1. Prentice Hall, Inc. © 200611-1 STRATEGIC MANAGEMENT & BUSINESS POLICY 10 TH EDITION THOMAS L. WHEELEN J. DAVID HUNGER CHAPTER 11 Evaluation & Control

2. Prentice Hall, Inc. © 200611-2 Evaluation and Control

3. Prentice Hall, Inc. © 200611-3 Evaluation and Control Evaluation and Control Information – –Performance data –Activity reports

4. Prentice Hall, Inc. © 200611-4 Evaluation and Control Measuring performance – –The end result of activity

5. Prentice Hall, Inc. © 200611-5 Evaluation and Control Types of Controls – –Behavior controls How something is done through policies, procedures, rules, SOP’s

6. Prentice Hall, Inc. © 200611-6 Evaluation and Control Types of Controls – –Output controls What is to be accomplished; focus on end result through performance targets

7. Prentice Hall, Inc. © 200611-7 Evaluation and Control Types of Controls – –Input controls Resources – skills, abilities, values, motives

8. Prentice Hall, Inc. © 200611-8 Evaluation and Control Types of Controls – –Behavior controls ISO 9000 Standards Series ISO 14000 Standards Series

9. Prentice Hall, Inc. © 200611-9 Evaluation and Control Types of Controls – –Activity Based Costing (ABC) Allocation of indirect and fixed costs to individual products or product lines Based on value-added activities More accurate charge of costs

10. Prentice Hall, Inc. © 200611-10 Evaluation and Control Types of Controls – –Enterprise Risk Management (ERM) Identify risks Rank risks Measure risks

11. Prentice Hall, Inc. © 200611-11 Evaluation and Control Primary Measures of Performance – –Traditional Financial Measures Return on investment (ROI) Earnings per share (EPS) Return on equity (ROE) Operating cash flow Free cash flow

12. Prentice Hall, Inc. © 200611-12 Evaluation and Control Primary Measures of Performance – –Shareholder Shareholder value Economic value added (EVA) Market value added (MVA)

13. Prentice Hall, Inc. © 200611-13 Evaluation and Control Primary Measures of Performance – –Balanced Scorecard Approach Financial Customer Internal business perspective Innovation and learning

14. Prentice Hall, Inc. © 200611-14 Evaluation and Control

15. Prentice Hall, Inc. © 200611-15 Evaluation and Control Evaluating Top Management & Board – –Chairman-CEO Feedback Instrument –Management Audit –Strategic Audit

16. Prentice Hall, Inc. © 200611-16 Evaluation and Control Divisional & Functional Performance – –Responsibility Centers Standard cost centers Revenue centers Expense centers profit centers Investment centers

17. Prentice Hall, Inc. © 200611-17 Evaluation and Control Using Benchmarking – –Continual process of measuring products, service, and practices against the toughest competitors or those companies recognized as industry leaders

18. Prentice Hall, Inc. © 200611-18 Evaluation and Control International Measurement Issues – –International transfer pricing –Repatriation of profit –piracy

19. Prentice Hall, Inc. © 200611-19 Evaluation and Control Strategic Information Systems – –Enterprise Resource Planning (ERP) –Divisional and functional IS support

20. Prentice Hall, Inc. © 200611-20 Evaluation and Control Problems in Measuring Performance – –Short-term orientation –Goal displacement Behavior substitution Suboptimization

21. Prentice Hall, Inc. © 200611-21 Evaluation and Control Guidelines for Proper Control – –Minimum amount of information necessary –Meaningful activities and results –Timely –Long and short-term –Pinpointing exceptions –Meeting/exceeding standards

22. Prentice Hall, Inc. © 200611-22 Evaluation and Control Strategic Incentive Management – –Weighted-factor method –Long-term evaluation method –Strategic funds method