POKHARA UNIVERSITY

1. Chapter-IV
Operationalizing Strategy
1

2. Concept and nature
“Operationalizing strategy refers to the process of
allocating resources to support the chosen strategy”.
This process include the various management
activities that are necessary to put strategy into
motion, institute strategic controls that monitor
progress and ultimately achieve organizational goals
2

3. Strategy Implementation
“Planning their Work” “Working their Plan”
Strategy Formulation Strategy Implementation
3

4. Contd…
The strategy implementation and strategy
formulation processes are closely related.
Implementation consists of the issues involved in
putting the formulated strategy to work. It is
necessary to spell out more precisely how the
strategic choice will come to be. Strategy, no matter
how brilliantly formulated, will not succeed if it
cannot be implemented.
4

5. Implementation is different
Operation driven rather than market driven
Action-oriented, make-things-happen tasks
Strategy formulation requires few; execution requires
everyone
Most know what it is; few know how to get things
done
5

6. Formulation Vs. Implementation
Formulation Implementation
Positions forces before the action Manages forces during the action
Focuses on effectiveness Focuses on efficiency
Intellectual process Operational process
Requires good intuitive and
analytical skills
Requires special motivational and
leadership skills
Requires coordination among few
individuals
Requires coordination among many
individuals
6

7. Problems in strategy implementation
• More time than planned
• Unanticipated problems
• Activities ineffectively coordinated
• Crises deviate attention away
• Employees without capabilities
• Inadequate employee training
• Uncontrollable external factors
• Inadequate leadership
• Poorly defined tasks
• Inadequate Information system
7

8. Strategy Implementation
Identify short-term objectives
Initiate specific
functional tactics
Communicate
policies to
empower
people
Design effective rewards
8

9. What are Short-Term Objectives?
Provide specific guidance for what is to
be done, translating vision into action
9

10. Role of Short-Term Objectives in Implementing Strategy
1. “Operationalize” long-term objectives
2. Raise issues and potential conflicts requiring
coordination to avoid dysfunctional
consequences
3. Identify measurable outcomes of functional
activities to be used to make feedback,
correction, and evaluation more relevant and
acceptable
10

11. Potential Conflicting Objectives and Priorities
Chief Executive Officer
Marketing and Sales Finance and Accounting Manufacturing
•Distribution channels
•Customer service
•Inventory obsolescence
•Communications
and data processing
•Carrying inventory
•Production supply
alternatives
•Warehousing
•Transportation
•More inventory
•Frequent short runs
•Fast order processing
•Fast delivery
•Field warehousing
•Less inventory
•Long production
runs•Cheap order processing
•Lowest cost routing
•Less warehousing •Plant warehousing
ObjectivesResponsibilities
11

12. Relationship of Action Plans to Short-Term Objectives
Specificity – Identify functional activities to be
undertaken to build competitive advantage
Provide a clear time
frame for completion
Identify who is
responsible for each
action in the plan
12

13. Qualities of Effective Short-Term Objectives
Measurable
Priorities
Linked to
long-term
objectives
13

14. Creating Measurable Objectives
Examples of
Deficient Objectives
Examples of Objectives with Measurable
Criteria for Performance
To improve morale in the
division (plant,
department, etc.)
To reduce turnover (absenteeism, number of rejects, etc.)
among sales managers by 10 percent by January 1, 2015
Assumption: Morale is related to measurable outcomes
(i.e., high and low morale are associated with different
results)
To improve support of the
sales effort
To reduce the time lapse between order date and delivery
by 8 percent (2 days) November 1, 2014
To improve the firm’s
image
To conduct a public opinion poll using random samples in
the five largest U.S. metropolitan markets to determine
average scores on 10 dimensions of corporate
responsibility by December 15, 2014. To increase our score
on those dimensions by an average of 7.5 percent by June
1, 2015
14

15. Value-Added Benefits of Short-Term
Objectives
Give operating personnel a
better understanding of
their role in a firm’s mission
Provide basis for
accomplishing conflicting
concerns
Motivation – clarify
personnel and group
roles in a firm’s strategies
Provide basis for strategic
control
15

16. What are Functional Tactics?
Key, routine activities that must be
undertaken in each functional area to
provide the business’s products and
services
Translate grand strategies into action
designed to accomplish specific short-
term objectives
16

17. Functional Tactics at General Cinema Corporation
Corporate Strategy
Achieve 15-20 percent
annual growth through
existing businesses and
carefully selected
diversification into
leisure-oriented,
consumer-oriented
product/service
businesses to absorb
increasing cash flow
from theater and soft
drink bottling
operations
Concentration and
market
development
selective
Maintain and
selectively expand
leading nationwide
position in the movie
exhibition industry to
provide positive cash
flow for corporate
diversification
Functional Tactics – Marketing
Seek only first-run films by outbidding
competition in each local market;
provide primarily family-oriented
movies , and maintain an admission
price only slightly above that of local
competition
Functional Tactics – Finance
Use lease or sale and leaseback
arrangements of each theater to
maximize cash flow for corporate
expansions; seek profitability through
volume, not higher ticket prices
Functional Tactics – Operations
Use multi-screen facilities with
minimal maintenance requirements
and a joint service area to serve
each mini-theater
Soft
drink
bottling
Movie
exhibition
Sunkist products
Corporate Strategy Business Strategies
Functional Tactics
17

18. Business Strategies and Functional Tactics
… are different in three ways
Time horizon
Specificity
Participants
who develop
them
18

19. Functional tactics to operationalize strategy
Time Horizon Specificity Participants
Functional tactics are more
specific than business
strategies. Business
strategies provide general
directions.
•Greater specificity of
functional tactics
contributes to successful
implementation by
Ensuring functional
managers focus on
accomplishments
Clarifying for top managers
how functional managers
intend to accomplish business
strategy
Facilitating coordination
among operating units
Functional tactics identify
activities to be undertaken
“now” or in the immediate
future. Business strategies
focus on the firm’s posture
three to five years out.
•Shorter time horizon of
functional tactics
contributes to successful
implementation by
Focusing attention on what
needs to be done now
Allowing functional
managers to adjust to
changing current conditions
General managers establish long-
term objectives and overall
business strategies. Operating
managers establish short-term
objectives and functional tactics
leading to business level success
•Key operating managers
contribute to business-level
goals by
Establishing short term
objectives and operating
strategies.
19
[How it differs with business strategy]

20. Characteristics of Functional Tactics in
Production/Operations
Viewed as core function of an organization
Involves converting inputs into value enhanced
output
Focuses on decision regarding
-Basic nature of firm’s Production and Operation
Management (POM) system
- Location
- Facilities design
- Process planning on short-term basis
20

21. Key Functional Tactics in Production and
Operation Management (POM)
21
Functional
Tactics
Typical questions to be answered
Facilities and
equipment
How centralized the facilities should be?
To what extent should automation be pursued?
How integrated should the separate processes be?
Sourcing How should the suppliers be selected?
What level of forward buying (hedging) is appropriate?
How many sources should be there?
Operations
planning and
controlling
Should work be scheduled to order or to stock?
What level of inventory is appropriate?
How should inventory be used (FIFO/LIFO), controlled,
replenished?
Maintenance approach- preventive or breakdown?

22. Characteristics of Functional Tactics in Marketing
Lead to strategic success of the firm through the
profitable sale of products/services in target market.
Clearly identify customer needs that products/services
aim to meet
Identify where, when, and by whom products/services
are to be sold
Define how firms will communicate with target
market.
Directly influence supply, demand, profitability,
consumer perception, and regulatory responses
through pricing
22

23. Functional
Tactics
Typical questions the functional tactics should
ask
Product/Service •Which product do we emphasize?
•Which product/service contribute most to
profitability?
•What product/service image do we seek to project?
•What consumer needs does the product/service seek
to meet?
•What changes should be influencing our costumer
orientation?
Price •Are we competing primarily on price?
•Can we offer discounts or other pricing
modifications?
•Are our pricing policies standards nationally, or is
there regional control?
•What price segments are we targeting?
•What is the gross profit margin?
Key Functional Tactics in Marketing
23

24. Functional
Tactics
Typical questions the functional tactics should ask
Place •What level of marketing coverage is necessary?
•Are there priority regarding geographical areas?
•What are the key channels of distribution?
•What are the channel objectives, structure, and
management?
•What sales organization de we want?
Promotion •What are the key promotion priorities and
approaches?
•Which advertising/communication priorities and
approaches are linked to different products, market
and territories?
•Which media would be most consistent with the total
marketing strategy?
Key Functional Tactics in Marketing
24

25. Characteristics of Functional Tactics in
Accounting and Finance
Time frame of finance tactics varies because they direct
the use of financial resources supporting the business
strategy, long term goals, and annual objectives.
Long-term tactics guide decisions in long term capital
investment, debt financing, dividend allocation, and
leveraging
Short-term tactics guide decisions in managing working
capital and short-term assets.
Accounting focused tactics have taken on increased
strategic significance in last decade
25

26. Functional
Tactics
Typical questions the functional tactics should
ask
Capital
Acquisition
•What is the acceptable cost of capital?
•What is the desired proportion of short-and long
term debt? Preferred and common stock?
•What balance is desired between internal and
external funding?
•What risk and ownership restrictions are appropriate?
•What level and forms of leasing should be used?
Capital
allocation
•What are the priorities of capital allocation projects?
•On what basis should the final selection of projects be
made?
•What level of capital allocation can be made by
operating managers without higher approval?
Key Functional Tactics in Accounting/Finance
26

27. Functional
Tactics
Typical questions the functional tactics should ask
Dividend and
working capital
management
•What portion of the earnings should be paid out as
dividend?
•Are things other than cash appropriate as dividends?
•What are the cash flow requirements? Minimum and
maximum
•How liberal or conservative should the credit policy
be?
•What limits, payment terms, and collection procedure
are necessary?
•What payment timing and procedure should be
followed?
Key Functional Tactics in Accounting/Finance…
27

28. Characteristics of Functional
Tactics in R&D
Assumed a key strategic role in many firms due to
increasing rate of technological change
May be more critical instruments of business strategy
in some industries than in others.
28

29. Functional
Tactics
Typical questions the functional tactics should
ask
Basic research
vs. Product and
process
development
•To what extent should innovation and breakthrough
research be emphasized ? In relation to the emphasis
on product development, refinement and
modification?
•What critical operating processes need R&D
attention?
•What new products are necessary to support growth?
Time Horizon •Is the emphasis short term or long term?
•Which orientation best supports the business
strategy? The marketing and the production strategy?
Key Functional Tactics in R&D
29

30. Functional
Tactics
Typical questions the functional tactics should
ask
Organizational
fit
•Should R&D be done at home or contracted outside?
•Should R&D be centralized or decentralized?
•What should be the relationship between the R&D
units and the product managers? Marketing
managers? Product Managers?
Basic R&D
Posture
•Should the firm maintain an offensive posture,
seeking to lead innovation in its industry?
•Should the firm adopt a defensive posture,
responding to the innovations of competitors?
Key Functional Tactics in R&D
30

31. Other Areas of Functional Tactics
Marketing: Product, Price , Place, Promotion,
Packaging
Finance and accounting: Capital acquisition,
Capital allocation, Dividend and working capital
management
R&D: Basic research vs. product and process
development; time horizon; organizational fit; basic
R&D postures
HR: Recruitment and selection, career development
and training, Compensation, Labor Relations
31

32. What Are Policies?
Policies are directives designed to guide the thinking,
decisions, and actions of managers and their subordinates
in implementing a firm’s strategy
32

33. Role of Policies in Implementing Strategy
• Previously referred to as standard operating
procedures, policies increase managerial
effectiveness by
• Standardizing many routine decisions
• Clarifying discretion, managers and employees can
exercise in implementing functional tactics
• Should be derived from functional tactics with key
purpose of aiding strategy execution
33

34. Empowerment and Policies
Training, self-managed work groups, eliminating whole
levels of management in organizations, and aggressive use
of automation are some of the ways of empowering
employees. At the heart of empowerment is the need to
ensure that decision making is consistent with the mission,
strategy, and tactics of the business while at the same time
allowing considerable freedom to operating personnel.
One way operating managers do this is through the use of
policies
34

35. How Policies Empower People?
Establish indirect control over independent action
by clearly stating how things are to be done now
Promote uniform handling of similar activities
Ensure quicker decisions by standardizing answers
to previously answered questions
Institutionalize basic aspects of organizational
behavior
35

36. How Policies Empower People?
(contd…)
Reduce uncertainty in repetitive and day-to-day
decision making
Counter resistance to or rejection of chosen
strategies by organization members
Offer predetermined answers to routine
problems
Afford managers a mechanism for avoiding hasty
and ill-conceived decisions in changing operations
36

37. Advantages of Formal Written Policies
• Require managers to think through policy’s meaning,
content, and intended use
• Reduce misunderstanding
• Make equitable and consistent treatment of problems
• Ensure unalterable transmission of policies
• Communicate authorization or sanction of policies
more clearly
• Supply a convenient and authoritative reference
• Systematically enhance indirect control and
organization-wide coordination of the key purpose of
policies
37

38. Selected Policies that Aid Strategy
Implementation
IBM has a marketing policy of not giving free
personal computers (PCs) to any person or
organization. (Supports IBM’s image strategy)
Maytag Company: Maytag will not approve any cost
reduction proposal if it reduces product quality in any
way. (Supports Maytag’s strategy to compete on
quality rather than on price)
[Maytag Corporation was an American home and commercial appliance
company headquartered in Newton, Iowa. It is now a brand owned by Whirlpool
Corporation.]
38

39. Resource Allocation
Resource allocation is the Central Management
Activity that allows for the execution of strategy.
Four Types of resources
Financial resources
Physical Resources
Human Resources
Technological Resources
39

40. Managing Conflicts
Disagreement between two or more parties on one or
more issue
Conflict not always bad
Conflict may not signal lack of concern
Can energize opposing groups to action
May help managers to identify problems
40

41. Empowering Employees
Training and development
Decentralized decision making
Teams, work groups
Empowering through policies
41

42. Exercising Adequate Control Over
Empowered Employees
Challenge
- How to ensure actions of employees stay within acceptable
bounds?
Managerial control
- Establish boundaries on what not to do, allowing freedom to
act with limits
- Track and review daily operating performance
Peer-based control
- Peer-based organizations will be successful and out compete
traditional rank-based, hierarchic companies because
individuals behave more responsibly, more intelligently,
more strategically, and more cooperatively, than the same
individuals would in traditional rank-based organizations
42

43. Just For Self Study….
Creating a peer-based organization does not mean you do away with
management positions or management structure, work still needs to be
managed. However, the governing, leadership choices in the four key
decision-making areas of strategy, tactics, operations, and functional
departments will be made, not by the self-similar elites, but by councils of
peers drawn from every level and function. Indeed, today a higher
consciousness is emerging in organizational thought that rejects rank as
the chief way of organizing relationships. It is arising on the periphery,
which has been the pattern for all evolutionary progress.
The strategy diamond gives a great way to think about business that
clearly allows to separate organizational structure and work management
from governance and decision making authority. With it, it is possible to
envision peer-based organizations. It also empowers to organize
businesses strategically around customers and company competencies,
not around static functions and hierarchical rank making. Putting it all
together peer-based strategy can be created. On the left side of the
strategy diamond, one can visualize organizational design and the
managing of work through traditional management positions. On the
right side, one can visualize organizational governance through the peer-
based leadership councils. 43

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