3.1 Introduction to strategy implementation

Strategy Implementation is a process by which strategies and policies are put into action through the development of programs, budgets, and procedures. This process might involve changes within the overall culture, structure, and/or management system of the entire organization. Except when such drastic corporate wide changes are needed, however, the implementation of strategy is typically conducted by middle and lower-level managers, with review by top management. Sometimes referred to as operational planning, strategy implementation often involves day-to-day decisions in resource allocation.



Programs
A program is a statement of the activities or steps needed to accomplish a single-use plan. It makes a strategy action oriented. It may involve restructuring the corporation, changing the company’s internal culture, or beginning a new research effort. For example, Boeing’s strategy to regain industry leadership with its proposed 787 airplane meant that the company had to increase its manufacturing efficiency in order to keep the price low. To significantly cut costs, management decided to implement a series of programs:

3.1 Introduction to strategy implementation

	Outsource approximately 70% of manufacturing.
	Reduce final assembly time to 3 days (compared to 20 for its 737 plane) by having suppliers build completed plane sections.
	Use new, lightweight composite materials in place of aluminum to reduce inspection time.
	Resolve poor relations with labor unions caused by downsizing and outsourcing.

Another example is discount retailer Dollar General’s programs to double the amount of space in the company’s distribution centers in order to reduce the number of truck deliveries and to redesign its stores to provide wider aisles and a brighter, clearer appearance.

Budgets
A budget is a statement of a corporation’s programs in terms of dollars. Used in planning and control, a budget lists the detailed cost of each program. Many corporations demand a certain percentage return on investment, often called “hurdle rate”, before management will approve a new program. This ensures that the new program will significantly add to the corporation’s profit performance and thus build shareholder value. The budget thus not only serves as a detailed plan of the new strategy in action, it also specifies through pro forma financial statements the expected impact on the firm’s financial future.

3.1 Introduction to strategy implementation

For example, General Motors budgeted $4.3 billion during 2000 through 2004 to update and expand its Cadillac line of automobiles. With this money, the company was able to increase the number of models from five to nine and to offer more powerful engines, sportier handling and edgier styling. The company reversed its declining market share by appealing to a younger market. (The average Cadillac buyer was 67 years old in 2000.) Another example is the $8 billion budget that General Electric established to invest in new jet engine technology for regional-jet airplanes. Management decided that an anticipated growth in regional jets should be the company’s target market.

The program paid off in 2003 when GE won a $3 billion contract to provide jet engines for china’s new fleet of 500 regional jets in time for the 2008 Beijing Olympics.

Procedures
Procedures, sometimes termed Standard Operating Procedures (SOP), are a system of sequential steps or techniques that describe how a particular task or job is to be done. They typically detail the various activities that must be carried out in order to complete the corporation’s program. For example, when the home improvement retailer Home Depot noted that sales were lagging because its stores were full of clogged aisles, long checkout times, and too few sales people, management changed its procedures for restocking shelves and pricing the products.

3.1 Introduction to strategy implementation

Instead of requiring its employees to do these activities at the same time they were working with customers, management moved these activities to when the stores were closed at night. Employees were then able to focus on increasing customer sales during the day. In order to repair poor labor relations, Boeing’s CEO agreed to allow machinists’