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Reporter: Marie Anne P. Gali Subject: Strategic Management Professor: Dr.

Pedro Sison

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STRATEGIC CONTROL There are three primary types of organizational control: strategic control, management control, and operational control. *Strategic control, the process of evaluating strategy, is practiced both after the strategy is formulated and after it is implemented. * Management control focuses on the accomplishment of the objectives of the various substrategies comprising the master strategy and the accomplishment of the objectives of the intermediate plans (for example, "are quality control objectives being met?"). * Operational control is concerned individual and group performance as compared with the individual and group role prescriptions required by organizational plans ( for example, "are individual sales quotes being met?"). Each of these types of control is not a separate and distinct entity and, in fact, may be indistinguishable from others. Moreover, similar measurement techniques may be used for each type of control. Strategic control is concerned with tracking the strategy as it is being implemented, detecting any problems areas or potential problem areas, and making any necessary adjustments. Newman and Logan use the term "steering control" to highlight some important characteristics of strategic control Ordinarily, a significant time span occurs between initial implementation of a strategy and achievement of its intended results. During that time, numerous projects are undertaken, investments are made, and actions are undertaken to implement the new strategy. Also the environmental situation and the firm Importance of strategic control Henry Mintzberg,one of the foremost theorists in the area of strategic management, tells us that no matter how well the organization plans its strategy, a different strategy may emerge. Starting with the intended or planned strategies, he related the five types of strategies in the following manner: 1. Intended strategies that get realized; these may be called deliberate strategies. 2. Intended strategies that do get realized; these may be called unrealized strategies. 3. Realized strategies that were never intended; these may be called emergent strategies. Recognizing the number of different ways that intended and realized strategies may differ underscores the importance of evaluation and control systems so that the firm can monitor its performance and take corrective action if the actual performance differs from the intended strategies and planned results.

Reporter: Marie Anne P. Gali Subject: Strategic Management Professor: Dr. Pedro Sison

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The differences between strategic and operational control are highlighted by reference to a general definition of management control: "Management control is the set of measurement, analysis, and action decisions required for the timely management of the continuing operation of a process". This section discusses in the terms presented Measurement

Strategic control requires data from more sources. The typical operational control problem uses data from very few sources. Strategic control requires more data from external sources. Strategic decisions are normally taken with regard to the external environment as opposed to internal operating factors. Strategic control are oriented to the future. This is in contrast to operational control decisions in which control data give rise to immediate decisions that have immediate impacts. Strategic control is more concerned with measuring the accuracy of the decision premise. Operating decisions tend to be concerned with the quantitative value of certain outcomes. Strategic control standards are based on external factors. Measurement standards for operating problems can be established fairly by past performance on similar products or by similar operations currently being performed. Strategic control relies on variable reporting interval. The typical operating measurement is concerned with operations over some period of time: pieces per week, profit per quarter, and the like. Strategic control models are less precise. This is in contrast to operational control models, which are generally very precise in the narrow domain they apply. ANALYSIS

Strategic control models are less formal. The models that govern the considerations in a strategic control problem are much more intuitive, therefore, less formal. The principal variables in a strategic control model are structural. In strategic control, the whole structure of the problem, as represented by the model, is likely to vary, not just the values of the parameters. The key need in analysis for strategic control is model flexibility. This is in contrast to operating control, for which efficient quantitative computation is usually most desirable. The key activity in management control analysis is alternative generation. This is different from the operational control problem, in which in many cases all control alternatives have been specified in advance. The key analysis step in operations is to discover exactly what happened. The key skill required for management control analysis is creativity. In operational control, by contrast, the formal review of outcomes to discover causes means that they skill required is the ability to do technical, even statistical, analysis of the data received.

ACTION

The relationship between action and outcome is weaker in strategic control. This is not surprising, as the most desirable area for control in strategic problems -the environment -is the least subject to direct action. The key action variables in strategic control are organizational. In the operational control problem, technical factors such as labor levels, production levels, choice of materials, and the like are the predominant control levels. Alternative actions in strategic control are less easy to choose in advance. In strategic control problem, it is possible to choose all possible action responses to received data in

Reporter: Marie Anne P. Gali Subject: Strategic Management Professor: Dr. Pedro Sison

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advance. In an operational control problem, the few responses possible can usually all be worked out before any operating data received. The worst failing in strategic control is omitting a worthwhile action. In operating control, the most typical sins are those of omissions (e.g., complaints about too many people employed, too many defects, and too much inventory). In the strategic control problem, sins of omission are much more serious (e.g., not moving into a business opportunity when it presents itself, not undertaking a particular social program, not applying resources to meet that challenges in the best fashion). The time for strategic control is longer. The period in which control has an impact is longer for strategic problems that for operating problems. The timing of strategic control is events oriented. By contrast, operating decisions tend to be made on a periodic basis, and they are usually measured accordingly. Strategic control has little repetition. Not even the structure is the same as past problems of a like kind, much less the technical details. Operating problems, by way of contrast, tend to repeat their structure. The relationship between action and outcome is weaker in strategic control. This is not surprising, as the most desirable area for control in strategic problems -the environment -is the least subject to direct action.

Implication for information system

The key action variables in strategic control are organizational. In the operational control problem, technical factors such as labor levels, production levels, choice of materials, and the like are the predominant control levels. Alternative actions in strategic control are less easy to choose in advance. In strategic control problem, it is possible to choose all possible action responses to received data in advance. In an operational control problem, the few responses possible can usually all be worked out before any operating data received. The worst failing in strategic control is omitting a worthwhile action. In operating control, the most typical sins are those of omissions (e.g., complaints about too many people employed, too many defects, and too much inventory). In the strategic control problem, sins of omission are much more serious (e.g., not moving into a business opportunity when it presents itself, not undertaking a particular social program, not applying resources to meet that challenges in the best fashion). The time for strategic control is longer. The period in which control has an impact is longer for strategic problems that for operating problems. The timing of strategic control is events oriented. By contrast, operating decisions tend to be made on a periodic basis, and they are usually measured accordingly. Strategic control has little repetition. Not even the structure is the same as past problems of a like kind, much less the technical details. Operating problems, by way of contrast, tend to repeat their structure.

"Strategic control focuses on the dual questions of whether: (1) the strategy is being implemented as planned; and (2) the results produced by the strategy are those intended." This definition refers to the traditional review and feedback stages which constitutes the last step in the strategic management process. Normative models of the strategic management process have depicted it as including their primary stages: strategy formulation, strategy implementation, and strategy evaluation (control). Strategy evaluations concerned primarily with traditional controls processes which involves the review and feedback of performance to determine if plans, strategies, and objectives are being achieved, with the resulting information being used to solve problems or take corrective actions.

Reporter: Marie Anne P. Gali Subject: Strategic Management Professor: Dr. Pedro Sison

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Recent conceptual contributors to the strategic control literature have argued for anticipatory feedforward controls, that recognize a rapidly changing and uncertain external environment. Schreyogg and Steinmann (1987) have made a preliminary effort, in developing new system to operate on a continuous basis, checking and critically evaluating assumptions, strategies and results. They refer to strategic control as "the critical evaluation of plans, activities, and results, thereby providing information for the future action". Schreyogg and Steinmann based on the shortcomings of feedback-control. Two central characteristics if this feedback control is highly questionable for control purposes in strategic management: (a) feedback control is post-action control and (b) standards are taken for granted. Schreyogg and Steinmann proposed an alternative to the classical feedback model of control: a 3step model of strategic control which includes premise control, implementation control, and strategic surveillance. Pearce and Robinson extended this model and added a component "special alert control" to deal specifically with low probability, high impact threatening events. The nature of these four strategic controls is summarized in Figure 6-4. Time (t ) marks the point where strategy formulation starts. Premise control is established at the point in time of initial premising (t ). From here on promise control accompanies all further selective steps of premising in planning and implementing the strategy. The strategic surveillance of emerging events parallels the strategic management process and runs continuously from time (t ) through (t ). When strategy implementation begins (t ), the third control device, implementation control is put into action and run through the end of the planning cycle (t ). Special alert controls are conducted over the entire planning cycle. Planning premises/assumptions are established early on in the strategic planning process and act as a basis for formulating strategies. Strategic Control: A New Perspective Most commentators would agree with the definition of strategic control offered by Schendel and Hofer: "Strategic control focuses on the dual questions of whether: (1) the strategy is being implemented as planned; and (2) the results produced by the strategy are those intended." This definition refers to the traditional review and feedback stages which constitutes the last step in the strategic management process. Normative models of the strategic management process have depicted it as including there primary stages: strategy formulation, strategy implementation, and strategy evaluation (control). Strategy evaluations concerned primarily with traditional controls processes which involves the review and feedback of performance to determine if plans, strategies, and objectives are being achieved, with the resulting information being used to solve problems or take corrective actions. Recent conceptual contributors to the strategic control literature have argued for anticipatory feedforward controls, that recognize a rapidly changing and uncertain external environment. Schreyogg and Steinmann (1987) have made a preliminary effort, in developing new system to operate on a continuous basis, checking and critically evaluating assumptions, strategies and results. They refer to strategic control as "the critical evaluation of plans, activities, and results, thereby providing information for the future action".

Reporter: Marie Anne P. Gali Subject: Strategic Management Professor: Dr. Pedro Sison

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Schreyogg and Steinmann based on the shortcomings of feedback-control. Two central characteristics if this feedback control is highly questionable for control purposes in strategic management: (a) feedback control is post-action control and (b) standards are taken for granted. Schreyogg and Steinmann proposed an alternative to the classical feedback model of control: a 3step model of strategic control which includes premise control, implementation control, and strategic surveillance. Pearce and Robinson extended this model and added a component "special alert control" to deal specifically with low probability, high impact threatening events. The nature of these four strategic controls is summarized in Figure 6-4. Time (t ) marks the point where strategy formulation starts. Premise control is established at the point in time of initial premising (t ). From here on promise control accompanies all further selective steps of premising in planning and implementing the strategy. The strategic surveillance of emerging events parallels the strategic management process and runs continuously from time (t ) through (t ). When strategy implementation begins (t ), the third control device, implementation control is put into action and run through the end of the planning cycle (t ). Special alert controls are conducted over the entire planning cycle. STRATEGIC SURVEILLANCE Compared to premise control and implementation control, strategic surveillance is designed to be a relatively unfocused, open, and broad search activity. "... strategic surveillance is designed to monitor a broad range of events inside and outside the company that are likely to threaten the course of the firm's strategy." The basic idea behind strategic surveillance is that some form of general monitoring of multiple information sources should be encouraged, with the specific intent being the opportunity to uncover important yet unanticipated information. Strategic surveillance appears to be similar in some way to "environmental scanning." The rationale, however, is different. Environmental, scanning usually is seen as part of the chronological planning cycle devoted to generating information for the new plan. By way of contrast, strategic surveillance is designed to safeguard the established strategy on a continuous basis. Special Alert Control Another type of strategic control is a special alert control. "A special alert control is the need to thoroughly, and often rapidly, reconsider the firm's basis strategy based on a sudden, unexpected event." The analysts of recent corporate history are full of such potentially high impact surprises (i.e., natural disasters, chemical spills, plane crashes, product defects, hostile takeovers etc.). While Pearce and Robinson suggest that special alert control be performed only during strategy implementation, Preble recommends that because special alert controls are really a subset of strategic surveillance that they be conducted throughout the entire strategic management process. The characteristics of each control component are detailed in Table 6-4, including the component's purpose, mechanism used to implement it, the procedure to be followed, degree of focusing, information sources, and organizational/personnel to be utilized.

Reporter: Marie Anne P. Gali Subject: Strategic Management Professor: Dr. Pedro Sison Strategic Control Process

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Although control systems must be tailored to specific situations, such systems generally follow the same basic process. Regardless of the type or levels of control systems an organization needs, control may be depicted as a six-step feedback model): 1. Determine what to control. What are the objectives the organization hopes to accomplish? 2. Set control standards. What are the targets and tolerances? 3. Measure performance. What are the actual standards? 4. Compare the performance the performance to the standards. How well does the actual match the plan? 5. Determine the reasons for the deviations. Are the deviations due to internal shortcomings or due to external changes beyond the control of the organization? 6. Take corrective action. Are corrections needed in internal activities to correct organizational shortcomings, or are changes needed in objectives due to external events? Feedback from evaluating the effectiveness of the strategy may influence many of other phases on the strategic management process. A well-designed control system will usually include feedback of control information to the individual or group performing the controlled activity. Simple feedback systems measure outputs of a process and feed into the system or the inputs of a system corrective actions to obtain desired outputs. The consequence of utilizing the feedback control systems is that the unsatisfactory performance continues until the malfunction is discovered. One technique for reducing the problems associated with feedback control systems is feedforward control. Feedforward systems monitor inputs into a process to ascertain whether the inputs are as planned; if they are not, the inputs, or perhaps the process, are changed in order to obtain desired results.

Why innovation is becoming more important


.>Technology is changing fast, new products come from new competitors >Fast changing environment, product lifetimes shorter, need to replace products sooner >Products are increasingly difficult to differentiate >Customers are more sophisticated, segmented and demanding, and expect more in terms of customization, newness, quality and price >Customers have more choice >New technologies no-one understands >Apparently separate technologies come together >Markets forming and changing fast With markets and technology changing fast, and good ideas quickly copied, there is continual pressure to devise new and better products, processes and services faster The Innovation Process [ by Rajnish Tiwari ] Innovation, according to Schumpeter (1934), covers: 1) The introduction of a new good or a new quality of the good 2) The introduction of a new method of production 3) The opening of a new market

Reporter: Marie Anne P. Gali Subject: Strategic Management Professor: Dr. Pedro Sison 4) The conquest of a new source of supply 5) The carrying out of the new organization of an industry

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The newness need not necessarily involve new knowledge thereby effectively implying that the newness may also concern advancement or modification of existing knowledge. Innovation, according to Rogers (2003), is an idea, practice, or object that is perceived as new by an individual or other unit of adoption. The Oslo Manual, developed jointly by Eurostat and the OECD and currently in its 3rd edition, defines innovation as "the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations." It differentiates between 4 types of innovations, namely "Product Innovation", "Process Innovation", "Marketing Innovation", and "Organisational Innovation" (OECD, 2007). Keeping these views in mind and for the purpose of this project, we regard innovation as "invention and commercialization of new (or betterment of existing) products, processes and/or services". The terms "processes" and "services" in this definition therefore cater also to marketing and organisational innovations. The innovation process encompasses several systematic steps, beginning from problem/requirement analysis to idea generation, idea evaluation, project planning, product development and testing to finally product marketing. The steps may overlap each other. These steps may be categorised into 3 broad phases, which represent a simplified innovation process. This project takes into account all the three phases of innovation. Special attention is paid to the process of research and development (R&D), which in many cases builds a corner-stone of innovation.

Ten types of Innovation 1. Networking Value chain and partnering 2. Business Model How an enterprise makes money 3. Enabling Process Routine non-differentiating process often outsourced to others.

Reporter: Marie Anne P. Gali Subject: Strategic Management Professor: Dr. Pedro Sison 4. Product performance Basic feature and functions 5. Core process differentiating proprietary process 6. Product system structured offering with array of tailorable, integrated componets. 7. Service assistance provided to prospect and customers 8. Channel conduits through with offering reach customers 9. Brand how value is communicated customer 10. Customer experience all spect of customers interaction with a company and brands. The Importance of Entrepreneurship

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Entrepreneurship is increasingly recognised as an important driver of economic growth, productivity, innovation and employment, and it is widely accepted as a key aspect of economic dynamism: the birth and death of firms and their growth and downsizing. As firms enter and exit the market, theory suggests that the new arrivals will be more efficient than those they displace. Existing firms that are not driven out are forced to innovate and become more productive in order to compete. Many studies have given empirical support to this process of creative destruction first described by Joseph Schumpeter. However, while academic studies have long recognised the importance of entrepreneurship, policy makers have only recently explicitly discovered it. Indeed, entrepreneurship was long considered an exogenous factor in government policies, and policy efforts were often directed simply towards the large population of very small firms rather than aimed at stimulating entrepreneurs able to introduce new products, processes or organisational forms in order to exploit new markets and grow. However, many OECD countries have made entrepreneurship an explicit policy priority in recent years, and governments policies now seek to affect the rate and type of entrepreneurship. As globalisation reshapes the international economic landscape and technological change creates greater uncertainty in the world economy, the dynamism of entrepreneurship is believed to be able to help to meet the new economic, social and environmental challenges. Governments increasingly consider entrepreneurship and innovation to be the cornerstones of a competitive national economy, and in most countries entrepreneurship policies are in fact closely connected to innovation policies, with which they share many characteristics and challenges. Both are associated with doing something new and, designed correctly, they can be mutually reinforcing. The dynamic process of new firm creation introduces and disperses innovative products, processes and organisational structures throughout the economy. Entrepreneurship objectives and policies nevertheless differ considerably among countries, owing to different policy needs and diverse perspectives on what is meant by entrepreneurship. In some countries, entrepreneurship is linked to regional development programmes and the creation of new firms is stimulated to boost employment and output in depressed regions. In others, entrepreneurship is a key element of strategies designed to facilitate the participation of certain target groups, such as women or minorities, in the economy. Some countries simply seek to increase firm creation as such, while others set out to support high-growth firms. While many countries are making serious efforts to support entrepreneurship, results appear to vary. Countries want to understand the determinants of and obstacles to entrepreneurship, and they need to analyse the effectiveness of different policy approaches. The lack of internationally comparable empirical evidence has however constrained our understanding of entrepreneurship and many questions remain unanswered. Ultimately, policy making must be guided, as far as possible, by evidence and facts. To tackle these issues, the OECD, in association with Eurostat and many others, has undertaken to build a new, and more robust, international knowledge base.

Reporter: Marie Anne P. Gali Subject: Strategic Management Professor: Dr. Pedro Sison

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Idealist The idealist entrepreneur is the most common type of entrepreneur shown above. He/She likes innovation and enjoys working on something new or creative or something personally meaningful. Optimizers The optimizer entrepreneur comes in a close second and is content with the personal satisfaction of simply being a business owner. I think everyone would have some sort of satisfaction being a business owner but if thats what mostly feels important then I guess you fall here. Hard Workers The hard workers entrepreneur category includes persons who enjoy putting in long hours to build a larger more profitable business. They like the challenge it presents and of course reap the most rewards if the business turns out to be a multi-million dollar enterprise. Hard work comes with all businesses but as we now see not everyone works hard for the business to grow as this group of entrepreneurs does. Jugglers The juggler entrepreneur likes the concept that the business gives them a chance to handle everything themselves. They are usually people with lots of energy and exist on the pressure of meeting deadlines, paying bills and of course making payroll. Who doesnt like pressure? J Last minute deadlines are lovely! Im sure a lot of you have ended up in a situation where the deadline is approaching quickly. Maybe youre a juggler

Reporter: Marie Anne P. Gali Subject: Strategic Management Professor: Dr. Pedro Sison Sustainers

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The sustainers entrepreneur category consists of people who like the thought of balancing work and a personal life. Most often they do not wish the business to grow too large where it will cut into their personal life too much. These guys just need enough to survive. No big hopes and dreams of a multinational corporation or interviews on The Big Idea J So there you have it five categories of entrepreneurs. Ive been trying to figure out which category best describes me, but I think I have attributes of the first four types. I love creativity and innovation so am I an idealist? I think everyone would feel satisfaction as a business owner, a natural sense of pride would always come with entrepreneurship. I definitely would love to see any business venture I undertake grow as large as it possibly can so then Im a hard worker? Yet I work well under pressure Id say I thrive on it a bit so then Im a juggler. I guess I am hybrid entrepreneur. What type of Entrepreneur are you?

Advantages of Entrepreneurs Excitement: compared to being regular employees, entrepreneurs enjoy much excitement beginning from the planning stage of the business up to development and realization. Thrillseekers obviously love being entrepreneurs as they are exposed to too much risk. You should never forget, that all business risks that you agree on taking, should be calculated. Salary Potential: most people who are employed generally feel that they are not being compensated for the work they do. In addition, they must follow the salary structure set by their employers. Entrepreneurs, on the other hand, earn money that is commensurate to their efforts. Flexibility: having control of work schedules and commitments makes the life of these entrepreneurs enviable. They are able to take vacations anytime and spend much quality time with their families. Independence: for people who love the idea of not being answerable to anyone else but themselves, becoming an entrepreneur would surely be wonderful. They would be able to make decisions without the pressure of getting fired. Disadvantages of Entrepreneurs No Regular Salary: when you start a business, you should be prepared to leave behind the security of having a paycheck each month. Even successful entrepreneurs experience lean months when all financial resources are being taken up by the new business. Work Schedule: although they have the luxury of a flexible schedule, entrepreneurs also make sacrifices especially during situations that require them to work longer hours. Unlike regular employees who are not worried too much about the status of the business, entrepreneurs must make sure that everything is going well.

Reporter: Marie Anne P. Gali Subject: Strategic Management Professor: Dr. Pedro Sison

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Administration: because they own the business, all major decisions are made by entrepreneurs. This is quite a burden and handling such responsibility is quite difficult. Every decision directly affects the future of their businesses and avoiding costly mistakes is imperative. After comparing the advantages and disadvantages, you will have to decide if you can realistically handle all the responsibilities of owning your own business aside from being prepared for all the risks you have to take. But if you look closely, being an entrepreneur is still desirable especially with the sense of fulfillment and accomplishment they gain from beating all odds and overcoming all challenges. As long as you have passion and commitment, you will be able to handle these disadvantages beautifully References: ezinearticles.com/?Entrepreneur-Advantages-and-Disadvan. www.johnstark.com/in4.htm www.strategic-control.24xls.com/en139 www.developingeyes.com/five-types-of-entrepreneurs/