MANAGEMENT CONTROL SYSTEMS

Class 1
The nature of Management control systems
Management Planning and Control Systems CF2003

Todays contents
Exam Motorola case Syllabus Management control system elements Motorola case

Management Planning and Control Systems CF2003

Elements of a control system

Management: Performed by management
System: Prescribed and usually repetitious way of carrying out an activity or a set of activities. Control: Mechanism that allows to determine if a process is performing appropriately.

Management Planning and Control Systems CF2003

Elements of a control system

1. Detector. Information about what is happening

2. Assessor. Comparison with standard

3. Effector. Behavior alteration, if needed

Communication Network

Management Planning and Control Systems CF2003

Why a Management control system?

STRATEGY EXECUTION

Management Planning and Control Systems CF2003

Planning and control System

Financial and non-Financial: P&L Variances analysis Balance Scorecard ROI EVA

Planning structure: Budget Responsability centers Transfer prices Compensation

Objectives and Strategies

Management Planning and Control Systems CF2003

Why am I taking this course?

We want you to become Controller, CFOs We want you to become Managers, not any Manager, General Managers

We want you to achieve your professional objectives

We want you to achieve your personal objetives

Management Planning and Control Systems CF2003

Motorola case Integrated Circuit- Chip

Management Planning and Control Systems CF2003

The concept of strategy

DEFINITION Plans to achieve organization goals Process of deciding on the goals of the organizations and the strategies for attaining these goals.

STRATEGY FORMULATION

GOALS: Profitability * Revenues Investment

Revenues- Expenses Revenues

Maximizing shareholder value Preserve company assets

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Management Control activities

Goals

Strategy Formulation Management Control

Planning what the organization should do Coordinating the activities of several parts of the organization Communicating information Evaluating information Deciding what, if any, action should be taken Influencing people to change their behaviour

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Strategy Formulation
Environmental analysis
Competitor Customer Supplier Regulatory Social/Political

Internal analysis
Technology know-how Manufacturing know-how Marketing know-how Distribution know-how Logistics know-how

Opportunities and Threats

Identify opportunities

Strengths and weaknesses

Identify core competencies

Fix internal competencies with external opportunities Firms strategies

Strategies are for :

1. The whole organization (Corporate strategies)

2. Business units
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Strategy Formulation
Corporate Strategies
Where to compete?
High

Single-industry

Degree of Relatedness

Related diversification

Unrelated diversification
High

Extend of Diversification
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Strategy Formulation
Business units strategies
Business units strategies depend on two aspects: 1. Its mission: What are its overall objectives? BCG model and GE model provide a guide to corporations to select its mission.

2. Its competitive advantage : How should the business unit compete in its industry to accomplish its mission?

Michael Porter Industry analysis and Value Chain analysis

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Strategy Formulation BCG Model

Build

Hold

Divest

Harvest

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Strategy Formulation GE Model

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Business Strategies

Strategy Formulation Industry analysis Five Forces Michael Porter

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Strategy Formulation Industry analysis Five Forces Michael Porter

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Motorola mapping

Management Planning and Control Systems CF2013

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Motorola- Questions
1. What are the key success factors for Motorolas ASIC Division?

2. Does a traditional standard cost system address these sucess factors?

3. What are good measures of these key sucess factors?

4. How would you control de plant using this measures and the current structure of the plant?

Management Planning and Control Systems CF2013

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Conclusiones
1. Un sistema de control se establece una vez definidas las metas u objetivos

2. Una vez establecido el objetivo, se establecen las estrategias y se establece el sistema de control que nos permitan cumplir estas estrategias. 3. La definicin de estrategias puede apoyarse en las 5 fuerzas de Michael Porter, el modelo BCG o el modelo de cadena de valor de Michael Porter

Management Planning and Control Systems CF2003

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Conclusiones
4. Una vez definidas las estrategias implemento un sistema de control que me permita asegurar que las estrategias se cumplan. Considero lo siguiente: Un detector: Regularmente reportes que comparan informacin. Indicadores Algo que me muestre lo que est sucediendo Un asesor: Una persona o sistema que analice la informacin mostrada por el detector y me diga si es bueno o malo Un efector: Una persona responsable que en caso que el resultado del anlisis resulte negativo, tome una accin correctiva. Un canal de comunicacin Un mail Una pltica Una junta
Management Planning and Control Systems CF2003

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