Mgt Control System Ch 1-Ch2 Newest

7/27/2019 Mgt Control System Ch 1-Ch2 Newest

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1.

MANAGEMENT CONTROL SYSTEMS

Basic Concepts Control

1. A detector (sensor)2. An assessor ( comparing actual with standard)3. An effector ( feedback)4. A communication network

Management A group of people who work together to achieve certain goals. The management control process is the process by which managers atall levels ensure that the people they supervise implement theirintended strategies.


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1.


Systems A system is a prescribed and usually repetitious way of carrying out anactivity or a set of activities.

Management Control Management control involves a variety of activities:

Planning what the organization should do.Coordinating the activities of several part of the organisationCommunicating

Evaluating Deciding what , if any, action should be takenInfluencing people to change their behaviour


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1.


Management control is the process by which managersinfluence other member of the organization to implement theorganizations strategies. (management control focuses primarily on strategy execution or strategy implementation ).Management control is facilitated by a formal system thatincludes a recurring cycle of activities.Management control does not necessarily require that all actionscorrespond to a previously determined plan, such as budget.(Conforming to a budget is not necessarily good, and departure from a budget is not necessarily bad ).


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Strategies are big and important plans. They state in a general way in which management wants the company to move .For instance: An automobile company to produceand sell an electric car.Strategy formulation is the process of deciding on the

goal of the organization and the ways for achieving thisgoal.Goal congruence:

The goal of an organizations individual membersshould be consistent with the goals of theorganization itself.


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Framework for Strategy Implementation

STRATEGY IMPLEMEHTATION

Managementcontrols

OrganizationStructure

Human ResourceManagement

Culture

Strategy Performance


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EXAMPLE OF

DECISIONS IN PLANNING AND

CONTROL FUNCTION

STRATEGYFORMULATION

MANAGEMENTCONTROL

TASK CONTROL

Add direct mail selling Determine advertisingbudget

Book TV commercials

Devise inventoryspeculation policy

Decide inventory level Reorder an item

Enter a new business Expand a plant Schedule production

Change debt/equity ratio Issue new debt Manage cash flow

Acquire an unrelatedbusiness

Introduce new product within product line

Coordinate order entry


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2. UNDERSTANDING STRATEGIES

Strategies are plans to achieve organizationgoals.Management control systems are tools toimplement strategies.Goals :

1. Profitability2. Maximizing Shareholders Value3. Multiple Stakeholders Approach

The Concept of Strategy A strategy describes the general direction in which anorganization plans to move to achieve its goals.


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Strategy Formulation:External Analysis Internal Analysis

Competitor, Customer, Technology , Manufacturing,Supplier, Regulatory , Marketing, Distribution, andSocial / Political Logistic know-how

Opportunities & Threat Strengths & Weaknesses Identify opportunities Identify core competencies

Fix internal competencies with external opportunities

Firms Strategies


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Strategy Formulation :

STRATEGY FORMULATION

ENVIRONMENTALANALYSIS

Competitor, Customer,Supplier, Regulatory,

Social/Political

INTERNALANALYSIS

Technology , Manufacturing,Marketing, Distribution,

Logistics

Oppor tun i t ies & Threat Identify opportunities

Strengths & Weaknesses Identify core competencies

Fix internal competencieswith external opportunities

Firms Strategies


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2. UNDERSTANDING STRATEGIES Two Levels of Strategy

Strategy Level Key StrategicIssues

StrategicOptions

Organizational LevelsInvolved

Corporatelevel

Are we in the rightmix of industries ?

What industriesshould we be in ?

Single industry Related

diversificationUnrelated

diversification

Corporate office

BusinessUnit level

What should bethe mission of thebusiness unit?

BuildHold

HarvestDivest

Corporate office andbusiness unit generalmanager

How should thebusiness unitcompete to realize

its mission ?

Low costDifferentiation

Business unit generalmanager


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Type of Corporate Strategy

Single IndustryFirm

Related DiversifiedFirm

UnrelatedDiversified

Firm

Pictorialrepresentation

Identifying features

Compete in only ONE industry

Sharing of corecompetencies acrossbusinesses

Totally autonomousbusinesses in

very differentmarkets

Examples McDonaldPurdue FarmsFord Motor

Texas Air

Proctor & Gamble Johnson & Johnson AT & TGillette

GeneralElectric

Rockwell


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Business Unit Competitive Advantage To achieve its mission, every business unit develop a competitiveadvantage. One question is what will be the basis for business unitscompetitive advantage ?

Michael Porter has describe two analytical approaches ( industry analysis and value chain analysis ) as an aid in developing a superior and sustainable competitiveadvantage.

1. Industry analysis The intensity of rivalry among existing competitors.

The bargaining power of customers. The bargaining power of suppliers. Threat from substitutes. The threat of new entry.


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2. Value chain analysis Competitive advantage derives from better customer value for anequivalent cost or equivalent value for a lower cost .

This analysis seeks to determine where in the companys

operations (from design to distribution ) customer value can be enhanced or costs lowered .Key questions for each value-added activity are:(a) Can we reduce costs , holding value (revenues) constant ?(b) Can we increase value ( revenue ), holding costs constant ?

(c) Can we reduce assets , holding costs and revenuesconstant ?(d) Can we do (a), (b) and (c) simultaneously ?


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FORMAL CONTROL PROCESS

MANAGEMENT CONTROL PROCESS

GOAL &STRATEGIES

STRATEGICPLANNING BUDGETING

RESPONSIBILITY

CENTREPERFORMANCE

REPORT

ACTUAL VSPLAN

WAS

PERFRORMANCESATISFACTORY ?

RULES

MEASUREMENT

YES

NO

REWARD/FEEDBACK

FEEDBACK

REVISED REVISED CORRECTIVE ACTION

Mgt Control System Ch 1-Ch2 Newest

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