STRATEGI C CONTROL: EVALUATI NG

STRATEGY
Unit VIII
Strategic Control is different from traditional approaches
to control where actual results are compared with
expected results or performance standards. This is
because the actual results in the case of strategic
management would come after a long period of 5-10 management would come after a long period of 5-10
years and management cannot afford to wait that long
for actual results to take place and then make
comparisons and take corrective measures.
In other words, strategic control needs to be taken while
the strategy is being implemented and not once actual
results take place.
STEPS IN TRADITION
CONTROL APPROACH:
1. SET PERFORMANCE
STANDARDS/GOALS
2. EXECUTE PLANS
3. ACTUAL RESULTS
ARE OBSERVED AT END OF
STRATEGIC CONTROL IS
DIFFERENT:
1. PREDETERMINED
STANDARDS/GOALS ARE SET
2. STRATEGIC
IMPLEMENTATION
PLANNING PERIOD
4. ACTUAL RESULTS
COMPARED WITH
PERFORMANCE
STANDARS/GOALS
CORRECTIVE ACTIONS
TAKEN IN CASE ACTUAL
ACTION DOES NOT MATCH
PERFORMANCE
STANDARDS/GOALS
IMPLEMENTATION
3. STRAGEGIC CONTROL TAKES
PLACE AT THE SAME TIME AS
IMPLEMENTATION AS
MANAGEMENT CANNOT
WAIT TILL END OF 5-10
YEARS TO SEE ACTUAL
RESULTS AND THEN TAKE
CORRECTIVE ACTIONS (AS IT
COULD BE TOO LATE)
Definition of Strategic Control: Strategic Control is concerned
with tracking the strategy as it is being implemented, detecting
problems or changes in underlying assumptions and making
necessary adjustments.
For Strategic Control, the following major questions
need to be answered:
1. Are we moving in the proper direction? Are key
things falling into place? Are our assumptions
about major trends and changes (assumptions about major trends and changes (assumptions
about the environment) correct? Do we need to
adjust or abort this strategy?
2. How are we performing? Are we meeting our
objectives and schedules? How are costs, revenues
and cash flows matching projections? Do we need
to make operational changes?
Strategic Controls: the Basis for Strategic Control
Establishing Strategic Controls: As strategic management significant
time span occurs between initial implementation of a strategy and
achievement of its intended results, numerous changes are
undertaken, actions undertaken to implement the strategy. Also
during that time, both the environmental situation and the firms
internal situation are developing and evolving. Strategic controls are
necessary to ensure things are happening as they are planned
alongwith these changes in this longer time frame. Strategic controls alongwith these changes in this longer time frame. Strategic controls
provide the basis for correcting the actions and directions of the firm
in implementing it strategy as developments and changes in its
environmental and internal situations take place. There are four types
of strategic controls:
1. Premise Control
2. Implementation Control
3. Strategic Surveillance
4. Special alert control
Premise Control
Every strategy is based on certain premises or
assumptions. These assumptions or predictions are
planning premises : the firms strategy is designed
around these predicted conditions.
Premise control is designed to check systematically Premise control is designed to check systematically
and continuously whether or not the premises set
during the planning and implementation process
are still valid.
The sooner invalid premises are recognised and
revised, the better the chances that an acceptable
change in strategy can be devised.
Premise control contd
Premise control involves the following:
1. What premises should be monitored?
Premises are primarily concerned with 2 types of factors:
environmental and industry. The environmental factors-
inflation, technology, interest rates, regulation, demographic
/social changesare key premises on which strategies are based. /social changesare key premises on which strategies are based.
Industry factors that affect performance of companies-such as
competition, suppliers, substitutes, barriers to entry-are factors
about which strategic assumptions are made on the basis of
which strategies are decided upon.
For premise control, premises should be selected for monitoring
which (i) are likely to change and (ii) would have a major impact
on the company and its strategy if they did.
How are Premise Controls carried out?
Key premises should be identified during th eplanning
process
The premises should be recorded and responsibility to
monitor them should be assigned to sutable persons or
departments
Emphasis should be placed o key premises: all premises Emphasis should be placed o key premises: all premises
need not be monitored as it would be too time consuming
a task.
Premises should be updated based on new information
Adjustments needed as a response to changes in
predictions /premises should be initiated.
Implementation Control
The Action Phase of strategic management involves a
series of steps , programmes, investments and moves
over a period of time to implement the strategy: special
programmes are undertaken, functional areas initiate a
number of strategic actions for specific units . These
actions take place continuously over an extended period
of time designed to execute the planned strategy and of time designed to execute the planned strategy and
achieve long term objectives. Implementation control
takes place in this context.
Implementation control is designed to assess whether
the overall strategy should be changed in light of
unfolding events and results associated with the steps
and actions that implement overall strategy.
Implementation Control consists of the following:
1. Monitoring Strategic Thrusts: Strategic thrusts are those
critical factors which represent the part of strategy
implementation actions that need to be carried out if the
overall strategy is to be accomplished. These critical actions
or thrusts provide management with information in the
form of a feedback on whether the overall strategy is form of a feedback on whether the overall strategy is
progressing as planned.
2. 2 Approaches for Implementation:
i. Selecting strategic thrusts (critical actions) and observing
these frequently.
ii. Use a stop/go assessments using factors such as time,
control, research & development , success, etc. to monitor
strategic thrusts (critical actions).
Milestone Reviews
Managers attempt to identify critical milestones that
will occur over the time period the strategy is being
implemented.
These milestones can be critical events, major
resource allocations or simply a passage of time. resource allocations or simply a passage of time.
A milestone review usually involves a full scale
assessment of the strategy and the advisability of
continuing or refocusing the direction of the
company.
Strategic surveillance
The third type of strategic control , 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 firms strategy.
Strategic Alert Control : A special alert control to
thoroughly and rapidly reconsider the firms basic
strategy based on sudden, unexpected event.
Operating Control systems
Operating control systems used by operating managers-
functional managers are useful for controling at the
oprating level.
The primary concern at the operating level is proper
allocation and use of the companys resources.
Operational control systems guide , monitor and evaluate Operational control systems guide , monitor and evaluate
progress in meeting annual objectives.
Four steps:
i. Set standards of performance
ii. Measure actual performance
iii. Identify deviations from standards
iv. Initiate corrective action or adjustment
Budgeting systems
A budget is a resource allocation plan that helps
managers coordinate operations operations and
facilitates managerial control of performance.
Budgets set standards against which action can be
measured.
Different types of budgets: Revenue budgets (sales Different types of budgets: Revenue budgets (sales
projections or expectations); Capital budgets ( specific
expenditure for plant , equipment, machinery and other
capital items needed during the budget period);
Expenditure budgets (numerous cost budgets such as
marketing budget, etc).
Budget= plan in Rupee value.
End of Course ! End of Course !