Tag: University of Mumbai BMS Notes

Synergy is the concept that the combined value and performance of two companies will be greater than the sum of the separate individual parts. Synergy is a term that is most commonly used in the context of mergers and acquisitions (M&A). Synergy, or the potential financial benefit achieved through the combining of companies, is often a driving force behind a merger.

Synergy is the concept that the whole of an entity is worth more than the sum of the parts. This logic is typically a driving force behind mergers and acquisitions (M&A), where investment bankers and corporate executives often use synergy as a rationale for the deal. In other words, by combining two companies in a merger, the new company’s value will be greater than the sum of the values of each of the two companies being merged.

Concept of Synergy

Mergers and acquisitions (M&A) are made with the goal of improving the company’s financial performance for the shareholders. Two businesses can merge to form one company that is capable of producing more revenue than either could have been able to independently, or to create one company that is able to eliminate or streamline redundant processes, resulting in significant cost reduction. Because of this principle, the potential synergy is examined during the M&A process. If two companies can merge to create greater efficiency or scale, the result is what is sometimes referred to as a synergy merge.

Shareholders will benefit if a company’s post-merger share price increases due to the synergistic effect of the deal. The expected synergy achieved through the merger can be attributed to various factors, such as increased revenues, combined talent, and technology, or cost reduction.

For example, when Proctor & Gamble Company acquired Gillette in 2005, a P&G news release cited that “the increases to the company’s growth objectives are driven by the identified synergy opportunities from the P&G/Gillette combination. The company continues to expect cost synergies of approximately $1 to $1.2 billion…and an increase in the annual sales run-rate of about $750 million by 2008.” In the same press release, then P&G chairman, president, and chief executive A.G. Lafley stated, “…We are both industry leaders on our own, and we will be even stronger and even better together.” This is the idea behind synergy—that by combining two companies the financial results are greater than what either could have achieved alone.

In addition to merging with another company, a company may also attempt to create synergy by combining products or markets. For example, a retail business that sells clothes may decide to cross-sell products by offering accessories, such as jewelry or belts, to increase revenue.

A company can also achieve synergy by setting up cross-disciplinary workgroups, in which each member of the team brings with him or her a unique skill set or experience. For example, a product development team may consist of marketers, analysts, and R&D experts. This team formation could result in increased capacity and workflow and, ultimately, a better product than all the team members could produce if they work separately.

 Synergy can also be negative. Negative synergy is derived when the value of the combined entities is less than the value of each entity if it operated alone. This could result if the merged firms experience problems caused by vastly different leadership styles and company cultures.

Synergy is reflected on a company’s balance sheet through its goodwill account. Goodwill is an intangible asset that represents the portion of the business value that cannot be attributed to other business assets. Synergies may not necessarily have a monetary value but could reduce the costs of sales and increase profit margin or future growth. In order for synergy to have an effect on the value, it must produce higher cash flows from existing assets, higher expected growth rates, longer growth periods, or lower cost of capital.

Types of Synergy

1. Operating Synergy

When the combined value of two firms is greater than the sum of the separate firms apart and, when the combined firm allows for the firms to increase their operating income and achieve higher growth it is termed as ‘’Operating synergy’.’ Operating synergies arise from the following:

Economies of scale, greater pricing power and higher margins resulting from greater market share and lower competition, combination of different functional strengths such as marketing skills and good product line, or higher levels of growth from new and expanded markets.

Operating synergies are achieved through merger, acquisition or takeovers of firms which have competencies in different areas such as production, research and development or marketing and finance can also help achieve operating efficiencies. Tata Steel which is one of the biggest Indian steel companies; it took over Corus which was Europe’s second largest steel company in 2007. Tata Steel’s takeover of the European steel major Corus for the price of $12.02 billion made the Indian company, the world’s fifth-largest steel producer. The acquisition was intended to give Tata steel access to the European markets and to achieve potential synergies in the areas of manufacturing, procurement, R&D, logistics, and back office operations.

2. Financial Synergy

Financial synergies are most often appraised in the context of mergers and acquisitions, but latest strategic alliances include strategic partnerships. These types of synergies relate to improvement in the financial metric of a combined business such as revenue, debt capacity, cost of capital, profitability, etc. Examples of positive financial synergies include: Increased revenues through a larger customer base, lower costs through streamlined operations, talent and technology harmonies.

In addition to above, financial synergies can result in the following benefits post acquisition: Increased debt capacity, greater cash flows, lower cost of capital, tax benefits etc. The Renault-Nissan (Franco – Japanese) strategic partnership or car making alliance expects to generate 5.5 billion euros ($6 billion) of synergies in 2018 by integrating more divisions and sharing resources better within the partnership. Increased union between the French carmaker and its 43.4 percent-owned Japanese partner generated more than 4 billion euros in synergies in 2015.

The two companies go together to benefit from cost cutting.  As of December 2016, the Alliance is the world’s leading plug-in-electric vehicle manufacturer, with global sales since 2010 of almost 425,000 pure electric vehicles, including those manufactured by Mitsubishi Motors which is also now part of the Alliance. The strategic alliance partnership between Renault and Nissan is not a merger or an acquisition. The two companies are joined together through a cross-sharing agreement. The structure was unique in the auto industry during the 1990s consolidation trend and later served as a model for General Motors and PSA Peugeot Citroen.

3. Marketing synergy

Marketing synergy implies that the marketing-mix makes for overall effectiveness. For example, by grabbing an opportunity which makes it possible to gain increased utilization of existing marketing and distribution facilities, it may be possible to enhance sales revenues without causing a proportionate increase in costs. Hero Honda Ltd was a joint venture between Hero Cycles of India and Honda Motor of Japan. Hero Cycle’s long experience about Indian road conditions including Indian rural and urban customers was wholly combined with Honda Motor’s superior technological capability to create the expected  synergy effect for producing a highly fuel efficient and sturdy motor cycle to suit the exact requirements of the Indian customers and meet the rough road conditions as early as 1985. The partnership lasted for 26 years.

Modes of strategic management are the actual kinds of approaches taken by managers in formulating and implementing strategies. They address the issues of who has the major influence in the strategic management process and how the process is carried out. Research indicates that managers tend to use one of three major approaches to, or modes of strategic management: entrepreneurial, adaptive, and planning. The mode selected is likely to influence the degree of innovation that occurs within the organization. Innovation is particularly important in the context of strategic management, because organizations that do not continually incorporate new ideas are likely to fail behind competitively, particularly when the environment is changing rapidly.

1. Entrepreneurial Mode

“Entrepreneurial mode is an approach in which strategy is formulated mainly by a strong visionary chief executive who actively searches for new opportunities, is heavily oriented toward growth, and is willing to make bold strategies rapidly”. The entrepreneurial searches for new mode are most likely to be found in organizations that are young or small, have a strong leader, or are in such serious trouble that bold are their only hope. Not surprisingly, in the entrepreneurial mode, the extent to which the strategic management process encourages innovation depends largely on the orientation of top leaders. Their personalities, power, and information enable them to overcome obstacles and push for change. Conversely, strong leaders also are in a position to threat innovative activities, should they be so inclined.

2. Adaptive Mode

“Adaptive mode is an approach to strategy formulation that emphasizes taking small incremental steps, reacting to problems rather than seeking opportunities, and attempting to satisfy a number of organizational power groups”. The adaptive mode is most likely to be used by managers in established organizations that face a rapidly changing environment and yet have several coalitions, or power blocks, that make it difficult to obtain agreement on clear strategic goals and associated long-term plans. For example, before London-based Grand Metropolitan PLC purchased Pillsbury, including the Burger King Chain, the chain was plagued by constant turnover, marketing problems, inconsistent service, and angry franchisees who frequently told Pillsbury what to do.  Grand Metropolitan is now working to put the chain back on track through a strategy that emphasizes, doing “whatever it takes to create a positive, memorable experience.” Concrete measures include increasing the number of field representatives who visit Burger King stores, highlighting cleanliness, and rewarding employees who take the initiative in improving service by doing things differently.

With the adaptive approach, the degree of innovation fostered by the strategic management process is likely to depend on the ability of managers to agree on at least some major goals and basic strategies that set essential directions. In addition, lower-level managers must have some flexibility in carrying out the basic strategy rather than being given extremely detailed plans to follow; this approach might be effective in a more stable environment or one in which agreement among coalitions is easy to obtain. Without at least some agreement among high-level managers on major goals and directions, however the adaptive mode may be ineffective in moving the organization in viable strategic directions.

3. Planning Mode

Planning mode is an approach to strategy formulation that involves systematic, comprehensive analysis, along with integration of various decisions and strategies”. Martin. With the planning mode, executives often utilize planning specialists to help with the strategic management process. The ultimate aim of the planning mode is to understand the environment well enough to influence it. The planning mode is most likely to be used in large organizations that have enough resources to conduct comprehensive analysis, have an internal situation in which agreement is possible on major goals, and face an environment that has enough stability to enable the formulation and implementation of carefully conceived strategies. For example, Disney’s plans include entry into the convention hotel business with its Dolphin Hotel, operated by the Sheraton Corporation, and Swan Hotel, run by the Westin Hotel Company. Combined, the two hotels offer 2350 rooms and more than 200,000 square feet of convention space inside Disney World. The hotels were heavily booked well in advance of their opening in 1990.

With the planning mode, innovation is most likely to occur when strategies explicitly articulate needs for product and service innovation and when top-level managers, such as those at Disney, help integrate efforts in the direction of encouraging innovation.

Assessing the Strategic Management Modes

Each mode can be relatively successful as long as it is matched to an appropriate situation. In fact, it may be possible to use different modes within the same organization. For example, a top-level manager may adopt an entrepreneurial mode for a new business that is just starting and use the planning mode for strategic management of the rest of the organization.

Each of these modes of strategic management can either promote organizational innovation or stifle it, depending on how the mode is used. Still, operating effectively in any of the three modes requires knowledge of the strategic management process. In carrying out the process, once the mission and strategic goals are determined, managers engage in competitive analysis.

Strategy analysis and choice focuses on generating and evaluating alternative strategies, as well as on selecting strategies to pursue. Strategy analysis and choice seeks to determine alternative courses of action that could best enable the firm to achieve its mission and objectives.

The firm’s present strategies, objectives, and mission together with the external and internal audit information, provide a basis for generating and evaluating feasible alternative strategies. The alternative strategies represent incremental steps that move the firm from its current position to a desired future state.

Alternative strategies are derived from the firm’s vision, mission, objectives, external audit, and internal audit and are consistent with past strategies that have worked well. The strategic analysis discusses the analytical techniques in two stages i.e. techniques applicable at corporate level and then techniques used for business-level strategies.

The techniques that have been discussed for the corporate level include BCG matrix, GE nine-cell planning grid, Hofer’s matrix and Shell Directional Policy Matrix and the techniques for business- level include SWOT analysis, experience curve analysis, grand strategy selection matrix, grand strategy clusters.

The judgmental factors constitute the other aspect on the basis of which strategic choice is made.

As environment changes, companies need to change their strategies to adapt to the environment not only to prosper but also to survive. Based on the multiple strategic choices, each choice is analyze and the best one is selected and implemented.

Strategic analysis and choice are two important components of the implementation stage of the strategic management plan. These two components are crucial links in the strategic management implementation procedure.

Strategic analysis is all about analyzing the strength of businesses’ position and understanding the important external factors that may influence that position. Factors Taken into Consideration for Strategic Analysis and Choice

Key Internal Factors

• Marketing
• Management
• Operations/Production
• Accounting/Finance
• Computer Information Systems
• Research and Development

Key External Factors

• Political/Governmental/Legal
• Economy
• Technological
• Social/Demographic/Cultural/Environmental
• Competitive

Techniques Used in Strategic Analysis

The following devices or techniques are used in the procedure of strategic analysis:

• Five Forces Analysis
• PEST Analysis (Political, Economic, Social and Technological Analysis)
• Market segmentation
• Scenario planning
• Competitor analysis
• Directional policy matrix
• SWOT Analysis (Strength, Weaknesses, Opportunities, and Threats Analysis)
• Critical Success Factor Analysis

Strategic choice

Strategic choice involves understanding the nature of stakeholders expectations, identifying the strategic option and evaluating and selecting the best/optimal choice amongst all.

Strategic implementation

Strategic implementation is the penultimate stage of strategic management and strategic analysis and choice are two significant constituents of that process.

Characteristics of Strategic Analysis and Choice

Following are the features of strategic analysis and choice:

• Establishment of long term goals
• Producing strategy options
• Choosing strategies to act on
• Selecting the best option and accomplishing mission and goal

At the time of performing strategic analysis and arriving at strategic choices, long term goals are fixed and different types of strategies are chosen that are most appropriate for the mission of the company and the variable conditions.

Strategic analysis and choice of strategies are done with the help of a number of techniques. If the appropriate strategy is chosen, a company would become more efficient to establish sustainability in competitive advantage and maximize firm valuation.

GE nine cell planning grid, tries to overcome some of the limitations of BCG matrix in two ways:

1. It uses multiple factors to assess industry attractiveness and business strength in place of the single measure employed in the BCG matrix.
2. It expanded the matrix from four cells to nine cells. It replaced the high/low axes with high/medium/low making a finer distinction between business portfolio positions.

Each business is appraised in terms of two major dimensions Market Attractiveness and Business Strength. If one of these factors is missing, then the business will not produce desired results. Neither a strong company operating in an unattractive market, nor a weak company operating in an attractive market will do very well

The vertical axis denotes

Industry attractiveness indicates how hard or easy it will be for a company to compete in the market and earn profits. The more profitable the industry is the more attractive it becomes. When evaluating the industry attractiveness, analysts should look how an industry will change in the long run rather than in the near future, because the investments needed for the product usually require long lasting commitment.

• Long run growth rate
• Industry size
• Industry profitability: entry barriers, exit barriers, supplier power, buyer power, threat of substitutes and available complements (use Porter’s Five Forces analysis to determine this)
• Industry structure (use Structure-Conduct-Performance framework to determine this)
• Product life cycle changes
• Changes in demand
• Trend of prices
• Macro environment factors (use PEST or PESTEL for this)
• Seasonality
• Availability of labor
• Market segmentation

Horizontal axis represent

Along the X axis, the matrix measures how strong, in terms of competition, a particular business unit is against its rivals. In other words, managers try to determine whether a business unit has a sustainable competitive advantage (or at least temporary competitive advantage) or not.

• Total market share
• Market share growth compared to rivals
• Brand strength (use brand value for this)
• Profitability of the company
• Customer loyalty
• VRIO resources or capabilities (use VRIO framework to determine this)
• Your business unit strength in meeting industry’s critical success factors (use Competitive Profile Matrix to determine this)
• Strength of a value chain (use Value Chain Analysis and Benchmarking to determine this)
• Level of product differentiation
• Production flexibility

Green zone

Suggests you to ‘go ahead’, to grow and build, pushing you through expansion strategies. Businesses in the green zone attract major investment.

Yellow zone

 Cautions you to ‘wait and see’ indicating hold and maintain type of strategies aimed at stability.

Red zone

 Indicates that you have to adopt turnover strategies of divestment and liquidation or rebuilding approach.

Advantages of GE 9CELL

• Helps to prioritize the limited resources in order to achieve the best returns.
• The performance of products or business units becomes evident.
• It’s more sophisticated business portfolio framework than the BCG matrix.
• Determines the strategic steps the company needs to adopt to improve the performance of its business portfolio.

Disadvantage of GE 9CELL

• Needs a consultant or an expert to determine industry’s attractiveness and business unit strength as accurately as possible.
• It is expensive to conduct.
• It doesn’t take into account the harmony that could exist between two or more business units.

The grid then does rating of each of the company’s business units on multiple sets of strategic factor within each axis of the grid.

In order to assess the industry attractiveness factors such as market growth, size of market, industry profitability, competition, seasonality and cyclical qualities, economies of scale, technology, and social/environmental/ legal/human factors are included.

For assessing business strength factors such as market share, profit margin, ability to compete, customer and market knowledge, competitive position, technology, and management caliber are identified.

The strategists then calculate “subjectively” a business’s position within the planning grid by quantifying the two dimensions of the grid.

The strategist first selects industry attractiveness factors to measure industry attractiveness and then assign each industry attractiveness factor a weight that reflects its perceived importance as compared to other attractiveness factors. Favorable to unfavorable future conditions for those factors are forecast and rated based on some scale (0 to 1 scale is illustrative).

Then a weighted composite scope is obtained for a business’s overall industry attractiveness. In order to assess business, a similar procedure is followed in selecting factors, assigning weights to them, and then rating the business on these dimensions.

Thus the GE planning grid might prove to be a useful tool for assessing a business within a corporate portfolio. Usually several managers are involved during the planning process. The inclusion and exclusion of factors and their rating and weighting are primarily matters of managerial judgment. This classifies businesses in terms of both the projected strength of the business and the projected attractiveness of the industry.

The decisions concerning the resource allocation remain quite similar to those in the BCG approach. Business classified as invest to grow would be treated like the stars in the BCG matrix. These businesses would be provided resources to pursue growth-oriented strategies.

Businesses classified in the harvest/divest category would be managed like the dogs in the BCG matrix. Businesses classified, as selectivity/ earnings would either be managed as cash cows or as question marks.

While the strategic recommendations generated by the GE planning grid are similar to those from the BCG matrix, the GE nine-cell grid improves on the BCG matrix in three fundamental ways.

• The terminology associated with GE grid is preferable because it is less offensive and more universally understood.
• The multiple measures associated with each dimension of the GE grid include more factors relevant to business strength and market attractiveness than simply market share and market growth.
• The nine-cell format allows finer distinction between portfolio positions than does the four-cell BCG format.

Strategy implementation is the translation of chosen strategy into organizational action so as to achieve strategic goals and objectives. Strategy implementation is also defined as the manner in which an organization should develop, utilize, and amalgamate organizational structure, control systems, and culture to follow strategies that lead to competitive advantage and a better performance. Organizational structure allocates special value developing tasks and roles to the employees and states how these tasks and roles can be correlated so as maximize efficiency, quality, and customer satisfaction-the pillars of competitive advantage. But, organizational structure is not sufficient in itself to motivate the employees.

Strategic implementation is critical to a company’s success, addressing the who, where, when, and how of reaching the desired goals and objectives. It focuses on the entire organization. Implementation occurs after environmental scans, SWOT analyses, and identifying strategic issues and goals. Implementation involves assigning individuals to tasks and timelines that will help an organization reach its goals.

An organizational control system is also required. This control system equips managers with motivational incentives for employees as well as feedback on employees and organizational performance. Organizational culture refers to the specialized collection of values, attitudes, norms and beliefs shared by organizational members and groups.

Following are the main steps in implementing a strategy:

• Developing an organization having potential of carrying out strategy successfully.
• Disbursement of abundant resources to strategy-essential activities.
• Creating strategy-encouraging policies.
• Employing best policies and programs for constant improvement.
• Linking reward structure to accomplishment of results.
• Making use of strategic leadership.

Steps in Strategy Implementation

To ensure an effective and successful implementation of strategies, it’s a good idea to have a system to go about it. Take a look at the steps to ensure that happens.

Step 1: Evaluation and communication of the Strategic Plan

The strategic plan, which was developed during the Strategy Formulation stage, will be distributed for implementation. However, there is still a need to evaluate the plan, especially with respect to the initiatives, budgets and performance. After all, it is possible that there are still inputs that will crop up during evaluation but were missed during strategy formulation.

There are several sub-steps to be undertaken in this step.

(a) Align the strategies with the initiatives

First things first, check that the strategies on the plan are following the same path leading to the mission and strategic goals of the organization.

(b) Align budget to the annual goals and objectives

Financial assessments conducted prior will provide an insight on budgetary issues. You have to evaluate how these budgetary issues will impact the attainment of objectives, and see to it that the budget provides sufficient support for it. In the event that there are budgetary constraints or limitations, they must first be addressed before launching fully into implementation mode.

(c) Communicate and clarify the goals, objectives and strategies to all members of the organization

Regardless of their position in the organization’s hierarchy, everyone must know and understand the goals and objectives of the organization, and the strategies that will be employed to achieve them.

Step 2: Development of an implementation structure

The next step is to create a vision, or a structure, that will serve as a guide or framework for the implementation of strategies.

• Establish a linking or coordination mechanism between and among the various departments and their respective divisions and units. This is mainly for purposes of facilitating the delegation of authority and responsibility.
• Formulate the work plans and procedures to be followed in the implementation of the tactics in the strategies.
• Determine the key managerial tasks and responsibilities to be performed, and the qualifications required of the person who will perform them.
• Determine the key operational tasks and responsibilities to be performed, and the qualifications required of the person who will perform them.
• Assign the tasks to the appropriate departments of the organization.
• Evaluate the current staffing structure, checking if you have enough manpower, and if they have the necessary competencies to carry out the tasks. This may result to some reorganization or reshuffling of people. In some cases, it may also require additional training for current staff members, or even hiring new employees with the required skills and competencies. This is also where the organization will decide if it will outsource some activities instead.
• Communicate the details to the members of the organization. This may be in the form of models, manuals or guidebooks.

Step 3: Development of implementation-support policies and programs

Some call them “strategy-encouraging policies” while others refer to them as “constant improvement programs”. Nonetheless, these are policies and programs that will be employed in aid of implementation.

(a) Establish a performance tracking and monitoring system

This will be the basis of evaluating the progress of the implementation of strategies, and monitoring the rate of accomplishment of results, or if they were accomplished at all. Define the indicators for measuring the performance of every employee, of every unit or section, of every division, and of every department.

(b) Establish a performance management system

Quite possibly, the aspect of performance management that will encourage employee involvement is a recognition and reward structure. When creating the reward structure, make sure that it has a clear and direct link to the accomplishment of results, which will be indicated in the performance tracking and monitoring system.

(c) Establish an information and feedback system

Establish an information and feedback system that will gather feedback and results data, to be used for strategy evaluation later on.

Again, communicate these policies and programs to the members of the organization.

Step 4: Budgeting and allocation of resources

It is now time to equip the implementors with the tools and other capabilities to perform their tasks and functions.

• Allocate the resources to the various departments, depending on the results of financial assessments as to their budgetary requirements.
• Disburse the necessary resources to the departments, and make sure everything is properly and accurately documented.
• Maintain a system of checks and balances to monitor whether the departments are operating within their budgetary limits, or they have gone above and beyond their allocation.

Step 5: Discharge of functions and activities

It is time to operationalize the tactics and put the strategies into action, aided by strategic leadership, utilizing participatory management and leadership styles.

Throughout this step, the organization should also ensure the following:

• Continuous engagement of personnel by providing trainings and reorientations.
• Enforce the applicable control measures in the performance of the tasks.
• Evaluate performance at every level and identify performance gaps, if any, to enable adjusting and corrective actions. It is possible that the corrective actions may entail changes in the policies, programs and structures established and set in earlier steps. That’s all right. Make the changes when necessary.

Basically, the results or accomplishments in Step 5 will be the input in the next step, which is the third stage of Strategic Management: “strategy evaluation”.

Some argue that implementation of strategies is more important than the strategies themselves. But this is not about taking sides or weighing and making comparisons, especially considering how these two are important stages in Strategic Management. Thus, it is safe to say that formulating winning strategies is just half the battle, and the other half is their implementation.

In project implementation or project execution, we put it all together. Project planning is complete, as detailed as possible, yet providing enough flexibility for necessary changes. In a customer-contractor relationship, the contract is signed, based on the right decisions about the contract structures, and including clauses for change and claim management.

1. Prepare the infrastructure

Many solutions are implemented into a production environment that is separate and distinct from where the solution was developed and tested. It is important that the characteristics of the production environment be accounted for. This strategy includes a review of hardware, software, communications, etc. In our example above, the potential desktop capacity problem would have been revealed if we had done an evaluation of the production (or real-world) environment. When you are ready for implementation, the production infrastructure needs to be in place.

2. Coordinate with the organizations involved in implementation

This may be as simple as communicating to your client community. However, few solutions today can be implemented without involving a number of organizations. For IT solutions, there are usually one or more operations and infrastructure groups that need to be communicated to ahead of time. Many of these groups might actually have a role in getting the solution successfully deployed. Part of the implementation work is to coordinate the work of any other groups that have a role to play. In some cases, developers simply failed to plan ahead and make sure the infrastructure groups were prepared to support the implementation. As a result, the infrastructure groups were forced to drop everything to make the implementation a success.

3. Implement training

Many solutions require users to attend training or more informal coaching sessions. This type of training could be completed in advance, but the further out the training is held, the less information will be retained when implementation rolls around. Training that takes place close to the time of implementation should be made part of the actual implementation plan.

4. Install the production solution

This is the piece everyone remembers. Your solution needs to be moved from development to test. If the solution is brand new, this might be finished in a leisurely and thoughtful manner over a period of time. If this project involves a major change to a current solution, you may have a lot less flexibility in terms of when the new solution moves to production, since the solution might need to be brought down for a period of time. You have to make sure all of your production components are implemented successfully, including new hardware, databases, and program code.

5. Convert the data

Data conversion, changing data from one format to another, needs to take place once the infrastructure and the solution are implemented.

6. Perform final verification in production

You should have prepared to test the production solution to ensure everything is working as you expect. This may involve a combination of development and client personnel. The first check is just to make sure everything is up and appears okay. The second check is to actually push data around in the solution, to make sure that the solution is operating as it should. Depending on the type of solution being implemented, this verification step could be extensive.

7. Implement new processes and procedures

Many IT solutions require changes to be made to business processes as well. These changes should be implemented at the same time that the actual solution is deployed.

8. Monitor the solution

Usually the project team will spend some period of time monitoring the implemented solution. If there are problems that come up immediately after implementation, the project team should address and fix them.

Process of Strategy Implementation

• Building an organization, that possess the capability to put the strategies into action successfully.
• Supplying resources, in sufficient quantity, to strategy-essential activities.
• Developing policies which encourage strategy.
• Such policies and programs are employed which helps in continuous improvement.
• Combining the reward structure, for achieving the results.
• Using strategic leadership.

The process of strategy implementation has an important role to play in the company’s success. The process takes places after environmental scanning, SWOT analyses and ascertaining the strategic issues.

Structural of Implementation

Before implementing a new or revised strategy, company leaders must ensure the organizational structure can support the planned activities. After identifying the tasks that the company must perform well to succeed, company executives configure organizational hierarchies to support primary strategic goals and achieve competitive advantages. They also identify areas of weakness that pose risks and devise techniques for handling crises. Successful strategic implementation depends on structuring the organization’s employees so they can most effectively use the tools and resources available to create quality products and services.

Structuring Activities

To prevent their staff from spending time on activities not directly related to achieving companies’ strategic goals, managers identify tasks that can be outsourced to third-party vendors. Structuring work this way allows experts to perform these jobs, typically at a lower cast, while employees focus on their core competencies supporting main businesses. For example, computer manufacturers typically outsource assembly while focusing internally on design, sales and distribution duties.

Aligning Functions to Strategic Objectives

Before corporate leaders can implement new strategyies, they need to ensure that all personnel in the organizational structure possess the necessary skills, knowledge and resources to accomplish the tasks. Work must flow from one function to another so leaders should establish clear processes with policies and procedures that define roles and responsibilities. The strategy must be consistent across all departments, adaptive to changes, competitively advantageous and technically feasible.

Establishing Authority

Successfully implementing a new strategy requires that managers and employees understand what activities require executive approval and which decisions employees have the empowerment to make without further approval. Ideally, decision makers should be those people who are closest to the situation and most knowledgeable about the impact. By avoiding micro-managing the organization, managers streamline operations and eliminate wasteful tasks. If the organization is structured to allow employees the flexibility to make critical decisions, they must also be held accountable for their actions.

Developing Partnerships

Strategic implementations require personnel to work together to achieve specific, measurable, attainable, relevant and time-constrained goals and objectives. Establishing a common balanced scorecard prevents groups from competing against each other to succeed individually at the expense of the whole company. If company executives foster a cooperative environment between departments, managers share resources, personnel and knowledge effectively. Additionally, the organizational structure should encourage new employees to seek out coaching and mentoring from corporate executives. By encouraging learning and development, company leaders establish a framework for sustainable growth.

It is vital to bear in mind that organizational change is not an intellectual process concerned with the design of ever-more-complex and elegant organization structures. It is to do with the human side of enterprise and is essentially about changing people’s attitudes, feelings and above all else their behavior. The behavioral of the employees affect the success of the organization. Strategic implementation requires support, discipline, motivation and hard work from all manager and employees.

1. Influence Tactics

The organizational leaders have to successfully implement the strategies and achieve the objectives. Therefore the leader has to change the behavior of superiors, peers or subordinates. For this they must develop and communicate the vision of the future and motivate organizational members to move into that direction.

2. Power

It is the potential ability to influence the behavior of others. Leaders often use their power to influence others and implement strategy. Formal authority that comes through leaders position in the organization (He cannot use the power to influence customers and government officials) the leaders have to exercise something more than that of the formal authority (Expertise, charisma, reward power, information power, legitimate power, coercive power).

3. Empowerment as a way of Influencing Behavior

The top executives have to empower lower level employees. Training, self managed work groups eliminating whole levels of management in organization and aggressive use of automation are some of the ways to empower people at various places.

4. Political Implications of Power

Organization politics is defined as those set of activities engaged in by people in order to acquire, enhance and employ power and other resources to achieve preferred outcomes in organizational setting characterized by uncertainties.   Organization must try to manage political behavior while implementing strategies. They should;

• Define job duties clearly.
• Design job properly.
• Demonstrate proper behaviors.
• Promote understanding.
• Allocate resources judiciously.

5. Leadership Style and Culture Change

Culture is the set of values, beliefs, behaviors that help its members understand what the organization stands for, how it does things and what it considers important. Firms culture must be appropriate and support their firm. The culture should have some value in it. To change the corporate culture involves persuading people to abandon many of their existing beliefs and values, and the behaviors that stem from them, and to adopt new ones. The first difficulty that arises in practice is to identify the principal characteristics of the existing culture. The process of understanding and gaining insight into the existing culture can be aided by using one of the standard and properly validated inventories or questionnaires that a number of consultants have developed to measure characteristics of corporate culture. These offer the advantage of being able to benchmark the culture against those of other, comparable firms that have used the same instruments. The weakness of this approach is that the information thus obtained tends to be more superficial and less rich than material from other sources such as interviews and group discussions and from study of the company’s history. In carrying out this diagnostic exercise, such instruments can be supplemented by surveys of employee opinions and attitudes and complementary information from surveys of customers and suppliers or the public at large.

6. Values and Culture

Value is something that has worth and importance to an individual. People should have shared values. This value keeps the everyone from the top management down to factory persons on the factory floor pulling in the same direction.

7. Ethics and Strategy

Ethics are contemporary standards and a principle or conducts that govern the action and behavior of individuals within the organization. In order that the business system function successfully, the organization has to avoid certain unethical practices and the organization has to bound by legal laws and government rules and regulations.

8. Managing Resistance to Change

To change is almost always unavoidable, but its strength can be minimized by careful advance. Top management tends to see change in its strategic context. Rank-and-file employees are most likely to be aware of its impact on important aspects of their working lives. Some resistance planning, which involves thinking about such issues as: Who will be affected by the proposed changes, both directly and indirectly? From their point of view, what aspects of their working lives will be affected? Who should communicate information about change, when and by what means? What management style is to be used?

9. Managing Conflict

Conflict is a process in which an effort is purposefully made by one person or unit to block another that results in frustrating the attainment of the others goals or the furthering of his interests. The organization has to resolve the conflicts.

Strategic management process has following five steps:

1. Mission and Goals

The first step in the strategic management begins with senior managers evaluating their position in relation to the organization’s current mission and goals. The mission describes the organization’s values and aspirations; and indicates the direction in which senior management is going. Goals are the desired ends sought through the actual operating procedures of the organization. It typically describe short-term measurable outcomes.

2. Environmental Scanning

Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes and helps in analyzing the internal and external factors influencing an organization. After executing the process, management should evaluate it on a continuous basis and strive to improve it.

3. Strategy Formulation

Strategy formulation is the process of deciding best course of action for achieving organizational objectives. After conducting environment scanning process, managers formulate corporate, business and functional strategies.

4. Strategy Implementation

Strategy implementation implies putting the organization’s chosen strategy in to action and making it work as intended. Strategy implementation includes designing the organization’s structure, distributing resources, developing decision making process, and effectively managing human resources.

5. Strategy Evaluation

Strategy evaluation which is the final step of strategy management process involves- appraising internal and external factors, measuring performance, and taking remedial/corrective actions. Evaluation assure the management that the organizational strategy as well as its implementation meets the organizational objectives.

These steps are carried by the businesses, 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, so as to make essential changes.

The Three Levels of Strategy

Strategy is at the heart of business. All businesses have competition, and it is strategy that allows one business to rise above the others to become successful. Even if you have a great idea for a business, and you have a great product, you are unlikely to go anywhere without strategy.

Many of the most successful business men and women throughout history have been great strategic thinkers, and that is no accident. If you wish to take your business to the top of the market as quickly as possible, it is going to be strategy that leads the way.

Of course, before you can get into the process of determining your own business strategies, you need to understand what the word ‘strategy’ really means in a business context. Does it involve long-term planning as to the general course of the business? Or is it related to the day-to-day operations and how they are designed in order to achieve success? Well, in practical application, strategy can refer to both of those things and more.

To help you understand strategy in business, this article is going to look at the three levels of strategy that are typically used by organizations. Only when all three of these levels are carefully considered will your business be able to get on the right path toward a prosperous future.

1. Corporate Strategy

The first level of strategy in the business world is corporate strategy, which sits at the ‘top of the heap’. Before you dive into deeper, more specific strategy, you need to outline a general strategy that is going to oversee everything else that you do. At a most basic level, corporate strategy will outline exactly what businesses you are going to engage in, and how you plan to enter and win in those markets.

It is easy to overlook this planning stage when getting started with a new business, but you will pay the price in the long run for skipping this step. It is crucially important that you have an overall corporate strategy in place, as that strategy is going to direct all of the smaller decisions that you make.

For some companies, outlining a corporate strategy will be a quick and easy process. For example, smaller businesses who are only going to enter one or two specific markets with their products or services are going to have an easy time identifying what it is that makes up the overall corporate strategy. If you are running an organization that bakes and sells cookies, for instance, you already know exactly what the corporate strategy is going to look like – you are going to sell as many cookies as possible.

However, for a larger business, things quickly become more complicated. Carrying that example forward to a larger company, imagine you run an organization that is going to sell cookies but is also going to sell equipment that is used while making cookies. Entering into the kitchen equipment market is a completely different challenge from selling the cookies themselves, so the complexity of your corporate strategy will need to rapidly increase. Before you get any farther into the strategic planning of your business, be sure you have your corporate strategy clearly defined.

2. Business Strategy

It is best to think of this level of strategy as a ‘step down’ from the corporate strategy level. In other words, the strategies that you outline at this level are slightly more specific and they usually relate to the smaller businesses within the larger organization.

Carrying over our previous example, you would be outlining separate strategies for selling cookies and selling cookie-making equipment at this level. You may be going after convenience stores and grocery stores to sell your cookies, while you may be looking at department stores and the internet to sell your equipment. Those are dramatically different strategies, so they will be broken out at this level.

Even in smaller businesses, it is a good idea to pay attention to the business strategy level so you can decide on how you are going to handle each various part of your operation. The strategy that you highlighted at the corporate level should be broad in scope, so now is the time to boil it down into smaller parts which will enable you to take action.

3. Functional Strategy

This is the day-to-day strategy that is going to keep your organization moving in the right direction. Just as some businesses fail to plan from a top-level perspective, other businesses fail to plan at this bottom-level. This level of strategy is perhaps the most important of all, as without a daily plan you are going to be stuck in neutral while your competition continues to drive forward. As you work on putting together your functional strategies, remember to keep in mind your higher level goals so that everything is coordinated and working toward the same end.

It is at this bottom-level of strategy where you should start to think about the various departments within your business and how they will work together to reach goals. Your marketing, finance, operations, IT and other departments will all have responsibilities to handle, and it is your job as an owner or manager to oversee them all to ensure satisfactory results in the end. Again, the success or failure of the entire organization will likely rest on the ability of your business to hit on its functional strategy goals regularly. As the saying goes, a journey of a million miles starts with a single step – take small steps in strategy on a daily basis and your overall corporate strategy will quickly become successful.

Good strategy alone isn’t going to automatically lead you to success in business, but it certainly is a good place to start. Once you have sound strategies in place, the focus of the organization will shift toward executing those strategies properly day after day. Of course, your strategies will need to be continually monitored and adjusted as you move forward to ensure you are staying on a path that is consistent with the goals of the business, so always keep the three levels of strategy near the front of your mind as your guide your company.

Strategic Business Unit (SBU) implies an independently managed division of a large company, having its own vision, mission and objectives, whose planning is done separately from other businesses of the company. The vision, mission and objectives of the division are both distinct from the parent enterprise and elemental to the long-term performance of the enterprise.

Simply put, an SBU is a cluster of associated businesses which are responsible for its combined planning treatment, i.e. the company engaged in a diversified range of businesses, categorises its multitude of businesses into a few separate divisions, in a scientific way. The task may include analysis and bifurcation of a variety of businesses.

It can be a business division, a product line of the division or even a specific product/brand, targeting a particular group of customers or a geographical location.

Characteristics of Strategic Business Unit

• Separate business or a grouping of similar businesses, offering scope for autonomous planning.
• Own set of competitors.
• A manager who is accountable for strategic planning, profitability and performance of the division.

A strategic business unit is specially formed to target a particular market segment, which requires expertise in production or management, not present in the parent company.

Strategic Business Unit Structure

The structure of SBU consist of operating units; wherein the units serve as an autonomous business. The top corporate officer assigns the responsibility of the business to the managers, for the regular operations and business unit strategy. So, the corporate officer is accountable for the formulation and implementation of the comprehensive strategy and administers the SBU by way of strategic and financial controls.

In this way, the structure combines related divisions of business into the strategic business unit and the senior executive is empowered for taking decisions for each unit. The senior executive works under the supervision of a chief executive officer.

There are three levels in a strategic business unit, wherein the corporate headquarters remain at the top, SBU’s in the middle and divisions clustered by similarity, within each SBU, remain at the bottom. Hence, the divisions within the SBU are associated with each other, and the SBU groups are independent of each other. From the strategic viewpoint, each SBU is an independent business.

A single strategic business unit is considered as a profit centre and governed by the corporate officers. It stresses over strategic planning instead of operational control so that the separate divisions of the SBU can respond as fast as they can, to the changing business environment.

Importance of Strategic Business Unit

1. Responsibility

One of the first role of strategic business units is to assign responsibility and more importantly outsource responsibility to others. With this, the top management has an overview of work being done in each individual unit and they do not have to get involved in day to day activities for these strategic business units.

2. Accountability

When handling multiple brands or products, it is easier if there are separate business units which are accountable for the success or failure of the business or product. By making these business units accountable, the company can directly take a call when hard decisions are to be taken.

3. Accountancy

Profit and loss and balance sheets will look more prettier and more manageable if the statements are prepared separately for separate strategic business units. This makes the accountancy more transparent and at the same time, when companies have to make investment decision than this accountancy will come in use for the company.

4. Strategy

Companies like Nestle have 4 different strategic units. One SBU like Maggi deals in Food products, another deals in Dairy products like Nestle milkmaid, the third SBU deals in Chocolate products like Kitkat so on and so forth. Thus, in the above example, it is very simple to change strategy for each business unit because the strategy for each is independent of the other.

5. Independence

The managers of the strategic business units get more independence to manage their own unit which gives them the opportunity to be more creative and innovative and empowers them for making decisions. The best thing that can happen for SBU’s are fast decision making which is possible only when these SBU’s are given independence to work by themselves.

6. Funds allocation

The last but not the least advantage of strategic business units are that funds allocation becomes simpler for the parent company. Depending on the performance of the SBU, funds allocation can be done on priority.

Thus, there are many advantages of having strategic business units and it is highly recommended that any firm which has multiple products adopt strategic business units in its organization structure.