CBMEC 2 STRATEGIC MANAGEMENT MODULE 7

STRATEGIC
MANAGEMENT

MODULE 7

Author

GRENELITA DC. BILBAO-FELIPE, MBA

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 CBMEC 2 STRATEGIC MANAGEMENT MODULE 7

UNIT III – STRATEGIC MANAGEMENT FRAMEWORK

MODULE 7

STRATEGY IMPLEMENTATION

At the end of the module, the student is expected to be able to:

1. Understand the implementation phase of strategic management. Focusing

on the people issues of managing change;
2. Identify who is responsible for strategy implementation;
3. Understand the strategy implementation process;
4. Define the role of organizational culture in implementation;
5. Understand the organizational side of implementation, emphasizing the
need for project planning, strategy-systems alignment, and the role of
organizational structure and design;
6. Appreciate the importance of project management in strategy
implementation;
7. Define the role of organizational alignment in strategy implementation;
8. Know why strategy implementation process succeed or fail; and
9. Familiarize themselves with the international aspects of strategy
implementation.

INTRODUCTION

There are many factors that influence the success of strategy

implementation. These factors may be grouped into two broad categories. One is
the human or people issues. In the first part, the implementation phase of
strategic management will be discussed, focusing on the people issues of
managing change. This includes the management style and skills of the leaders,
the role of middle managers in the process, overcoming resistance to change, and
aligning the culture of the organization with its new strategy. Also common reasons
for failure of strategy will be examined and principles of effective implementation
will also be identified.

The second category is the organizational issues. This will focus on the
organizational side of implementation, emphasizing the need for project planning,
strategy-systems alignment, and the role of organizational structure and design.
Also, international aspects of strategy implementation will be looked into.

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PART I: HUMAN OR PEOPLE ISSUES

Figure 7-1 Strategic Management Framework

WHO IS RESPONSIBLE FOR STRATEGY IMPLEMENTATION?

The simple answer to the question of who is responsible for strategy

implementation is – everyone. From top to bottom of the organization, everyone
contributes in some way to the effort. Corporate executives team up with vice
presidents or senior managers of the divisions translate corporate objectives into
business level priorities. The division managers, in turn, will work with their direct
reports (subordinates and peers) to take business level objectives to the functional
level. Plans will be developed, programs established, and budgets created. Within
each division, functional managers, supervisors and operating employees have
specific goals and responsibilities.
Although the strategy may have been formulated by a select group of top
managers or by team of representatives of several or all levels of the organization,
the task of implementation usually rests on the shoulders of employees.

The Roles of Middle Managers

Middle managers play a particular important role in strategy implementation

for two reasons:
1. They are a key source of information for top managers regarding the internal
and external environments of the organization.
2. They are often most directly responsible for overseeing the implementation
process within their functional areas.

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The four roles played by middle managers in strategic management

are:

1. Synthesizing information role – middle managers assist top

managers in constructing the world around them through data gathering
and labeling the data as either opportunities or threats so that top
managers can analyze the situation in a strategic fashion.
2. Implementing deliberate strategies role – the most traditional role of
middle managers where they take a master strategy created by top
managers and lead the frontline workers to execute the envisioned
strategies.
3. Championing strategic alternatives role – middle managers act more
proactively and help to shape the strategies and direction of the
organization by using upward influence on senior managers. In this role,
middle managers are allowed to experiment with new ideas among
frontline employees.
4. Facilitating adaptability role – middle managers take the strategy from
top managers but become innovative in fostering the implementation.
They encourage broad-based participation by employees and seek
ways to overcome employee resistance to change.

THE STRATEGY IMPLEMENTATION PROCESS

The implementation is a complex and sometimes muddled process. It may

require major changes in the systems, structure, leadership style, employee
behaviors, and resources of the organization, as well as the identification and
creation of new core competencies and organizational culture. These change
efforts may require a considerable length of time. Implementation is commonly
viewed as a mechanical process where action plans are deduced and carried out
by middle managers from a master strategy conceived by top management.
Research suggests that the reality is considerably more complex. Even in fairly
stable situations, priorities must be revised as conditions evolve and new
information unfolds. Implementation, therefore, is best characterized as an
ongoing series of interventions which are only partly anticipated in top
management plans and which adjust strategic directions to suit emergent events.

THE ROLE OF ORGANIZATIONAL CULTURE IN IMPLEMENTATION

A strong organizational culture, where norms, values, and beliefs are clear
and shared widely, may make it easier for firms to get the employee buy-in needed
to implement strategic changes. Employees are often more willing to embrace the
new strategy because a broad consensus within the firm already exists concerning
the direction of the firm. On the other hand, when a strong culture becomes rigid
and inflexible, it is unable to accommodate change and becomes an impediment
to implementation. The implication for managers is that culture is a key

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implementation variable that must be monitored, managed, and aligned with the
strategy to improve its likelihood of success.

WHY DOES IMPLEMENTATION FAIL?

Studies show that some of the most common barriers to implementation are
related to people issues, as follows:

1. Unclear strategy or poor communication of strategy

• Top management believes that one meeting or one announcement of
the new strategy is sufficient
• Top management fails to “walk the talk”

Solutions:
• Strategic managers need to use a variety of communication channels to
promote the change – memos, meetings, public speeches, the company
newsletter, formal and informal interactions, press releases, and e-mail
announcements.
• Managers must lead by example.

2. Top-down or laissez-faire senior management style

• Top-down style imposes strategic change on employees without
adequate attempts to get their buy-in
• Laissez-faire style whereby executives are too isolated and disengaged
from the implementation process.

Solution:
• High-involvement planning also known as direct participation, is an
inclusive approach to the strategic management process. The approach
is achieved by moving away from the top down, control-oriented model
of planning to a process that encourages the participation and ideas of
middle managers and frontline employees such as sales
representatives, engineers, and operating employees. Successful high-
involvement approaches normally have the following characteristics:

a. A compelling need for change within the organization

b. Clearly defined goals, problems, issues, or opportunities to address
c. Involvement of employees from all levels and functions of the
organization
d. Visible commitment and active participation of senior executives
e. Availability of relevant information to make informed analyses
f. Follow-up and accountability for action plans that are generated

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Table 7 – 1 Stages of High-Involvement Planning

STAGE1: STAGE 2: STAGE 3:

PRE-CONFERENCE CONDUCT FOLLOW-UP
PREPARATION CONFERENCE
• Form a steering • Open the • Communicate the
group to design conference by outcomes of the
and lead the framing the issues conference
conference and encouraging
active participation
• Define the purpose • Create a sense of • Define the roles and
of the conference openness, responsibilities for
community, and the changes
trust
• Define the • Use planning • Make resources
boundaries of the techniques available to support
discussion, designed to change efforts
including what is off engage the whole
limits group
• Select, invite, and • Define the changes • Stress
prepare need in the accountability
participants organization
• Arrange for • Monitor change,
logistics of the communicate
conference ongoing process,
and call for more
change

3. Poor coordination across functions, business activities, or national

borders

As companies grow and as the business environment becomes

increasingly global, transactions across national borders are very common.
As this trend continues, the ability to work effectively with people from other
cultures is paramount. This skill depends on the ability to understand and
adapt to differences in national culture, reflected in how people from other
parts of the world think, work, and what they value. Failure to be culturally
competent is a recipe for disastrous strategy implementation.
Geert Hofstede, an authority on the subject, has completed a series
of studies on cultural variables in management and found that cultural
values differ along several key dimensions, including:

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a. Power distance – the degree of inequality between people in a culture

that is considered normal and acceptable. This might be reflected in the
extent to which differences in power and decision-making authority exist
within organizations in a particular culture.
b. Individualism – the degree to which people in a country prefer to act as
individuals rather than as members of a group. Collectivism, the
counterpart of individualism, is evident in cultures that value loyalty to
the group.
c. Competitiveness – the extent to which tough values like
aggressiveness, results, assertiveness, and performance are
emphasized versus more nurturing values like service, care for the
disadvantage, quality of life, and personal relationships. Cultures high in
competitiveness are more task oriented than relationship oriented.
d. Uncertainty avoidance – the degree of discomfort associated with risk-
taking and ambiguity. Culture high in uncertainty avoidance are risk
averse and prefer clear rules and structure. Low uncertainty avoidance
suggests a greater willingness to take a chance, to explore, and to
accept change.

Cultural competence depends on this three-step process:

• Step 1: Awareness of differences in cultural values and norms
• Step 2: Positioning one’s own culture relative to your counterpart
• Step 3: Adapting to the differences to facilitate exchange and
cooperation

4. Employee Resistance to Change or Inadequate Preparation for

Change

Reasons for Resistance:

a. Loss of control
b. Fear of the unknown
c. Lack of confidence to adapt to the new demands of the change
d. An ever-increasing workload
e. Past resentments and distrust toward management

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Table 7 - 2 Four-Phase Reaction to Change

REACTIONS TO CHANGE ACTIONS MANAGERS MAY

TAKE
Phase 1: Avoidance is Communicate openly and often
characterized by withdrawal and by with employees
a feeling of numbness and a sense
of denial; it is a passive form of
opposition.
Phase 2: Resistance – it is a more Give employees some freedom to
active form of opposition; negative express their concerns and fears
emotions run high in the resistance
phase, including anger, frustration,
disgust, anxiety, and in extreme
cases, even hostility.
Phase 3: Exploration – the Work with employees to establish
employee begins to accept that the priorities and short-term goals
future will be different and trying to
cling to the past is a fruitless effort;
confusion and a lack of clear focus
remain but at least an awakening to
a new reality has set in.
Phase 4: Commitment – the focus Recognize and appreciate the
shifts outward to the causes and employees who have made the
effects of change throughout the transition
organization; the employee’s focus
is much clearer and broader; he or
she is now ready to accept the
change, adapt, and move forward.

Principles for Implementing Change

1. Establish a sense of urgency. Analyze and explain the need for

change. If the situation is urgent, let people know. Identify and discuss
crises, potential crises, or major opportunities. If it is not urgent,
however, don’t attempt to create a false sense of urgency.

2. Communicate early, often, and in person. Whenever possible,

communicate openly. Full disclosure may not always be possible but it
is ideal.

3. Involve people in the process. Form a guiding coalition with enough

power to lead the change effort. Encourage the group to work together
as a team, give employees a personal stake in the outcome of the

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change and provide employees with the training they need. Consider
using a high-involvement planning process.

4. Create and communicate a shared vision of the future. Develop a

statement of strategic direction that articulates the links between the
organization’s competitive environment, its new strategies, and the
organizational changes needed to realize the goals of the strategies.
Use every vehicle possible to communicate the new vision and
strategies.

5. Develop an implementation plan. Define roles, responsibilities,

deadlines, and resource requirements for change. Work with employees
to establish the plan and to develop a sense of partnership.

6. Anticipate and remove barriers to change. Encourage new ideas and

behaviors and change systems, policies, and structures that undermine
the new strategies. Hire, promote, and develop employees who can
implement the new strategies.

7. Reinforce and institutionalize new approaches. Articulate the

connection between the new behaviors and corporate success. Plan for
and create short-term wins. Recognize and reward employees involved
in the improvements.

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PART II: ORGANIZATIONAL ISSUES

Figure 7-2 Strategic Management Framework

In this part we emphasize the organizational side of implementation,

emphasizing three factors:

A. Project Management
B. Organizational Alignment
C. Organizational Structure and Design

A. Project Management – successful execution of a project involves project

planning, scheduling, monitoring, and control.

1. Project planning is required to establish a set of directions in sufficient

detail to tell the implementation team exactly what must be done, when
it must be done, and what resources to use for successful
implementation.
• A simple method to assist in planning all this detail in a hierarchical
manner is called an even planning process, which starts with making a
list of major activities, in a general order, to complete a project.
• The end result of this planning process is an action plan that identifies
the set of required activities to meet the project objectives, the person/s
responsible for each activity, the time required to compete each activity,
the predecessor activities, and the resources. Predecessor activities are
tasks that must be finished before a new task can begin.

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2. Project Scheduling involves placing an action plan on a time scale with

relative and specific times for activities.
• Program Evaluation and Review Techniques (PERT) was designed
to handle probabilistic time estimates of activities, and to aid in
determining the probability of completion of a project by a given date.
The probabilistic time estimates are subject to variation.
• Critical Path Method (CPM) uses deterministic time estimates – time
estimates that are fairly certain.

3. Project Monitoring and Control – includes collecting information about

project performance, comparing actual progress to the plan, and taking
action to bridge any difference between the desired plan and the actual
results.
• Gantt Chart is a horizontal bar chart with an embedded time scale that
helps identify the start and completion of activities. It is a useful tool for
indicating the current status of activities compared to the planned
progress for each.
• Network Diagram is composed of a number of arrows and nodes. The
arrows represent the activities and the nodes indicate the start and
completion of an activity. A network diagram better illustrates the
interdependence of activities as compared to Gantt chart.

B. Organizational Alignment is the process of linking and coordinating

discrete activities within the organization.

1. Vertical Alignment refers to the alignment of strategies, objectives,

action plans, and decisions throughout the various levels of the
organization.
• Levels of Strategy – corporate, business, and functional
• Fourth Level – the decision areas within each function
2. Horizontal alignment refers to coordination of efforts across the
organization and is primarily relevant to the lower levels in the strategy
hierarchy.
• Cross-functional integration implies the consistency of decisions
across functions (Level 3) so that activities and decisions across
marketing, operations, HR, and other functions complement one
another.
• Intra-functional integration is achieved through coherence across
decision areas (Level 4) so as to achieve synergy within each function.

C. Organizational Design – the structure and control systems that help a

company achieve its intended strategy.

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• Organizational Structure is a key component of design. The

organization structure specifies the reporting relationships between
different offices and employees, the lines of authority, the channels of
communication, and information flow.

• Elements of Organization Structure

a. Chain of command suggests that an employee should report
directly to one supervisor.
b. Span of control pertains to the number of subordinates directly
reporting to a supervisor.
c. Degree of centralization refers to the distribution of decision making
authority at various levels in the organization.

• Five Components of an Organizational Structure

a. Strategic apex – the top management which is primarily responsible
for creating a vision for the organization.
b. Operating core – the employees that do the frontline work of the
organization.
c. Middle line – the managers who mediate between the top
management and the working core.
d. Technostructure – the staff people responsible for the planning and
control of the organization.
e. Support staff – the staff personnel who provide indirect services to
the entire organization such as secretaries and mail room
employees.

• Types of Organization Structure

a. Simple Structure – in a young and small entrepreneurial firm, the
top manager – often the owner and president/CEO – creates a vision
for the organization and carries it out directly supervising the
operating core with little or no need for any staff or middle line
managers.

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Figure 7 – 3 Simple Structure

b. Functional Structure – as a business grows, so does its range of

activities, which become increasingly difficult to manage through a
simple structure. One way to manage the expanded range of
activities is to group employees based on their specialization or the
task they perform. For example, all information technology
specialists are grouped together, as are all accountants, human
resources specialists, and so on.

Figure 7 – 4 Functional Structure

c. Divisional Structure – another way to solve the coordination

problem associated with the expanded range and scope of tasks
associated with growth and diversification strategies is to use a

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divisional structure. The divisions could be formed on the basis of

products, geography, or customers served. Each division may have
functional subdivisions, but divisional lines separate functional
specialists from one another.

Figure 7 -5 Divisional Structure

d. Matrix Structure – combines the advantages of specialization that
a divisional structure affords. This kind of structure has a dual focus
on functional and product or project considerations. Employees in
this structure have at least two bosses: a product or project manager,
and a functional manager.

Figure 7 – 6 Matrix Structure

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e. Network Structure – results from linking a central group of core staff

with loosely coupled partners, such as subcontractors. The core
group sets a strategic direction of the organization and provides
operational support to sustain the network.

Figure 7 – 7 Network Structure

INTERNATIONAL ASPECTS OF STRATEGY IMPLEMENTATION

In today’s competitive world, companies must search out resources on a

global scale, having products designed from a source that offers the best
competitive advantage, obtaining technology from the best source, and
manufacturing in those countries that offer best access to markets or a favorable
cost structure. The declining transportation and communication costs and
advances in information technology have made it easier for companies to share
resources worldwide. Furthermore, international mergers also afford partners the
economies of scale and international reach they need in order to compete globally.

The different strategies to achieve international expansion are the following:

1. Licensing is a form of strategic alliance where no equity is involved.
2. Joint ventures were identified as another kind of strategic alliance with
equity contributions from partners.
3. Mergers and acquisitions result in one legal entity that emerges when
(a) two organizations merge into one, or (b) one acquires another.
4. Greenfields are created by the parent company through complete
internal development (i.e., without strategic partner). A greenfield
operation is a wholly owned subsidiary of the parent company.

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Implementation Requirements for Different International Strategies

1. Financial factors – include capital requirements, financial risk, and profit
potential to the investor.
2. Technical or Industrial factors – encompass access to customer
feedback, risk of know-how proliferation, and the ability to exploit
economies of scale and other cost advantages.
3. Managerial factors – include the speed of entry and the need for and
level of parent company involvement in management affairs.

Table 7 – 3 Implementation Requirements for Different International

Strategies

INTERNATIONAL STRATEGIES
IMPLEMENTING LICENSING JOINT MERGER GREENFIELD
REQUIREMENTS VENTURE AND
ACQUISITION
Financial
-Need for capital None Medium High Very high
-Profit potential Low Medium High Very high
-Financial risk Low Medium Medium High
Technical or Industry
-Access to Low Medium High Very high
customer
feedback
-Risk of know-how High Medium Low Very low
proliferation
-Ability to exploit Low Medium Medium High
the economies of
scale

Managerial
-Speed of entry High High Medium Low
-Need for and Low Medium High Very High
level of parent
company’s
involvement in
management
affairs

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REFERENCES

PORTH, S., 4th Ed. Strategic Management, Pearson Learning Solutions, 2011

WHEELEN, T and Hunger, D., Strategic Management & Business Policy:

Achieving Sustainability, Pearson Education South Asia Pte Ltd, 2010

https://images.search.yahoo.com

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ACTIVITY 1

Present an illustration (sample) of the following tools and then compare

and contrast each.

A. PROJECT SCHEDULING

TOOLS ILLUSTRATION SIMILARITIES DIFFERENCES

PERT
CPM

B. PROJECT MONITORING AND CONTROL

TOOLS ILLUSTRATION SIMILARITIES DIFFERENCES

GANTT CHART
NETWORK
DIAGRAM

ACTIVITY 2

Research a company that attempted – either successfully or

unsuccessfully – to transform itself by developing and implementing a major
change in strategy. Provide all relevant details. Critique the implementation
efforts and approach used by the company. What does your analysis tell you
about effective strategy implementation?

RUBRICS

Directions: Please refer to the RUBRICS as your guide in answering the

activities.

CRITERIA EXCELLENT GOOD FAIR POOR

Accuracy All of the Most of the Some of the Few to none
answers are answers are answers are of the
correct correct correct answers are
correct
Completion All of the Most of the Some of the Student did
assigned work assigned answers are not
is complete correct accomplish

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work is the assigned

complete work
Timeliness Assignment Assignment Assignment Assignment
was received was received was received was received
on the due one day late two days late 3 days late
date

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