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STRATEGIC MANAGEMENT UNIT-3 STRATEGIC IMPLEMENTATION

Meena Kaushik (MBA-874-2K10)

Strategy implementation Strategy implementation is the translation of chosen strategy into organizational action so as to achieve strategic goals and objectives. Strategy implementation is also defined as the manner in which an organization should develop, utilize, and amalgamate organizational structure, control systems, and culture to follow strategies that lead to competitive advantage and a better performance. Excellently formulated strategies will fail if they are not properly implemented. Also, it is essential to note that strategy implementation is not possible unless there is stability between strategy and each organizational dimension such as organizational structure, reward structure, resource-allocation process, etc. Strategy implementation poses a threat to many managers and employees in an organization. New power relationships are predicted and achieved. New groups (formal as well as informal) are formed whose values, attitudes, beliefs and concerns may not be known. With the change in power and status roles, the managers and employees may employ confrontation behaviour. What are the principal barriers? In our work in PROSPECTS, we grouped barriers into the four categories listed below. 1) Legal and institutional barriers These include lack of legal powers to implement a particular instrument, and legal responsibilities which are split between agencies, limiting the ability of the city authority to implement the affected instrument. The survey of European cities in PROSPECTS indicates that land-use, road building and pricing are the policy areas most commonly subject to legal and institutional constraints. Information measures are substantially less constrained than other measures.

2) Financial barriers These include budget restrictions limiting the overall expenditure on the strategy, financial restrictions on specific instruments, and limitations on the flexibility with which revenues can be used to finance the full range of instruments. PROSPECTS found that road building and public transport infrastructure are the two policy areas which are most commonly subject to financial constraints, with 80% of European cities stating that finance was a major barrier. Information provision is the least affected.

3) Political and cultural barriers These involve lack of political or public acceptance of an instrument, restrictions imposed by pressure groups, and cultural attributes, such as attitudes to enforcement, which influence the effectiveness of instruments. The surveys in PROSPECTS show

that road building and pricing are the two policy areas which are most commonly subject to constraints on political acceptability. Public transport operations and information provision are generally the least affected by acceptability constraints.

4) Practical and technological barriers While cities view legal, financial and political barriers as the most serious which they face in implementing land use and transport policy instruments, there may also be practical limitations. For land use and infrastructure these may well include land acquisition. For management and pricing, enforcement and administration are key issues. For infrastructure, management and information systems, engineering design and availability of technology may limit progress. Generally, lack of key skills and expertise can be a significant barrier to progress, and is aggravated by the rapid changes in the types of policy being considered. Six Supporting Factors in Strategy Implementation Organizations successful at strategy implementation effectively manage six key supporting factors: 1. 2. 3. 4. Plan 5. 6. Action Planning Organization Structure Human Resources The Annual Business Monitoring and Control Linkage.

Action Planning First, organizations successful at implementing strategy develop detailed action plans... chronological lists of action steps (tactics) which add the necessary detail to their strategies. And assign responsibility to a specific individual for accomplishing each of those action steps. Also, they set a due date and estimate the resources required to accomplish each of their action steps. Thus they translate their broad strategy statement into a number of specific work assignments. Organizational Structure Next, those successful at implementing strategy give thought to their organizational structure. They ask if their intended strategy fits their current structure. And they ask a deeper question as well... "Is the organization's current structure appropriate to the intended strategy?" We're reminded here of a client we worked with some years ago. The company was experiencing problems implementing its strategy calling for the development of two new products. The reason the firm had been unable to develop those products was simple... they had never organized to do so. Lacking the necessary commitment for new product development, management didn't establish an R&D group. Rather, it assigned its manufacturing engineering group the job of new product development... and hired two junior engineers for the task. Since the primary function of the manufacturing engineering group was to keep the factory humming, those engineers kept getting pulled off their "new product" projects and into the role of the manufacturing support. Result no new products. Human Resource Factors Organizations successful at strategy implementation consider the human resource factor in making strategies happen. Further, they realize that the human resource issue is really a two part story. First, consideration of human resources requires that management think about the organization's communication needs. That they articulate the strategies so that those charged with developing the corresponding action steps (tactics) fully understand the strategy they're to implement. Second, managers successful at implementation are aware of the effects each new strategy will have on their human resource needs. They ask themselves the questions... "How much change does this strategy call for?" And, "How

quickly must we provide for that change?" And, "What are the human resource implications of our answers to those two questions?" In answering these questions, they'll decide whether to allow time for employees to grow through experience, to introduce training, or to hire new employees. The Annual Business Plan Organizations successful at implementation are aware of their need to fund their intended strategies. And they begin to think about that necessary financial commitment early in the planning process. First, they "ballpark" the financial requirements when they first develop their strategy. Later when developing their action plans, they "firm up" that commitment. As a client of ours explains, they "dollarize" their strategy. That way, they link their strategic plan to their annual business plan (and their budget). And they eliminate the "surprises" they might otherwise receive at budgeting time.

Monitoring & Control Monitoring and controlling the plan includes a periodic look to see if you're on course. It also includes consideration of options to get a strategy once derailed back on track. Those options (listed in order of increasing seriousness) include changing the schedule, changing the action steps (tactics), changing the strategy or (as a last resort) changing the objective. (For more on this point, see "Monitoring Implementation of Your Strategic Plan.") Linkage - The Foundation for Everything Else Many organizations successfully establish the above five supporting factors. They develop action plans, consider organizational structure, take a close look at their human resource needs, fund their strategies through their annual business plan, and develop a plan to monitor and control their strategies and tactics. And yet they still fail to successfully implement those strategies and tactics. The reason, most often, is they lack linkage. Linkage is simply the tying together of all the activities of the organization...to make sure that all of the organizational resources are "rowing in the same direction." It isn't enough to manage one, two or a few strategy supporting factors. To successfully implement your strategies, you've go to manage them all. And

make sure you link them together. Strategies require "linkage" both vertically and horizontally. Vertical linkages establish coordination and support between corporate, divisional and departmental plans. For example, a divisional strategy calling for development of a new product should be driven by a corporate objective calling for growth, perhaps - and on a knowledge of available resources capital resources available from corporate as well as human and technological resources in the R&D department. Linkages which are horizontal - across departments, across regional offices, across manufacturing plants or divisions require coordination and cooperation to get the organizational units "all playing in harmony." For example, a strategy calling for introduction of a new product requires the combined efforts of and thus coordination and cooperation among the R&D, the marketing, and the manufacturing departments. For more on the subject of linkage, please see Linkage: The Foundation for Everything Else. MODELOF STRATEGY IMPLEMENTATION:ACTIVATING STRATEGY MANAGING CHANGE ACHIEVING EFFECTIVENESS

PROJECT IMPLEMENTATION STRUCTRAL IIMPLEMENTATION STRATEGIC PLAN PROCEDURAL IMPLEMENTATION LEADERSHIP IMPLEMENTATION BEHAVIOURAL IMPLEMENTATION FUNCTIONAL IMPLEMENTATION

EVOULATION & CONTROL OPERATIONAL IMPLEMENTATION

RESOURCE ALLOCATION

Feedback

The model of strategy implementation depicts three major themes: Activating Strategies: - This serves to prepare the ground for managerial tasks and activities of strategy implementation. There are project implementation, procedural implementation and resource allocation. The activation of a strategy is depicted in the form of a pyramid, with strategy at the top. Strategies lead to several plans. Each plan leads to several programmes. Each programme results in numerous projects. Projects are supported by budgets prepared through the resource allocation process. The administrative mechanisms of policies,
STRATEGY PLANS PROGRAMMES PROJECTS BUDGETS POLICIES, PROCEDURS, RULES AND REGULATION

Procedures and rules and regulations support the working of the organization while it implements the projects, programmes, plans and projects. First of all strategy should lead to plans. For example, if expansion strategies have been adopted, various types of expansion plans will have to be formulated. An expansion plan could be designed to set up an additional plant to manufacture the same product. Plan results in different types of programmes. Programme is a broad term which includes goals, policies, procedures, rules and regulations and other steps that needs to be taken for putting a plan into action. For example, a research and development programme for the development of new product. A programme leads to the formulation of a project. A project is a highly specific programme for which the time schedule and cost are predetermined. It requires an allocation of funds based on capital budgeting by organizations. Policies are the guideline to action. Policies are utmost importance to an effective implementation. For example, our company will accept all the defective products from the computer without any question being asked.

Procedures are the sequential steps described in sufficient detail, required to implement a policy. Rules and regulations are the prescribed mode of conduct in a given situation the dos and donts that serves to make the policies and the procedures explicit. Managing Change:-This is the core of strategy implementation and deals with managing change in complex situations. The three part covers under this theme are structural implementation, behavioural implementation and leadership implementation. Achieving Effectiveness:- This is the outcome of the whole process. This theme will cover two set of activities of functional and operational implementation. Following are the main differences between Strategy Formulation and Strategy ImplementationStrategy Formulation Strategy Formulation includes planning and decision-making involved in developing organizations strategic goals and plans. In short, Strategy Formulation is placing the Forces before the action. Strategy Formulation is an Entrepreneurial Activity based on strategic decision-making. Strategy Formulation emphasizes on effectiveness. Strategy Formulation is a rational process. Strategy Formulation requires coordination among few individuals. Strategy Implementation Strategy Implementation involves all those means related to executing the strategic plans. In short, Strategy Implementation is managing forces during the action. Strategic Implementation is mainly an Administrative Task based on strategic and operational decisions. Strategy Implementation emphasizes on efficiency. Strategy Implementation is basically an operational process. Strategy Implementation requires coordination among many individuals.

Strategy Formulation requires a great deal Strategy Implementation requires specific of initiative and logical skills. motivational and leadership traits. Strategic Formulation precedes Strategy Implementation. STrategy Implementation follows Strategy Formulation.

What is Core Competency? Core competency is a unique skill or technology that creates distinct customer value. For instance, core competency of Federal express (Fed Ex) is logistics management. The organizational unique capabilities are mainly personified in the collective knowledge of people as well as the organizational system that influences the way the employees interact. As an organization grows, develops and adjusts to the new environment, so do its core competencies also adjust and change. Thus, core competencies are flexible and developing with time. They do not remain rigid and fixed. The organization can make maximum utilization of the given resources and relate them to new opportunities thrown by the environment. Resources and capabilities are the building blocks upon which an organization create and execute value-adding strategy so that an organization can earn reasonable returns and achieve strategic competitiveness.

Figure: Core Competence Decision Resources are inputs to a firm in the production process. These can be human, financial, technological, physical or organizational. The more unique, valuable and firm specialized the resources are, the more possibly the firm will have core competency. Resources should be used to build on the strengths and remove the firms weaknesses. Capabilities refer to organizational skills at integrating its team of resources so that they can be used more efficiently and effectively. Organizational capabilities are generally a result of organizational system, processes and control mechanisms. These are intangible in nature. It might be that a firm has unique and valuable resources, but if it lacks the capability to utilize those resources productively and effectively, then the firm cannot create core competency. The organizational strategies may develop new resources and capabilities or it might make

stronger the existing resources and capabilities, hence building the core competencies of the organization. Core competencies help an organization to distinguish its products from its rivals as well as to reduce its costs than its competitors and thereby attain a competitive advantage. It helps in creating customer value. Also, core competencies help in creating and developing new goods and services. Core competencies decide the future of the organization. These decide the features and structure of global competitive organization. Core competencies give way to innovations. Using core competencies, new technologies can be developed. They ensure delivery of quality products and services to the clients. Strategic Budgeting:Budget Before understanding the key concepts of budgeting, it is important to understand the meaning of budget. A budget is used to make a documentation of the translation of plans into money. So, the amount of money that needs to be spent in the planned strategies of the company would lie under the budget of that company. These planned strategies include the expenditure that a company incurs and also the income that the company predicts to make. So, in other words, a budget helps one to make an estimation of the amount of money that would be required for the company to handle the projects undertaken by it. It must also be understood that a budget is not made permanently. There are conditions under which a company can make changes in the budget and go as per as the needs of the market. As for example, if a company sees that the use of computers is not as had been planned in the budgeting; it would either replace it with something or not make any investment at all in the field. This is where the utility of controlling comes into the picture. Other than this a budget is also significant from other perspectives. If one talks about the resource allocation, budget has an equally important role to play in it. The reason for the same is that let's say that a company has budgeted that it can afford a certain amount of power supply for a certain project that is conducted in a village. Under the conditions, the amount of human resource that would be required to carry out the project can be determined from the budget itself. Normally a budget is of three types. They have been mentioned as follows: Survival Budget: This form of budgeting is important in the boundary conditions. It estimates the minimum resources so as to complete a particular project. So, if a company has a look at the survival project, there is one obvious analysis that can be done. This is that under the most optimistic of the situations, the resources allocated would be sufficient. There would be very little margin of error under the conditions. Guaranteed Budget: This budget is formulated when there is a guarantee of a particular amount of income at the time of formulation of budget. So, when a budget is made

from this perspective, this income is taken into consideration. If somehow, the debtors are not able to provide the income that the company used as guarantee before making the budget, it would have to switch over to the survival budget formation. Optimal Budget: The third form of budget is the optimal budget. This budget is used under the conditions when there is extra money in the company accounts or else the company feels that it could raise extra money from the market. So, if the position of the company is good then this form of budgeting can be applied. Budgeting Responsibilities Owing to the circumstances under which a budget is fruitful, the organizations should be highly selective in handing over the responsibilities of making the budget. There are a few pre-requisites of making a budget. They are as follows: i. ii. iii. The concerned employee should have a clear understanding of the company's values, strategies, and plans that lie in the near future. The employees must know the importance of cost-efficiency and costeffectiveness. Also, the concerned employee must have knowledge about the resources that would be used to generate and raise funds. The above pre-requisites are essential for the company if they have the motive of using budgeting in the planning, controlling and resource allocation purposes.

So, it is generally recommended that a company has a budgeting team that has an optimal size so as to prevent any discrepancy with the formation of the budget. Under all situations where the concerned members of the finance department have difficulties in planning the budget, they would have to consult the board of members for the same. For a situation like this to arise, the planning in the company must certainly have been wrong. So, we can see that the new planning would depend solely on the fact that budget allows the same to happen. Under all other conditions, the estimated plan would have to change. Role of Budgeting in Resource Allocation A company's success is highly dependent on the resource allocation. This has to be done optimally so as to complete a certain project. The law of economics suggests that a company has the least resources and has to make the most of it. So, only an appropriate resource allocation would help this happen. This would be in terms of human resource, raw materials, equipments, money, time and all other attributes that take for making a project successful. Here again, the budgeting of the company plays an important role to play. The reason for the same is that in all the sectors that have been talked about here, only a planned budget could decide the maximum a company can afford.

All organizations have at least four types of resources that can be used to achieve desired objectives; financial resources, physical resources, human resources, and technological resources. Allocating resources to particular divisions and departments does not mean that strategies will be successfully implemented. A number of factors commonly prohibit effective resource allocation, including and overprotection of resources, too great an emphasis on short-run financial criteria, organizational politics, vague strategy targets, a reluctance to take risks, and a lack of sufficient knowledge.

Making of a Strategic Budget:-

Levels of management

Budgeting Process Resource Availability Approval and Sanction

Desired Long & Short run goals Corporate policy Guidelines

Top Management

Strategic budget Minimising Gaps

Proposals Executive Management Position Papers (e.g. Environment, core competencies marketing and past performance)

Targets/operational Plans Implementation

Operating Management

There are three approaches to resource allocation through budgeting: The first approach is top-down approach. Where resource are allocated through a process of down to the operating levels. The B.O.D., CEO, MD and the Executive committee could decide the requirements and distribute resource accordingly. It is adopted in entrepreneurial mode of strategy implementation. The second approach is bottom up approach. It could be used in participative mode of strategy implementation. It starts from the operating level. The third approach is mix approach it involves an iterative form of strategic decision making between different levels of management. This approach is known as Strategic Budgeting. Definition of Business Policy:Business Policy defines the scope or spheres within which decisions can be taken by the subordinates in an organization. It permits the lower level management to deal with the problems and issues without consulting top level management every time for decisions. Business policies are the guidelines developed by an organization to govern its actions. They define the limits within which decisions must be made. Business policy also deals with acquisition of resources with which organizational goals can be achieved. Business policy is the study of the roles and responsibilities of top level management, the significant issues affecting organizational success and the decisions affecting organization in long-run. Features of Business Policy An effective business policy must have following features1. Specific- Policy should be specific/definite. If it is uncertain, then the implementation will become difficult. 2. Clear- Policy must be unambiguous. It should avoid use of jargons and connotations. There should be no misunderstandings in following the policy. 3. Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed by the subordinates. 4. Appropriate- Policy should be appropriate to the present organizational goal. 5. Simple- A policy should be simple and easily understood by all in the organization. 6. Inclusive/Comprehensive- In order to have a wide scope, a policy must be comprehensive.

7. Flexible- Policy should be flexible in operation/application. This does not imply that a policy should be altered always, but it should be wide in scope so as to ensure that the line managers use them in repetitive/routine scenarios. 8. Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in minds of those who look into it for guidance. Difference between Policy and Strategy The term policy should not be considered as synonymous to the term strategy. The difference between policy and strategy can be summarized as follows1. Policy is a blueprint of the organizational activities which are repetitive/routine in nature. While strategy is concerned with those organizational decisions which have not been dealt/faced before in same form. 2. Policy formulation is responsibility of top level management. While strategy formulation is basically done by middle level management. 3. Policy deals with routine/daily activities essential for effective and efficient running of an organization. While strategy deals with strategic decisions. 4. Policy is concerned with both thought and actions. While strategy is concerned mostly with action. 5. A policy is what is, or what is not done. While a strategy is the methodology used to achieve a target as prescribed by a policy.

Organizational Support systems and processes:-Organizational systems and processes are the wheels that make any organization go. An organizational system is a set of interacting elements devised to accomplish a process. An organizational process is a series of actions undertaken to achieve a predetermined result. Every manufacturing organization performs a transformation process of converting the raw material into finished product. They use variety of management and production systems in doing so. Thus organizational systems and processes are an integral part of any organization. Different types of Organizational systems: Informational Systems Control Systems Reward systems 1. Informational Systems:- "An information systems strategy brings together the business aims of the company, an understanding of the information needed to support those aims, and the implementation of computer systems to provide that information. It

is a plan for the development of systems towards some future vision of the role of information systems in the organisation." Or we can say that:"An IS strategy is something which is essentially a planning process in the minds of the decision makers, users and developers of the systems. It is supported with written reports and plans, but they are of secondary importance." The conceptual framework is given by Galliers which shows the relationship between the Information and its strategy. This approach is an holistic, socio-technical stance, rather than the traditional mechanistic approach which places most emphasis on the information technology aspect of the information system. Galliers states that the IS strategy has four distinct components: the information strategy, the information technology strategy, the information management strategy and the change management/ implementation strategy. The Information Strategy:The information strategy acts as the linchpin between the academic strategy and the IS strategy. It answers the questions: what information is required? and where is the information required to support the primary tasks, or key goals, of the academic strategy. It also questions the appropriateness of the critical assumptions behind the academic strategy in light of the changing environment and changing perceptions. This assessment and review process is one of the core concepts behind this model. Thus, for Galliers, strategy should have both deterministic and emergent elements. The Information Technology Strategy:The information technology strategy is, for Galliers, of secondary importance: it is concerned with applications and platforms, the 'nuts and bolts' of how to provide the information. Thus, it is concerned with the technological infrastructure necessary to fulfil the requirements of the information strategy. The Information Management Strategy:The Information Management Strategy is concerned with how the information services are organised for the different facets of the Institution (i.e., centralised, distributed, out-sourced) and policy issues such as who gets access and what level of access they receive. The Change Management/ Implementation Strategy:The Change Management/ Implementation Strategy will identify what organisational change will be needed for the information systems strategy to be successful and when it will be implemented and by whom. Importantly, those who will implement the

strategy should be involved in its formulation and specific plans and budgets should be drawn into the process here.

2. Control System:- A MCS is a system. A system is an aggregate of machines and people that work toward a common objective. A system can be described as a series of steps or phases consisting of an input phase, a processing phase, and an output phase. A control system adds measurement, analysis and reporting phases to the system. Output is measured, compared against a plan, analyzed if judged significant, and then reported back to the appropriate earlier phases of the system in the form of positive or negative reinforcement. In a management control system, data/information is typically fed back to managers of the various system phases. Responsible managers will then take appropriate action based on the data/information provided. To help insure that the data/information supplied is of high quality, the MCS must have certain characteristics. As indicated in Figure, every MCS has certain generic components. There must be a reliable performance measurement system. Realistic standards should be planned and maintained. The standards should be consistently and regularly compared with performance measurement data. Any variances that exceed predetermined thresholds should be enthusiastically investigated and reported to the people who have responsibility and authority to make appropriate and timely adjustments. All adjustments should be controlled, especially any adjustments that affect predetermined standards and thresholds. The control is formed in a cyclical manner which consist of basic for steps:1. Establishing Standards 2. Measuring actual performance

3. Evaluating actual performance against standards 4. Determining corrective action

Establish standards

Measure performance

Correct performance if needed

Evaluate performance against standards

CONTROL CYCLE

Issues in control system: Need for a control system:- It arises from the fact that the result of subdivision of responsibility and creation of structure means dispersal of the total strategic tasks among different organizational units. Science the activities of each of these units are to be coordinated, controls are necessary. Type of control to be used:-Control may b classified as preventive or corrective, formal or informal, direct or indirect or social or individual controls. Formal controls are prescribed in nature and are based on quantitative, objective data. For example financial controls. Informal controls are emergent in nature and are based on qualitative, subjective data. Integrating the formal and Informal system:-Science both of the systems are important but it is important to decide the primacy to be given to either of them. At the lower level there is the greater the need of formal control on the other hand at the higher level informal control is used.

3. Reward System:Employees dont work for free. Most businesses are not volunteer services, so you have to compensate them in some way for their time and effort. What used to be called pay and then became remuneration is today often termed reward. It refers to all of the monetary, non-monetary, and psychological payments that an organisation provides for its employees. Types of reward:Many managers believe that people only work for money. However, you must remember that there are two basic types of reward:There are extrinsic rewards, which cover the basic needs of income to survive (to pay bills), a feeling of stability and consistency (the job is secure), and recognition (my workplace values my skills). In Maslows Hierarchy of Needs, these are at the lower end. We could also call these the financial rewards. On the other hand, there are intrinsic rewards, the most important of which is probably job satisfaction, a feeling of completing challenges competently, enjoyment, and even perhaps the social interactions which arise from the workplace. These are at the upper, self-efficacy end of the need hierarchy. We could also call these psychological rewards. Objectives Reward systems have three main objectives: to attract new employees to the organisation, to elicit good work performance, and to maintain commitment to the organisation. 1. Attraction A reward system is intended to attract and retain suitable employees. An employer who develops a reputation as cheap is unlikely to be desirable in the job market, because potential employees will think it does not reward effort. Such an organisation is likely to end up with the people that nobody else wants. 2. A great performance

Rewards are also intended to maintain and improve performance. As we have stated in earlier articles, nobody can truly motivate: employee motivation can only come from within. But the promise of a bonus or a pay rise is intended to encourage employees to motivate themselves to reap the rewards. Performance-related pay is very popular in todays organisations. Some companies have three different kinds of performancerelated pay: individual, team, and organisation. The main problem with individual performance-related pay (IPRP) is that it assumes that pay alone motivates workers, but this is not correct. Consider the intrinsic rewards or psychological rewards mentioned earlier. A worker with high pay but who receives no intrinsic rewards will probably go elsewhere. 3. Commitment The reward system also serves to maintain and strengthen the psychological contract. It indicates what behaviour the organisation values, i.e. what is paid for. For example if your company values teamwork, then there will probably be a team bonus of some kind. The psychological contract will partly determine what employees perceive to be fair in terms of reward for the work they do. Disruptive behaviour such as theft in the workplace

Culture and Strategy Implementation:Each and every organization has its own work environment, its own way of doing things, its own processes and its own politics. How these organization approaches problems, what it believes in and its thought process defines its personality. This is what corporate culture is. It is born out of the organizations beliefs and philosophies about why it does things the way it does. It is born out of how organizations with their stakeholders. Consistently doing the things you do results in your corporate culture. Culture is formed by screening and selecting new employees who share the same values as the organization. However, culture evolves, it is not static. Both internal (hiring, staff turnover, etc) and external (technology, competition, etc.) factors shape the culture. Your beliefs, vision, objectives and business practices may be compatible with culture. If this is the case, your culture becomes a valuable ally in strategy implementation. On the other hand, if there is conflict then you do not have a strategyculture fit and you need to do something about it quickly. Strong cultures promote successful strategy implementation while weak cultures do not. By strong culture, mean there is a shared belief in practices, norms and other practices within the organization that helps energize everyone to do their jobs to promote successful strategy implementation. For example, if your culture is built around listening to customers and empowering employees (both authority and

responsibility), it promotes the execution of a strategy that supports superior customer service. In weak cultures, employees have no pride in ownership of work, work is sloppy, there are very few values and people form political groups within the organization. Such cultures provide little or no assistance to implement strategy. Some time ago, I was working with a small business that in the software industry. They had been in business for a number of years before I was brought in. One of the things I noticed initially was that there was constant re-work; i.e. bulk of the developers time was spent in fixing bugs instead of new development work. Deliverables were always late. Customers who did receive the product found the software buggy. The organizations reputation suffered as a result. To combat this we initiated a number of measures; from letting unprofitable customers go to introducing time tracking, etc. But we forgot the most fundamental aspect; to initiate a change in the culture. Developers looked at our initiatives with doubt. I was told statements like This will never work or Wait for a few days and we will revert back to the old way of doing things. We did eventually figure it out and started to implement a change in culture. Changing a culture is the toughest of all management tasks. It takes time to change unhealthy culture and you may have to weed out obstacles to a healthy culture. This experience was a valuable lesson for me. In weak cultures, people do not take risks that are needed to succeed. They believe in moving cautiously, preferring to follow than lead. In todays dynamic business world, strategies are dynamic. Hence, it is but logical that your organizational culture has to be dynamic too. It needs to adapt to the demands of business. In such cultures, all employees have confidence in the teams ability to meet any challenge. Strategic leadership:- Strategic leadership refers to a mangers potential to express a strategic vision for the organization, or a part of the organization, and to motivate and persuade others to acquire that vision. Strategic leadership can also be defined as utilizing strategy in the management of employees. It is the potential to influence organizational members and to execute organizational change. Strategic leaders create organizational structure, allocate resources and express strategic vision. Strategic leaders work in an ambiguous environment on very difficult issues that influence and are influenced by occasions and organizations external to their own. The main objective of strategic leadership is strategic productivity. Another aim of strategic leadership is to develop an environment in which employees forecast the organizations needs in context of their own job. Strategic leaders encourage the

employees in an organization to follow their own ideas. Strategic leaders make greater use of reward and incentive system for encouraging productive and quality employees to show much better performance for their organization. Functional strategic leadership is about inventiveness, perception, and planning to assist an individual in realizing his objectives and goals. Strategic leadership requires the potential to foresee and comprehend the work environment. It requires objectivity and potential to look at the broader picture. A few main traits / characteristics / features / qualities of effective strategic leaders that do lead to superior performance are as follows: Loyalty- Powerful and effective leaders demonstrate their loyalty to their vision by their words and actions. Keeping them updated- Efficient and effective leaders keep themselves updated about what is happening within their organization. They have various formal and informal sources of information in the organization. Judicious use of power- Strategic leaders makes a very wise use of their power. They must play the power game skilfully and try to develop consent for their ideas rather than forcing their ideas upon others. They must push their ideas gradually. Have wider perspective/outlook- Strategic leaders just dont have skills in their narrow specialty but they have a little knowledge about a lot of things. Motivation- Strategic leaders must have a zeal for work that goes beyond money and power and also they should have an inclination to achieve goals with energy and determination. Compassion- Strategic leaders must understand the views and feelings of their subordinates, and make decisions after considering them. Self-control- Strategic leaders must have the potential to control distracting/disturbing moods and desires, i.e., they must think before acting. Social skills- Strategic leaders must be friendly and social. Self-awareness- Strategic leaders must have the potential to understand their own moods and emotions, as well as their impact on others. Readiness to delegate and authorize- Effective leaders are proficient at delegation. They are well aware of the fact that delegation will avoid overloading of responsibilities on the leaders. They also recognize the fact that authorizing the subordinates to make decisions will motivate them a lot.

Articulacy- Strong leaders are articulate enough to communicate the vision (vision of where the organization should head) to the organizational members in terms that boost those members. Constancy/ Reliability- Strategic leaders constantly convey their vision until it becomes a component of organizational culture. To conclude, Strategic leaders can create vision, express vision, passionately possess vision and persistently drive it to accomplishment. Functional strategy:Functional strategy is the approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing a distinctive competence to provide a company or business unit with a competitive advantage. Eg: A multi-dimensional company has several business units. Each unit has its own business strategy. Each unit has it own set of depts. The orientation of functional strategy is dictated by its Parent business units strategy. Eg: A mfg functional strategy that emphasizes on an expensive, quality assurance process over cheaper,high volume production. A H.R functional strategy which stresses on hiring and training high skilled but costly workforce. KEY GOALS:To achieve corporate and business unit objectives and strategies by maximizing resource productivity. To develop a distinctive competence to provide the company with competitive advantage. FUNCTIONAL STRATEGY OBJECTIVES:Profitability Market share Human talent financial health Cost efficiency Product quality Innovation Social responsibility

TYPES OF FUNCTIONAL STRATEGIES: Finance and Accounting Human Resources Information Systems Marketing Production/Operations Research & Development

1.Finance and Accounting:- Below are some of the more important functional strategies. It is important that functional strategies be supportive of the overall business strategy and consistent between themselves.

Capital structure Medium-term planning methods Budget systems and approaches Emphasis between leasing and buying How owners are rewarded Capital investment methods and systems Credit strategies Liquidity strategies

2. HUMAN RESOURCE:- Below are some of the more important functional strategies. It is important that functional strategies be supportive of the overall business strategy and consistent between themselves.

Job design Job specifications Recruiting Selection approaches and criteria Hiring methods Compensation systems and level Evaluation systems and criteria Training and development Promotion criteria

3. INFORMATION SYSTEM:"Strategic information systems change the goals, business processes, products, services or environmental relationships of organizations to help them gain an edge over competitors." In order to be considered strategic, the information system must create a sustainable competitive advantage.

Criteria:There are three ways in which information systems can create a sustainable competitive advantage. Only one need be present for the system to be considered strategic.

Increase customer switching costs. Provide customers with a system of value to them, but which would cost the customer considerably to switch to a competitors system. This serves to lock-in current customers. Raise entry barriers to new entrants. Create an information system that is essential within the industry, but which has a high initial cost. The serves to discourage new competitors. Change the basis of competition. Utilize IS to change the basis of competition from price to something else. Examples include, in-stock status, speed of order fulfillment, and added information with the product. This allows you to sell on a more profitable basis.

Below are some of the more important functional strategies. It is important that functional strategies be supportive of the overall business strategy and consistent between themselves.

Strategic information systems Centralization/decentralization of IS people, computers, and databases Standardization policies and approaches Support for mobile computing Policies towards technology (leaders, late adopters, followers) Systems strategic control methods and approaches Steering committees Integration of systems Inter-functional versus functional systems Inter-organizational systems Internet, intranet, and extranet support

4. MARKETING STRATEGY:Deals with pricing, distributing and selling a product. Here the company uses two types of strategies namely 1.Market development: where the company or its unit captures a larger market share of an existing market. Eg: Unilever, Colgate-Palmolive Firstly these companies are experts in advertising and promotion to implement strategies

Secondly they extend PLC by introducing new and improved variations of the product. 2. Product development: They develop new products for existing markets They develop new products for new markets Eg: Gujarat Co-operative milk marketing federation developed new products to sell to its existing customers, then through Amul it introduced Ice-creams and Desserts, Health drinks etc. [Can be called as Line extension] OTHER MARKETING STRATEGIES:Distribution System 1. Should the company sell directly to mass merchandisers? 2. Should the company use distributors and dealers to sell its products? Eg: John Deree [sells tractors and lawn movers] opted for both mass merchandisers and dealers Below are some of the more important functional strategies. It is important that functional strategies be supportive of the overall business strategy and consistent between themselves.

Price: What is included in the initial price Price level Discounts Terms Product Quality Features and options Styling Brand name Product line and related products Warranties and guarantees Service and after-sale items Promotion Advertising Personal selling Promotion Publicity Place Distribution channels Distribution coverag

OPERATIONAL/ PRODUCTION:Below are some of the more important functional strategies. It is important that functional strategies be supportive of the overall business strategy and consistent between themselves.

Size of facility Location of facility Product design Type of equipment Type of tooling Inventory size and strategy Quality control methods Degree and types of cost controls Use of standards Level of specialization Degree and approach towards technological innovation Focus between product and process

6. RESEARCH AND DEVELOPMENT:Below are some of the more important functional strategies. It is important that functional strategies be supportive of the overall business strategy and consistent between themselves. Which level(s) of R&D to support and emphasis between them Basic research Applied research Development New product type New product of existing type Improvement of existing product Centralization/decentralization of R&D Emphasis between product and process R&D Innovate versus imitate strategies Where to have R&D done Internal Private outside R&D contractor University

SUPPORT SYSTEMS:- As we saw earlier, different managers, operational units, and functional areas have different information needs. Thats why organizations often tailor information systems to meet particular needs. Harrahs IT group, for example, developed the Player Contact System to help its casino salespeople connect to top customers on a more personal basis. Working from a prioritized list of customer names displayed on a computer screen, the salesperson clicks on a name to view relevant information about the customer, such as background and preferred casino activities. Theres even a printed script that can be used to guide the conversation. Such a system isnt very helpful, however, to middle or top-level managers, who need systems to help them carry out their oversight and planning responsibilities. To design marketing programs, for instance, marketing managers rely on summary information gleaned from a dedicated customer-relationship management system. Lets look at some of the widely available information systems designed to support people at the operational and upper-management levels. operations support system Information system:- used by lower-level managers to assist them in running day-to-day operations and making routine decisions. These are generally used by managers at lower levels of the organizationthose who run day-today business operations and make fairly routine decisions. They may be transaction processing systems, process control systems, or design and production systems. Transaction Processing Systems:Most of an organizations daily activities are recorded and processed by its transaction processing system (TPS)transaction processing system (TPS)Information system used to record and process an organizations daily activities or transactions., which receives input data and converts them into outputinformationintended for various users. Input data are called transactions Financial and nonfinancial events that affect a business.events that affect a business. A financial transaction is an economic event: it affects the firms assets, is reflected in its accounting statements, and is measured in monetary terms. Sales of goods to customers, purchases of inventory from suppliers, and salaries paid to employees are all financial transactions. Everything else is a nonfinancial transaction. The marketing department, for example, might add some demographic data to its customer database. The information would be processed by the firms TPS, but it wouldnt be a financial transaction. Figure Transaction Processing System illustrates a TPS in which the transaction is a customers electronic payment of a bill. As you can see, TPS output can consist not only of documents sent to outside parties (in this case, notification of payment received), but also of information circulated internally (in the form of reports), as well as of information entered into the database for updating.

Figure 15.6. Transaction Processing System:-

Process contro Systems:- refers to the application of technology to monitor and control physical processes. Its useful, for example, in testing the temperature of food as its being prepared or gauging the moisture content of paper as its being manufactured. Typically, it depends on sensors to collect data periodically. The data are then analyzed by a computer programmed either to make adjustments or to signal an operator. Harrahs uses process-control technology to keep customers happy. At any given point, some slot machines are down, whether because a machine broke or ran out of money or somebody hit the jackpot. All these contingencies require immediate attention by a service attendant. In the past, service personnel strolled around looking for machines in need of fixing. Now, however, a downed slot machine sends out an I need attention signal, which is instantly picked up by a monitoring and paging system called Messenger Plus and sent to a service attendant. Design and Production Systems:As we saw modern companies rely heavily on technology to design and make products. Computer-aided design (CAD) System using computer technology to create models representing the design of a product. Software, for instance, enables designers to test computer models digitally before moving new products into the prototype stage.

Many companies link CAD systems to the manufacturing process through computeraided manufacturing (CAM). Computer-aided manufacturing (CAM) system using computer technology to control production processes and equipment. Systems that not only determine the steps needed to produce components but also instruct machines to do the necessary work. A CAD/CAM system can be expanded by means of computerintegrated manufacturing (CIM)computer-integrated manufacturing (CIM)System in which the capabilities of a CAD/CAM system are integrated with other computerbased functions, which integrates various operations (from design through manufacturing) with functional activities ranging from order taking to final shipment. The CIM system may also control industrial robotscomputer-run machines that can perform repetitive or dangerous tasks. A CIM system is a common element in a flexible manufacturing system. Flexible manufacturing system:- (FMS)System in which computer-controlled equipment is programmed to handle materials used in manufacturing., which makes it possible to change equipment setups by reprogramming computer-controlled machines that can be adapted to produce a variety of goods. Such flexibility is particularly valuable to makers of customized products. Management Support Systems:Mid- and upper-level managers rely on a variety of information systems to support decision-making activities, including management information systems, decision support systems, executive support systems, and expert systems. Management Information Systems:A management information system (MIS) management information system used to extract data from a database and compile reports that help managers make routine decisions. Extracts data from a database to compile reports, such as sales analyses, inventory-level reports, and financial statements, to help managers make routine decisions. The type and form of the report depend on the information needs of a particular manager. At Harrahs, for example, several reports are available each day to a games manager (whos responsible for table-game operations and personnel): a customer-analysis report, a profitability report, and a labor-analysis report. Decision Support Systems:A decision support system (DSS) Interactive system that extracts, integrates, and displays data from multiple sources to help managers make no routine decisions. For example, suppose that a gaming company is considering a new casino in Pennsylvania (which has just legalized slot machines). To decide whether it would be a wise business move, management could use a DSS like the one illustrated in Figure Decision Support System. The first step is to extract data from internal sources to

decide whether the company has the financial strength to expand its operations. From external sources (such as industry data and Pennsylvania demographics), managers might find the data needed to determine whether theres sufficient demand for a casino in the state. The DSS will apply both types of data as variables in a quantitative model that managers can analyze and interpret. People must make the final decision, but in making sense of the relevant data, the DSS makes the decision-making process easierand more reliable. Figure 15.7. Decision Support System

Executive Information Systems:As we observed Managing for Business Success, senior managers spend a good deal of their time planning and making major decisions. They set performance targets, determine whether theyre being met, and routinely scan the external environment for opportunities and threats. To accomplish these tasks, they need relevant, timely, easily understood information. Often, they can get it through an executive information system (EIS). Executive information system (EIS):- System that provides senior managers with strategic information customized to meet their needs and presented in a convenient format, which provides ready access to strategic information thats customized to their needs and presented in a convenient format. Using an EIS, for example, a gamingcompany executive might simply touch a screen to view key summary information that highlights in graphical form a critical area of corporate performance, such as revenue trends. After scanning this summary, our executive can drill down to retrieve more detailed informationfor example, revenue trends by resort or revenue trends from various types of activities, such as gaming, hotel, retail, restaurant, or entertainment operations.

Artificial intelligence Systems (AI):- is the science of developing computer systems that can mimic human behavior. Ever since the term was coined in 1956, AI has always seemed on the verge of being the next big thing. Unfortunately, optimistic predictions eventually collided with underwhelming results, and many experts began to doubt that it would ever have profitable applications. In the last decade, however, some significant advances have been made in AIalbeit in the area of game playing, where activities are generally governed by small sets of well-defined rules. But even the game-playing environment is sometimes complex enough to promote interesting developments. In 1997, for example, IBMs Deep Bluea specialized computer with an advanced chess-playing programdefeated the worlds highest-ranked player. More recently, several AI applications have been successfully put to commercial use. Lets take a brief look at two of these: expert systems and face-recognition technology. Expert systems (ES):- are programs that mimic the judgment of experts by following sets of rules that experts would follow. Theyre useful in such diverse areas as medical diagnosis, portfolio management, and credit assessment. For example, youve called the customer-service department of your credit-card company because you want to increase your credit line. Dont expect to talk to some financial expert whos authorized to say yes or no. Youll be talking to a service representative with no financial expertise whatsoever. He or she will, however, have access to an ES, which will give you an answer in a few seconds. How does it work? The ES will prompt the representative to ask you certain questions about your salary and living expenses. It will also check internal corporate data to analyze your purchases and payment behavior, and, based on the results, it will determine whether you get an increase and, if so, how much. At Harrahs, an ES called the Revenue Management System helps to optimize the overall profitability of both hotel and casino operations. When a customer requests a room, the program accesses his or her profile in the database and consults certain rules for assessing the application. One rule, for example, might be: If the customer has wagered more than $100,000 in the past year, add 10 points. Eventually, the system decides whether your application will be accepted (and at what rate) by adding up points determined by the rules. While a tightwad may not get a room even when there are vacancies, a high roller may get a good rate on a luxury suite even if the hotel is nearly full. Face-Recognition Technology:Harrahs uses another particularly interesting, and sophisticated, application of AI. In the hotel-casino business, its crucial to identify and turn away undesirable visitors. One tool for this task is a digital camera-surveillance system that uses face-recognition technology. Using this technology, a program classifies a persons face according to the presence/absence or extent of certain unique features, such as dimpled chins,

receding jaws, overbites, and long or short noses. If theres a match on, for example, fifteen features between a person being scanned and someone in the company database; a staff member decides whether the two people are the same. If a security manager then concludes that the face belongs to a skilled card-counter, the customer will be discouraged from playing blackjack; if it belongs to a known cheater, the individual will be escorted out of the casino. The system, however, does more than spot undesirables. It can also identify high rollers and send information about customers to managers on the floor. Thats why a Harrahs manager can greet a preferred customer at the door with his favorite drink and a personalized greeting, such as Hi, Bill! Hows Karen? Did you ever get that vintage Corvette? Here, have a gin rickey on the house.