ASSIGNMENT

Unit 4: Strategy Formulation and Implementation

1. Explain strategy formulation with an example?

Strategy formulation is the process by which an organization chooses the most

appropriate courses of action to achieve its defined goals. This process is essential to an
organization’s success, because it provides a framework for the actions that will lead to
the anticipated results. Strategic plans should be communicated to all employees so that
they are aware of the organization’s objectives, mission, and purpose. Strategy
formulation forces an organization to carefully look at the changing environment and to
be prepared for the possible changes that may occur. A strategic plan also enables an
organization to evaluate its resources, allocate budgets, and determine the most effective
plan for maximizing ROI (return on investment).

Strategy formulation by Nestle for Maggi noodles is a good marketing initiative in which
they have decided to keep the price constant and decrease the weight of products
marginally and this is having a positive impact on the buying behaviour among
consumers in India.

2. Explain the various stages involved in strategy implementation?

Institutionalisation of Strategy
The first basic action that is required for putting a strategy into operation is its
institutionalisation. Since strategy does not become either acceptable or effective by
virtue of being well designed and clearly announced, the successful implementation of
strategy requires that the strategy framer acts as its promoter and defender. Often strategy
choice becomes a personal choice of the strategist because his personality variables
become an influential factor in strategy formulation. Thus, it becomes a personal strategy
of the strategist. There-fore, there is an urgent need for the institutionalisation of strategy
because without it, the strategy is subject to being undermined. Therefore, it is the role of
the strategist to present the strategy to the members of the organisation in a way that
appeals to them and brings their support. This will put organisational people to feel that it
is their own strategy rather than the strategy imposed on them. Such a feeling creates
commitment so essential for making strategy successful.

Setting Proper Organisational Climate Setting

Organisational climate relevant for strategy implementation is important for making
strategy to work. Organisational climate refers to the characteristics of internal
environment which conditions the cooperation, the development of the individuals, the
extent of commitment and dedication of people in the organisation, and the efficiency
with which the purpose is translated into results. Organisations whose strategy is
implemented with conducive climate are more effective than those whose are not. People
are the instruments in implementing a particular strategy and organisational climate is
basically a people oriented attempt. A top manager can play an important role in shaping
the organisational climate not only by providing standards for what others do but also
what he does because organisational climate is a matter of practice rather

Developing Appropriate Operating Plans

Operating plans are the action plans, operational programmes and decisions that take
place in various parts of the organisation. If they are made to reflect desired strategic
results, they contribute to the achievement, of organisational objectives by focusing
attention on those factors which are important. For example, in budgeting, more
resources will be allocated on those factors which are critical to the success of the
organisation as spelled out during the strategy formulation process. There are various
ways of making sure that operating plans contribute. If every manager understands
strategy, he can certainly review the programme recommendations of staff advisers and
line subordinates to see that they are consistent with the requirements of the strategy.
Major programmes can be reviewed by appropriate committees to see if they contribute
positively. This lends an aura of formality to the programme decisions and their
influences on strategy may become clear.

Developing Appropriate Organisation Structure

Organisation structure is the pattern in which the various parts of the organisation are
interrelated or interconnected. It prescribes relationships among various positions and
activities. For implementing strategy, the organisation structure should be designed
according to the needs of the strategy. The relationship between strategy and structure
can be thought of in terms of utilising structure for strategy implementation because
structure is a means to an end, that is, to provide facilities for implementing strategy.
Therefore, both should be integrated. In the absence of such an integration, outcome may
be confusion, misdirection and splintered effort within the organisation. There can be
various ways of designing an organization structure.

Periodic Review of Strategy

 There should be periodic review of strategy to find out whether the given strategy is
relevant. This is required because even the care-fully developed strategies might cease to
be suitable if events change, knowledge becomes more clear, or it appears that the
environment will not be as originally thought. Thus, strategies should be reviewed from
time to time. What should be the frequency for such a review is not universal but major
strategies should be reviewed at least once a year. In fact this is done by most of the
organisations who believe in relating themselves with the environment.

3. Explain the various reasons for strategy failure?

1. Unsatisfactory coupling of strategy and operational actions.

Unsatisfactory coupling of the strategy to the actions necessary to implement it, both
within the organization and in the external decision situations with which it is
concerned may cause unsuccessful implementation of the strategy. This type of
difficulty can result from a number of causes and conditions. For example,
unsatisfactory coupling of the new strategy may be due to the lack of explicit
decoupling from previous strategy and commitment within the organization itself.
This decoupling may be caused, in turn, by the existence of a sizable group of people
within the organization who are convinced that the new strategy is not practical and
that the previous ways and activities are best.

2. Insufficient attention to the negotiation of outcomes in decision situations

Another major factor causing unsuccessful implementation of the strategy is
insufficient attention to the negotiation of outcomes in the external decision
situations. It is a tendency to assume, once the strategy is formulated, that all that is
necessary for the success of the organization is the aggressive pursuit of the strategy.
However, this assumption holds good only as long as there is no change in the
decision situations. If these situations change, there should be corresponding change
in the strategy also. For this, it is essential that the structure of the strategic decision
situations in which the organization is involved should be kept clearly in view
throughout the implementation. If this is done, changes in the conditions surrounding
those decision situations can be taken in stride. Contingency strategy made during the
strategy formulation process can be brought into operation when appropriate.

3. Defective strategy.
Sometimes, there may be strategy which cannot be implemented within the context of
present and future organizational resources. The net result is that either strategy is
denounced half way or put in cold storage incurring loss in both the situations.
Therefore, strategic choice should always be correlated with the organizational
capability to implement it. While implementing a strategy, the above factors should be
taken into account and various tools of strategy implementation should be selected
carefully to ensure effective implementation.
4. Explain the concept of Strategic business units?
Definition: A strategic business unit, popularly known as SBU, is a fully-functional unit
of a business that has its own vision and direction. Typically, a strategic business unit
operates as a separate unit, but it is also an important part of the company. It reports to
the headquarters about its operational status.

Description: A strategic business unit or SBU operates as an independent entity, but it has
to report directly to the headquarters of the organisation about the status of its operation.
It operates independently and is focused on a target market. It is big enough to have its
own support functions such as HR, training departments etc. There are several benefits of
having an SBU. This principle works best for organizations which have multiple product
structure. The best example of SBU are companies like Proctor and Gamble, LG etc.
These companies have different product categories under one roof. For example, LG as a
company makes consumer durables.

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.

5. Explain the hard and soft elements of McKinsey 7S Framework?

 The 7S Model specifies seven factors that are classified as "hard" and "soft" elements.
Hard elements are easily identified and influenced by management, while soft elements
are fuzzier, more intangible, and influenced by corporate culture. The hard elements are
as follows:

 Strategy
 Structure
 Systems

The soft elements are as follows:

 Shared values
 Skills
 Style
 Staff

1. The strategy is the plan deployed by an organization in order to remain competitive in

its industry and market. An ideal approach is to establish a long-term strategy that aligns
with the other elements of the model and clearly communicates what the organization’s
objective and goals are.
2. The structure of the organization is made up of its corporate hierarchy, the chain of
command, and divisional makeup that outlines how the operations function and
interconnect. In effect, it details the management configuration and responsibilities of
workers.
3. Systems of the company refer to the daily procedures, workflow, and decisions that
make up the standard operations within the organization.
4. Shared values are the commonly accepted standards and norms within the company that
both influence and temper the behavior of the entire staff and management. This may be
detailed in company guidelines presented to the staff. In practice, shared values relate to
the actual accepted behavior within the workplace.
5. Skills comprise the talents and capabilities of the organization’s staff and management,
which can determine the types of achievements and work the company can accomplish.
There may come a time when a company assesses its available skills and decides it must
make changes in order to achieve the goals set forth in its strategy.
6. Style speaks to the example and approach that management takes in leading the
company, as well as how this influences performance, productivity, and corporate
culture.
7. Staff refers to the personnel of the company, how large the workforce is, where their
motivations reside, as well as how they are trained and prepared to accomplish the tasks
set before them.