Operationalzing the strategy

By Thomas Nixon.

A firm that is moving from strategy formulation to strategy implementation has to give enough consideration to three interrelated concerns Identification of annual objectives
Development of specific functional strategies Communication of concise policies to guide decisions

Identification of annual objectives

Market

share , return on investment , return on equity, stock price, and expansion into new markets indicate the ultimate effectiveness of a chosen strategy The identification and communication of annual objectives that relate to the long term objectives of a strategy is crucial step in the successful implementation of a strategy Annual objectives also provide a specific basis for monitoring and controlling organizational performance

Qualities of effective annual objectives

Annual

objectives are specific, measurable statements of what an firms subunits is expected to achieve in the next year as a part of the businesss grand strategy Some times a firm may fail in reaching these goals due to the poor understanding of the environment

Linkage to long term objectives

An annual objective must be linked clearly to the long-term objectives of the organization The objectives differ basically in the following four aspects 1. Focus: long-term objectives focus on the future position of the firm in its competitive environment 2. Time frame: long-term objectives are fixed for 5 years or more, where as the annual objectives are fixed only for only one year 3. Specificity: long-term objectives are broadly stated and annual objectives are directly linked to the company 4. Measurement: both long-term and annual objectives are quantifiable

Integrated and coordinated objectives

Implementation

of the grand strategies requires integrated and coordinated objectives The annual objectives of different subunits should be integrated and coordinated With out this long-term objectives remain unfulfilled due to the conflicts between departments Proper coordination and integration of operating units leads to the successful implementation of the strategy

Consistency in annual objectives

An

organization must maintain consistency in setting its annual objective In an organization with many departments the managers of the different departments may not think on the same lines Due to their varied work, back grounds, managers might have different and inconsistent perception Annual objectives are said to be consistent when each objective clearly states what is to be accomplished , when it is to be accomplished, and how each accomplishments is measured

Benefits of annual objectives

Helps

managers to define their role in the mission of the organization This helps in motivating the mangers in the organization When they draw the objectives they feel more accountable and responsible and try to accomplish in a grand manner Well set annual objectives also provide a basis for strategy control Annual objectives provide strong motivation for mangers in strategy implementation

Developing functional strategies

A

functional strategy is a short-term game plan for a key functional area with in a company These strategies must be consistent with long-term objectives and the grand strategy These functional help in the implementation of the grand strategy by organizing and activating specific sub-units of the company

Difference between grand and functional strategy

There

are three basic characteristics which differentiate functional strategies from grand strategies Time horizon Specificity Participation in their development

Time Horizon
For

a functional strategy the time horizon is usually short The functional strategy is designed to achieve an annual objective but ultimately contributes to the goal of the company For example BPL

Specificity
A

functional strategy is more specific than a grand strategy Functional strategies give specific guidance to managers responsible for completing the objectives successfully Grand strategy indicates a specific direction that its move to capture the market For example usha kiran movies

Participation in their development

Various

people at the functional and business levels participate in both functional and business strategy formulation Business strategy is the responsibility of the general manager of the business unit Functional managers establish annual objectives and operating strategies meant for his department

Functional strategies
Key

functional strategies 1. product

1. 2. 3. 4.

Key considerations Type of product Product image Consumer need Changes that influence customers

Functional strategies
Key

functional strategies

Key considerations
Price as the basis of competition Price modifications through discounts Uniformity in pricing policies Target segments

2. price

1.

2.

3. 4.

Functional strategies
Key

functional strategies 3. place

1.

2.

3.

4.

Key considerations Level of market coverage Priority geographic areas Key distribution channels Change in marketing mix

Functional strategies
Key

functional strategies 4. promotion

1.

2.

3.

Key considerations Key promotion priorities Advertising and comm. priorities Media

Finance or Accounting
While

most operating strategies guide implementation in the immediate future, financial strategies direct the use of resources in supporting long-term goals and annual objectives financial strategies usually act as the basis for programs of capital acquisition can be shown as

Long-term

It

Functional Strategies In Finance

Key

functional strategies 1. Capital acquisition

Key considerations 1. cost of capital 2. proportion of long and short-term debt 3. balance between internal and external funding 4. Level and form of leasing

Functional Strategies In Finance

Key

functional strategies 2. Capital allocation

Key considerations 1. priorities in allocation of projects 2. basis for final selection of projects 3. capital allocation authority

Functional Strategies In Finance

Key

functional strategies 3. Dividend and working capital management

Key considerations 1. dividend-pay out ratio 2. stability of dividends 3. credit policies 4. payment timing and procedure

Research & Development

R

& D is the critical function in many organizations because of the importance of technology in most industries R & D strategy determines the appropriateness of basic research or product development for the firm The time horizon is short term and long term It maintains relations with other departments It concentrates on new projects that support growth of the firm

Production or Operations

POM is a core function in the organization

The process of converting inputs into value enhanced output is very important in any industry whether manufacturing, services, or retail business
The POM strategy should also provide guidelines for the purchase function If the firm is to succeed, POM strategies must be coordinated with marketing, financial, and HR strategies of the firm

HR
The

strategic importance of functional strategies in the area of HR is now widely accepted HR contributes to the successful implementation of the grand strategy of the company by nurturing managerial talent, managing compensation, and motivating employees It covers areas like recruitment, selection, orientation, career development, performance evaluation, labor relations, discipline and control

Development of Policies
Policies

enhance managerial effectiveness Policies aid in the establishment and control of ongoing operations in consistent It helps in decision making Policies also promotes uniform handling of similar activities Policies may be written and formal or unwritten and informal policies have an important strategic role to play