chapter 8: strategy formulation and implementation

Functional-level strategies are the action plans adopted by major departments
to support the execution of business-level strategy. Major organizational functions
include marketing, production, finance, human resources, and research
and development. Senior managers in these departments adopt strategies that
are coordinated with the business-level strategy to achieve the organization’s
strategic goals. 64
For example, consider a company that has adopted a differentiation strategy
and is introducing new products that are expected to experience rapid
growth. The human resources department should adopt a strategy appropriate
for growth, which would mean recruiting additional personnel and training
middle managers for movement into new positions. The marketing department
should undertake test marketing, aggressive advertising campaigns, and
consumer product trials. The finance department should adopt plans to borrow
money, handle large cash investments, and authorize construction of new
production facilities.
A company with mature products or a low-cost strategy will have different
functional strategies. The human resources department should develop strategies
for retaining and developing a stable work force, including transfers,
advancements, and incentives for efficiency and safety. Marketing should stress
brand loyalty and the development of established, reliable distribution channels.
Production should maintain long production runs, routinization, and cost
reduction. Finance should focus on net cash flows and positive cash balances.
The final step in the strategic management process is implementation—how
strategy is put into action. Some people argue that strategy implementation is
the most difficult and important part of strategic management. 65 No matter
how creative the formulated strategy, the organization will not benefit if it is
incorrectly implemented. In today’s competitive environment, there is an
increasing recognition of the need for more dynamic approaches to formulating
as well as implementing strategies. Strategy is not a static, analytical
process; it requires vision, intuition, and employee participation. 66 Many organizations
are abandoning central planning departments, and strategy is
becoming an everyday part of the job for workers at all levels. Strategy implementation
involves using several tools—parts of the firm that can be adjusted
to put strategy into action—as illustrated in Exhibit 8.9. Once a new strategy
is selected, it is implemented through changes in leadership, structure, information
and control systems, and human resources. 67 For strategy to be implemented
successfully, all aspects of the organization need to be in congruence
with the strategy. Implementation involves regularly making difficult decisions
about doing things in a way that supports rather than undermines the
organization’s chosen strategy. Remaining chapters of this book examine in
detail topics such as leadership, organizational structure, information and
control systems, and human resource management.
Leadership
The primary key to successful strategy implementation is leadership.
Leadership is the ability to influence people to adopt the new behaviors needed
Formulating Functional-Level Strategy 23
Formulating Functional-Level Strategy
Strategy Implementation and Control