Module 4 – Case

STRATEGY IMPLEMENTATION AND STRATEGIC CONTROLS

Assignment Overview

This final case involves an analysis of strategy implementation at Pepsico. You will use the resources you identified in the SLP to gather information about the company and relate that information to your work in the previous cases.

Required Reading

Refer to the required and optional readings related to strategy implementation and strategic controls, the themes for this module.

Case Assignment

In Module 4, we will conclude the case study process by researching Pepsico’s strategic controls and their fit with the company’s chosen strategy.

Keys to the Assignment

• Step One: Review your Case papers from Modules 1-3 so that you are familiar with the mission, vision, SWOT, strategy, and strategic choices you have identified over the course of the class.
• Step Two: Research the structure, systems, people, and culture at Pepsico. You will not be able to get answers to every single question, but you will need to answer at least one or two for each component.
• Step Three: Describe Pepsico’s organizational design, key strategic control systems (e.g., budgeting and variance analysis systems), primary human resources concerns, and cultural factors, and the effect that these have had on the implementation of Pepsico’s strategy.
• Step Four: In a 6- to 8-page paper, critically evaluate the fit—or the lack of fit—between the company’s mission, strategy, and organizational components crucial to implementation. Do these components complement the strategy? Why or why not?
• Step Five: Choose three of the 13 ethical “prescriptions” included in the following article: https://www.scu.edu/ethics/focus-areas/business-ethics/resources/incorporating-ethics-into-the-organization/ . Next, discuss the extent which the company’s sense of business ethics has been embedded within its strategic management process, as evidenced by your chosen three indicators.
• Step Six: What changes would you—as the CEO—make to better assure the success of the company’s strategy? This is the most important section of the Module 4 Case.
• Step Seven: Consider the Case as a formal business report that you are developing for the Board of Directors and CEO as Pepsico’s consultant. This is a professional document. Follow the format below:
  • Executive summary: This is a synopsis of the main points, conclusions, and recommendations made in the longer report. If you would like a refresher on writing an executive summary, check this website: http://www.csun.edu/~vcecn006/summary.html
  • Introduction: State the main purpose of the paper (thesis statement), what you hope to accomplish, and how you will go about doing it.
  • Main Body: The “meat” of the paper. Emphasize analysis, not just description. Delineate separate topics or sections with headings.
  • Conclusion: Summarize your paper in the light of your thesis statement.

Assignment Expectations

Your paper will be evaluated using the grading rubric.

Tips and Suggestions

Note the following tips and suggestions:

• Business school case-study assignments are meant to offer practice opportunities for future business people who are earning their MBA degrees. Consider yourself a consultant hired by the company to make these critical assessments. There are no right or wrong answers to the Case question, as long as your position is well defended.
• Study the theoretical concepts provided in the Background materials section of the module, and identify main strategy concepts.
• Include a cover page and reference page, in addition to the 6-8 pages of analysis described above. You must meet minimum length requirements.
• Include section headings as appropriate.
• Cite and reference all sources, including those you paraphrase. This means include citations and quotation marks for direct quotes of more than five words, and citations for information you have “borrowed” or paraphrased from other sources.
• Follow Trident Guidelines for Well-Written Papers.
• Submit your analysis by the end of this module.

Module 4 – Background

STRATEGY IMPLEMENTATION AND STRATEGIC CONTROLS

Strategy is implemented using organizational design (structure), people, culture, and control systems. Strategy must successfully work through these elements in order to produce performance. No matter how well a strategy is conceived, if an organization’s people cannot implement it, if the culture cannot support it, if the structure cannot coordinate it, and if the systems cannot measure and control it—the strategy will fail.

We will start by considering how of each of these components individually link to strategy. By way of the Case analysis, we will examine the integration or “fit” between the various components and strategy.

Structure

Organizational structure refers to the manner in which the lines of communication of authority are established, the manner in which work is divided up among organizational members, and the way that communication and work are coordinated. Different types of structures support different types of strategies. The key elements of structure that have the greatest effect on the success or failure of strategy implementation are centralization, boundaries, networks, and virtual organization.

Centralization

• Centralization refers to the level of concentration of decision making. In a highly centralized organization, decisions are made by a relatively small number of people, usually concentrated at the highest levels of the organization. Standardization is common in centralized organizations, thus favoring economies of scale and efficient value chains.
• Decentralized organizations are characterized by flexible and autonomous decision-making groups at operational levels in the organization. Such groups have the ability to rapidly adjust to changes in the marketplace and are well-suited to strategies that require innovation. However, because of duplication, economies of scale are difficult to achieve.

Emerging Structures

• Borderless Organizations: Taking cross-functional teams to a new level, the borderless organization does not just assemble teams with members from different organizational levels and functions. Instead, the borderless organization removes barriers both vertically (between levels) and horizontally (between functions or departments). The implications for strategy implementation include increased information, transparency, and flexibility.
• Alliance Networks: These are collections of suppliers, distributors, customers, and even competitors who have the ability to bring needed assets to bear on an urgent problem where there is insufficient time to develop the needed resources and capacities in-house. Organized and coordinated online, these networks can be mobilized and put to work instantaneously.
• Virtual Corporations: An extension of Alliance Networks, the virtual corporation is an extra-organizational coalition of people and organizations brought together expressly to work on a specific problem or project. They can be assembled rapidly and dispersed as soon as the project is over, representing the ultimate in flexibility and speed in strategy implementation.

The following reading is an exposition on how various types of teams can be useful in strategy implementation:

Pryor, M.G., Singleton, L.P., Taneja, S., and Toobs, L.A. (2009). Teaming as a strategic and tactical tool: An analysis with recommendations. International Journal of Management, 26 (2), 320-334. Retrieved on November 6, 2012, from ProQuest.

Review this presentation on Organizational Design by Professor Anastasia M. Luca, Ph.D. MBA.

Strategic Controls (Systems)

Three organizational systems are essential to controlling strategy implementation:

Accounting and budgeting systems: These systems can be complex and not easily adapted. If a new strategy requires data that is not easily accessible through existing accounting systems, implementation can be slowed, and a potentially successful implementation can be jeopardized. If a new proposed strategy does not fit a familiar pattern, decision making can be become risky and unpredictable.

Information Systems: Information technology is playing an ever greater role in strategy implementation. IT provides point-of-sale information between retailers and manufacturers, streamlines logistics and distribution, and controls inventories. IT systems must be capable of providing the right information in the right format to the right people at the right time.

Measurement and Reward Systems: Rewards can be used to shape behavior in the direction of meeting strategic objectives. Rewards must be connected to measures of goal attainment (e.g., specific increases in market share), and proper time horizons (future rewards for future goals).

Review this presentation on Strategic Controls by Professor Anastasia M. Luca, PhD MBA.

People

Strategies that are based on distinctive competencies or unique capabilities are often dependent on people and their skills to carry them out. Thus, for successful implementation, sufficient numbers of people with the right skill sets are essential.

In-house or Import? Hiring raw talent and growing employees with the needed qualifications maximizes fit, but it can take years. Retraining existing workers with new skills can be problematic when old employees resist “learning new tricks.” Hiring employees with needed skills external to the organization is faster, but there is no guarantee that even they will fit well within the organization’s culture.

Motivation: It is not enough to have the right number of people with the right skills; people must also be motivated to work toward successful strategy implementation. Much is known about motivation, and many tools are available; these include tangible rewards (e.g., bonuses) and intangible rewards such as self-fulfillment. Perhaps the motivator with the most potential for eliciting long-term commitment to fulfilling the firm’s strategic goals is that of empowerment, which gives employees the discretion and autonomy to use their initiative.

The following article highlights the importance of having the right people in place to achieve strategic goals:

Garrow, V. and Hirsh, W. (2008). Talent management: Issues of focus and fit. Public Personnel Management, 37(4), 389-403. Retrieved on August 29, 2014 from ProQuest.

Culture

The fit between an organization’s culture and its strategy is critical. If a firm is depending on innovation to achieve differentiation, but the culture is risk averse or has a tendency to punish mistakes, the strategy will in all likelihood fail. Culture can support the strategy when three elements are in alignment:

• Shared values that are aligned with the corporate vision and strategic focus along with a management style that fosters behavior that will support the competencies that confer competitive advantage.
• Norms can act as strong controls for strategic implementation. They encourage behavior that is in alignment with shared values. People can circumvent rules, and they cannot be watched all of the time, but norms can promote the desired behavior even when nobody is watching.
• Symbols model for employees what values and norms are important. Some important symbols include the vision and style of the founder of the company and folklore or stories that embody company values, rituals, and routines, and which reinforce the types of events and behaviors that are most desired and celebrated.

The following reading ties together the importance of systems, strategy, structure, and culture. It is highly readable and will help you see how all of these elements are interdependent and must align to achieve successful implementation:

Heneman, R. L., Fisher, M. M., and Dixon, K. E. (2001). Reward and organizational systems alignment: An expert system. Compensation & Benefits Review, 33(6), 18-29. Retrieved on November 6, 2012, from ProQuest.

Optional Reading

Aligning organizational culture with business strategy. (2013, November). Towers Watson. Retrieved on August 29, 2014 from http://www.towerswatson.com/en-US/Insights/Newsletters/Global/strategy-at-work/2013/viewpoints-qa-aligning-organizational-culture-with-business-strategy

Durden, C. (2012). The linkages between management control systems and strategy: An organic approach. Proceedings from The International Conference on Accounting and Finance. Singapore: Global Science and Technology Forum. Retrieved on August 29, 2014 from ProQuest.

Klosowski, S. (2012). The application of organizational restructuring in enterprise strategic management process. Management, 16(2), 54-62. Retrieved on August 29, 2014 from ProQuest.

Module 4 – SLP

STRATEGY IMPLEMENTATION AND STRATEGIC CONTROLS

Simulation

In Module 4, you will continue with the CVP analysis you completed in the Module 3 SLP.

Scenario Continuation:

It is still January 2, 2013. You have just completed your revised SLP3 strategy using CVP analysis, and you are eager to implement your decisions for 2013 through 2016.

Using the CVP analysis from SLP3, run the simulation for a final time. Again, be sure to take notes about your analysis and document the reasoning behind your decisions.

Finalize your report showing the strategy you have used.

Assignment Overview

Using the strategy that you developed in SLP3, run the simulation. Document your results as you did previously. Review and analyze these results, and develop a final strategy.

Please turn in a 6- to 8-page paper, not including cover and reference pages.

Keys to the Assignment

The key aspects of this assignment that should be covered and taken into account in preparing your paper include:

• The revised strategy consists of the Prices, R&D Allocation %, and any product discontinuations for the W1, W2, and W3 tablets for each of the four years: 2013, 2014, 2015, and 2016.
• You must present a rational justification for this strategy. In other words, you must provide support for your proposed strategy using financial analysis and relevant theories.
• Use the CVP Calculator and review the PowerPoint that explains CVP and provides some examples.
• You will need to crunch some numbers (CVP Analysis) to help you determine your prices and R&D allocations.
• Make sure your proposed changes in strategy are firmly based in this analysis of financial and market data and sound business principles. Your goal is to practice using CVP and get better at it.
• Present your analysis professionally, making strategic use of tables, charts, and graphs.

Time Line Summary:

SLP1

• 2016: Hired on December 31, 2016.
• Turned in first report to CEO Smothers.

SLP2

• You are returned – via Time Warp – to January 1, 2013.
• You make decisions for 2013 – 2016.
• December 31, 2016 – You have revised all four years, and you write up your summary report.

SLP3

• Apparently, your SLP2 decisions were not “good enough,” as you have again been returned to January 1, 2013.
• It is once again January 1, 2013: You decide to use CVP analysis to develop a revised four-year plan for your strategy. You analyze the results of your first decisions from SLP2, taking notes, and documenting your decision-making process. You use the CVP Calculator to help you develop your strategy. Your notes explaining the logic behind your decisions.

SLP4

• It is still January 1, 2013. Using your CVP analysis from SLP3, you run the simulation, implementing your revised four-year plan. You keep track of your financial and marketing results year over year.
• You submit your final 6- to 8-page report, which includes your Final Total Score.
• You compare – and report – your results with previous results.

SLP Assignment Expectations

Your paper will be evaluated using the grading rubric.

Tips and Suggestions

Note the following tips and suggestions:

You might find these downloads useful:

Decision Matrix Table – Download this Word doc with a blank table you can use to show your proposed strategy decisions.

PowerPoint discussing CVP – Provides a good overview of Cost Volume Profit analysis, the various equations that you can use, and how to use it. Some examples are provided showing how to use the CVP Calculator.

CVP Calculator – This an Excel-based calculator that you can use to determine prices, volumes, and profits. Keep in mind that it will tell you what need, but the market determines what you actually get.

• Include a cover page and a reference page, in addition to the 6-8 pages of analysis described above.
• Include appropriate section headings.
• Use charts and graphics strategically, but do not use these as “space fillers.” Include lengthy tables, etc., in an Appendix instead.
• Cite and reference all sources that you use in your work, including those that you paraphrase. This means include citations and quotation marks for direct quotes, and citations for that information which you have “borrowed” or paraphrased from other sources.
• Follow Trident Guidelines for Well-Written Papers.

 

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