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S T R A T E G I C C O N T R O L : E V A L U A T I N G

S T R A T E G Y

Unit VIII

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Strategic Control is different from traditional approaches

to control where actual results are compared withexpected results or performance standards. This is because the ‘actual results’ in the case of strategicmana ement would come after a lon eriod of -10

years and management cannot afford to wait that longfor actual results to take place and then makecomparisons and take corrective measures.

In other words, strategic control needs to be taken whilethe strategy is being implemented and not once actualresults take place.

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STEPS IN TRADITIONCONTROL APPROACH:

1. SET PERFORMANCESTANDARDS/GOALS2. EXECUTE PLANS

3. ACTUAL RESULTS ARE OBSERVED AT END OF

STRATEGIC CONTROL ISDIFFERENT:

1. PREDETERMINEDSTANDARDS/GOALS ARE SET

2. STRATEGIC

PLANNING PERIOD4. ACTUAL RESULTS

COMPARED WITHPERFORMANCE

STANDARS/GOALS

CORRECTIVE ACTIONSTAKEN IN CASE ACTUAL

ACTION DOES NOT MATCHPERFORMANCE

STANDARDS/GOALS

IMPLEMENTATION3. STRAGEGIC CONTROL TAKES PLACE AT THE SAME TIME AS

IMPLEMENTATION ASMANAGEMENT CANNOT

WAIT TILL END OF 5-10 YEARS TO SEE ACTUAL

RESULTS AND THEN TAKECORRECTIVE ACTIONS (AS IT

COULD BE TOO LATE)

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Definition of Strategic Control : Strategic Control is concerned with tracking the strategy as it is being implemented , detectingproblems or changes in underlying assumptions and makingnecessary adjustments.

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For Strategic Control, the following major questionsneed to be answered:

1. Are we moving in the proper direction? Are keythings falling into place? Are our assumptionsabout ma or trends and chan es assum tions

about the environment) correct? Do we need toadjust or abort this strategy?

2. How are we performing? Are we meeting our

objectives and schedules? How are costs, revenuesand cash flows matching projections? Do we needto make operational changes?

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Strategic Controls: the Basis for Strategic Control

Establishing Strategic Controls: As strategic management significanttime span occurs between initial implementation of a strategy and

achievement of its intended results, numerous changes areundertaken, actions undertaken to implement the strategy. Alsoduring that time, both the environmental situation and the firm’sinternal situation are developing and evolving. Strategic controls arenecessary to ensure things are happening as they are planneda ongw ese c anges n s onger me rame. ra eg c con ro sprovide the basis for correcting the actions and directions of the firmin implementing it strategy as developments and changes in itsenvironmental and internal situations take place. There are four typesof strategic controls:1. Premise Control2. Implementation Control3. Strategic Surveillance4. Special alert control

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Premise Control

Every strategy is based on certain premises orassumptions. These assumptions or predictions areplanning premises : the firm’s strategy is designedaround these predicted conditions.

Premise control is desi ned to check s stematicall

and continuously whether or not the premises setduring the planning and implementation processare still valid.

The sooner invalid premises are recognised andrevised, the better the chances that an acceptablechange in strategy can be devised.

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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

— .Industry factors that affect performance of companies-such ascompetition, suppliers, substitutes, barriers to entry-are factorsabout 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 impacton the company and its strategy if they did.

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How are Premise Controls carried out?

Key premises should be identified during th eplanningprocess

The premises should be recorded and responsibility tomonitor them should be assigned to sutable persons ordepartments

Emphasis should be placed o key premises: all premisesneed not be monitored as it would be too time consuminga task.

Premises should be updated based on new information

Adjustments needed as a response to changes inpredictions /premises should be initiated.

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Implementation Control

The Action Phase of strategic management involves aseries of steps , programmes, investments and moves

over a period of time to implement the strategy: specialprogrammes are undertaken, functional areas initiate anumber of strategic actions for specific units . Theseactions take place continuously over an extended period

o t me es gne to execute t e p anne strategy anachieve long term objectives. Implementation controltakes place in this context.

Implementation control is designed to assess whether

the overall strategy should be changed in light ofunfolding events and results associated with the stepsand actions that implement overall strategy.

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Implementation Control consists of the following:1. Monitoring Strategic Thrusts: Strategic thrusts are those

critical factors which represent the part of strategyimplementation actions that need to be carried out if theoverall strategy is to be accomplished. These critical actionsor thrusts provide management with information in the

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 monitorstrategic thrusts (critical actions).

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Milestone Reviews

Managers attempt to identify critical milestones that

will occur over the time period the strategy is beingimplemented.

These milestones can be critical events, major

resource a oca ons or s mp y a passage o me. A milestone review usually involves a full scale

assessment of the strategy and the advisability of

continuing or refocusing the direction of thecompany.

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Strategic surveillance

The third type of strategic control , strategic

surveillance is designed to monitor a broad range ofevents inside and outside the company that are likelyto threaten the course of the firm’s strategy.

Strategic Alert Control : A special alert control tothoroughly and rapidly reconsider the firm’s basic

strategy based on sudden, unexpected event.

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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 company’s resources.,

progress in meeting annual objectives. Four steps:i. Set standards of performanceii. Measure actual performanceiii. Identify deviations from standardsiv. Initiate corrective action or adjustment

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Budgeting systems

A budget is a resource allocation plan that helpsmanagers coordinate operations operations and

facilitates managerial control of performance. Budgets set standards against which action can be

measured.

Different types of budgets: Revenue budgets (salesprojections or expectations); Capital budgets ( specificexpenditure for plant , equipment, machinery and othercapital items needed during the budget period);

Expenditure budgets (numerous cost budgets such asmarketing budget, etc).

Budget= plan in Rupee value.

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End o Course !

unit_viii_892230091

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