chapter nine implementing strategy: achieving effective strategic control

Chapter Nine

Implementing Strategy:Achieving Effective

Strategic Control

CHAPTER 9McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights

reserved.

STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin

After studying this chapter, you should have a good understanding of:• The value of effective strategic control systems in strategy

implementation

• The key difference between “traditional” and “contemporary” control systems

• The imperative for “contemporary” control systems in today’s complex and rapidly changing competitive and general environments

• The benefits of having the proper balance among the three levers of behavioral control—culture, rewards and incentives/boundaries

• How a strong and positive culture and reward system can lessen the need for boundaries

• Why there is no “one best way” to design strategic control systems and the important contingent roles of business- and corporate-level strategies

Learning Objectives

TRANSPARENCY-76


reserved.


Formulate Strategies

Formulate Strategies

Implement Strategies

Implement Strategies

Strategic Control

Strategic Control

Exhibit 9.1 Traditional Approach to Strategic Control

TRANSPARENCY-77


reserved.


Contemporary Approach to Strategic Control

Exhibit 9.2TRANSPARENCY-78

ImplementStrategies

ImplementStrategies

InformationalControl

BehavioralControl

FormulateStrategies

FormulateStrategies

StrategicControl

StrategicControl


reserved.


Essential Elements of Strategic Control

Boundaries

Culture Rewards



reserved.


Action Plan for Objective #3

DescriptionPrimary Responsibility Target Date

1. Develop and implement 2002 marketing plan, including specific plans for addressing Falcon 20 retrofit programs, and expanded sales of cabin shells.

R.H. Plenge

(V.P. Marketing)

December 15, 2001

2. Negotiate new supplier agreement with Gulfstream Aerospace. M. Spraggins

(President)

March 1, 2002

3. Continue and complete the development of the UltraSlim window and have a fully tested and documented design ready for production at a manufacturing cost of less than $900 per unit.

D.R. Pearson

(V.P. Operations)

June 15, 2002

4. Develop a window design suitable for L-1011 and similar wide-body aircraft and have a fully tested and documented design ready for production at a manufacturing cost comparable to the current Boeing window.

D.R. Pearson

(V.P. Operations)

September 15, 2002



reserved.


Developing Meaningful Action Plans: MSA Aircraft Interior Products, Inc. MSA Aircraft Interior Products, Inc., is a San Antonio, Texas-based manufacturing firm founded in 1983 by

Mike Spraggins and Robert Plenge. The firm fulfills a small but highly profitable niche in the aviation industry with two key products. The Accordia line consists of patented, light-weight, self-contained window-shade assemblies. MSA’s interior cabin shells are state-of-the-art assemblies that include window panels, side panels, headliners, and suspension-system structures. MSA’s products have been installed on a variety of aircraft such as the Gulfstream series, Cessna Citation aircraft, and Boeing’s 727, 737, 757, and 707 series aircraft.

Much of MSA’s success can be attributed to carefully articulated action plans that are consistent with the firm’s mission and objectives. During the past 5 years the firm has increased its sales and profits at an annual rate of 15 to 18 percent. It has also been successful in adding many prestigious companies to its customer base. Below are excerpts from MSA’s mission statement and objectives as well as the action plans to achieve its objective of a 20 percent annual increase in total sales.

Mission Statement (Excerpted)• Be recognized as an innovative and reliable supplier of quality interior products for the high-end, personalized

transportation segments of the aviation, marine, and automotive industries.• Design, develop, and manufacture interior fixtures and components that provide exceptional value to the

customer through the development of innovative designs in a manner that permits decorative design flexibility while retaining the superior functionality, reliability, and maintainability of well-engineered factory-produced products.

• Grow, be profitable, and provide a fair return, commensurate with the degree of risk, for owners and stockholders.

Source For purpose of confidentiality, some of the information presented in this application has been disguised. We would like to thank company management and Mr. Joseph Picken, consultant, for providing us with the information used in this application.

Strategy Spotlight 9.4Continued

TRANSPARENCY-81a


reserved.


Developing Meaningful Action Plans: MSA Aircraft Interior Products, Inc.Objectives (Excerpted)1. Achieve sustained and profitable growth over the next three years: 20 percent annual growth in revenues 12 percent pretax profit margins 18 percent return on shareholders’ equity2. Expand the company’s revenues through the development and introduction of two or more new products capable of generating revenues in excess of $8,000,000 per year by 2005.3. Continue to aggressively expand market opportunities and applications for the Accordia line of window-shade assemblies, with the objective of sustaining or exceeding a 20 percent annual growth rate for at least the next 3 years.

MSA’s action plans are supported by detailed month-by-month budgets as well as strong financial incentives for their executives. Budgets are prepared by each individual department and include all revenue and cost items. Managers are motivated by their participation in a profit-sharing program and the firm’s two founders each receive a bonus equal to 3 percent of total sales.Source For purpose of

confidentiality, some of the information presented in this application has been disguised. We would like to thank company management and Mr. Joseph Picken, consultant, for providing us with the information used in this application.

Strategy Spotlight 9.4

Transparency 80: “Action Plan” for Objective #3.

(Exhibit 9.4)

TRANSPARENCY-81b


reserved.


Summary of Relationships Between Control and Business- and Corporate-Level Strategy

Level of StrategyType of Strategy

Need for Interdependence

Primary Type of Rewards and Controls

Business-Level Overall cost Leadership

Low Quantitative

Business-Level Differentiation High Qualitative

Corporate-Level Related Diversification

High Qualitative

Corporate-Level Unrelated Diversification

Low Quantitative


chapter nine implementing strategy: achieving effective strategic control

Documents