Strategy Implementation
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Transcript of Strategy Implementation
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Implementing Strategy in Companies That Compete in a Single Industry
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Overview
Strategy implementationHow 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
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Implementing Strategy Through Organizational Structure, Control, and Culture
Organizational structureAssigns 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
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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
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Implementing Strategy
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Building Blocks of Organizational Structure
Grouping tasks, functions, and divisionsOrganizational 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
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Building Blocks of Organizational Structure (cont’d)
Allocating authority and responsibilityHierarchy of authority (chain of command)Span of control (number of subordinates)Tall and flat organizationsDrawbacks of taller organizations
Less flexibility and slower response timeCommunication problemsDistortion of commandsExpense
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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 mechanismsDirect contact among managers across
functions or divisionsLiaison 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 blocksControl and efficiencyControl and qualityControl and innovationControl 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 control Face-to-face interaction
Output control Performance goals for each division, department, and
employee Behavior 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 platformOutput 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
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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 leadershipTraits of strong and adaptive corporate
culturesBias for actionNature of the organization’s mission (sticking
with what the organization does best)How to operate the organization (motivating
employees to do their best)
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Building Distinctive Competencies at the Functional Level
Grouping by function: functional structureGrouping people on the basis of their
expertise or because they use the same resources
AdvantagesPeople can learn from one anotherPeople can monitor each otherManagers have greater controlWith different functional hierarchies, the company
can avoid becoming too tall
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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 problemsMeasurement problemsCustomer problemsLocation problemsStrategic problemsThe outsourcing option
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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 priceReduces bureaucratic costs
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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 structureGroup the overall product line into product
groupsCentralize support value chain functions to
lower costsDivide support functions into product-oriented
teams of functional specialists who focus on the needs of one specific product group
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Kodak’s Product Structure
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Implementing Strategy in a Single Industry (cont’d)
Increasing responsiveness to customer groups—market structureGroup people and functions by customer or
market segmentsDifferent 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 structureTo be responsive to needs of regional
customersTo 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 structuresMatrix structure
Value chain activities are grouped by function and by product or project
Flat and decentralizedPromotes innovation and speedNorms and values based on innovation and
product excellence
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Matrix 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 (cont’d)Product-team structure
Tasks divided along product or project linesFunctional 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 lineTends 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
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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)
ReengineeringFundamental rethinking and radical redesign
of business processes to achieve dramatic improvements
Focuses not on functions, but on processes (which cut across functions)