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SL GM 601
Designing the Control
Process and
Managerial Controls
ICFAI BUSINESS SCHOOL
Class of 2011
Level
Business
Business 1 Business 2 Business 3 Level
Functional
Human
Product/ R Financial/ Marketing Relations Level
&D Accounting Strategies Strategies
Strategies Strategies
Class of 2009
12/13/10 2
Business Strategy 1
Two Levels of Strategy
Strategy Level Key Strategic Generic Primary
Issues Strategic Organisational
Options Level Strategies
Involved
Corporate Level Are we in the right mix Single Industry Corporate
of industries Office
Related
What industries of Diversification
subindustries should we
be in Unrelated
Diversification
Business Unit What should be mission Build; Hold; Harvest; Corporate Office and
Level of the Business Unit Divest BU General Manager
How should the business
unit compete to realise Low Cost BU GM
its mission Differentiation
Remainder divested
Market Growth Rate
Stren/Weak Selectively
Image Invest
Pollution 1.Identify Industry attractiveness factors
People 2.Assign weight to each factor Invest
3.Obtain weighted composite score
4.Classify the score into ratings H/M/L
5.Classify business units into different categories
Class of 2008 Business Strategy
12/13/10 9
1
Business Competitive
Advantage
– Porter’s Five Forces analysis
• Powerful industry forces Less profitable
• Key strategic issues change depending on the
relative strength of five forces
• Based on the nature of each force formulate
effective strategies
– Value Chain Analysis
• The options ??
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Class of 2011 – SL GM
601
Formal Vs Informal
• External
• Internal
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601
Informal Forces
Affecting Goal
Congruence (2)
• External
– Work ethic
• Employee loyalty
• Employee Diligence
• Employee Aspirations
• Employee Pride in doing a good job
These could be Local, National , Industry
Specific
01/06/2010 Examples ??? Class of 2011 – SL GM
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601
Informal Forces
Affecting Goal
Congruence (3)
• Internal
– Culture
• Common Beliefs
• Shared Values
• Norms of behaviour
• Implicitly accepted and explicitly
manifested assumptions
– Management Style
– The Informal Organisation
– Perception and Communication
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601
Formal Control System
• Rules
• Formal Control Process
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601
Formal Control System
(2)
• Rules
• All types of formal instructions and controls
• Remains in force till they are modified
• Some rules are guidelines – though stated as
rules, it is expected that, on occasions, these
rules may be overlooked
• Positive actions to be taken
• Prohibitions
• Physical Controls
• Manuals
• System Safeguards
• Task Control Systems Class of 2011 – SL GM
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601
Formal Control Process
Goals & Rules Other
Informatio
Strategies
n
Rewar
Yes
d
Responsibility Was
Strategic Budgeting
Centre Reports Performance
Planning
Performance Sastisfactory
Revis Measurem
Correctiv
No
e Revis ent
e e
Action
Feedback
Communication
• Functional Organisation
• Business Unit Structure
• Matrix Structure
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601
Functional Organisation
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601
Implications of System
Design
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601
Controller
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601
Relation to Line
Organisation
Corporat Corporate
e Contoller
Controll
er Business Unit
Business Unit Manager
Manager
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601
Types of Organisation and
Uncertainty?
• Is there any difference in uncertainty of
business between an organisation following
a «Build» strategy and another following a
« Harvest » strategy?
• Build strategies undertaken during growth and Harvest strategy
undertaken during periods of mature or decline stage
• Build aims to increase market share. Harvest aims to hold the
market share
• Dependency on inputs and outputs higher for build managers
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601
Different Corporate
Strategies: Organisational
Structure
Single Implication
Related Unrelated
Industry Diversification Diversification
Organisational Functional Business Units Holding Company
Structure
Industry familiarity of High Low
Corporate
Management
Functional Background Relevant operating experience Mainly
of Corporate Finance
Management (mfg, mktg, r&d)
transfer pricing
Incentive Compensation : Financial and Primarily
Bonus criterion non financial
Financial
Criteria
Criteria
Bonus01/06/2010
determination approachPrimarily
Class ofSubjective Primarily formula based
2011 – SL GM 601 30
Different Strategic
Missions : Implication for
Strategic Planning Process
Build Hold Harvest
Importance of Strategic Relatively high Relatively Low
Planning
Formalisation of Capital Less formal DCF More formal DCF
Expenditure Decisions analysis, longer pay analysis shorter pay
back back
Capital Expenditure More emphasis on More emphasis on
Evaluation Criteria non-financial data financial data (cost
(mkt shr, efficient efficiency, straight
use of R&D cash on cash
expenditure, etc) incremental returns )
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601