Chapter 12

Question 1

Strategic Control

Answer 1

Strategic Control consists of determining the extent to which the organization’s strategies are successful in attaining its goals and objectives.
Strategic control addresses the gaps between the intended and realized strategies.

Question 2

Why Strategic Control?

Answer 2

Without strategic control, there are no clear benchmarks and ultimately no reliable measurements of how the company is doing.
Strategic control enables executives to account for last-minute changes during the implementation process.

Question 3

Strategic Control Process

Answer 3

Determine focus of control.
Identify standards or benchmarks.
Measure performance.
Compare standards to performance.
Institute changes as needed.

Question 4

Step 1: Focus of Strategic Control

Answer 4

Focus should be internal: How well is the firm attaining its goals?
Focus should also be external: What recent external changes are affecting the firm?
Both quantitative and qualitative factors should be considered.
It is important to align the focus with the ongoing strategy to be assessed so that its success or failure can be evaluated accordingly.

Question 5

Step 2: Strategic Control Standards (Benchmarks)

Answer 5

Set standards for internal factors identified in the previous step.
If possible, standards should be based on competitive benchmarks, best practices, or other targets.
Standards should be as specific as feasible.

Question 6

Benchmarking & Best Practices

Answer 6

Strategic control standards are often based on competitive benchmarking—the process of measuring a firm’s performance against that of the top performers, usually in the same industry.
After determining the appropriate benchmarks, a firm’s managers set goals to meet or exceed them. Best practices—processes or activities that have been successful in other firms—may be adopted as a means of improving performance.

Question 7

PIMS

Answer 7

PIMS (profit impact of market strategy) program contains quantitative and qualitative information on the performance of thousands of firms.
Published information on three measures— (1) quality, (2) innovation, and (3) market share—can be particularly useful measures

Question 8

Product/Service Quality

Answer 8

There has been a positive relationship between product/service quality—including both the conformance of a product or service to internal standards and the ultimate consumer’s perception of quality—and the financial performance of those firms.

Question 9

Innovation

Answer 9

Innovation is a complex process and is conceptualized, measured, and controlled through a variety of means.
Expenditures on developing new or improved products and processes also tend to increase the level of innovation.

Question 10

Market Share

Answer 10

Market share is a common measure of performance. As market share increases, control over the external environment, economies of scale, and profitability are all likely to be enhanced.
Relative market share can be used as key measure as well.

Question 11

Steps 3–5: Exerting Strategic Control

Answer 11

Establish performance targets or benchmarks throughout the organization.
Corrective action should be taken at all levels if actual performance is less than the standard that has been established unless extraordinary causes of the discrepancy can be identified.
Exerting strategic control requires that performance be measured (Step 3), compared with previously established standards (Step 4), and followed by corrective action (Step 5), if necessary.

Question 12

Balanced Scorecard

Answer 12

Performance measurement is not based on a single quantitative factor such as profits or stock price, but on an array of quantitative and qualitative factors that includes factors such as as return on assets, market share, customer loyalty and satisfaction, speed, and innovation.

Question 13

Control Through theFormal and Informal Organizations

Business process re-engineering

Answer 13

The formal organization—the organizational structure—can help or hinder success.
Business process reengineering—the application of technology and creativity in an effort to eliminate unnecessary operations or drastically improve those that are not performing well—exerts control through the formal organization.
The informal organization refers to the norms, behaviors, and expectations that evolve when individuals and groups come into contact.
When top executives use the formal organization effectively, the informal organization tends to reinforce the formal organization and promote the same values. However, when the organization’s value system is unclear or even contradictory, the informal organization will ultimately develop its own, more consistent set of values and rewards.

Question 14

Crisis Management

Answer 14

A crisis refers to any substantial disruption in operations that physically affects an organization, its basic assumptions, or its core activities.
Crisis management refers to the process of planning for and implementing crisis responses.

Question 15

Issues in Crisis Management

Answer 15

Examples of crises include terrorism, natural disasters, boycotts, counterfeiting, and political unrest.
Crises in organizations occur much more frequently than widely reported, however.
Many firms do not actively engage in crisis planning.

Question 16

Crisis Management Framework

Answer 16

Before the Crisis, organizations should develop a crisis management team to develop and plan for worst-case scenarios and define standard operating procedures that should be implemented prior to any crisis event.
During the Crisis, an organizational spokesperson should communicate effectively with the public to minimize the effect of the crisis.
After the Crisis, communication with the public should continue as needed and the cause of the crisis should be uncovered.

Question 17

Black Swan

Answer 17

The term black swan is used to describe a broad array of low-probability, high-impact events, including organizational crises. Taleb points out we rarely predict black swans accurately, so CEOs often spend their time, energy, and resources preparing for crises that may never occur

Question 18

Trends in Strategic Management

Answer 18

Globalization
Growing influence of the Internet
Sustainability
Erosion of the low cost-differentiation dichotomy
Effective crisis management