1. Controls for Differentiated Strategies
Management Control Systems
Chapter 13
Sept 2014
Iwan Pudjanegara SE., MM.

2. Corporate Strategy
Different organizations generally operate in different strategic contexts.
Different strategies require different task priorities, key success factors, skills, perspectives, and behaviours for effective execution.
Sept 2014
Iwan Pudjanegara SE., MM.

3. Corporate Strategy
Control system are measurement systems that influence the behaviour of the people whose activities are being measured.
A continuing concern in the design of control systems should be whether the behavior induced by the system is consistent with the strategy.
Sept 2014
Iwan Pudjanegara SE., MM.

4. Business Unit Strategy
The strategy of a BU depends on :
Its Mission : what are its overall objectives?
Its competitive advantage : how should the BU compete in the industry?
4 Missions of BUs:
Build, Hold, Harvest, and Divest
Sept 2014
Iwan Pudjanegara SE., MM.

5. Business Unit Strategy
2 generic ways of BUs to compete and develop “sustainable competitive advantage” :
Low Cost
Differentiation
Sept 2014
Iwan Pudjanegara SE., MM.

6. Mission of Business Unit
Build, Hold, Harvest, and Divest.
The mission of the BU influences the uncertainties.
MCS (SPM) can be systematically varied to motivate the manager to cope effectively with uncertainty.
Different missions often require systematically different MCS.
Sept 2014
Iwan Pudjanegara SE., MM.

7. Mission and Uncertainty
Why “Build” units tend to face greater environmental uncertainty than “Harvest” units?
Build strategies typically are undertaken in the growth stage of product life cycle. Harvest strategies typically are undertaken in the mature/decline stage of the product
Sept 2014
Iwan Pudjanegara SE., MM.

8. Mission and Uncertainty
An objective of a Build BU is to increase market share. Build strategy puts a BU in greater conflict with its competitors than does a harvest strategy.
On both the input side and the output side, build managers tend to experience greater dependencies on external individuals and organizations than do harvest managers.
Build BUs are often in new and evolving industries.
Sept 2014
Iwan Pudjanegara SE., MM.

9. Competitive Advantage
A BU can choose to compete either as a differentiated player or as a low-cost player.
If a BU is choosing a differentiation approach, rather than a low-cost approach, increases uncertainty in a BU’s task environment.
The uncertainty facing low-cost and differetiation BUs is similar to the uncertainty facing harvest and build BUs.
Sept 2014
Iwan Pudjanegara SE., MM.

10. Differentiation vs Low-Cost
Product innovation is more critical, because focuses primarily on uniqueness and exclusivity.
Tend to have a broader set of products to create uniqueness and create high environmental complexity.
Products succeed if customers perceive that they offer more advantages.
Reducing cost. Prefers to keep its product offering stable over time.
Tend to have narrow product lines to minimize inventory carry costs and benefit from scale economies.
Typically produce no-frill commodity products and succeed because low price.
Sept 2014
Iwan Pudjanegara SE., MM.

11. Top Management Style Differences in Management Styles
Implications for Management Control
Personal vs Impersonal Controls
Tight vs Loose Controls
Sept 2014
Iwan Pudjanegara SE., MM.