Strategic and organizational concepts for MAC

Question 1

What are some of the not so good implications from strategy?

Answer 1

1. What if the strategy is in the wrong direction? Following a path that ignores the innovation in the technology and environmental issues
2. Groupthink: can get a narrow vision/forget the broader picture, and groupthink can result in not grasping the outside world.
3. Can reduce creativity as it is made too simple to follow the direction

Question 2

What are the five definitions of strategy?

Answer 2

1. Plan: We see the strategy as a plan – understand what the actions should be, what to do today, and then see what objectives we need to do it
2. Pattern: Strategy is something that is build up over time, and it is more the actions that are showing the direction - the pattern
3. Position: Look into the environment, what competitors/customers/suppliers do/need – see where we should be. Analyze the environment and find the best position
4. Perspective: Idea of where we want to be (entrepreneur), strong view/vision
5. Ploy: If we want a new perspective then it is radical change, not a quick change in position

Question 3

What are some of the different types of strategies?

Answer 3

1. Planned: Often a stable environment
2. Entrepreneurial: Based on individual strategy (often vision) – top leader
3. Ideological: Coming from values that are proposed into the strategy
4. Umbrella: Only make strategies within the specified area/umbrella. Could be only working within certain industries, or only be present in markets where there is opportunity to be market leader
5. Process: Process is controlled but the content comes from participants. Open about what is going on and has clear definition about how process is structured
6. Disconnected: Having a strategy but then emergent strategies come into the organization
7. Consensus: Ongoing adaptation
8. Imposed: Comes from external, something that need to be done differently (imposed to do due to climate changes, things become illegal)

Question 4

Explain how there can be intended, unrealized and realized strategies?

Answer 4

Can have a intended strategy that becomes deliberate - but then some actions inside or outside the organization (emergent strategy) occurs, and the outcome of this combination/reformulation is then re realized strategy that is actually implemented. The startegies that are not implemented are then unrealized strategies

Question 5

Explain what the key concepts for the Design school is

Answer 5

1. Focus on finding a fit between internal and external capabilities
2. It is a prescriptive model
3. The decision maker is the CEO/top management
4. It is good in a stable environment where the CEO can have the full overview
5. The strategies found should be simple so that others can implement the strategy
6. Clear seperation of formulation and implementation - here focus is on formulation

Question 6

What is some of the critique to the design school?

Answer 6

1. Too simple
2. Assumes that we start from scrath
3. Assumes that we can think our way to the strategy
4. No feedback lines/learning
5. CEO cannot know everything
6. Not flexible to changes in the environment

Question 7

What are the similarities between the three prescriptive schools?

Answer 7

1. All missing the link to the “real world” in the organization
2. Cannot be used on its own
3. All are top down
4. Works in stable environments

Question 8

What does “prescriptive mean”

Answer 8

Focus on how strategies should be formulated rather than focus on strategies actually do form

Question 9

Explain what the difference on the prescriptive and descriptive schools are?

Answer 9

Prescriptive schools: strategies made by top management, and ordinary employees does not influence the strategy. Focus on objectives - focus on the strategy formulation and not how it forms. Focus on how the strategy should be formed and carried out.

Descriptive:

• Understand what the challenges are
• values the contribution of the lower level employees.
• Decision making process begins from the bottom.
• Based on the mental process, and how people perceive patterns and process of formation.
• Strategy formation can be done using past experience, process of learning
• Strategies can be unplanned, developing incrementally over time
• If past experience was positive then we do that, and if negative then a different decision is made (prescriptive analyze all options before deciding based on all factors what the best option is)

Question 10

What are the key concepts of the planning school?

Answer 10

1. Prescriptive school
2. Find overall strategy, decompose into smaller plans, elaborate, formalize, implement and then control
3. Having a plan department
4. Strategies are explicit
5. Focus on objectives/budgets

Question 11

What are the advantages of the planning school?

Answer 11

1. High degree of control of the strategies and see if they are on track
2. Knowing if the individual department delivered what was expected/according to budget

Question 12

What are the critiques/disadvantages of the planning school?

Answer 12

1. Require a lot of information
2. Only works in stabel environments - no flexibility
3. Planning department not attached to the daily operations
4. Focus on the process, sometimes strategic plans gets lost in the planning
5. No room for creativity and learning

Question 13

What are the prescriptive models missing?

Answer 13

1. The human side:
   - Cognition: can the top leader have all of the information? = bounded rationality
   - Creativity: a leader having a vision
   - Learning: action, though action/trying out strategies- cannot think everything though
2. Seperation between formulation and implementation
   - Strategy does not interact between formulation and operational side
   - Lack of creativity
   - Risk of lack of commitment/involvement

Question 14

What are the key concepts of the positioning school?

Answer 14

1. Strategy formation is a analytical process
2. Based on Porter
3. Organizations need analyse the environment extensively and then decide upon the best strategy/position to be in
4. Suggest a specifik strategy
5. Do not focus on history or resources but rather where the company wishes to be
6. Highly focus on external environment

Question 15

What are the advantages of the positioning school?

Answer 15

1. Get a lot of information though the analyses
2. Understand how a firm can get a competitive advantages
3. Raises the issue of sustainability – do not want a short-term strategy, but a long term/sustainable to earn money in the long run

Question 16

What are the critique/disadvantages of the positioning school?

Answer 16

1. Companies do not have all choices available in reality
2. Is it realistic that companies can just chose a position that they wish to be in? Is strategy rather build over time
3. Works stable environments
4. Bias towards large companies
5. Does not include learning and creativity - simply chose the strategy that is best on paper

Question 17

What are the key aspects of the entrepreneurial school?

Answer 17

1. Strategy formation as a visionary process.
2. In between prescriptive and descriptive schools
3. Entreprenør can change the vision of the organization (culture schools that this is not possbile)
4. Former schools are more deliberate - here, not aware and focus on how we ended up with the strategy
5. Having a vision, trying to see where the future is heading and what are the opportunities (Elon Musk moon)

Question 18

What are the advantages of the entrepreneurial school?

Answer 18

1. Flexible
2. Minimizes organizational politics – what the entrepreneur says goes
3. A charismatic leader gives motivation for implementation

Question 19

What are the disadvantages of the entrepreneurial school?

Answer 19

1. Can result in groupthink where the group cannot think themselves, but are blind and just follow the leader
2. If the leader stops then the visionary is gone
3. Narrow control
4. No involvement of employees
5. Paradox: when the vision is formed it can be difficult to change it

Question 20

What are the key concepts about the cognitive school?

Answer 20

1. Strategy formation as a mental process
2. Concerns how we perceive the environment and how different people perceive it differently based on their prior information/background
3. Underlines why we need diverse group of managers and employees
4. Perception is not rational - bounded rationality
5. We cannot comprehend all information

Question 21

What are some of the cognitive biases?

Answer 21

1. Conservatism: Failure to change ideas in the light of new information
2. Self-sealing: Searching for facts confirming held view while rejecting information. Try to find facts that confirm the present beliefs, not as open towards new information
3. Inconsistency: Inability to apply same decision criteria to similar situations
4. Recency: Recent events dominate thinking, while less recent are ignored
5. Availability: Reliance on events/information that are easily recalled/close to one
6. Anchoring: Giving initial information too much weight when making prediction
7. Illusory correlation: Easily believe in causation
8. Selective perception: Tendency to see problems in terms of one’s own background - why we need a diverse group of managers

Question 22

What are the two wings of the cognitive school?

Answer 22

1. Objective wing: need to reduce biases

2. Subjective wing: we will always have biases

Question 23

What is the strength of the cognitive school?

Answer 23

Reminds us that thinking and psychology play an important role in strategy formation

Question 24

What are the weaknesses of the cognitive school?

Answer 24

1. Raises important questions but does not answer them

2. Very descriptive, but does not tell us how to do the strategy based on that

Question 25

How is the cognitive and learning school linked?

Answer 25

Both says how we do not everything/cannot perceive the whole world

Question 26

How is the learning school and cultural school linked?

Answer 26

Focus on resource based view, and collective understanding

Question 27

How is the learning school and cultural school linked?

Answer 27

Focus on resource based view, and collective understanding.
Both learning and culture are resources that cannot be imitated - and both is binding the company to their current state and strategy.

Question 28

How is the learning school different from the prescriptive schools?

Answer 28

Prescriptive schools only works in stable environments, and often forgets that the ones with the operational knowledge is not a part of the management/planning team at it tries to predict the future.
Learning school is acknowledging the bottom-up knowledge, and a lot of change in the environment

Prescriptive schools are also more deliberate and focus on control and making sure that intentional are realized - learning school is more emergent

Perscriptive: think, do, think
Learning: do, think, do

Question 29

Why focus on resources, competencies and capabilities in the learning school?

Answer 29

1. Long term perspective - over time try and learn and match the resources to the environment, dynamic capabilities change over time through learning.
2. Build up competencies due to learning - Novo Nordisk build knowledge up over time within one field and this becomes a competencies
3. Environments change over time so need competencies that can be moved

Learning school believes that resources develop over time due to experience and time

Question 30

Why focus on resources, competencies and capabilities in the cultural school?

Answer 30

Idea that you are embedded in culture, way of thinking about the world, the way decisions are made. The culture is a rare and unique resource that cannot be imitated. Culture school believes that resources are stable and is difficult to change

Question 31

What are the key aspects of the learning school?

Answer 31

1. Strategy formation as an emergent process
2. Emergent: strategy is not something that is planned, but formed through doing things
3. Learning and knowledge are resources build up over time
4. Cannot sit at the table and plan everything - need bottom up ideas
5. Establish some structure while still maintaining the learning perspective - logical incrementalism

Question 32

What are the strengths of the learning school?

Answer 32

1. Flexibility when the environment changes
2. Learning importance
3. Not only top managers are making the strategy
4. Works best in complex environments

Question 33

What are the disadvantages/weaknesses of the learning school?

Answer 33

1. Do not specify how to do strategies besides from that it is through learning over time
2. Process of strategy formulation can become political
3. Bad for crisis situations

Question 34

Why do we have differen strategy schools?

Answer 34

1. Different frames to understand the world
2. No correct way to do strategy –> organizations are different
3. Different directions that guide the organizational perspective on strategy
4. Strategy can be understood in different ways
5. Changes over time, development of the strategy field
6. Different situations - stable environment, challenging environment with political
7. Understand if process just can be designed by the top leader, or it needs to be more learning with feedback loops
8. Periods where different strategies will be the best
9. Different lenses to understand how organizations work in reality

Question 35

How do the prescriptive schools and the power school differ?

Answer 35

In the prescriptive schools it was only the top management that participate in the strategy formation, so here there is no issue of people negotiating to their they self-interest through

Question 36

What are the key aspects of the power school?

Answer 36

1. Strategy formation as a process of negotiation
2. Understand that all individuals and department do not have the same perception and goals
3. There is no optimal strategy, but the strategy is what the people in the organization negotiates themselves to
4. Strategy is a dog fight for scare resources

Question 37

What is the difference of micro and macro power?

Answer 37

Micro: individuals having self-interests
Macro: organizations and units

Question 38

Strengths of the power school?

Answer 38

1. Insightful in periods of major change

2. Explain why many good strategies fail

Question 39

Weaknesses of the power school?

Answer 39

Ignores importance of leadership and culture

Question 40

What are the key aspects of the cultural school

Answer 40

1. Strategy formation as a collective process
2. Culture is build up over time, which makes it difficult to change the culture/strategy overnight as the organization is embedded in the culture
3. The organization must take decisions/actions within the box of the culture
4. Sees the strategy as a collective process, a perspective and a rare resource
5. Culture is the most rare and unique resource

Question 41

What are the strengths of the culture school?

Answer 41

1. Help to understand resistance to change
2. Help to understand how strategies are bounded in the organization
3. Highlights how an organization cannot change its culture overnight and how strategies can only be developed within the box of the culture

Question 42

What are the weaknesses of the cultural school?

Answer 42

1. Can lead to group think
2. Conceptually vague
3. Difficult to manage

Question 43

What are the key aspects of the environmental school?

Answer 43

1. Strategy formation as a reactive process

2. The environment dictates the strategies, and the companies imply react to this

Question 44

What are the different theories in the environment school about?

Answer 44

1. Contingency theory:
   - The strategy is contingent on the structure of the environment.
   - If stable environment = stable strategy
   - Simple factors in the environment that we need to deal with (based on x we need to do this strategy) - too simple?
2. Population ecology:
   - Organizations become similar because they need to survive
   - The idea from Darvin and the natural selection – in an environment there is limited resources, and it goes to the organization that matches the environment in the best way. If not matching, then the company does not survive
3. Institutional theory:
   - Companies in the same industry will react similar due to norms and regulations to match the environment

Question 45

What is the critique towards the environmental school?

Answer 45

Some argue that it is not a strategy as companies simply reach to the environment and does not take any decisions on their own. Either conscious (contingency) or over time (population)

Question 46

What are the key aspects of the configuration school?

Answer 46

1. Strategy formation as a process of transformation
2. The strategy adopts a structure which matches to the type of context (e.g., stable environment = defender strategy is good)
3. Focus on having stability while also recognizing the need for transformation
4. Build onto the contingency theory as it includes more elements
5. Combine the different schools and sees that in different contexts, different configurations appear
6. Over time, elements in the environment, internal aspects will not match anymore, then a change will happen and there will be a new configuration

Question 47

Explain how the two sides of the configuration school is connected?

Answer 47

The configuration side describes the state that the organization and its surrounding contexts are in. When the organization has adopted a state then strategy making becomes inevitable (transformation side), which describes the strategy making process. Can be top down or bottom up

Question 48

What does miles and snow find? (configuration/contingency school)

Answer 48

Classifies corporate behavior into four broad categories, each with its own unique strategy.

Defender: concerned with stability - competitively pricing to keep out competitors (good in stable environments)
Prospector: actively search for innovative products and market opportunities.
Analyzer: minimize risk while maximizing profit
Reactor: reacts to the environment (good in regulated industries)

Question 49

What is the difference between deliberate and emergent strategies?

Answer 49

Deliberate is an approach that emphasizes achieving an intended objective.
Emergent is the process of identifying unforeseen outcomes from the execution of a Strategy and learn to incorporate those unexpected outcomes into future plans

Question 50

Why is it important to look at the relationship between the strategy and MCS?

And what would happen to the MCS in situations where strategy differ between firms?

Chapman chapter 1

Answer 50

1. We need to understand that there are multiple ways of doing MCS, and it must be aligned with the strategy and support this.
2. Having differentiation strategy: which MCS do we want to have to support that? Not the same as the MCS for low cost strategy (cost drivers, keeping costs down, efficiency goals). Differentiation MCS should focus more on satisfying customers, see if customers come back and brand value
    the MCS depends on the strategy

Question 51

What is the traditional view on MCS, and how and why has it changes towards the newer view?

Chapman chapter 1

Answer 51

The traditional view is that MCS only is applicable in situations of stable environments, else it is irrelevant. It is true that sometimes MCS can be irrelevant, e.g., if KPIs are prohibiting learning and trying new things.
The traditional MAC only look at financial measures.

The new view is that we need a deeper understanding of the relationship between the MC, MCS and the strategy, and see that MCS also are relevant in unstable environments.
Could be balance scorecards.
Go away from only looking at the financial measures - we also want to understand what actually drives the financial results as well as what drives the performance in the long run.

Question 52

What is the implication of having all the strategy knowledge on strategic management accounting and control?

Answer 52

1. The strategy dictates how the control should be made
2. In different situations different MC and MCS are functioning
3. Before, simple ideas about formulation and implementation
4. In complex situations, want more motivation and implementation – cannot use traditional MC (controlling budgets, market share), but need to understand that there should be a match between the MC, MSC, and the strategy
5. It is not only one form of control (earlier: is the goal achieved= need variety in control, informal control, need to consider how we can measure intangible assets
6. Risk of controlling only financial measures: they are historical, and only consider specific aspects and does not look at what drives the organization and strategy
7. We are trying to argue that we cannot only use the traditional way

Question 53

What is content approach? (Chenhall ch. 2)

Answer 53

Sees strategy as carefully making objectives and plans. Rational approach with formalized procedures. Formulate deliberate policies to achieve the strategies.

Divided into two groups:

1. Outside in
   - Focus on external environment to identify opportunities and threats (miles and snow, porter)
2. Inside out
   - Development of internal resources that provide strengths and weaknesses

Question 54

What is the process approach?

Answer 54

• Strategy is defined as a pattern of behavior that evolves over time
• Recognizes how strategy is a process where ideas emerge in unintended ways
• Focus on how processes influence content of strategies

Question 55

Why is it important to study strategy, MC and MCS and their relationship to each other?

Answer 55

1. Strategy is many different things
2. In this way MCS is something specific, strategy is made, implementation is put in smaller tasks, and then this can be controlled
3. If seeing strategy as more emergent (bottom-up)
   Then MC becomes different - MC becomes a part of understanding the belief system , include dialogs, include information, include the overall context of the organizations much more

Question 56

Why may the traditional ways of control not be suitable more?

Answer 56

1. If we have instabilities in the environment, then the simple idea can be difficult as there cannot be made goals - cannot have this static view
2. Needs to be understood in a broader frame
3. In Simons Lever of control, there is still included goals but that is only one lever
4. Malmi & Brown: still have the cybernetic but is surrounded by the new elements

Question 57

What is the pros and cons of trying to see more broadly at MCSs - so for instance incorporate different types of control into MCS?

Answer 57

Pro:

1. Include more aspects
2. Better fit between culture and strategy
3. If there is instability in the environment (stability can be unrealistic)
4. Demotivating for employees to just be controlled on goals

Cons:

1. Hard to define and measure
2. MC becomes nearly everything - can we then use it for anything?
3. Becomes subjective, the evaluations, what should be important, power struggles

Question 58

What is the ideas behind having for instance both financial and non-financial measures including BCS, four levers of control include in Simons mode - and what is the idea behind the even broader understanding of seeing MSC as a package?

Answer 58

1. Important to have also non-financial measures as this is the foundation for the financial measures
2. Challenges with having only financial as they are short term, does not say anything about the uniqueness of the company and what should be controlled in the specific context
3. We should not get rid of the financial measures, need to be combined with others
4. Levers of control: diagnostic way of analyzing/controlling the targets - need also other levers, belief system, dialog, interaction
5. Package:
   Need to understand the broader view of the traditional (cybernetic part) but also combine with understanding of values, culture, and the organizational structure and procedures must be aligned in MCS

Question 59

How does Davila argue that MCS can be used for innovation purposes as well?

Answer 59

Says that the traditional view of MCS focus on implementing standardization and being a implementation tool actually hinder innovation and change

Need to view MCS in a different way - we need to have different targets to enhance innovations, because we cannot know what the product/product development should be beforehand (as the cybernetic model would suggest) - need objectives that support innovation and that does not lock the company into a specific direction they must go to.

Question 60

What does the empirical studies on MCS and strategy say? (Ch. 4, Langfield-Smith)

Answer 60

1. Easier studies look at the simple fit with a contingency perspective
2. Studies on performance measures and reward systems focused on the fit between strategy and performance and rewards systems
   - For defender strategy: use objetive performance evaluations
   - Prospector: more subjective performance measures (environments with uncertainty)
   - Use BCS to combine financial and non-financial measures

Question 61

What does theories argue that the key role of strategic control systems are?

Answer 61

Communicating strategic direction and priorities, developing mechanisms for determine whether the strategy is achieved, and provide information that can be used to modify actions to achieve the goals

Question 62

What are the benefits of using strategic data analysis together with strategic performance measurement?

Answer 62

Better identification and measurement of strategic value drivers.
E.g., find through analyses what drivers customers satisfaction and then use this knowledge to make actions plans

Question 63

What is the role or strategic measurement and control?

Answer 63

1. Communication of strategic directions and priorities
2. Determining whether the strategy is implemented as planned
3. Providing information

Data and analyses are critical elements in strategic measurement and control system effectiveness

Question 64

Why does not all company use strategic data analysis, and why are firms struggling?

Answer 64

There are barriers within technial and organizational

1. Technical barriers

Inadequate measures
- Challenging to get adequate measures to the non-financial performance dimensions

Information system problems
- Data is spread around the company – lack of centralized databases

Data inconsistencies
- Inconsistency across organization in measuring different aspects

2. Organizational barriers

Lack of information sharing

• Data sharing across units is difficult
• Control over data gives power and job security

Uncoordinated analyses
- Different functions just plan their own analysis

Fear of results

• Fear of looking bad in evaluations and analysis
• E.g., managers that performs well under the current system who do not want the new system and new strategic data analysis

Organizational beliefs
- Strong organizational belief make resistance to new systems and new analyses as they do not see the need

Question 65

What is the practise theory about, and what does this view bring?

Answer 65

1. Tries to understand the strategic potential of MCS and the day-to-day uses of MCS for the management of customer relationships in HQ and units
2. The relationship between strategy making from the top management and the day-to-day activities is important as the central part of strategies is often in routines, and the strategic capabilities and resources are grounded in the day-to-day organizational action
3. Focus on practitioners and practices, since it is not an organization that makes the strategy, but the people and all around the organization
4. Challenging to make top-down strategies as there can come resistance from the lower levels that know the content
5. Have focus on how the MCS is used in an organization – difference in use at the HQ and in the shops

Question 66

How should the MCS of BCS be used and how can it be used?

Answer 66

1. BCS has many forms of usage - it can be used in different ways and with different purposes
2. BCS need to look at the organizational problems and see how it can be tailored to help (e.g., enhance planning in innovative firm)
3. Need to look more at the inside-out perspective and look at the specific situation - translate BCS to the unique company/sitation
4. BSC are not only about implementing pre-made strategies, but it should be through problems that we construct and translate MCS

Question 67

Why can we not have simple goals and follow up on that?

Answer 67

There is a risk of controlling short term on financial goals:

1. If the strategy concerns investing a lot in the long term, then a short term financial view would not look good and would not be relevant to look that
2. If the strategy is changing, e.g., entering a ned market then a simple control would not work

Question 68

What are the emergent trends in management control?

Answer 68

1. Using performance management for strategic control
   - Using non-financial measures
   - Focus on creating integrated MCS
   - MCS should match context of company
2. Control models for performance management
   - BCS
   Focus on link between performance measures - understand the causal relationship

• Lever of control
  Balancing the four levers of control

3. New forms of organizations
   Connections within the organization and a wider network of external partners
   –> how to control this? difficult to control external actors due to different beliefs systems
4. Other
   - Risk: risk is underestimated
   - Culture: control and culture are closely related
   - IT: now there is access to real life data
5. Practice theory
   - Gap between theory and real word
   - Need to focus on how MCS are used and not whether they are used

Question 69

What are the four levers of control?

Answer 69

Balancing the four levers:;

1. Belief system
   - Mission statement, create direction - narrow down what we can consider
2. Boundary system
   - What strategic agendas can we do
3. Diagnostic control system
   - Focus on plan and goals
4. Interactive control system
   - New trends, what goes on in the lon run, having dialogue with employees
   - stimulate development of emergent initiatives

Question 70

Why should MCS be seen as a package and what framework is proposed?

Answer 70

MCS do not operate in isolation, and we cannot look at one practice at a time as the contingency theory states.

Cultural control is at the top - this translates to the belief system in levers of control.
The culture defines what strategies can be made - culture overrules strategies

Cybernetic control which act within the frame set by the cultural controls - planning, controlling –> the traditional controlling

Administration below which creates the structure for the cybernetic controls

–> package

Question 71

What is the current research on MCS missing?

Answer 71

More qualitative studies and not any surveys as there can only be included a few variable here.

The package view on MCS is the future, but we are limited in knowledge due to the the use of quantitative research of the topic.