STRATEGIC MAGEMENT 4. Strategy implementation Features of the Hungarian firms

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STRATEGIC MAGEMENT 4. Strategy
implementationFeatures of the Hungarian firms
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Types of implementation strategies

• At the time of implementation the types of
  corporate strategies in the US were analysed in
  the framework of more than 150 interviews with
  managers of great firms ( Farkas de Backer). 5
  main types were distinguished (in the practice
  however often their mix can be adopted).
• 1. In spite of the general recognition of the
  importance of a strategy only 20 of the US
  managers think, that their main task is the
  development of this strategy. These firms are so
  called strategy-based ones. Their managers
  concentrated on the future on the coordination
  of the development of the strategy and the
  control of its fulfilment.

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• 2. The main goal of some so called HR based
  -strategies is the development of managerial
  talent and competent employees, to achieve both
  the firms objectives and the employees
  satisfaction.
• Here the manager (boss) first of all aims at the
  creation of a team. He knows as many employees as
  possible personally. He always enter into
  conversation with them on firms values,
  decision-making and performances. He takes part
  in the carrier-planning and the development of
  the staffs human relations.

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• 3. Other strategy-type is the expert based one.
  Here the CEO and the other managers are
  specialised in some areas (products, technologies
  etc.), in which the firm has market advantages,
  and they work hard to distribute their knowledge
  among the firms units, which is the base of
  competitiveness.
• 4. In some firms the manager has a box-oriented
  strategy. Here exact regulatory systems, strict
  rules, fixed processes determine the employees
  actions, and the control is an important task of
  managers. In the US this is often the strategy in
  banks .

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• 5. Exchange management is the fifth strategy
  type. It can be adopted at firms, where managers
  think, that a fundamental exchange (e.g. a rapid
  adaptation) or continuous exchanges are needed
  for success. So, he destroys the traditional
  systems and familiarize employees with the lack
  of the continuity.
• Firms apply all of these strategies parallel (but
  the proportions of their application is
  different). The main task of all managers is to
  introduce first of all the type of the strategy,
  which suits the situation and opportunities of
  his firm.

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HR management

• Key factors of strategies implementation are
  always human resources (behaviour of managers,
  employees). Utilisation of its give a lot of
  tasks for the management.
• 1. After the plan has been accepted, it has to be
  presented (in a communication process) to the
  employees (being responsible for the
  realisation). They have to know the details which
  imply their tasks. But often the wide publication
  of some strategic goals is an effective method of
  publicity as well.

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• 2. Human resources strategies begin with
  recruitment and the selection of employees. There
  are many tools for these works (e.g. poster,
  advertisement, interviews, jury, tests, exams ).
• Parkinsons remark effectivity of that
  methods is always uncertain.
• 3. Traditional tools of HR management are
  motivation and respect (fixing of salaries and
  bonuses, laudation or abuse, titles, rewards or
  penalties, promotion).
• 4. Participation (e.g. when the firm gives
  employees possibilities to influence how they do
  their jobs) can be also a good manner to increase
  productivity.

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• A market leading firm has to be a learning
  organisation, where the staff collects new ideas
  systematically from their customers and suppliers
  etc., RD is part of the business process and
  employees always change their knowledge.
• 5. Effective tools of the development of the
  intellectual power of employees are the
  post-graduate schools and trainings. The mobility
  (scholarships, exchange of posts in the firm, or
  between firms) helps the development of young
  people. In the developed economies employees have
  to adapt to the requirements of the long-life
  learning as well.

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Implementation decisions

• Development of a traditional production (service)
  strategy can be supported by the decision-making
  in many questions. E.g.
• the rational extent of the production can be
  decided by break-even analysis (see the next
  slides),
• the effective proportions of production factors
  (e.g. labour and capital) can be analysed by
  iso-curves (see above),
• good production scheduling can be determined by
  flow-charts etc. (see the third coming slides).

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Profitable extent of the production

• Break-even analysis compares the revenues and
  total costs (sum of fixed and variable costs) and
  helps the managers determine the minimal volume
  from which the production can be profitable (the
  point at which the these functions are equal).
• Variable costs are those that vary as a function
  of operations. Fixed costs are those that do not
  vary if the level of production changes. Total
  costs are the sum of the two mentioned.
• Often planners presume that the functions of
  revenues and costs are linear, but sometimes a
  non-linear analysis is needed as well (figure).

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Source own figure based on many publications
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• Exercise. Determination the rational proportion
  of the production factors by break-even analysis.
• In Paris-lines KLMs old airplanes can transport
  200 passengers, one flight costs 78.200 USD
  (overhead) and 420 USD pro passenger. New
  airplanes can transport 300 passengers, the
  flight costs 85.400 USD and 360 USD pro
  passenger.
• In case of how many passengers would it be
  rational to replace old plains by the modern
  type? (See the next figure as well)
• 420 x 78.200 360 x 85.400 x 120

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Red line the rational decision about the
utilisation of airplaines type
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Proportions of the resources of the production

• According to the classical theories the main
  production factors (resources) are labour and
  capital. Theoretically we can determine their
  optimal proportion in production by iso-curve
  analysis. The optimal proportion is, where the
  iso-cost line is tangential to the iso-quant
  curve (figure).
• Iso-cost line volumes of production factors,
  aggregated value of which are the same.
• Iso-quant volumes of production factors,
  utilisation of which the volume of the
  production will be the same.
• Often in the practice this analyse can be
  realised by the help of break-even analysis as
  well (exercise).

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Iso-curve analysis
Source own figure based on many publications
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Scheduling

• Many production processes are very complex. To
  organise and control them it is essential for
  managers to have a good scheduling technique.
• A traditional and simple method for
  scheduling is the graphic Gantt diagram
  (flow-chart), a bar chart where each bar
  represent a project task and the row of bars
  depict the overlap of scheduled actions as well
  (see the next slide).
• Another technique is PERT (Project Evaluation and
  Review Technique) or CPM (Critical Path Method).

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Milestone planned event, which proves the
execution of a task Source own figure based on
many publications
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• PERT identifies the activities necessary in a
  project, developing a network that specifies the
  interrelationships among those activities,
  determining how much time each activity will take
  (and how much they will cost).
• A specific advantage of PERT is the determination
  of the critical path (the longest path through
  the project) and the opportunity to reduce it.
• There are good computer programs to optimize PERT
  (e.g. to minimise the time of the
  implementation).

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A, B, C projects activities 1, 3, 4
times, which are necessary to their realisation
Source own figure based on many publications
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• New techniques of production strategy (e.g.
  outsourcing and strategic alliances) concentrate
  on adaptability.
• Outsourcing is the action, when a large firm
  transfers one part of its production to
  subcontractors where it is cheaper. E.g.
  maquiladoras, which are assembly plants built in
  Northern Mexico close to the US border.
• Strategic alliance is a cooperation agreement of
  large firms to work together, e.g. to develop new
  products or technologies, to get raw materials,
  to enter a new market etc.

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Control of the implementation

• In the framework of monitoring, the manager
  observes external and internal processes which
  influence the realisation of a strategy.
• Controlling is the process of monitoring and
  adjusting firms activities towards goal
  attainment. It is a traditional management
  function. During the last decades its methods
  developed rapidly creating and adapting some
  systems of strategic indices like Balanced
  Scorecard or SAP.

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Features of the Hungarian firms

• There are two enterprise statistics in Hungary.
• Registered firms are units which figure in the
  register of treaty.
• Active firms are units which supplied tax reports
  or statistical information.
• The number of (registered) Hungarian firms is 1,6
  millions (table), so on average there are 16
  firms owned by 100 Hungarians. This latter number
  is more than two times higher than in the EU. But
  the number of great firms is, limited (table).

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Analysis of enterprise situation

• There are some effective techniques of an
  analysis on the situation, problems, goals and
  behaviour of enterprises. I.e.
• Interviews of managers, employees, which can map
  the views of the questioned persons.
• Survey. The main factors determining the
  credibility of a survey result are the random
  selection, and a high number of questioned
  persons. (In case of a simple yes/no question
  this number is high, if it is greather than 30)
• GKI realises always many enterprise surveys.

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• According to the survey results the main
  competitiveness problems of the Hungarian firms
  are in their marketing. The methods used are
  simple. Usually products are developed by the
  firm, RD cooperation is exceptional.
  Price-policy is growth oriented, sales promotions
  are frequent, the practice of product
  differentiation is quite unknown. In most of the
  cases channels of purchasing are traditional.
  Publicity is concentrated on throwaways and
  fly-bills, high quality catalogues are very rare.
  Only a small proportion of firms protect their
  image (tables).

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Distribution of firms according to the level of
competitiveness of their products, services
Source Enterprise survey of GKI.
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Distribution of firms according to the level of
competitiveness of their prices
Source Enterprise survey of GKI.
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Distribution of firms according to the level of
competitiveness of their purchasing network
Source Enterprise survey of GKI.
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Distribution of firms according to the level of
competitiveness of their marketing
Source Enterprise survey of GKI.
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Proportions of firms () declaring that the given
factor is an important obstacle of their growth
Source Enterprise survey of GKI.
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• Thank you for your attention!