Assignment task
Identify a strategy of a business unit (Domino's), identify the critical activities required to implement it and critically analyze to what extent are the culture, structure, routines, resources and capabilities aligned with the strategy.
The objective of the assignments is to critically identify the design and implementation of strategy. It should identify the successful application as well as the shortcomings.
Strategies and the meaning of success
Business strategies succeed when they lead to business growth, strong competitive position, and strong financial performance. Many different strategies are possible, but all are meant to bring improvements in these areas. In highly competitive industries, the firm's officers and other senior managers take a keen interest in knowing precisely how well their strategies succeed in serving this purpose. This is especially true just after the firm changes, or adjusts strategies.
Domino’s Pizzas changes strategies
In 2009, for instance, managers and owners of Domino's Pizza, Inc. were seriously concerned because the firm had just had 3 years of negative sales growth and shrinking market share. The firm was, in particular, losing market share to two major competitors, Papa John's and Pizza Hut.
Domino's operates in the "Quick Service Restaurant" (QSR) industry. Many people call this industry, unkindly, the "Fast Food" business. The firm competes not only with other Pizza restaurants, but also with restaurants with different menus such as Subway, McDonalds. This segment of the Restaurant industry defines itself not by menus, but instead by the words "Fast" and "Quick." Understandably, therefore, Domino's started with a strategy based on "Quick Service Delivery." The firm excels in fast delivery, a point that separates Domino's from its competitors. Nevertheless, in 2009, the strategy was clearly failing.
In late 2009, therefore, the firm's new CEO chose to "re-center" strategy on pizza quality. Market research showed that customers rated Domino's pizza taste as very poor ("like cardboard"). As a result, by the end of 2009, the firm had substantially improved the pizza recipe and launched a marketing program to bring this news to the market.
The firm began in 2009 detailed tracking of growth, competitive, and financial metrics appearing in the next section. By the end of 2010 the first results were impressive. Metrics in all three categories showed remarkable improvement. Domino's took this as confirmation that the new strategy was succeeding.
Now in 2017, the firm continues to research and improve the pizza recipe, while adjusting its marketing strategy at the same time. The firm is guided by a 7 year tracking history with these metrics.
Analysts measure impact on financial performance with metrics that focus on the firm's core line of business. Domino's prefers to measure strategic impact with EBITDA—Earnings before interest, taxes, depreciation, and amortization. This is because EBITDA and other selective income metrics measure strategic impact more precisely than overall Net income after taxes.
Just being able to conceits bold new strategies is not enough. The general manager must also be able to translate his or her strategic vision into concrete steps that "get things done”
Strategy formulation entails heavy doses of vision, analysis, and entrepreneurial judgment, successful strategy implementation depends on the skills of working through others, organizing, motivating, culture-building, and creating stronger fits be-teen strategy and how the organization operates Ingrained behavior does not change just because a new strategy has been announced. Practitioners emphatically state that it is a whole lot easier to develop a sound strategic plan than it is to make it happen. In case of Domino’s, hey failed in the first time in identifying the reasons for decline in sales and profit margin.
Constituents of Strategy implementation
What makes the job of the strategy manager so complicated when it comes to implementation is the number of tasks involved and the variety of ways to approach each task. Strategy implementation has to be tailored to the organization's overall condition and selling, to the nature of the strategy and the amount of strategic change involved and to the manager's own skills, style, and methods.
Four broad areas stand out:
1. Performing the recurring administrative tasks associated with strategy implementation.
2. Creating "fits" between strategy and the various internal "ways of doing things" in order to align the whole organization behind strategy accomplishment.
3 Figuring out an agenda and a set of action priorities that matches up well with the organization's overall situation and the context of the- sluing in which implementation must take place.
4. What managerial approach and leadership style to adopt in inducing the needed organizational changes.
The strategy implementers’ challenge in performing these tasks is to bring the organization's conduct of internal operations into good alignment with strategy and to unite the total organization- behind strategy accomplishment. The implemented job is one of building such enthusiasm and commitment up and down the ranks that a virtual organization wide crusade emerges to carry out the chosen strategy.
Strategy-supportive matches are needed with organizational skills and capabilities, functional area activities, organization structure, reward systems, and incentives, policies and procedures, information systems and control mechanisms, budgets and programs, and shared values and cultural norms. Domino’s started focusing on improvement in quality of its products rather than delivery. It also focused on improving its incoming figure by continuously doing market research and surveys with regard to the public opinions about the industry it belongs to and the things they prefer.
Administrative Aspects of Strategy Implementation
The Manager's role in the implementation process is to lead and keynote the tone, pace, and style of strategy implementation. There are many ways to proceed. A strategy implementer can opt for an active, visible role or a low-key, behind the scenes role. He or she can elect to make decisions authoritatively or on the basis of consensus, to delegate much or little, to be deeply involved in the details of implementation or to remain aloof from the day-to-day problems. It is up to the strategy implementer to decide whether to proceed swiftly (launching implementation initiatives on many fronts) or lo move deliberately, content with gradual progress over a long period.
To some extent, therefore, each strategy implementation situation is unique enough or require the strategy manager to tailor his or her action agenda to fit the specific organizational environment at hand- This forces the manager to be conscious of all that strategy implementation involves and to diagnose carefully the action priorities and in what sequence things need to be done. The manager's role is thus all-important His or her agenda for action and conclusions about how hard and how fast to push for change are decisive in shaping the character of implementation and moving the process along.
Successful strategy execution depends greatly on good internal organization, resources, healthy work culture and competent personnel. Building a capable organization is thus always a top strategy implementation priority. Some of the organizational issues that stand out as dominant:
· Developing an internal organization structure that is responsive to the needs of the people of the organisation.
· Keeping a tune with the culture of the organisation that is aligning strategy with corporate culture and competencies.
· Developing the skills and distinctive competences in which the strategy grounded and seeing that the organization has the managerial talents, technical expertise, and competitive capabilities it needs.
· Keeping a match among the resources and routine activities that can be easily incorporated with the strategy.
· Selecting people for key positions.
Matching Organization Structure to Strategy
The following five-sequence procedure serves as a useful guide for fitting structure to strategy:
· Pinpoint the key functions and tasks requisite for successful strategy execution
· Reflect on how the strategy-critical functions and organizational units relate to those that are routine and to those that provide staff support-
· Make strategy-critical business units and functions the main organizational building blocks.
· Determine the degrees of authority needed to manage each organizational unit, bearing in mind both the benefits and costs of decentralized decision making.
· Provide for coordination among the various organizational units.
1. Pinpoint the key functions and tasks requisite for successful strategy execution
In any organization, some activities and skills are always more critical to strategic success than others are. The strategy-critical activities vary according to the particulars of a firm's strategy and competitive requirements. To help identify what an organization's strategy-critical activities are, two questions can usefully be posed:
"What functions have to be performed extra well and on time for the strategy to succeed? And
"In what areas bad performance would seriously endanger strategic success?
In case of Domino’s it has become very important to understand and raise the reasons for decline in its sales volume. Contrary to the perception of the industry it belonged, to have fast delivery, the problem was of focus on quality.
2. Understanding the Relationships among Activities
Activities can be related by the flow of material through the production process, the type of customer served, the distribution channels used, the technical skills and know-how needed to perform them, a strong need to centralized authority over them, the sequence in which tasks must be performed, and geographic location, to mention some of the most obvious ways.
3. Grouping Activities into Organization Units
If activities crucial to strategic success are to get the attention and visibility they merit, then they have to be a prominent part of the organizational scheme. Senior managers can seldom give a stronger signal as to what is strategically important than by making key function and critical skills the most prominent organizational building blocks and, further, assigning them a high position in the organizational pecking order.
4.Determining the Degree of Authority and independence to be given to Each Unit
Activities and organizational units with a key role in strategy execution should not made subordinate to routine and non-key activities. Revenue-producing and results-producing activities should not made subordinate to internal support or staff functions. The crucial administrative skill is selecting strong managers to head up each unit and delegating them enough authority to formulate and execute an appropriate strategy for their unit.
5. Providing for Coordination among the Units
Providing for coordination of the activities of organizational units is accomplished mainly through positioning them in the hierarchy of authority. Managers higher up in the pecking order generally have authority over more organizational units and thus the power to coordinate, integrate, and otherwise arrange for the cooperation of the units under their supervision. The chief executive officer, to chief operating officer, and business-level managers are, of course central points of coordination because they have broad authority. Besides positioning organizational units along the vertical scale of managerial authority, coordination of strategic efforts can also achieved through informal meetings, project teams, special task forces, standing committees, formal strategy reviews, and annual strategic planning and budgeting cycles.
Structure Evolves as Strategy Evolves: The Stages Model
Four distinct stages of strategy-related organization structure have singled out:
Stage I organizations, are small, single-business enterprises managed by one person. The owner-entrepreneur has close daily contact with employees and each phase of operations. Most employees report directly to the owner, who mates all the pertinent decisions regarding mission, objectives, strategy, and daily operations.
Stage II organizations differ from Stage I enterprises in one essential aspect: an increased scale and scope of operations force a transition from one-person management to group management.
Stage III consists of organization whose operations, though concentrated in a single field or product line, are scattered over a wide geographical area and large enough to justify having geographically decentralized operating units. The key difference between Stage II and Stage III, however, is that while the functional units of a Stage II organization stand or fall together (in that they are built around one business and one end market), the geographic operating units of a Stage III firm can stand alone (or nearly so) in the sense that the operations in each geographic unit are not dependent on those in other areas. Typical firms in this category are breweries, cement companies, and steel mills having production capacity and sales organizations m several geographically separate market areas.
Stage IV includes large, diversified firms decentralized by line of business. Typically, each separate business unit is headed by a general manager who has profit-and-loss responsibility and whose authority extends across all of the unit's functional areas except, perhaps, accounting and capital investment (both of which are traditionally subject to corporate approval). Both business strategy decisions and operating decisions are concentrated at the line-of-business level rather than at the corporate level
Competitive advantage in Marketing strategy of DOMINOS
Supply chain – Vertical integration across the supply chain has helped the company in aligning its resources and controlling the cost structure so as to be competitive in the market & at the same time emerge as most preferred Pizza provider.
Fast Delivery – Whether you have the mouth-watering Pizza at their outlets or get it delivered at your place, one can always count on Dominos for its quick delivery services which have helped the company in improving its value delivery process. It even brought in packaging to prove that its pizza is delivered Hot.
Low-cost outlets – It is one of the major cost components making their business viable as compared to the rival Yum brand’s outlets. There is no outlet of Domino’s which is premium designed with plush interiors. Instead, the outlets promote faster consumption so that people can order, eat and move on. Pizza is promoted exactly for what it stands for – Fast food.
The Strategy-Related Pros and Cons of Alternative Organization Forms
There are essentially five strategy-related approaches to organization:
(1) Functional specialization,
(2) Geographic organization,
(3) Decentralized business divisions,
(4) Strategic business units, and
For instance, Sales at Domino's have soared since the company came out with a new pizza recipe in 2009. Having a better core product was necessary for business to turn around. Domino's has also innovated its sandwiches, pastas, and side dishes. The "specialty chicken," strips topped with cheese and sauces increasingly ordered alongside pizzas, driving up the average ticket sale at Domino's,
Domino's has opened 1,800 new stores in 10 countries in the past four years, Doyle told investors. Domino's is thriving in emerging markets like Brazil and China because it is a relatively inexpensive luxury.
Selecting People for Key Positions
Assembling a capable management team is an obvious part of the strategy implementation task. The recurring administrative issues here center on what kind of core management team is needed to carry out the strategy and finding the people to fill each slot. Sometimes the existing management team is suitable and sometimes the core executive group needs to strengthened and/or expanded, either by promoting qualified people from within or by bringing in skilled managerial talent from the outside to help infuse fresh ideas and fresh approaches into the organization's management. In turnaround situations, in rapid-growth situations, and in those cases, where the right kinds of managerial experience and skills are not present in-house, recruiting outsiders to fill key management slots is a standard part of the organization-building process.
Aligning culture and strategy: Impact of Organizational Culture on Strategy Implementation
Organizational culture includes the shared beliefs, norms and values within an organization. It sets the foundation for strategy. For a strategy within an organization to develop and be implemented successfully, it must fully align with the organizational culture. Thus, initiatives and goals must be established within an organization to support and establish an organizational culture that embraces the organization’s strategy over time.
Dominos have both Veg & Non-Veg Pizza in its menu with options of different toppings to choose from. Though they offer both Veg & Non-Veg Pizza, Dominos Veg menu is more popular and hence it is Star in BCG matrix. With Domino’s almost taking away the market share of Pizza’s from Pizza hut, Non veg pizzas are in fact a cash cow for Domino’s (at least in India) because veg pizza’s have a lot of local competition but there is very less competition for Non veg pizzas.
Organizations that remain flexible are more likely to embrace change and create an environment that remains open to production and communication. This provides a model that welcomes cultural diversity and helps clarify strategy implementation. Culture within an organization can serve many purposes, including unifying members within an organization and help create a set of common norms or rules within an organization that employees follow.
A stable culture, one that will systematically support strategy implementation, is one that fosters a culture of partnership, unity, teamwork and cooperation among employees. This type of corporate culture will enhance commitment among employees and focus on productivity within the organization rather than resistance to rules and regulations or external factors that prohibit success.
Flexible, strong and unified cultures will approach strategy implementation and affect implementation in a positive manner by aligning goals. Goals can come into alignment when the organizational culture works to focus on productivity and getting the organization’s primary mission accomplished. This may include getting products delivered to customers on time, shipping out more products than the organization’s chief competitor or similar goals. This will create a domino effect in the organization that ensures that all work performed by each individual in the company and work group focuses on performance and on the strategic importance of the company. This allows culture to align with strategy implementation at the most basic level. For this level of unification to work, goal setting must align with and be supported by systems, policies, procedures and processes within the organization, thereby helping to achieve strategy implementation and continuing the cultural integrity of the organization.
In year 2009 it has released its video under “Oh yes we did” campaign claiming it as a turnaround strategy where different stakeholders explained how they handled the critics. Company also communicated through it the innovating strategies they are following to cater the customers changing needs.
“30 minutes guaranteed delivery or free” is all-time popular campaign that helped the company increase its awareness across the geographies & demographics. Currently, in 2016, the brands ranking is 301 in the global brand ranking of Forbes. Pizza hut is also close with a ranking of 355.
Part of cultural alignment and strategy implementation involves process implementation. Processes include utilizing technology to facilitate goal attainment and the results a company is looking for when working with customers to meet their needs. While most of the time the hard problems and needs of an organization get met, the culture becomes neglected in the process. That is where processes come into place and strategy implementation gradually comes into existence to uphold and maintain organizational culture and strategies.
When culture aligns with strategy implementation, an organization is able to more efficiently operate in the global marketplace. Culture allows organizational leaders to work both individually and as teams to develop strategic initiatives within the organization. These may include building new partnerships and re-establishing old ones to continue delivering the best possible products and services to a global market.
Customer of Dominos varies geographically across the world. In developed nations like US, UK etc. consumers are of all age groups whereas in developing nations like India majority of customers are younger generations in the age group of 20-40 years.
Furthermore, health consciousness is definitely affecting the consumer psyche as people are looking for healthier options such as Subway or others which are lesser in calories as compared to a complete pizza
Aligning resources and capabilities with strategy
In appraising resources and capabilities to guide strategy formulation there are four key steps. Firstly, the key resources and capabilities have to be identified. Next they have to be appraised both for their strategic importance, and then for their comparative strength in relation to competitors. Finally, strategic implications — how these capabilities can drive value — have to be developed.
1. Identifying Key Resources and Capabilities
The first step is to identify the firm’s key resources and capabilities, and this should be done both from the client end (what the clients need) and the firm’s supply end (what the firm offers). It helps to thoroughly identify, analyze and appraise key resources and capabilities. This work should include an overall look at the practice, some investigation of client needs, industry and sector analysis, financial analysis, market intelligence, partner interviews and practice-group discussions.
2. Assessing the Strategic Importance of The Firm’s Resources and Capabilities
The principle here is to assess how vital (or unimportant) it is for the firm or a department to have certain capabilities in order to successfully pursue their strategic objectives. The true test of strategic importance is to assess the extent to which the resources and capabilities of the firm actually give the firm a sustainable competitive advantage against its rivals.
Resources and capabilities need to be assessed for relative strength compared with those firms identified as competitors. A thorough competitor analysis — considering the likely strategies of competitors, their overall objectives, their resources and capabilities, their positioning in their markets, their specialist strengths, the sorts of clients and sectors they serve, their pricing, service levels and profitability — all helps to establish ways in which the firm can successfully compete. In its review of comparative strength of resources and capabilities, the firm should also look out for stagnating capabilities and declining competitiveness. Where relevant, benchmarking and other analytical methods should be used to move from subjective to objective analysis.
How does the firm exploit its key strengths more effectively and what should the firm do about its vulnerabilities either to correct them or reduce the firm’s exposure to them? The next step, therefore, is to develop some strategic implications so as to exploit strengths more effectively and so as to address weaknesses by correction development, outsourcing or acquisition of further resources.
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