I.

STRATEGY IMPLEMENTATION

LEARNING OUTCOMES
 At the end of the unit, students will be able to:
1. Discuss the importance of achieving synergy during strategy implementation
2. Identify and explain the communicating strategies and motivational systems of both domestic
and international firms
3. Develop functional strategies
4. Explain the role of accounting in setting and implementing management strategy

INTRODUCTION

The strategic-management process consists of three stages: strategy formulation, strategy

implementation, and strategy evaluation. It does not end when the firm decides what strategy or
strategies to pursue. There must be a translation of strategic thought into strategic action. This
action stage of strategic management is known as Strategy Implementation which includes
developing a strategy-supportive culture, creating an effective organizational structure,
redirecting marketing efforts, preparing budgets, developing and utilizing information systems,
and linking employee compensation to organizational performance. Implementing strategy
affects an organization from top to bottom; it affects all the functional and divisional areas of a
business.

ACTIVATING PRIOR LEARNING

 Choose a partner and identify whether the statement describes Strategy Formulation or
Strategy Implementation.
1. It is positioning forces before the action.
2. It is primarily an operational process.
3. It requires coordination among many individuals.
4. It focuses on effectiveness.
5. It varies substantially among different types and sizes of organizations.
6. It requires good intuitive and analytical skills.
7. It is primarily an intellectual process.
8. It is managing forces during the action.
9. It requires special motivation & leadership skills.
10. It focuses on efficiency.
TOPIC I: COMMUNICATING STRATEGY

Learning Objectives:
 At the end of the topic, students will be able to:
1. Define communication and identify its elements
2. Explain the importance of communication
3. Elaborate ways on how to effectively communicate strategy in business

Presentation of Content

DEFINITIONS OF COMMUNICATION
 It is an intercourse by words, letters, symbols or messages; and is a way that one
organization member shares meaning and understanding with another. (Koontz and
O'Donnell)
 Communication is an exchange of facts, ideas, opinions or emotions by two or more
persons. (Newmann and Summer)
 Communication is a sum of all the things one person does when he wants to create
understanding in the minds of another. It involves a systematic and continuous process of
telling, listening and understanding. (Allen Louis A.)

ELEMENTS OF COMMUNICATION PROCESS

 Communicator-the person who intends to
communicate the message to other persons.
 Message - the subject matter of communication.
This may be opinion, order, appeal, views,
suggestions etc.
 Transmission - the act of conveying the message.
 Channel - the medium used to transmit the
message.
 Receiver - the person for whom the message is
meant.
 Response - replying or reaction of the receiver.

IMPORTANCE OF COMMUNICATION
1. Helps in achieving coordination: According to Mary Curling Niles, "Good communications
are essential to co-ordination. They are necessary upward, downward and sideways,
through all the levels of authority and advice for the transmission, interpretation and
adoption of policies, for the sharing of knowledge and information and for the more subtle
needs of good morale and mutual understanding."
2. Helps in smooth working: Herbert G. Hicks has pointed out that "communication is basic to
an organization's existence — from the birth of the organization on through its continuing
life. When communication stops, organized action comes to an end." According to G.R.
Terry, "communication serves as a lubricant fostering the smooth operations of the
management."
3. Increased managerial efficiency: Communication helps the manager in performing his
duties quickly and systematically and also facilitates in increasing his effectiveness.
 4. Helps in decision-making: Information from different levels which helps the process of
decision-making is received through the system of communication. Again, these decisions
are passed on through communication to those who are involved in executing them.
5. Helps in maintaining industrial peace: Communication helps both management and
workers in putting forth their views to each other and thus it facilitates in maintaining
industrial peace.
6. Helps in recruitment process: Communication is needed in the recruitment process to
acquaint potential employees with the merits of working for the enterprise. After selecting
the candidates for the jobs, communication is needed at the time of orientation to make
candidates acquaint themselves with peers, superiors and with company rules and
regulations.
7. Helps employees to perform effectively: Employees are required to know their job
relationship and importance to the overall operation. This knowledge makes it easy for
them to identify themselves with the organization mission.
8. Helps to acquaint subordinates with their evaluation: Communication is needed to
acquaint the subordinates with the evaluation of their contribution to enterprise activity. It
is a matter of some motivational importance for the subordinates to know from their
superior how they stand and what the future may hold for them. This appraisal if
intelligently carried out will boost the morale of the subordinates.
9. Helps in teaching employees about Personal Safety: Communication is essential to reduce
accidents, to lower compensation, to minimize legal costs and to reduce recruitment and
training costs for replacement.
10. Helps in projecting the image of the enterprise: The amount of support which the
enterprise receives from its social environment is affected by the information which elite
groups and the wider public have acquired about its goals, activities and accomplishments.
11. Helps manager in performing his functions: Communication helps the manager in
performing his managerial functions such as planning, organizing, staffing, directing and
controlling. Planning requires detailed communication among the managerial and other
personnel.

FACETS OF EFFECTIVE COMMUNICATION

 Clarity and alignment
o A strategy can only be communicated effectively if it is first clearly and explicitly defined.
o The strategy should be aligned with both its vision, mission statement and core values.
o Attainable and measurable tactics and action plans should be set throughout the
strategic planning process, so that employees understand how their work contributes to
the overall strategy.
o The different questions answered at each stage might be as follows:
 Stage Questions to be answered Example

Vision Where are we going? A vibrant rural economy driven by value-

added agriculture.

Mission Why do we exist? To create and facilitate the development

Who do we serve? of value-added agricultural businesses.
How do we bring value?

Values What do we stand for? Sustainable production, empowerment

of smallholders

Goals What are we trying to achieve? Use local farmer leaders with business
development skills to develop the
businesses.

Strategies How are we going to progress? Create a membership of twenty farmers

by February 1.

Tactics What do we need to do? Form a membership committee to

recruit local farmer leaders. Identify forty
Action How will we do it? farm leaders in the area. List their
plans Who will take responsibility for qualifications. Contact them individually
each action? with the expectation that half of them
When will they do it by? will join.

 Engagement of employees
o When employees are engaged in the strategic planning process, they become energized.
o One should allow employees to voice their opinions in a safe environment and
communicating at every stage of the process. This might be done at a regular meeting or
through an online collaborative forum.
 Reinforcement of strategy
o Leaders within the company should keep on educating and inspiring employees with the
strategy.
o You can use traditional methods like company meetings and email newsletters, while
also embracing new technologies such as social media. Messaging should remind
employees of their role in the strategy and evoke the mission statement.

WAYS TO COMMUNICATE STRATEGY MORE EFFECTIVELY

 The following are the communications approaches that help effectively reach employees and
encourage behaviors that advance strategy and improve results. (Everse, Georgia, 2011)
1. Keep the message simple, but deep in meaning. It should be at the core of all of the
communications, a simple and inspiring message that is easy to relate to and
understand. Strategy-specific messages linked to purpose become tools to help
employees connect their day-to-day efforts with the aspiration of the company.
2. Build behavior based on market and customer insights. For employees to fully
understand how your strategy is different and better than the competition they need to
be in touch with market realities. By building internal campaigns based on market and
customer insights, you bring your strategy to life for your employees through this
important lens. The purpose is to encourage their teams to develop department-specific
responses, and to generate new ideas and new behaviors based on what they’ve learned
3. Use the discipline of a framework. Messages need to be prioritized and sequenced
based on purpose.
o Inspire.  The content should demonstrate progress against goals, showcase benefits
to customers, and be presented in a way that gets attention and signals importance.
o Educate. To educate your teams most effectively on the validity of your strategy and
their role in successful execution, make sure you provide job-specific tools with
detailed data that they can customize and apply in their day-to-day responsibilities.
o Reinforce. It isn’t enough to explain the connection between your company’s
purpose and its strategy — and between that strategy and its execution — once.
You’ll need to repeat the message in order to increase understanding, instill belief
and lead to true change overtime.
4. Think broader than the typical CEO-delivered message. And don’t disappear.
Employees are more likely to believe what leaders say when they hear similar arguments
from their peers, and conversations can be more persuasive and engaging than one-way
presentations. Designate a team of employees to serve as ambassadors responsible for
delivering important messages at all levels.
5. Put on your “real person” hat. And take off your “corporate person/executive” hat. The
fact is, not many people are deeply inspired by the pieces of communication that their
companies put out. Authentic messages from you will help employees see the challenges
and opportunities as you see them and understand and care about the direction in which
you’re trying to take the company.
6. Tell a story. Use storytelling as much as possible to bring humanity to the company and
to help employees understand the relevance of your strategy and real-life examples of
progress and shortfalls against it. Ask employees to share stories as well, and use these
as the foundation for dialogues that foster greater understanding of the behaviors that
you want to encourage and enhance versus those that pose risks.
7. Use 21st-century media and be unexpected. The delivery mechanism is as important
and makes as much of a statement as the content itself. Consider the roles of social
media, networking, blogs, and games to get the word out in ways that your employees
are used to engaging in.
8. Make the necessary investment. Ask this question: What am I willing to invest per
employee to help them internalize our strategy and based on that understanding,
determine what they need to do to create a differentiated market experience for our
customers? If you don’t win over employees first, you certainly won’t succeed in winning
with customers, as they ultimately hold that relationship in their hands.
Application
A. Activity: Just Listen
 This is an activity that encourages participants to communicate how they feel about a
subject. People get into pairs and one member talks about his or her opinions. His partner
listens without speaking, and then, without rebuttal, recaps on what has been said.
 Uses. This activity strengthens your team members' listening skills. Listening is an
incredibly important part of good communication, and it's a skill that people often ignore
in team activities. This activity also shows them how to listen with an open mind.
 People and Materials
o An even number of team members, ideally.
o Eight index cards for each team of two. Each card should list one topic. The topics
should be interesting, but not too controversial. You don't want the listeners disliking
the speakers just because they disagree with their viewpoint.
 Instructions:
o Have your team members sit down in pairs.
o Give each pair eight index cards.
o One partner will blindly choose a card and then speak for three minutes on how she
feels about the topic. As she talks, the other person cannot speak – his goal is to listen.
o After three minutes, the listener has one minute to recap on what his partner has said.
He cannot debate, agree or disagree – only summarize.
o Next, the roles switch, and the process starts again.
B. Group Activity
 Each group composing of 5 members will select a business firm and answer the following
questions:
a. What is the nature and purpose of the business?
b. What are the strategies to be implemented by the business to improve its
profitability?
c. How do they communicate this to all members of the organization?
 Group outputs will be presented in the class.

Feedback
1. List the pros and cons for an establishment if a manager communicates strategy to its
employees.
TOPIC II: STRATEGY AND STRUCTURE

Learning Objectives:
At the end of the topic, students will be able to:
1. Define strategy and structure
2. Elaborate the relationship between strategy and structure
3. Differentiate the basic types of organizational structure

Presentation of Content

DEFINITIONS OF STRATEGY
 It is a plan of action to achieve the organizational goal efficiently and effectively.
 It is a means by which long-term objectives are achieved.

DEFINITIONS OF STRUCTURE
 It provides formal means of decentralizing and centralizing consistent with the
organizational control.
 It balances the need for specialization with the need for integration.

STRATEGY-STRUCTURE RELATIONSHIP
 There is a close relationship between an organization’s strategy and its structure.
 The understanding of this relationship is important so that in implementing the strategy,
the organization structure is designed according to the needs of the strategy.
 The relationship between strategy and structure can be thought in terms of utilizing
structure for strategy implementation because the structure is a means to an end and not
an end in itself. The master appropriate end is the objectives for which the organization
exists in the first place, as revealed by its strategy.
 Without coordination or relationship between strategy and structure, the most likely
outcomes are confusion, misdirection, and splintered efforts within the organization.
MATCHING STRUCTURE WITH STRATEGY
 Changes in strategy often require changes in the way an organization is structured for two
major reasons:
1. Structure largely dictates how objectives and policies will be established.
 For example, objectives and policies established under a geographic organizational
structure are couched in geographic terms.
 Objectives and policies are stated largely in terms of products in an organization
whose structure is based on product groups.
 The structural format for developing objectives and policies can significantly impact
all other strategy-implementation activities.
2. The second major reason why changes in strategy often require changes in structure is
that structure dictates how resources will be allocated.
 If an organization’s structure is based on customer groups, then resources will be
allocated in that manner.
 Similarly, if an organization’s structure is set up along functional business lines, then
resources are allocated by functional areas.
 Unless new or revised strategies place emphasis in the same areas as old strategies,
structural reorientation commonly becomes a part of strategy implementation.
 According to Chandler, changes in organizations strategy bring about new administrate
problems which, in turn, require a newly refashioned structure if the new strategy is to be
successfully implemented. Chandler has found structure tends to follow the growth
strategy of the organization but not until inefficiency and internal operating problems
provoke a structural adjustment.
 Thus, organizational actions proceed in a particular sequence: new strategy creation, an
emergence of new administrative problems, a decline in portability and performance, a
shift to a more appropriate organization structure, then recovery to improved
strategy execution and more profit and performance. However, this sequence can be
broken if suitable organization structure is conceived at the starting point of strategy
implementation.
 Structure undeniably can and does influence strategy. Strategies formulated must be
workable, so if a certain new strategy required massive structural changes it would not be
an attractive choice. In this way, structure can shape the choice of strategies. But a more
important concern is determining what types of structural changes are needed to
implement new strategies and how these changes can best be accomplished.

SYMPTOMS OF AN INEFFECTIVE ORGANIZATIONAL STRUCTURE

1. Too many levels of management
2. Too many meetings attended by too many people
3. Too much attention being directed toward solving interdepartmental conflicts
4. Too large a span of control
5. Too many unachieved objectives
6. Declining corporate or business performance
7. Losing ground to rival firms
8. Revenue and/or earnings divided by number of employees and/or number of managers is
low compared to rival firms
TYPES OF ORGANIZATIONAL STRUCTURE
1. The Functional Structure
 It is the simplest and least expensive of the seven alternatives.
 It groups tasks and activities by business function, such as production/operations,
marketing, finance/accounting, research and development, and management
information systems.
 A university may structure its activities by major functions that include academic
affairs, student services, alumni relations, athletics, maintenance, and accounting.
 It also promotes specialization of labor, encourages efficient use of managerial and
technical talent, minimizes the need for an elaborate control system, and allows rapid
decision making.
 Advantages:
o Simple and inexpensive
o Capitalizes on specialization of business activities such as marketing and finance
o Minimizes need for elaborate control system
o Allows for rapid decision making
 Disadvantages:
o Accountability forced to the top
o Delegation of authority and responsibility not encouraged
o Minimizes career development
o Low employee/manager morale
o Inadequate planning for products and markets
o Leads to short-term, narrow thinking
o Leads to communication problems

2. The Divisional Structure

 It is also known as decentralized structure and can be organized in one of four ways:
Way of Description/Purpose Example
Organization
Divisional o It is appropriate for organizations o Hershey Foods is an
Structure by whose strategies need to be tailored example of a company
Geographic Area to fit the particular needs and organized using the
characteristics of customers in divisional by
different geographic areas. geographic region type
o This type of structure can be most of structure. Hershey’s
appropriate for organizations that divisions are United
have similar branch facilities located States, Canada,
in widely dispersed areas. Mexico, Brazil and etc.
Divisional o It is most effective for implementing o General Motors,
Structure by strategies when specific products or DuPont, and Procter &
Product (or services need special emphasis. Gamble use a divisional
services) o It is widely used when an organization structure by product to
offers only a few products or services implement strategies
or when an organization’s products or
services differ substantially.
 Divisional o It is the most effective way to o Book publishing
Structure by implement strategies when a few companies often
Customer major customers are of paramount organize their activities
importance and many different around customer
services are provided to these groups, such as
customers. colleges, secondary
o It allows an organization to cater schools, and private
effectively to the requirements of commercial schools.
clearly defined customer groups.
Divisional o All operations related to these o Manufacturing
Structure by specific processes would be grouped business organized into
Process under the separate divisions and each six divisions: electrical
process (division) would be work, glass cutting,
responsible for generating revenues welding, grinding,
and profits. painting, and foundry
o It can be particularly effective in work
achieving objectives when distinct
production processes represent the
thrust of competitiveness in an
industry.

 With a divisional structure, functional activities are performed both centrally and in
each separate division.
 Advantages:
o Accountability is clear
o Allows local control of local situations
o Creates career development chances
o Promotes delegation of authority
o Leads to competitive climate internally
o Allows easy adding of new products or regions
o Allows strict control and attention to products, customers, and/or regions
 Disadvantages:
o Can be costly
o Duplication of functional activities
o Requires a skilled management force
o Requires an elaborate control system
o Competition among divisions can become so intense as to be dysfunctional
o Can lead to limited sharing of ideas and resources
o Some regions/products/customers may receive special treatment
 3. The Strategic Business Unit (SBU) Structure
 In multidivisional organizations, an SBU structure can greatly facilitate strategy-
implementation efforts.
 The SBU structure groups similar divisions into strategic business units and delegates
authority and responsibility for each unit to a senior executive who reports directly to
the chief executive officer. This change in structure can facilitate strategy
implementation by improving coordination between similar divisions and channeling
accountability to distinct business units.
 Advantages:
o Improved coordination and accountability
o Makes the tasks of planning and control by the corporate office more manageable
 Disadvantages:
o Requires an additional layer of management
o Increases salary expenses
o The role of the group vice president is often ambiguous.

4. The Matrix Structure

 It is the most complex of all designs because it depends upon both vertical and
horizontal flows of authority and communication (hence the term matrix).
 Advantages:
o Project objectives are clear
o Employees can clearly see results of their work
o Shutting down a project is easily accomplished
o Facilitates uses of special equipment/ personnel/facilities
o Functional resources are shared instead of duplicated as in a divisional structure
 Disadvantages:
o Requires excellent vertical and horizontal flows of communication
o Costly because creates more manager positions
o Violates unity of command principle
o Creates dual lines of budget authority
o Creates dual sources of reward/punishment
o Creates shared authority and reporting
o Requires mutual trust and understanding

SOME DO’S AND DON’TS IN DEVELOPING ORGANIZATIONAL CHARTS

Do’s Don’ts
 Reserve the title CEO for the top executive of the  Don’t use the title “president” for the top
firm. person; use it for the division top managers
 Directly below the CEO, it is best to have a COO if there are divisions within the firm.
(chief operating officer) with any division  Do not use the title “president” for
presidents reporting directly to the COO. functional business executives. They should
 On the same level as the COO and also reporting to have the title “chief,” or “vice president,”
the CEO, draw in your functional business or “manager,” or “officer,” such as “Chief
 executives, such as a CFO (chief financial officer), Information Officer,” or “VP of Human
VP of human resources, a CSO (chief strategy Resources.”
officer), a CIO (chief information officer), a CMO  Do not recommend a dual title (such as
(chief marketing Officer), a VP of R&D, a VP of legal “CEO and president”) for just one
affairs, an investment relations officer, executive.
maintenance officer, and so on.  Do not have the CFO, CIO, CSO, human
 If the firm is large with numerous divisions, decide resource officer, or other functional
whether an SBU type of structure would be more positions report to the COO. All these
appropriate to reduce the span of control positions report directly to the CEO.
reporting to the COO.  Avoid having a particular person reporting
 A key consideration in devising an organizational to more than one person above in the chain
structure concerns the divisions. Note whether the of command. This would violate the unity-
divisions (if any) of a firm presently are established of-command principle of management that
based upon geography, customer, product, or “every employee should have just one
process. boss.”

Application. Revising McDonald’s Organizational Chart

Purpose: Developing and altering organizational charts is an important skill for
strategists to possess. This exercise can improve your skill in altering an
organization’s hierarchical structure in response to new strategies being
formulated.
 Instructions:
1. Review the organizational chart given above for McDonald’s Corporation.
2. On a separate sheet of paper, answer the following questions:
 What type of organizational chart is illustrated for McDonald’s?
 What improvements could you recommend for the McDonald’s organizational chart?
Give your reasoning for each suggestion.
 What aspects of McDonald’s chart do you especially like?
 What type of organizational chart do you believe would best suit McDonald’s? Why?

Feedback
A. Research on Organizational Structures of three (3) firms and supply the needed information to
complete the table below:

Name of Firm Type of Reason/s for Using such Recommendations for

Organizational Organizational Structure Improvement
Structure
TOPIC III: ORGANIZATIONAL LEADERSHIP

Learning Objectives:
At the end of the topic, students will be able to:
1. Define organizational leadership
2. Elaborate the organizational leadership skills leaders need
3. Differentiate the organizational leadership styles

Presentation of Content

ORGANIZATIONAL LEADERSHIP
 It is a management approach in which leaders help set strategic goals for the organization
while motivating individuals within the group to successfully carry out assignments in
service to those goals.
 Within the organizational structure, individuals, group and units are the mechanism of
organizational structure and the effectiveness of their actions is a major determinant of
successful implementation.

ELEMENTS OF ORGANIZATIONAL LEADERSHIP

1. The Role of Chief Executive Officer (CEO)
 The Chief Executive Officer is the catalyst in strategic management.
 This individual is most closely identified with and ultimately accountable for strategy’s
success.
 Nature of CEO
o Symbolic – this individual’s action and the perceived seriousness of his or her
commitment to a chosen strategy, particularly if the strategy represents a major
change, exert significant influence on the intensity of subordinate manager’s
commitment to implementation.
o Substantive – the firm’s mission, strategy and key long-term objective are strongly
influenced by the personal goals and values of CEO’s. To the extent that the CEO
invests time and personal values in the chosen strategy, he or she represents
important source for clarification, guidance and adjustment during
implementation.
2. Assignments of Key Managers
 A major concern of top management in implementing a strategy is that the reight
managers are in the right position for the new strategy.
 Confidence in the individuals occupying pivotal managerial position is directly and
positively correlated with top management expectations that a strategy can be
successfully executed.
 This confidence is based on the answers to the following fundamental questions:
o Who holds the current leadership positions that are especially critical to strategy
execution?
o Do they have the right characteristics to ensure that the strategy will be effectively
implemented?
  One practical consideration in making key managerial assignments when implementing
strategy is whether to emphasize current (or promotable) executives or bring in new
personnel.

Advantages Disadvantages
Executives to Already knows people,  Less adoptable to major
implement a practices and conditions strategic changes because of
new strategy Personnel qualities and better knowledge, attitudes and values
known and understood by  Past commitments may hamper
associates hard decisions required in
Have established relationships executing a new strategy
with peers, subordinates,  Less ability to become inspired
suppliers, buyers, etc. and credibly convey the need
Symbolizes organizational for change
commitment to individual
careers
Bringing in  Outsider may already believe in  Often costly, both in terms of
outsiders to and have “lived” the new compensation and “learning-to-
implement a strategy work-together” time
new strategy  Outsider is unencumbered by  Candidates suitable in all
internal commitments to respects (i.e., exact experience)
people may not be available, leading to
 Outsider comes to the new compromise choices
assignments with heightened  Uncertainty in selecting the
commitment and enthusiasm right person
 Bringing in an outsider can  The “morale” costs when an
send powerful signals outsider takes a job several
throughout the organization insiders wanted
that change is expected  “what to do with poor ol” Fred
problem

ORGANIZATIONAL LEADERSHIP SKILLS

 Here are five organizational leadership skills that leaders need to succeed in today’s
business world:
1. Leading People
o To lead authentically, a manager must be able to direct and motivate a team.
o Leaders should identify the strengths of each individual, empowering
employees and delegating responsibilities accordingly.
o Fostering a communication-rich environment and providing opportunities for
employees to succeed are among the skills every business wants.
2. Strategic Decision-Making
o No matter what the business climate, a leader must be able to make decisions
that reflect the best interests of a company’s short-term and long-term goals.
o In ideal situations, leaders take time to weigh options, consider consequences
and stand by their decisions once made.
 o A strategic decision-maker may rely on team members and others with specific
expertise to help support their decisions, using the resources available to make
choices in the best interest of the business.
3. Conflict Management
o Leaders have to manage conflict in the workplace, which can be a formidable
task in some industries.
o Resolving conflict is about more than choosing sides; it is about weighing the
priorities of the parties involved, resolving the situation in an effective way, and
learning from the experience as a whole.
4. Participative Management
o Progressive business models show participative management, where employees
are involved in the decision-making process, can greatly benefit a business.
o By being included in the planning, design, and execution phases of a business,
employees are more motivated, productive and creatively fulfilled.
5. Challenging the Status Quo
o A leader must reflect on the company’s goals and employ critical thinking skills
and reflection to find innovative ways to elevate the business.
o By developing a company culture that promotes creative and abstract thinking,
a leader can draw upon his or her work environment for inspiration to offer new
solutions to improve productivity and revenue.

ORGANIZATIONAL LEADERSHIP STYLES

1. Transformational Leadership
 A transformational leader is one who navigates an organization toward improvement by
changing existing thoughts, procedures, and culture.
 Leading through example, inspiration, and engagement, the transformational leader will
seek ways to get the best performance and potential out of each team member.
 It takes courage to be a transformational leader, one who challenges old ways of doing
things in favor of better, more efficient, and more intuitive strategies.
 TOP QUALITIES – Innovative, Empathetic, Motivational
2. Democratic Leadership
 With democratic leadership, while organizational hierarchy may still exist,
influence, power and the ability to contribute to decisions may be widely
distributed across tiers and departments.
 Also sometimes called participative leadership, democratic leadership requires
collaborative energy, delegation of responsibilities, and group-level decision making.
 This demands a leader who knows how to cultivate participation, empower team
members, and work directly alongside organizational members at every level.
 TOP QUALITIES - Actively Engaged, Supportive, Accountable
3. Autocratic Leadership
 An autocratic leader holds singular authority in an organization.
 This is a common leadership style in which all key decisions go through a top figure and
in which most members of the organization answer to a hierarchy that leads up to this
figure.
  While autocratic leadership is rarely very popular with employees, it’s the preferred
strategy in organizations where employees perform streamlined functions, where
control is more critical to success than creativity, and where there is scant threshold for
error.
 TOP QUALITIES – Disciplined, Decisive, Confident
4. Laissez-Faire Leadership
 It is a style in which organizational leaders take a hands off approach to decision-making
and task-completion.
 This style of leadership gives organizational members a wide latitude when it comes to
managing projects, solving problems, and resolving disagreements. In most instances,
leadership simply provides a clear set of expectations, the resources needed for job
completion, and accountability to the public, shareholders, or any other outside
interests.
 This style of leadership can be effective in select contexts, but it can be challenging to
motivate employees or establish accountability when implemented in the wrong setting.
 TOP QUALITIES - Open-minded, Trusting, Communicative
5. Bureaucratic Leadership
 It refers to organizational leadership through a highly formalized set of processes,
procedures, and structures. Here, rules, policies, and hierarchies form a clear set of
expectations as well as an explicit chain of command.
 At each level of a bureaucracy, organizational members are beholden both to their
immediate superiors and to a larger ecosystem of rules and procedures.
 Bureaucratic leaders lead by channeling established rules, enforcing existing structures,
and presiding over specific segments of the hierarchy.
 TOP QUALITIES – Organized, Consistent, Focused
6. Servant Leadership
 Servant leaders empower employees, interact directly with clients, and recognize
their organization's role as part of a community.
 It refers to a decentralized style in which a leader satisfies the needs of stakeholders
first.
 Servant leaders empower employees, interact directly with clients, and recognize their
organization’s role as part of a community.
 TOP QUALITIES – Receptive, Persuasive, Encouraging
7. Transactional Leadership
 It succeeds best in a context of order, structure, and rigid hierarchy.
 The job of leadership is to ensure individuals perform their roles correctly and
effectively, and that group performance produces positive outcomes.
 A good transactional leader will use those rewards and penalties to identify strengths
and weed out weaknesses among personnel. Transactional leaders may prize the status
quo.
 Where change is needed, a transactional leader will typically implement it within
existing systems and structures rather than through major structural transformation.
 TOP QUALITIES – Regimented, Focused, Efficient
 8. Situational Leadership
 It refers less to one specific style of leadership and more to the idea of leadership as an
inherently adaptable responsibility.
 It remains highly flexible at all times, capable of adjusting strategies, procedures, and
vision according to an organization’s circumstances, demands, and even to a shifting
culture.
 The situational leader possesses the agility to adapt strategy to changing dynamics. This
calls for a leader with the emotional intelligence to recognize organizational needs and
the skill to act on those needs.
 TOP QUALITIES – Nimble, Adaptable, Versatile
9. Cross-Cultural Leadership
 It acknowledges the increasingly global nature of business.
 Cross-cultural leaders recognize that every country has different business norms,
leadership practices, and cultural realities.
 This type of leader knows how to navigate these differences to unite culturally-diverse
partners, achieve unified goals, and create pathways to common ground.
 TOP QUALITIES – Inclusive, Respectful, Versatile
10. Charismatic Leadership
 The truly charismatic leader effectively creates a sense of shared purpose, nurtures
the passions of organizational members, and unites personnel behind a
single vision.
 It depends significantly on the compelling personality of the leader. This type of leader
will inspire others through commitment, conviction, and positive example.
 Charismatic leaders will usually possess strong communication skills, the capacity for
exceptional personal empathy, and the strength of personality to positively define
company culture.
 TOP QUALITIES – Inspiring, Influential, Personally invested

ROLE OF LEADERSHIP IN STRATEGIC IMPLEMENTATION

 Implementing corporate strategy requires a team effort headed by your organization's
leadership team.
 Each person involved in change management has their responsibilities, and it is important
for the entire organization to understand the role of leadership in strategic implementation
to make delegating responsibility more effective.
1. Involvement
o Company leadership needs to identify what those departments are and create an
implementation team that consists of representatives from each affected group.
o Management needs to create a structure that identifies various group leaders, the
responsibilities of those group leaders & an accountability system that insures that
the implementation team meets its timetable for getting the new program or policy in
place.
2. Interest
o Implementing change or any new strategy within a company requires a feeling of
urgency on the part of the entire company.
 o It is the job of management to create that urgency by explaining to the staff why the
implementation is necessary.
o Leadership needs to help the employees understand how the company benefits from
the new implementation, but it also needs to get the organization to see the setbacks
of not making a change.
3. Monitoring
o Strategic implementation within a company is a dynamic procedure that needs to be
monitored by management and altered to meet implementation goals.
o It is the responsibility of leadership to put a monitoring system in place, analyze the
data that is being generated during the implementation and make any necessary
changes to make the implementation more efficient.
4. Next Step
o The company leadership needs to be able to identify when each phase of a strategic
implementation is complete & be ready to transition the company to the next phase.
o If the company is bringing in a new software program for customer management,
then the first phase of the program may be to implement it in the sales department.
Management needs to identify when the proper alterations to the software have
been made that will allow it to be implemented in other parts of the company.

Application
A. Group Activity
For each group, analyze the assigned situations below. Identify what organizational leadership
style would be most appropriate and justify your answer. Summarize your discussions and
make an oral presentation.

Group Number Situation

1 Your small chain of coffee shops verges on the next leap forward. After a few years
of steady growth, you’re investing considerable capital into a handful of new
locations and menu items. You expect a period of transformation, followed by
another steady period of rapid growth, and eventually, a sustainable phase of
modest and incremental growth. At that point, your company may even go public,
but it’s hard to know for certain. To weather this journey with steady leadership,
you’ll want a leader, one with the instincts and adaptability to lead according to
each phase’s demands.
2 Your corporation was once on the cutting edge of the electronic
communication game, but suddenly, nobody wants to buy your fax machines.
How did you get so out of touch? Time to bring in a dynamic leader with the
capacity to change the focus, strategy, and techniques that once made your
company successful but today make it look like a dinosaur.
3 You preside over a team of experienced product developers tasked with the
challenge of inventing an innovative, biometric refrigerator alarm for
stubborn dieters. You may know how to manage the big picture stuff, but
these experts all know more about biometrics, refrigerators, and alarms than
you ever will. In a setting like this, where most members are skilled, creative,
highly-motivated and capable of working independently, a style of leadership
 can offer the freedom needed for creative thinking and experimentation.
4 You’re starting a block chain consulting group comprised of technical gurus,
financial experts, and marketing professionals. Your dream team of consultants
consists of former business partners and colleagues working in major financial
centers all over the world. You hope to unite this diverse group to serve a
common set of goals while giving each team member the freedom to contribute
unique talents. Your ability to help this team find common ground while ensuring
each participant feels respected and comfortable will depend on how well you
manage a culturally diverse set of customs, practices, and expectations.
5 You run a regional chain of supermarkets with a slim profit-margin. While you
do a good volume of business, factors such as food spoilage, breakage, and
theft are cutting into your revenue. You need somebody to come in and right
the ship, which means ensuring employees are effectively rotating stock,
reducing habits that result in breakage, and taking steps to mitigate
shoplifting. Because you largely employ a staff that works for low wages, has
limited professional training, and is prone to high turnover, good results
require constant oversight. You need a leader that keeps a watchful eye on
management, employee behavior, and outcomes in each location as well as
one with the authority to intervene where results are less than desired.
6 After years of mismanagement and even a small dose of executive corruption,
your accounting firm “cleaned house.” Old leaders and managers were fired in a
cloud of scandal, leaving the confidence of employees shaken and the firm’s public
reputation stained. A leader has been hired to preside over the company as it
repairs its image and restores the trust of its employees. This leader brings passion
and commitment as well as the ability to appeal to the personal interests and
emotional instincts of employees, who are wary of their company’s integrity. This
leader will be critical to bringing the firm back from the dead.

B. ‘Centre Stage’ (from Higgins, 2018)

 Select four team members as volunteers. One team member plays the role of an
employee who has missed meetings or been late to work in recent times.
 Each of the other three participants demonstrates a different style of leader (to save time,
nominate the particular personality trait). Ask all participants to form a circle, and put two
chairs in the middle of the circle.
 After each demonstration of how to deal with the employee, ask the whole group to
reflect on the different leadership approaches.
 For example, the group could consider what worked and what did not. Finally, to conclude
this activity, ask the group to consider what the ‘ideal’ leader would do in the scenario.
Feedback
A. CASE ANALYSIS
Laura is the associate director of a nonprofit agency that provides assistance to children and
families. She is the head of a department that focuses on evaluating the skill-building
programs the agency provides to families. She reports directly to the agency leadership. As a
whole, the agency has been cautious in hiring this year because of increased competition for
federal grant funding. However, they have also suffered high staff turnover. Two directors,
three key research staff, and one staff person from the finance department have left. Laura
has a demanding schedule that requires frequent travel; however, she supervises two
managers who in turn are responsible for five staff members each. Both managers have been
appointed within the last six months.

Manager 1: Kelly has a specific background in research. She manages staff who provide
research support to another department that delivers behavioral health services to youth.
Kelly supports her staff and is very organized; however, she often takes a very black and white
view of issues. Upper level leadership values Kelly’s latest research on the therapeutic
division’s services. Kelly is very motivated and driven and expects the same from her staff.

Manager 2: Linda has a strong background in social science research and evaluation. She
manages staff that work on different projects within the agency. She is known as a problem
solver and is extremely supportive of her staff. She is very organized and has a wealth of
experience in evaluation of family services. Linda is very capable and can sometimes take on
too much.

The managers are sensing that staff are becoming overworked as everyone takes on increased
responsibilities due to high staff turnover. Staff have also mentioned that Laura’s "glass half-
empty" conversation style leaves them feeling dejected. In addition, Laura has not shared
budgets with her managers, so they are having difficulty appropriately allocating work to staff.
Laura said she has not received sufficient information from the finance department to
complete the budgets. The finance department said they have sent her all the information
they have available. As staff become distressed, the managers are becoming frustrated. They
feel like they are unable to advocate for their staff or solve problems without key information
like the departmental budget.

DISCUSSION QUESTIONS:
1) How can Laura most effectively use her leadership skills in her role as associate director?
2) What steps could be taken to build staff confidence?
3) What advice would you give Laura on improving her leadership skills?
4) Which leadership style do you think a leader would need to be effective in this situation?
TOPIC IV: STRATEGY AND MOTIVATIONAL SYSTEMS

Learning Objectives:
At the end of the topic, students will be able to:
1. Define motivation and differentiate its major components
2. Identify the key elements of motivation
3. Explain the importance of motivation in implementing strategy

Presentation of Content

DEFINITIONS OF MOTIVATION
 It is the intrinsic inducement that propels an individual to think, feel and perform in
certain ways.
 It is the process of activating behavior, sustaining it and directing it toward a particular
goal.
 The motivating function of management includes at least four major components:
o Leadership
 It includes developing a vision of the firm’s future and inspiring people to work
hard to achieve that vision.
 Leadership is the lifting of a person’s vision to higher sights, the raising of a
person’s performance to a higher standard, the building of a person’s personality
beyond its normal limitations.
 Good leaders establish rapport with subordinates, empathize with their needs and
concerns, set a good example, and are trustworthy and fair.
o Group Dynamics
 It plays a major role in employee morale and satisfaction.
 Informal groups or coalitions form in every organization. The norms of coalitions
can range from being very positive to very negative toward management.
o Communication
 It is a process by which information is exchanged between individuals through a
common system of symbols, signs, or behavior.
 Good two-way communication is vital for gaining support for departmental and
divisional objectives and policies. Top-down communication can encourage
bottom-up communication.
o Organizational Change
 It is the movement of an organization from one state of affairs to another. A
change in the environment often requires change within the organization
operating within that environment. 

KEY ELEMENTS OF MOTIVATION

1. INTENSITY – refers to the level of effort provided by the employee in the attempt to
achieve the goal assigned to him.
2. DIRECTION – relates to what an individual chooses to do when he is confronted with a
number of possible choices.
3. PERSISTENCE – is a dimension of motivation which measures how long a person can
maintain effort to achieve the organization’s goals.
MOTIVATIONAL METHODS & PROGRAMS
1. Motivation through job design
 JOB DESIGN – is the way the elements in a job are organized.
 Important concepts in designing jobs:
o Job Enrichment
o Job Characteristics Model
o Job Crafting
2. Organizational behavior modification
o A person tends to repeat behavior that is accompanied by favorable consequences
and tends not to repeat behavior that is accompanied by unfavorable
consequences.
o FIVE-step problem solving model:
a. Identifying critical behaviors that make a significant impact on the employee’s
job performance.
b. Developing baseline data which is obtained by determining the number of times
the identified behavior is occurring under present conditions;
c. Identifying behavioral consequences of performance;
d. Developing and implementing an intervention strategy to strengthen desirable
performance behaviors and weaken undesirable behaviors;
e. Evaluating performance improvement
3. Motivation through recognition & pride
 Feedback is an essential part of recognition;
 Praise is one of the most powerful forms of recognition;
 Reward and recognition programs should be limited to organizational goals;
 Identification of the type of rewards and recognition that the workers will value; and
 It is important to evaluate the effectiveness of the reward and recognition program.
4. Motivation through financial incentives
 Financial incentives take the form of any or a combination of the following:
o Time rates
o Payment by results
o Performance and profit related pay
o Skill/competency based pay
o Cafeteria or flexible benefits system

STRATEGY & MOTIVATION

o Objectives, strategies, and policies have little chance of succeeding if employees and
managers are not motivated to implement strategies once they are formulated.
o When managers and employees of a firm strive to achieve high levels of productivity, this
indicates that the firm’s strategists are good leaders.
o It is important that strategists identify the composition and nature of informal groups in
an organization to facilitate strategy formulation, implementation, and evaluation.
Leaders of informal groups are especially important in formulating and implementing
strategy changes.
 o An organization’s system of communication determines whether strategies can be
implemented successfully. The strategic-management process becomes a lot easier when
subordinates are encouraged to discuss their concerns, reveal their problems, provide
recommendations, and give suggestions. A primary reason for instituting strategic
management is to build &support effective communication networks throughout the firm.
o The manager of tomorrow must be able to get his people to commit themselves to the
business, whether they are machine operators or junior vice-presidents. The key issue will
be empowerment, a term whose strength suggests the need to get beyond merely sharing
a little information and a bit of decision making.

Application
A. Role Play
 Each group will be given a task of portraying how to motivate employees using the
different motivational methods and programs. They will be performing it in the class.
B. Duo Activity
 Each pair will complete the table below and one will present their output in the class.

Name of Annual Objective Strategy How to motivate employees to

Firm implement the strategy?

Feedback
A. Answer the following questions:
 If you worked in a management role, how would you create a work environment that
employees found motivating?
 What actions, behaviors, or workplace events, would limit or destroy your workplace
motivation?
 Given that you can't motivate another person, what actions did you take that helped the
coworker or reporting staff member experience feelings of motivation or choose
motivated behavior?
TOPIC V: ESTABLISHING ANNUAL OBJECTIVES

Learning Objectives:
At the end of the topic, students will be able to:
1. Elaborate the definition, importance, benefits and qualities of annual objectives
2. Explain the role of annual objectives in the attainment of overall company’s vision, mission,
goals and objectives
3. Formulate annual objectives drawn from long-term objectives

Presentation of Content

A critical step in the successful implementation of grand strategy is the identification and
communication of annual operating objectives that relate logically to the strategy’s long-term
objectives. Establishing annual objectives is a decentralized activity that directly involves all managers
in an organization. Active participation in establishing annual objectives can lead to acceptance and
commitment.

DEFINITION AND IMPORTANCE OF ANNUAL OBJECTIVES

o They translate long-range aspirations into this year’s budget.
o They provide clarity that is powerful, motivating facilitator of effective strategy
implementation.
o They are essential for strategy implementation because they
(1) represent the basis for allocating resources;
(2) are a primary mechanism for evaluating managers;
(3) are the major instrument for monitoring progress toward achieving long-term
objectives; and
(4) establish organizational, divisional, and departmental priorities.

BENEFITS OF ANNUAL OBJECTIVES

o They serve as guidelines for action, directing and channeling efforts and activities of
organization members.
o They provide a source of legitimacy in an enterprise by justifying activities to
stakeholders.
o They serve as standards of performance.
o They serve as an important source of employee motivation and identification.
o They give incentives for managers and employees to perform.
o They provide a basis for organizational design.
o They serve as a basis in developing budgets, schedules, trigger points and other
mechanisms for controlling strategy implementation

QUALITIES OF EFFECTIVE ANNUAL OBJECTIVES

o They should be measurable, consistent, reasonable, challenging, clear, communicated
throughout the organization, characterized by an appropriate time dimension, and
accompanied by commensurate rewards and sanctions.
 o They should be integrated and coordinated foe better implementation of grand
strategies.
o They should state quantity, quality, cost, and time—and also be verifiable. Terms and
phrases such as maximize, minimize, as soon as possible, and adequate should be
avoided.
o They provide focal points for raising and resolving conflicts between organizational
subunits that might otherwise impede strategic performance.

CONSISTENCY IN ANNUAL OBJECTIVES

o Annual objectives are more consistent when each objective clearly states what is to be
accomplished, when it will be done and how accomplishment will be measured.
o If objectives are measurable and state what is to be done and when it will be achieved
in a clear, understandable manner, then there is less likelihood of misunderstanding
between the independent operating managers who must implement the grand
strategy.
o Objectives should be consistent across hierarchical levels and form a network of
supportive aims. Horizontal consistency of objectives is as important as vertical
consistency of objectives.

LINKAGE TO LONG-TERM OBJECTIVES

o An annual objective must be clearly linked to one or more long-term objectives of the
business grand strategy.

Dimension Long-term Objectives Annual Objectives

Time Frame Focused usually five years or More immediate, usually
more in the future involving one year
Focus Focused on the future Identify specific
position of the firm in its accomplishments for the
competitive environment company, functional areas or
other sub-units over the next
year
Specificity Broadly stated Stated in absolute terms
Measurement Measured in broad, relative
terms

o Clearly stated and communicated objectives are critical to success in all types and sizes
of firms. Annual objectives, stated in terms of profitability, growth, and market share
by business segment, geographic area, customer groups, and product, are common in
organizations.
o For instance, Stamus Company could establish annual objectives based on long-term
objectives as illustrated below:
 o Clear annual objectives do not guarantee successful strategy implementation, but they
do increase the likelihood that personal and organizational aims can be accomplished.
o Overemphasis on achieving objectives can result in undesirable conduct, such as faking
the numbers, distorting the records, and letting objectives become ends in themselves.
Thus, managers must be alert to these potential problems.

Application
o Group Activity on Formulating Annual Objectives
Instructions:
1. The class will be grouped with 5 members each.
2. Each group will choose a business firm & conduct a research of its long-term objectives.
3. From the identified long-term objectives, annual objectives will be formulated.
4. Prepare a 5-minute oral presentation reporting the results of group discussion.

Feedback
o Issues for Review and Discussion
1. What is the importance for a business to establish and clearly communicate long-term
and annual objectives?
2. How objectives should be communicated to individuals?
TOPIC VI: DEVELOPING FUNCTIONAL STRATEGIES: MARKETING, FINANCIAL, PRODUCTION/
OPERATIONS, HUMAN RESOURCE AND RESEARCH AND DEVELOPMENT STRATEGIES

Learning Objectives:
At the end of the topic, students will be able to:
1. Define functional strategy
2. Explain how functional strategies help in the implementation of grand strategy
3. Compare and contrast grand strategy from functional strategy
4. Formulate functional strategies on different areas

Presentation of Content

KINDS OF STRATEGY

People Responsible Purpose

Corporate-level Top Management  Address issues of concern to the entire
Strategy organization
Business-level Strategy Middle-level Managers  Deals with major business units or
divisions of the corporate portfolio
 Intended to help the organization
achieve its corporate strategies
Functional Strategy Lower-level Managers  Deal with strategies for the major
organizational functions (e.g., marketing,
finance, production, research and
personnel) considered relevant for
achieving the business strategies and
supporting the corporate-level strategy

DEFINITION OF FUNCTIONAL STRATEGY

 It is a short-term game plan for a key functional area within the company.
 It clarifies grand strategies by providing more specific details about how key functional
areas are to be managed in the near future.
 It translates thought (grand strategy) into action designed to accomplish specific annual
objectives.
 It is derived from business strategy, giving specific, short-term guidance to operating
managers.

HOW FUNCTIONAL STRATEGIES HELP IN THE IMPLEMENTATION OF GRAND STRATEGY?

 Organizing and activating specific sub-units of the company to pursue business activity in
daily activities
 Translate thought (grand strategy) into action designed to accomplish specific annual
objectives
 Supports grand strategy to accomplish annual objectives
 Specifies short-term guidance to operating managers
DIFFERENCES OF GRAND STRATEGY AND FUNCTIONAL STRATEGY

Grand Strategy Functional Strategy

Time Horizon Covered  Long-term  Identify and coordinate short-term
actions, usually undertaken in a
year or less
Specificity  Provides general  Gives specific guidance to
direction managers responsible for
accomplishing annual objectives
Participation in the  Business strategy is the  Development of functional
Development responsibility of the strategy is typically delegated by
general manager of a the business-level manager to
business unit. principal subordinates charged
with running the operating areas
of the business.

AREAS WHEREIN FUNCTIONAL STRATEGIES ARE FOCUSED

1. MARKETING
 The role of the marketing function is to profitably bring about the sale of
products/services in target markets for the purpose of achieving the business’ goals
 Functional strategies in the marketing area should guide this endeavor in a manner
consistent with the grand strategy and other functional strategies.
 Effective marketing strategies guide marketing managers in determining who will
sell what, where, when, to whom in what quantity and how.
a. A functional strategy for the product component of the marketing function
should clearly identify the customer needs the firm seeks to meet with its
product or service. It involves decisions regarding features, product lines,
packaging, quality and other peripheral services.
b. The functional strategy for the place component identifies where, when and by
whom the product or services are to be offered for sale. The primary concern
here is the channels of distribution, the combination of marketing institutions
through which the product or services flow to the final user.
c. The promotion component of marketing strategy defines how the firm will
communicate with the target market. It must be consistent with other
marketing strategy components and due to cost requirements, closely
integrated with financial strategy. Functional strategy for the promotion
component should provide marketing managers with basic guides for the use
and mix of advertising, personal selling, sales promotion and media selection.
d. The price components are perhaps the single most important consideration in
marketing. It directly influences demand and supply, profitability, consumer
perception and regulatory response.
2. FINANCIAL/ACCOUNTING
 Strategies in this area direct the use of financial resources in support of the business
strategy, long-term objectives and annual objectives.
 Financial operating strategies with longer time perspectives guide financial
managers regarding long-term capital investment, use as debt financing, dividend
allocation and the leverage posture of the firm
 Key Functional Strategies
a. Capital Acquisition – Long-term financial strategies usually guide capital
acquisition in the sense that priorities change infrequently overtime. The desired
level of debt versus equity and internal long-term financing of business activities
is a common issue in capital acquisition strategy.
b. Capital Allocation – Capital Allocation strategy is dependent on the grand
strategy. Growth-oriented grand strategies generally require numerous major
investments in facilities, projects, acquisitions and or people.
 Also, this also helps manage conflicting priorities among operating
managers competing for capital resources.
 Retrenchment or stability require a financial strategy that focuses on the
reallocation of existing capital resources.
 This could necessitate pruning product lines, production facilities, or
personnel to be reallocated elsewhere in the firm.
 If a business is pursuing rapid growth, flexibility in making capital
expenditures at the operating level may enable timely responses to an
evolving market.
c. Dividend Management – is an integral part of the firms internal financing.
Dividends are paid on earnings, lower dividends increase the internal funds
available for growth and in internal financing reduces the need for external,
often debt, financing.
d. Working Capital – critical to the daily operation of the firm, and capital
requirements are directly influenced by seasonal and cyclical fluctuations, firm
size and the pattern of receipts and disbursements.

Key Functional Strategies in Typical Questions that should be answered by

Finance and Accounting the Functional Strategy
Capital Acquisition  What is an acceptable cost of capital?
 What is the desired proportion of short and
long-term debt, preferred and common
equity?
 What balance is between internal and
external funding?
 What risk and ownership restrictions are
appropriate?
 What level and forms of leasing should be
used in providing assets?
Capital Allocation  What are the priorities for capital allocation
projects?
  On what basis is final selection of projects to
be made?
 What level of capital allocation can be made
by operating managers without higher
approval?
Dividend and Working Capital  What portion of earnings should be paid out
Management as dividends?
 How important is dividends stability?
 Are things other than cash appropriate as
dividends?
 What are the cash flow requirements;
minimum and maximum cash balances?

3. RESEARCH AND DEVELOPMENT

 It is now a part and parcel of the whole enterprise as a primary director of the
company’s strategy and culture.
 R&D strategy also guides organization of the R&D function. It can be internal and
within the firm or private outside contractor.
 Strategic Principles of Research and Development
a. To drive innovation across the entire extended enterprise to create value
b. To leverage technology and competency o drive sustainable innovation and
capture competitive advantage
 Types of Research and Development Strategy
a. OFFENSIVE STRATEGY – Technological innovation and new product
development are emphasized as the basis for the firm’s future success. It
entails high risk and demands considerable technological skills, forecasting
enterprise and the ability to quickly transform basic innovation into
commercial products.
b. DEFENSIVE STRATEGY – emphasizes product modification and the ability to
copy or acquire new technology to maintain a firm’s position in the industry.
c. A COMBINATION OF THE TWO – is often used by large companies with some
degree of technological leadership. All have defensive strategy for currently
available products and emphasis on an offensive R&D posture in basic long-
term research.
 Functional Strategy in Research and Development

R&D Decision Area Typical Questions that should be answered by the

functional strategy
Basic Research vs.  To what extent should innovation and
Commercial Development breakthrough research be emphasized
 In relation to the emphasis on product
development and refinement and modification?
 What new projects are necessary to support
growth?
 Time Horizon  Is the emphasis short-term or long-term?
 Which orientation best supports the business
strategy? Marketing and production strategy?
Organizational Fit  Should R&D be done in-house or contracted out?
 Should be centralized or decentralized?
 What should be the relationship between the R&D
unit(s) and product managers? Marketing
managers? Production managers?
Basic R&D Posture  Should the firm maintain an offensive posture,
seeking to lead innovation and development in the
industry?
 Should the firm adopt a defensive posture,
responding quickly to competitors’ developments?

4. PRODUCTION/OPERATIONS
 The core function of the business firm
 The process of converting inputs (raw materials, supplies, people and machines) into
value-enhanced output
 This function is most easily associated with manufacturing firms. However, it applies
equally to all other types of business (including service and retail, for example)
 Functional strategy in POM strategy must guide decision regarding:
a. The basic nature of the firm’s POM system, seeking an optimum balance
between investment input and production/operations output and
b. Location, facilities design and process planning on a short-term basis
 Functional Strategies in POM
a. The facilities and equipment component of POM strategy involves decisions
regarding plant location, size, equipment and facilities utilization that should be
consistent with grand strategy and other operating strategies
b. Purchasing. From a cost perspective, there are things that are taken into
considerations. Like in the form of purchasing, if in what terms of volume and
delivery requirements should be done to support operations.
c. Operations planning and control provide guidelines for on-going production
operations. They are meant to encourage efficient organization of
production/operations resources to match long-range, overall demand. This
component often dictates whether production/operations will be demand
oriented, inventory oriented or subcontracting oriented.
 If demand is cyclical or seasonal, the POM strategy must ensure that
production/operations processes are efficiently geared to this pattern.
Example: A bathing suit manufacturer would prefer inventories to be at
their highest in the early spring.
 If demand is least cyclical, a firm must emphasize producing to inventory,
wanting a steady level of production and inventories. When demand
fluctuations are less predictable, many firms subcontract to handle sudden
increases in demand while avoiding idle capacity and excess capital
investment
  POM operating strategies must be coordinated with marketing strategy if the firm is
to succeed. Careful integration with financial strategy components (such as capital
budgeting and investment decisions) and the personnel function are also necessary.

Areas of Production Typical questions that should be asked regarding POM

Facilities and Equipment  How centralized should the facilities be?
 How integrated should be separate processes be?
 To what extent will further mechanization be
pursued?
 Should size and capacity be oriented toward peak or
normal operating levels?
Purchasing  How many sources are needed?
 How do we select suppliers and manage relationships
over time?
 What level of forward buying is appropriate?
Operations Planning and  Should work be scheduled to order or to stock?
Control  What level of inventory is appropriate?
 How should inventory be used (controlled or
replenished?
 Should maintenance efforts be preventive or
breakdown-orineted?
 What emphasis should be placed on job
specialization? Safety? Use of standards?

5. PERSONNEL/HUMAN RESOURCES
 The strategic importance of functional strategies in personnel area has become
more widely accepted in recent years.
 Personnel management needs in accomplishing grand strategy is dine by ensuring
the development of managerial talent, the presence of systems to manage
compensation and regulatory concerns and the development of competent, well-
motivated employees.
 Functional strategies in personnel should guide the effective utilization of human
resources to achieve both the annual objectives of the firm and the satisfaction and
development of employees. This includes strategies in:
a. Recruitment, selection and orientation which guides personnel management
decisions for attracting and retaining motivated, productive employees. This
area should provide basic parameters for answering these questions:
o
b. Development and training component which guides personnel actions taken to
meet future human resource needs of grand strategy
c. Compensation, labor relations, discipline and control to enhance the
productivity and motivation of the work force.
Application
Research Work. Make a list of functional strategies of the following competing firms. Explain
how these functional strategies improve the firm’s profitability and
productivity.
1. Procter and Gamble and Unilever
2. Smart Communication, Inc. and Globe Telecom, Inc.

Feedback
A. Answer the following questions:
 What are the three major R&D approaches to implementing strategies? Which
approach would you prefer as owner of a small software company? Why?
 Describe some marketing, finance/accounting, R&D, and management information
systems activities that a small restaurant chain might undertake to expand into a
neighboring state
 Explain how marketing, finance/accounting, R&D, and management information
systems managers’ involvement in strategy formulation can enhance strategy
implementation.
TOPIC VII: ROLE OF ACCOUNTING IN SETTING AND IMPLEMENTING MANAGEMENT STRATEGY

Learning Objectives:
At the end of the topic, students will be able to:
1. Define accounting
2. Identify the functions of finance/accounting
3. Explain the role of accounting in setting management strategy
4. Elaborate the role of accounting in implementing management strategy

Presentation of Content

DEFINITIONS OF ACCOUNTING
 It is a practice and body of knowledge concerned primarily with methods for recording
transactions, keeping financial records, performing internal audits, reporting and analyzing
financial information to the management, and advising on taxation matters.
 It is a systematic process of identifying, recording, measuring, classifying, verifying,
summarizing, interpreting and communicating financial information. It reveals profit or
loss for a given period, & the value and nature of a firm's assets, liabilities&owners' equity.
 It provides information on the resources available to a firm, the means employed to
finance those resources, and the results achieved through their use.

FUNCTIONS OF FINANCE/ACCOUNTING
1. The Investment Decision
 It also called capital budgeting.
 It is the allocation and reallocation of capital and resources to projects, products,
assets, and divisions of an organization.
 Once strategies are formulated, capital budgeting decisions are required to
successfully implement strategies.
2. The Financing Decision
 It determines the best capital structure for the firm and includes examining various
methods by which the firm can raise capital (for example, by issuing stock, increasing
debt, selling assets, or using a combination of these approaches).
 It must consider both short-term and long-term needs for working capital.
 Two key financial ratios that indicate whether a firm’s financing decisions have been
effective are the debt-to-equity ratio and the debt-to-total-assets ratio.
3. The Dividend Decision
 It concerns issues such as the percentage of earnings paid to stockholders, the
stability of dividends paid over time, and the repurchase or issuance of stock.
 It determines the amount of funds that are retained in a firm compared to the
amount paid out to stockholders.
 Three financial ratios that are helpful in evaluating a firm’s dividend decisions are the
earnings-per-share ratio, the dividends-per-share ratio, and the price-earnings ratio.
 The benefits of paying dividends to investors must be balanced against the benefits of
internally retaining funds, & there is no set formula on how to balance this trade-off.

ROLE OF ACCOUNTING IN SETTING MANAGEMENT STRATEGY

 Preparing Financial Ratio Analysis
o It is the most widely used method for determining an organization’s strengths and
weaknesses in the investment, financing, and dividend areas.
o Because the functional areas of business are so closely related, financial ratios can
signal strengths or weaknesses in management, marketing, production, research and
development, and management information systems activities.
o Computing financial ratios is like taking a picture because the results reflect a situation
at just one point in time. Comparing ratios over time and to industry averages is more
likely to result in meaningful statistics that can be used to identify and evaluate
strengths and weaknesses.
o Classifications of Key Financial Ratios
1. Liquidity Ratios - measure a firm’s ability to meet maturing short-term obligations.
2. Leverage Ratios - measure the extent to which a firm has been financed by debt.
3. Activity Ratios - measure how effectively a firm is using its resources.
4. Profitability ratios - measure management’s overall effectiveness as shown by the
returns generated on sales and investment.
5. Growth ratios - measure the firm’s ability to maintain its economic position in the
growth of the economy and industry.
 Setting Profitability Goals
o Managerial accountants are able to collect the right type of data, analyze the data and
translate it into the information that decision makers need to establish long range
profitability goals.
o For example, these accountants have access to their companies’ financial data across
the enterprise and down to the business unit level. The financial information provided
to senior leaders by managerial accountants allow them to reevaluate their products’
pricing strategies and assess their agreements among their distribution channel
partners to optimize profits.
 Creating Acquisition Strategy
o While a company’s mission & vision statements are the foundation for its operations &
plans for healthy growth, it is the financial information provided by accountants that
support the decisions that help the company to reach its high level goals.
o Acquisition strategies are used to identify ways to cut costs through consolidation and
divestiture and to promote value creation for company investors by choosing winning
business purchases.
o Before corporate executives decide to move forward on such a strategy, they would
consult with managerial accountants to determine if the long term results of their
actions will produce the desired performance improvements.
 Supporting Risk Management and Controls
o Without the help of managerial accountants a company’s risk management functions
would be largely dependent on subjective data.
o Corporate leaders realize that they must quantify risk management objectives to make
them relevant and measurable, and the financial information provided by accountants
support this function. Some types of financial information can also contribute to
estimating the severity of impact to a particular business unit or to an enterprise for
identified risks.
ROLE OF ACCOUNTING IN IMPLEMENTING MANAGEMENT STRATEGY
 Management accountants as information processing and measurement agents are at the
forefront of business strategy implementation processes. The value of accountants to
businesses have gone beyond preparation of financial statements, the strategic alliance
that now exist between business and their accountants is a type of long term partnership
that is poised to continue to yield result.
 The role of management accountants in building a sustainable business strategy are
discharged in the following aspects of business operations and accounting information
processes.
o Balanced Scorecard: The BSC is a unique managerial tool specifically designed to
assist managements translate mission statements of organizations into concrete
actionable parameters.
o Corporate Governance: Management accountant provides professional advice on the
best practices of corporate governance that are highly optimized to promote the
achievement of company strategy.
o Strategic Management Accounting: The contributions of managerial accountants in
areas of market share and profitability analysis are some examples of the roles of
professionally trained accounting practitioner.
o Integrated Risk Management: Relevant information both financial and non-financial is
needed for sound decision making. Accountants with their managerial skills and
training are best positioned to not only provide this information in the right format but
to also analyze it in such a way that managers at all level would appreciate and value.
o Change Management Process: Management accountants act as business advisors in
the overall change management process.
o Developing Suitable Budgetary Control: Management heavily rely on the intuitive
mind of accountants to design and assist in the implementation of budgeting
functions which will in the long run translate into the achievement of a company’s
strategy. They produce feasibility reports alongside their recommendations as to
whether to make the investment or not.
o Investment Appraisal and Analysis: Investment appraisal is an ancient wisdom which
entails weighing all possible options before committing economic resources. Capital
budgeting is not a comfort zone for all but for those specifically trained to deal with
the complexities and difficulties that crop up every now and then.

FINANCE/ACCOUNTING AUDIT CHECKLIST

 The following finance/accounting questions should be examined:
1. Where is the firm financially strong and weak as indicated by financial ratio analyses?
2. Can the firm raise needed short-term capital?
3. Can the firm raise needed long-term capital through debt and/or equity?
4. Does the firm have sufficient working capital?
5. Are capital budgeting procedures effective?
6. Are dividend payout policies reasonable?
7. Does the firm have good relations with its investors and stockholders?
8. Are the firm’s financial managers experienced and well trained?
9. Is the firm’s debt situation excellent?
Application
A. Research Work. Identify a business establishment wherein one of its departments is
accounting. Determine the role of such department in strategy formulation and how it helps in
implementing business strategies. Make recommendations on how to improve the firm’s
profitability through its accounting processes.

Feedback
A. Explain how finance/accounting managers’ involvement in strategy formulation can enhance
strategy implementation.
B. Explain why projected financial statement analysis is considered both a strategy-formulation
and a strategy-implementation tool.

SUMMARY OF THE UNIT

Communication is an indispensable part of the management process. Effective communication

is important in executing a planned programme, in implementing strategies and in controlling the
activities with the help of feedback information. Information relating to subordinates' performance is
necessary to know whether planned objectives are being realized. It is also an important aid in
directing and in motivating the employees. Thus, communication is an indispensable part of the
management process.

Any change in corporate strategy is likely to require some of change in the way an organization
is structured and in the kind of skills in particular positions. Manager must, therefore, closely examine
the way their company is structures in order to decide what, if any, changes should be made in the
way work is accomplished. Successful strategy implementation requires the support of, as well as
discipline and hard work from, motivated managers and employees. Formulating the right strategies
is not enough, because managers and employees must be motivated to implement those strategies.
Management issues considered central to strategy implementation include matching organizational
structure with strategy, linking performance and pay to strategies, creating an organizational climate
conducive to change, managing political relationships, creating a strategy-supportive culture, adapting
production/ operations processes, and managing human resources. Establishing annual objectives,
devising policies, and allocating resources are central strategy implementation activities common to
all organizations. Depending on the size and type of the organization, other management issues could
be equally important to successful strategy implementation.

Successful strategy implementation depends on cooperation among all functional and

divisional managers in an organization. Marketing departments are commonly charged with
implementing strategies that require significant increases in sales revenues in new areas and with
new or improved products. Finance and accounting managers must devise effective strategy-
implementation approaches at low cost and minimum risk to that firm. R&D managers have to
transfer complex technologies or develop new technologies to successfully implement strategies.
Information systems managers are being called upon more and more to provide leadership and
training for all individuals in the firm. The nature and role of marketing, finance/accounting, R&D, and
management information systems activities, coupled with the management activities largely
determine organizational success.
STUDENT REFLECTION ON LEARNING

REFERENCES

Printed Sources:
 David, Fred R. (2011). Strategic Management Concepts and Cases 13 th Edition. Pearson
Education, Inc.
 Hilario, Margarita G. & Guieb, Lilia L. (2005) Module in Strategic Management and Business
Policy

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