies is a fundamental challenge for managers.
A simple organizational structure may result in competitive advantages for some small companies.
Difference in functional specialization and orientation may impede communication and coordination.
The CEO must integrate functional decision making and coordinate the actions of overall business
across the functions.
Functional specialization often may develop narrow perspective, losing sight of the companys
strategic vision and mission.
To overcome this, the multidivisional structure (M-Form) can be implemented.
M- Form Structure

In this each division represents a separate business. The top corporate officer delegates responsibility
for day to day operations and business unit strategy to division managers.
It was developed in the 1920s. This was developed when coordination and control- oriented problems
were felt in large firms. Functional departments often had difficulty dealing with distinct product lines
and markets. Top managers became overloaded, and over-involved in solving short- run problems such
as coordination, communications and neglected long- run strategic issues.

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 The new innovative structure is called for:

Creating separate divisions each representing a distinct business.

Each division would house its functional hierarchy.

Division managers would be given responsibility for managing day to

day operations.

A small corporate office that would determine the long run strategic
direction of the firm and exercise financial control over the semi
autonomous divisions.

This new structure is able to monitor the performance of individual businesses, simplifying the control
problems, improving the better allocation of resources etc.
Divisional Structure

As the small organization grows, it faces difficulty managing the different products in different areas for
different segments. The divisional structure is necessary to motivate people.
The divisional structure may be one of the following:
By Geographic areas: It is appropriate for organizations whose strategies need to be tailored to fit the
particular needs and characteristics of customers in different geographical areas.
By Process: It is similar to functional structure because activities are organized according to the way
work is actually performed.
By products or services: It is most effective for implementing strategies when specific products need
special emphasis.
By customers: When a few major customers are important and many services are provided to these
customers then a divisional strategy by customer can be most effective.
Advantages:
The accountability is clear
The divisional managers are responsible for sales and profit levels.

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 Employee morale is higher

It creates carrier development opportunities
Leads to competitive climate within the organization
Disadvantages:
It is costly.
Some duplication of staff services
Managers must be well qualified, which may attract high salary
Headquarters driven control systems
Some divisions may receive special treatment; hence to maintain consistent companywide practices is
difficult.
SBU Structure

The SBU (strategic business unit) consist of operating units where each unit represents a separate
business.
The top corporate officer delegates responsibility for day- to-day operations if its managers. The
corporate office is responsible for formulating and implementing overall corporate strategy and
manages the SBUs through strategic and financial controls.
SBU structure groups similar divisions into strategic business units, and delegates authority and
responsibility for each unit to a senior executive who reports directly to the chief executive officer.

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 The different divisions can be regrouped into SBUs if they have common characteristics, such as
competing in the same industry, being located in the same area or having the same customers. SBU
structure enables the company to monitor more accurately.
This structure is suitable when more units exist and in each unit many products are manufactured.
The responsibility is delegated to each SBU and further responsibilities are given to each division head.
The structure requires experts for each division. This requires different layers of management to
control the activities.
This structure is very costly because establishment expenses increase owing to higher number of
employees. The advantage is the performance of each SBU and each division can be monitored and
the resources may be diversified from stronger units to weaker units.
In this structure each SBU is forced to compare itself with another SBU which may be a monitoring
factor for the weaker SBU.
For example, Sony has been restructuring to match the SBU structure with ten internal companies, as
organized into 4 strategic business units. It has been pushing the company to make better use of
software products and content in television and audio gear to increase Sonys profitability.
Matrix Structure

Matrix organizations identified that functional structure or the one around the product and geography
provides an appropriate organizational structure. The matrix structure is a contrast and is suitable
when organizations conclude that neither functional nor divisional form is suitable.
In matrix structure functional and product forms are combined simultaneously at the same level of
organization. Employees have two superiors, a product or project manager and a functional manager.

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 The home department, i.e. engineering, manufacturing or sales is usually functional and is permanent.
People from functional units are temporarily assigned for different products or different projects.
This is most complex and depends on both horizontal and vertical flows
Dual line of budgetary authorities
Dual sources of reward and punishment, shared authority and dual reporting channels require an
extensive and effective communication system.
Widely used in construction, healthcare, research and defense.
However, the project objectives are clear; many channels of communication, workers can see the
visible results of their work.
In matrix structure organizations need planning, training, clear mutual understanding of roles and
responsibilities, excellent internal communications and mutual trust and confidence.
The matrix structures are more suitable when the organizations are pursuing strategies and new
products, customer groups and technologies in their range of activities.
The matrix structure was developed to combine the stability of the functional structure with the
flexibility of the product form. This structure is very useful when the external environment is complex
and changeable.
This structure is often in SBU when the following three conditions exist1. The ideas need to be cross fertilized across projects or products.
2. Resources are scarce.
3. Abilities to process information and to make decisions need to be improved.
For the development of matrix structure, Davis and Lawrence have proposed three distinct phases:
1. Cross functional task forces- Temporary cross functional task forces are initially used when a new
product line is introduced. The project manager is in charge as the key horizontal link.
2. Product/ brand management- If the cross functional task forces become more permanent, the
project manager becomes a product or brand manager and the next phase starts. The product or
brand managers act as the integrators of the semi permanent products or brands.
3. Mature matrix- The third and final phase of matrix development involves a true dual authority
structure. Both the functional and product structures are permanent. All employees are connected
both in a horizontal manner and also a vertical manner.
4. The matrix structure is not very popular because of difficulties in implementation and trouble in
managing.

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Network Structure
It is a newer and radical organizational design; it is an example for what could be termed as nonstructure. This is an elimination of in- house business functions.
Many activities are outsourced and obtained from service providers. A corporation organized in this
manner is called a virtual organization because it is composed of a series of project groups or
collaborations linked by network.
This structure is suitable when the environment is unstable and is expected to remain so.
Electronic markets and sophisticated information system reduce the transaction cost of the market
place.
The organization functions with a small headquarters acting as a broker electronically connected to
some completely owned divisions.
Companies like Nike, Reebok and Benetton use the network structure in their operation functions.

This structure provides an organization with flexibility and adaptability to cope with rapid
technological changes. It allows the company to concentrate on its distinctive competitors by
collecting efficiencies from other competitors.

This structure is in response to social and technological advances.

It allows the company to concentrate on its distinctive competitors by collecting efficiencies from
other competitors.
This structure is in response to social and technological advances.
The biggest disadvantage is that the personal interaction is not available in this structure.
Strategic Business units and Core Competence
Nowadays most corporations organize their businesses into appropriate SBUs. This concept is relevant to
multi product, multi business enterprises. It is required to group the products and businesses into
appropriate SBUs, and then to decide for strategic planning. The attention is to be paid for what is the best
way of grouping the products/ businesses of such large enterprise.
An SBU is a grouping of related businesses, which can be considered for composite planning treatment.
The purpose is to provide effective strategic planning for each of the units. Large multi- business firms
were handling businesses planning on to a territorial basis.
Often, the territorial structure did not suit the structure of strategic planning. Since a number of territorial
units handled the same product, it was getting varied strategic planning treatment. Also, since a given
territorial planning unit carried different and unrelated products, products with dissimilar characteristics
were getting identical strategic planning treatment.
The following advantages are derived from an SBU:

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1. A scientific method of grouping the business of a multi business corporation which helps the firm in
strategic planning.
2. An improvement over the territorial grouping of business and strategic planning based on territorial
units.
3. An SBU is a grouping of related business that can be taken up for strategic planning distinct from the
rest of the business.
4. Each SBU will have its own set of competitors.
5. Each SBU will have a CEO, who will be responsible for strategic planning.
6. The most important characteristics of SBU are:a. It is a single business or collection of related businesses which offer scope for independent
planning and which might feasibly stand alone from the rest of the organization.
b. Has its own set of competitors.
c. Has a manager who has responsibility for strategic planning and profit performance and who ahs
control of profit influencing factors.
An SBU is a grouping of related businesses in a scientific way. The purpose is to provide effective strategic
planning treatment to each of its products/ businesses. The attempt should be to group the businesses into an
appropriate number of strategic business units before the firm takes up the strategy formulation task. The
concept of grouping is that all related from the stand point of function should fall under one SBU. SBU
concept helps a multi business corporation in scientifically grouping its businesses into a few distinct business
units. This grouping would provide the organization the right direction to strategic planning by removing the
confusions and difficulties.
Value Chain analysis

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This is widely used as a means of describing the activities within and around the organizations. It is to assess
the companys ability to provide value for money products or services. This was originally introduced as an
accounting analysis to throw light on the value added by separate steps in complex manufacturing
processes.
One of the key aspects is the recognition that organizations are much more than a random collection of
machines, men and money. These resources should be properly utilized to achieve the optimum utilization in
the best interest of the company. These resources should be properly deployed otherwise the resources may
not have value. These resources should be properly organized into routines and systems which ensure that
products or services produced are valued by the consumer.
The primary activities of the organization are grouped into 5 main areas, viz.
1. Inbound logistics- are the activities concerned with receiving, storing and distributing the inputs to the
products/ services. This includes material handling, stock control, transport, etc.
2. Operations- transform these various inputs into the final product or services which include machining,
packaging, assembly, training, etc.
3. Outbound logistics- collect store and distribute the product to customers. These would include
warehousing, material handling, transport, etc.
4. Marketing and sales- provide the means whereby consumers/ users are made aware of the product/
service and are able to purchase it. This would include sales administration, advertising, selling and so
on.
5. Services- are all those activities which enhance or maintain the value of the products/ service like
installation, repair training and spares etc.
There are 4 supporting activities: the above mentioned primary activities are linked to the supporting
activities.
Procurement- this refers to the process for acquiring the various inputs to the primary activities.
Technology development- all value activities have technology, if it is simply know- how. The key
technologies may be concerned directly with the product or with the processes or with the
particular resource.
Human resource management- This is a particularly important area, which transacts with all
primary activities. It is concerned with those activities involved in recruiting, managing, training,
developing and rewarding people within an organization.
Infrastructure- The systems of planning, finance, quality control, information management are
crucially important to an organizations performance in its primary activities. Infrastructure also
consists of the structures and routines of the organization, which sustain its culture.

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Identifying Core Competencies

Value chain analysis is useful in describing the separate activities which are necessary to underpin an
organizations strategies and how they link together both inside and outside the organization. To have
successful operations in the organizations, it is necessary to have threshold competence in the above
activities.
Some activities are very critical; these are called core competencies and will differ from one organization
to another organization depending on how the company is positioned and the strategies it is pursuing. The
unique resources and core competencies allows the organization to gain competitive advantage.
It is important to identify an organizations core competencies not only for reasons of ensuring fit between
these core competencies and the changing nature of the markets or environment but core competencies
are required to identify the new opportunities. The core competencies can be used for exploiting the new
markets. The development of added value services/ or geographical spread of markets are two ways in
which core competencies can be exploited.
Value chain analysis is a reminder that the long term competitive position of an organization is concerned
with its ability to sustain value for money products or services. This can be helpful in identifying those
activities in which the organization must undertake a threshold level of competence and those which
represent the competencies of the organization. It is necessary to identify on what basis the company has
gained competitive advantage and also which are the core competencies in sustaining this advantage.
Managing Linkages
Core competencies in separate activities may provide competitive advantage for an organization, but over
time, these may be limited by competitors. If core competencies relate to the management of linkages within
the organizations value chain and linkages into supply and distribution chains, then they will be more robust
and difficult to copy .It is the management of these linkages, which provide leverage, and level of performance
which are difficult to match.
The ability to coordinate the activity of specialist teams or departments may create competitive advantage
through improving value for money in the product or services. Specialization of roles and responsibilities is
common in most organizations and is one way in which high levels of competence in separate activities is
achieved. However, often it results in a set of activities which are incompatible- with different departments
pulling in different directions but not achieving the overall goal of the organization.
The management of internal linkages in the value chain could create competitive advantage in a number of
ways. There may be important linkages between the primary activities. The management of the linkages
between a primary activity and a support activity may be the basis for core competencies. There is a chance to
miss out the managing of linkages between the primary activities in an analysis.
Linkages between different support activities may also be the basis of core competencies. In addition to the
management of internal linkage, competitive advantage may also be gained by the ability to complement and
coordinate the organizations own activities.
Competitive advantage can be gained in a number of different ways-

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 Vertical integration
Quality control in raw materials and production
Total quality management
Merchandising activities
Leadership and strategic implementation
A strategy manager has many different leadership roles to play: visionary, chief, entrepreneur, chief,
administrator, culture, builder, resource acquirer and allocator, capabilities, builder, process integrator,
crisis, solver, motivator, arbitrator, policy maker, policy enforcer. The managers have to be highly
committed in their work.
Managers have the following 5 leadership roles to play in pushing for good strategy execution:

Staying on top of what is happening, closely monitoring the progress, ferreting out issues, and
learning what obstacles lie in the path of good execution.

Promoting a culture and the spirit that motivate organizational members to execute strategy in a
competent fashion and perform at a high level.

Keeping the organization responsive to changing conditions, alert for new opportunities and ahead
of others, in developing valuable competencies and capabilities.

Exercising ethical leadership and insisting that the company conduct its affairs like a model
corporate citizen.

Pushing corrective actions to improve strategy execution and overall strategic performance.

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