Business Strategy Lecture advance mba pmba

Business strategy

1. 5. The Five Generic Competitive Strategies (Chapter 5)
1. What is Strategy & Why is it Important? (Chapter 1)
2. Charting a Company’s Direction: Its Vision, Mission, Objectives, & Strategy (Chapter 2)
3. Evaluating a Company’s External Environment (Chapter 3)
4. Evaluating a Company’s Resources, Capabilities & Competencies (Chapter 4)
POSTGRADUATE INSTITUTE OF MANAGEMENT
University of Sri Jayewardenepura
Master of Business Administration
MBA517: Crafting & Executing Strategy
6. Strengthening a Company’s Competitive Position (Chapter 6)
8. Building an Organization Capable of Good Strategy Execution (Chapter 10)
7. Corporate Strategy: Diversification & the Multi-business Company (Chapter 8)
Asanga Ranasinghe
10. Revision
9. Corporate Culture & Leadership (Chapter 12)

2. •Crafting a strategy is market-driven & resource-driven, executing a strategy Is operations-driven.
•It involves management of both people & business processes.
•Successful strategy execution depends on
oDoing a good job of working with & through others
oBuilding & strengthening competitive capabilities
oCreating appropriate organisational structure
oAllocating resources
oInstituting strategy- supportive policies, processes & systems
oMotivating & rewarding people
oInstilling a discipline of getting things done
•Is a job for the whole management team, not just for a
few senior managers.
•Need excellent people- management skills & perseverance
•Requires a determined commitment at all levels to change,
action & perform.
A FRAMEWORK FOR EXECUTING STRATEGY
Asanga Ranasinghe

3. A FRAMEWORK FOR EXECUTING STRATEGY
•The Principal Components of the Strategy Execution Process
oStaffing the organization with managers & employees capable of executing the strategy well.
oDeveloping the resources & organizational capabilities required for successful strategy execution.
oCreating a strategy-supportive organizational structure.
oAllocating sufficient resources (budgetary and otherwise) to the strategy execution effort.
oInstituting policies & procedures that facilitate strategy execution.
oAdopting business management processes that drive continuous improvement in strategy execution activities.
oInstalling information & operating systems that support strategy implementation activities.
oTying rewards directly to the achievement of performance objectives.
oFostering a corporate culture that promotes good strategy execution.
oExercising the leadership needed to propel implementation forward.
Asanga Ranasinghe

4. •Committing to executing a strategy:
oEntails figuring out the specific techniques, actions & behaviours necessary for a smooth strategy-supportive
operation.
oFollowing through to get things done and deliver results.
oMaking things happen – leadership & making them happen right – management
•Good strategy execution requires a team effort.
•All managers should have strategy-executing responsibility in their areas of authority
•All employees are active participants in the strategy execution process.
•When strategies fail, it is often because of poor execution. Strategy execution is therefore a critical
managerial endeavour.
•The 2 best signs of good strategy execution are
1. Whether a company is meeting or beating its performance targets
2. Whether they are performing value chain activities in a manner that is conducive to companywide operating
excellence.
•Whether the organization is large or small & whether strategy execution involves sweeping or minor
changes, effective leadership requires a keen grasp of what to do & how to do it in light of the
circumstances.
A FRAMEWORK FOR EXECUTING STRATEGY
Asanga Ranasinghe

5. The 10 Basic Tasks of the Strategy Execution Process
A FRAMEWORK FOR EXECUTING STRATEGY
•When strategies
fail, it is often
because of poor
execution.
•Strategy execution
is therefore a
critical managerial
endeavour.
Asanga Ranasinghe

6. A FRAMEWORK FOR EXECUTING STRATEGY
•The Principal Components of the Strategy Execution Process
oStaffing the organization with managers & employees capable of executing the strategy well.
oDeveloping the resources & organizational capabilities required for successful strategy execution.
oCreating a strategy-supportive organizational structure.
oAllocating sufficient resources (budgetary and otherwise) to the strategy execution effort.
oInstituting policies & procedures that facilitate strategy execution.
oAdopting business management processes that drive continuous improvement in strategy execution activities.
oInstalling information & operating systems that support strategy implementation activities.
oTying rewards directly to the achievement of performance objectives.
oFostering a corporate culture that promotes good strategy execution.
oExercising the leadership needed to propel implementation forward.
Asanga Ranasinghe

7. Building an Organization Capable of
Proficient Strategy Execution: 3 Key Actions
BUILDING AN ORGANIZATION CAPABLE OF GOOD STRATEGY EXECUTION - 3 KEY ACTIONS
•Implementing a strategy depends
on ensuring that strategy-
supportive resources &
capabilities are in place, ready to
be deployed.
•Include the skills, talents,
experience & knowledge of the
company’s human resources.
•Proficient strategy execution
depends heavily on competent
personnel of all types.
•The role of leadership in strategy
execution, assembling a strong
management team is especially
important. Asanga Ranasinghe

8. oThe most important consideration is to fill key managerial positions with
smart people, who are
✓Clear thinkers
✓Good at figuring out what needs to be done
✓Skilled on managing people
✓Accomplished in delivering good results
oManagement team needs 3 types of people
✓Planners who ask tough questions and figure out what needs to be done.
✓Implementers who can select, manage & lead the right people.
✓Executors who turn decisions into actions that drive the changes that
produce sustainable competitive advantage.
oRight people in right jobs need to happen through
✓Moving within
✓Promoting
✓Hiring from outside
STAFFING THE ORGANIZATION
•Putting Together a Strong Management Team
oPutting together a talented management team with the right mix of experiences, skills, & abilities to get things
done is one of the first steps to take in launching the strategy-executing process
Asanga Ranasinghe

9. oThe quality of an organization’s people play great role of successful strategy execution.
oKnowledgeable, engaged employees are the best source of creative ideas for the nuts-&-bolts operating
improvements & lead to operating excellence
oThe best companies make a point of recruiting & retaining talented employees—the objective is to make the
firm’s entire workforce a genuine competitive asset.
oIn many industries, adding to a company’s talent base & building intellectual capital are more important to good
strategy execution than additional investments in capital projects
oBest practices aimed at staffing jobs with the best people are :
✓Spending considerable effort on screening & evaluating job applicants
✓Providing employees with training programs that continue throughout their careers.
✓Offering promising employees challenging, interesting & skill-stretching assignments.
✓Rotating people through jobs that span functional & geographic boundaries.
✓Making the work environment stimulating & engaging.
✓Encouraging employees to challenge status-quo
✓Coaching average performers to improve their skills and capabilities, while weeding out underperformers.
•Recruiting, Training & Retaining Capable Employees
STAFFING THE ORGANIZATION
•Rigorous recruiting process
•Clear path to leadership
•Actively managed succession planning
•Extensive on-the-job & formal training opportunities
•Detailed development & career planning
P&G “Build From Within” Approach to
building capability to execute strategy

10. Deloitte’s emphasis on learning &
development, across all stages of the
employee life cycle, has led to recognitions
such as being ranked number one on Chief
Executives ’ list of “Best Private Companies for
Leaders” & being listed among Fortune ’s “100
Best Companies to Work For.”
Illustration Capsule 10.1 (Page 298) – Management Development at Deloitte Touché Tohmatsu Limited
Clear path to partnership - During the initial recruiting phase & then throughout an
employee’s tenure at the firm, Deloitte lays out a clear career path. The path
indicates the expected timeline for promotion to each of the firm’s hierarchy levels,
along with the competencies & experience required. Deloitte’s transparency on
career paths, coupled with its in-depth performance management process, helps
employees clearly understand their performance. This serves as a motivational tool
for top performers, often leading to career acceleration
Special programs for high performers - Deloitte also offers fellowships &
programs to help employees acquire new skills & enhance their leadership
development. Global Fellows program helps top performers work with senior
leaders in the organization to focus on the realities of delivering client service
across borders. Emerging Leaders Development program utilizes skill building,
360-degree feedback, & one-on-one executive coaching to help top-performing
managers & senior managers prepare for partnership.
Sponsorship, not mentorship - To train the next
generation of leaders, Deloitte has implemented
formal mentorship programs to provide leadership
development support. A sponsor is tasked with
taking a vested interest in an individual &
advocating on his or her behalf. Sponsors help
rising leaders navigate the firm, develop new
competencies, expand their network & harness the
skills needed to accelerate their career.
Formal training programs- Deloitte has a program to
ensure that recent college graduates are equipped with
the necessary training for succeeding on the job. Deloitte’s
commitment to formal training is evident at all levels. Each
time an employee is promoted, he or she attends
“milestone” school, a weeklong simulation that replicates
true business situations employees would face as they
transition to new stages of career development. Deloitte
institutes mandatory training hours for all of its employees
to ensure that individuals continue to further their
professional development.
Discussion Points
1.What are the specific strategies employed by Deloitte in
relation to putting together a strong management team?
2.What is the Deloitte approach to recruiting, training &
retaining capable employees?

11. •3 Approaches to Building and Strengthening Capabilities
oBuilding new competencies & capabilities is a multistage process that occurs over a period of months and years.
It is not something that is accomplished overnight.
oIt is also managerially very challenging.
Approaches to Building
& Strengthening
Resource Capabilities
Develop
capabilities
internally
Acquire capabilities
through mergers &
acquisition
Access capabilities via
collaborative
partnerships
oA company’s capabilities must be continually refreshed to remain aligned with changing customer expectations,
altered competitive conditions, & new strategic initiatives.
oSuperior strategy execution capabilities are the only source of sustainable competitive advantage when strategies
are easy for rivals to copy.
DEVELOPING & BUILDING CRITICAL RESOURCES & CAPABILITIES
Asanga Ranasinghe

12. DEVELOPING & BUILDING CRITICAL RESOURCES & CAPABILITIES
•Developing Capabilities Internally
oInternal efforts to create or upgrade capabilities is complex, as capabilities are the product of bundles of skills &
know-how that are integrated into organizational processes through
the combined efforts of cross functional teams spanning
a variety of departments & locations.
oA company’s capabilities must be continually refreshed to remain
aligned with
➢Changing customer expectations
➢Altered competitive conditions
➢New strategic initiatives.
oManagerial actions to develop competitive capabilities generally
take one of two forms:
1.Strengthening the company’s base of skills, knowledge & experience
2.Coordinating & integrating the efforts of the various work groups
& departments.
oActions of the first sort can be undertaken at all managerial levels.
oActions of the second sort need senior manager involvement to
enforce the necessary cooperation & coordination among
individuals, groups & departments.
Toyota’s Legendary Production System: A
capability that is built through tireless trail & error
over 50 years & translating into Competitive
Advantage
•Use just-in-time delivery of parts &
components to the point of vehicle assembly.
•Develop people who can come up with unique
ideas for production improvements through
training to become better problem solvers.
•Emphasize continuous improvement
•Organize all jobs around human motion to
create a production/assembly system with no
wasted effort.

13. •Acquiring Capabilities through Mergers & Acquisitions
oSometimes a company can refresh & strengthen its competencies by acquiring another company with attractive
resources & capabilities.
oCapability motivated acquisitions are are essential when there exists the following:
DEVELOPING & BUILDING CRITICAL RESOURCES & CAPABILITIES
Facebook acquired Oculus VR, a company that
makes virtual reality headsets, to add capabilities
that might enhance the social media experience.
Transferring & integrating these capabilities to other
parts of the Facebook organization prove easier said
than done, however, as many technology
acquisitions fail to yield the hoped-for benefits.
oIntegrating the capabilities of two companies might be problematic when there are underlying incompatibilities
in their supporting systems or processes.
oThere is always the risk that under new management the acquired capabilities may not be as productive as they
had been – end up damaging or destroying the capabilities.
Asanga Ranasinghe

14. •Accessing Capabilities through Collaborative Partnerships
oValuable resources & capabilities can be acquired by forming collaborative partnerships with suppliers,
competitors, or other companies having the cutting-edge expertise.
oThere are 3 basic ways to pursue this course of action:
DEVELOPING & BUILDING CRITICAL RESOURCES & CAPABILITIES
Some years ago, Starbucks & Kraft
entered into a collaborative
marketing arrangement whereby
Starbucks gained access to the
Kraft’s retailing capability through
its dealer network for the purpose
of expanding sales in retail & Kraft
gained a strong portfolio expansion
that strengthened its go to market
capabilities & bargaining power
with B2B customers (retailers)
Asanga Ranasinghe

15. •A company’s organizational structure should be matched to the particular requirements of implementing
the firm’s strategy – based on its capabilities & value chain activities.
MATCHING ORGANIZATIONAL STRUCTURE TO STRATEGY
Structuring the Work Effort to
Promote Successful Strategy
Execution
Asanga Ranasinghe

16. •Deciding Which Value Chain Activities to Perform Internally & Which to Outsource
oWisely choosing which activities to perform internally & which to outsource can lead to several strategy-executing
advantages.
✓lower costs, heightened strategic focus, less internal bureaucracy, speedier decision making, & a better arsenal of
organizational capabilities.
oSuch heightened focus on performing strategy-critical activities can lead to 3 important execution related benefits
1.The company improves its chances for outclassing rivals in the performance of strategy-critical activities & turning a
competence into a distinctive competence.
2.The streamlining of internal operations that flows from outsourcing often acts to decrease internal bureaucracies, flatten
the organizational structure, speed internal decision making, & shorten the time it takes to respond to changing market
conditions.
3.Partnerships with outside vendors can add to a company’s arsenal of capabilities & contribute to better strategy
execution.
Data processing
activities are
outsourced to
commuter service
firms for better
service & lower cost
Cycle times are
shortened for new
models by outsourcing
the production of many
parts & components to
independent suppliers
Work hand in hand on
store operations with
franchisees to deliver the
promise of fast food &
customer satisfaction
MATCHING ORGANIZATIONAL STRUCTURE TO STRATEGY

17. Innovation & design are core competencies
& drivers behind the creation of winning
product line such as the iPod, iPhone & iPad.
In consequence, all activities directly related
to new product development and product
design are performed internally.
Producing a continuing stream of great new
products/ product versions is the key to the
success of Apple’s strategy. This needs
manufacturing flexibility & speed.
Apple outsources the
manufacturing of products like
its iPhone to Asia, where
Contract Manufacturing
Organizations (CMOs) create
value through their vast scale,
high flexibility & low cost
Apple, more so than their competitors,
is able to capture CMO value creation
by leveraging their immense sales
volume & strong cash position to
receive preferred treatment
Apple needs to ensure that
the latest ideas are reflected
in the products & the high
demand for new models are
met, especially during the
launch phase.
Illustration Capsule 10.3 (Page 306) – Which Value Chain Activities Does Apple Outsource & Why?
For these capabilities, Apple turns to
outsourcing,
Apple has tightened its
supplier standards & increased
its efforts at monitoring
conditions & enforcing its
standards by conducting over
700 comprehensive site audits
each year to ensure
compliance.
Discussion Points
1.Has Apple been able to outclass rivals in
performing strategy-critical activities better
through its outsourcing strategy?
2.Through partnerships with outside vendors has
Apple been able to add to a company’s arsenal of
capabilities & contribute to better strategy
execution?
Asanga Ranasinghe

18. •Aligning the Firm’s Organizational Structure with Its Strategy
oThe type of organisational structure that is most suitable for a given firm will depend on the firm’s size &
complexity as well as its strategy.
oA simple structure (line-and-staff structure) consists of a
central executive (often the owner-manager) who handles all
major decisions and oversees all operations with the help of a
small staff
oA functional structure is organized into functional
departments, with departmental managers who report to the
CEO & small corporate staff
oA multidivisional structure is a decentralized structure
consisting of a set of operating divisions organized along
business, product, customer group, or geographic lines & a
central corporate headquarters that allocates resources,
provides support functions & monitors divisional activities.
oA matrix structure combines two or more organizational
forms, with multiple reporting relationships. It is used to
foster cross-unit collaboration
MATCHING ORGANIZATIONAL STRUCTURE TO STRATEGY
Asanga Ranasinghe

19. MATCHING ORGANIZATIONAL STRUCTURE TO STRATEGY
•Determining How Much Authority to Delegate
Asanga Ranasinghe

20. •Facilitating Collaboration with External Partners & Strategic Allies
oOrganizational mechanisms - whether formal or informal – are required to ensure effective working relationships
with each major outside constituency involved in strategy execution
oA network structure is a configuration composed of a number of independent organizations engaged in some
common undertaking, with one firm typically taking on a more central role.
MATCHING ORGANIZATIONAL STRUCTURE TO STRATEGY
The high-end Italian motorcycle
company Ducati operates in this
manner, assembling its
motorcycles from parts obtained
from a handpicked integrated
network of parts suppliers.
Asanga Ranasinghe

21. •Executing strategy is an action-oriented, operations-driven activity revolving around the management of people and
business processes.
•Good strategy execution requires a team effort.
•10 managerial tasks are part of every company effort to execute strategy: (1) staffing the organization with the right
people, (2) building the necessary organizational capabilities, (3) creating a supportive organizational structure, (4)
allocating sufficient resources, (5) instituting supportive policies and procedures, (6) adopting processes for
continuous improvement, (7) installing systems that enable proficient company operations, (8) tying incentives to
the achievement of desired targets, (9) instilling the right corporate culture, and (10) exercising internal leadership
to propel strategy execution forward.
•The 2 best signs of good strategy execution are whether a company is meeting or beating its performance targets &
performing value chain activities in a manner that is conducive to companywide operating excellence.
•Building an organization capable of good strategy execution entails 3 types of actions: (1) staffing the organization
(2) acquiring, developing, and strengthening strategy-supportive resources & capabilities (3) structuring the
organization and work effort
•Building core competencies and competitive capabilities can be approached in 3 ways: (1) developing capabilities
internally, (2) acquiring capabilities through mergers and acquisitions, and (3) accessing capabilities via collaborative
partnerships.
•Structuring the organization & organizing the work effort in a strategy-supportive fashion has 4 aspects: (1) deciding
which value chain activities to perform internally & which ones to outsource; (2) aligning the firm’s organizational
structure with its strategy; (3) deciding how much authority to centralize and how much to delegate and (4)
facilitating the necessary collaboration & coordination with external partners and strategic allies.
KEY POINTS
Asanga Ranasinghe