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What is Strategic Control?

Tracks a strategy as it is implemented, detects problems or changes in its underlying premises, and makes necessary adjustments.

Questions Involved in Assessing a Strategys Success

1. Are we moving in the proper direction? Are our assumptions about major trends and changes correct? Should we adjust or abort the strategy? 2. How are we performing? Are objectives and schedules being met? Are costs, revenues, and cash flows matching projections? Do we need to make operational changes?

Four Types of Strategic Control

1. Strategic surveillance

2. Premise control 3. Special alert control 4. Implementation control Strategy implementation Strategy formation Time 1 Time 2 Time 3

Definitions of Strategic Controls



Premise Control - Designed to check systematically and continuously whether premises on which the strategy is based are still valid Implementation Control - Designed to assess whether the overall strategy should be changed in light of the results associated with the incremental actions that implement the overall strategy Strategic Surveillance - Designed to monitor a broad range of events inside and outside the firm that are likely to affect the course its strategy Special Alert Control - Thorough, and often rapid, reconsideration of the firms strategy because of a sudden, unexpected event

Strategic Controls


Premise Control
Environmental factors Industry factors (depends on the accuracy of initial factor selection)

Implementation Control
Strategic thrust areas Milestone reviews

Strategic Surveillance
Marketing Intelligence Competitive Intelligence

Special Alert Control

As a byproduct of surveillance
(read pg 411,412)

Characteristics of Strategic Controls

Types of Strategic Control
Basic Characteristics
Objects of control Degree of focusing Data acquisition: Formalization Centralization Use with: Environmental factors Industry factors Strategy-specific factors Company-specific factors

Premise Control
Planning premises and projections High Medium Low Yes Yes No No

Implementation Control
Key strategic thrusts and milestones High High Medium Seldom Seldom Yes Yes

Strategic Surveillance
Potential threats and opportunities Low Low Low Yes Yes Seldom Seldom

Special Alert Control

Occurrence of recognizable but unlikely events High High High Yes Yes Yes Seldom

What are Operational Controls?

Systems that guide, monitor, & evaluate progress in meeting short-term objectives, providing post-action evaluation and control over short periods.

Establishing Effective Operational Control Systems

1. Set standards of performance Steps involved in postaction control systems 2. Measure actual performance 3. Identify deviations from standards set 4. Initiate corrective action

Types of Operational Control Systems

Budgets

Schedules

Key success factors

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Types of Budgets
1. Profit and loss (revenue) budgets: Monitor sales and expense categories on a monthly or more frequent basis 2. Capital budgets: Show timing of specific expenditures for plant, equipment, machinery, inventories, and other capital items 3. Cash flow (expenditure) budgets: Forecast receipt and disbursement of cash during the budget period

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Schedules

Schedules

A planning tool for allocating the use of time constrained resource or arranging sequence of interdependent activities

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Key Success Factors (KSFs)

Key success factors

Those factors which are necessary to be measured, monitored and controlled which are critical to the definition of companys success as stated during formulating Vision, Mission & objectives

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Key Success Factors examples

Key Success Factor 1. Product quality 2. Customer service 3. Employee morale 4. Competition

Measurable Performance Indicator a. Performance data versus specification b. Percentage of product returns c. Number of customer complaints a. Delivery cycle in days b. Percentage of orders shipped complete c. Field service delays a. Trends in employee attitude survey b. Absenteeism versus plan c. Employee turnover trends a. Number of firms competing directly b. Number of new products introduced c. Percentage of bids awarded versus standard

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Monitoring and Evaluating Performance Deviations

Key Success Factors
Cost control: Ratio of indirect overhead cost to direct field and labor costs
Objective, Assumption, or Budget Forecast Performance at This Time Current Performance Current Deviation

Analysis
Are we moving too fast, or is there more unnecessary overhead than was originally thought?

10%

15%

12%

+3 (ahead)

Gross profit

39%

40%

40%

0%

Customer service: Installation cycle in days

2.5 days

3.2 days

2.7 days

+0.5 (ahead)

Can this progress be maintained?

Ratio of service to sales personnel

3.2

2.7

2.1

Why are we behind here? How -0.6 can we maintain the (behind) installation-cycle progress?

Product quality: Percentage of products returned

1.0%

2.0%

2.1%

-0.1% are the ramifications for other (behind) operations?

Why are we behind here? What

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Monitoring and Evaluating Performance Deviations (concluded)

Key Success Factors
Product performance versus specification Marketing: Monthly sales per employee(Rs 000) Expansion of product line Employee morale: Absenteeism rate Turnover rate Competition: New product introductions (average number)
Objective, Assumption, or Budget Forecast Performance at This Time Current Performance Current Deviation

Analysis

100%

92%

80%

-12% Why are we behind here? (behind) +600 (ahead)

Good progress. Is it creating any problems to support?

12,500

11,500

12,100

+2 Are the products ready? Are products the perfect standards met? (ahead)
(on target) -8% (behind)

2.5% 5% 6

3.0% 10% 3

3.0% 15% 6

Looks like a problem! Why are we so far behind? Did we underestimate timing?

-3 What are the implications for (behind) our basic assumptions?

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The Quality Imperative: Concepts Related to TQM

Viewed as a new organizational culture and way of thinking Foundations of TQM

 

Intense focus on customer satisfaction Accurate measurement of every critical variable in a businesss operation Continuous improvement of products, services, and processes Work relationships based on trust and teamwork

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Key Elements of Implementing TQM

1. Define quality and customer value 2. Develop a customer orientation 3. Focus on companys business processes 4. Develop customer and supplier partnerships 5. Take a preventive approach 6. Adopt an error-free attitude 7. Get the facts first 8. Encourage all levels of employees to participate 9. Create an atmosphere of total involvement 10. Strive for continuous improvement

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The Value Chain Approach to Developing a Customer Orientation

External suppliers Function (like production) Seeking: Quality Efficiency Responsiveness Internal suppliers (functions)
Outputs

External (ultimate) customer

Outputs

Other internal customers (activities)

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Examples: Ways to Enhance Customer Value

Quality
Marketing
Provides accurate assessment of customers product preferences to R&D Consistently produces goods matching engineering design

Efficiency
Targets advertising campaign at customers, using costeffective medium Minimizes scrap and rework through high-production yield Uses computers to test feasibility of idea before going to more expensive fullscale prototype Simplifies and computerizes to decrease cost of gathering information Given required vendor quality, negotiates prices to provide good value Minimizes employee turnover reducing hiring and training expenses

Responsiveness
Quickly uncovers and reacts to changing market trends

Operations

Quickly adapts to latest demands with production flexibility Carries out parallel product/process designs to speed up overall innovation Provides information in real time (as events described are still happening) Schedules inbound deliveries efficiently, avoiding both extensive inventories and stock-outs In response to strong growth in sales, finds large numbers of employees and quickly teaches needed skills

R&D

Designs products that combine customer demand and production capabilities Provides information that managers in other functions need to make decisions Selects vendors for their ability to join in an effective partnership Trains work force to perform required tasks

Accounting

Purchasing

Personnel

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Challenges of strategy implementation

NIB

Organizational Buy-in
Individual v/s company objectives Acceptance at functional level Functional conflict Functional isolation Co-ordination Skill inadequacy Change management Politics Resource mismatch

Dynamic nature of environment

Speed of environment change Empirical nature of forecast Elasticity of strategy Employee turnover New needs New opportunities Tactics v/s strategy

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END OF MODULE 8