Stratigic Mangment

ALLOCATING RESOURCES TO THE STRATEGY EXECUTION EFFORT +. 10111 Explain why resource allocation should always be based on strategic prionites. Eatly in the strategy implementation process, managers must determine what resources (in terms of funding, people, and so on) will be required and how they should be distributed across the company's various organizational units. This includes carefully screening requests for more people and new facilities and equipment, approving those that will contribute to the strategy execution efiort, and turning down those that don't. Should internal cash flows prove insufficient to fund the planned strategic initiatives, then management must raise additional funds through borrowing or selling additional shares of stock to investors. A company's ability to marshal the resources needed to support new strategic initiatives has a major irmpact on the strategy execution process. Too little funding and an insufficiency of other types of resources slow progress and impede the efforts of organizational units to execute their pieces of the strategic plan competently. Too much funding of particular organizational units and value chain activities wastes organizational resources and reduces financial performance. Both of these scenarios argue for managers to become deeply involved in feviewing budget proposals and directing the proper kinds and amounts of resources to strategyeritical organizational units. A company's strategic prionties must drive how capital allocations are made and the size of each unit's operating budgets. A change in strategy nearly always calls for budget reallocations and resource shifting. Previously important units with a lesser role in the new strategy may need downsizing. Units that now have a bigger strategic role may need more people, new equipment, additional facilities, and above-average increases in their operating budgets. Implementing new strategy initiatives requires managers to take an active and sometimes fotceful role in shifting resources, not only to better support activities now having a higher priority but also to capture opportunities to operate more costeffectively. This requires putting enough resources behind new strategic initiatives to fuel their success and making the tough decisions to kill projects and activities that are no longer justified. Visible actions to reallocate operating funds and move people into new organizational units signal a determined commitment to strategic change. Such actions can catalyze the implementation process and give it credibility. Microsoft has made a practice of regularly shifting bundreds of programmers to new high-priority programming initiatives within a matter of weeks or even days. Fast-moving developments in many markets are prompting companies to abandon traditional annual budgeting and resource allocution cycles in favor of resource allocation processes supportive of more rapid adjustments in strategy. In response to rapid technological change in the communications industry, AT \&T has prioritized investments and acquisitions that have allowed it to offer its enterprise customers faster, more flexible networks and provide innovative new customer sernices, such as its Sponsored Data plan. Merely finetuning the execution of a company's existing strategy seldom requires big bhifts of resources from one area to another. In contrast, new strategic initiatives generally require not only big shift in resources but a larger allocation of resources to the effort as weil. However, there are times when strategy changes or new exscution initiatives need to be made without adding to total company expenses. In such circumstances, managers have to work their way through the existing budget line by line and activity by activity, looking for ways to trim costs and shift resources to activities that are higherpriority in the strategy execution effort. In the event that a compeny needs to make significant cost cuts during the course of launching new strategic initiatives, managers must be especially creative in finding ways to do more with less. Indeed, it is common for stratesy changes and the drive for good stratezy execution to be aimed at achieving considerably higher fevels of onerating efficiency and, at the same time, making sure the most important value chain activities are performed as effectively as possible Describe two of the implementation processes listed in Chapter 11. How does each process you listed aid in strategy implementation. Give an example of a real world company using this process as a way of implementing policies. ( 8 points)