Illustrate how companies have used strategic priorities to drive how capital allocations are made in the pursuit of good strategy execution.

Question

What will be an ideal response?

Answer 1

1. In response to rapid technological change in the communications industry, AT&T has prioritized investments and acquisitions that have allowed it to offer its enterprise customers faster, more flexible networks and provide innovative new customer services, such as its Sponsored Data plan.
2. In 2013, Google decided to kill its 20 percent time policy, which allowed its staff to work on side projects of their choice one day a week. While this side project program gave rise to many innovations, such as Gmail and AdSense (a big contributor to Google's revenues), it also meant that fewer resources were available for projects that were deemed closer to the core of Google's mission.
3. Microsoft has made a practice of regularly shifting hundreds of programmers to new high-priority programming initiatives within a matter of weeks or even days.
4. See Illustration Capsule 11.1.  In 2000, CAMC implemented a Six Sigma program to examine quality problems and standardize care processes. Performance improvement was important to CAMC's management for a variety of strategic reasons, including competitive positioning and cost control.
5. See Illustration Capsule 11.3. Nucor's low-cost leadership strategy entails achieving lower labor costs per ton of steel than competitors' costs. Nucor management uses an incentive system to promote high worker productivity and drive labor costs per ton below those of rivals.
Capital allocations must be closely linked to the needs of good strategy execution. Too little funding and an insufficiency of other types of resources slow progress and impede the efforts of organizational units to execute their pieces of the strategic plan proficiently. Too much funding and an overabundance of other resources waste organizational resources and reduce financial performance. Both outcomes argue for managers to be deeply involved in reviewing budget proposals and directing the proper kinds and amounts of resources to strategy-critical organizational units.