Nueva Ecija University of Science and Technology

College of Management and Business Technology

Strategic
Management
UNIT 6: STRATEGY IMPLEMENTATION:
OPERATIONALIZING THE STRATEGY
UNIT 6. STRATEGY IMPLEMENTATION: OPERATIONALIZING THE STRATEGY
Overview
This unit is about strategy Implementation. Implementation involves several tasks - doing what must
be done to make the strategy successful. The main concern in the implementation of a grand strategy
is to operationalize that strategy throughout the organization. There are some important tools to
accomplish this: annual objectives, resource allocation, policies, and action plans. Annual
objectives are specific, measurable statements of what a business is expected to achieve within
an annual period. Resource allocation allows for strategy execution. Policies are instrument for
strategy implementation. Action plans must be established to make a strategy work. Also, developing
functional strategies are considered to support the company's overall business strategy.
Learning Objectives
At the end of this unit, I am able to:

1. Understand the nature of operationalizing the strategies;

2. Describe annual objectives, their qualities, linkages, coordination and integration,
consistency, and benefits;
3. Discuss the importance of resource allocation, policies, and action plans; and
4. Recognize the value of functional strategies in different business areas.

Setting Up

Name: __________________________________________ Date : _____________________

Section: _____________________

Directions: Read the statement below. Explain your ideas base on your understanding of the
message of this thought.
“It is challenging to make sure
that our daily operations
aligned with your overall
strategies.”

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Lesson Proper
Operationalizing the Strategy
The implementation of an organization strategy involves the application of the management
process to obtain the desired results. Particularly, strategy implementation includes designing the
organization's structure, allocating resources, developing information and decision processes, and
managing human resources, including such areas as the reward system, approaches to leadership,
and staffing.
After objectives are established, corporate-level and business unit strategies are selected,
several activities must take place to ensure that the strategy is successful. The first concern in the
implementation of a strategy is to operationalize that strategy throughout the organization. The
strategist has a number of tools to accomplish this: annual objectives, functional strategies, policies,
resource allocation, and action plans. The development of functional strategies in each area of the
organization may support the achievement of desired results and execution of the plans.
Annual Objectives
Management issues central to strategy implementation include establishing annual objectives
that relate logically to the strategy's long-term objectives. Annual objectives are essential for strategy
implementation because they:
a. represent the basis for allocating resources,
b. are a primary mechanism for evaluating managers,
c. are the major instrument for monitoring progress towards achieving long-term objectives,
and
d. establish organizational, divisional, and departmental priorities.

1. Qualities of Effective Annual Objectives

Annual objectives are specific and measurable statements of what an organization subunit is
expected to achieve in contributing to the accomplishment of the business's grand strategy.
2. Linkages of Annual Objectives and Long-Term Objectives
Four basic dimensions distinguish annual and long-term objectives:
a. Time Frame. Annual objectives are more immediate, usually involving one year. Long-term
objectives are focused usually five years or more in the future.
b. Focus. Annual objectives tend to have a narrower focus and shorter-term deliverables.
Long-term objectives focus on the future position of the firm in its competitive environment.
c. Specificity. Annual objectives are very specific and directly linked to the company, a
functional area, or other subunit. Long-term objectives are broadly stated.
d. Measurement. Annual objectives are stated in absolute terms, such as a 5 percent increase
in sales in the next year. Long-term objectives are measured in broad, relative terms, for
example, 20 percent market share.
3. Integrated and Coordinated Objectives
Implementation of grand strategies requires objectives that are integrated and coordinated.
However, subunit managers (e.g, vice president of finance, vice president of marketing. vice president
of production) may not consider such as “superordinate” purpose in setting annual objectives.
Successful implemenation of strategy depends on coordination and integration of operating
units. This is encouraged through the development of annual objectives.
Managers should be involved at key points in the planning process so annual objectives are
integrated and coordinated.
4. Consistency of Annual Objectives
Annual objectives are more consistent when each objective clearly states what is to be
accomplished, when it will be done and how the accomplishment will be measured. Objectives can
then be used to monitor the effectiveness of an operating unit and progress toward the business’s
long-term objectives. Annual objectives must be measurable and prioritized in terms of time and
impact on the success of the strategy.
a. Measurable. Annual objectives may easily assess by clear and quantifiable measures.
However, there are key results that easier and more difficult to measure than others.
b. Priorities. Annual objectives prioritize short-term objectives.
5. Benefits of Annual Objectives
It provides a tangible, meaningful focus through which managers can translate long-term
objectives and grand strategies into specific action. If developed through the participation of
managers responsible for their implementation, they provide an “objective” basis for addressing and
accommodating conflicting concerns. They provide a basis for strategic control e.g. budgeting and
scheduling. They provide motivational forces in strategy implementation.
Policies
The term policy has various definitions in management literature. Some authors equate policy
with strategy. Others do this inadvertently by using "policy" as a synonym for company mission,
purpose or culture.
Policies are designed to guide the behavior of managers about the pursuit and achievement of
strategies and objectives. Policies are the instrument for strategy implementation. It refers "to
specific guidelines, methods, procedures, rules, forms, and administrative practices established to
support and encourage work towards stated goals."
Most authors consider procedures and rules to be policies. Procedures can be defined as
chronological steps that must be followed to complete a particular action; rules can be defined as
actions that can or cannot be taken. Neither a procedure nor a rule provides much latitude in decision
making, so some writers do not consider either to be a policy.

Policies and procedures help enforce strategy implementation in several ways:

a. Policy institutionalizes strategy-supportive practices and operating procedures throughout
the organization.
b. Policy reduces uncertainty in repetitive and day-to-day activities in the direction of efficient
strategy execution.
c. Policy limits independent action and discretionary decision and behavior. Procedures
establish steps on how things are to be handled.
d. Policy helps align actions and behaviors with strategy. This minimizes zigzag decisions and
conflicting practices and establishes consistent patterns of action in terms of how the
organization is attempting to make the strategy work.
e. Policy helps to shape the character of the working environment and to translate the
corporate philosophy into how things are done, how people are treated, and what corporate
beliefs and attitudes mean in terms of everyday activities.
f. Policy helps establish a fit between corporate culture and strategy.
Koontz and O'Donnell suggest that the following principles determine the potential
effectiveness of policies concerning strategy implementation:
 a. Policies should reflect objectives. The existence of a policy can only be justified if it leads to
the achievement of the organization's objectives.
b. Policies should be consistent. Policies which conflict with each other should be avoided.
c. Policies should be flexible. In general policies should neither be ignored nor departed from
indiscriminately.
d. The extent to which a policy is mandatory, as opposed to advisory, should be clear.
e. Policies should be communicated, taught and understood. It is important to ensure that
employees understand the existence and meaning of policies, and appreciate why they exist.
f. Policies should be controlled. Stated policies can be assessed and controlled as part of any
formal planning system and strategic review.
Policies may be written and formal or unwritten and informal. There are at least seven
advantages to formal written policies:
a. Managers are required to think through the policy's meaning, content, and intended use.
b. The policy is explicit so misunderstandings are reduced.
c. Equitable and consistent treatment of problems is more likely.
d. Unalterable transmission of policies is ensured.
e. Authorization or sanction of the policy is more clearly communicated, which can be helpful
in many cases.
f. A convenient and authoritative reference can be supplied to all concerned with the policy.
g. Indirect control and organizational coordination, key purposes of policies, are
systematically enhanced.
Policies can exist for any functional tasks undertaken by the organization. The effective decisions
cannot be made without regard to their impact on other areas of the business. For example, policy of
minimizing the inventory may come at the expense of satisfying customers. Trade-offs are generally
required in this process.
Resource Allocation
Resource allocation is a central management activity that allows for strategy execution. The real
value of any resource allocation-program lies in the resulting accomplishment of an organization's
objectives.
A number of factors prohibit effective resource allocation, including an over-protection 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.
Yavitz and Newman explain why below the corporate level, there often exists an absence
of systematic thinking about resources allocated and strategies of the firm:
a. Managers normally have many more tasks than they can do. Managers must allocate time
and resources among these tasks. Pressure builds up. Expenses at too high. The CEO wants
a good financial report for the third quarter.
b. Strategy formulation and implementation activities often get deferred. Today's problems
will soak up available energies and resources. Scrambled accounts and budgets fail to reveal
the shift in an allocation way from strategic needs to currently squeaking wheels.
The relationship between resources and strategy is two-way. Strategy affects resources and
resources affect strategy.
 Resources can be evaluated from several different perspectives:
a. The most prevalent way of evaluating them is by functional areas: finance, research and
development, human resources, operations, marketing.
b. A second way of evaluating resources is by type: financial, physical, human, and
organizational.
c. A third way of evaluating resources is in terms of their tangibility. Tangible resources
(e.g., a plant or the number of employees) can be observed and measured. Less tangible
resources (e.g., corporate name) are also important though their characteristics and
importance are harder to evaluate.

Action Plans
Changes in strategic direction do not occur automatically. Operational plans must be established
to make a strategy work. Moreover, there must be close interaction between the strategic and
operational planning systems.

1. Three types of plans

These types of plans are generated during the implementation phase:
a. The plan of action. This involves the definition of objectives in quantitative and actional
terms, the timing of strategy, the formation of sub-strategies relating to markets,
production, finance, distribution, pricing, research and development, investment, and
personnel placement.
b. Plan of implementation. This deals with organizational design changes and structural
modification, motivational plans, reward and punishment systems, leadership style, and
control and information systems.
c. Plan of policy. This covers changes in values, rules, policies, and procedures.
2. Characteristics of Implementable Strategic Plans
Dennis Hykes (1984 ) suggests that implementable strategic plans have, as a minimum, three
characteristics:
a. They are linked to the appropriate control systems within the organization. Plans must be
tied to the budgeting, operational planning, and incentive compensation systems.
b. There must be a smooth transition from the planning cycle to budget cycle. This link is
accomplished through strategic programs that connected with a responsible member of
operating management, and are an integral part of an operational plan.
c. They are "owned" by operating management. Plans are likely to be "owned" by operating
management when the following occurs:
i. Strategic plans must be in the management mainstream, that is, they should be a
regular, continuous process, as other management processes tend to be.
ii. Plans, and the process, must be easily digestible, that is, relatively uncomplicated
systems, techniques, and forms should be used to produce relatively brief (20-to 30-
pages) plans.
iii. The line managers are the planners, with the planning staff concentrating on process
design, facilitation, troubleshooting, and review and analysis.
 They are perceived as being achievable by those responsible for implementation. The plan must
be achievable-neither too difficult nor too easy. Finding the optimal level of difficulty can be aided by
using an interactive, participative team approach in their development, coupled with a soundly
constructed review program for the plan.

Functional Strategies
Functional strategy translates the grand strategy at the business level into action plans for
subunits of the company. It refers to the set of strategic initiatives taken in one part of a business.
Some authors refer to these as functional "strategies": "A functional strategy is the short-term game
plan for a key functional area within a company" , some others prefer to regard them "as plans, or
tactics, for carrying out the business strategy". A company needs a functional strategy for every major
functional activity.
Functional strategies must be developed in the following areas: finance, marketing,
production/operations, research and development and personnel. The primary role of a functional
strategy is to support the company's overall business strategy. Functional strategies help in
implementation of a grand strategy by organizing and activating specific subunits of the company to
pursue the business strategy in daily activities.
1. Finance
Financial management is primarily concerned with two functions. The first function, acquiring
funds to meet the organization's current and future needs. The second function is recording,
monitoring, and controlling the financial results of an organization's operations.
Financial strategies concern objectives, profitability, liquidity and cash management, leverage
and capital management, asset management, investment ratios, and financial planning and control.
2. Marketing
Marketing consists of four strategic considerations: products/services, pricing, channels of
distribution/location of outlets, and promotion. In general, the mix of these elements should be
appropriate, and the plans for each of the elements must also be appropriate.
Marketing strategy is concerned with matching existing or potential products or services with
the needs of customers. The particular generic strategy adopted by a business unit influences the
types of products or services the business offers, its prices for those products or services, the
channels of distribution it uses, the location of its outlets, and its advertising and promotional
policies. Products or services are characterized by number, diversity, and the rate of change.
The marketing strategy selected by an organization is dependent on whether the organization is
attempting to reach new or existing customers and whether its products or services are new or
already exist.
Here are some of the firm’s marketing strategies to be used with respect to the four
strategic considerations mentioned above:
a. A marketing penetration strategy attempts to gain greater control in a market in which it
already has a product or services.
b. A market development strategy consists of introducing the firm's existing products or
services to customers other that the ones it currently serves.
c. A firm using a product development strategy creates a new product or service for existing
customers.
d. With a diversification marketing strategy, an organization offers a new product or service
to new customers.
 e. A number of pricing options are available. A lower price will be desirable to increase volume.
However, pricing is a complex issue because it is related to cost-volume-profit trade-offs
and because it is frequently used as a competitive weapon.
f. The functional strategy for the place component identifies where, when, and by whom the
product/services are to be offered for sale. This component of marketing strategy guides
decisions regrading channels to ensure consistency with the total marketing effort.
g. Promotion refers to the methods which are used to put products and services in the public
eye. Functional strategy for the promotion component should provide marketing managers
with basic guides for the use and mix of advertising, personal selling, sales promotion, and
media selection.
3. Production/Operations
Production/Operations Management (POM) is the core function in the business firm. Somehow,
someplace, the goods and services that a company sells must be obtained. Basically, this involves a
process of converting labor, materials, etc., into the particular combination of qualities that a selected
group of customers wants.
The major decisions in the production/operations strategy are concerned with the technical
core, quality, facilities, technology, and production planning and control. POM operating strategies
must be coordinated with marketing strategy if the firm is to succeed. Careful integration with
financial strategy components and the personnel function are also necessary.
4. Research and Development
The need to develop or improve products and production processes is met by the research and
development (R&D) function. The most important research and development strategy issue concerns
the relationship of R&D to corporate strategy. The most important innovation is in the strategy of the
organization, the more implementation will require consideration of strategic issue in R&D.
Moreover, if R&D is part of an aggressive new product development strategy, a series of
decisions logically follow from such a link, including funding levels, project selection decisions, and
the structure for R&D. If R&D is used primarily for process improvement, the decisions are more
conservative.
5. Personnel
Every activity a company undertakes requires human resources - people who are qualified and
motivated to perform specific tasks. Human resource strategies concern human resource planning,
recruitment and selection, training and development, compensation and rewards, employment
security, and labor relations.
The type of human resource activities that are undertaken in any organization are influenced by
the environments, strategy, and organizational design.
Arranging the supply of human resources is a never-ending and sensitive task for several
reasons:
a. Company is needed for human resources change.
b. The supply of human resource changes.
c. In spite of these demand and supply changes, people seek stability and dependability in
their jobs.
d. Expectations overlap. The way an employee is treated create hopes or fears in many other
people.

References:
⚫ Barnat, Ryszard, LLM, DBA, PHD, (2018), Strategic Management: Formulation and
Implementation, https://www.strategy-implementation.24xls.com/en201
⚫ David, Fred R., (2011), Strategic Management: Concepts and Cases -13th Edition, Pearson
Education, Inc., Prentice Hall
⚫ David, Fred R. (2001), Strategic Management (Concept and Cases) 8th Edition, Pearson
Education, Inc.
⚫ https://www.smartsheet.com/strategic-implementation
⚫ https://www.businessmanagementideas.com/strategic-management/functional-
strategy/21042
Assessing Learning

Name: _________________________________________ Date: __________________________

Course/Year/Section: _________________________ Score: _________________________

Exercise 6-1

Directions: Write letter True if the statement is correct and False if the statement is incorrect.

______________1. One of the essential qualities of annual objectives involves the need to prioritize
long-term objectives.

______________2. A more consistent annual objective answers the concerns about what to achieve,
when to do, and how to accomplish.

______________3. Annual objectives provide motivational forces in strategy implementation.

______________4. Every organization’s key results can be assessed easily, clearly and in
quantifiable measures.

______________5. Annual objectives translate long-range aspirations into a year’s budget.

______________6. Implementation of grand strategies requires objectives that are integrated and
coordinated.
______________7. Policies need to be communicated concisely to guide company decisions.
______________8. Action plans communicate specific guides to decision making.
______________9. Managers must allocate time and resources in evaluating the functional areas:
finance, research and development, human resources, operations, marketing.

______________10. Plans must be tied to the budgeting, operational planning, and incentive
compensation systems.
Name: _________________________________________ Date: __________________________
Course/Year/Section: _________________________ Score: _________________________

Exercise 6-2

Directions: Identify the following statements by writing the answers on the space provided.
______________1. It refers to specific guidelines, methods, procedures, rules, forms, and
administrative practices established to support and encourage work towards stated goals .

______________2. A strategy that consists of introducing the firm's existing products or services to
customers other that the ones it currently serves.

______________3. This objective is more immediate, usually involving one year.

______________4. It consists of four strategic considerations: products/services, pricing, channels
of distribution/location of outlets, and promotion.

______________5. A central management activity involving tangible and intangible resources that
allow for strategy execution.

______________6. Set of strategic initiatives taken in one part of a business.

______________7. This covers changes in values, rules, policies, and procedures.
______________8. It focuses on the future position of the firm in its competitive environment .
______________9. It helps align actions and behaviors with strategy.
______________10. It must be measurable and prioritized in terms of time and impact on the
success of the strategy.
Name: _________________________________________ Date: __________________________
Course/Year/Section: _________________________ Score: _________________________

Exercise 6-3

Directions: On the space provided, answer the following questions below.

Rubrics for Essay:

Criteria Points
A. Content (Answers are comprehensive, accurate and complete) 5
B. Organization (Well organized, coherently developed and easy to follow) 5
C. Written Structure (Displays no errors in sentence structure) 5
TOTAL 15

1. Why do annual objectives are essential for strategy implementation?

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2. How make the resource allocation, policies, and action plans become important in managing
organizational strategies?
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3. How does an organization select its long-term objectives and grand strategy sets? Explain its
sequential selection.
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