Ch 8 -1
Copyright © 2011 Pearson Education
Strategic Management: Concepts
and Cases
Arab World Edition
Fred R. David
Abbas J. Ali
Abdulrahman Y. Al-Aali
Chapter 8:
Implementing Strategies:
Management and
Operations Issues
Ch 8 -2
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Chapter Outline
• The Nature of Strategy Implementation
• Annual Objectives
• Policies
• Resource Allocation
• Managing Conflict
• Matching Structure With Strategy
Ch 8 -3
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Chapter Outline (cont’d)
• Restructuring, Reengineering, and E-Engineering
• Linking Performance and Pay to Strategies
• Managing Resistance to Change
• Managing the Natural Environment
• Production/Operations Concerns When
Implementing Strategies
• Human Resource Concerns When Implementing
Strategies
Ch 8 -4
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Source: Adapted from Fred R. David, “How Companies Define Their Mission,” Long Range Planning 22,
no. 3 (June 1988) 40.
Ch 8 -5
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Nature of Strategy Implementation
Formulation vs. Implementation
• Strategy implementation is different
from strategy formulation
• Formulation focuses on
effectiveness
• Implementation focuses on
efficiency
Ch 8 -6
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Nature of Strategy Implementation
Management Perspectives
Shift in responsibility
Strategists
Ch 8 -7
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Divisional and
Functional
Managers
Management Issues
Annual Objectives
Policies
Management
Issues
Resources
Organizational Structure
Restructuring
Rewards/Incentives
Ch 8 -8
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Management Issues (cont’d)
Resistance to Change
Natural Environment
Management
Issues
Supportive Culture
Production/Operations
Human Resources
Ch 8 -9
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Annual Objectives
Purpose of Annual Objectives
• Basis for resource allocation
• Mechanism for management evaluation
• Metric for measuring the progress on longterm objectives
• Establish priorities (organizational,
divisional, and departmental)
Ch 7-10
Ch 8 -10
Copyright © 2011 Pearson Education
•
Polices
Refers to specific guidelines , methods ,
procedures , rules , forms and administrative
practices established to support and encourage
work toward stated goals
• Some examples that may requires a policy:• To use one or more suppliers
• To operate one ,two , or three shifts
• To discourage smoking at work
• To discourage insider trading
• To discourage working on a secondary job for a
different employees
Ch 711
Copyright © 2009 Pearson Education, Inc.
Publishing as Prentice Hall
Resource Allocation
• Resources allocation is a central management
activity
• A process of allocating resources consistent with
priorities indicated by approved annual
objectives
• All organizations have four types of resources:
1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources
Ch 8 -12
Copyright © 2011 Pearson Education
Ch 7-12
Managing Conflict
• Conflict can be defined as--------- a
disagreement between two or more parties
on one or more issues
• Conflict not always “bad”
• An absence of conflict can signal apathy
• Conflict can help managers identify
problems
Ch 7-13
Ch 8 -13
Copyright © 2011 Pearson Education
Managing Conflict
Approaches for Managing Conflicts
Avoidance
Ignoring the problem in hopes
that the conflict will resolve itself
Compromising
(Defusing) playing down
differences between conflicting parties (there is
neither a clear winner nor loser )
Confrontation
holding a meeting at which
conflicting parties present their views and work
through their differences.
Ch 7-14
Ch 8 -14
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Matching Structure with Strategy
• Changes in strategy lead to changes
in organizational Structure
 Structure largely dictates how
objectives and policies will be
established
 Structure dictates how resources will be
allocated
Ch 7-15
Ch 8 -15
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Matching Structure with Strategy
Basic Forms of Structure
• Functional Structure
• Divisional Structure
• Strategic Business Unit Structure (SBU)
• Matrix Structure
Ch 7-16
Ch 8 -16
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The Functional Structure
•
A functional structure groups tasks & activities by
business functions such as production &operation ;
marketing ; finance ;accounting …etc
•
The functional structure is the widely used structure
because it is the simplest , least expensive, and
promotes much specialization of labor
•
A university may structure its activates by major
functions that include academic affairs , student service
, alumni relation , maintenance , and accounting
Ch 717
Copyright © 2009 Pearson Education, Inc.
Publishing as Prentice Hall
The Divisional Structure (decentralized structure
)
It is suitable for the large corporations
• It can be organized in one of four ways
 By geographic area
 By product or service
 By customers
 By process
The divisional structure is the second widely used
structure because it enables the corporation to motivate
employees ; control operation and compete successfully
in diverse location
The national investor (a comprehensive banking investment
firm ) organizes its activates into four divisions ;
investment banking ; private equity ; asset management
; and real estate
•
Ch 718
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Publishing as Prentice Hall
The Strategic Business Unit (SBU) structure
•
As the number , size , and diversity of divisions in an
organization increase , the SBU structure is needed .
•
SABIC has grouped its many divisions into six primary SBUs
; chemicals ;; plastic ;polymers ; innovative plastics ;
fertilizers and metals
•
SBU can greatly facilitate strategy implementation efforts
•
The SBU structure places similar divisions into SBU and
delegates authority and responsibility for each unit to a
senior executive who directly report to the CEO
•
Ch 719
Copyright © 2009 Pearson Education, Inc.
Publishing as Prentice Hall
The Matrix Structure
•










Ch 720
A matrix structure is the most complex of all design
because it depends on both vertical and horizontal
flows of authority and communication
some advantages of the matrix structure ;
The project objectives are clear
channel of communication will be increased
Facilitate the use of specialized personal, equipments ,
and facilities
For a matrix structure to be effective ,
Organizations need participative planning
Training
Clear mutual understanding of roles and responsibilities
Excellent internal communication
Mutual trust and confidence
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Publishing as Prentice Hall
Restructuring,, and Re-Engineering
Restructuring (also called Downsizing,
rightsizing) )
• Reducing the size of the firm in terms
of number of employees , number of
divisions or units
• The target is---------- to improve both
efficiency and effectiveness
Ch 7-21
Ch 8 -21
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Re-engineering ;it is called also Process
innovation , Process redesign
• Reengineering is concerned with employee
and customer well being than shareholder
well – being .
• The purpose is improving cost - quality –
service – and speed of the production
Ch 7-22
Ch 8 -22
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Linking Performance and Pay to Strategies
Situation in the Arab World
• Most companies adopt a compensation
system which primarily includes a base
salary with annual rises.
• Increasingly in large Arab corporations
there is a tendency to utilize pay systems
similar to those found in western
countries.
Ch 7-23
Ch 8 -23
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Production/Operations Concerns
Production processes typically
constitute more than 70% of firm’s
total assets.
Ch 7-24
Ch 8 -24
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Production/Operations Concerns (cont’d)
Production/Operations Decisions
• Plant size
• Kind of tooling
• Plant location
• Product design
• Inventory / Inventory
control
• Choice of equipment
• Quality control
• Shipping and packaging
• Cost control
• Technological innovation
• Use of standards
• Equipment and resource
utilization
• Job specialization
Ch 8 -25
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• Employee training
Human Resource Concerns
Human Resource Strategic Responsibilities
• Assessing staffing needs/costs
• Developing performance incentives
• Child-care policies
• Work–life balance issues
Ch 7-26
Ch 8 -26
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Benefits of a Diverse Workforce
• Improves corporate culture
• Improves employee morale
• Leads to easier recruitment of employees
• Decreases complaints and litigation
• Increases creativity
• Improves client relations
• Increases productivity
• Maximizes brand identity
• Reduces training costs
Ch 8 -27
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