_ STRATEGY IMPLEMENTATION After you have studied this chapter, you should be able to: 1. understand the meaning of strategy implementation; 2. identify and enumerate the levels of strategy; and 3. _ identify the strategies for the different functions in the organization. A strategy can be defined in many perspectives. A manager can simply define it as a strategic goal. In another way, it is a battle plan, a technique or a tactic in the art of war. Itis a method of facing competition. It is a set of integrated decision. Strategy comes from the Greek word strategos, which means “the art of the general.” A strategy is not realized all the time, 100% of its intentions. The conditions in the environment may affect an intended goal or objective to strategy. Employees may lack the needed com- mitment to make the strategy work. The entire organization may resist the change at the last minute. The list goes on and on. LEVELS OF STRATEGY A strategy falls into three different levels. They are the following: corporate, business, and functional strategies. Corporate strategy. It comprises of decisions that give the organization what industry it will be and not be in and how it will allocate specific resources. ‘When the Ayala Corporation gave up Purefoods, it concentrated on land and real estate development. The kind of decision highlights a corporate strategy, when a company chooses what kind of industry it wants to concentrate. Since corporate strategy concerns the whole corporation, it usually fulfills the mission and vision of the company. It generally analyzes the whole system on the basis of participation of the different business units. The corporate strategies establish the framework by which alt other strategies are formulated and implemented.What is crucial in strategic management is of course the corporate level strategies. Itis concerned with the proper selection of business which the company should compete in. Here are the considerations to be followed in corporate level strategy: Scope. it means identifying the overall goals of the corporation and the types of busi- ness in which the companies should get in. Access to Competition. It means identifying and defining where the company should be accessible. For example, Rustan’s is clearly identified with the high-end consumers while SM is for the middle income, mass market. Management of Relationships. The strategies should be shared and coordinated to all the employees. Management Practices. A company should decide how the employees are to be gov- erned in the achievement of corporate objectives. Implementing a strategy is a challenging task for many organizations. In many asffects, while there are already strategies to be implemented, there are emotional attachmefts in- volved. Of course, different employees have different views on how to execute a strategy and how to execute a change. Analysts have pointed out that it is now harder to execute a strategy than before. In 1981, Jack Welch was able to formulate a strategy for GE, catapulting it as the number 1 brand. . Before, it was rather easy to measure profits. If the investment is P2,000,000.00 and the cost is P1,000,000.00 then profit is P1,000,000.00. Today, the P1,000,000.00 net profit should be attributable to a lot of intangible assets such as the percentage of customer loyalty, customer retention, and the like. With this kind of environment companies are facing right now, strategy implementation should be accompanied by effective leadership and communication. There should be a formu- lation of vision, mission, and values. There should be enthusiasm in all levels. Commitment should emanate, that will spell sound results. The organizational structure of the company should allow empowerment and there is accountability on all strategic actions. Short-term goals should also be created at the business level. Busiriess strategy. It is a set of decisions that provides ways on how the organization competes in the industry it chooses to be in and eventually sustains a competitive advantage. Business strategies are basically positioning strategies, making the companies secure a foothold in the market. It also positions the brand and enables brand awareness to the customers. It also instills loyalty on the brand. Jollibee has sustained a competitive advantage against its rivals. The same is true for Coca-Cola, Functional strategy. it comprises of decisions in the different functions of the. ‘organization that support the business strategy. These functions include marketing, production, finance, research and development, and human resources. Also called operational strategies, they translate the strategies in the corporate and busi- ness levels to departmental or functional units.«They are transformed into specific processes, human and other resources.. Each fonction develops and implements a set of decisions. For example, marketing has has recrultine gg oduct, Pricing, placement, and promotion. The human resource function ‘as recruitment, training, compensation, and industrial relations. tt depends on the company on how it can unite all the functions into one whole, and make the strategy works. FUNCTIONAL STRATEGIES IN MARKETING Marketing is always described as the process of creating and satisfying consumer needs and wants through products and services, Marketing encompasses a wide range of basic func- tions, all of which provide customer satisfaction. The first is customer analysis. To be able to define the target market, it is important to analyze the personalities, economic status, gender, and other demographical aspects to come up with strategies that would be essential in setting up overall company goals, objectives as well as its mission and vision statements. The gathering of pertinent information seems tedi- ous but a successful organization always monitors the market and studies the buying patterns of people, both existing and potential customers. The second function is the selling of products and services. In here, it is not just selling the product or service. It also includes other tasks that will help in selling the product. Tasks like advertising and promotion are crucial especially if there are new products. They take in many forms like using the media (print, television, radio and film), brochures, fiyers, tarpau- lins, among others. The Internet has also become an effective tool in making the message across all sectors of the target market. It is also necessary to maintain the power of the brands in the minds of the consumers. Personal selling is a tool for products like industrial goods or those that need a more personalized and more detailed discussion of the features of the prod- uct like a car. Selling the product does not end in the actual purchase of the product or availment of a service. After sales transactions involve the feedback from customers and how the product or service can be improved through the comments and suggestions of customers. Marketers maintain and retain customer loyalty. They also attend to customer complaints. The third function is product or service planning. The most popular and most effec- tive option is test marketing. It predicts future sales of new products and services, Marketers should be able to plan out carefully the segments and the locations of where to conduct the market test. Test marketing eliminates the possibility of heavy losses or possible product fail- ure. Product and service planning also includes brand positioning and packaging. These are relevant on maintaining superior brand power by positioning the product or service; making the consumers to remember the brand. Packaging speaks well of the product and a good pack- aging attracts the target consumers. Planning provides the development of features, styles and quality of the product. It also determines options on products or brands that should be phased out and which products or brands should be diversified. The fourth function in marketing is that of pricing. There are major considerations with regard to pricing. The first one is the capacity of the consumers to buy. The question— is: Can the consumers afford to buy the product at a certain price? On the other hand, the government controls certain prices like oil prices so suppliers cannot charge exorbitant prices to the detriment of the consumers. Another consideration is the price of raw materials in producing the product. It makes sense when a manufacturer charges a reasonable price with consideration also to the costs and the markup of the product offering. A manufacturer should also consider its price and the markup of the distributor before the product reaches the final consumer. Prices should be competitive with the other brands as well. The fifth function is distribution. This includes locations of retail sites, sales territories and channels, transportation carriers, wholesaling and retailing. Some manufacturers or pro- ducers would prefer intermediaries rather than distributing the product directly to consum- ers. Small-scale manufacturers would opt for distributors because of the financial constraints attached to distributing the product directly. Medium- to large-scale producers, on the other hand, use intermediaries to divert their resources in the improvement of their production processes. Marketing research is the systematic gathering and analyzing of data that relates to the marketing of goods and services. There are various ways in doing marketing research. Large companies employ market research firms to conduct surveys, tests, and the like to monitor further the strength of their products in the market. And last, opportunity analysis. It is equivalent to cost benefit analysis. Companies obvi- ously determine whether benefits outweigh the costs. FUNCTIONS IN FINANCE There are three important decisions: investment decision, financing decision, and the dividend decision. The investment decision is also called capital budgeting. It involves the allocation of resources including capital to projects, products or services, and assets. This is an efficient placement of capital to various means. Financing decision examines and finds the best capital structure for the organization. It determines how the firm can raise capital such as selling of assets, issuing stock or obtaining a debt facility. The dividend decision concerns the right period or time frame by which the organization will issue a percentage of income.to stockholders through dividends. It also determines the issuance of stocks and the earnings retained to the firm. FUNCTIONS IN PRODUCTION The production or operations function includes those activities that transform inputs to products or services. The first function is Process. This includes various activities such as the use of facili ties, production flow analysis, and physical distribution system. The second function is Capac- ity. Capacity decisions concern with the determination of optimal output levels for the firm without going over or under production. To achieve this, the company makes a forecast and schedule production operations. The third decision is Inventory. Of course, there is a need to ‘manage the level of raw materials, work in process and finished goods inventory. This alsoeras the size, quantity, and period of orders. On the other hand, workforce decisions 7 Ee © management of skilled, unskilled, clerical, and management employees. There should be appropriate motivation techniques, job design, job enrichment, among others. The last one is Quality. It denotes the production of quality goods and services. This includes test- ing, quality assurance, and cost control. IMPLEMENTING STRATEGIES AND E-COMMERCE E-commerce has essentially changed the way business is conducted. There is a constant restructuring of business processes to enable companies to attract more customers via the worldwide web. The Internet has actually eased up entry barriers for new companies because they do not need high capital to invest in sales forces. The Internet has become a tool in making busi- ness and transacting with companies. One advantage of the Internet is the ease > for customers to compare prices. It is relatively | The Internet enables consumers to easy for customers to collect information about | compare prices, products and services products and services without having to go to of suppliers. On the part of the the stores. suppliers, there is an intensive price war, To overcome it, some suppliers request buyers to enter a code before they can collect prices. One of the strategies that a company can implement is through product bunch. It gives the buyers the chance not to compare prices individually but on a whole package. Another strategy is the introduction of niche products. Through the direct access avail- able in the Internet, companies can identify target consumers and this introduces products and services that will cater to their needs. Customer-centered strategy enables a company to pull out information from consumers to improve the company’s performance. Another strategy is the expansion into related product lines. This expansién helps com- panies to share activities such as promotion and distribution. This sharing can lower costs which is advantageous to consumers. The Internet enables consumers to compare prices, products and services of suppliers. On the part of the suppliers, there is an intensive price war. To overcome it, some suppliers request buyers to enter a code before they can collect prices. ‘Two strategies are available: price lining and smart pricing. Price lining refers to the practice of offering the same products at price points depending ‘on consumer needs. Smart pricing refers to the practice of charging various prices from one market to anoth- er depending on the conditions of the market. Another strategy is by achieving cost leadership ina particular market or industry.—s STRATEGIC INSIGHTS (Adapted and inspired by the book: On the Profession of Management by Peter Drucker, 2003) SM started out as a small shoe store in Carriedo while Jollibee started out as an ice cream parlor in Recto. Both companies did not start out big. Post-it notes started from a simple idea which was unplanned. Spencer Silver was working in one of 3M’s research labs sometime in 1970 trying to develop a strong adhesive. It can get stuck but it was so easy to lift off. Silver did not throw away what he had started. Four years later, Arthur Fry, another 3M scientist was a member of the church choir. While singing, the Pages he was reading on kept on falling out. He suddenly remembered about Silver’s adhesive so he put some on the markers. They stayed on and lifted them off without damaging the Pages. And the rest was history. That was the birth of the Post-it notes, launched in 1980, 10 years after Silver developed the adhesive. It was a huge success. On the other hand, organizations with creative ideas should have managers who can commit their resources and put in highly skilled, knowledgeable people who would make things happen for the future.:Creative ideas do not necessarily mean specific ones, very detailed, but can be general ideas like that of 3M, initially developed as an adhesive. Research efforts should be directed on the realization of these ideas and further transformed in actual operations. Of course the idea is economically feasible which means there is an immediately visible economic result. It may not be Possible, at least, for the present time to infuse all the features of the idea but what is crucial is that the transformation of the idea into a product or service would have profitable results. This also connotes satisfaction of a particular need or want. In short, the future demands the transformation of an idea into a successful product or service. Managers should commit to the idea. This also includes the courage and perseverance aside from commitment; it demands faith, the belief that the idea will transform the future and make things happen. A company which does not work for the future will b successful company should not rest on its laurels forever. A used to dominate the industry had been complacent, slept ani enemy: change. It took sometime before it was able to recoy recoup its losses, but failed to monopolize the market. e in big trouble. Even a large, Filipino-owned company which id did not foresee the impending ver. Ten years after, it was able toJaime Zobel de Ayala and the Ayala Corporation INSTRUCTIONS: Read the short article. Additional data can be found at the sites below, Answer the questions after reading the article. (Adapted from www.pinoyprofile.com/jaime-zobel-de-ayala/; www.wingsweb.org/forum06/ biographies_zobel.cfm) Jaime Zobel de Ayala is the president and chairman of the Ayala Corporation. The said $1.2B company is the holding organization for the following: Ayala Malls, Avida, Alveo, Ayala Land, Ayala BusinessScapes, Ayala Hotels, Makati Development Corporation, Ayala Property Management, Bank of the Philippine Islands, Globe Telecoms, Manila Water Company (Maynilad), Integrated Microelectronics, Inc., Azaléa Technology Investments, Inc., Ayala Automotives Holdings, Inc. (Honda Cars Makati and Isuzu Automotive Dealership, Inc.), Ayala International Pte, Ltd., Integreon Managed Solutions, Inc., Ayala Foundation, Inc., and eTelecare. Aside from his membership in the board of the Ayala Group of Companies, he is a member of other international organizations: JP Morgan International Advisory Council, the Mitsubishi Corporation International Advisory Committee, the Toshiba International Advisory Group, the Asia Society, and the Asia Business Council. As an alumnus of Harvard University, he is a member of the Harvard University Asia Center Advisory Committee, Harvard Business School Asia Advisory Committee, and the Board of Trustees of the Asian Institute of Management. Jaime studied at Harvard University where he earned his BA in Economics (cum laude) in 1981 and his MBA in 1987. Ayala planted the seeds of fruitful hard work and discipline coupled with sound manage ment principles as early as 1834. In this kind of industry, perseverance and determination helped in the pioneering of real estate development and banking in the country. As a huge contributor in building the Philippine economy, Ayala fostered financial strength, high product quality, and professionalism.Questions for Analysis: 1. What are the qualities of Jaime Zobel de.Ayala which made him to pioneer in urban development through real estate? 2. Trace the various industries that Ayala ventured into through the Internet. Trace the financial strength, high product quality, and professionalism he has inculcated in these businesses. Comment on these.