annual objectives unit i

Strategy ImplementationStrategy ImplementationStrategy ImplementationStrategy Implementation

Strategy Implementation

• Translating thought into a Strategic action

• Three Concern Areas:

– Identification of Measurable, Mutually determined annual objectives

– Development of Specific Functional Strategies

– Communication of Concise policies to guide decisions

Annual Objectives• Translation of Long Term aspirations into

Year’s budget • Specific basis for Monitoring & Controlling

organizational Performance • Alert Top Management to variations in

Key Performance Areas • Specific, Measurable statements of what

an organization subunit is expected to achieve in contributing to accomplishment of Business’s Grand Strategy

Annual ObjectivesQualities of Effective Annual Objectives:

• Linkage to Long Term objectives – Add breadth & specifies what must be

accomplished in order to achieve long term objective

– Provide Targets for performance of operating areas

• Consistency in Annual Objectives:– What, When & How Measurement

• Measurable:– Measurable activity & measurable outcomes

• Priorities:– Prioritize short term objectives – Objectives critical to success deserve additional

attention

Qualities of Effective Annual Objectives

• Acceptable• Flexible• Suitable• Motivating • Understandable• Achievable

Annual ObjectivesBenefits of Annual Objectives:• Tangible & Meaningful focus through which

managers translate long term objectives & grand strategies into specific actions

• Clarity of Purpose: A better understanding of each person’s role in business mission

• Link b/w Strategic Intent & operating reality: Process to form annual objectives form for addressing conflicting political concerns

• Basis for Strategic Control: Developing budgets, schedules, Trigger points & other mechanisms for controlling strategy implementation

Annual Objectives

• Motivational Pay Offs in strategy Implementation - Link to Business reward structure

Functional Strategies • Functional Strategy is short term game plan for

a key functional area within a company • Specific details about how key functional areas

are to be managed in the near future • Areas of Marketing, Finance, Production, R&D &

Personnel • Implementing Grand Strategy by organizing &

activating specific sub units of the company to pursue the business strategy in daily activities

• Translate Grand Strategy into action designed to accomplish specific annual objectives

• Identify & coordinate actions that support the grand strategy & improve the likelihood of accomplishing annual objectives

Distinction B/W Grand & Functional Strategy

• Time Horizon:– Shorter for Functional Strategy – Identify & coordinate short term actions – Shorter time span focuses manager’s

attention on what needs to be done now to make grand strategy work

– Shorter time framework allows functional managers to recognize current conditions & adjust to changing conditions in developing functional strategies

Distinction B/W Grand & Functional Strategy

• Specificity:– More specific than Grand Strategy – Functional actions but Grand Strategy provides

general direction – Specific guidance to acc annual objectives – How to meet annual objectives – Adds Substance, Completeness & meaning to

what a specific sub unit of a business must do – Clarifies Top Management how functional

managers intend to accomplish grand strategy – Facilitate coordination b/w operating units within

orgn by clarifying areas of interdependence & potential conflict

Distinction B/W Grand & Functional Strategy

• Participants:– Functional strategy is delegated by

business level manager to principal subordinates for running operating area of the business

– Involvement of operating managers essential as he is the front runner & active involvement increases commitment to strategies developed

Functional Strategies in the Marketing Area

• Product:– Identification of customer needs – Features, Product Lines, Packaging,

Quality & NPD – Product Service Concept & Target Markets – Most profitable Product lines – Changes to influence customer orientation – Which products do we emphasize

Price • Approach to pricing strategy: Cost

oriented, market oriented or competition oriented

• Discounting structures • Pricing policies: National or Regional

differences • Price Segments to be Targeted • Profit margins• Market Skimming or Market Penetration

Place

• Decisions regarding channel management

• Level of Market Coverage• Priority geographic areas • Channel objectives & Structures • Sales organization structure • SCM

Promotion• Key Promotion priorities &

Approaches • Advertising, Communication

priorities & approaches linked to different products or markets

• Media Management • Promotion Budgeting

Functional Strategies in the Finance Area

• Capital Acquisition:– Acceptable cost of capital – Desired proportion of short term &

long term debt; Preferred & common equity

– Balance b/w Internal & External Funding

– Appropriate Risk & Ownership structures

– Levels & Forms of leasing for providing assets

• Capital Allocation:– Priorities for Capital Allocation Projects – Final selection of Projects – Capital Allocation by operating

Managers w/o approval• Dividend & Working Capital

Management:– Proportion of earnings as dividends – Importance of dividend stability – Cash Flow Requirements; Minimum &

Maximum Cash balances – Liberal/ Conservative Credit Policies – Payment timings & Procedures

Functional Strategies in the R & D Area

• Research vs. Commercial Development:– Emphasis on Innovation & Break

Through – Emphasis on product development,

Refinement & modification

• Time Horizon:– Short Term or Long Term – Orientation to support business

strategy

• Organizational Fit:– In House R & D or contracting out– Centralized or Decentralized

• Basic R&D Posture:– Offensive posture leading Innovation &

Development in Industry – Defensive posture reacting to

competitor’s development

Functional Strategies in the R & D Area

Functional Strategies in Personnel

• Development of Managerial Talent:– Employee Recruitment, Selection &

Orientation – Career Development & Counseling, Training

& Development

• Compensation & Regulatory Concerns:– Compensation, Labor/Union Relations

• Competent & Well Motivated:– Discipline, Control & Evaluation – Performance Appraisal, 360 degree

Feedback

Developing & Communicating Concise Policies

• Policies: Directives designed to guide the thinking, decisions & actions of managers & subordinates in implementing orgn strategy

• Guidelines for establishing & controlling ongoing operations consistent with Firm’s strategic objectives

• Increase managerial effectiveness by standardizing routine decisions & controlling discretion of managers

• Policies are derived from functional strategies with key purpose of aiding strategy execution

Purpose of Policies• Indirect control over Independent Action • Uniform Handling of Similar Actions ‘• Quicker decisions by standardizing answers • Institutionalize the basic aspects of Orgn.

Behavior• Reduce Uncertainty in Repetitive & day –to

day decision making • Counteract resistance to or rejection for

chosen strategies by organization members • Predetermined answer to routine problems • Afford managers a mechanism for avoiding

hasty & ill conceived decisions in changing operations

Policies

• Policies can vary in their strategic significance

• Policies can be externally imposed or internally driven