STRATEGIC

MANAGEMENT
FILE

“STRATEGIC AND
OPERATIONAL CONTROL”

Submitted to,
Ms. Shilky
Submitted by,
Kanchan Rani(100)
Vijay(111)
Vineet()
Dhananjay
Strategic control

Strategic control is concerned with tracking the strategy as it is being implemented,

detecting any problems areas or potential problem areas, and making any necessary
adjustments.

Strategic is formulated on the basis of several assumption. Relate to the environmental

and organisational factors that are dynamic and eventful. Continually evaluate the
strategy as it is being implemented and take the necessary steps to adjust the strategy to
the new requirements.

Newman and Logan use the term "steering control" to highlight some important
characteristics of strategic control Ordinarily, a significant time span occurs between
initial implementation of a strategy and achievement of its intended results. During that
time, numerous projects are undertaken, investments are made, and actions are
undertaken to implement the new strategy.

Also the environmental situation and the firm's internal situation are developing and
evolving. Strategic controls are necessary to steer the firm through these events. They
must provide some means of correcting the directions on the basis of intermediate
performance and new information.

"Strategic control focuses on the dual questions of whether: (1) the strategy is being
implemented as planned; and (2) the results produced by the strategy are those
intended.”

Strategy evaluations concerned primarily with traditional controls processes which

involves the review and feedback of performance to determine if plans, strategies, and
objectives are being achieved, with the resulting information being used to solve
problems or take corrective actions.

Recent conceptual contributors to the strategic control literature have argued for
anticipatory feed forward controls that recognize a rapidly changing and uncertain
external environment.

Nature of Strategic Evaluation

• Evaluate effectiveness of organisational strategy in achieving organisational

objectives.
• Perform the task of keeping organisation on track.
Importance of Strategic Evaluation

• Congruence between decisions and intended strategy

• Successful culmination of the strategic management process
• Creating inputs for new strategic planning
• Ability to coordinate the tasks performed
• The need for feedback
• Appraisal and reward
• Check on the validity of strategic choice.

The Importance of Strategic Control

Why does actual performance sometimes not match the performance desired in the
strategic objectives? Was the strategic plan severely flawed in its formulation? Did
management’s implementation of the plan fall short? Were there uncontrollable factors
external to the organization that prevented achievement of the plan? These questions
suggest the importance of evaluation and control and a need to understand how the plan
can go away.
By this, the firm can monitor its performance and take corrective action if the actual
performance differs from the intended strategies and planned results.

Types of Strategic Control

1. Premise control

Planning premises/assumptions are established early on in the strategic planning process

and act as a basis for formulating strategies.

"Premise control has been designed to check systematically and continuously

whether or not the premises set during the planning and implementation process
are still valid.

It involves the checking of environmental conditions. Premises are primarily concerned

with two types of factors:

• Environmental factors (for example, inflation, technology, interest rates,

regulation, and demographic/social changes).
• Industry factors (for example, competitors, suppliers, substitutes, and barriers to
entry).
All premises may not require the same amount of control. Therefore, managers must
select those premises and variables that (a)are likely to change and (b) would a major
impact on the company and its strategy if the did.

2. Strategic implantation

Strategic implantation control provides an additional source of feed forward information.

"Implementation control is designed to assess whether the overall strategy should be

changed in light of unfolding events and results associated with incremental steps
and actions that implement the overall strategy."

Strategic implementation control does not replace operational control. Unlike operations
control, strategic implementation control continuously questions the basic direction of the
strategy. The two basis types of implementation control are:

1. Monitoring strategic thrusts (new or key strategic programs). Two

approaches are useful in enacting implementation controls focused on monitoring
strategic thrusts: (1) one way is to agree early in the planning process on which
thrusts are critical factors in the success of the strategy or of that thrust; (2) the
second approach is to use stop/go assessments linked to a series of meaningful
thresholds (time, costs, research and development, success, etc.) associated with
particular thrusts.
2. Milestone Reviews. Milestones are significant points in the development of a
programme, such as points where large commitments of resources must be made.
A milestone review usually involves a full-scale reassessment of the strategy and
the advisability of continuing or refocusing the direction of the company. In order
to control the current strategy, must be provided in strategic plans.

3. Strategic surveillance

Compared to premise control and implementation control, strategic surveillance is

designed to be a relatively unfocused, open, and broad search activity.

"... strategic surveillance is designed to monitor a broad range of events inside and
outside the company that are likely to threaten the course of the firm's strategy."

The basic idea behind strategic surveillance is that some form of general monitoring of
multiple information sources should be encouraged, with the specific intent being the
opportunity to uncover important yet unanticipated information.

Strategic surveillance appears to be similar in some way to "environmental scanning."

The rationale, however, is different. Environmental, scanning usually is seen as part of
the chronological planning cycle devoted to generating information for the new plan.
By way of contrast, strategic surveillance is designed to safeguard the established
strategy on a continuous basis.

4. Special alert control

Another type of strategic control is a special alert control.

"A special alert control is the need to thoroughly, and often rapidly, reconsider the
firm's basis strategy based on a sudden, unexpected event."

The analysts of recent corporate history are full of such potentially high impact surprises
(i.e., natural disasters, chemical spills, plane crashes, product defects, hostile takeovers
etc.).

While Pearce and Robinson suggest that special alert control be performed only during
strategy implementation, Preble recommends that because special alert controls are really
a subset of strategic surveillance that they be conducted throughout the entire strategic
management process.

The characteristics of each control component are detailed in Table 6-4, including the
component's purpose, mechanism used to implement it, the procedure to be followed,
degree of focusing, information sources, and organizational/personnel to be utilized.

Operational control

Operational control systems are designed to ensure that day-to-day actions are consistent
with established plans and objectives. It focuses on events in a recent period. Operational
control systems are derived from the requirements of the management control system.

Corrective action is taken where performance does not meet standards. This action may
involve training, motivation, leadership, discipline, or termination.

Operational control systems are designed to ensure that day-to-day actions are consistent
with established plans and objectives. It focuses on events in a recent period. Operational
control systems are derived from the requirements of the management control system.
Corrective action is taken where performance does not meet standards. This action may
involve training, motivation, leadership, discipline, or termination.

Evaluation Techniques for Operational Control:

• Value chain analysis: Firms employ value chain analysis to identify and evaluate
the competitive potential of resources and capabilities. By studying their skills
relative to those associated with primary and support activities, firms are able to
 understand their cost structure, and identify their activities through which they can
create value.
• Quantitative performance measurements: Most firms prepare formal reports of
quantitative performance measurements (such as sales growth, profit growth,
economic value added, ration analysis etc.) that manager’s review at regular
intervals. These measurements are generally linked to the standards set in the first
step of the control process. For example if sales growth is a target, the firm
should have a means of gathering and exporting sales data. If the firm has
identified appropriate measurements, regular review of these reports helps
managers stay aware of whether the firm is doing what it should do. In addition
to there, certain qualitative bases based on intuition, judgement, opinions, or
surveys could be used to judge whether the firm’s performance is on the right
track or not.
• Benchmarking: It is a process of learning how other firms do exceptionally high-
quality things. Some approaches to bench marking are simple and
straightforward. For example Xerox Corporation routinely buys copiers made by
other firms and takes them apart to see how they work. This helps the firms to
stay abreast of its competitors’ improvements and changes.
• Key Factor Rating: It is based on a close examination of key factors affecting
performance (financial, marketing, operations and human resource capabilities)
and assessing overall organisational capability based on the collected information.

Barriers in Evaluation

1. Limits of Controls
2. Difficulties in measurement
3. Resistance to evaluation
4. Short-termism : The concentration on obtaining immediate profit at the
expense of long term security.
5. Relying on efficiency versus effectiveness

Requirements of Effective Evaluation

• Control should involve only the minimum amount of information

• Control should monitor only managerial activities and results
• Control should be timely
• Long term and short term control should be used
• Control should aim at pinpointing exceptions
• Rewards for meeting or exceeding standards should be emphasized