Page 190 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes have to be changed, a strategy- supportive culture may have to be developed, reward and
incentive plans are to be revised and if necessary, restructuring, re-engineering and redesigning
becomes imperative. In short, the difficulties in affecting the organisational adjustments arise
from the tasks associated with change. The success of strategy implementation, to a large extent,
therefore, depends on the way the task of change management is carried out.
Though both the formulation and implementation are inextricably linked, they can be
distinguished as follows (Fred R. David):

Strategy formulation Strategy implementation
1. Positioning forces before the action. Managing forces during the action.
2. Focuses on effectiveness. Focuses on efficiency.
3. Primarily an intellectual process. Primarily an operational process.
4. Requires good intuitive and analytical skills. Requires motivation and leadership skills.
5. Requires coordination among few Requires coordination among many
individuals individuals.

Implementation moves responsibility from the corporate level to operational levels. This shift
in responsibility from strategists to divisional, functional and operational managers may cause
implementation problems especially when strategic decisions come as a surprise to middle and
lower-level managers. Therefore, strategic decisions must be communicated and understood
throughout the organisation. It is also essential that divisional and functional managers be
involved as much as possible in strategy formulation activities and, likewise strategists be
involved in strategy implementation activities.

Case Study Cost Reduction Strategy at Bajaj

ajaj Auto is India’s biggest scooter and motorcycle manufacturer, yet it faces intense
competition from some of the world’s leading scooter and motorcycle
Bmanufacturers. This case explores how it was using supplier strategies to reduce its
costs and remain competitive.
In 1998, Bajaj Auto – India’s biggest scooter and motorcycle manufacturer – was struggling
to shake off a strong challenge from Honda, Suzuki and Piaggio in its home market. The
family-owned company, which lacks the technological resources of its competitors, had to
compensate by watching its expenses. Its aim is to remain the lowest cost producer in the
world.
But no matter how hard Bajaj tries to control costs and improve productivity at its plants
near Pune, in West India, the incremental savings were meager. This is because most of the
costs are incurred before the components enter Bajaj’s factory gates. In-house costs make
up only about 10 to 12% of the sales price. Advertising and distribution costs account for
a further 3 to 4%. By contrast, ‘about 65% of the sales price comes from costs outside Bajaj’s
direct control. This can rise to 75% for new models. Bajaj has recently realised that further
big cost savings are more likely to come from its suppliers than from the manufacturing
process.
Contd...

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