What is the difference between strategy formulation and strategy implementation?

ID: 427183 • Letter: W

Question

What is the difference between strategy formulation and strategy implementation? What are the different levels of strategy? What are the different levels of strategy? On what two dimensions are all business strategies based? What are the three dimensions of corporate strategy and how are they different? Why should a firm choose a global strategy rather than a multidomestic strategy? How do the international strategies affect the trade-offs managers must make between local responsiveness and global efficiency? Explain the five facets of the strategy diamond? What is social entrepreneurship? How might a firm disrupt an existing market? What are the three facets of the entrepreneurial process? Among those factors affecting the level of entrepreneurial activity, which might be the easiest to change and which might be the most difficult? Which might take the most time to change? What key pieces of information would you need to assess whether you should launch a global start-up? Once you have decided to launch a global start-up, what key resources and capabilities must you begin putting into place?

Explanation / Answer

1.(A) As under:-

Strategy Formulation

Strategy Implementation

Strategy Formulation comprises planning and decision-making involved in line with organization’s strategic goals and plans, mission and vision.

Strategy Implementation involves all those methods/systematic steps related to effectively executing the strategic plans.

Strategy Formulation is laying the road map before the action.

Strategy Implementation is walking as per the road map during the action.

Strategy Formulation is an Entrepreneurial Activity based on strategic decision-making.

Strategic Implementation is mainly an Administrative Taskbased on strategic and operational decisions.

Strategy Formulation emphasizes on ideating with effectiveness.

Strategy Implementation emphasizes on executing with efficiency.

Strategy Formulation is a rational/innovation based process.

Strategy Implementation is basically an operational process.

Strategy Formulation requires co-ordination among few individuals.

Strategy Implementation requires co-ordination among many individuals/divisions/departments with synchronization.

Strategy Formulation requires a great deal of initiative and logical skills.

Strategy Implementation requires specific motivational and leadership traits.

Strategic Formulation precedes Strategy Implementation.

Strategy Implementation follows Strategy Formulation.

(B)

Strategy may operate at different levels of an organization – corporate level, business level, and functional level.

Corporate Level Strategy: Occupies the highest level of strategic decision making and covers actions dealing with the vision, mission, strategic objectives of the firm, acquisition and allocation of resources and coordination of strategies of various SBUs for optimal performance. Top management of the organization makes such decisions. The nature of strategic decisions tends to be value-oriented, conceptual and less concrete than decisions at the business or functional level.

Business-Level Strategy: Business level strategy is – applicable in those organizations, which have different businesses-and each business is treated as strategic business unit (SBU). The fundamental concept in SBU is to identify the discrete independent product / market segments served by an organization. Since each product/market segment has a distinct environment, a SBU is created for each such segment. For example, Reliance Industries Limited operates in textile fabrics, yarns, fibers, and a variety of petrochemical products. For each product group, the nature of market in terms of customers, competition, and marketing channel differs.

Therefore, it requires different strategies for its different product groups. Thus, where SBU concept is applied, each SBU sets its own strategies to make the best use of its resources (its strategic advantages) given the environment it faces. At such a level, strategy is a comprehensive plan providing objectives for SBUs, allocation of resources among functional areas and coordination between them for making optimal contribution to the achievement of corporate-level objectives.

Such strategies operate within the overall strategies of the organization. The corporate strategy sets the long-term objectives of the firm and the broad constraints and policies within which a SBU operates. The corporate level will help the SBU define its scope of operations and also limit or enhance the SBUs operations by the resources the corporate level assigns to it. There is a difference between corporate-level and business-level strategies.

Functional-Level Strategy: Functional strategy relates to a single functional operation and the activities involved therein. Decisions at this level within the organization are often described as tactical. Such decisions are guided and constrained by some overall strategic considerations.

Functional strategy deals with relatively restricted plan providing objectives for specific function, allocation of resources among different operations within that functional area and co-ordination between them for optimal contribution to the achievement of the SBU and corporate-level objectives.

Below the functional-level strategy, there may be operations level strategies as each function may be dividend into several sub functions. For example, marketing strategy, a functional strategy, can be subdivided into promotion, sales, distribution, pricing strategies with each sub function strategy contributing to functional strategy.

2. (A)

When we look at businesses holistically, there are two distinct dimensions that account for every decision and action.

The two dimensions are:

Though they’re distinct dimensions, they’re heavily interrelated. Your financial picture will often guide your operational decisions, and your operational decisions will often have to be checked against your financial picture. Viewing business this way isn’t anything new. We already have well-established positions that track these dimensions. Chief Operations Officers (COOs) handle operations and Chief Financial Officers (CFOs) take care of the finances. What’s important to consider is that all of these positions are either senior executive level or high middle management in traditional businesses – the reason they’re so high up is that their functions and perspectives are so critical.

Operations: How will we execute the plan? Who should work on which project? Which of these projects should we work on this week? Where are we with our new infrastructure migration? Is everyone trained to do the critical tasks of our business? The dimension of operations is the realm of execution and productivity. In short, it covers getting stuff done.

Many businesses have a decent sense of strategy and struggle with operations. That CEO’s vision just never seems to manifest. Or perhaps the marketing plan becomes just another document that wasted more resources to develop than it was worth. The perennial problem here is one that creatives understand all too well – our imaginative reach always exceeds our operational grasp.

On the other hand, some businesses shine in operations and struggle in the other dimensions. What tends to occur in these businesses is a lot of overworking and pushing and very little actual progress being made when it comes to the three ends of business. Another symptom here is the constantly shifting new initiative that forces everyone to be in a continual state of overwhelm; it’s common for business teams to have their priorities shift to a new project before the last one is done just because a decision was made to go in a different direction.

What separates a lot of good businesses from great ones is their execution. Businesses that get the right stuff done grow faster and more consistently than businesses that struggle with execution.

Finances: How much revenue did you make last month? Of that, how much was profit? What are your overheads? How much do you need to make in the next quarter to increase your revenue by 10%? How much of your revenue do you need to save for taxes?

What’s striking is that the more grounded you get in your financial reality, the more clarity you have about what your business has done and can do. Many people are continually scared because they have no idea what they made last month and this month, nor do they have any idea what’s coming in in the future. This makes every day feel like a hustle, and every win, a temporary stalling of the inevitable crash of not having enough money to pay the bills.

A challenge with this particular dimension understands what level of granularity you need for effective decision-making. Most people don’t need to have a daily sales report, but a monthly sales report may not give you enough time to react or plan. Additionally, a gross sales report may not show you which income stream is the breadwinner and which is the lead weight you need to drop. Since each business is put together a little differently, the insights that you can get from the financial dimension need to be tailored to meet the way your business works.

(B)

Three dimensions of Corporate Strategy are:

BUSINESS DIVERSIFICATION: Low Levels of Diversification Single-Business - > 95% of revenues from a singles business unit, Dominant-Business - 70-95% from a single business unit, Vertically-integrated Businesses - 70% of sales in value chain Moderate to High Levels of Diversification Related-Diversified - 70% or more from businesses that are related. Businesses must share product, technological or distribution linkages. Businesses may be related-linked or related constrained High Levels of Diversification Unrelated-Diversified - <70% in related business units.

Corporate advantages of Diversification:

Motives of Diversification: Operational economies of scope and scale (Strategic Competitiveness)

Financial economies of scope (Internal Capital Market)

Anticompetitive economies of scope (Market Power)

Employee Incentives (Growth Motive)