Overall scope and direction of a corporation and how its various business operations work together to achieve particular goals.
Corporate strategy refers to the overall strategy for a diversified company.
Since a diversified company has a combination or mix of several businesses in multiple industry environments, the corporate strategy embraces the whole mix of the businesses.
It also embraces the ways of coordinating and integrating the strategies of individual business units.
As Michael Porter pointed out, corporate strategy concerns itself with four concepts that companies most commonly use; portfolio management, restructuring, transferring skills, and sharing Activities. He put more emphasis oh the last two issues.
As he said, “companies have the best chance of being successful at diversification if they capitalize on the existing relationships between business units by having them transfer skills and share activities.”
The corporate strategy aims at improving the attractiveness and performance of the diversified company’s overall business. The process of allocating resources among the various strategic business units (SBUs) is the responsibility of the top-level corporate managers.
They decide and implement how cash, staffing, equipment, vehicles, finances, and others. resources will be distributed among the SBUs.
The scope of corporate strategy is much broad – issues of diversification, adding new products or services, the way of competing with other firms; developing cooperative relationships, and the like. The top-level executives at the diversified company develop a corporate strategy with inputs from the multiple business units.
What is Corporate Strategy
Corporate strategy concept developed in the early 1960s.
The concept of defining the business in practice meant choosing the optimum product market scope for the business (Ansoff, 1968).
Over the years the criteria of choice about the appropriate product market scope has enlarged owing to both the changes in the external conditions where products, markets, technology, resources, and risks are global, local as well as go-local (local impacted by global).
The early idea about corporate strategy according to Brown (1997) is “opportunity divided by capability.”
The option where capability in terms of the internal factors best matched the external challenges was the best one. It is the different strengths within an organization that enable adaptation.
Once the choice is made for a particular scope to be pursued, the organization has to allocate resources to get results from that scope at the intended timing.
Resources have to be complemented with the task of steering towards results tiding over managerial, strategic, and financial or governance-related difficulties.
This is the commitment to the strategy.
3 building blocks of corporate strategy are thus defined in this module as:
- The options and the pathways to attain them (e.g. growth through expansion in global markets).
- Sustaining the strategy through resource allocation (e.g. allocate resources from business A which is mature to Business which is emerging), and
- Committing to strategy (resolving managerial or strategic problems through the parent entity).
The current understanding of corporate strategy suggests that an organization’s sustainability and profitability depend on the value the organization creates for customers.
One has to delineate the customers and markets one would serve and then concentrate on the value one would create.
- Does the organization bring something new for the customers?
- How does it make a difference through innovation, service, newness, affordability?
- A sound value preposition attracts the customers and in turn, leads to profitability.
Profitability is rooted in bringing the right combination of product, technology, the price point at the right time to the right market.
Organizations such as General Electric, Sony, Honda, Coke, Pepsi, Dell, Samsung, Walt Disney, and Apple are successful contemporary companies. They manufacture and market their products globally.
Analyzing this more closely will make it clear to you that each has opted to grow in a manner different from others.
Apple products may be more homogenous globally than those of General Electric or Pepsi, which have modified their products to suit the different customer needs of the diverse markets(for example United States, India, Brazil, and China) they serve.
Each of these companies has followed different strategies to attain its position some have diversified extensively, some have grown in a broad segment, some have gone global, and some have been restricted to a few countries (options).
Again each of the different businesses they operate in has their different strategies.
For example, Apple may have a different strategy for growth in North America as opposed to Asia even if it markets similar products in both continents.
General Electric may choose to serve Asian diagnostic markets differently than it does the European market (pathways).
From its current operations, we infer the present strategy of the organization and from the portfolio of investment it is developing, to some extent about the futures markets, technologies products it might develop (future scope).
The grand strategies explain the scope of the activities, the logic and context of choice based on the premises of this reasoned evolution. The grand strategies also referred to here as the options are growth, stability, retrenchment or combination of the three.
Within each of these broad options, many sub-options are here referred to as pathways.
Among the options;
- Stability implies a state of status quo, or rather a state where the activity level is significantly lower than is in the growth phase.
- Growth implies an expansion in the level of operations of the organization.
- Retrenchment implies a state of deliberate cut back in activities. It is the “pruning of activities” stage.
- A combination implies the balancing act between different businesses for sustained profitability.
Implementation of Corporate Strategy
Strategies that have been formulated now have to be put into action. Implementation has been described as the “managerial exercise of putting the chosen strategy in place” (Thompson & Strickland, 2003).
As the strategies are implemented the existing/old order in the organization will yield to the new one. Implementation implies an organization-wide change at different levels, among different activities resources and their configuration.
Implementation or execution of strategy has to be planned so that it happens. Implementation or execution as it is also called is perceived by most chief executives to be the more difficult task than formulation because it is the active change and how it takes place at ground level that determines the success or failure of strategy. Implementation has two aspects, an analytical aspect, and a people aspect.
Moving the people towards the action is an important job in implementation which is leadership-contingent.
The deliverables of the implementation process are scattered across the functions/activities of the organization and have to be aligned, altered and people-activated to achieve the deliverables through rewards and leadership.
Managing the change process is integral to implementation. People as doers and leaders play a pivotal role in implementation. People are the owners and drivers of change.
The people in the organization must know about the rational change, the sequence of the change, and the realignment of resources, structure, positions, and skills as part of the change process. The middle and lower-level managers push the changes.
Implementation requires a different set of skills and mindset. Domain knowledge, business knowledge, and people skills are important to steer the implementation process.
Implementation is not possible unless there is a plan for it, and the linkage between strategy and implementation is clearly understood and maybe revisited often.
Culture, structure, business-level leadership, knowledge and information sharing play a significant mediating role in implementation. This module explains the different aspects of implementation.
Implementation/execution leads to results. According to Ram Charan (2002, p.5) “most often today the differences between a company and its competitors is the ability to execute.
If your competitors are executing better than you are they are beating you in here and now, and the financial markets won’t wait to see if your elaborate strategy plays out.
So leaders who can’t execute don’t get free runs anymore. Execution is the great unaddressed issue in the business world today”.
Implementation can be defined as the “let’s make things happen”, phase that puts to test a manager’s ability to allocate resources, lead the organization towards change, restructure operations, motivate people to develop a strategy-supportive culture and meet or beat performance standards.
A mediocre strategy can yield results if the implementation is good but a great strategy cannot yield results if the implementation is weak.
The 2×2 matrix figure above presents the four situations in terms of optimality of implementation versus quality of formulation.
The four combinations that emerge are:
- Optimal implementation and excellent formulation (quadrant C) an ideal situation.
- Excellent formulation and sub optimal implementation (quadrant D) a situation of uncertain results.
- Suboptimal implementation and poor formulation (quadrant A) a grim situation.
- Optimal implementation and poor formulation (quadrant B) a situation of uncertain results.
The quadrant C is the ideal situation for any organization. For those organizations that are caught towards quadrants D or B, the managerial initiative will play an important role in salvaging the situation.
It is generally said that a poor formulation can be salvaged at the time of implementation, but it is more difficult to salvage a poor implementation.
Implementation or execution is the phase where the abstractness of the formulation is translated into specific, clear programs.
The two phases are differentiated more in theory for understanding than in practice where they are inter-linked and iterative. If the implementation issues and bottlenecks are discussed at the time of formulation, an implementation may become easier.
Formulation and implementation are differentiated in terms of the nature of the process, participants, skills, and deliverables as shown in Table.
Difference between formulation and implementation
Implementation Process of Corporate Strategy
Implementation involves the entire organization.
Let us not assume that implementation is smooth and all the things that are critical to making the strategy fall into place, there is neither a short-cut nor a checklist for implementation.
If it were to be so then managerial talent would not be at a premium.
There is a multitude of intertwined tasks that have to be performed to precision. Implementation is challenging because during this phase there may be a change in strategy based on real-time learning.
As actualization of strategies takes place many unforeseen situations develop – erratic supplies, shortage of manpower, change in external condition, and so on. These compel managers to work within the emergent circumstances.
Some components of the strategy may now become unattainable and have to be dropped (for example, an organization in pursuit of growth may decide to expand operations and subsequently reduce prices.
Its decision is based on the premise that an increase in production capacity with the setting up of a new plant will result in significant cost advantages.
As it begins to set up the additional facility for capacity expansion the competitors also begin capacity expansion but they outsource instead of manufacturing, obtaining the same cost advantages as its expansion would provide.
Should the organization continue to lock up resources even if returns will be far below anticipations or reassess the situation and revise the strategy?
Upon the analysis, it decides to forgo capacity expansion by building a new plant and instead serve a differentiated class with an improved product, better service, at higher prices.
Its original business plan changes and the organization plans to spend on developing resources for the emergent strategy.
Its plan to expand is dropped (unrealized strategy) and its plan to invest to improvise the product and service is implemented (emergent strategy).
The emergent strategy may have been a backup plan or may have emerged post-analysis of the unrealized strategy.
This means that during implementation there may be a realization about the unfeasibility, inappropriateness, and/or impossibility of going ahead with a chosen strategy.
The readiness to evaluate the unrealized proposal and accept a new one in the light of professional and technical advice requires a high degree of communication, clarity, mutual trust and high professional competence among the top and functional managers.
This pattern of change in the strategies;
The activity, division, department, and/or function “silos” that are created to facilitate day-to-day functioning have to be broken down to facilitate cross-functional/departmental/team learning and actions through specific projects.
These silos harbor tough resistance to cross-functionality, knowledge sharing, knowledge transfer or sharing of resources for optimization. The resistance can be behavioral, procedural, resource contingent or driven by the organization’s coalitions and politics.
Strategy-specific resources may have to be allocated along with strategy¬specific disbursement, measurement, and control that can be attained only through special purpose vehicles created in implementation.
Resource allocation would inevitably create some imbalances leading again to disgruntlement, frustration, and questioning. Clarity of purpose and communication here are the way to resolve the impasse.
Strategic change may have to be initiated organization-wide with some areas changing in more ways than others. Issues, problems, and conflicts endemic to change have to be addressed as would be the case with post-merger cultural integration.
Many people-related issues would come up as the integration is carried out which may either have been overlooked or seemed trivial during the merger/premerger.
Implementation is a complex process.
It requires provisioning of leadership, people, resources and an enabling culture to transform the relatively abstract conceptualizations of the formulation into specific goal-directed plans programs and performance targets.
These elements are detailed below.
Objective: To lead the change and to create ownership of strategy at all levels.
Leadership can make or mar implementation.
According to Hrebiniak (2005) “Leadership must be execution biased.”
If it is not, the organization may flounder in its attempt to change and implement. Leaders lead by example.
Personal integrity, commitment, inspiring people, and the ability to take a risk, are the leadership qualities sought in organizational leaders. Implementation presents new challenges every day.
Leadership is critical to implementation because the implementation is as much an analytical operations process as it is a people’s process.
A leader’s upfront involvement with execution sends the message of commitment; a comprehensive understanding of what is happening and motivation.
Jack Welch of GE led the six sigma initiative upfront in 1991. This interest, commitment, and projection of involvement established six sigma very well in GE though initially, he was skeptical of such programs.
The successful organizations of today: Wal-Mart, General Electric, Sony, Apple, Microsoft, Dell, and Infosys are to an extent what they are because of the leadership.
Leadership drives an organization to carry the implementation process well and successfully. Leaders themselves own the execution, create ownership down the hierarchy and motivate accomplishment.
Therefore, the first requirement of good leadership is at the strategic level. Did the strategic leaders perceive the crest and pitfalls accurately within a reasonable limit?
Michael Dell’s idea to sell computers directly to customers wasn’t new. Thousands of companies do so. Michael Dell’s “direct sell and build to order approach” was the core of his strategy (Bossidy et al, 2002).
This clarity about what needs to be done to make the strategy work had the backing of foresight and capacity to lead from the front.
Years later the Dell model of assembly is the industry norm in the PC industry and Dell retains substantive edge because of assiduously building the operations part of the organization lending it some immutable characteristics.
Leadership at the business unit and functional unit levels have to complement the strategic leadership.
At these levels, the dominant role of leadership is the front line mobilization for change and execution. The translation of the broad ideas into specific actions with outcomes is contingent upon the ownership and leadership of business and functional level managers.
The Blake and Mouton (1985) grid of leadership styles places leaders in four quadrants in terms of concern for work or concern for people as shown in the figure below.
From the figure, we infer that the leaders can be work or people-centric. The work-centric leader is the Hard Task Master and likely to be good at sequencing tasks, work planning but not at motivation and empowerment.
In the implementation, we need to shift such managers more towards being people-centric. The leader who is too people-centric (Party Time) cannot effectively translate targets into tasks or enforce work discipline.
It is a laissez-faire attitude that permeates the organization.
The two opposing quadrants are the Ideal Leader who can have a high concern for work as well as for people and can be an asset to the implementation process and the Poor Leader who is casual showing neither concern for people or work.
A leader’s job in implementation:
- Is to be involved with work to implicitly communicate the importance of initiatives, and desired work-related behaviors.
- Through their involvement with people implies being able to motivate them and develop the appropriate physical and cultural environment for performance.
- To be the solution provider.
Implementation needs both transformational and transactional leaders. The distinction between the leadership approaches is in terms of the level at which the leadership is exercised.
Objective: To energize the organization.
According to Peter Drucker: “Management is about human beings. Its task is to make people capable of joint performance, to make their strengths effective and their weaknesses irrelevant” (as quoted in The Definitive Drucker by Elizabeth Haas Edersheim, 2007, pp157).
The organization is most likely to do a better job if it has a long term plan to develop people. People are central to implementation.
It is being increasingly recognized that all other resources being equal, it is the people factor that makes an enormous difference among the performance of organizations.
People mobilize action towards the desired ends. The people function needs the commitment and direction from the CEO. If the CEO fails to do so, strategy implementation is on the wrong footing.
The people aspect of the organization is linked to the commitment of the CEO, the change in culture and the motivation climate of the organization.
For effective implementation through people the organization has to:
- Put the right people at the right job.
- The right person in the job at the right time! ’’Right People” have to be hired and trained with focus, energy and time. The CEO has to recognize and place those who can deliver on the front lines of implementation, the others will follow. Hiring the right people is the responsibility of the human resources department. It is also a function of culture. Remember HR performs the activation role, not policy-making one.
- Develop people to their highest potential through training, responsibility assignment, and motivation.
- Once the right people are on board the next onerous task is to develop them to give their best. In an implementation, the development of people’s capabilities has to be in line with the task ahead. People have an extraordinary capacity to deliver under the right set of circumstances. The people who will implement strategy must have integrity, energy, knowledge, capacity to build the team, lead, delegate, plan, program, and budget. Implementation requires a discipline of time. Employee empowerment and engagement are an integral part of any organization seeking to be in a predominant position in its industry. People are to be retained and developed continuously and not in a frenzy as a strategic requirement.
- Create a diverse workforce for a knowledge-based digitized workplace.
- Diversity among the workforce brings different perspectives to the organization and enriches its decision making. Modern organizations have global exposure when they source materials, expertise, and skills from across the world. Their home country governments initiate programs of more inclusive employment so that the disadvantaged groups, minorities, women have better employment opportunities. The twin forces of exposure and regulatory pressure or persuasion as the case may be compelled organizations to broad base the workforce. They must simultaneously develop plans to enable people to grow and feel equated so that their talent and expertise is used to the fullest for mutual benefits.
- Develop a culture conducive to the growth of people.
- To attract the right people some changes may need to be made in appraisals, rewards, bonuses and stock options and also in the climate and culture of the organization. These changes are to be brought about by the top management as they, with line managers, control the accountability and the rewards. The organization has to ask: is this the kind of culture we what to work in? Improvements – sometimes radical, sometimes incremental must follow the No answer.
Objective: “Tooling” the people for action.
Resources provide the tools and ammunition for the strategy.
If a University wants to increase its Gross Enrolment Ratio and decides to strengthen its open and distance learning program it needs to invest in the latest and most appropriate technology to be able to reach a larger number of students and deliver quality, highly interactive, education through the distance mode.
To be able to do so it needs to have sufficient money, manpower, teaching materials, building and studios, and equipment. Without this, the strategy cannot be realized.
Organizations seldom can claim resource abundance.
The process of developing resources where resource implies capabilities and competencies as well is an on-going process. The priority of the resources is determined by the strategic agenda of the organization.
For example, the uninterrupted working of the furnace in a cement plant requires a constant power supply.
For a cement, manufacturer power is a critical resource, provisioning of power by the captive power plant is an inbuilt cost. Compared to power, coal, and limestone the other resources are less critical.
However, if the power supply is assured and uninterrupted the other resources would be given more attention. Resource criticality varies from industry to industry.
Frontline staff is more important in retail, hospitality and health industries than in steel manufacturing
Intellectual resources are more critical for design firms, universities, research labs and industries that survive on innovation than for aluminum smelting. Capabilities for marketing are critical of fast-moving consumer goods and consultancies.
Similarly, organizations differ in their resource access. They can use strategic alternatives only if they have the necessary sources.
Resource constraints impose limits on what an organization can do.
Because of resource, constraint organizations assess resource availability and then use it as a guide in the formulation of strategy. Financial resources are distributed using portfolio approaches.
For the distribution of talent and competencies, organizations can map the key competencies and leverage them in some instances. Over the long term, critical competencies are to be developed consistently and continuously.
Spreading resources require much ingenuity and process innovations enable organizations to do so.
Portfolio approaches such as the BCG matrix and GE Matrix, are used to allocate resources but they may be inadequate to pin the needs of different activities within the given businesses as well as is needed.
The twodimensional aspects may not capture the intricacies of all the aspects associated with resource allocation, particularly when organizations operate in highly diverse businesses.
Resource allocation can also turn out to be a contentious issue among the different units/functions/activities.
This impasse can be resolved before allocation by a clear focused strategy and a clear plan for execution. Doubts, misgivings and ill-informed prejudices are best resolved before allocation rather than after.
Objective: To develop a fit between strategy and organization’s routines, beliefs and actions.
You would have studied culture in other subjects.
Here our concern to explore its impact on implementation. Culture exists and it affects and also reflects strategy execution. Culture is not “seen” in the organization, it is palpable.
You can sense whether the organization is brimming with energy or seeped in an attitude of indifference even though there is no device to measure the energy levels.
Culture also reflects the organization’s core values and beliefs. Culture dominates the people’s mindsets about what is doable or non-doable and what is or is not acceptable in the organization. Culture leads to behavior and behavior leads to performance.
If the culture of the organization fosters excellence, people will learn behaviors that lead to it and that in turn will lead to good performance.
Daily rituals reinforce culture. People absorb the culture by observation of other people’s behavior and of those behaviors that get rewarded.
Do the organization reward initiative and ethical behavior, or does it reward followership?
In the implementation phase, culture can be a stumbling block to initiatives and programs. Very often an organization’s systems, procedures, and beliefs do not allow them to accept change.
In India computerization met with much resistance because most employees within public sector organizations did not see it as a tool for increasing productivity but as a tool for replacement of manpower.
Functional subcultures reinforce their codes for analysis and behavior. These codes are important to understand and alter to promote cross-functional linkages
If the strategy requires that changes are made in people’s attitudes and methods of work for better performance issues cannot be addressed by functional systems alone.
The organization will also have to work around the culture and reinforce the desired behaviors through a series of HR-related measures.
Culture broadly represents the “how we do things around here” stance. McDonald’s, where 50 million burgers are made in a day, works on the credo of QSCV (quality, service, cleanliness, and value) across the 34,000 outlets spread across 119 countries.
The credo is enforced daily through training, actions of supervisors and control mechanisms.
All organization rituals and actions are in sync with the organization’s idea of affordable food in clean surroundings.
Similarly, if an organization wants to put in place a culture that promotes ethical behavior and conduct, its practices ranging from the composition of its board to requisition for small items will be developed to promote the specific culture.
A strategy may require commitment, adherence to certain values, ethical behavior and service delivery.
If the culture promotes seeking alibis for tasks not done, lackadaisical attitude and resistance to learning, the strategy has little chance of success. The primary task of culture change is to move the people towards the “can-do” side.
A leading example here is that of Wal-Mart. Wal-Mart set out to be the preferred destination for purchasing necessity items because of price.
The idea of keeping costs low was reinforced by Sam Walton’s adoption of strategies that even among senior managers promoted frugality: hired self-driven cars instead of limousines on business visits, stayed in clean but not fancy places when sourcing products.
Change in culture requires a change in mindsets and perceptions. Culture is not a standalone factor. Culture leadership and the people initiative are closely linked. A strong change needs a strong leadership push along with a change in many human resource-related practices.
Most of the merger and acquisition failures are because of a mismatch between cultures. A merger brings people from two different cultures together with the acquired company’s employees feeling threatened by the dominant company.
There are mistrust and apprehension about the way the future will unfold in terms of compensation, promotion, responsibility, layoffs, salary cuts, demotions, and other cutbacks.
The new joint entity has to deal effectively with them as soon as it can otherwise the benefits of the merger will remain elusive.
Strategies that are geared for cost reduction, innovation, and globalization require discipline. The discipline has to be embedded in the corporate DNA.
Culture can be shaped if there is clarity about the strategy outcomes and change requirements.
Many a time strategy is not fully realized because of confusion about what to do, how to handle internal coalitions and politics and inability to prioritize or inability to back it in time with resources.
Strategy, people, history and functional policies are some of the important determinants of the organizational culture. Nordstrom and The Taj Mahal Hotel have developed a culture of customers first based on these determinants.
Nordstrom’s credo is simple and self-explanatory and is indicative of the extent the frontline salesperson is empowered to promise and deliver for customer satisfaction.
You would have often observed that as the size of the family grows additional rooms are added and other activities are undertaken to accommodate the new arrivals. Based on this analogy let us examine an organization’s growth with the same structure that it set out with.
The organization structure is the arrangement of different positions and roles which have been vested with the responsibility and authority to perform tasks. The structure evolves in response to the external changes and the changing dynamics of work within the organization.
You would have read about different structures in your other courses.
A review of those will be of help here. Through the structure, the organization develops operating competency (functional structure), competitive position (divisional structure) multi-functionality (matrix structure) or innovation competence (project structure).
The structure also addresses the issue of the extent of decentralization/centralization and the span of control. No structure form is ideal or a panacea to the difficulties faced in implementation.
In the implementation, the crucial question is: does the structure meet the requirements of the proposed strategy? According to Hrebiniak (2005) the structural requirements of the generic competitive strategies are:
|Type of Strategy|
|High Market and technology relatedness.||Increased centralization.|
|Low Market and technology relatedness.||Increased Decentralisation.|
|If one is high and the other is low.||Centralization and decentralization.|
Proctor and Gamble once had a product divisional structure to service each of its main product lines adequately. It met the then-competitive requirements of the organization.
However, with global expansion and the strategy of globalization in emerging markets supported by 127,000 employees, 300 brands in 180 countries its needs for coordination management and efficiency can no longer be serviced by the same structure.
It needed to develop a simple structure, strengthened both, the center and the many different control units across the globe to effectively market P and G’s product across different psychographic, social, and economic segments.
The current structure of P&G is shown in the figure below.
The market development unit is charged with knowing about consumers and retailers in each market and integrates the innovation from GBU in business plans.
You will notice that the building of products into two categories indicates that P&G sees marketing distribution and manufacturing-related synergy among the products (out of 300) placed with each broad unit.
Mergers, acquisitions, vertical integration, and forward integration necessitate organizational restructuring to accommodate the new tasks that have to be performed.
Structure creates the envelope within which they have been equipped with resources. A change in structure is difficult from getting every body’s acceptability for the same.
A structure suited to the strategy is presumed to lead to effectiveness In addition to the four basic structures, that is, functional, divisional, project and matrix organizations, the structure is also determined within the context of the business practices of the country.
Network structures are common with the Chaebols (in South Korea) or Keiretsu (Japan.).
In network structures, there are groups of independent organizations that have different products and markets but the same administrative and financial control. The Keiretsu are networks of related businesses whereas the Chaebols are networks of unrelated businesses.
The Toyota Keiretsu has a network of organizations such as Toyota Machine Works, Toyota Body Works, Aichi Steel Works, Nippondenso, and Futaba Industrial, whereas the Chaebols of Samsung has networked with electronics, chemicals construction, and heavy industry organizations to name a few.
The execution of strategy is impacted by the extent of centralization versus decentralization, the costs associated with the structure (tall structures are expensive as they have more managerial levels as opposed flat structures), the extent of coordination mechanism and information sharing and the extent to which responsibility and accountability are clear.
Objective: To transcend divisional/functional/structural boundaries.
As organizations pursue corporate strategy there are instances when the work they are expected to do is accomplished through a project. NASA took up the man on the moon mission.
It was not possible to devote the time and energy to all the tasks and activities for such a vision within the ambit of the existing structure, budget, accountability, and skills. It was not only a country’s vision but also a reaffirmation of humankind’s ability.
To accomplish that vision, a separate project with budget, accountability, credibility, and structure was set up.
On similar lines, organizations set up projects to undertake tasks which are not possible for the organization within the confines of the present set up.
A project performs the function of freeing the organization’s resources from the current set-up to deliver more than what it is doing at the moment.
For example, an organization is pursuing growth on the platform of a very high-quality industrial product.
It has planned to introduce six sigma and get results for three critical divisions that will generate revenue to be plowed back in the business to retain its innovative and qualitative edge.
A project management approach to introduce six sigma would establish clear, specific, concise objectives for the introduction of the initiative.
To initiate the six sigma initiation across three divisions, first cross-divisional teams have to be created, who will take up the assignment and then cross-functional teams across external and internal procurement, scheduling, operations, delivery, and so on have to be taken up.
The project management team helps cut across horizontal and vertical lines in the organization for new strategy-led initiatives.
In case the strategy of an infrastructure company requires;
- erecting a new plant or developing a port,
- then the project management approach would develop before the project, (for issues such as regulatory and legal issues about land ownership, titles, environmental clearances, fundraising),
- project in progress, (design development, construction, quality assurance, resource restructuring commercial tie-ups), and
- post-project plan (marketing support, managing collaborations monitoring meeting performance targets).
For each of the 3 different phases, the skill pool and resources from across the organization will be identified, trained and put on the task.
The project can be externally oriented such as setting up a plant in Africa in proximity to raw material as well as markets. The organization has no prior experience in Africa. It creates a specialist team of engineers, legal experts, designers, and liaison officers each having a different but complementary skill set.
They help to lay the foundation of the organization’s business in an unknown land. The organization could not have done so if the people were in their incumbent positions and with the same set of rules regulations and accountability. The organization’s rituals of working would take too much time and may scuttle the effort.
The internally focussed projects, on the other hand, are taken up to pilot quality set up ISO14000/ISO15000, six sigma employee coaching empowerment initiatives. The success of the project leads to a scale-up.
At a time an organization may be involved with both externally oriented and internally focussed projects.
Organizations may have project management skills.
They, however, have difficulty with the initiation of new change culture and learning because it means dismantling the old order.
In the absence of the project management approach, the organization faces difficulty in implementing new projects as on-going activities take precedence and people and other resources are not available.
The project management approach induces a sense of accountability, a sense of urgency, importance, credibility, and ownership for the task.
A project management approach puts the exercise in a time frame for accomplishment, important milestones, and control measures. The approach can help to economize time and effort.
The introduction of quality programs, environmental compliance programs, and diversity programs are facilitated sooner with the project management approach. The project enables testing of ideas and scalability across the organization base on the learning.
Programmes and Plans
Objective: To establish small control units.
On the ground, it translates into delegation, empowerment, and specificity of key performance indicators.
The intent may be to offer quality service and experience but if the replacement policies are opaque or require the customer to visit the store twice, thrice, or if the employees are not trained in courtesy and order processing than the intent is not realized.
The figure below shows the interrelatedness among billing, merchandise selection, display and policies to cater to the customer. If any of these are weak then the entire customer satisfaction objective is not attained to the fullest.
Programs are developed by a team of cross-functional managers under the guidance/supervision of designated senior management personnel or even the CEO.
They examine the overall strategy from translating it into specific responsibility/timelines/out- come/resources/budgets and monitoring.
When the programs are either poorly drawn up or implemented ineffectively desired strategic outcomes are not achieved.
The programs at the lowest functional levels are drawn from the hierarchy of strategy-corporate, competitive and functional. The programs are spelled out in terms of measures such as cash flow and so on.
Consequent to the change in the strategic stance, these measures are also redefined to lead to profitability after the changes have been made in strategy.
The figure below shows both the relationship of the programs to strategy as well as changes after the strategy shift.
At the functional levels, much interdependence among the different activities is required. It is here that detailed specific communication about tasks, resources, outcomes and very important links to strategy is required.
Standard operating procedures, interdependent key performance indicators, work manuals, departmental agreements, face-to-face interactions, interdepartmental meetings are used to develop coordination.
In the absence of such mechanisms, there is confusion and loss of coordination. Inherent contradictions among the intent, strategy, and plans may lead to avoidable mistakes some of them strategic.
In the box below the situation of the Indian organized retail sector is discussed. The retail sector had a favorable external environment.
The expansion of the retail sector with well-crafted strategies could have led to a different scenario for employment and growth.
However, the assumption that the customer is just waiting for organized retail to open the doors and retailers’ only worry is real estate and long-term funding led them to miss the vital aspect of customer centralism either through price or selection of merchandise.
As a result, organized retail floundered. Apart from the lack of strategic foresight, what hit it badly was the inability to develop wellthought out plans.
Company policy was the mantra rather than customer policy as shown below example.
In India, the retail sector was seen as the sunrise sector which held the promise of growth with employment. The growth story was thwarted in part because the retail chains could not get the merchandise selection, price points and service attributes right.
The first of the retail chains operated with the mindset of a shop owner rather than an organized retailer. This led them to be oblivious of the customer’s needs for comfort, selection, and service.
Most of them compromised on quality to be able to offer lower-priced products on the assumption that customers will make a trade-off between quality price and the convenience of shopping.
Customers wanted good quality at affordable prices along with the shopping experience.
The unorganized sector with its many family stores and specialized shops was catering to the price and quality aspirations 50 percent of the time.
Organized retail had to match the quality offered by the existing stores and additionally create value on the ground that was superior to the previous experience.
The investors were upbeat about retail expansion and PE funding was available. They expanded in haste without getting the mix of quality, experience and price right.
The organized retail stores could not develop customer-friendly packaging (choices of smaller packaging for grocery items or policies for exchange for clothes or electronic goods which their competitors in smaller shops could) or the right merchandise mix or customer-friendly exchange policies.
The mindset that “it won’t work here” prevented them from innovating and organized retail could not take off as expected.
Most of the organized retail failed to deliver to the customer the right mix of price, ambiance, experience, and quality. The industry experienced mergers, takeovers, sell-offs, and liquidation within a span of a few years.
The inability to resolve the contradictions between opting for rapid growth versus getting the mix right led to many Indian retail forays closing shop. The industry could not either strategize optimally or develop good action plans for implementation.
Too many inward-looking procedures made the organizations bureaucratic rather than customercentric.
In contrast, Nordstrom empowers employees at the store level to offer exchange arrangements. The employee feels empowered and the customer is spared the hassle of going to many people for an exchange or refund. Nordstrom’s other service standards are exacting and do not easily lead to customer disgruntlement.
Nordstrom would support its policy of salesperson’s empowerment with requisite training about products, company credo, communication skills, and etiquette. The training initiative has to be supported by a budget. The budget not only meets the training costs but should some hiring be required than to is within the budget provisions.
Consider the second example where the disconnect between the intent and the plans on the ground leads to citizens’ dissatisfaction.
In Asian countries, there is a tendency for civic organizations to builds amenities without providing for their operation and management.
Later, there is no budget available for repairs, replacements or upgrades. Here it is not the lack of foresight but poor budgeting which makes the representatives unpopular with voters.
Glueck (1988) suggests five reasons why plans and programs are needed. They are developed to ensure:
- The strategic decisions are implemented by all the parts of an organization.
- There is a basis available for controlling activities in the different functional areas of business.
- The time spent by functional managers in decision-making is reduced as plans lay down clearly what is to be done and policies provide the discretionary framework within which decisions need to be taken.
- Similar situations occurring in different functional areas are handled consistently by the functional managers
Coordination across the different functions takes place where necessary.
Social Responsibility and Corporate Strategy
Organizations are institutions within society. They have grown to enormous proportions and consume almost all the resources that the planet has to offer. Over the last 30 years, there has been an increasing concern about the responsibility of the modern commercial organization towards society.
Why should the business organizations be burdened with social responsibility is an often asked question. The answer lies in the size, clout, and resources organizations have acquired over the last 150 years.
Undoubtedly, the main business was to earn profits, at the same time prudence required that they act responsibly towards the society within which they function.
The evolution of social concerns has happened over time and organizations have responded by choosing to be more proactive rather than reactive.
Earlier, social concerns were separated from the mainstream of decision making and were not integrated with the strategic focus of the organization.
For modern organisations the choice is not so much about to do or not to do, but how and to what extent the legitimate concerns of society must be integrated into the strategic decision making.
Corporate social responsibility implies a commitment of the organizations to be ethically, economically, socially and ecologically responsive on a voluntary basis.
This extends beyond the regulatory compliance and the actions taken thus are is in excess of the compliance requirements. The voluntary compliance of social and ecological responsibility of companies is called Corporate Social Responsibility (CSR).
The implementation phase actuates the formulation of strategy. An implementation may be initiated with the formulation phase but is distinct from it. The implementation phase requires a different set of skills, it is focussed on a solution.
Structure, culture, leadership, resources plan projects are some of the things that affect implementation and are also impacted by implementation.
The plans and programs are the links between the corporate, business-level strategy and the functional units of the organization. The plans are based on attainable targets and gradually transform the organization towards the strategic orientation.
Information technology also plays an important role in determining the efficiency and effectiveness of the implementation.