prentice hall, inc. © 200611-1 strategic management & business policy 10 th edition thomas l....
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Prentice Hall, Inc. © 2006 11-1
STRATEGIC MANAGEMENT & BUSINESS POLICY10TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
CHAPTER 11 Evaluation & Control
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Prentice Hall, Inc. © 2006 11-2
Evaluation and Control
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Prentice Hall, Inc. © 2006 11-3
Evaluation and Control
Evaluation and Control Information –
–Performance data –Activity reports
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Prentice Hall, Inc. © 2006 11-4
Evaluation and Control
Measuring performance –
–The end result of activity
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Prentice Hall, Inc. © 2006 11-5
Evaluation and Control
Types of Controls –
–Behavior controls•How something is done through policies, procedures, rules, SOP’s
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Prentice Hall, Inc. © 2006 11-6
Evaluation and Control
Types of Controls –
–Output controls•What is to be accomplished; focus on end result through performance targets
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Prentice Hall, Inc. © 2006 11-7
Evaluation and Control
Types of Controls –
–Input controls•Resources – skills, abilities, values, motives
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Prentice Hall, Inc. © 2006 11-8
Evaluation and Control
Types of Controls –
–Behavior controls•ISO 9000 Standards Series•ISO 14000 Standards Series
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Prentice Hall, Inc. © 2006 11-9
Evaluation and Control
Types of Controls –
–Activity Based Costing (ABC)•Allocation of indirect and fixed costs to individual products or product lines•Based on value-added activities•More accurate charge of costs
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Prentice Hall, Inc. © 2006 11-10
Evaluation and Control
Types of Controls –
–Enterprise Risk Management (ERM)•Identify risks•Rank risks•Measure risks
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Prentice Hall, Inc. © 2006 11-11
Evaluation and Control
Primary Measures of Performance –
–Traditional Financial Measures•Return on investment (ROI)•Earnings per share (EPS)•Return on equity (ROE)•Operating cash flow•Free cash flow
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Prentice Hall, Inc. © 2006 11-12
Evaluation and Control
Primary Measures of Performance –
–Shareholder•Shareholder value•Economic value added (EVA)•Market value added (MVA)
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Prentice Hall, Inc. © 2006 11-13
Evaluation and Control
Primary Measures of Performance –
–Balanced Scorecard Approach•Financial•Customer•Internal business perspective•Innovation and learning
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Prentice Hall, Inc. © 2006 11-14
Evaluation and Control
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Prentice Hall, Inc. © 2006 11-15
Evaluation and Control
Evaluating Top Management & Board –
–Chairman-CEO Feedback Instrument–Management Audit–Strategic Audit
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Prentice Hall, Inc. © 2006 11-16
Evaluation and Control
Divisional & Functional Performance –
–Responsibility Centers•Standard cost centers•Revenue centers•Expense centers profit centers•Investment centers
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Prentice Hall, Inc. © 2006 11-17
Evaluation and Control
Using Benchmarking –
–Continual process of measuring products, service, and practices against the toughest competitors or those companies recognized as industry leaders
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Prentice Hall, Inc. © 2006 11-18
Evaluation and Control
International Measurement Issues –
–International transfer pricing–Repatriation of profit–piracy
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Prentice Hall, Inc. © 2006 11-19
Evaluation and Control
Strategic Information Systems –
–Enterprise Resource Planning (ERP)–Divisional and functional IS support
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Prentice Hall, Inc. © 2006 11-20
Evaluation and Control
Problems in Measuring Performance –
–Short-term orientation–Goal displacement
•Behavior substitution•Suboptimization
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Prentice Hall, Inc. © 2006 11-21
Evaluation and Control
Guidelines for Proper Control –
–Minimum amount of information necessary–Meaningful activities and results–Timely –Long and short-term–Pinpointing exceptions–Meeting/exceeding standards
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Prentice Hall, Inc. © 2006 11-22
Evaluation and Control
Strategic Incentive Management –
–Weighted-factor method–Long-term evaluation method–Strategic funds method