Chapters 1 and 2

1
CHAPTER 8 Strategy Implementation Resources and
Relationships
2
Learning Objectives

• Appreciate the advantages and potential
  disadvantages of various types of
  inter-organizational relationships
• Analyze stakeholders to determine their strategic
  importance
• Select strategies for dealing with stakeholders
  based on their strategic importance
• Understand how to make partnerships effective
• Create plans for functional-level resources to
  implement business strategies
• Determine how to effectively manage relationships
  with external stakeholders

3
Strategy Implementation

• Managing
• Stakeholder relationships and
• Organizational resources
• To move the organization towards the successful
  execution of its strategies
• Consistent with strategic direction

4
Advantages of Interor-ganizational Relationships

• Resource Acquisition
• Gain access to a particular resource, such as
  capital, employees with specialized skills,
  intimate knowledge of a market, or a modern
  production facility.
• Speed to Markets
• Firms with complementary skills partner to
  increase speed to market with hope of capturing
  first-mover advantages.

5
Advantages of Interor-ganizational Relationships

• Enter Foreign Market
• Often the only practical way to gain access to a
  foreign market.
• Economies of Scale
• High fixed costs sometimes require firms to find
  partners to expand production volume.

6
Advantages of Inter-organizational Relationships

• Risk and Cost Sharing
• Allows two or more firms to share the risk and
  cost of a particular business endeavor.
• Product / service development
• Provides firms the opportunity to pool their
  skills to develop new products and/or services
• Learning
• Provide participants with the opportunity to
  learn from their partners (e.g. lean
  manufacturing, product development, human
  resource management in an unfamiliar country)

7
Advantages of Inter-organizational Relationships

• Strategic Flexibility
• A valuable alternative to acquisitions, because
  they do not have to be as permanent. They also
  require less of an internal resource commitment,
  which frees up resources for other uses.
• Collective Political Clout
• Can increase collective clout and influence
  governments into adopting policies favorable to
  their industries or circumstances.
• Neutralizing or Blocking Competitors
• Firms can gain the competencies and market power
  needed to neutralize or block the moves of a
  competitor

8
Strategic Importance of Stakeholders and Decision
to Partner
Formal Power
High Importance
Economic Power
Partnering and Inclusion in the Firms Activities
Political Power
Strategic Importance of External Stakeholder
Influence on Environmental Uncertainty Facing the
Firm
Monitoring and Traditional Management Techniques
Low Importance
Possession of Knowledge or Resources not Found in
Firm
9
Tactics for Managing and Partnering with External
Stakeholders
Traditional Management
Partnering / Inclusion

• Customers
• Customer service departments
• Marketing and marketing research
• On-site visits
• 800 numbers
• Long-term contracts

• Customers
• Involvement on design teams or product testing
• Joint planning sessions
• Joint training/service programs
• Financial investments
• Interlocking directorate

10
Tactics for Managing and Partnering with External
Stakeholders
Traditional Management
Partnering / Inclusion

• Suppliers
• Purchasing departments
• Encourage competition among suppliers
• Sponsor new suppliers
• Threat of
• Long-term contracts

• Suppliers
• Involvement on design teams for new products
• Integration of ordering system with manufacturing
• Shared information systems
• Interlocking directorate

11
Tactics for Managing and Partnering with External
Stakeholders
Traditional Management
Partnering / Inclusion

• Competitors
• Joint ventures
• Consortia or Alliances
• Trade associations for information sharing and
  collective lobbying
• Informal price leadership
• Collusion (may be illegal)

• Competitors
• Direct competition based on differentiation
• Intelligence systems
• Corporate spying and espionage (ethical problems)

12
Tactics for Managing and Partnering with External
Stakeholders
Traditional Management
Partnering / Inclusion

• Government
• Legal, tax or government relations offices
• Lobbying and political action committees
• Campaign contributions
• Personal gifts to politicians (ethical problems)

• Government
• Jointly or government sponsored research
• Joint foreign development projects
• Problem solving task forces on sensitive issues
• Appoint retired government officials to board

13
Tactics for Managing and Partnering with External
Stakeholders
Traditional Management
Partnering / Inclusion

• Local Communities
• Task forces to work on special community needs
• Cooperative training and educational programs
• Development committees/boards
• Joint employment programs

• Local Communities
• Community relations offices
• Public relations advertising
• Involvement in community service
• Donations to local causes

14
Tactics for Managing and Partnering with External
Stakeholders
Traditional Management
Partnering / Inclusion

• Activist Groups
• Organizational decisions to satisfy demands
• Public/political relations efforts
• Financial donations

• Activist Groups
• Consultation with representatives on sensitive
  issues
• Joint research and development programs
• Appointments to the board

15
Tactics for Managing and Partnering with External
Stakeholders
Traditional Management
Partnering / Inclusion

• The Media
• Exclusive interviews or early release of
  information
• Inclusion in social events and other special
  treatment

• The Media
• Public/political relations efforts
• Media experts/press releases

16
Tactics for Managing and Partnering with External
Stakeholders
Traditional Management
Partnering / Inclusion

• Unions
• Union avoidance through excellent treatment of
  employees
• Hiring professional negotiators
• Mutually satisfactory labor contracts
• Chapter XI protection to re-negotiate contract

• Unions
• Contract clauses that link pay to performance
• Joint committees on safety and other issues
• Joint industry/labor panels
• Inclusion on management committees
• Appointments to the board

17
Tactics for Managing and Partnering with External
Stakeholders
Traditional Management
Partnering / Inclusion

• Financial Intermediaries
• Financial reports
• Close correspondence
• Finance and accounting departments
• High-level financial officer
• Audits

• Financial Intermediaries
• Inclusion in management decisions requiring
  financing
• Contracts and linkages with other clients of
  financier
• Shared ownership of projects
• Appointments to the board

18
Actions that Increase the Likelihood of
Successful Partnerships

• Carefully study and select a partner
• Define roles of partners
• Develop a strategic plan
• Keep top managers involved
• Meet often, informally, at all managerial levels
• Appoint someone to monitor partnership
• Maintain enough independence to develop your own
  expertise
• Anticipate and plan for cultural differences

19
Functional-Level Resource Management

• Functional-level strategy is the collective
  pattern of day-to-day decisions made and actions
  taken by managers and employees who are
  responsible for value-creating activities within
  a functional area
• Paying attention to the details
• Many companies are successful because of
  excellence at the functional level
• The following characteristics are essential
• Decisions made within each function are
  consistent
• Decisions made within one function are consistent
  with decisions made within other functions
• Decisions made in all functional areas are
  consistent with and support the strategies of the
  business

20
Conducting a Functional Strategy Audit

• Marketing Strategy
• Target Customersfew vs. many, what groups, what
  regions
• Product Positioningpremium commodity, multi-use,
  specialty use
• Product Line Mixa mix of complementary products
• Product Line Breadtha full-line offering of
  products
• Pricing Strategiesdiscount, moderate, premium
  prices
• Promotion Practicesdirect sales, advertising,
  direct mail, Internet
• Distribution Channelsfew or many, sole contract
  responsibilities
• Customer Service Policiesflexibility,
  responsiveness, quality
• Product/Service Image premium quality, good
  price, reliable
• Market Researchaccuracy, frequency and methods
  for obtaining marketing information

21
Conducting a Functional Strategy Audit

• Operations Strategy
• Capacity Planninglead demand to ensure
  availability or lag demand to achieve capacity
  utilization
• Facility Locationnear suppliers, customers,
  labor, natural resources or transportation
• Facility Layoutcontinuous or intermittent flow
• Technology and Equipment Choicesdegree of
  automation, use of computers and information
  technology
• Sourcing Arrangementscooperative arrangements
  with a few vs. competitive bid
• Planning and Schedulingmake to stock, make to
  order, flexibility to customer requests
• Quality Assuranceacceptance sampling, process
  control, standards
• Workforce Policiestraining levels,
  cross-training, rewards, use of teams

22
Areas of Interdependency and Potential Conflict
Between Marketing and Operations

• Facility Size and Process Choice vs. Market
  Forecasts
• Facility Location vs. Market Planning
• Production Schedules vs. Forecasts, Orders and
  Promotions
• Operating Policies

23
Conducting a Functional Strategy Audit

• Information Systems Strategy
• Hardwarelocal area network (LAN), mainframe,
  minicomputer, internal systems, links to Internet
• Softwaredata processing, decision support, Web
  management, computer automated design (CAD),
  computer integrated manufacturing (CIM),
  just-in-time inventory
• Personnelin-house experts, subcontracting or
  alliances
• Information Securityhardware, software, physical
  location and layout
• Disaster Recoveryoff-site processing, backup
  procedures, virus protection and treatment
• Business Intelligencemanagement support,
  marketing, accounting, operations, RD, human
  resources, finance
• Internetuses of Internet in communications,
  marketing, resource acquisition, research or
  management

24
Conducting a Functional Strategy Audit

• RD/Technology Strategy
• Research Focusproduct, process, applications
• Research Orientationleader, early follower, late
  follower
• Project Prioritiesbudget, quality, creativity,
  time
• Knowledge Creationtraining, alliances and
  ventures, acquisitions, cross-functional teams
• Corporate Entrepreneurshipseed money grants,
  time off to develop a venture, management
  support, rewards for entrepreneurs, ideas come
  from everyone

25
Conducting a Functional Strategy Audit

• Human Resources Strategy
• Recruitmententry level vs. experienced
  employees, colleges, technical schools, job
  services
• Selectionselection criteria and methods
• Nature of Workpart-time, full-time, or a
  combination, on site or off site, domestic or
  foreign
• Performance Appraisalappraisal methods and
  frequency, link to rewards
• Salary and Wageshourly, piece rate, commission,
  fixed, relationship to performance,
  competitiveness
• Other Compensationstock ownership programs,
  bonuses
• Management Compensationstock awards, stock
  options, bonuses linked to performance,
  perquisites, low interest loans
• Benefitsmedical, dental and life insurance, paid
  leave, vacations, child care, health club
• Personnel Actionsdisciplinary plans,
  outplacement, early retirements
• Trainingtypes of training, availability of
  training to employees, tuition reimbursement

26
Conducting a Functional Strategy Audit

• Financial Strategy
• Sources of Capitaldebt, equity, or internal
  financing
• Financial Reportingfrequency, type, government,
  shareholders, other stakeholders
• Capital Budgetingsystem for distributing
  capital, minimum ROI for investments, payback
• Overhead Costsallocation of overhead costs based
  on direct labor, machine use, sales volume,
  activity
• Financial Controlsystem to ensure accuracy of
  internal and external financial information,
  audits
• Returns to Shareholdersdividends policy,
  re-purchase of stock, treasury stock, stock
  splits
• Financial Targetsestablishment of financial
  targets for functional areas and business units,
  method of reporting on progress

27
Problems with Capital Budgeting Systems

• Inaccurate Cost Data
• Base Comparisons
• Hurdle Rate
• Qualitative Factors

28
Major Concepts in Chapter 8

• Strategy implementation involves managing
  relationships with internal and external
  stakeholders as well as managing other
  organizational resources. These processes
  overlap.
• One of the most important reasons for
  interorganizational relationships is to acquire
  need resources, especially knowledge
• Stakeholders that are high priority for
  partnerships possess a large amount of formal,
  political or economic power, have a large impact
  on the uncertainty facing the firm or possess
  needed resources

29
Major Concepts in Chapter 8

• A set of traditional monitoring and management
  techniques apply to stakeholders that are not
  high priority for partnerships
• Strategies are implemented through day-to-day
  decisions. The challenge is to create a pattern
  of integrated, coordinated functional-level
  decisions that meets the needs of stakeholders
  and fulfills the planned strategies of the
  organization