Academic journal article Economics & Sociology

Instruments of Implementing the Enterprises' Strategy

Academic journal article Economics & Sociology

Instruments of Implementing the Enterprises' Strategy

Article excerpt

ABSTRACT. The main obstacles to the effective implementation of the strategy are studied. The basic tools of business strategy are analyzed. Particular attention is given to budgeting and balanced system of indexes. The advantages and disadvantages of these tools of implementing the strategy are identified. Their ability to avoid major barriers to the implementation of the strategy is determined. The main stages of complex integrated system of design and implementation of the strategy based on balanced systems of indexes are defined. It was determined at which stage of this system the main obstacles to effective implementation of the strategies are neutralized.

Keywords: strategy, implementation of the strategy, plan, budgeting, management according to the objectives, balanced scorecard.

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Introduction

In a dynamic and uncertain environment the importance of developing a strategy is proven. The development of strategy was the subject of many works of theorists and practitioners of management. Numerous works were formed in several schools of strategic thought. H. Mintzberg distinguishes 10 schools (Mintzberg, 2000). Representatives of these schools describe different approaches to strategy development: as a process of thinking; as a process of formal planning; as a process of selecting the position of the company; as a process of predicting the future; as the development process; as a process of negotiation, etc.

If the drafting and formulation of strategies is a subject of many scientific papers, the question of the strategy has been given the necessary attention only for the last 20 years. Quite often, despite the fact that the development of a strategy has taken a lot of time and effort, the results are not always satisfactory. And usually, the strategy is a plan, which is known by only the company's management, is not followed by anyone, and the execution of which is not controlled. Studies show that due to certain shortcomings in the planning or implementation, usually only 63% of strategies are effectively implemented (Menkins, Steele, 2005). Another study showed that 70% of CEOs' failures were not the result of poor strategy, but its inefficient implementation (Niven, 2004). If the choice of strategy is more determined by environmental conditions, the implementation of the strategy depends on the business environment, quality of management, efficiency of business processes, corporate culture, motivation system, etc. Therefore, the question of how to effectively implement a strategy to achieve planned goals is quite relevant.

The purpose of this study is the isolation of the main problems arising in the implementation of strategies and characteristics of the main tools of business strategy.

Problems of realization of enterprises' strategy

A typical feature of the leaders of Ukrainian enterprises is that they were used to solve issues and problems at the time they arise, as business rules had the ability to change daily. Thus, they do not have enough experience with strategic plans and tools (Starinskiy, 2005).

I. Ansoff analyzed and identified the main causes of failure in strategic planning (Ansoff, 1989). First of all, strategic planning is not an integrated system, so there is no mechanism for implementing and monitoring strategies. Secondly, there is a constant conflict of interests between the strategic and daily operations, setting priorities. Thirdly, computer information system for management fails to provide the necessary strategic information to managers. Fourthly, managers have no skills of strategic planning, which reduces the effectiveness of planning. Finally, there will always be resistance to change due to the threat of organizational structure and way of thinking.

Michael Menkins and Richard Steele identified the following reasons for ineffective implementation of strategy (Menkins, Steele, 2005):

- Companies do not compare current performance with long-term plans (according to researches, less than 15% of companies regularly compare the results of each unit with the prediction and the plans of the last year);

- Results rarely meet projections for several years (despite the fact that the results at the beginning of each subsequent year are slightly higher than at the beginning of the previous, they are not the same as the target);

- Complexity of perception of the strategy (if the strategy is not clearly defined, the correct allocation of resources is impossible. …

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