STRATEGY IMPLEMENTATION, FACTORS AFFECTING STRATEGY IMPLEMENTATION
By Ayoade Apelegan
“Strategy without process is little more than a wish list.” Robert Filek
In many companies, the main focus regarding strategy is put on the formulation of a new strategy. However, a well-formulated strategy does not automatically mean that the company achieves the objectives as set in the strategy. To ensure the achievement of organizational objectives, the formulated strategy needs to be implemented at all levels of the organization.
Strategic management is considered to be one of the most vital activities of any organization since it encompasses the organization’s entire scope of strategic decision-making. Through the strategic management process, it allows the organization to formulate sets of decisions, actions and measures – collectively known as strategies – that are subsequently implemented to achieve organizational goals and objectives.
The mission, vision and major organizational goals form the basis for further strategic choices on corporate, business, and functional level. To be able to make these strategic choices, the organization first needs to analyze the external environment to identify the opportunities and threats the organization is facing, which may affect the achievement of its mission. Moreover, the organization should identify its strengths and weaknesses by analyzing the internal operating environment. Based on this, so-called, SWOT analysis, the organization is ready to make the necessary strategic choices, where it can use its strengths to correct its weaknesses, take the external opportunities, and counter the threats. The strategic choices are the foundation for the new business model of the organization, which should match the demands from the market to the resources and capabilities of the organization, and should lead to the realization of the organizational goals.
WHAT IS STRATEGY?
“Strategy is the direction and scope of an organization over the long-term. It helps achieve an advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and fulfil stakeholder expectations.”
A strategy is an action that managers take to attain one or more of the organization’s goals. Strategy can also be defined as “A general direction set for the company and its various components to achieve a desired state in the future. Strategy results from the detailed strategic planning process”.
Strategy can also be said to be about integrating organizational activities and utilizing and allocating the scarce resources within the organizational environment to meet the present objectives. While planning a strategy, it is essential to consider that decisions are not taken in a vacuum and that any action taken by a firm is likely to be met by a reaction from those affected, competitors, customers, employees or suppliers.
Features of Strategy
- A strategy is significant because it is not possible to foresee the future. Without perfect foresight, the firms must be ready to deal with the uncertain events which constitute the business environment.
- Strategy deals with long term developments rather than routine operations, i.e. it deals with the probability of innovations or new products, new methods of productions, or new markets to be developed in future.
- A strategy is created to take into account the probable behaviour of customers and competitors. Strategies dealing with employees will predict employee behaviour.
- Specialized plan to outperform the competitors.
- Details about how managers must respond to any change in the business environment.
- Redefines direction towards common goals.
- Reflects the concern to effectively mobilize resources.
- Maximizes the organization’s chances to achieve the set objectives.
From the features of the strategy above, we can see that strategy is a well-defined roadmap of an organization.
TYPES OF STRATEGY
In an organization, strategies can exist at all levels – right from the overall business to the individuals working in it. Here are some common types of strategies:
These are also explicitly mentioned in the organization’s Mission Statement. They involve the overall purpose and scope of the business to help it meet the expectations of stakeholders. These are important strategies due to the heavy influence of investors. Further, corporate strategies act as a guide for strategic decision-making throughout the business.
These are actions and approaches crafted to produce a successful performance in one specific line of business or a particular market.
For example, a strategy aimed at enhancing the market position of “Eva Water”, one of the ranges of products of Nigerian Bottling Company Plc. is a business strategy. Business strategies are usually determined by the General Managers of each of the organization’s lines of business, often with the advice and input from heads of functional areas within each business.
They involve strategic decisions about:
Meeting the needs of the consumers
Gaining an advantage over the competitors
Creating new opportunities, etc.
Functional strategies are actions and approaches used by an organization’s functional department to support the business strategy. An example of a functional strategy is an organization’s marketing strategy, which are approaches for running the sales and marketing part of the business.
An organization’s product strategy is a functional strategy that takes care of the production aspect of the business. In most organizations, functional strategies are crafted by heads of respective functions with the General Manager of the business having final approval.
These are approaches for managing key operating units (plants, distribution centres, geographic units etc.) and specific operating units with strategic significance (for example, advertising campaigns, the management of specific brands, online sales etc.). For example, approaches fashioned by a plant manager to run a specific plant (an operating strategy) should be in tandem with the overall product strategy of the organization.
These are about how each part of the business is organized to deliver the corporate and business unit level strategic direction. Therefore, these strategies focus on the issues of resources, people, processes, etc.
Strategy defines the overall mission, vision and direction of an organization. The objective of a strategy is to maximize an organization’s strengths and to minimize the strengths of the competitors.
The strategy statement of a firm sets the firm’s long-term strategic direction and broad policy directions. It gives the firm a clear sense of direction and a blueprint for the firm’s activities for the upcoming years.
The main constituents of a strategic statement are as follows:
Strategic intent gives an idea of what the organization desires to attain in future. It answers the question of what the organization strives or stands for? It indicates the long-term market position, which the organization desires to create or occupy and the opportunity for exploring new possibilities.
Diagram: Strategic Intent Hierarchy
Vision: Vision implies the blueprint of the company’s future position. It describes where the organization wants to land. It is the dream of the business and inspiration, base for the planning process. It depicts the company’s aspirations for the business and provides a peep of what the organization would like to become in future. Every single component of the organization is required to follow its vision.
Mission: Mission delineates the firm’s business, its goals and ways to reach the goals. It explains the reason for the existence of the business. It is designed to help potential shareholders and investors understand the purpose of the company. A mission statement helps to identify, ‘what business the company undertakes.’ It defines the present capabilities, activities, customer focus and business makeup.
Business Definition: It seeks to explain the business undertaken by the firm, concerning customer needs, target audience, and alternative technologies. With the help of business definition, one can ascertain the strategic business choices. The corporate restructuring also depends upon the business definition.
Business Model: Business model, as the name implies is a strategy for the effective operation of the business, ascertaining sources of income, desired customer base, and financing details. Rival firms, operating in the same industry relies on the different business model due to their strategic choice.
Goals and Objectives: These are the base of measurement. Goals are the results, that the organization attempts to achieve. On the other hand, objectives are time-based measurable actions, which help in the accomplishment of goals. These are the results which are to be attained with the help of an overall plan, over the particular period.
The vision, mission, business definition, and business model explains the philosophy of business but the goals and objectives are established to achieve them.
Strategic Intent is extremely important for the future growth and success of the enterprise, irrespective of its size and nature.
Strategic Management Process – Meaning, Steps and Components
The strategic management process means defining the organization’s strategy. It is also defined as the process by which managers choose a set of strategies for the organization that will enable it to achieve better performance.
Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises its competitors, and fixes goals to meet all the present and future competitor’s and then reassesses each strategy.
Strategic management process is explained in the following four steps:
Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process, management should evaluate it continuously and strive to improve it.
Strategy formulation is the process of deciding the best course of action for accomplishing organizational objectives and hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies.
Strategy implementation implies making the strategy work as intended or putting the organization’s chosen strategy into action. Strategy implementation includes designing the organization’s structure, distributing resources, developing a decision-making process, and managing human resources.
Strategy evaluation is the final step of the strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial/corrective actions. Evaluation makes sure that the organizational strategy, as well as its implementation, meets the organizational objectives.
These components are steps that are carried, in chronological order, when creating a new strategic management plan. Present businesses that have already created a strategic management plan will revert to these steps as per the situation’s requirement, to make essential changes.
Strategic Management is an ongoing process.
Environmental Scanning – Internal & External Analysis of Environment
Organizational environment consists of both external and internal factors. The environment must be scanned to determine development and forecasts of factors that will influence organizational success.
Environmental scanning refers to possession and utilization of information about occasions, patterns, trends, and relationships within an organization’s internal and external environment. It helps the managers to decide the future path of the organization. Scanning must identify the threats and opportunities existing in the environment.
While for strategy formulation, an organization must take advantage of the opportunities and minimize the threats. A threat to one organization may be an opportunity for another.
Internal analysis of the environment is the first step of environment scanning. Organizations should observe the internal organizational environment. This includes employee interaction with other employees, employee interaction with management, manager interaction with other managers, and management interaction with shareholders, access to natural resources, brand awareness, organizational structure, main staff, operational potential, etc. Also, discussions, interviews, and surveys can be used to assess the internal environment. Analysis of internal environment helps in identifying the strengths and weaknesses of an organization.
As business becomes more competitive, and there are rapid changes in the external environment, information from the external environment adds crucial elements to the effectiveness of long-term plans. As the environment is dynamic, it becomes essential to identify competitors’ moves and actions. Organizations have also to update the core competencies and internal environment as per the external environment. Environmental factors are infinite, hence, an organization should be agile and vigilant to accept and adjust to the environmental changes.
For instance, Monitoring might indicate that an original forecast of the prices of the raw materials that are involved in the product is no more credible, which could imply the requirement for more focused scanning, forecasting and analysis to create a more trustworthy prediction about the input costs. Similarly, there can be changes in factors such as competitor’s activities, technology, market tastes and preferences.
While in external analysis, three correlated environments should be studied and analyzed —
- Immediate / industry environment
- National environment
- Broader socioeconomic environment / macro-environment
Examining the industry environment needs an appraisal of the competitive structure of the organization’s industry, including the competitive position of a particular organization and its main rivals. Also, an assessment of the nature, stage, dynamics and history of the industry is essential. It also implies evaluating the effect of globalization on competition within the industry. Analyzing the national environment needs an appraisal of whether the national framework helps in achieving competitive advantage in the globalized environment.
Analysis of macro-environment includes exploring macro-economic, social, government, legal, technological and international factors that may influence the environment. The analysis of an organization’s external environment reveals opportunities and threats for an organization.
Strategic managers must not only recognize the present state of the environment and their industry but also be able to predict their future positions.
Click here to read How to Conduct Competitor Analysis
Steps in Strategy Formulation Process
Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of organizational goals and objectives and thereby achieving the organizational vision.
The process of strategy formulation involves six main steps. Though these steps do not follow a rigid chronological order, however, they are very rational and can be easily followed in this order.
Setting Organizations’ objectives – The key component of any strategy statement is to set the long-term objectives of the organization. It is known that strategy is generally a medium for the realization of organizational objectives. Objectives stress the state of being there whereas Strategy stresses upon the process of reaching there. The strategy includes both the fixation of objectives as well the medium to be used to realize those objectives. Thus, a strategy is a wider term which beliefs in the manner of deployment of resources to achieve the objectives.
While fixing the organizational objectives, the factors which influence the selection of objectives must be analyzed before the selection of objectives. Once the objectives and the factors influencing strategic decisions have been determined, it is easy to take strategic decisions.
Evaluating the Organizational Environment – The next step is to evaluate the general economic and industrial environment in which the organization operates. This includes a review of the organization’s competitive position. It is essential to conduct a qualitative and quantitative review of an organizations existing product line. The purpose of such a review is to make sure that the factors important for competitive success in the market can be discovered so that the management can identify their strengths and weaknesses as well as their competitors’ strengths and weaknesses.
After identifying its strengths and weaknesses, an organization must keep a track of competitors’ moves and actions to discover probable opportunities for threats to its market or supply sources.
Setting Quantitative Targets – In this step, an organization must practically fix the quantitative target values for some of the organizational objectives. The idea behind this is to compare with long term customers, to evaluate the contribution that might be made by various product zones or operating departments.
Aiming in context with the divisional plans – In this step, the contributions made by each department or division or product category within the organization is identified and accordingly strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic trends.
Performance Analysis – Performance analysis includes discovering and analyzing the gap between the planned or desired performance. A critical evaluation of the organization’s past performance, present condition and the desired future conditions must be done by the organization. This critical evaluation identifies the degree of the gap that persists between the actual reality and the long-term aspirations of the organization. An attempt is made by the organization to estimate its probable future condition if the current trends persist.
Choice of Strategy – This is the ultimate step in Strategy Formulation. The best course of action is chosen after considering organizational goals, organizational strengths, potential and limitations as well as the external opportunities.
Strategy implementation is the process by which an organization translates its chosen strategy into action plans and activities, which will steer the organization in the direction set out in the strategy and enable the organization to achieve its strategic objectives.
Steps in strategy implementation:
- Ensure that plans are aligned with organizational mission, vision and values
Strategic development is an important business activity which involves defining the strategic direction an organization will take and the objectives it aims to achieve. Obvious as this may seem, it is vital to ensure that implementation plans are based on the stated organizational strategy and objectives. Just as a strategy must be derived from the organization’s mission and vision and in line with organizational values, so the implementation must follow the direction which has been set out in the organization’s strategic documents and prioritize those things which are seen to be most important for the future success of the organization. Bear in mind, however, that organizational mission and vision, or even values may need to change in response to changing circumstances and should be reviewed regularly.
- Build an effective leadership team
The optimal implementation of a strategy is highly dependent on the professional people management and leadership capabilities of both strategic and operational managers. New strategies may create new requirements for leaders and the organizations that they lead. Strategic change may require new personnel with fresh perspectives, or differing skills and experience. Strategic shifts may well entail a change in emphasis involving new customers or markets, technologies or business processes. Leaders may need to adjust their leadership styles or learn new management techniques and approaches. The implementation of a new strategy may alter priorities, change resource allocations, and involve a shift in relationships. This can sometimes pose a threat to the power and status of some significant and influential people within the organization. Processes for assessing and developing leadership should be seen as a normal part of strategic implementation. Leaders will have to take an objective view of the existing management team, including themselves, and assess whether the team is capable of implementing the strategy. Ideally, coaching or development should be offered to help individuals to improve their performance or develop new skills, if necessary so that they are better able to achieve the goals and objectives required of them. Our checklists on managing plateaued or passive people may be helpful here.
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- Create an implementation plan
A full implementation plan with milestones needs to be created for all levels of the organization. The plan should lay out the steps necessary to achieve the objectives and include schedules for key activities. The resources needed to achieve the objectives must also be detailed. The plan should quantify the financial, personnel, operational, time, and technological resources which will be required, as well as identifying those responsible for individual initiatives. The implementation plan sets priorities and accountabilities, including short-term and long-term objectives. Strategic objectives should: be broken down into manageable pieces; establish a chain of command; and may also outline additional organizational structures which will need to be aligned with the strategy initiative – the creation of cross-functional teams for example. Accountability is an important factor in successfully delivering strategy and acts as a motivator which concentrates people’s minds on following through on the responsibilities allocated to them. Personal accountabilities must be clearly defined so that individuals understand what they are responsible for. A fundamental task when drawing up a strategic implementation plan is to draft it in such a way that it can be articulated into separate action plans for each project and initiative. Ensure that good project management practices are followed and that training in project management methods is given as appropriate. The plan also needs to be visible so that it does not become disconnected from the decision-making process, and accessible to all, not restricted to the strategy department or senior executives and managers. Strategy implementation is a dynamic process which has to take account of changing conditions impacting upon the strategy and its implementation. The plan, therefore, must be capable of change and amendment as circumstances dictate and the latest version should incorporate the results of ongoing learning.
- Allocate budgetary resources
Securing a satisfactory budget is one of the main requirements when implementing strategy. A new strategy may entail the development of new processes, the purchase of new equipment, the recruitment of additional employees, staff training or development activities, or the upgrading of information technology. The budgeting process needs to ensure that strategic initiatives are properly resourced and can be implemented in the agreed timescales. Organizations use budgets to make sure that what is important gets done, but it is all too easy to focus on tactical challenges and short-term financial targets and allow this to take up a large amount of time and resources. Strategic initiatives can become the victim of this process, so the budgetary process needs to be aligned with strategy. Each aspect of the strategy must be linked to operating and capital budgets. Budgetary processes can also be used to track whether activities are behind schedule or not achieving the anticipated results. Financial forecasts, key performance indicators and actual expenditure can be compared to assess progress and to decide whether the costs involved are worth the results being produced. In some cases, it may become necessary to adjust the budget to reallocate or redistribute resources and get the strategy back on track.
- Assign objectives and responsibilities
A formal planning and measurement structure are needed to implement strategy effectively. Strategic responsibilities and objectives need to be assigned so that individuals understand their roles within the strategy and can take responsibility for or ownership of specific strategic tasks and outcomes. All those who have a role to play in the implementation of the strategy need to be clear about intended outcomes and their responsibilities for the achievement of these outcomes. The task of ensuring that employees know and understand their roles and how these contribute to organizational objectives rests with those who have drawn up the strategy and those who are responsible for ensuring that it is being implemented effectively. Objectives and responsibilities should be made explicit and where possible they should be assigned to individuals rather than teams as this makes for clear personal accountability. Employees at all levels also need to know how their performance will be measured and evaluated. Metrics should be created for each task and documented so that everybody knows what the intended outcomes and the expected timeframes are. Organizations will be unable to hold individuals to account if strategic objectives or outcomes are not measured. It is important to break strategic goals down into smaller specific objectives which can be measured and tracked. As specific objectives are met, step by step, this will give individuals and teams a sense of achievement, generate a sense of momentum and help to maintain enthusiasm. Be aware that while some outcomes, such as a growth in profits are relatively easy to record and measure, other matters such as staff morale and engagement will require softer metrics.
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- Align structures and processes
All organizations have existing business processes, plans and structures in place to manage their operations. Often these operate in isolation from one another and can bear little relationship to each other or organizational strategy. If separate business units set their objectives independently, the contribution they make to organizational success could well turn out to be less than expected. For an organization to be capable of effectively implementing strategy, structures and processes need to be aligned with the strategic objectives. The strategy may be set out in a plan but organizational structures will determine how it is defined and executed. The activities of business units need to be coordinated and the skills and capabilities of each unit made available for the benefit of the organization as a whole. Think about how this can be achieved, perhaps by individual directors championing a particular strand of the business across the organization. Alignment assists in clarifying the strategy and in coordinating the activities of those who put it into action. It will also ensure consistency of purpose from the top of the organization down to the operating level as the strategy is embedded throughout the organization. Ongoing and proposed projects also need to be aligned with strategic objectives. To achieve this, each project must be evaluated to determine whether and to what extent it will contribute to the achievement of strategic objectives. This will inform decisions as to which projects should be resourced and carried through to completion. Review points should be built into implementation plans.
- Align people
Effective people management is a critical issue in the successful implementation of the strategy. The work of employees needs to be aligned with the strategy so that their efforts contribute to the achievement of organizational objectives. Organizations should define the behaviours required throughout the organization. It may be necessary to ask employees to change the way that they work. Cultural issues will need to be considered here. For example, in organizations where internal collaboration has traditionally been weak, employees may need to start working cross-functionally. Organizations need to create a cohesive strategy which employees can understand and get engaged with. Employees need to know that they are making a meaningful contribution to the success of the organization and senior leaders must ensure that employees at all levels can articulate and evaluate how their job roles help to achieve specific strategic objectives. Organizations need to consider what skills and capabilities they need to meet their strategic aims, both now and in the future. For this reason, leaders should attempt to anticipate how the organization and the strategy are likely to evolve in the foreseeable future and identify those skills which will be of greater or lesser importance.
- Communicate the strategy
All employees will need to have a clear understanding of the core elements of the strategy and how it is to be executed, so the strategy must be effectively communicated to everyone. This will encourage employee buying, commitment and engagement and should have a positive impact on productivity. Develop a communication strategy that will promote the overall vision and strategy of the organization and articulate and define a set of well-defined goals. Avoid vague statements and ensure that objectives are expressed in concrete and measurable terms with tangible results and expected time frames. Issues to be considered include messages to be communicated; audience to be reached; behavioural changes needed; communication channels to be used; and measures to evaluate the level of success or failure. Simply giving employees a copy of the strategic plan is rarely effective. Instead, prepare a separate document, summarizing the most important and significant points and providing a clear, concise summary. Remember to include information on why this particular strategy has been adopted and explain the rationale for the priorities which have been established. Avoid jargon and aim to make the messaging clear, concise, consistent and as convincing and compelling as possible. To ensure that the message becomes embedded, be prepared to repeat messages often, possibly using different channels, media and formats. Aligning your communications with organizational objectives will make them more relevant and effective, and help you to make a convincing case for the resourcing of communications activity within the organization. In the case of a long-term strategy, identify some quick wins which will demonstrate the success of the new strategy and increase the visibility of the changes at regular intervals.
- Review and report on progress
Progress should be reviewed regularly to check that the strategy is being implemented as envisioned. Strategy reviews allow managers to track progress, reflect on priorities and identify any issues that may need to be tackled. Remember, though, that strategy reviews have more to do with whether the strategy is producing results than with controlling performance. Review meetings must be held often enough to keep the implementation process on course and to enable leaders to make decisions about any strategic adjustments which are needed to be made. Initially, this may be weekly, bi-weekly, monthly or quarterly. Frequency can be scaled back later when it is clear that the implementation process has been established and is working well. More frequent meetings may be necessary if the strategy is introducing major organizational change or if the business environment is evolving rapidly. There must be sufficient time for meaningful discussion to take place. Meetings may be time-consuming at first but the need for frequent meetings will decrease as time goes on. Time spent productively in the early stages will save time later on. The regular reporting and reviewing process should be supported by an effective tracking system which can describe and measure performance. Such measures, or key performance indicators (KPIs), can be developed using a framework such as Kaplan and Norton’s balanced scorecard. This uses financial and non-financial perspectives to describe progress inconsistent, insightful, operational terms and to translate strategic objectives into measurable performance. The use of such a framework can facilitate improvements as the effectiveness of the strategy is tested in the real world.
- Make strategic adjustments as necessary
Strategy implementation is a dynamic process which takes place against the background of changing economic, social and competitive circumstances. This is where the leadership skills, capabilities and judgment of managers will be called upon to steer the organization. This will involve decisions on the allocation of resources for optimal benefits as the competitive context evolves and judgments as to when changes are warranted. A balance between frequent changes of direction which may result in loss of organizational momentum and coordination and rigid adherence to plans when these are manifestly not achieving results needs to be found. Just as important, is the need for managers to align people, communicating changes, explaining how individual and team contributions contribute to outcomes and how engagement with the strategy will help them to achieve personal goals and aspirations, and effectively motivating and energizing employees across the organization.
- Develop an organizational culture that supports the strategy
Organizational culture plays a significant role in successfully translating strategic plans and initiatives into action. No matter how good an organization’s strategy may be, implementation will be hindered if the organizational culture does not support it. Culture is to the organization what personality and character are to individuals. It consists of the assumptions, values and beliefs that employees share and which influence their activities, opinions and behaviour at work. A culture which is aligned with organizational strategy will help organizations to implement strategy successfully as a shared belief in organizational aims and objectives will promote commitment. Conversely, an organizational culture which is not aligned may stand in the way of adjustments to changing business needs and weaken the ability of an organization to achieve its strategic aims. (Source: managers.org.uk)
Factors Affecting Strategy Implementation
The most common reasons why implementation of the strategies are unsuccessful are:
The leadership style affects implementation by driving the strategy, maintaining focus, being visionary, and acting as a driver for change management necessitated by the new strategy.
The organizational structure explains the decision-making process, clarifies roles and responsibilities, allocates human resources, and ensures a level of flexibility to respond to unexpected circumstances. The organizational culture provides information about the internal environment and mentality, which is reflected in the level of openness, customer orientation, quality of work, and speed of accomplishing tasks and responding to changes.
Information systems support the decision-making process through the quality and quantity of information available for executives to use in decision making.
Lack of communication
The employees and managers do not fully understand the strategy, and this arises mainly from their lack of understanding of the mission and objectives of the organization. This lack of understanding may be traced to several reasons, such as:
Lack of effective communication, or lack of communication, in general. It falls upon the shoulders of senior management and the strategic management team to communicate the organizational mission and goals to every member of the workforce, and also make them understand the strategy and each member’s particular role in how it will be carried out.
Lack of owners touch
Lack of ownership on the part of the “implementers”, the members of the workforce. Since the employees and maybe even the supervisors of the smaller units are unaware of the strategy or do not understand it, there is very little motivation and sense of empowerment to make them perform well in their respective tasks and functions. There is a lack of ownership, since the employees do not feel that they have a stake in the plan, and this results in poor implementation of the strategy.
The decided strategy is not understandable and well-defined. Confusing, convoluted, and generally, overwhelming plan. Some people can only assimilate several things at one time. If they are presented with a plan that seems too massive and too ambitious for them, their natural response would involve shutting down and refusing to understand. Thus, the strategy formulation must be carried out properly, and the strategic plan prepared in a user-friendly manner. Also, communication is key. No matter how overwhelming the strategic plan may be, it can still be understood and accepted by the workforce if communicated properly.
The strategy is disconnected from crucial aspects of the business such as budgeting and employee compensation and incentives. Executing the strategies involves funding, resource allocation, financial management and other budgeting matters, and if there is no link connecting these activities to the strategies, then there is no way that they will be implemented effectively. This is largely an issue that must be addressed in the strategy formulation stage.
Lack of commitment of decision-makers
Decision-makers do not have interest and commitment to implement the strategy.
Lack of attention
The strategy is paid little attention to by the management. All too often, the owners, managers and supervisors become too caught up in the day-to-day operations of the business, they rarely refer to the strategic plan. Before long, they end up adopting a dismissive attitude towards the strategic plan, treating the strategies as something related to the overall management process, but still separate. They devote a token number of hours in a month to go over the plan and discuss strategies, but that’s it. After the discussion, they will put it at the back of their minds, and continue as they were.
To ensure the success of the strategy implementation, covering all your bases is important. The best way to go about that is by following the essential steps to executing the strategies.
Budget, technology, tools and human resources are inadequate for strategic decision implementation.
Conflicting goals and priorities
Goals and priorities are influenced by personal interest.
Strategy Formulation vs Strategy Implementation
Following are the main differences between Strategy Formulation and Strategy Implementation
|Strategy Formulation||Strategy Implementation|
|Strategy Formulation includes planning and decision-making involved in developing an organization’s strategic goals and plans.||Strategy Implementation involves all those means related to executing the strategic plans.|
|In short, Strategy Formulation is placing the Forces before the action.||In short, Strategy Implementation is managing forces during the action.|
|Strategy Formulation is an Entrepreneurial Activity based on strategic decision-making.||Strategic Implementation is mainly an Administrative Task based on strategic and operational decisions.|
|Strategy Formulation emphasizes on effectiveness.||Strategy Implementation emphasizes on efficiency.|
|Strategy Formulation is a rational process.||Strategy Implementation is an operational process.|
|Strategy Formulation requires coordination among a few individuals.||Strategy Implementation requires coordination among many individuals.|
|Strategy Formulation requires a great deal of initiative and logical skills.||Strategy Implementation requires specific motivational and leadership traits.|
|Strategic Formulation precedes Strategy Implementation.||Strategy Implementation follows Strategy Formulation.|
Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and effectiveness of the comprehensive plans in achieving the desired results. The managers can also assess the appropriateness of the current strategy in today’s dynamic world with socio-economic, political and technological innovations.
The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers, groups, departments etc., through control of performance. Strategic Evaluation is significant because of various factors such as – developing inputs for new strategic planning, the urge for feedback, appraisal and reward, development of the strategic management process, judging the validity of strategic choice etc.
The process of Strategy Evaluation consists of the following steps:
Fixing the benchmark of performance
While fixing the benchmark, strategists encounter questions such as – what benchmarks to set, how to set them and how to express them. To determine the benchmark performance to be set, it is essential to discover the special requirements for performing the main task. The performance indicator that best identifies and express the special requirements might then be determined to be used for evaluation. The organization can use both quantitative and qualitative criteria for a comprehensive assessment of performance. Quantitative criteria include determination of net profit, ROI, earning per share, cost of production, rate of employee turnover etc. Among the Qualitative factors is a subjective evaluation of factors such as – skills and competencies, risk-taking potential, flexibility etc.
Measurement of performance
The standard performance is a benchmark with which the actual performance is to be compared. The reporting and communication system help in measuring the performance. If appropriate means are available for measuring the performance and if the standards are set in the right manner, strategy evaluation becomes easier. But various factors such as the manager’s contribution are difficult to measure. Similarly, divisional performance is sometimes difficult to measure as compared to individual performance. Thus, variable objectives must be created against which measurement of performance can be done. The measurement must be done at the right time else evaluation will not meet its purpose. For measuring the performance, financial statements like – balance sheet, profit and loss account must be prepared on an annual basis.
While measuring the actual performance and comparing it with the standard performance there may be variances which must be analyzed. The strategists must mention the degree of tolerance limits between which the variance between actual and standard performance may be accepted. The positive deviation indicates a better performance but it is quite unusual exceeding the target always. The negative deviation is an issue of concern because it indicates a shortfall in performance. Thus, in this case, the strategists must discover the causes of deviation and must take corrective action to overcome it.
Taking Corrective Action
Once the deviation in performance is identified, it is essential to plan for corrective action. If the performance is consistently less than the desired performance, the strategists must carry a detailed analysis of the factors responsible for such performance. If the strategists discover that the organizational potential does not match with the performance requirements, then the standards must be lowered. Another rare and drastic corrective action is reformulating the strategy which requires going back to the process of strategic management, reframing of plans according to new resource allocation trend and consequent means going to the beginning point of the strategic management process.
Strategic decisions are the decisions that are concerned with the whole environment in which the firm operates, the entire resources and the people who form the company and the interface between the two.
Features of Strategic Decisions
- Strategic decisions have major resource propositions for an organization. These decisions may be concerned with possessing new resources, organizing others or reallocating others.
- Strategic decisions deal with harmonizing organizational resource capabilities with the threats and opportunities.
- Strategic decisions deal with the range of organizational activities. It is all about what they want the organization to be like and to be about.
- Strategic decisions involve a change of major kind since an organization operates in an ever-changing environment.
- Strategic decisions are complex in nature.
- Strategic decisions are at the topmost level, are uncertain as they deal with the future, and involve a lot of risks.
- Strategic decisions are different from administrative and operational decisions. Administrative decisions are routine decisions which help or rather facilitate strategic decisions or operational decisions. Operational decisions are technical decisions which help execution of strategic decisions. To reduce cost is a strategic decision which is achieved through an operational decision of reducing the number of employees and how we carry out these reductions will be an administrative decision.
The differences between Strategic, Administrative and Operational decisions can be summarized as follows-
|Strategic Decisions||Administrative Decisions||Operational Decisions|
|Strategic decisions are long-term decisions.||Administrative decisions are taken daily.||Operational decisions are not frequently taken.|
|These are considered where The future planning is concerned.||These are short-term based Decisions.||These are medium-period based decisions.|
|Strategic decisions are taken per organizational mission and vision.||These are taken according to strategic and operational decisions.||These are taken per strategic and administrative decision.|
|These are related to overall Counter planning of all Organization.||These are related to the working of employees in an organization.||These are related to production.|
|These deal with organizational Growth.||These are in the welfare of employees working in an organization.||These are related to production and factory growth.|
Benefits of Strategic Management
There are many benefits of strategic management and they include identification, prioritization, and exploration of opportunities.
For instance, newer products, newer markets, and newer forays into business lines are only possible if firms indulge in strategic planning.
Strategic management allows firms to take an objective view of the activities being done by it and do a cost-benefit analysis to know whether the firm is profitable.
Thus does not have to do with financial benefits alone but also the assessment of profitability that has to do with evaluating whether the business is strategically aligned to its goals and priorities.
The key point to be noted here is that strategic management allows a firm to orient itself to its market and consumers and ensure that it is actualizing the right strategy.
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It has been shown in many studies that firms that engage in strategic management are more profitable and successful than those that do not have the benefit of strategic planning and strategic management.
When firms engage in forwarding looking planning and careful evaluation of their priorities, they have control over the future, which is necessary for the fast-changing business landscape of the 21st century.
Further, high performing firms tend to make more informed decisions because they have considered both the short term and long-term consequences and hence, have oriented their strategies accordingly. In contrast, firms that do not engage themselves in meaningful strategic planning are often bogged down by internal problems and lack of focus that leads to failure.
The section above discussed some of the tangible benefits of strategic management. Apart from these benefits, firms that engage in strategic management are more aware of external threats, an improved understanding of competitor strengths and weaknesses and increased employee productivity. They also have lesser resistance to change and a clear understanding of the link between performance and rewards.
The key aspect of strategic management is that the problem solving and problem preventing capabilities of the firms are enhanced through strategic management. Strategic management is essential as it helps firms to rationalize change and actualize change and communicate the need to change better to their employees.
Finally, strategic management helps in bringing order and discipline to the activities of the firm in both internal processes and external activities.
In recent years, virtually all firms have realized the importance of strategic management. However, the key difference between those who succeed and those who fail is how strategic management is done and strategic planning is carried out makes the difference between success and failure. Of course, there are still firms that do not engage in strategic planning or where the planners do not receive support from management. These firms ought to realize the benefits of strategic management and ensure their longer-term viability and success in the marketplace.
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