Chapter 7 Strategy Implementation

1. Chapter 7 Strategy Implementation

2. Learning Objectives To understand: • the role of leadership in successful execution of strategies • how culture and organizational energy influence the success of strategy implementation • functional strategies and their importance to strategy implementation • the stages firms encounter as they execute global strategies • basic organizational structures, and their strengths and weaknesses • the various roles played by foreign subsidiaries

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

4. Four Primary Responsibilities of Leaders • Design organizational purpose, vision and core values • Develop policies, strategies and structure • Create an environment for organizational learning • Serve as a steward for the organization

5. Situational Leadership • Leadership style should fit the situation • Effective leaders can employ a range of styles, from coercive to coaching to consensus-building • Most successful leaders exhibit a high degree of emotional intelligence

6. Emotional Intelligence Self Awareness: Ability to understand own moods and emotions as well as their impact on others Self Regulation: Ability to regulate impulses, to think before acting Motivation: Drive to achieve, optimism, passion Empathy: Ability to understand the emotional make-up of other people Social Skill: Ability to manage relationships for particular purposes Sources: Daniel Goleman, “What makes a leader?” HBR on What Makes a Leader, (2001), 1-25; and Daniel Goleman, “Leadership that gets results,” HBR on What Makes a Leader, (2001), 53-85.

7. Leadership Styles Authoritative: Inspire with a vision, set direction. Appropriate when new direction needed. Affiliative: Build teams, create harmony. Appropriate in stressful situations. Democratic: Build consensus, create participation. Appropriate when need input from key employees and buy-in. Pace-setting: Set high standards. Appropriate when need quick results from a highly motivated team. Coaching: Develop people for the future. Coercive: Demand immediate compliance. Appropriate in a crisis. Sources: Daniel Goleman, “What makes a leader?” HBR on What Makes a Leader, (2001), 1-25; and Daniel Goleman, “Leadership that gets results,” HBR on What Makes a Leader, (2001), 53-85.

8. Organizational Culture An organization’s culture, the system of shared values that guides employee beliefs and behavior, influences the success of strategy implementation. • Often reflects the values and leadership styles of top executives • Human resource management practices can influence culture – recruitment, training, performance evaluation

9. Organizational Energy An organization’s energy can be described in terms of its intensity and its quality. • Passion – High energy that is positive • Comfort or Complacency – Low energy that is positive • Aggression – High energy that is negative • Resignation – Low energy that is negative

10. 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

11. 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.

12. 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.

13. 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

14. 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.

15. 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.

16. 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.

17. Well-Integrated 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

18. Creating anInternational Mind-Set CEOs can create a sense of urgency about global matters by • expanding organizational visions to include overseas operations • assigning specific individuals to monitor global trends and incorporate information into strategic planning processes • frequently discussing global issues with employees, the board of directors, and the media • making frequent visits to global operations • recruiting and promoting foreign nationals for key managerial roles

19. Stages of International Development • Domestic Stage - Possible exporting • International Stage - Significant exporting • Multinational Stage - Marketing and production facilities throughout world • Global Stage - Organization not associated with any one country

20. 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

21. 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)

22. 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

23. 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

24. Foreign Subsidiaries • Local implementation – focus on one country, making only minor adjustments to business strategy to meet local needs • Specialized contribution – play a unique role as a member of an interdependent network of subsidiaries, often as the production arm or as a distributor to a particular region • Global mandate – responsible for an entire global business