Strategic Implementation PDF

CHAPTER 6 STRATEGIC IMPLEMENTATION STRATEGIC MANAGEMENT UAB Index 6.1. Strategy evaluation criteria and selection techniques ▪ Suitability ▪ Feasibility ▪ Acceptability 6.2. Strategy implementation 6.1. Strategy evaluation criteria and selection techniques 6.1. Strategy evaluation criteria an...

CHAPTER 6 STRATEGIC IMPLEMENTATION STRATEGIC MANAGEMENT UAB Index 6.1. Strategy evaluation criteria and selection techniques ▪ Suitability ▪ Feasibility ▪ Acceptability 6.2. Strategy implementation 6.1. Strategy evaluation criteria and selection techniques 6.1. Strategy evaluation criteria and selection techniques In practice, it is difficult to establish a rational process → non-rational elements EVALUATION AND SELECTION PROCESS Firms apply 3 key success criteria that can be used to assess the viability of strategic options Suitability Feasibility Acceptability 6.1. Strategy evaluation criteria and selection techniques RATIONAL APPROACH STRATEGIC OPTIONS No Mission and objectives Internal analysis External analysis IS IT A SUITABLE STRATEGY? Yes Availability of R&C Problems of implementation IS THE STRATEGY FEASIBLE? Yes Performance/Value Risk Stakeholders IS THE STRATEGY ACCEPTABLE? Yes STRATEGY SELECTION No STRATEGY IS REJECTED No No IS IT POSSIBLE TO SOLVE THE PROBLEM? Yes 6.1. Strategy evaluation criteria and selection techniques SUITABILITY: Assess whether an strategic option adapts to the mission, the objectives, and the key strategic issues underlined by the strategic analysis Mission and objectives STRATEGIC OPTION Internal analysis: Strengths and weaknesses External analysis: Threats and opportunities 6.1. Strategy evaluation criteria and selection techniques STRATEGIC MODELS -Theoretical models , logical reasoning HOW TO ASSESS SUITABILITY EMPIRICAL EVIDENCE - Relates strategies and results, trying to find out which strategies work better under different circumstances 6.1. Strategy evaluation criteria and selection techniques FEASIBILITY refers to the real possibility of implementation, which is also related to the concept of organizational fit. RESOURCES AND CAPABILITIES AVAILABLE THAT ARE NECESSARY: HOW TO ASSESS FEASIBILITY -Financial feasibility -Other R&C ORGANIZATIONAL FIT: Consistency strategy - organization 6.1. Strategy evaluation criteria and selection techniques ACCEPTABILITY measures the consequences of adopting a specific strategy; whether or not its expected outcomes are acceptable to the various stakeholders. Does the strategy improve stakeholders’ current situation? Expected returns > costs derived from the implementation of the strategy Usually, from a shareholders’ perspective Economic – rational approach 6.1. Strategy evaluation criteria and selection techniques PERFORMANCE – VALUE CREATION ACCEPTABILITY RISK (financial, political) STAKEHOLDERS (identification, analysis, negotiation) 6.1. Strategy evaluation criteria and selection techniques External Analysis Strategy selection Mission Objectives Deliberate strategy Strategy implemented Internal Analysis Emergent strategies Both deliberate and emergent strategies take place within firms Evaluating entry strategies in external markets (Navas & Guerras, 2013) Strategic alternatives: Exports, joing venture, own subsidiary… •SUITABILITY. E.g. High country risk would make exports suitable, but not so the creation of a subsidary •FEASIBILITY. Eg. Whereas exports require little investment, the incorporation of a subsidiary requires tying up a large volume of resources. The non-availability of these resources may imply the second option becomes hardly feasible. •ACCEPTABILITY. Eg. Assess expected return on the investment, risk incurred, reation of local authorities, cultural shock with local employees… 6.2. Strategy implementation Design of organizational structure, management and leadership style, and organizational culture STRATEGY IMPLEMENTATION Strategic planning Strategic control 6.2. Strategy implementation STRATEGIC PLANNING Strategic planning is a decision-making process that is useful to determine how the strategy will be pursued in the future: the nature of the tasks to be performed, when they will be undertaken and by whom, the activities to be allocated to each program, etc. (Navas & Guerras, 2013). Formats vary, but a typical strategic plan may have elements such as: ▪Mission, goals and objectives statement ▪Environmental analysis ▪Organizational analysis ▪Proposed strategy ▪Resources (Johnson et al., 2008) 6.2. Strategy implementation STRATEGIC PLANNING ADVANTAGES ADVANTAGES - Formal and systematic process - Provides a reference framework that allows optimum allocation of resources - Long-term focus - Defines the implications for managers - Forces to think about the main issues affecting strategic formulation and implementation DISADVANTAGES - Excessive bureaucracy - Difficulty in making predictions - Distance between those designing the strategic plan and those implementing the strategy - Possibility of designing incremental plans arising from possible changes - Costly Formal strategic planning → When is it more suitable? INCONVENIENTES 6.2. Strategy implementation STRATEGIC CONTROL Strategic control is a special kind of organizational control that monitors and evaluates the strategic management process, in order to check it is functioning properly. It provides the necessary feedback for verifying that all the steps in the strategic management process are appropriately undertaken 6.2. Strategy implementation STRATEGIC CONTROL Certo & Peter (1993: 163); Navas & Guerras (2018) 6.2. Strategy implementation STRATEGIC CONTROL Control of outcomes – “after the event” Certo & Peter (1993: 163); Navas & Guerras (2018) Two additional types of control: - Control “before the event” - Present control 6.2. Strategy implementation STRATEGIC CONTROL  Requirement: measuring the outcomes.  A strategic audit evaluates the areas affected by the strategic management process within an organization (Certo & Peter, 1993). Qualitative measurements METHODS FOR MEASURING THE OUTCOMES Assessments based on subjective data (e.g. answering questions regarding the most important aspect of the firm’s key areas) Quantitative measurements Based on the identification of indicators that may be scored statistically or mathematically (numbers, ratios..) 6.2. Strategy implementation STRATEGIC CONTROL The Balanced Scorecard Kaplan & Norton (1996: 54); Navas & Guerras (2018) 6.2. Strategy implementation The Balanced Scorecard To illustrate… PERSPECTIVE OBJECTIVE MEASURES TARGETS INITIATIVES Financial - Profitability - Returns on assets - Improve ROA: 5% in 2 years - Plan of productivity Customer - Value perceived by customers -Customer satisfaction - Rated #1 by 75% of customers - Customer loyalty program Internal -Operations - Quality indicators - Reduce defect rate to 3% -R&D plan Learning & Growth -Employees abilities - Employees performance - Increase employees motivation - Employees training plan REFERENCES • GRANT, R. (2016). Contemporary Strategy Analysis, Text and Cases. 9th edition, Wiley: London. • NAVAS, J.E.; GUERRAS, L.A. (2018). Fundamentals of Strategic Management. 2nd edition, Thomson ReutersCivitas: Madrid.