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.
MANAGEMENT CONTROL SYSTEMS
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 SYSTEMS
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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1.
MANAGEMENT CONTROL SYSTEMS
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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2. UNDERSTANDING STRATEGIES
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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2. UNDERSTANDING STRATEGIES
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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2. UNDERSTANDING STRATEGIES
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. UNDERSTANDING STRATEGIES
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