Chapter 10

Strategic Control

1
 Strategic Control
 Normative models of strategic management
process include 3 stages:
– Strategy formulation
– Strategy implementation
– Strategy evaluation (control)
 Strategic control focuses on the dual
questions:
– Strategy is being implemented as planned
– The results produced by the strategy are those
intended
2
 Strategic Control
 Strategy evaluations are concerned
primarily with traditional control 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.

3
 Controls by Timing
 Control based on timing means applying control at
different stages of the production cycle

Conversion Outputs
Inputs
Process

Feedforward Concurrent Feedback

4
 Controls by Timing
 Feedforward control – Deals with inputs.
Ensures that inputs e.g materials, people
etc meet required standards so as to
satisfy next stage
 Concurrent control – looks at the
transformation process so that
conformance to standards is maintained
e.g statistical process control (SPC)
– The aim of SPC is to minimise or prevent
the risk of having defects by looking at the
process itself instead of inspecting finished
goods.

5
 Controls by Timing
 Feedback control – is the verification or service
after it has been completed to see whether it meets
the required standards e.g quality control
– Quality control is the identification of non-
conformances in the end products before they go to the
customer.

6
 Shortcomings of Feedback
Control
 Schreyogg and Steinmann argue that
feedback control is questionable for control
purposes in strategic management:
– Feedback control is post-action control
– Standards are taken for granted

7
 Premise Controls
 Planning premises\assumptions are
established early on in the strategic
planning process and acts as a basis for
formulating strategies.

 Premise control has been designed to check

8
 Premise Controls
 It involves the checking of environmental
conditions.Premises are primarily concerned with
2 types of factors:
– Environmental factors e.g inflation, technology, interest
rates, regulations and demographic\social changes
– Industry factors e.g competitors, suppliers, substitutes
and barriers to entry
 Managers should select those premises and
variables that
– 1. Are likely to change
– Would have a major impact on the company and its
strategy if they did
9
 Implementation Control
 Implementation control is designed to
assess whether the overall strategy should
be changed in light of unfolding events and
results associated with incremental steps
and actions that implement the overall
strategy.
 Strategic implementation control
continuously questions the basic direction
of the strategy.

10
 Implementation Control
 2 basic types of implementation control are:
– Monitoring strategic thrusts
• Agree early on in the planning process on
what are the critical factors for the success of
the strategic thrusts
• Use stop\go assessments linked to a series of
meaningful thresholds (time, costs, research
and development, success)
– Milestone Reviews: Milestones are
significant points in the development of a
program. A milestone review involves a full
scale re-assessment of the strategy and the
advisability of continuing or refocusing the
direction of the company. 11
 Strategic Surveillance
 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.
12
 Special Alert Control
 A special alert control is the need to
thoroughly and often rapidly reconsider the
firm’s basic strategy based on a sudden,
unexpected events.
 Recent corporate history are full of such
potentially high impact surprises e.g natural
disasters, chemical spills, plane crashes,
product defects, hostile takeovers etc.

13
 Control Process
 Control may be depicted as a six-step
process:
– Determine what to control
– Set control standards
– Measure performance
– Compare the performance to the standards
– Determine the reasons for the deviations
– Take corrective action

14
 Control Process
 The first step is determining which areas to
control- base major controls on the
organizational mission, goals and objectives
developed during the planning process
 Must make a choice because it is expensive
and virtually impossible to control every
aspect of the organization's activities.

15
 Control Process
 The 2nd step in the control process is
establishing standards.
 A control standard is a target against which
subsequent performance will be compared.
 They can be measured in a variety of ways
including physical, quantitative and
qualitative terms.
 5 performance aspects can be managed and
controlled: quantity, quality, time, cost and
behaviour. 16
 Control Process
 Examples:
– Profitability standards – indicate how much
profit the co. would like to make in a given
time period.
– Market position standards – indicate the
percentage
– Productivity standards – these indicate the
various acceptable rates at which final products
should be generated within the organisation.

17
 Control Process
 The third step is measuring
performance.The actual performance must
be compared to the standards
 Strategic control standards are based on the
practice of competitive benchmarking – the
process of measuring a firm’s performance
against that of the top performance in its
industry.
 Some deviations from standards may be
justified because of changes in
environmental conditions or other reasons. 18
 Control Process
 The fourth step of the control process
involves finding out why performance has
deviated from the standards.
 The organisation needs to ask if the
deviations are due to internal shortcomings
or external changes beyond the control of
the organisation.

19
 Control Process
 A checklist:
– Are the standards appropriate for the stated
objective and strategies?
– Are the objectives and corresponding strategies
still appropriate in the light of the current
environmental situation?
– Are the firm’s structure and resource adequate
for successfully implementing the strategies?
– Are the activities being executed appropriately
for achieving the standards?

20
 Control Process
 The final step in the control process is
determining the need for corrective action.
 Managers can choose among 3 courses of
action:
– They can do nothing
– They can correct the actual performance
– They can revise the standard

21
 Control Process
 Maintaining the status quo is preferable when
performance essentially matches standards.
 There are 3 choices of corrective action:
– Normal mode: follow a routine, no crisis
approach
– Ad hoc crash mode: saves time by speeding up
the response process, geared to the problem at
hand.
– Preplanned crisis mode – lowers response time
and increases the capacity for handling strategic
surprises 22
 Control Process
 The below checklist suggest 5 areas for
corrective actions:
– Revise the standards
– Revise the objectives
– Revise the strategies
– Revise the structure, system or support
– Revise activity
 Managers can also attempt to influence
events or trends external to itself through
advertising or other public awareness
programs. 23
 Strategic Audit
 A strategic audit is an examination and
evaluation of areas affected by the operation
of a strategic management process within an
organisation.
 A strategic audit may be required under the
following conditions:
– Performance indicators show that a strategy is
not working or is producing negative side
effects

24
 Strategic Audit
– High-priority items in the strategic plan are not
being accomplished.
– A shift or change occurs in the external
environment
– Management wishes
• To fine-tune a successful strategy and
• To ensure that a strategy has worked in the past
continues to be in tune with subtle internal or
external changes that may have occurred.

25
 Strategic Audit
 There are qualitative and quantitative
measurement methods
 Quantitative standards include:
– Sales
– Net Profit
– Dividend returns
– Return on investment
 The above refer to financial control but other
quantitative measures can be non financial in
nature e.g productivity

26
Evaluation of Corporate Strategy
 3 basic questions to ask:
– Is the existing strategy good?
– Will the existing strategy be good in the
future?
– Is there a need to change strategy?

27