Managerial carrots and sticks: Encouraging strategy implementation

Case Description: This case addresses many strategic management issues. Selected issues related to the formulation and implementation of both low cost and differentiation strategies are illustrated. The importance of lower level managers embracing their company's strategy and showing initiative to implement that strategy is also highlighted. The case illustrates the importance of having these managers understand and recognize the need to use informational resources available within an organization to objectively assess their area of responsibility in the context of strategy implementation and gives examples of how they can act constructively based on that information. Other topics include a discussion of challenges in transitioning from the role of college student to employee and from employee to manager. The case also provides students with a perspective as to how they might be evaluated by their superiors once they are employed as managers. The case has a difficulty level appropriate for senior level and graduate level students in strategic management courses. The case is designed to be taught in 1-2 class hours and is expected to require 3 hours of outside preparation by students. Case Synopsis: The case chronicles the strategic evolution of a fictitious privately held small local company that grew to become a midsize regional sporting goods retailer. The company was founded by three brothers who used their enthusiasm for sports and the knowledge gained from their participation in those sports to formulate and implement a successful differentiation strategy. This strategy resulted in steady growth of the company in multiple locations. A private equity firm bought the company and after a failed attempt at pursuing a strategy primarily designed to lower costs and increase profitability prior to an initial public offering, the firm replaced their CEO hired to pursue that strategy with a new CEO who is orchestrating a return to a differentiation strategy. The company has now regained profitability by returning to that strategy. As part of the company's new evaluation and control procedures associated with the differentiation strategy, the CEO and the Vice President of Managerial Development meet individually with each store manager each year to review the performance of their store for the prior year. The case describes two of those meetings. In one meeting, a store manager receives praise for achieving a high level of performance by successfully formulating and implementing a differentiation strategy tailored to the local market. In the other meeting, a different store manager receives criticism for the substandard store performance at his store due in large measure to his failure to embrace the company's return to a differentiation strategy. This manager continued to implement the unsuccessful companywide cost-based strategy instituted by the prior CEO. The new CEO must decide how to reward the personnel at the high performing store and what changes need to be made at the lower performing store.