Navigating Strategic Excellence: Strategic Management Decisions and Successful Execution of Strategic Plans
Strategic management is an aspect of an organization's management function. It is a philosophical (prescriptive or descriptive) approach to managing strategy in organizations. The prescriptive approach focuses on how strategies should be developed. It is more top-down and often based on SWOT analysis. The descriptive approach in contrast, the descriptive approach emphasizes how strategies should be put into practice. It involves experimenting with different methods, learning from experience, and applying an Agile methodology to strategic management.
Strategic management is a broad discipline; its scope spans the entire strategic decision-making structure of an organization. Strategic management encompasses a series of interconnected activities and decisions that guide the organization toward its desired future state. It involves a continuous cycle of planning, organizing, leading, and controlling to achieve organizational success. The key aspects of strategic management in relation to the management functions (planning, organizing, leading and controlling) include.
Strategic management is the continuous cycle of planning, organizing, leading, and controlling to achieve long-term success. Strategic management integrates all these functions. It ensures that the organization’s internal capabilities (resources, skills, culture) align with external opportunities (market trends, customer needs). It also allows for adaptation when circumstances change.
Decision-Making Processes
Strategic management is a broad discipline; its scope spans the entire strategic decision-making structure of an organization. It encompasses a series of interconnected activities that guide the organization toward its desired future state. The key decision-making processes can be described in relation to the management functions (planning, organizing, leading, and controlling) as follows:
Strategic management is a broad discipline; its scope spans the entire strategic decision-making structure of an organization.
Strategic management involves strategic decision-making - a process by which management's intentions and ideas are put into action. Strategic management encompasses a series of interconnected activities that guide the organization toward its desired future state. Effective decision-making in one function impacts the others. It involves a continuous cycle of planning, organizing, leading, and controlling to achieve organizational success. Strategic management decisions steer the organization through its business environment, navigating challenges and seizing opportunities toward a successful future.
Strategic Planning
Strategic planning is a specific aspect of strategic management that deals with developing a long-term plan for an organization. It is an organizational process of defining its direction and long-term goals, creating specific plans to achieve them, implementing those plans, and evaluating the results. Strategic planning establishes the long-term goals and strategies, while strategic management involves the implementation, monitoring, and adjustment of these strategies. Strategic planning involves looking forward, beyond the immediate future, to reach a particular set of goals. The strategic planning process includes three critical phases:
Strategic planning can be viewed as a dynamic system of interconnected decisions that shape an organization’s future. It involves crafting a compelling vision, defining a clear mission, setting measurable goals, assessing internal and external factors through SWOT analysis, allocating resources effectively, and tracking progress using relevant KPIs. These decisions collectively guide the organization toward its desired destination, ensuring adaptability and alignment with long-term objectives. Strategic planning isn’t just about setting goals; it’s about laying out the step-by-step path to achieve them. Without a solid strategic plan, organizations risk drifting aimlessly or getting caught up in urgent activities that don’t contribute to long-term success.
Strategy
In the context of business, a strategy - Business strategy - is the overarching blueprint that outlines an organization’s long-term goals and the broad approaches to achieving them. It serves as the high-level plan conceived by top leadership to provide direction and set the trajectory for success. In the business context, strategy is akin to a multilayered web of interconnected strategic options. These layers collectively address the core issues and challenges faced by an organization. The concept of layers emphasizes that strategy is not monolithic; it operates at different levels within the organization, including: corporate, business unit level, operations and functional areas.
Strategic decision-Making and Decisions
Strategic decision-making refers to the process of making choices related to an organization’s overall, long-term direction. It is a deliberate approach to decision-making that considers the big picture, the organization’s strengths and weaknesses, and the impact the decision will have on its future success. This includes deciding on objectives, resources, and capabilities to be developed and the key actions needed to achieve these objectives in the context of all the relevant internal and external circumstances.
Strategic decision-making involves selecting courses of action that shape an organization’s long-term direction, competitive advantage, and resource allocation. It is not a single isolated choice, but a system of interconnected decisions across a number of dimensions, such as: Direction and Vision, Resource Allocation, Risk Management, Innovation and Adaptation, Organizational Stricture and Culture. Strategic decisions shape the organization’s direction, resource allocation, and competitive advantage.
The dimensions of strategic decision-making include:
Strategic decision-making is the process of developing and putting into action choices that will influence the long-term welfare of the organization. It involves considering multiple options and weighing the potential outcomes before choosing the most appropriate solution. This requires careful consideration, planning, collaboration, and input from multiple stakeholders within the organization. The ultimate goal of strategic decision-making is to make decisions that support the long-term success and competitiveness of the organization. Top level executives usually make these choices (strategic decisions) and involve a substantial commitment of organizational resources, and might have long-term impacts. A strategic decision refers to the identification, evaluation, and selection of the best strategy that increases the likelihood of achieving organizational goals. These decisions have the characteristics of being directive, rare, and consequential.
Strategic management is a broad discipline; its scope spans the entire strategic decision-making structure of an organization. Strategic management encompasses a series of interconnected activities and decisions that guide the organization toward its desired future state. It involves a continuous cycle of planning, organizing, leading, and controlling to achieve organizational success. The key aspects of strategic management in relation to the management functions (planning, organizing, leading and controlling) include.
- Planning: Strategic management involves formulating a clear vision, mission, and goals for the organization. This planning process includes analyzing internal and external factors, identifying opportunities and threats, and choosing the best strategies to achieve objectives. It sets the direction for the organization.
- Organizing: Once the strategy is in place, strategic management focuses on organizing resources effectively. This includes allocating budgets, defining roles and responsibilities, and creating an organizational structure that supports the strategy. Efficient resource allocation ensures alignment with the strategic goals.
- Leading: Effective leadership is crucial for strategic management. Leaders communicate the strategy, inspire employees, and drive change. They create a shared vision, motivate teams, and guide the organization toward successful implementation. Leadership ensures that everyone is working toward the same strategic objectives.
- Controlling: Strategic management involves continuous monitoring and evaluation. Leaders track progress, measure performance against goals, and make necessary adjustments. Controlling ensures that the strategy remains relevant and effective. Regular assessments help identify deviations and allow for corrective actions.
Strategic management is the continuous cycle of planning, organizing, leading, and controlling to achieve long-term success. Strategic management integrates all these functions. It ensures that the organization’s internal capabilities (resources, skills, culture) align with external opportunities (market trends, customer needs). It also allows for adaptation when circumstances change.
Decision-Making Processes
Strategic management is a broad discipline; its scope spans the entire strategic decision-making structure of an organization. It encompasses a series of interconnected activities that guide the organization toward its desired future state. The key decision-making processes can be described in relation to the management functions (planning, organizing, leading, and controlling) as follows:
- Planning: Planning is deciding in advance what to do, how to do it, when to do it, and who is to do it.
- Decision-Making Process: In planning, decisions involve setting organizational goals, analyzing the environment, and formulating strategies. Leaders decide on the best course of action based on available information.
- Relation to Other Functions:
- Planning informs organizing by determining resource needs (e.g., budget, personnel) to achieve goals.
- It guides leading by defining the vision and objectives that leaders communicate to motivate teams.
- Controlling relies on the plans set during this process to measure performance against targets.
- Organizing: Organizing structures the organization and its capabilities to execute the strategy.
- Decision-Making Process: Organizing decisions involve structuring the organization, allocating resources, and defining roles. Leaders decide how to arrange people, tasks, and processes.
- Relation to Other Functions:
- Organizing supports planning by implementing the resource allocation strategies.
- It directly impacts leading by shaping reporting relationships and team dynamics.
- Controlling relies on the established organizational structure to monitor performance.
- Leading: Leaders motivate and guide teams toward common goals.
- Decision-Making Process: Leading decisions focus on motivating, guiding, and influencing people. Leaders decide how to communicate, inspire, and address challenges.
- Relation to Other Functions:
- Leading aligns with planning by ensuring that employees understand and embrace the strategic vision.
- It affects organizing by influencing team dynamics and collaboration.
- Controlling relies on leadership to address deviations and maintain alignment.
- Controlling: Controlling ensures that the strategy remains on track.
- Decision-Making Process: Controlling decisions involve monitoring performance, comparing it to standards, and taking corrective actions. Leaders decide when and how to adjust course.
- Relation to Other Functions:
- Controlling validates planning by assessing whether goals are being met.
- It informs organizing by identifying areas where adjustments are needed.
- Leading adapts based on feedback from the controlling process.
Strategic management is a broad discipline; its scope spans the entire strategic decision-making structure of an organization.
Strategic management involves strategic decision-making - a process by which management's intentions and ideas are put into action. Strategic management encompasses a series of interconnected activities that guide the organization toward its desired future state. Effective decision-making in one function impacts the others. It involves a continuous cycle of planning, organizing, leading, and controlling to achieve organizational success. Strategic management decisions steer the organization through its business environment, navigating challenges and seizing opportunities toward a successful future.
Strategic Planning
Strategic planning is a specific aspect of strategic management that deals with developing a long-term plan for an organization. It is an organizational process of defining its direction and long-term goals, creating specific plans to achieve them, implementing those plans, and evaluating the results. Strategic planning establishes the long-term goals and strategies, while strategic management involves the implementation, monitoring, and adjustment of these strategies. Strategic planning involves looking forward, beyond the immediate future, to reach a particular set of goals. The strategic planning process includes three critical phases:
- Preparing for Strategic Planning: During this phase, organizations assess their current situation, analyze internal and external factors, and identify opportunities and challenges. It’s about understanding where the organization stands and what it aims to achieve.
- Creating Your Strategic Plan: In this phase, organizations develop a detailed strategic plan. This includes defining the mission, vision, and specific objectives. Leaders make decisions on resource allocation, competitive positioning, and growth strategies. The plan outlines how the organization will achieve its goals.
- Putting Your Strategic Plan into Practice: Execution is key. Organizations take action based on the strategic plan. This involves projects, work plans, budgeting, and ongoing management. Regular monitoring and adjustments ensure alignment with the strategy.
Strategic planning can be viewed as a dynamic system of interconnected decisions that shape an organization’s future. It involves crafting a compelling vision, defining a clear mission, setting measurable goals, assessing internal and external factors through SWOT analysis, allocating resources effectively, and tracking progress using relevant KPIs. These decisions collectively guide the organization toward its desired destination, ensuring adaptability and alignment with long-term objectives. Strategic planning isn’t just about setting goals; it’s about laying out the step-by-step path to achieve them. Without a solid strategic plan, organizations risk drifting aimlessly or getting caught up in urgent activities that don’t contribute to long-term success.
Strategy
In the context of business, a strategy - Business strategy - is the overarching blueprint that outlines an organization’s long-term goals and the broad approaches to achieving them. It serves as the high-level plan conceived by top leadership to provide direction and set the trajectory for success. In the business context, strategy is akin to a multilayered web of interconnected strategic options. These layers collectively address the core issues and challenges faced by an organization. The concept of layers emphasizes that strategy is not monolithic; it operates at different levels within the organization, including: corporate, business unit level, operations and functional areas.
Strategic decision-Making and Decisions
Strategic decision-making refers to the process of making choices related to an organization’s overall, long-term direction. It is a deliberate approach to decision-making that considers the big picture, the organization’s strengths and weaknesses, and the impact the decision will have on its future success. This includes deciding on objectives, resources, and capabilities to be developed and the key actions needed to achieve these objectives in the context of all the relevant internal and external circumstances.
Strategic decision-making involves selecting courses of action that shape an organization’s long-term direction, competitive advantage, and resource allocation. It is not a single isolated choice, but a system of interconnected decisions across a number of dimensions, such as: Direction and Vision, Resource Allocation, Risk Management, Innovation and Adaptation, Organizational Stricture and Culture. Strategic decisions shape the organization’s direction, resource allocation, and competitive advantage.
The dimensions of strategic decision-making include:
- Direction and Vision: Strategic decisions involve defining the organization’s purpose, vision, and mission. These guide the overall direction and provide a compass for decision-making.
- Purpose: Defining the organization’s purpose, mission, and vision.
- Decisions: What markets to enter, what products/services to offer, and how to position the brand.
- Resource Allocation: Strategic choices determine where investments are made and which projects receive priority.
- Purpose: Efficiently allocating resources (financial, human, technological) to achieve strategic goals.
- Decisions: Budget allocation, investment priorities, and capacity planning.
- Risk Management: Strategic decisions assess risks and uncertainties. Balancing risk-taking with risk mitigation strategies ensures sustainable growth.
- Purpose: Balancing risk and reward.
- Decisions: Assessing risks, diversifying portfolios, and contingency planning.
- Innovation and Adaptation: Organizations must adapt to changing environments. Strategic decisions foster innovation, encourage agility, and allow for course corrections.
- Purpose: Staying relevant and competitive.
- Decisions: Investing in R&D, adopting new technologies, and responding to market shifts.
- Organizational Structure and Culture: Decisions impact how the organization is structured, how teams collaborate, and the prevailing culture. These factors influence performance and employee engagement.
- Purpose: Creating an environment conducive to strategy execution.
- Decisions: Designing reporting structures, fostering collaboration, and shaping organizational norms
Strategic decision-making is the process of developing and putting into action choices that will influence the long-term welfare of the organization. It involves considering multiple options and weighing the potential outcomes before choosing the most appropriate solution. This requires careful consideration, planning, collaboration, and input from multiple stakeholders within the organization. The ultimate goal of strategic decision-making is to make decisions that support the long-term success and competitiveness of the organization. Top level executives usually make these choices (strategic decisions) and involve a substantial commitment of organizational resources, and might have long-term impacts. A strategic decision refers to the identification, evaluation, and selection of the best strategy that increases the likelihood of achieving organizational goals. These decisions have the characteristics of being directive, rare, and consequential.
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Formulation
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Implementation
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Execution
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Evaluation & Control
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Organizational Strategy
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Strategy Formulation
Strategy formulation is the process of using available knowledge in an organization, from analysis of the organization's internal and external environments, to identify and document its intended direction, and the actionable steps to reach its goals. The goal is to outline how an organization will prevail through its journey to reach its ultimate destination. It involves making strategic choices, analyzing available information, and crafting a roadmap for success.
It involves developing a roadmap to guide an organization toward achieving its long-term objectives and overall mission.
the concept of strategy formulation and elaborate on its key components:
Strategy Formulation Decisions
Strategy formulation decisions can be categorized into the following key areas: corporate strategy, business unit and competitive strategy, and operations strategy.
These decisions are interconnected, and effective strategy formulation requires alignment across all levels of the organization
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It encompasses several crucial aspects:
Strategy formulation provides the framework within which recommended strategic options are crafted to fill in the details to bridge the gap between high-level direction and actionable plans. Strategy formulation serves as the backbone of the strategic planning process, ensuring that all business activities are aligned with the organization’s unified vision, goals, and objectives.
Strategy formulation produces a clear set of recommendations, with justifications, for using available organizational resources with selected approaches (options) for achieving the strategic objectives. The written formulation include the following key elements:
A well-crafted set of recommendations, backed by justifications, forms the foundation for successful strategy execution. A good recommendation includes the intended direction and the actionable steps to reach the strategic goals.
Crafting a well-thought-out strategy is crucial for success. Devising effective strategies that significantly contribute to an organization’s future success remains a challenge. While the concept of strategy is straightforward, creating a clear, agreed-upon strategy for a company proves difficult. Often, the process devolves into recording vague platitudes that neither clarify the strategic concept nor achieve consensus among decision-makers. The challenge lies in the difficulty of trying to encapsulate the essence of a strategy in the confines of a business plan or strategic plan. The issues range from the complexity of organizational strategy, its dynamic nature, uncertainty, to its intangible nature.
Corporate strategy encompasses several key components that guide an organization’s long-term direction and contribute to achieving its objectives. The components include:
Corporate strategy integrates these components to create a roadmap for the organization. Additionally, there are three levels of strategy:
Business Unit Level strategy ...
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Dimensions Of Strategy
In the business context, strategy is a layered concept, existing as options from a number of dimensions, including: corporate strategy, business level and competitive strategy, operations strategy, functional strategies.
Corporate strategy is concerned with making decisions about the overall direction and scope of the entire organization. These decision include, but are not limited to, whether to enter, retain, or exit a given business; whether to pursue growth internally or externally, i.e., through alliances or acquisitions; and how to allocate resources within a portfolio. The ultimate goal of corporate strategy is to improve the company's performance and achieve its long-term objectives.
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Corporate strategy is a plan that outlines the mission, values, and goals of an organization. There are different types of corporate strategies a company can pursue; these may include: growth strategies such as market penetration, product development; stability, retrenchment, liquidation, etc. A company's corporate strategy may be to focus on sales, growth or leadership. A company may also use corporate strategy to prioritize resources.
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The scope of corporate strategy, typically include the following elements:
The scope of corporate strategy can vary from one organization to another, depending on its size, industry, and specific circumstances. It is a dynamic process that should adapt to changing external and internal environment factors to help the company remain competitive and achieve its long-term objectives.
The strategic direction element of corporate strategy is concerned with defining the company's overall plan or direction of an organization in pursuit of its long-term objectives. It includes defining the organization's vision, mission, values and goals, as well as identifying the markets and products it will focus on, the competitive advantages it aims to build, and the resources and capabilities it needs to achieve its objectives. There are several types of strategic directions, including options such as: growth strategies, market strategies, product strategies, and technology strategies.
A well defined and effectively communicated strategic direction is essential for guiding a company toward its long-term goals, maintaining competitiveness, and adapting to changing market conditions. It provides a clear road map for the organization to follow, and helps ensure that everyone is working towards a common purpose.
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It is useful to organize the corporate level strategy considerations and initiatives into a framework, based the various ways the organization can achieve its corporate objectives. Those ways represent aspects of corporate strategy, and include:.
Leaders responsible for corporate strategy decisions have to consider many factors, including allocation of resources, organization design, portfolio management, and the strategic trade-offs. By optimizing all of those factors, a leader can hopefully create a portfolio of businesses that is worth more than the sun of its parts. The purpose of corporate strategy is to create company value, and to motivate employees to work toward that value, or set of goals. The goals are are an indication of what the company as a whole is trying to achieve and become.
Business Level and Competitive Strategy
Businesses need to find the right markets (target markets) and locations to compete in, and make sure their value proposition is the right one for the the right customers and right locations Value proposition is a statement describing the value that a company or product/service offers to the customer. It answers the question "why should the customer buy our product/service?".
The decisions on how to win provide answers to the following:
Creating competitive advantage, is the primary concern of competitive strategies. Successful competitive strategies usually involve building uniquely strong or distinctive competencies in one or several areas crucial to success and using them to maintain a competitive edge over rivals.
Business strategy is a master plan that is designed to help a company reach specific goals. It highlights the market opportunities that the business wants to explore, steps for performing it and the resources required to put it into practice. Business strategy is focused on creating value and competitive advantage for a business. It outlines the actions a company takes to compete effectively in particular markets, and serves as the foundation for a company's functional strategies. A business strategy helps different departments/functions work together, ensuring departmental and functional level decisions support the overall direction of the company.
Brand strategy is the holistic approach behind how a brand builds identification and favourability with customers and potential customers. Brand strategy encompasses several different brand elements such as: voice, storytelling, brand identity, brand values, and overall vibe. Brand strategy helps inform the different choices you make as a business.
Generic Strategies: Competitive Strategy
Generic strategies are ways of gaining competitive advantage - In other words, developing the "edge" that gets you the sale, and takes it away from your competitors. A company can consider formulating competitive strategy by using generic strategies as the fundamental choices, and then adding various competitive tactics. Competitive tactics is the set of policies and procedures that a business uses to gain competitive advantage in the market place. Generic strategies refers to the alternative methods an organization uses to position itself, competitively, in an industry. These may include:
Note that no one generic strategy is better than another. An organization can be successful using any one of these strategies A choice of one of these generic strategies provides the foundation for a business strategy, however there can be many variations and elaborations; among these are competitive tactics such as: Timing tactics - when to enter a market, market location/positioning tactics - where and how to enter and/or defend, and cooperative strategies. An organization needs to choose the right strategy based on the industry environment factors (what competitors are doing), and also where the organization's strengths lie (core competencies). A business needs strong and differentiated capabilities to compete successfully. For example, if you are pursuing a cost leadership strategy, you need capacity, great supply chain management, and a culture that drives cost out of the system.
Business Strategy
A business strategy establishes the company's approach to where and how it will successfully compete and win in business. Business strategy highlights the market opportunities that the business wants to explore, the steps/actions to take, and the resources to put the actions into practices. Business strategy provides the company with the basis for making the right investments in; what products - goods and services - to offer, and strong capabilities that give the company competitive advantage and differentiates it from competitors. Gaining competitive advantage over other firms is what makes a business successful. A company has competitive advantage whenever it can attract customers and defend against competitive forces better than its rivals.
A Business Level Strategy provides a way for organizations to provide value to customers by exploiting an organization's core competencies and capitalizing on its strengths, using them as competitive advantage to win business from its competitors and become successful. Business strategy can help you create better products or services, offer better pricing, make it easier to buy, or create a benefit that your customers want/need. Competitive Strategy is concerned with how the organization competes within the chosen markets and industries, as constrained by competitive priorities (established through the SWOT analysis). Competitive strategy is concerned with creating competitive advantage through creating a unique selling proposition for your business. It involves pursuing an ongoing process of brand management, pricing evaluation, distribution strategy and operational efficiencies in creating, maintaining, and improving your competitive advantage in your market place and increasing customer preference and loyalty, sales, profits and market share. A competitive strategy is implemented by a set of policies and procedures that a business uses to gain a competitive advantage in the market. It involves the process of identifying and executing actions that allow a business to improve its competitive position.
Types of Business Strategy
Business strategy is a tool to help organizations define the methods and tactics (function actions) they need to take within their company to reach their business goals. Business strategies act as a foundation for developing operations and functional strategies. Some examples of business strategic options include:
Business strategy identifies clear set of plans and actions that outline how an organization will compete and win in particular markets with current portfolio of products and services. A business strategy helps different functional departments work together, ensuring departmental decisions support the overall direction of the company.
Formulating Operations Level Strategy
Operations strategy formulation is the process of selecting the most appropriate and efficient ways (means) to realize the organization's vision and help it achieve its goals and objectives. It is a complex and dynamic process that requires careful planning and analysis. There are many factors to consider when formulating an operations strategy, these include decision areas such as:
Operations strategy involves making informed decisions across these areas to optimize productivity and achieve organizational goals
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Operations strategy formulation is a part of strategic management and involves using several analytical tools to figure out the best way to use the organization's resources. Some of the steps involved in formulating operations strategy include:
The process of operations strategy formulation helps in generating a specific course of actions for running the operations system.and thereby, providing operational excellence and competitive advantage to the organization. The Operations System, for an organization, is the joint configuration of resources and processes such that its resulting competencies are aligned with the organization's desired competitive position. An organization's Operations System provides the best match (fit) of supply (of tangible resources) with customer demand for the mix of products and services. Besides the efficient operations strategy formulation, an organization requires a strong support process for the effective implementation of operations strategies. The support process provides vial resources and input to support the core process (implementation of operations strategies).
The formulation and implementation of an operations strategy may get support from relevant functions such as: accounting, finance, human resources, marketing, and management information systems (MIS). For example, human resource function provides support processes for recruiting skilled workforce to properly execute their assigned responsibilities. The accounting function support process keeps track of the organization's financial resources. The marketing function support process performs market research, devise a marketing plan and involves product development. The MIS function support process helps in the processing and movement of information and data to make business decisions.
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Operations Strategy formulation is the process - a set of procedures - that a company can adopt to establish the way it goes about making the actual decisions, taken over time, that shape the operations strategy of a company. Operations strategy formulation involves comprehensive analysis (identification and evaluation) of the strengths and weaknesses of operations capability - resources, processes, and people - and the determination of infrastructure and structure required to support the business strategy. An analysis should be conducted to determine how the elements of structure and infrastructure support or hinder the business strategy, and what needs to be done to optimize their usefulness and verify operational capabilities.
Operations strategy formulation involves first consider the corporate or business strategies, and market analysis/needs; then consider determining the competitive priorities - cost, time, quality, and flexibility - of the firm and how to handle them. These competitive priorities then translating these priorities into production requirements in terms of performance objectives. which drive the structure and infrastructure decisions of the firm. A company's structure is related to the physical attributes of operations. A company's infrastructure is composed of its policies and systems governing a number of activities such as capital budgeting, equipment selection, organizational structure, etc
Operations Strategy
Operations strategy is the set of decisions an organization makes regarding the production and delivery of goods/services. It includes the development and execution of plans, policies, and procedures that optimize resources, minimize costs, and improve the organization's operations' efficiency and effectiveness. Operations strategy refers to the system an organization implements to achieve its long-term goals and accomplish its mission. It involves decisions based on multiple factors, including product management, supply chain, inventory, forecasting, scheduling, quality, facilities planning and management. For service providers, operations strategy concerns financing, marketing, human resources, and service that matches the company's performance goals and mission.
Operations strategy is the system of decisions which shape the long-term capabilities of the company's operations and their contribution to overall strategy through the ongoing reconciliation of market requirements and operations resources. Operations strategy answers the following questions:
By developing operational strategies, a company can examine and implement effective and efficient systems for using resources, personnel and the work process.
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Operational strategies refers to the methods companies use to reach their objectives.
Operations strategy as a strategic decision-making process requires multiple factors be taken into consideration with respect to each other. In a a product-oriented business structure these may include: procurement of raw materials to the final logistics involved with delivering the product to end-user. As well as factors such as staff, product development, quality assurance, and issues of plant capacity and forecasting models that focus on strategic objectives. An effective operations strategy fosters the alignment of people, processes, and products with the company's mission to ensure long-term sustainable growth.
Common Types of Operations Strategies
Operations strategies revolve around the core business processes such as production, supply chain, distribution, logistics, etc. Operations strategies may also revolve around capacity of production facilities, their location, product lines procurement, etc. Operations strategy may also include strategies such as product development, market penetration, customer engagement, etc. There are many types of Operations strategy, including,
The above are some common types of operations strategies an organization can use to enhance efficiency, boost capabilities and improve competitive advantage, includes:
Components of Operations Strategy
Operations strategy consists of a series of decisions that organizations take in order to implement their competitive business strategies. These decisions that comprise an operations strategy can be grouped into different elements or components of the strategy, such as:
Operations strategy is essentially, about the different ways of aligning plans, activities, and objectives.
Structure and Infrastructure Decisions
Operations strategy is the whole system of decisions that are aimed at shaping both the long-term capabilities of operations, regardless of the type of operations, and their contribution to overall strategy achievement. The realized operations strategy is the total pattern of decisions which shape the long-term capabilities of any type of operations and their contribution to the overall business strategy. These decisions can be categorized as structure or infrastructure decisions.
Structural decisions are the ones that define the shape of the building blocks associated with a particular operation. They are directly related to the tangible aspects of operations, such as: process technology for manufacturing, vertical integration, facilities - location, capacity, and variety of product manufacturing. Structural decisions define the overall tangible shape and architecture of the operations. The elements or components of structural decisions category include:
Structural decisions have several remarkable strategic implications, they require substantial financial investments, and have great effects on physical assets. They have long term impact, and are not easily reversible, once they have been taken. A company's structure is related to the physical attributes of operations.
Infrastructural decisions or practices, comprise just operational practices or decisions that correspond to operations managers exclusively. These decisions may be considered as strategic or tactical choices because they refer to the people, systems, policies, practices, procedures and organization which support the value creation processes (i.e., goods manufacturing or service production) and enable them to perform their function. The elements of infrastructural decisions and practices may include:
Infrastructural decisions relate to systems used to enhance enhance the utilization of structural resources, and the control of those resources so the business achieves a high level of productivity. Infrastructure decisions affect organizational culture control systems, workforce, quality management and leadership. Their cumulative effects can be difficult and costly to change, just like the structural ones are.
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Operations strategy is the set of decisions an organization makes, regarding those various operations they take, in the production and delivery of products - goods and/or services. Operations strategy is the system of decisions that a firm makes to achieve long-term competitive advantage. It is the collective concrete actions chosen, mandated or stipulated by corporate strategy and implemented in the operations function. Operations strategy specifies how the firm will employ its operations capabilities to support the business strategy. Each organization strategy requires a tailored operations strategy. Operations strategy works in tandem with overall business strategy, helping organizations to achieve their long-term goals and improve competitiveness. Operations strategy acts like a plan to specify the structure and usage of resources. Operations strategy drives a company's operations function, the part of the business that produces and distributes goods and services.
The realized/real operations strategy of a company, is the set of the actual operations management decisions that are taken over time, and shape the operations of a company. Operations strategy is the logic underlying operations management decisions.
Operations strategy focuses on maximizing the efficiency and effectiveness of production of services or goods while minimizing operating costs. Operations strategy focuses on maximizing the efficiency and effectiveness of production of services or goods while minimizing operating costs. Operations strategy focuses on reducing process costs, and improving profits for the entire business. Operations strategy helps operations management optimize the use of resources, people, processes and technology. Operations strategy helps align the organization's operations with the overall goals and objectives, and enable it to more effectively compete in the market.
Strategy formulation is the process of using available knowledge in an organization, from analysis of the organization's internal and external environments, to identify and document its intended direction, and the actionable steps to reach its goals. The goal is to outline how an organization will prevail through its journey to reach its ultimate destination. It involves making strategic choices, analyzing available information, and crafting a roadmap for success.
It involves developing a roadmap to guide an organization toward achieving its long-term objectives and overall mission.
the concept of strategy formulation and elaborate on its key components:
- Strategy Formulation:
- Definition: Strategy formulation is the process of developing a comprehensive plan to achieve an organization’s long-term goals and objectives. It involves making strategic choices, analyzing available information, and crafting a roadmap for success.
- Purpose: The primary purpose of strategy formulation is to align an organization’s resources, capabilities, and actions with its vision and mission.
- Key Steps:
- Environmental Analysis: Assess internal and external factors (such as market trends, competition, technological advancements, and regulatory changes).
- Setting Objectives: Define clear and measurable goals.
- Generating Options: Create alternative strategies or courses of action.
- Evaluating Options: Assess the feasibility, risks, and potential outcomes of each option.
- Selecting the Best Strategy: Choose the most suitable strategy based on analysis and organizational priorities.
- Documenting the Strategy: Clearly articulate the chosen strategy, including implementation steps.
- Crafting Options:
- During strategy formulation, organizations generate various options or approaches to achieve their objectives. These options are based on the analysis of available information and insights.
- Crafting options involves creativity, critical thinking, and considering different scenarios. It’s essential to explore diverse paths rather than settling for the first idea that comes to mind.
- Options can vary in terms of scope, risk, resource requirements, and alignment with organizational values.
- Documenting the Recommended Options:
- Once a set of viable options is generated, the next step is to document them systematically. This documentation serves as a reference for decision-makers, stakeholders, and implementation teams.
- The documentation typically includes:
- Description of Each Option: Clearly explain what each strategy entails.
- Rationale: Why was each option considered? What problem does it address?
- Assumptions: Highlight any underlying assumptions (e.g., market conditions, customer behavior, resource availability).
- Evaluation Criteria: Criteria used to evaluate and compare options (e.g., financial impact, alignment with organizational values).
- Recommendation: Based on the evaluation, recommend the most suitable strategy.
- Example Applied to the Barbershop at Airports:
- Options:
- Full-Service Barbershop
- Express Barbershop
- Premium Experience
- Collaborate with Airlines
- Mobile Barbershop
- Assumptions and Hypotheses:
- Validate demand through surveys.
- Observe passenger behavior during layovers.
- Research airport policies.
- Offer gender-neutral services.
- Recommended Option: Based on validation and research, choose the most feasible option (e.g., full-service barbershop) and document the rationale and assumptions.
- Options:
Strategy Formulation Decisions
Strategy formulation decisions can be categorized into the following key areas: corporate strategy, business unit and competitive strategy, and operations strategy.
- Corporate Strategy Decisions:
- These decisions impact the entire organization and guide its overall direction:
- Portfolio Management: Deciding which businesses to enter, maintain, or exit.
- Diversification Strategy: Choosing how to expand into new markets or industries.
- Resource Allocation: Allocating resources (financial, human, technological) across business units.
- Mergers and Acquisitions: Deciding on potential acquisitions or mergers.
- Risk Management: Identifying and mitigating risks at the organizational level.
- These decisions impact the entire organization and guide its overall direction:
- Business Unit and Competitive Strategy Decisions:
- These decisions focus on individual business units and their competitive positioning:
- Market Entry Strategy: How to enter new markets (e.g., organic growth, partnerships, acquisitions).
- Product Positioning: How to differentiate products/services from competitors.
- Pricing Strategy: Determining optimal pricing based on market dynamics.
- Competitive Advantage: Identifying unique strengths to outperform rivals.
- Marketing and Sales Strategy: How to reach and engage target customers effectively.
- These decisions focus on individual business units and their competitive positioning:
- Operations Strategy Decisions:
- These decisions relate to day-to-day operations and efficiency:
- Production Strategy: How to manufacture goods efficiently.
- Supply Chain Strategy: Managing suppliers, logistics, and inventory.
- Quality Control: Ensuring consistent product/service quality.
- Capacity Planning: Determining production capacity and resource utilization.
- Technology Adoption: Leveraging technology for operational improvements.
- These decisions relate to day-to-day operations and efficiency:
These decisions are interconnected, and effective strategy formulation requires alignment across all levels of the organization
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It encompasses several crucial aspects:
- Resource allocation: Determining how to allocate resources (such as budget, personnel, and technology) effectively.
- Prioritization: Identifying which initiatives or projects are most important.
- Organization-wide alignment: Ensuring that all departments and teams work cohesively toward common objectives.
- Validation of business goals: Ensuring that the chosen goals align with the organization’s overall mission and vision.
Strategy formulation provides the framework within which recommended strategic options are crafted to fill in the details to bridge the gap between high-level direction and actionable plans. Strategy formulation serves as the backbone of the strategic planning process, ensuring that all business activities are aligned with the organization’s unified vision, goals, and objectives.
Strategy formulation produces a clear set of recommendations, with justifications, for using available organizational resources with selected approaches (options) for achieving the strategic objectives. The written formulation include the following key elements:
- Clear Recommendations: These are specific, actionable suggestions for achieving strategic objectives. Recommendations should align with the organization’s mission and vision, capabilities, etc.
- Justifications: Each recommendation must be supported by logical reasoning. Justifications explain why a particular approach or option was chosen.
- Resource Utilization: Recommendations consider available resources (financial, human, technological). Efficient resource allocation ensures effective execution.
- Approaches and Options: Different strategies or approaches are evaluated. Options are weighed based on feasibility, impact, and alignment with goals.
- Strategic Levels: Recommendations span various levels (corporate, business unit, functional). Each level contributes to overall success.
- Intended Direction: Recommendations provide a clear path forward. They guide decision-making and resource allocation.
A well-crafted set of recommendations, backed by justifications, forms the foundation for successful strategy execution. A good recommendation includes the intended direction and the actionable steps to reach the strategic goals.
Crafting a well-thought-out strategy is crucial for success. Devising effective strategies that significantly contribute to an organization’s future success remains a challenge. While the concept of strategy is straightforward, creating a clear, agreed-upon strategy for a company proves difficult. Often, the process devolves into recording vague platitudes that neither clarify the strategic concept nor achieve consensus among decision-makers. The challenge lies in the difficulty of trying to encapsulate the essence of a strategy in the confines of a business plan or strategic plan. The issues range from the complexity of organizational strategy, its dynamic nature, uncertainty, to its intangible nature.
Corporate strategy encompasses several key components that guide an organization’s long-term direction and contribute to achieving its objectives. The components include:
- Visioning:
- Function: Visioning involves setting the high-level direction for the organization. It includes defining the company’s vision, mission, and corporate values.
- Contribution to Corporate Objectives: A clear vision inspires and aligns employees, stakeholders, and partners. It provides a shared purpose and motivates everyone to work toward common goals.
- Objective Setting:
- Function: Objective setting defines specific and measurable outcomes that the organization aims to achieve within a chosen timeframe. These objectives can relate to growth, profitability, market share, innovation, or other strategic areas.
- Contribution to Corporate Objectives: Well-defined objectives provide focus and clarity. They guide decision-making, resource allocation, and performance evaluation. Achieving these objectives directly contributes to overall corporate success.
- Resource Allocation:
- Function: Resource allocation involves efficiently distributing human and capital resources to support the organization’s objectives. It ensures that resources are allocated where they can have the most impact.
- Contribution to Corporate Objectives: Proper resource allocation optimizes productivity, minimizes waste, and enhances competitiveness. It enables the organization to execute its strategy effectively.
- Strategic Trade-offs:
- Function: Strategic trade-offs involve making choices when faced with competing opportunities. Not all feasible options can be pursued simultaneously, so leaders must prioritize and allocate resources wisely.
- Contribution to Corporate Objectives: By balancing risks and returns, strategic trade-offs help the organization focus on its core strengths and competitive advantages. They prevent spreading resources too thin and ensure strategic alignment.
Corporate strategy integrates these components to create a roadmap for the organization. Additionally, there are three levels of strategy:
Business Unit Level strategy ...
- Organizational Structure and Segmentation:
- Function: Defines how the business unit is organized and segmented. It identifies distinct areas such as operations, accounting, marketing, and sales.
- Contribution to Business Objectives: Efficient organization ensures smooth operations and resource allocation, supporting overall business goals.
- Business Model and Strategic Thinking:
- Function: Establishes the business model—how the unit creates, delivers, and captures value. Strategic thinking aligns actions with long-term objectives.
- Contribution to Business Objectives: A well-defined business model drives profitability and competitive advantage.
- Analysis of Competitors and Business Environment:
- Function: Assesses competitors, market trends, and external factors. Identifies threats and opportunities.
- Contribution to Business Objectives: Informed decisions based on competitive landscape enhance resilience and adaptability.
- Long-Term Goals and Objectives:
- Function: Sets clear, measurable goals aligned with the overall corporate strategy.
- Contribution to Business Objectives: Long-term objectives guide resource allocation and performance evaluation.
- Product Development and Market Share:
- Function: Determines product/service offerings and market positioning.
- Contribution to Business Objectives: Effective product development and market share growth drive revenue and profitability.
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Dimensions Of Strategy
In the business context, strategy is a layered concept, existing as options from a number of dimensions, including: corporate strategy, business level and competitive strategy, operations strategy, functional strategies.
Corporate strategy is concerned with making decisions about the overall direction and scope of the entire organization. These decision include, but are not limited to, whether to enter, retain, or exit a given business; whether to pursue growth internally or externally, i.e., through alliances or acquisitions; and how to allocate resources within a portfolio. The ultimate goal of corporate strategy is to improve the company's performance and achieve its long-term objectives.
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Corporate strategy is a plan that outlines the mission, values, and goals of an organization. There are different types of corporate strategies a company can pursue; these may include: growth strategies such as market penetration, product development; stability, retrenchment, liquidation, etc. A company's corporate strategy may be to focus on sales, growth or leadership. A company may also use corporate strategy to prioritize resources.
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The scope of corporate strategy, typically include the following elements:
- Business Portfolio - This element of corporate strategy in concerned with decisions about the composition of the company's business portfolio. This involves determining which businesses to invest in and which ones to divest. The options may include diversification, divestiture, or acquisition. The business portfolio mix should be determined based on the organization's goals, strengths, weaknesses, opportunities, and threats.
- Market Selection - This element of corporate strategy is concerned with decisions on which markets to invest in. This involves identifying the most attractive markets for the organization to enter, and determining the best ways to enter those markets. The options may include market segmentation, product differentiation, and pricing strategies. The market selection process should result in a prioritized market portfolio, a prioritized list of markets worthy of investment and pursuit.
- Competitive Advantage - Corporate strategy outlines how a company will gain a sustainable competitive advantage in its chosen markets. The options may include: cost leadership, differentiation, and focus.
- Resource Allocation - This involves decisions about how to distribute resources - capital, human resources, and equipment - among business units, projects, and initiatives to maximize overall performance.
- Mergers and Acquisitions - Corporate strategy may involve decisions regarding mergers, acquisitions, partnerships, or divestitures. These actions can help a company expand its capabilities, enter new markets, or streamline its operations.
- Risk Management - Assessing and managing risks is another important aspects of corporate strategy. Organizations need to identify potential risks and develop strategies to mitigate them.
- Sustainability and Corporate Social Responsibility (CSR) - In the modern business environment, corporate strategy often includes elements related to sustainability, or CSR. Companies may develop strategies for reducing their environmental impact, promoting social responsibility, and ethical business practices.
- International Expansion - Corporate strategy may encompass international expansion plans. This can involve entering new countries, establishing partnerships, or adapting products and services for international markets.
- Innovation and Technology - Corporate strategy should address innovation and technology adoption. It may include plans for research and development, digital transformation, and staying current with industry trends.
- Organizational Structure and Culture - Decisions about the organizational structure, culture and leadership are important aspects of corporate strategy. The structure should support the strategy, and the culture should align with the company's values and goals.
The scope of corporate strategy can vary from one organization to another, depending on its size, industry, and specific circumstances. It is a dynamic process that should adapt to changing external and internal environment factors to help the company remain competitive and achieve its long-term objectives.
The strategic direction element of corporate strategy is concerned with defining the company's overall plan or direction of an organization in pursuit of its long-term objectives. It includes defining the organization's vision, mission, values and goals, as well as identifying the markets and products it will focus on, the competitive advantages it aims to build, and the resources and capabilities it needs to achieve its objectives. There are several types of strategic directions, including options such as: growth strategies, market strategies, product strategies, and technology strategies.
A well defined and effectively communicated strategic direction is essential for guiding a company toward its long-term goals, maintaining competitiveness, and adapting to changing market conditions. It provides a clear road map for the organization to follow, and helps ensure that everyone is working towards a common purpose.
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It is useful to organize the corporate level strategy considerations and initiatives into a framework, based the various ways the organization can achieve its corporate objectives. Those ways represent aspects of corporate strategy, and include:.
- Strategic Direction - These Grand strategies are major, overarching strategies that shape the course of a business organization. They are focused on the long-term goals of the organization. Corporate Strategy establishes how to prioritize and mobilize resources to ensure perceived interests or goals. The types of corporate strategy may include: growth strategy, stability strategy, retrenchment strategy, liquidation strategy, etc.
- Portfolio Management strategy - This is concerned with making decisions about the portfolio of lines of business (LOBs) or strategic business units (SBUs), not the company's portfolio of individual products. The most important strategies developed at this level address queries on whether a business should diversify or focus on concentration. Portfolio matrix models can be useful in reexamining a company's present portfolio.
- Parenting strategy - This strategy is concerned with how to allocate resources and capabilities and activities across the portfolio of businesses. How we allocate resources and manage capabilities and activities across the portfolio? Where do we put special emphasis, and how much do we integrate various lines of business? What is the manner in which management coordinates activities and transfers resources and cultivates capabilities among product lines and business units?. Answering these questions involves evaluating and making decisions on the following: Priorities in allocating resources? what are critical success factors in each business unit, and how can the company do well in them? Coordination of activities (e.g., horizontal strategies) and transfer of capabilities among business units? How much integration of business units is desirable?
Leaders responsible for corporate strategy decisions have to consider many factors, including allocation of resources, organization design, portfolio management, and the strategic trade-offs. By optimizing all of those factors, a leader can hopefully create a portfolio of businesses that is worth more than the sun of its parts. The purpose of corporate strategy is to create company value, and to motivate employees to work toward that value, or set of goals. The goals are are an indication of what the company as a whole is trying to achieve and become.
Business Level and Competitive Strategy
Businesses need to find the right markets (target markets) and locations to compete in, and make sure their value proposition is the right one for the the right customers and right locations Value proposition is a statement describing the value that a company or product/service offers to the customer. It answers the question "why should the customer buy our product/service?".
The decisions on how to win provide answers to the following:
- How will we position ourselves against our competitors?
- What type of resources and capabilities should the company develop in order to gain competitive advantage over competitors?
- What unique approaches will we apply to create new markets?
Creating competitive advantage, is the primary concern of competitive strategies. Successful competitive strategies usually involve building uniquely strong or distinctive competencies in one or several areas crucial to success and using them to maintain a competitive edge over rivals.
Business strategy is a master plan that is designed to help a company reach specific goals. It highlights the market opportunities that the business wants to explore, steps for performing it and the resources required to put it into practice. Business strategy is focused on creating value and competitive advantage for a business. It outlines the actions a company takes to compete effectively in particular markets, and serves as the foundation for a company's functional strategies. A business strategy helps different departments/functions work together, ensuring departmental and functional level decisions support the overall direction of the company.
Brand strategy is the holistic approach behind how a brand builds identification and favourability with customers and potential customers. Brand strategy encompasses several different brand elements such as: voice, storytelling, brand identity, brand values, and overall vibe. Brand strategy helps inform the different choices you make as a business.
Generic Strategies: Competitive Strategy
Generic strategies are ways of gaining competitive advantage - In other words, developing the "edge" that gets you the sale, and takes it away from your competitors. A company can consider formulating competitive strategy by using generic strategies as the fundamental choices, and then adding various competitive tactics. Competitive tactics is the set of policies and procedures that a business uses to gain competitive advantage in the market place. Generic strategies refers to the alternative methods an organization uses to position itself, competitively, in an industry. These may include:
- Cost Leadership Strategy - This strategy is for organizations that want to compete for a broad customer base, based on price. The organization is trying to be the lowest cost producer. Common mechanisms to drive down costs include: establishing rigid cost controls; building state-of-the-art facilities to produce at scale at a low cost; outsourcing to countries with lower wages. To be effective, this strategy requires your product or service to be standardized. This strategy can help defend your business against Porter's five (5) forces.
- Differentiation Strategy - This strategy is for firms that want broad customer base, based on their uniqueness. With differentiation strategy an organization is attempting to establish and maintain meaningful differences between the firm and its competitors. Typically, firms with this strategy will focus on building unique features to win in the marketplace. Common mechanisms to differentiate include: Superior quality; Customer service; Design; Uniqueness.
- Focused Strategy - This is a specialization strategy. The focus dimension of a competitive strategy recognizes that either a cost advantage or differentiation strategy can be applied to a more narrow (niche) market.
- Focused Cost Leadership Strategy - These organizations compete on price but also stand out because they focus on serving a niche market. Common mechanisms to adopt a Focused Cost Leadership Strategy include:Focusing on serving a small group of customers; By uniquely understanding the needs of your niche market, you can cut costs to serve the needs of that market. This strategy can help defend your business against Porter's 5 Forces in the same way that broad cost leadership strategy can.
- Focused Differentiation Strategy - This strategy is very similar to that of a differentiation strategy except that it is focused on a very narrow segment of the market. These firms compete by offering unique features to a small market segment. Common mechanisms to focus include: Select a profitable narrow subset of the market; Focus on areas where competition is weakest; Focus on areas where product substitution is difficult.
- Integrated Cost/Differentiation Strategy - This is a hybrid strategy. This strategy involves producing low-cost products with differentiated features. This strategy is about simultaneously focusing on two drivers of competitive advantage: cost and differentiation.
Note that no one generic strategy is better than another. An organization can be successful using any one of these strategies A choice of one of these generic strategies provides the foundation for a business strategy, however there can be many variations and elaborations; among these are competitive tactics such as: Timing tactics - when to enter a market, market location/positioning tactics - where and how to enter and/or defend, and cooperative strategies. An organization needs to choose the right strategy based on the industry environment factors (what competitors are doing), and also where the organization's strengths lie (core competencies). A business needs strong and differentiated capabilities to compete successfully. For example, if you are pursuing a cost leadership strategy, you need capacity, great supply chain management, and a culture that drives cost out of the system.
Business Strategy
A business strategy establishes the company's approach to where and how it will successfully compete and win in business. Business strategy highlights the market opportunities that the business wants to explore, the steps/actions to take, and the resources to put the actions into practices. Business strategy provides the company with the basis for making the right investments in; what products - goods and services - to offer, and strong capabilities that give the company competitive advantage and differentiates it from competitors. Gaining competitive advantage over other firms is what makes a business successful. A company has competitive advantage whenever it can attract customers and defend against competitive forces better than its rivals.
A Business Level Strategy provides a way for organizations to provide value to customers by exploiting an organization's core competencies and capitalizing on its strengths, using them as competitive advantage to win business from its competitors and become successful. Business strategy can help you create better products or services, offer better pricing, make it easier to buy, or create a benefit that your customers want/need. Competitive Strategy is concerned with how the organization competes within the chosen markets and industries, as constrained by competitive priorities (established through the SWOT analysis). Competitive strategy is concerned with creating competitive advantage through creating a unique selling proposition for your business. It involves pursuing an ongoing process of brand management, pricing evaluation, distribution strategy and operational efficiencies in creating, maintaining, and improving your competitive advantage in your market place and increasing customer preference and loyalty, sales, profits and market share. A competitive strategy is implemented by a set of policies and procedures that a business uses to gain a competitive advantage in the market. It involves the process of identifying and executing actions that allow a business to improve its competitive position.
Types of Business Strategy
Business strategy is a tool to help organizations define the methods and tactics (function actions) they need to take within their company to reach their business goals. Business strategies act as a foundation for developing operations and functional strategies. Some examples of business strategic options include:
- Product differentiation - This type of differentiation strategy may be based on innovative technology, pricing, features and design. Companies can differentiate their products by highlighting the fact that they have superior technology, features, pricing, or styling. With differentiation strategy, firms target to achieve market leadership.
- Improve customer experience - Customer experience refers to the sum of all interactions a customer has with a business, both pre and post sales. The customer experience strategy defines the actionable plans in place to deliver a positive, meaningful experience across those interactions.
- Pricing - When it comes to pricing strategy, businesses can differentiate either by keeping their prices low to attract more customers, or give the products aspiration value by pricing them beyond what most ordinary customers could afford.
- Cross-sell more products - Focus on selling additional products to the same customer.
- Improve customer retention - This strategy requires you to identify key tactics and projects to retain your customers.
- Grow sales from new products - This strategy involves introducing new products into the market and updated products that are able to keep up with trends. It requires the company to invest in research and development in order to constantly innovate.
- Technological advantage - Obtaining a technological advantage to achieve better sales, improved productivity or even market domination.
Business strategy identifies clear set of plans and actions that outline how an organization will compete and win in particular markets with current portfolio of products and services. A business strategy helps different functional departments work together, ensuring departmental decisions support the overall direction of the company.
Formulating Operations Level Strategy
Operations strategy formulation is the process of selecting the most appropriate and efficient ways (means) to realize the organization's vision and help it achieve its goals and objectives. It is a complex and dynamic process that requires careful planning and analysis. There are many factors to consider when formulating an operations strategy, these include decision areas such as:
- Goods and Services:
- Consistency in costs, quality, and resource utilization across all business divisions.
- Meeting customer expectations through clear quality management.
- Process and Capacity Design:
- Strategically designing processes to achieve production goals.
- Efficiently managing capacity and technology resources.
- Location Strategy:
- Considering supply chain logistics, movement of goods, and marketing implications.
- Choosing optimal locations for production facilities.
- Layout Design and Strategy:
- Arranging workstations, desks, and material flow within facilities.
- Ensuring smooth operations and resource utilization.
- Human Resources and Job Design:
- Implementing continuous improvement programs.
- Providing training and fostering employee satisfaction.
- Supply Chain Management:
- Streamlining processes, cost-effectiveness, and building trusted partnerships.
- Efficiently managing the flow of materials and information.
- Inventory Control:
- Strategizing inventory management based on market conditions.
- Considering factors like weather, supply shortages, and labor.
- Scheduling:
- Balancing production requirements and workforce/machine availability.
- Customizing schedules based on industry and business department needs.
- Maintenance:
- Ensuring quality and reliability of people, machines, and processes.
- Implementing preventive maintenance practices.
Operations strategy involves making informed decisions across these areas to optimize productivity and achieve organizational goals
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Operations strategy formulation is a part of strategic management and involves using several analytical tools to figure out the best way to use the organization's resources. Some of the steps involved in formulating operations strategy include:
- Analyzing competitive dynamics of the marketplace - This involves analyzing the market place in the external environment to understand its dynamics. This help management in understanding the issues that it must consider while formulating its operations strategy. It involves detailed analysis of current market structure, existing competitors and their offerings, and the competition intensity level. This also involves understanding the customer needs and preferences, and the competitive positioning of the organization. This analysis helps organizations identify which aspects of its products and services can provide competitive advantage over its competitors.
- Identify key factors that influence customer satisfaction - [Order-qualifiers and Order-winners] - Analysis of the competitive dynamics leads the organization to identify the order-qualifying and order-winning attributes/factors for a product/service it is offering. Identifying these key factors involves determining the criteria that customers use to evaluate and select products and services, and the attributes that differentiate the organization from its competitors. Order-qualifying attributes are the minimum requirements that customers expect, while order-winning attributes are the ones that provide competitive edge/advantage to the organization.
- Identify Strategic Options - Identify strategic options for sustaining competitive advantage; the organization must identify the order-winning attributes of its products and services and try to sustain them for a competitive advantage. The order-qualifying and order-winning attributes give a set of strategic options that may help the organization is sustaining a competitive advantage. Strategic options are action-oriented responses to the external situation that an organization faces. An organization must analyze and weigh each strategic option, and select the most suitable one to achieve the competitive advantage.
- Devise the overall corporate strategy - Organizations may not use all the strategic options available to them. The organization should match available strategic options (those for sustaining the competitive advantage) with available resources and constraints. Based on the selected strategic option, the organization develop a strategic plan to fulfill organizational objectives by taking into consideration the strengths and weaknesses of the organization. This results into the development of the overall corporate strategy. The corporate strategy specifies the business that the organization will pursue; examines new opportunities and threats in the environment and identifies growth objectives. It provides an overall direction for carrying out the organization's functions.
- Create Operations Strategy - Once corporate strategy is developed, it serves as the basis for the operations strategy. In other words, the operations strategy specifies the way through which operations implement the corporate strategy. Operations strategy may also focus on continuous cost-improvement, maximizing productivity, and cost control by planning and control activities and thereby reducing overall costs. Arriving at an appropriate operations strategy can help an organization develop capabilities that the organization needs to achieve its corporate strategies.
The process of operations strategy formulation helps in generating a specific course of actions for running the operations system.and thereby, providing operational excellence and competitive advantage to the organization. The Operations System, for an organization, is the joint configuration of resources and processes such that its resulting competencies are aligned with the organization's desired competitive position. An organization's Operations System provides the best match (fit) of supply (of tangible resources) with customer demand for the mix of products and services. Besides the efficient operations strategy formulation, an organization requires a strong support process for the effective implementation of operations strategies. The support process provides vial resources and input to support the core process (implementation of operations strategies).
The formulation and implementation of an operations strategy may get support from relevant functions such as: accounting, finance, human resources, marketing, and management information systems (MIS). For example, human resource function provides support processes for recruiting skilled workforce to properly execute their assigned responsibilities. The accounting function support process keeps track of the organization's financial resources. The marketing function support process performs market research, devise a marketing plan and involves product development. The MIS function support process helps in the processing and movement of information and data to make business decisions.
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Operations Strategy formulation is the process - a set of procedures - that a company can adopt to establish the way it goes about making the actual decisions, taken over time, that shape the operations strategy of a company. Operations strategy formulation involves comprehensive analysis (identification and evaluation) of the strengths and weaknesses of operations capability - resources, processes, and people - and the determination of infrastructure and structure required to support the business strategy. An analysis should be conducted to determine how the elements of structure and infrastructure support or hinder the business strategy, and what needs to be done to optimize their usefulness and verify operational capabilities.
Operations strategy formulation involves first consider the corporate or business strategies, and market analysis/needs; then consider determining the competitive priorities - cost, time, quality, and flexibility - of the firm and how to handle them. These competitive priorities then translating these priorities into production requirements in terms of performance objectives. which drive the structure and infrastructure decisions of the firm. A company's structure is related to the physical attributes of operations. A company's infrastructure is composed of its policies and systems governing a number of activities such as capital budgeting, equipment selection, organizational structure, etc
Operations Strategy
Operations strategy is the set of decisions an organization makes regarding the production and delivery of goods/services. It includes the development and execution of plans, policies, and procedures that optimize resources, minimize costs, and improve the organization's operations' efficiency and effectiveness. Operations strategy refers to the system an organization implements to achieve its long-term goals and accomplish its mission. It involves decisions based on multiple factors, including product management, supply chain, inventory, forecasting, scheduling, quality, facilities planning and management. For service providers, operations strategy concerns financing, marketing, human resources, and service that matches the company's performance goals and mission.
Operations strategy is the system of decisions which shape the long-term capabilities of the company's operations and their contribution to overall strategy through the ongoing reconciliation of market requirements and operations resources. Operations strategy answers the following questions:
- What are the goals of the organization?
- What are the resources available to the organization?
- What are the constraints on the organization?
- nts on the organization?
- What are strengths and weaknesses of the organization?
- What are the opportunities and threats facing the organization?
- What are the key performance indicators (KPIs) for the organization?
- What are the critical success factors (CSFs) for the organization?
By developing operational strategies, a company can examine and implement effective and efficient systems for using resources, personnel and the work process.
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Operational strategies refers to the methods companies use to reach their objectives.
Operations strategy as a strategic decision-making process requires multiple factors be taken into consideration with respect to each other. In a a product-oriented business structure these may include: procurement of raw materials to the final logistics involved with delivering the product to end-user. As well as factors such as staff, product development, quality assurance, and issues of plant capacity and forecasting models that focus on strategic objectives. An effective operations strategy fosters the alignment of people, processes, and products with the company's mission to ensure long-term sustainable growth.
Common Types of Operations Strategies
Operations strategies revolve around the core business processes such as production, supply chain, distribution, logistics, etc. Operations strategies may also revolve around capacity of production facilities, their location, product lines procurement, etc. Operations strategy may also include strategies such as product development, market penetration, customer engagement, etc. There are many types of Operations strategy, including,
- Corporate Strategy - Overall company strategy, driving the company mission and interconnected departments/functions. This type of operations strategy adhere to a company's mission statement and aligns itself to a larger corporate strategy. Businesses using this type of operations strategy develop production initiatives, key performance indicators, and decision-making processes based on strategic plan determined by company's leadership and stakeholders.
- Customer-Driven Strategies - This operations strategy is customer centric, and intended to improve customer experience. Companies using this type of strategy make operations decisions based on the customer experience. Some examples include: a rental car company that eliminates long lines at the airport, or a customer support/call center that eliminates waiting times. These are market based strategies that enable the organization to meet the needs and desires of a target market. These strategies must allow a company to evaluate and adapt to changing environments, continuously enhancing core competencies, and developing new strengths on an ongoing basis. This type of operations strategy aligns with sales and marketing strategies to manage and fulfill customer expectations, and contributes to building loyalty and referral business.
- Core Competencies Strategy - Core competencies are the strengths and resources within a company. This type of operations strategy revolves around the main strengths of a company's business model. By identifying the best core business processes within an organization; this type of operations strategy focuses on leveraging existing strengths to maximize profitability. By identifying its core competencies a company can develop processes such as customer satisfaction, product development, and building professional relationships with stakeholders. This type of operations strategy involves developing the company's key strengths and resources. Core competency based strategies are resource-based strategies, and may include having well-trained staff, optimal business locations, and marketing and financial strengths.
- Competitive Strategies - This type of operations strategy involves a company developing its operations processes to distinguish their products or services from competitors based on identified competitive priorities and established competitive advantage. A company can change their operations strategy to move towards a competitive advantage based on higher quality product, faster lead time during production, etc..
- Product Development - Operations strategy around product (good/service) development aim to develop compelling products and services that resonate with a firm's customers. Operations strategy behind the development of products - goods and service - should consider design, innovation, and added value. When developing a product - good or service - a company should consider the wants and needs of its customers, how it stands against the competition, and how its technical measures relate to its customers' needs. Companies should consider packaging services with immediately observable and psychological benefits and support services. This type of operations strategy resolves around the quality control of existing products or services as well as the development of new products and services. Businesses using this model often determine their operations strategies based on research and ideas from product managers.
- Supply Chain Strategy - This strategy refers to the process of creating excellence through superior delivery capabilities. One type of supply chain operations strategy might be to reduce product costs through bulk purchases, or production line automation. Another, might look at offering product customization to deliver more customer value, while simultaneously making the delivery of goods more efficient.
- Market penetration strategy - This focuses on capturing larger segments of the target customer market. This strategy has several potential focus areas: a business can decide to attract customers away from competitors; or it can attract nonusers that have no experience with your business or with a competitor. Another focus of this strategy is employing one or more geographic locations, centered around a target demographic. Businesses can also try to add more value to existing clients, thereby enticing increased spending on product or service upgrades. For example, an insurance company might define market penetration success by the number of new automobile policies sold. In this regard, it may also decide to hire additional insurance sales agents, open additional branch offices in new locations, partner with online portals, etc. to gain additional customers.
- Location Strategy - This related to decisions as to how near the company and its products should be to the consumers, suppliers, and talent while taking into consideration costs, infrastructure, logistics, and government.
- Layout Strategy - This relates to integrating capacity needs, personnel levels, inventory requirements, and technology in order to ensure that material, people, and information efficiently flow through the company.
The above are some common types of operations strategies an organization can use to enhance efficiency, boost capabilities and improve competitive advantage, includes:
Components of Operations Strategy
Operations strategy consists of a series of decisions that organizations take in order to implement their competitive business strategies. These decisions that comprise an operations strategy can be grouped into different elements or components of the strategy, such as:
- Product Operations - Product operations management look to streamline processes; analyze data regarding their products and use it to prioritize tasks, and help product management decide which elements of a product to prioritize.
- Designing and Positioning the Production System - This element includes choosing the type of processing system, production design, and finished goods inventory plan, etc. for each main line of product in the business plan. Production systems are of two (2) types: Systems focused on Products; and Systems focused on Processes.
- Focusing Production/Manufacturing and Service Facilities - One of the important elements of operations strategy is to plan for different production facilities to achieve some sort of specialization in each of them. This allows the production facility to gain a command over achieving specific objectives because the equipment, procedures, and supporting systems can focus on certain limited tasks for a particular set of customers.
- Design and Development of Product/Service - The design and development process involve different stages and phases such as: generating ideas, making the feasibility reports, designing and testing prototypes, preparing a production model, evaluating production related economies of scale, market-based testing of the product/service, taking feedback, and developing final design and initiating production.
- Inventory Management - [TBD]
- Supply Chain Optimization - [TBD]
- Quality of Final Product - [TBD]
- Selection of Technology and Process Development - An essential aspect of operations strategy is to determine the way of producing products/services. This includes making decisions and plans on every detail of processes and facilities in production. To achieve the optimum level of production, the analysis of the selected product for production is conducted for the process and appropriate technology. Operations managers face various challenges in taking such decisions due to the availability of lots of options or alternatives.
- Resource Allocation - This involves the continuous allocation of resources such as: cash, capital, workforce, machines, materials, capacity, equipment, services, etc. The allocation of these resources must be done in such a way that helps in achieving the goals of operations up to a maximum extent. Allocating these resources at the right time and place of production shows the efficiency level of production managers. Economical production can be achieved by utilizing resources in an optimal way. A sound operations strategy is required to obtain superior quality products, minimize wastage and optimum utilization of available resources.
- Planning of Capacity, Facility, and Layout - These are key decision areas critical to achieve competitive advantage, are creating layout, facilities, and location for the production of products/services, .The expansion of the manufacturing unit in the future also depends on these decisions related to the land and equipment acquisition for production, and location of new manufacturing units.
Operations strategy is essentially, about the different ways of aligning plans, activities, and objectives.
Structure and Infrastructure Decisions
Operations strategy is the whole system of decisions that are aimed at shaping both the long-term capabilities of operations, regardless of the type of operations, and their contribution to overall strategy achievement. The realized operations strategy is the total pattern of decisions which shape the long-term capabilities of any type of operations and their contribution to the overall business strategy. These decisions can be categorized as structure or infrastructure decisions.
Structural decisions are the ones that define the shape of the building blocks associated with a particular operation. They are directly related to the tangible aspects of operations, such as: process technology for manufacturing, vertical integration, facilities - location, capacity, and variety of product manufacturing. Structural decisions define the overall tangible shape and architecture of the operations. The elements or components of structural decisions category include:
- Facilities: Size, Capacity and Location - Facilities operations decisions refer to size, capacity and plant location(s). Factory capacity refers to the level and variety of manufacturing output.
- Location - Plant location may depend on a number of factors, such as: location of raw materials, location of markets, availability of transportation and communication systems, qualification of workforce, etc. Globalization can also affect location decisions as firms have to be competitive within a unique market.
- Process technology - This may refer to manufacturing process technology. Firms may produce either high volumes of standardized homogeneous and undifferentiated products, or low volumes of differentiated products, specific to customers' preferences by using general equipment or manufacturing machines. Innovative information technologies let firms develop and exploit new automation manufacturing technologies that give these firms more flexible and efficient solutions to material requirements planning or operations engineering.
- Vertical Integration - Managers have to decide which raw materials or components are necessary to be internally developed and which ones must be externally bought. Vertical integration can be useful choice to get economies of scale.
Structural decisions have several remarkable strategic implications, they require substantial financial investments, and have great effects on physical assets. They have long term impact, and are not easily reversible, once they have been taken. A company's structure is related to the physical attributes of operations.
Infrastructural decisions or practices, comprise just operational practices or decisions that correspond to operations managers exclusively. These decisions may be considered as strategic or tactical choices because they refer to the people, systems, policies, practices, procedures and organization which support the value creation processes (i.e., goods manufacturing or service production) and enable them to perform their function. The elements of infrastructural decisions and practices may include:
- Quality Management - This defines the expected quality from the consumers view point as well as established policies and procedures that the company intends to adopt towards attaining such quality levels. Quality management can be defined from two (2) points of view. A simple quality control process oriented towards reducing the number of defects in final products; It is just an inspection process. The other view is considering quality management as an operations philosophy on trying to erode any source of defects. :
- Workforce/Human Resources - This relates to decisions on how to recruit, motivate and retain the staff with necessary skills and talents.
- Inventory Management - This relates to decisions about inventory ordering and holding, and how to optimize the process in order to ensure consumers' satisfaction, enhanced supplier capabilities and effective production schedule.
- Organizational Structure - This refers to corporate structure and business structure. Corporate structure is the business arrangement created in response to demands of corporate strategy. Corporate structure decisions result in different organizational units, each focusing on different tasks or specialties. To achieve unity of effort by combining the activities of these diverse units, the organization relies on integrative methods and mechanisms provided though structural integration.
- Planning and Control Systems - Production planning and control systems contribute to the productivity of resources by ,making it possible to accurately match the supply of capacity and inventory to demand.
- New Product/Service Design - Product/service design processes dictate the product or service attributes that will provide the customers the value they seek.
- Process Capacity and Design - This defines how the product - good or service - is produced (i.e., the production processes utilized and the specific technology, quality, human resource, and capital investments that the management will undertake in order to determine majority of the company's basic cost structure.
- Supply Chain Management - This relates to decisions on how to integrate supply chain into the company's operations and strategy It includes decisions on what will be purchased when it will be purchased, whom it will be purchased from and the conditions for such purchases. Procurement is the process of getting the goods and materials your company needs.
Infrastructural decisions relate to systems used to enhance enhance the utilization of structural resources, and the control of those resources so the business achieves a high level of productivity. Infrastructure decisions affect organizational culture control systems, workforce, quality management and leadership. Their cumulative effects can be difficult and costly to change, just like the structural ones are.
[TBD]
Operations strategy is the set of decisions an organization makes, regarding those various operations they take, in the production and delivery of products - goods and/or services. Operations strategy is the system of decisions that a firm makes to achieve long-term competitive advantage. It is the collective concrete actions chosen, mandated or stipulated by corporate strategy and implemented in the operations function. Operations strategy specifies how the firm will employ its operations capabilities to support the business strategy. Each organization strategy requires a tailored operations strategy. Operations strategy works in tandem with overall business strategy, helping organizations to achieve their long-term goals and improve competitiveness. Operations strategy acts like a plan to specify the structure and usage of resources. Operations strategy drives a company's operations function, the part of the business that produces and distributes goods and services.
The realized/real operations strategy of a company, is the set of the actual operations management decisions that are taken over time, and shape the operations of a company. Operations strategy is the logic underlying operations management decisions.
Operations strategy focuses on maximizing the efficiency and effectiveness of production of services or goods while minimizing operating costs. Operations strategy focuses on maximizing the efficiency and effectiveness of production of services or goods while minimizing operating costs. Operations strategy focuses on reducing process costs, and improving profits for the entire business. Operations strategy helps operations management optimize the use of resources, people, processes and technology. Operations strategy helps align the organization's operations with the overall goals and objectives, and enable it to more effectively compete in the market.
Strategy Implementation
Strategy Implementation is a function of the strategic management process. Strategy implementation is the organizing function of the strategic management process, and it is concerned with turning selected formulated strategy into action for attaining the desired results established during strategy formulation. Strategy implementation involves the creation of a strategic plan, as well as a number of other plans that are linked to appropriate control systems, such as: budgeting, operations systems and incentive systems, within the organization. These plans may include: action plans, implementation plan, and operational plans, and tactical plans.
Strategy implementation is all about “how” the activities will be carried out, “who” will perform them, “when” and "how often" will they be performed, and “where” will the activities be conducted. And it does not refer only to the installation or application of new strategies but also to existing strategies that have always worked well in the past years, and are still expected to yield excellent results in the coming periods. Reinforcing these strategies is also a part of strategy implementation.
The nature of strategy implementation requires an organization to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed. Strategy implementation includes: developing a strategy-supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance. Strategy implementation produces the resources or strategic assets critical to developing the policies, procedures, regulatory/control mechanisms, and knowledge products used in the creation and delivery of value to customers.
Strategic Planning and Plan
A plan is a set of actions to achieve a specific goal or objective, while a strategic plan is a term organizations use to describe a high-level plan for achieving long-term goals or objectives. Strategic plans provide a framework for future decision-making and guide resource allocation broadly. Developing a strategic plan is a more detailed and practical exercise. It involves translating the high-level strategy into actionable steps, timelines, and responsibilities. Developing a strategic plan is the process of translating the high-level strategy into actionable steps. It’s about creating a detailed roadmap that guides the organization’s actions. The key aspects of developing a strategic plan include:
Developing strategic plan is a detailed planning process, akin to an architect drawing up a blueprints for buildings, where precision and practicality matter. Developing a strategic plan involves translating the strategic vision into a detailed, actionable roadmap. It zooms in on the specific steps required to achieve the strategic goals. The key elements of a strategic plan includes:
The output is a detailed plan that guides day-to-day activities and monitors progress. It emphasizes execution, implementation, and accountability.
Strategy implementation is one way by which an organization's objectives, strategies, and policies are put into action through development of initiatives, programs and projects.
Together, projects, programs, and portfolios combine to deliver the beneficial change required to implement, enable and satisfy the strategic intent of an organization. The implementation tactics you use and the steps you take will depend on the specific undertaking, organization, and goals. Although a manager may talk about "implementing a differentiation strategy", the real implementation of a strategy happens at the bottom of the strategy hierarchy and the organizational hierarchy, through the actions of operational employees who carry out planned tasks that add value to the company's product. Such tasks may include: research and development to add new features, monitoring production to ensure company's products meet high quality standards, and marketing the product to add brand value in the eyes of consumers.
Strategy Implementation Major Tasks
The selected strategy from strategy formulation has to be implemented and executed for it to have any value to the organization. Implementation raises an issue of compatibility with the existing and current resource obligation, structures of the organization, policies, and the system of administration. Strategy implementation revolves around the management of people, resources, and business processes. Even though strategy implementation is unique to each organization, there are some major general tasks management must perform well to successfully implement the strategy. These may include:
Strategy implementation is the responsibility of managers at different levels in the organization (top, middle, and line management) focused on building capacity through projects and programs to strengthen or enhance the organization's strategic assets utilized in creating value for customers and stakeholders.
Strategy Implementation as a System of Strategic Decisions
Strategy implementation is not an event, rather it is an ongoing process to close the gap between the current organizational capabilities and what the corporate and business strategy calls for. It involves managing change in the organization's internal environment which then allows the organization to successfully adapt /respond to the changing external environment in which the organization exists and operates. Implementation assumes the existence of an operations systems (e.g., payroll system, performance management system, employee compensation and benefits system, employee on-boarding system, etc.).
Strategy implementation consists of all the decisions and actions, and plans required to turn selected strategic choices into reality. It is a complex mix of decisions and activities on managing people, strategy, and operations in creating "fits" between the ways things are done and what it takes for effective strategy execution to make the strategy work as intended. Implementation plan includes several different components that need to be coordinated and managed through the assignment and direction of personnel to carry out the plan. Effective strategy implementation provides the context for successful strategy execution.
Implementation Plan - Components
The implementation plan will be unique to the project you are working on, so it may include additional components not listed above. The implementation plan is more holistic and addresses other variables that affect the implementation process such as risks, resources, and team roles and responsibilities. The implementation plan defines the responsibility of top, middle and lower level managers focused on the creation of new strategic assets and/or enhancement and strengthening existing strategic assets needed by the entity in order to build an organization capable of carrying out the strategy and maintaining its ability to achieve future outcomes.
Action Plan
The action plans are schedules for actions to be taken, and policies and procedures that guide resource allocation and prioritization decisions. An action plan focuses exclusively on describing work packages and tasks. The basic elements of the action plan are a list of activities needed for implementation, and time table showing when, responsibilities for each activity, time table of activities, budgeted costs, expected flow of funds, resources needed, etc. Resources are constraints on the course of action. It also involves budgeting - identifying the sources and levels of resources that can be committed to the courses of action.
Operational Plan
The Operations Plan describes milestones, conditions for success and explains how or what portions of a strategic plan will be put into operation during a given operations period. The operations plan is a basic tool that directs the day-to-day activities of organizational staff. An operational plan addresses four basic questions: Where are we now? Where do we want to be? How do we get there? How do we measure our progress?
Strategy Implementation is a function of the strategic management process. Strategy implementation is the organizing function of the strategic management process, and it is concerned with turning selected formulated strategy into action for attaining the desired results established during strategy formulation. Strategy implementation involves the creation of a strategic plan, as well as a number of other plans that are linked to appropriate control systems, such as: budgeting, operations systems and incentive systems, within the organization. These plans may include: action plans, implementation plan, and operational plans, and tactical plans.
Strategy implementation is all about “how” the activities will be carried out, “who” will perform them, “when” and "how often" will they be performed, and “where” will the activities be conducted. And it does not refer only to the installation or application of new strategies but also to existing strategies that have always worked well in the past years, and are still expected to yield excellent results in the coming periods. Reinforcing these strategies is also a part of strategy implementation.
The nature of strategy implementation requires an organization to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed. Strategy implementation includes: developing a strategy-supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance. Strategy implementation produces the resources or strategic assets critical to developing the policies, procedures, regulatory/control mechanisms, and knowledge products used in the creation and delivery of value to customers.
Strategic Planning and Plan
A plan is a set of actions to achieve a specific goal or objective, while a strategic plan is a term organizations use to describe a high-level plan for achieving long-term goals or objectives. Strategic plans provide a framework for future decision-making and guide resource allocation broadly. Developing a strategic plan is a more detailed and practical exercise. It involves translating the high-level strategy into actionable steps, timelines, and responsibilities. Developing a strategic plan is the process of translating the high-level strategy into actionable steps. It’s about creating a detailed roadmap that guides the organization’s actions. The key aspects of developing a strategic plan include:
- Specifics: Defining precise actions and tasks, including who will do what, how, and when
- Goals and Objectives: It outlines specific goals and objectives that align with the strategy.
- Execution: Determining how to implement the strategy.
- Measurement: The plan allows organization to gauge their performance over time.
- Adaptation: Regularly reviewing and adjusting the plan.
Developing strategic plan is a detailed planning process, akin to an architect drawing up a blueprints for buildings, where precision and practicality matter. Developing a strategic plan involves translating the strategic vision into a detailed, actionable roadmap. It zooms in on the specific steps required to achieve the strategic goals. The key elements of a strategic plan includes:
- Tactical Actions: Defining specific initiatives, projects, programs, and programs.
- Resource Allocation: Allocating resources (financial, human, technological) to each initiative.
- Timelines: Establishing deadlines and milestones.
- Performance Metrics: Identifying how success will be measured.
- Risk Mitigation: Addressing potential challenges.
The output is a detailed plan that guides day-to-day activities and monitors progress. It emphasizes execution, implementation, and accountability.
Strategy implementation is one way by which an organization's objectives, strategies, and policies are put into action through development of initiatives, programs and projects.
- Portfolios structure investments in line with strategic initiatives and objectives, while balancing, aligning, and scrutinizing capacity and resources.
- Strategic Initiatives are the means through which a company translates its goals and vision into practice. They are the specific actions or goals an organization adopts to bring its vision to life.
- Programs combine business-as-usual with projects and steady state activities dictated by strategic priorities.
- Projects are transient endeavors that bring about change and achieve planned objectives.
Together, projects, programs, and portfolios combine to deliver the beneficial change required to implement, enable and satisfy the strategic intent of an organization. The implementation tactics you use and the steps you take will depend on the specific undertaking, organization, and goals. Although a manager may talk about "implementing a differentiation strategy", the real implementation of a strategy happens at the bottom of the strategy hierarchy and the organizational hierarchy, through the actions of operational employees who carry out planned tasks that add value to the company's product. Such tasks may include: research and development to add new features, monitoring production to ensure company's products meet high quality standards, and marketing the product to add brand value in the eyes of consumers.
Strategy Implementation Major Tasks
The selected strategy from strategy formulation has to be implemented and executed for it to have any value to the organization. Implementation raises an issue of compatibility with the existing and current resource obligation, structures of the organization, policies, and the system of administration. Strategy implementation revolves around the management of people, resources, and business processes. Even though strategy implementation is unique to each organization, there are some major general tasks management must perform well to successfully implement the strategy. These may include:
- Building a Capable Organization - This means building a sound organization capable of executing the strategy. An organization becomes sound when its employees are competent, its management structure is matched with its requirements and it has high competitive capabilities. Organization-building actions include: developing competent personnel, developing competitive organizational capabilities, and developing dynamic organizational structure.
- Establishment of Strategy Supportive Budget - This ensures that relevant business units/divisions/departments have sufficient budgets to do their work successfully. Senior management responsible for preparing budgets in the company need to take care of the budgetary requirements of each unit. Budgets are financial statements of the resources required to achieve a set of finite objectives or put into action a formulated strategy. Resource allocation as expressed in the budget needs to be carefully linked to strategy. BCG Product Portfolio Matrix is one of the tools that can be used to link resource allocation decisions to choice of strategy. Budgets can be classified into the following categories: Capital Budgets, Revenue Budgets, and Expenditure Budgets.
- Installment of Internal Administrative Support Systems - The term Internal Systems refers to the policies and processes required to ascertain desirable behavior, information system providing strategically critical information on time, and other management and operations systems such as: accounting system, budgeting system, and measurement and reward system. The system directly involved in the implementation of strategy is the project planning system which involves the scheduling of specific tasks for carrying out the project. These internal systems help support the management process and the manner in which managers coordinate and control strategic process.
- Designing Strategy-Supportive Rewards and Incentives - This deals with the planning that helps in associating rewards and incentives with strategy and objectives. The personnel of various departments should be motivated to work towards accomplishing the strategy. The organization should motivate its employees with the help of rewards, incentives, sanctions, controls, and standards.
- Building Strategy-Supportive Corporate Culture - Organizational or corporate culture is the pattern of role-related beliefs, values, and expectations Organizational culture defines the particular way the organization solves problems of survival through adaptation to its external environment and internal integration which is supportive of the strategy. It is a social control system with norms as behavior guides. Rules and norms for behavior within an organization are derived from these beliefs, values, and expectation. Norms of behavior can actually exert more control over employee behavior than a set of objectives and sanctions. Norms can also work to discourage sloppy work which will violate a set of shared values of excellence held by employees. Culture manifests itself in the particular way things are done in an organization including how decisions are made. Culture affects who gets hired, how they get trained (formally or informally), what behaviors get rewarded, who gets promoted, and virtually all organizational procedures and administrative protocols.
- Exercising Strategic Leadership - Leadership is an organizational capability that an organization must possess, at decent levels, to enable leaders and management to effectively organize, coordinate and communicate the organization's direction nd vision to the workforce and keep them motivated and committed to achieve the strategic objectives and goals. This is a potential source of competitive advantage, and therefore, highly essential for successful strategy implementation. It is construed as the ability to anticipate, envision, and maintain flexibility, and empower others to create strategic ,change as necessary. Successful strategic leaders in organizations effectively and gainfully influence the employees' behavior and thoughts. They are capable of creating intellectual capital.
- Establishing Strategy-Supportive Policies and Procedures - Policies and (operating/work) procedures must have conformity with the organization's strategy. Strategy-supportive polices are essential as they provide useful guides for decision-making. Strategy-supportive work procedures or work practices ensure proper support for effective strategy implementation. Well conceived policies and procedures promote the creation of a work climate that facilitates effective strategy implementation.
- Instituting Mechanisms for Continuous Improvement - There are a number of Continuous Improvement Mechanisms that can be used to improve business operations and processes (including products and services). Some examples of these are: Business Process Re-engineering (BPR), Total Quality Management (TQM), and Six Sigma.
- Instituting Best Practices - Best practices are those business activities of either competitors or some other organization that have proven very successful in achieving business goals. A company may have best practices, for example, in exceeding customer expectation, or in motivating employees. A company can identify the best practices of other companies through bench marking.
- Designing Strategic Control Systems - Strategic control systems are management tools used to track an organization's progress toward its strategic goals, identify any issues or problems, and take corrective action, if needed. Strategic controls are designed by management to answer the following questions:(1) Are we moving in the proper direction?; Are our assumptions about major trends and changes correct?; Do we need to adjust this strategy? (2) How are we performing?; Are we meeting objectives and schedules?; How are costs, revenues and cash flows matching projections? Do we need to make operational changes? Strategic controls provide basis for correcting the actions and directions of the organization in implementing its strategy as the external environment situation, and internal situations are developing (changing).
Strategy implementation is the responsibility of managers at different levels in the organization (top, middle, and line management) focused on building capacity through projects and programs to strengthen or enhance the organization's strategic assets utilized in creating value for customers and stakeholders.
Strategy Implementation as a System of Strategic Decisions
Strategy implementation is not an event, rather it is an ongoing process to close the gap between the current organizational capabilities and what the corporate and business strategy calls for. It involves managing change in the organization's internal environment which then allows the organization to successfully adapt /respond to the changing external environment in which the organization exists and operates. Implementation assumes the existence of an operations systems (e.g., payroll system, performance management system, employee compensation and benefits system, employee on-boarding system, etc.).
Strategy implementation consists of all the decisions and actions, and plans required to turn selected strategic choices into reality. It is a complex mix of decisions and activities on managing people, strategy, and operations in creating "fits" between the ways things are done and what it takes for effective strategy execution to make the strategy work as intended. Implementation plan includes several different components that need to be coordinated and managed through the assignment and direction of personnel to carry out the plan. Effective strategy implementation provides the context for successful strategy execution.
Implementation Plan - Components
- Objectives - Outline project objectives; thee are goals or milestones you want to reach. Set your goals and decide what metric your team will use to measure and monitor progress. Identify the goals that the new strategy should achieve. Determine what you hope to accomplish when your project is completed, like whether you hope to win over a new marketing client, or revamp your internal content strategy. Goals help establish a clear picture of what you hope to attain. Without a clear picture of what you are trying to attain, it can be difficult to establish a plan for getting there. Another important aspect of goal setting is to account for variables that might hinder your team's ability to reach the identified goals and lay out contingency plans.
- Scope Statement - Set the scope of your project by conducting research. The project statement should outline the boundaries you've set for your project and broadly define what goals, deadlines, and project outcomes you will be working towards.
- Outline of Deliverables - Deliverables are the tangible products your project delivers. The deliverables can serve as a resource when managing time frames, delegating tasks, and allocating resources.
- Schedule Milestones (Task Due Dates) - Although the project timelines may change as your project progresses, it is important to clarify your expected due dates during implementation panning. Estimate tasks due dates, and schedule milestones around these due dates.
- Allocate Resources - This involves allocation of resources - financial, physical, human, and technological resources - to the departments and function areas responsible for executing the strategy. Resource allocation is a central management activity that allows for strategy execution.
- Designate Team Members Relationships, Roles and Responsibilities - Determine who needs to do what and when. Develop action plans to help determine "what" specific actions or activities need to be carried out by "who", and "when" in order to achieve a goal within the constraints defined by the objective statements. An action plan gives a time table for implementing a strategy. In this phase it can be helpful to document all of the resources available, including the employees, teams and departments that will be involved. Outline a clear picture of what each resource is responsible for achieving, and establish a communication process that everyone should adhere to.
- Map Out Risks - Map out all the potential risks you may face in your project, as identified in your brainstorming strategic risk scenarios.
The implementation plan will be unique to the project you are working on, so it may include additional components not listed above. The implementation plan is more holistic and addresses other variables that affect the implementation process such as risks, resources, and team roles and responsibilities. The implementation plan defines the responsibility of top, middle and lower level managers focused on the creation of new strategic assets and/or enhancement and strengthening existing strategic assets needed by the entity in order to build an organization capable of carrying out the strategy and maintaining its ability to achieve future outcomes.
Action Plan
The action plans are schedules for actions to be taken, and policies and procedures that guide resource allocation and prioritization decisions. An action plan focuses exclusively on describing work packages and tasks. The basic elements of the action plan are a list of activities needed for implementation, and time table showing when, responsibilities for each activity, time table of activities, budgeted costs, expected flow of funds, resources needed, etc. Resources are constraints on the course of action. It also involves budgeting - identifying the sources and levels of resources that can be committed to the courses of action.
Operational Plan
The Operations Plan describes milestones, conditions for success and explains how or what portions of a strategic plan will be put into operation during a given operations period. The operations plan is a basic tool that directs the day-to-day activities of organizational staff. An operational plan addresses four basic questions: Where are we now? Where do we want to be? How do we get there? How do we measure our progress?
Strategy Execution
Strategy execution is one of the three (3) co-incident determinants of the strategic management process including strategy formulation and strategy implementation. Strategy execution takes place within the context of strategy implementation, and is a change control process involving a series of integrated decisions/actions that take place over time, and inextricably change the organization and its relationship with its environments. Strategy execution involves a disciplined and systematic approach to managing - directing, controlling and facilitating - the day-to-day decisions and activities undertaken at all levels in the organization (involving top management through middle management, and front-line managers and workers) that carryout the ongoing pursuit of a strategy and complete it. Successful execution involves decisions about strategy, organization design - structure, information sharing, incentives and controls - within an organizational context of power, culture, leadership and ability to manage change.
Strategy Execution Planning and Plan
After the strategy execution team is formed, its first task is to write the strategy execution plan that guides strategy execution. This involves:
Strategy execution is a disciplined process - a logical set of connected activities that enable an organization to make its strategy work as intended. It is concerned with managing initiatives - this is where strategy is translated into practice or remains on paper - and building adequate organization strategic capability - the organization's ability to harness all its skills, organizational capabilities, and resources - in order to gain competitive advantage, and thus survive and increase its value over time. The focus of strategic capability is on the organization's assets, resources, market position in projecting how well it will be able to employ strategies in the future.
Strategy Execution Management
Strategy execution is the process for executing the strategic choices by means of budgeted resource allocations; focus on getting the work of the business done efficiently and effectively. Execution involves doing things to create "fits" between the way things are done and what it takes to make the strategy work as intended. is an action-oriented process for building a capable organization that can make the selected planned/formulated strategy work as intended, through execution of the initiatives in those plans to realize the actual strategy. It revolves around the management of people resources, and business processes. Strategy execution management tasks may include:
Strategy execution can lead to organizational learning, so the execution flow includes feedback loops and controls. The controls portion comprises feed-forward, concurrent, and feedback controls.
Successful strategy execution involves managing the successful transformation of the organization to better position it to deliver its mission and meet the desired outcomes. Successful strategy execution involves decisions about managing changes to appropriate elements of the Operating Model which is concerned with how resources are organized and operated to get critical work done. Changes to elements of the organization's Operating Model may include: governance, accountability, or culture, and in some cases overhauling the whole structure, when a company's strategy changes.
The successful execution results in a company's actual/realized strategy - typically a combination of (1) planned - deliberate and purposeful actions and (2) emergent - as-needed reactions to unanticipated developments and fresh competitive pressures. A realized strategy is the strategy that an organization actually follows. Successful execution is the best possible results a strategy and its implementation will allow in the actual realized strategy. Realized strategies are a product of a firm’s intended strategy (i.e., what the firm planned to do), the firm’s deliberate strategy (i.e., the parts of the intended strategy that the firm continues to pursue over time), and its emergent strategy (i.e., what the firm did in reaction to unexpected opportunities and challenges).
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Strategy Execution Decisions
Strategy execution involves the decisions and activities the organization undertakes in order to turn the implemented strategy into commercial success. These decisions and activities encompass the thousands of decisions and actions taken every day by executive, middle and line managers, and employees acting according to information they may have, and their own self-interest as influenced by organizational culture, and constrained by organizational policies and procedures. These strategic decisions have to be timely - this refers to "when", in the evolution of changes in the organization, the decisions are made rather than how much time the decision maker has to make the decision.
The execution flow involves both top-down flows and bottom-up flows of decisions.
Once the dyadic information flow is completed, further refinement of the whole process might start again, based on the outcome of this process.
These decisions about change take place within an organizational context of power, culture, leadership, and ability to manage change. This makes it more difficult for managers to control execution.
Execution System
Strategy execution is the continuous process of closing the gap between where the company is, and what the strategy calls for. Execution involves integration of both top-down and bottoms-up flows. The top-down integration involves cascaded flows of coordinated decisions and actions (participation and communication) through the implemented layers of corporate strategy, business strategy and operations strategy in the organization. The bottom up flows of participation and communication of information up to the organization managers through feedback mechanisms.
The ideal execution process for each organization is different, but all include some basic and fundamental building blocks that enable executive management to influence the actions of employees in all areas of the organization that result in effective execution of intended and emergent strategy. These building blocks include:
These building blocks are inextricably linked in a coherent system.
Strategy execution system is a social-technical system that provide the framework to integrates strategic decisions and actions such as:
Strategy execution depends on each member of the organization's daily tasks and decisions, so its vital to ensure everyone understands not only the broader strategic goals, but how their individual responsibilities make achieving them possible.
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In order to exercise control, managers have to take the following steps:
After a strategy is selected, it is implemented over time so as to guide a firm within a changing environment. Managers want to know if the company is headed in the right direction and if current company trends and changes are keeping them on that right path. To answer this question requires the implementation of strategic control.
A firm’s successive strategies are greatly affected by its past history of implemented and executed strategies which determine its current state, emergent strategy, and actual/realized strategy. It is important to reexamine past assumptions, and compare actual results with earlier hypotheses.
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Execution management involves integration of the series of decisions/actions that take place over time, and inextricably changes the organization and its relationship with its environments. The change may be planned or emergent. Successful execution involves decisions about:
These decisions take place within the organizational context of power, culture, leadership and the ability to manage change. Successful execution is the best possible results a strategy and its implementation will allow in the actual realized strategy that closes the strategy-to-performance ('strategy-execution') gap. A company's actual strategy is typically a combination of (1) planned - deliberate and purposeful actions and (2) emergent - as-needed reactions to unanticipated developments and fresh competitive pressures.
Strategy execution is one of the three (3) co-incident determinants of the strategic management process including strategy formulation and strategy implementation. Strategy execution takes place within the context of strategy implementation, and is a change control process involving a series of integrated decisions/actions that take place over time, and inextricably change the organization and its relationship with its environments. Strategy execution involves a disciplined and systematic approach to managing - directing, controlling and facilitating - the day-to-day decisions and activities undertaken at all levels in the organization (involving top management through middle management, and front-line managers and workers) that carryout the ongoing pursuit of a strategy and complete it. Successful execution involves decisions about strategy, organization design - structure, information sharing, incentives and controls - within an organizational context of power, culture, leadership and ability to manage change.
Strategy Execution Planning and Plan
After the strategy execution team is formed, its first task is to write the strategy execution plan that guides strategy execution. This involves:
- The team establishes a set of ambitious, but practical objectives - This involves translating the objectives of the strategy into clear, concrete, measurable, and feasible operational sub-objectives that are linked to departmental process and individual goals. Progress measurement points (milestones) should be established to ensure that focus is not only on end goals/results, but also on intermediate goals (milestones).
- The team defines concrete tasks and activities that are required to achieve the objectives of the strategy. There should be detailed specification of the individual steps that are required to execute the strategy.
- The execution team assigns clear responsibilities for performing the tasks and activities. This involves assigning responsibilities to actions identified and planned during implementation.
- The execution team develops the strategy execution plan - This involves developing integrated functional strategies by translating the objectives and activities to all organization units impacted by the strategy. Each organization unit must then clearly describe how they will contribute to the realization of the organization's strategy. The strategy is often translated into the annual plan of the organizational unit. The objectives and activities of the annual organizational unit plan tend to be the level at which the progress of the strategy and its execution is monitored.
Strategy execution is a disciplined process - a logical set of connected activities that enable an organization to make its strategy work as intended. It is concerned with managing initiatives - this is where strategy is translated into practice or remains on paper - and building adequate organization strategic capability - the organization's ability to harness all its skills, organizational capabilities, and resources - in order to gain competitive advantage, and thus survive and increase its value over time. The focus of strategic capability is on the organization's assets, resources, market position in projecting how well it will be able to employ strategies in the future.
Strategy Execution Management
Strategy execution is the process for executing the strategic choices by means of budgeted resource allocations; focus on getting the work of the business done efficiently and effectively. Execution involves doing things to create "fits" between the way things are done and what it takes to make the strategy work as intended. is an action-oriented process for building a capable organization that can make the selected planned/formulated strategy work as intended, through execution of the initiatives in those plans to realize the actual strategy. It revolves around the management of people resources, and business processes. Strategy execution management tasks may include:
- Visualize the Strategy - Visualization of the strategy enables shared understanding of what the strategy is. An effective way to visualize the strategy to improve understanding is an illustration that shows the important elements of the strategy and how each related to one another and to the mission goals. Frameworks such as the Strategy Map by Kaplan and Norton, etc. help in this regard.
- Measure the Strategy - The key goals elements of the strategy should be assigned an easily understood performance measure. The full set of strategic performance measures can be organized into a Balanced Scorecard based dashboard to help managers determine the progress or lack there of of the strategy execution.
- Report Progress, Compare and Learn - Your strategy is a hypothesis, its your best estimate of the route to success. It is essential to check your hypothesis at the end of an execution cycle (just like budgets are reviewed monthly to ensure financial commitments are being kept), to ensure the strategy is producing results, versus controlling performance. Compare your initial strategic assumptions with what you have learnt from the reality of the results from the completed execution cycle. In addition, look back at your Strategy Execution Capability as well to ensure it is supportive of your strategy.
- Make Decisions and Update strategy - Strategy execution is much like sailing a boat toward a planned destination. A defined course and full complement of navigational charts will not eliminate the need to remain vigilant, to assess the environment, and to make corrections as conditions change while on the journey. As part of the regular reporting process leaders must make ongoing strategic decisions and update the strategy to keep it current and on course. A company needs to update its strategy based on changes in its competitive environment and on the strategy execution feedback from reporting on the previous cycle, as well as update and fine tune your execution capabilities if necessary. Adjust or revise the strategy as necessary. Implementation is an iterative process, so the work doesn’t stop as soon as you think you’ve reached your goal. Processes can change mid-course, and unforeseen issues or challenges can arise. Sometimes, your original goals will need to shift as the nature of the project itself changes.
- Manage Initiatives - This is about selecting, prioritizing, and executing the right initiatives - those actions/plans - that will lead to achieving specific strategic objectives or closing objective performance gap. Strategic initiatives are new plans or actions to improve strategic asset or solve a strategic problem.
- Manage Projects - Develop a capability in project management to coordinate and control - monitor and report progress - the execution of critical strategic projects focused on improving an organization's delivery on its mission. These projects statements include scope, budget, and start/end dates. One effective strategy for monitoring progress is to use daily, weekly, and monthly status reports, and check-ins to to provide updates; reestablish due dates and milestones, and ensure all teams are aligned.
- Communicate Strategy - Leaders must communicate their visualized strategy to the workforce in a way that will help them understand not only what needs to be done, but why.
- Align Workforce Individual Roles - Set individual performance goals and objectives for managers and employees. Make to link all individual objectives with the strategy at the organization level. Aligning Individual Roles - Senior leadership must ensure that employees at all levels can articulate and evaluate their personal contribution towards achieving specific strategic goals.
- Reward Performance - After explaining the strategy and aligning the workforce to it, senior managers must institute the incentives that drive behaviors consistent with the strategy. Monitor and coach regularly to motivate and provide feedback in the right way.
- Evaluate Performance - Most organizations conduct a formal performance evaluation and review at the end of the individual performance management cycle. The evaluation should answer the basic question; "have the individual performance objectives been achieved?"
- Get Closure on the Project, and Agreement on the Output - Everyone on the team should agree on what the final product should look like based on the goals set at the beginning. When you’ve successfully implemented your strategy, check in with each team member and department to make sure they have everything they need to finish the job and feel like their work is complete.
- Review of How the Process Went - Conduct a retrospective. Once your strategy has been fully implemented, look back on the process and evaluate how things went. Ask yourself questions like:
- Did we achieve our goals?
- If not, why? What steps are required to get us to those goals?
- What roadblocks or challenges emerged over the course of the project that could have been anticipated? How can we avoid these challenges in the future?
- In general, what lessons can we learn from the process?
Strategy execution can lead to organizational learning, so the execution flow includes feedback loops and controls. The controls portion comprises feed-forward, concurrent, and feedback controls.
Successful strategy execution involves managing the successful transformation of the organization to better position it to deliver its mission and meet the desired outcomes. Successful strategy execution involves decisions about managing changes to appropriate elements of the Operating Model which is concerned with how resources are organized and operated to get critical work done. Changes to elements of the organization's Operating Model may include: governance, accountability, or culture, and in some cases overhauling the whole structure, when a company's strategy changes.
The successful execution results in a company's actual/realized strategy - typically a combination of (1) planned - deliberate and purposeful actions and (2) emergent - as-needed reactions to unanticipated developments and fresh competitive pressures. A realized strategy is the strategy that an organization actually follows. Successful execution is the best possible results a strategy and its implementation will allow in the actual realized strategy. Realized strategies are a product of a firm’s intended strategy (i.e., what the firm planned to do), the firm’s deliberate strategy (i.e., the parts of the intended strategy that the firm continues to pursue over time), and its emergent strategy (i.e., what the firm did in reaction to unexpected opportunities and challenges).
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Strategy Execution Decisions
Strategy execution involves the decisions and activities the organization undertakes in order to turn the implemented strategy into commercial success. These decisions and activities encompass the thousands of decisions and actions taken every day by executive, middle and line managers, and employees acting according to information they may have, and their own self-interest as influenced by organizational culture, and constrained by organizational policies and procedures. These strategic decisions have to be timely - this refers to "when", in the evolution of changes in the organization, the decisions are made rather than how much time the decision maker has to make the decision.
The execution flow involves both top-down flows and bottom-up flows of decisions.
- Top-Down: Top-down flows of decisions and actions from corporate strategy decisions through business strategy decisions to strategy implementation decision and actions (participation and communication down and across operating units),
- Bottoms-Up: Bottom-up flows of information resulting from day-to-day decisions and actions taken in operations influencing corporate level strategic decisions,
Once the dyadic information flow is completed, further refinement of the whole process might start again, based on the outcome of this process.
These decisions about change take place within an organizational context of power, culture, leadership, and ability to manage change. This makes it more difficult for managers to control execution.
Execution System
Strategy execution is the continuous process of closing the gap between where the company is, and what the strategy calls for. Execution involves integration of both top-down and bottoms-up flows. The top-down integration involves cascaded flows of coordinated decisions and actions (participation and communication) through the implemented layers of corporate strategy, business strategy and operations strategy in the organization. The bottom up flows of participation and communication of information up to the organization managers through feedback mechanisms.
The ideal execution process for each organization is different, but all include some basic and fundamental building blocks that enable executive management to influence the actions of employees in all areas of the organization that result in effective execution of intended and emergent strategy. These building blocks include:
- Clarifying decision rights and norms - How decisions are made; How people instinctively act or take action.
- Designing Information flows and Mindsets - How data and knowledge are processed; How people make sense of their work and environment.
- Motivators and Commitments (Aligning motivations of employees with organization purpose) - How people are encouraged to perform; How people are inspired to contribute.
- Aligning Organizational Structure and Network to Strategy - How work and responsibilities are allocated; How connections are made beyond the organizational chart.
- Allocation of resources - This is a set of basic activities in implementation that refers to both financial and non-financial resources that are (a) available to the organization and (b) are lacking but required for strategy implementation. How much funding would be needed to support implementation, covering the cost and expenses that must be incurred in the execution of the strategies? Another resource is time - Is there more than enough time to see the strategy throughout its implementation?
These building blocks are inextricably linked in a coherent system.
Strategy execution system is a social-technical system that provide the framework to integrates strategic decisions and actions such as:
- Strategic decisions, and actions taken resulting from those decisions.
- Operations management decisions and activities performed resulting from decisions.
- Observing the outputs and outcomes of strategic actions through reporting and monitoring environment changes.
- Diagnosing the issues resulting from the patterns of organization behavior effected by organization outputs.
- Timely adaptation to changes in environment and timely response to any identified opportunities or threats to achieving the mission objectives and strategic goals.
Strategy execution depends on each member of the organization's daily tasks and decisions, so its vital to ensure everyone understands not only the broader strategic goals, but how their individual responsibilities make achieving them possible.
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In order to exercise control, managers have to take the following steps:
- Setting performance standards - Every function in the organizations begins with plans which specify objectives or targets to be achieved. In the light of these, standards are established which are criteria against which actual results are measured.
- Measuring actual performance,
- Analyzing variance, and
- Taking corrective actions.
After a strategy is selected, it is implemented over time so as to guide a firm within a changing environment. Managers want to know if the company is headed in the right direction and if current company trends and changes are keeping them on that right path. To answer this question requires the implementation of strategic control.
A firm’s successive strategies are greatly affected by its past history of implemented and executed strategies which determine its current state, emergent strategy, and actual/realized strategy. It is important to reexamine past assumptions, and compare actual results with earlier hypotheses.
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Execution management involves integration of the series of decisions/actions that take place over time, and inextricably changes the organization and its relationship with its environments. The change may be planned or emergent. Successful execution involves decisions about:
- Strategy - This is a hypothesis (educated guess) of the intended approach/means to accomplish specified actions/tasks that contribute to desired goals and objectives. Strategy is achieved through the constant interplay between doing, planning and evaluation in closing the performance gap.
- Structure -
- Coordination -
- Information Sharing -
- Incentives and Controls - []
These decisions take place within the organizational context of power, culture, leadership and the ability to manage change. Successful execution is the best possible results a strategy and its implementation will allow in the actual realized strategy that closes the strategy-to-performance ('strategy-execution') gap. A company's actual strategy is typically a combination of (1) planned - deliberate and purposeful actions and (2) emergent - as-needed reactions to unanticipated developments and fresh competitive pressures.
Implementation
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The role of managers is to guide the organization towards goal accomplishment. Managers are responsible for combining and utilizing organizational resources to ensure their organizations achieve their purposes.
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- Integrating Functional Strategies - Identify and give due consideration to the cross-functional implications of strategy at implementation when the critical issues of strategy are appraised. [Horizontal Integration]
- Develop Tactical plans for functional areas such as marketing, production, personnel, finance, and plant facilities. Implementation requires outstanding collaboration between all members of the various groups throughout the whole organization from top management to line workers.
- Developing budgets that steer resources into those internal activities critical to strategic success.
- Finalizing strategic plan with input from all invested parties.
- Aligning the budget to annual goals.
- Producing various versions of the plan for each group.
- Establishing a system for tracking and monitoring the plan.
- Establishing a performance management and reward system.
- Presenting the plan to the entire organization.
- Building annual department plans around the corporate plan.
The role of managers is to guide the organization towards goal accomplishment. Managers are responsible for combining and utilizing organizational resources to ensure their organizations achieve their purposes.
Strategic Evaluation and Control
Strategic evaluation and control is the process of determining the effectiveness of a given strategy in achieving the organizational objectives, and taking corrective actions when required. Control can be exercised in a number of ways, including: through contingency strategies and a crisis management team. Strategic evaluation can help to assess whether the decisions match the intended strategic requirements. Strategic evaluation, through its process of control, feedback, rewards, and review, helps in a successful culmination of the strategic management process. Strategic evaluation operates in the context of various organizational systems. An organization develops various systems which help in integrating various parts of the the organization.The major organizational systems are: information system, planning system, motivation system, appraisal system, and development system. The major organizational systems are: information system, planning system, motivation system, appraisal system, and development system. All these organizational systems play their roles in strategic evaluation and control process.
Strategy Evaluation
This is a process for making necessary adjustments based on monitoring and control information and strategy performance review. Strategy evaluation ensures that all key supporting elements of the business management systems including Measures and Rewards, Structures and Processes, Culture and People are aligned behind the chosen strategy and hinged on the mission, vision, values and critical success factors (CSF) of the organization. The evaluation and control process is concerned with defining, attaining, and presenting constructive information for reviewing alternatives to the analyzed action plan.
Strategy evaluation involves the assessment of performance measures collected through monitoring of projects and programs to determine the effectiveness of a strategy in meeting strategic objectives. The evaluation may be based on a set of selection criteria/factors that ensures the chosen strategy will be effective. Strategy evaluation is a necessarily intertwined with strategic control. In practice, the term strategic control is used to include evaluative aspects, because unless the results of an action are known, corrective action cannot be taken. An effective evaluation of the strategy begins with defining the parameters to be measured; these parameters should mirror the goals set in the direction setting stage of the strategic management function/process.
Strategic Control
Strategic control is a way to manage the execution of your strategy/strategic plan. It is a management process; and it is unique in that it is built to handle unknowns and ambiguity as it tracks a strategy's implementation and subsequent results. Strategic control is the process for tracking a strategy as it is being executed, detecting problems or changes in the underlying premises and assumptions, and reporting to appropriate management levels.
The purpose of control at the strategic levels is not to answer the question "have we made the right strategic choices at some time in the past?", but rather, "how well are we doing now in the immediate future for which reliable information is available?". The point is not to bring to light past errors but to identify needed corrections to steer the corporation in the desired direction. And this determination must be made with respect to currently desirable long-range goals and not against the goals or plans that were established at some time in the past.
Strategic control is the process used by organizations to control the formation, implementation and execution of strategies. It is a specialized form of management control and differs from other forms of management control (in particular, from operational control) with respect to its need to handle uncertainty and ambiguity at various points in the control process. Strategic control is focused on the achievement of future goals, rather than the evaluation of past performance. The types of strategic controls may include:
Strategic controls allow you to step back and look at the big picture and make sure all the pieces of the picture a correctly aligned. Ordinarily, a significant time span occurs between initial implementation of a strategy and achievement of its intended results. In an organization during the time you are putting a strategy in place (mobilizing resources), numerous projects are undertaken, investments are made, and actions are taken to implement the new strategy. Meanwhile, the environmental situation and the organization's internal situation are developing and evolving. Strategic control are necessary to steer the company through these events, and avoid pitfalls and obstacles,.towards its long term strategic direction. Strategic controls must provide some means of correcting direction on the basis of intermediate performance and new information.
Strategic Control Systems
Strategic controls systems are at their core cybernetic in nature; using one or more closed loop controls to ensure that any observed deviations from expected activity or outcomes are highlighted to managers who can then intervene to correct/adjust the organization's future activities. Strategic controls systems may have controls that are forward looking to give controls that are "future-directed and anticipatory".
Strategic control systems are concerned with effectively monitoring and correcting a firm's strategy and performance. Strategic control involves monitoring a strategy as it is being implemented, evaluating deviations and making necessary adjustments. Strategic controls are mainly of three types: financial, output and behavior controls.
Strategic managers should ensure that financial controls and output controls are supplemented with behavior controls for efficient achievement of goals. Strategic managers can measure efficiency by comparing the total inputs with the total outputs (how many units of inputs are used to produce a unit of output).
Strategic Control is concerned with tracking the strategy as it's being executed, detecting any problem areas or potential problem areas suggesting the strategy is incorrect, and making any necessary adjustments. Data gained at this stage provide feedback enabling the organization to learn and deal better with future strategies. Strategic control involves actions that may include performance measurements, monitoring, consistent review of internal and external issues and factors, and making corrective actions when necessary.
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Strategic control systems necessarily comprise a small set of standard elements, the absence of any one of which makes strategic control impossible to achieve. The four elements include:
The above elements imply an active involvement by senior management in the determination of strategic activities pursued by the component parts of an organization.
Strategic Control system is concerned with tracking the strategy as it's being executed, detecting any problem areas or potential problem areas suggesting the strategy is incorrect, and making any necessary adjustments. A strategic control system monitors the performance of operations and adjusts the strategy to improve performance. There are five (5) parts to a control system, including:
A strategic control system is concerned with tracking the strategy as it is being implemented, detecting problems or changes in the premises and making necessary adjustments. The strategic control system is built to handle unknowns and ambiguity as it tracks a strategy's implementation and subsequent results. The basic components of the strategic control system generate answers to these two questions:
Strategic control is about the big picture. It focuses on the long-term direction of the organization, monitoring progress toward strategic goals, and making changes or adjustments to the overall strategy as needed. Strategic control is an evaluation exercise focused on ensuring the achievement of your goals.
Types of Strategic Control Systems
In strategic control, managers want to know if the company is headed in the right direction, and if current company trends and changes are keeping them on the right path. To answer these questions requires the implementation of strategic controls.
Strategic controls are designed by managers to help them successfully implement and execute the organization's strategies. Managers set up control systems, this typically involves four steps:
These steps must be repeated periodically until the organizational goals are achieved. Strategic control provides managers the tools to regulate and govern their activities through both proactive (feed forward) and reactive (feedback) methods.
Strategic control is concerned with managing organizational financial performance, productivity (output) supplemented with behavior control to ensure the organization efficiently achieves its goals. It involves actions such as monitoring internal and external environments' factors to identify issues and enable you to react to any substantial changes in the business environment.
Strategic control may involve:
Strategic control is concerned with tracking the strategy as it is being implemented, detecting problems or changes in the premises and making necessary adjustments. A strategic control system monitors the performance of operations and adjusts the strategy to improve performance. Strategic control systems make employees more responsive to customers through monitoring and evaluating employees' behavior and contact with customers.
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A viable strategy is defined in terms of the degree to which the strategy meets the following criteria i.e.,:
The whole point about strategy is that the critical factors determining its quality are often not directly observable or simply measured; and by the time strategic opportunities/threats do directly affect operating results, it may well be too late for an effective response.
Strategic evaluation and control is the process of determining the effectiveness of a given strategy in achieving the organizational objectives, and taking corrective actions when required. Control can be exercised in a number of ways, including: through contingency strategies and a crisis management team. Strategic evaluation can help to assess whether the decisions match the intended strategic requirements. Strategic evaluation, through its process of control, feedback, rewards, and review, helps in a successful culmination of the strategic management process. Strategic evaluation operates in the context of various organizational systems. An organization develops various systems which help in integrating various parts of the the organization.The major organizational systems are: information system, planning system, motivation system, appraisal system, and development system. The major organizational systems are: information system, planning system, motivation system, appraisal system, and development system. All these organizational systems play their roles in strategic evaluation and control process.
Strategy Evaluation
This is a process for making necessary adjustments based on monitoring and control information and strategy performance review. Strategy evaluation ensures that all key supporting elements of the business management systems including Measures and Rewards, Structures and Processes, Culture and People are aligned behind the chosen strategy and hinged on the mission, vision, values and critical success factors (CSF) of the organization. The evaluation and control process is concerned with defining, attaining, and presenting constructive information for reviewing alternatives to the analyzed action plan.
Strategy evaluation involves the assessment of performance measures collected through monitoring of projects and programs to determine the effectiveness of a strategy in meeting strategic objectives. The evaluation may be based on a set of selection criteria/factors that ensures the chosen strategy will be effective. Strategy evaluation is a necessarily intertwined with strategic control. In practice, the term strategic control is used to include evaluative aspects, because unless the results of an action are known, corrective action cannot be taken. An effective evaluation of the strategy begins with defining the parameters to be measured; these parameters should mirror the goals set in the direction setting stage of the strategic management function/process.
Strategic Control
Strategic control is a way to manage the execution of your strategy/strategic plan. It is a management process; and it is unique in that it is built to handle unknowns and ambiguity as it tracks a strategy's implementation and subsequent results. Strategic control is the process for tracking a strategy as it is being executed, detecting problems or changes in the underlying premises and assumptions, and reporting to appropriate management levels.
The purpose of control at the strategic levels is not to answer the question "have we made the right strategic choices at some time in the past?", but rather, "how well are we doing now in the immediate future for which reliable information is available?". The point is not to bring to light past errors but to identify needed corrections to steer the corporation in the desired direction. And this determination must be made with respect to currently desirable long-range goals and not against the goals or plans that were established at some time in the past.
Strategic control is the process used by organizations to control the formation, implementation and execution of strategies. It is a specialized form of management control and differs from other forms of management control (in particular, from operational control) with respect to its need to handle uncertainty and ambiguity at various points in the control process. Strategic control is focused on the achievement of future goals, rather than the evaluation of past performance. The types of strategic controls may include:
- Premise Control - Every strategy is founded on certain assumptions relating to environmental and organizational forces. Premise control serves to test continuously these assumptions to determine whether they are still valid or not. This facilitates the strategists to take necessary corrective action at the right time than just pulling on with the strategy based on vitiated or invalid postulations.
- Implementation Control - In order to implement a chosen strategy, there is need for preparing quite good number of plans, programs and projects. The purpose of implementation control is to evaluate as to whether these plans, programs and projects are actually guiding the organization towards its pre-determined goals or not. This type of control is a step-by-step assessment of implementation activities. It focuses on the incremental actions and phases of strategic implementation, and monitors events and results as they unfold. Is each action or project happening as planned? Are the proper resources and funds being allocated for each step? There are two (2) basic types of implementation control:
- Monitoring Strategic Thrusts -This is the assessment of specific projects or thrusts that have been created to drive the larger strategy;
- Reviewing Milestones - During strategic planning, you likely identified important points in the implementation process. When these milestones are reached, your organization will reassess the strategy and its relevance. Milestones could be based on time frames, such as the end of a quarter, or on significant actions, such as large budget or resource allocations. Implementation control can also take place via operational control systems, like budgets, schedules, and key performance indicators.
- Strategic Surveillance - If premise and implementation strategic controls are more specific by nature, strategic surveillance, is more generalized and overriding control which is designed to monitor a broad range of events both inside and outside the organization which are likely to threaten the very course of a firm’s strategy. They allow the organization to monitor a broad range of events and conditions inside and outside the company that are likely threaten the successful achievement of the firm's strategic objectives. This provides the opportunity to uncover important, yet unanticipated information.
- Special Alert Control - When something unexpected happens, a special alert control is mobilized. This is a reactive process, designed to execute a fast and thorough strategy assessment in the wake of an extreme event that impacts an organization. The event could be anything from a natural disaster or product recall to a competitor acquisition. In some cases, a special alert control calls for the formation of a crisis team—usually comprising members of the strategic planning and leadership teams—and in others, it merely means activating a predetermined contingency plan.
Strategic controls allow you to step back and look at the big picture and make sure all the pieces of the picture a correctly aligned. Ordinarily, a significant time span occurs between initial implementation of a strategy and achievement of its intended results. In an organization during the time you are putting a strategy in place (mobilizing resources), numerous projects are undertaken, investments are made, and actions are taken to implement the new strategy. Meanwhile, the environmental situation and the organization's internal situation are developing and evolving. Strategic control are necessary to steer the company through these events, and avoid pitfalls and obstacles,.towards its long term strategic direction. Strategic controls must provide some means of correcting direction on the basis of intermediate performance and new information.
Strategic Control Systems
Strategic controls systems are at their core cybernetic in nature; using one or more closed loop controls to ensure that any observed deviations from expected activity or outcomes are highlighted to managers who can then intervene to correct/adjust the organization's future activities. Strategic controls systems may have controls that are forward looking to give controls that are "future-directed and anticipatory".
Strategic control systems are concerned with effectively monitoring and correcting a firm's strategy and performance. Strategic control involves monitoring a strategy as it is being implemented, evaluating deviations and making necessary adjustments. Strategic controls are mainly of three types: financial, output and behavior controls.
- Financial Control - Managers use a financial control system to measure a company’s financial performance. For effective financial control, they establish financial goals (e.g., growth, profitability, return to shareholders) and then measure the actual achievement of those goals.
- Output Control - In the case of the output control system, managers forecast performance goals for each unit and employee. They measure the actual performance of the units and employees. Lastly, they compare the actual performance against the goals already set for them.
When the performance of employees or units is linked to the reward system, the output control itself provides an incentive structure for employee motivation in the organization. - Behavior Control - A behavior control system refers to a comprehensive system of rules and procedures. These are prescribed to direct the behavior/actions of employees at each level of the organization. Rules and procedures standardize the way of reaching the goals. Two forms of behavior control are;
- operating budgets and
- standardization of inputs, conversion activities (programming work activities so that they are done the same way time and again), and outputs.
Strategic managers should ensure that financial controls and output controls are supplemented with behavior controls for efficient achievement of goals. Strategic managers can measure efficiency by comparing the total inputs with the total outputs (how many units of inputs are used to produce a unit of output).
Strategic Control is concerned with tracking the strategy as it's being executed, detecting any problem areas or potential problem areas suggesting the strategy is incorrect, and making any necessary adjustments. Data gained at this stage provide feedback enabling the organization to learn and deal better with future strategies. Strategic control involves actions that may include performance measurements, monitoring, consistent review of internal and external issues and factors, and making corrective actions when necessary.
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Strategic control systems necessarily comprise a small set of standard elements, the absence of any one of which makes strategic control impossible to achieve. The four elements include:
- Articulation of the strategic outcomes being sought,
- Description of the strategic activities to be carried out (attached to specific managed resources) in pursuit of required outcomes,
- Definition of a method to track progress made against these two elements (usually, through monitoring f a small number of performance measures /indicators and associated target values),
- Identification of an effective intervention mechanisms that would allow observrs (usually, the organization's managers) to change / correct / adjust the organization's activities when targets sre not achieved.
The above elements imply an active involvement by senior management in the determination of strategic activities pursued by the component parts of an organization.
Strategic Control system is concerned with tracking the strategy as it's being executed, detecting any problem areas or potential problem areas suggesting the strategy is incorrect, and making any necessary adjustments. A strategic control system monitors the performance of operations and adjusts the strategy to improve performance. There are five (5) parts to a control system, including:
- Review the goals, objectives and constraints of the operations strategy,
- Monitor conditions and changes in the operations and their environment,
- Measure actual performance in key areas,
- Compare actual performance with plans from the strategy and identify gaps,
- Adjust the strategy to improve performance, moving or adding resources, revising plans, or in the extreme cases changing the whole strategy,
A strategic control system is concerned with tracking the strategy as it is being implemented, detecting problems or changes in the premises and making necessary adjustments. The strategic control system is built to handle unknowns and ambiguity as it tracks a strategy's implementation and subsequent results. The basic components of the strategic control system generate answers to these two questions:
- Has the strategy been implemented as planned?
- Based on the observed results, does the strategy need to be changed or adjusted?
Strategic control is about the big picture. It focuses on the long-term direction of the organization, monitoring progress toward strategic goals, and making changes or adjustments to the overall strategy as needed. Strategic control is an evaluation exercise focused on ensuring the achievement of your goals.
Types of Strategic Control Systems
In strategic control, managers want to know if the company is headed in the right direction, and if current company trends and changes are keeping them on the right path. To answer these questions requires the implementation of strategic controls.
Strategic controls are designed by managers to help them successfully implement and execute the organization's strategies. Managers set up control systems, this typically involves four steps:
- Establish standards
- Measure performance,
- Compare performance,
- Take corrective action as needed
These steps must be repeated periodically until the organizational goals are achieved. Strategic control provides managers the tools to regulate and govern their activities through both proactive (feed forward) and reactive (feedback) methods.
- Proactive control - These systems help in keeping an organization on track, anticipating future events and responding to opportunities and threats.
- Reactive control - These systems help detect deviations after events have occurred and then take corrective actions. Managers can adopt corrective actions through adjustments in the strategy if variations are detected.
Strategic control is concerned with managing organizational financial performance, productivity (output) supplemented with behavior control to ensure the organization efficiently achieves its goals. It involves actions such as monitoring internal and external environments' factors to identify issues and enable you to react to any substantial changes in the business environment.
Strategic control may involve:
- The reassessment of a strategy due to an immediate, unforeseen event. For example, if a company’s main product is becoming obsolete, the company must immediately reassess its strategy.
- Monitoring the progress of strategy Implementation, which often involves a series of activities that occur over a long period time, at various milestones, or intervals at . Managers can effectively monitor the progress of a strategy at various milestones, or intervals to determine whether the overall strategy is unfolding as planned.
- Monitoring internal and external events. Multiple sources of information are needed to monitor events. These sources include conversations with customers, articles in trade magazines and journals, activity at trade conferences, and observations of your own or another company’s operations. For example, Toyota gives tours of its plants and shares the “Toyota Way” even with competitors.
Strategic control is concerned with tracking the strategy as it is being implemented, detecting problems or changes in the premises and making necessary adjustments. A strategic control system monitors the performance of operations and adjusts the strategy to improve performance. Strategic control systems make employees more responsive to customers through monitoring and evaluating employees' behavior and contact with customers.
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A viable strategy is defined in terms of the degree to which the strategy meets the following criteria i.e.,:
- Consistency - The strategy must not represent mutually inconsistent goals and policies.
- Suitability (Appropriateness) - Is the strategy consistent with the organization's mission, values, and operating principles? Does it fit with the vision and mission?
- Consonance - The strategy must represent adaptive response to the external environment and to the critical changes occurring within it as defined by the SWOT Analysis information..
- Advantage - The strategy must provide for the creation and/or maintenance of a competitive advantage in the selected areas of activity.
- Flexibility - Can it be adapted and changed as needed?
- Cost-Benefit - Is the strategy likely to lead to sufficient benefits to justify the costs in time and other resources?
- Timing - Can and should the organization implement this strategy at this time, given external factors and competing demands?
The whole point about strategy is that the critical factors determining its quality are often not directly observable or simply measured; and by the time strategic opportunities/threats do directly affect operating results, it may well be too late for an effective response.
Organizational Strategy
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Organizational Strategy
An organizational strategy is a long-term plan that guides a company’s decision-making process and resource allocation. It outlines how a business organization intends to use its resources—such as finances, staff, facilities, and inventory—to support its business activities and achieve its objectives. Organizational strategy can be conceptualized as strategy layers, such as:
These layers of organizational strategy—corporate, business, operations and functional—interconnect to create a cohesive approach for achieving organizational success. Imagine them as layers in a hierarchy with well defined relationships - corporate strategy provides the context for business strategy decisions, which drives operations strategy, and marketing strategy. The pother functional strategies such as HR, Finance, etc. provide the necessary capabilities to support the foundation.
Organizational Strategy as a System
Strategy can be viewed as a system within the broader management system of an organization as a system. The strategy system is comprised of various components and subsystems that interact and influence each other. Each component plays a specific role, and their integration determines the overall effectiveness of the strategy.
Business strategy is a layered concept, and typically, it is formulated at several levels in an organization. These layers include; corporate, competitive, operations, and functional strategy layers. The strategies from these layers are interconnected by aligning their respective objectives. Each strategy layer serves a distinct purpose but works in concert with the other layers towards a common organizational goal and mission. The relationships between these layers are dynamic and interdependent. Corporate strategy shapes the context for competitive strategy which in turn guide the development of operations strategy.
These layers must be aligned, and integrated with relevant business function strategies that reinforce the strategy layers and enhance overall effectiveness, adaptability, and competitiveness of the organization. The operations strategy objectives contributes to the corporate strategy objectives, and both must align with the chosen competitive strategy. For example, a company might choose a competitive strategy of cost leadership, and its operations strategy objectives would be aligned to reduce production costs, which in turn supports the corporate strategy of becoming a low cost provider in the market. Successful alignment of these objectives is crucial for the sustainable success of the organization as a whole. A misalignment of the strategic layers and business function strategies can lead to inefficiencies, and hindering overall organizational performance. A good business strategy must resolve relevant strategic issues and solve associated problem(s).
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Strategy System Visualization
A strategy system can be visualized as a complex adaptive system with interconnected parts.
Imagine strategy as a complex machine with interconnected parts. Let’s explore some of its components:
Remember, strategy isn’t static—it’s dynamic. Organizations must continuously adapt, learn, and refine their strategies to thrive in a changing world. By mastering the building blocks and viewing strategy as a journey, companies can create powerful and effective strategies that beat the market.
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Organizational Strategy
An organizational strategy is a long-term plan that guides a company’s decision-making process and resource allocation. It outlines how a business organization intends to use its resources—such as finances, staff, facilities, and inventory—to support its business activities and achieve its objectives. Organizational strategy can be conceptualized as strategy layers, such as:
- Corporate Strategy: Corporate strategy is the highest level of strategy within an organization. It focuses on the overall direction and scope of the entire company. The components of corporate strategy address resource allocation, organizational design, portfolio management, and trade-offs.
- Purpose: Corporate strategy answers questions like:
- “What industries should we operate in?”
- “How do we allocate resources across different business units?”
- “What is our long-term vision?”
- Example: Deciding to diversify into a new market or acquire another company1.
- Purpose: Corporate strategy answers questions like:
- Business Strategy: Business strategy operates at the business unit level. It’s about how a specific business competes within its chosen industry. The components of business unit and competitive strategy address: vision and business objectives, SWOT Analysis, Core values and resource allocation, Tactics and Operational delivery, and measurement and performance metrics.
- Purpose: Business strategy addresses questions such as:
- “How do we gain a competitive advantage?”
- “What value do we offer to customers?”
- “Which market segments do we target?”
- Example: Choosing a differentiation strategy by offering unique features or cost leadership by minimizing costs.
- Purpose: Business strategy addresses questions such as:
- Operations Strategy: Operations strategy plays a vital role in organizations, ensuring that resources and processes are managed optimally. It continuously updates business operations and strategies, allowing companies to reduce risks, save money, adopt the latest technologies and remain profitable. Operations strategy serves as a crucial framework within organizations, guiding planning and decision-making processes to achieve operational goals. The components of operations strategy address: Designing and positioning the production system, location and layout of production facilities, and design and development of product/service.
- Purpose: Operations strategy addresses questions such as:
- “Where should we allocate resources?" - Operations strategy defines how resources are distributed across different departments and functions.
- “How can we enhance employee efficiency?" - It aligns objectives, allowing employees to use their skills and time efficiently.
- “What processes need improvement?" - Operations strategy identifies areas for enhancement in processes, technologies, and best practices.
- "How do we safeguard product quality?" - It ensures quality control and reliability.
- "What can enhance customer experiences?" - Operations strategy contributes to better customer interactions and satisfaction.
- Example: Cross training barbers to handle various services (cutting, shaving, or styling hair types) to maximize flexibility.
- Functional Strategy: Functional strategy focuses on specific functional areas (e.g., marketing, HR, production, R&D) within the organization.
- Purpose: Operations strategy addresses questions such as:
- Purpose: Functional strategies support the broader business-level strategy. They ensure that each department’s actions align with the overall goals.
- Example:
These layers of organizational strategy—corporate, business, operations and functional—interconnect to create a cohesive approach for achieving organizational success. Imagine them as layers in a hierarchy with well defined relationships - corporate strategy provides the context for business strategy decisions, which drives operations strategy, and marketing strategy. The pother functional strategies such as HR, Finance, etc. provide the necessary capabilities to support the foundation.
Organizational Strategy as a System
Strategy can be viewed as a system within the broader management system of an organization as a system. The strategy system is comprised of various components and subsystems that interact and influence each other. Each component plays a specific role, and their integration determines the overall effectiveness of the strategy.
Business strategy is a layered concept, and typically, it is formulated at several levels in an organization. These layers include; corporate, competitive, operations, and functional strategy layers. The strategies from these layers are interconnected by aligning their respective objectives. Each strategy layer serves a distinct purpose but works in concert with the other layers towards a common organizational goal and mission. The relationships between these layers are dynamic and interdependent. Corporate strategy shapes the context for competitive strategy which in turn guide the development of operations strategy.
These layers must be aligned, and integrated with relevant business function strategies that reinforce the strategy layers and enhance overall effectiveness, adaptability, and competitiveness of the organization. The operations strategy objectives contributes to the corporate strategy objectives, and both must align with the chosen competitive strategy. For example, a company might choose a competitive strategy of cost leadership, and its operations strategy objectives would be aligned to reduce production costs, which in turn supports the corporate strategy of becoming a low cost provider in the market. Successful alignment of these objectives is crucial for the sustainable success of the organization as a whole. A misalignment of the strategic layers and business function strategies can lead to inefficiencies, and hindering overall organizational performance. A good business strategy must resolve relevant strategic issues and solve associated problem(s).
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Strategy System Visualization
A strategy system can be visualized as a complex adaptive system with interconnected parts.
Imagine strategy as a complex machine with interconnected parts. Let’s explore some of its components:
- Mission and Vision: These provide the overarching purpose and direction for the organization. They guide strategic choices.
- Goals and Objectives: Specific targets that the organization aims to achieve. They define success and help prioritize actions.
- Environmental Analysis:
- Internal Environment: Assessing strengths, weaknesses, resources, and capabilities.
- External Environment: Understanding market trends, competitors, regulatory factors, and customer needs.
- Competitive Advantage:
- Identifying what sets the organization apart from competitors.
- Leveraging strengths to create value for customers.
- Resource Allocation:
- Allocating financial, human, and technological resources strategically.
- Balancing short-term needs with long-term investments.
- Risk Management:
- Anticipating and mitigating risks.
- Being agile in response to unexpected events.
- Marketing Plan
- Operations Plan
- Financial Plan
- Management Team
- Appendix
Remember, strategy isn’t static—it’s dynamic. Organizations must continuously adapt, learn, and refine their strategies to thrive in a changing world. By mastering the building blocks and viewing strategy as a journey, companies can create powerful and effective strategies that beat the market.